Flawed investigation leads to compensation for employee sacked for inappropriate IP use

A senior HR consultant, who was sacked by her employer upon suspicions that she had copied confidential business information, has received compensation by order of the Fair Work Commission.

In December 2014, the Adelaide HR consultancy dismissed the employee when they discovered that she had downloaded the information, which included clients’ personal details and other intellectual property, and transferred it to an external hard drive. The employee defended her actions, stating that she had done so to work on projects from home over Christmas while the office was closed and the IT system was being upgraded. Upon remotely checking her system, the company uncovered that the employee had also downloaded confidential material in September 2014.

Alleging that the employee was stealing the information to assist in starting her own business, the company accused her of serious misconduct and breaches of company policy. It also claimed that she attempted to conceal the downloads by hiding the external hard drive at her work station. The company’s chief executive reported the employee’s misconduct to the Adelaide police, in part to underpin any future insurance claim, citing the potential for damage to the company’s business.

However, the Commissioner ruled that the misconduct was not serious enough to justify immediate dismissal and that the employer failed to follow a proper investigation process.

“[T]he demonstrated misconduct fell short of the serious misconduct warranting immediate dismissal,” said the commissioner. While accepting that the employee had exercised “poor judgement” and took “liberties”, it was the employer’s failure to investigate that made the dismissal unfair.

He accepted the “combination of events and circumstances was grounds for suspicion”, and while he found some of the employee’s explanations to be “unconvincing”, he deemed that suspicion was not enough, and he wasn’t satisfied that the employee had motive or intent to misappropriate the intellectual property.

The Commissioner found the company’s procedures lacking in regards to the employee’s notification of her dismissal, which occurred during a phone discussion after the employee left the office for a medical appointment. Although she acknowledged that the file transfer was “a silly thing to do”, the employee was not given the opportunity to address the allegations raised, or to respond to some of the reasons, for her dismissal.

According to the Commissioner, he could not be satisfied that the employee understood on a “reasonable basis” that a direct instruction not to duplicate the file or IP had been provided.

The consultancy was ordered to pay the employee $11,505 compensation plus superannuation. The Commissioner accepted reinstatement was inappropriate because the employee’s actions gave rise to legitimate “suspicion” and “unease” that caused damage to the employment relationship.

iHR Australia observes that employers can avoid, or minimise, costly and time-consuming legal battles and compensation payouts by ensuring correct procedure is followed via thorough and expert workplace investigations. iHR provides a range of investigation services, from dealing with informal complaints to significant and complex formal investigations. We are experienced in handling complaints from operational to senior executive and board level, including liaising with unions involved in representing parties to a complaint. iHR can also review your internally-conducted workplace investigations, providing advice or recommendations, and can help ensure that these investigations are sound and will stand up to external testing.

iHR also offers workplace investigation officer training, where participants are guided through the key principles of conducting a lawful workplace investigation, focusing on unlawful discrimination, harassment and bullying.