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Introduction

This is an appeal to the full court of the Federal Court of Australia by a former employer (the “company”) against a decision by a primary judge of the same court that awarded $75,000 (being six months’ pay) to the company’s former employee for reasons that amounted to the company dismissing the former employee because he refused to sign a new contract of employment.

The former employee also lodged a “cross appeal” stating that he should have been awarded 12 months’ pay of $150,000.

Both the appeal and cross appeal were dismissed, reinforcing the primary judge’s decision that the former employee was dismissed because he wished to seek legal advice prior to signing (a reduced) contract of employment and in the words of the court:

“In addition or in the alternative, [the former employee] alleged that [the company] repudiated or breached his contract by failing to give him reasonable notice of termination”.

Background

The company is a family-owned investment services firm.

The former employee is a martial arts champion who worked as a bodyguard since about 1989 and has held senior security positions in the Philippines and Australia. Between 2009 and 2015 he operated his own business providing security services. He holds an Advanced Diploma in Security Risk Management and a Diploma in Business Management.

The company employed the former employee from May 2016 until November 2016, under an oral contract. His annual salary was $150,000, plus superannuation, and he was provided with a company car, first a Mercedes S-Class, then a 2015 Maserati. Part of his job involved driving the vehicle to pick up and drop off his manager. Between May and October 2016, the former employee was given wide-ranging additional responsibility; fundamentality all administration of the business that did not involve financial trading. He was given the title “Chief Operations Officer”.

The dismissal

In the period leading up to that fateful event, the former employee had a discussion with his employer about implementing new employment contracts for all of the company’s employees. To this end, he engaged lawyers from a top tier law firm to prepare two types of employment contracts, one for award employees and the other for non-award employees.

Late in the afternoon of 11 November 2016, with no prior notice, Mr Tran was told that that his presence was required in the boardroom.

In the boardroom the former employee was presented with a new contract. The former employee recognised it as a contract in the same form he had issued to staff during the week. He told the company it was “for normal staff, not for me”. The former employee was not happy, either with the terms of the contract or, as the primary judge put it, “its applicability to him and the position he had occupied”. Although the former employee’s salary would not change, his status was reduced. He would no longer be employed as Chief Operations Officer, reporting directly to the owner. Rather, his new title would be “Risk Manager” and he would be reporting to the owner’s son. His duties were reduced and there was no mention of a company vehicle. The contract also included a 12-month probationary period.

According to the former employee’s affidavid:

“I was feeling very nervous and uncomfortable about the contract, especially considering how I was recently being treated. It was also clear that there were lots of details in there that I couldn’t be across on such short notice. Although I had been handing these out earlier in the week to other employees (since this was a contract designed for normal employees), I wasn’t across all the details of the contents and would not be comfortable signing it without having at least an opportunity to read it through. I was also conscious this version was probably tweaked by Justin Le Blond who had recently promised, when winking, to make it a lot stronger. I said:

Me: “I will take it to a lawyer to review.”

[The owner son’s] face changed, his voice became angry and he raised his voice when he said:

[OS]: “It’s your contract!”

[OS] was yelling at me at this point:

“I will not pay you if you don’t sign it now. If you don’t sign now, it shows you are not loyal”.

At some point, [the OS] said to me:

“What value do you bring to the company when we pay you $150,000, car, no fringe benefits tax, nearly $200,000?”

Soon afterwards, the owner entered the boardroom and at some point, the former employee signed the contract “under enormous pressure” from the company. He later regretted his action and tore the contract in half.

The former employee then left the building in the company Maserati.

This led to the company calling the police to retrieve the company vehicle and three mobile phones belonging to the company, having determined that the former employee had resigned (a point which the former employee denied). These issues were the subject of text messages.

The primary judge finding

The primary judge found that the former employee did not resign from his employment at the meeting. Rather, his Honour found that his employment was terminated after he left the meeting because he had sought to exercise his workplace right to seek legal advice about the new contract. The effect of his Honour’s findings is that, by arranging for the police to contact the former employee after he had sent the text message reasserting his workplace right to obtain legal advice about the new contract and retrieve its property, the company “had repudiated his contract of employment” and, by returning the Maserati with its keys and three mobile phone handsets, the former employee “had accepted the repudiation”.

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Introduction

This decision has a lot of “wow” factor – not only in terms of the financial cost to the company, but the importance of dealing with issues front-on, including complaints of bullying (in this case 7), the exacerbation of an (unknown to company) mental health condition, monitoring workloads, and the importance of the contract of employment being right first time.

Remembering that the onus is on the employer (within reason) to prove it did nothing wrong (ie the “reverse onus of proof”).Further the “bully” was personally fined $8,000.

Please also note that I have “glossed over” a number of issues due the length of the decision.

Further noting that there is NO income limit for an adverse action claim (and whilst not pertaining to this case, no minimum employment period).

The penalty

To get this out of the way first, the penalties were made up of:

  • Fines of $40,000 to the company and $7,000 for the “bully”.
  • The company was ordered to pay the applicant:
    • $756,410.00 as compensation in respect of his forgone share options;
    • $2,825,000.00 as compensation for his future economic loss.
    • $10,000.00 for general damages.
    • Damages for breach of contract of $1,590,000.00.

The Fair Work Act 2009 provides for the maximum penalty for a single contravention by the company is $54,000.00 and for the boss $10,800.00. The seven contraventions involving the making of complaints must be grouped together as one contravention for the purpose of assessing penalties.

Background

The applicant in this matter was employed at a publicly listed enterprise software company as State Manager for Victoria on 3 July 2006 until his dismissal 18 May 2016.

At the time of employment, the company was very small and became “very large” due (in part) the good efforts of the applicant.

The company’s reason provided for the dismissal (which was rejected by the court) was poor performance.

However, the applicant (via his QC and assisting counsel) that he was dismissed unlawfully for “making a workplace a complaint”, contrary to s 340 of the Fair Work Act:

  • Seven instances of his exercising his workplace rights by making complaints in relation to his employment: in particular, complaints as to his having been bullied (ie marginalising him, stopping him from attending meetings with clients and preventing him from doing his job);
  • His proposed exercise of his right to bring legal proceedings under a workplace law;
  • His proposed exercise of a safety net contractual entitlement; and
  • His having a safety net contractual entitlement.

The court noting that the applicant’s legal team did not press claims that he had been dismissed for other reasons (being his taking sick leave; being temporarily absent from work; and having a mental disability).

Show me the money

With the growth of the company, so was the applicant’s salary with his gross income increasing from $208,932.00 in the 2006/07 financial year to $845,128.00 in the 2015/16 financial year. Most of that increase was attributable to incentive payments; with his base salary increase only from $165,000.00 to $192,000.00 during the same period. He was also provided with share options in 2013, 2014 and 2015.

Personal crisis and ongoing Depression (work/life balance)

Whilst financially things were going very well, in the background he was working very long hours to the detriment of his home life: in September 2010, his 14-year-old daughter became ill with Kawasaki disease, requiring open-heart surgery in January 2011. He did not go to the hospital with her at that time. He had thought it vital to finalise an important deal on behalf of the company before the end of the company’s financial year. This not only left the applicant with feelings of guilt, but directly attributed to chronic depression.

