Can you dismiss an employee for misconduct at the office Christmas party?

An engineering company holds its Christmas party at the office. The drinks are free-flowing, and there is a swimming pool in the yard. Before the night is over, one employee has pushed a colleague, fully clothed, into the pool, and then ended up in a physical fight with the general manager. The employer dismisses him, and he claims unfair dismissal. In McDaid v Future Engineering and Communication Pty Ltd [2016] FWC 343 the Fair Work Commission (the FWC) upheld the dismissal. The case is a useful reference point for any employer planning an end-of-year function.

What happened at the Future Engineering Christmas party

Future Engineering and Communication Pty Ltd (FEC) is a Western Australian company that designs, manufactures and installs communication towers, powerline infrastructure and associated equipment on sites around Australia. It employs around 60 people. Damien McDaid had worked there as a project coordinator since 2008.

On Friday 19 December 2014 FEC treated its employees to a day of go-karting followed by a Christmas party back at the company premises. The office had a swimming pool. FEC supplied the alcohol, the soft drinks and the food, and there were no controls over how much alcohol anyone chose to consume.

There had already been tension between McDaid and the general manager, Craig Davies, in the days before the event. Davies had told staff that anyone who had not completed their work would be left out of the festivities, and McDaid came in on the Saturday beforehand to finish his scheduling. He also raised a disagreement with Davies over an $84 petrol expense claim, which he offered to put back onto his work credit card.

By the evening McDaid was drunk. A number of witnesses described him aggressively haranguing Sugan Sinna, a design engineer, and repeatedly pushing or poking him in the chest. Davies intervened to separate the two men. Some time later McDaid came back at Sinna, and this time he threw him, fully clothed, into the swimming pool without warning. Davies had already told McDaid twice to go home, and McDaid had refused.

After the pool incident Davies again directed McDaid to leave the premises. The exchange became heated, with each man swearing at the other. The Commission accepted Davies's evidence that McDaid then pushed him twice, the second time with enough force to send him crashing into the front gate and the ground, where he suffered grazing to his legs, feet and shoulder. Davies then punched McDaid in the head, which ended the fight. The Commission had watched the CCTV footage and could not see clearly how the fight began, and because McDaid said he had no memory of the events, it accepted Davies's account.

What followed is a useful model of how a dismissal should be run. In January 2015 FEC met with McDaid, who brought a support person, and raised the events of the night. Settlement discussions followed but went nowhere, and McDaid was off work on medical certificates. On 17 March 2015 he attended a further meeting, again with a support person, and gave his account of the night by reading from a prepared statement. Later that afternoon he was asked whether he had anything further to add. When he did not, FEC terminated his employment effective immediately, with a termination letter setting out the reasons.

The legal test: was the dismissal harsh, unjust or unreasonable?

McDaid applied to the FWC under s 394 of the Fair Work Act 2009 (Cth) (the Act) for an unfair dismissal remedy. In deciding the application, the FWC had to consider whether the dismissal was harsh, unjust or unreasonable against the eight factors in s 387 of the Act:

• Valid reason: whether there was a valid reason for the dismissal related to the employee's capacity or conduct, including its effect on the safety and welfare of other employees;
• Notification: whether the employee was notified of that reason;
• Opportunity to respond: whether the employee was given an opportunity to respond to any reason related to capacity or conduct;
• Support person: whether the employer unreasonably refused to allow a support person at discussions relating to the dismissal;
• Performance warnings: if the dismissal related to unsatisfactory performance, whether the employee had been warned about it beforehand;
• Size of the enterprise: the degree to which the size of the employer's enterprise would be likely to affect the procedures used;
• HR expertise: the degree to which the absence of dedicated human resource management specialists would be likely to affect the procedures used; and
• Other matters: any other matters the FWC considers relevant.

Commissioner Williams found three valid reasons for the dismissal. First, McDaid had repeatedly and aggressively harangued Sinna, pushing him in the chest and finally throwing him, fully clothed, into the swimming pool. Second, he refused to leave the premises when directed to do so by the general manager. Third, he initiated the fight with Davies by pushing him twice, the second time with enough force to knock him off his feet and into the gate.

The Commissioner was also satisfied that the process was fair. McDaid was told that FEC was investigating his conduct on the night, was notified in writing of the reasons for his dismissal, and had a proper opportunity to respond at the meetings in January and March, with a support person present throughout. Because the dismissal did not relate to his performance, the warning factor did not apply. FEC was a medium-sized business without dedicated human resource specialists, and the procedures it followed were appropriate given those circumstances. There was also evidence that McDaid had behaved in a verbally aggressive manner towards colleagues in the past, so his conduct on the night was not out of character.

