21 October 2010
What are some of the ways an employee will try to get a pay-out from their employer in connection with termination of employment?
· Anxiety, stress or bullying during performance or conduct management;
· Taking sick leave during performance or conduct management;
· ‘You have to make me redundant because my role has changed;’
· ‘I’m a member of the union;’
· ‘I’m a delegate for the union;’
· ‘My cousin is a lawyer;’
· Lodging a workers’ compensation claim;
· ‘I was not aware of the policy;’
· ‘You did not comply with the policy to me.’
Introduction
1. Part 3-2 Unfair dismissal (s385) – Fair Work Act;
2. Unlawful termination – Fair Work Act:
(a) Part 3-1 General Protections
(i) Adverse action (s340);
(ii) Discrimination (s351);
(iii) Temporary absence – illness or injury (s352);
(b) Part 3-6 Redundancy (s530);
(c) Part 6-4 Additional provisions relating to the termination of employment (s772) -
(i) temporary absence from work because of illness or injury within the meaning of Regulation 6.04 of the Fair Work Regulations 2009;
(ii) Trade union membership or participation in trade union activities;
(iii) Non-membership of a trade union;
(iv) race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin;
(v) dismissal during absence from work during maternity leave or other parental leave;
(vi) temporary absence from work because of carrying out voluntary emergency management activities, where the absence is reasonable having regard to all the circumstances;
3. Workers’ Compensation Act 1987 NSW (ss241 and 242): the right of an employee to seek reinstatement if an employee is dismissed due to a workplace injury and produces a medical certificate as to fitness;
4. Workers’ Compensation Act 1987 NSW (s248): it is unlawful to dismiss an employee absent on workers’ compensation within 6 months of injury if the reason is due to unfitness for employment;
5. Unlawful discrimination under State and federal anti-discrimination laws.
6. The common law of employment.
This paper looks at aspects of unfair dismissal law, and the common law of employment in the context of employment policies and their relationship with the contract of employment.
A majority of Australian workers are covered by an award or other industrial instrument, giving them automatic access to unfair dismissal laws after working for the required 6-month (or for a ‘small business employer,’ 12-month) period. Of the remainder who are not covered by one of those instruments, employees with remuneration equal to or less than the ‘high income threshold’ (currently $113,800 pa remuneration plus statutory superannuation) have access to unfair dismissal laws.
A notable exception regardless of whether there is coverage by an industrial instrument is casual employees, who do not have access to unfair dismissal laws.
This leaves management employees and a host of occupational and professional employees who are paid more than the high income threshold without access to unfair dismissal laws. These employees are largely reliant on their rights under a contract of employment.
One of the themes following the election of the 2007 Rudd Labor Government is an increase in the number of employees with access to protections from dismissal, particularly from ‘unfair’ dismissal. Perhaps the biggest single change was to reduce from 100 to 15 the number of employees which define a ‘small business employer.’ Another major change was to make it possible for an employee to challenge a ‘redundancy’ dismissal, something which was removed by the Howard Coalition Government’s ‘Work Choices’ legislation in March 2006.
The common law
The ‘common law’ is still a very important area for termination of employment notwithstanding the broadening of statutory dismissal laws passed by the last federal Labor Government and which took effect in 2009 and 2010.
Unless a contract of employment provides otherwise, the employer may dismiss an employee for any reason, or for none and is not required to accord the employee procedural fairness prior to dismissal. If the contract is for an indefinite period, then the employer may lawfully dismiss the employee by giving the period of notice specified in the contract, subject to the minimum notice required by the National Employment Standards (s117, Fair Work Act) or an award or other industrial instrument that applies to the employee.
If there is no notice term, then the employer may dismiss the employee lawfully by giving ‘reasonable’ notice.
In cases where the employer fails to give the required notice, the employee’s damages are limited to the remuneration that would have been earned during the required notice period, subject to the employee’s duty to mitigate their loss. The common law has traditionally not awarded damages for loss of future earnings, for the distress caused by the manner of termination, or the fact that the manner of termination may make it difficult for the employee to find further work. See ‘Remedies for Unfair Dismissal under the Workplace Relations Act 1996 - a Fair Go All Round?’ by Karen Wheelright: [2001] MqLJ 8.
Employees may be also entitled to damages for losses caused to them by a breach of the contractual terms, implied automatically ‘by law’ either:
· that the employer not act in such a way as to damage or destroy the trust and confidence between the employer and the employee; or,
· a breach of a duty of ‘good faith.’
This is an area of law still under development in Australia , with one of the leading cases, Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney
Notwithstanding the clear statements from the courts, employees invariably allege that an employer, in terminating their employment, has acted in breach of these legal obligations without relying on specific terms of the contract of employment or ones that are implied ‘in fact.’
To circumvent the limitations of the common law, the better advised employees will look for policies and procedures which can establish a basis for being ‘implied’ terms ‘in fact’ of the contract, the breach of which entitles the employee to damages flowing from the breach. See Byrne v Australian Airlines Ltd (1995) 185 CLR 410 for authority on how terms are implied into a contract of employment.
