[1] This is an application for leave to appeal and, if leave is granted, an appeal by Woolworths Ltd trading as Safeway ("Safeway") against a decision[1] and order[2] of Senior Deputy President Acton given and made on 6 June 2005. The Senior Deputy President allowed an application for relief against termination of employment pursuant to section 170CE(1) of the Workplace Relations Act 1996 ("the Act") by Mr Cameron Brown. The Senior Deputy President ordered Safeway to reinstate Mr�Brown, maintain the continuity of his employment and made an order for payment of lost remuneration.

[2] An appeal to the Full Bench lies only by leave of a Full Bench: 3

[3] Where, as here, the matter the subject of the appeal involves the exercise of a discretion or the application of a broad standard the appellant must demonstrate a error within the principles in House v The King: [4]

"The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred."

[4] Mr Brown is a butcher. In about 1996 he commenced a butchering apprenticeship at the Safeway supermarket at Niddrie. He worked at various Safeway Supermarkets during the course of his apprenticeship. He finished his apprenticeship in 2000 and commenced working full time as a relief butcher at Safeway stores around the Mornington Peninsula. In 2002 Mr Brown commenced a course at a TAFE college but continued working at the Safeway store at Mornington on a casual basis.

[5] During 2002, Mr Brown had an eyebrow ring inserted through the outer end of his left eyebrow. Thereafter Mr Brown always covered his eyebrow ring with a bright blue waterproof band-aid whilst working.

[6] At all material times Safeway had a dress policy ("Policy") which relevantly provides:

Exposed jewellery (including body piercing) is not permitted as this is a potential threat to food safety due to possible physical and microbiological contamination. No visible body piercing is permitted, which includes (visible) tongue piercing, eyebrow, nose, lip etc piercing. Watches, earrings, rings with stones, necklaces or fob/key chains are not to be worn

The following exceptions are permitted to be worn but particular attention must be given to ensure that they are clean and do not contaminate food:

• A maximum of one small plain sleeper in each ear;

Where a wedding band contains stones and cannot be removed, it must be taped and a glove worn to prevent possible contamination of food. This also applies to other rings that are unable to be removed ...

• Disposable gloves are to be used for food preparation such as slicing or icing,

• Inverted bag technique for serving product to customers is to be used in all fresh food departments.

• Hands must be washed and dried on entering the fresh food department by all personnel, including visitors. Hand washing must involve the use of approved liquid hand soap and warm water.

• Regular hand washing throughout the day shall form part of all employees personal hygiene regimen.

Band-aids: Only use approved blue bandaids from the first aid kit. This is for three reasons:

1. They are waterproof, reducing the risk of possible food contamination.

2. Protecting the wound from contamination by environmental factors.

3. They are easily seen if they should dislodge and end up in food product.

Gloves must be worn over the hand if a band-aid is required.

Every food handler shall be adequately trained in food handling techniques and personal hygiene.

Visitors to the Fresh Food Areas, including maintenance personnel, are also required to wear hats covering their hair and remove any exposed jewellery before entering the fresh food departments. In addition to this, if handling product, visitors must wear a clean apron and ensure they follow all relevant GFFP procedures.

Maintenance staff must notify the department manager before commencing any work and on completion to ensure that all measures are taken to avoid product contamination." (underline emphasis added)

[7] At the end of 2002, Safeway opened a second supermarket at Mornington which resulted in a reduction in business at the supermarket where Mr Brown was working as a casual butcher. His hours were reduced, eventually to zero. However, he remained on the casual roster. Mr�Brown then sought casual hours at other Safeway stores in the area. He visited the store at West Rosebud and spoke with the store manager, Mr David Nilsen. Mr Nilsen indicated that he could provide Mr Brown with casual work for about four weeks and adverted to the possibility of further work arising from the possible departure of another employee. Mr Brown gave evidence to the effect that Mr Nilsen had given him permission to continue wearing his eyebrow ring covered with a blue band-aid whilst working at the West Rosebud store ("the Nilsen permission"). Paragraph 10 of Mr Brown's statement records the Nilsen permission:

"[Nilsen] specifically asked me at this time what I had done with eye-ring at the last store I had worked at and I answered truthfully and said that I had covered it with a blue band-aid. He then indicated that I could do that at Rosebud West."

[8] This statement is not in the 'proper' form usually required as a precondition to admissibility in a court. It summarizes the effect of a conversation rather than giving the witness' best recollection of the conversation in direct speech. In cross-examination Mr Brown gave evidence as to the words used by Mr Nilsen:

"He just asked me what I did in my last store [about the eyebrow ring]. I told him. He said, yes, that's fine."[5]

[9] Mr Brown received ongoing work at the Rosebud store. He wore his eyebrow ring covered with a blue band-aid whilst working at Rosebud store without adverse comment for about two years. During this period he was interviewed by a senior human resources officer, Ms Monttebello, in relation to an assistant manager's position. Mr Brown gave evidence that during the interview Ms Monttebello asked him whether he would be prepared to remove his eyebrow ring if he was given the position of assistant manager. Mr Brown indicated that he would think about it. He was not offered the position.