Two parts of the Commissioner's reasoning are worth pausing on, because they are the parts that transfer to other workplaces. The first is alcohol. McDaid did not try to use his drinking as an excuse for his behaviour, but he criticised FEC for supplying the alcohol. The Commissioner accepted that in some circumstances an employer that provides alcohol at a work function and takes no steps to ensure it is consumed responsibly may be culpable for events that follow, such as a drunken employee being injured falling down stairs. But he added that employees who drink are also responsible for their own actions: drinking may in part explain bad behaviour, but it should not be accepted as an excuse for it, and society no longer readily accepts alcohol as an excuse for bad behaviour, let alone physical violence.

The second is self-defence. Davies had also injured McDaid in the fight, but because the evidence showed that McDaid initiated the physical altercation, Davies's response was properly viewed as self-defence.

The result was that McDaid's dismissal was neither harsh, unjust nor unreasonable. His application was dismissed.

What the McDaid case means for your business

The McDaid decision distils into five practical points for employers:

• A work function is still work: conduct at a Christmas party or other work function can be a valid reason for dismissal, even though it happens outside ordinary working hours.
• Alcohol is no excuse: the FWC will not accept intoxication as an excuse for violence or aggression towards colleagues.
• A fair dismissal is a process, not a decision: FEC won because it notified McDaid of the reasons, gave him a chance to respond with a support person, and kept a record of the process.
• The employer's own conduct is in the frame: an employer that supplies alcohol with no controls can draw criticism, and may be culpable in some circumstances for what follows.
• Eligibility limits who can claim: an employee generally needs six months' service to bring an unfair dismissal claim, or 12 months with a small business employer (fewer than 15 employees), and the application must be lodged within 21 days of the dismissal taking effect.

The first point is the one employers most often get wrong. It is tempting to treat the Christmas party as a social event that happens to be organised by work, and to assume that what happens there stays there. The FWC does not see it that way. A workplace function is an extension of the workplace for the purposes of misconduct, and behaviour at the party can support disciplinary action just as behaviour in the office can. The same reasoning cuts both ways: it is also why an employer can face claims of harassment, discrimination or injury arising from the same event.

The alcohol point deserves equal weight. The Commissioner's comments were not a finding that FEC was at fault, and McDaid's claim failed. But the reasoning signals that an employer that pours unlimited alcohol and takes no steps to encourage responsible consumption may face consequences if an accident follows, whether through workers' compensation, work health and safety obligations or a civil claim. The same facts that justify dismissing an employee for violence can also expose the employer that set the scene.

What to change before your next work function

These steps, taken before the event, put a business in the strongest position to defend a dismissal if an incident occurs:

• Set expectations before the event: remind staff in writing that the code of conduct applies at work functions and that serious misconduct can lead to dismissal.
• Control the alcohol: monitor consumption, keep food, soft drinks and water freely available, consider drink limits, and arrange transport or accommodation.
• Investigate before you dismiss: gather witness accounts and any footage, and put the specific allegations to the employee rather than acting on hearsay.
• Give the employee a chance to respond: notify them of the reasons for the proposed dismissal, allow a support person, and take what they say into account before deciding.
• Document the process: keep notes of the meetings, the allegations put, the employee's responses and the termination letter with reasons, because that record is what the FWC will examine if the dismissal is challenged.

How an employment lawyer takes the guesswork out of a dismissal

A case like McDaid can look straightforward from the outside, but the employer's victory depended on a series of procedural steps, each of which was tested in evidence. A lawyer's role is to make sure a business does not leave those steps to chance.

Before the event, an employment lawyer can review your code of conduct and alcohol policy, and help you plan the function so that responsible service of alcohol and transport home are addressed. If an incident does occur, a lawyer can advise on whether the conduct is serious enough to justify dismissal, help you run the investigation and the dismissal meeting, and check that each of the s 387 factors is dealt with properly. If a dismissed employee then applies to the FWC, a lawyer can assess the strength of the application, including whether the employee meets the eligibility requirements and the 21-day deadline, and represent you through conciliation and any hearing.

The value of that help is not just avoiding a payout. If a dismissal is found to be unfair, the FWC can order reinstatement, or compensation capped at the lesser of 26 weeks' pay and half the high income threshold. A properly advised dismissal, like FEC's, is one that survives scrutiny. A dismissal that skips the process is the one that turns an otherwise defensible decision into a claim you have to defend.

The Christmas party is still the workplace

The Christmas party is still the workplace. That single sentence is the one to hold onto from this case. McDaid's dismissal was upheld not because employers can sack anyone who misbehaves at a party, but because the conduct was genuinely serious, intoxication did not excuse it, and FEC ran a fair process at every step.

For Australian employers, the practical picture is clear. Conduct at a work function can justify dismissal, and alcohol will not excuse violence towards colleagues. But a valid reason is only part of the story. The employee must be notified of the reason, given a chance to respond with a support person, and the process must be appropriate for the size and resources of your business. Set expectations before the event, control the alcohol, investigate properly, and take advice before you make the call. Get those steps right and you can defend a dismissal that deserves to be defended.