Bradley Stokes v Auction Blue Pty Ltd
[2021] FWC 105
•12 JANUARY 2021
| [2021] FWC 105 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
Section 394 - Application for unfair dismissal remedy
Bradley Stokes
v
Auction Blue Pty Ltd
(U2020/14013)
| Deputy President Anderson | ADELAIDE, 12 JANUARY 2021 |
Application for an unfair dismissal remedy – storeman – jurisdiction – COVID-19 - sale of business – trial period with purchaser – Jobkeeper wage subsidy maintained by vendor – whether employed and by whom – whether dismissed and when - whether genuine redundancy – consultation obligation - jurisdiction established – application to be conciliated
On 22 October 2020 Bradley Stokes (Mr Stokes or the Applicant) applied to the Commission under section 394 of the Fair Work Act 2009 (the FW Act) for an unfair dismissal remedy in relation to his alleged dismissal on 1 October 2020.
Mr Stokes had worked for approximately six and a half years as a full time storeman for a privately owned small business auction house based in Adelaide, South Australia, Auction Blue Pty Ltd (Auction Blue or the Respondent).
The Respondent raised four inter-related jurisdictional and preliminary objections, claiming:
it was not the employer at the relevant time;
there was no dismissal by the employer at the relevant time;
if there was a dismissal, it was at an earlier date and the application is out of time; and
if there was a dismissal, the dismissal was a case of genuine redundancy.
Mr Stokes rejects each of these contentions.
This decision concerns these preliminary issues. It does not concern whether the dismissal (if any) was unfair or any issue of remedy.
I issued directions on 25 November 2020.
Materials were filed by both Auction Blue and Mr Stokes.
I heard the application by telephone on 7 January 2021.
Auction Blue was self-represented by its sole owner (and now Business Development Manager of the purchaser business Lloyds Auctions SA Pty Ltd), Mr David Richardson. Mr Stokes was represented by a paid agent, Just Relations. I had earlier[1] granted permission to Mr Stokes under section 596 of the FW Act to be represented on the ground of efficiency having regard to complexity, as well as fairness.
I reserved my decision, which I now deliver.
I heard evidence from two persons: Mr Stokes and Mr Richardson.
Each gave evidence conscientiously. Mr Stokes, aggrieved at his alleged dismissal, was somewhat defensive but particularly in answer to questions from the Commission, did so in a generally reliable manner. Mr Richardson also gave evidence clearly and, putting aside the understandable tendency of a self-represented party to also argue one’s case when giving evidence, was generally a reliable witness (though I do not accept his evidence about when accrued entitlements on termination were paid out).
Although the factual narrative is complex, there are relatively few factual disputes. The disputed facts can generally be explained by the effluxion of time and the haziness of memory of events months prior. Where there are disputed facts, I have particular regard to the documentary record for explanation or corroboration.
Aside from opinions expressed by both witnesses whilst giving evidence, each also in part led hearsay evidence of what was said by persons not called in these proceedings (Mr Stokes with respect to post-dismissal communication with a former employee, and Mr Richardson with respect to what an officer of the purchaser business told him about conversations with Mr Stokes in July 2020). I do not discount entirely, but give little weight to hearsay evidence where it is disputed and unable to be tested.
I make findings based on the manner in which evidence was given, its consistency with corroborating documentary evidence and inherent plausibility.
Facts
I make the following findings.
Auction Blue is a small business auction house which, until 1 July 2020, operated the business from the suburb of Richmond in suburban Adelaide.
Until 1 July 2020, it employed approximately four persons (Mr Richardson plus three), having pre COVID-19 employed around six.
Auction Blue has been privately owned and operated by Mr Richardson for approximately thirty years.
Mr Stokes worked for Auction Blue as a full time storeman since 12 May 2014. He and Mr Richardson developed a good working relationship and Mr Richardson came to value his work and his interest and enthusiasm in the industry of collectables. Mr Stokes developed competency with relevant information technology systems and whilst primarily a storeman, Mr Stokes was also general handyman in the business.
His employment was governed by a modern award, the Storage Services and Wholesale Award 2020 (the Storage Award).
COVID-19 and Jobkeeper
The economic effect of COVID-19 hit Auction Blue from March 2020. Business income fell and working hours were reduced. In April 2020 Mr Richardson applied for a wage subsidy under the Jobkeeper scheme to maintain the employment of employees, including Mr Stokes. The business being eligible, wages paid to Mr Stokes from April 2020 were thereafter subsidised by Jobkeeper.
Mr Stokes was not stood down. Until 1 July 2020 he and another employee continued, together with Mr Richardson, to work from the Richmond site albeit in a different manner and with some reduced hours. One other employee worked remotely. Mr Stokes continued to be paid his regular wage by Auction Blue (with partial subsidy). His wage exceeded the level of Jobkeeper subsidy.
Sale of business
In April and May 2020 Mr Richardson formed the view that his business, longstanding though it was, would not survive the pandemic intact, and explored options for its sale. He opened negotiations with a national auction house, Lloyds Auctions and Valuers (Lloyds or the purchaser).
In May 2020 an in-principle agreement was reached between Auction Blue and Lloyds for Lloyds to purchase the business of Auction Blue (its assets and trading name) and for the new ownership to commence from 1 July 2020.
In mid-June 2020 the terms of the sale agreement between Auction Blue and Lloyds were finalised.
Lloyds took ownership of assets and the operation of Auction Blue’s business from 1 July 2020.
