Employer contends worker's decision to secretly take new job repudiated contract
The Fair Work Commission (FWC) recently dealt with a case involving a worker who claimed she was unfairly dismissed after starting a new job while on extended leave from her original employer.
This case highlighted the complex interplay between employment contracts, workers' compensation claims, and the definition of dismissal under the Fair Work Act.
It raised important questions about when an employer's actions constitute termination of employment, even if framed as accepting an employee's repudiation of their contract.
Background of the case
The worker had been employed as a senior designer since March 2022. She went on extended leave in June 2023 due to a medical condition and filed a workers' compensation claim. While still employed and on leave, she accepted a new position with another company in February 2024 without informing her original employer.
The worker's employment contract explicitly stated that she must not "without the prior consent of the Company, engage in any other business activity or employment." However, she did not seek permission before accepting the new role.
In late March 2024, the worker requested annual leave from her original employer for early April. This prompted the employer to investigate her status, leading to the discovery of her new employment.
Key arguments
When the original employer learned of this new job, they wrote to the worker on 4 April 2024 stating she had repudiated her employment contract by taking another job without permission.
The employer claimed this meant her employment had terminated back in February when she started the new role.
The worker filed an application with the FWC alleging unfair dismissal. The employer objected, arguing there was no dismissal at their initiative as required under the Fair Work Act definition.
The employer contended that by accepting other employment without permission, the worker had repudiated her contract. They argued their letter in April merely accepted this repudiation, rather than constituting a dismissal at their initiative.
The worker's representative argued that even if there was repudiatory conduct, the employer's action in sending the termination letter still amounted to dismissal under the Fair Work Act. They emphasised that allowing employers to avoid unfair dismissal claims through contractual arguments would undermine the Act's protections.
Commission's analysis of "dismissal"
The FWC analysed the definition of "dismissal" under section 386 of the Fair Work Act. They considered whether an employer accepting an employee's alleged repudiation could result in termination not being at the employer's initiative.
The member examined various legal authorities on repudiation and dismissal, including High Court decisions and previous FWC rulings. They noted that repudiatory conduct by an employee typically gives an employer the right to summarily dismiss, rather than automatically ending employment.
As the FWC member explained:
"I consider having to determine complicated contractual issues concerning repudiation and acceptance prior to considering the unfair dismissal and general protections provisions is contrary to a quick, informal and non-technical approach."
Ultimately, the member rejected the employer's interpretation as inconsistent with the Fair Work Act's intended operation. They reasoned:
"I consider it would be an extremely odd outcome if an employer who is alleging that an employee has committed a serious and repudiatory breach of their employment contract can select whether to summarily dismiss the employee at the employer's initiative or alternatively accept repudiation and have the employment terminate at the employee's initiative."
The FWC found that even if the worker had repudiated her contract, the employer's letter in April constituted dismissal at their initiative under the Act.
Conclusion and implications
The FWC ruled that the worker was dismissed within the meaning of the Fair Work Act when the employer sent the termination letter in April 2024. As the member explained:
"I consider this was an action on the part of [the employer] which was the principal contributing factor which resulted in the termination of the employment. I consider [the employer] summarily dismissed [the worker] on 4 April 2024 purportedly because she had commenced alternative employment with [another company] without its permission in breach of her employment contract."
This decision emphasises that employers cannot necessarily avoid unfair dismissal claims by framing termination as acceptance of an employee's repudiation. The FWC member noted:
"I do not accept that is the intended operation of the FW Act."
Consequently, the case has been directed to proceed to a conference to address the substantive unfair dismissal claim. This ruling highlights the importance of carefully managing terminations, even when an employee may have breached their contract.
Employers should seek advice before attempting to rely on contractual repudiation arguments to avoid unfair dismissal provisions.
