In the name of the employer – Guy Hallwright fallout

COMMENT The employment watchdog is taking reputational damage seriously. People can be dismissed solely for brand damage, even though the employer has not suffered actual loss.

COMMENT

Some readers will not recognise the name Guy Hallwright, but a mention of the “Forsyth Barr hit-and-run guy” is more likely to ring loud bells. 

It is this association between Forsyth Barr and the actions of its employee, Mr Hallwright, which caused Forsyth Barr to dismiss Hallwright from his employment. 

The Employment Relations Authority has recently upheld that dismissal as being justified. 

This decision reinforces the fact that an employee’s actions outside the workplace can be sufficient, in certain circumstances, to justify dismissal.

It also indicates the ERA is taking reputational damage seriously and will consider a range of evidence in deciding whether an employer’s reputation has been damaged. 

Hallwright was dismissed from his employment as a senior investment analyst after his conviction for causing grievous bodily harm with reckless disregard. 

His actions were not carried out in the course of his employment and nothing related to the incident was capable of identifying the nature of his employment or the identity of his employer. 

However, Hallwright’s downfall, to a certain extent, was the amount of media coverage. This interest was largely generated by Hallwright’s senior position in a high-profile company.

He claimed his conduct did not bring Forsyth Barr into disrepute as there was no evidence of clients lost or negative comments by clients. 

However, the authority found that an employer does not have to wait for a negative impact on the working environment before dismissing an employee when such impact is inevitable.

Forsyth Barr acknowledged that it could not prove an actual loss to the business. However, it pointed to evidence of what the authority accepted was almost constant linking in the media of Hallwright with Forsyth Barr as his employer. 

An experienced PR consultant gave evidence that this linking would have caused damage to Forsyth Barr’s reputation, and had the potential to cause significant ongoing damage.

Although Hallwright argued that the cause of any damage was the inaccurate and biased media reporting, the authority was of the view that even if the media coverage did include inaccuracy and over-statement, the fact remained that the serious incident had occurred and Hallwright received a criminal conviction as a result.

The existence of the underlying conduct meant that it could not be said that the media attention, rather than the conduct, was the cause of any damage to Forsyth Barr’s reputation.

The decision is interesting in that it readily accepts there was no evidence of quantifiable loss to the business. Rather, the ERA gave weight to the evidence of a PR consultant in establishing that there was the potential for significant ongoing reputational damage.

What does the decision mean for employers?

What this decision means for employers is that it is possible to dismiss an employee solely for reputational damage, even where the employer has not suffered any actual loss. 

It is open for employers in this situation to engage expert evidence to establish the risk or likelihood of loss. 

However, it should be kept in mind that Hallwright was in a very senior position and the incident was widely publicised. If he had been a junior employee and the media had not reported on the incident and linked it to his employer, a dismissal would not have been justified. 

It is important that, if dismissing an employee for reputational damage, a nexus is established between the conduct of the employee and the damage to the reputation of the employer. 

Is there a link between the employee’s conduct and the employer? Did the conduct have an adverse effect on the reputation of the employer? When such a link is established, an employer may consider dismissal for serious misconduct.

Even in cases where an employee’s conduct has an impact on their employer’s reputation, an employer must keep in mind the need to follow a fair process before making a final decision. 

The minimum procedural requirements applying to any dismissal are that the employer must sufficiently investigate the allegations against the employee, the employer must raise its concerns with the employee and give the employee a reasonable opportunity to respond to those concerns. The employer also must genuinely consider the employee’s explanations. 

Even where all these requirements are complied with, the authority or court has discretion to consider any other factors it thinks appropriate. These may include the wording of the employee’s agreement and any applicable policies. 

Forsyth Barr rewarded for innocent-until-proven-guilty approach

In the Hallwright decision, factors which indicated that Forsyth Barr had acted in a procedurally fair manner included the fact that it had put its principal concerns to Hallwright in considerable detail and Hallwright had an opportunity to answer them. 

Forsyth Barr had also taken an innocent until proven guilty attitude and had not moved to terminate Hallwright until after he had been convicted. Furthermore, on the evidence, the authority concluded that Forsyth Barr had genuinely considered Hallwright’s views; it had just seen matters differently.

To date, cases dealing with dismissals due solely to employer reputational damage have been relatively rare. 

Although employers must always assess whether there is a sufficient nexus between the employee’s behaviour and the damage to the employer’s reputation before taking action, this decision highlights the fact that such dismissals remain a viable option for employers where the actions of their employees, even outside the workplace, have the potential to impact negatively on their business.

We note that Hallwright is currently considering whether to appeal the authority’s determination.

Jennifer Mills is a partner and Christie Hall is a senior associate at Minter Ellison Rudd Watts

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