Ironically, the applicant found solace in attending work to “escape the pain”. This also made worse his relationships with his family. In the words of the court:

“[The applicant] identified his feelings of guilt as stemming from his inappropriately having prioritised his work for [the company] over his daughter’s life and health. It is therefore perhaps cruelly ironic that [the applicant’s] evidence is that in order to avoid that distress, work became the one safe place where he could “escape”. He therefore increased his already long working hours.

“Outside of work however, [the applicant] could not escape his grief. He became emotionally closed off from his wife. Predictably, that gave rise to tensions within their marriage. [the applicant] gave evidence [as did an expert witness], which I accept, that at various times the marital relationship had been on the verge of breaking down. The applicant] also experienced repeated thoughts of suicide. On at least one occasion he had taken steps, ultimately not implemented, directed towards that end”.

The company was unaware of the extent of the applicant’s distress

Apart from confirming to his work colleagues from time to time that he remained concerned about his daughter’s health, the applicant was careful not to reveal to anyone at the company the depth of his private turmoil. Being able to focus on the practical problems of work without anyone at the company knowing about his damaged condition allowed him to hide in his safe place, numb to his grief and pain.

Also causing the applicant distress, was separate legal proceedings that he and his daughter were then bringing in which each had claimed damages on the basis that certain medical practitioners who were alleged to have misdiagnosed her had been negligent.

4 November 2015, the applicant saw a psychiatrist, who testified that the applicant confided:

“They [the company] don’t know about my suicidal tendencies but I’ve been told in the past four years that I could have done better. I haven’t been performance managed yet but I have to work longer hours because I get absolutely distracted about my daughter. I’m not efficient. Severe concentration problems. I forget things and I send the wrong emails to people, repeatedly getting into trouble with my boss because I misjudge situations”.

“As a result of his dismissal he suffered a profound mental breakdown. Whether his dismissal caused that breakdown, or whether it was merely a manifestation of his earlier depressive disorder from which he had continued to suffer after his daughter’s illness, is the subject of contested expert evidence to be discussed later. It is however not in dispute that after he was dismissed [the applicant] became, and remains, incapable of ever working again”. [My emphasis].

The applicant’s performance at work does not materially decline notwithstanding his (later diagnosed) depressive disorder

The court did not accept that the applicant’s long established, and only later diagnosed, depressive disorder caused a material decline in his performance at work, citing the performance bonuses provided to the applicant. He also received the “Chairman’s Award” in of 2012, 2013 and 2014.

Serial Complainer = exercising a workplace right

He was always astute to ensure that his contribution to the success of the company be rewarded in monetary terms; to the extent that his boss describing the applicant as being a constant complainer:

“[The applicant] complained from the day he started at [the company]. He complained from day one that the salary that we had offered him and that he had agreed was not enough and I had to change it. He complained about options. He complained about staff. He complained so much. You will see it through all the papers, and the last three or four months … I couldn’t care less about a complaint. All I cared about is his ability to perform, number 1, and number 2, that his behaviours were acceptable. But his complaints were totally irrelevant to the whole thing. And if Behnam had been the right person, he would still be there”.

The court commenting:

“As [the applicant’s boss] evidence implies, I am entitled to be satisfied that had [the applicant] not been a strong performer he would have been given very short shrift. Instead, I infer that [his boss] yielded to [the applicant’s] demands for additional financial rewards because he was a strong performer whose services he wished to retain”.

“I am satisfied that [the company’s] “Open Door Policy” and its “Workplace Bullying Policy” …are not disputed to have been applicable at the relevant time. They provide an explicit basis for the Court to be satisfied that [the applicant] was “able to make a complaint” as he claims he did, inter-alia, about his having been bullied in relation to his employment”.

The court adding:

“The same applies with respect to any complaint [the applicant] made in good faith regarding his contractual entitlements…I respectfully adopt the reasoning of Rangiah and Charlesworth JJ in PIA Mortgage Services Pty Ltd v King [2020] FCAFC 15 at [19]-[20]:

‘Under the general law, an employee has a right to sue his or her employer for an alleged breach of the contract of employment. A suit may be regarded as the ultimate form of complaint. Accordingly, in our opinion, an employee is “able to make a complaint” about his or her employer’s alleged breach of the contract of employment. That ability is “underpinned by” (to use Dodds-Streeton J’s expression in Shea) the right to sue, and extends to making a verbal or written complaint to the employer about an alleged breach of the contract.

‘Further, an employee who alleges that his or her employer has contravened a statutory provision relating to the employment is “able to make a complaint” within s 341(1)(c)(ii) of the FW Act. That right or entitlement derives from the statutory provision alleged to have been contravened. The ability encompasses making a complaint to the employer or an appropriate authority about the alleged contravention, whether or not the statute directly provides a right to sue or make a complaint’”.

The court ultimately finding that the applicant did exercise a workplace right by complaining about his being bullied by one or more other employees of the company or about his safety net contractual entitlements.

Bullying

The applicant had complained of bullying to the HR department, however the fact that he did not formalise the complaint, it was telling that the HR person who met with the applicant “conceded in their conversation that the conduct he had described to her was unacceptable”.

Pecuniary penalties

The court, as previously mentioned, was satisfied that it can make orders compensating the Applicant for loss that he has suffered because of the Respondents’ contravention of the Fair Work Act, finding that there was a clear “causal connection” between that contravention and the various forms of loss suffered by the applicant. These being described in detail as:

  • Forgone share options;
  • Future economic loss:

“At common law, damages are payable to compensate a person for a loss of future earning capacity where that loss of capacity is caused by reason of an injury which in turn has been caused by the wrongdoer’s negligent act or omission, and the diminution of earning capacity is or may be productive of financial loss: Graham v Baker [1961] HCA 48; 106 CLR 340 at 347.

“Also at common law, the fact that a plaintiff may be predisposed to an injury caused by tortious conduct does not reduce his damages; the tortfeasor must take an injured person as he finds him or her. As Dixon CJ put it in Watts v Rake [1960] HCA 58; 108 CLR 158 at 160:

‘If the injury proves more serious in its incidents and its consequences because of the injured man’s condition, that does nothing but increase the damages the defendant must pay. To sever the remaining leg of a one-legged man or put out the eye of a one-eyed man is to do a far more serious injury than it would have been had the injured man possessed two legs or two eyes. But for the seriousness of the injury the defendant must pay’.

“I am satisfied…that in circumstances in which:

  • a person’s capacity to have continued in remunerative employment has been demonstrated over approximately half a decade, notwithstanding their suffering from a depressive disorder; and
  • where expert psychiatrists uniformly opine that the person’s dismissal for a prohibited reason has caused a significant aggravation of their pre-existing depressive disorder, with the consequence that they have lost their capacity to work and have a poor prognosis of ever regaining any capacity for remunerative employment in a position for which they would be otherwise qualified;
  • the Court is entitled, within the meaning of s 545 of the Fair Work Act, to consider it appropriate to make an order compensating that person for the economic loss he or she has suffered: without any reduction by reason of the person having the pre-existing condition which their unlawful dismissal has aggravated.
  • General damages

“At common law damages are payable for pain and suffering, which includes physical pain; mental illness or anguish; loss of enjoyment of life; and loss of the amenities of life.

