Pulling the purse strings on company expenses

Workplace Directions

Employees often have the ability to spend employer funds on business related expenses. This may be through the use of company credit cards, purchase orders and/or petty cash. However, difficulty sometimes arises when employees expend employer funds on amounts which are not work related. A recent decision of the Fair Work Commission considered an unfair dismissal application in which the employee incurred expenses on his employer’s account including massages, vitamins and bath mats – which the employer decided constituted serious misconduct.

Facts

In Ranjan Mohapatra v Acciona Energy Australia Global Pty Ltd t/as Acciona [2015] FWC 5976, Mr Mohapatra’s employment as a Quality and Commissioning Engineer was summarily terminated after it was uncovered that he had purchased items on a company credit card and claimed those items on the company’s expenses system, although they were not covered by his employer’s travel expenses policy. In the event that expenses were incurred, which were not business related, the policy provided that the employer, Acciona Energy Australia Global (Acciona), would seek recovery of the costs and any interest from the employee.

Mr Mohapatra’s purchases included 14 massages, a blender, an Australia Day t-shirt, a singlet, two pairs of boxer shorts, a pair of gym shoes, shorts, a 3 metre extension lead, a back pack, a duffle bag, two bathmats, a cooler bag, vitamins and a heater. Mr Mohapatra claimed that all of the expenses were work related, as the items were purchased to replace his personal possessions that had been damaged during transit. Additionally Mr Mohapatra attempted to misrepresent the nature of the expenses, claiming the backpack was purchased as part of breakfast, the duffle bag as lunch and the heater as another type of meal.

Decision

Commissioner Roe held that there was a valid reason for the termination of employment and that Mr Mohapatra was not unfairly dismissed following an investigation into his conduct. Commissioner Roe held that in the circumstances, the termination of employment was a proportionate response to Mr Mohapatra’s conduct which amounted to serious misconduct.

This decision was supported by Mr Mohapatra’s repeated misrepresentation of unorthodox expenditure as business-related travel expenses, including trying to cover up the purchases by obscuring the detailed description on tax invoices, and deliberately disguising purchased items as meals. Mr Mohapatra’s behaviour was not limited to isolated incidents, which reinforced Commissioner Roe’s view that he had failed to act appropriately.

Acciona’s travel expenses policy clearly stated that employees were to claim reimbursement for ‘any reasonable, necessary and duly documented expenses’. However, in respect of this, Commissioner Roe noted:

It is common in these matters to focus too closely on the details of the corporate policies and procedures. In the real world of work, employees cannot be expected to read and remember detailed documents which are designed to protect the employer. In most cases common sense and reasonable and consistent standards and practices are the best test.

Ultimately, Commissioner Roe noted that an employer has to be able to trust that a senior employee who is expected to work and travel autonomously will use the employer’s credit card responsibly.

Commissioner Roe rejected Mr Mohapatra’s submission that because a doctor’s visit had previously been approved and paid for by Acciona, the 14 massages directed by the doctor should also be considered a business expense.

Commissioner Roe determined that he was unable to ‘conceive of how a reasonable person could believe that purchase of clothing because an employee forgot to pack certain items for travel, or purchase of a heater or a bath mat when staying in a high quality hotel or apartment could be a reasonable business expense.’

Commissioner Roe identified that even if Mr Mohapatra was motivated by a lack of judgment and understanding it was such an extreme case ‒ given the engineer’s level of education, responsibility and seniority ‒ that this had to be regarded as serious misconduct in any event.

Lessons for employers

There are a number of methods by which employers can and should regulate the spending of company funds by employees. These may include limiting the authority of employees to specified delegation amounts, providing ‘claw back’ provisions in employment contracts in the event an employee inappropriately spends company funds and repayment is required, or putting in place regular checks and audit systems to ensure funds are appropriately used.

Ultimately, employees spending employer funds inappropriately may be engaging in serious misconduct requiring the termination of employment. In the event that you suspect or require assistance in investigating employee spending of employer funds, we are able to assist.

Authored by Elizabeth Radley, Partner and Katie-Maree O’Brien, Associate, Newcastle.


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