[10] In November 2004, Ms Lowe was transferred to the Rosebud store as its trading manager and noticed Mr Brown's eyebrow ring covered by a band-aid. She came to the view that it contravened the Policy and apparently determined that action ought be taken. Thereafter, Mr Brown was repeatedly informed by managers that his eyebrow ring, even if covered by a band-aid, was in contravention of the Policy and that he was required to remove it. Mr Brown was spoken to by Mr Blain-Bartle in November 2004. Ms Lowe spoke to Mr�Brown on 16 December 2004. On 13 January 2005, Mr Nilsen, in the presence of Mr�Blain-Bartle and Ms Lowe, told Mr Brown that he needed to remove the eyebrow ring at work. On 14 January 2005 there was a further meeting between Mr Nilsen, Ms Lowe, Mr�Brown and a union representative, Mr Burley. At that meeting Mr Brown was again told that he was in breach of the Policy by wearing the eyebrow ring, whether covered by a band-aid or not. He refused to remove the eyebrow ring and was sent home with pay. On 15�January 2005, Mr Brown returned to work wearing the eyebrow ring and was directed by Ms Lowe to remove it or leave work. Mr Brown refused to remove the eyebrow ring and also refused to leave work. Later that day, Ms Lowe gave Mr Brown a written warning that if he persisted in refusing to remove the eyebrow ring he would be sent home with no pay. On 16�January 2005, Mr Brown again attended work with the eyebrow ring and was directed by the duty manager, Mr Galway, to remove the ring or leave the store. Mr Brown left the store. On 17 January 2005, Mr Brown again attended work wearing the eyebrow ring and was directed by Mr Nilsen to remove the eyebrow ring or leave the store. Again, Mr Brown left the store. On 20 January 2005, Mr Hopkins from Safeway's human resources department attended the Rosebud store, counselled Mr Brown that the wearing of the eyebrow ring, even if covered by a band-aid, was in breach of company policy and issued him with a warning:

"Due to the serious nature of your breach of company policy regarding jewellery, this is a first and final warning. Any further breaches may lead to your employment being terminated."

[11] The written submissions filed on behalf of Mr Brown concede:

"There is no dispute that Brown was given numerous opportunities to remove the eyebrow ring and numerous warnings about the consequences of not doing so."[6]

[12] Throughout the period from November 2004, Mr Brown, supported by Mr Burley of the union, maintained that the eyebrow ring, when covered by a band-aid, was not in breach of the Policy. Safeway representatives consistently maintained that the wearing of the eyebrow ring, whether covered by a band-aid or not, was in breach of the Policy.

[13] The AMIEU notified a dispute to the Commission pursuant to the relevant certified agreement in relation to Safeway's direction that Mr Brown remove the eyebrow ring while at work. On 24 January 2005 that dispute was conciliated by Commissioner Grainger. That conciliation resulted in the Commissioner issuing the following recommendation:

"[1] Having heard the submissions of the parties and having conferred with them in conciliation conference I make the following recommendations:

1. that The Australasian Meat Industry Employees Union (the AMIEU) have until close of business, Tuesday, 1 February 2005 to make written representations to Woolworths Limited (Woolworths) regarding the application by Woolworths of the Dress/Appearance Standards Policy for Meat, Deli, Seafood, Bakery and Produce Departments (exhibit R2, the policy) both generally and specifically with regard to its application to Mr Cameron Brown at Safeway, Rosebud West.

2. that Woolworths have until close of business on Wednesday, 2 February 2005 to give the AMIEU its written response to their requirements both generally and specifically with regard to Mr Cameron Brown at Safeway, Rosebud West.

3. that AMIEU have until close of business on Thursday, 3 February 2005 to notify Woolworths of the intention of Mr Cameron Brown to comply with any requirement of Woolworths in regard to compliance with any specific provision of the policy.

4. that Mr Brown be paid by Woolworths until close of business on Thursday, 3 February 2005.

5. that if required by Woolworths after the requirements made by AMIEU, Mr�Brown will remove his eyebrow stud before resuming his duties at Safeway Rosebud West on Monday, 7 February 2005.

[2] I note that the primary and paramount concern in this matter must be the public health and safety of Woolworths customers. Both Woolworths and the AMIEU should also both be concerned for the clear and consistent application of the policy in regard to all Woolworths employees."

[14] The AMIEU forwarded a submission to Safeway in accordance with the recommendation.[7] The submission focussed on the low level of risk of microbiological contamination associated with the wearing of an eyebrow ring and an inconsistency in permitting some body jewellery but not the eyebrow ring worn by Mr Brown. On 3 February 2005, consistent with the recommendation, Safeway sent a letter to Commissioner Grainger and a copy to the AMIEU indicating that it would "maintain the current dress and appearance policy relating to our fresh food departments." The letter included the following:

"As outlined during conciliation, it is agreed that Woolworths should reaffirm its dress and appearance policy with all staff members. Woolworths will undertake to ensure staff members working in the fresh food departments are aware of the current policy relating to the wearing of jewellery.

Mr Brown is required to remove his eyebrow ring prior to recommencing his work duties. Failure to do so on the next time he returns to work will result in termination of his employment."

[15] On 7 February 2005, Mr Hopkins attended the Rosebud store. Mr Brown attended for work accompanied by Mr Burley. The eyebrow ring was still in place covered by a band-aid. Mr�Hopkins provided Mr Brown with a last opportunity to remove the eyebrow ring and return to work. Mr Brown refused and his employment was terminated.

