Australia: The three occasions you will be found without a valid reason for dismissal

Last Updated: 12 May 2017
Article by Rebecca Byun (formerly with Holding Redlich)

Most Read Contributor in Australia, August 2018

One of the most common claims that will arise in the modern workplace is the unfair dismissal claim. There is little surprise – almost anyone is eligible to make an unfair dismissal claim 1 and it costs close to nothing to lodge an application with the Fair Work Commission 2.

A recent examination of unfair dismissal cases shows that employers are still acting prematurely. Perhaps as expected, many employers are caught out for failing to afford a fair process (which requires such things as providing employees with an opportunity to respond or a chance to improve their performance). However, the cases also show that employers have failed to defend unfair dismissal claims due to a flawed first step.

In this update, we examine three circumstances where the Fair Work Commission has found that there was no "valid reason for dismissal"3 to act on and that therefore, the dismissal was "harsh, unjust or unreasonable" 4.

  1. Genuine concern, but not a valid reason for dismissal

In most cases, a dismissal follows some genuine concerns or doubts about an employee's ability to do the job or to fit into the business' culture. Or in other cases, the dismissal may follow an incident involving the employee that requires responsive action from the business.

However, the Fair Work Commission has frequently found that genuine underperformance or misbehaviour in the workplace may not always be sufficient to constitute a "valid reason for dismissal".

In the recent decision of Mary Conelius v Southern Suburbs Football Club Inc. [2017] FWC 485, an employee claimed she was unfairly dismissed by Souths Leagues Club. The Club sought to rely on reasons of the employee's ongoing underperformance and two incidents in which the employee displayed 'outbursts' including at the reception area. In considering whether there was a valid reason for dismissal, the Commissioner concluded that the employee did indeed have multiple performance issues and had often been dismissive of assistance and training offered to her. The Commissioner also found that one of the employee's 'outbursts' was inappropriate conduct and in breach of the Club's policy.

However, the Commissioner found that there was nevertheless "no valid reason for dismissal". The Commissioner stated that "I have no doubt Souths had concerns with Ms Conelius in respect of certain aspects of the performance of her duties, however it is evident Ms Conelius required, and was receiving training on these issues" 5. Further, the Commissioner considered that the outburst was out of character and while inappropriate, it was not offensive, threatening nor abusive. It was also not directed at another employee. As for the second 'outburst', the Commissioner found the employee was merely very emotional and repeatedly expressed her view that she was likely to be 'sacked'.

Key take out:

This decision reminds employers that a reason for general concern about performance or conduct may not be enough. The requirement is that there needs to be a reason for dismissal, and not just a reason for general concern. Further, the reason for dismissal must be "sound, defensible and well founded" 6, and not "capricious, fanciful, spiteful or prejudiced" 7.

  1. A valid reason for dismissal, but not found at the time of dismissal

Employers must be able to point to a "valid reason for dismissal" at the time of dismissal, even if it not communicated to the employee at the time of dismissal 8. Critically, this means that employers will be caught out even if a "valid reason for dismissal" would almost certainly arise soon after the dismissal.

This was what happened in Catherine Purcell v Rock N Road Bitumen Pty Ltd [2017] FWC 486. In this case, an employee was dismissed due to ongoing performance issues. Rock N Road Bitumen formally put these issues to the employee (following three months of informal feedback). Three days after formally raising the issues, the employee was dismissed.

Again in this case, the Commissioner had no issue in finding that the employee was not suited to the job and did not "apply herself adequately to the many tasks of the role".9 Yet, despite there being genuine concerns, the Commissioner found that there was no "valid reason for dismissal". This was because no "valid reason for dismissal" existed at the time of dismissal. The Commissioner held that these issues would most certainly have constituted a valid reason for dismissal in the weeks or months following the dismissal, but the employer had acted prematurely. The dismissal was therefore found to have been "harsh, unjust or unreasonable". 10

Key take out:

Employers need to be sure they have a "valid reason for dismissal" that has fully crystallised at the time of dismissal. A "valid reason for dismissal" that would have eventuated after the point of dismissal is too late and cannot be relied on.

