Fair Work Act 2009

s.604 - Appeal of decision

Appeal against decision [2017] FWC 5740 of Commissioner Ryan at Melbourne on 6 November 2017 in matter number U2017/7855.

[1] CSL Limited T/A CSL Behring (the 'Appellant'; 'CSL') seeks permission to appeal against a decision[1] (the 'Decision') and order[2] of Commissioner Ryan issued on 6 November 2017.[3] The Decision deals with an application for an unfair dismissal remedy. The Commissioner determined that the dismissal of Mr Papaioannou (the 'Respondent') was harsh and that an order for reinstatement was appropriate. The Commissioner ordered that the Respondent be reinstated to the position he occupied immediately prior to his dismissal; that the period between the dismissal and reinstatement was be counted for all purposes as a period of employment; and that the Appellant was to pay the Respondent an amount for remuneration lost or likely to be lost because of the dismissal, from the date of termination of employment to the date of reinstatement.

[2] An appeal under s.604 of the Fair Work Act 2009 (Cth) (the FW Act) is an appeal by way of rehearing and the Commission's powers on appeal are only exercisable if there is error on the part of the primary decision maker.[4] There is no right to appeal and an appeal may only be made with the permission of the Commission. The matter was listed for hearing in respect of both permission to appeal and the merits of the appeal. The relevant background may be shortly stated.

[3] CSL employed the Respondent in the role of 'Plasma Receipt Operator' from 1 July 2008 until 6 July 2017. The CLS Limited CSL Agreement 2015 (the 'CSL Agreement') applied to the Respondent at all relevant times.

[4] CSL dismissed the Respondent because he had no capacity to perform his pre-illness duties, as set out in the termination letter from Anthony Kaye (CSL Director, Base Fractionation and Haemostasis) to the Respondent, dated 6 July 2017:

'On the basis of the medical evidence available to it, CSL has now formed the view that you do not have the capacity to perform your pre-illness duties now or in the foreseeable future. CSL has not reviewed any information which would enable us to form a different view.

Accordingly, CSL regrets to advise you that your employment with CSL will be terminated effective today (6 July 2017).[5]

[5] The termination letter was preceded by a meeting between Mr Kaye and the Respondent, at which Mr Warren Fridell (CSL Senior Manager Workplace Relations) and the Respondent's support person (Mr Alistair Thomas, AMWU Organiser) were also present. At that meeting Mr Kaye raised the following points with the Respondent:

• On 26 April 2017, CSL made the Respondent aware that it was considering termination of his employment based upon his incapacity to perform the inherent requirement of his role now or into the foreseeable future. CSL provided him the opportunity to provide further information before CSL made its decision.

• On 19 May 2017, having been provided an unclear prognosis from his treating practitioner, Dr Congiu, CSL requested that he attend an independent medical examination (IME) to gain a better understanding of his capacity to return to work.

• On 30 May 2017, the Respondent attended the IME which was conducted by Dr Bloom. CSL received his report on 7 June 2017.

• On 26 June 2017, CSL provided the Respondent with a copy of Dr Bloom's report, which was written in consultation with Dr Congiu, and requested the meeting which took place on 6 July 2017.[6]

[6] As noted above, on 30 May 2017 Dr Bloom undertook a medical assessment of the Respondent. In his report, Dr Bloom agreed with Dr Congiu's diagnosis of the Respondent's condition and that he was currently unfit for work. Dr Bloom concluded, inter alia:

'I think it optimistic to anticipate that [Chris] will be well enough to commence and sustain a graduated RTW program within the next approximately 12 months. Beyond that timeframe, assuming adequate response to treatment, he may possibly recover sufficiently to trial a very graduate return to work...The prognosis for his illness is considered guarded, and I think it optimistic to anticipate a durable return to work- even on a part-time basis- much before about 12 months, and even this is uncertain...It is not possible to predict with any degree of confidence just when he will have capacity to sustain a return to work, but at this stage I would be cautiously hopefully that this could occur within 12 to 24 months.'

[7] Dr Bloom's medical assessment is set out at Annexure AK63 to Exhibit R1.

[8] Dr Bloom's report provided the basis for Mr Kaye's assessment that the Respondent would not be able to return to work at all, in any capacity in the foreseeable future. So much is clear from paragraph [70] of Mr Kaye's statement:

'Upon reviewing Dr Bloom's report dated 7 June 2017, it became clear to me that not only was Chris unable to perform his job at that point in time, but there was no way of knowing with sufficient clarity when he might be able to turn to work in any capacity at all. Dr Bloom's report confirmed that it was "not possible to predict with any degree of confidence just when he will have the capacity to sustain a return to work" and that this might be possible within 12 to 24 months. This report made me appreciate that Chris' illness was more severe than I had previously understood and the prospect of him returning to work at all was even worse than what I had expected. At this point in time, Chris had been absent from work due to his illness since 25 August 2016 (approximately 10 months) and based on the report of Dr Bloom I did not consider that Chris would be able to return to work at all, in any capacity, in the foreseeable future.'

[9] It is common ground that at the time of his dismissal the Respondent had no capacity to perform his pre-illness duties.[7] The antecedent period of incapacity for work was for a total period of 39 weeks, with the most recent period prior to dismissal being from 10 October 2016 to 6 July 2017.[8]

[10] At the time of his dismissal the Respondent was in receipt of 'salary continuance' pursuant to the terms of Part 9 of the CSL Agreement.[9] Salary continuance is the provision of income maintenance by CSL for employees who are off work as a result of injury and/or sickness and have no entitlement to workers compensation and have exhausted their personal leave entitlements. Salary continuance at 90 percent of an employee's 'Average Weekly Earnings' is payable for up to 104 weeks, subject to the terms set and in Part 9 of the CSL Agreement.

[11] The Applicant (Mr Papaioannou) sought an order for reinstatement, lost remuneration and continuity of service.

