What is a valid reason for dismissal?
This decision of the Fair Work Commission explains how it answers this question.
“s.387(a) — Whether there was a valid reason for the Applicant’s dismissal which is related to her capacity or conduct
[25] An employer bears the persuasive onus of establishing or proving that there was a valid reason for an employee’s dismissal.12 The level of proof is on the balance of probabilities, at a reasonable level of satisfaction.13 The fact that serious allegations are made does not alter the position in civil proceedings that the level of proof is based upon the balance of probabilities.14
[26] In order to be a valid reason, the reason for the dismissal should be “sound, defensible or well founded”, and should not be “capricious, fanciful, spiteful or prejudiced”.15 Further, the Commission will not stand in the shoes of the employer and determine what the Commission would do if it was in the position of the employer.16
[27] Where a dismissal relates to conduct, the reason for the dismissal may be valid because the conduct occurred and justified dismissal. However, the reason may not be valid because the conduct did not occur, or it did occur but did not justify dismissal.17
[28] The question of whether the alleged conduct took place, and what it involved, is to be determined by the Commission on the basis of the evidence in the proceedings before it,18 and reasonable minds may differ.
[29] The Respondent submits that there was a valid (performance) reason for the Applicant’s dismissal. That valid reason is said to be the Applicant’s failure to meet her KPIs over an extended period (i.e. ten or more Activations each week). Her failure in this regard is said to have occurred despite the Respondent providing the Applicant with an appropriate induction, relevant training and support, and the provision of around 500 leads per month. In essence, the Respondent says that the Applicant was a poor performer in the VP role, who did not improve, or shows signs of sustained and consistent future improvement, across her 4 month engagement in the VP role (including during the 11 week disciplinary process that preceded her dismissal).
[30] Between her commencement in the VP role in April 2023, and her dismissal in August 2023, there were four (including the Applicant) employees working in the VP role. The Respondent relies upon Attachment “L” to compare the Applicant’s Activation numbers to the three other VP role employees during the period 10 April 2023 to 1 September 2023. Attachment L is not evidence. Rather, it is a purported summary of evidence (in table form) that is not supported by the tender of the underlying evidence (i.e. raw data) that it purports to summarise. That said, having regard to the evidence of Ms Holman at the hearing,19 I am prepared to accept that Attachment “L” can be relied upon by the Respondent in these proceedings as a factual comparator of the number of Activations made by the four employees in the VP roles during the period 10 April 2023 to 1 September 2023.
[31] One of the Applicant’s core contentions as to the absence of valid reason for her dismissal rests upon her claim that because she worked from home, whilst the three other TP role employees worked together for one day in the office each week (and worked from home the other four days), she was disadvantaged. In circumstances where the Applicant was employed on the basis that she would be working wholly from home in the ACT, and the Respondent’s offices are in the Gold Coast, Queensland, I do not accept that the reason relied upon by the Respondent for the Applicant’s dismissal ought be undermined by the Applicant not being in a position to attend the Respondent’s offices one day per week.
[32] In my view, the real (and fatal) difficulty with the Respondent’s asserted valid reason for the Applicant’s dismissal is that it relies upon asserted contractual terms that hold not force or effect. In this regard, I make the following findings:
- a) the Applicant signed (and thus agreed to enter into) the written employment agreement for the VP role on 11 April 2023 (Employment Contract).20
- b) the Applicant signed (and thus agreed to enter into) the written Marriott Vacation Club International (MVCI) Australia Vacation Planner Commission Plan on 18 April 2023 (VP Commission Plan).21
- c) Clause 5 ‘Remuneration’ of the Employment Contract provides that the Applicant’s remuneration for the VP role consists of a base hourly rate, and superannuation contributions;22
- d) Clause 7 “Incentive Arrangements” of the Employment Contract provides that the Applicant “may be eligible to participate in the [VP] Commission Plan” which will be paid in addition to remuneration under Clause 5. Such Commission Plan may be unilaterally amended from time to time by the Respondent, and payments under the VP Commission Plan are not included when calculating remuneration or other entitlements (including payments in lieu of notice) under the Employment Contract;23
- e) Clause 19 ‘General’ of the Employment Contract provides that its written terms constitute the “entire agreement” between the parties;
- f) Clause 6.0 of the VP Commission Plan reads:
“PERFORMANCE STANDARDS:
Certain performance standards are required to continue employment. Failure to achieve established performance standards may result in performance management, up to and including separation from the company.
1) Associate must reconfirm/reverify 100% of their bookings and enter 90% data entry correctly.
2) Associate Gross Booking To Show factor should not fall below 90% in a sales month.