Application for leave to amend Notice of Appeal

[16] Safeway sought leave to amend its Notice of Appeal in a number of respects. None of those amendments were opposed, save for the amendment to include a new ground 2A challenging her Honour's finding of fact as to the Nilsen permission. It is passing strange that there is no suggestion in the evidence that Mr�Brown ever referred to the Nilsen permission in the various meetings and other interactions he had between November 2004 and the date on which his employment was terminated. This fact certainly casts doubt on his subsequent evidence as to the Nilsen permission. However it is not sufficient to persuade us that Her�Honour's finding that the Nilsen permission occurred can properly be characterised as "glaringly improbable" or "inconsistent with facts incontrovertibly established by the evidence" or that her Honour "failed to use or palpably misused [her] advantage" in seeing the witnesses give evidence.[8] More importantly, to allow the amendment would be unfair to Mr Brown. The absence of any reference to the Nilsen permission in the contemporaneous documents and in Mr Brown's own statements does not conclusively prove that the matter was not raised. Mr Brown has not been given an opportunity in cross-examination to address the proposition that he did not raise the Nilsen permission prior to the termination of his employment. It is inappropriate to speculate on what his answer might have been had that issue been raised with him in cross-examination. For all we know, Mr�Brown may well have given oral evidence in cross-examination that the matter was in fact raised. It was open to Safeway to press the argument before her Honour at a time when Mr Brown might have been recalled. It did not do so. Of course, we do not, on the re-hearing, share her Honour's benefit of having seen the witnesses give their evidence. We grant leave to Safeway to amend its Notice of Appeal in respect of the amendments that are not opposed. In the interests of justice and in the exercise of our discretion we refuse Safeway leave to add the proposed ground 2A.

[17] Her Honour identified the reason for the termination of Mr Brown's employment as follows: [9]

"Safeway terminated Mr Brown's employment because he wore an eyebrow ring covered by a blue bandaid while at work at the Rosebud West Safeway store in breach of the Safeway policy entitled "Safeway Dress/Appearance Standards for Meat, Deli, Seafood, Bakery and Produce Departments."

[18] Her Honour then stated that she was "not satisfied Mr Brown's wearing of an eyebrow ring covered by a blue bandaid while at work at the Rosebud West Safeway Store was a valid reason for the termination of his employment".[10] It is apparent from paragraph 12, and from her reasons as a whole, that the Nilsen permission was the foundation of her Honour's decision. Her Honour noted:

"[12] I am not satisfied it constituted a valid reason because Mr Brown was told by Safeway before he commenced employment at the Rosebud West Safeway store in December�2002 that he could wear a blue bandaid over his eyebrow ring while at work at the Rosebud West Safeway store." (emphasis added)

[19] In the context of considering whether there was a valid reason for the termination of Mr Brown's employment, her Honour also relied on the following matters:

"[21] Moreover, I do not think Mr Brown's wearing of his eyebrow ring constituted any more risk to hygiene in food handling than if he had worn "one small plain sleeper in each ear". The Safeway Dress Policy allows Mr Brown to wear "one small plain sleeper in each ear". The evidence before me was that prior to his termination, Mr Brown was prepared to remove the jewellery he had in his ear, leaving only his eyebrow ring. And, Mr Brown's eyebrow ring is of the type that is not easily removable as it requires special tools to remove it and is unlikely to fall off.

[22] While there was evidence before me that blue bandaids have been found in food, there was no evidence that in the two years Mr Brown worked at the Rosebud West Safeway store the blue bandaid he wore over his eyebrow ring while at work ever fell into food or became loose. Further, the evidence before me was that the hygiene concerns Safeway had about Mr Brown wearing an eyebrow ring covered by a blue bandaid while at work could be adequately dealt with by Mr Brown wearing a "hairnet" [Exhibit H8] of the type commonly worn by workers in the meat industry. [Exhibit H9]

[23] Although the wearing of such a "hairnet" is not within the Safeway Dress Policy, it would have enabled Safeway to meet its hygiene concerns without resiling from what it had told Mr Brown before he commenced the employment." (footnotes omitted except in para [22])

[20] Her Honour concluded, apparently on the basis of these assessments:[11]

"I do not think any undermining of the attainment of [Safeway's policy] objectives resulting from Mr Brown wearing his eyebrow ring covered by a blue bandaid constituted a valid reason for the termination of his employment."

[21] With respect, for reasons that we will give, Her Honour erred in concluding that there was no valid reason for the termination of Mr Brown's employment.

[22] The effect of her Honour's decision is to require Safeway to continue the employment of Mr�Brown in circumstances where he has repeatedly refused to remove his eyebrow ring, notwithstanding that it is contrary to the Policy. The central basis for her Honour's decision was the 'permission' given by Mr Nilsen in late 2002. On one view, the effect of her Honour's decision, if allowed to stand, is that an employer will be bound for all time by a permission or indulgence granted informally by a middle manager contrary to a policy established by the employer. In our opinion, this issue is of such importance that in the public interest leave to appeal ought be granted. Having formed that opinion, leave to appeal must be granted in accordance with section 45(2) of the Act. Leave to appeal is granted. Leave having been granted, the appeal proceeds as a re-hearing.

Breach of an employer's policy as a basis for termination of employment

[23] It is convenient to first deal with the legal principles related to breach of an employer's policy as a basis for termination of employment.

[24] In the modern era employers face an often bewildering array of statutory obligations in relation to matters such as health and safety, discrimination, taxation, trade practices and fair trading to mention the most obvious examples. Employers face potential liability arising from their common law duty of care to their employees and to members of the public. Employers may be subject to contractual obligations that require them to conduct their business in a particular way or to meet particular standards or observe particular constraints. For these reasons it is entirely reasonable, and often necessary, for employers to put in place policies, with which employees must comply, to facilitate the employer's compliance with its obligations and duties.

[25] Any obligation on an employee to observe a policy established by the employer must be founded in the terms of the contract of employment. A requirement to observe a policy may be an express term of the contract. Indeed, a contract of employment may even incorporate a policy by reference.[12] In the absence of an express term, the matter turns on the implied term to obey lawful directions. Such a term is implied into contracts of employment.[13] In Adami v Maison de Luxe Ltd[14] Isaacs ACJ observed:[15]

"It is no doubt a correct principle that, once the relation of employer and employee is established, obedience to lawful orders is, if not expressly, then impliedly, contemplated by the contract creating the relation, and mere disobedience of such orders is a breach of the bargain."

