Summary dismissal requires incidents of serious misconduct

The Case

Jeavons v Entram Pty Ltd (2015)

Entram Pty Ltd (Entram) entered into sale of business negotiations with a competitor. During the meetings, the general manager of Entram, Mr Jeavons:

made disparaging comments about Entram’s directors and the business;
suggested the business couldn’t run without him;
sought to negotiate better employment conditions with the purchaser; and
stated the directors would get a “truckload of money” from the sale of the business, and was resentful that he would get nothing.

The potential purchaser decided not to proceed with the purchase of Entram.

Entram discovered Mr Jeavons’s behaviour and summarily dismissed him, alleging his conduct was the reason the sale did not proceed. The directors believed Mr Jeavons had deliberately tried to sabotage the sale, given he had tried to buy the business himself.

The Verdict

The Court held that Entram did not have sufficient grounds to summarily dismiss Mr Jeavons. It found that while the behaviour amounted to misconduct, it was not serious misconduct because:

the disparaging remarks about the directors would not have stopped the sale as the directors would not have had an ongoing role in the business post-sale;
Mr Jeavons was attempting to negotiate a better contract with the purchaser, rather than trying to stop the sale;
the disparaging comments about the business were in response to questions about possible improvements; and
there was no wilful dishonesty or gross disloyalty that damaged the relationship between Mr Jeavons and Entram.

The Lesson

If you wish to summarily dismiss an employee, you will have the onus of proof. As such, you should not summarily dismiss an employee unless there are clear and strong reasons justifying such a decision. Disparaging remarks may not be sufficient to justify a summary dismissal. Instead, the entire circumstances of the conduct need to be examined.

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.