Repudiation of an employment contract terms can amount to termination

Repudiation of an employment contract terms can amount to termination.png

Repudiation of an employment contract terms can amount to termination

Employers need to be mindful that repudiating an employee’s employment contract may give rise to an argument that the decision constituted a dismissal, notwithstanding the employee remaining employed. The principle was highlighted in a recent Fair Work Commission (FWC) decision of Deputy President Peter Anderson, concerning the withdrawal of an employee’s private use of a work vehicle, following his involvement in a road accident.

The employee works as an electrician at a solar farm for Solarig Australia Pty Ltd (the employer). He commenced employment on 11 February 2019 at the farm, which is approximately an 80 kilometre round trip from his home.

His employment contract did not refer to private use of a vehicle; however, his manager told him that he would be allocated a vehicle and be entitled to limited private use. He understood this to mean travelling to and from work and minor detours such as dropping children at school.

On the morning of 3 February 2021, the vehicle he was driving struck a kangaroo. He assessed the damage, determined he could still drive the vehicle to work, and then reported the damage. The company assessed the vehicle as unroadworthy and sent it off for repairs.

Several days later, the company informed him that he would no longer be allowed to drive a company car to and from work, that he would not be allocated a replacement vehicle, and that he could only drive company vehicles within the worksite. Their position was consistent with other employees whose private vehicle usage had been withdrawn.

The company believed he had been at fault in the incident, had failed to contact his supervisor from the incident scene or take photos at the scene, and had been reckless in deciding to continue his journey.

The employee responded by claiming that the withdrawal of private use of a vehicle breached the terms of his employment contract, and he calculated that the loss of the benefit amounted to 12% of his remuneration package, to which he was entitled. The company did not pay him any additional money, and he sought relief from the Fair Work Commission.

Deputy President Anderson agreed that the employee had a contractual right to use a company vehicle for private purposes and that the contract did not provide the company with either an express or implied right to withdraw the benefit in the circumstances.

Consequently, he determined that the repudiation action of the company amounted to dismissal within the meaning of the Fair Work Act 2009.  As he commented,

Importantly, and relevant to this matter, there are circumstances where a repudiatory breach that has been accepted has the effect of terminating the employment relationship even where the employee continues working for the employer… In such circumstances, and if the breach was at the initiative of the employer, not only would the employment contract have come to an end but the employment relationship as it was known and had existed would be terminated with the effect that the employee would have been “dismissed” within the meaning of the FW Act.

In determining the actions constituted a fundamental breach of the employment relationship, the Deputy President determined an unfair dismissal had occurred.

He ordered the `reinstatement’ of the employee, meaning the return of the pre-existing condition being the private use of a company vehicle.

Mr B v Solarig Australia Pty Ltd [2021] FWC 2805 (24 May 2021)

For queries about employee contracts, terminations, or any other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 1300 WAL LAW, 0417 622 178 or via email to dean.cameron@workforceadvisory.com.au.

Disclaimer: This information is provided as general advice on workplace relations and employment law. It does not constitute legal advice, and it is always advisable to seek further information regarding specific workplace issues. Liability limited by a scheme approved under professional standards legislation.

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