[12] The Applicant relied on two witness statements in the proceedings at first instance, from the Applicant himself[10] and by his treating psychiatrist, Dr Leonardo Congiu,[11] neither of whom were required for cross-examination. The Respondent relied on a witness statement from Mr Kaye,[12] who was cross-examined, though not extensively.[13]

[13] In the proceedings at first instance there was a conflict in the medical evidence regarding the prognosis of the Applicant's illness, as between Dr Bloom and Dr Congiu.[14]

[14] Before the Commissioner the Applicant contended that there was no valid reason for dismissal.[15] At paragraphs [12]-[13] of the Applicant's written submissions he says:

'The Applicant's condition is temporary. All medical specialists who have asses the Applicant agree that he will recover from the illness. The Applicant's long term treating psychiatrist, Dr Leonard Congiu, estimated a 6 month period for recovery. The occupational physician engage by the Respondent, Dr Michael Bloom, gave a more conservative prognosis, of recovery within 12 to 24 months.

The Respondent's contention that the Applicant will not have the capacity tom perform his duties "in the foreseeable future" cannot be sustained in light of the medical evidence predicting a return to work capacity. The prospects for recovery are good, and it cannot reasonably be said that further performance of the Applicant's work would be "radically different from that undertaken by him and agreed to be accepted by the employer under the agreed terms of his employment".'

[15] In relation to s.387(g), the Applicant submitted that there were a number of other matters that were relevant in assessing whether the dismissal was harsh, unjust or unreasonable:

'The personal and economic effects of the dismissal have been severe. Returning to work was an important goal in the Applicant's rehabilitation. Dismissal led to the cessation of salary continuance payments, a benefit to which the Applicant was entitled under the Agreement. The applicant will find it difficult to obtain alternative employment given his health.

The dismissal was harsh in light of the Applicant's long and positive work record.

The dismissal was harsh and unreasonable in that it failed to reflect the medical evidence indicating that the Applicant will be able to turn to work during the period of income maintenance entitlement. The dismissal was unreasonable in that it rested on the erroneous proposition that the Applicant's absence from work frustrated the employment relationship. In fact his absence was pursuant to the terms of his employment contained in the Agreement. The dismissal was therefore unfair'.[16]

[16] The Respondent submitted that the correct approach to determining whether a valid reason for termination exists is set out in Lion Dairy & Drinks Milk Ltd v Norman[17] (Lion Dairy) and contended that there was a valid reason for dismissal. The Respondent's submissions are encapsulated in paragraph 10 of its written submissions:

'It is plain on the evidence that the Applicant had no capacity for work at the time of dismissal. Further, the conclusions of Dr Bloom in his report of 7 June 2017 supported the decision of the Respondent. Having regard to the evidence of Mr Kaye and the report of Dr Bloom, there is no evidentiary basis upon which to make a finding that the reason for dismissal was capricious, fanciful, spiteful or prejudiced'.

[17] The Respondent submitted that the application should be dismissed and, in the alternative, if the Commission found that the Applicant had been unfairly dismissed, then the Commission should find that reinstatement was inappropriate:

'As the appropriateness of reinstatement, the Respondent relies upon the fact that the Applicant does not have any capacity for work and the report of Dr Bloom dated 17 June 2017. The Respondent also relies upon the statement of Mr Kaye.'[18]

[18] The Commissioner found that there was a valid reason for dismissal (at [17] - [18]):

'[17] Having regard to the evidence before the Commission, there is no way in which it could ever be considered that the decision of the employer spiteful, prejudiced or capricious. It is very clear that to the extent that the employer has relied upon a medical report prepared by a professional, Dr Bloom, that that constitutes a clearly defensible position adopted by the employer.

[18] Much of the case has been as to whether or not the employer should have preferred the medical evidence of the applicant's treating psychiatrist over the evidence of an occupational physician. It is entirely defensible for an employer to rely upon the report of Dr Bloom in this matter. I am more than satisfied that the employer had a valid reason for the dismissal, based upon the report of Dr Bloom.' [Emphasis added]

[19] It is apparent from the Commissioner's decision that he applied the approach set out in Lion Dairy (also see the Decision at [25], set out later at [23]).

[20] As to the matters referred to in s.387(b), (c) and (d) the Commissioner said (at [22]):

'[22] Having determined that there is a valid reason for the dismissal, I can turn to paragraphs (b), (c) and (d). It is very clear that the process adopted by the employer in this matter put the applicant on notice at all times as to the proposed course of conduct at each and every step along the way. The applicant was always given an opportunity of responding before the decisions were made. The applicant was given property opportunity to respond to any of the issues raised by the employer.'

[21] As to the matters referred to in s.387(f) and (g) the Commissioner said (at [11] - [12]):

'[11] I can say at the outset that the criteria related to or referred to in paragraph 387(e) is not a relevant criteria for the purposes of the present matter. I can also say that in relation to paragraphs (f) and (g), there is no degree to which the size of the employer's enterprise impacts upon the procedures followed in effecting the dismissal and there is no degree to which there would be an absence of dedicated human resource management impacting on the procedures and that is because the employer is a large employer. It has got a robust and comprehensive industrial relations/HR management system in place and this is not a question or a case there any of the procedures followed by the employer would have any impact on a finding of fairness and unfairness.

[12] The employer can't be criticised whatsoever for its procedures in this matter and they could have no weight in any finding or have no weight against the employer's interest. They also have no weight in advancing the applicant's case.'

[22] As to s.387(h), (any other matters that the Commission considers relevant), the Commissioner had regard to the salary continuance arrangements and the difference of opinion between Drs Bloom and Congiu. As to the first matter he says (at [26] - [33]):

'[26] The issue of salary continuance has been canvassed throughout the evidentiary material of the parties, simply because the applicant has been in receipt of salary continuance for a period of time.

[27] I note that salary continuance commenced in April 2013 and I take that date from paragraph 10 exhibit R1. It then ended on 30 September 2013. I take that from paragraph 15 of exhibit R1. Then it separately commenced on 17 November 2014 and that is from paragraph 21 of exhibit R1. It then concluded on 12 January 2015 and that is at paragraph 27 of exhibit R1.

