Dismissal fair for undisclosed romance

The Fair Work Commission has recently ruled that a bank manager’s failure to disclose a relationship with a subordinate, and then his lying about the existence of a relationship to his manager, was a valid reason for termination of his employment.

Facts

The employee was a bank manager of one of the large banking institutions in Australia. The married bank manager began a relationship with an employee who reported to him.  Within a month of the relationship commencing, the manager and the employee had moved into an apartment together.

Crucially in this case, soon after the relationship started, the bank manager began pushing for the employee’s advancement in the bank. This included emphasising the extent of her performance to his manager.  The bank manager also made his manager aware that a competitor had offered the employee a position with a higher salary.

Based on the bank manager’s advocacy for the employee, she received a $17,000 pay increase.  The bank manager did not undertake similar advocacy for any of his other direct reports.

Evidence was given at the hearing that the bank manager and the employee were spending an unusual amount of time together, including arriving and leaving work together, and spending time together in an office with the door locked.  Naturally, rumours began to circulate around the office about a relationship between the two.

The bank manager’s boss soon became aware of the rumours and asked the bank manager whether there was truth to the rumour. His boss told the bank manager that there was no issue with there being a relationship and that it occurred elsewhere in the business, but protections against conflict needed to be put in place if something was going on.

The bank manager denied the rumour and said that he had been spending the extra time with the employee to help her to develop her skills in her role.

At hearing, when asked why he had denied that he was in a relationship with the employee, the bank manager said:

“It was a question I wasn’t expecting. It definitely caught me by surprise. Look, that time of my life was extremely stressful. It still is stressful. I was married to my wife for 12 years. Two young children. I’ve had an affair. I obviously have done the wrong thing. Quite ashamed and embarrassed, to be direct. At the time I had not disclosed information to my wife about my relationship with [the employee], nor had she to her husband. It was only the start of the relationship, as well. I didn’t really know where the relationship was going.”

The bank manager’s boss gave evidence that if the bank manager had been truthful, then the bank would have simply taken steps to put measures in place to prevent any issues emanating from a conflict of interest due to the relationship. This may have included moving one of them to another branch.   In giving his evidence, the boss also said that he would not have given the employee the promotion she had received had it not been for the word of the bank manager.

Ultimately, there was a domestic event between the bank manager and the employee that led to the ending of the relationship.  The event caused the bank manager to finally disclose the relationship to his boss.  An AVO was put in place in respect of the bank manager by the employee.

The bank manager then breached the AVO by calling the employee, and the bank manager disclosed this with his boss who told him he would have to “…refer to HR and determine what the next steps are.”

Around that time, the bank manager also attended his branch and informed a number of the employees about the relationship, that it had now ended and that it was messy.  He also told the employees that “…there were some additional serious matters relating to a potential criminal matter and property damage.”

The termination

The bank manager was suspended without pay.  The bank manager met with his boss and was provided with a letter of allegations and he responded accordingly.  The allegations included:

“That you were dishonest about your relationship with [the employee] when questioned about it and did not disclose that there might be a real or perceived conflict of interest.

That you breached the AVO and in doing so exposed [the employer] to reputational damage.

That you inappropriately disclosed details of your relationship with your subordinates.”

After considering the bank manager’s response, the bank manager’s employment was terminated at a subsequent meeting.  His termination letter stated the following:

“As a result of your actions I have lost trust and confidence in you as a senior leader in my business. I do not believe that you can restore that loss of trust and confidence. I therefore see no future for you in my business.”

The bank manager subsequently commenced an unfair dismissal application against the bank.

The hearing

In its defence, the bank said that it had terminated the bank manager for four (4) reasons:

• conflict of interest;
• dishonesty;
• criminal conduct; and
• disclosure to staff members of the bank manager’s relationship with the employee.

In considering the matter, Senior Deputy President Hamberger made the following statement which should be heeded by all employers and managers:

“To be blunt, it should be obvious to any reasonably intelligent person that for a manager in an organisation such as [the bank] to form a romantic relationship with a direct subordinate creates the potential for a conflict of interest. The applicant should have disclosed his relationship with [the employee] – at least from the time they moved in together – to [his boss]. This would have enable (sic) the respondent to put in place appropriate arrangements to manage any potential conflict of interest.”

SDP Hamberger stated that the issue of the conflict of interest and dishonesty could not be separated in this instance.  He found that the bank manager’s failure to disclose the relationship and then lying about the existence of a relationship to his boss, gave the bank a valid reason for the dismissal.

SDP Hamberger stated that:

“The applicant had a duty to disclose his relationship with [the employee] to his manager even before [his boss] asked him about it. This failure to disclose was greatly compounded when he lied to [his manager] about the relationship. His explanation as to why he lied to [his boss] when the latter first asked him about the rumours of a relationship was that he was caught by surprise, in an informal meeting, that he was going through a stressful time, and that he was embarrassed and ashamed.. there can be no doubt that [his boss] expected to be told the truth.”

SDP Hamberger rejected the bank manager’s argument that termination was disproportionate to the gravity of the conduct.  His Honour found that the bank manager’s ‘misconduct was serious, and should not be downplayed’.

Lessons for Employers

This case serves as a reminder of the difficulties that can arise where personal relationships and employment relationships become intertwined.   Whilst an employer cannot control personal relationships between employees, it should ensure that it has adequate protections in employment contracts and/or policies that will require disclosure by employees in circumstances where the relationship could result in an apparent or perceived conflict of interest.