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Annamarie Rooding  
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Murray Kellock  
Partner
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Sydney
Andrew Gray  
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Robert Lilburne  
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Ian Johnson  
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The Australian Industrial Relations Commission has awarded compensation to an employee it found was unfairly dismissed on the basis she was medically unfit for work, despite finding that the termination could have been justified on the ground of the employee’s misconduct.

Implications for employers

When considering whether to terminate an employee’s employment, to mitigate the risk of a successful challenge to the termination employers should ensure that their decision is soundly based on all relevant grounds.

Background

The applicant, Ms Chand, commenced employment with the State Rail Authority of NSW (SRA) in April 2000. In mid-2002, she acted as a ‘whistleblower’ against several other employees, alleging the corruption of time sheets and abuses of lunch break privileges. Ms Chand subsequently suffered from stress and anxiety-related health issues and was absent from work during periods of late 2002. Her leave during these periods was supported by medical certificates indicating she was unfit for work due to stress and anxiety.

Over the next two years Ms Chand engaged in a return to work program with SRA, and SRA made arrangements for a psychiatrist, Dr Davies, to examine her (on two occasions) and provide it with reports as to her medical capacity for work. In his three reports over that period, Dr Davies diagnosed Ms Chand as suffering from a probable paranoid personality disorder, but declared her fit to continue working at SRA.

These three reports were succeeded by a series of incidents involving Ms Chand at the workplace. Specifically, after SRA decided Ms Chand’s position was redundant with effect on 31 July 2004, she was placed in a redeployment program at SRA’s Career Transition Centre.

While participating in the program, Ms Chand was generally rude and uncooperative, including that she questioned the expertise and experience of the Centre staff, insisted on taping all meetings using a voice recorder, failed to attend scheduled meetings, entered confidential areas of the work premises without authorisation, attempted to distract other employees and falsely accused an SRA security officer of inappropriately touching himself in front of her.

Following these incidents, and after unsuccessfully attempting to have Ms Chand examined by a different practitioner, SRA submitted further information to Dr Davies and asked him to again report on Ms Chand’s capacity for work. Dr Davies did not re-examine Ms Chand before preparing his report in response to this request.

In his fourth and final report in November 2004, Dr Davies confirmed his earlier diagnoses that Ms Chand suffered from a probable paranoid personality disorder and concluded that Ms Chand was clearly “not able to function in a workplace team and should be retired” in accordance with SRA’s medical retirement policy.

Relying on this report, SRA terminated Ms Chand’s employment purportedly in accordance with its medical retirement policy on the basis she was medically unfit for work. The dismissal was effective on 31 January 2005. Ms Chand requested a copy of Dr Davies’ report but SRA did not provide it to her.

Ms Chand brought an unfair dismissal claim against SRA, arguing she was not medically unfit for work and therefore there was no valid reason for her termination. She relied on the evidence of three other mental health practitioners (two psychiatrists and a psychologist), each of whom had treated her personally and disagreed with Dr Davies’ diagnosis.

Decision

The Commission found that Ms Chand’s dismissal was not for a valid reason and on that basis concluded SRA had unfairly dismissed Ms Chand.

Crucial to its decision was the Commission’s finding in relation to the differing opinions in the evidence provided by the four medical experts. Ultimately, the Commission preferred the evidence of Ms Chand’s experts, who generally disagreed with Dr Davies’ diagnosis of probable paranoid personality disorder, to that of Dr Davies. The Commission noted that together, Ms Chand’s practitioners had the advantage of treating and observing her over a lengthy period of time. In contrast, Dr Davies’ final report, on which SRA relied in deciding to terminate Ms Chand’s employment, was based solely on information provided to him by the SRA and in the absence of any further examination of Ms Chand.

In light of this finding, and given SRA dismissed Ms Chand’s employment solely for her medical incapacity for work, the Commission held that Ms Chand’s employment had not been terminated for a valid reason and that her claim was entitled to succeed.

However, in considering the appropriate remedy to award Ms Chand, and having regard to Ms Chand’s evidence that she did not suffer from any psychiatric illness affecting her capacity for work, the Commission described Ms Chand’s conduct during her employment as misconduct which was of the “worst possible kind in terms of its obstructive purpose and destructive effect on her employment relationship with the SRA”. Further, the Commission stated that Ms Chand was:

“…belligerent, obstructive and on some occasions offensive in her conduct. She caused an endless amount of interference, she wasted the time, effort and goodwill of nearly all the employees of the SRA with whom she came into contact.”

The Commission concluded Ms Chand’s employment history of misconduct would have justified termination of employment independently of any concerns about her medical capacity for work.

While these matters could not affect the finding that the dismissal was unfair (because SRA had not relied on Ms Chand’s misconduct to support her dismissal), they markedly influenced the nature of the remedy the Commission was prepared to award Ms Chand.

The Commission found that reinstatement of Ms Chand to her former position would have been “entirely” inappropriate in those circumstances. Instead, the Commission ordered SRA to pay Ms Chand 20 weeks’ pay, which represented the likely duration of her employment had she been dismissed by the SRA for misconduct in accordance with applicable workplace policies.

Please note this decision is currently the subject of an appeal before the Full Bench of the Commission. Stay tuned for more details.