[28] It recommenced again on 8 August 2015. That is at paragraph 31 of exhibit R1. It then concluded on 5 October 2015. That is at paragraph 37 of exhibit R1. It recommenced again on 8 August 2015 and that is at paragraph 31 of exhibit R1. It then concluded on 5 October 2015 and that is at paragraph 37 of exhibit R1. It then started again on 10 October 2016. That is at paragraph 45 of exhibit R1. It stopped on 6 July 2017. That is at paragraph 74 of exhibit R1 and that also happens to be the date of termination of the applicant.

[29] On my calculation the applicant has already received some 39 weeks of salary continuance on those calculations. That is just taking it from the material that is in exhibit R1.

[30] Salary continuance has a specific relevance in this matter because it is a term of the enterprise agreement which covers the employee and the employer. It has relevance because the salary continuance does not have a total cap of 104 weeks but it has a cap of 104 weeks for a specific incidence of salary continuance, in which case all of the earlier salary continuance periods prior to 10 October 2016 do not count for the purpose of calculating a period of 104 weeks from 10 October 2016.

[31] The salary continuance provisions of the enterprise agreement are incredibly generous. It reflects extremely well on the employer that it has agreed to a provision of salary continuance of such generosity and the processes for accessing salary continuance appear to be highly beneficial for employees. The process seems to be relatively simple and the entitlements seem to be relatively easy to access.

[32] In the circumstances of this matter, it becomes directly relevant as to whether or not the dismissal is fair or unfair on the basis that if the applicant had remained in employment, the applicant would certainly have had an opportunity of continuing salary continuance and that is a term and condition of employment that is available to all employees.

[33] In the circumstances of this present matter, the inability of the applicant to attend work is matched by the ability of the applicant not to attend work and receive pay by virtue of the salary continuance provisions. It is a direct factor which goes to whether or not the dismissal, even if for a valid reasons, is harsh, unjust or unreasonable.'

[23] In relation to the difference of opinion between Drs Bloom and Congiu the Commissioner says (at [34] - [35]):

'[34] I also take into account as a relevant factor the difference in opinion between the treating psychiatrist, Dr Congiu, and the opinion of the occupational physician Dr Bloom. The employer, as I have identified, had a valid reason for the dismissal based upon the opinion expressed by Dr Bloom, however, in the circumstances where the treating psychiatrist had set the return date at a much earlier date, it becomes a relevant factor. It is any other relevant matter which impacts upon fairness.

[35] I am not, as a Commissioner, going to decide who is right or who is wrong. I don't need to. It is the mere presence of that opinion and because it is the opinion of the psychiatrist, it, in some respects, should trump the decision of a non-psychiatrist in relation to a psychiatric assessment of the applicant. It is not a matter that weighs heavily but it is a matter which is relevant and I take it into account.' [Emphasis added]

[24] The matters in s.387(d) (unreasonable refusal to allow a support person) and (e) (warning of unsatisfactory performance), were not relevant.

[25] The Commissioner went on to conclude that the dismissal was harsh (at [36] - [37]):

'[36] If I weigh up all of the relevant matters as required under section 387, I come to the conclusion that the dismissal was harsh. It's harsh because in circumstances where the employment could not be carried out by the applicant because of the current incapacity of the applicant, whilst that might give rise to a valid reason for the dismissal, the dismissal itself denied the applicant the benefit of the terms of an enterprise agreement which were intentionally designed to be generous and intentionally designed to specifically cover long periods of absence by the employee.

[37] The Applicant simply didn't have to have the capacity to work in order to get the benefits of the enterprise agreement. The enterprise agreement was predicated upon the Applicant not having the capacity to work in order to get the benefit of the agreement. In all the circumstances of this matter, the dismissal was harsh on the employee.'

[26] As to remedy, the Commissioner concluded that a remedy should be granted and considered that an order for reinstatement is appropriate, for the following reasons (at [42] - [45]):

'[42] In the present matter, I consider that an order for reinstatement is appropriate. It is appropriate in the circumstances where there is no issue of conduct. This is not a conduct issue, which raises questions as to trust and confidence in the employee. It is appropriate because reinstating the employee puts the employee and the employer in exactly the same position they were as at the date of dismissal. The employee is not performing work but the employee is accessing and has the ability to access the salary continuation provisions of the agreement.

[43] It remedies the particular unfairness which I have found exists in this matter, which is the denial of the applicant to the salary continuation scheme. I am in agreement with the submissions made by the respondent that salary continuation is not a right and that the respondent has the ability to terminate a person. In other words, a person being on salary continuance is not immune from dismissal. However, they can be dismissed as has been shown by the present circumstances. It is not that they are not immune from dismissal, it is whether or not dismissal in the circumstances of the person on salary continuance would be either for a valid reason or would be a fair dismissal.

[44] In the circumstances of this matter, reinstatement is the most appropriate remedy. Having said that, it is very clear that at some point of time, if it's going to be within six months as identified by Dr Congiu or whether it's going to be within 12 months as identified by Dr Bloom, if the applicant does not make the requisite recovery from his psychological or psychiatric illnesses, there will come a time when the employer can revisit the issue of dismissal. The circumstances of that will be dealt with by the parties at that time.

[45] A decision of the Commission in relation to a dismissal which took effect on 6 July 2017 has no bearing - and the parties need to understand this - has no bearing on any future conduct that the employer may take to dismiss the employee at any future date after the employee has been reinstated. That reflects absolutely the correct position of the employer that salary continuance does not make an employee immune from dismissal.'

[27] The Commissioner went on to deal with the issue of lost remuneration (at [46] of the Decision) and continuity of service (at [47] of the Decision).

[28] As mentioned earlier, the Commission's powers in relation to an appeal under s.604 of the FW Act are only exercisable if there is error on the part of the primary decision maker.[19] There is no right to appeal and an appeal may only be made with the permission of the Commission.