The purchase price was paid by Lloyds over the following months.
In the period following 1 July 2020, although Auction Blue had sold the business and its trading name to Lloyds, the corporate entity Auction Blue Pty Ltd continued to exist (in a non-trading capacity) and shares continued to be held exclusively by Mr Richardson[2].
Sale implications for employees
When negotiating the sale of the business, Mr Richardson wanted Lloyds to retain his existing staff (three employees) rather than have Lloyds employ new staff afresh. He did not want his staff to be involuntarily out of a job.
An arrangement was reached between Mr Richardson and Lloyds in June 2020 whereby the three Auction Blue employees (Mr Stokes and two others) would continue to work in their regular roles for a three month transition period from 1 July 2020 to 30 September 2020 whilst Lloyds were in charge to enable Lloyds to assess their suitability for ongoing employment with the purchaser.
It was also agreed that Mr Richardson would himself become an employee of Lloyds (a Business Development Manager) working in the business for a fixed three year term.
Mr Richardson also sought to help staff obtain other employment if they did not want to work for Lloyds. He prepared a reference for Mr Stokes and provided it (together with details from the personnel records) to Lloyds[3]. Mr Stokes wanted to stay working in the business.
In May 2020 Mr Richardson advised Mr Stokes (and the other two employees) that he had reached a sale agreement with Lloyds which he hoped would enable staff to keep their jobs after 1 July 2020. In various discussions at the time, he advised Mr Stokes (and the other two employees) that they would be contacted by Lloyds and advised the arrangements for the transition period. Each side were relieved to some degree by the news.
Agreement between Mr Stokes and Lloyds
By 18 June 2020 Mr Stokes had not heard from Lloyds. He sent a text message to Mr Richardson resulting in the following exchange:[4]
“Mr Stokes:Hey David sorry to text you at late I need to know if my job with u is going to carry on or not waiting for a phone call for a few days now is quite stressful and painful.
Sorry if I think about things too much.
Mr Richardson: I keep paying you till they start paying you. In fact I will pay you for the first two weeks that they will be paying you as well.
Mr Stokes:Ok thanks still doesn’t let me know of the future which is important to me
Mr Richardson: I am pretty sure they are delaying things till the end of the financial year (30/6/20). I have spoken to them every day this week, they had someone lined up to come down who had a family crisis and because of COVID would not have been able to get back in an emergency so they are talking to someone else.
Mr Stokes: Thank you I think.
Mr Richardson: It is all good, for 2 weeks you will be paid double!”
On 3 July 2020 a Lloyds manager, Mr Owen Young Gee spoke to Mr Stokes by telephone. Mr Stokes was told that Lloyds was agreeable to Mr Stokes (and the other two employees) continuing in the business for a transition period to assess their suitability for ongoing employment. Mr Stokes was pleased to belatedly get this message, and agreed to do so believing that he (and the other two staff) would be offered future employment on about the same pay.
On 7 July 2020 Mr Young Gee sent Mr Stokes the following email:[5]
“Hi Brad,
Please find a Confidentiality and other matters Agreement for your review, signature and return.
It is a requirement of all employees and contractors who work closely with Lloyds to enter into this agreement.
If you have any queries in relation to the agreement please contact me on XXXXX XX or discuss with Brett Mudie.
Regards,
Owen Yong Gee”
The email attached a document entitled “Confidentiality and Other Matters Agreement” (the Confidentiality Agreement)[6].
The following day, 8 July 2020, Mr Stokes (and one of the other employees, Mr Sawade) met with Mr Young Gee at the workplace. Mr Young Gee sought return of the signed Confidentiality Agreement. Mr Stokes, who had briefly read the document, questioned why the document referred to the law of Queensland as the governing law (clause 31). Mr Stokes was told the agreement was a requirement of people working in Lloyd’s business and there was nothing to be concerned about as it protected confidentiality of what was now Lloyds assets.
Mr Stokes then signed the agreement with Lloyds, on 8 July 2020. He did not particularly notice that the Agreement named Lloyds Auctions (SA) Pty Ltd as “the Client” and he (Bradley Stokes) as “the Contractor” both in its recital and signature block[7].
Period 1 July 2020 to 1 October 2020
Mr Stokes continued to turn up for work in the months of July 2020, August 2020 and September 2020 and continued to perform productive work. He was inducted into the Lloyds business. Over time, he did less of his former work (storeman duties) and was assigned by Lloyds more administrative tasks. There were at least three practical differences from his pre-1 July 2020 work with Auction Blue:
Lloyds required Mr Stokes to wear a Lloyds uniform, which he did;
the IT system moved to the Lloyds platform with Mr Stokes getting a new (Lloyds) email address; and
though Mr Richardson was still present in the business, he gave no instruction or direction to Mr Stokes. After 1 July 2020, Mr Stokes took instruction and direction only from Lloyd’s managers and in particular from a Lloyd’s Busines Development Manager Mr Joseph Train.
