Out of hours conduct: differing approaches in workers’ compensation, unfair dismissal and equal opportunity jurisdictions

Forty years ago, workplaces in Australia were very different from the workplaces of modern Australia. There was no email, no mobile telephones, no social media. Most employees came to work at a workplace, “clocked on”, did their work and then “clocked off”. The line between working (and being at work) and an employee’s private life outside work was usually clear and unambiguous. Employees rarely worked remotely or from home (and there was mostly no capacity to do so).

The intervening years have seen a rate of technological change at an unprecedented rate which has blurred the line between work and private life to such an extent that many employers and employees struggle to identify which is which.

Not even the most ardent advocate for the rights of employees would challenge the right of an employer to regulate the conduct of employees at work — particularly where that regulation is aimed at protecting the health safety and welfare of all employees — but what of conduct that occurs outside the usual workplace or outside usual working hours?

Questions that arise include:

• When is conduct that occurs outside the usual workplace or outside usual working hours sufficiently connected to work to allow the employer to regulate it?
• When should the employer be responsible for things that occur outside the workplace which injure or damage an employee?
• Should there be a connection between the right to regulate conduct and being held responsible? 

An employer’s liability for, and capacity to regulate, employee conduct that may, at first blush, be considered private in nature and/or occurs out of hours is a complex area that has given rise to significant judicial consideration in a variety of different contexts.

It is an issue that raises challenging policy considerations regarding what conduct an employer can and/or should legitimately regulate in order to protect itself and its legitimate business interests, and when such regulation infringes an employee’s right to be free from undue influence or control from their employer in their personal and private activities.

 

• workers’ compensation;
• unfair dismissal; and
• equal opportunity (sexual harassment).

As will be seen, while the unfair dismissal and workers’ compensation jurisdictions are becoming more aligned in that they are narrowing the scope of out of hours conduct that an employer can be responsible for (and can regulate), this approach has not yet manifested itself more regularly in the equal opportunity space.

Workers’ compensation

Significance of “out of or in the course of employment”

In the workers’ compensation jurisdiction, a worker is entitled to appropriate compensation in relation to an injury to the worker arising out of or in the course of employment.^[1] The scope of what is within “the course of” employment generally depends on the sufficiency of the connection or nexus between the employment and the thing done by the employee at the time the injury occurred. The outcomes of cases have varied and have largely turned on their facts, but there has been, over time, a discernable trend towards the adoption of a beneficial (to the employee) approach to whether something is “in the course of” employment.^[2]

High Court’s ruling provides clarity: Comcare v PVYW

The High Court in Comcare v PVYW^[3] recently provided some much needed clarity on this issue in the context of injuries that occur outside of work as a result of attendance at a particular place or engagement in a particular activity.

This case involved an appeal against a decision of the Full Federal Court to award workers’ compensation to a public servant who was injured in the course of having sexual relations while on a work trip. The worker arranged to meet a friend outside of work hours during the work trip and, while engaging in sexual activity, a light fitting was pulled from its mount and struck the worker’s face, injuring her.

The Full Federal Court had held that the injury arose “in the course of employment” because it was suffered during an interval or interlude from an overall period of work while she was in a particular place where her employer had induced or encouraged her to be,^[4] and was therefore compensable.

The High Court overturned this decision on the basis that, although the injuries were sustained during an interval or interlude within an overall period of work, the employer did not encourage the employee to engage in the sexual activities she was engaged in when she was injured and should therefore not be held liable to pay compensation.

The High Court clarified that, where an injury occurs outside of work hours as a result of attendance at a particular place or engagement in a particular activity, the injury would only be “in the course of employment” if the employee attended the place or engaged in the activity because the employer encouraged or induced them to do so. In this sense “inducement or encouragement” by the employer may give rise to liability to pay compensation, but it also operates as a limit on liability for injuries sustained out of work hours during an overall period of work.

Developments after High Court’s ruling

Subsequent to the High Court decision in Comcare v PVYW, the Full Court of the Federal Court had occasion to consider a similar type of matter, but reached a different conclusion that does seem to have some inconsistency with the reasoning of the High Court. In Westrupp v BIS Industries Ltd^[5] the employee had been injured at a tavern within the camp at a remote mine site and was involved in an altercation with another employee which led to the employee being assaulted. The employee was not the instigator of the assault.

The Full Court held that the injury was sustained in the course of employment because the employer induced the employee to be at the camp and the tavern was part of the camp. The Court held that, as the employee had not engaged in misconduct (which would have disentitled him to compensation), his injuries were compensable.

