[Note: refer to the Federal Court decision dated 23 July 2014 [2014] FCAFC 89 for result of appeal.]

[2013] FWCFB 6191
FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.604—Appeal of decision

B, C and D
v
Australian Postal Corporation T/A Australia Post
(C2011/6623)

VICE PRESIDENT LAWLER
SENIOR DEPUTY PRESIDENT HAMBERGER
COMMISSIONER CRIBB

SYDNEY, 28 AUGUST 2013

Appeal against decision [[2011] FWA 7126] of Commissioner Lewin at Melbourne on 4 November 2011 in matter numbers U2010/15319, U2010/15398, U2010/15320 - Appeal – unfair dismissal – emailing pornography in breach of policy – dismissal may be harsh, unjust or unreasonable notwithstanding valid reason – correct approach to assessing valid reason – correct approach to assessing whether dismissal is harsh, unjust and unreasonable notwithstanding a finding that there was a valid reason for dismissal..

REASONS FOR DECISION OF VICE PRESIDENT LAWLER AND COMMISSIONER CRIBB

[1] This Full Bench has before it applications for permission to appeal and cross-appeal against a decision ([2011] FWA 7126) in relation to unfair dismissal applications brought by three employees of Australia Post. Section 400 applies to each of the appeals and, accordingly:

[2] This is not a case where there is any serious challenge to the Commissioner’s primary findings of fact.

[3] There is an emerging trend in the decided cases towards regarding the accessing, sending or receiving and storing pornography by an employee as a form of serious misconduct that invariably merits termination of employment. Such a proposition is inconsistent with basic principle. Accessing, sending or receiving and storing pornography is not a separate species of misconduct to which special rules apply. In the context of an application for an unfair dismissal remedy, it is a form of misconduct to which the same general principles apply as apply in all unfair dismissal matters involving reliance on misconduct.

[4] We are satisfied that the emerging prominence of dismissals based on pornography related breaches of employer policy, and a concern that the decision of the Full Bench in Queensland Rail v Wake (2006) 156 IR 393 (Queensland Rail) is being misinterpreted, supplies the public interest required for grant leave to appeal in this case. This case proves to be a suitable vehicle to address that matter of public interest. We grant permission to appeal. Having granted permission to appeal, the appeal proceeds as a rehearing albeit that the Full Bench cannot exercise any of the powers conferred by s.607(3) unless error is established: Coal and Allied Operations Pty Ltd v AIRC (2001) 203 CLR 194 at [17] and [32].

The relationship between “valid reason” and “harsh, unjust and unreasonable”

[5] This appeal has highlighted a tension or ambiguity in the jurisprudence going to what is encompassed by the expression “valid reason” in s.387(a) of the Fair Work Act 2009 (Cth) (FW Act). That tension or ambiguity is rooted in the history of the unfair dismissal remedy. It is an issue that needs to be considered in some detail.

[6] An unfair dismissal remedy was first provided in Federal industrial legislation in 1993. Section 170DE of the Industrial Relations Act 1988 (IR Act 1988) was inserted by the Industrial Relations Reform Act 1993 (Cth) (1988 Reform Act). It provided:

[7] In other words, when the unfair dismissal remedy was first enacted, the existence or otherwise of a “valid reason” for dismissal was the determinant of whether or not the dismissal attracted an unfair dismissal remedy. Subsection (1) contained a prohibition against termination unless there was a valid reason. Subsection (2) invalidated a reason if the ‘harsh unjust or unreasonable’ criterion was met.

[8] The constitutional validity of s.170DE and other provisions introduced by the 1988 Reform Act was challenged in Victoria v The Commonwealth (1996) 187 CLR 416. The enactment of s.170DE had relied on the external affairs power and the Termination of Employment Convention to which Australia had subscribed. The High Court held that s.170DE(2) was invalid but severable. The majority concluded (at 517-9):

[9] In 1996 the Workplace Relations and Other Legislation Amendment Act 1996 (WROLA Act) effected substantial amendments to the IR Act 1988 – including to the termination of employment provisions - and renamed it the Workplace Relations Act 1996 (WR Act 1996). The termination of employment provisions in subdivisions A, B, C and CA of Division 3 of Part VIA of IR Act 1988 were repealed and replaced.

[10] Those amendments (introduced into the Parliament before the decision in Victoria v Commonwealth was handed down) shifted the primary focus of the Commission’s inquiry from a consideration of whether or not there was a “valid reason” for the dismissal to whether the dismissal was “harsh, unjust or unreasonable”. A new s.170CA specified a new “principle object” of Division 3. The object in s.170CA(1)(c) was “to provide for remedies appropriate to a case where, on arbitration, a termination is found to be harsh, unjust or unreasonable.”

[11] Following those amendments, a ‘federal system’ employee could apply to the Commission for an unfair dismissal remedy “on the ground that the termination was harsh, unjust or unreasonable” (s.170CE). Section 170CG(3) of the WR Act 1996 conferred a power of arbitration on the Commission, following unsuccessful conciliation. That provision specified a series of matters that the Commission “must have regard to” in determining whether a termination was “harsh, unjust or unreasonable” including:

[12] Pursuant to s.170CH the Australian Industrial Relations Commission could make an order that provided a remedy if it had “determined that the termination was harsh, unjust or unreasonable.”

[13] The list of matters specified in s.170CG(3) has been adjusted by amendment, but the basic structure for grounding the unfair dismissal remedy – a finding that the dismissal was “harsh, unjust or unreasonable”, with the existence of a “valid reason” being only one of a number of matters that the Commission was required to consider - has remained unchanged through successive amendments to the WR Act and in the current unfair dismissal regime in the FW Act. Section 387 of the FW Act contains the current incarnation of the list of considerations, first introduced in 1996 in s.170CG(3) of the IR Act 1988, for determining whether a dismissal is “harsh, unjust or unreasonable”. Section 387 of the FW Act provides:

[14] At the time of the Commissioner’s hearing and decision, s.387 referred to “FWA” rather than “FWC”. The change of name and statutory references has occurred since. We will refer to the relevant provisions of the FW Act in their current form and note that they were otherwise identical.

[15] It is important to appreciate that the WROLA Act amendments inverted the previous priority of consideration. Under s.170DE of the IR Act 1988, as enacted, the focus was on “valid reason”, with a finding that the dismissal was “harsh, unjust or unreasonable” merely constituting a way of concluding that there was “no valid reason” for the dismissal. By virtue of s.170DE(2), dismissals that were harsh, unjust and unreasonable were a subset of dismissals where there was no valid reason for dismissal. After the amendments affected by the WROLA Act the focus was on whether the dismissal was “harsh, unjust or unreasonable”. The existence of a “valid reason” was relegated to one of a number of matters that the Commission was required to consider in determining whether the dismissal was “harsh unjust or unreasonable”.

[16] It may be noted that this inversion did not occur in a vacuum. A number of Federal awards contained provisions that required respondent employers to refrain from dismissing an employee if to do so would be “harsh, unjust or unreasonable”1 (with the consequence that a number of the authorities on the meaning of that expression occurred in the context of a dispute over the application of such award conditions – Byrne v Australian Airlines (1995) 185 CLR 410 is an important example). New South Wales had already established an unfair dismissal regime based on whether the dismissal was “harsh, unjust or unreasonable”. The note to s.170CA of the WR Act 1996 suggested a legislative intent that the NSW general approach to unfair dismissal was being adopted and endorsed in the new Federal unfair dismissal regime introduced by the WROLA Act.

Meaning of “valid reason”

[17] There are numerous Full Bench decisions of the Commission and its predecessors that endorse and apply the statement of principle by Northrop J in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 (Selvachandran) that “a valid reason is a reason that is sound, defensible or well-founded”. Selvachandran was decided in 1995 under the original 1993 regime. That is, before s.170DE(2) had been declared unconstitutional in Victoria v Commonwealth. Under that pre-inversion regime in s.170DE of the IR Act, matters such as proportionality, inconsistent treatment, condonation and other matters that mitigated against a termination being fair in all the circumstances were considered within the rubric of “valid reason” because that was the ultimate determinate of liability in s.170DE.

