Unfair dismissal, reinstatement and trust and confidence

In a fascinating appeal before a Full Bench of the Fair Work Commission, it has allowed an appeal by an employer against a decision by a Commissioner to order the reinstatement and payment of lost earnings of several employees found to have been unfairly dismissed on the basis that the Full Bench had found an error in his reasoning but not his conclusion and has re-imposed reinstatement orders and ordered compensation by way of back pay together with an order for continuity of service.

The case concerns the dismissal of six shift managers who had refused to carry out stevedoring work during a period of protected industrial action being taken against the employer by its stevedores who the appellants managed with the employer contending that the six managers were guilty of serious misconduct for failing to follow a lawful and reasonable direction to do so leading to the employer losing trust and confidence in them; see para 9.

Here are two extracts from the Full Bench decision.

“Qube conducts stevedoring operations, including at Fremantle port.

[7] The unfair dismissal applications before the Commissioner arose from common circumstances at the Fremantle port between July and September 2021. Stevedores employed by Qube were taking protected industrial action. Each applicant was a shift manager and was asked to perform work, which the Commissioner found to be stevedoring work. The shift managers declined to do so and were dismissed for allegedly not following a lawful and reasonable direction.

[8] Some differences exist in the personal circumstances of each applicant (such as age, length of service and qualifications) and in the nature or timing of Qube’s request of each to perform work and the reason(s) each declined the request, though each cited ‘safety’. Each applicant was, on dates that varied, suspended and issued a show cause letter. Prior to being dismissed, each applicant, through common solicitors, engaged in correspondence with Qube whereby each denied the allegation and contested the proposition that Qube’s direction was lawful and reasonable.

[9] Each applicant was dismissed by letter (Mr Burchardt on 21 September 2021 and Messrs Pedder, Miller, Butsenko, Iki and Brazel on 24 September). The reason for dismissal was common: 4

“… Qube is now satisfied that you failed to follow a lawful and reasonable direction on [dates] and that your conduct constituted serious misconduct in this regard. Your unsatisfactory responses and lack of contrition have failed to show cause as to why your employment should not be terminated and have caused a further diminution in Qube’s trust and confidence in your ability to perform your duties in the important role as a Shift Manager. Qube is now of the view that the requisite trust and confidence cannot be restored.”

……………………………………………………………

 

“Conclusion

[145] In determining the matter by reference to s 387(a) alone, the Commissioner failed to evaluate all relevant considerations required by s 387 of the FW Act.

[146] In his alternate formulation of the Decision, and in conducting the evaluation required by s 387 the Commissioner wrongly failed to give weight to ss 387 (b) and (c).

[147] In light of these appealable errors, permission to appeal is granted.

[148] We allow the appeal with respect to grounds 1 and 2.

[149] We dismiss the appeal with respect to grounds 3, 4, 5, 6, 7, 8, 9 and 10 though with respect to grounds 3, 4 and 5 (valid reason) we have found error in the Commissioner’s reasoning but not the conclusion reached.

[150] The applications require redetermination.

[151] We do not agree with Qube that the applications should not be redetermined by this full bench. Qube’s submission is premised on the proposition that the Commissioner’s credit finding and findings of fact were in error and that evidence before the Commission needs to be assessed afresh. As is apparent from our decision, we have generally not found error in the Commissioner’s fact-finding. Although the Commissioner made appealable errors in assessing s 387(a), his ultimate conclusion that there was no valid reason was not in error.

[152] Nor have we found that the Commissioner made appealable errors of fact or law in ordering reinstatement.

[153] In these circumstances we proceed to redetermine the matter.

Redetermination

[154] We consider it appropriate to redetermine all six applications jointly.

[155] In redetermining the applications we have regard to the evidence and materials before the Commissioner. We adopt the facts as found by the Commissioner save that we have no regard to findings or commentary as to the historical waterfront dispute of 1998 and its legacy. We do not adopt, as we need not do so, the Commissioner’s observation that performing stevedoring work was not incidental to the contractual requirements of the shift managers whose responsibility it was to manage the work of stevedores. We adopt and are informed by but need not repeat the reasons and conclusions we reached when considering appeal grounds 1 to 10.