However, in this three month period 1 July 2020 to 1 October 2020 payment arrangements did not change. In particular:
Mr Stokes continued to receive the same rate of pay and his full wage from Auction Blue Pty Ltd. His payslips in this period made no reference to Lloyds. They were unchanged from previous payslips. They referred to Auction Blue as the payer;
Auction Blue continued to lodge a Jobkeeper Monthly Claim and Report with the Australian Taxation Office as it had done prior to 1 July 2020. Those reports for the months of July 2020, August 2020 and September 2020 are in evidence.[8] They were signed off by Auction Blue’s accountants and the declaration indicates that the persons referenced in the attached “Auction Blue Pty Ltd Payroll Employee Summary” were all employees of Auction Blue Pty Ltd and were eligible employees who had been “paid at least $4,500” in each of the relevant months. The gross and net wage paid to Mr Stokes in each of these months by Auction Blue Pty Ltd was included as a separate line item in each of the Payroll Employee Summaries;
on the basis of the declaration made by Auction Blue, the Australian Taxation Office remitted $4,500 in each of these months to Auction Blue as subsidy for Mr Stokes wage; and
despite Mr Stokes doing productive work for the benefit of Lloyds, Auction Blue did not seek re-imbursement from Lloyds of any wage it paid Mr Stokes in this period, nor did Auction Blue pass on the wage subsidy it received to Lloyds.
I do not accept Mr Richardson’s evidence that only the $4,500 wage subsidy was earned and paid by Auction Blue to Mr Stokes in each of the months in this period and that the higher “earnings” recorded on the payroll summaries and paid included accrued annual and long service leave entitlements owed at 30 June 2020. The evidence on this was vague and unconvincing. The payroll summaries make no reference to amounts paid to Mr Stokes other than earnings. Nor is it apparent that any long service leave liability arose by 30 June 2020 (South Australian law requires pro rata payments after seven years of service). Further, it would appear from the subsequent Employment Separation Certificate issued by Auction Blue[9] that annual leave was paid out to Mr Stokes on 20 October 2020, not prior.
Events 1 October 2020
On the morning of 1 October 2020, Mr Train informed Mr Richardson that as the three month transition period had concluded, Lloyds had decided what to do with the carried over staff. Mr Train told Mr Richardson that Lloyds had decided to keep two on but not the other. He advised Mr Richardson that Mr Stokes would not be kept on as Lloyds believed that he hadn’t fitted in as well as the others. Mr Richardson was privately surprised and disappointed. He believed that Mr Stokes should be kept on, even if a choice was to be made. He did not however express that view to Mr Train. He neither made the decision nor was consulted about the decision. He was simply told to bring Mr Stokes to the office and agreed to do so as he thought his presence might soften the news.
Mr Richardson approached Mr Stokes and together they entered the office.
Mr Train proceeded to tell Mr Stokes that the transition period had expired and Lloyds had decided not to keep him on as they didn’t believe he had adapted as well as others to their business. Mr Stokes was in some shock. Mr Richardson, on behalf of Mr Stokes, asked when it was to take effect. Mr Train said that it was immediate, and Mr Stokes would conclude that day. Mr Stokes left the premises.
That day, 1 October 2020, was the last day Mr Stokes worked in the business or entered the business premises.
Period 1 October 2020 to 20 October 2020
In the days that followed, Mr Richardson, concerned for Mr Stokes, maintained some contact with Mr Stokes.
On one occasion, Mr Richardson told Mr Stokes that he (Mr Richardson) would arrange for Mr Stokes to come back to the workplace to collect his tools. Mr Stokes declined the offer – no longer feeling comfortable in the presence of Lloyds managers and staff kept on.
In the twenty day period 1 October 2020 to 20 October 2020 Auction Blue Pty Ltd continued to pay monies to Mr Stokes (on 8 and 20 October but according to Mr Stokes, without an accompanying payslip) and continued to make a Jobkeeper claim and receive a Jobkeeper subsidy for the wages it paid.
During this twenty day period, Mr Richardson advised Mr Stokes that he could keep him on Jobkeeper until he found new employment but that the Jobkeeper rules had changed, and that Mr Stokes would need to agree to do 20 hours work per week for him if Auction Blue was to keep him on the books, continue to claim a Jobkeeper wage subsidy and pay him wages equal to the subsidy. Mr Richardson did not particularly know what work he would provide Mr Stokes (given that he could no longer work in the business for Lloyds) but as Auction Blue Pty Ltd continued to be a registered entity, some menial tasks might be found. Mr Richardson advised that, alternatively, the arrangement would need to come to an end.
The issue came to a head on 20 October 2020 by which time Mr Richardson needed a decision. He sent Mr Stokes the following text:[10]
“So Brad. So I pay you today for doing nothing or do I send you a separation certificate?”
On or about that date Mr Stokes informed Mr Richardson that he wanted the separation certificate.
Auction Blue then made up a final payment to Mr Stokes. It thereafter no longer claimed a Jobkeeper wage subsidy for Mr Stokes. It cancelled his registration with Jobkeeper. To assist Mr Stokes find alternate work, it prepared a (Centrelink) Employment Separation Certificate which Mr Stokes had requested. The Employment Separation Certificate provided, in part:[11]
“Date employment ceased: 20/10/2020
Reason for separation: Other
(business sold)
Final gross payment including leave and redundancy payments: $2,510.58
Annual leave paid 20/10/2020: $2,510.58”
Two days later, 22 October 2020, Mr Stokes filed these proceedings, claiming that he had been unfairly dismissed by Auction Blue on 1 October 2020.
