The COVID-19 pandemic normalised working remotely and as a result, employers may be finding it difficult to roll-back working from home policies and giving lawful and reasonable directions that require employees to return to the office.
In the recent decision of Johnson v PaperCut Software Pty Ltd [2026] FWC 178, the Fair Work Commission (FWC) found that PaperCut Software Pty Ltd’s (the Employer’s) direction in relation to their hybrid work policy was lawful and reasonable, and so the employee’s failure to comply with the direction amounted to a valid reason for dismissal.
The employee commenced employment with the Employer in April 2022, at a time when the Government strongly advised that employees work from home in light of the COVID-19 pandemic. As such, the employment contract stated that he was “permitted” to work from home “in line with relevant policy” and that he may be required to work at other locations from time to time.
The employment contract also stated that the employee had a duty to comply with the Employer’s lawful and reasonable directions and all policies, rules and regulations, and that failure to comply may result in disciplinary action, including dismissal.
In August 2022, the Employer sought to vary the employment contract to specify that his place of employment included the Employer’s office in addition to his home, which the employee did not agree to on the basis that it was his understanding that he was allowed to work fully remotely.
In 2024 with the aim of returning to working in office, the Employer consulted with staff – including the employee – and implemented a hybrid work policy which required employees to transition to three days per week in-office attendance by January 2025.
The Employer informed the employee of this change in a meeting in December 2025 and also advised the employee that he did not have to agree with the change, but he would have to comply with it.
The employee refused to comply with the hybrid work policy arguing that the hybrid work policy was in breach of the terms of his employment contract which permitted him to work from home.
The Employer continued to meet with the employee and issued the employee multiple written directions and warnings between January to May 2025 which set out its expectations that he comply with the hybrid work policy.
Finally, in May 2025 the Employer issued the employee a final warning letter advising him that if he did not meet the three-days in office requirement over the next three weeks he would face disciplinary action, including termination of his employment. The employee attended the office on one occasion during those three weeks.
In June 2025, the employee attended a meeting where he was advised that if he did not comply with the Employer’s lawful and reasonable direction to attend the office three days per week, he may be dismissed.
The employee did not follow this direction and so in a second meeting in June 2025 the Employer terminated his employment for failing to comply with the lawful and reasonable direction.
The employee made an unfair dismissal application arguing that the Employer did not have a valid reason to dismiss him and that the direction to comply with the hybrid work policy was unlawful and unreasonable because it breached the employment contract terms.
In deciding the matter, the FWC stated that the issue of whether the employee failed to follow the direction was not in dispute, but rather that the issue of the matter was solely whether the direction was lawful and reasonable.
The FWC first accepted that the Employer’s direction was lawful on the basis that the Employer’s direction did not breach the terms of the employment contract, but rather the employment contract supported the lawfulness of the direction.
When interpreting the contract, the FWC found:
Secondly, the FWC found that the Employer’s direction was reasonable having regard to the steps taken by the Employer to develop the hybrid working policy in consultation with its employees and implementing the policy over an extended period of time. The FWC also took into consideration that the Employer had provided the employee with numerous opportunities to comply with the hybrid work policy.
Although the FWC accepted that the employee genuinely believed he had the right to work from home, the FWC concluded that there was no reasonable basis for him to hold this belief in consideration of the employment contract terms.
Therefore, finding that the Employer’s direction was lawful and reasonable, and so the employee’s failure to comply with the direction formed a valid reason to dismiss him, the FWC ultimately dismissed the employee’s unfair dismissal application.
In this case, the Employer’s successful defence was centred on having well drafted employment contracts and a properly created and implemented hybrid working policy. The Employer was also clear in its reasonable expectations in terms of in-office days and gave the Employee ample chances to comply with the policy and his employment obligations before terminating his employment.
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