Appeal - termination of employment - after-acquired knowledge - duty to arbitrate on the basis of facts in existence at the time of the termination - leave to appeal - Workplace Relations Act 1996 ss.643(1)(a) and 652.

[1] This is an appeal, for which leave is required, by Metricon Homes Pty Ltd (Metricon) against an order made by Commissioner Foggo on 21 November 2008. [1] The proceedings before the Commissioner arose from an application by Mr Bradley for a remedy in relation to the termination of his employment by Metricon. The Commissioner ordered Metricon to pay Mr Bradley the equivalent of four weeks' pay in lieu of notice. Metricon has appealed.

[2] Mr Bradley commenced employment with Metricon in 2002. He held various positions in its information technology area until the termination of his employment on 20 June 2008. His application was heard by the Commissioner in November 2008. The Commissioner gave an ex tempore decision on 13 November 2008 and published an edited decision on 31 December 2008. [2] The Commissioner found that "there was … an element of harshness regarding the fact that the termination was a summary dismissal as opposed to a dismissal."[3] The order was intended to compensate for that harshness.

[3] Metricon contends that the Commissioner erred in ordering any remedy when, on the facts as found, the termination was not harsh, unjust or unreasonable. It submitted that we should dismiss the application. There is no cross-appeal.

[4] It is unnecessary to detail the evidence concerning the conduct which Metricon relied on. The Commissioner made a number of findings. They include findings that Mr Bradley had abused his system administration privileges to gain access to, copy and/or download information on the private folders of other employees, including his manager. The Commissioner also found that Mr Bradley had access to emails addressed to other employees, through a system which automatically relayed emails addressed to designated employees to another directory. It was not generally known that this system existed. In some cases links had been created so that emails addressed to other employees went directly to Mr Bradley's inbox.

[5] The Commissioner also found that Mr Bradley had compiled a list of employee user names and passwords. The evidence indicates that much of the information which he gained access to through these various means was private, commercially sensitive and in some cases highly confidential. A significant amount of the information was discovered on the hard drive of a computer which had been allocated to Mr Bradley for his use. The Commissioner rejected various explanations for this conduct and she found that there was no legitimate reason for it.

[6] There being no cross-appeal the Commissioner's findings of misconduct are not under direct challenge. The findings are adverse to Mr Bradley. Employees in the information technology field who have access or potential access to private information on the IT systems of their employers are in a position of trust. Conventional standards of honesty are expected of such employees and we reject any submission to the contrary. The Commissioner's findings indicate a serious breach of those standards. It should be made clear, however, that no findings were made as to whether the misconduct was engaged in for personal gain.

[7] The Commissioner's decision to make an order in Mr Bradley's favour was based on the manner in which his employment was terminated. After some confidential information had been discovered on the disc of his computer, Metricon executives confronted Mr Bradley with the results of their inquiries to that point and, being dissatisfied with his explanations, proceeded to terminate his employment on the same day. The Commissioner noted that Metricon had not completed its inquiries when it decided to terminate the employment. The Commissioner was critical of Metricon for acting without having all of the relevant information. The relevant findings are set out in the following paragraphs.

"[22] There is a difference between dismissal and instant dismissal the latter being of a harsher nature than the former. On the evidence it seems that there was an adjournment of between 15 and 20 minutes in the meeting of 20 June 2008. During that time Mr Smith sought advice regarding possibilities that had been put, possibilities regarding the use to which Mr Bradley might have put the information which he was said to have been collating, only to find that there had been no such use implemented. There was an opportunity for Mr Bradley to reconsider what he had put before the company.

[24] The nature of the information technology industry is dealing with information in a timely and efficient manner aided by computerised tools which make communication instant and wide reaching. It is understandable that the company did not want to have a long or extensive investigation to ascertain the extent of the breach of the email system or the confidential documentation which was copied was involved because that inevitably raised possible manipulation of materials in the intervening period.

