After hours conduct by intoxicated employee at staff function
Employment Practices Liability (EPL) – unfair dismissal – flawed disciplinary process
Stephen Keenan v Leighton Boral Amey NSW Pty Ltd  FWC 3156
A recent decision by a senior member of the Fair Work Commission (FWC) (Stephen Keenan v Leighton Boral Amey NSW Pty Ltd  FWC 3156) highlights how difficult it is for insured employers to regulate their employees’ after hours conduct.
The decision also highlights the risks of employers providing unlimited alcohol at work functions, and is a timely reminder of the importance of how disciplinary processes need to be conducted.
Leighton Boral Amey NSW Pty Ltd (the Employer) dismissed Stephen Keenan as a result of his drunken, inappropriate conduct at its Christmas function.
The Employer organised and paid for the function, held from 6:30 pm to 10:00 pm on 12 December 2014 at the Novotel Sydney Brighton Beach Hotel. Employees did not have to pay for beer, wine, mixed drinks, soft drinks or food during the function. Later, they were able to help themselves to bottled beer.
The Employer did not assign any manager to supervise the running of the function or employees’ conduct at the function.
It was found that Keenan drank 10 stubbies during the function having already consumed two beforehand. Keenan quickly became heavily intoxicated. At no stage did anyone refuse Keenan drinks as his behaviour degenerated, nor suggest he limit or cease his drinking, or leave the function.
During the function, Keenan ‘aggressively’ used ‘extreme profanity’ about and towards his colleagues; aggressively intimidated and bullied a colleague Ms Stokes by asking ‘Who the f*ck are you? No seriously. What the f*ck do you even do here?’; asked a female colleague (Ms Kennedy) a number of personal questions including about her marital and relationship status; and said to Ms Kennedy three or four times, ‘I want to ask for your phone number but I don’t want to be rejected.’
After the function officially concluded at 10:00 pm, a number of employees continued festivities at the Hotel’s upstairs bar (albeit now paying for their own drinks). There, Keenan touched Ms Stokes’ chin despite her pulling away; told a female colleague, ‘I used to think you were a stuck up b*tch’; kissed a female colleague (Ms O’Reilly) on the mouth without warning; and subsequently said to her, ‘I’m going to go home and dream about you tonight.
When the employees departed the Hotel, while waiting at a taxi rank, Keenan said to a colleague, ‘My mission tonight is to find out what colour your knickers you have on.’
Perhaps not unexpectedly, the Employer and Keenan then went through a disciplinary process which saw Keenan dismissed.
The Fair Work Commission (FWC) hearing and process
Keenan applied to the FWC to appeal against his dismissal.
The FWC unfair dismissal procedure is rapid. An employee must apply for relief within 21 days after a dismissal takes effect. The FWC holds a telephone conciliation conference shortly after an employee files an application and, if this does not resolve the matter, conducts an arbitrated conference or hearing 3 to 4 months later.
In an unfair dismissal case, the FWC must consider each of the matters prescribed by section 387(1) of the Fair Work Act 2009 (Cth) (FW Act) to determine whether the dismissal was harsh, unjust or unreasonable (and therefore unfair).
The FWC’s decision – flawed disciplinary process
The FWC found that during the disciplinary process the Employer identified eight alleged incidents of misconduct by Keenan. However, the Employer’s representative only put the allegations to Keenan in general terms (by asking open ended questions). To provide Keenan with a proper opportunity to respond to the allegations as required under unfair dismissal law, the Employer should have put the substance (detail) of the allegations to Keenan.
The Employer decided to terminate Keenan’s employment (with notice) but failed to take into account its different treatment of another senior manager who, only months earlier, had been counselled for inappropriate profane language directed towards a female apprentice.
The FWC unfair dismissal process
The FWC then separately considered the two main areas of Keenan’s contentious conduct on the evening in question.