The reasoning of the Full Court in Westrupp is difficult to reconcile with the reasoning of the High Court in Comcare v PVYW. Both occurred at a location the employer encouraged the employee to be at after their working shift had ended. Both involved the employee being injured and neither involved a finding that the employee had been engaged in misconduct. In Comcare v PVYW the High Court said a further step was required — to look at the activity the employee was engaged in and determine if it was encouraged by the employer. If such an analysis was applied in Westrupp, it would be difficult to see how the activity the employee was engaged in (an altercation — even if he did not instigate it) was one that the employer encouraged him to engage in.

Unfair dismissal

General principles

For employees who fall within the unfair dismissal jurisdiction under the Fair Work Act 2009 (Cth), an employer’s ability to fairly dismiss the employee for out of hours misconduct is limited to misconduct that the employer is legitimately entitled to regulate or control. In the context of unfair dismissal cases, Federal Tribunals have held that an employer has no right to control or regulate an employee’s out of hours conduct, unless the employee’s behaviour outside of working hours has an impact on their employment to the extent that it can be said to breach an express or implied term of their contract of employment.^[6]

Accordingly, where an employee engages in misconduct while not at work or not required to be performing their work duties, the employer will generally not be able to fairly dismiss that employee.

Out of hours conduct and instances of valid dismissal

There are some circumstances that have been recognized by the courts as ones in which “out of hours” misconduct by an employee may constitute a valid reason for dismissal. In B. Rose v Telstra Corporation Ltd, Vice President Ross stated that:

"It is clear that in certain circumstances an employee’s employment may be validly terminated because of out of hours conduct. But such circumstances are limited:

1. the conduct must be such that, viewed objectively, it is likely to cause serious damage to the relationship between the employer and the employee;
2. the conduct damages the employer’s interests; or
3. the conduct is incompatible with the employee’s duty as an employee."

The test to be applied is that “in essence the conduct complained of must be of such gravity or importance as to indicate a rejection or repudiation of the employment contract by the employee.”

Rose v Telstra: misconduct insufficiently connected to employment

In Rose v Telstra, the employee, Mr Rose, was involved in a fight with another employee while off-duty on a work trip funded by his employer. VP Ross held that Mr Rose’s conduct lacked the requisite connection to his employment because the incident took place outside of working hours, the employee was not wearing his work uniform and was not “on-call” at the relevant time, the incident took place in a hotel room (not a public place) and accordingly there was no evidence that the reputation of the employer had been tarnished by what occurred. It was therefore not accepted that Mr Rose’s conduct, objectively viewed, was likely to cause serious damage to his employment relationship and he was therefore unfairly dismissed.

The facts in Rose v Telstra were reasonably similar to the facts in Westrupp and yet in different jursidictions led to very different outcomes. The employer in Rose v Telstra could not fairly dismiss Mr Rose because his misconduct was not sufficiently connected with his employment and yet applying the reasoning in Westrupp, the employer could have been liable for any injuries suffered by the other employee.

When is there sufficient connection between employment relationship and out of hours conduct?

For an employer to successfully defend an unfair dismissal claim in circumstances where the reason for the dismissal related to private or out of hours conduct by the employee, the employer must demonstrate that there is a sufficient nexus between the employment relationship and the conduct in question.

For example, in Streeter v Telstra Corporation,^[7] the Full Bench of the Australian Industrial Relations Commission (AIRC) held that, despite the fact that the relevant conduct of the employee was of an inherently private nature (namely, engaging in consenting sexual activity with co-workers which was observed by another co-worker in a privately paid for hotel room following an after-work function), the employee’s failure to honestly answer questions concerning her conduct during an investigation into that conduct amounted to a valid reason for termination. This decision was justified on the basis that, notwithstanding the inherently personal nature of her activities, the employee needed to be honest with her employer during the investigation so that the employer could determine and take any appropriate action. The employee’s dishonesty during the investigation meant the employer could not be confident that she would be honest in future, thereby destroying the relationship of trust and confidence between them.^[8] If, however, the employee had been honest in the investigation there would not have been a valid reason for dismissal because the employee’s conduct, while offending a co-worker, was private in nature.

In contrast, in Applicant v Respondent,^[9] the Full Bench of the AIRC dismissed an appeal by the employer against a finding that its dismissal of an employee for his out of hours conduct was harsh, unjust or unreasonable. The employer dismissed the flight attendant following an investigation into allegations that he had sexually harassed a fellow flight attendant in a hotel room paid for by the employer. The Full Bench upheld the first instance decision that the company’s policies did not extend to the conduct of the dismissed employee that occurred in the complainant’s hotel room. The Full Bench noted that, although the employer in this case was responsible for providing and paying for the overseas accommodation, flight attendants have time off in foreign destinations which is clearly a break from employment obligations and (save for in the circumstances set out in Rose v Telstra) conduct engaged in during that time off is not something an employer can legitimately seek to regulate or control.

