Unfair dismissal; the doctrine of condonation and tolerance

There are many unfair cases which are dealt with by the Fair Work Commission in which an employee who has been dismissed may argue that a dismissal is relevantly unfair because although the reason for it is arguably valid, the employer had tolerated the conduct in the past and it is now harsh, unjust and unreasonable for the employer to dismiss the employee because of the conduct.

This is sometimes called the doctrine of condonation and toleration. Here is an example of it in action.

“Condonation and Toleration

[6] The concept of condonation embraces notions of waiver and election. 1 Deputy President Wells helpfully summarised the principles applicable to the concept of condonation in Cannan & Fuller v Nyrstar Hobart Pty Ltd2 [references omitted]:

“Condonation

[255] The principle behind the Applicants’ submission of condonation is that an employer, with full knowledge of an employee’s misconduct and continues to employ him, cannot later rely on that misconduct to dismiss the individual. Thus, by knowing the behaviours of Mr Cannan and Mr Fuller and electing to continue the employment of them, Nyrstar ‘condoned’ their conduct and ‘waived’ the right to terminate their employment contracts.

[256] The practical manifestation of this principle in the employment context is that a wronged party has the right to elect, in the face of a breach of a condition of an employment contract, either to continue the contract or terminate it for breach. In order for condonation to be present, an employee must provide that:

  • the employer had full knowledge of the conduct;
  • despite this, the employer retains the employee’s services; and
  • with this election, the employer has deliberately given up the right to dismiss the employee summarily.”

[7] An appeal against Deputy President Wells’ decision in Cannan & Fuller v Nyrstar Hobart Pty Ltd was dismissed by a Full Bench of the Commission. 3

[8] At common law, even if conduct is condoned, it can later be taken into account to evaluate the significance of further misconduct. The principle was explained by Justice Sheppard in John Lysaght (Australia) Ltd v Federated Iron Workers’ Association; Re York: 4

“It is no doubt possible for the company to waive particular acts of misconduct that would otherwise have justified dismissal without notice. These particular acts could not subsequently be used for this purpose once the decision was made not to rely on them. The act of misconduct however does not then disappear and become irrelevant when further misconduct occurs. It remains and makes up the continuing history and record of a man’s service. That record may always be referred to for the purpose for which the company now points to it and the presence of incidents such as I have described will always be a relevant factor to be weighed in the balance by an employer when he comes to consider whether or not a further breach or other act of misconduct should not bring about a dismissal.”

[9] The majority of the Full Bench of the Commission in B, C and D v Australian Postal Corporation 5 explained the relevance of condonation and toleration in the context of an unfair dismissal application in the following way:

“[42] Broadly speaking, circumstances bearing upon whether a dismissal for misconduct is harsh, unjust or unreasonable fall into three broad categories:

(1) The acts or omissions that constitute the alleged misconduct on which the employer relied (together with the employee’s disciplinary history and any warnings, if relied upon by the employer at the time of dismissal) but otherwise considered in isolation from the broader context in which those acts or omissions occurred.

(2) The broader context in the workplace in which those acts or omissions occurred. [This may include such matters as a history of toleration or condonation of the misconduct by the employer or inconsistent treatment of other employees guilty of the same misconduct.]

(3) The personal or private circumstances of the employee that bear upon the substantive fairness of the dismissal. [This includes, matters such as length of service, the absence of any disciplinary history and the harshness of the consequences of dismissal for the employee and his or her dependents.]

[43] The determination of whether there was a valid reason proceeds by reference to the matters in category (1) and occurs before there is a consideration of what Northrop J described as “substantive fairness” from the perspective of the employee. Matters in categories (2) and (3) are then properly brought to account in the overall consideration of the whether the dismissal was “harsh, unjust or unreasonable” notwithstanding the existence of a “valid reason”.” [emphasis added]

[10] In Toll Holdings Limited v Johnpulle, 6 a Full Bench of the Commission considered the earlier Full Bench decisions in Cannan & Fuller v Nyrstar Hobart Pty Ltd and B, C and D v Australian Postal Corporation and made the following observations in relation to the relevance of condonation and toleration to the various s 387 considerations [references omitted]:

“[15] It may be accepted that, under the general law, an employer is disentitled to summarily dismiss an employee for an earlier instance of misconduct on the part of that employee where the employer with full knowledge of the misconduct had decided to retain the employee in employment. It would be difficult to conclude for the purpose of s.387(a) of the FW Act that an employer who had condoned misconduct by an employee in this way and had thus lost the right of summary dismissal at law nonetheless had a valid reason for dismissing that employee. The Commissioner therefore did not err in declining to find that the instances of misconduct described in the second, third and fourth allegations against Mr Johnpulle constituted valid reasons for his dismissal. It may also be accepted that, for the purpose of s.387(h), the Commissioner was entitled to treat as relevant that Toll had previously elected not to dismiss Mr Johnpulle for his earlier instances of inappropriate behaviour towards Mr Karzi. However the fact that Mr Johnpulle had (as the Commissioner found) engaged in the earlier instances of inappropriate behaviour did not thereby become otherwise irrelevant in the consideration of whether his dismissal was harsh, unjust or unreasonable. The Commissioner’s own findings supported the conclusion, stated in Toll’s dismissal letter, that Mr Johnpulle had engaged in a “pattern of unacceptable behaviour” towards Mr Karzi and had persisted in that behaviour notwithstanding that he had been told by the Team Leader to cease such behaviour and he had agreed to do so. That was necessarily a highly material consideration which, while not necessarily being determinative, was adverse to the conclusion that the dismissal was harsh, unjust or unreasonable. It was also relevant to the issue of reinstatement, since it went to the degree of risk that Mr Johnpulle might repeat such behaviour in future if reinstated.

[16] The Commissioner did not have regard to the fact that Mr Johnpulle’s misconduct was not isolated but was part of a “pattern of unacceptable behaviour”. That was an error in the exercise of his discretion of the type described in House v The King as a failure to “take into account some material consideration”.”

Ashley-Cooper v Palm Beach Motor Yachts Co P/L T/A Palm Beach Motor Yachts (2019) FWC 8305 delivered 6 December 2019 per Saunders DP