Workplace Misconduct
Workplace Bullying Prevention Australia: Why Councils and SMEs Must Act Before Problems Escalate
Workplace Bullying Prevention Australia: Why Councils and SMEs Must Act Before Problems Escalate
Workplace bullying continues to challenge Australian organisations despite years of focus on workplace culture, employee wellbeing and compliance. Councils and small to medium-sized businesses (SMEs) regularly deal with the consequences of bullying complaints, including workplace investigations, staff turnover, workers’ compensation claims, damaged morale, and reputational harm.
Many organisations still view workplace bullying as an employee relations issue. That approach is no longer sufficient.
In 2026, regulators increasingly treat workplace bullying as a psychosocial hazard that employers must actively manage under workplace health and safety obligations. Organisations that ignore the warning signs expose themselves to significant legal, financial, and operational risks.
The reality is straightforward. Preventing workplace bullying costs far less than dealing with the fallout.
Why Workplace Bullying Matters More Than Ever
Workplace bullying affects far more than the individuals directly involved. It can undermine workplace culture, damage productivity, and create lasting impacts across entire teams.
When employees experience bullying, organisations often see:
- Increased absenteeism.
- Higher staff turnover.
- Reduced productivity.
- Lower employee engagement.
- Workplace conflict.
- Workers’ compensation claims.
- Costly workplace investigations.
For councils, the risks can be even greater. Allegations involving senior managers, executives or elected members can quickly attract media attention and erode community confidence.
For SMEs, the loss of a valued employee or a prolonged workplace dispute can significantly disrupt day-to-day operations.
What Is Workplace Bullying?
Workplace bullying occurs when a person or group repeatedly behaves unreasonably towards a worker or group of workers in a way that creates a risk to health and safety.
The key elements are repetition, unreasonable behaviour, and risk.
Bullying may involve:
- Repeated verbal abuse.
- Intimidation or aggressive behaviour.
- Persistent humiliation.
- Deliberately excluding individuals from workplace activities.
- Spreading rumours or gossip.
- Unreasonable workloads or deadlines.
- Withholding information necessary to perform duties.
- Harassment through emails, messaging applications or social media.
Although a single incident may not constitute workplace bullying, employers should never ignore inappropriate behaviour. Early intervention often prevents minor issues from developing into formal complaints or workplace investigations.
Workplace Bullying Is Now a Psychosocial Hazard
Australian workplaces have experienced a significant shift in how they manage employee wellbeing.
Employers are now expected to identify and manage psychosocial hazards with the same diligence they apply to physical hazards. Workplace bullying remains one of the most common and damaging psychosocial risks.
Unchecked bullying can contribute to:
- Anxiety and depression.
- Stress-related illness.
- Reduced workplace participation.
- Long-term psychological injury.
- Increased workers’ compensation costs.
The impact often extends beyond the affected employee. Teams experiencing unresolved conflict frequently suffer declining morale, reduced collaboration, and poorer performance.
Organisations that actively manage psychosocial risks are better positioned to create safe, productive, and compliant workplaces.
The Hidden Cost of Workplace Bullying
Many organisations underestimate the true cost of workplace bullying.
The direct expenses associated with complaints often include legal advice, investigations, and compensation claims. However, the indirect costs frequently exceed the visible financial impacts.
These costs may include:
- Internal investigations.
- Independent workplace investigations.
- Legal representation.
- Recruitment and onboarding expenses.
- Lost productivity.
- Increased sick leave.
- Reduced employee engagement.
- Damage to organisational reputation.
Every bullying complaint consumes management time and organisational resources. The longer issues remain unresolved, the more expensive they become.
Why Councils Face Unique Risks
Local government operates in an environment where transparency, accountability and public trust are essential.
Unlike private sector organisations, councils must manage workplace issues while maintaining public confidence and responding to community expectations.
Poorly managed workplace bullying complaints can result in:
- Governance reviews.
- Community criticism.
- Political pressure.
- Adverse media coverage.
- Reputational damage.
A complaint that begins as an internal employment matter can quickly become a public issue.
That reality makes early intervention and effective workplace culture management critical for councils of all sizes.
Leadership Shapes Workplace Culture
Strong leadership remains the most effective defence against workplace bullying.
Employees closely observe how leaders behave and what behaviour they tolerate. Managers who ignore inappropriate conduct often create an environment where bullying flourishes.
Leaders who consistently demonstrate professionalism, accountability and respect set a very different standard.
Effective leaders:
- Address concerns promptly.
- Communicate expectations clearly.
- Support respectful workplace behaviour.
- Hold individuals accountable.
- Promote psychological safety.
Organisations rarely regret acting too early. They often regret acting too late.