The common law and the ‘policy’ cases
A number of cases in Australia
In Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889, the Full Court of the Federal Court considered a term of an employment contract which provided that the employee agrees to ‘abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced.’ Key to the decision was the finding that ‘abide by’ created both obligations and also the acceptance of benefits in the policies. Even though the employment contract stipulated compliance by the employee only, the court decided it was intended that both employee and employer must comply. The employee was therefore entitled to the benefits of the policy, which in this case, was the right to redundancy pay.
In contrast to the Riverwood case, the NSW Court of Appeal decided in Willis v Health Communications Network Ltd [2007] NSWCA 313, that a document with the title ‘Redundancy Policy’ had not been incorporated into the employment contract. In this case, although the policy had been applied many times prior to the employee’s dismissal due to redundancy, there was no term in his employment contract which referred to the employer’s policies.
Similar to the Willis case, in Whittaker v Unisys Australia Pty Ltd [2010] VSC 9, the Supreme Court of Victoria decided that a redundancy policy did not to apply to the employee due to there being no reference to the ‘Redundancy Policy’ in the employment contract or a more general term requiring the employee to abide by the employer’s policies.
In Goldman Sachs JB Were Services Pty Ltd v Nikolich [2007] FCAFC 120, the Full Court of the Federal Court determined that an employment policy to the effect that the employer would take every practical step to provide and maintain a healthy working environment for its employees was a term of the employment contract. The employer had breached this provision by failing to promptly investigate a grievance instigated by the employee concerning the allocation of staff and alleged intimidation by his manager, which led to significant psychological damage. The employee recovered substantial damages for psychological injuries as a consequence of the policy breach, although not, it must be said, due to the termination of the employment.
In Rogers
In Gera
Increasingly, employees who do not have access to the unfair dismissal jurisdiction are asserting that an employer’s policies are contractually binding, often to overcome the absence of their rights to unfair dismissal protection and commonly, short periods of notice of termination written into their contracts of employment.
The Fair Work Act 2009
Under the Fair Work Act, section 387 requires that for an employer’s decision to be upheld, the decision must not be ‘harsh, unjust or unreasonable.’
Two recent cases illustrate different approaches that Fair Work Australia (FWA) might take to assessing claims alleging a breach of section 387.
Two employees were employed to fit tyres for Beaurepaires. After working together to fit a tyre and tube, the tyre was inflated and exploded. Beaurepaires dismissed the employees summarily.
Beaurepaires was not satisfied with the way the employees had conducted themselves at safety meetings during their employment, and this was a factor which went into the decision to dismiss. FWA disagreed that the employees displayed such an attitude. Nevertheless, Beaurepaires had never actually said anything to the employees during their employment about their apparent attitude.
Beaurepaires was also not satisfied with the way the employees had conducted themselves during the investigation. During the investigation Beaurepaires had taken into account that the employees showed no remorse for what had occurred. FWA said that given the employees were not extensively educated or articulate, the expectation of Beaurepaires was unrealistic. It was enough that they admitted their mistake.
Beaurepaires also relied on the fact that during the investigation the employees swore at the manager to justify the dismissal. FWA said:
‘All three participants are grown men who had worked together for some time in a tyre fitting shop, not in the haberdashery department of David Jones. Swearing can be a valid reason for termination of employment. Swearing in these circumstances was predictable, but I do not intend to resolve what particular words were spoken at the time. In all the circumstances of this case I do not consider any swearing, on either version, to be a further reason for the termination of employment of either applicant.’ [paragraph 23]
It was found by FWA that each employee made a mistake in their work and each of their respective mistakes was a valid reason to dismiss them. Further, one of the employees failed to immediately identify the other as responsible for the exploding tyre and FWA found this failure to be a further valid reason to dismiss.
The employees had no prior records of warnings, counselling or the like. They admitted their mistake which led to the exploding tyre.
On the question of the sufficiency of the investigation conducted by Beaurepaires, FWA said:
‘Both applicants were notified of the reason for their termination of employment as it related to their specific acts of carelessness and they were provided with an opportunity to respond. However, I have concluded that neither was given sufficient notice or opportunity to respond to the question of whether their response to Mr McKenzie [a manager] was inadequate or, to the extent that it provided a context, that their previous attitude to safety was a consideration. It would have been fairer to both Mr Kane [employee] and Mr McMillan [employee] if a greater opportunity had been provided to them to provide reasons for why their employment should not be terminated.’ [paragraph 30]
FWA found that the employees’ conduct did not justify summary dismissal. Summary dismissal was ‘disproportionate to the gravity of the misconduct in respect of which each applicant acted.’
FWA approached this case on the basis that each element of the statutory test, ‘harsh, unjust or unreasonable’ needed to be considered separately and only after each of these were satisfied could an employer’s decision to dismiss could be upheld.
It is not clear whether FWA would have decided the case differently had the employees been dismissed with notice or pay in lieu rather than summarily. However, the fact that there were valid reasons to dismiss appears to suggest that had the employer given or paid for notice, that the employer may have been successful.
One employee was awarded maximum compensation (6 months’ remuneration) and the outcome for the other employee was due to be resolved by the parties, with the suggestion by FWA that reinstatement may be available.