[156] In relation to matters requiring initial determination in s 396 of the FW Act, we find as follows:

  1. Each of the six unfair dismissal applications were made within the period required by s 394(2);
  2. Each applicant was a person protected from unfair dismissal;
  3. Qube was not a “small business employer” as defined in s 23 of the FW Act. The Small Business Fair Dismissal Code is inapplicable; and
  4. No dismissal was a case of genuine redundancy.

[157] We now turn to s 387 considerations.

Valid reason

[158] Valid in this context is generally considered to be whether there is a “sound, defensible or well-founded” reason for dismissal and one that is not “capricious, fanciful, spiteful or prejudiced. 48 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.

[159] The Commission will not stand in the shoes of the employer and determine what the Commission would have done if it was in the employer’s position. The question the Commission must address is whether there was a valid reason for the dismissal related to the employee’s capacity or conduct (including its effect on the safety and welfare of other employees).

[160] A valid reason is not assessed simply by reference to a legal right to terminate a contract of employment.49

[161] We conclude there was no valid reason for dismissal in each matter.

[162] Each of the six applicants advised Qube prior to being dismissed that they were ready, willing and able to perform their contractual duties. Qube’s lack of transparency in informing each manager the particular duties they were being required to perform in the face of protected industrial action denied each applicant a reasonable opportunity to meet their contractual obligations and comply with their employer’s direction.

[163] Being unable to discern with particularity what was being asked of them, the employees were not in breach of duty. Nor was their conduct misconduct. They did not refuse to perform contractual duties. They did not fail to follow a lawful and reasonable instruction of their employer because the direction to work was not transparent. There being no breach or misconduct, dismissal on that account was not for a valid reason.

[164] This weighs in favour of a finding of unfairness.

Notification of reason for dismissal

[165] Notification of a valid reason for dismissal should be given to an employee protected from unfair dismissal before a decision is made to terminate their employment50 and in plain and clear terms.51

[166] All six applicants were notified of the reason for dismissal in plain and clear terms. The reason was identified prior to dismissal during the show cause process.

[167] This weighs against a finding of unfairness.

Opportunity to respond

[168] An employee protected from unfair dismissal should be provided an opportunity to respond to a reason for dismissal relating to their conduct or capacity. An opportunity to respond should be provided before a decision is taken to terminate an employee’s employment.52

[169] The opportunity to respond is an element of procedural fairness but does not require formality. This consideration is to be applied in a common-sense way to ensure the employee is treated fairly.53 Where an employee is aware of the precise nature of the employer’s concern about his or her conduct or performance and has a full opportunity to respond to this concern, that is enough to satisfy this consideration.54

[170] A show cause process was conducted by Qube. That process provided a meaningful opportunity for each of the six applicants, though their solicitor, to respond to the allegations of breach and misconduct. Each did so.

[171] This weighs against a finding of unfairness.

Opportunity for support person

[172] This consideration is not relevant as Qube did not refuse, let alone unreasonably, any of the six applicants a support person.

Warnings concerning performance

[173] These matters do not concern performance or competency. This consideration is not relevant.

Size of enterprise and human resource capability

[174] The employer is not a small business within the meaning of the FW Act.

[175] There is no sense in which the size of the employer or its internal human resources capacity mitigated managing workplace or disciplinary matters in a fair manner.

[176] This consideration is not relevant.

Other matters

[177] The lack of reasonable transparency by Qube as to what was specifically being required of the shift managers bears not solely on whether a valid reason for termination existed (s 387(a)). It is also a consideration relevant to s 387(h) as it bears on the harshness of the dismissals given the consequences. Each dismissal occurred absent such transparency. For reasons already expressed and which need not be repeated, we assess this factor under s 387(h) as weighing in favour of a finding of harshness.

