What is dismissal?

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Introduction

See Fair Work Act s.386

The term dismissed is defined in the Fair Work Act as a situation where:

a person’s employment has been terminated at the employer’s initiative, or
a person was forced to resign because of the conduct or course of conduct engaged in by the employer.

A dismissal does NOT include where:

a person is demoted in his or her employment without a significant reduction in duties or remuneration and remains employed by the employer
a person was employed under a contract for a specified period of time, specified task or for the duration of a specified season and the employment comes to an end at the end of that period, or
a person had a training arrangement with their employer which:
- specified that the employment was limited to the duration of the training arrangement, and
- whose employment ends at the end of that training arrangement.

Related information

When does a dismissal take effect?

Terminated at the employer’s initiative

Contains issues that may form the basis of a jurisdictional issue.

See Fair Work Act s.386(1)(a)

The action of the employer must cause the termination

A termination is at the employer’s initiative when:

the employer’s action ‘directly and consequentially’ results in the termination of employment, and
had the employer not taken this action, the employee would have remained employed.^[1]

There must be action by the employer that either intends to bring the relationship to an end or has that probable result.^[2]

The question of whether the act of an employer results ‘directly or consequentially’ in the termination of employment is an important consideration but it is not the only consideration.^[3] It is important to examine all of the circumstances including the conduct of the employer and the employee.^[4]

Repudiation

The test for repudiation by the employer is whether the conduct of the employer, when judged objectively, showed an intention to no longer be bound by a contract.^[5] The employer’s actual or subjective intention is not relevant.^[6]

A repudiation of the contract does not bring the contract to an automatic end but gives the affected party the right to terminate the contract.^[7] If the affected party accepts the repudiation the contract will end.^[8]

Where an employer has repudiated the contract, and an employee accepts the repudiation and an employee exercises their right to terminate the contract, this will amount to a termination at the employer’s initiative.

An employee may engage in conduct amounting to a repudiation by seriously breaching the contract of employment.

Employment contract may continue after employment relationship is terminated

Termination at the employer’s initiative requires the termination of the employment relationship, not the contract of employment.^[9]

Case examples

Terminated at the employer’s initiative

Employer claimed employee resigned her employment

Nohra v Target Australia Pty Ltd [2010] FWA 6857 (Roberts C, 22 October 2010), [(2010) 204 IR 389].

The applicant submitted a letter of resignation which effectively gave 7 months’ notice. Her employer accepted the resignation but made it effective immediately. It was found that the termination of employment occurred at the employer’s initiative.

Employer argued abandonment of employment

Sharpe v MCG Group Pty Ltd [2010] FWA 2357 (Asbury C, 22 March 2010).

An employee who had notified her employer that she would be unable to attend work due to medical reasons, and was then terminated, was found to have been terminated at the initiative of the employer. An argument that the employee had abandoned her employment by not attending for work as directed was rejected. It was held that the employer had terminated the employment.

Employer proposed changed working conditions to accommodate employee’s pregnancy

Owens v Allied Express Transport Pty Ltd [2011] FWA 1058 (Hampton C, 28 February 2011).

Permission to appeal refused [2011] FWAFB 2929 (Boulton J, Kaufman SDP, Bissett C, 10 June 2011), [(2011) 210 IR 17].

The employer and employee agreed that the employee would work in a less difficult role as the employee was pregnant. However, when the employer informed the employee that there would be a significant reduction in salary for the new role, the employee refused to agree, and regarded herself as having been dismissed. This was found to constitute a termination of employment at the initiative of the employer.

NOT terminated at the employer’s initiative

Employee engaged on series of fixed-term contracts

Drummond v Canberra Institute of Technology [2010] FWA 3534 (Deegan C, 4 May 2010).

Leave to appeal refused [2010] FWAFB 5455 (Drake SDP, Cartwright SDP, Roberts C, 6 August 2010), [(2010) 197 IR 287].