[26] In R v Darling Island Stevedoring and Lighterage Co. Limited; Ex parte Halliday & Sullivan[16] Dixon J, addressing "the standard or test by which the common law determines the lawfulness of a command or direction given by a master to a servant", summarized the common law as follows:[17]

_"If a command relates to the subject matter of the employment and involves no illegality, the obligation of the servant to obey it depends at common law upon its being reasonable. In other words, the lawful commands of an employer which an employee must obey are those which fall within the scope of the contract of service and are reasonable. ... But what is reasonable is not to be determined, so to speak, in vacuo. The nature of the employment, the established usages affecting it, the common practices which exist and the general provisions of the instrument… governing the relationship, supply considerations by which the determination of what is reasonable must be controlled. When an employee objects that an order, if fulfilled, would expose him to risk, he must establish a case of substantial danger outside the contemplation of the contract of service (_Bouzourou v. Ottoman Bank [(1930) A.C. 271, at pp. 275-277]; Ottoman Bank v. Chakarian [(1930) A.C. 277, at pp. 282, 283])."[18] (emphasis added)

[27] Dixon J ought not be taken as using the expression "within the scope of a contract of service" to refer merely to the terms of the contract. Rather, the expression encompasses all matters connected with the job performed by an employee pursuant to his or her contact of employment, and any of its incidents. If a policy is rationally related to the business of the employer a direction to observe the policy will typically be within the scope of the contract of employment.

[28] Consistent with these principles, the Full Bench in Potter v Workcover Corporation[19] observed:

[67] Of course breaching an employer's policy will not of itself automatically give rise to a valid reason for termination of employment. It depends on the character of the policy and the nature of the breach. The policy in question must be lawful and reasonable.

[29] At common law, not every failure to obey a lawful direction justifies dismissal. In Adami Isaacs ACJ noted:[20]

"But whether disobedience in a given case is of such a character as to justify a complete dissolution of the contract by one of the parties and, as here, a forfeiture by the other of valuable accruing rights, together with some degradation - altogether a severe penalty - is, in my opinion, quite a different matter. Such a justification requires the disobedience to be as phrased "wilful disobedience of a lawful order." That is, it must be not merely a breach but a radical breach of the relation, and inconsistent with its continuance... "Wilfully" does not necessarily connote in that connection anything criminal or immoral, but it does connote some deliberate design or purpose to derogate from duty. ... Any conduct on the part of either [employer or employee] inconsistent with the maintenance of the relation created amounts to a renunciation, and the other has a right to terminate it. An order that is not so clearly implied or expressed as to be free from doubt has been left so by the act of both parties. A refusal to comply with it, if the employee, regarded as a reasonable man with knowledge of all the circumstances, may reasonably and does honestly contest it, is not, if respectfully communicated, a wilful disobedience of a lawful order, which by reason only of "wilfulness" entitles the employer to penalize the employee. The employee is there, to the knowledge of his employer, only acting in defence of his supposed rights - that is his only intention and purpose. He is not wilfully insubordinate. Other grounds may justify a rescission, as, for instance, the importance of the refusal apart from wilfulness or its effect on the general condition of the employer's business. ... It is incontestable that any conduct of an employee which is not merely inconsistent with some particular obligation involved, and possibly not striking at the root of the matter, but which is inconsistent with the relation established, is a just cause for the employer's termination of that relation. Habitual neglect or a definite refusal of a general kind to pursue the employer's lawful policy of business would afford such justification." (emphasis added)

[30] The facts in Adami are instructive. In that case the proprietor of a hall determined that the hall would commence opening for dancing on Saturday afternoons. The manager (who worked as a bookmaker on Saturdays) refused to comply with the employer's requirement that he work on Saturdays and was dismissed. The High Court held that the dismissal was lawful. Following on immediately from the passage in the preceding paragraph, Isaacs ACJ stated:[21]

"That is what happened here. The direction as to Saturday afternoons was not an isolated order but was part of a business policy. The nature of the business was such that it was clearly within the contemplated scope of the employer's rights to select Saturday afternoons as a means for popularizing or extending the business. The refusal of the appellant to give his personal services and his determination to substitute another to take his place was an important and a definite and constant refusal to carry out the duties which, on a considered construction of the contract and circumstances, were, in my opinion, personally undertaken by the appellant in clause 4 of the agreement. He there undertook not only the "full control of the staff" but "the general supervision of the business" subject to the board of directors. That "control" and that "general supervision" might reasonably be directed by the company to include his presence at the hall and, inter alia, the checking of receipts. A general and total refusal of these duties after their specification was, whether the appellant was insubordinate or not, and whether "wilful" or not, a refusal which, by reason of the importance of the duties involved and the extent of the refusal, amounted in law to a renunciation entitling the employer to terminate the contract. For this purpose the letter of 6th July 1923 affords no answer. Under the second branch it is no longer, as it was under the first, a matter assumedly unimportant to the employer, or merely a question of the design and purpose of the employee. The effect of the refusal on the employer's business, and, therefore, its relative importance in the whole contract, are relevant considerations. Therefore, even putting aside "wilfulness" altogether, the legal effect of the refusal is to control the business, and that, in the absence of some provision in the law or the contract, is inconsistent with the general relation of employer and employed."[22]

[31] In Laws v London Chronicle Ltd[23] Lord Evershed observed:[24]

"It follows that the question must be - if summary dismissal is claimed to be justifiable - whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service. It is, no doubt, therefore, generally true that wilful disobedience of an order will justify summary dismissal, since wilful disobedience of a lawful and reasonable order shows a disregard - a complete disregard - of a condition essential to the contract of service namely the condition that the servant must obey the proper orders of the master, and that unless he does so the relationship is, so to speak, struck at fundamentally."

