Australia: Is change ahead? The future of procedural fairness in unfair dismissal claims

Last Updated: 23 February 2016
Article by Richard Ottley

IN BRIEF

A frequent area of confusion for employers, is the process which should be followed when terminating employment. In particular, many employers when seized with the knowledge that their employee's conduct is incompatible with their continued employment, overlook considerations of natural justice in their haste to terminate the employee.

Complying with procedural fairness and ensuring employees are given a fair and reasonable opportunity to defend themselves before being terminated, has particular relevance under the unfair dismissal laws. These laws direct the Fair Work Commission's attention to such matters when arriving at a view as to whether a termination was harsh, unjust or unreasonable. A failure to observe procedural fairness where required to do so, will often result in an otherwise unimpeachable dismissal being held to be unfair, thereby resulting in the applicant's claim being successful.

This has caused a degree of controversy amongst employers. Calls for reform have been heard by the Productivity Commission which made certain recommendations in this area in its Report into the Workplace Relations Framework (No 76) of 30 November 2015.

This article looks at such recommendations in the context of a recent decision of the Fair Work Commission in December 2015 involving the dismissal of motoring journalist whose employment was terminated following his causing damage to a car he was testing (Daniel DeGasperi –v- Caradvice.com.au Pty Ltd – Decision of Commissioner Cambridge -17 December 2015).

Facts of the case

The applicant was Deputy Editor of Caradvice being a business primarily focused upon the operation of its website. Caradvice.com.au is a website that contains numerous car reviews and other industry news and information. The applicant in his role as Deputy Editor was responsible for testing various motor vehicles loaned to the company for this purpose.

The applicant was involved in a single car accident while testing an Alfa Romeo 4C at 11:45 pm on the old Pacific Highway near Brooklyn. The car had been put in race mode at the time of the accident. The Alfa Romeo 4C was a new model sports car and there were only two of them in Australia at the time of the accident. Whilst the vehicle did not appear to be extensively damaged, it turned out that the cost of repairs were significantly more than first appeared to be the case.

The applicant was sent an email some three days after the accident in which he was requested to attend a meeting with the CEO of the company to talk about how the company should respond to Fiat Chrysler Australia (being the organisation that had loaned the vehicle). The next day the applicant duly attended the CEO's office where he was informed that his employment had been terminated on the basis of misconduct associated with the car accident. He was provided with a pre-prepared termination letter which confirmed his employer's view that his actions constituted serious misconduct warranting summary dismissal. Despite being summarily terminated, his employer provided four weeks' pay in lieu of notice (in addition to statutory entitlements).

The applicant subsequently brought a claim for unfair dismissal asserting that the car accident could not constitute misconduct or serious misconduct because it was not wilful or deliberate behaviour. He asserted that the stability control system of the vehicle was not deactivated when in race mode but merely suspended until the driver pressed the brake. He also asserted that his employer did not have policies or procedures with respect to the deactivation of stability control when reviewing motor vehicles. The applicant complained about alleged deficiencies in procedural fairness including that he was not notified of the reason for dismissal prior to being terminated, he was not provided with sufficient time to formally respond to the allegations and he was deprived of the opportunity to bring a support person to the meeting at which he was dismissed.

The Commission accepted the position advanced by the employer that the applicant's decision to test the Alfa Romeo 4C late at night on a public road and to engage the vehicle's race mode might properly be considered to represent conduct which supported the decision to terminate. In coming to this view the Commission also considered the senior position occupied by the applicant as Deputy Editor. It is uncertain how much account the Commission took of the applicant's assertion that the stability control system of the Alfa Romeo 4C was not deactivated when race mode was engaged but merely suspended until the driver pressed the brake. It is also unclear how the Commission viewed the applicant's assertion concerning the alleged lack of company policies on the topic of deactivation of stability controls.

