Contributory misconduct reductions in unfair dismissal remedies.

• Author: Southey, Kim
• Position: Contributed Article - Report

Abstract

When an attempt to conciliate an unfair-dismissal claim fails, arbitration may be called upon to determine whether the dismissal was fair or unfair. In the event that the dismissal is deemed unfair, Australia's federal industrial tribunal can reduce the amount of compensation ordered for the worker if their conduct contributed to the dismissal. This article offers original insights about the application of contributory-misconduct provisions to unfair-dismissal remedies by Australia's federal industrial tribunal. A content analysis was performed on arbitration decisions concerning misconduct-related dismissals made between July 2000 and June 2010 that awarded a remedy to the worker. It was found that reductions to remedies were more highly associated with situations where employees engaged in production deviance, had longer service histories, and apologised for their behaviour. Within the 33 decisions that recorded a reduction to the remedy, three typical remedy discounts were identified: reduced back pay, no back pay, or part reductions to compensation. It is concluded that in broad terms, the reductions may provide some sense of restorative justice to the organisation in finalising an unfair-dismissal dispute. However, these reductions may have less meaning to individual victims where the worker's misconduct involved acts of inter-personal deviance.

1. Introduction

   Much of the academic review of unfair dismissal in Australia during the past decade has contended with the ongoing and significant reforms to the coverage and implications of dismissal protections under the federal industrial legislation (Forsyth 2012, Stewart 2012, O'Neill and O'Neill 2010, McCallum 2008, Chapman 2006). While the global literature on arbitral decision-making over dismissal claims is quite extensive, scholars have only more recently started to investigate and describe the influences at play during the settlement of unfair-dismissal claims within the Australian context (Freyens 2010, Southey and Fry 2010, Southey and Innes 2010, Mourell and Cameron 2009, Chelliah and D'Netto 2006). However, the primary interest in this article relates to those unfairly dismissed workers affected by the legislative provision that allows the tribunal member to reduce the amount of compensation when determining a remedy.

   Contributory-misconduct provisions currently exist within the Fair Work Act 2009, under Part 3-2, Division 4, Section 392. This article draws attention to the application in practice of this discreet and under-explored aspect of the legislation. The case history of unfair-dismissal arbitrations determined by Australia's federal industrial tribunal is peppered with decisions where the tribunal--in making an order for a remedy--incorporated some form of negative consequence for the unfairly dismissed worker. The contributory misconduct provision within Australia's federial industrial legisation serves as a reprimand to a worker for their role in the dismissal, despite that the dismissal itself was deemed to have been unfair.

   The first section of this article identifies the jurisdictional boundaries of the current Fair Work Act 2009 for remedying an unfair dismissal. After which the discussion considers how since the introduction of unfair-dismissal provisions in The Workplace Relations Act 1996 members of the tribunal have used sections of previous industrial legislation to discount remedies. This is followed by an analysis of misconduct-related arbitration decisions that favoured the worker, yet also recorded a discount to the worker's remedy. By identifying potential influencing characteristics on arbital decision-making from the literature, a content-analysis methodology is used to identify the presence of these potential variables in the relevant arbitration decisions. In order to come to some understanding as to why some workers incurred a discounted remedy while others did not, the logical comparison group in the analysis consists of employees who succeeded in their claims without incurring reduced remedies. Finally, as the present legislation does not directly stipulate the form that the reductions should take, this article seeks to describe the nature of the discounts imposed on the remedies.

2. Unfair Dismissal Remedies and Contributory Misconduct in Australia's Federal Legislation

   Australia's unfair-dismissal provisions are contained in Part 3-2 of The Fair Work Act 2009. In the event that the federal tribunal--at present the Fair Work Commission (FWC)--determines that an employee's dismissal is unfair, Section 390 of the Act empowers the member of the FWC to order a remedy. Section 391, subsection (1) permits an order for reinstatement, which involves reappointing the dismissed worker to the position they held immediately prior to their dismissal. If this is not possible, the dismissed worker may be re-employed in another position on terms and conditions no less favourable than those on which the person was employed immediately before the dismissal. An order can also be made to maintain the employee's continuity of service under subsection (2), and (or) to restore lost pay under subsection (3).