Non-renewal of employment at the expiry of the last of a series of fixed term contracts was held not to be a termination of employment at the initiative of the employer.

Series of ‘outer limit contracts’

Department of Justice v Lunn PR974185 (AIRCFB, Lawler VP, Harrison SDP, Raffaelli C, 27 November 2006), [(2006) 158 IR 410].

The employer and employee had entered into a series of outer limit contracts. Even though there was a strong expectation that contracts would be renewed, it was not sufficient to displace the legal effect of the contract that the parties had entered into. The employment was terminated through the passing of time at the end of the final contract, and the employee was not terminated at the initiative of the employer.

Apprenticeship contracts

Qantas Airways Limited v Fetz and others Print Q1482 (AIRCFB, Giudice J, Harrison SDP, Lawson C, 9 June 1998), [(1998) 84 IR 52].

Apprentices were placed on apprenticeship contracts with a duration of four years but with an expectation that there would be an offer of permanent employment after that (subject to performance and operational requirements). On appeal, the apprentices were held to be subject to contracts for a specified period of time. Therefore when the apprenticeship contracts expired and the apprentices were not offered further employment, this was not a termination of employment at the initiative of the employer.

Forced resignation

Contains issues that may form the basis of a jurisdictional issue.

A forced resignation is when an employee has no real choice but to resign.^[10]

The onus is on the employee to prove that they did not resign voluntarily.^[11] The employee must prove that the employer forced their resignation.^[12]

A resignation is forced where the employee can prove that the employer took action with the intent (or which had the probable result) of bringing the relationship to an end.^[13]

The line distinguishing conduct that leaves an employee no real choice but to resign, from an employee resigning at their own initiative, is a narrow one.^[14] The line, however, must be ‘closely drawn and rigorously observed’.^[15]

A forced resignation can also be referred to as constructive dismissal.

Heat of the moment resignation

An employer is generally able to treat a clear and unambiguous resignation as a resignation.^[16]

Where a resignation is given in the heat of the moment or under extreme pressure, special circumstances may arise.^[17] In special circumstances an employer may be required to allow a reasonable period of time to pass.^[18] The employer may have a duty to confirm the intention to resign if, during that time, they are put on notice that the resignation was not intended.^[19]

Case examples

Forced resignation

Employee notified employer of future intention to resign

Marks v Melbourne Health [2011] FWA 4024 (Ives DP, 24 June 2011).

A letter from the employee to the employer indicating an intention to resign in the future, and sent at a time that the employee was distressed and unwell, was held not to be an effective notice of resignation.

Accordingly, the employer’s purported acceptance of the resignation was held to constitute a termination of employment at the employer’s initiative.

Employer alleged employee resigned – employee continued to present for work

Bender v Raplow Pty Ltd [2011] FWA 3407 (Richards SDP, 8 June 2011).

After an angry discussion between an employee and her manager, the employee believed she had been dismissed and the employer believed the employee had resigned. The employee continued to attend for work afterwards in the belief she had to work out the notice period for her dismissal.

The employee was found not to have resigned because she did not demonstrate an intention not to be bound by her contract of employment.

Failure to pay wages

Hobbs v Achilleus Taxation Pty Ltd ATF the Achilleus Taxation Trust; Achilleus Accounting Pty Ltd ATF The Achilleus Accounting Trust [2012] FWA 2907 (Deegan C, 4 April 2012).

Permission to appeal refused [2012] FWAFB 5679 (Drake SDP, Richards SDP, Gregory C, 20 July 2012).

An employee gave notice of his resignation after having been paid under half of what he was owed in wages over a period of 4 months.

This was held to be a forced resignation due to the conduct of the employer, and constituted a dismissal by the employer.

NOT a forced resignation

Employee resigned before a disciplinary interview

Love v Alcoa of Australia Limited [2012] FWAFB 6754 (Boulton J, Kaufman SDP, Lee C, 10 August 2012), [(2012) 224 IR 50].

