Executive claims flawed process, but employer alleged failures to manage conflicts of interest and financial management responsibilities
The Employment Relations Authority (ERA) recently dealt with a case involving a chief executive who was dismissed for alleged serious misconduct after an investigation into financial management concerns, raising important questions about procedural fairness and conflict of interest management in workplace investigations.
The worker argued that his dismissal was unjustified, claiming the investigation process was flawed and that he had not been given adequate opportunity to respond to allegations.
He maintained that concerns about his performance had never been properly raised with him before the investigation commenced, and that the speed of the dismissal process was unfair.
The employer defended the dismissal, arguing that the worker had breached good faith obligations through failures to manage conflicts of interest and financial management responsibilities.
The organisation maintained that the worker's conduct had fundamentally undermined trust and confidence, justifying summary dismissal for serious misconduct.
CEO's company liquidation triggers investigation
The worker had been employed as chief executive of a sports association from early 2022 until his dismissal in December 2023. Prior to his appointment, his company had entered into a sponsorship agreement providing $10,000 per year in "in kind" services for three years in exchange for free advertising. This arrangement created a potential conflict of interest that would become central to the dismissal.
The worker's company went into voluntary liquidation in March 2023, but he failed to immediately inform the board. When the board chairperson discovered the liquidation through other sources, the worker said "he was too embarrassed" to inform the board.
The chairperson stated: "Our main concern was with the fact that he hid this from us and didn't report the conflict or come clean. The liquidation of his company may have been fine if he had front-footed it, but he never did."
Additional concerns arose regarding the worker's financial management during a restructuring process. Two personal grievance settlements he authorised exceeded his financial delegations, and the chairperson claimed he had been seeking information about these matters without receiving adequate updates from the worker.
Investigation process raises procedural fairness questions
The organisation engaged a private investigator in August 2023 to examine four specific concerns. On 25 August, the chairperson and another board member handed the worker a letter outlining the investigation, which led to an emotional confrontation.
The worker said he was "shocked and blindsided by the news he was being investigated" and was observed showing the confidential letter to staff members.
During a November 2023 coffee meeting, the chairperson told the worker to "stop stressing and that everything had been sorted" and advised "that it would not be a good idea for [the worker] to participate in an interview with the private investigator because it would delay matters." However, the chairperson later denied giving this advice.
The worker subsequently declined to participate in the investigation interview, which proceeded without his input. The investigation failed to gather crucial evidence from relevant witnesses, particularly the former chairperson who had negotiated the original sponsorship agreement and "was not spoken to at any stage during any of [the organisation's] investigation."
ERA examines employer's investigation into misconduct
The ERA found significant problems with the investigation process. The authority noted that concerns had not been properly raised with the worker before the investigation commenced. Text messages between the chairperson and worker in September 2023 showed the chairperson saying:
"As far as I can see and know it was fine. Yes maybe more communication could have been beneficial, but you and I already talked about that."
The ERA found these communications were "completely at odds with the statement [the chairperson] gave to the private investigator" regarding financial and sponsorship concerns.
The authority determined there was "a disconnect between [the chairperson's] text messages to [the worker] and the allegations that were drafted."
The authority also identified a fundamental fairness issue with the decision-makers, noting: "Appointing [the chairperson and board member] as decision makers when they were also witnesses is unlikely to be a step a fair and reasonable employer is likely to take." This arrangement violated principles of natural justice in workplace investigations.
Speed of dismissal process deemed unfair
The ERA found that the worker was not given adequate time to respond to allegations. After receiving detailed allegations on 7 December 2023, he provided a written response on 14 December and received additional information on 18 December. The disciplinary meeting occurred on 19 December, where he was dismissed in the same meeting.
The authority noted: "This was not enough time to respond to the employer's new information and the allegations in general." The ERA found that "new information from auditor and CFO had been provided the night before" without adequate opportunity for the worker to respond.
The accelerated timeline and procedural failures resulted in the worker being denied fundamental fairness throughout the investigation and dismissal process, undermining the employer's ability to justify the serious misconduct findings.
Is it unjustified dismissal?
The ERA concluded: "I am satisfied [the worker's] dismissal was both procedurally and substantively unjustified." The authority found that while some of the worker's conduct was problematic, the investigation process was fundamentally flawed and the allegations were not sufficiently proven to justify dismissal for serious misconduct.
The ERA found that the worker "has not contributed to his personal grievance," noting: "While [the worker] himself accepted to a degree he could have done things differently and the way in which the Board had previously operated with verbal agreements was not optimal for the future of [the organisation], he is not responsible for the failures to raise these matters with him at an earlier stage."
The ERA ordered compensation of "$25,000.00 for unjustified dismissal" and "lost wages in an amount equivalent to 4 months wages." The decision emphasised the serious procedural failures and unfair treatment throughout the investigation process, resulting in a substantial financial consequence for the employer's failure to follow proper dismissal procedures.