   Alternatively, Section 392, subsection (1), allows an order for compensation in lieu of reinstatement. Based on the 'fair go all round' principle, subsection (2) requires the tribunal member to take into account the effect of the order on the viability of the employer's business before making an order for financial compensation. This subsection also requires the member to take into account the employee's length of service and the remuneration they would have received had no dismissal occurred, less the amount of any remuneration earned by the employee from other work since dismissal. Subsection (4) states that the compensation 'must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person's dismissal'. And, under subsection (5), compensation is capped at half the amount of the high-income threshold. The present income threshold for making a claim is $129,300 (FWCa 2014), which caps compensation at $64,650. However, of central interest to this article is the remedy provision under subsection (3), which empowers members of the FWC to reduce the amount of compensation in the case of misconduct. Specifically, Section 392 subsection (3), states:

   Misconduct reduces amount

   (3) If the FWC is satisfied that misconduct of a person contributed to the employer's decision to dismiss the person, the FWC must reduce the amount it would otherwise order under subsection (1) by an appropriate amount on account of the misconduct. This clause first appeared in legislation through the 2006 Work Choices amendments to The Workplace Relations Act 1996, under Part 12, Division 4, Section 654 (Chapman 2009). However, the legislation was not always so direct and specific about reducing compensation in recognition of the employee's misconduct. While under the operation of The Workplace Relations Act 1996, tribunal members relied upon Section 170CH(4) of the 1996 Act to penalise workers for contributory misconduct. This Section empowered the Australian Industrial Relations Commission (AIRC) to make any order appropriate to cause the employer to pay the employee an amount in respect of remuneration lost by the employee because of the termination.

   The Full Bench of the AIRC reinforced this interpretation in Kenley and JB Hi Fi (2000 in S7235, paragraph [36]) by stating:

   In summary we think that the discretion conferred by s.170CH(4) is general in nature and it is to be exercised having regard to the context in which it appears and the scheme of The Workplace Relations Act 1996 as a whole. In deciding whether or not it is appropriate to make an order in respect of lost remuneration we think that the Commission may properly take into account all of the circumstances of the case, including the conduct of the Applicant which led to the termination of employment in question. Tribunal members also relied upon the 'fair go all round' requirements under Division 4, Section 635(2) of the 1996 legislation to administer penalties. For instance, Commissioner Mansfield in Balica and Toyota (2004 in PR945518, p. 10) was of the opinion that:

   Toyota must receive a fair go', along with Balica in any order I make. My order requires Balica to be reinstated but with an effective penalty of around $10,000 loss of remuneration. He is required to provide an apology and an undertaking to his workmates and the company regarding good behaviour in the future. He needs to also understand that Toyota may also issue a final warning regarding his behaviour on 22 September, 2003. Balica will suffer a significant penalty but will be re-employed by Toyota and potentially enjoy higher levels of remuneration and a better quality of life than he otherwise would. Overall I believe this outcome provides a fair go all round' to the Parties. The analysis of arbitration decisions favouring workers presented later in this article reveals that in most cases, tribunal members do not discount the worker's compensation for contributory misconduct. When contributory misconduct penalties are applied, it is with the view to make employees aware that despite 'winning' their unfair-dismissal claim, they too must bear some accountability for the situation. Commissioner Smith captures this attitude in Curiso and SPC Ardmona (2006 in PR974216, p. 2) by stating:

   I am not persuaded to grant an order causing the employer to pay the full amount of remuneration lost. I think it is appropriate to make an order which has regard to the conduct of Mr Cursio. He is not blameless and should not be seen to be so (emphasis added). The gravity of the misconduct is not an apparent factor in the decision to discount a remedy. Logically, contributory-misconduct discounts should be associated with misconduct deemed...