Unfair dismissal and warnings

This extract from a recent appeal decision in the Fair Work Commission deals with the  manner in which, in an unfair dismissal case, the Commission should deal with prior warnings provided to the employee.

“In relation to the error of principle, the way the Commissioner dealt with the prior warnings is inconsistent with the Full Bench decision in Newton v Toll Transport Pty Ltd. In that case, the Full Bench distilled principles relating to the extent to which prior misconduct may be relevant in assessing whether a dismissal is unfair and the way that consideration of prior misconduct may arise during the course of a hearing into an unfair dismissal application. The Appellant in that case contended that:

“…it is not appropriate for the Commission to itself formulate or identify valid reasons for dismissal not expressly relied on and advanced by the employer during the course of a hearing. Whilst an employer can, un-controversially, rely on ‘after acquired’ knowledge of misconduct to establish a valid reason, it cannot rely on conduct which was known to it and not relied on in effecting a dismissal as the employer will have waived the capacity to rely on such conduct.”

[75] The Full Bench in Newton v Toll Transport Pty Ltd described this submission as the Appellant conceding that an employer can rely on what is actually ‘after acquired’ knowledge of conduct that did not come to light by the time of dismissal, but also submitting that this must be done by the employer, specifically and directly at the hearing, given that it is the employer who bears the onus of establishing a valid reason for dismissal. Rejecting that proposition, the Full Bench in Newton v Toll Transport Pty Ltd said (citations omitted):

“[65] The Commission is bound to determine whether, on the evidence provided, facts existed at the time of termination that justified the dismissal. Contrary to the Appellant’s submission, in determining whether there was a valid reason for the dismissal the Commission is not confined to the reason advanced by the employer (either at the time of dismissal or during the course of the subsequent hearing). A valid reason for dismissal can be any valid reason underpinned by the evidence provided to the Commission.”

[76] Authorities in support of the propositions cited in this paragraph by the Full Bench include the decision of the High Court in Byrne v Australian Airlines Ltd. 36 That case, while decided under a different statutory regime, concerned an award provision to the effect that termination of employment shall not be harsh, unjust or unreasonable. The judgments variously referred to the distinction between substance and procedure, when considering the fairness of a dismissal. Brennan CJ and Dawson and Toohey JJ, held that both the procedure used to dismiss an employee for misconduct and the question of whether the employee engaged in the misconduct, must be considered in deciding whether the dismissal was harsh, unjust or unreasonable.37 Their Honours also held that ‘…facts which existed at the time of a dismissal, but which come to light only subsequently, might justify the dismissal when otherwise it would be harsh, unjust or unreasonable.’38 Similarly, after observing that the distinction between procedure and substance may be elusive,39 McHugh and Gummow JJ held that while the adoption of an unfair procedure may render a dismissal harsh, unjust or unreasonable, whether it does so or not must depend upon the whole of the circumstances.40 Their Honours went on to hold that:

“Procedures adopted in carrying out the termination might properly be taken into account in determining whether the termination thus produced was harsh, unjust or unreasonable. The submissions for the respondent in the present appeals appeared to concede this. But the burden of the respondent’s submissions is that there was error in determining the issue without regard to the very material circumstance of the finding of the primary judge as to the complicity of the appellants in pilfering. Those submissions should be accepted. This means that the primary judge was bound to consider whether, on the evidence given at the trial, the respondent could resist the allegation of breach of cI II (a), provided that the evidence concerned circumstances in existence when the decision to terminate employment was made. A further consequence is that it remains for the Full Court to determine whether Hill J erred in his findings of fact as to complicity in pilfering. If those findings were upheld it would be very difficult to see how the dismissal of the appellants could be regarded as harsh, unjust or unreasonable.” 41

[77] The Full Bench in Newton v Toll Transport Pty Ltd went on to state:

“[66] We accept that if the Commission determines that there is a valid reason for dismissal which is not expressly advanced by the employer then it must act judicially and accord the parties procedural fairness – an issue to which we will return shortly; but we reject the Appellant’s waiver submission; namely the proposition that in the context of establishing a valid reason for dismissal an employer cannot rely on conduct of which the employer was aware but waived/condoned by not relying on such conduct to dismiss the employee.”

[78] Three points may be made about the implications of the Commissioner excluding the prior warnings from her consideration. Firstly, the warnings were part of the factual matrix that existed at the time the Appellant decided to dismiss the Respondent. The Appellant was entitled to rely on the prior warnings at the hearing before the Commissioner to support its contention that there was a valid reason to dismiss the Respondent. The Appellant was also entitled to rely on the warnings as a matter relevant to the overall exercise of weighing the matters in s.387, which the Commissioner was required to undertake. This was so, regardless of whether the Appellant referred to the prior warnings in the Show Cause letter or the termination letter or otherwise relied on them as reasons for dismissal of the Respondent at the relevant time.

