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Hypothetical 2013 – The Most Difficult Dismissal of All…

16 December 2013

Hypothetical 2013 – The Most Difficult Dismissal of All…

Margaret Chan, Associate

PCS’ second annual Hypothetical event, held this year at the Australian National Maritime Museum in Darling Harbour, was a spectacular evening.

While a number of workplace relations issues have been the focus of much attention in 2013, this year’s hypothetical was about one issue that is never far from the minds of most human resources and employment law practitioners: termination of employment and best practice dismissals.

This year, PCS was privileged to have SKY NEWS Business channel presenter, Brooke Corte (pictured on page 5), as our MC for the evening. Attended by over 120 friends and clients of PCS, this year’s Hypothetical was also televised on SKY Business’ Australian Public Affairs Channel on Monday, 25 November 2013.

The scenario

A captivated audience watched a video written, produced and directed by none other than PCS’ founder and Managing Principal, Joydeep Hor unfold on the big screen. The video depicted the different perspectives, tensions, conflicts and sense of betrayal caused by the highly public and rather sudden termination of the CEO of “the Company”, Garry, by the Board – who was represented by its Chairman, Frank.

The video showed Garry and Frank discussing their views on Garry’s termination – highlighting underlying issues and reasons such as the poor financial performance of the Company, Garry’s lack of accountability about the Company’s financial performance, the lack of performance management, the risqué client entertainment of the Company’s high value clients involving escorts and pole dancing aboard Garry’s yacht, the amount of notice given to Garry when he was terminated and the non-compete restraint in his unsigned employment contract. The issues of stress, depression and bullying were also alluded to by Garry.

Our expert panel

Following the video, it was over to the Expert Panel, who were required to think on their feet and respond to the questions posed by Joydeep as Facilitator.

On the expert panel for the first time this year were:

  • Michele Grow, CEO of Davidson Trahaire Corpsych, playing the role of newly-appointed Non-Executive Director;
  • Tim Donaghey, Barrister-at-Law, providing input on the legal issues facing Frank and the Board; and
  • John Dakin, Director of Career Management firm Directioneering, acting as Garry’s career management advisor.

Previous panellists:

  • Robyn Sefiani from Sefiani Communications Group; and
  • Hannah Low of the Australian Financial Review

also reprised their roles on our expert panel this year to provide their perspective on the media and public relations implications of this high-profile termination.

Issues at play

Our expert panel this year was treated to a smorgasbord of issues to pick their way through – including a series of complex legal, management and psychological issues such as:

  • whether high level executives (such as CEOs) should be subjected to formal performance management processes if and when they are underperforming;
  • the implications of an investigation into Garry’s inappropriate conduct in allowing the risqué client entertainment event (dubbed the “Love Boat” by Tim) and his subsequent high-profile termination;
  • Garry’s allegations of bullying against the Board – by “ambushing” him and tabling “reports prepared behind (his) back”;
  • whether the payment provided by the Company in lieu of notice was sufficient;
  • personal liability issues for the Board of Directors;
  • Garry’s depression and mental health issues; and
  • whether a non-compete restraint could be enforceable where there was no signed contract, and even if there had been one, (or deemed acceptance of the terms by Garry), whether it would be enforceable by the Company.

Expert analysis

Our experts then broke into an energetic and, at times, playful discussion about the various factors that would influence them and the thoughts that were going through their heads as the Hypothetical scenario unfolded before them.

Michele Grow spoke in her capacity as a hypothetical Board member, discussing the duties of a Director from a corporate governance perspective and the necessity of obtaining further clarity around the timeline, process and reasons for Garry’s termination.

In response to Garry’s claims about feeling stressed and depressed, Michele highlighted the obligations of the Board to ensure that it was taking appropriate “care and protection” of the workforce – touching upon some of the officers duties under work health and safety legislation.