“Loss of amenities” refers to the destruction or diminution of a faculty or skill that causes “the deprivation of the ability to participate in normal activities and thus to enjoy life to the full and to take full advantage of the opportunities that otherwise it might offer”: Teubner v Humble [1963] HCA 11; 108 CLR 491 at 506 per Windeyer J. Such damages are awarded once and for all. If the damage is or may be permanent, then it has to be assessed for the duration of the applicant’s life. While it is “impossible precisely to translate pain and suffering and the loss of enjoyment of life into money values”, and no amount of money will restore an applicant to her pre-injury position, that is the purpose of an award of such damages. That means that an attempt must be made to assess a reasonable sum, having regard as far as possible to the prevailing standards of the community: O’Brien v Dunsdon (1965) 39 ALJR 78.

“Notwithstanding, there is no “tariff” on damages for pain and suffering. In Planet Fisheries Pty Ltd v La Rosa [1968] HCA 62; 119 CLR 118 (Planet Fisheries) per Barwick CJ, Kitto and Menzies JJ observed at 125:

‘The judgment of a Court awarding damages is not to be overborne by what other minds have judged right and proper for other situations. It may be granted that a judge who is making such an assessment will be aware of and give weight to current general ideas of fairness and moderation. But …[t]he awareness must be a product of general experience and not formed ad hoc by a process of considering particular cases and endeavouring, necessarily unsuccessfully, to allow for differences between the circumstances of those cases and the circumstances of the case in hand’.

[The “ambush”…]

“However, I am satisfied [the applicant] is entitled to more than a nominal award in that regard. His dismissal for a prohibited reason was effected only after when, against his doctor’s advice, the applicant] had accepted [his boss’s] request that he to travel to Brisbane in order to attend a meeting for which [his boss]…”

“[His boss’s] representations to [the applicant] to that effect were knowingly false and deceptive. [The applicant’s] termination as then followed in consequence was accompanied within the hour by a company-wide announcement. [The applicant] was instructed not to go back to his office to collect his personal possessions; they would be sent on to him. I am satisfied that those unfortunate events added a not insignificant quantum of humiliation to the predictable shock and hurt that [the applicant] would have suffered simply by reason of the fact of his unlawful termination. I am satisfied that such humiliation became an element in his suicidal ideation immediately following that event.

“I will award [the applicant] $10,000.00 as compensation in the nature of general damages, having regard to the hurt and humiliation he was forced to suffer in consequence of the manner of his unlawful dismissal”.

  • Special damages

“…[the applicant] seeks compensation for incurred and future medical expenses from May 2016 to September 2020. He claims $50,000.00 as an approximation of that loss. However, [the applicant] has led no evidence which would entitle me to make any findings as to such claimed special damages. For that reason, I decline to make an order for compensation in those regards”.

Contract claim

This is VERY instructive for practitioners of IR/ER/HR.

The court then turned its attention to the breach of (employment) contract claim:

“In Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; 218 CLR 471, Gleeson CJ, McHugh, Kirby Hayne and Callinan JJ stated (at [34]) “the ‘general test of objectivity [that] is of pervasive influence in the law of contract’” dictates that “[t]he legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions”.

“That conclusion was restated in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [38], per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ . In referring to Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; 209 CLR 95 (at [25]), their Honours said:

‘Although the word ‘intention’ is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties’.

“Their Honours continued (at [40]):

This Court, in Pacific Carriers Ltd v BNP Paribas [(2004) 218 CLR 451], has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement”. (Emphasis added)

Costs

“Neither party has advanced submissions as to costs. That may simply be because s 570 of the Fair Work Act precludes, save in limited instances, a Court awarding costs in a matter litigated pursuant to that Act. The cases – to which I have only given limited attention – suggest that it is also at least arguable that that prohibition extends to an award of costs with respect to any associated claims, such as the applicant brought in contract in these proceedings (Stanley v Service to Youth Council Inc (No 3) [2014] FCA 716; 225 FCR 357, Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20; 229 FCR 221, Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2016] FCA 987).

“Having regard to the above, I will make no order as to costs but will provide for the opportunity for the parties to file submissions if they are advised that they should be entitled to an award of costs”.

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Overview

This decision goes against the doctrine that if an employee continues to work for an employer under changed circumstances, then the affected employee has an “implied” acceptance to the changes…or does it? Each and every HR person should read this report as it is fundamental to the contract of employment.

Introduction

The Federal Court hearing an appeal from a decision of the magistrates’ court contemplates whether the reduction of an employee’s hours of work constitutes a bona fide redundancy. Each and every HR person should read this report as it is fundamental to the contract of employment.

Background

This was an appeal by the employer against a ruling of the magistrates’ court, where an employee’s union argued that the reduction to an employee’s hour of work was tantamount to redundancy for the purposes of the Fair Work Act 2009.

The union “won” this case and the employer appealed to the federal court and lost, again.

Not relevant, but to give context is the fact that the company was a cleaning business and the employee a cleaner.

The cleaner had been employed since 1 May 2014 as a full-time cleaner by the company.

Due to circumstances beyond the company’s control, the company decided to reduce the employee’s hours to from 38 hours a week to 20 hours a week, with a corresponding loss of earning of some 40 percent.

Whilst refusing to sign an amended contract of employment, the employee began working the reduced hours on 12 September 2017 because she considered she had no choice.

In the magistrates’ court, the magistrate upheld the Union’s claims, awarded the cleaner $5,194.98 in redundancy pay, with interest fixed at $502.56, and ordered the employer to pay the Union a civil penalty of $1,500.

The employer’s argument

The employer contended that the magistrate’s decision was based on an incorrect interpretation of the Act, arguing that the employee was not entitled to redundancy pay because the employment relationship continued after the termination of the contract and termination of a contract of employment at the employer’s initiative is not enough to generate an entitlement to redundancy.

The magistrate did not accept that there had been a variation of the full-time contract, her Honour found that the employer had repudiated [retracted] the contract and the employee accepted the repudiation.

The focus of the employer’s argument was on the distinction between the termination of the employment relationship and the employment contract. The employer submitted that the magistrate erred by relying on the fact that s 119 fails to refer expressly to the employment relationship as a reason for construing the phrase “employment is terminated” to include the employment contract.

The legal parameters

Subsection 119(1) of the Fair Work Act 2009 (Cth) (FW Act) provides that:

An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:

(a)          at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or

(b)          because of the insolvency or bankruptcy of the employer.

“Dismissed” is defined in s 386 of the Act. It relevantly provides that:

A person has been dismissed if:

(a)          the person’s employment with his or her employer has been terminated on the employer’s initiative; or

(b)          the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.

However, a person has not been dismissed if:

(c)           the person was demoted in employment but:

(i)            the demotion does not involve a significant reduction in his or her remuneration or duties; and

(ii)           he or she remains employed with the employer that effected the demotion.

The common law

Citing a number of judgments, the judge in this matter quoted:

“[A] person’s employment cannot be divorced from the contract of employment which governs it. This is so even if the employment and the contract terminate at different times, for instance in circumstances where, although the employment has ended following a dismissal, the contract remains on foot because the employer’s repudiatory conduct has not been accepted: Visscher v Giudice (2009) 239 CLR 361.

