Employers must conduct a reasonable investigation and avoid a "knee-jerk reaction" when considering sacking any employee facing serious out-of-hours criminal offence, a tribunal has warned.

Senior Deputy President Jonathan Hamberger yesterday ordered meat supplier Milly Hill Pty Ltd to pay its former apprentice butcher six weeks' wages in compensation after it dismissed him over his arrest on charges of being an accessory after the fact to murder.

At the time of his dismissal, the butcher was ten months shy of completing his three-year apprenticeship at the company's Kempsey retail butcher store located in Macleay Valley of NSW.

In conversations with the apprentice's parents, the company's director expressed his concerns about the effect the criminal charge might have on the company's reputation and financial viability.

Commissioner Michael Roberts accepted the apprentice's late unfair dismissal application in March, finding his solicitors were responsible for the delay.

Before Senior Deputy President Hamberger, Milly Hill argued that it had acquired evidence that customers would boycott the retail butcher store, and other employees would resign, if it continued to employ the apprentice.

One retail employee suggested the apprentice's mood and appearance had deteriorated in the lead-up to his arrest, the company claimed.

"[The apprentice] received a phone call at work, a short time later I noticed him sharpening his knife very aggressively and I said to him 'what's up' and he replied by saying if any of them touch me mates I will stab them," the worker testified.

"I then told [the apprentice] to pull your head in and wake up to yourself and don't be so stupid, from that day on I had fears for my own safety and feeling [sic] threatened."

"Grave" offence didn't warrant dismissal

Senior Deputy President Hamberger found that the apprentice's conduct, while "grave", fell short of what would be "reasonable grounds on which to base a finding of serious misconduct".

"The offence with which he was charged was not a violence offence, but the offence to which he was charged as an accessory certainly was," he said.

Milly Hill's small retail presence in regional NSW, coupled with the apprentice's aggressive behaviour just prior to his arrest and the fact he worked with sharp knives, justified the concerns of Milly Hill, its employees and customers, Senior Deputy President Hamberger said.

But while the dismissal was valid, Senior Deputy President Hamberger said it was inconsistent with the Small Business Fair Dismissal Code, given the deficiencies in the company's handling of the pre-dismissal process.

Citing the two-step test in John Pinawin T/A RoseVi.Hair.Face.Body v Domingo, the senior deputy president found that Milly Hill had failed to "conduct a reasonable investigation into the matter" to determine whether a dismissal was "reasonable".

The full bench in that case upheld the summary dismissal of a hairdresser whose work performance had deteriorated because of his recreational drug-taking (see Related Article).

Senior Deputy President Hamberger said it was firstly necessary for Milly Hill to consider whether the apprentice's misconduct was sufficiently serious to justify immediate dismissal, and secondly, whether such a belief had a reasonable basis, following an investigation.

"On the balance of probabilities, I find that [Milly Hill's director] had a knee-jerk reaction to the news that [the apprentice] had been charged, fuelled by reports of customer and employee dissatisfaction, and proceeded to terminate his employment on that basis," he said.

"However, I do not consider that [Milly Hill's director] had reasonable grounds on which to believe this."

Senior Deputy President Hamberger noted that while it sought advice from a lawyer on the day the charges were laid, it failed to "direct the solicitors to conduct an investigation into that situation".

On the company's purported reliance on customer and employee dissatisfaction, Senior Deputy President Hamberger said the company had failed to properly scrutinise the claims before sacking the apprentice.

"Similarly, while I accept that customers and employees told [Milly Hill's director] (in some cases indirectly, through [a store manager]) that they would not be happy if [the apprentice] continued to work for Milly Hill, I cannot find that that this constitutes a reasonable investigation," he said.

For example, the senior deputy president found that Milly Hill's fears of a customer boycott, fuelled by comments supplied by another Kempsey store holder, was motivated by an unrelated disagreement between her and the apprentice over a disputed car park space.

"The evidence suggests that [Milly Hill's director] was a passive recipient of these reports of dissatisfaction, rather than that he had actively sought out their opinions," he said.

Employer failed to establish "relevant connection"

Referring to the apprentice's out-of-hours conduct, Senior Deputy President Hamberger said Milly Hill failed to establish "a relevant connection between the criminal activity and the employee's employment".

"There is no presumption that a criminal conviction alone is a valid reason for termination of employment, particularly where the criminal offence was committed outside of work," he said, noting that the apprentice is currently out on bail and no conviction has been recorded.

"Even conduct outside of work involving criminal offences does not, alone, warrant dismissal."

While insufficient to constitute serious misconduct, the apprentice's actions "nonetheless contributed to his dismissal", Senior Deputy President Hamberger said.

He acknowledged the community apprehension surrounding the arrest, especially given that the apprentice was the only alleged offender named in the media because the person charged with allegedly committing the murder was under 18 years at the time, and therefore couldn't be identified.

Recognising that the apprentice was nearing the completion of his time, the senior deputy president criticised the company for failing to "put sufficient thought" into whether it could retain him and "mitigate" the risks to its employees and customers.

Finding the apprentice was denied procedural fairness, Senior Deputy President Hamberger ruled out reinstatement as a remedy and awarded the apprentice compensation.

Deeth v Milly Hill Pty Ltd [2015] FWC 6422 (28 October 2015)