[25] In that respect there is an element of harshness which arises because of the nature of Mr Bradley's work. Had he been employed in any other industry, stand down provisions were a possible option while the investigation was completed. The investigation which continued after the dismissal of the Applicant confirmed the reasons for the dismissal but at the time of the dismissal they were not as clear cut and the information not put before the Applicant. In my view there were several, albeit not many, issues raised during the 20 June 2007 meeting which could have been the subject of further discussion and investigation prior to the dismissal of Mr Bradley. Having said that I have concluded that there was sufficient reason for dismissal but I am not satisfied that there has been sufficient reason put before me why there should have been a summary dismissal.

[26] In my view Mr Bradley should have been stood down pending further investigation but in light of that not being a practical option, the appropriate manner of the termination of employment would have been to provide notice, but for that notice to be provided in lieu of there being any further work.

[27] In terms of the provisions of the Act I therefore find as follows. There was a valid reason for the termination of employment. The employee was notified of that reason. He was notified that it was serious and he was notified that if the allegations put to him were sustained they could result in the termination of his employment. There was in my view an element of harshness regarding the fact that the termination was a summary dismissal as opposed to a dismissal and I put it no more highly than this.

[28] An order will be issued that the applicant, Mr Bradley, be paid the equivalent of four weeks' notice as a way of addressing the defined element of harshness in the termination of employment."

[8] We have set out these paragraphs in full, but they can be summarised briefly. Although it is not crystal clear, it appears that the conclusion that the dismissal involved harshness is confined to the manner in which the termination was put into effect. The Commissioner found that Metricon had acted prematurely in confronting Mr Bradley and then terminating his employment before completing its investigations.

[9] The question raised by the appeal is whether the Commissioner's decision to order four weeks' pay to compensate Mr Bradley for the harshness of summary dismissal is affected by error. Metricon's case is that the Commissioner should have taken the after-acquired knowledge into account in assessing whether the termination was harsh. Had the Commissioner done so, it was submitted, the application would have been dismissed. Before examining this question it is necessary to outline some of the statutory provisions and their effect.

[10] The application for relief was made under s.643(1)(a) of the Workplace Relations Act 1996 (the Act) and alleged that the termination was harsh, unjust and unreasonable. An application of that kind, provided it is valid, is initially dealt with by conciliation. If conciliation fails, and the applicant elects to proceed, s.652 empowers the Commission to arbitrate. In such an arbitration the duty of a member of the Commission is to determine on the evidence in the case whether the termination was harsh, unjust or unreasonable. Evidence of relevant facts in existence at the time of the termination are to be taken into account even if the employer was unaware of them at the time. The starting point for this proposition is the judgment of Von Doussa J in Lane and Others v Arrowcrest Group Pty Limited (t/as ROH Alloy Wheels) [4] (Arrowcrest). After discussing relevant authority His Honour said this:

"In my opinion it is ... open to an employer to justify a dismissal by reference to facts not known to the employer at the time of dismissal, but discovered subsequently, so long as those facts concern circumstances in existence when the decision was made. Whether the decision can be so justified will depend on all of the circumstances." [5]

[11] The statement of principle in Arrowcrest was adopted by the High Court in Byrne v Australian Airlines Limited. [6] It follows that the Commissioner was under a duty to determine Mr Bradley's application on the basis of the facts and circumstances in existence at the time of the termination.

[12] In reaching her decision the Commissioner emphasised that Metricon had not completed its inquiries and that not all of the facts which were eventually relied upon had been discovered or put to Mr Bradley. By contrast, she did not express any conclusion based on all of the evidence of misconduct, including the facts which subsequently came to light. It appears to us that her conclusion that the dismissal was harsh was based on Metricon's state of knowledge at the time of the termination. The question which required an answer was whether in light of the totality of the evidence the termination was harsh, unjust or unreasonable. By considering the more limited question of whether the termination was harsh unjust or unreasonable on the facts known to Metricon at the time of the termination the Commissioner fell into error.

[13] We agree with Metricon's submission that the Commissioner did not properly take the results of the post-termination inquiries into account. This was an error in the exercise of the discretion. We grant leave to appeal. The order under appeal must be quashed.

[14] In the circumstances it is appropriate that we determine the application for relief ourselves. We have the transcript and materials and neither party suggested that we should not deal with the application in the circumstances which have arisen. We turn first to the evidence.