Policies Alone Will Not Prevent Bullying
Every organisation should maintain a clear workplace bullying policy. However, policies only work when employees understand them, and leaders apply them consistently.
An effective policy should:
- Define workplace bullying.
- Provide practical examples.
- Explain reporting pathways.
- Outline investigation procedures.
- Emphasise procedural fairness.
- Explain confidentiality obligations.
- Identify available support services.
A policy hidden on an intranet page will not change workplace behaviour.
Employees need confidence that leaders will enforce the policy fairly and consistently.
Training Builds Capability and Accountability
Workplace bullying prevention requires ongoing education.
Employees need to understand what bullying looks like, how to report concerns and what standards of behaviour the organisation expects.
Managers require additional skills in:
- Complaint management.
- Conflict resolution.
- Difficult conversations.
- Psychosocial risk management.
- Early intervention strategies.
- Workplace investigations.
Regular training helps organisations reinforce expectations and maintain a respectful workplace culture.
Early Intervention Prevents Escalation
Most serious workplace disputes begin with relatively minor issues that organisations fail to address.
Common warning signs include:
- Interpersonal conflict.
- Increased complaints.
- Team dysfunction.
- Employee disengagement.
- Declining morale.
- Increased absenteeism.
Managers who identify these indicators early can often resolve issues through coaching, mediation, facilitated discussions or other informal processes.
Early intervention remains one of the most effective workplace bullying prevention strategies available.
When Should You Engage an External Investigator?
Some matters require an independent assessment.
External workplace investigators may be appropriate when:
- Senior managers are involved.
- Conflicts of interest exist.
- Serious misconduct is alleged.
- Multiple parties are involved.
- Organisational impartiality may be questioned.
- Significant reputational risks exist.
An independent investigation helps demonstrate procedural fairness, transparency, and objectivity.
For councils, government agencies and larger SMEs, independent investigations often provide confidence to employees, executives, governing bodies, and the wider community.
Creating a Respectful Workplace Culture
Preventing workplace bullying requires more than policies, training sessions and investigations.
It requires leadership commitment and a workplace culture built on respect, accountability, and professionalism.
Organisations that encourage employees to raise concerns early, address complaints fairly and support respectful behaviour create safer and more productive workplaces.
The benefits are substantial:
- Stronger employee engagement.
- Higher retention rates.
- Better organisational performance.
- Reduced workplace conflict.
- Lower legal and compliance risks.
Final Thoughts
Workplace bullying is no longer simply an HR issue. It is a workplace health and safety issue, a governance issue, and a leadership issue.
Councils and SMEs that invest in workplace bullying prevention, psychosocial risk management, leadership development and workplace culture create stronger, safer, and more resilient organisations.
Those that delay action often face escalating conflict, costly investigations, reduced productivity, and reputational damage.
The most successful organisations understand a simple truth: preventing workplace bullying is not just about compliance. It is about protecting people, strengthening culture, and building a workplace where employees can perform at their best.
Is Legal Professional Privilege Still Relevant for Workplace Investigations in 2026?
Update June 2026: This article has been expanded to include recent Federal Court commentary, additional case studies and practical guidance for councils, government agencies and SMEs. Read our updated article: “Is Legal Professional Privilege Still Relevant for Workplace Investigations in 2026?“
Is Legal Professional Privilege Still Relevant for Workplace Investigations in 2026?
Many councils, government agencies, and employers still believe that hiring lawyers to carry out a workplace investigation automatically protects the process with legal professional privilege.
That idea is still risky.
Australian courts and tribunals keep confirming that simply having a law firm involved does not create privilege. The crucial question is whether the investigation is mainly to get legal advice or to get ready for a lawsuit.
By 2026, this problem has become more important because investigations now more often include:
- psychological and social risks
- accusations of bullying and harassment
- complaints about unwanted sexual behaviour
- reporting of wrongdoing by an insider
- code of Conduct breaches
- conflicts of interest
- fraud and corruption allegations
- unfair dismissal proceedings; and
- workers’ compensation and workplace conflicts
Employers who do not understand privilege may accidentally reveal sensitive information during lawsuits, Commission hearings, court reviews, and investigations.
The Key Legal Principle
The High Court’s decision in Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49 is still the fundamental rule. Privilege applies only when the main reason for the communication or document is to get or give legal advice, or to use it in current or expected legal cases.
Who the investigator is does not matter.
If the primary goal of the investigation is to find out if rules were broken, if bad behaviour happened, or if someone should be disciplined, then privilege might not protect the information.
The Fair Work Commission Warning Employers Still Ignore
One of the most important workplace investigation decisions is Gaynor King [2018] FWC 6006.