Submissions
Auction Blue advance jurisdictional and preliminary objections on the basis that if any of them are made out, the application cannot proceed to a merit or remedy hearing. In particular Auction Blue submits:
that Auction Blue was not the employer of Mr Stokes at the date of alleged dismissal (1 October 2020);
in the alternative and whether it was his employer or not, that Auction Blue did not dismiss Mr Stokes at the date of alleged dismissal;
in the further alternative, there was no dismissal at any time in that Mr Stokes’s employment ended on 30 June 2020 by sale of the business, or on 1 October 2020 by the end of a specified trial period with the purchaser, or on 20 October 2020 by resignation;
in the further alternative, that if Auction Blue dismissed Mr Stokes at any time it did so because of the sale of its business and this constitutes a genuine redundancy; and
in the further alternative, if Auction Blue dismissed Mr Stokes it did so upon the sale of business on 30 June 2020 and thereby the unfair dismissal application is out of time.
In advancing the proposition that it was not the employer of Mr Stokes at 1 October 2020, Auction Blue relies on the fact that Mr Stokes was working for the productive benefit of Lloyds in the three month period 1 July 2020 to 30 September 2020, was inducted into the business of Lloyds during this period, knew that he was being assessed by Lloyds for suitability in this period, worked on the basis of an agreement he signed with Lloyds on 8 July 2020 and took no direction from Mr Richardson during this period.
In advancing the proposition it that did not dismiss Mr Stokes on 1 October 2020, Auction Blue relies on the fact that Mr Richardson no longer had authority to hire or fire Mr Stokes, that Mr Richardson was by then himself an employee of Lloyds, that the decision was made by Lloyds and not Auction Blue and that in any event it was not a decision which Mr Richardson would have made or recommended, had he been consulted.
In support of its submission that no dismissal occurred on 30 June 2020 Auction Blue says that its business ceased trading and employment came to a consequential end.
In support of its submission that no dismissal occurred on 1 October 2020 Auction Blue says that a specified trial period came to an end on its own terms.
In support of its submission that no dismissal occurred on 20 October 2020 Auction Blue says that Mr Stokes was given a choice and chose to end the relationship with Auction Blue. In that sense, he ended his employment.
In support of its alternate submission that the dismissal was a genuine redundancy, Auction Blue says that an arms-length sale of the business occurred for sound commercial and economic reasons, and Mr Stokes had been consulted in May 2020 and June 2020 about the potential sale and what the sale meant for him. It says that a decision by a successor business not to employ one of its employees is not a dismissal let alone an unfair dismissal.
In opposing each of the jurisdictional and preliminary objections, Mr Stokes makes the following submissions:
he was never an employee of Lloyds. Whilst he had some hope Lloyds would keep him on, he did not sign an employment contract or make an oral employment agreement with Lloyds. The Confidentiality Agreement is not a contract of employment;
he remained an employee of Auction Blue after 1 July 2020 because Auction Blue continued to pay his wages, continued to hold itself out as his employer on his payslips and to the Australian Taxation Office, received a publicly funded Jobkeeper wage subsidy to defray the cost of wages paid to Mr Stokes, and was eligible for the subsidy because it made a legally binding declaration to the authorities that Mr Stokes was in fact its employee;
there is no legal impediment to Auction Blue continuing to be the employer of Mr Stokes after the sale of the business because the legal entity of Auction Blue continued and continued to be owned by Mr Richardson;
Auction Blue negotiated the three month transition period for its employees with Lloyds, knew that Lloyds would assess their suitability over this period and only offer direct employment with Lloyds where an employee was considered suitable;
Auction Blue implicitly if not expressly conferred a right on Lloyds managers to dismiss its employees (including Mr Stokes) by virtue of its agreement to the transition period, and in any event Mr Richardson of Auction Blue participated in the dismissal meeting and was a party to it;
in support of its alternate submission that Auction Blue dismissed Mr Stokes on 20 October 2020, it relies on the Employment Separation Certificate given by Auction Blue to Mr Stokes for Centrelink purposes;
to the extent the dismissal was a redundancy, it was not a genuine redundancy within the meaning of the FW Act because Mr Stokes was not consulted within the true meaning of “consultation” as required by the relevant modern award that governed his employment; and
the application is not out of time but in any event, if the date of dismissal was 30 June 2020 an extension of time should be granted because it was not reasonable for Mr Stokes to file proceedings until he knew whether Lloyds would employ him following the transition period.
Consideration
I now deal with each of the four jurisdictional and preliminary issues raised by Auction Blue.
In so doing, I note that this is not a matter where the transfer of employment provisions of the FW Act[12] are relevant. Mr Stokes is not advancing a claim against Lloyds. He is not claiming that he was ever employed by Lloyds. He is not seeking a re-employment order against Lloyds. His claim is solely against Auction Blue.
Was Mr Stokes employed by Auction Blue, and if so during what period(s)?
For Mr Stokes’s application to fall within the Commission’s jurisdiction it is necessary that he was “an employee” protected from unfair dismissal (section 382 FW Act) and “dismissed” from his “employment” (section 386).
Mr Stokes meets the jurisdictional criteria to be protected from unfair dismissal in that he was covered by a modern award (section 382(b)(i)) and worked (for Auction Blue) in excess of the twelve month minimum statutory employment period applicable to a small business employee (section 382(a)).
However, was Mr Stokes employed by Auction Blue, and if so during what period(s)?
It is not in dispute that Mr Stokes was employed by Auction Blue for a period from 12 May 2014 until 30 June 2020, being the date prior to the sale of the business to Lloyds taking effect.
He was an employee of Auction Blue on 30 June 2020.
What was his employment status between 1 July 2020 and 1 October 2020?