[18] A consideration of the post-inversion unfair dismissal decisions of the AIRC following the 1996 WROLA Act demonstrates that such matters were still frequently considered under the rubric of “valid reason”. When the cases refer to Selvachandran, it is almost invariably cited simply as authority for the proposition that a “valid reason” is a reason that is “sound, defensible or well-founded”. Sometimes the additional observation that “a reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason” is also quoted. Those observations, quoted in isolation, do not illuminate the narrowing of the conception of ‘valid reason’ necessarily affected by the inversion.

[19] However, it is instructive to set out Northrop J’s full consideration of the meaning of “valid reason” in s.170DE of the IR Act 1988 provided in Selvachandran:

[20] Northrop J’s reasoning anticipated the reasoning of the High Court in Victoria v Commonwealth – that s.170DE(2) by its operation could render invalid a reason that would otherwise have been a valid reason. The fact that some dismissals are “harsh, unjust or unreasonable” notwithstanding the existence of a “valid reason” means that the class of dismissals that are “harsh, unjust or unreasonable” is greater than the class of dismissals where there is no “valid reason” for the dismissal.

[21] Section 387 specifies a range of matters that must be considered in each case. Section 387(h) requires consideration of “any other matters that FWA considers relevant”. In any given case, there will be a range of matters, beyond those specified in s.387(a) to (g), that rationally bear upon whether the dismissal is “harsh, unjust or unreasonable” and thus are “relevant matters” that must be considered pursuant to s.387(h).

[22] Often it will not make any difference to the ultimate outcome whether a particular circumstance is considered pursuant to s.387(a) in determining whether there is a valid reason, or as a relevant matter pursuant to s.387(h), leading to the ultimate determination of whether the dismissal was “harsh, unjust or unreasonable”. However, in some cases it may matter greatly. That will tend to be so when the particular misconduct, shorn of the personal circumstances of the employee and the broader context beyond the particular acts or omissions that are said to constitute the misconduct, is clearly a matter that a reasonable employer is entitled to take seriously. This is such a case.

The Exceptional Facts in Queensland Rail

[23] At this point it is desirable to comment at some detail on the facts in Queensland Rail. The facts and circumstances in Queensland Rail were exceptional because, as the Full Bench noted (156 IR 393 at [27]), the employer (QR), “made sustained efforts over a number of years to make employees aware of its policy and the consequences of breaching the policy”.

[24] Those efforts were outlined by the Commissioner at length in the decision at first instance (PR973936). There is no suggestion in the Full Bench’s reasons that it rejected any of the Commissioner’s findings in that regard. On the contrary, the Full Bench set out and endorsed key portions of the Commissioner’s findings. It is useful to set out a detailed summary of the Commissioner’s findings because they demonstrate the truly extraordinary steps taken by the employer in that case to deal with the problem of inappropriate use of its IT system.

[25] At all material times QR had policies against the inappropriate use of its computer systems to access pornographic material, sexually explicit messages, images, cartoons, jokes or to send or distribute offensive material. For example, its 2001 policy stated: “Any QR employee found to be in breach of this statement will be subject to disciplinary action which may result in dismissal”. (PR973936 at [11]). In August/September 2002 a video entitled “Employment Equity: It’s Everyone’s Business” was distributed throughout QR. The video specifically covered the appropriate use of QR’s computer systems. There was a specific example on the video on misuse of email. The employee was shown this video on 15 November 2002. (PR973936 at [14]).

[26] In March 2003 QR required all employees to read and electronically acknowledge appropriate use of QR’s systems. (PR973936 at [15]) This was in addition to the standard “QR legal notice” that an employee had to acknowledge each time they logged on to the QR network. This notice advised employees that the system is for business purposes and that unauthorised use is not acceptable and had to be accepted as a precondition to logging on to the network (PR973936 at [34]).

[27] It is clear that QR recognised that it had a cultural problem with the sending and receipt/storage of pornography and other inappropriate material by employees. It took active and sustained steps to address the problem over an extended period. In late 2004, QR, through its CEO, determined that it would take sustained and serious action against the inappropriate use of its electronic communications system. The following occurred:

[28] This is the context in which the Full Bench reached the conclusion on the rehearing that upheld the dismissal of the employee notwithstanding his long service of 27 years. The Full Bench stressed that “in this case the Appellant went to great lengths to alert employees to the policy and to warn them that breaches would lead to dismissal.” And that, “[d]espite this the employee breached the policy on a number of occasions in a substantial way” (156 IR 393 at [27]). In the special circumstances of that case, the Full Bench held that “[w]hile appreciating that loss of employment is a bitter blow, we see no proper basis on which the Commission might properly intervene to reverse the employer’s decision in this case”.

[29] At first instance in Queensland Rail, the Commissioner had placed determinative weight on the very long service of the employee in finding that the dismissal was harsh. The Full Bench addressed a concern that “[t]he Commissioner’s approach might well be interpreted to mean that employees with long service ought be immune from termination of employment unless guilty of breaches of the policy involving large amounts of ‘hard core’ pornography” and noted: “We think that an employer is entitled to take a firmer line than that.” (156 IR 393 at [17]) The Full Bench then immediately placed emphasis on the fact that the employer went to “great lengths to alert employees to the policy and to warn them that breaches would lead to dismissal” as if to underscore the obviously correct proposition that long service does not render an employee immune from termination for breach of policy.

[30] The Full Bench made an important concluding observation (156 IR 393 at [23]):

[31] This is properly to be seen as a reassertion of the basic principle that in each case, whether a termination is “harsh, unjust or unreasonable”, must be decided on the facts and circumstances of the particular case. The Full Bench expressly contemplated that, in a different case, the particular circumstances might render a termination for a pornography related breach of policy harsh, unjust or unreasonable notwithstanding the policy stating that any deliberate breach will result in termination. The decision in Queensland Rail is inconsistent with the proposition that there is any automaticity in concluding a termination based on pornography-related misconduct will not be harsh, unjust or unreasonable.

[32] The Full Bench of the Industrial Relations Commission of NSW read Queensland Rail in a similar way in Budlong v NCR Australia Pty Limited [2006] NSWIRComm 288:

[33] We respectfully endorse that analysis.

Emailing pornography in breach of policy as misconduct for which dismissal is not harsh, unjust or unreasonable

[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.

[37] A prohibition on using an employer’s IT system to access, send or receive and store pornography or other unacceptable material is a lawful, rational and reasonable policy for an employer to implement for a number of reasons that are not related to any moral offence at pornography. The main reasons are:

[38] It is the first of these reasons that arguably is the most important. In Queensland Rail the Full Bench observed:

[39] The Full Bench in Queensland Rail noted that “[t]he use of company electronic communications systems for storage and transmission of images containing sexually-related, pornographic and violent material is a serious and socially important issue.” (para [22]) A policy against such material supports the employer’s duty of care owed to all its employees and the concomitant duty to provide employees with a safe working environment free from discrimination and harassment, including sexual discrimination and harassment. Pornography accidentally seen by another employee can cause offence and distress. Deliberately sending or showing pornography to another employee uninvited is a well recognised form of sexual harassment. Policies prohibiting the sending or receipt and storage of pornography rationally and reasonably assist in the discharge of those duties and in limiting potential legal liability in relation to employees but also clients, customers or other third parties.

[40] Thus, the accessing, sending or receipt and storage of pornography will typically contravene an employer policy and, adopting the approach set out above, that contravention will usually constitute a “valid reason” for termination (that matter being determined from the perspective of the employer).

[41] Nevertheless, it remains a bedrock principle in unfair dismissal jurisprudence of the Commission that a dismissal may be “harsh, unjust or unreasonable” notwithstanding the existence of a “valid reason” for the dismissal”: Australian Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1; J Boag & Son Brewing Pty Ltd v John Button [2010] FWAFB 4022; Windsor Smith v Liu [1998] Print Q3462; Caspanello v Telstra Corporation Limited [2002] AIRC 1171; King v Freshmore (Vic) Pty Ltd [2000] Print S4213; Dahlstrom v Wagstaff Cranbourne Pty Ltd [2000] Print T1001; Erskine v Chalmers Industries Pty Ltd [2001] PR902746 citing Allied Express Transport Pty Ltd (1998) 81 IR 410 at 413; Qantas Airways Limited v Cornwall (1998) 82 IR 102 at 109; ALH Group Pty Ltd T/A the Royal Exchange Hotel v Mulhall [2002] PR919205. That principle reflects the approach of the High Court in Victoria v Commonwealth and is consequence of the reality that in any given case there may be “relevant matters” that do not bear upon whether there was a “valid reason” for the dismissal but do bear upon whether the dismissal was “harsh, unjust or unreasonable”.

