By Charles Power

A common solution when a dismissal is disputed is for the employer and an employee to reach a separation agreement. This will often see the dismissal rescinded by agreement and the employee allowed to resign with immediate effect. This agreement will usually preclude the employee’s right to lodge an unfair dismissal claim, even if the employer later reneges on aspects of the separation agreement.

In Sheng Li v Ventura Bus Lines T/A Ventura (2017), the parties had reached a separation agreement to settle a dispute about the employee’s dismissal for misconduct and poor performance. The agreement came about after the employee’s union subsequently approached the employer on behalf of the employee to have the dismissal converted to a resignation.

Ultimately, it was agreed between the parties that the employee’s dismissal would be rescinded, the employee allowed to resign, the employer would give the employee a ‘good reference’ and actively support his search for alternative employment.

The employee later argued his resignation was not voluntary, but was forced upon him because of the employer’s conduct or a course of conduct, because the employer did not give him a good reference, nor actively recommended him to other bus companies.

The Fair Work Commission (FWC) rejected this argument. The FWC ruled the dismissal was rescinded by the employee’s letter of resignation, and the plan to have the dismissal converted to a resignation was initiated on behalf of the employee not by the employer. The employee understood what he was doing when he resigned. In the 48 hours between the dismissal and signing his letter of resignation, the employee sought and obtained advice from the union and discussed it with his wife. He agreed to resign on the basis that the combination of resignation and a reference gave him the best possible chance to secure alternative employment. He exercised an “effective and real choice”.

‘Reference’ vs ‘Good Reference’

There was some disagreement between the parties as to whether the employer had agreed to provide a ‘reference’ rather than a ‘good reference’. The FWC preferred the employer’s evidence that it had promised a ‘reference’, but found that it provided a statement of service instead, which the employer argued was consistent with its belief as to the content of a reference.

The FWC stated that a reference is a “promise to communicate some qualitative opinion about an employee’s character or work record that may support the decision of a prospective employer to hire that employee”.

However, the FWC considered the post-resignation conduct of the employer did not alter the character of the resignation. Although the employer did not adequately provide a reference, it did not act in bad faith. To the contrary, it made initial contact with prospective employers and communicated service details when asked to do so.

Before dismissing an employee, consider this. Dismissing an employee can expose you to legal risk under numerous laws and industrial instruments. That’s why before you dismiss an employee, it’s critical to know that the dismissal is lawful.