In an orthodox sale of a business, the situation is black and white. Where a purchaser agrees to take on a transferring employee (usually with adjustment to the purchase price for accrued employee service-based liabilities that by law are carried over) a transferring employee comes to be employed by the successor business (often with an express contract) from the date business ownership changes.
However, the factual narrative in this matter, as I have found, is far from orthodox.
It is clear that Auction Blue ceased to operate the business from 1 July 2020. The business trading name and its assets were thereafter owned and operated by Lloyds.
However, a business transfer does not automatically transfer contracts of employment. Whether contracts of employment transfer is a product of overall circumstance including whether via the sale agreement the purchaser has agreed to take on any of the former employees (and on what basis) and whether an agreement is made (express or implied) between the purchaser and relevant employee(s) to create an employment relationship.
In this matter, far from being black and white there was considerable grey. That there is a dispute about these matters in this litigation is not a surprise; it is the product of Auction Blue and Lloyds each failing to provide clarity between themselves and to Mr Stokes.
The sale agreement between Auction Blue and Lloyds is not in evidence. All that is known is gleaned from Mr Richardson’s oral evidence that Lloyds were initially reluctant to take on his employees and that it was only upon his pressing that agreement between he and Lloyds was reached whereby in the first three months’ of Lloyd’s ownership a transition period would operate in which the employees would keep working in the business and Lloyd’s managers would use that time to assess their suitability for employment.
In practice, Mr Stokes took instruction from Lloyds managers, wore a Lloyds uniform, was given a Lloyds email address and was inducted into the Lloyds business and its policies. From 3 July 2020 he believed Lloyds would offer him future employment on the same pay. These factors are consistent with an employment relationship with Lloyds but not necessarily so. Labour hire arrangements, for example, where a labour hire agency holds the employment relationship but where the host client controls operational work, dress standards and provides a workplace induction are common. If those arrangements are genuinely triangular, there is no employment relationship between the worker and the host client.
The existence of a right to discipline or terminate a worker’s employment is a right held by an employer. In this matter, I have found that Mr Richardson did not have the right to remove Mr Stokes form the business after 1 July, or to decide to keep him working in the business. The business was no longer his. Ordinarily this would weigh strongly in favour of a finding that Auction Blue was not the employer of Mr Stokes in the period 1 July 2020 to 1 October 2020.
However, the circumstance is not ordinary. An even more weighty factor exists: the payment of wages. Auction Blue continued to pay Mr Stokes wages after 1 July 2020. Whilst its agreement to do so is somewhat incongruous given that the productive benefit of Mr Stokes’s work in this period accrued to Lloyds and not to Auction Blue, I can only conclude that Mr Richardson did so because it was a necessary step to achieve the goal he sought for Mr Stokes – that Mr Stokes not be involuntarily retrenched but be kept in his former job by the new owner.
It is also open on the evidence to conclude that this was a necessary step to enable a Jobkeeper wage subsidy to continue to be claimed by Auction Blue and received to defray the costs of continuing to pay Mr Stokes over this period.
That Auction Blue continued to pay Mr Stokes, that it continued to pay Mr Stokes his usual wage (which was in excess of the Jobkeeper subsidy), that it made the wage payments in the regular fortnightly pay cycle Mr Stokes had become accustomed and that it issued a payslip to Mr Stokes each pay day holding itself out as the payer (which it was) are powerful indicators that Auction Blue was maintaining a continuing employment relationship with Mr Stokes.
These factors, together with the absence of any termination agreement on or about 30 June 2020, and the fact that on a regular basis during this period Auction Blue continued to make a monthly claim for a wage subsidy with respect to the wages paid to Mr Stokes and in doing so held out to the Australian Taxation Office that Mr Stokes continued to be its employee in a Payroll Employee Summary, received the subsidy and did not remit any part of it to Lloyds, and the fact that even after 1 October 2020 Mr Richardson held out to Mr Stokes some (unspecified) work, collectively create an irresistible conclusion that an employment relationship still existed between Auction Blue and Mr Stokes during this period.
What then is to be made of the fact that Mr Stokes was working for the benefit of Lloyds during this period? The work was performed to allow Lloyds to assess his suitability for a future employment offer. If a future employment offer was made, then Mr Stokes would no longer be an Auction Blue employee and Auction Blue would benefit in that it would thereafter no longer carry any obligation towards Mr Stokes. Unusual though it may be, this was a case where the vendor kept employing the worker for a future period to allow the purchaser to assess their suitability.
I appreciate that Mr Richardson had assumed the orthodox arrangements on the sale of a business would apply in which he would cease to be the employer of Mr Stokes at the same time as the sale of his business took effect. However, that wasn’t the arrangement he put in place. Although his intentions towards Mr Stokes were well-intended and circumstances were complicated by the Jobkeeper scheme, he didn’t terminate Mr Stokes’s employment or give him notice of termination on or prior to 30 June 2020, he kept paying him over the following three months and only concluded the relationship on 20 October 2020.
I also appreciate that Mr Richardson assumed that Lloyds would enter an employment agreement with Mr Stokes. At its highest, the 3 July 2020 phone discussion between Mr Stokes and Mr Young Gee was a promise of future employment by Lloyds, but not an oral employment agreement for the transition period.
