District Court awards nearly $300,000 to General Manager wrongfully dismissed for intoxication at work
In Mitchell-Innes v Willis Australia Group Services Pty Ltd (No 2)(Unreported, District Court of New South Wales, Taylor DCJ, 8 December 2014), Donald Mitchell-Innes sued his employer, Willis Australia Group Services (Willis) for wrongful dismissal after Willis summarily dismissed Mr Mitchell-Innes for what it believed was gross misconduct: being drunk at work. Taylor DCJ found that the plaintiff had been wrongfully dismissed and ordered Willis to pay nearly $300,000 in damages.
On 30 October 2012, Mr Mitchell-Innes travelled to Melbourne to attend a work conference. The night before the conference, Mr Mitchell-Innes attended dinner and drinks with colleagues, during the course of which he admitted to consuming 17 standard drinks. On the following morning, Mr Mitchell-Innes arrived at the conference and appeared intoxicated. Senior colleagues reported that he was "smelling strongly of alcohol … talking loudly, slurring his words, making animal noises and throwing lollies".
Whilst Taylor DCJ found that Mr Mitchell-Innes' behaviour constituted misconduct, he was not convinced that the misconduct was sufficiently serious to justify summary dismissal. His Honour noted that a single act of misconduct can justify summary dismissal, although that misconduct must be "of such aggravated character that it strikes the employment contract down immediately, completely and permanently."
A clause in Mr Mitchell-Innes' employment contract stated: "a condition of your employment is compliance with any policies and procedures [of the] Willis Group…". The policies included the "Code of Work" policy and "Disciplinary Counselling" policy, both of which included prohibitions against being intoxicated at work. Both of these policies contemplated summary dismissal only when an employee's actions could "seriously damage Willis' reputation" or "endanger the well-being of Willis' staff".
Taylor DCJ determined that this clause meant Willis' policies were incorporated by reference within Mr Mitchell-Innes' employment contract. Taylor DCJ was not convinced that Mr Mitchell-Innes' misconduct resulted in either serious damage to Willis' reputation or endangered the well-being of Willis' staff. Accordingly, Willis was effectively restrained from summarily dismissing Mr Mitchell-Innes because of the restrictions it imposed on itself in its employment policies.
His Honour cited a series of mitigating factors that reduced the seriousness of Mr Mitchell-Innes' misconduct, including:
- The plaintiff's long and blemish-free record of employment with Willis;
- A culture within the firm that encouraged the consumption of alcohol with colleagues and clients;
- The plaintiff caused no reputational damage to the firm because no clients were present to witness the plaintiff's behaviour; and
- The plaintiff did not damage staff morale or staff discipline within the firm.
Taylor DCJ awarded the plaintiff $296,650.75 damages, the sum representing lost salary, a lost retention bonus, lost long service leave entitlements and pre-judgment interest.
Lessons for Employers
This decision makes it clear that intoxication at work will not always justify summary dismissal. Courts will carefully construe the employment contract, employment policies and the company's "culture" to determine the seriousness of any employee misconduct.
Employers should be careful not to draft employment contracts and employment policies in a way which limits their flexibility when responding to and dealing with employee misconduct (as Willis' policy did by requiring serious damage to the firm's reputation or endangerment to the well-being of Willis staff to justify summary dismissal).
Federal Court orders that damages in a unlawful termination claim are not a priority payment in the winding up of the employer
Section 556 of the Corporations Act 2001 (Cth) (Act) requires that certain employee entitlements be paid in priority to unsecured debts in the case of the winding up of the employer. These priority payments include:
- Payments of wages and superannuation entitlements owing to the employees;
- Payments made as compensation for workplace injuries (workers' compensation payments);
- Payments for accrued leave entitlements; and
- Retrenchment payments.
In Schmitt v Carter  FCA 1370, Mr Schmitt worked as the Chief Financial Officer of CMA Corporation Limited; for much of his employment, he was also a Director of CMA. Mr Schmitt was dismissed summarily and commenced proceedings against CMA for unlawful termination. A few months after he commenced proceedings, CMA entered into voluntary administration. CMA obtained a stay of the wrongful dismissal proceedings upon entering into voluntary administration.
Mr Schmitt approached the Federal Court seeking an order that any damages he obtain in the wrongful dismissal proceedings be paid in priority to other unsecured debts as "retrenchment payments" within the meaning of section 556 of the Act.
The Act defines a retrenchment payment as:
an amount payable by the company to the employee, by virtue of an industrial instrument (which includes an employment contract), in respect of the termination of the employee's employment by the company, whether the amount becomes payable before, on or after the relevant date.
Justice Gleeson decided that the damages Mr Schmitt sought, if payable, would not be an amount payable by virtue of the employment contract because his claim was not an amount payable by the company (yet). Justice Gleeson said (at 47):
Although there is an obvious connection between the employment contract and the plaintiff's claim, that claim cannot be described as an amount payable 'by virtue of' the employment contract because the plaintiff's claim arose only upon the termination of the contract.
This broad principle presents problems for any employment-related claims which may be made against a company in administration.
It is interesting that Justice Gleeson chose to develop her reasoning so broadly as it wasn't strictly necessary for Her Honour to address this issue, since Mr Schmitt wasn't eligible for a priority payment because he was a director of CMA at the relevant time and the exception within subsection 556 (1C) of the Act prevents him from claiming priority.
Thanks to associates Michael Whitbread and Viv Jones and Summer Clerk William Maher for their assistance in the preparation of this Update.