[29] The decision subject to appeal was made under Part 3-2 of the FW Act, which relates to unfair dismissal. Section 400(1) provides that permission to appeal must not be granted from such a decision under Part 3-2 unless the Commission considers that it is in the public interest to do so. Further, in such matters appeals on a question of fact may only be made on the ground that the decision involved a "significant error of fact" (s.400(2)). In Coal & Allied Mining Services Pty Ltd v Lawler and others, Buchanan J (with whom Marshall and Cowdroy JJ agreed) characterised the test under s.400 as "a stringent one".[20]

[30] The task of assessing whether the public interest test is met is a discretionary one involving a broad value judgment.[21] In GlaxoSmithKline Australia Pty Ltd v Makin a Full Bench of the Commission identified some of the considerations that may attract the public interest. These include where the decision at first instance manifests an injustice, or the result is counter intuitive, or that the legal principles applied appear disharmonious when compared with other recent decisions dealing with similar matters.[22]

[31] The Appellant relies on its grounds of appeal to establish an arguable case of appellable error and to support its contention that it is in the public interest to grant permission to appeal. It is also submitted that the Decision is counter intuitive in a number of respects and manifests an injustice. The Appellant also contends that the issues raised have an impact beyond the parties to the present proceedings and will affect any workplace where the employer offers particularly generous entitlements when an employee is absent from work (such as unlimited sick/personal leave or income protection/accident pay policies).[23] Further, during the course of oral argument counsel for the Appellant submitted that 'the obvious tension between Jetstar and Lion supported the granting of permission to appeal'.[24]

[32] The Respondent submits that the Commissioner did not make an appellable error and the appeal should be dismissed. Further, it is submitted that it is not in the public interest to grant permission to appeal:

'The decision at first instance turned on the particular facts of the particular salary continuance scheme and the worker's circumstances. It does not raise issues of importance or general application. No guidance to resolve a diversity of decisions is required here. The present case follows a long line of authorities in capacity cases and presents no novel issues. There is no disharmony in the application of the relevant principles.

The decision does not manifest any injustice or give rise to a counter intuitive result. The decision appropriately reflects the harshness of the Appellant dismissing an incapacitated worker entitled to salary continuance well before that entitlement was to cease. Permission to appeal should not be granted.' [25]

[33] During the course of oral argument the Respondent acknowledged that there is a 'real tension' between Jetstar and Lion Dairy and that it 'is very difficult to reconcile the two different approaches'.[26]

[34] It is convenient to turn first to the question of permission to appeal and the proposition that the tension between 'Jetstar and Lion' supports the granting of permission.

[35] The reference by the Appellant's counsel to 'Jetstar and Lion' is a reference to the Full Bench decision in Jetstar Airways Ltd v Neeteson-Lemkes[27] ('Jetstar) and the decision of the majority in Lion Dairy.

[36] In Jetstar the Full Bench set out the findings the Commission is required to make in an unfair dismissal case relating to the employee's capacity:

'In this matter, as earlier stated, the reason for the dismissal relied upon by Jetstar was a capacity based one, namely that Ms Neeteson-Lemkas was unable to perform the inherent requirements of her safety critical role then or in the future, and that there were no reasonable adjustments which could be made to allow her to perform that role. Section 387(a) therefore required the Commissioner to consider and make findings as to whether, at the time of dismissal, Ms Neeteson-Lemkas suffered from the alleged incapacity based on the relevant medical and other evidence before her and, if so, whether there were any reasonable adjustments which could be made to her role to accommodate her. Those findings then need to be considered and treated as matters of significance in the process of deciding whether Ms Neetson-Lemkas' dismissal was, to use the general rubric, unfair.'[28] [Emphasis added]

[37] Lion Dairy also considered the approach to be taken by the Commission in dismissal cases relating to the person's capacity. In that matter the majority observed (at [34]):

'...In cases such as the present, the Commission is not in a position to make an expert medical assessment. An employer is entitled, and expected, to rely on expert assessments. If there is some apparent conflict in medical opinions it will usually be incumbent on the employer to resolve that conflict...'[29] [Emphasis added]

[38] Counsel for the Appellant contended that Lion Dairy was authority for the proposition that when there are expert medical assessments going to an employee's capacity, the Commission does not go behind those assessments and make its own assessment.[30] In short, in a capacity case if the employer has reasonably relied upon medical evidence that is the end of the matter. The Commission would only interfere if the employer's reliance on a medical report was unreasonable, for example if the report was vague and not categorical with respect to the employee's capacity.[31]

[39] We agree with the Appellant's submission that there is a tension between Jetstar and Lion Dairy in respect of the approach to be taken to the determination of 'whether there was a valid reason for the dismissal related to the person's capacity', within the meaning of s 387(a). It is in the public interest to grant permission to appeal to resolve the conflict of authority on this point.[32] On that basis we are satisfied that it is in the public interest to grant permission to appeal and we grant permission.

[40] The Appellant submits that the approach posited in Lion Dairy should be adopted, in preference to that advanced in Jetstar. The Respondent took the contrary position.

[41] The starting point is to construe the words of s.387(a) according to their ordinary meaning having regard to their context and legislative purpose. Context includes the existing state of the law and the mischief the legislative provisions was intended to remedy.[33] As the High Court observed in Project Blue Sky:

'... the duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.'[34]

[42] More recently, in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue[35] (Alcan) the High Court described the task of legislative interpretation in the following terms:

'This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.'[36]

[43] Section 15AA of the Acts Interpretation Act 1901 (Cth) requires that a construction that would promote the purpose or object of the FW Act is to be preferred to one that would not promote that purpose or object (noting that s.40A of the FW Act provides that the Acts Interpretation Act 1901, as in force at 25 June 2009, applies to the FW Act). The purpose or object of the FW Act is to be taken into account even if the meaning of a provision is clear. When the purpose or object is brought into account an alternative interpretation may become apparent. If one interpretation does not promote the object or purpose of the FW Act, and another does, the latter interpretation is to be preferred. Of course, s.15AA requires us to construe the FW Act in the light of its purpose, not to rewrite it.[37]

[44] Turning first to the terms of s.387:

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

(a) whether there was a valid reason for the dismissal related to the person's capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person - whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer's enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant.'