Conclusion on merit

[178] Although ss 387(b) and (c) considerations weigh against a finding of unfairness they do not outweigh the consideration under s 387(a) that no valid reason for the dismissals existed. On these applications, the absence of a valid reason is a particularly weighty matter which, properly characterised, outweighs the fact that each of the applicants was given an opportunity to respond (s 387(b)) and was provided reasons for their dismissal (s 387(c)).

[179] That Qube made such provision does not ameliorate the unfairness of these managers being dismissed without a valid reason. Qube was not transparent with the managers in advance of its show cause process or generally. It denied the managers an opportunity to clearly understand what was being asked of them in the face of protected industrial action by those they managed. They were thus denied an effective opportunity to determine whether their employer’s requirements were consistent with their contractual obligations or being reasonably requested. In those circumstances, dismissal for non-compliance with the employer’s requirements was unfair because those very working requirements were not identified by the employer with transparency and particularity.

[180] Had Qube handled the matter differently and in particular had it been transparent about what was being asked of its managers, a refusal to perform contractual duties may have been a breach of contract and, more relevantly, may have provided a valid reason for dismissal. That is not what occurred. In any event, a range of other considerations would apply in those circumstances, including whether any refusal was reasonable having regard to broader workplace health and safety rights and obligations.

[181] As a consequence, each of the dismissals was harsh, unjust and unreasonable.

Remedy

[182] We now turn to remedy.

[183] We do not consider that the evidence establishes an objective basis to conclude that trust and confidence was so compromised by the events leading to dismissal that it would preclude a reinstatement order.

[184] We take to account that, having found the dismissals unfair, that reinstatement is the primary remedy under the FW Act 55 and our earlier findings on grounds 8 and 9 of the appeal. As recently observed by a differently constituted full bench, in circumstances where there is no valid reason for an employee’s dismissal, this will be a material consideration in determining whether reinstatement is appropriate.56 We have so found.

[185] There are no other discretionary reasons not to order reinstatement. It is sought. We note and take into account that not all the circumstances, including the post-dismissal circumstances, of the six shift managers are identical though each seek reinstatement. That one of the dismissed managers has secured alternate employment in the interim is not a reason to not order the remedy sought.

[186] We also take into account our finding that the managers were not in breach of their employment obligations nor was their conduct misconduct.

[187] Having regard to all of the circumstances of each applicant and those of the respondent, including the findings in relation to trust and confidence, we find that reinstatement is the appropriate remedy in each case.

[188] We order that each applicant be reinstated within 28 days of the date of this order.

[189] There are no discretionary reasons not to make an order for continuity of service and back-pay. The back-pay order will include payment of superannuation that would have been payable had each applicant not been dismissed.

[190] However, with respect to back-pay and taking into account the requirements of s 391(4) we will order that remuneration earned by any applicant by way of income from gainful work (whether as employee or contractor) since dismissal and until reinstatement shall be deducted from the quantum of back-pay. We direct each applicant to provide a sworn declaration of such remuneration (if any) to Qube within 28 days of this order. We direct the parties to confer on quantum. A member of this full bench will assist the determination of the terms of any back-pay order if quantum is not agreed.

Disposition

[191] The Commission orders as follows:

  1. permission to appeal is granted;
  2. the appeals are allowed and the decision and orders of the Commissioner quashed;
  3. the applications are redetermined by the full bench;
  4. upon redetermination, the dismissal of each applicant is found to be harsh, unjust and unreasonable within the meaning of s 385(b) and s 387;
  5. Qube is ordered to reinstate each applicant within 28 days of this decision and order, with consequential orders for continuity of service and back-pay (subject to deduction of any remuneration earned from gainful work (whether as employee or contractor) since the date of dismissal); and
  6. each applicant is directed to provide a sworn declaration of post-dismissal remuneration from gainful work (if any) to Qube within 28 days of this order.”

Qube Ports Pty Limited v Burkhardt and Others  [2022] FWCFB 65 delivered 16 May 2022  Catanzariti VP, Anderson DP and Hampton C