What is a valid reason for dismissal in Australia

What is a valid reason for dismissal in Australia? Here is an extract from a Fair Work Commission case on this issue which has the elements of the answer.

“Whether there was a valid reason for the applicant’s dismissal (s 387 (a))

[75] The meaning of valid reason in s 387(a) is drawn from the judgement of North J in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 (‘Selvachandran’). This meaning has been considered and applied by members of the Commission and its predecessors for many years. For example, in Rode v Burwood Mitsubishi Print R4471, a Full Bench of the then Australian Industrial Relations Commission (‘AIRC’) discussed the meaning of valid reason in the context of the relevant provisions of the Workplace Relations Act 1996, and by citing Selvachandran, the Full Bench said at [17]-[19]:

‘[17] In relation to the meaning of “valid reason” the following remarks of Northrop J in Selvachandran v Peteron Plastics Pty Ltd are relevant:

“Section 170DE(1) refers to a ‘valid reason, or valid reasons’, but the Act does not give a meaning to those phrases or the adjective ‘valid’. A reference to dictionaries shows that the word ‘valid’ has a number of different meanings depending on the context in which it is used. In The Shorter Oxford Dictionary, the relevant meaning given is: ‘2. Of an argument, assertion, objection, etc; well founded and applicable, sound, defensible: Effective, having some force, pertinency, or value.’ In The Macquarie Dictionary the relevant meaning is ‘sound, just or wellfounded; a valid reason’.

In its context in s 170DE(1), the adjective ‘valid’ should be given the meaning of sound, defensible or wellfounded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of s 170DE(1). At the same time the reason must be valid in the context of the employee’s capacity or conduct or based upon the operational requirements of the employer’s business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. The provisions must `be applied in a practical, commonsense way to ensure that’ the employer and employee are each treated fairly, see what was said by Wilcox CJ in Gibson v Bosmac Pty Ltd, when considering the construction and application of a s 170DC.”

[18] While Selvachandran was decided under the former statutory scheme the above observations remain relevant in the context of s.170CG(3)(a). A valid reason is one which is sound, defensible or well founded. A reason for termination which is capricious, fanciful, spiteful or prejudiced is not a valid reason for the purpose of s.170CG(3)(a).

[19] We agree with the appellant’s submission that in order to constitute a valid reason within the meaning of s.170CG(3)(a) the reason for termination must be defensible or justifiable on an objective analysis of the relevant facts. It is not sufficient for an employer to simply show that he or she acted in the belief that the termination was for a valid reason.’

See also: Nettleford v Kym Smoker Pty Ltd (1996) 69 IR 370.

[76] In B, C and D v Australian Postal Corporation t/a Australia Post [2013] FWCFB 6191, a majority of the Full Bench (Lawler VP and Cribb C) dealt with breaches by a number of employees of Australia Post’s IT policies, in respect to the sending, receiving and sharing of pornographic material. The plurality said at [34]-[36]:

‘[34] In considering whether there was a valid reason for a dismissal under s.387(a), the reason(s) being considered are the employer’s reason(s). In a misconduct case, the Commission is concerned with whether the misconduct in fact occurred, not with whether the employer has reasonable grounds to believe that it occurred (eg. Yew v ACI Glass Packaging Pty Ltd (1996) 71 IR 201, Sherman v Peabody Coal Ltd (1998) 88 IR 408; Australian Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1).

[35] Subject to that, as indicated by Northrop J in Selvachandran, “valid reason” is assessed from the perspective of the employer and by reference to the acts or omissions that constitute the alleged misconduct on which the employer relied, considered in isolation from the broader context in which they occurred. It is the reason of the employer, assessed from the perspective of the employer, that must be a “valid reason” where “valid” has its ordinary meaning of “sound, defensible or well founded”. As Northrop J noted, the requirement for a valid reason “should not impose a severe barrier to the right of an employer to dismiss an employee”.

[36] A failure to comply with a lawful and reasonable policy is a breach of the fundamental term of the contract of employment that obliges employees to comply with the lawful and reasonable directions of the employer. In this way, a substantial and wilful breach of a policy will often, if not usually, constitute a “valid reason” for dismissal.’

