Dismissal Justified – $8K Compensation Anyway

Despite the Employment Relations Authority determining a company Managing Director was justifiably dismissed, the former employee was awarded $8,000 because of the poor process and how he was suspended.

WeCare Finance was started in 2015 with the help of John Dewar. At the time of his dismissal he was the Managing Director, a Director and a shareholder.

Dewar was dismissed in June 2019 for serious misconduct after an internal investigation concluded he had used customers’ funds for personal benefit. He would charge customers $600 for a successful loan application which he held in his personal loan account he had with the business. He would then pay brokers and referrers from this money, sometimes in cash. Dewar accepted his system of using a post it note pad at the bottom of his computer screen to keep track of transactions was “not pretty and in hindsight not good accounting practice”.

The company engaged a forensic accountant in 2019 after hearing Dewar was benefiting personally from the client transactions. In February 2019, the company’s chairman and a director met with Dewar to tell him he had been suspended pending an investigation into financial irregularities that appeared to be fraudulent. The suspension was on full pay however Dewar was not given notice of the meeting or the opportunity to respond to the proposed suspension before a final decision was made. These are key elements of a justifiable suspension.

The forensic examination found $58,900 was taken from WeCare Finance’s bank account without the knowledge or consent of the directors. Of this $40,300 was cash cheques, supposedly for brokerage fees, and $18,600 was regular reductions of $600 in the loan account for the benefit of Dewar.

Four months later in June, Dewar was dismissed on two substantiated allegations. The first that Dewar made advances and withdrawals on a personal loan account without the knowledge or consent of the directors, and the second allegation of crediting brokerage fees to Dewar’s personal account to reduce personal loan to the company.

The Authority found the disciplinary investigation process failed to follow the procedure set out in Dewar’s Employment Agreement, at the first meeting Dewar was not given the opportunity to adjourn to seek advice or sufficient opportunity to respond to the allegations, and they failed to formally interview staff who Dewar said could provide relevant information supporting him.

The second allegation was found by the Authority to have not been adequately investigated, however the second allegation was said to have been appropriately investigated and that Dewar’s business practices were inadequate to a degree that amounted to serious misconduct.

As such the dismissal was concluded to be justified, however Dewar was unjustifiably disadvantaged for the suspension and shortcomings in the investigation, and was awarded $8,000 compensation.

The lessons here… always follow the process, consult with the employee before suspending them and conduct a full and thorough investigation. There are no short cuts.