3) Associate productivity should not fall below other standards as defined by management.
The Company reserves the right to adjust these performance factors from time to time. Any adjustments will be communicated to the associate in advance of the month for which they will be effective.
PRO-RATED TARGET
Prorated targets will be applicable to associates who are on paid leave for a certain period. The criteria are as follow:
− On paid leave for a minimum of 5 days and above, taken consecutively. The leave must be applied 30 days in advance and are subjected to approval.
− Personal leave will not be taken into consideration.
− Hospital leave will be taken into consideration if the leave duration is for a minimum of 1 week:
All minimum targets for tours and packages sold will be prorated accordingly if the criteria are met. The Volume tier required will be affected and will follow the pro-rated target given. If the revised prorated target is not met, no commission payment will be made”; and
- g) the written “Acknowledgement” on the last page of the VP Commission Plan states that “it is not to be construed as a contract or a guarantee of employment”, and that the Respondent “reserves the right to amend, modify eliminate any single component(s) of this Plan at any time”.
[33] On the basis of the foregoing terms of the Employment Contract and the VP Commission Plan, I find that from a contractual and employment relationship perspective, there was no basis upon which the Respondent had the lawful right to hold the Applicant to the performance standards set out in clause 6.0 of the VP Commission Plan, such that any failure to meet such performance standards could give rise to her discipline or dismissal. I reach this finding in circumstances where:
- a) the VP Commission Plan expressly states that it is not a contract; and
- b) the Employment Contract states that:
(i) it constitutes the entire agreement between the parties;
(ii) the Applicant ‘may’ (not shall be required to) participate in an incentive program; and
(iii) any incentive program (such as the VP Commission Plan) does not form part of the Applicant’s remuneration under the Employment Contract.24
[34] The words set out in Clause 2 of the Employment Contract concerning the duties and responsibilities of the Applicant, in my view, do not extend to a requirement for the Applicant to comply with an incentive program (such as the VP Commission Plan) that can be unilaterally amended by the Respondent at any time. This is especially so in circumstances where the VP Commission Plan is not a contract, and does not form part of the Employment Contract (including in respect of remuneration to be paid for work performed under the Employment Contract).
[35] In the facts and circumstances of this case, relying upon a requirement that has no basis in contract (as between the parties), to meet a specific number of KPIs is not a sound, defensible, or well-founded reason for dismissal. I find that the Applicant’s dismissal was not for a valid reason, which weighs in favour of a finding that the Applicant’s dismissal was harsh, unjust and unreasonable.
s.387(b) – Whether the Applicant was notified of the valid reason; and s.387(c) – Whether the Applicant was given an opportunity to respond to any reason related to her capacity or conduct
[36] Proper consideration of s.387(b) of the Act requires a finding to be made as to whether the Applicant “was notified of that reason” and given an opportunity to respond to same.
[37] Contextually, the reference to “that reason” is the valid reason found to exist under s.387(a) of the Act.25 Notification of a valid reason for termination must be given to an employee protected from unfair dismissal before the decision is made to terminate their employment,26 and in explicit, plain and clear terms.27
[38] In order to be given an opportunity to respond for the purposes of s.387(c), the employee must be made aware of allegations concerning the employee’s conduct so as to enable them to respond to the allegations and must be given an opportunity to defend themselves. As Justice Moore has stated in Wadey v YMCA Canberra28:
“the opportunity to defend, implies an opportunity that might result in the employer deciding not to terminate the employment if the defence is of substance. An employer may simply go through the motions of giving the employee an opportunity to deal with allegations concerning conduct when, in substance, a firm decision to terminate had already been made which would be adhered to irrespective of anything the employee might say in his or her defence. That… does not constitute an opportunity to defend.”29
[39] Given I have found that there was no valid reason for the Applicant’s dismissal, the criterion under ss.387(b) and (c) do not arise for consideration. If they did arise for consideration, I note that the Applicant was given a second written warning on 16 August 2023, and was subsequently dismissed by way of letter dated 30 August 2023. There was no further disciplinary or termination meeting with the Applicant between the second warning and her dismissal. The criterion under ss.387(b) and (c) of the Act would thus weigh in favour of a finding that the Applicant’s dismissal was harsh, unjust or unreasonable. Whilst the Applicant was made well aware of the asserted reason/s that would lead to her dismissal (i.e. her failure to meet 10 KPIs) prior to her dismissal, and given an opportunity to engage with and respond to same during the disciplinary process, that is not sufficient on the case law in respect of compliance with ss.387(b) and (c) of the Act. “
Favaloro v MVCI Australia Pty Ltd – [2024] FWC 1508 delivered 11 June 2024 per Boyce DP