Reinstatement for unfair dismissal; when and why

Reinstatement is supposed to be the primary remedy for unfair dismissal under the Fair Work Act, but it is more honoured in the breach than the observance. Here is an extract from a recent decision of a senior and very highly respected and regarded member of the Commission which in my respectful opinion affirms how the issue should be approached.

“One of the objects of Part 3-2 of Ch 3, dealing with unfair dismissal, states:

‘(c) to provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement.’ (my emphasis)

From a plain reading of s 381(c) – Object of this Part – it is clear the legislature intended to give primacy to reinstatement in circumstances where an employee has been unfairly dismissed and the Commission is required to exercise a discretion as to any orders in respect to remedy.

[123] In this respect, I refer to what was said by the Full Bench of the Commission in Colson v Barwon Health [2014] FWCFB 1949, where at [29], it was said:

‘[29] The passages from which the sentences relied on by the Appellant are extracted clearly indicate that the Deputy President understood and applied the statutory requirements in respect of reinstatement, as does the broader context of his decision. The Deputy President noted the primacy of reinstatement as a remedy for an unfair dismissal. His observations about primacy did no more than state that consideration of reinstatement against the test of whether it is inappropriate was required (and a finding that it is inappropriate is required) before compensation in lieu could be ordered and does not provide licence to search for a reason to order an employee’s reinstatement when that is not appropriate. The requirement to find that reinstatement is inappropriate before considering compensation in s.390 of the Act gives effect to the emphasis on reinstatement in s.390(1)(c) of the Act’. (footnote omitted)

[124] In Nguyen and Le v Vietnamese Community in Australia [2014] FWCFB 7198, the Full Bench of the Commission discussed the meaning of ‘inappropriate’ in the context of s 390 and helpfully summarised the relevant case law as to a loss of trust and confidence telling against an unfairly dismissed employee’s reinstatement. At [20]-[21], the Full Bench said:

‘[20] The most common argument advanced in support of the proposition that reinstatement is inappropriate is the proposition, variously expressed, that there has been a loss of trust and confidence such that it would not be feasible to re-establish the employment relationship.

[21] In Perkins v Grace Worldwide (Aust) Pty Ltd the Full Court of the Industrial Relations Court considered the effect of a loss of trust and confidence on the question of the “practicability” of a reinstatement remedy and said:

“Trust and confidence is a necessary ingredient in any employment relationship… So we accept that the question whether there has been a loss of trust and confidence is a relevant consideration in determining whether reinstatement is impracticable, provided that such loss of trust and confidence is soundly and rationally based.

At the same time, it must be recognised that, where an employer, or a senior officer of an employer, accuses an employee of wrongdoing justifying the summary termination of the employee’s employment, the accuser will often be reluctant to shift from the view that such wrongdoing has occurred, irrespective of the Court’s finding on that question in the resolution of an application under Division 3 of Part VIA of the Act.

If the Court were to adopt a general attitude that such a reluctance destroyed the relationship of trust and confidence between employer and employee, and so made reinstatement impracticable, an employee who was terminated after an accusation of wrongdoing but later succeeded in an application under the Division would be denied access to the primary remedy provided by the legislation. Compensation, which is subject to a statutory limit, would be the only available remedy. Consequently, it is important that the Court carefully scrutinise any claim by an employer that reinstatement is impracticable because of a loss of confidence in the employee.

Each case must be decided on its own merits. There may be cases where any ripple on the surface of the employment relationship will destroy its viability. For example the life of the employer, or some other person or persons, might depend on the reliability of the terminated employee, and the employer has a reasonable doubt about that reliability. There may be a case where there is a question about the discretion of an employee who is required to handle highly confidential information. But those are relatively uncommon situations. In most cases, the employment relationship is capable of withstanding some friction and doubts. Trust and confidence are concepts of degree. It is rare for any human being to have total trust in another. What is important in the employment relationship is that there be sufficient trust to make the relationship viable and productive. Whether that standard is reached in any particular case must depend upon the circumstances of the particular case. And in assessing that question, it is appropriate to consider the rationality of any attitude taken by a party.

It may be difficult or embarrassing for an employer to be required to re-employ a person the employer believed to have been guilty of wrongdoing. The requirement may cause inconvenience to the employer. But if there is such a requirement, it will be because the employee’s employment was earlier terminated without a valid reason or without extending procedural fairness to the employee. The problems will be of the employer’s own making. If the employer is of even average fair-mindedness, they are likely to prove short-lived. Problems such as this do not necessarily indicate such a loss of confidence as to make the restoration of the employment relationship impracticable.”’