[79] The Commissioner’s decision to exclude consideration of the prior warnings from her assessment of the s.387 matters, resulted in an important aspect of the factual matrix, being disregarded. That approach was inconsistent with established authority, set out in Newton v Toll Transport Pty Ltd and earlier cases, notably the High Court decision in Byrne v Australian Airlines Ltd. We agree with the Appellant’s submission that by putting aside the Appellant’s prior conduct history, the Commissioner failed to have regard to an important fact, that was plainly relevant to weighing the criteria in s.387 of the Act. This was both a failure to take a material consideration into account and an error of principle.
[80] Secondly, the basis upon which the Commissioner decided to exclude the prior warnings involved an error of fact. Contrary to the Commissioner’s finding, direct evidence in relation to the prior warnings was led in the hearing at first instance. We accept the Appellant’s submission that the Respondent knew that the prior warnings were relevant to the decision to dismiss her and that she was on notice that the prior warnings would be relied on at the hearing. The Respondent pre-emptively referred to the warnings and the events that preceded them in her Form F2 Application for an unfair dismissal remedy and her witness statement in support of her application. The Appellant referred to the prior warnings in its Form F3 Response to the application. Details of the warnings, the events that preceded them and the investigations undertaken by the Appellant, were also set out in the witness statements filed by the Appellant in the proceedings at first instance. The decision maker gave evidence that she relied on the warnings in the process of deciding to dismiss the Respondent. That evidence was not contested. Further, the Respondent was cross-examined about the prior warnings and provided her views in relation to them.

[81] Given the impact on the Commissioner’s decision of excluding consideration of the prior warnings, this was a significant error of fact which was directly relevant to the outcome at first instance. The Commissioner was bound to have regard to that evidence in considering whether there were facts that existed at the time of the dismissal, which justified the dismissal. This would have been the case even if the prior warnings were not expressly advanced as a reason for the dismissal by the Appellant at the first instance hearing.

[82] Thirdly, as noted by the Full Bench in Newton v Toll Transport Pty Ltd, before deciding on the relevance of the prior warnings to the question of whether there was a valid reason for the Respondent’s dismissal, the Commissioner was required to accord the parties procedural fairness. There is no indication in the transcript of proceedings that the Appellant had been put on notice that the Commissioner would take the approach of excluding evidence about the about the prior warnings, which was advanced by the Appellant at the first instance hearing, either in relation to the validity of the reason for dismissal or the other matters in s.387 of the FW Act.

[83] In the present case, the prior warnings were relevant to the question of whether there was a valid reason for dismissal because they evidenced previous conduct on the part of the Respondent involving breaches of the Appellant’s policies and procedures. The evidence does not support the Respondent’s assertions that the prior warnings were invalid or that the conduct which was the subject of the prior warnings was not substantiated. To the contrary, the prior warnings were issued to the Respondent on the basis that the conduct was substantiated and, other than that the Respondent disputed the warnings in her submissions at the hearing before the Commissioner, there is no basis to find otherwise. By considering for the purposes of s.387(b) that the Respondent had not referred to the prior warnings in the show cause letter, and excluding the prior warnings on this ground, the Commissioner erred by failing to have regard to a relevant matter. The Commissioner’s view about the prior warnings also affected her consideration of the matter in s.387(c).

[84] We conclude that the exclusion by the Commissioner of the prior warnings from her consideration of the matters in s.387 resulted in a failure to properly balance those matters. Finally, we note that although it was not advanced as an appeal ground, we are also of the view that paragraph [186] of the decision makes clear that the Commissioner considered that the Respondent was not aware that the warnings would be relied on in “this proceeding” was procedurally unfair. For the sake of completeness we note that the matters in ss.387 (a) – (h) are directed at facts and circumstances as they existed at the time of a dismissal, with the possible exception that s.387(h) allows a broader range of considerations. However, the question of fairness in a hearing in relation to an unfair dismissal application can have no relevance to the considerations in those sections. By taking into account procedural fairness related to the conduct of the hearing into the Respondent’s unfair dismissal the Commissioner was guided by an irrelevant matter, resulting in failure to take into account a material consideration – the prior warnings.

[85] For the reasons set out above, the Commissioner was bound to consider the prior warnings based on the evidence before her. If the Commissioner was of the view that the manner in which the prior warnings arose during the proceedings could result in procedural unfairness to either party, adjustments to the hearing schedule and process could, and should have been made to address this. For these reasons, appeal Ground 1 is upheld.”

Virgin Australia Airlines Pty Ltd v Blackburn (2022) FWCFB 232 delivered 12 December 2022 per Catanzariti VP, Dobson DP and Simpson C