Australia: Revisiting the appropriateness of reinstatement in unfair dismissal cases

Last Updated: 18 November 2014
Article by Ashleigh Mills

Most Read Contributor in Australia, September 2016

Case Note: Thinh and Thanh Le v Vietnamese Community in Australia t/a Vietnamese Community Ethnic School South Australia Chapter [2014] FWCFB 7198

A Full Bench of the Fair Work Commission has recently revisited the issue of when reinstatement is appropriate in an unfair dismissal context. In this case it held that any animosity in respect of continuing legal proceedings concerning the underpayment of wages between the employer and employee should not be taken into account in making this decision.

In Thinh and Thanh Le v Vietnamese Community in Australia t/a Vietnamese Community Ethnic School South Australia Chapter [2014] FWCFB 7198 the Full Bench upheld the decision of Senior Deputy President O'Callaghan (SDP O'Callaghan) that compensation, and not reinstatement, was the appropriate remedy for two school teachers who had been unfairly dismissed from their positions of 8 and 13 years respective service. Though agreeing with his ultimate finding, the Full Bench held that SDP O'Callaghan was not entitled to take unrelated and ongoing legal proceedings into account when determining the appropriateness of reinstatement, in circumstances where the legal proceedings had been instituted to assert a protected workplace right (in this case, underpayment).

In the course of its decision the Full Bench detailed the relevant authorities relating to the principles of reinstatement and concluded that the 'appropriateness' of the remedy will most often depend upon an assessment of the trust and confidence remaining between the parties.

Unfair dismissal and reinstatement

Reinstatement is the primary remedy for unfair dismissal, and an order for compensation will only be made in circumstances where the Commission considers reinstatement to be inappropriate (section 390(3) Fair Work Act 2009 (Cth)) (the FW Act). In Thinh the Commission reiterated this point and cautioned against the ordering of compensation in unfair dismissal proceedings simply because the reinstatement may prove 'difficult', for instance where the employee's return may be awkward or embarrassing for the employer.

However, the Commission also confirmed that there should not be a presumption that reinstatement will automatically follow from a finding of unfair dismissal, and that the determinative question in every case is whether reinstatement is 'appropriate'. In the context of unfair dismissal proceedings, appropriateness is to be given a broad construction and encompasses the 'practicality' test of the previous Workplace Relations scheme. The Commission outlined a number of situations in which reinstatement would generally not be appropriate. For example, where:

  • an employer has discovered, subsequent to the termination, that the employee has engaged in an act of serious misconduct which could lead to a further termination;
  • an employer no longer conducts the business at which the employee was employed;
  • the employee is incapacitated because of injury or illness; or
  • there has been a loss of trust and confidence such that it would not be feasible to re-establish the employment relationship.

Loss of trust and confidence

The Commission confirmed that the loss of trust and confidence as between employer and employees was the most common argument advanced for those asserting the inappropriateness of reinstatement. However, it cautioned against the assumption that friction and ill-feeling between the parties would constitute a loss of trust and confidence significant enough to render reinstatement inappropriate. For instance, the Commission stated that the reluctance of an employer to shift from a view, despite a tribunal's assessment that the employee was wrongfully dismissed, does not provide a sound basis to conclude that the relationship is no longer viable. The Commission also confirmed that the person who asserts a loss of trust and confidence is responsible for establishing that the relationship has been damaged to such an extent that it is no longer productive or feasible.

Application to the facts of the case

In Thinh the Full Bench found that the employment relationship had in fact been damaged to a degree resulting in a relevant loss of trust and confidence which exceeded mere 'difficulty' or 'embarrassment' on the part of the employer. It agreed with SDP O'Callaghan's ruling that it would have been inappropriate to reinstate the two school teachers, and upheld the order for compensation. The Commission agreed that the following factors supported the employer's argument against reinstatement:

  • the hostile conduct of the parties towards each other during the course of proceedings;
  • the signed declaration of twenty other teachers from the school identifying the potential for conflict; and
  • the fact that reinstatement could disrupt the operations of the school and delivery of classes to the students.

Importantly though, the Full Bench held that in assessing the appropriateness of reinstatement, no weight could be given to the existence of ongoing legal proceedings between the employees and their former employer relating to a claim for underpayment. Under the FW Act the pursuit of a claim for underpayment is considered a workplace right, and any adverse action taken by an employer in response to such a claim is forbidden. In noting this, the Full Bench stated that it would be incongruous if the exercise of a workplace right could operate as a barrier to reinstatement in an unfair dismissal proceeding. In this respect only, they found, SDP O'Callaghan had erred in the exercise of his discretion.

Lessons for employers

  • the fact that there is a degree of friction or doubt about the ongoing relationship will generally not be enough to avoid the reinstatement of an employee who has been unfairly dismissed. However, reinstatement will not be ordered where the relationship can no longer be considered viable or productive;
  • separate legal proceedings brought by an employee against an employer in which the employee is asserting a workplace right cannot be used to support a claim for the inappropriateness of reinstatement; and
  • each unfair dismissal case will be decided on its own facts, including the nature of the employment.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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