[45] Section 387 requires the Commission to 'take into account' the matters in paragraphs (a)-(h) in considering whether it is satisfied that a dismissal was 'harsh, unjust or unreasonable'. To take a matter into account means that the matter is a 'relevant consideration' in the Peko-Wallsend[38]sense of matters which the decision maker is bound to take into account. The obligation to take into account the matters set out in s.387(a)-(h) means that each of these matters, insofar as they are relevant, must be treated as a matter of significance in the decision making process.[39] As Wilcox J said in Nestle Australia Ltd v Federal Commissioner of Taxation:

'To take a matter into account means to evaluate it and give it due weight, having regard to all other relevant factors. A matter is not taken into account by being noticed and erroneously disregarded as irrelevant'.[40]

[46] Importantly, the requirement to take a matter into account does not mean that the matter is necessarily a determinative consideration.

[47] Turning then to the terms of s.387(a), two observations may be made. First, the expression 'whether there was a valid reason for the dismissal' is not suggestive of a subjective test. We return to this point shortly. Here we simply note that the provision does not say 'whether the employer believed on reasonable grounds that there was a valid reason for dismissal'.

[48] The second observation is that s.387(a) refers to a 'valid reason...related to the person's capacity or conduct (including the effect on the safety and welfare of other employees)'. Notably, s.387(a) does not posit a different approach to the determination of valid reason depending on whether the dismissal was related to the person's capacity or conduct. This suggests that the legislature intended that the same approach be adopted, irrespective of the reason for the dismissal. The legislative context supports this view.

[49] Where a different approach is to be taken in capacity (as opposed to conduct) dismissal cases, the legislature is explicit. Hence, in dismissals relating to unsatisfactory performance, s.387(e) requires the Commission to take into account 'whether the person had been warned about that unsatisfactory performance before the dismissal'. There is no express requirement to take into account whether the person had been warned in dismissals relating to, say, conduct. Though, depending on the circumstances, such a matter may be taken into account (under s.387(h)) if the Commission considers it relevant.

[50] The terms of s.382(a) and the legislative context support the proposition that in a capacity case the Commission is required to consider and make findings as to whether, at the time of the dismissal, the applicant suffered from the alleged incapacity based on the relevant medical and other evidence before the Commission, as determined in Jetstar.

[51] Such an interpretation is also consistent with the objects of Part 3-2 as set out below:

(a) to establish a framework for dealing with unfair dismissal that balances:

(i) the needs of business (including small business); and

(b) to establish procedures for dealing with unfair dismissal that:

(ii) address the needs of employers and employees; and

(c) to provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement.

(2) The procedures and remedies referred to in paragraphs (1)(b) and (c), and the manner of deciding on and working out such remedies, are intended to ensure that a "fair go all round" is accorded to both the employer and employee concerned.

Note: The expression "fair go all round" was used by Sheldon J in in re Loty and Holloway v Australian Workers' Union [1971] AR (NSW) 95.

[52] The object of establishing a balanced framework and providing a 'fair go all round' seems antithetical to the notion that it is the employer who resolves any conflict in the medical assessment of an employee's capacity.

[53] Returning to s.387(a) and the expression 'whether there was a valid reason for the dismissal', it is convenient to briefly refer to the legislative history and then to the jurisprudence.

[54] Section 170DE of the Industrial Relations Act 1988 (the IR Act_)_ contained the first statutory iteration (at the Federal level) of what would eventually lead to the more detailed criteria now contained in s.387 of the FW Act. Section 170DE provided as follows:

(1) An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service.

(2) A reason is not valid if, having regard to the employee's capacity and conduct and those operational requirements, the termination is harsh, unjust or unreasonable. This subsection does not limit the cases where a reason may be taken not to be valid.

[55] An employee claiming unlawful termination pursuant to s.170DE, could pursue their claim in the Industrial Relations Court of Australia. The then AIRC could exercise certain powers in respect to dismissals on account of redundancy. The AIRC was subsequently provided with primary jurisdiction (including the ability to arbitrate) in respect of unfair dismissal claims under the Workplace Relations Act 1996 (the WR Act). Section 170CG(3) of that Act provided as follows:

(3) In determining, for the purposes of the arbitration, whether a termination was harsh, unjust or unreasonable, the Commission must have regard to:

(a) whether there was a valid reason for the termination related to the capacity or conduct of the employee or to the operational requirements of the employer's undertaking, establishment or service; and

(b) whether the employee was notified of that reason; and

(c) whether the employee was given an opportunity to respond to any reason related to the capacity or conduct of the employee; and

(d) if the termination related to unsatisfactory performance by the employee - whether the employee had been warned about that unsatisfactory performance before the termination; and

(e) any other matters that the Commission considers relevant.

[56] Section 170CG(3)(a) of the WR Act adopted some of the wording of s.170DE(1) of the IR Act, but the context was different. Section 170DE(1) contained a prohibition on termination of employment except for a valid reason. Under s.170CG(3) the question of whether there was a valid reason for the termination of employment was no longer the critical question. There is no causal connection between a finding that there was no valid reason for the termination and a conclusion that the termination was harsh, unjust and unreasonable.[41]

[57] The Workplace Relations Amendment (Work Choices) Act 2005 amended the Workplace Relation Act 1996 and introduced s.652(3), which contained the following:

(3) In determining, for the purposes of the arbitration, whether a termination was harsh, unjust or unreasonable, the Commission must have regard to:

(a) whether there was a valid reason for the termination related to the employee's capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the employee was notified of that reason; and

(c) whether the employee was given an opportunity to respond to any reason

related to the capacity or conduct of the employee; and

(d) if the termination related to unsatisfactory performance by the employee - whether the employee had been warned about that unsatisfactory performance before the termination; and

(e) the degree to which the size of the employer's undertaking, establishment or service would be likely to impact on the procedures followed in effecting the termination; and

(f)the degree to which the absence of dedicated human resource management specialists or expertise in the undertaking, establishment or service would be likely to impact on the procedures followed in effecting the termination; and

(g) any other matters that the Commission considers relevant.

