Termination: The case for strict policies

Unfair dismissal will soon be an issue for all employers. Recent claims of unfair dismissal have lived or died on the strength of company policies – not on the fact that they were in place, but how they were enforced. PETER VITALE explains.

By Peter Vitale

Termination for breach of company policy
Unfair dismissal will soon be an issue for all employers. Recent claims have lived or died on the strength of company policies – not on the fact that they were in place, but how they were enforced.

The Australian Industrial Relations Commission has recently considered a number of cases where the employer has successfully and unsuccessfully relied on breaches of company policy as a reason for termination.

These cases are a useful reminder about the importance of company policies, how to implement them and enforce them – especially in light of the fact that unfair dismissal will soon be an issue for all employers.

Dismissed for drinking beer over lunch: Zero alcohol policy

A supermarket store manager with 20 years service was dismissed for serious misconduct. He had taken another manager to lunch where they both consumed two pots of full strength beer.

The full bench of the AIRC upheld the dismissal and considered that the sanction of dismissal was not disproportionate to the conduct. The commission found that the manager was in breach of the supermarket’s zero alcohol policy, in which it was emphasised that the employer would enforce zero tolerance for the consumption of unauthorised alcohol in the workplace.

A significant fact was that the store manager’s employment contract stipulated that it was a condition of his employment that no alcohol was to be consumed during working hours, including meal breaks. The contract also said that if he breached company policy, or failed to obey lawful instruction, the company could terminate his services immediately.

The full bench of the AIRC did not agree that the breach of contract was “at the fringes of the contract” and “relatively trivial”. Rather it considered that it was not unreasonable to characterise the breach as being “at the heart of the contract”.

The full bench of the AIRC concluded that:

the breach of contract appears to be an isolated incident by an employee who had long service with the company. Against this, the breach was clear, and made by a senior managerial employee who had the responsibility of upholding policies which the company had every right to implement and enforce. Such a breach will be sufficient to justify a termination and amount to a valid reason unless the policy in question was illegal, does not relate to matters subject to the employment relationship, or is unreasonable.”

The full bench also reminded employers to ensure that policy documents are clear and consistent:

The statement of this policy differs from document to document and those differences may justify some doubt in the minds of the respondent’s employees as to the precise scope and detail of the no alcohol policy. Where a respondent wants to rely on the strict enforcement of a policy it would be well-advised to ensure the clarity and precision of that policy wherever it appears in its policies and codes of conduct.”

Store manager dismissed for taking stock home

Another long serving employee failed in her unfair dismissal claim after she breached her employer’s policy against removing goods from the store without approval. This was the case even though the AIRC found that the employee had acted honestly and in the interests of the business.

The employee had taken goods from a Spotlight store, of which she was the manager, to the value of approximately $1000. The goods were intended for use by the employee’s daughter in her interior design business. It was not disputed that the employee had done so openly and with another employee as a witness, and that she intended to return the unused goods and pay for what had been used.

The company had a strict policy that credit was not to be extended to any customer without an approved credit application having been completed, nor were company goods to be removed without payment or approval. The policies were clearly set out in the company’s “store manual”. The employee had received training in relation to the content of the store manual and was responsible for training other employees, and as store manager she was responsible for applying the policy to other employees.

The employer also gave evidence that it enforced the policy strictly and had not waived any breach by other employees in other cases.

Similarly, an employee failed in a claim against a BP-related company following his termination for breaching the company’s policy prohibiting employees purchasing goods on any discount. The employee had been in breach of the policy by purchasing a packet of cigarettes at a promotional discount price.

Reinstated despite breach of safety policy

In another case, involving Rio Tinto’s Bell Bay refinery, an employee was reinstated to his former position despite a breach of the company’s safety standards.

In this case the employee had breached the company’s policy of not moving underneath a load, in this case suspended by a crane. He had been under the load for an estimated four seconds. While the breach of the policy was admitted, the AIRC found that the policy had not been enforced strictly by the company. In this context the breach was consider minor by the commission.

The lessons for employers:

  • If certain behaviour is serious enough to your operations to justify termination, make sure you have a clear policy prohibiting that conduct. You will still need to convince the commission that you have a valid reason for terminating employment.
  • Make sure the policy is in writing and that employees are educated about the policy regularly.
  • Enforce the policy rigorously and consistently. Lax or inconsistent enforcement may harm your ability to rely on the policy as a basis for termination, even in serious circumstances.


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