Probationary dismissals still valid

Following the High Court of Australia decision in Qantas Airways Limited v Transport Workers Union of Australia [2023] HCA 27, commentators have been warning that employees dismissed during probation may be able to bring a general protections claim under Part 3-1 of the Fair Work Act 2009 (Cth) on the basis that their dismissal was to prevent them from exercising a future workplace right to bring an unfair dismissal claim.

Now, the commentators say their prophecy has been proven true with the Federal Court decision in Dabboussy v Australian Federation of Islamic Councils [2024] FCA 1074. In this case, the Chief Executive Officer of the Australian Federation of Islamic Council was dismissed seven (7) hours short of being able to bring an unfair dismissal claim. The Court, on an interim basis, reinstated Mr Dabboussy on the basis he had an arguable case that he was dismissed, when he was, to deny him the ability to bring an unfair dismissal claim under Part 3-2 of the FW Act.

It needs to be appreciated that the Federal Court decision was made on an interim basis. It does not represent a final decision, based on full evidence and legal argument. The final decision will be hotly awaited.

In our view, a full and proper appreciation of the purpose of probationary periods and qualifying periods must permit an employer to end the employment, even if it is done hastily and moments before any qualifying period ends. To hold otherwise risks a lunacy in the law. The design of probationary and qualifying periods is to permit early termination without the risk of an unfair dismissal claim – that is the design of the system that cannot now be used against employers. Parliament could not have intended to give with one hand and take with another.

The facts

The Australian Federation of Islamic Council is a not-for-profit and a small business employer. As such, it’s employees must pass a 12-month qualifying period before they can bring an unfair dismissal claim.

Mr Dabboussy was employed by the Council as it’s Chief Executive Officer from 4 September 2023. Mr Dabboussy was summarily terminated on 3 September 2024.

On 9 August 2024, the Council wrote to Mr Dabboussy letting him know that allegations of inappropriate conduct of a sexual nature had been made against and were to be investigated. The Council said, “On the face of it, we believe that this conduct amounts to serious misconduct.” Mr Dabboussy acknowledged the allegations were “immensely serious.”

Mr Dabboussy was interviewed by an external investigator on 28 August 2024. Mr Dabboussy approved his interview transcript in the morning of 3 September 2024.

The evening before, on 2 September 2024, the Council heard that drafting findings of the investigation found the allegations to be substantiated. The Council voted unanimously to terminate Mr Dabboussy’s employment. Mr Dabboussy was given that outcome at 4:40pm on 3 September 2024.

As a result, Mr Dabboussy could not bring an unfair dismissal claim.

The FW Act and Qantas

Part 3-1 of the FW Act provides various general protections, including in s 340 that “a person must not take adverse action against another person because the other person has a workplace right…, proposes … to …. exercise a workplace right, or to prevent the exercise of a workplace right by the other person.”

What is a workplace right is broadly defined, and includes having the benefit of a workplace law, and being able to initiate, or participate in, a process or proceedings under a workplace law. These rights capture the ability to bring unfair dismissal proceedings under the FW Act.

In Qantas, the central issue was whether the decision to outsource ground handling jobs was unlawful because Qantas had identified that the outsourcing decision would prevent the workers taking lawful industrial action in the future when bargaining for a replacement enterprise agreement. The High Court held that Qantas had contravened s 340 of the FW Act for taking adverse action due to a future workplace right. The High Court majority said:

… a person who takes adverse action against another person for a substantial and operative reason of preventing the exercise of a workplace right by the other person contravenes s 340(1)(b), regardless of whether that other person has the relevant workplace right at the time the adverse action is taken. Qantas did not avoid the operation of s 340(1)(b) in relation to its adverse action by taking the action prior to the existence of the workplace rights the exercise of which Qantas sought to thwart.

And so, the argument that dismissing someone during probation to avoid them being able to access unfair dismissal was opened.

The decision

The Dabboussy case concerned an urgent hearing to make interim orders pending a final hearing. The test for making interim orders is whether there is an arguable case and whether the balance of convenience favours the order.

