A FULL Bench of the Fair Work Commission (FWC) has clarified for all employers their likely protection from an unfair dismissal claim in instances where frustration of a contract has occurred.

Last week’s ruling in Mahony vs Catholic Education Office, Sydney concerned a former Catholic Education teacher who was suspended without pay, and later dismissed, following sexual assault charges laid against him in 2012*.

Given the former teacher had pleaded not guilty and argued he was entitled to the presumption of innocent, he filed for unfair dismissal.  The executive director and legal representative of the Catholic Education Office, Dr Daniel White, sought to defend the organisation from the claim on the basis that the contract was frustrated and thus the dismissal was not at the employer’s initiative.

A key argument of Dr White was that to continue to employ the applicant would be illegal under the Child Protections (Working with Children) Act 2012.

In the first instance, Commissioner McKenna agreed with Dr White’s argument, however noted that because Mr Mahony had continued to be employed for 7 months (suspended with pay) as he awaited trial, that this indicated the dismissal action was at the initiative of the employer.

The Catholic Education Office appealed this interpretation, with a Full Bench comprising Vice President Catanzariti, Deputy President Booth and Commissioner Roberts ruling in favour of the employer last Thursday.

“The Full Bench notes that the case before it has been run on the basis that the continuation of employment is not permissible and is inconsistent with the Child Protection (Working With Children) Act 2012. To do so would be illegal on the part of the employer,” the Full Bench ruled.

“Therefore in our view it cannot be fairly said that Mr Mahony’s employment was terminated on the employer’s initiative pursuant to s.386(1)(a) of the (Fair Work Act).”

Implications for resource employers

While the involvement of child protection laws and sexual assault charges make this case unique, and perhaps more clear-cut for the commission, the ruling has implications for other circumstances where it appears that the contract cannot be performed.

In such circumstances, it may well be that the contract could be viewed as having come to an end naturally through the doctrine of frustration. In the resource industry, this means that where a fundamental prerequisite to the job is removed, such as the loss of an electrical licence or other inherent requirements of the job, it may be easy to establish frustration of the contract.

If frustration can be clearly established, employers would likely have a strong argument against unfair dismissal claims.

However, AMMA members should be mindful that in cases where the cause of a long-term absence prior to dismissal may not be as clear, such as a medical condition or disciplinary reasons, it may be difficult to argue that frustration of the contract meant termination was not at the employer’s initiative.

Thus, with more complex cases presenting potential exposure to claims, AMMA members are recommended to contact your local AMMA office to seek advice before enacting the chosen course of action.

For further information on this case, contact Bill FitzGerald in AMMA’s Hobart office via (03) 6270 2256.

*Note: AMMA was unable to find on the public record whether Mr Mahony was convicted or acquitted of the sexual assault charges laid against him. Nonetheless, this background is included only for the purposes of this industrial relations case summary.