[42] Broadly speaking, circumstances bearing upon whether a dismissal for misconduct is harsh, unjust or unreasonable fall into three broad categories:

(1) The acts or omissions that constitute the alleged misconduct on which the employer relied (together with the employee’s disciplinary history and any warnings, if relied upon by the employer at the time of dismissal) but otherwise considered in isolation from the broader context in which those acts or omissions occurred.

(2) The broader context in the workplace in which those acts or omissions occurred. [This may include such matters as a history of toleration or condonation of the misconduct by the employer or inconsistent treatment of other employees guilty of the same misconduct.]

(3) The personal or private circumstances of the employee that bear upon the substantive fairness of the dismissal. [This includes, matters such as length of service, the absence of any disciplinary history and the harshness of the consequences of dismissal for the employee and his or her dependents.]

[43] The determination of whether there was a valid reason proceeds by reference to the matters in category (1) and occurs before there is a consideration of what Northrop J described as “substantive fairness” from the perspective of the employee. Matters in categories (2) and (3) are then properly brought to account in the overall consideration of the whether the dismissal was “harsh, unjust or unreasonable” notwithstanding the existence of a “valid reason”.

[44] This may best be illustrated by an example:

[45] At this point there is clearly a valid reason. Valid reason is viewed from the perspective of the employer. That view disregards issues of substantive fairness from the employee’s perspective and there is clearly a valid reason. The employer had a vital interest in limiting its legal liability from accident or injury associated with a breach of the road rules, especially using a mobile phone while driving. The employer’s policy was obviously reasonable. The employer was entitled to view compliance with its policy against the use of mobile phones by drivers in its public buses as a very serious matter. Now consider the following additional circumstances personal to the employee:

[46] It can be seen that those additional circumstances put a totally different complexion on the dismissal. In the case on which this example is based, the dismissal was held to be harsh, notwithstanding the existence of a valid reason, and the employee was reinstated. No backpay was ordered as a reflection of employee’s misconduct (see Nasrieh v ComfortDelGro Cabcharge Pty Ltd T/A Hillsbus [2012] FWA 9617). That outcome is consistent with the approach of Northrop J in Selvachandran. When issues of substantive fairness from the employee’s perspective were considered, the dismissal was harsh notwithstanding the existence of a valid reason viewing the conduct in isolation of the employee’s personal circumstances.

[47] In Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 41 IR 452 Sheppard and Heerey JJ observed (at p 460):

[48] Thus, a finding that an employee has failed to comply with policies and procedures does not mean that a dismissal is not harsh, unjust or unreasonable. The Commission has consistently applied the proposition that instant dismissal of an employee for non-compliance with his or her employer’s policies may, in the particular circumstances of an individual case, be harsh, unjust and unreasonable: Kangan Batman TAFE v Hart [2005] PR958003, Ross VP, Kaufman SDP and Foggo C at para [51]; Fearnley v Tenix Defence Systems Pty Ltd [2000] Print S6238, Ross VP, Polites SDP and Smith C (Fearnley) at [61]); Atfield v Jupiters Ltd (2003) 124 IR 217 (Jupiters) at [12]-[13].

[49] In Jupiters an employee had breached a policy prohibiting gambling. The Full Bench observed:

[50] In Fearnley an employee was dismissed for breaching a policy against fighting. The Full Bench upheld the Commissioner’s finding that because the employee was acting in self-defence there was no valid reason and the dismissal was harsh unjust or unreasonable.

[51] The principle just stated is equally applicable in cases of dismissal for misconduct in accessing or emailing pornography contrary to an employer’s policy. Any notion that a clear and knowing breach of policy will always provide a valid reason for a dismissal that will not be harsh, unjust or unreasonable, no matter the employee’s length of service and other circumstances, is inconsistent with basic principle. Every case must be assessed by reference to its particular circumstances.

[52] In pornography cases there will typically be no contest in relation to whether or not the misconduct – the breach of policy - occurred because the sending or receipt of the offending material will usually be proved unequivocally by computer records. 2 That is, in most cases there will be no contest as to the existence of a valid reason. But that is not the end of the inquiry. The bedrock principle to which we have referred means that an issue remains as to whether the dismissal was “harsh, unjust or unreasonable” notwithstanding the existence of that valid reason. Typically, as in this case, it will be the central issue.

[53] A determination as to whether a dismissal was harsh, unjust or unreasonable involves the application of a broad discretionary standard. The discretion is nevertheless one that must be exercised judicially, that is, in accordance with applicable legal principles. As noted, the key principle here is the principle that a dismissal may be harsh, notwithstanding the existence of a valid reason for dismissal, because it is disproportionate to the misconduct. The classic statement of principle comes from the judgement of McHugh and Gummow JJ in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 465:

[54] Their Honours noted that the distinction between procedure and substance is elusive and continued (185 CLR 410 at 466):

[55] Their Honours noted that the question of whether a dismissal is harsh, unjust or unreasonable “is not answered by imposing a disjunction between procedure and substance. It is important that matters not be decided simply by looking to the first issue before there is seen to be any need to enter upon the second.” (185 CLR 410 at 466).

[56] At first blush, there is a tension between these statements and the approach of Northrop J in considering the existence of a valid reason before considering issues of substantive fairness. However, that tension is more apparent than real. In Byrne v Australian Airlines the High Court was concerned with an award clause that prohibited dismissal if to do so would be “harsh, unjust or unreasonable”. The award clause made no reference to “valid reason”. Northrop J was concerned with a provision, s.170DE, that required, on its proper construction, the consideration of “valid reason” from the employer’s perspective before turning to considerations of substantive unfairness and thus whether the dismissal was harsh, unjust and unreasonable – a different issue. That is an approach which fits well with the form of the post-inversion unfair dismissal remedy.

[57] In Byrne v Australian Airlines (1995) 185 CLR 410 at 467 McHugh and Gummow JJ endorsed the observations of Sheppard and Heerey JJ in Bostik (Aust) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 at 28 in relation to the phrase “harsh, unjust or unreasonable”:

[58] Reaching an overall determination of whether a given dismissal was “harsh, unjust or unreasonable” notwithstanding the existence of a “valid reason” involves a weighing process. The Commission is required to consider all of the circumstances of the case, having particular regard to the matters specified in s.387, and then weigh:

[59] It is in that weighing that the Commission gives effect to a ‘fair go all round’.

[60] It needs to be stated clearly that a determination of whether a given dismissal for the sending or receipt and storage of pornography is disproportionate to the misconduct such as to be “harsh, unjust or unreasonable” involves a consideration of all of the circumstances and a weighing of the gravity of the misconduct against the various factors that mitigate against dismissal as a proportionate (fair) response to the misconduct, including, of course, factors subjective to the particular employee (such as age, length of service, service record etc) to determine whether those matters in combination rendered dismissal a disproportionate penalty for the misconduct such that it ought properly be characterised as “harsh” notwithstanding the existence of a “valid reason”.

[61] The formulation, implementation, dissemination and enforcement of polices are a matter within the prerogative of management. The almost infinite variety of businesses and their circumstances necessarily leads to great variability in employer approaches to those matters. In particular, there is great variability in the approach of employers to:

[62] Breaches of policy can often cover a spectrum from the trivial, minor or technical to the very serious.

[63] All or virtually all medium to large employers have a range of policies that employees are required to observe, including a policy against the accessing, transmission or storage of pornography and other unacceptable or inappropriate material and a policy against harassment and victimisation. Most employers train employees in the employer’s policies. Many if not most employers require employees to familiarise themselves with the employer’s policies. Many if not most employers have logon notices reminding employees using the employer’s IT system that they are bound by the employer’s policies. Common experience dictates that such policy training often does not result in enduring employee familiarity with the policies and that logon reminders become, as it were, part of the wallpaper.