The City of Darwin hired Minter Ellison to look into bullying claims. The Council later said the report was confidential because lawyers carried out the investigation.
Commissioner Wilson did not accept that argument.
The Commission looked into the real reason for the investigation and found that the main goal was to see if workplace behaviour rules and Council policies were broken, not to get legal advice.
The Commission also looked at how the employer acted: employees were told about the investigation, the accusations, and the results. Sharing this information weakened the claim of privilege.
That decision is still very important in 2026 because many organisations still organise investigations in ways that do not protect privilege.
Why Some Investigation Reports Remain Protected
Privilege applies when the investigation is done mainly to get legal advice.
In the cases Bowker, Coombe and Zwarts v DP World Melbourne Ltd [2015] FWC 7312 and Kirkman v DP World Melbourne Ltd [2016] FWC 605, the Fair Work Commission agreed that certain information was protected because the investigators were hired specifically to help lawyers give legal advice.
The Commission examined:
- the exact words used in the retainer
- the role of the lawyers
- the reason for the investigation
- how documents were managed
- whether findings were broadly disclosed; and
- whether the employer kept things confidential as they should
Privilege is determined by how things are organised, their goals, and how people behave—not by job titles or guesses.
Recent Federal Court Commentary (2023–2026)
The Federal Court’s decision in Diawara v National Australia Bank Limited [2023] FCA 1048 provides one of the most important recent clarifications. (Australasian Lawyer)
The case was about a claim of privilege over a cultural review report created during a discrimination dispute. The Court confirmed that:
- the dominant purpose test remains the central inquiry
- the focus is on why the person made or obtained the document
- the party claiming privilege must prove the necessary facts; and
- privilege can apply even if the document is used for secondary or additional purposes
The Court looked at the agreement between Herbert Smith Freehills and Wise Workplace Solutions and agreed that the main reason for the report was to help the lawyers legally advise NAB.
This decision confirms that privilege can be kept, but only when the evidence clearly shows that the main reason was legal advice.
Recent Oversight Commentary
A 2022 external review by the South Australian Ombudsman highlighted the importance of the dominant purpose test when evaluating claims of privilege over investigation materials. The Ombudsman said that if investigations mainly focus on gathering facts about employee complaints or policy violations, claims of privilege might fail unless the evidence clearly shows the investigation was for obtaining legal advice.
The Ombudsman also emphasised that labelling a document “privileged and confidential” does not make it privileged. Courts and oversight agencies will focus on the true nature of the work and the actual reason for the investigation.
Why This Matters for Local Government
The problem is especially serious for councils.
Local government investigations often include:
- councillor behaviour
- allegations against a senior executive
- code of Conduct matters
- complaints about bullying
- procurement concerns
- allegations of corruption
- protected disclosures; and
- conflicts of interest
Many councils believe that hiring outside lawyers guarantees privacy.
That assumption becomes a problem when things get to:
- The Fair Work Commission
- NCAT
- ICAC
- The NSW Ombudsman
- Legal process
- Public interest disclosure investigations; or
- Judicial review.
If privilege doesn’t apply, sensitive information might be exposed, including:
- draft findings;
- internal communications;
- witness credibility assessments;
- legal assumptions;
- procedural weaknesses; and
- governance failures.
The Practical Lessons for Employers in 2026
Organisations should not automatically assume they have special rights just because lawyers are investigating.
The safer approach is to separate:
- factual investigations
- disciplinary decision-making
- witness evidence collection; and
- legal advice.
Employers should get advice early on how to organise the investigation before choosing investigators.
- Retainer documents are important.
- How the investigation is carried out is important.
- How findings are shared is important.
- How reports are shared is important.
- How the organisation uses the report later may decide if the privilege continues.
Often, the best protection isn’t a privilege.
The best way to protect yourself is by carrying out investigations that are:
- procedurally fair
- impartial
- based on evidence
- properly documented; and
- capable of withstanding external scrutiny
The main lesson from the Commission, the Federal Court, and oversight authorities is still the same.
In 2026, organisations that still do not understand legal professional privilege may find out too late that their supposedly confidential investigation materials can be revealed during lawsuits or regulatory checks.
How Should Employers Address Misconduct Allegations in 2026?
How Should Employers Address Misconduct Allegations in 2026?
Allegations of workplace misconduct are becoming more complicated, more noticeable, and much more dangerous for employers in 2026.
Local councils, government agencies, and small businesses are now receiving more complaints about:
- bullying and harassment
- conflicts of interest
- misuse of resources
- fraud and corruption
- inappropriate social media conduct
- discrimination
- workplace behavioural issues
Meanwhile, employees now have vastly different expectations. Employees better understand their workplace rights, psychological safety requirements are being examined more closely, and organisations face increasing demands to show fairness, transparency, and accountability.