An employee who admitted to police that he had taken company property without authorisation resigned rather than attend a scheduled meeting with his employer about the matter.

This was held on the facts to be a voluntary and not a forced resignation.

Resignation of employee while under suspension and investigation

Davidson v Commonwealth [2011] FWA 3610 (Deegan C, 7 June 2011).

Permission to appeal refused [2011] FWAFB 6265 (Boulton J, Hamilton DP, Ryan C, 16 September 2011), [(2011) 213 IR 120].

The resignation of an employee who was barred from access to the workplace, and then suspended from work and subjected to a disciplinary investigation was held not to have been forced to resign by the employer.

Employee negotiating conditions following change in position

Blair v Kim Bainbridge Legal Service Pty Ltd T/as Garden & Green [2011] FWA 2720 (Gooley C, 10 May 2011).

The employee resigned in the belief that her employer required her to accept a lower rate of pay or resign. It was found that the employee had misunderstood the position and acted prematurely because the employer had made no final decision about the matter. Therefore the resignation was not forced by the employer’s conduct.

Employee on performance management plan

Ashton v Consumer Action Law Centre [2010] FWA 9356 (Bissett C, 20 December 2010).

An employee who resigned after having been placed on supervisory requirements was found not to have been forced to resign by the employer.

Employee resigned prior to a decision being made following a disciplinary process

Pacific National (NSW) Limited v Bell [2008] AIRCFB 555 (Harrison SDP, Cartwright SDP, Larkin C, 20 August 2008), [(2008) 175 IR 208].

The employee was subject to a disciplinary procedure relating to falsification of timesheets. The employee acted on the advice of the union and resigned before the employer had come to a decision in relation to the disciplinary matter.

This was held on appeal to be a voluntary, not a forced, resignation.

Employee resigned over failure to pay wages on time

Bruce v Fingal Glen Pty Ltd (in liq) [2013] FWC 3941 (O’Callaghan SDP, 19 June 2013).

Permission to appeal refused [2013] FWCFB 5279 (Boulton J, Gooley DP, Hampton C, 2 August 2013).

The employee resigned after the employer repeatedly paid her wages late and failed to pay superannuation. The lateness was commonly one to two days but had been more on occasion. The Commission found that whilst the employer’s conduct was improper the circumstances did not leave the employee with no choice other than to resign.

The resignation was not found to be forced by the employer’s conduct.

Demotion

If a demotion involves a significant reduction in duties or remuneration, it may constitute a ‘dismissal’, even if the person demoted remains employed by the employer.^[20]

The employment contract may be repudiated when an employee is demoted, without consent, and suffers a significant reduction in pay.^[21] If the repudiation is accepted, either expressly or through conduct, the contract is terminated.^[22]

If the demoted employee remains in employment after accepting the repudiation they would be under a new contract of employment.^[23] However, a demoted employee may accept the repudiation and remain employed in the demoted position without agreeing to the demotion; that is, under protest or for financial or similar reasons.^[24]

If the employee’s contract or industrial instrument contains an express term allowing demotion without termination then any demotion will not amount to a termination.^[25]

Case example

Demotion a dismissal

Significant reduction in remuneration

Johnson v Zehut Pty Limited T/A URBRANDS [2014] FWC 7496 (Boulton J, 10 November 2014).

The employee had worked for a clothing retailer for over 12 years, in a variety of roles including National Sales Manager and National Operations Manager. She was asked to manage a store that was performing poorly, and she agreed on the basis of the maintenance of her then current salary package.

Within a year the company sought to have the employee agree to a change in the terms of her contract of employment, equivalent to a reduction of over $30,000 per year. When the employee did not accept the change, the company treated her refusal to accept the new terms and conditions of employment as a resignation.

The Commission concluded that the actions of the company brought the employment relationship to an end, and found that the applicant was dismissed at the initiative of the employer. There was no valid reason for the dismissal, the termination of the employee’s employment was harsh, unjust or unreasonable.