[58] Section 387 of the FW Act contains the same criteria as in the earlier s.652(3), save for the additional criteria now found in s.387(d) of the FW Act, relating to any unreasonable refusal to allow the employee to have a support person.

[59] In relation to the former s.170DE(1), Wilcox J made the following observation in Yew v ACI Glass Packaging Pty Ltd (Yew).[42]

'The effect of s 170DE(1) is to make unlawful a termination of employment effected without a valid reason. If the termination comes before the Court, it is the duty of the Court to determine for itself whether, upon the balance of probabilities, there was a valid reason for the termination. It must do this by reference to the evidence. The Court is not concerned with the question whether, upon the information available to the employer, the conclusion reached by the employer was, or was not, a reasonable one. I agree that the Court 'does not sit as an appeal' from the employer's decision; but only because the reference to an appeal implies that the Court is concerned to examine the employer's decision-making process. It is not. It is concerned to ascertain whether there was a valid reason for the conclusion that the employee's employment should be terminated. The Court does this for itself, and on the basis of the evidence of the primary facts placed before it.' [emphasis added]

[60] Yew was cited with approval and applied in a number of subsequent cases.[43]

[61] In Sherman v Peabody Coal Ltd,[44] Moore J was dealing with a review of a decision by a judicial registrar in relation to an application for relief concerning the termination of the applicant's employment. In the course of his decision Moore J considered the meaning of the expression 'the...conduct of the employee' in the context of s.170DE(1). His Honour dealt with this issue in the following terms (at p 15):

One turns then to the subject matter of the connection, which is 'the...conduct of the employee'. In its ordinary meaning this is a clear expression which fastens attention on an employee's actual conduct. In my opinion, there is no warrant for, in effect, substituting for it, some other expression, such as 'the conduct of the employee as honestly and reasonably perceived by the employer after sufficient inquiry.'

[62] In Australian Meat Holdings Pty Ltd v McLauchlan[45] a Full Bench of the Commission considered the approach to be taken to s.170CG(3)(a). The appellant in that case had submitted that in circumstances where an employee is terminated for misconduct and the employer believes, on reasonable grounds after sufficient inquiry, that the employee has been guilty of misconduct then a 'valid reason' exists for the termination within the meaning of s.170CG(3) and the Commission should not disturb that decision. The Full Bench rejected that submission:

'On the basis of the foregoing we are of the view that in determining a s170CE(1)(a) application the Commission is bound to consider whether, on the evidence in the proceedings before it, the termination was 'harsh, unjust or unreasonable', provided that the evidence concerns circumstances in existence when the decision to terminate the employment was made.

While such findings are relevant they do not conclusively determine whether the termination was harsh, unjust or unreasonable. That issue is to be decided by the Commission on the evidence in the proceedings before it. The test is not whether the employer believed, on reasonable grounds after sufficient inquiry, that that employee was guilty of the conduct which resulted in termination.'[46] [emphasis added]

[63] In Edwards v Giudice[47] the applicant's employment had been terminated for misconduct. At first instance the Commission found that the dismissal was unfair and ordered reinstatement. On appeal the Full Bench concluded that the Commissioner had erred in failing to determine whether the applicant was guilty of misconduct as alleged by the employer and that the Commissioner should have done so as part of ascertaining whether her termination had been harsh, unjust or unreasonable. The appeal was upheld and the Commissioner's decision quashed. The applicant sought judicial review in the Federal Court, the application was dismissed.

[64] In the course of his judgment Moore J held:

'The approach of the Full Bench was, in my opinion, unexceptionable. When the reason for a termination is based on the misconduct of the employee, the Commission must, if it is an issue in proceedings challenging the termination, determine whether the conduct occurred. The obligation to make such a determination flows from s 170cG(3)(a). That is, the Commission must determine whether the alleged conduct took place and what it involved.

Paragraph (a) speaks of "whether there was a valid reason ... related to the... conduct of the employee". The paragraph requires consideration of the validity of the reason when the reason is, relevantly, based on conduct of the employee. It is, in my opinion, difficult to avoid the conclusion that the Commission is obliged in such circumstances to investigate in the inquiry process contemplated by s 170CG(3) whether the conduct relied on occurred as a necessary step in the process of determining whether a valid reason existed.'[48]

[65] The Full Court of the Federal Court considered the approach to determining whether a valid reason exists in the context of a capacity case in Crozier v Australian Industrial Relations Commission.[49] In that matter the Court was dealing with an application for judicial review in relation to a decision of a Full Bench of the AIRC. The Court held:

'The word "capacity", as used in s 170CG(3)(a), means the employee's ability to do the work he or she is employed to do. A reason will be "related to the capacity" of the employee where the reason is associated or connected with the ability of the employee to do his or her job. The terms of s 170CG(3)(a) provide no support for Mr Crozier's contention that there can be no "valid reason ... related to the capacity ... of the employee" where an employee is working to his or her personal best, even though this personal best is less than what is required to do the job for which he or she is employed. Plainly, there can be a valid reason for the termination of an employee's employment where he or she simply does not have the capacity (or ability) to do the job. In this case, the Full Bench found that Mr Crozier knew that "the main focus of his position was to generate new business"; that he failed to meet this objective; and that his failure was not due to external factors but to a lack of capacity (or ability) as a sales representative (at 150 & 152-153). In making these findings it acted within jurisdiction, and we detect no jurisdictional error in its approach.'

[66] Importantly, the Court endorsed the approach taken by the Full Bench, that is, of considering the evidence of capacity and making the requisite finding.

[67] In V v Ambulance Victoria, Smith C decided that there was not a valid reason for termination based on capacity, after considering the relevant medical evidence. The Commissioner said[50]:

'[40] I turn firstly to consider whether there was a valid reason for the dismissal related to the person's capacity or conduct (including its effect on the safety and welfare of other employees).

[41] The termination of employment related directly to the capacity of Ms V. Ambulance Victoria reached the conclusion that Ms V could not perform the inherent requirements of her role and that her ongoing condition is unlikely to imminently resolve.