The FWC’s decision – conduct during the function
The FWC found that the Employer had a ‘valid reason’ for dismissal as a result of Keenan’s intentionally aggressive, intimidatory and bullying conduct during the function towards Ms Stokes (a female, much younger and smaller than him). However, the FWC found that dismissal for this reason was unfair because Keenan was not given an ‘opportunity to respond’ (section 387(1)(c) of the FW Act) to the allegation.
The FWC found Keenan’s behaviour towards Ms Kennedy during the function did not constitute a valid reason for dismissal, because despite characterising this behaviour as ‘boorish’ and ‘oafish’, the conduct did not constitute sexual harassment. His other conduct during the function was ‘aberrant’ and did not constitute a valid reason for dismissal.
The FWC’s decision – out of hours conduct
The Employer had internal bullying, harassment (including sexual harassment) and discrimination policies. It had issued pre-function communications to staff about their conduct at the function. However, at no stage had the Employer said anything about its expectations of employees’ behaviour at social activities of the nature of the socialising after the official function concluded.
The FWC found that the Employer was not entitled to regulate Keenan’s behaviour in the upstairs bar or out on the street, and his conduct there could not constitute a ‘valid reason’ for dismissal (section 387(1)(a) of the FW Act). This was because it found that the period after the official finish of the function was outside of the workplace, and outside of working time.
The FWC applied settled principles from unfair dismissal cases. According to these principles, out of hours conduct must be ‘likely to cause serious damage to the relationship between the Employer and employee, damaging to the Employer’s interests or conduct incompatible with the employee’s duty as an employee’. (Rose v Telstra Corporate Limited  AIRC 1592).
The FWC found the Employer had no grounds for regulating the out of hours conduct because, for example, the sexual harassment was not ‘in connection with the employee’s employment’ for which the Employer could be liable, there was no evidence it would suffer damage by Keenan working together with the employees in question, or of any risk to their health and safety.
The FWC found the dismissal was unfair, and has adjourned the hearing to allow for submissions on whether reinstatement of Keenan is appropriate – the alternative remedy would be compensation. Watch this space.
This decision should cause employers to review internal employment policies and apply responsible service of alcohol obligations at work parties and similar functions. EPL insurers should be similarly wary that insureds have such policies are in place and communicate them to staff.
Implications for EML/ML insurers
The decision serves as a timely reminder that the FWC will generally be reluctant to uphold a dismissal for conduct out of hours and away from the workplace.
Any flaws in an insured employer’s defence to such an unfair dismissal claim often only emerge later in the process once the evidence is well developed and the FWC can take an objective view of the employer’s position. However, the risk of cost (and claims reserve) surprises resulting from this can be mitigated by close attention early on in a claim, as is the case with other classes of claims.
When approaching unfair dismissal EPL/ML claims (especially relating to conduct outside of working hours or the workplace), insurers and self-insured employers should move promptly to:
- Examine early whether an employer was lawfully able to regulate the employee’s particular conduct;
- Obtain (as early as possible) all relevant internal employment policy documents and any evidence of notices or communications to employees about expected standards of conduct, and
- Critically examine and investigate the insured employer’s dismissal process, including the manner by which allegations were put to the dismissed employee and consistency with other similar dismissals.
As a final observation, it would be interesting to see the FWC grapple with out of hours workplace bullying conduct in an application under its new anti-bullying jurisdiction – for example if one of the recipients of Keenan’s unwanted comments on the night brought such a claim against the Employer and/or Keenan. Again, watch this space.
Launch of Gilchrist Connell’s national Employment Practices Liability/Management Liability practice
This Limelight marks the July 2015 launch of Gilchrist Connell’s national Employment Practices Liability/Management Liability practice. We took this step as a result of the significant increase in EPL/ML and work health and safety claims over the last few years.
Joel Zyngier is the national head of our EPL/ML practice. Joel is certified by the Law Institute of Victoria as an Accredited Specialist in Workplace Relations and acts for insurers and self-insured organisations in all states and territories, defending employment law claims and litigation and work health and safety investigations and prosecutions (primarily under Employment Practices Liability and Management Liability policies). Joel’s full profile setting out his extensive experience can be provided upon request.
Date: 8 July 2015