Vicarious liability and sufficient connection

Later cases have held that where an employer would be held vicariously liable for the conduct of an employee outside of working hours, this would create a sufficient connection between the conduct and the employment so as to bring the conduct within the scope of legitimate employer supervision.^[10] The application of this principle in the unfair dismissal jurisdiction does however lack consistency.

Case study: Tribunal decision in Stephen Keenan v Leighton Boral Amey

In the case of Stephen Keenan v Leighton Boral Amey, in relation to the allegation of sexual harassment, because that conduct was held not to be in connection with the employee’s employment, it did not constitute unlawful sexual harassment for which the employer could be held vicariously liable and therefore did not constitute a valid reason for dismissal.

In this case, a team leader, Mr Keenan, was dismissed as a result of his conduct at and after his work Christmas function. During the function, Mr Keenan swore at multiple senior managers and directors and made inappropriate comments to a female staff member. Following the formal conclusion of the work function at 10 pm, a large group including Mr Keenan moved upstairs to the public bar, which had not been hired out by their employer, to continue socializing. At this point, Mr Keenan engaged in further inappropriate conduct, including suddenly grabbing another female colleague’s face with both hands and kissing her on the mouth, then saying: “I’m going to go home and dream about you tonight.”

Conduct after the end of the formal function

In relation to Mr Keenan’s conduct that occurred after the end of the formal Christmas function, the AIRC held that such conduct could not be said to be in connection with Mr Keenan’s employment because “the social interaction which occurred there was not in any sense organized, authorised, proposed or induced” by the employer. Those who gathered at the public bar did so entirely of their own volition, it was in a public place and there was nothing in the employer’s code of conduct or policies that suggested they had any application to social activities of this nature. The AIRC held that it followed from that conclusion that Mr Keenan’s sexually harassing behaviour towards the female colleague he kissed was not rendered unlawful by section 28B of the Sex Discrimination Act 1984 (Cth) (SD Act), and was therefore not conduct for which the employer was vicariously liable. On this basis, it was held not to constitute a valid reason for dismissal.

Leaving aside the issue of vicarious liability, the Commission went on to hold the conduct that occurred after the formal work Christmas function was also outside the scope of Mr Keenan’s employment because it was properly characterized as private activity and therefore could not constitute a valid reason for termination.

Conduct at the formal work Christmas function

In relation to Mr Keenan’s conduct at the formal work Christmas function, it was held that this could be the subject of legitimate employer supervision and was in breach of the employer’s policies, thereby creating a valid reason for termination. Notwithstanding this, the dismissal was ultimately held to be harsh, unjust and unreasonable due to the process by which it was implemented, however it should be noted that an appeal has been lodged against this decision (and so this position may change in future).

Commission’s role in determining liability under SD Act

The decision of the Commission in Keenan is problematic because as a Federal Tribunal, it cannot make a determinative judgment about liability under the SD Act. While the Commission expressed a view that the employer would not be liable for Mr Keenan’s conduct under the SD Act, this view appears inconsistent with much of the case law applying in sexual harassment cases in both State Tribunals and Courts and Federal Courts.

Equal opportunity — sexual harassment

Statutory framework: Federal Sex Discrimination Act

Unlike the workers’ compensation (to some extent) and unfair dismissal (to a greater extent) jurisdictions, which have tried to narrow the scope of out of hours conduct that employers can be liable for and/or regulate, the sexual harassment jurisdictions (both State and Federal) appear to take a much broader approach. Federally, the SD Act defines sexual harassment as engaging in an unwelcome sexual advance or request for sexual favours, or other unwelcome conduct of a sexual nature, in circumstances where a reasonable person would anticipate that the person harassed would be offended, humiliated or intimidated.^[11]

The SD Act prohibits employees and other “workplace participants” (which include an employer or employee, a commission agent or contractor, and a partner in a partnership) from sexually harassing other employees or workplace participants. In relation to “workplace participants”, the prohibition on sexual harassment is limited to such harassment “at a place that is the workplace of either or both of those persons”, where “workplace” is defined to mean “a place at which a workplace participant works or otherwise carries out functions in connection with being a workplace participant”.

Meaning of “workplace”: Federal Court decision Vergara v Ewin

In this context, courts have generally given a wide meaning to the term “workplace”, as was demonstrated in Vergara v Ewin.^[12] In that case, the court held that Mr Vergara, a contractor providing services to Living and Leisure Australia Ltd (LLA) had sexually harassed Ms Ewin, an employee of LLA, on several occasions, including at the office of KPMG, where the two were visiting for a work meeting, at the LLA office, at a hotel across from the LLA office and on the street outside the LLA office.

