The Pink Folder – Senior Employees and their duties of trust and confidence (3 Tips for Employers)

Senior employees are often in a position of trust with their employers, to the extent they may owe an implied common law duty of fidelity to their employer, irrespective of the terms of their employment contract. This duty is often implied as a result of a senior employee’s access to confidential information, their knowledge of internal operations or their ability to exercise or influence decision-making powers on behalf of their employer.

We have recently reviewed a decision[1] of the Fair Work Commission (the Commission) involving the Kingston City Council, Victoria (the Council) and its former Manager of People and Culture. The manager in the decision was alleged to have kept a ‘pink folder’ containing material which was contrary to Council’s interests (intended to be used against Council in the future), making an employee redundant without authorisation and supporting a former employee’s claim (also in the Commission) against the Council.

Top (3) tips for employers

Tip 1 – Ensuring there are higher obligations for senior employees

·        Employers should consider imposing higher obligations on their senior employees in respect of confidentiality, whether through additional clauses in their employment contract or using a separate Deed of Confidentiality;

·        Senior employees should be provided training and guidance to report suspected misuse of confidential information; and

·        User accounts to access information should be restricted to employees on a ‘need to know’ basis to minimise risks to confidentiality of information.

Tip 2 – Identifying conflicts of interests

·        Where disputes or proceedings arise, employers should conduct a preliminary assessment to determine whether there are any conflicts of interest within the workplace (such as a former manager being involved in proceedings commenced by their former subordinate employee);

·        Where a workplace investigation is required, employers should ensure the investigator does not have a conflict of interest with individuals involved in the investigation; and

·        The employer should minimise conflicts of interest where possible (it may not be practical for smaller businesses).

Tip 3 – Ensure allegations are put to employees for their response

·        Regardless of whether there is overwhelming evidence of misconduct, an employer cannot conclude allegations are substantiated until it has properly investigated the allegations and provided the employee with an opportunity to respond;

·        An employee may well commence stress leave or ask for further information in order to respond. It is important for an employer to respond to these issues;

·        Until allegations are capable of being substantiated, it is risky for an employer to make a determination against an employee. Failure to afford procedural fairness is likely to render a dismissal unfair, irrespective of the severity of the issues.

A bit of background on the jurisdiction

The Fair Work Act 2009 (Cth) (the Fair Work Act) and the jurisdiction of the Commission applies to most employees and employers in Victoria, including local government employers and their employees. Victoria referred its industrial relations powers to the Commonwealth by way of the Fair Work (Commonwealth Powers) Act 2009 (Vic) in 2009, with the notable exception of law enforcement officers, executives in the public service and judicial officers.

What happened between the Council and the employee?

The employee participated in Council discussions involving a former employee’s general protections application against the Council (the Former Employee). The Former Employee was a member of her team, who was terminated for making unsubstantiated allegations the Council was transporting soil containing asbestos to a Council park. The way in which the general protections application was resolved led to the Council becoming concerned the employee had privately communicated confidential information to the Former Employee, contrary to the interests of Council.

The Council subsequently received an anonymous email alleging, amongst other things, the employee had collaborated with the Former Employee and were intending to commence legal proceedings against the Council. The anonymous email was reported to the Independent Broad-based Anti-Corruption Commission(IBAC) given its nature. IBAC advised the Council it was appropriate to conduct an internal investigation. During the course of the investigation, the employee was stood down from her employment. Following a contested show cause process, the employee’s employment was terminated.

What did the Council do correctly?

It was commendable the Council had a system in place where employees had the opportunity to raise concerns anonymously if they did not feel comfortable disclosing their identity. Council’s managers received appropriate training and promptly referred the concerns to the IBAC for further guidance.

In the decision, it was accepted by the Commission the matter did not involve “shades of grey” because the positions adopted by the Council and the employee were “black and white”. The Commission’s task was to determine which position was more credible and to be preferred. Council’s decision to instruct lawyers to conduct a workplace investigation and obtain significant corroborating evidence against the employee led to its position being accepted by the Commission.

The Commission appeared to have placed emphasis on the employee’s senior position within the Council. The employee’s misconduct was clearly inconsistent with the required level of trust and confidence the Council was entitled to expect of her. In particular, it was noted at paragraph 167 of the decision that:

Someone in that position is required to have a relationship with the Chief Executive Officer and other senior staff that is based on trust and confidentiality, given their dealings with and access to sensitive and confidential information concerning the staff within the organisation. The evidence does not demonstrate that [the employee] acted in a manner consistent with these expectations. 

[our emphasis added]

Employers who need some practical advice on senior employees and duties of trust and confidence please feel free to call NB Lawyers, lawyers for employers for an obligation free consultation to discuss how we can assist you with any concerns you may have.

Written By

Jonathan Mamaril


NB Lawyers – Lawyers for Employers

[email protected]

+61 (07) 3876 5111

Assisted By

Dan Chen

NB Lawyers – Lawyers for Employers

[email protected]  

+61 (07) 3876 5111

About the Authors

Jonathan Mamaril leads a team of handpicked experts in the areas of employment law and commercial law who focus on educating clients to avoid headaches, provide advice on issues before they fester and when action needs to be taken and there is a problem mitigate risk and liability. With a core value of helping first and providing practical advice, Jonathan is a sought after advisor to a number of Employers and as a speaker for forums and seminars where his expertise is invaluable as a leader in this area as a lawyer for employers.

Dan Chen is a lawyer at NB Lawyers, the lawyers for employers, and specialises in employment law. Dan is passionate about assisting business owners, small and large understand their obligations under Australia’s complex workplace relations system.

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[1] Belinda Ayres v City of Kingston T/A Kingston City Council