Nor can the Confidentiality Agreement be relied upon by Auction Blue to alter this conclusion. The Confidentiality Agreement did not create an employment relationship with Lloyds, either on its terms or in fact. By imposing this agreement on Mr Stokes, Lloyds acted in a ham-fisted manner. The Agreement appears to do more than protect confidentiality of its assets or systems. It appears to recognise an “engagement”[13] of some sort in which Lloyds describes itself as a “client” of Mr Stokes and Mr Stokes as a “contractor” of Lloyds. Nothing more artificial or ludicrous in the context of the sale and purchase of this business could be imagined, yet that is what Mr Stokes was compelled by Lloyds to sign. Mr Stokes wasn’t running a business, he didn’t have an ABN, he had no choice of what work to do, he had no right to reject allocated tasks and accrued no goodwill. He just kept working as he had the preceding six years, under the instruction of new managers, and hoping he’d be kept on by the purchaser. Confusingly, the Agreement refers to “the Contractor’s employment” in clause 9 but never describes Mr Stokes as its employee.
For the purpose of these proceedings it matters not whether I find that Mr Stokes was or was not a contractor of Lloyds in this three month period. Were it necessary to do so, I would find that he was not a contractor despite the label accorded by the Confidentiality Agreement. None of the regular indica of a genuine independent contractor relationship exist to support such a conclusion[14]. I have found that Mr Stokes was working for the benefit of Lloyds in this period but as an employee of Auction Blue with Auction Blue benefiting in the indirect manner I have identified.
Also supporting the conclusion that the Confidentiality Agreement between Lloyds and Mr Stokes did not create an employment relationship is the evidence of Mr Richardson as to the contrasting practice that existed between he and Lloyds with respect to his employment. His evidence was that he too was required to sign a Confidentiality Agreement with Lloyds in similar terms to Mr Stokes. However, his evidence was that he was also required to enter a separate Employment Agreement with Lloyds in which he became a Business Development Manager for a fixed term. No such separate Employment Agreement was submitted by Lloyds to Mr Stokes. The evidence is that Lloyds did so only for Mr Richardson and for those employees of Auction Blue it subsequently decided to employ after the transition period.
I conclude that Mr Stokes was employed by Auction Blue in the period 1 July 2020 to 1 October 2020 including on 1 October 2020.
I deal with the issue of Mr Stokes’s employment status from 1 October 2020 to 20 October 2020 below.
Was Mr Stokes dismissed and, if so, by whom and when?
Under the FW Act, a person can only be “unfairly dismissed” if they have been “dismissed” (section 385(a)).[15]
Section 386 of the FW Act provides that:
“(1) A person has been dismissed if:
(a)the person’s employment with his or her employer has been terminated on the employer’s initiative; or
(b)the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.”
The following general observation by a full bench of the Commission, although decided under a former Act[16] and in the context of a forced resignation matter, is relevant to the interpretation of section 386(1)(a):[17]
“…there [needs] to be some action on the part of the employer which is either intended to bring the employment to an end or has the probable result of bringing the employment relationship to an end.”
Whether a person was dismissed, just as whether they were employed, is a combined issue of fact and law. It does not necessarily follow that because a person was employed, that they were dismissed by their employer.
I turn to the first alleged dismissal date of 30 June 2020, being the date alleged by Auction Blue (in its alternate submission).
If Mr Stokes was an employee of Auction Blue on 30 June 2020, as is not in dispute, was he dismissed by Auction Blue on 30 June 2020?
In the orthodox circumstance of a business closure or a sale of a business (including where an employee does not become a transferring employee of the purchaser), employment contracts commonly come to an end by virtue of redundancy, in that the job the employee has been performing for the vendor no longer exists.
Had I found that Lloyds entered into an employment relationship with Mr Stokes from 1 July 2020 and that the work he performed thereafter was work for Lloyds under cover of an employment relationship with Lloyds, it would necessarily follow that his employment with Auction Blue would have ceased on 30 June 2020 on account of the business sale. In those circumstances there would have been a termination of employment by Auction Blue, and fresh employment with a different entity, Lloyds.
That however is not my finding.
As noted, the conduct of the parties meant that these were not the orthodox circumstances of a business sale. Having found that Auction Blue continued to employ Mr Stokes after 30 June 2020 and on the same remuneration, it follows that he could not have been and was not dismissed by Auction Blue on 30 June 2020.
I now turn to the next alleged dismissal date, 1 October 2020, being the date alleged by Mr Stokes.
If Mr Stokes was an employee of Auction Blue on 1 October 2010, as I have found, was he dismissed by Auction Blue on 1 October 2020?
I have found that Mr Richardson gave, by virtue of the sale of his business and his agreement with Lloyds to the employee transition, the right for Lloyds to decide whether any of his employees would continue to work in the business upon the conclusion of the transition.
It does not however follow that the decision by Lloyds not to make an employment offer to Mr Stokes constituted a decision by Lloyds to terminate his employment with Auction Blue. Only Auction Blue could terminate his employment with Auction Blue. That right was not outsourced to Lloyds.
On 1 October 2020 Lloyds made a decision not to offer employment to Mr Stokes. That is the proper characterisation of what occurred on 1 October 2020. A consequence of that was that Mr Stokes no longer had a right to be present in a business then owned and operated by Lloyds. Lloyd’s requiring him to leave the business that day and not return was a necessary consequence of not offering him employment and of the transition period having come to an end.