On an interlocutory basis, the Federal Court held at [27]:

The evidence before me strongly suggests that the Executive Committee meeting was arranged with great haste at a time when [the investigator’s] report had not even been finalised, and after Mr Dabboussy had already been stood down. There is no explanation on the evidence before me as to why it was necessary for the Executive Committee to meet for the purpose of considering what were at that stage said to be “draft findings” or how it was that [the Council] came into possession of [the investigator’s] “draft findings.” In my view, there is a strong inference available that the Executive Committee was convened … for the purpose of facilitating termination of Mr Dabboussy’s employment before 4 September 2024, so as to deny him the opportunity to make a claim for unfair dismissal under Part 3-2 of the FW Act.

It must be appreciated that the decision of the Court was made on the basis that there is only an arguable case of a breach of Part 3-1 of the FW Act. “Mr Dabboussy has established a prima facie case that the timing of his dismissal was influenced by a desire to ensure that he could not make a claim for unfair dismissal and that this was also a substantial and operative reason for his dismissal on 3 September 2024”, the Court said. This was despite the investigator’s “investigation and findings provided [the Council] with reasonable grounds for summarily terminating Mr Dabboussy’s employment and that … the various allegations made against him were substantiated was the principal reason for the dismissal.”

The Court acknowledged the strength of the Council’s case but was astute to the reality that “the timing of the … decision deprives him of the most obvious and effective right to challenge what he contends was his unjustified dismissal on the ground that he was not guilty of the misconduct attributed to him.”

On an interim basis, Mr Dabboussy was reinstated to his employment until the final hearing.

“What about me, it isn’t fair”

Seems perverse? It must be remembered that the decision was interlocutory and made to a different standard or limited evidence.

Is it surprising that an employer would terminate employment within the probationary and qualifying period to avoid an unfair dismissal claim? No. What is unlawful about acting in a manner envisaged and permitted by the law.

Hopefully, at a final hearing, the Court will hear detailed arguments about the purpose of probationary periods and qualifying periods.

It is accepted industrially that probationary periods give both employers and employees the free opportunity to assess the suitability of the employment relationship with the ability to end it during the probationary period without significance consequence. For employers that means, primarily, the benefit of not facing an unfair dismissal claim.

The Explanatory Memorandum to the FW Act commented in respect of qualifying periods in the unfair dismissal jurisdiction (our emphasis):

·        “the new system will remove the 100-employee exemption introduced under Work Choices and instead introduce new qualifying periods that have to be met before an unfair dismissal claim can be made - 12 months for employees of businesses with fewer than 15 employees and six months for employees in businesses with 15 or more employees”;

·         “There are several aspects of the new system that should make compliance easier for businesses. … There will also be … a 12-month qualifying period for small business employees”;

·        “Therefore, small businesses will have 12 months in which to assess the performance of an employee and terminate their employment if necessary. This will be adequate time for a small business to assess the performance of an employee”; and

·        “Overall, the new system has more of a focus on early intervention and informal processes over the previous system. It will increase access to unfair dismissal remedies for employees while still imposing certain conditions on access that will benefit business, particularly small business.”

It is readily apparent that the qualifying period benefited employers. 

So, what is unlawful in acting in a manner to get that benefit? It cannot be ignored that the probationary and qualifying period is a benefit granted to employers. Part 3-1 of the FW Act needs to be interpreted having regard to the benefit created later in Part 3-2 of the FW Act. Parliament gave employers a benefit and it cannot be unlawful to act in a manner to obtain that benefit (as opposed to acting to deny a right). To do otherwise creates a potential lunacy in the law.

Commentators have suggested that a way to avoid this outcome is to terminate the employment earlier in the probationary or qualifying period. Such an approach tends to highlight the silliness of the current commentary. When does one draw the line:  a week out, a month or longer? Others have said, change the contractual probationary period to 5 months or less and create a disconnect from the qualifying period. But then isn’t that making it more obvious that the design is to avoid access to unfair dismissal?

Embrace the truth. It is okay that employers act to obtain the benefit of the laws created by Parliament. Yes, an employee is dismissed before the end of the probationary and qualifying period for the benefit of not facing an unfair dismissal claim. That is the scheme. And therein lies an important distinction. While the effect of acting to obtain a benefit is that an employee cannot exercise a right, the effect should not be converted into the reason for acting. The reason is to access a benefit given by the FW Act.

Author: James Mattson