As businesses prepare to enter into the final quarter of the 15-16 financial year many businesses will begin to take stock of their human resources needs in the coming months. It is likely that many employers will undertake staff evaluations and it is common at this time to assess under-performing or problematic team members.

It is important to both the employer’s on-going business and to employees to accord personnel the necessary degree of procedural fairness the law expects and to assess performance against objective, reasonable criteria. Notwithstanding, it is inevitable that some conduct (either serious misconduct, or repeated instances of other misconduct) will merit termination of some employees in some circumstances.

This update summarises some recent key topics reflected in the decisions of the Fair Work Commission in the past year, focussing on the issue of reasonableness of dismissals and other sanctions.

1. The Need for Objectivity – Setting Clear Expectations

In O v The Trustee for Print Warehouse Australia Trust t/a Print Warehouse [2015] FWC 8232 – Bissett C – 3 December 2015 an employee was successful in asserting that they had been unfairly dismissed when their employer terminated their employment on the grounds of a failure to reach certain sales targets.

The employee’s success was based largely on the facts of the case – in this instance, the employee had never been provided with written sales targets to meet, nor was he informed that he was failing to meet those targets. It was also found that it was unreasonable of the employer not to offer formal warnings in relation to the employee’s performance and that it had failed to take appropriate steps to provide the employee with substantive assistance in meeting his targets.

Whilst a term of the employee’s agreement was that he would be set sales targets and that a failure to meet these targets could merit dismissal, the failure of the employer to document any performance meetings weighed heavily against the employer’s claim that they had clearly set and assessed the employee’s performance against pre-determined criteria.

The Print Warehouse case demonstrates the importance of carefully documenting the basis for any dismissal or other sanction against employees, and the difficulty that employers often face proving matters of fact that have no contemporaneous record.

In the words of Commissioner Bissett:

“[49] It is, hopefully, not an error he [the employer] will make in the future. Such documentation is not to be seen as a mere administrative nuisance but enables both an employer and employee to monitor in an objective manner performance and progression against documented standard”.

 2. The Need for Clarity – Making Sure Your Policies are Understandable

In P v Coca Cola Amatil (Aust) P/L t/a Coca Cola [2015] FWC 8142 – Gostencnik DP – 30 November 2015 an employee employed in a beverage manufacturing plant was dismissed on the basis of several late attendances at work.

Whilst the Commission found that as a matter of fact one warning was unfairly given (in respect of minor lateness attributable to inadvertently losing a swipe-card and on another occasion illness on the way to work) a final written warning was accepted as being reasonable owing to the fact that the employer’s particularly stringent clock-on standards were well known to the employee and were still not complied with.

When the employee was eventually dismissed (following an early unauthorised clock-off during an overtime shift) the employee still managed to successfully assert that they had been unfairly dismissed (notwithstanding the fairness of the earlier lateness warnings) based on a number of issues identified with the practices of management at the plant:

  • the facts of the employees poor performance and failure to comply with various policies had to be weighed against the generality of those policies – in the Commission’s view the policies were not clear or easily understood in the given employee’s role
  • the practices of management towards enforcing their policies was inconsistent – in practice, the employee had been permitted to clock off early on overtime shifts nearly a dozen times in the past without sanction
  • the evidence given by a floor manager versus the evidence given by a human resources manager showed a clearly different understanding of acceptable practices at different levels of the employer’s organisation

 
In relation to the employee’s termination letter, which had asserted that the employee had breached the employer’s code of conduct the Commission was not satisfied that anything in the code clearly instructed the employee on what was permissible conduct in relation to early clocking off.

This case raises the importance of having well drafted (and more relevantly, well understood) policies around employee’s duties. As Deputy President Gostencnik stated:

“[55] An expectation without communication is merely a pipedream, and a breach of an uncommunicated expectation does not form a sound, defensible or well-founded reason for dismissal.