Because the terms of a person’s employment are determined by the related contract of employment, to identify whether the employment of a person such as Mr Jovic has been terminated and replaced with another employment or continued according to amended terms depends on the contractual terms applicable to that employment.

The reasons for the employer’s actions are not relevant to this aspect of the analysis”.

What is redundancy?

Putting to one side the exception for the ordinary and customary turnover of labour, which is irrelevant in this case, para 119(1)(a) erects an entitlement to redundancy pay on the happening of two causally connected events:

  • One is the termination of the employee’s employment at the employer’s initiative.
  • The other is the termination of the employee’s employment because the employer no longer requires the job done by the employee to be done by anyone.

The Union argued that the phrase “employment is terminated” is not to be construed in isolation from the words around them. Drawing on Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [44] (Gummow, Hayne and Heydon JJ), it submitted that the entitlement to redundancy pay created by para 119(1)(a) depends on the job becoming redundant and not on the employee being surplus to the employer’s requirements.

Put simply, when looking at your workforce as a whole, you determine which jobs you need and those you do not (and, naturally, the opposite also applies). Of secondary determination is which people are surplus to requirements, and this is where it tricky, as it is not a as simple of saying “that person occupies the surplus position, then it is that person who must go.

But the entitlement to redundancy pay in this matter does not only depend on the job being surplus to the employer’s requirements. It also depends on the employment having been terminated on that account. Both questions must be answered in the employee’s favour before she is eligible for redundancy pay. As Judge Cameron put it in FL Press at [230]:

“the reason for the termination should not distract from the question of termination”. Where, as here, it was common ground that the job the employee was doing was redundant, the only question was whether the employee’s employment had been terminated”.

Ambiguity

The judge in this matter finding that the phrase “employment is terminated” is ambiguous. According to the judge:

“It could refer to the employment relationship, to the employment contract, to both, or to the termination of employment in the job which the employer no longer requires done. Thus, to discern its meaning it is necessary to consider a number of contextual matters, including the context in which it is used in the section”.

The employer relied on some of the meanings derived from the Macquarie Dictionary, but not others, which the judge picked up on, as those other meanings went to the union’s favour.

Employment not defined in the FWA

Not only is “employment” not defined in the FW Act, but neither is the phrase “employment is terminated”. The judge noting that:

“It appears four times in the Act: in subs 119(1), 123(1), 772(2), and 789(1). Paragraph 123(1)(b) excludes an employee whose employment is terminated because of serious misconduct from the right to receive notice of termination or payment in lieu. Paragraph “772(2)(b) carves out an exception to para 772(1)(f), which prohibits an employer from terminating an employee’s employment on the basis of ‘race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin’. That exception operates where ‘the person is a member of the staff of an institution that is conducted in accordance with the doctrines, tenets, beliefs or teachings of a particular religion or creed’ and the ‘employment is terminated’ in good faith and to avoid injury to the religious susceptibilities of adherents of that religion or creed. Paragraph 789(1)(b) excludes the requirements for notification and consultation in Pt 6-4 Div 3 of the FW Act in relation to such an employee. The phrase also appears in a note to s 768BM, which cross-references s 119”.

However, the judge concluded that none of these references assists in resolving the question of interpretation in this case. The phrase “termination of employment” appears more frequently but likewise nothing in those provisions is of assistance, stating:

“Importantly, I was not taken to any authorities on the meaning of ‘employment’ or ‘termination of employment’ in any of these provisions”.

The legislative history

The history of the legislative entitlement to redundancy pay begins with two decisions of the Australian Conciliation and Arbitration Commission (C&A Commission): Termination, Change and Redundancy Case (1984) 8 IR 34 (TCR No 1) and Termination, Change and Redundancy Case (1984) 9 IR 115 (TCR No 2) (the TCR case). The TCR case was a test case brought by the Australian Council of Trade Unions. As a result of the TCR case, federal (and later most state) awards were varied to include a standard set of redundancy provisions.

The object of this was “to give effect or give further effect to” the ILO Convention (No. 158) concerning Termination of Employment at the Initiative of the Employer, done at Geneva on 22 June 1982, and entered into force for Australia on 26 February 1994.

Further, in TCR No 1, the C&A Commission took the view that the payment of redundancy (or severance) pay was justifiable “as compensation for non-transferable credits and the inconvenience and hardship imposed on employees” (at 71). In doing so, the C&A Commission adopted two of three conclusions reached by the Committee of Inquiry into Technological Change in Australia 1980 (CITCA Committee) as to the elements of monetary compensation for retrenchment. They were set out at 72–73 of the decision:

  • compensation for non-transferable ‘credits’ that have been built up, such as: accrued benefits like sick leave and long service leave; loss of seniority; and loss of the employer’s contribution to pension or superannuation.
  • compensation for the inconvenience or hardship imposed and assistance to the retrenched employee to make the change, with aims such as: to act as temporary income maintenance while the retrenched employee searches for another job; and to allow for the possibility of retraining or relocation to take up a new job.

In TCR No 2, the Full Bench sat again to consider an amendment to the Metal Industry Award 1984 to reflect its decision and, after hearing further argument, determined (at 135) to include a provision in these terms in the amendment:

“An employer, in a particular redundancy case, may make application to the Commission to have the general severance pay prescription varied if he/she obtains acceptable alternative employment for an employee”.

The current legislation

The judge found it abundantly clear that the terms of s 119 derive from the relevant part of the standard clause developed by the C&A Commission for inclusion in federal awards. That clause distinguished between an employee who was transferred to lower paid duties by reason of redundancy and an employee whose employment was terminated for that reason:

#.1 Definition  

Redundancy occurs when an employer decides that the employer no longer wishes the job the employee has been doing to be done by anyone and this is not due to the ordinary and customary turnover of labour.

#.2 Transfer to lower paid duties  

Where an employee is transferred to lower paid duties by reason of redundancy the same period of notice must be given as the employee would have been entitled to if the employment had been terminated and the employer may at the employer’s option, make payment in lieu thereof of an amount equal to the difference between the former ordinary rate of pay and the new ordinary time rate for the number of weeks of notice still owing.

#.3 Severance pay  

#.3.1 In addition to the period of notice prescribed for ordinary termination in clause ? – Termination of employment, an employee whose employment is terminated by reason of redundancy must be paid, subject to further order of the Commission, the following amount of severance pay in respect of a continuous period of service:

The FW Act does not state that its intention was to codify established minimum terms and conditions of employment. Clause r.82 of the regulatory analysis incorporated in the Explanatory Memorandum to the Fair Work Bill 2008 (Cth) (FW Bill) states:

“The NES will provide for written notice of termination and redundancy pay. These are currently awards-based entitlements, which will be legislated to provide more comprehensive protection for employees and extend redundancy pay to award-free employees”.

Beyond this, there is no indication that the Parliament intended to extend the entitlement to redundancy pay, according to the judge.

So what about the legislative purpose of the FWA?

The object of the FW Act is described in s3 as follows:

The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:

(a)          providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and

(b)          ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and

(c)           ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and

(d)          assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and

(e)          enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(f)           achieving productivity and fairness through an emphasis on enterprise‑level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and

(g)          acknowledging the special circumstances of small and medium‑sized businesses.

