This matter concerned an application by Ms Lenora Peary (Employee) for a remedy pursuant to s643 of the Workplace Relations Act 1996 (WR Act) on the grounds that the termination of her employment by Australian Hearing (Employer) was harsh, unjust or unreasonable.

The facts

The Employee commenced employment with the Employer in February 2005 at the Employer’s Lismore Office. In May 2006 she was promoted to office manager at Lismore.

In January 2008, the Employee was appointed to the role of acting district manager for a period of five months in addition to her normal duties. After only one week in this role, the Employee was removed from these duties on the basis that she had allegedly misused the Employer’s confidential information.

On 4 February 2008, the Employee took sick leave for one week with depression. In the weeks that followed, the Employee became involved in a running dispute with the new acting district manager and a number of other employees at the Employer’s Lismore office.

In late March 2008, the Employee unsuccessfully requested a meeting with her direct supervisor regarding her issues with other employees and after consulting a psychologist, the Employee took another week off work with depression.

Following this period of leave and as a result of further complaints about the Employee made to senior management, the Employer instigated a disciplinary inquiry under the relevant collective agreement, the Australian Hearing Collective Agreement 2006 (Agreement).

As a result of the inquiry, the Employer advised the Employee by letter that various allegations against her were substantiated and accordingly proposed that the Employee should take up a temporary assignment in an inferior position at one of the Employer’s Tweed Heads or Ballina offices for a period of three months at the same salary.

On 28 May 2008, the Employee obtained a medical certificate from her general practitioner which indicated that she was unfit for work until 28 June 2008. The certificate indicated that the Employee was suffering major depression.

In late July the Employer arranged a hire car for the Employee to attend work at the Employer’s Ballina office.

During her employment at the Ballina office, the Employee was not invited to participate in the Lismore office team meetings or training. In fact, no action was taken to gradually re-introduce the Employee to the Lismore office and little was done by way of mentoring, mediation or training either to improve her skills or to resolve the staff relationship issues.

On 16 October 2008, the Employee emailed the technician at the Employer’s Lismore office, indicating that she was lonely at Ballina, that she was still depressed but improving and suggesting that the Lismore office would be a frustrating place to work.

After reviewing this email, the Employer subsequently instituted further disciplinary proceedings against the Employee under the terms of the Agreement on the basis that she was attempting to undermine the authority of her superiors.

On 16 October 2008, the Employer advised the Employee of the disciplinary proceeding and that it required a written response by 23 October 2008. The Employer also indicated that it would review the provision of the hire car to the Employee.

Following this conversation on 17 October 2008, the Employee again went on sick leave. She forwarded a medical certificate to the Employer for the period until 17 November 2008. The Employer requested that the Employee’s response to the disciplinary proceedings be provided by 17 November 2008.

A series of emails between the Employee and her direct manager on 13 November 2008 resulted in the Employee tendering her resignation due to work-related stress, as diagnosed by her doctor.

The unfair dismissal claim at first instance

In February 2009, the Commission heard the matter of Lenora Ann Peary v Australian Hearing at first instance.

The Employer sought to have the Employee’s unfair dismissal claim struck out on the basis that the Employee had resigned her employment with the Employer.

Section 645 of the WR Act allows an employer to apply to strike out an employee’s unfair dismissal claim where an employee has resigned from their employment, because the termination of that employment cannot be said to be at the initiative of the employer.

In rejecting the Employer’s application to strike out the unfair dismissal claim, Commissioner Thatcher found that the Employee’s resignation was not voluntarily given and that it hinged upon the debilitated mental condition of the Employee and the conduct of the Employer in the lead up to the resignation, including the performance management process.

The appeal

On appeal the Employer argued that Thatcher C did not give proper effect to the provisions of the WR Act, submitting that there is no termination at the initiative of the employer unless the resignation was an intended consequence of conduct or a course of conduct engaged in by the employer. The full bench did not accept this construction of the WR Act. It held that while the WR Act requires an employee to prove that the employer engaged in conduct or a course of conduct which forced the employee to resign, there is a requirement for the employee to prove that the employer intended to force the employee to resign.

The Employer also appealed on the basis that there was insufficient evidence for a finding as to the Employee’s mental state at the time she resigned. The full bench rejected this submission, finding that Thatcher C clearly accepted the Employee’s evidence as to her state of mind when she visited the doctor on 12 November 2008:

“It was open to the Commissioner to conclude that Mrs Peary was very upset indeed by the requirement that she provide a written answer to a disciplinary charge the day her sick leave expired.”

Another ground of appeal raised by the Employer related to the significance the Commissioner attached to the fact that the Employee had been transferred to Ballina and had not been relocated to Lismore.

This is a highly relevant ground of appeal as it allowed the full bench to reiterate some of Thatcher C’s reasons for decision including:

“…it appears that Mrs Peary had been placed in isolation at Ballina, cut off from contact with staff at Lismore, of whom there were eight, working mainly alone on unstimulating tasks, travelling 32 kilometres twice a day. There was little or no prospect of the situation altering. This was because of Australian Hearing’s requirement that she could not return to Lismore until she had attended mediation and she could not attend mediation until she had undergone six sessions of psychological counselling at her own expense. In addition, there was the disciplinary charge, the implied threat to withdraw her transport and the requirement that she submit a written response to the disciplinary charge the day her sick leave expired. We have no doubt there was an adequate basis for finding that she was forced to resign.”

It seems that this combination of the Employer’s conduct and the Employee’s mental disposition left the Employee in a position where she ultimately felt she had no option but to resign from her employment. Accordingly, the full bench upheld Thatcher C’s finding that the termination of the Employee’s employment had been at the initiative of the Employer and thus the Employee’s unfair dismissal claim could proceed to conciliation.

Lessons for employers

The Peary case and the resultant appeal demonstrate that employers faced with similar situations:

  • should implement performance management in respect of an individual’s performance, rather than as a means of addressing staff relationship issues
  • must ensure that arrangements put in place to address internal conflict or performance management issues do not become a long-standing punishment that may be viewed unfavourably
  • should avoid insisting that an employee on sick leave address performance management issues, until that individual has returned to work and is fit and capable of being assessed on his or her performance
  • must not assume that where an employee communicates that he or she cannot return to work for medical reasons, the employee is providing notice of resignation, and
  • ought to provide employees (particularly those with diagnosed mental conditions) with an opportunity to seek counsel regarding the resignation, or at least 24 hours to reconsider their decision.