[32] It is possible to discern in decisions of the Commission involving a breach of an employer's policy a conceptual tension as to whether mitigating factors ought be treated as going to the existence of a valid reason for termination within the meaning of s.170CG(3)(a) or only as relevant to the overall determination of whether the termination was harsh, unjust or unreasonable in accordance with s.170CG(3). In our opinion, the better view is that where a breach of policy involves a breach of the implied term requiring an employee to obey lawful directions sufficient to justify dismissal at common law then the breach will be a valid reason for termination of employment in the sense of a reason that is "sound, defensible or well-founded."[25] Mitigating circumstances are then relevant (pursuant to s.170CG(3)(b) to (e)) to a determination of whether the termination of employment is harsh, unjust or unreasonable notwithstanding the existence of that valid reason.

[33] This was the approach adopted by the Full Bench in Atfield v Jupiters Ltd.[26] In that case the Full Bench accepted that the breach of policy (a strict prohibition on employees of a casino gambling on the casino premises on pain of instant dismissal) involved a breach of an important term of the contract of employment and constituted a valid reason for termination "in the sense that the reason was 'sound, defensible or well-founded,'"[27] but held that the mitigating circumstances (the employee was unaware that the prohibition on gambling extended to a hotel adjoining the main casino premises and sought to withdraw the bet as soon as it was suggested that the bet was placed in breach of policy, an unblemished record and prejudice in gaining further employment in the industry in circumstances where the employee had made a significant investment in self-funded training) meant that it was open to the Commissioner at first instance to conclude that the termination was harsh.

[34] In summary, a breach of an employer's policy involving or amounting to a failure to obey a lawful and reasonable direction of the employer sufficient to justify dismissal at common law will amount to a valid reason for termination of employment within the meaning of s.170CG(3)(a) in the sense of a reason that is "sound, defensible or well-founded."[28] A failure to comply with a direction to do or refrain from doing something in compliance with a employer's policy will not provide a valid reason for termination of employment where:

(a) the policy, or a direction to comply with the policy, is illegal;

(b) the policy does not relate to the subject matter of the employment or matters affecting the work of the employee; or

(b) the policy, or a direction to comply with the policy, is unreasonable.

[35] What is reasonable will depend upon all the circumstances including the nature of the employment, the established usages affecting it, the common practices which exist and the general provisions of the instrument governing the relationship. A policy will be reasonable if a reasonable employer, in the position of actual employer and acting reasonably, could have adopted the policy. That is, a policy will only be unreasonable if no reasonable employer could have adopted it. A policy will not be unreasonable merely because a member of the Commission considers that a better or different policy may have been more appropriate. As the Full Bench observed in the XPT Case[29], albeit in a somewhat different context, it is not the role of the Commission "...to interfere with the right of an employer to manage his own business unless he is seeking from the employees something which is unjust or unreasonable."[30]

[36] Even where a breach of policy (or failure to comply with a direction to observe a policy) provides a valid reason for termination of employment, it is well established that the termination may nevertheless be harsh, unjust or unreasonable.[31] For example:

• the employee may establish ignorance of the policy;

• termination of employment may be a disproportionate response to the breach having regard to its nature and the employee's length of service and prior history;

• the employee may demonstrate prior non-enforcement or inconsistent application of the policy which, in the particular circumstances, render termination for breach of the policy harsh, unjust or unreasonable (although it should be noted that "…merely because in the past, another employee in breach of the policy may have been dealt with in a particular way other than dismissal is not, of itself, a reason why subsequent dismissals in similar circumstances might be said to be harsh."[32]);

• the evidence may disclose that the policy is being applied in a discriminatory fashion or is used as a pretence to disguise a real reason that is impermissible (eg union membership or non union membership).

This list is not intended to be exhaustive and each case will turn on its own facts.

[37] The lawfulness of directions by an employer as to dress has been considered by the courts. As long ago as 1912, Higgin J said:[33]

"Mr. Badger has a quaint theory that he has a common law right to tell the employee what he should wear, apart from the power given to make regulations. I know of no such common law right. A servant has to obey lawful commands, not all commands. The servant does not commit a breach of duty if he refuse to attend a particular church or to wear a certain maker's singlets. The common law right of an employee is a right to wear what he chooses, to act as he chooses, in matters not affecting his work. Prima facie, a man may wear what he likes so long as he does not offend against decency; and the burden lies on the employer to show the contrary." (emphasis added)

[38] In Australian Telecommunications Commission v Hart[34] the Full Court of the Federal Court was concerned with disciplinary action against a male employee of Telecom consequent upon charges arising from the employee's refusal to comply with a direction not to wear a 'caftan'. The direction in question stated:[35]

"...your present practice of wearing a caftan and thongs during working hours is not acceptable. You are therefore directed to maintain a standard of dress generally acceptable in the community and in Telecom in future as is expected of an officer in your position. Disciplinary action will be taken if you wear your caftan and thongs during working hours in the future."

[39] At first instance Smithers J rejected an argument by the employer based on discrimination but found that the charges were not made out on the basis that, while there was an implied term as to dress standards, it did not justify the particular direction.[36] It is important to note that counsel for Telecom had suggested that there was a policy in relation to dress that excluded a man from wearing a caftan but that such policy was not proved before Smithers J.[37] The Full Federal Court (Fox and Sheppard JJ; Northrop J dissenting) allowed the employer's appeal.