A single investigation that is not managed well can rapidly become more serious:
- unfair dismissal proceedings
- workers compensation claims
- psychological injury allegations
- reputational damage
- union disputes
- media scrutiny
- loss of staff confidence
Despite these changing risks, one principle stays the same:
Procedural fairness remains central to every justifiable workplace investigation.
Why Procedural Fairness Still Matters
Procedural fairness is not just an HR formality or a legal technicality.
It supports a legal and trustworthy investigation process.
Employees who face allegations must be provided with:
- clear details of the allegations
- enough time to respond
- access to relevant information
- an opportunity to provide evidence
- a fair and unbiased assessment process
Investigators and decision-makers should remain open-minded throughout the entire investigation. If an investigator works backward from a desired result, the honesty of the process is already affected.
The Fair Work Commission keeps emphasising that assumptions, hints, and unsupported opinions cannot replace factual evidence.
The Continuing Relevance of Deng v Westpac
One of the most often talked about cases about procedural fairness is Kefeng Deng v Westpac Banking Corporation [2018] FWC 7334. (CaseNote)
Westpac looked into claims about using customer information improperly and breaking internal rules. Although the Commission agreed that there were valid concerns about the employee’s behaviour, the investigation process itself faced strong criticism.
The Fair Work Commission pointed out several major failures, including:
- insufficient detail provided before the interview
- a five-hour interview with minimal breaks
- failure to thoroughly test or corroborate evidence
- an apparent overreliance on the investigator’s opinion
- only 24 hours provided for the employee to respond to detailed allegations
Commissioner Riordan said parts of the process were unfair and criticised the investigation for not properly following important leads. The Commission ultimately determined that the dismissal was unfair and ordered the employee to be reinstated.
The decision is still especially important in 2026 because many organisations keep making the same mistakes.
Common Investigation Failures Still Seen in 2026
Although people are more aware of governance and workplace culture, many employers still do not fully understand how complex misconduct investigations can be.
Frequent problems include:
- managers investigating their own staff without training
- poorly framed allegations
- lack of independence
- rushing investigations
- failing to gather corroborating evidence
- excessive delays
- inadequate interview practices
- confidentiality breaches
- failing to separate fact from opinion
- predetermined outcomes
In local government settings, these problems become more serious because investigations often draw political attention, council members’ examination, and public interest.
For SMEs, the impact can be equally damaging. An investigation with mistakes can damage workplace relationships, lower morale, and cause long-term harm to reputation.
Why Poor Investigations Create Bigger Problems
Many organisations strongly emphasize “resolving the issue quickly.”
This approach often leads to much higher risks in the long term.
An investigation conducted poorly can be detrimental:
- complainants
- respondents
- witnesses
- workplace culture
- leadership credibility
- staff trust
- public confidence
Employees soon lose trust in systems they see as biased, inconsistent, or unfair.
When trust is lost, organisations often experience more complaints, higher employee turnover, and employees becoming less willing to report wrongdoing.
What a Professional Investigation Looks Like in 2026
A proper workplace investigation should include:
- logical terms of reference
- properly articulated allegations
- impartial investigators
- evidence-based findings
- procedural fairness throughout
- documented reasoning
- proportionate recommendations
- independent review of findings before disciplinary action
Importantly, findings must always rely on evidence rather than assumptions, office politics, or the pressure to reach a quick result.
Effective investigations follow a systematic and fair approach and can withstand careful examination by others.
The Value of Independent Investigators
For important, sensitive, or high-risk issues, independent investigators offer some of the best protections for councils, government agencies, and small and medium-sized enterprises.
Independent investigators provide:
- objectivity
- investigative expertise
- procedural fairness experience
- evidentiary assessment skills
- independence from internal politics
- increased credibility
External investigators also help show employees, regulators, and tribunals that the organisation handled the matter fairly and professionally.
That trustworthiness can become especially important if the issue later goes to the Fair Work Commission, a regulator, or the media.
Final Thoughts
By 2026, workplace investigations must be handled with greater seriousness than just routine HR tasks.
Allegations of misconduct now have major legal, operational, cultural, and reputational affects.
The organisations best able to handle these risks are those that:
- act early
- investigate professionally
- maintain procedural fairness
- document decisions carefully
- remain evidence-focused throughout the process
When investigations are conducted correctly, organisations protect both themselves and the integrity of their workplace culture.
