A recent decision of the Fair Work Commission has resulted in an employee being awarded the maximum compensation of 26 weeks pay (a little over $40,000) after it was held she was constructively dismissed. The constructive dismissal arose after the employer accused the employee of spreading malicious rumours in front of the entire workplace.

In the matter of Jenny Yang v FCS Business Service Pty Ltd [2020] FWC 4560 (FCS)the director of the Company became aware of malicious rumours regarding his relationship with a fellow staff member. What followed was a series of errors by the Company in the investigation and dismissal process. This ultimately resulted in a finding by the Fair Work Commission the employee was unfairly dismissed and entitled to the maximum compensation under the Act.

Tip 1 – Address rumours and gossip immediately

Workplace rumours are toxic and spread quickly. When management becomes aware of a malicious rumour circulating it should immediately take steps to investigate the matter.   Allowing rumours to circulate without taking action is highly detrimental to the working environment and employee morale. As such, an employer should immediately take steps to stop the spread of the rumour and prevent more employees getting involved.

By taking immediate action to investigate malicious rumours, employees will quickly become aware that the spreading of gossip is not acceptable in the workplace. This will prevent the continuation of the malicious rumours. Additionally, by acting swiftly and employer immediately sets a standard of appropriate behaviour. This will mitigate the risk of future gossip and rumours spreading through the workplace.

Tip 2 – Conduct a thorough independent investigation

Workplace politics and rumours can be difficult to manage, particularly where the rumours relate to owners and/or managers of the business. An error made by the Company in FCS was the director that was the subject of the rumour also conducted the investigation into the rumour. When investigating such incidents independence is key. In circumstances where an incident involves a manager or director, the manager or director should step back from the investigation process as their involvement may result in personal bias. A Company should arrange for a human resources representative or an independent third party to conduct an investigation into any rumours circulating within the organisation.

Additionally, an investigation must be performed professionally and in accordance with the principles of procedural fairness. In FCS, upon becoming aware of the rumours the director called all employees into a meeting. During this meeting the director asked employees to raise their hand if they had heard the rumour from the applicant. After no employees raised their hands, a secret paper ballot was conducted where employees were given the opportunity to anonymously state whether or not they had heard the rumour from the applicant. The paper ballot resulted in a number of employees stating the applicant had spread the rumours. 

When conducting an internal investigation a Company must ensure it adheres to the principles of procedural fairness. This involves ensuring all relevant parties (including the complainant, witnesses and respondent) are given an opportunity to provide full details around what occurred. Additionally, any allegations should be raised privately. The contents of all meetings should remain confidential. This was a key failure in the FCS case. By making accusations against the employee in front of all staff, the employee was humiliated and was put in a position where she had no choice but to resign her employment.

Tip 3 – Ensure the final outcome is handled appropriately

A failure to conduct a proper investigation prior to terminating an employee may invalidate the termination itself, even where there are sufficient grounds for termination. This was highlighted by Commissioner Cambridge who stated: “had there been a proper, careful, fair and just investigation into the rumours which ultimately confirmed that the applicant had maliciously and falsely created and disseminated false rumours about Mr Shen, such conduct may have represented a sound, defensible and well-founded reason to dismiss the applicant”.  

Although the spreading of gossip and malicious rumours may be a “a sound, defensible and well-founded reason to dismiss”, if the employer does not comply with the provisions of Section 387 of the Fair Work Act (for example, by allowing a support person to be present), they may nevertheless be the subject of an unfair dismissal application. Where an employer is concerned regarding malicious rumours being circulated in the workplace, they should conduct interviews to substantiate any allegation against an employee. Once an allegation is substantiated, the allegation should be put to the employee in a letter of determination and a show cause notice. The organisation should then take the appropriate disciplinary action against the employee. These important procedural steps, will address the circulation of malicious rumours, without exposing the organisation to unnecessary legal risk.

We are here to help Employers deal with potential difficult claims hopefully before they even become a claim please contact +61 (07) 3876 5111 to arrange an obligation free consultation to discuss your inquiries and we will do our best to provide a helpful, practical solution. 

Written By

Jonathan Mamaril

Principal

NB Lawyers – Lawyers for Employers

jonathanm@nb-lawyers.com.au

+61 (07) 3876 5111

Assisted by

Matthew Guteridge

Lawyer

NB Lawyers – Lawyers for Employers

matthewg@nb-lawyers.com.au

+61 (07) 3876 5111

About the Authors

Jonathan Mamaril leads a team of handpicked experts in the areas of employment law and commercial law who focus on educating clients to avoid headaches, provide advice on issues before they fester and when action needs to be taken and there is a problem mitigate risk and liability. With a core value of helping first and providing practical advice, Jonathan is a sought after advisor to a number of Employers and as a speaker for forums and seminars where his expertise is invaluable as a leader in this area as a lawyer for employers.

Matthew Guteridge has experience in working in a variety of sectors including Manufacturing and Health and the hospitality sector in both Brisbane and Regional Queensland. Matthew enjoys and has great expertise in providing advice and representation on all matters relating to employment law, including Enterprise Agreements, Dismissal Disputes and Bullying complaints.

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