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22 May 2017

Fair Work Commission criticises HR model

The Fair Work Commission (FWC) has criticised Komatsu Forklift Australia Pty Ltd’s HR department for fundamental failures of due process in its dismissal, via email, of a worker who had been absent due to mental health issues.

The Fair Work Commission (FWC) has criticised Komatsu Forklift Australia Pty Ltd’s HR department for fundamental failures of due process in its dismissal, via email, of a worker who had been absent due to mental health issues.


The employee, Mr John Finnegan, worked for the Komatsu Forklift Australia Pty Ltd (Komatsu) for eight years. Komatsu is part of the business of Komatsu Australia Pty Ltd (KAL). In August 2015, Mr Finnegan was placed on a performance improvement plan (PIP) after failing to meet his sales budget key performance indicator (KPI) requirements. He claimed that problems with his personal relationships, particularly involving his new manager, contributed to his performance difficulties.

In March 2016, when it became clear to Komatsu that Mr Finnegan was experiencing some mental health problems, the PIP was abandoned and he was immediately placed on sick leave due to ‘ongoing concerns regarding behaviour and work performance’. Komatsu required Mr Finnegan attend an independent medical assessment with psychological testing. The medical assessment was documented in a report dated 23 March 2016, which concluded that Mr Finnegan was temporarily unfit for his usual work with his current manager.

Komatsu implemented a return to work plan for Mr Finnegan in April 2016 that involved him working for a different supervisor in a different work location, and engaged in duties performed for a related entity, KAL (which were substantially different to his previous sales performance role in that they did not involve any KPI requirements). At the commencement of the third week of the return to work plan, Mr Finnegan was transferred back to duties for Komatsu instead of KAL but remained at a different location and under direction from a different supervisor. Mr Finnegan expressed concerns about an anticipated return to any work under the supervision of his previous manager and Komatsu decided to cease the return to work plan as a result of these concerns.

In May, Komatsu proposed to bring Mr Finnegan’s employment to an end by way of a deed of release but Mr Finnegan rejected this proposal. Komatsu subsequently directed Mr Finnegan to return to work in his previous role but reporting to a different manager. This second return to work arrangement once again involved Mr Finnegan’s ongoing performance in line with his KPI requirements.

Mr Finnegan did not return to work and instead provided medical certificates indicating that he was unfit to work. After two failed attempts to implement a return to work plan and more than three months absence on unpaid sick leave, Komatsu sent a letter to Mr Finnegan indicating its intention to make a determination about his on-going employment. Komatsu required Mr Finnegan to submit material regarding his capacity to return to work by 9 November 2016. Lawyers acting on Mr Finnegan’s behalf requested an extension of time until 16 November in order to submit the information. This was granted by Komatsu. On 17 November, Mr Finnegan’s lawyers sent another extension request but it was denied by Komatsu.

On 22 November 2016, Komatsu sent an email to Mr Finnegan attaching a letter of dismissal. Komatsu claimed that the reason for dismissal was Mr Finnegan’s refusal of reasonable directions to return to work. It said that Mr Finnegan’s failure to show that he could perform the inherent requirements of his role, after being given ample opportunity to do so, meant it could no longer employ him.

Mr Finnegan submitted that he had been unfairly dismissed and made particular criticism of the fact that Komatsu had failed to contact his psychiatrist in order to obtain accurate information about his condition.


Commissioner Cambridge said that medical evidence confirmed Mr Finnegan’s incapacity to work due to an illness, rather than his refusal to perform work. He stated that the dismissal was communicated insensitively and in a highly inappropriate way considering Mr Finnegan’s mental health issues.

The Commissioner also considered that Mr Finnegan was not provided with a proper opportunity to respond to issues surrounding his capacity for continued employment. He said that Komatsu should have provided for a meeting with Mr Finnegan and his representatives before making the decision to dismiss.

The Commission ruled that Komatsu ‘misconstrued’ Mr Finnegan’s incapacity to work as a refusal to perform his duties. Mr Finnegan did not refuse to perform work but he was unable to perform work, and the Commissioner held that ‘the reason Komatsu stated for the dismissal of the applicant cannot be supported as a fact, and therefore was invalid’.

Komatsu was ordered to pay Mr Finnegan $1,250 in compensation.


It is clear from this decision that Komatsu did not fully understand or articulate the reason for the decision to terminate the Mr Finnegan’s employment. While it may have been established that Mr Finnegan was unable to fulfil the inherent requirements of his role, Komatsu (in the termination letter) asserted Mr Finnegan’s refusal to return to work as the basis for the decision to terminate his employment. The circumstances did not support a conclusion that Mr Finnegan refused to return to work, but rather, that he was unfit to do so. This meant Komatsu was unable to establish a valid reason for the dismissal.

It is important that employers carefully consider the reasons for a proposed dismissal, ensure the reasons are lawful and factually correct, and articulate them in a way that supports a lawful and reasonable decision.

This case also cautions HR specialists against treating workers as human resources, suggesting that the vocation be renamed to ‘human relations’. The Commissioner emphasised the risk of ignoring the fact that workers are ‘easily damaged’ human beings, which should be handled with more care than machines. For this reason, as well as affording natural justice and procedural fairness, employers should review their employee management practices to ensure that any dismissal decision is communicated in a way that is respectful and maintains basic standards of human dignity.

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