Whilst I appreciate that, from Mr Stokes’s perspective, the events of 1 October 2020 looked and felt like a dismissal, it wasn’t. He continued as an employee of Auction Blue for the next twenty days. He received a fortnightly wage payment on 2 October 2020 and then again on 20 October 2020. He didn’t return any of those payments to Mr Richardson. Whilst in this twenty day period he was understandably shocked and upset at not being chosen by the purchaser after the transition period (when others were), he was given options by Mr Richardson and communicated with Mr Richardson on those issues: that either he be kept on the books with Auction Blue receiving Jobkeeper until he found alternate employment (but having to do 20 hours work per week of some ill-defined nature), or he take an employment separation certificate and the relationship would be ended.
Mr Stokes understandably wanted to get another job, and upset at what had occurred, took the separation certificate, clearing the way for him to seek alternate work and claim unemployment benefits if needed.
By ending payroll payments to Mr Stokes on 20 October 2020, by no longer registering him for a Jobkeeper wage subsidy, and by providing him an Employment Separation Certificate that indicated his employment ceased on 20 October 2020 by reason of the business having been sold, Auction Blue brought Mr Stokes’s employment to an end on and from 20 October 2020.
This conduct of Auction Blue on and around 20 October 2020 was conduct “intended to bring the employment to an end or had the probable result of bringing the employment relationship to an end”[18].
I do not accept that by posing the question it did to Mr Stokes by text on 20 October 2020, and by opting for the separation certificate option, Mr Stokes resigned. In practice, there was no open choice given to Mr Stokes; it was a Hobson’s choice. Mr Richardson initiated the choices, defined them in the terms he did and by 20 October 2020 was impatient for a decision. Where the type of work on offer (if any) was so ill-defined and solely for the purpose of tying Mr Stokes over on Jobkeeper until he found alternate work, the option of ending it all with the separation certificate was a logical response to what the employer was saying.
In any event, if the option taken by Mr Stokes was to be characterised as a resignation (termination at his initiative), then the Hobson’s choice he was presented would clearly establish circumstances whereby he was “forced to do so because of conduct, or a course of conduct, engaged in by his or her employer” within the meaning of section 386(1)(b) of the FW Act – and thereby a dismissal within the meaning of the FW Act.
I conclude that Mr Stokes was dismissed by Auction Blue on 20 October 2020.
The reason for dismissal was that Auction Blue had sold the business, the purchaser had not offered Mr Stokes employment and Auction Blue, having ceased trading, had no ongoing employment it could productively offer Mr Stokes in the position it employed him, or otherwise.
Is the application out of time?
The application is not out of time. It was filed two days after the dismissal.
Was the dismissal a “genuine redundancy”?
The FW Act provides that a dismissal is not “harsh, unjust or unreasonable” if it is a “genuine redundancy”.[19] The employer bears the legal onus of establishing that Mr Stokes’s dismissal was a case of “genuine redundancy”.
Section 389 of the FW Act provides as follows:
“389 Meaning of genuine redundancy
(1) A person’s dismissal was a case of genuine redundancy if:
(a)the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
(b)the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
(2)A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:
(a) the employer’s enterprise; or
(b) the enterprise of an associated entity of the employer.”
I have found that the sale of the business of Auction Blue to Lloyds was a genuine commercial transaction. From 1 July 2020 Auction Blue ceased trading. It operated thereafter solely for the purpose of paying its employee’s wages (subsidised by Jobkeeper), until the purchaser decided whether to offer them employment, or until its employees found alternate employment and left.
Thus, on 20 October 2020 there was an “operational requirement” resulting in Auction Blue no longer being able to employ Mr Stokes as a storeman, as it no longer operated a business requiring a storeman (or any business at all). This was the position on 20 October 2020 when Mr Stokes was dismissed. Nothing had happened between 1 July 2020 and 20 October 2020 which changed the operational circumstance that continued to preclude Auction Blue from employing Mr Stokes as a storeman. Whilst the company continued to exist, it had and continued to cease trading.
Section 389(1)(a) is made out by Auction Blue. Section 389(2) does not apply as there was no reasonable basis on which Auction Blue could otherwise employ Mr Stokes. Lloyds was not an associated business and in any event, Mr Richardson went out of his way to endeavour to have Lloyds offer employment to his staff (including Mr Stokes) by paying their wages (albeit publicly subsidised) during the transition period.
Did Auction Blue comply with “any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy” (section 386(1)(b))?
I have noted that Mr Stokes was employed under a modern award, the Storage Award, That Award (clause 30) imposes an obligation on an employer to consult about major workplace change.
Clause 30.1 imposes an obligation (amongst others) to give notice and commence discussions with employees once a definite decision is made to make major changes to an organisation which are likely to have significant effects on employees. Significant effects are defined (in clause 30.5) to include termination of employment.
Although the evidence suggests that Auction Blue’s discussions with Mr Stokes about its decision to sell the business and the effect of that decision on his employment were brief, informal and not in writing, they occurred on more than one occasion. I am satisfied that in the context of this small business and the uncertainty brought on by both COVID-19 and the time taken by Lloyds to provide the terms of a written contract of sale as well as its agreement to the transition period for employees, Auction Blue met its minimum obligation of notification and discussion once it had made a definite decision. Mr Richardson tried to keep Mr Stokes and his other employees in the loop as much as he could during May and June 2020. He himself was impatient to have Lloyds speak to his staff, as is apparent from his text reply to Mr Stokes on 18 June 2020.
Similarly, Mr Richardson sought to engage, albeit briefly, with Mr Stokes in the period after 1 October 2020.