The sexual harassment at the hotel and the street outside the LLA office occurred after the court found Mr Vergara sexually harassed Ms Ewin at the LLA office, and requested that she speaks with him. Ms Ewin suggested that they move to the hotel, as there was nobody else in the LLA office and she felt safer speaking in a public place. In relation to this conduct, the key issue was whether the sexual harassment occurred in the “workplace”, that is, the place of work or the place at which functions in connection with being a workplace participant are carried out. The Full Federal Court upheld the first instance decision, finding that each instance of sexual harassment occurred in the workplace and, in relation to the sexual harassment at the hotel and on the street, the purpose of attendance and thus the function carried out at the hotel was to deal with the sexual harassment which began at the workplace and on this basis, there was a sufficient connection to the workplace to render the hotel a workplace for the purposes of the SD Act.

“In connection with employment”: Federal Court Full Bench decision: South Pacific Resort Hotels Pty Ltd v Trainor

A broad interpretation has also been given to the circumstances in which an employer will be vicariously liable for the sexual harassment of its employees. Under s 106 of the SD Act, vicarious liability arises when the sexual harassment is done “in connection with the employment” of the employee, except in circumstances where the employer has taken all reasonable steps to prevent the conduct occurring.

In South Pacific Resort Hotels Pty Ltd v Trainor,^[13] it was held that the expression “in connection with employment” in section 106 is a broad one of practical application. In that case, Ms Trainor was sexually harassed in accommodation provided for, and operated by, her employer. Her harasser was a fellow employee who was also residing at the same accommodation, in a separate room, for the purpose of his work. The employer had a policy that prevented non-employees from entering the staff accommodation. The sexual harassment occurred outside working hours in Ms Trainor’s room.

The employer argued that, other than the fact that the two were employees, there was no evidence that it was by reason of their employment that Ms Trainor and her harasser came into contact, and as the conduct occurred out of hours, the two were not performing any function related to their employment.

The Full Federal Court disagreed with the employer’s argument, finding that the conduct occurred in accommodation occupied by the complainant and her harasser for the purpose of their common employment. It could not be said that their common employment was unrelated or merely incidental to the sexual harassment.In particular, the fact that non-employees were prohibited from entering the staff accommodation meant that the only reason the two were in that particular accommodation was their common employment.

Conclusion

Blurring of lines between private/personal and employment related behaviour

The cases discussed above demonstrate the difficulty posed by the blurring of the line between what constitutes out of hours/private conduct and what constitutes conduct that an employer can legitimately regulate and/or be held liable for.

Aligning of unfair and workers’ compensation jurisdictions

It appears that the unfair dismissal and workers’ compensation jurisdictions are becoming more aligned in that they are narrowing the scope of out of hours conduct that an employer can be responsible for by limiting it to circumstances in which such conduct can be said to have a requisite connection with employment. As has been outlined, such connection often arises where an employer has an ability to control the conduct of the employee. The alignment of these two jurisdictions is a welcome move towards increasing clarity for employers and employees as to what is work (or work related) conduct and what is private conduct. Employees should be free to engage in private conduct which has no connection with work, within the boundaries of the law, without fear of reprisal from their employer — but by the same token employers should not be liable for things that happen during such private activity.

In the workers’ compensation space, this is done through the requirement of “inducement or encouragement” by the employer to engage in the activity giving rise to an injury outside of work hours and, as is evident from the reasoning in Comcare v PVYW, an employer should not be held liable for the out of hours conduct of its employees that the employer has no way of regulating or controlling.

Similarly in the unfair dismissal jurisdiction, employers are only entitled to validly dismiss employees for out of hours misconduct where it has a sufficient connection with employment such that an employer may legitimately regulate such conduct. While this situation can be difficult to identify, it comes with a recognition that private and out of hours conduct of employees is generally outside the scope of the employment relationship.

Contrasting approach in sexual harassment jurisdiction

In contrast, the cases in the sexual harassment jurisdiction demonstrate that the courts are much more willing to find that out of hours conduct has a sufficient connection with employment to warrant a finding of unlawful sexual harassment and/or vicarious liability. This is evident from the broad interpretations given to what constitutes a “workplace” (as was seen in Vergara v Ewin) and “in connection with employment” (as was seen in South Pacific Resort Hotels Pty Ltd v Trainor).

Difficulties for employees and employers

The lack of a consistent and clear delineation in these jurisdictions between private conduct and conduct in the course of, or in connection with, employment, makes it difficult for both employees and employers to be able to identify where each of their rights, duties and obligations begins and ends. Unfortunately, real clarity on these issues remains elusive.

The authors would like to acknowledge the assistance of Matthew Condello, Lawyer, Clayton Utz with research in the preparation of this article.

This article was first published in Employment Law Bulletin, Vol 22 No 1, February 2016.