In brief

  • The Court of Appeal of New South Wales in Bartlett v Australia & New Zealand Banking Group Ltd [2016] NSWCA 30 has upheld an appeal by an employee for damages for breach of contract, finding that he was wrongfully dismissed.
  • The Supreme Court previously held that a clause in the employment contract which purported to provide ANZ with the power to summarily dismiss the employee based on ANZ’s opinion meant that ANZ did not have to prove that the employee actually committed serious misconduct.1 We previously provided an update on this decision.2
  • The Court of Appeal has now reconsidered the interpretation of the employment contract and found that the summary dismissal clause was required to be read in the context of the employment contract as a whole. This meant that the employment contract required ANZ to establish that the employee had in fact engaged in misconduct.
  • Even if the employment contract has been drafted in a way that allows ANZ to summarily dismiss based on its opinion, this is subject to ANZ acting reasonably in forming the opinion.

Court of Appeal Decision

The Court of Appeal found that the clause allowing ANZ to summarily dismiss Mr Bartlett if it held the opinion that he had committed serious misconduct (Summary Dismissal Clause) must be read in the context of the employment contract. The preceding clause dealing with disciplinary action (Disciplinary Action Clause) required an actual breach of the employment contract (or performance requirements) for ANZ to terminate the employment.

The Court of Appeal resolved the conflict between the Summary Dismissal Clause and the Disciplinary Action Clause by finding that the existence of the misconduct must be established objectively, but the ‘opinion of ANZ’ referred to in the Summary Dismissal Clause could be relied upon to determine the seriousness of the misconduct.

The Court of Appeal held that ANZ’s power to summarily terminate Mr Bartlett was dependent upon the objective occurrence of misconduct, and this finding was not open to the Court based on the evidence put before the primary judge.

The Court of Appeal also noted that, even if the employment contract had allowed ANZ to summarily dismiss Mr Bartlett based on its opinion of misconduct alone, ANZ was still obliged to act reasonably in forming its opinion, at least so far as its process was concerned.

Implications

  • Careful drafting of employment contracts, including consideration of specific clauses in the context of the overall contract, is key.
  • Even where it is possible to construe an employment contract as providing a right to summarily dismiss an employee based solely on an ‘opinion’ of misconduct, the employer will still be expected to act reasonably in forming the opinion.
  • Employers should be careful to ensure that any investigation into misconduct is conducted in a reasonable manner that meets a standard that can be expected from a “reasonable corporate employer”.