In Spotless at [37]–[41] Colvin J made the following observations about the legislative purpose of s119(1):

“37         First, the Act is to provide a safety net of minimum terms and conditions of employment that cannot be undermined.

“38         Second, the Act is not expressed as a reform that removes or reduces minimum terms and conditions of employment afforded by the law as it existed at the time of enactment. Nor is it expressed as a codification or improvement of existing minimum standards. Rather, its object is to ensure ‘fair, relevant and enforceable’ minimum terms and conditions. Save that there might be said to be unfairness to employees in a general sense if minimum standards were reduced by the Act (such as by confining the circumstances in which there may be an entitlement to redundancy pay), it is difficult to discern any specific object concerning the relativity between minimum standards as they existed before the Act was enacted and those expressed through the Standards. Nevertheless, it would appear to be unlikely that the Act would deploy established terminology in the field of industrial law concerning an established standard as to particular workplace conditions (such as redundancy pay) where it was intended to change the standard. A purpose of establishing minimum terms and conditions may be expected to be advanced by using existing terminology where such conditions were to be adopted by the Act.

“39         Third, the Act has detailed provisions that provide for compliance and enforcement and establishes a Fair Work Ombudsman and a Fair Work Commission with substantial powers to supervise compliance and ensure enforcement of the Standards. The rights and protections afforded by the Act do not depend upon the employee independently resorting to claims. The Act puts in place a substantial structure to support the making of claims. Nevertheless, the Fair Work Act confers statutory entitlements upon employees that cannot be undermined and to that extent is protective of the interests of employees. It would be contrary to this purpose if a particular condition was interpreted in a manner that, in effect, conferred power upon an employer by adopting a particular business practice to decide whether its employees would receive the benefit of a particular minimum entitlement (such as redundancy pay).

“40         Fourth, the Act has objects that include the promotion of productivity and economic growth and flexibility for business. An interpretation that inhibited the ability of a business to adopt employment practices that best suited the nature of its business activities would be inconsistent with this object.

“41         Fifth, the terms of Division 11 manifest an intention to provide a qualified right to redundancy pay. It is qualified by the presently contentious language in s 119(1)(a). It is also qualified by the exclusions expressed in s 121 (employees for less than 12 months and employees of small business and those the subject of a modern award with specific provisions). Importantly, it is further qualified because Division 11 does not apply to the employees described in s 123. They include employees ‘employed for a specified period of time, for a specified task, or for the duration of a specified season’, employees terminated for misconduct and casual employees.”

The employment relationship is “inherently” a contractual one

The employment relationship is “inherently” a contractual one. Consequently, there can be no employment relationship without a contract of employment. As McHugh and Gummow JJ observed in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 436:

“The evolution in the common law as to the relationship of employment has been seen as a classic illustration of the shift from status (that of master and servant) to that of contract (between employer and employee)”.

Nevertheless, there is a difference between the employment relationship and the contract of employment. A contract of employment can come into existence before the employment relationship is formed and an employer who withdraws an offer of employment after it has been accepted or an employee who resigns before the starting date can be liable for breach of contract. Furthermore, a contract of employment can include obligations, such as a restraint of trade covenant, which continue after the employment relationship has come to an end.

There is also a conceptual difference between the termination of an employment relationship and the discharge of a contract of employment.

The judge finding:

“The central flaw in [the employer’s] argument is that it proceeded on the false premise that the employment relationship survived the termination of the employment contract”.

Quoting from the 8th edition of Macken’s Law of Employment, the judge noted:

“The employer-employee relationship will also end when the contract of employment ends, if that relationship has not ended earlier. The possibility of the contract of employment existing after the employment relationship has ended seems established, although ordinarily it will be of ‘no real significance’”.

The judge adding the statement of principle is well-supported. In Byrne:

“It does not appear to have been doubted in this country that a wrongful dismissal terminates the employment relationship notwithstanding that the contract of employment may continue until the employee accepts the repudiation constituted by the wrongful dismissal and puts an end to the contract…”

In both Visscher (at [53]) and Byrne (at 427) reference was made to the statements of Latham CJ in Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 454 that “[a]n employer terminates the employment of a servant when he dismisses him …” and Dixon J in the same case at 469 that “[t]here is nothing in the general law preventing the wrongful dismissal of a servant operating to discharge him from service, notwithstanding that he declines to accept the dismissal as absolving him from further performance but keeps the contract open and remains ready and willing to serve”. In Visscher (at [54]) reference was also made to the statement by Latham CJ in Automatic Fire Sprinklers Pty Ltd v Watson at 451 that:

“[T]he wrongful dismissal determines the relationship of master and servant created by the contract, even though the servant may not have accepted his dismissal as entitling him to regard the contract as discharged”.

History of the Visscher case

Visscher began as a claim for reinstatement in the Australian Industrial Relations Commission. Mr Visscher commenced employment with the respondent shipping company (Teekay) in March 2000. He began as a casual employee but soon afterwards accepted an offer of permanent employment as a Third Mate. Within months he was promoted to Chief Officer but Teekay wrote to him declaring that it would no longer be bound by its legal obligations. Nevertheless, Mr Visscher continued in its employment working as a Chief Officer, although Teekay considered he had returned to his original position as Third Mate albeit that his duties and remuneration did not change. In the Full Court, held that Mr Visscher could not insist on performance of his contract, even if the contract itself remained on foot for limited purposes. His Honour went on to say at [50] that the fact that Mr Visscher remained in employment with Teekay and sailed as Chief Officer did not lead to a different conclusion. His Honour considered that Mr Visscher continued under a new contract, in his original position of permanent Third Mate.

In the High Court the majority said that Buchanan J had elided the concepts of termination of an employment relationship and the discharge of a contract of employment: Visscher at [53]. Their Honours explained that it does not follow from the fact that a wrongful dismissal is effective to bring the employment relationship to an end that the contract is thereby discharged. At [56] they said that the case did not involve dismissal with a consequent destruction of the employment relationship. It was accepted that the employment relationship continued after the repudiation. But Visscher was a very unusual case. As the majority observed at [57], it was a feature of the case that “the employment relationship continued with Mr Visscher undertaking the duties of a Chief Officer and being remunerated to the same extent”.

Visscher v the current case

Here, in contrast to Visscher, there was, in effect, a wrongful dismissal constituted by the employer’s repudiation of the employment contract, which brought the employment relationship to an end. The relationship in which the employee entered after she accepted the repudiation was a fundamentally different relationship from the relationship the parties previously enjoyed. She was no longer a full-time employee but a part-time employee, performing a fraction of the work she formerly undertook for a fraction of the remuneration she formerly received. The judge adding:

“Even if I am wrong in this respect, I do not accept that what happened to [the employee] was not a termination of her employment within the meaning of the FW Act”.

The judge then digging deeper into history:

“What occurred in the present case appears to have been within the contemplation of the Convention. Paragraph 22 of the 1995 General Survey of the International Labour Office entitled “Protection against Unjustified Dismissal”, to which the Full Court referred at 103–4 of its reasons, relevantly stated:

‘Certain changes introduced by the employer, in particular as concerns conditions of employment and which do not arise out of genuine operational requirements, might place the worker under pressure either to accept such changes or to give up his job or incur the risk of being sanctioned for having disregarded the employer’s instructions. It is therefore necessary to be able to verify whether a situation does not constitute a disguised dismissal or a real termination of the relationship instigated by the employer in the sense of the Convention, since otherwise the worker concerned would de facto or de jure be unduly deprived of the protection provided by the Convention’”.

