In April this year we reported on the Employment Relations Authority determination on the justified dismissal of Guy Hallwright, a senior investment analyst at Forsyth Barr. The case was recently brought before the Employment Court on appeal, and last week the Employment Court held that Mr Hallwright’s dismissal was justified.

In the case of Hallwright v Forsyth Barr Ltd [2013] NZEmpC 202 the Employment Court found that Mr Hallwright’s highly publicised “road rage” conviction, which took place out of work hours and which was widely published by national news media, brought Forsyth Barr into disrepute and compromised Mr Hallwright’s ability to do his job.

The Court’s decision provides some valuable practical guidance for employers. It is a useful reminder for both employers and employees that misconduct occurring outside work hours may justify a dismissal. Employers should always take care to act reasonably in the circumstances and follow a fair process. This may include delaying a decision on discipline/dismissal pending the outcome of a criminal trial and sentencing.

Behaviour related to employment

Mr Hallwright’s employment agreement included an obligation not to engage in any activity that was likely to compromise his ability to carry out his duties.

Because the incident did not occur during work hours, Mr Hallwright contended that his conduct was unrelated to his employment, and that it was a private “driving” matter. (He also considered, at the time, that he was not under an obligation to inform his employer of the incident or the related charges.) In Court, Mr Hallwright argued that his employer was not materially bought into disrepute by either his conviction or the media reporting. However, the Court found otherwise.

It is well established that conduct that occurs outside the workplace can give rise to disciplinary action. While much will depend on the particular context, the Court commented in Hallwright that different forms of out-of-hours conduct cannot automatically be excluded from the reach of an employment agreement.

In assessing whether conduct is linked to employment, the Court said that the test is not necessarily whether the conduct itself is directly linked, but whether it has the potential to impact negatively on employment. Judge Inglis explained, “that is why an employee can be held out for what might otherwise be regarded a private activity, carried out away from the workplace and with no ostensible connection to the employment or other employees.”

The Court reiterated that the focus of the enquiry is on the impact of an employee’s conduct on the employer’s business. The nature of an employer’s business and the validity of its concerns about maintaining its reputation (both in the marketplace and within its client base) are taken into account in determining the required nexus between an employee’s conduct and their employment.

Serious misconduct

Mr Hallwright’s employment agreement defined serious misconduct to include conduct “bringing the employer into disrepute”. Reputational damage can be difficult for employers to establish. Helpfully for employers, the Court reiterated that an employer is not required to prove that it has suffered reputational damage to establish serious misconduct. Rather, the standard is whether the employer has a reasonable basis for forming the view that its employee has committed serious misconduct at the relevant time.

Accordingly, the Court found that the employer’s view that its reputation had been damaged was one that was reasonably open to it, having regard to the circumstances at the time. Judge Inglis commented that “the reality was that Mr Hallwright was in a high profile, trusted senior position within the company, and extensive media coverage had linked his offending with the company brand.”

Further, an employer is not required to take retrospective steps to apply for name suppression or seek out public relations advice in order to maintain its position. Mr Hallwright’s submission that the company was responsible for not mitigating the damage to its reputation was unsuccessful.

Conviction affected employee’s ability to undertake his duties

Mr Hallwright submitted in Court that his engagement with news media was an “ancillary,” rather than integral, part of his role, and his ability to undertake his duties was not compromised by either the fact of his conviction or the media reporting. The Court found otherwise, and held that an integral part of his role involved media engagement through providing comment on topical issues.

Court’s approval of employer’s process

While the incident occurred in 2010, Mr Hallwright’s dismissal did not take place until some two years later following the conclusion of the criminal process.

The Court noted that the company was placed in a difficult position due to the lengthy criminal process. On the one hand, any steps to take disciplinary action against Mr Hallwright pending the outcome of the criminal process may have led to a personal grievance, particularly given the employee’s assurances that he was innocent and the truth would come out at trial. On the other hand, Mr Hallwright later complained that he had been lulled into a false sense of security because the employer delayed taking disciplinary action.

The Court approved the employer’s course of action in standing behind Mr Hallwright while he vigorously defended the criminal charges, wearing the collateral damage to its reputation in the interim, giving him the presumption of innocence and making it clear that it was reserving judgment and allowing the criminal process to run its course before reaching a concluded view or taking disciplinary action. Reassuringly for employers, the Court commented that it “struggled to see” how the employer could be criticised for adopting the process that it did.

While in practice this meant that Mr Hallwright stayed in employment for two years, including engaging with media on work-related issues, the Court found that this did not vitiate the company’s ability to take disciplinary action against him following his conviction.