[40] Fox J (with whom Sheppard J agreed) observed that "[t]here does not seem to be any doubt as to the common law position" and set out the passages from Darling Island Stevedoring above. His Honour continued:

"The English law respecting employment is now dealt with comprehensively by statute (see Harvey, Industrial Relations and Employment Law (1982)) but some of the cases relating to "conduct" justifying dismissal are helpful in the present context. Harvey (op. cit. pars. 531-532) deals with appearance, including dress and grooming, and says, quoting from a passage from Boychuk v. H.J. Symons Holdings Ltd [1977] I.R.L.R. 395: "… a reasonable employer… can be allowed to decide what, upon reflection and mature consideration, could be offensive to the customers and the fellow employees…" The effect on customers and staff of the conduct of the respondent in wearing the particular garment was considered by the Board in the present case."

[41] His Honour held that Telecom was entitled to give to Mr Hart "a direction authorised by the common law, with its correlative duty to obey."[38] His Honour observed that a direction that all officers should maintain a standard of dress acceptable to Telecom "could well be regarded as unduly arbitrary, authoritarian and unreasonable. On the other side of the line, [Telecom] may be able to legislate to ban caftans."[39] His Honour took the view that in substance the direction given by Telecom was a direction that the employee not wear a caftan.[40] Having adverted to evidence that Telecom had a "well founded and genuine concern…as to its image being detrimentally affected by the [employee's] frequent wearing of caftan whilst on duty,"[41] his Honour clearly took the view that a direction not to wear a caftan was authorised by the common law.[42]

[42] We turn now on the rehearing to consider the matters specified in s.170CG.

[43] Her Honour appears to have proceeded on the presumption that Mr Brown's eyebrow ring breached the Policy.[43] Mr Brown maintained before her Honour and before the Full Bench, as he had with Safeway, that the eyebrow ring, when covered by a band-aid, did not breach the Policy because it was not "exposed jewellery" within the meaning of the policy. We concur with her Honour's apparent view that the eyebrow ring breached the Policy even if covered by a band-aid. In our opinion, the expression "exposed jewellery" in the policy means jewellery exposed when normal clothing is being worn (and therefore does not include piercings to, for example, the navel) and encompasses a piercing to the face that is covered by a band-aid. The policy itself expands upon the concept of "exposed jewellery" when it states:

"No visible body piercing is permitted, which includes (visible) tongue piercing, eyebrow, nose, lip etc piercing."(emphasis added)

Thus, the policy itself includes eyebrow piercing within the category "visible body piercing". Safeway would reasonably require its employees to limit the use of blue band-aids to circumstances where their use was necessary. Even a very remote risk of a band-aid falling into food is a risk that Safeway was entitled to seek to minimise given the obvious potential for even a single instance to adversely impact on the business of Safeway. It is beside the point that there was no evidence that a band-aid worn by Mr Brown had ever fallen into food or become loose. Given the position of Mr Brown's eyebrow ring (through the end of his eyebrow) her Honour's finding that "the hygiene concerns Safeway had... could be adequately dealt with by Mr Brown wearing a 'hairnet' [Exhibit H8] of the type commonly worn by workers in the meat industry"[44] is puzzling. Exhibit H8 is a brochure that depicts two women wearing "hairnets". It is evident from the photograph that the natural way of wearing the hairnet leaves the eyebrows fully exposed. More importantly, this finding does not bear upon the question of whether the Policy (or a direction to observe the Policy) is reasonable in the relevant sense and thus does not bear upon the issue of whether there was a valid reason for the termination of Mr Brown's employment.

[44] Counsel for Mr Brown submitted that the Nilsen permission formed part of Mr�Brown's contract of employment or gave rise to an express term by which Mr Brown was permitted to wear this eyebrow ring. That submission was made before Her Honour but was not addressed in the decision. For our part, we do not think that the language attributed to Mr Nilsen gave rise to an indeterminate contractual entitlement in Mr Brown to wear his eyebrow ring whilst covered by a bandaid for however long he was employed by Safeway. The conversation was informal. The language of the Nilsen permission was not the language of offer and acceptance or the language of promise. Viewed in context, it does not arise above an enquiry on the part of Mr Nilsen. The policy does not provide Mr Nilsen with a discretion to allow or permit employees to act contrary to the policy. Mr Nilsen, in allowing Mr Brown to cover the eyebrow ring with a bandaid (and not comply with the policy), did so without the authority of Safeway. On discovering Mr Nilsen's error, Safeway was entitled to take appropriate (ie lawful; and reasonable) steps to ensure that Mr Brown complied with the policy. It seems to us that the proper course was to discuss the issue with Mr Brown, provide him with reasonable notice that he needed to comply with the policy, and in the event that he did not do so, to provide him with a warning that his employment was at risk. This is the course that Safeway took.

[45] In this case the Policy was directed at standards of presentation to members of the public (Mr Brown's role occasionally required him to serve customers) and at the maintenance of appropriate standards of hygiene. On any view it was open to a reasonable employer in the position of Safeway, acting reasonably, to adopt the relevant portions of the Policy: they are rationally related to the business of Safeway and are directed at matters affecting the work of employees serving customers or involved in the handling and preparation of food, including Mr Brown. There can be no dispute on the evidence before her Honour that the presence of jewellery on the face or hands presents an increased risk of microbiological contamination by persons involved in the handling and preparation of food. Undoubtedly, a blanket ban on the wearing of jewellery would be justified in such circumstances. The policy provided for limited exceptions (a small plain sleeper in each ear and a plain wedding band). No doubt these exceptions were an effort to balance the requirements of good hygiene with the preference of employees to wear jewellery. In our view the relevant portions of the policy are reasonable in the sense discussed. On the evidence before her Honour, the risk of microbiological contamination presented by Mr Brown's eyebrow ring was no greater than the risk presented by a plain ear stud which the policy permitted. Even so, the exclusion of eyebrow rings did not render the policy unreasonable. The mere fact that an employer has granted some reasonable concessions in a policy provides no warrant to the Commission to indirectly force the employer to extend those concessions.