[64] The nature of material that will come within descriptors such as “inappropriate”, “unacceptable” or “pornographic” and the like will present as a spectrum. The lines of delineation between appropriate and inappropriate or acceptable and unacceptable are not sharp because they are broad, even amorphous, terms in respect of which reasonable minds might differ. Emailing pornography to a friend or other willing recipient is objectively a less serious breach of policy than emailing pornography to unwilling recipients or for the purposes of harassment.

[65] Particular conduct may breach a policy so as to constitute a valid reason but dismissal for that conduct without prior specific warning may be harsh. For example, an employer may have a policy against swearing in the workplace. Such a policy is supported by the same key reason justifying an anti-pornography policy. Swearing in a workplace can lead to an environment where the risk of abuse, harassment and victimisation, and thus the potential legal liability of the employer, is increased. In each case the policy furthers the legitimate interest of the employer to maintain a workplace where conduct that may cause offence to other employees is minimised. However, one can readily hypothesise a case where the breach of a swearing policy would not be seen by any reasonable person as justifying dismissal. In a workplace where swearing occurs without warnings or disciplinary response, selecting a single instance of swearing by a stressed employee with long and unblemished service as a basis for dismissal would be seen by any reasonable person as harsh and unfair.

[66] In Byrne McHugh and Gummow JJ endorsed the decision in Lane v Arrowcrest Group Pty Ltd (1990) 27 FCR 427 at 456 in the following terms (1995) 185 CLR 410 at 467:

[67] Thus, a failure to monitor compliance or enforce a policy can be a relevant factor that weighs against a finding that a dismissal for breach of the policy was not harsh, unjust or unreasonable. If widespread breaches of policy, of the sort that occurred in this case, occur without an employer response then this weighs against a decision that the dismissal was justified and not harsh, unjust or unreasonable.

[68] Bearing in mind that, putting aside the effect of an employer’s policy, it is not unlawful for an employee to access or email pornography of the sort with which this case is concerned, generally speaking, if an employer wishes to elevate contravention of a policy against accessing or transmission of pornography and other unacceptable material on its IT system to the level where a breach of the policy constituted by a series of group emails of unacceptable material to willing recipients will be of an order of seriousness to justify a dismissal (especially of an employee with a substantial period of satisfactory service) that will likely be immune from a finding that it was harsh, unjust or unreasonable, then notions of ‘a fair go all round’ dictate that the employer must have taken adequate steps to bring home to employees that breaches will be treated seriously and will likely result in dismissal.

[69] If breaches of policy present as a spectrum of seriousness, particular mitigating factors that may make a dismissal harsh notwithstanding the existence of a valid reason also present as a spectrum. The adverse personal consequences of a dismissal tend to increase with age and duration of employment. For some employees, the loss of employment is not particularly damaging. A young, single employee with an in-demand trade or skill will likely find new employment very quickly. However, for an older employee without qualifications or a trade, dismissal can amount to a personal catastrophe and lead to long term unemployment, serious depression, loss of the family home, failed relationships and all of the myriad tribulations that flow from that for children.

[70] The point is that there are some forms of wilful misconduct (like deliberate fraud against the employer or a serious unprovoked assault) that will almost certainly merit dismissal irrespective of an employee’s length of service, good disciplinary record and personal circumstances. Employees do not need to be warned that such conduct will be treated seriously by the employer. (Albeit that, even then, it is possible construct extreme scenarios where it may be objectively unfair to dismiss the employee – for example, the misconduct occurred while the employee was suffering a one-off episode of automatism arising from a injury caused negligently by another employee). There are other forms of misconduct that are clearly not such as to merit summary dismissal but should be the subject of a warning or warnings or ‘active steps’ that bring home to the employee that the employer regards the conduct in question as serious and meriting dismissal before dismissal occurs, particularly where the employee has substantial service. That is so in the present case.

The circumstances in the present case

[71] The three employees in this appeal, Mr B, Mr C and Mr D, admitted sending the emails in question. Mr B, sent 6 unacceptable emails to his home email address and sent emails from his home email address to work friends at their Australia Post email address – one with a video attachment depicting an extreme pornographic act. Mr C sent 11 emails. Mr D, was a blue collar employee who did not have an Australia Post logon and was dismissed for sending multiple emails from his private home computer to groups who included work friends at their Australia Post email address.

[72] Mr Dwyer, the CEPU official who represented the employees at first instance, did not make a submission that there was no valid reason for the dismissals. The conduct was admitted and the case proceeded on the basis that there was a clear breach of policy (at least in the cases of Mr B and Mr C) 3. Mr Dwyer’s submissions proceeded on an assumption that there was a valid reason for the dismissals. Mr Dwyer’s written submissions were directed at establishing that the dismissals were harsh notwithstanding that the admitted breaches may have provided a valid reason for the dismissals.

[73] The breaches of policy in this case only attracted management attention and a disciplinary response as a result of the installation of a new software filter on the Australia Post email system. The new filter monitored email transmissions in and out of the system and could recognise and flag emails with image attachments likely to be pornographic. In this way instances of pornographic material being emailed by employees in the Dandenong Letter Centre (DLC) came to the attention of Human Resources and a decision was made to conduct an investigation. Partial searches of the stored emails of the individuals concerned, and Australia Post employees listed as recipients of the emails, revealed a large number of breaches involving a large number of employees at the DLC - including supervisors and managers within the DLC. The evidence established that Australia Post did not conduct a comprehensive search of stored email for all employees at the DLC. It follows that the number of employees engaging in the conduct in question may have been even higher than the number revealed by the investigations that were conducted.

[74] Australia Post conducted a disciplinary process in relation to some 40 employees. A number of employees were terminated, including the Appellants in this case. Others received a lesser sanction or warning. It appears that dismissal, rather than a warning or other lesser sanction, was determined by whether emails identified in the partial searches were sent or merely received and stored, the number of emails sent and the extremity of the attached material – with the inference available from Mr B’s circumstances that extreme material was effectively treated as meriting automatic dismissal.

[75] The Commissioner found that the dismissals of Mr R and Mr C were not harsh, unjust or unreasonable but that the dismissal of Mr B was harsh in all the circumstances. The Commissioner found that reinstatement was not an “appropriate” remedy for Mr B and awarded compensation. Mr C and Mr D appealed against the dismissal of their applications. Mr B appealed against the Commissioner’s refusal of the remedy of reinstatement. Australia Post cross-appealed in relation to the granting of Mr B’s application, contending that the Commissioner erred in finding that Mr B’s dismissal was harsh.

[76] Before the Commissioner, none of the Appellants disputed the misconduct alleged against them. A finding that there was a valid reason was inevitable and the only real issue was whether dismissal was a disproportionate disciplinary sanction so as to render the dismissals harsh. Nevertheless, most of the Commissioner’s decision is devoted to a consideration of “valid reason” (that is, the requirement in s387(a)).

[77] In relation to the material that the Appellants had transmitted, the Commissioner held:

[78] The Commissioner spelt out in some detail the rationale for the policy and the legitimate interests of Australia Post that the policy protected (see especially paras [24] to [26]).

[79] The Commissioner referred with apparent approval to the “distinction was drawn by Australia Post for disciplinary purposes, between an individual’s receipt of and access to inappropriate material and an individual sending, forwarding or distributing the inappropriate material” as “seemingly designed to protect the relevant interests of Australia Post and mitigate the objective risks by preventing the distribution, circulation and accumulation of the material giving rise to those risks” (para [23]).

[80] The matters specified in s.387(b) to (g) have no material bearing on the outcome of these appeals and the Commissioner’s treatment of them is not in issue.

[81] The Commissioner addressed the requirement in s.387(h) to consider other “relevant” matters as follows:

[82] The Commissioner gave his conclusions on the application of the statutory test in relation to each of the Appellants as follows:

Consideration

[83] Australia Post was correct to be concerned about the existence of a relatively large group of employees in the DLC who were using the Australia Post IT system to send and receive and store pornography and other unacceptable material contrary to its IT policy. Australia Post’s legitimate concerns about the sending and or receipt and storage of pornography by employees are based on the matters referred to in paragraph [30] above, not to any moral offence at pornography per se.