[42] This conclusion was said to be based upon the medical evidence. This is not the state of the medical evidence, as it is less certain than that stated by Ambulance Victoria. Whilst Dr McDonough was concerned about a continuing 'poor mental state' his conclusion was that a slow, partial return to some duties may be possible. Dr McDonough was of the view that Ms V was not fit to return to full operational duties without restrictions. Those restrictions related to right knee arthritis and the potential for additional stressful workplace situations overwhelming her. The findings of Associate Professor Mendelson are more positive. He concluded that Ms V should resume duties on a gradual basis following an appropriate period of training and under a period of supervision. He further stated that there was no indication of any diagnosable mental disorder. However Associate Professor Mendelson did express some caution as to whether or not she would be particularly sensitive or vulnerable to the usual stressors working as an ambulance paramedic.

[43] This has been a difficult matter for all concerned. I have no doubt that Ambulance Victoria seeks to make the right decision to protect its employees and the public it serves.

[44] However I have not been persuaded that there was a valid reason for the termination of Ms V.

• There has not been a clear finding that Ms V cannot perform the inherent requirements of the job by the independent medical practitioners;

• There is no finding by the independent medical practitioners that any concerns they expressed will not imminently resolve;

• Ms V has on several occasions, since her accident, returned to operational work without incident; and

• The reason she was suspended from duty (the use of methadone) and from which she didn't immediately seek to return, was not finally found by Dr Gijbers (sic) as an inhibiting factor to the normal performance of her duties.' [emphasis added]

[68] In dismissing the subsequent appeal the Full Bench said:[51]

'[16] Having regard to the reasons of Commissioner Smith in relation to the medical evidence, read as a whole, we are not persuaded that his conclusion that "There has not been a clear finding that Ms V cannot perform the inherent requirements of the job by the independent medical practitioners" can be characterised as the application by him of an erroneous test in determining whether there was a valid reason for the termination.

[17] It is evident from the Commissioner's reasons, read as a whole, that the issue arising out of the medical evidence was whether the evidence supported a finding that the respondent could not perform the inherent requirements of her role. He assessed the medical evidence, noting that one specialist was concerned about a continuing "poor mental state", whilst the other found that that there was no indication of any diagnosable mental disorder. He noted that whilst one found that the respondent was not fit to return to full operational duties without restrictions but that a slow, partial return to some duties may be possible, the other concluded that the respondent should resume duties on a gradual basis following an appropriate period of training and under a period of supervision. Having assessed the medical evidence, the Commissioner was not persuaded that it supported a finding that there was a valid reason for the termination for a number of reasons stated and having regard to the processes which the appellant implemented for managing the resumption of normal operational duties of an employee returning to work after an extended absence. The finding challenged by the appellant is one of the conclusions drawn from the evidence by the Commissioner which supported his finding that there was no valid reason for the termination, rather than a separate and determinative test.' [emphasis added]

[69] Further, at [28], the Full Bench said:

'The responsibility of the Commissioner was to determine whether the evidence supported a finding that there was a valid reason for the termination of employment in all of the circumstances, including the particular nature of the industry and the respondent's role.'

[70] Finally, we note that in Miller v University of NSW[52] Gray J said[53]:

'If the 'valid reason' contemplated by s170CG(3)(a) of the WR Act involved no more than an inquiry into the legal rights of the parties, in most cases it would be a short inquiry. It would be answered by saying that the employer had the right to dismiss the employee on notice and had exercised that right. The provision refers to a 'valid reason' in another sense altogether. The reason must be related to the capacity or conduct of the employee, or to the employer's operational requirements. What is sought is not the existence of a legal entitlement to terminate the employment, but the existence of the reason for the exercise of that right that is related to the factual situation. The validity is not to be judged by reference to legal entitlements, but to the Commission's assessment of the factual circumstances as to what the employee is capable of doing or has done...' [Emphasis added)]

[71] Plainly his Honour saw that the assessment of capacity was to be determined by the Commission based on its assessment of the evidence.

[72] In support of the proposition that Lion Dairy should be adopted the Appellant referred to the following passage from Lion Dairy, at [26] of that decision_:_

'[26] Consideration of English authorities in unfair dismissal cases should be treated with caution because of some differences in the legislation and a divergence of approach in assessing the reasonableness of a reason for dismissal. However, in the context of capacity issues and the proper role of the tribunal, there is a distinct commonality in approach. In Viridor Waste v Edge, a case concerning capacity, Langstaff J said:

"24. In determining claims of unfair dismissal, the statutory focus of the Tribunal is required to be on the reasoning of the employer. Where the Tribunal is satisfied that the employer's belief in the culpability of an employee is genuine the question is then not whether on all the information available to the Tribunal at the time of the hearing that belief had reasonable grounds to support it, but whether the material which was before the employer at the time of its decision was such as to provide a reasonable basis for the belief. The difference between the two is that the former is capable of taking into account information which the employer did not have. If the employer's investigation of what had taken place was reasonable, its belief cannot be assessed on the basis of information which might have come to light if only a wider and more far reaching investigation had been undertaken. It has to be judged on the material the employer actually had. It is necessary for a Tribunal to base its decision clearly on that material. Mr Crosfill is right in his submission that in paragraph 29 of the Reasons here, however, there is no reference to the particular information which was before Mr Newman of Viridor, who took the relevant decisions.

25. The next question for a Tribunal, having identified the material which was considered by the employer in reaching its view, is not what conclusion it would have formed from the information, but whether that information taken as a whole reasonably supported the conclusion to which the employer actually came. If a Tribunal asks what it would have decided, given the information, it is in danger of substituting its own decision for that of the employer. Though substitution arguments are all too easily asserted, and it must always be borne in mind that a Tribunal's task is to make an assessment overall as to whether a dismissal is or is not reasonable - and if it comes to the latter view it will plainly be reaching a decision different from that of the employer - its task is always to assess the employer's decision, and not to make its own other than by way of commentary upon the employer's reasoning. The danger of leaving out of account any specific reference to the material upon which the Respondent actually based its view is that a Tribunal then examines all the material for itself and is drawn into reaching its own opinion not as to what was permissible on the basis of that material, but what it would itself conclude on all the material now available to it.' (footnotes omitted) [emphasis added]

[73] The extract from Viridor Waste v Edge ('Viridor') is unpersuasive, for the reasons mentioned earlier in [26] from Lion Dairy, namely, English cases 'should be treated with caution because of some differences in the legislation and a divergence of approach in assessing the reasonableness of a reason for dismissal'. The difference in the legislative framework is apparent from the underlined passage from Viridor.[54]

[74] We were not taken to any other authority in support of the approach to capacity dismissal cases advocated in Lion Dairy.

