Express law No. 18

16 March 2005

Reinstatement where the employment relationship has irrevocably
broken down: Andrea Walsh v Australian Taxation Office

Two
recent cases of the Australian Industrial Relations Commission
establish that the Commission is unlikely to
order reinstatement of an APS employee where the employment
relationship has irrevocably broken down. The decisions
have significant implications for APS employers as they
suggest that, even if the Commission finds that the termination
of an employee's employment was harsh, unjust or
unreasonable, the Commission will refuse to order the employee's
reinstatement if it considers that the employee could not
return to a harmonious working environment.

Andrea Walsh
v Australian Taxation Office

Australian Industrial Relations
Commission, Sydney, 4 March 2005, [PR 956205]

Decision at
First Instance: PR951810 (Commissioner Eames)

In March 2004
Ms Andrea Walsh sought relief in the Australian Industrial
Relations Commission under s.170CE of the Workplace
Relations Act 1996 (the WR Act), following the termination
of her employment by the Australian Taxation Office (ATO)
for breaching the APS Code of Conduct. Alleging that that
the termination of her employment was harsh, unjust or
unreasonable, Ms Walsh sought reinstatement to the position
in which she was employed immediately before the termination
and also sought compensation for lost earnings.

Although
the Commission found that there was a valid reason for
the ATO to terminate Ms Walsh's employment, Commissioner
Eames found, that the termination was harsh because, amongst
other things, it was disproportionate to the gravity of
Ms Walsh's misconduct. This finding was triggered
by the fact that in making its decision to terminate Ms
Walsh's employment, the ATO had not complied with
its own policies and procedures and had taken into account
a record of previous misconduct by Ms Walsh that should
have been removed from her file. The Commission considered
that it had been inappropriate for the ATO to rely on the
prior misconduct in concluding that Ms Walsh had engaged
in a 'pattern of behaviour', which was a key
reason for the ATO's decision to terminate Ms Walsh's
employment.

Despite this finding, Commissioner Eames refused
to reinstate Ms Walsh to her former position within the
ATO. Considering
Ms Walsh's proven misconduct, documented unsuitability
for her employment and persistent behaviour of making inappropriate 'jokes' and
offers of 'inducement' to supervisors, Commissioner
Eames found that there was no basis on which Ms Walsh could
return to the ATO on harmonious terms. Finding that Ms
Walsh's employment relationship with the ATO was
incapable of being repaired, the Commissioner refused to
order Ms Walsh's reinstatement and instead awarded
Ms Walsh compensation equivalent to six months' salary
for her unfair dismissal.

Full Bench Decision: PR956205
(Senior Deputy Presidents Duncan and Lloyd, Commissioner
Cribb)

On 26 October 2004, Ms Walsh sought leave to appeal
to a Full Bench of the Commission against Commissioner
Eames' decision,
claiming that the Commissioner had erred in the exercise
of his discretion concerning reinstatement by making findings
of fact which were either not open or which were based
on a mistaken view of the relevant facts. Ms Walsh also
argued that Commissioner Eames had erred in law by failing
to take account of each of the considerations set out in
s.170CH of the WR Act and in finding that there was a valid
reason for termination.

The Full Bench rejected all of these
arguments and refused leave to appeal on the basis that
the application disclosed
no appellable error and no public interest consideration
required that leave be granted.

In upholding Commissioner
Eames' refusal to order
Ms Walsh's reinstatement under s.170CH of the WR
Act, the Full Bench placed considerable emphasis on the
breadth of the discretion conferred under subsections (3)
and (6) of the WR Act and the fact that Commissioners must
exercise their discretion having regard to the evidence
and material before them.

The Full Bench expressly endorsed
the Commissioner's 'apparently
contradictory' findings that a valid reason for termination
had existed due to Ms Walsh's breach of the Code
of Conduct, but that the termination was harsh due to its
disproportionate nature.

The Full Bench noted that in addressing
the question of whether or not it was appropriate to reinstate
Ms Walsh,
Commissioner Eames was required to have regard to all of
the factors enumerated in s.170CH(2) of the WR Act. The
Full Bench was satisfied that evidence of an irrevocably
broken down employment relationship could be a relevant
factor arising under the 'any other matters' consideration
in s.170CH(2)(e) and was in fact critical in this case.
The Full Bench noted that this approach was consistent
with the established principle that the restoration of
trust is a relevant factor when reinstatement is considered.

Conclusion

The significance of the Walsh decisions for
APS agencies is that they confirm that even a large agency
can resist
a reinstatement order when the Commission has determined
that the termination of an employee's employment
was harsh, unjust or unreasonable, if there is sufficient
evidence that the relationship of trust has broken down.
In preparing for arbitration of unfair dismissal cases,
agencies should ensure that they consider applying this
line of argument.

The decision is also a salutary reminder
of the importance of APS agencies complying with their
own policies and procedures.

Text of the decisions is
available at:
http://www.airc.gov.au/decisionssigned/html/PR956205.htm

For
further information please contact:

Virginia Masters
Senior Lawyer
T 02 6253 7470 F 02 6253 7381
virginia.masters@ags.gov.au

Important: The material in Express law is
provided as an early, interim view for general information
only and further analysis on the matter may be prepared
by AGS. The material should not be relied upon for
the purpose of a particular matter. Please contact
AGS before any action or decision is taken on the basis
of any of the material in this message.