What is termination of employment?

In Siagian, to which the Full Court in Mohazab referred, Wilcox CJ said that it was “preferable to the treat the words ‘termination of … employment’ in Div 3 of the Part VIA of the [IR Act] as including any act that brings to an end the employer-employee relationship, whether or not the act, or any acceptance of it, also brings to an end the contract of employment”.

Conclusion

The judge concluding:

“For all these reasons I am satisfied that [the employee’s] employment was terminated when [the employer] repudiated her contract of employment as a full-time cleaner. Since it is common ground that the reason for the termination was that [the employer] no longer required that job to be done by anyone, she was entitled to redundancy pay…[and] it follows that the appeal must be dismissed”.

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Introduction

Full decision can be read here.

What happens when an employee, whilst on leave, refuses to return, or allowed to be collected, the employer’s vehicle?

In this case it resulted in the employee’s dismissal for serious misconduct. Not before numerous emails to and from the company and the employee, including (from the employee): “[U]se [sic] ain’t getting s**t from me or my property especially when use [sic] can’t even pay me what I signed up for”?

The short answer is that the Deputy President, presiding over this matter, found that the company had a valid reason for dismissing the employee, and that the dismissal was not unfair. The application for unfair dismissal was therefore dismissed.

This decision also reinforces the importance of having contracts of employment and company policies (in this case pertaining to the use of company vehicles). It also provides direction on “serious misconduct”.

Background

The events leading up to the applicant’s dismissal:

  • The applicant commenced employment with the company October 2017 as a field tester. For the purpose of carrying out her duties as a field tester, the applicant was provided with a motor vehicle, which was owned by the company.
  • The applicant’s employment contract set out the following concerning a Company Motor Vehicle:

“You will be provided with a fully maintained company vehicle for work purposes and limited personal use. The provision of this vehicle is subject to the [the company’s] Vehicle Policy and Guideline.

“It is a condition of all arrangements that you maintain all of the necessary licences, obey all applicable road rules and never drive the vehicle with drugs or alcohol in your system”.

  • Whilst the employment contract stipulated that the provision of the company vehicle was subject to the company’s Vehicle Policy and Guideline, the applicant said she was not provided with the Vehicle Policy and did not have access to it as her email/intranet access was not set up. However, apart from her assertion, there was no evidence to show that he did not have access to the company’s intranet.

Workers Compensation claim

On 13 September 2019, the applicant made a workers’ compensation claim and was assessed as having no capacity to work from 12 to 19 September 2019. The applicant gave evidence that she had been repeatedly bullied throughout her employment with the company, not treated the same as everyone else on several occasions, had been stalked on fake job sites, and his anxiety had become unbearable – hence the reason for taking leave.

The company directed that the applicant return the vehicle or arrange or make it available for collection by the company whilst she was on leave.

Given the lack of cooperation in seeing to the vehicle’s return, the company’s HR Manager formalised a directive that the vehicle would be collected at a specific time and address and advised that the applicant should remove any and all personal items before the time of collection.

The applicant’s response at this point was: “Sorry I’ll be unavailable to do so until my contract or employment has ended. This car is part of my package and it stays with me”.

Which in turn led to the email the following day: “[U]se [sic] ain’t getting s**t from me or my property especially when use [sic] can’t even pay me what I signed up for”.

[Ed: At this point I would like to apologise to the applicant for the failure of Australia’s education system].

The company responded by advising that the vehicle was “a tool of trade” vehicle, and not part of the applicant’s remuneration package and if the vehicle was not made available for return, the company would terminate her services.

This, being an impasse, resulted in the company directing its solicitors to issue the following letter:

“Dear[applicant]

I act for [the company].

I understand that you are representing [the applicant] in relation to an employment dispute with [the company].

[The applicant] is absent from work due to illness and has asked [the company] to direct communications to you.

Whilst [the company] does not concede that it is obliged to comply with any directive from [the applicant] about who to speak to, I have been asked to contact you in this instance in the hope that you can assist [the applicant] to understand her obligations and responsibilities.

  • [the applicant] has exhausted her paid personal leave, and by agreement annual leave, but seems to be under the misapprehension that she will continue to be paid for continued absences after all of her leave has expired.
  • [the applicant] has retained the [company] vehicle which she used in the course of the work and has threatened to sell it if she does not receive payment for her absence. The vehicle is a tool of trade which [the applicant] does not have a right to continue to possess. [The applicant] has been asked to make arrangements for its return but she has repeatedly refused.
  • These, and other issues with [the applicant’s] conduct (including evidence of unsafe driving) mean that there is a serious disciplinary discussion that must occur when she returns to work. By refusing to return the [the company’s] vehicle [the applicant] is only making these matters worse.

I would appreciate if you could contact me as a priority to confirm arrangements for the return of the [the company] vehicle. If [the applicant] fails to return the vehicle she may be considered as having refused a lawful and reasonable request which could give rise to a basis to terminate her employment…”

There was no reply from the applicant’s representative, however there were email exchanges between the applicant and the company; and 18 and 21 October 2019, two company employees attended the applicant’s residence and unsuccessfully attempted to retrieve the company vehicle.

The applicant was given an ultimatum by email directing the applicant:

“…to return the company vehicle by no later than 3:00 pm on 25 October 2019 [and] if you do not comply with this direction your continuing serious misconduct will result in your employment being terminated”.

The company texted the applicant alerting her to the email.

The applicant’s response was “[N]o worries I’ll see use [sic] in court”.

Finally, the applicant agreed that both the company vehicle and mobile phone could be collected from her residence on 4 November 2019 between 12.00-3.00 pm. Both were collected and both were damaged – the phone beyond repair.

Following the collection of the company’s property, the applicant sent abusive text messages to the company, including:

“How dare u bring u my f**king personal life u maggot c**t…F**king piece of s**t are U absolutely discust [sic] me…Might just get into ur [sic] personal life hey! Know a few people that will be able to help me out with a dog c**t like u…Want to talk me at fake sites…Yuck”.

Lawful Direction

The Deputy President concluding that:

“There could be no doubt that the direction to return the company vehicle was lawful and reasonable. An employer clearly has authority to give directions and expect them to be obeyed, subject to such directions being lawful and reasonable”.

Citations

In R v Darling Island Stevedoring and Lighterage Co Ltd; Ex part Halliday, (Darling Island Stevedoring) it was held:

“If a command relates to the subject matter of the employment and involves no illegality, the obligation of the servant to obey it depends at common law upon its being reasonable. In other words the lawful commands of an employer which an employee must obey are those which fall within the scope of the contract of services and are reasonable”.

The Full Bench in Briggs v AWH stated that the determination of whether an employer’s direction was a reasonable one did not involve an abstract or unconfined assessment as to the justice or merit of the direction. The employer therefore is not required to demonstrate that the ‘direction issued was the preferable or most appropriate course of action, or in accordance with “best practice”, or in the best interests of the parties’. Adopting the approach identified in Darling Island Stevedoring, the Full Bench cited Dixon J, quoting:

“But what is reasonable is not to be determined, so to speak, in vacuo. The nature of the employment, the established usages affecting it, the common practices which exist and the general provisions of the instrument, in this case an award, governing the relationship, supply considerations by which the determination of what is reasonable must be controlled”.