I do not accept the submission by Mr Stokes that the discussions were one-way and as such not consultation. Whilst his representative rightly points to cases where one-way communication has been found to not be consultation, each factual circumstance creates its own context. This matter is a case of a business being sold and ceasing operations entirely, not a negotiation over a restructure. Further, there was informal discussion between a handful of close knit employees and the hands-on business owner in which the owner told the employees that for economic reasons he was selling the business, that Mr Stokes was advised when a purchaser was found and similarly when a transition period was agreed, and Mr Richardson received and responded to oral comments and texts on what this meant for staff including from Mr Stokes.
However, clause 30.2 of the Award required Auction Blue to:
“give in writing to the affected employees…all relevant information about the changes including their nature, their expected effect on employees and any other matters likely to affect employees” (other than confidential information) (my emphasis)
The decision to sell the business of Auction Blue was a decision by the Respondent to make a major change in organisation that was likely to have a significant effect on employees, within the meaning of clause 30.1 of the Award.
There is no evidence before me that Auction Blue gave Mr Stokes any such notification in writing whilst he was employed, let alone as soon as practicable after a definite decision was made. The only evidence of a written statement by the employer was the Employment Separation Certificate in October 2020 sent after dismissal. The one sentence text message of 20 October 2020 is so brief that it cannot reasonably be said to convey information that meets the requirements of clause 30.2.
In these circumstances, Auction Blue failed to meet a technical requirement of the consultation provision in clause 30 of the Award.
Whilst the redundancy was genuine in the sense of being for a valid operational reason, and whilst a minimum level of oral notification and discussion occurred, this finding precludes a conclusion that Auction Blue met all the elements of the definition of “genuine redundancy” in section 389 of the FW Act.
For that reason, and that reason alone, this jurisdictional challenge advanced by Auction Blue is not made out.
Conclusion
Mr Stokes was dismissed by Auction Blue from its employment on 20 October 2020.
The reason for dismissal was that Auction Blue had sold its business from 1 July 2020, the purchaser subsequently did not offer Mr Stokes employment and Auction Blue, having ceased trading, had no ongoing employment it could productively offer Mr Stokes in the position it employed him, or otherwise.
Whilst the dismissal was a redundancy for sound business reasons, it was not a genuine redundancy within the meaning of the FW Act because whilst Auction Blue consulted with Mr Stokes, it did not do so in writing as required by the applicable modern award.
The jurisdictional objection by Auction Blue that it did not dismiss Mr Stokes is thus rejected.
The jurisdictional objection by Auction Blue that the application is out of time is thus rejected.
The preliminary objection by Auction Blue that that the dismissal was not an unfair dismissal because it was a genuine redundancy within the meaning of the FW Act is also rejected.
It follows that the application is within jurisdiction and Mr Stokes is entitled to have his application proceed to a determination whether his dismissal was “harsh, unjust or unreasonable”, and if so (but only if so), matters of remedy.
Next Steps
This matter has not been conciliated, as would ordinarily be the case with unfair dismissal matters. Auction Blue exercised its right to have the jurisdictional and preliminary issues determined in advance of conciliation proceedings.
Now that these preliminary issues have been determined, it is not appropriate to list the matter for arbitration of merits and remedy unless and until the matter is fully conciliated.
I direct that Member Assisted Conciliation occur if the application is not otherwise resolved between the parties.
Conciliation will be conducted by another member of the Commission other than myself, so as to not compromise any further proceedings I may need to conduct. That notwithstanding, my findings may assist the parties is assessing their position in conciliation and their future prospects. For the purposes of conciliation, the parties are invited to note in that context:
my finding that there was a redundancy for a legitimate business reason;
that Auction Blue would have made out the definition of genuine redundancy but for a technical failure to comply with an element of the consultation obligation in the governing modern award;
despite being made redundant, Mr Stokes received no payment in lieu of notice nor redundancy payment. The employer is a small business and may thereby be excluded from a redundancy payment obligation under the FW Act and the modern award. Nonetheless, Mr Stokes had served six and a half years as an employee, some six months short of pro rata long service leave under the applicable South Australian legislation;
compensation, should the dismissal be unfair (but only if unfair), is governed by well-established principles and statutory limitations; and
issues of compensation do not arise if the dismissal is found to not be unfair.
The parties will be advised following the publication of this decision of arrangements for the conduct of a Member Assisted Conciliation.
DEPUTY PRESIDENT
Appearances:
G. Dircks, with permission, for the Applicant
D. Richardson, for Auction Blue Pty Ltd
Hearing details:
2021.
Adelaide; telephone.
7 January.
[1] Unpublished decision, 4 January 2021
[2] A2, A3, A4
[3] R3 and BS1
[4] BS2, R5
[5] R6
[6] R2
[7] R2 page 1 of 11 and 11 of11
[8] R4
[9] BS4
[10] BS5
[11] BS4
[12] Sections 22(5), (6), (7) and (8) FW Act
[13] R2 clause 2
[14] Jiang Shen Cai trading as French Accent v Rozario[2011] FWAFB 8307 at [30] (French Accent) applying Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, Roy Morgan Research Pty Ltd v Commissioner of Taxation [1997] 37 ATR 528 and Hollis v Vabu [2001] HCA 44
[15] Bupa Aged Care Australia Pty Ltd v Tavassoli [2017] FWCFB 3941
[16] Workplace Relations Act 1996 (Cwth)
[17] ABB Engineering Construction Pty Ltd v Doumit cited in O’Meara v Stanley Works Pty Ltd (2006) 58 AILR 100 at [23]
[18] Ibid
[19] Section 389 FW Act
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