Frontline Intelligence: Legal - The high cost of inadequate investigation

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Joydeep Hor and Kirryn West outline the importance of conducting adequate investigations and the ramifications of an unsatisfactory workplace culture in sexual harassment cases.

People + Culture Strategies recently successfully acted for a client to secure over $1.4m in a case before the Supreme Court of New South Wales. The case concerned the termination of that senior executive’s employment following sexual harassment allegations and highlights a number of important issues for employers, namely, the importance of conducting adequate investigations and the ramifications of an unsatisfactory workplace culture.

The facts

The executive was employed as the Sales Director of Bibby Financial Services Australia (“Bibby”) from 2002 to February 2009. Under his contract, the Sales Director was entitled to a one-off “special bonus” of up to $1.4m. However, shortly before the special bonus payment was due, Bibby terminated the Sales Director’s employment on the basis of serious misconduct relating to allegations of sexual harassment. The allegations included inappropriate touching, inappropriate comments and unwelcome attention.

In January 2009, Bibby conducted an investigation into the allegations of sexual harassment and interviewed a number of employees in the Sales Director’s team.

None of the employees interviewed supported the claims of sexual harassment. Despite this, on 4 February 2009, the Sales Director was called to a meeting where he was told that:

“Your conduct is unbecoming of a director…If you do not resign we will terminate your contract. This process is not a negotiation. We do not have to tell you anything.”

Bibby then took steps to terminate the Sales Director’s employment for serious misconduct and did not pay the Sales Director’s notice period or the special bonus. When the Sales Director brought a claim, Bibby also sought to rely on conduct of the Sales Director that had been discovered post-termination, including communicating the taking of ecstasy tablets and failing to disclose a potential confl ict of interest.

The findings

The Court held that Bibby decided to terminate the employment of the Sales Director on 4 February 2009 and the allegations of sexual harassment or other serious misconduct were not upheld. Therefore, the Sales Director was entitled to the special bonus and six months of notice. The Court also considered whether any of the conduct discovered post-termination could be used to justify a termination on the basis of serious misconduct.

In relation to the emails evidencing drug taking, the Court found that the conduct of the Sales Director could only be viewed in the context of Bibby’s policies, procedures and corporate culture. Bibby’s Drug and Alcohol Policy provided that in the event of an incident involving drugs or alcohol, Bibby would intervene and offer assistance. In such circumstances, the Court found that the Sales Director’s employment would not have been terminated summarily on the basis of sending emails referencing drug use.

Further, the Court found that at that time the emails were sent, Bibby had a corporate culture which tolerated heavy drinking and condoned and paid for the use of dating and escort services and strip clubs as part of the business. Bibby’s workplace culture meant that the Sales Director’s conduct was no more damaging to the company’s reputation than Bibby’s Managing Director attending lap dancing venues and strip clubs with clients or suppliers.

Key learnings for employers

 

  • Investigations should be conducted by persons who are experienced and competent, in many circumstances, an external independent investigator should be engaged.
  • Obtaining evidence corroborating the allegations is important; in the absence of such evidence, employers should be cautious of making adverse findings.
  • Procedural fairness must be followed. Any employee being investigated should have all of the allegations put to them and be provided with a reasonable opportunity to respond
  • Policies and procedures should be carefully drafted and reviewed to ensure they do not impose onerous obligations on the employer.
  • The corporate culture of an organisation should be audited regularly; appropriate behaviour and culture training should be provided to all employees and managers regardless of their seniority.

 

About the author

Joydeep Hor is the managing principal at People + Culture Strategies. p. 02 8094 3101. M: 0416 265 795. e: joydeep.hor@peopleculture.com.au

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