[46] Her Honour held that there was not a valid reason "because" Mr Brown was told by Safeway before he commenced employment at the Rosebud store that he could wear a blue band-aid over his eyebrow ring whilst at work.[45] That permission would certainly have rendered harsh, unjust or unreasonable any termination of employment for breach of policy without a prior warning. However, the various directions given subsequent to November 2004 were lawful and reasonable. There is nothing in the evidence to suggest the Policy was finally enforced in relation to Mr Brown in a discriminatory fashion or for illegitimate or extraneous purpose. Mr Brown's repeated refusal to comply with those directions involved a breach of the implied term to obey lawful directions sufficient to justify dismissal at common law and thus provided a valid reason for the termination of Mr Brown's employment. Her Honour erred in finding to the contrary.

[47] Mr Brown was given repeated directions and warnings requiring him to remove the eyebrow ring and comply with the Policy.

[48] Mr Brown was given an opportunity to respond in relation to the reason.

[49] The termination did not relate to unsatisfactory performance but rather related to unsatisfactory conduct in relation to which Mr Brown was warned before the termination.

[50] Safeway is a very large undertaking with dedicated human resource management specialists. The procedures followed in effecting the termination were fair and appropriate.

[51] In relation to section 170CG(3)(e) - "any other matters that the Commission considers relevant", her Honour stated:

[28] I do not consider Commissioner Grainger's recommendation, following a s.170LW application by The Australasian Meat Industry Employees Union, that Mr�Brown remove his eyebrow ring if required by Safeway is relevant. Commissioner Grainger did not have the benefit, as I have had, of substantial evidence on the issue of Mr Brown's eyebrow ring.

[29] Nor do I consider the apparent failure of Mr Brown to indicate to Safeway prior to the termination of his employment that Mr Nilsen had told him he could wear his eyebrow ring covered by a blue bandaid while at work is a relevant matter. The evidence before me does not suggest that if Mr Brown had so told Safeway, then Safeway would not have terminated his employment.

[30] Finally, I do not consider the repeated advice from Safeway to Mr Brown over December�2004 to February 2005 that he was breaching the Safeway Dress Policy in wearing the eyebrow ring covered by a blue bandaid, the repeated opportunities given by Safeway to Mr Brown over that period to remove the eyebrow ring or the warnings from Safeway to Mr Brown over that period that his employment would be terminated if he did not remove his eyebrow ring are relevant matters, when Safeway told him before he commenced employment at the Rosebud West Safeway store in December 2002 that he could wear a blue bandaid over his eyebrow ring while at work at the Rosebud West Safeway store.

[52] With respect to her Honour, Commissioner Grainger's recommendation was a relevant matter and her Honour erred in concluding that it was not relevant. The fact that Commissioner Grainger did not have the benefit of substantial evidence on the issue of Mr Brown's eyebrow ring is a matter that goes to the weight to be attached to his recommendation in all the circumstances rather than to its relevance. Her Honour was not aware, just as this Full Bench is not aware, of what material or arguments the parties advanced in the conciliation before Commissioner Grainger. It may reasonably be supposed that each party argued the merits of its position in the course of the conciliation. In any event, in our opinion, Commissioner Grainger's recommendation was a relevant matter.

[53] In our view, her Honour erred in treating as irrelevant the repeated opportunities given by Safeway to Mr Brown to remove the eyebrow ring and the repeated warnings that his employment was at risk if he did not remove his eyebrow ring. Her Honour treated those matters as irrelevant because of the Nilsen permission. However, for the reasons we have given, we do not accept that the Nilsen permission disentitled Safeway from subsequently seeking to have Mr Brown observe the Policy. In those circumstances, the repeated opportunities and warnings are clearly relevant to the existence of a valid reason and in the overall determination of whether the termination was harsh, unjust or unreasonable.

[54] We place weight on the fact of the Nilsen permission, the fact that Mr Brown was permitted to continue wearing his eyebrow ring covered by a band-aid for a period of some two years at the Rosebud store before there was any attempt to enforce the policy and the fact that Ms�Monttebello did not seek to address the matter at the time she interviewed Mr Brown. These matters would have determinative relevance if Mr Brown's employment had been terminated for breach of the policy peremptorily or without a significant warning or opportunity to rectify his conduct. However, that is not the case here. Safeway followed a protracted process that afforded Mr Brown repeated opportunities to comply with the policy. He made a deliberate and conscious choice to refuse to remove his eyebrow ring in defiance of the directions to comply with the policy by removing the eyebrow ring whilst at work.

[55] We place some weight on the recommendation by Commissioner Grainger which implicitly acknowledges the ultimate entitlement of Safeway to require compliance with the policy on the basis of Safeway's position that the eyebrow ring did not comply with the policy. The terms of Commissioner Grainger's recommendation reduce the weight to be attached to Mr Brown's view that his eyebrow ring, when covered by a band-aid, did not breach the Policy.