[77] Further, the Full Bench of the Australian Industrial Relations Commission said in Container Terminals Australia Limited v Toby [2000] Print S8434 at [15]:

‘[15] In our view, the consideration of whether there was a valid reason for termination is a separate issue from the determination of whether a termination was harsh, unjust or unreasonable: see generally Department of Justice v Hepburn (1999) 93 FCR 508, at 512-513 and cases cited therein. The focus of the consideration is upon the employer and the basis for his decision to terminate rather than upon its consequences for the employee. “What has to be examined is the validity of the reason, and its connection with the employee’s capacity or conduct or its basis in operational requirements of the employer”: see Qantas Airways Ltd v Cornwall (1998) 83 IR 102, at 106. In making such an examination “it is not the court’s function 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 court but rather it is for the court to assess whether the employer had a valid reason connected with the employee’s capacity or conduct…”; see: Walton v Mermaid (1996) 142 ALR 681, at 685.’

[78] The above authorities (and many more), make clear that a ‘valid’ reason must be ‘sound, defensible or well founded’ and not ‘capricious, fanciful, spiteful or prejudiced.’

………………………………………Further matters to be considered under s 387 of the Act

[91] Subsections (b)-(e) of s 387 are generally grouped under the rubric of ‘procedural fairness’ or ‘natural justice’ issues. To highlight the importance of procedural fairness issues, in unfair dismissal cases, I cite four authorities on the subject. In Crozier v Palazzo Corporation Pty Limited t/as Noble Storage and Transport (2000) 98 IR 137 (‘Crozier v Palazzo’), a Full Bench of the AIRC said at [73]:

‘As a matter of logic procedural fairness would require that an employee be notified of a valid reason for their termination before any decision is taken to terminate their employment in order to provide them with an opportunity to respond to the reason identified. Section 170CG(3)(b) and (c) would have very little (if any) practical effect if it was sufficient to notify employees and give them an opportunity to respond after a decision had been taken to terminate their employment.’

[92] In Wadey v YMCA Canberra [1996] IRCA 568, Moore J made clear that an employer cannot merely pay ‘lip service’ to giving an employee an opportunity to respond to allegations concerning an employee’s conduct. His Honour said:

‘In my opinion the obligation imposed on an employer by that section has, for present purposes, two relevant aspects. The first is that the employee must be made aware of allegations concerning the employee’s conduct so as to be able to respond to them. The second is that the employee must be given an opportunity to defend himself or herself. The second aspect, 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, in my opinion, does not constitute an opportunity to defend.’

[93] Nevertheless, procedural fairness steps should be applied in a common sense and practical way. In Gibson v Bosmac Pty Ltd (1995) 60 IR 1 (‘Gibson’), Wilcox CJ said at [7]:

‘Ordinarily, before being dismissed for reasons related to conduct or performance, an employee must be made aware of the particular matters that are putting his or her job at risk and given an adequate opportunity of defence. However, I also pointed out that the section does not require any particular formality. It is intended to be applied in a practical, commonsense way so as to ensure that the affected employee is treated fairly. Where the 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, this is enough to satisfy the requirements of the section.’

[94] It goes without saying that any issue/s of procedural unfairness may not be of such significance as to outweigh the substantive reason/s for an employee’s dismissal, particularly in cases of misconduct where the proven misconduct is of such gravity (such as proven fraud) as to outweigh any other considerations in respect to ‘harshness’, such as age, length of service, employment record, contrition or personal and family circumstances.

[95] In Bostik Australia Pty Ltd v Gorgevski (No 1) [1992] FCA 271; 36 FCR 20, the Federal Court of Australia Industrial Division said at [37]:

‘Harsh, unjust and unreasonable

  1. These are ordinary non-technical words which are intended to apply to an infinite variety of situations where employment is terminated. We do not think any redefinition or paraphrase of the expression is desirable. We agree with the learned trial judge’s view that a court must decide whether the decision of the employer to dismiss was, viewed objectively, harsh, unjust or unreasonable. Relevant to this are the circumstances which led to the decision to dismiss and also the effect of that decision on the employer. Any harsh effect on the individual is clearly relevant but of course not conclusive. Other matters have to be considered such as the gravity of the employee’s misconduct.’ (my emphasis)

[96] It cannot be seriously suggested, nor do I understand Mr Dircks enthusiastically put otherwise, that there were any procedural fairness concerns in the steps taken by the respondent in investigating the incident and the disciplinary process in respect to the applicant’s dismissal. Given the inherently dangerous nature of the respondent’s activities, it is hardly surprising that employees were continuously reminded of their safety obligations through training, Team talks and published policies and procedures. Nevertheless, the Commission must make findings on the matters under sub-ss (b)-(e) of s 387 of the Act.”

Khoshaba v Woolstar Pty Limited t/a Sydney National Distribution Centre [2020] FWC 6596 delivered 10 December 2020 per Sams DP