[75] The approach advanced by the majority in Lion Dairy is inconsistent with the weight of authority and the proper construction of s.387(a). It is, with respect, plainly wrong.

[76] Contrary to the proposition in Lion Dairy, there is no basis to leave the resolution of any conflict in medical opinion to the employer. The Commission is frequently called upon to resolve evidentiary conflict, including the assessment of expert evidence.

[77] The tension between Lion Dairy and Jetstar is to be resolved by the adoption of the approach in Jetstar. In a dismissal related to the person's capacity, s.387(a) requires the Commission to consider and make findings as to whether, at the time of dismissal, the applicant suffered from the alleged incapacity. Such findings are to be based on the relevant medical and other evidence before the Commission.

[78] In adopting the approach in Lion Dairy the Commissioner erred. On that basis, we uphold the appeal and quash the Decision and Order. We remit the matter for rehearing to Commissioner Platt.

Mr Grealy from the "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) for the Respondent.

[1] [2017] FWC 5740.

[3] [2017] FWC 5740.

[4] This is so because on appeal FWC has power to receive further evidence, pursuant to s.607(2); see Coal and Allied v AIRC [2000] HCA 47; (2000) 203 CLR 194 at [17] per Gleeson CJ, Gaudron and Hayne JJ.

[5] Annexure AK66 to the Witness Statement of Anthony Kaye; Exhibit R1.

[6] Annexure AK66. As set out in the termination letter. Also see Mr Kaye's file note of the meeting, at Annexure AK65 to Exhibit R1. Mr Kaye's evidence as to what was said at the meeting was unchallenged.

[7] Transcript 26 October 2017, at [165].

[13] Transcript 26 October 2017, at [49]-[158].

[14] See Transcript of proceedings 26 October 2017 at [140]-[149] and [214]-[222].

[15] Transcript 26 October 2017, at [167].

[16] Applicant's written submissions at [18]-[20]; AB 76-77.

[17] [2016] FWCFB 4218, at [25] - [28.]

[18] CSL's written submissions at [32].

[19] See Coal and Allied v AIRC [2000] HCA 47; (2000) 203 CLR 194 at [17] per Gleeson CJ, Gaudron and Hayne JJ.

[20] [2011] FCAFC 54; (2011) 192 FCR 78 at paragraph 43.

[21] O'Sullivan v Farrer [1989] HCA 61; (1989) 168 CLR 210 per Mason CJ, Brennan, Dawson and Gaudron JJ; applied in Hogan v Hinch [2011] HCA 4; (2011) 85 ALJR 398 at [69] per Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ; Coal & Allied Mining Services Pty Ltd v Lawler and others [2011] FCAFC 54; (2011) 192 FCR 78 at [44] to [46].

[22] [2010] FWAFB 5343, 197 IR 266 at [27].

[23] Appellant's outline of submissions at [19].

[24] Transcript of proceedings 5 February 2018 at [241].

[25] Respondents submissions 29 January 2018 at [18] - [19].

[26] Transcript 5 February 2018 at [182].

[27] [2013] FWCFB 9075.

[29] [2016] FWCFB 4218 at [34].

[30] Transcript 5 February 2018 at [49]).

[32] See CFMEU v Queensland Bulk Handling Pty Ltd [2012] FWAFB 7551 at [19].

[33] See Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at [4]; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at p. 408.

[34] (1998) 194 CLR 355 at [78] per McHugh, Gummow, Kirby and Hayne JJ; also see Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9; 253 CLR 531 at [65]-[66].

[35] [2009] HCA 41; (2009) 239 CLR 27.

[37] Mills v Meeking [1990] HCA 6; (1990) 169 CLR 214 at para 235 per Dawson J; R v L (1994) 49 FCR 534 at para 538.

[38] Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24.

[39] Friends of Hinchinbrook Society Inc v Minister for Environment (No 3) (1997) 77 FCR 153; Australian Competition and Consumer Commission v Leclee Pty Ltd (1999] FCA 1121_; Edwards v Giudice_ [1999] FCA 1836; National Retail Association v Fair Work Commission [2014] FCAFC 118.

[40] (1987) 16 FCR 167 at 184; cited with approval by Hely J in Elias v Federal Commissioner of Taxation [2002] FCA 845; (2002) 123 FCR 499 at [62] and by Katzmann J in Construction, Forestry, Mining and Energy Union v Deputy President Hamberger [2011] FCA 719; (2011) 195 FCR 74 at [103].

[41] Windsor Smith v Liu (1998) 140 IR 398 per Giudice P, Polites SDP and Gay C at p.8

[42] (1996) 71 IR 201.

[43] Cornwall v Qantas Ltd, unreported Federal Court, 8 December 1997 per Drummond J; Sherman v Peabody Coal Ltd, unreported Federal Court 27 February 1998 per Moore J; Pabhuru v Woolworths Ltd trading as Mac's Liquor, unreported Locke JR N12180 of 1995m 17 June 1997; Elvidge v Burswood Report Management Ltd (1996) 70 IR 122.

[44] Sherman v Peabody Coal Ltd, unreported Federal Court 27 February 1998.

[45] (1998) 84 IR 1.

[47] [1999] FCA 1836; (1999) 94 FCR 561.

[49] 2001 FCA 1031

[50] [2011] FWA 8576.

[51] [2012] FWAFB 1616

[52] [2003] FCAFC 180.

[53] Ibid at [13] (Ryan and Gyles JJ agreed, at [78]

[54] Also see s.98(4) of UK Employment Rights Act 1996

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