A recent decision of the Employment Relations Authority severely penalised an employer for failing to provide clarity in respect of its expected credit card practices. 

 An employee’s employment agreed specified that work-related travel was chargeable to a company credit card on certain terms.  Unfortunately, the employer did not have any accompanying policies in place setting out its expectations around company credit card use, and it had allowed a culture to develop whereby employees occasionally charged personal expenses to the company credit card and declared them in order to be deducted from their next pay packet.

The employer got fed-up of acting as a personal finance company and providing what it considered ‘advances on salaries’ after one employee racked up $11,500 of personal spending on the company credit card over three days … in Las Vegas!

A disciplinary process followed … the outcome of which was the employee’s dismissal.  But the ERA did not agree that dismissal was justified in the circumstances.  The evidence of all witnesses was that the employer had not only allowed the practice of using company credit cards for personal expenses to develop, but had also condoned it.  The employee in question, for example, had previously incurred approximately $9,000 of personal spending on the company credit card which had been reimbursed by deductions from his wages – including a note of thanks from the employer’s accounts team for declaring the expenses!

While the employment agreement prescribed some terms in respect of the use of company credit cards (such as requiring pre-approval of expenditure by managers), enforcement of those terms has lapsed.  Having not then taking any action to notify its employees that it would no longer tolerate the behaviour that had been allowed to develop, the employer was unable to justifiably dismiss the employee. 

The result?  A personal grievance for unjustified dismissal and an award for 3 ½ months wages plus $10,000 compensation, not to mention the significant costs involved in defending the application …

Key lessons to be learnt:

1.    Ensure your employment agreements allow for the implementation of policies and guidelines;

2.    Keep those policies up-to-date and relevant to your operations;

3.    Be diligent in enforcing your policies; and

4.    If you allow the enforcement of a policy to lapse, obtain advice quickly in order to take steps to bring your practices back up to scratch.