Michele then donned an organisational psychology cap and offered her insight into Garry’s revelation that he had depression. Although it should come as no surprise, Michele revealed that 45% of all adults will suffer from some form of mental illness at some point in their lifetime and that many individuals are able to function at quite a high level during this time despite their illness. Accordingly, while mental health should be treated with care in the work place, it should not necessarily be treated as an impairment or be used to excuse underperformance (particularly in circumstances where it is unclear whether there has been an actual diagnosis of depression – as was in Garry’s case). However, Michele indicated that in the circumstances, given his particularly stressful termination, it would be necessary to ensure that Garry was seeking appropriate support for his condition.

Tim Donaghey, as a legal representative on the panel, was responsible for unpacking many of the legal issues around Garry’s termination. Tim examined the implications of Garry’s unsigned contract and whether he may still be bound to its terms, the notice payment of 3 months that was provided to Garry and whether this could be open to challenge given his seniority, as well as potential breach of contract issues by the Company.

Tim also suggested that Garry could potentially bring a General Protections claim under the FW Act on the basis of discrimination following the disclosure of his depression – although this would be dependent on whether Garry could establish that there was a causative relationship between his mental illness and termination. Tim then went on to discuss whether there was an obligation on the Company to undertake a performance management process with Garry, as well as the issue of personal liability of CEOs and Board members in these types of termination situations.

John Dakin walked attendees through what this termination meant for Garry from a personal perspective and the issues he would work through with Garry as his career management advisor. John explained the types of emotional and psychological issues that Garry may have – particularly given the long tenure Garry had with The Company and his meteoric rise through the ranks. John also addressed the importance of personal branding (particularly at the executive level) and the importance of seeking advice around communications – particularly where legal proceedings are on foot.

John then raised the very pertinent question of whether Garry had received the necessary training that he needed before being appointed to the CEO role and whether this could have been a contributing factor to his underperformance in the role.

Hannah Low also took to the stage to reveal what would spark a journalist’s interest in the scenario and the types of issues on which a journalist might choose to focus.

In addition to the yacht incident, the size of the organisation, the alleged bullying at the highest levels of the Company, the culture of the Company and whether Garry was performance managed out of his role were all deemed to be factors which would make the scenario an attractive one for journalists.

Hannah also highlighted that while Garry’s mental health issues would not, of itself, necessarily be newsworthy, any suggestion that the mental health issues had arisen as a result of his role – particularly when tied in with the issues of executive and corporate bullying, would certainly make Garry’s story a more interesting one for readers.

Robyn Sefiani explained to attendees how she would approach managing the publicity that would ow from these events and how to minimise reputational damage to the Company, as well as to members of the Board – particularly given Gary’s allegations that policies had been applied inconsistently. Robyn suggested that any damage control that she would undertake would be both internal and external and would largely depend on whether the Company’s actions aligned with what it publicised as being its values. Her advice also included a suggestion that the Board would need to investigate to discover how deeply-rooted and prevalent the “ends justifies the means” culture was in the organisation and whether the risqué yacht incident was a one-off incident attributable to its former-CEO, or whether more systematic issues lie dormant within the organisation which could create future reputational risk.

In response to a question from Joydeep about whether Frank should accept interviews from Hannah (or another journalist), Robyn also outlined the various strategies that could be adopted and which of these would be most appropriate in various circumstances.

Holistic, best practice processes

The combination of minds on the Panel were illustrative of the many stakeholders that are common to a high-pro le termination scenario and also reinforced the importance of having a holistic approach to people management matters, underpinned by a solid and pragmatic legal strategy. However, one key takeaway from the night is that “every termination of employment needs to be treated as the most dif cult termination of all” – regardless of who is being terminated and why.

Many in attendance on the night commented afterwards that this year’s Hypothetical confirmed much of the best practice processes around termination which they were aware of, but the added dimension of dealing with aspects of the termination which were not usually associated with primary HR functions – such as the reputational and public relations implications and strategies in these circumstances – were “food for thought” and fertile ground for further discussions with their teams.

We hope that all our guests at the event walked away feeling better prepared to make sure their businesses are well informed about dealing with dismissals.

Once again, the PCS team would like to take the opportunity to thank everyone who attended its signature event.

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