The Fair Work Commission recently dealt with a significant case that raises questions about employment contracts and the rights of employers and employees. The case centred around whether an employee’s decision to begin a new job while on extended leave from her current employer could be considered a repudiation of her employment contract, and whether the subsequent actions by the employer constituted unfair dismissal under the Fair Work Act.
The Case Background
The employee in question, a senior designer, had been with her original employer since March 2022. In June 2023, she went on extended leave due to a medical condition and subsequently filed a workers’ compensation claim. While still officially employed and on leave, she accepted a new job with another company in February 2024, without notifying her original employer.
The employment contract she had with her original employer explicitly prohibited engaging in any other employment or business activity without prior consent. Despite this clause, the employee did not seek permission before taking on her new role.
In March 2024, the employee requested annual leave for early April from her original employer. This request led to the employer investigating her current status, during which they discovered her new employment.
Key Legal Arguments
Upon learning about the employee’s new job, the original employer sent a letter on April 4, 2024, claiming that the employee had repudiated her contract by accepting another position without permission. The employer argued that this act of repudiation meant that the employment relationship had effectively ended back in February when she started the new role.
The employee responded by filing an unfair dismissal claim, asserting that the employer’s actions amounted to a dismissal. The employer countered by arguing that their letter merely accepted the employee’s repudiation of the contract, which did not constitute a dismissal initiated by them, as defined under the law.
The employee’s legal representative contended that even if the employee had engaged in repudiatory conduct, the employer’s act of sending the termination letter still amounted to a dismissal. They argued that allowing employers to sidestep unfair dismissal claims through such contractual arguments could undermine the Act’s protections for employees.
Analysis
The FWC’s analysis focused on the definition of “dismissal” under section 386 of the Fair Work Act. A key question was whether an employer’s acceptance of an employee’s alleged repudiation could be seen as a termination that was not initiated by the employer.
The FWC member reviewed various legal precedents on repudiation and dismissal, considering whether the employer’s actions aligned with the intended operation of the Fair Work Act. They concluded that even if the employee had breached her contract, the employer’s decision to send the termination letter in April amounted to a dismissal initiated by the employer.
The member emphasised that requiring the resolution of complex contractual disputes before addressing unfair dismissal claims contradicts the Fair Work Act’s aim for a quick, informal, and non-technical approach. They reasoned that an employer should not be able to choose between summarily dismissing an employee for serious misconduct or accepting repudiation to terminate the contract at the employee’s initiative.
Conclusion and Implications
The employee was dismissed within the meaning of the Fair Work Act when the employer sent the termination letter. This decision underscores that employers cannot avoid unfair dismissal claims by framing a termination as merely accepting an employee’s repudiation.
The case has been scheduled for a conference to address the substantive unfair dismissal claim. This ruling serves as a crucial reminder for employers to manage terminations carefully, even in situations where an employee may have violated their contract. The decision highlights the importance of understanding the legal complexities surrounding employment contracts and the protections provided by the Fair Work Act.
