In a recent Fair Work Commission decision, Mr Michael Galway v Vivin Imports Pty Ltd [2025] FWC 3277, an underperforming sales manager successfully challenged his dismissal—even though the Commission accepted there was a valid performance-based reason for termination.

This case is a timely reminder for employers: a valid reason is not enough. If the process is flawed, the dismissal will likely be deemed unfair.

The Case at a Glance

The employee, a 66-year-old sales manager with a long history in the furniture industry, was dismissed after failing to meet revised (and lower) annual sales targets. His performance had declined significantly over several months, and the Commission agreed the shortfall was real and serious.

However, the dismissal was ultimately found to be unfair due to:

• major procedural deficiencies, and
• the negative effect of broad post-employment restraints on his ability to secure new work.

The Commission ordered the employer to pay $25,380 in compensation, representing the 12 weeks the employee was likely to have remained employed if due process had been followed.

1. Valid Reason, but Invalid Process

Deputy President Masson was clear: the employee’s performance had significantly declined. He had achieved only 47.7% of his annual sales target, and the Commission found no substance to his claims that his targets were unrealistic or impacted by external factors such as incorrect allocations or drought-affected regions.

However, procedural fairness is a separate—and essential—requirement.

Critical procedural failures included:

• No warning that his job was at risk
• No opportunity to respond to concerns
• No performance management process
• A “perfunctory” dismissal over the phone
• Sales concerns were never expressly put to him

Even though the employee “would have been well aware” of his poor results, the employer never communicated that his performance was considered unsatisfactory, nor that dismissal was under consideration.

This lack of natural justice substantially undermined the otherwise valid performance reason.

2. Post-Employment Restraints Impacted Fairness

An important feature of this decision is the Commission’s focus on the practical effect of post-employment restraints.

The employee’s contract included restrictive covenants preventing him from working in competition or soliciting clients anywhere in Australia for up to 12 months—despite his 20-year career in the furniture industry.

Even if those restraints may have been technically unenforceable, the Commission recognised that many employees will comply out of fear of potential legal action. For an older worker with limited alternative industries, the restraints significantly reduced his job prospects, and the FWC treated this as a relevant factor in assessing harshness.

3. Compensation, Not Reinstatement

The employee did not seek reinstatement, citing the manner of dismissal and loss of trust.

The Commission assessed that he would have remained employed for a further 12 weeks had a fair process been followed, and awarded compensation equal to those lost earnings—$25,380 (less tax).

Key Learnings for Employers

This case offers several important lessons for employers managing underperformance, especially with senior or long-serving employees.

1. Performance Issues Must Be Clearly Communicated

Assuming an employee “knows” their performance is inadequate is insufficient.

Employers must ensure:

• the concerns are clearly articulated
• specific performance issues are identified
• expectations and targets are reiterated
• the employee is given the opportunity to respond

2. Provide Procedural Fairness—Always

Before termination for underperformance, an employer must:

• warn the employee that employment is at risk
• outline what improvement is required
• offer reasonable support and time to improve
• allow the employee to provide their perspective

Failing to do so almost guarantees an unfair dismissal finding.

3. Be Careful With Post-Employment Restraints

Even if a restraint may be unenforceable, the FWC will consider its practical impact on an employee—especially older workers with specialised industry experience.

Restrictive covenants should always be:

• reasonable
• tailored to the role
• geographically and time bound
• proportionate to the employer’s legitimate business interests

Overly broad restraints can backfire.

4. Train Managers on Lawful Dismissal Processes

The director’s “perfunctory” phone call featured prominently in the decision. Senior leaders must understand:

• what they can and cannot say
• the importance of documentation
• when to seek HR or legal advice
• how to navigate sensitive conversations

A misstep can turn a defensible termination into an expensive claim.

5. Start Now: Non-Compete Reform Is Coming

The Albanese Government has announced plans to ban non-compete clauses for employees earning under $175,000, likely from mid-2027.

Employers should begin reviewing contract templates and considering alternative methods of protecting their business (e.g., confidentiality agreements, IP protections, shorter notice periods, garden leave).

Final Thoughts

The Vivin Imports decision is a clear reminder that performance dismissals must be handled with care. Even legitimate concerns will not protect an employer if the process is deficient or if contractual restraints unfairly disadvantage the employee post-termination.

If your organisation needs support reviewing your performance management framework, updating employment agreements, or training your leaders on how to carry out lawful and defensible workplace processes, I can help.