The Case

Joseph v Parnell Corporate Services Pty Ltd (2021)

Mr Joseph was the CEO of Parnell Corporate Services Pty Ltd (Parnell) when his employment was summarily terminated for misconduct (consisting of assault, misleading conduct and discrimination), which resulted in Parnell paying compensation arising from Mr Joseph’s misconduct. In summarily terminating Mr Joseph’s employment, Parnell withheld his annual leave and long service leave entitlements of around $140,000.

Mr Joseph commenced proceedings, alleging his employment was wrongfully terminated, claiming compensation and non-payment of his annual leave and long service leave entitlements. Parnell cross claimed against Mr Joseph, seeking compensation for the damages it had paid as a result of his conduct and claiming it could offset this by withholding Mr Joseph’s annual leave and long service leave payments.

Mr Joseph alleged he was indemnified by Parnell and could not be held liable for his misconduct.

The Verdict

The Federal Court and Full Court of the Federal Court found that as this was an act of serious misconduct, Mr Joseph was not protected by the Employees Liability Act 1991 (NSW).

The Federal Court and Full Court of the Federal Court on appeal also held that the summary termination of Ms Joseph’s employment had been lawful.

However, the Federal Court at first instance held that Parnell could not withhold the payment of Mr Joseph’s annual leave and long service leave, as this breached s324 of the Fair Work Act 2009 (Cth) as it was not a permitted deduction. The Full Court of the Federal Court overturned this decision and held that Parnell could withhold payment given the circumstances of this case.

The Lessons

Often employers can find themselves in trouble because of the actions taken by their employees. Infrequently, such employees are held accountable for their actions in ways other than the employer simply concluding the employee’s employment. This case outlines how one such employee was held accountable.

In circumstances of serious misconduct, where an employer suffers loss, it is important to consider whether a cause of action can be bought against an employee to recoup that loss, or at the very least, retain payments owed to the employee to offset the loss. Obtaining legal advice about the particular circumstances is warranted, as if the circumstances do not warrant the taking of such action, an employer itself can be found to be in breach.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.