Don’t Be Caught Out: Check Your Employee Contracts!

Tuesday July 20, 2021

A recent decision from the Fair Work Commission highlighted the fact that a workplace dismissal may occur even in situations where an employer did not sever the employment relationship, and where an employee continues to perform the same roles and duties.

Altering an employee’s employment conditions may result in their unfair dismissal – as occurred in a recent Fair Work case, in which the Fair Work Commission ruled in favour of an employee who filed for unfair dismissal after his employer changed his contractual benefits by taking away his company car.

The employee claimed his company car was hit by a kangaroo as he drove to a rural solar farm earlier this year. The employee checked the car, but couldn’t see the full extent of the damage, as the accident occurred at night. As such, he continued driving to the worksite. With limited phone coverage, he claims he could not inform anyone about the accident, but once he arrived, he told a manager what happened. The car was inspected and deemed unroadworthy, so it was sent for repairs.

The next day, all employees were told they could no longer use their company cars for personal use and the employee who collided with the kangaroo was told he would not be provided with a replacement car. He was allowed to use a car from the company pool but only to drive on site – he was forbidden to drive the car to and from his home.

As a result of this, the employee had to re-register and reinsure his own, personal car so he could get to work. The employee was not given an opportunity to respond before the company car was taken from him. He didn’t receive any compensation for the change to his contract, which he signed in early 2019 and which specifically mentioned the use of a company vehicle.

The employee was given a “first and final” disciplinary warning from his employers, because he “failed to immediately call a manager or a supervisor” and “his decision to drive an unroadworthy and unsafe car was ‘reckless, dangerous and… illegal’.”

Although the employee was not dismissed from his role, the original employment contract was called into question. Therefore, the employee filed for unfair dismissal.

This is a case of repudiation of a contract – and a timely reminder to check employment contracts and ensure benefits are discretionary.

The employee was told he could use the car for ‘limited personal use’ in his initial job offer. This was reinforced in the handover document he was asked to sign when given the keys.

By removing the employee’s contractual benefit and not financially reimbursing him, the employer failed to uphold its end of the contract.

The Fair Work Commission decided:

  • That the employee was not given an opportunity to respond before his contractual benefit was withdrawn.
  • That the warning the employee was given was unfair given the circumstances (considering it was pitch black and he had poor mobile coverage).

Because of these factors, the FWC determined the decision was harsh, unjust and unreasonable. The FWC ordered the employer to reinstate the employee’s use of the company car for personal and professional use.

This case is a reminder that an employer cannot remove a contractually agreed upon benefit unilaterally unless the employment contract includes a clause that allows employers to make changes or withdraw benefits.

To change a contractual, non-discretionary benefit, the employee needs to be consulted and an agreement must be made in writing, with adequate compensation offered. If the benefit forms part of an employee’s contractual entitlements, this benefit simply can’t be removed or altered.

However, if the benefits are discretionary, then the company is able to reduce or even remove these benefits – although employers are advised to be honest and open about changes to benefit agreements.

If you’d like advice on employee contracts – or simply an expert eye to ensure they’re watertight – then have a chat to the team at the HR Dept. That’s what we’re here for.

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