[84] As should be evident from the discussion above, there was clearly a valid reason for the dismissals in this case. Viewing the conduct from the employer’s perspective, as explained by Northrop J in Selvachandran, the employees engaged in conduct in breach of a reasonable policy that Australia Post was entitled to treat as an important policy and they did so generally knowing that the conduct was not permitted. Subject to a qualification in relation to Mr D, the breaches of policy by the employees were moderately serious but were certainly not in the most serious ‘category’. Most of the material was softcore pornography and no more salacious than material that might be viewed on free to air television almost any night of the week. A small amount of the material is properly classified as hardcore.

[85] The three Appellants all had substantial periods of satisfactory service (Mr D – 17 years, Mr B – 13 years and Mr C, 11 years). Dismissal for each of those employees was a serious matter that put them and their families at risk of significant personal hardship. When there is an objective focus on the reasons for the policy as a material consideration in assessing the seriousness of the breach, it is hard to see how the proper vindication of Australia Post’s interests warranted the termination of such long serving employees without prior warning for sending such material to willing recipients given the prior culture of toleration at the DLC and the absence of any evidence of the material travelling beyond willing recipients or friends who were not offended.

[86] In relation to Mr D, who did not have an Australia Post logon or email address and who sent emails from his home computer using his own private internet connection, there was an issue as to whether he could be said to have “used” Australia Post’s email system contrary to the policy. It is understandable that an employee could proceed on the basis that such conduct did not involve them “using” the Australia Post email system. However, in relation to the distribution of offensive material to persons within Australia Post, Australia Post is entitled to appeal to the employee’s duty of good faith and fidelity (or its “Our Ethics” policy) as a basis for contending that a reasonable employee ought to have realised that Australia Post would not approve of such material being sent into the Australia Post IT system from an employee’s private email address and that it ought not be done.

[87] In relation to Mr B, the material sent to his own home email address did not increase the relevant risk to Australia Post.

[88] In addition to long service, good disciplinary records and the harsh economic consequences for the Appellants and their families, Mr Dwyer had relied on a number of other matters before the Commissioner in contending that the dismissals were harsh, unjust or unreasonable. Those matters were set out in detail in a lengthy outline of final submissions. Matters on which those submissions focussed included:

[89] The Commissioner’s reasons do not contain any consideration of those matters under s.387(h) or in his overall consideration of whether the dismissals were harsh, unjust or unreasonable in paragraphs [39] and following. To the extent they were considered, that consideration occurred in the portion of the reasons dealing with “valid reason” (s.387(a)) and that consideration was scant.

No harm or damage

[90] The emails in question were invariably sent to friends who, apart from a single instance that did not go anywhere, were apparently content to receive the material. There was no evidence that any of the Appellants (or any other employee involved in the sending and receipt of such emails) had sent such material to employees recklessly. There was no evidence that any such material had accidentally been viewed by other employees, let alone in a way that caused offence so as to activate the legal liability risk that is the primary justification of the policy. There was no evidence of any complaints being received by management.

[91] There was no evidence of any particular harm or damage caused by the Appellants sending pornographic emails to friends. There was no evidence of any reputational damage to Australia Post in the form of an external recipient taking offence at such material emanating from the email address of an Australia Post employee. Moreover, Australia Post’s reliance on the risk of reputational damage needs to be addressed in the light of its apparent failure to monitor compliance with the relevant policies and take action against instances of non-compliance that came to the attention of management – including line management in a facility at the DLC. There, various managers had received offensive material over time but had taken no action to enforce the policy or warn employees against sending such material.

[92] The time and resource costs to Australia Post of the sending of the emails was necessarily very minor (this is not a case, for example, of employees imposing a time cost of the sort that is involved in an employee surfing pornography on the employer’s IT system when they are meant to be working).

[93] The Commissioner’s reasons do not address the absence of harm or damage which was a relevant factor relied upon by the Appellants. That was a relevant matter bearing upon the relative seriousness of the misconduct.

Culture

[94] The Commissioner made a number of observations on the “culture” argument in the course of considering whether there was a valid reason for the dismissal of each of the Appellants. The Commissioner noted the reliance of the Appellants on the existence of a culture of tolerance or condonaton at the DLC:

[95] The Commission commented:

[96] The Commissioner made other comments on this issue:

[97] The Commissioner summarised his conclusions as follows:

[98] The Commissioner then concluded:

[99] It is noted that the Commissioner’s express consideration of culture was confined to whether it “invalidated” the reason for decision. That is not the correct question.

[100] We agree with the submission on behalf of Australia Post that the evidence did not support the contention of the union that there was a culture of toleration or tacit condonation within Australia Post generally for the sort of policy breaches that occurred in this case – the emailing of pornographic and other unacceptable material to friends in a group email list. However, the evidence does support a finding that a culture of that type existed within the DLC that remained undetected by executive management until the new email filter was installed. A large volume of material of the sort subsequently identified as unacceptable had been circulating among a large number of employees including, as the Commissioner found, “individuals who fell within a very broad categorisation of those with managerial or supervisory positions”. As recipients, those individuals could see that the emails they were receiving were, more often than not, being copied to other employees. Over an extended period, no action was taken by any of those individuals. The primary facts found by the Commissioner call for a finding that the DLC was a workplace where there was a culture of toleration.

[101] As the Commissioner found, there was, at the DLC, an “extraordinary volume of email traffic” involving a large number of employees “over an extended period of time... without any relevant detection or action being taken by Australia Post”. And this notwithstanding that supervisors and junior managers in the DLC were aware of situation by virtue of themselves having sent or received unacceptable material by email. The absence of any active steps taken by Australia Post to bring home to employees that it regarded compliance with the policy as a serious matter, such that material breaches would sound in dismissal, was a “relevant matter” within the meaning of s.387(h) that was central to the case advanced on behalf of the employees. The existence of a culture over an “extended period” without any apparent attempts at monitoring or auditing compliance with the policy makes the need for some form of warning or ‘active steps’ before dismissal occurs even more obvious as a matter of “a fair go all round” in relation to employees with long service like the Appellants. If Australia Post had taken steps to monitor compliance with its policy and manage its risk it would have discovered the existence of the culture at a much earlier time and could have taken the required ‘active steps’ required to bring home to employees that the policy would be enforced with serious breaches resulting in dismissal. Indeed, the Commissioner noted at para [22] that “[t]he significance of the accumulation and circulation of such material is that it gave rise to a situation which was highly prejudicial to the interests of Australia Post and in respect of which due diligence by Australia Post in the management of the IT system was a necessary and reasonable requirement.” And yet the Commissioner appears to have taken no account of the Australia Post’s failure to satisfy that “necessary and reasonable requirement” in relation to the use of the email system at the DLC.

[102] The Commissioner’s reasons disclose that his express consideration of the “culture” relied upon by the Appellants as a relevant matter was confined to his explicit consideration of whether there was a “valid reason” for the dismissals. The issue was not whether the culture found by the Commissioner was such as to “invalidate the reason for the termination of the [Appellants’] employment”. The issue was whether the “culture”, in combination with the other mitigating factors applicable to each of the Appellants rendered the dismissal harsh, unjust or unreasonable – whether the culture, and the historical absence of monitoring and enforcement of policy within the DLC, rendered it harsh to dismiss an employee without any specific warning for breaches of policy of a type that had been widespread and unaddressed for an extended period. That is the primary significance of the underlying facts found by the Commissioner. The Commissioner’s reasons for decision do not expressly address that issue.

Absence of enforcement and warnings

[103] At least within the DLC, Australia Post did not take steps to monitor compliance with the relevant policies or enforce them. The evidence demonstrated that a large volume of pornographic emails had been sent by a large number of employees over an extended period without a management response, and this in circumstances where supervisors and managers were involved in sending and receiving such emails.

