Valid rea­son for dis­missal the key to defend­ing unfair dis­missal claims

In brief

A recent judg­ment of the Full Bench of Fair Work Aus­tralia (FWA) has high­light­ed that the exis­tence of a valid rea­son for dis­missal is piv­otal to an employer’s abil­i­ty to suc­ceed in defend­ing unfair dis­missal claims.

Cri­te­ria for estab­lish­ing an unfair dismissal

When an unfair dis­missal claim is made by an eli­gi­ble employ­ee, the cen­tral fact which the employ­ee must estab­lish is that the dis­missal was harsh, unjust or unrea­son­able. In con­sid­er­ing whether this thresh­old has been met, FWA con­sid­ers a num­ber of factors:

  • Exis­tence of a valid rea­son for the dis­missal, such as poor per­for­mance or misconduct
  • Pro­ce­dur­al jus­tice require­ments, such as noti­fi­ca­tion of the rea­son for the dis­missal and pro­vi­sion of an oppor­tu­ni­ty to respond
  • Any oth­er dis­cre­tionary mat­ters that FWA con­sid­ers rel­e­vant — effect of the ter­mi­na­tion on the employ­ee, length of ser­vice and com­par­a­tive treat­ment of oth­er employ­ees in sim­i­lar circumstances 

As this deter­mi­na­tion is high­ly dis­cre­tionary, the dif­fi­cul­ty for employ­ers up until this point has been not know­ing whether ter­mi­nat­ing an employ­ee will result in an unfair dis­missal claim. How­ev­er, the Full Bench has recent­ly hand­ed down a judg­ment which pro­vides some clar­i­ty in this hith­er­to grey area.

Par­malat Food Prod­ucts Pty Ltd v Kasian Wililo

Mr Wil­ilo was engaged by Par­malat Food Prod­ucts as a fork­lift oper­a­tor. Dur­ing a night shift, he placed his arms, head and shoul­ders under­neath an unse­cured load in clear breach of safe­ty policies.

Dur­ing an inves­ti­ga­tion into the mat­ter, Mr Wil­ilo denied his involve­ment in the inci­dent. How­ev­er, Par­malat had wit­ness state­ments and CCTV footage which were incon­sis­tent with his respons­es. The CCTV footage was nev­er shown to him dur­ing the investigation.

Fol­low­ing the inves­ti­ga­tion, the com­pa­ny ter­mi­nat­ed Mr Wililo’s employ­ment and he lodged an unfair dis­missal claim with FWA.

First instance deci­sion – valid rea­son for dismissal

The high­ly dis­cre­tionary nature of the deter­mi­na­tion required of FWA was reflect­ed by the first instance deci­sion which rein­stat­ed the employ­ee, even though Par­malat clear­ly had a valid rea­son for dis­missal in his proven breach of safe­ty poli­cies and had sat­is­fied pro­ce­dur­al jus­tice require­ments. The rea­son­ing relied upon by the Com­mis­sion­er for approv­ing the employ­ee’s claim was based on the fol­low­ing factors:

  • The length of his employ­ment and dis­ci­pli­nary history
  • The fail­ure of Par­malat to show him the CCTV footage dur­ing the investigation
  • The employee’s con­duct was not wil­ful or neg­li­gent, but rather the result of care­less­ness and a fail­ure to appre­ci­ate the poten­tial dan­ger of his actions
  • Par­malat failed to demon­strate that it con­sis­tent­ly applied a zero tol­er­ance pol­i­cy with respect to safe­ty breaches
Par­malat appeal to the Full Bench

On appeal to the Full Bench, Par­malat empha­sised the flawed rea­son­ing under­ly­ing the first instance deci­sion and the con­se­quences aris­ing for employ­ers from such a deci­sion. The com­pa­ny argued that when an employ­ee is found to have been dis­missed for a safe­ty breach, this amounts to a valid rea­son for dis­missal and indeed seri­ous mis­con­duct”. The com­pa­ny sub­mit­ted that if the employ­er applies appro­pri­ate mea­sures to ensure pro­ce­dur­al fair­ness, it is incon­ceiv­able that a con­clu­sion should be reached that ter­mi­na­tion of employ­ment is harsh.”

Par­malat deci­sion over­turned on appeal

The Full Bench agreed with the employ­er and laid down a guid­ing prin­ci­ple for the deter­mi­na­tion of unfair dis­missal claims by hold­ing that the exis­tence of a valid rea­son for dis­missal is a very impor­tant con­sid­er­a­tion in estab­lish­ing the fair­ness of a ter­mi­na­tion.” This state­ment sends a clear direc­tive to com­mis­sion­ers of FWA to view the exis­tence of a valid rea­son for dis­missal as the pri­ma­ry consideration.

How­ev­er, the Full Bench also high­light­ed the impor­tance of employ­ers com­ply­ing with the pro­ce­dur­al jus­tice require­ments, point­ing out that where such com­pli­ance is com­bined with a valid rea­son for dis­missal it would only be if sig­nif­i­cant mit­i­gat­ing fac­tors are present that a con­clu­sion of harsh­ness is open”.

Lack of sig­nif­i­cant mit­i­gat­ing factors

In apply­ing this prin­ci­ple to the present sit­u­a­tion, the Full Bench found that such sig­nif­i­cant mit­i­gat­ing fac­tors did not exist. Fur­ther, the fac­tors relied upon by the Com­mis­sion­er at first instance were found to be unjus­ti­fied because:

  • The employ­ee’s ser­vice was short and his dis­ci­pli­nary record was poor
  • The fail­ure to show the CCTV footage was not a mat­ter of sig­nif­i­cance because it was large­ly incon­clu­sive and did not alter the con­clu­sion that the employ­ee was giv­en the oppor­tu­ni­ty to respond to the allegations
  • The con­duct of the employ­ee was delib­er­ate and, in any event, char­ac­ter­is­ing the con­duct as care­less­ness did not dimin­ish the seri­ous­ness of the misconduct
  • There was not a suf­fi­cient basis to find that Par­malat could not apply its safe­ty pol­i­cy because it had been applied incon­sis­tent­ly in oth­er safe­ty breaches
Sig­nif­i­cance of the deci­sion for employers

The deci­sion of the Full Bench is to be wel­comed by employ­ers, as it pro­vides greater cer­tain­ty about the rel­a­tive impor­tance of the fac­tors which FWA will con­sid­er in deter­min­ing unfair dis­missal claims. Employ­ers can gen­er­al­ly assume that pro­vid­ed there is a valid rea­son for dis­missal and they sat­is­fy the pro­ce­dur­al jus­tice require­ments, there will be scant basis for the employ­ee to lodge an unfair dis­missal claim. In the absence of gen­uine­ly sig­nif­i­cant mit­i­gat­ing fac­tors, such claims have lit­tle pos­si­bil­i­ty of suc­cess. The full text of the judg­ment in the Par­malat appeal can be found at the web­site of Fair Work Aus­tralia.

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