Having made the above finding, the Commission noted a number of factors touching on procedural fairness which made the termination unfair. Those matters included the first indication that the applicant was given that his employment was in jeopardy was in fact the provision of the letter of termination at the termination meeting on 23 March 2015. The Commission noted that the employer did not provide an opportunity for the applicant to respond to the findings of misconduct that the employer had identified from earlier responses to questions asked of him by the CEO a few days before. In particular the Commission noted that the applicant was "plainly denied an opportunity to advance any explanation, or offer any defence, or provide other factors which may have had some influence on the decision to dismiss".

The Commission also noted that as another example of the erroneous procedure the employer followed, it failed to give the applicant any indication that the meeting to which the applicant was invited was one where disciplinary action might be considered including termination. In fact an email that had invited the applicant to the meeting implied that a discussion was to be held before the applicant conducted a scheduled car comparison test. The Commission noted that given the arrangements made for the meeting, the applicant was in effect denied the opportunity to have a support person to assist him because there was no indication the meeting was of a nature where this would be necessary.

In conclusion, the Commission came to the view that notwithstanding there was a valid reason for the dismissal the applicant was denied procedural fairness having regard to the above factors. This resulted in the particular dismissal being unreasonable and unnecessarily harsh. The applicant's claim for unfair dismissal was therefore established. Orders made included payment of four weeks remuneration.

Whatever view one might take as to the gravity or otherwise of the conduct supporting the termination decision, the simple fact remains that in the Commission's eyes, the claim for unfair dismissal would have failed if the employer had directed its attention to issues around procedural fairness and satisfied these requirements before terminating the applicant.

Productivity Commission Report

This decision is an example of the type of case the Productivity Commission has in mind when making recommendations to reform the test for unfair dismissal in its recommendations. The Productivity Commission's Report noted in its key points that further incremental reform was required in relation to the unfair dismissal regime to:

"prevent spurious cases from resulting in financial settlement, by introducing more effective upfront filters that focus on the merits of claims, and revised fee arrangements for upfront lodgement and for cases proceeding to arbitration;
not favour form over substance, by changing the legislative test for unfair dismissal and the penalty regime to ensure that procedural errors alone are not sufficient to award compensation or restore employment in what would otherwise be regarded as a fair dismissal."

The Productivity Commission in its Report at Recommendation 17.4 went on to state that:

"The Australian Government should change the penalty regime for unfair dismissal cases so that:

  • employees can only receive compensation when they have been dismissed without reasonable evidence of persistent underperformance or serious misconduct;
  • procedural errors by an employer should not result in reinstatement or compensation for a former employee, but can, at the discretion of the Fair Work Commission, lead to either counselling and/or education of the employer, or penalties.In repeated or serious cases, the Fair Work Commission should seek penalties by making an application to the Federal Court or Federal Circuit Court".

If Recommendation 17.4 finds its way into legislation then a failure to observe procedural fairness requirements alone, will not be sufficient to underpin a successful claim for unfair dismissal.The employee in order to succeed, will need to show that they have been dismissed without reasonable evidence of persistent significant underperformance or serious misconduct. Employers however should not rest on their laurels in this context, as a failure to implement and observe procedural fairness would expose them to the risk of financial penalties.

Conclusion

It will be interesting to see what the Government does with the Productivity Commission's Report and whether it will seek to implement what some commentators will regard as a paradigm shift away from the primacy of procedural fairness in the context of the unfair dismissal laws.However the threat of sanctions for failure to provide procedural fairness may be seen as providing a suitable counterweight to the removal of procedural fairness considerations in the Commission's evaluation of unfair dismissal claims.

Perhaps the key message for employers in all of this, is to ensure that they continue to observe procedural fairness in accordance with the unfair dismissal laws as they presently stand, and to remember that if the Productivity Commission's above Recommendation is fully implemented there will be no cause for complacency.

For more information, please contact:

Richard Ottley, Partner
Phone: +61 2 9233 5544
Email: rbo@swaab.com.au

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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