[15] We have set out a summary of the Commissioner's findings of misconduct earlier in this decision. We also noted that in the absence of a cross-appeal those findings were not under direct attack. Mr Dircks, who appeared on behalf of Mr Bradley, submitted that if the Full Bench found it necessary to decide the application itself we should not be bound by the Commissioner's findings. In particular Mr Dircks submitted that we should find that there was a lawful or innocent explanation for all of Mr Bradley's conduct and that none of it breached any obligation arising out of his employment. Despite this submission we intend to adopt the Commissioner's findings of misconduct. There are four reasons. The first reason we have mentioned twice before, namely: there is no cross-appeal. Secondly, as we also indicated earlier, the findings of misconduct were open on the evidence before the Commissioner. The critical issues on the facts concerned whether there was an explanation for the conduct which might render it lawful or innocent. For the most part the Commissioner found against Mr Bradley on those issues. On what has been put on the appeal there is no reason to conclude that the Commissioner's discretion miscarried. Thirdly, Mr Dircks appears to have conceded that the decision was "within the discretionary power of the Commission to make". Finally, the Commissioner's findings of misconduct appear to us to be correct. The conduct was engaged in and there was no lawful or innocent excuse for it. Like the Commissioner, however, we make no finding as to the motive for the misconduct.

[16] As already noted Mr Bradley's application was made pursuant to s.643(1)(a) of the Act and, relevantly, was to be dealt with pursuant to s.652(3) of the Act. Section 652(3) reads:

(3) In determining, for the purposes of the arbitration, whether a termination was harsh, unjust or unreasonable, the Commission must have regard to:

(a) whether there was a valid reason for the termination related to the employee's capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the employee was notified of that reason; and

(c) whether the employee was given an opportunity to respond to any reason related to the capacity or conduct of the employee; and

(d) if the termination related to unsatisfactory performance by the employee - whether the employee had been warned about that unsatisfactory performance before the termination; and

(e) the degree to which the size of the employer's undertaking, establishment or service would be likely to impact on the procedures followed in effecting the termination; and

(f) the degree to which the absence of dedicated human resource management specialists or expertise in the undertaking, establishment or service would be likely to impact on the procedures followed in effecting the termination; and

(g) any other matters that the Commission considers relevant."

[17] Adopting as we do the Commissioner's findings in relation to misconduct, we make the following findings in relation to the paragraphs of s.652(3). There was a valid reason for the termination of Mr Bradley's employment, Metricon notified him of that reason although not all of the particulars were available and Mr Bradley was given an opportunity to respond to the matters which were then put to him. The termination did not relate to unsatisfactory performance and the matters in (e) and (f) had no relevant application. An important additional matter is that the full extent of the misconduct, as revealed by the inquiries after the termination, was very significant and that fact looms large in our consideration.

[18] The misconduct involved serious breaches of trust by an employee with access to the private information on the files of all of the other employees of his employer. In normal circumstances termination for proven misconduct of that kind would not be harsh, unjust or unreasonable. While reliance was placed on the undoubted fact that Metricon terminated the employment before completing its inquiries, in our view that factor should not be given a great deal of weight. It would be strange if a termination of employment which was otherwise not harsh, unjust or unreasonable might be found to be so because the employer did not know the full extent of the misconduct at the time of termination. The misconduct had already occurred. And although Metricon did not know about all of it at the time of termination, Mr Bradley did. Mr Dircks referred us to the passage in Arrowcrest distinguishing between situations in which the employee's fraud or dishonesty contributed to the employer's state of ignorance and situations in which the employer had failed to make reasonable inquiries. [7] We do not think this case fits neatly into either category. It is apparent that Metricon had sufficient indication of the seriousness of the misconduct and that, given the nature of the employment, it was justified in acting quickly. When the full extent of the misconduct is considered along with the other matters to which we have referred there is no basis to find that the termination was harsh, unjust or unreasonable.

[19] The application for relief is dismissed. We shall issue a separate order giving effect to our decision.

M. Felman, of counsel, for Metricon Homes Pty Ltd.

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[1] 7 (1990) 27 FCR 427 at 456.

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