What is the test of misconduct for the purposes of the dismissal of an employee? Here an extract from a famous case which is frequently cited (quoted) in Fair Work Commission cases on the subject.
The task of the Commission when determining whether alleged misconduct occurred was described by Justice Moore of the Federal Court as follows:
“ Paragraph (a) speaks of “whether there was a valid reason … related to the
… conduct of the employee”. The paragraph requires consideration of the validity of the reason when the reason is, relevantly, based on conduct of the employee. It is, in my opinion, difficult to avoid the conclusion that the Commission is obliged in such circumstances to investigate in the inquiry process contemplated by s 170CG(3) whether the conduct relied on occurred as a necessary step in the process of determining whether a valid reason existed.
The reason would be valid because the conduct occurred and justified termination. The reason might not be valid because the conduct did not occur or it did occur but did not justify termination. An employee may concede in an arbitration that the conduct took place because, for example, it involved a trivial misdemeanour. In those circumstances the employee might elect to contest the termination in the arbitration on the basis that the conduct took place but the conduct did not provide a valid reason and perhaps also by relying on the other grounds in pars (b) to (e). However an employee may not concede or admit, for the purposes of the arbitration, that the conduct occurred or may not be prepared to accept that the Commission could assume the conduct occurred. In either situation the employee would be putting in issue whether the conduct occurred. In my opinion the Commission must, in these circumstances, determine whether the conduct occurred as a step in resolving whether there was a valid reason. I do not see how the Commission can move straight to a consideration of whether termination was justified by assuming the conduct did occur. First the Commission would have failed to resolve an issue raised by and relied on by the employee, namely whether the conduct occurred at all. Secondly the Commission would have failed to make findings by reference to which a Full Bench might have to determine an appeal where the Commission had concluded the termination was harsh, unjust or unreasonable on assumed facts and not facts found.”
Edwards v Giudice and Others  FCA 1836.