Unfair dismissal and the infuriating conduct and capacity tests

Employees may have their employment terminated on the ground of their conduct or their capacity, and the case law which has developed under the Fair Work Act as to the legal principles which apply to the distinction. For example where an employee is dismissed because of his or her conduct, the case law requires that the Fair Work Commission in an unfair dismissal case must “make a finding as to whether the conduct in question occurred”; see Edwards v Giudice (1999) 169 ALR 89, 92.

There is a distinction between an employee’s conduct or capacity. Although ordinary people may struggle to understand why the distinction matters, it is because sec 387 of the Act provides amongst other things that “In considering whether it is satisfied that a dismissal was harsh unjust or unreasonable the Commission must take into account “(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct including its effect on the safety and welfare of other employees”.

Accordingly, the approach taken in an unfair dismissal case by the Commission when determining whether there was a valid reason for the dismissal will be different depending upon whether the employer relies upon grounds which are said to go to conduct or to capacity or (heaven forbid) to both. For example performance issues are generally regarded as falling within the capacity of the employee rather than conduct.

In the case of conduct, the issue for the Commission is not whether the employer reasonably believed that the conduct occurred, but whether the Commission believes that the conduct occurred.

These very fine lines are on display in the following extract from a recent unfair dismissal case.

“Valid reason for the dismissal related to capacity or conduct (including its effect on the safety and welfare of other employees).

While the Commission is obliged to take into account whether there was a valid reason for dismissal, relating to the employee’s capacity or conduct,49 this provision should not be construed as requiring there to be a valid reason. Although, whether there is or not will have bearing on the decision reached.

To explain further, ‘valid’ in this context is generally considered to be whether there was a sound, defensible or well-founded reason for the dismissal.50 The provisions must be applied in a practical, common-sense way to ensure that the employer and employee are treated fairly.51

In the context of termination of employment related to the conduct of an employee, it is well established that the Commission must make a finding as to whether the conduct in question occurred. So much is clear from the decision of the Full Court of the Federal Court in Edwards v Giudice,52 and numerous subsequent decisions of the Full Bench of the Commission.53 The question is whether the conduct took place, and the Commission determines the answer based on the evidence in the proceedings before it. The test is not whether the employer reasonably believed that the conduct occurred.

There may sometimes be a blurring of the line between what constitutes conduct and what constitutes capacity. It is accepted that performance is more likely to relate to capacity than to conduct. 54 Capacity, refers to the level at which the employee renders performance, including factors such as diligence, quality, the care taken and so on.55 However, the overlap between the concept of unsatisfactory performance and the concept of misconduct can be seen, for example, in relation to the neglect of duty or poor timekeeping.56

AMS purports that the reason for Mr Jenkins’ dismissal was unsatisfactory performance. However, I consider that it was twofold. The first reason was premised on Mr Jenkins’ unsatisfactory performance. The second, his failing to be contactable for the client for two working days. In my view, the second reason touches not on Mr Jenkins’ ability to perform the role of production engineer; it sits squarely within the remit of his conduct over the course of those two working days.

It is the second reason that is examined first. It was accepted that essentially Mr Jenkins’ placement at CSA was to fill a role. He was not a consultant in the sense of the word that he was engaged for his wealth of expertise, experience and acumen, and could determine his working hours and days. Mr Jenkins was required to be ready, willing and able to work on his rostered hours. Further, while it was the case that he was working from home, this did not negate his responsibility to explain, to both client and employer, when he was not contactable or absent. Hence, when he became uncontactable for two days whilst working for CSA and failed to notify his employer (line manager) of such ‘absence’, his conduct became misconduct.

Mr Jenkins gave evidence concerning the lack of support from his employer regarding the provision of IT infrastructure. AMS disputed that there was a lack of support, emphasising that they outlined to Mr Jenkins what he would need (such as a router). They were informed by Mr Jenkins that he wanted a specific router and would purchase it himself. Evidence was given that AMS would have provided any IT equipment required.

Nevertheless, by 1 April 2020, things were in place such that Mr Jenkins could work effectively from home. However, Mr Jenkins explained that on 9 April 2020, he experienced IT difficulties such that it prevented him from accessing the workplace remotely. There is no persuasive evidence to show that he contacted his employer to notify of his lack of accessibility or sought IT support at this time. Mr Parker gave evidence, which was not disputed, that Mr Wells had on 20 April 2020 expressed concern not only about Mr Jenkins’ performance but that he was not contactable for two days in the previous week. 57 From all accounts, this appears to have been the first indication that AMS knew of Mr Jenkins’ lack of accessibility to the workplace. That information came from the client of AMS, not AMS’ employee, Mr Jenkins.

There was much made of the IT deficiencies faced by Mr Jenkins and the difficulties associated with working remotely. Still, those deficiencies and difficulties do not, in turn, abrogate his duty to inform his employer when he is unable to access the workplace remotely. There was no compelling evidence before me to show that Mr Jenkins had notified his employer or had sought assistance from his employer to rectify the issue. The failure to be ‘accessible’ for work absent a contemporaneous and plausible explanation to the employer, is of sufficient gravity to constitute a valid reason. In this respect, I refer to clause 9 of Mr Jenkins’ ‘Standard Terms of Employment’, and his breach of the same.

