Commission confirms that there is no contractual right to dismiss “at will” in Australia

A recent decision of the Fair Work Commission[1] is a timely reminder to employers and all Human Resource (HR) practitioners that while the terms of a contract of employment are important to determining respective obligations, they do not override statutory unfair dismissal laws and common law principles developed in Australia.

Implications for practitioners

All HR practitioners should be familiar with statutory obligations related to employment, especially those concerning the termination of employment. Sole reliance by HR practitioners on the terms contained in an employee’s contract of employment will likely lead to deficiencies and errors in procedure and result in the dismissal being characterised as harsh, unjust and unreasonable.


The employer operated a small Insurance Broker business and the employee was engaged as a General Insurance Manager for just over one year. In the months leading up to the employee’s termination, the employer’s dissatisfaction with his work performance and conduct resulted in verbal warnings. The employer, unfortunately, did not confirm the verbal warnings in writing.

Towards the end of January 2016, the employer determined to dismiss the employee. The employee was subsequently called into a meeting and dismissed on the spot, without explanation.

Rather than terminate the employee’s employment for unsatisfactory work performance or misconduct, the employer turned to the employee’s contract of employment, which provided that the employer may terminate the employment upon giving four weeks’ notice, or payment in lieu of notice. The employer decided to pay the employee an amount equivalent to four weeks’ wages in lieu of notice.

After the dismissal and prior to hearing, the employer identified additional issues regarding the former employee’s conduct, namely the accessing, downloading and storage of pornographic material on three separate occasions on employer provided equipment.

At the hearing the employer relied on the contractual term as justification of the dismissal, which was not connected with unsatisfactory performance or misconduct. In the alternative, the employer tried to rely on the subsequent discovery of the pornographic material on company provided laptop and iphone to justify the dismissal.

The Commission went ‘behind’ the employer’s ‘highly erroneous reliance upon a purported contractual right’ to ascertain whether a valid reason existed to justify the dismissal, albeit not identified at the time of the dismissal.

The Commission concluded that while the use of employer provided equipment to access, download and/or store pornographic material would, generally speaking, amount to misconduct, each case should be considered on its merits.

If such conduct occurred in breach of a clearly stated and understood policy, the employee could expect to be disciplined or even dismissed for deliberately accessing, downloading and/or storing the material on the employer’s equipment, whether such conduct occurred within or outside of the ordinary working hours.

The employer, however, had no policy and there were suggestions that directors may have participated in accessing, downloading and dissemination of pornographic material.

The entire basis for the termination, and the approach taken to it, were characterised by the Commission as “fundamentally misconceived” and “failed to deal with the dismissal … in any fundamentally fair manner.”

Unlike the American concept of employment “at will”, the Commission held that such a concept did not exist in Australia. The employer’s “severely flawed approach” subverted the “statutory unfair dismissals laws, and also offend the broader common law position that has developed in Australia”.

The Commission found that the dismissal was harsh, unjust and unreasonable and awarded compensation of $10,000.

It is worth noting that the Commission’s findings only relate to those employees who fall within the various statutory regimes in Australia. In the case where employees are engaged on common law contracts of employment, the employer’s obligations in relation to procedural fairness are limited to the provisions in the employee’s contract of employment and any policies which may be incorporated into the contract.






Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.