Old Misconduct, New Consequences? Fair Work Commission says employee’s historic misconduct does not justify dismissal

In the recent decision of Stephan Matthai v The University of Melbourne [2025] FWC 1938, the Fair Work Commission (the FWC) held that an employee’s dismissal for serious misconduct occurring 7 years earlier was harsh and therefore unfair, leading to the reinstatement of his employment.

Facts

The Applicant, Dr Stephan Matthai, was employed by The University of Melbourne (the University) in 2015 as a professor and chair of reservoir engineering in its Department of Infrastructure Engineering. Dr Matthai was covered by the University of Melbourne Enterprise Agreement 2024 (the Enterprise Agreement) and was a person protected from unfair dismissal pursuant to the Fair Work Act 2009 (Cth) (the FW Act).

In 2017, Dr Matthai had been the supervisor of a student, referred to by pseudonym ‘AB’, who was undertaking a Doctor of Philosophy. In May and June 2017, throughout their studies, Dr Matthai and AB exchanged numerous intimate text messages and emails.

During this time, it became clear to Dr Matthai that AB had developed a romantic interest in him, which caused Dr Matthai to convey to AB that he did not want to ‘create expectations apart from the great company that they could give each other’, but continued their exchanges, nonetheless.

In July 2017, Dr Matthai was asked to attend a meeting with the head of department, Dr Rajabifard, who told Dr Matthai that AB complained about him and had asked to change supervisor. Dr Matthai agreed that a change of supervisor would be ‘the best way forward’.

In 2018, AB reported Dr Matthai’s behaviour to the University’s human resources department, who met with AB to discuss the matter. AB made no formal complaint to the University and no further action was taken in respect of the matter.

Years later, in January 2024, AB emailed the University alleging that Dr Matthai had sexually harassed her in 2017. The University commenced an investigation into the allegations, appointing an external investigator. The University put written allegations of misconduct to Dr Matthai, which consisted of the communications between Dr Matthai and AB via text and email.

The investigation revealed no basis for the allegation of sexual harassment but did conclude that Dr Matthai’s messages to AB were ‘highly inappropriate’ and breached the University’s Appropriate Workplace Behaviour Policy (the AWB Policy).

As part of the University’s investigation process, the University’s director of workplace relations requested that the Provost of the University make a decision in relation to the allegations against Dr Matthai. In reviewing all evidence, the Provost determined that due to the severity of the conduct, the significant power imbalance of power between the parties, and the fact that Dr Matthai breached the AWB Policy, determined that the appropriate penalty was to terminate Dr Matthai’s employment without notice.

On 17 December 2024, the University summarily dismissed Dr Matthai on grounds of serious misconduct.

Dr Matthai then made an unfair dismissal application.

Decision

Valid Reason

Deputy President Colman first turned to the issue of whether there was a valid reason for Dr Matthai’s dismissal.

In doing so, the FWC considered whether an employee’s private conduct would give rise to a valid reason for dismissal. Deputy President Colman turned to the decision in Sydney Trains v Bobrenitsky [2022] FWCFB 32, where the FWC previously held that private conduct must have a relevant connection with employment, and that such a connection might exist where, for example, the employee damages the employer’s interests in respect of its relationships with clients or staff, or because of the adverse effect of the conduct on other employees, or the efficient operation of the business. In such cases, conduct that might otherwise be private will be considered work-related and can be relied on as a valid reason for dismissal.

Dr Matthai presented evidence in the FWC that his conduct was private and not for the University to regulate.

Ultimately, Deputy President Colman rejected Dr Matthai’s argument, as it failed to take into account Dr Matthai’s position of significant power over AB in the University. The Deputy President considered factors including that students rely on supervisors to provide them with work, facilitate work opportunities, and foster relationships for future working life. These factors, among others, create a power dynamic that can make it difficult for students to raise concerns about the personal aspect of the working relationship, putting student welfare at risk if boundaries are not observed.

The Deputy President also considered that interpersonal complications can adversely affect the work of students and given the nature of study, there are no ‘out of hours’ conduct, as work can be conducted at any time in any place.

Having regard to these issues, the Deputy President considered that the workplace policies applying to Dr Matthai’s employment were engaged when he was communicating with AB, even during private conversations.

The FWC considered that by sending AB intimate messages, he failed to comply with the AWB Policy and was therefore in breach of his employment agreement, which required him to comply with policies of the University. Dr Matthai acknowledged that he wilfully contravened the AWB Policy.

The FWC in this instance found that Dr Matthai’s conduct was wilful and deliberate and that the contravention of the policy was serious. The Deputy President concluded that the conduct amount to serious misconduct for the purposes of the Enterprise Agreement and that there was a valid reason to terminate Dr Matthai’s employment.

Other considerations

Section 387(h) of the FW Act requires the FWC to consider other matters it considers relevant in determining whether a dismissal is harsh, unjust or unreasonable. Here, a prominent factor is the historical nature of the conduct. The FWC noted that the University had been aware of the conduct in quite a significant amount of detail, since 2017, and had enough information to investigate at that time. While the FWC was not critical of the University for not investigating (as AB did not want to make a formal complaint), the decision not to act at that time was still relevant. The FWC considered that in delaying acting in relation to this matter for seven years, Dr Matthai was deprived of the opportunity to seek alternative employment at age 55 rather than 62. In delaying action, Dr Matthai was also given an opportunity to demonstrate to the University that such conduct would not recur. Deputy President Colman gave significant weight to the fact Dr Matthai had maintained an unblemished record and had no record of disciplinary matters after this event. Accordingly, the Deputy President was satisfied that the decision to dismiss Dr Matthai was harsh and therefore unfair.

Given the FWC was satisfied that Dr Matthai would not engage in such conduct again, the FWC was not convinced that the employment relationship was irrevocably damaged. The Deputy President then ordered that Dr Matthai be reinstated to his former position at the University.

Take home message

This decision serves as a reminder to employers that workplace investigations should be conducted thoroughly as soon as allegations of misconduct become known. There is a real risk that by failing to deal with potential breaches of employment policies at in a timely manner, any subsequent disciplinary action may be considered unfair.

Employers should always thoroughly investigate complaints the greatest possible extent so that issues can be resolved and closed, minimising the risk of recurrence and an inability to discipline employees for conduct which is in breach of workplace policies, although it can be difficult to reconcile this position against the wishes of the complainants.

Should you wish to discuss the matters raised in this article, please contact Lincoln Smith on + 61 8 8210 1203 or lsmith@normans.com.au, or Annabelle Narayan on +61 8 8210 1292 or anarayan@normans.com.au, or Edward De Luca on +61 8 8210 1279 or edeluca@normans.com.au.