Lack of Sleep, Poor Decisions and Rising Workplace Risk: Why Councils and SMEs Should Pay Attention
Lack of Sleep, Poor Decisions and Rising Workplace Risk
Introduction: The Hidden Cost of Workplace Fatigue
Across Australia, many workplaces still treat exhaustion as a sign of commitment. Employees who work late into the night, managers surviving on minimal sleep, and executives constantly “pushing through” are often praised for their dedication.
However, growing research suggests this culture may be creating a serious governance and compliance risk for Local Government, government agencies, and SMEs.
How Lack of Sleep Impacts Decision-Making
Lack of sleep does far more than reduce productivity. Research now links fatigue to poor judgment, inflexible thinking, impaired decision-making, and unethical behaviour.
Tired employees are more likely to cut corners, ignore procedures, make reactive decisions, and fail to properly consider the consequences of their actions. Fatigue also reduces emotional control and increases “tunnel vision” thinking, where individuals focus only on immediate outcomes rather than long-term risks.
Fatigue and Unethical Behaviour in the Workplace
Importantly, one of the first abilities people lose when tired is the capacity to reflect on the ethical consequences of their actions. This means exhausted employees are more likely to rationalise shortcuts or justify conduct they would normally recognise as inappropriate.
What begins as “just getting the job done” can quickly evolve into procedural breaches, poor workplace behaviour, or misconduct.
Governance Risks for Local Government and Public Sector Organisations
For councils and government organisations, this creates significant risk.
Fatigued staff may:
- Overlook procurement requirements
- Mishandle complaints
- Fail to maintain proper records
- Make poor decisions under pressure
- Ignore compliance obligations
In environments where accountability, transparency, and procedural fairness are critical, even small lapses can lead to allegations of misconduct, governance failures, reputational damage, or legal scrutiny.
Many investigations into workplace misconduct, fraud, corruption, and compliance breaches reveal a common factor — employees operating under excessive workload pressure and chronic fatigue.
Why SMEs Are Particularly Vulnerable
For SMEs, the danger can be even greater.
Small businesses often operate with limited staff, high workloads, and minimal internal oversight. Owners and employees frequently manage multiple responsibilities while working extended hours. Over time, fatigue can weaken internal controls and create conditions where errors, poor judgment, or even fraudulent conduct become more likely.
Common Workplace Failures Linked to Exhaustion
An exhausted finance employee may fail to identify suspicious transactions. A fatigued manager may ignore bullying or harassment complaints. An overworked staff member may manipulate records simply to keep up with unrealistic expectations.
These issues are rarely isolated incidents. They are often symptoms of a workplace culture where fatigue has become normalised.
Workplace Fatigue as a Risk Management Issue
The issue is not simply employee wellbeing — it is organisational risk management.
Businesses and councils that reward constant overwork may unintentionally be increasing their exposure to fraud, misconduct, poor workplace culture, and legal liability.
Forward-thinking organisations are now recognising fatigue as both a workplace safety issue and a governance issue. Managing workloads, encouraging healthy work practices, and reducing burnout are no longer optional wellbeing initiatives — they are essential risk mitigation strategies.
Creating a Sustainable Workplace Culture
Leaders should ask themselves an important question:
Are we rewarding productivity — or simply rewarding exhaustion?
Organisations that prioritise sustainable workloads, ethical leadership, and employee wellbeing are far more likely to maintain strong governance, effective decision-making, and healthy workplace cultures.
Conclusion: An Exhausted Workplace Is Not a High-Performing Workplace
The message for leaders is simple: an exhausted workplace is not a high-performing workplace.
It is a workplace operating with reduced judgment, weakened ethical safeguards, and increased exposure to serious organisational risk.
For Local Government, government agencies, and SMEs, managing fatigue is no longer just a wellbeing initiative — it is a critical governance and compliance priority.
Workplace behaviour and culture
Bullying, Harassment, and Misconduct
Workplace behaviour and culture go far beyond being merely human resources concerns.
These concerns centre on governance, compliance, and risk management.
These issues directly affect governance, compliance, and risk management.
- Formal complaints
- Workplace investigations
- Sick leave and workers’ compensation claims
- Staff resignations
- Unfair dismissal claims
- Legal action
- Reputational damage
- Loss of productivity
- Audit and governance issues
So workplace behaviour is a critical organizational risk—not just a personality issue.
What Exactly Defines Workplace Behaviour?
Workplace behaviour includes:
- Bullying
- Harassment
- Sexual harassment
- Discrimination
- Aggressive management styles
- Conflicts between staff
- Inappropriate language
- Misuse of authority
- Misconduct
- Breaches of the Code of Conduct
- Victimisation
- Unprofessional behaviour
These behaviours erode workplace culture and pose serious risks to the organization.
Why Workplace Culture Matters
Workplace culture is often described as:
“The way we do things around here.”