[125] The Full Bench continued at [27]:

‘[27] The following propositions concerning the impact of a loss of trust and confidence on the question of whether reinstatement is appropriate may be distilled from the decided cases:

  • Whether there has been a loss of trust and confidence is a relevant consideration in determining whether reinstatement is appropriate but while it will often be an important consideration it is not the sole criterion or even a necessary one in determining whether or not to order reinstatement.
  • Each case must be decided on its own facts, including the nature of the employment concerned. There may be a limited number of circumstances in which any ripple on the surface of the employment relationship will destroy its viability but in most cases the employment relationship is capable of withstanding some friction and doubts.
  • An allegation that there has been a loss of trust and confidence must be soundly and rationally based and it is important to carefully scrutinise a claim that reinstatement is inappropriate because of a loss of confidence in the employee. The onus of establishing a loss of trust and confidence rests on the party making the assertion.
  • The reluctance of an employer to shift from a view, despite a tribunal’s assessment that the employee was not guilty of serious wrongdoing or misconduct, does not provide a sound basis to conclude that the relationship of trust and confidence is irreparably damaged or destroyed.
  • The fact that it may be difficult or embarrassing for an employer to be required to re-employ an employee whom the employer believed to have been guilty of serious wrongdoing or misconduct are not necessarily indicative of a loss of trust and confidence so as to make restoring the employment relationship inappropriate.

[28] Ultimately, the question is whether there can be a sufficient level of trust and confidence restored to make the relationship viable and productive. In making this assessment, it is appropriate to consider the rationality of any attitude taken by a party’ (footnotes omitted)

[126] In Regional Express Holdings Limited t/a REX Airlines v Richards [2010] FWAFB 8753 (‘Regional Express’), the Full Bench made the following observations regarding loss of trust and confidence at [26]:

‘[26] Whenever an employer dismisses an employee for misconduct, assuming the employer is acting honestly, there is an implied loss of trust and confidence in the employee. If it is subsequently found that the termination was harsh, unjust or unreasonable it is appropriate to consider whether the relationship can be restored if the employee is reinstated. That question cannot be answered solely by reference to the views of management witnesses. All of the circumstances should be taken into account.’ (my emphasis)

[127] There was little evidence, or even persuasive opinion, from the University’s witnesses that the employment relationship between Dr Zhao and the University is irretrievably broken, or so untenable as to serve as an impediment to her reinstatement. Indeed, I would go further and state that I consider Dr Zhao will continue to make a significant and positive contribution to the UTS Business School, particularly in its teaching focus. There was no evidence that Dr Zhao’s reinstatement would damage, or adversely impact on the University’s reputation, or on its Australian and international rankings.

[128] There is no evidence that Dr Zhao was an uncooperative or belligerent employee. Nor was there any evidence that she was anything but a dedicated, hard-working team player who had good and positive relationships with her supervisors and colleagues. It is appropriate that she be reinstated, and I intend to do so.

[129] Section 391(2) of the Act provides that, if the Commission makes an order for reinstatement and considers it appropriate to do so, the Commission may also make any order that it considers appropriate to maintain:

‘(a) the continuity of the person’s employment; [and]

(b) the period of the person’s continuous service with the employer…’

[130] In all the circumstances, I consider it appropriate to make an order to maintain Ms Zhao’s continuity of employment and the period of her continuous service with the UTS; see: Kenley v JB Hi Fi Print S7235.

[131] Section 391(3) of the Act provides that if the Commission makes an order for reinstatement and considers it appropriate to do so, the Commission may also make any order to cause the employer to pay to the applicant an amount for the remuneration lost, or likely to have been lost by the applicant because of the dismissal.

[132] Section 391(4) of the Act provides that, in determining an amount for the purposes of such an order, the Commission must take into account:

‘(a) the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for reinstatement; and

(b) the amount of any remuneration reasonably likely to be so earned by the person during the period between the making of the order for reinstatement and the actual reinstatement.’

[133] An order to restore lost pay does not necessarily follow an order for reinstatement. The Commission ‘may make any order that it considers appropriate’ (my emphasis); thus, it is a discretionary exercise to be undertaken by the Commission. However, where an employee has engaged in misconduct, the Commission may refuse to make any order to restore lost pay or make an order for part payment of lost remuneration.

[134] In all the circumstances of this matter, I consider an order for the payment of lost remuneration is appropriate in this case. Of course, although under present advisement Dr Zhao has been without income since 21 August 2019, should she have earnt any income since and up to her reinstatement, this amount should be deducted from the lost remuneration amount.

[135] Finally, s 381 of the Act is a significant and overarching object of Part 3-2. It is expressed in these terms:

‘381 Object of this Part

(1) The object of this Part is:

(a) to establish a framework for dealing with unfair dismissal that balances:

(i) the needs of business (including small business); and

(ii) the needs of employees; and

(b) to establish procedures for dealing with unfair dismissal that:

(i) are quick, flexible and informal; and

(ii) address the needs of employers and employees; and

(c) to provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement.

(2) The procedures and remedies referred to in paragraphs (1)(b) and (c), and the manner of deciding on and working out such remedies, are intended to ensure that a “fair go all round” is accorded to both the employer and employee concerned.

Note: The expression “fair go all round” was used by Sheldon J in in re Loty and Holloway v Australian Workers’ Union [1971] AR (NSW) 95.’

[136] I am satisfied that the outcome and orders I make in this matter ensure a ‘fair go all round’ is accorded to both Dr Zhao and the University.”

Zhao v University of Technology Sydney (2020) FWC 416 delivered 11 March 2020 per Sams DP