A dishonest manager deserved to be dismissed - commonsense!

Too often we hear about how the judiciary is out of touch with community expectations.  It would not be hard to find cases where employers feel aggrieved for having to compensate or reinstate misbehaving employees.  Well, in Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20, five judges of the Full Federal Court of Australia overturned findings of the County Court of Victoria, in a decision full of common sense and logic. 

The case is significant because it:

• analyses the dishonest and devious conduct of a manager by focusing on the impact of his behaviour on the employment relationship;  and

• gives caution to employers that they may be bound by their decisions, despite later discovering misconduct.

The story

Mr Sautner was the Director for Commercial Business of Melbourne Stadiums Limited, Etihad Stadium.  In that role he had responsibility for the integrity of the ticketing system.

Mr Saunter’s employment contract permitted termination on six months written notice or by providing remuneration in lieu of that notice.  Alternatively, his employment could be terminated immediately for serious misconduct.

On 3 June 2013, Melbourne Stadiums advised Mr Sautner that his employment was redundant “effective from today”.  Mr Sautner collected his belongings and left the office.  Melbourne Stadiums offered him a deed of release to sign for an ex-gratia payment.

Mr Sautner tried to negotiate more.  Mr Sautner did not sign the deed and no payment was made to him.  Then on 20 June 2013 Melbourne Stadiums relied on Mr Sautner’s then discovered serious misconduct to say he would never be paid any money.  What did Mr Sautner do that led Melbourne Stadiums to what was effectively a summary dismissal?

As part of his position Mr Saunter received access to tickets for personal use.  Mr Sautner instead of attending events, used those tickets as a form of cash to barter goods and services for his personal benefit.  Contrary to terms of business agreed with the Australian Rugby Union, Mr Sautner pressured a junior employee to allow him to purchase 36 tickets in excess of the four tickets he was allowed to purchase for the British Lions test.  Mr Sautner also secretly photographed his CEO and made disparaging comments about him to a client and junior employee. 

The County Court said …

When he received nothing from Melbourne Stadiums Mr Sautner sued and won a payment of over nine months remuneration as compensation.  The County Court said:

• Melbourne Stadium’s policy did not clearly say Mr Sautner could not use the tickets in the manner he did and it was for Melbourne Stadiums “to put beyond doubt that the sale or bartering of tickets” would lead to dismissal – so the dismissal was ‘unfair’;

• the ARU, when made aware of Mr Sautner’s activities, was “prepared to condone” his actions – so why did Melbourne Stadiums need to be concerned?; 

• the comments about the CEO were private and employees are entitled to their own opinions – apparently even when they share them with subordinates;  and

• Mr Sautner’s actions didn’t show that he did not intend to perform his duties as contracted, so summary dismissal wasn’t permitted.

What the?

On appeal, the Full Federal Court ruled …

The Full Federal Court said the County Court got it completely wrong:

The focus … is not … [on] … what [Melbourne Stadiums] ought to have done to ensure it could summarily dismiss Mr Sautner for such conduct.  This focus is misplaced.  It tends to distract from the relevant question, being whether Mr Sautner’s conduct … involved a sufficiently serious breach of his obligations to his employer to warrant his summary dismissal.

Looking at the bartering of tickets, the policy of Melbourne Stadiums was simple:  tickets were available for “personal use”; it did not say “personal gain”.  In looking at Mr Saunter’s conduct in bartering the tickets for personal benefits, the Federal Court said “the impropriety of that conduct was so obvious it went without saying”.  Mr Sautner was not using the tickets for personal use but rather as a supplementary source of income.  The conduct was a serious breach of trust.

As to Mr Sautner’s conduct in acting contrary to the ARU’s requirements, the Federal Court found he “blatantly rorted [the] system”.  Mr Sautner did not disclose his conduct to Melbourne Stadiums or the ARU, and used a subordinate employee to facilitate his wrongful conduct.  This was serious misconduct.  Focusing on the ARU’s apparent forgiveness of Mr Sautner’s conduct was misconceived; “[t]he required focus was the impact of Mr Sautner’s conduct on the [employment] relationship”.

Similarly, the taking of photographs of a superior manager to use to ridicule them was a serious breach of trust.  Whilst “[r]easonable minds might differ about the seriousness of” making disparaging comments, when he coupled the comments with taking the photographs, Mr Sautner breached the trust of his employer.

Summary dismissal was justified:

… each of the … misconduct was deliberate, involved elements of dishonesty, and of its very nature struck at the heart of the trust relationship between Mr Sautner and [Melbourne Stadiums].  Each of those three, individually, justified summary dismissal.  Taken together, …, no other conclusion was reasonably open …

Ah, some commonsense.  But wait, there is more.

Forever hold your peace 

The Full Federal Court said that had Melbourne Stadiums lawfully terminated Mr Sautner’s employment on notice, then it could not now resuscitate the contract to then re-terminate it on some other ground (and avoid paying Mr Sautner’s contractual entitlements).  Melbourne Stadiums would need to live with its choice of termination, once properly implemented.

A lucky escape

Melbourne Stadiums was nevertheless able to summarily dismiss Mr Sautner because not only had Mr Sautner not signed the deed of release, but it had not given him six months’ notice or paid him that notice in lieu, as required by the contract.  Not having yet effectively terminated his employment in accordance with the contract, Melbourne Stadiums could therefore now rely on summary dismissal of Mr Sautner.

Lessons for employers

The case provides a great illustration of the stark differences between an unfair dismissal and breach of contract case.

Undoubtedly, the considerations of the County Court might have some sway in determining whether a dismissal was unfair.  In contrast, in a breach of contract case, issues of fairness do not arise.

That is not to say that Mr Sautner would have necessarily been successful in an unfair dismissal claim.  He was a senior employee and his misconduct was serious, deliberate and self-serving.  On the ‘fair go all round’ basis his dismissal may have been fair.  For less senior employees, perhaps a clearer policy may have been necessary.

The case also illustrates the danger in trying to rely on later discovered misconduct to justify a summary termination after dismissal on notice.  Once the decision has been made, the employer is stuck with the consequence.  If notice has been paid in lieu, the employer can’t recover the money even if it could have dismissed summarily - if only it knew then what it knows now.  But there might be a way around the problem - the Full Federal Court speculated that “a contractual term entitling the employer to repayment of those monies” might solve the problem.

Another reason to review those senior executive contracts?

Author: James Mattson