[104] There was no proximate prior warning to employees that Australia Post would treat such breaches of policy seriously to the point of dismissal for employees with long service. There was no evidence of notice being given to employees of the installation of the new email filter with a reminder of Australia Post’s stand on the policy.

[105] Australia Post did not take “active steps” to bring home to employees that Australia Post would treat such conduct seriously, let alone active steps of the sort taken by the employer in Queensland Rail. Australia Post had a policy that unambiguously prohibited most of the conduct in question (albeit that the policy is not expressed in terms that bring home to the employee the level of seriousness with which breaches will be regarded as reflected in the dismissal of the Appellants for the breaches found against them). The policies did not specify termination as the likely disciplinary sanction for breach.

[106] The Appellants, like all employees had had formal training sessions in that and other Australia Post policies in times past. There was a standard logon notice requiring compliance. So much will apply in the case of almost all larger employers with dedicated human resources specialists and a professional IT system. So much applied to the employer in Queensland Rail prior to the “active steps” taken over a period of years to elevate the employees’ appreciation of the seriousness that the employer was attaching to compliance with its IT policy and upon which the Full Bench placed determinative reliance. Contrary to the submission on behalf of Australia Post, the present case is clearly distinguishable from Queensland Rail precisely because Australia Post did not take “active steps” of that sort before resorting to dismissal for breach of the policy. The Appellants in this case were dismissed without a second chance provided by a specific warning or a general warning in the form of active steps of the sort considered in Queensland Rail. Unlike the employer in Queensland Rail, Australia Post did not:

[107] Lest there be any confusion, we are not to be taken as holding that the particular set of steps taken by the employer in Queensland Rail represent a minimum or a yardstick: the employer in Queensland Rail went to extraordinary lengths. It was repeated breaches of policy in the face of those extraordinary steps that justified the dismissal of an employee with 27 years’ service. Each case must be considered by reference to its own particular circumstances.

[108] Bearing in mind the context we have elaborated, Australia Post did not do anything in particular to bring home to employees that breaches of policy of the sort that had been occurring in the DLC (over an extended period and involving supervisors and managers) without a management response would be treated so seriously as to result in the dismissal for the sort of conduct engaged in by the Appellants. That is a factor that weights materially in favour of a finding that dismissal for the Appellants was a harsh response to the misconduct. The observation in Lane v Arrowcrest Group Pty Ltd (1990) 27 FCR 427 at 456 referred to above is apposite.

Disparate treatment

[109] Mr Dwyer made lengthy submissions by reference to a large volume of evidence on the topic of disparate treatment. We do not propose to set out that lengthy material. To observe, as the Respondent has done, that other employees who received a lesser sanction, or no sanction at all, did not send as many emails as the Appellants, or did not send material that was as hard core as some of the material sent by the Appellants - albeit that Mr Dwyer demonstrated that many of the particular attachments sent by the Appellants had also been sent by other employees or received by a manager - is to miss the point of Mr Dwyer’s arguments. In all cases the species of misconduct was the same. The lenient approach shown to other employees jars in comparison to the decision to dismiss the Appellants notwithstanding differences in the numbers of emails sent and the nature of the attachments. The Commissioner appears to have approached this aspect of the matter on the basis that it was open to the decision-maker to view the misconduct of the Appellants as more serious. That is not the issue. It is for the Commission to assess the seriousness of the misconduct in all the circumstances and weigh that misconduct against the mitigating factors.

Terminations were harsh

[110] On the rehearing, given the factors we have discussed and weighing the seriousness of the misconduct against the factors mitigating against dismissal, we conclude that the misconduct did not warrant dismissal and that in each case the dismissal was harsh. In particular, the culture that existed at the DLC, and the historical absence of monitoring and enforcement of policy within the DLC, rendered it harsh to dismiss employees such as the Appellants, without any prior warning, for breaches of policy of a type that had been widespread and unaddressed for an extended period. That conclusion is enforced by a consideration of the examples relied upon by Mr Dwyer in relation to treatment of the same species of misconduct by other employees, especially (junior) managers. In relation to Mr B, we adopt the Commissioner’s findings against the contention that Mr B had been misleading during the investigation.

Error

[111] Depending upon how one interprets various of the Commissioner’s observations, the Commissioner either failed to take into account relevant matters or failed to accord those matters adequate weight in the relevant sense: the Commissioner’s failure to address the thrust of the Appellants’ reliance on manifestly relevant matters - the culture at the DLC, the absence of relevant warnings and disparate treatment - amounted to a failure to exercise the discretion actually entrusted to the Tribunal (cp Mallet v Mallet (1984) 156 CLR 605 at 614). This constitutes error within House v The King (1936) 55 CLR 499 at 505.

Conclusions

[112] In relation to the matters specified in s.387:

[113] On the rehearing, and weighing the seriousness of misconduct against the matters that militate against dismissal being not “harsh, unjust or unreasonable”, for the reasons we have given, we find that, in all the circumstances, each of the each of the dismissals was harsh.

[114] The grant of a remedy is governed by s.390 of the FW Act.

[115] There is no dispute that the Appellants were protected from unfair dismissal at the time of being dismissed. The only issue in relation to whether the Appellants had been unfairly dismissed was whether their dismissal was harsh, unjust or unreasonable. Each of the Appellants made an application under s.394.

[116] Having concluded that each of the dismissals were harsh, we are also satisfied that each of the Appellants was unfairly dismissed such that the requirement in s.390(1)(b) is satisfied. We are satisfied that, in the circumstances we have set out, a remedy is appropriate.

[117] The language of s.390 demonstrates that the legislature intended reinstatement to be the primary remedy where FWC was satisfied that the discretion to order a remedy was exercised. The plain words of s.390(3) prohibit FWC from ordering compensation unless FWC is affirmatively satisfied that “reinstatement of the person is inappropriate”.

[118] Given the time that has elapsed since the decision of the Commissioner, and the scope for changed circumstances that may bear upon the issue of whether reinstatement is appropriate, we have decided not to determine remedy ourselves but instead remit the issue of remedy to Vice President Lawler for determination. In making that remitter, we make the following observations:

(a) On the present state of evidence we are not satisfied that reinstatement is inappropriate for each of the Appellants. Indeed, we are affirmatively satisfied that reinstatement with continuity of employment is appropriate. There is nothing about the conduct of Appellants that could reasonably be taken to have undermined fundamental trust and confidence in the employment relationship. It is unlikely that any of the Appellants would engage again in conduct of the sort in issue in this case. The factors that weighed in favour of the dismissal being harsh also weigh in favour of reinstatement being appropriate.

(b) There must be a significant discount in any order for back pay to reflect the fact of the Appellants’ misconduct, quite apart from any other discounts that may be appropriate to reflect a “fair go all round”, particularly in light of the delay in the resolution of these matters. Obviously income earned in the intervening period must be brought to account.

[119] In relation to Australia Post’s cross appeal against the finding and award of compensation in favour of Mr B, it is sufficient to note that our conclusions mean we agree with the Commissioner’s conclusion that the dismissal of Mr B was harsh, even if account is taken of 6 emails that he sent to his home address. In any event we are not persuaded that the Commissioner failed to take account of those six emails – they are expressly considered at para [47] of the Decision.

[120] We allow the appeal and quash the Commissioner’s decision and orders. We remit the matter of remedy to Vice President Lawler for determination in accordance with these reasons.

[121] We do not wish these reasons to be misrepresented. We are not endorsing or authorising employees to use their employer’s IT system to email pornography or other unacceptable material. We endorse the right of employers to have policies against the use of their IT systems to access, store or email pornography or other unacceptable material. We endorse the right of employers to regard compliance with such polices as a serious matter. We acknowledge that, depending upon the circumstances, a breach of such a policy can ground misconduct that may justify a dismissal that would not be harsh, unjust or unreasonable. However, upon a full consideration of the particular circumstances of the present case, we are satisfied that each of the dismissals was harsh.

REASONS FOR DECISION OF SENIOR DEPUTY PRESIDENT HAMBERGER

[122] This decision concerns two appeals against Commissioner Lewin’s decision of 4 November 2011 ([2011] FWA 7126) by Australia Post and by Mr B, Mr C and Mr D (the employees). Australia Post is appealing the Commissioner’s decision that Mr B’s dismissal was harsh, unjust and unreasonable. The employees are appealing the Commissioner’s decision that Mr D’s and Mr C’s dismissal was not harsh, unjust or unreasonable, as well as his decision that Mr B should receive compensation rather than reinstatement.