The applicant’s employment contract

The terms of the applicant’s employment contract and the Vehicle Policy, clearly stipulated the circumstances in which a vehicle was provided, the obligations that fell upon the employee, and that ultimately the company retained sole discretion concerning the usage of the company vehicle whilst on leave. There was no compelling evidence adduced to support the assertion that the company vehicle formed part of the applicant’s employee entitlements (salary package), or that she had unfettered access and use of the company vehicle whilst on leave.

Common practice

The work carried out by the company’s employees required that the company provide them with vehicles, and it was common practice for the company to direct its employees to return the vehicles whilst on leave.

Notification of the reason and an opportunity to respond

The Deputy President provides an advisory that:

“At a general level, the case law makes it plain that when it comes providing an opportunity to respond, the process does not require any degree of formality, and that the requirement is to be applied in a common sense practical way in order to ensure that the employee is treated fairly.

“The Full Bench in Royal Melbourne Institute of Technology v Asher in citing a number of cases:

“Ordinarily, before being dismissed for reasons related to conduct or performance, an employee must be made aware of the particular matters that are putting his or her job at risk and given an adequate opportunity of defence. However, I also pointed out that the section does not require any particular formality. It is intended to be applied in a practical common-sense way so as to ensure that the affected employee is treated fairly. Where the employee is aware of the precise nature of the employer’s concern about his or her conduct or performance and has a full opportunity to respond to this concern, this is enough to satisfy the requirements of the section”.

Serious misconduct

The Deputy President’s decision considered the term “serious misconduct”’, stating that it does not operate as a fixed standard for the determination of the type of conduct by the employee which may warrant summary dismissal; citing Sharp v BCS Infrastructure Support Pty Limited, the Full Bench (in citing other decisions):

“[T]here is no rule of law that defines the degree of misconduct which would justify dismissal without notice’, and identified the touchstone as being whether the conduct was of such a grave nature as to be repugnant to the employment relationship”.

Further citing:

“Wilful or deliberate behaviour amounting to serious misconduct is conduct which strikes at the heart of the employment relationship. In North v Television Corporation Ltd Franki J stated:

“It is clear that a single act of disobedience may be sufficient to justify dismissal on the ground of misconduct but it was held in Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 2 All ER 285, that to justify summary dismissal a single act must be such as to show that the employee was repudiating the contract of service or one of its essential conditions”.

Onus of proof on employer

The Deputy President finding:

“Clearly, [the company] bears the onus of establishing the serious misconduct. The applicable standard of proof is on the balance of probabilities, but the more serious the allegation, the higher the burden on the employer to prove the allegation”. [My emphasis].

Common law

The DP conducing that…

“I am satisfied that [the applicant’s] misconduct was manifestly serious and in clear breach of the obligations she had under the Vehicle Policy, her employment contract and general duties as an employee. The ordinary relationship of employer and employee at common law is one importing implied duties of loyalty, honesty, confidentiality and, importantly, mutual trust. [the applicant] clearly had the trust of [the company] to do what was right concerning the company vehicle, that was to return it on direction to do so. It was after all not hers to keep or to sell. But her actions manifested a wilful disregard of the repeated lawful and reasonable directions of [the company]”. [My emphasis].

“It is therefore my conclusion that the ‘trust’ and ‘confidence’ essential to the relationship of employer and employee had been destroyed. There was, in my view, a valid reason for terminating the employment of [the applicant] based on her serious misconduct”.

Endnote

There was no mention of the status of the workers compensation claim.

Greg Reiffel Consulting works exclusively for employers – acting as a powerful advocate in all areas of Workplace/Industrial Relations and Human Resources Management. (Unfair Dismissals are a speciality). My business grows by referrals. I would appreciate it if you would pass my details on to your colleagues, clients or associates who could benefit from my skill set. Defending/Preventing unfair dismissals, policies and procedures, contracts of employment, codes of conduct and more…

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Full Decision here.

Introduction

This is essential reading for those of us who deal with the matters of “unfair dismissal” and “protected (adverse) Actions”; and not to mention the important of having well-constructed policies (in this case “media policy”) and contracts of employment.

Your “brand” is your bread and butter, reputational damage can destroy it!

Background

This was an appeal to the Full Bench of the Federal Court by a person who was senior employee (the “applicant”) of a prominent law firm claiming “adverse action” because of his political beliefs. The applicant was dismissed with being paid three month’s pay in lieu of notice (in accordance with his contract of employment) for breaching the firm’s Media Policy in that he criticised the Government departments, of which were either clients or potential clients.

The decision (appeal rejected)

The applicant previously having his case before a single judged dismissed.

Two of the three judges dismissed the appeal, with the third also dismissing the appeal but using different reasoning.

That is, according to the Full Bench, was that whether an employer contravenes the adverse actions’ section of the Fair Work Act 2009 by dismissing an employee because the employee repeatedly breaches the employer’s policy prohibiting its employees from criticising the Government (being a client of the employer) in the media when the employer reasoned that that conduct could affect its ability to continue to attract and earn income from fees from Government work.

The primary judge found that, consistently with his history of similar conduct, during November and December 2016, the applicant had criticised the Commonwealth Government twice in The Sydney Morning Herald. His Honour found that the conduct breached the firm’s media policy that in its practical effect prohibited such criticism in the media. The primary judge found, as facts, that first, the Firm dismissed the applicant because he disobeyed instructions and a policy not to discuss the Firm’s clients in public without first getting permission and secondly, the Firm did not terminate the applicant’s employment for having, or expressing, a political opinion. The Judge finding:

  • Two reasons which were “in the mind” of the Firm were “inextricably linked, i.e. that the Firm did not consider the applicant valuable enough to justify the repeated disobedience of his orders;
  • The Firm was motivated by three matters in reaching his decision to terminate the applicant’s employment: applicant’s disobedience to the media policy (and the not-to-be-questioned authority of the Firm’s managing partner), the Firm’s perception that he was not making the Firm much in the way of fees and the fact that the Firm was entitled to end the relationship on three months’ notice without any reason;
  • The applicant’s employment with the Firm was terminated because he expressed a political opinion and found that no one at the Firm cared about the applicant’s political opinion, but very much cared about his conduct being a threat to its business”. The “concerns” of the Firm’s managing partner “were more pedestrian” in that he “held a perception that the applicant was not bringing in much in the way of profit and he was infuriated by the applicant’s refusal to comply with the media policy and what he regarded as insubordinate behaviour by an employee who was not, to his understanding, profit enhancing; and
  • The applicant had been dismissed “because he disobeyed instructions and a policy not to discuss the Firm’s clients in public without first getting permission”.

Discrimination under the Fair Work Act

The Full Bench examined, as part of this decision, the section of the Fair Work Act pertaining to discrimination/Protected (adverse) action:

The relevant section of the FWA states:

“351       Discrimination

  • An employer must not take adverse action against a person who is an employee, or prospective employee, of the employer because of the person’s race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin”.