Predominately, AMS relied upon Mr Jenkins’ capacity to perform the role, or lack thereof, to justify his dismissal. While Mr Jenkins called witnesses, who gave favourable testimony concerning Mr Jenkins’ ability, I note that both had limited exposure working with Mr Jenkins. While counsel for Mr Jenkins identified that AMS had not called the relevant representatives of its clients to give evidence, it was evident that AMS had made enquiries with its clients to ascertain, generally, the issues concerning Mr Jenkins’ performance.

While on its face it seems plausible that Mr Jenkins lacked the capability to perform the role of a production engineer, so much is evinced from the email purported to be from Ms Young and Mr Parker’s conversation with Mr Wells – the evidence is not sufficiently compelling for a finding to be made that more likely than not Mr Jenkins’ performance was unsatisfactory, such that it constitutes a valid reason, or forms part of a valid reason, for Mr Jenkins’ dismissal.

Ms Young’s account appeared to have been garnered from unnamed ‘Senior’s’ who had been informed from unnamed ‘cross shifts’ that they would spend an excessive amount of time amending Mr Jenkins’ work. 58 The accounts provided are third hand, in that the Seniors have relied upon that which has been communicated by ‘cross shifts’, and thereafter Ms Young has relied upon the account of the Seniors. AMS relied upon Ms Young’s account.

[46] Further, Mr Parker gives evidence of what was communicated to him by email from Mr Wells. The email from Mr Wells goes no further than stating ‘[H] will be transitioning to stope reconciliations as it is proving more difficult than we anticipated to get drill and charge plans agreed remotely. 59 We have secured recruitment which will join us within the next month’.60 Mr Parker stated that Mr Owen ‘expressed concerns with Phil’s performance’.

While it was evident that neither GSM nor CSA required Mr Jenkins going forward, and that AMS had received information from its clients regarding concerns about Mr Jenkins’ performance, there remained a lack of direct evidence to support a finding being made, and the evidence about performance concerns was at best ‘second hand’.

AMS placed reliance on the evidence of Mr Parker and Mr LeRoy, which was absent the setting of key performance indicators, measuring achievement against the same, and having in place a tangible plan that identified the areas of concern and what was to be actioned by Mr Jenkins. Aside from the accounts of Mr Parker and Mr LeRoy, which were premised on the feedback from client representatives, there was little else to go on.

Mr LeRoy provided a copy and paste in his statement of his notes of a conversation held on 31 January 2020. However, save Mr LeRoy’s evidence to the contrary, there is little before me to verify that the notes were contemporaneously prepared – and not, for example, prepared sometime after the event in preparation for these proceedings. However, I am appreciative that Mr Jenkins’ evidence does disclose in some respect, the account detailed at paragraph 8 of Mr LeRoy’s witness statement. Mr Jenkins gave evidence, for example, which affirmed he had been informed that he made it harder by modifying plans and that there were reasons that sites had in place their own processes.

When Mr Jenkins was asked whether he was informed that if AMS could not meet client needs, this would mean perhaps he couldn’t be placed with clients and that there wouldn’t be any work for him, Mr Jenkins replied to the effect that he believed the issues were rectified, so he did not believe his job was at risk. The belief appears most plausible given the lack of regular performance management meetings.

Whilst Mr Parker spoke of the support provided when Mr Jenkins commenced with CSA, and the email sent on 14 February 2020 confirming areas where performance improvement was required, I do not consider these actions can be accurately depicted as ‘performance management’. By this, I mean where the term ‘performance management’ connotes a process whereby performance improvement is evaluated regularly and assessed against clear indicators with a view to ending employment if the performance does not meet the requisite standard.

The approach adopted by AMS was supportive and tempered, but it did not plainly set out for Mr Jenkins that his performance was unsatisfactory, what precisely he needed to do to address it (and the time frame for doing so) and that a failure to improve would result in the loss of his employment. The evidence provided by AMS was that Mr Jenkins believed other people were in the wrong, he was difficult to coach and take on board guidance, he thought he was right and wants to challenge everything. Yet, when asked whether Mr Parker expressed to Mr Jenkins his issues as a performance failing – Mr Parker said ‘no’.

The Commission’s function is not to stand in the shoes of the employer and determine whether or not the decision made by the employer was a decision that would be made by the Commission. It is for the Commission to assess whether the employer had a valid reason connected with the employee’s capacity or conduct.61

Insofar as Mr Jenkins’ conduct is concerned, the two days where he was not accessible for work and failed to notify his employer constitutes misconduct and, it follows, is a valid reason for dismissal. In respect of AMS having a valid reason to dismiss Mr Jenkins, in part, or otherwise wholly reliant on his performance, I do not consider this to be the case. The evidence did not lend itself to a finding of unsatisfactory performance, such that it constituted a valid reason for dismissal or formed part of a valid reason.

In Parmalat Food Products Pty Ltd v Wililo62 the Full Bench held that the existence of a valid reason is a very important consideration in any unfair dismissal case, the absence of which will almost invariably render the termination unfair. However, I am satisfied that AMS had a valid reason for Mr Jenkins’ dismissal.”

Saunders v Western Diesel and Turbo Service  [2020] FWC 6335 delivered 18 December 2020 per Beaumont DP