3. Tying Up Loose Ends – the Value of a well drafted Deed of Settlement

In E v Jeremy J Hartley P/L t/a Subway [2015] FWC 8192 – Gooley DP – 30 November 2015an employee who brought an unfair dismissal claim (that was subsequently settled at the conciliation stage of the unfair dismissal resolution process) was prevented from withdrawing her consent to settlement on the basis that she had entered into a binding agreement with her employer that was incapable of revocation.

In this case the employee was represented at conciliation by an agent appointed by her with full authority to negotiate and enter into a binding deed of settlement on her behalf.  The employee attended the conciliation alongside her representative and expressed a verbal agreement to accept the terms of settlement offered at conciliation.

The employee’s agent executed the deed of settlement and a sum was remitted to the agent on her behalf.

Subsequently the employee had a change of heart and expressed a wish to proceed to a hearing of her matter – it is possible that the employee’s reaction was a result of the diminished sum that she received after her agent’s deduction of their fees for acting on her behalf.

In forming its view, the Commission determined that a party’s actions at conciliation are governed by the usual rules of contractual interpretation. Applying the standard of Masters v Cameron (the authority case on when a contract is binding) the Court found that notwithstanding that settlement had not been finally drawn up at conciliation, by their actions it was clear that both parties had agreed to enter into a binding agreement and the employee’s subsequent dissatisfaction with the terms of that agreement were ultimately irrelevant.

This case has application in both the context of an actual unfair dismissal claim and in general termination situations – an employer should be proactive in obtaining an employee’s agreement to any settlement and a deed of settlement should be prepared and entered into as soon as possible afterwards to remove any ambiguity about its application.

4. Can you demote instead of dismiss?

Employers may prefer to demote an employee rather than terminate them in various circumstances. However, employers should be careful of demotion where it involves a ‘significant reduction in duties or remuneration’ (per section 382(6) of the Fair Work Act 2009 (Cth)) (Act) as this may inadvertently trigger unfair dismissal protections.

In a case that applied the provisions of the former Workplace Relations Act 1996 (Cth), Charlton and Eastern Airlines Pty Ltd [2007] AIRC 101 the Australian Industrial Relations Commission (now FWC) considered the demotion of a pilot due to legitimate concerns about his procedural non-compliance.

Whilst the Court found that as a matter of fact, there were very good reasons for the demotion the fact that a demotion occurred gave rise to a claim by the employee that they had effectively been terminated. Charlton is  still relevant under the current Act, and stands for the principle that, notwithstanding the valid reasons for demotion, the demotion was nevertheless a ‘termination’ for unfair dismissal purposes because it involved a significant change in the pilot’s duties and remuneration and that in that case the Court must consider the demotion as a dismissal – the exercise then becomes one considering whether the demotion breached the relevant criteria of harshness that are applied to dismissals (under the current Act ‘harsh, unjust or unreasonable’).

However, employers can insulate themselves from claims of unfair dismissal in demotion situations if it is built into the employment agreement. In Holland v Qantas Airways Limited [2011] FWA 3778 an employer defeated a claim by an employee (again a pilot) that a demotion from their current status of pilot to first officer was not a termination (by virtue of a repudiation of the existing employment agreement) because the agreement specifically contemplated that an employee could be terminated without the requirement to terminate their employment.

Additionally, where both parties accept the demotion this may be regarded as a bilateral variation of an existing agreement (or termination with consent and engagement on new terms) provided that the employer’s actions are not coercive.

5. Managing the Process – Obtaining appropriate advice

Failing to obtain the right advice and implementing the correct procedures around staff evaluations (and where necessary, sanctions) is a common mistake made by many small and medium enterprises that do not have the operational bandwidth to have a dedicated human resources officer monitor the process of evaluation and dismissal, where necessary. As has been shown in Coca Cola however, even large organisations can fall foul of unfair dismissal protections if policies and procedures at one level of an organisation do not translate through the chain of responsibility to ground-level management.

Pointon Partners has considerable experience in advising clients on all issues relating to dismissals, including unfair dismissals and redundancy. If you are considering making organisational changes in the lead in to financial year 16-17 please feel free to contact Michael Bishop or Amelita Hensman of our office to discuss your human resources needs.

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