Employment & Safety Update – 23 April 2021

Amendments to Fair Work Act following Respect@Work Report, and Full Bench reduces compensation following misconduct finding

A. Proposed amendments to Fair Work Act and Fair Work Regulations

Following the Respect@Work: A National Inquiry into Sexual Harassment in Australian Workplaces’ Report, the Federal Government recently announced that it will introduce legislation to amend the Fair Work Act 2009 and Fair Work Regulations 2009 to:

  • include sexual harassment in the definition of ‘serious misconduct’; and
  • clarify that sexual harassment can be a ‘valid reason’ for dismissal.

Serious misconduct involves an employee deliberately behaving in a way that is inconsistent with continuing their employment, therefore warranting dismissal without notice or payment in lieu of notice.

While the proposed change to the Fair Work Regulations will not alter an employer’s substantive rights (sexual harassment has always been a valid reason for termination) the inclusion of a specific and express reference to sexual harassment in the definition of serious misconduct reflects that this type of behaviour within the workplace can justify summary dismissal.

B. Case note – Misconduct finding reduces employee compensation

Section 392(3) of the Fair Work Act provides that where the FWC is satisfied a person’s misconduct contributed to an employer’s decision to dismiss the person, the FWC must reduce the amount of compensation it would otherwise order as a result of the misconduct.

Recently, the Full Bench of the Fair Work Commission (FWCFB) decision in Butterfly Systems Pty Ltd v Sergeev [2021] FWCFB 18, provided guidance as to how the FWC will deal with deductions to compensation in practice.


Mr Sergeev was employed as a Software Developer with Butterfly Systems Pty Ltd (Butterfly Systems). Following a heated telephone discussion, Mr Sergeev said he was going to take one day of his annual leave to be taken on the same day. Mr Sergeev was told his request would not be approved as there was a lot of work to do, but he submitted the request anyway. He then disconnected from Butterfly System’s corporate network as he considered himself to be on annual leave.

Mr Sergeev’s employer sent him a text message a couple of hours later informing him he had been summarily dismissed and requested that he return any property of the employer as soon as possible.

Mr Sergeev filed an unfair dismissal application and was successful at first instance. He was awarded $35,000 in compensation. Butterfly Systems appealed to the Full Bench.

Outcome of the Appeal

The FWCFB held that there was a valid reason for dismissal but that dismissal itself was disproportionate saying that his actions might have resulted, at worst, in a formal warning.

The FWCFB initially reduced his compensation to $9,230.77, on the basis that he would have only been employed for another 4 weeks.

However, it then reduced Mr Sergeev’s compensation by a further 20% as a result of his misconduct, as Mr Surgeev’s misconduct directly contributed to the employer’s decision to dismiss him. This resulted in Mr Sergeev’s compensation ultimately being reduced to $7,384 – about $28,000 less than the original award.

The decision reinforces that misconduct is a relevant matter when considering the settlement of unfair dismissal claims as the requirement to consider misconduct can have a signficant impact on the compensation that Fair Work Commission may award.

If you have any queries about this update, please contact:

Joe Mullavey
M: 0416 794 061
E: jmullavey@pageseager.com.au

Published: 23 April 2021

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