[123] The appeals were heard in Melbourne on 16 February and 2 April 2012. Australia Post was represented by Mr M McKenney, of counsel and the employees by Mr D Victory, of Maurice Blackburn Lawyers.

An appeal under s 604 of the Fair Work Act 2009 (the Act) is an appeal by way of rehearing and FWA’s powers on appeal are only exercisable if there is error on the part of the primary decision maker. There is no right to appeal; rather an appeal may only be made with the permission of FWA.

[124] The decision subject to appeal was made under Part 3.2 - Unfair Dismissal - of the Act. Section 400 (1) of the Act provides that permission to appeal must not be granted from a decision made under Part 3.2 unless FWA considers that it is in the public interest to do so. Further, in such matters, appeals on a question of fact can only be made on the ground that the decision involved a ‘significant error of fact’ (s 400(2)). Section 400 of the Act manifests an intention that the threshold for a grant of permission to appeal is higher in respect of unfair dismissal appeals than the threshold pertaining to appeals generally.

Commissioner Lewin’s decision

[125] The employees had been dismissed by Australia Post for distributing inappropriate material using Australia Post’s e-mail system. The Commissioner noted that the employees themselves conceded that they had indeed distributed inappropriate content in or attached to e-mails, using the Australia Post e-mail system. However it had been submitted before him that their actions in distributing the inappropriate material was encouraged, condoned or readily tolerated by a culture of management practice present within their own workplaces. The Commissioner made his own finding that the material relied upon by Australia Post to dismiss the employees was in each case highly inappropriate.

[126] The Commissioner found that an extraordinary volume of e-mail traffic containing what very broadly could be described as inappropriate content was circulating at the Dandenong Letter Centre (where the employees were employed) at the time that the employees’ actions occurred. The Commissioner noted that a distinction was drawn by Australia Post for disciplinary purposes, between an individual’s receipt of and access to inappropriate material and an individual sending, forwarding or distributing inappropriate material. He found that the use of the Australia Post IT system to transmit the relevant content was a wholly inappropriate use of Australia Post’s resources. The accumulation and proliferation of the inappropriate material within the organisation’s systems posed potentially serious consequences for the organisation. There were reputational risks and occupational health and safety risks of a high order, as well as productivity issues arising from the significant diversion of the energy of employees at various levels of the organisation. The situation required action and intervention by Australia Post in accordance with established management policies and procedures.

[127] Commissioner Lewin emphasised that the employees had been dismissed for sending or distributing inappropriate material rather than receiving inappropriate material from others or accessing inappropriate material using the Australia Post IT system more generally. Persons who may have received and/or accessed the same material or other inappropriate material had not been subject to disciplinary action. On reviewing the evidence Commissioner Lewin was satisfied that few people who could properly be described within the category of “management” participated in the sending, forwarding or distribution of inappropriate material.

[128] The Commissioner found that there were some instances of the transmission of inappropriate material by a person who could be considered a “manager”. He was however satisfied on the evidence before him that where issues of this nature had come to the attention of Australia Post the relevant management policies and procedure to which the employees were subject had been followed.

[129] Commissioner Lewin judged that there was no active managerial encouragement or condoning the distribution of inappropriate material. He was unable to conclude that the circumstances invalidated the reason for the termination of employment of each of the employees’ employment. He found that in each case there was a valid reason for termination, being the use of the Australia Post e-mail system to send, forward or distribute highly inappropriate material contrary to the proper use of the e-mail system and in the knowledge that doing so was a prohibited use of e-mail system.

[130] In relation to Mr D and Mr C, the Commissioner found that the decision to terminate their employment was not harsh, unjust or unreasonable. The evidence of their using the Australia Post e-mail system for the purpose of distributing inappropriate material was not mitigated by reason of their being incited, encouraged or somehow otherwise excused for the distribution of that material by management. He took into account their service and the alternative disciplinary options open to Australia Post in lieu of their termination.

[131] The Commissioner found that the evidence in relation to Mr B involved some relevant distinction from the circumstances of the other employees. On that evidence Mr B used the Australia Post e-mail system to send inappropriate material from the Australia Post system to his home address. In addition, he used the Australia Post system to send inappropriate material to one address of one person within the Australia Post system on one occasion. The Commissioner found that Australia Post had itself made a distinction when it came to sending inappropriate material to one’s own home email address. He referred to the case of Mr Brown who had forwarded an e-mail from the Australia Post system to his personal e-mail address. He referred to evidence that since the material was exclusively sent to Mr Brown’s private e-mail address the disciplinary action taken was a written reprimand and warning. He found that given these circumstances it was not unreasonable to proceed on the basis that such action, particularly given the extensive range of disciplinary action available to Australia Post would be relevant to Mr B’s action of sending inappropriate material to his private e-mail address from the Australia Post system. Given this he considered that the substantive reason for the termination of Mr B’s employment was the e-mail containing inappropriate material which had been dealt with in the evidence. He accepted Mr B’s evidence that the only time he forwarded an e-mail containing inappropriate material to another employee was one occasion at the request of a colleague when he and the colleague were alone in the office. He also found on the evidence that there had been no attempt by Mr B to mislead Australia Post’s investigations, nor had he been uncooperative.

[132] Commissioner Lewin had regard to Mr B’s service, the absence of any previous poor work performance or misconduct, and the availability of the disciplinary sanctions within the range of options open to Australia Post circumstances. He judged that in these circumstances the failure to use an alternative option of this kind in lieu of the termination of Mr B’s employment was unreasonable. The termination was harsh because of the significant personal consequences for Mr B of his single and limited act of sending the e-mail in question and unreasonable because penalties of a more appropriate degree were available and suitable in the circumstances. The Commissioner found that an appropriate remedy should be awarded. However he decided that it would not be appropriate to make an order for reinstatement, particularly as the Act did not permit him to make such an order in conjunction with the imposition of the disciplinary penalties available to Australia Post such as transfer to another position at the same or lower level, reduction in salary, a warning, or formal counselling. Accordingly he indicated that he would make an order for compensation.

Submissions on Behalf of the Employees

[133] Mr Victory, on behalf of Mr D and Mr C, submitted that the Commissioner erred in his approach to determining whether their dismissals were harsh unjust or unreasonable. The approach he should have taken was to:

[134] Mr Victory submitted that the Commissioner had also erred by failing to take into account material considerations when determining whether the dismissal of the two employees was harsh. These included:

[135] Mr Victory submitted that the Commissioner erred by finding that Mr D used the Australia Post e-mail system for the purpose of distributing inappropriate e-mail as he did not have access to the system and sent e-mails from home from his personal e-mail account. This mistake was significant because it meant that Mr D did not have the benefit of the pop-up screen.

[136] Mr Victory also submitted that the Commissioner erred by finding that Mr D’s and Mr C’s conduct was not mitigated by reason of being incited, encouraged or excused by management. He also contended that the Commissioner failed to give adequate reasons.

[137] In relation to the Commissioner’s decision not to order the reinstatement of Mr B, Mr Victory submitted that a number of relevant considerations had not been taken into account, including the failure of Australia Post to terminate other employees, including managers, who were guilty of misconduct at least as serious. He submitted that the Commissioner should have taken into account the ability of FWA to make a recommendation or express a view about the appropriate disciplinary sanction to be applied if Mr B had been reinstated. Moreover it was inappropriate to take into account that the provisions of the Act do not permit an order for reinstatement which would impose the disciplinary penalties available to Australia Post.

Submissions on behalf of Australia Post

[138] On behalf of Australia Post, Mr McKenney rejected Mr Victory’s submissions concerning the proper approach that should be adopted by FWA in matters such as this. He submitted that the approach taken by Mr Victory was too prescriptive. FWA is required by s.387 of the Act to have regard to the matters specified in that section, and that is what the Commissioner did.