If the culture allows:
- Bullying
- Harassment
- Aggressive behaviour
- Poor management behaviour
- Ignoring complaints
- Favouritism
- Conflicts of interest
- Lack of accountability
Policies cannot resolve the issue because staff prioritise organizational culture over formal rules.
Toxic workplace culture often leads to:
- High staff turnover
- Increased sick leave
- Low morale
- Complaints
- Investigations
- Loss of staff
- Difficulty recruiting staff
- Reputational damage
Workplace culture is a governance matter, forged by the tone set from the top.
Bullying in the Workplace
Workplace bullying involves repeated unreasonable behaviour that threatens health and safety.
Examples include:
- Yelling at staff
- Constant criticism
- Excluding staff
- Setting unrealistic deadlines
- Withholding information
- Public humiliation
- Threatening job loss
- Excessive monitoring
- Misuse of performance management
- Spreading rumours
Bullying often escalates into both a WHS and HR issue.
Harassment and Sexual Harassment
Harassment encompasses any behaviour that:
- Offends
- Humiliates
- Intimidates
Sexual harassment includes:
- Unwelcome comments
- Jokes
- Messages
- Emails
- Physical contact
- Requests for dates
- Inappropriate comments
- Displaying inappropriate material
Organizations now bear a proactive responsibility to prevent sexual harassment, not just respond to complaints.
Misconduct
Misconduct may include:
- Breaches of the Code of Conduct
- Inappropriate behaviour
- Misuse of resources
- Conflicts of interest
- Fraud or theft
- Breaches of policy
- Failure to follow lawful and reasonable directions
Misconduct often sparks formal investigations.
Why These Issues Become Major Problems
Workplace behaviour issues can quickly escalate into major problems when:
- Complaints are ignored
- Managers do not act
- Managers are the problem
- There is no reporting system
- Policies exist but are not followed
- Investigations are not handled properly
- There is no training
- Leadership tolerates poor behaviour
- There are no consequences
Many major workplace investigations stem from a minor issue that was first overlooked.
What Organizations Should Have in Place
To proactively manage workplace behaviour risks, Councils, and organizations should implement:
- Code of Conduct
- Workplace Behaviour Policy
- Bullying and Harassment Policy
- Complaint Handling Procedure
- Investigation Procedure
- Training for managers
- Training for staff
- External investigator available
- Confidential reporting process
- Proper documentation
- Leadership training
- Clear consequences for misconduct
This forms a key part of a strong compliance and governance framework.
The Role of Managers and Leaders
Managers and leaders shape workplace culture in important and impactful ways.
Staff closely watch how managers act and what they allow.
When managers:
- Ignore bad behaviour
- Do not act on complaints
- Play favourites
- Bully staff
- Do not follow policy
- Do not document issues
As a result, the workplace culture will deteriorate.
Culture Flows Powerfully from the Top Down.
Final Thought
Many organizations see workplace behaviour issues as solely the responsibility of Human Resources.
They are not.
These issues touch on governance, risk management, legal matters, and reputation.
If workplace behaviour is not managed effectively, it will inevitably become:
- A complaint
- An investigation
- A legal issue
- A reputational issue
A powerful way to manage workplace behaviour is to:
- Set clear standards
- Train staff and managers
- Act on issues early
- Investigate properly
- Ensure leadership sets the right example
Remember
Workplace culture springs from influences that go far beyond formal policies.
It is shaped by the behaviour you allow.
Contact [email protected] if you need help in this area.
Fraud and Financial Mismanagement in Local Government and SMEs
Fraud and Financial Mismanagement: A Serious Risk for Local Government and SMEs
Fraud and financial mismanagement affect not just large corporations. Local governments and small to medium-sized enterprises (SMEs) often confront heightened risks because they typically have fewer controls, limited staff, and greater levels of employee trust.
Unfortunately, this combination creates fertile ground for fraud, corruption, and financial mismanagement that often remain hidden for long periods.
This article explores the critical risk of fraud, how it unfolds, and the strategies Local Government and SMEs can use to combat it.
Why Fraud and Financial Mismanagement Are Serious Risks
Fraud often hides in plain sight, far from obvious or conspicuous. It often begins modestly and thrives. A single incident of a minor false invoice or misuse of a company credit card can quickly escalate into ongoing theft, procurement fraud, or manipulation of financial records.
In local government, fraud involving public funds triggers financial losses, damages reputations, and sparks political fallout. A fraud incident within a council can quickly grab front-page headlines, triggering investigations, audits, and intense public scrutiny.
For SMEs, fraud can strike with devastating impact. Many small businesses run on razor-thin profit margins, where a single act of fraud can trigger severe financial distress or even bankruptcy.