Even where performance or conduct issues are so stark and there is a bleak prospect of any improvement, employers must ask themselves whether they have reached a point at which these genuine concerns constitute a valid reason for dismissal. If not, a dismissal will be found to be premature and without a "valid reason for dismissal".

  1. No evidence to justify a valid reason for dismissal

In many unfair dismissal cases, employers are driven by a strong (and often well-placed) conviction that an employee has clearly acted out of line and that dismissal is justified. However, the Fair Work Commission makes it clear that the legal requirement for a "valid reason for dismissal" is objective. In other words, the reason must be objectively valid and not merely subjectively felt or experienced by the employer. There must be objective evidence to support and establish a "valid reason for dismissal".

In Colby Somogyi v LED Technologies Pty Ltd [2017] FWC 1966, the Fair Work Commission found that the employer did not have a valid reason to summarily dismiss an employee for a Facebook post that was found to be "undoubtedly crude and immature"11, "offensive and vulgar" 12.

Despite these genuine concerns, the employer's downfall was that it did not conduct any investigation into the incident before dismissing the employee. As a result, it was unable to properly collect objective evidence to establish a "valid reason for dismissal".

The Commissioner held that despite the crude and immature Facebook post, it was difficult to conclude that there was a valid reason for dismissal and if there was, it had not been properly established. There was nothing in the evidence to show that the employee had been provided with the social media policy that he had breached, and no evidence to confirm that the post was directed at the business or any of its employees.

Key take out:

Before proceeding to dismiss an employee, employers need to be sure there is sufficient objective evidence to establish a "valid reason for dismissal".

Particularly where the reasons relate to an incident or an allegation made against the employee, employers need to take care not to rely solely on subjective understandings of what occurred (including allegations by clients or other staff) to dismiss an employee. An investigation will be required to establish a valid reason and therefore, justify a dismissal.

Conclusion

The common theme across these recent cases is that the Fair Work Commission acknowledges that there were genuine concerns about the applicant employee that warranted some action by the employer. However, the Fair Work Commission makes it clear that dismissal will not always be the appropriate action to take.

In determining an unfair dismissal application and whether a dismissal was "harsh, unjust or unreasonable" 13, the Fair Work Commission must take into account various factors that surrounded the dismissal. However, an employer's defence will inevitably fail if they do not have a "valid reason for dismissal". As the Full Bench has previously warned, "[t]he absence of a valid reason will almost invariably render the termination unfair" 14.

Employers should therefore take the time to make sure they are acting on more than just a genuine concern, that they have a "valid reason" at the time of dismissal and that they have objective evidence to justify the dismissal.

Footnotes

1 An employee will be eligible so long as they are: 1) covered by a modern award or enterprise agreement; and/or 2) earn less than the high income threshold, which is currently indexed at $138,900 per annum (1 July 2016 to 30 June 2017).

2 As at the date of this article, it costs $69.60 to lodge an unfair dismissal application.

3 Section 387(a) of the Fair Work Act 2009 (Cth) – One of the factors that the Fair Work Commission must take into account in considering whether a dismissal was "harsh, unjust or unreasonable" is whether there was a valid reason for dismissal that related to the person's capacity or conduct.

4 Section 385(b) of the Fair Work Act 2009 (Cth).

5 See [80].

6 Selvachandran v Peterson Plastics Pty Ltd (1995) 62 IR 371, 373.

7Ibid.

8Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 373, 377-378.

9 See [37].

10 Section 385(b) of the Fair Work Act 2009 (Cth).

11 See [28].

12 Ibid.

13 Section 385(b) of the Fair Work Act 2009 (Cth).

14 Parmalat Food Products Pty Ltd v Kasian Wililo [2011] FWAFB 1166 at [24].

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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