[139] Mr McKenney submitted that the evidence disclosed that the policy of Australia Post had been properly promulgated and enforced. He also denied that there was a culture of forwarding and receiving inappropriate e-mails at Australia Post and referred to the express consideration of culture given by the Commissioner in his decision.

[140] Mr McKenney submitted that there was no differential treatment between Mr D and Mr C and other employees guilty of the same misconduct. All employees had been subject to the Employee Counselling and Disciplinary Process (ECDP) where there was evidence of misuse by employees in sending inappropriate e-mails. Differential outcomes could quite fairly result from the application of the ECDP.

[141] Mr McKenney submitted that the gravity of the misconduct by the employees was very serious given the extent of the misuse of Australia Post’s e-mail system and its potential consequences. It was irrelevant whether there were any complaints made about the conduct of any of the employees. There was potential in the admitted conduct of the employees for sexual harassment of other employees as well as damage to the reputation of Australia Post. The enterprise agreement did not prevent the dismissal of an employee for serious misconduct even where this was a first breach.

[142] The reference by the Commissioner to Mr D using the Australia Post e-mail system was a reference to sending e-mails into that system. This conduct was in breach of relevant policies and formed the basis for determining that the termination of Mr D’s employment was on the basis of the admitted misconduct giving rise to a valid reason for the termination of his employment.

[143] Mr McKenney submitted that the Commissioner made a significant error in relation to Mr B in that his dismissal had not been for a single e-mail but for six e-mails containing inappropriate material. This was significant in considering the extent of his conduct in terms of misuse of Australia Post’s IT resources. This significant error affected the determination as to whether the misconduct was such that the decision to dismiss Mr B could be seen as proportionate to the extent of the misconduct.

Consideration

[144] The appeals are against a discretionary decision. In House v The King (1936) 55 CLR 499 at 504-505 the High Court stated the principles governing appeals against discretionary decisions. The Court held that:

[145] Section 400(2) modifies the House v The King principles by limiting any review based on a mistake of fact to a significant error of fact. As noted previously s.400 clearly evinces an intention by the legislature that appeals in unfair dismissal matters are more limited than appeals with respect to other matters under the Act.

[146] The leading Full Bench authority in cases such as this is Wake v Queensland Rail (2006) 156 IR 393. In granting leave to appeal, the Full Bench stated (at paragraph 3):

[147] The Full Bench also found (at paragraph 11):

[148] At paragraph 21 the Full Bench stated:

[149] Finally, the Full Bench commented (at paragraph 23):

[150] I endorse the comments of the Full Bench. Australia Post has a legitimate interest in eliminating email traffic of the kind dealt with in this case. At the same time, it is important that any disciplinary action employers take against employees who have been involved in sending, receiving or accessing inappropriate material is done in a fair and equitable manner. Regard must be had to the circumstances of each individual employee.

[151] The Full Bench found that Queensland Rail had had for a number of years a firm and well-publicised policy prohibiting the use of its electronic communications system to store or transmit material which was sexually-related, pornographic or violent. In the present case Australia Post had a number of relevant policies. These included “It’s Your Business - Our Ethics: The Way We Do Things At Australia Post.” This contained a definition of unacceptable behaviour as including:

[152] In addition, Australia Post had an “IT Systems Security Policy.” This specifically prohibited “behaviour or content that might be regarded as offensive, immoral or unethical”. Users are prohibited from transmitting, storing, copying or possessing any material that is defamatory, offensive or in breach of licensing conditions. The policy stipulates that the content of e-mail messages is the property of Australia Post and that management has the right and the capability to read e-mails entering, leaving and within the Australia Post network. All employees who access Australia Post’s IT system make a daily declaration indicating an acknowledgement that employees may have disciplinary action taken against them for misusing e-mail including by the use, access or transmission of pornographic photos, animation, cartoons and images of sexually explicit, sexist and racist material. Other relevant policies include those in relation to harassment, discrimination and bullying. The Harassment Discrimination and Bullying Policy made clear that sexual harassment could include things that are said, done, sent, displayed or written which are of a sexual nature. The policy specifically prohibited behaviour that offends, embarrasses or scares.

[153] The evidence before Commissioner Lewin indicated that Australia Post went to considerable lengths to educate staff about sexual harassment. The evidence included the training records of the employees. All the employees had received training in the Harassment, Discrimination and Bullying Policy and had received pamphlets in their pay slips. A brochure distributed to staff at the Dandenong Letter Centre in mid 2009 specifically referred to rude, dirty or obscene e-mails, screen savers or text messages as examples of sexual harassment.

[154] The evidence is that there were clear policies prohibiting the types of inappropriate emails sent by each of the employees. None of the employees had any excuse for not being aware of those policies. While Mr D - because he did not have access to the IT system - would not have seen the daily declaration, he was still subject to the other relevant policies and received training in relation to harassment, discrimination etc. I note that Mr D was dismissed by Australia Post for breaches of the Harassment, Discrimination and Bullying Policy, not the IT Policy.

[155] With regard to Mr Victory’s submission that the employees received differential treatment, especially when compared to managerial staff, I do not find that this is made out on the evidence. While different employees received different sanctions, the evidence supports Mr McKenney’s contention that all employees - once there was reason to believe they may have engaged in misconduct - were subject to the same Employee Counselling and Disciplinary Process. Australia Post - quite reasonably - took account of individual circumstances in determining what sanction to apply. For example, it distinguished between sending and merely receiving inappropriate material.

[156] I do not agree with Mr McKenney’s submission that the Commissioner made a significant error of fact in finding that Mr B was dismissed for sending only one email. It is clear from his decision that the Commissioner was well aware of how many emails Mr B sent. However, given his findings about the approach taken by Australia Post in relation to other employees who had sent emails to their personal addresses he made the reasonable inference that the emails Mr B sent to his private email address did not constitute grounds for his termination. Accordingly he proceeded on the reasonable basis that ‘the substantive reason’ for his dismissal was the one email he sent to a colleague.

[157] With regard to the Commissioner’s failure to order the reinstatement of Mr B I agree with Mr Victory’s contention that it would have been open to the Commissioner to have reinstated Mr B together with a recommendation that Australia Post apply one of the lesser sanctions available to it. However such a recommendation would not have been binding. I do not consider that in taking account of the inability of FWA to order reinstatement while imposing the disciplinary penalties available to Australia Post the Commissioner was having regard to an irrelevant consideration. Nor am I satisfied that the Commissioner failed to have regard to other relevant considerations. At paragraph 57 of his decision, he explicitly had regard both to Mr B’s length of service, and the absence of any poor work performance or misconduct prior to his dismissal, in considering whether his termination was harsh, unjust or unreasonable, as well as the more limited nature of Mr B’s misconduct. These considerations were referred to again in considering what remedy would be appropriate.

[158] As noted previously, s.400 of the Act provides that FWA cannot grant permission to appeal unless it considers that it is in the public interest to do so. In GlaxoSmithKline Australia Pty Ltd v Makin ([2010] FWAFB 5343) the Full Bench said:

[159] I draw the same conclusion in relation to the two appeals in this case. I would decline to grant permission in relation to both appeals.

sig

VICE PRESIDENT

Appearances:

Mr. D. Victory on behalf of the Appellants

Mr. M. McKenney of Counsel and Ms. S. Blackman on behalf of the Respondent

Hearing details:

2012.

Melbourne:

16, February.

and

Melbourne:

2, April.

Final written submissions:

Filed by the Respondent on 5 May 2012

1 The constitutional validity of such federal award terms was based on a decision of the High Court in Re Ranger Uranium Mines Pty Ltd; Ex parte Federated Miscellaneous Workers' Union of Australia (1987) 163 CLR 656 that established that there could be a valid federal system “industrial dispute” over the reinstatement of a group of employees said to have been unfairly dismissed.

 2   Of course, it may properly be open to an employee to deny the misconduct on the basis that someone other than the employee used the employee’s computer or logon.

 3   Mr D did not send any emails from an Australia Post computer or using an Australia Post logon and there was an issue taken that his sending emails from his home computer using his private internet connection, albeit to work friends at their Australia Post email address, constituted a breach of the Our Ethics policy relied on by Australia Post.

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