In this case the employer conducted an investigation into who had placed racist graffiti on a crib room white board.
The employer had well documented and communicated policies concerning discrimination, harassment and equal opportunity and all employees including the one who was dismissed participated in training and were well aware of the policies.
No employee admitted to writing the graffiti, so the employer engaged a handwriting expert, who wrote a report and concluded it was ‘highly probable’ that a particular employee had done it.
The employer met with the employee and presented the report. The employee, with a union representative present, denied being responsible. However the employer, relying solely on the report by the expert, decided to summarily dismiss the employee for harassment, discrimination and breaching company policy by reason of what had been written on the white board.
The union acting for the employee in FWA said that the conclusion of the report of the expert did not exclude the possibility that another person was responsible. FWA said that the employer only needed to be satisfied on the balance of probabilities that allegations are substantiated. This meant that FWA needed to be satisfied that the expert and his judgement were sound, which it did.
The fact that the employee only had one hour to review and respond to the report was sufficient, given the report was short and clear.
The union argued unsuccessfully that the termination letter was written prior to the employer hearing the response of the employee after the expert’s report was giving to him, but this was denied and not able to be proved.
The employee’s ‘consistent denial concerning the allegation did not provide the [employer] with any grounds to mitigate the penalty of dismissal.’ [paragraph 137]. As a consequence the employer’s decision was not disproportionate, even though the employee was employed for 8 years and there was evidence that if the employee responsible had owned up while the investigation was still being undertaken, that only a warning would have resulted.
FWA also took into account the following in its decision:
‘In finding the [employer] had a valid reason for dismissing the [employee], and following consideration of the other relevant factors set out in s.387, I have also considered whether on a global basis, the termination of the [employee’s] employment constitutes ‘a fair go all round’. The [employer] is entitled to expect compliance with its express workplace policies and procedures. It also follows that not all breaches of such policies will result in dismissal. However, in the circumstances of this case, I am unable to be satisfied that the termination of the applicant’s employment was harsh, unjust or unreasonable.’ [paragraph 147]
The unfair dismissal cases illustrate two different approaches that FWA may take when reviewing a dismissal. On the one hand there is the rigid application of each of the words ‘harsh, unjust and unreasonable’ taken from s387 of the Fair Work Act. In the Beaurepaires case, FWA quotes this passage from a High Court case, Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 465:
‘It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted.’
The FWA in the Beaurepaires case provides a strong example of the primacy of form over substance, by making it possible that an employer with a lawfully valid reason to dismiss, should not have done so due to a defect in process.
In contrast, the Glennies Creek Coal case suggests that it is still open to apply the more traditional approach taken by tribunals in Australia, the principle of a ‘fair go all round,’ long established in industrial laws: Re Loty and Holloway v Australian Workers’ Union (1971) 71 AR (NSW) 95. This expression has been used to summarise the objective in unfair dismissal cases, which is to provide industrial justice by giving due weight to:
· the importance but not inviolability of the right of an employer to manage the employer's business;
· the nature and quality of the work in question;
· the circumstances surrounding the dismissal; and
· the likely practical outcome if an order in favour of the employee is made.
This approach relies more on a review of all of the circumstances and a balance of the interests of all of the involved parties rather than a ‘tick-the-box’ approach. I fear a trend towards box ticking rather than ensuring a ‘fair go.’
Termination of employment: What are the lessons for employers?
All of the cases, both common law and in Fair Work Australia, illustrate a number of very important lessons for an employer:
Systems:
· consider carefully whether policies which address process and investigations should be in place compared with, for example, management guidelines or nothing at all;
· distinguish the need to establish fair process policies for employees with access to unfair dismissal laws compared to those without such access;
· if policies are desired, then determine the desired outcomes as between establishing mandatory, promissory process or non-binding general statements of commitment;
· align written terms of employment - letters of offer, contracts and the like - with the required outcomes;
· decide what type of subject matter should be in written terms of employment rather than in a policy;
· review how policies should be communicated to employees, balancing the availability of technology such as intranets, the use of the induction process, resources for on-going training and education and the weight of paper if policies are published in written form;
· decide the method for updating written terms of employment and policies;
· find a place where policies and similar documents in their current and earlier forms are stored for the purpose of dealing with claims by employees.
At the start of employment:
· ensure contracts are signed;
· check that employees have not made handwritten amendments to the contract;
· verify that employees are aware of policies on commencement.
During employment:
· verify that employees are aware if policies change;
· provide on-going education about important policies. In most workplaces this is always the discrimination and harassment policies, and OH&S. There will be others.
At the end of employment:
· decide when it is cheaper or necessary to do the deal or take an easier option rather than follow a required process – but when you choose one route, stick to it;
· investigations are tough for an employer to get right so assume that every step will be scrutinised by someone else;
· do not even write a termination letter until after the process has concluded for fear of showing that the employee is judged before responding to allegations;
· the cost of defending a claim for unfair dismissal when reinstatement is not sought by the dismissed employee places enormous pressure on an employer and employees who are represented to settle;
· when an employee claims reinstatement in an unfair dismissal, consider offering reinstatement to settle or, fight hard!
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