Valid in this context is generally considered to be whether there was a sound, defensible or well-founded reason for the dismissal. Further, in considering whether a reason is valid, the requirement should be applied in the practical sphere of the relationship between an employer and an employee where each has rights, privileges, duties and obligations conferred and imposed on them. That is, the provisions must be applied in a practical, common sense way to ensure that the employer and employee are each treated fairly. Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 as cited in Potter v WorkCover Corporation, (2004) 133 IR 458 and endorsed by the Full Bench in Industrial Automation Group Pty Ltd T/A Industrial Automation  FWAFB 8868, at par . When considering whether there has been a valid reason concerning conduct, the Commission must itself determine whether the alleged conduct actually occurred based upon the evidence and materials before it. Rail Corporation New South Wales v Vrettos (2008) IR 129 and  and Edwards v Giudice (1999) 94 FCR 561.
The failure to follow a lawful instruction which was reasonable in the circumstances may provide an employer with a valid reason to terminate an employee’s employment. Cox v South Australian Meat Corporation  IRCA 287 (13 June 1995) per von Doussa J.
Conversely, it has been held that the failure to comply with an unreasonable direction does not provide a valid reason for the termination of a person’s employment. In Izdes v L.G. Bennett & Co Pty Ltd t/as Alba Industries IRCA 499 (14 September 1995). Beazley J also stated:
“In determining whether a refusal to carry out the lawful and reasonable directions of an employer constitutes a valid reason for termination, it is necessary to have regard to all the circumstances, including the nature and degree of the employee’s conduct.” Cf: Tranter v Council of the Shire of Wentworth (unreported, 24 October 1995, Marshall J. See also Schreier v Austal Ships Pty Ltd, Print N9636.
In Woolworths Limited (t/as Safeway) v Cameron Brown PR963023 (26 September 2005) a Full Bench of the AIRC, after considering the principles in Selvachandran v Peteron Plastics Pty Ltd and the approach of the AIRC in Atfield v Jupiters Limited t/a Conrad Jupiters Gold Coast, PR928970 (19 March 2003) at . considered when a failure to abide by a policy of an employer would amount to a valid reason for termination of employment and when it would not:
“In summary, a breach of an employer’s policy involving or amounting to a failure to obey a lawful and reasonable direction of the employer sufficient to justify dismissal at common law will amount to a valid reason for termination of employment within the meaning of s.170CG(3)(a) in the sense of a reason that is “sound, defensible or well-founded.” A failure to comply with a direction to do or refrain from doing something in compliance with an employer’s policy will not provide a valid reason for termination of employment where:
(a) the policy, or a direction to comply with the policy, is illegal;
(b) the policy does not relate to the subject matter of the employment or matters affecting the work of the employee; or
(b) the policy, or a direction to comply with the policy, is unreasonable.” Woolworths v Brown at .
In Kolodjashnij v Lion Nathan T/A J Boag and Son Brewing Pty Ltd,  AIRC 893 (16 October 2009). Deegan C determined that:
“Not every breach of a policy will provide a valid reason for termination of employment. However in circumstances where the policy is both lawful and reasonable and an employer has stressed the importance of the particular policy to the business and made it clear to employees that any breach is likely to result in termination of employment, then an employee who knowingly breaches that policy will have difficulty making out an argument that there is no valid reason for the termination.” 36
Mr Clayton contends, in effect, that he did not deliberately breach the policy in that he was relying upon the indicative detection window advised to him by Coles as part of his induction. He further contends that if he was not deliberately in breach of the D&A policy, there would not be a valid reason for dismissal. In that regard, he relies upon various decisions of the Commission and its predecessors concerning the approach generally adopted to misconduct, and in particular, serious misconduct, and to a number of decisions concerning drug and alcohol policy breaches.
Coles contends, in effect, that Mr Clayton deliberately or recklessly breached the D&A policy, but in any event, the applicant’s intentions were not relevant when applied to a policy of the kind in operation at the Coles EPDC.
In Harbour City Ferries Pty Ltd v Toms  FWCFB 6249. (Toms) the Full Bench was dealing with an appeal of a decision concerning the breach of a “zero-tolerance” drug and alcohol policy. The Member at first instance Toms v Harbour City Ferries Pty Ltd  FWC 2327. found that the employee’s attendance at work having consumed some marijuana was a valid reason for dismissal but that there were various mitigating factors that made the dismissal harsh. The Full Bench concluded that in that case, the mitigating factors were not sufficient to produce that finding.
The Federal Court in subsequently considering the Full Bench decision in that matter Toms v Harbour City Ferries Pty Ltd  FCAFC 35observed as follows:
“The conclusions reached by the Full Bench about the relative importance and relevance of the questions of impairment and breach of the policy may be seen in the following two paragraphs which immediately precede the outcome of the appeal:
The lack of any impairment arising from drug use, the absence of a link between drug use and the accident and the absence of substantial damage to the Marjorie Jackson are not factors relevant to the ground of misconduct identified as non-compliance with the Policy. The fact is that Harbour City required its policy complied with without discussion or variation. As an employer charged with public safety it does not want to have a discussion following an accident as to whether or not the level of drug use of one of its captains was a factor. It does not want to listen to the uninformed in the broadcasting or other communications industry talk about drug tests establishing impairment. It does not need to have a discussion with any relevant insurer, litigant or passenger’s legal representative about those issues. What it wants is obedience to the policy. Harbour City never wants to have to have the discussion.
The mitigating factors referred to and relied on by Deputy President Lawrence are not mitigating factors that address the core issue, which was the serious misconduct which led to the dismissal of Mr Toms. The core issue, the valid reason for termination of Mr Tom’s employment was his deliberate disobedience, as a senior employee, of a significant policy. The Deputy President does not address Mr Tom’s failure to comply with the Policy. The only mitigating factor relevant to this issue was the use of marijuana as pain relief. Consequent upon that explanation is the decision to accept a shift while aware of the likelihood of being in breach of the Policy.
(Emphasis in original.)
It is clear that “deliberate disobedience” of the respondent’s policy by a senior employee was viewed by the Full Bench as the central factor to be assessed and not, as Deputy President Lawrence had found, whether the drug use had a demonstrated or likely bearing on the incident. At  the Full Bench also listed each of the other matters referred to as taken into account by Deputy President Lawrence. It is apparent from  that the Full Bench determined that they did not provide a reason to intervene against the application and enforcement of the respondent’s policy.”
– Clayton v Coles Group Supply Chain Pty Ltd (2016) FWC 4724 delivered 19 August 2016 per Hampton C