Termination of employment letters
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A termination of employment letter serves a significant purpose in bringing the employment relationship to an end.Read more...
When considering whether a dismissal is unfair, the Fair Work Commission (the FWC) will have regard to two types of fairness – procedural fairness and substantive fairness.
Procedural fairness is about natural justice and the procedure followed by an employer when terminating an employee’s employment. We discussed procedural fairness in our earlier article, Employment Law Essentials – What is “Procedural Fairness”?
The second limb, substantive fairness, is focussed on the objective fairness of the penalty applied in disciplinary action.
Substantive Fairness and the Fair Work Act
Under the Fair Work Act 2009 (Cth) (FW Act), a dismissal will be unfair if it is “harsh, unjust or unreasonable”. In deciding whether this is the case, the FWC must take into account a range of factors including whether there was a valid reason for the dismissal.
This evaluation of a valid reason for dismissal is where substantive fairness enters the unfair dismissal equation.
What is a valid reason?
A valid reason is a reason that justifies terminating an employee’s employment.
The case law says that valid reason should be “sound, defensible and well founded” and should not be “capricious, fanciful, spiteful or prejudiced” (Selvachandran v Peterson Plastics Pty Ltd (1995) 62 IR 371). Furthermore, a valid reason “must be defensible or justifiable on an objective analysis of the relevant facts” (Rode v Burwood Mitubishi Dec 451/99 M Print R4471 AIRC).
In essence, a valid reason can’t be manufactured by an employer, it must be based on objectively ascertainable facts and should be proportionate to the conduct or capacity issue in question.
Case study – Hanson v Precepts Services Pty Ltd  FWC 1488 (Precepts Services Decision)
In a recent decision of the FWC, an employee was awarded more than $27,000 in compensation when his employment was terminated for reasons that were over inflated by his employer. The employee was accused of swearing at and intimidating a co-worker to such a degree that he was summarily dismissed.
Evidence before the FWC established that the employer condoned the use of “robust language” in the workplace and the managing director in particular was guilty of using such language and having frustrated outbursts. The employer had not taken action against other employees for their colourful language in the past and consequently, the employee had been judged by a different standard to others.
The FWC held that there was not a valid reason for the dismissal because the employer’s reasons were not justifiable. It had overstated the gravity of the conduct, especially with regards to the workplace culture, and therefore the conduct was not objectively serious enough to warrant summary dismissal.
This case demonstrates that consistency in decision making and a regularly monitored culture in a workplace can impact on the existence of a valid reason.
As mentioned above, affording an employee substantive fairness involves a degree of objective analysis. The reasons for dismissing an employee must be able to be substantiated on objective facts. This can sometimes be a challenge when there is a high degree of tension, emotion and pressure when dismissal is being contemplated.
Before making any final decisions about disciplinary action, employers should take a step back and think critically about the reasons they considering taking that action. Did the conduct alleged actually happen? Was the employee’s behaviour serious enough to warrant dismissal? Does the employee actually lack the capacity to perform their role?
Case study – Dawson v Qantas Airways Limited  FWCFB1712 (Qantas Decision)
In this case, the employment of a long serving flight attendant was terminated because he stole miniature bottles of gin from his employer’s stock and lied about how the alcohol came into his possession.
In determining whether there was a valid reason for the employee’s dismissal the Full Bench of the FWC commented that it was required to consider the entire factual matrix,
“The Commission must determine on the evidence before it whether the Applicant did in fact remove the alcohol from the aircraft and whether he subsequently misled and deceived the Respondent as to how and why the alcohol came into his possession. Only if this can be shown on the evidence can the termination be considered valid.”
Ultimately, the Full Bench found that the evidence established that the employee had stolen the alcohol then lied about it and there was, therefore, a valid reason for the termination of his employment that was objectively justifiable.
Applying objectivity is about understanding the reasons for dismissing an employee without emotions or strong opinions getting in the way. In the Qantas Decision, the reasons were the employee’s theft and dishonesty, which were able to be substantiated by evidence gathered by the employer. The reasons were not capricious, fanciful, spiteful or prejudiced because they were not conflated or manufactured in anyway.
Contrast this to the Precept Services Decision where the reasons for dismissing the employee were overstated and not objectively justifiable, resulting in a finding that the punishment did not fit the crime.
Case study – Lion Dairy and Drinks Milk Limited v Norman  FWCFB 4218 (Lion Dairy Decision)
In this case, the employee’s employment was terminated because he could no longer perform the inherent requirements of his role.
The employee was involved in a skydiving accident and sustained some serious injuries. When the employee was ready to return to work, he saw two doctors who gave differing opinions about his fitness to return to his role. The employer preferred the view of the doctor whose opinion was that the employee would not be able to perform all the duties that he had before his injuries. On that basis, his employment was terminated and he later made an unfair dismissal application to the FWC.
The FWC Full Bench held that there was a valid reason for employee’s dismissal in that the he could not perform the requirements of his role. The Full Bench said that employers are entitled to rely on expert medical evidence available to them and that, in this case, the employer was within its rights to prefer the medical evidence of one doctor over another.
The Full Bench commented that a reason based on medical evidence will usually be one that is sound, defensible and well-founded, and thus a valid reason for the purposes of the FW Act.
This case demonstrates that the nature of the material relied upon by an employer can be a significant factor in assessing whether a valid reason exists and whether an employee has been afforded substantive fairness.
Substantive fairness should be applied by employers when making any decision about a disciplinary penalty. Those making the decision, including whether to terminate employment, should consider whether there are objectively ascertainable facts to justify the penalty and whether the “punishment fits the crime”.