Under Pressure: When a new employment contract results in unfair dismissal

An employee told to ‘finish up’ after seeking clarity from his employer about the proposed terms of a new employment agreement was found to have been unfairly dismissed.

The Fair Work Commission (FWC) held that in the recent decision of Clint Dupre v Excell Protective Group Pty Ltd [2024] FWC 2313, the decision of the employer to terminate a longstanding employee following his refusal to sign a new employment contract amounted to an unfair dismissal.

Facts

The Applicant, Mr Dupre commenced employment as an Operations Manager with Excell Protective Group Pty Ltd (Excell) on 23 March 2015 pursuant to an employment contract dated 19 March 2015. Throughout Mr Dupre’s employment with Excell, he had not received any warnings of unsatisfactory performance or conduct related issues.

On 19 November 2023, Mr Dupre was provided with a proposed new contract of employment with Excell backdated to 25 October 2023, in addition to a new position description and non-disclosure agreement. This new contract contained a higher sales target, non-solicitation and post-termination restraint clauses. Mr Dupre was concerned with the scope of the new contract, particularly the restraint clauses. Mr Dupre raised these concerns with the CEO, Mr Kaushal, and Manager, Capability and Culture, Mr Edwards, in a meeting on 4 January 2024. During this meeting, the CEO agreed to make amendments to the contract.

On or around March 2024, Mr Kaushal announced that the management team of Excell would be transferred to a new entity called ‘Zipd’. Zipd was owned by Mr Kaushal.

Mr Dupre received correspondence from Mr Edwards dated 6 March 2024, which contained a new contract of employment, job description, and non-disclosure agreement for Mr Dupre’s transfer to Zipd. This contract contained the same terms that Mr Dupre raised concerns about in the 4 January 2024 meeting. In Mr Edwards’ correspondence to Mr Dupre, it was communicated that the matter was ‘pressing’ and it ‘must be resolved no later than 1500 Friday 8 March 2024. Further, the correspondence stated that if Mr Dupre did not agree, then ‘a decision must be made’ upon his ‘role in the business’.

Following this correspondence, Mr Edwards texted Mr Dupre on 8 March 2024 that the deadline ‘was not met’ and if he signed the contract anyway, then ‘Mr Kaushal ‘may now lawfully reject it’ as Mr Dupre did not follow ‘reasonable directions.’

On 11 March 2024, Mr Dupre responded to Mr Edwards, attaching a document which set out clarifications he sought in relation to the Zipd contract of employment.

On 12 March 2024, Mr Dupre received a letter from Excell, titled ‘Performance Review’, which contained an invite to a meeting to be held on with Mr Kaushal and Mr Edwards, for the purpose of reviewing Mr Dupre’s performance at Excell.

On 3 April 2024, Mr Dupre and a number of other Excell staff attended a meeting with Mr Kaushal, where Mr Kaushal advised that if those present at the meeting did not sign their new contracts of employment, he would ‘consider that to be a resignation’.

On 11 April 2024, Mr Dupre attended another meeting with Mr Kaushal and Mr Edwards, where Mr Dupre was presented with the same Zipd contract of employment and was ‘demanded’ to sign it. Mr Dupre advised that he would not sign the agreement and that he would not resign from his employment. In response, Mr Kaushal advised Mr Dupre to ‘finish up’ with immediate effect. Mr Dupre was then advised to hand back his access fob and collect his belongings and to leave the premises of Excell.

On 16 April 2024, Mr Dupre sent Mr Edwards an email which requested confirmation of his termination of employment and a separation certificate, in addition to the payment of his entitlements.

On 17 April 2024, Mr Edwards sent Mr Dupre an email which contained a letter, which reads ‘Excell Security became aware of your resignation on 11 April 2024 when it became aware of your email note indicating that you no longer work for Excell Security. I am advised that Excell is to accept this as a resignation and I ask that you confirm the resignation in writing so that entitlements can be calculated and paid to you…’

On 19 April 2024, Mr Dupre responded to Mr Edwards’ email and outlined that he did not resign from his employment with Excell, and that he wished to remain employed.

On 23 April 2024, Mr Dupre sent another email to Mr Edwards, outlining that Excell has refused to confirm whether he would remain to be employed and that this was a ‘fundamental breach of the employment contract’ and that he considers himself ‘to have been dismissed’. On 1 May 2024, the Applicant filed an unfair dismissal application with the FWC.

Decision

Was Mr Dupre dismissed?

In assessing the evidence before it, Deputy President Masson of the FWC firstly considered whether Mr Dupre was considered ‘dismissed’ by way of the meeting held on 11 April 2024.

In light of the evidence before it, with particular weight given to the 11 April 2024 meeting, Deputy President Masson held that Mr Dupre did not resign from his employment with Excell but rather it was the actions of Excell that resulted in the termination of Mr Dupre’s employment. Ultimately, it was Mr Kaushal’s statement that Mr Dupre was to ‘finish up’ and to hand back his belongings, after Mr Dupre had stated he was not resigning, that had the effect of ending the employment relationship.

Accordingly, it was held that Mr Dupre’s termination was ‘at the initiative of the employer’ within the meaning of section 386(1)(a) of the Fair Work Act 2009 (Cth) (the FW Act).

Was the dismissal unfair?

Following this, the FWC was required to consider whether the dismissal was ‘unfair’ for the purposes of section 387 of the FW Act, which requires an assessment of whether the dismissal was ‘harsh, unjust, or unreasonable’.

In considering this issue, the FWC considered whether Excell had a valid reason to dismiss Mr Dupre. It was held that Mr Dupre’s refusal to sign the employment contract could not be considered as misconduct or poor performance and in the absence of those reasons, Excell had no reason to dismiss him. The FWC considered that Mr Dupre’s dismissal was not supported by a valid reason, that there were significant procedural failures by Excell in effecting the dismissal, Mr Dupre was not provided an opportunity to respond to the dismissal and that Excell’s access to professional HR support ultimately weighed in favour that the dismissal was harsh, unjust and unreasonable.

The FWC ordered that compensation totalling $42,552.06 be paid to Mr Dupre in lieu of reinstatement, which was not an appropriate remedy in the circumstances.

Take home message for employers

This case highlights that a refusal to sign an employment contract is not a valid reason to effect the termination of one’s employment, as it does not relate to the misconduct or poor performance of the employee. Employees are within their rights to negotiate the terms of their employment. Rather, amendments to existing employment agreements must be made with the consent of the parties.

Should an employer commence any disciplinary process, this case also emphasises the importance of having a valid reason and offering appropriate procedural fairness. In particular, employees must be afforded the opportunity to respond to allegations of misconduct. The process followed by Excell did not comply with this requirement.

For more specific information or advice on any of the material contained in this article, please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au, or Annabelle Narayan on +61 8 8210 1292 or at anarayan@normans.com.au, or Edward De Luca on +61 447 784 887 or at edeluca@normans.com.au.