So fraud prevention and financial controls must take centre stage, not be relegated to afterthoughts.
Common Types of Fraud in Local Government and SMEs
Fraud and financial mismanagement typically reveal themselves through recognisable patterns. The most common types include:
Procurement Fraud
This stands as one of the most critical fraud risks facing local government. It features:
- Fake invoices
- Collusion with suppliers
- Conflicts of interest
- Overcharging for goods or services
- Paying for work not completed
Procurement fraud thrives on the large sums of money involved and the inherent trust placed in the procurement process.
Payroll Fraud
Payroll fraud includes:
- Ghost employees
- False overtime claims
- Unauthorised pay increases
- Timesheet manipulation
Payroll fraud can persist undetected for years when payroll reports are not thoroughly reviewed.
Expense Claim Fraud
This occurs when employees claim:
- Personal expenses as business expenses
- Fake receipts
- Inflated travel claims
- Unauthorised use of company credit cards
Though individual claims may be small, over time they can drain organisations of thousands of dollars.
Theft of Cash or Assets
This includes:
- Stealing cash
- Taking equipment or materials
- Misuse of fuel cards
- Using council or company equipment for private work
Financial Mismanagement
Financial mismanagement may not always be fraudulent, yet it can inflict just as much damage. It features:
- Poor record keeping
- Unauthorised spending
- Budget blowouts
- Failure to reconcile accounts
- Lack of financial oversight
- Not following procurement policies
Financial mismanagement often opens the door to fraud.
Why Fraud Occurs (The Fraud Triangle)
Fraud experts often invoke the Fraud Triangle to reveal why people commit fraud. It centres around three key factors:
- Pressure—Financial problems, gambling, debt, lifestyle pressures
- Opportunity—Weak internal controls, poor supervision, lack of audits
- Rationalisation—The person convinces themselves the fraud is justified (“I’m underpaid,” “I’ll pay it back,” “No one will notice”)
By reducing opportunities, an organisation significantly slashes the risk of fraud.
Warning Signs of Fraud and Financial Mismanagement
Warning signs constantly reveal when something is wrong. Watch out for these common red flags:
- An employee who never takes leave
- One person controlling a process from start to finish
- Missing receipts or invoices
- Suppliers who refuse to provide documentation
- Regular budget overruns
- Complaints about unfair procurement processes
- Poor record keeping
- Delays in financial reporting
- Staff living beyond their means
- Resistance to audits or oversight
Though not definitive proof of fraud, these indicators raise enough concern to demand a thorough review.
How Local Government and SMEs Can Prevent Fraud
Fortunately, straightforward controls can stop most fraud in its tracks.
Segregation of Duties
No single person should control a process from start to finish. For instance:
- One person raises a purchase order
- Another person approves it
- Another person processes the invoice
- Another person approves payment
Clear Policies and Procedures
Organisations must set clear, decisive policies on:
- Procurement
- Conflict of interest
- Expenses
- Use of credit cards
- Delegations and approvals
- Financial management
Policies must not only exist—they must be actively used and enforced.
Regular Audits
Regular internal and external audits serve as a powerful weapon against fraud. People are much less likely to commit fraud when they know they are being watched.
Fraud and Corruption Control Plan
Local governments and organisations must have a Fraud and Corruption Control Plan that identifies risks and outlines how to manage them.
Encourage Reporting
Many fraud cases became known only because someone reported them. There should be:
- Confidential reporting systems
- Whistleblower policies
- A culture where people feel safe reporting concerns
Management Oversight
Managers must regularly carry out regular reviews:
- Financial reports
- Supplier lists
- Overtime reports
- Credit card statements
- Procurement reports
Fraud prevention is a shared responsibility in management, not merely an accounting task.
The Real Cost of Fraud
The cost of fraud extends well beyond the money stolen. The actual cost breaks down into:
- Investigation costs
- Audit costs
- Legal costs
- Loss of reputation
- Loss of public trust
- Staff morale damage
- Management time
- Possible disciplinary action or termination
- Media spotlight—especially shining on Local Government
Often, reputational damage cuts deeper than financial loss.
Final Thoughts
Fraud and financial mismanagement pose serious threats to local governments and SMEs, which rely heavily on trust, grapple with limited resources, and often lack strong internal controls.
Yet, most fraud is preventable.
When organisations zero in on:
- Strong internal controls
- Clear policies
- Management oversight
- Regular audits
- Fraud awareness
- Encouraging reporting
They can significantly slash their risk of fraud.
Fraud prevention is not just about catching wrongdoers—it is about creating systems that actively stop fraud before it starts.
