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Full-Time to Casual Unfair

Greg Arnold

31 May 2024

This case highlights the pitfalls of altering an employee’s contract without consultation.

The Fair Work Commission (FWC) recently ruled on an unfair dismissal matter that involved a café and an employee. This case underscores the potential pitfalls of altering an employee’s employment contract without proper consultation (or indeed consent), especially for businesses navigating financial difficulties.

The Case Overview

The café owner, struggling with financial challenges due to rising costs, increased competition and the lingering effects of COVID, decided to change the employment status of a full-time employee to a casual employee. This decision was communicated to the employee via a WhatsApp message on 2 January  2024, effective immediately.

In a technical sense, the full-time position was made redundant, and the employee being re-deployed into the casual role.

The employee, whilst feeling her job security was compromised, accepted the café owner’s repudiation of her full-time employment on 28 January 2024. However, she subsequently filed an unfair dismissal claim with the FWC, arguing that the dismissal was unfair, with no valid reason based on her conduct or work performance.

FWC’s Considerations

In evaluating whether the dismissal was harsh, unjust, or unreasonable, the FWC reviewed several criteria from s.387 of the Fair Work Act. These included whether there was a valid reason for the dismissal, the method of notification, the lack of opportunity for the employee to respond, and the absence of dedicated HR management in the business.

The FWC determined that the café owner’s financial struggles did not constitute a valid reason for dismissal related to the employee's conduct or capacity. The method of notification through a WhatsApp message was deemed unreasonable and the lack of HR expertise within the business significantly impacted the decision-making process.

Impact of HR Expertise and Financial State

The FWC acknowledged the unique challenges businesses face, particularly in the absence of dedicated HR manager or advisor. The Commissioner noted the café owner’s misunderstanding of employment laws, mistakenly believing it was lawful to change the employee's status to casual without proper procedure.

The café's financial state was recognised as a genuine factor in the owner's decision. However, the FWC emphasised that financial difficulties do not exempt employers from adhering to employment laws or justify improper procedures for altering employment contracts.

Findings and Compensation

After considering all relevant factors, the FWC found that the dismissal was unjust and unreasonable due to the lack of a valid reason related to the employee's conduct or capacity. The Commission ruled that while reinstatement was not appropriate, given the damaged employment relationship, compensation for the employee was warranted due to the financial loss suffered. The employee was awarded $5,879.63, plus superannuation of $646.76.

Takeaways for Business Owners

This case highlights the importance of understanding and complying with employment laws, even amid financial difficulties. Key lessons include:

  1. Proper Notification: Any changes to employment status should be communicated through formal and reasonable methods, not informal messages.

  2. HR Expertise: Businesses should seek professional HR advice to navigate complex employment laws and avoid legal issues.

  3. Adherence to Procedures: Following fair and reasonable procedures is crucial when making significant changes to an employee's contract or effecting a dismissal.

By adhering to these principles, businesses can better manage financial challenges while maintaining compliance with employment laws and ensuring fair treatment of employees.

If you are thinking about downsizing or restructuring, we can help you avoid unfair dismissal claims and general protections claims. Ask us how. 

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