The Unfair Dismissal Risks Associated with Withdrawing or Altering Employee Benefits

It is often the case that employers decide to compensate their employees by offering benefits in addition to the payment of wages.

Employers are increasingly using benefits such as the provision of a company car, mobile phone plans, private health insurance payments, health club memberships and various other non-salary benefits, to lure and secure their preferred candidates, particularly in highly competitive labour markets.

Although these types of benefits can be valuable tools when used correctly, employers tend to overlook the legal consequences of a decision to withdraw or alter such benefits at some time in the future.

In the recent unfair dismissal case of Bradley v Solarig Australia,1 it was found that the employer’s unilateral decision to withdraw the employee’s entitlement to the use of a company car amounted to a repudiation of the contract of employment under which the employee was originally engaged thereby entitling the employee to bring an unfair dismissal claim under the Fair Work Act 2009 (Cth) (FW Act), even though the employment relationship otherwise continued between the parties.

Facts

In early 2019, Solarig Australia Pty Ltd (Solarig) employed Mr Bradley as an electrician at its solar farm in rural South Australia. While there was some dispute as to the precise terms and conditions upon which Mr Bradley was employed, it was accepted by Deputy Commissioner Anderson that Mr Bradley was entitled to the use of a company car for business purposes and which also could be used for limited personal purposes.

In the early morning of 3 February 2021, while driving to work in what was described as “pitch black” conditions, a kangaroo struck Mr Bradley’s company vehicle. Mr Bradley pulled over to the side of the road, inspected the damage, and satisfied himself that the vehicle could still be driven to the solar farm which was about twenty kilometres away. Given the rural location, there was no mobile phone coverage for Mr Bradley to alert management at the time of the accident.

Upon arriving at work, Mr Bradley reported the accident to management. The next day, Mr Bradley was informed that he was no longer allowed to drive company vehicles to and from work. This decision was made prior to the commencement of an independent investigation into the accident, which concluded on 4 March 2021. Mr Bradley believed he would be monetarily compensated for the loss of this benefit as part of his next pay packet however, this did not occur.

While his employment otherwise continued with Solarig, Mr Bradley argued that by withdrawing his entitlement to the benefit of the use of a company vehicle, Solarig had (unfairly) dismissed him from his original employment contract with Solarig, pursuant to which he was entitled to the benefit of the use of a company vehicle.

Question One: Was Mr Bradley ‘Dismissed’?

Deputy President Anderson recognised that even if an employee continues in employment with the employer, the employee can still be ‘dismissed’ within the definition of the FW Act if the employer is found to have repudiated the original employment contract and introduced a new, fundamentally different contract. This was what the Deputy President found had occurred here.

Deputy President Anderson found that Solarig, by withdrawing Mr Bradley’s entitlement to a company vehicle, had repudiated Mr Bradley’s original employment contract even though Mr Bradley continued to be employed by Solarig. Deputy President Anderson found that a fundamentally new employment relationship had come into existence between Solarig and Mr Bradley, due to the withdrawal of the benefit of the use of a company vehicle. The entitlement to Mr Bradley of the use of the company vehicle was calculated to represent about 16% of Mr Bradley’s remuneration package.

Question Two: Was Mr Bradley’s Dismissal Unfair?

Deputy President Anderson was critical of the reasons relied upon by Solarig to justify its withdrawal of the use of the company vehicle (as well as its issue of a disciplinary warning to Mr Bradley). These reasons included that it was Mr Bradley who had hit the kangaroo, that he had failed to call management at the time of the accident, and that he had driven in a reckless, dangerous and illegal manner.

Importantly, these reasons were only communicated to Mr Bradley once the investigation by Solarig was complete, which was after the decision had already been made by Solarig to withdraw his entitlement. The Deputy President considered that this approach undermined Mr Bradley’s right to procedural fairness and for this reason, amongst others, it was held that Mr Bradley’s dismissal was unfair in the circumstances.

Question Three: What was the Appropriate Remedy?

Mr Bradley sought to be compensated by Solarig in the amount of $15,000 per year (being the estimated value of the withdrawn benefit) for each year that he continued to work for Solarig, as well as backpay to the date the benefit was withdrawn. Alternatively, Mr Bradley sought that he be provided another company vehicle by Solarig as well as receive backpay.

The Deputy President ordered that Mr Bradley be reinstated to his position within Solarig at the time of his dismissal. This effectively meant that Solarig was required to reinstate Mr Bradley’s entitlement to use a company vehicle for business reasons and limited personal reasons. It was not considered appropriate to order backpay.

Key Takeaways

There are many lessons that employers can take from this decision.

The glaring teaching is that employers must be wary of the potential consequences of withdrawing an employee’s contractual entitlement to a benefit. Such a decision may constitute a repudiation by the employer of the employment contract, which if accepted by the employee, can result in a finding that the employee has been ‘dismissed’ by the employer. This can give the employee standing to bring an unfair dismissal claim against the employer, even where the employee continues in his/her employment with the employer.

The decision also reminds employers of the need to ensure that the terms and conditions upon which discretionary benefits are offered to employees are carefully considered and documented in the written employment contract.

Of course, it is also important for employers to remember that all employees should be offered procedural fairness with respect to decisions that may adversely affect them. Put simply, employers generally should not decide on a course of action that is to the detriment of employees without first giving the employees an opportunity to put forward their case.


1 Bradley v Solarig Australia Pty Ltd [2021] FWC 2805.


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