Contact [email protected] if you need help in this area.
$90,000 Sexual Harassment Case: A Warning for Councils and Small Businesses
$90,000 Sexual Harassment Case: A Warning for Councils and Small Businesses
$90,000 Sexual Harassment Decision – What Council CEOs and SME Managers Must Learn From This Case
A recent Federal Circuit and Family Court decision has sent a very clear message to employers across Australia: failing to properly manage workplace sexual harassment and basic employment obligations can be extremely costly — both financially and reputationally.
In Mejia v Capital City Café-Bar [2026], the Court ordered a café director to pay approximately $90,000 in compensation and penalties following a sexual harassment incident involving a young employee. This case is significant because it is one of the first published decisions under the new sexual harassment jurisdiction introduced under the Fair Work Act reforms in March 2023.
For Council CEOs, senior managers, and SME owners, this case provides several critical lessons.
What Happened in This Case?
The employee, a 23-year-old migrant worker, alleged that the café director hugged her, kissed her without consent, and attempted to offer her money while pinning her against a sink.
The incident occurred shortly after the employee had raised concerns about her pay and the fact that she had not been receiving pay slips. The employee did not return to work after the incident and later commenced legal proceedings.
The Court accepted that the incident caused distress, humiliation, and ongoing emotional impact, and compensation was awarded accordingly.
However, the sexual harassment itself was only part of the problem.
The Employer’s Bigger Problem – Multiple Fair Work Breaches
What significantly increased the penalties was the employer’s broader failure to comply with basic employment laws. The Court found the director had failed to:
- Provide a Fair Work Information Statement
- Provide a Casual Employment Information Statement
- Provide pay slips
- Pay correct wages including overtime and casual loading
- Maintain proper employment records
- Make the Award and National Employment Standards available
- Provided false pay slips to the Fair Work Ombudsman
The Judge described this as a “comprehensive, if not complete, disregard for the obligations of a national system employer.”
This is a critical point for employers: sexual harassment cases often expose broader compliance failures.
Important Legal Development – New Sexual Harassment Jurisdiction
This case was brought under section 527D of the Fair Work Act, introduced under the Secure Jobs, Better Pay reforms.
This means employees now have another legal pathway to pursue sexual harassment claims — in addition to the Human Rights Commission and anti-discrimination processes.
In practical terms, this increases the legal risk for employers.
Key Takeaways for Council CEOs and SME Managers
A Single Incident Can Result in Large Compensation
The Court made it clear that sexual harassment does not need to be repeated behaviour to result in significant damages.
Many managers still believe that a “one-off incident” is less serious.
This case confirms that is not how courts see it.
Power Imbalance Matters
The Court placed significant weight on:
- The employee being young
- Being a migrant
- Having limited financial resources
- The offender being the business owner and in a position of authority
This highlights a major risk area for:
- Small businesses
- Councils
- Family-run businesses
- Workplaces where owners/directors deal directly with staff
Power imbalance increases damages.
Poor HR Practices Will Make Everything Worse
The penalties were not just for harassment — they were for systemic non-compliance.
This is where many councils and SMEs are exposed:
- No proper policies
- No training
- Poor documentation
- Incorrect pay slips
- No investigation procedures
- No HR systems
- No external investigator
When something goes wrong, these failures compound liability.
Text Messages and Apologies Can Become Evidence
The director sent messages apologising and asking the employee to keep the incident secret.
This significantly damaged his case.
Managers and business owners often try to “fix things informally” after an incident.
This can make the legal situation worse.
This Case Sends a Message About Personal Liability
Importantly, the director personally was ordered to pay penalties.
This is critical for:
- Council senior managers
- Directors
- Business owners
- CEOs
- General Managers
You can be personally liable, not just the organisation.
What Organisations Should Do Now
This case clearly shows what organisations should have in place:
- A clear sexual harassment policy
- Complaint reporting procedures
- Investigation procedures
- Manager training
- Proper wage and payroll compliance
- Proper employment records
- Access to an external investigator
- Post-investigation follow-up processes
Organisations that do not have these systems are exposed to significant risk.
Final Thoughts
This decision is a warning to employers across Australia. The combination of sexual harassment and basic employment law breaches resulted in a $90,000 outcome for a single incident involving one employee in a small business.
For councils and SMEs, the message is very clear:
If you do not have proper workplace policies, complaint procedures, and investigation processes in place before something happens, it is already too late.
Prevention, proper procedures, and independent investigations are no longer optional — they are a critical part of risk management and governance.
If you have none of these, then contact ACCA ([email protected]). I can help protect you, your business, and your employees by ensuring you have the proper policies and ensuring matters are handled properly, fairly, and legally.