The guide to Pt 3.1 of the Fair Work Act in s 334 states that the Part provides general workplace protections and that, among others, “Division 3 protects workplace rights, and the exercise of those rights” and “Division 5 provides other protections, including protection from discrimination”.

Relevantly, the prohibitions in Pt 3.1 against an employer taking adverse action against an employee in s 340 (in respect of workplace rights generally), and specifically in s 346 (in respect of industrial activity), s 351 (in respect of discrimination) and s  352 (in respect of dismissal for illness and injury) are enlivened if the employer takes the particular adverse action “because” a fact or circumstance obtains or has occurred.

Practitioners may wish to read on…(it gets a bit legal):

Section 346, for example, which is in Div 4, relevantly proscribes an employer from taking adverse action, such as dismissal, against an employee “because” the employee is or was an official or member of an industrial association (s 346(a)) or engaged, is engaging or proposes to engage in industrial activity (s 346(b)).  And s 351(1), which is in Div 5 and is headed “Discrimination”, relevantly proscribes an employer from taking adverse action against an employee or prospective employee “because” of the particular employee’s specific characteristics, including physical or mental ones, his or her sexuality, beliefs or political opinion.

Section 361(1) creates a presumption in an application under Pt 3-1 that, where an employee alleges that the employer took, or is taking, adverse action for a particular reason, and “taking that action for that reason or with that intent would constitute a contravention of this Part”, “the action was or is being taken for that reason or with that intent unless the person proves otherwise”.  Importantly, s 360 provides:

‘360        Multiple reasons for action

For the purposes of this Part, a person takes action for a particular reason if the reasons for the action include that reason”.

Barclay High court decision

In Barclay 248 CLR 500, the High Court considered the operation of the adverse action provisions in the context of a claim under s 346 that an employer had taken adverse action against an employee “because” he was an officer of an industrial association and had engaged in industrial activity.

The High Court observed that the Parliament intended ss 360 and 361 to provide a balance between the parties to a workplace dispute by, first, establishing a presumption in favour of an employee who alleges that an employer had taken, or is taking, adverse action against him or her because of a particular circumstance or fact of the kind specified in any of ss 340, 346, 351 or 354 and, secondly, enabling the employer to rebut that presumption. The presumption and onus that ss 360 and 361(1) create are necessary because the employee cannot know or prove what was in the decision-maker’s mind when he or she took the adverse action. The court must enquire into, and make findings about, the mental processes of the decision-maker for taking the adverse action complained of.

Accordingly, the employer or decision-maker acting on its behalf who took the alleged adverse action must prove, as a fact, that none of his or her reasons for that action included as a substantial and operative factor any reason or intent that the Act proscribed him or her from having, the Court must determine the question of fact, namely “why was the adverse action taken?”

French CJ and Crennan J explained (248 CLR at 523 [61], [62] and see too per Heydon J at 547 [148]):

“Central to the respondents’ argument on this appeal was the contrary and incorrect view that Mr Barclay’s status as an officer of an industrial association engaged in lawful industrial activity at the time that Dr Harvey took adverse action against him meant that Mr Barclay’s union position and activities were inextricably entwined with the adverse action, and that Mr Barclay was therefore immune, and protected, from the adverse action. If accepted, such a position would destroy the balance between employers and employees central to the operation of s 361, a balance which Parliament has chosen to maintain irrespective of the fact that the protection in s 346(b) has a shorter history than the protection in s 346(a). That balance, once the reflex of criminal sanctions in the legislation, now reflects the serious nature of the civil penalty regime. Speaking more generally, that balance is a specific example of the balance of which Alfred Deakin spoke as being necessary for an effective conciliation and arbitration system.

Secondly, it is a related error to treat an employee’s union position and activity as necessarily being a factor which must have something to do with adverse action, or which can never be dissociated from adverse action. It is a misunderstanding of, and contrary to, [General Motors-Holden’s Pty Ltd v Bowling [(1976) 136 CLR 676] to require that the establishment of the reason for adverse action must be entirely dissociated from an employee’s union position or activities. Such reasoning effectively institutes an interpretation of the relevant provisions indistinguishable from that of Isaacs J in Pearce, which was rejected in Bowling. The onus of proving that an employee’s union position and activity was not an operative factor in taking adverse action is to be discharged on the balance of probabilities in the light of all the established evidence”. (Emphasis added.)

Gummow and Hayne JJ (248 CLR) and Heydon J rejected the argument that, in answering the question “Why was the adverse action taken?” the court could take into account any “unconscious” state of mind of the decision-maker or employer.

BHP High Court decision

In BHP Coal 253 CLR 243 French CJ and Kiefel J rejected as erroneous the reasoning of the primary judge (Jessup J) who had posited that the employer (or decision-maker) has to establish, under s 361(1), that no part of his or her reasons included the employee’s engagement in industrial activity (and see also at 268–269 [90]–[93] per Gageler J).  Their Honours said:

“The primary judge then went on to consider whether Mr Doevendans’ conduct constituted an industrial activity in the relevant respects. The only inference which can be drawn from this additional reasoning is that, because the adverse action was based upon the sign which Mr Doevendans held and waved, this activity must be taken as one of the reasons for the action. That is to say no more than that the adverse action had a connection, in fact, to the industrial activity. That connection may necessitate some consideration as to the true motivations of Mr Brick, but it cannot itself provide the reason why Mr Brick took the action he did. That inquiry was concluded by his Honour’s earlier findings. His Honour, in effect, wrongly added a further requirement to s 361, namely that the employer dissociate its adverse action completely from any industrial activity”.

In essence, in this passage, French CJ and Kiefel J applied the test that, even though Mr Doevendans’ conduct amounted to his engaging in industrial activity within the meaning of s 346(b) and that conduct was “a reason” for the decision-maker, Mr Brick, acting as he did, the conduct was not a substantial and operative reason in Mr Brick’s mind when he took the adverse action. That conclusion was consistent with the reasons in Barclay, based on the trial judge’s unchallenged findings of fact.

Endeavour Coal High Court decision

In Endeavour Coal 231 FCR 150, Jessup J (who, with Perram J constituted the majority) explained the principle established in Barclay 248 CLR 500 and BHP Coal 253 CLR 243 as follows:

The “connection” which was held not to be sufficient in BHP Coal was between the adverse action taken by the employer and the industrial activity in which the employee had engaged. It was not between two different characterisations of the conduct of the employee, in that case, as a contravention of the employer’s conduct policy and as participation in industrial activity. As French CJ and Kiefel J made clear, if adverse action was taken because the conduct involved such a contravention, it did not become a breach of s 346 merely because the conduct was, at the same time, participation in industrial activity. The existence of such a “connection” was insufficient. What was necessary was that the actual reason of the decision-maker, in his or her own mind, be the employee’s participation in industrial activity. To see their Honours’ reasons in this way is, in my view, to recognise the consistency of those reasons with the statements of principle contained in the reasons of Gageler J in the same case. Those statements represent the law after Barclay and BHP Coal”. (Emphasis added.)

Perram J came to the same conclusion.  He gave the example that, while a judge in giving reasons for his or her decision will have regard to the unsuccessful party’s submissions as an important part of arriving at that decision, those submissions will not be the reasons that are substantial and operative in why the judge made the decision: Endeavour Coal 231 FCR at 173.