During a recent appeal, a Full Court of the Federal Court of Australia reviewed two separate and conflicting decisions of a Full Bench of the Fair Work Commission. Each decision concerned whether the employer (a teaching institution) had "dismissed" employees (teachers) within the meaning of the Fair Work Act 2009 (Cth). The terminations occurred in circumstances where the employer considered that it was subject to a statutory obligation not to continue the teachers' employment due to them having been charged with child sex offences.

In this eBulletin, we consider the reasoning adopted by a Full Court of the Federal Court and outline the key learnings for employers.


A Full Court of the Federal Court (Full Court) recently undertook a review of two separate and conflicting decisions in which a Full Bench of the Fair Work Commission (Full Bench) considered whether the employer, the Catholic Education Office (CEO), could legally continue to employ a teacher that had been charged with a child sex offence.

In each case, the Full Bench had to determine whether the employees had been "dismissed" within the meaning of the Fair Work Act 2009 (Cth) (FW Act), giving them jurisdiction to make an unfair dismissal claim.

Mahony v Education Office1

The first case involved Mr Mahony, a teacher who had worked with the CEO since 1986 in a number of secondary schools. On 23 September 2012, Mr Mahony was arrested and charged with sexual assault. He pleaded not guilty and was released on bail. Mr Mahony was initially suspended with pay until the determination of his criminal trial.

However, on 20 December 2013, following correspondence between Mr Mahony and the CEO, the CEO advised him that "taking into account all the circumstances, in particular the significant nature of the charges you face which touch on the key responsibilities of the [CEO] Sydney as manager of system of catholic schools", the CEO would no longer continue to employ Mr Mahony. Mr Mahony filed an unfair dismissal claim.

The CEO argued that Mr Mahony's employment had not been terminated on the CEO's initiative and therefore he was not "dismissed". Rather, it became unlawful for the CEO to continue to employ Mr Mahony to perform the work he was employed to do due to the commencement of the Child Protection (Working with Children) Act 2012 (NSW) (CP Act), and accordingly the employment contract had been "frustrated".

The Commission at first instance rejected this argument and determined that Mr Mahony's employment had been terminated by the conscious decision of the CEO. However, on appeal to a Full Bench, this decision was overturned. The Full Bench ruled that Mr Mahony's employment with the CEO could not have continued as it would have been unlawful under the CP Act. The Full Bench concluded that as Mr Mahony had not been "dismissed'", he did not have access to unfair dismissal remedies.

O'Connell v Catholic Education Office2

Mr O'Connell commenced employment with the CEO as a secondary school teacher in 1979. On 17 February 2015, Mr O'Connell was charged with indecent assault on a person under the age of 16 years. He claimed he was innocent. The CEO decided to terminate his employment the following day, even though Mr O'Connell asked if he could be assigned alternative duties, be suspended, or placed on leave, pending the determination of the criminal matter.

Mr O'Connell lodged an unfair dismissal claim. In this case, the CEO argued that by reason of the operation of the CP Act, the CEO had no lawful choice but to terminate Mr O'Connell's employment because he was a "disqualified person" from performing child related work, as was the case in Mahony v Education Office. The Full Bench rejected this submission and ruled that the decision in Mahony v Education Office was wrong. The Full Bench held that reading the relevant provisions of the CP Act, termination of Mr O'Connell's employment was not required simply because charges had been laid against the employee. The Full Bench was satisfied that the ordinary meaning of the words in the CP Act did not impose an absolute bar on the continuation of employment of a "disqualified person", it only prevented Mr O'Connell being utilised to perform "child-related work". Therefore, the CEO did have a choice, and Mr O'Connell had been dismissed at the initiative of the CEO. This meant that he was eligible to bring an unfair dismissal claim against the CEO.

Reasoning of the Full Court

As a result of the inconsistency in how each of these cases was determined, both decisions were appealed and brought to a Full Court of the Federal Court for determination.

The meaning of the word "dismissed"

The FW Act relevantly provides that a person has been "dismissed" if the person's employment with his or her employer has been terminated on the employer's initiative. The Full Court gave detailed consideration to the meaning of the term "dismissed" and specifically the meaning of the phrase "terminated on the employer's initiative".

The Full Court referred to the case of Mohazab v Dick Smith Electronics (Mohazab)3 which considered the meaning of the phrase "terminated on the employer's initiative". In Mohazab, the court found that an important feature of "termination at the initiative of the employer" is that the act of the employer results "directly or consequentially" in the termination of the employment, and the employment relationship is not voluntarily left by the employee. The Full Court accepted that the Mohazab definition of "dismissed" remains good authority.

Mr Mahony and Mr O'Connell both argued that the degree of discretion the CEO possessed in deciding to terminate their employment was irrelevant. If the CEO had not dismissed them, their employment would not have come to an end and that remains the case irrespective of whether the CEO was, or believed itself to be, obliged to take that step. On this basis, they contended that each of them had been dismissed at the initiative of the CEO and therefore there was a proper basis on which to make an unfair dismissal claim. The Full Court accepted these submissions.

Outcome - dismissal at the initiative of the employer

The Full Court found that the termination of the employment of Mr Mahony and Mr O'Connell was the result of a deliberate, considered act of the CEO and accordingly, both employees were dismissed within the meaning of the FW Act. Therefore, they were both eligible to make an unfair dismissal claim.

The Full Court considered it was unnecessary for it to decide whether the provisions of the CP Act required the CEO to terminate the employment of Mr Mahony and Mr O'Connell. However, the Court confirmed that even if the CEO was under a statutory obligation of the kind it argued, where compliance with the CP Act required termination, this would still be considered dismissal at the initiative of the employer. This is because, in the words of a Full Court in Mohazab, it was "the act of the employer [which resulted]…in the termination of the employment."

Mr Mahony's case was remitted to a Full Bench for determination and Mr O'Connell's case was upheld.

Bottom line for employers

The Court has confirmed that even if an employer is under a statutory obligation to end the employment relationship, this will still amount to a dismissal at the employer's initiative and, accordingly, the relevant employee will be eligible to make a claim of unfair dismissal under the FW Act.

If it could be said that the decision to terminate was necessary in order to comply with a statutory obligation, this might be relevant in determining whether the employee would ultimately be successful in an unfair dismissal claim (i.e. in establishing that the dismissal was harsh, unjust, or unreasonable). It would not provide a jurisdictional basis to object to the claim itself.

Employers should carefully consider the meaning of any legislation they intend to rely on to end an employment relationship, and obtain legal advice to ensure that action taken in response to alleged misconduct in those circumstances is supported at law.

Employers should also ensure that their contracts of employment allow them to take disciplinary action against employees who fail to promote the best interests and reputation of the organisation, both during and after work hours.