[56] Counsel for Mr Brown raised s.52 of the Trade Practices Act and the doctrine of promissory estoppel. In oral submissions he conceded that neither s.52 nor the doctrine of promissory estoppel are directly applicable in proceedings before the Commission. Rather, counsel in effect argued by analogy that the considerations underpinning s.52 and the principle of promissory estoppel underscore the correctness of her Honour's decision, relying as it does on the Nilsen permission. However, those principles would only be relevant by analogy in the present case if the fact that the Nilsen permission, together with the two years in which Mr Brown was permitted to wear his eyebrow ring covered by a band-aid at the Rosebud store and the failure by Ms Monttebello to require him to remove it, prevented Safeway from eventually seeking to enforce the policy in and from December 2004. For the reasons we have given, those matters did not prevent Safeway from seeking to enforce the policy at that time, provided that enforcement was bona fide. There is no basis in the evidence to suggest that it was other than bona fide. Both a claim under section 52 of the Trade Practices Act and the doctrine of promissory estoppel raise issues of detrimental reliance. Mr�Brown gave evidence that he would not have accepted work at the Rosebud store had Mr�Nilsen indicated that he was not permitted to wear his eyebrow ring. This evidence does not ground a finding that Mr Brown relied upon any representation implicit in the Nilsen permission to his detriment. On the contrary, Mr Brown received the benefits of employment with Safeway from the time of his engagement and there is no suggestion in the evidence that he could and would have pursued more favourable employment opportunities if the Nilsen permission had not been given.

[57] Counsel for Mr Brown placed reliance on the decision in Dawson v Woolworths�Pty�Ltd.[46] That matter concerned an employee of Woolworths who was dismissed for a breach of what appears to be a precursor of policy at issue in this matter. A long standing employee who had multiple earrings was dismissed shortly after the policy was introduced because of a failure to comply with a direction to remove an earring from each ear. The member at first instance held the termination was harsh, unjust or unreasonable and ordered that the employee be reinstated. The Full Bench noted:

"5. There were two bases upon which the Deputy President found that termination was harsh, unjust and unreasonable. Firstly, she found that the dress standards policy itself was unreasonable and that accordingly termination of employment for its breach was harsh, unjust and unreasonable. Secondly, she found that even if the policy were reasonable, the application of the policy to Ms Dawson, in the circumstances, was harsh, unjust and unreasonable. We will deal with the second of these bases first."

[58] The Full Bench endorsed the conclusion of the member as to the second basis and continued:

"8. We wish to make some comment concerning the first basis for her Honour's decision, that Woolworths' policy on dress standards was unreasonable. The reasonableness of the policy, as her Honour points out in her decision, was never in issue between the parties. Ms Dawson's counsel did not seek to lead evidence on the question or to cross-examine the company's witnesses in relation to it. What evidence there was in relation to the matter was elicited from the company's witnesses by the Deputy President herself.

9. The policy on dress standards is apparently a national policy and one which Ms Dawson's union, the Shop Distributive and Allied Employees Association, does not challenge. The union has been concerned about the implementation of the policy rather than the policy itself, more specifically, its application to existing employees like Ms Dawson whose dress may not itself be obtrusive but nevertheless contrary to the policy.

10. An application for a remedy in respect of termination of employment is an action between parties in which the Commission is required to act judicially. An important part of that duty is to decide the application on the basis of the cases as put by each side. In this matter, one of the bases for the Deputy President's decision was that the policy itself was unreasonable, despite the fact that the applicant declined to rely on that matter when the issue was raised by the Deputy President at the outset of the proceedings. In those circumstances, Her Honours' finding that the policy was unreasonable, was unnecessary and inappropriate. The finding should be treated with caution if the policy falls for consideration in other cases.

11. When the first basis for her Honour's decision is put to one side, the decision in this case in the end is confined to the particular facts and circumstances surrounding the termination of Ms Dawson's employment and can have no real significance in other cases." (emphasis added)

[59] The facts in Dawson can and ought be distinguished from the present matter. In Dawson the employee had much longer service than Mr Brown and her work did not involve handling food. Mr Brown received more extensive and more specific warnings than the employee in Dawson.

[60] In all the circumstances, we are not satisfied that the termination of Mr Brown's employment was harsh, unjust or unreasonable.

[61] We allow the appeal and dismiss the application for relief.

[3] Coal and Allied Operations Pty Ltd v AIRC [2000] HCA 47; (2000) 203 CLR 194 at [17] and [32]

[4] [1936] HCA 40; (1936) 55 CLR 499 at 504 per Dixon, Evatt and McTiernan JJ

[6] Submission of the Respondent, Cameron Brown, paragraph 120

[8] Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 at 479 per Brennan, Gaudron and McHugh JJ.

[12] Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889, Lindgren, North and Mansfield JJ, 4 July 2000 see especially the judgment of Mansfield J at para [148]ff.

[13] Lister v Romford Ice & Cold Storage Co Ltd [1956] UKHL 6; [1957] AC 555 at 594

[14] [1924] HCA 45; (1924) 35 CLR 143

[16] [1938] HCA 44; (1938) 60 CLR 601

[18] see also Hackshalls Ltd v McDowell (1930) AR (NSW) 620 at 629 per Cantor J.

[19] (2004) 133 IR 458

[22] See also Gavan Duffy and Starke JJ at 154-5

[23] (1959) 1 WLR 698

[25] Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373 per Northrop J

[26] (2003) 124 IR 217

[27] at para [11] quoting the classic expression in Selvachandran

[28] Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373 per Northrop J

[31] Bostik (Australia) Pty Ltd v Gorgevski (No 1) [1992] FCA 209; (1992) 41 IR 452 at 460

[32] Agnew v Nationwide News Ltd (2003) 126 IR 461 at [25]

[33] Australian Tramway Employees' Association v Brisbane Tramways Company Limited (1912) 6 CAR 35�at�41-2

[34] [1982] FCA 185; (1982) 65 FLR 41

[36] Hart v Jacobs (1981) 57 FLR 18

[39] [1982] FCA 185; (1982) 65 FLR 41 at 48

[46] Print R2502, Giudice J, Watson C and McCutcheon C, 1 March 1999

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