Daniel Mahony v Pipe Hunter Pty Ltd T/A Pipe Hunter
[2013] FWC 2621
•1 MAY 2013
[2013] FWC 2621 |
FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Daniel Mahony
v
Pipe Hunter Pty Ltd T/A Pipe Hunter
(U2012/13437)
Anthony Russell
v
Pipe Hunter Pty Ltd T/A Pipe Hunter
(U2012/13438)
COMMISSIONER BLAIR | MELBOURNE, 1 MAY 2013 |
s.394 - application for unfair dismissal remedy
[1] The above matters are applications under s.394 of the Fair Work Act 2009 (the Act) for unfair dismissal remedy. One application was made by Mr Daniel Mahony (Mr Mahony) and the other application was made by Mr Anthony Russell (Mr Russell) (together, the Applicants). Both applications were made against their former employer, Pipe Hunter Pty Ltd t/as Pipe Hunter (the Respondent).
[2] The matters were conciliated but conciliation was unsuccessful. The matters were then arbitrated simultaneously on 6 and7 March 2013.
[3] From the commencement of the arbitration proceedings it was accepted that the Respondent was not a small business and therefore not covered by the Small Business Fair Dismissal Code.
[4] Mr Mahony commenced employment on 15 March 2010 and was terminated on 12 September 2012. Mr Russell commenced employment on 15 July 2009 and was also terminated on 12 September 2012.
[5] Both Applicants were terminated for alleged serious misconduct, which related to the registration of a company on 9 September 2012 and their alleged intention to operate the business in direct competition with the Respondent in breach of the Applicant’s employment obligations.
[6] It is asserted that the Respondent dismissed both Applicants on speculative grounds and based on private discussions between the Respondent and third parties.
[7] It is asserted that the Respondent, not having ascertained directly from the Applicants prior to the dismissal what their intentions were by registering a company and not having included the Applicants in any of its discussions with third parties prior to the dismissal, the Respondent could not have believed, on reasonable grounds, that the Applicants’ subjective intention was to operate the business in direct competition with the Respondent in breach of the Applicants’ employment obligations.
[8] Accordingly, the Applicants contend that the conduct does not fall within the type of conduct justifying summary dismissal.
[9] The Applicants acknowledge that a company known as Victorian Pipeline and Plumbing Services Pty Ltd was registered on 9 September 2012. Both Applicants acknowledge that it was their intention, at some point in the future, to operate that business.
[10] The Applicants assert that the business name was registered as part of a project conducted by Mr Russell which was part of this schooling to develop a business plan. Mr Russell took the view that because of the time and effort invested in putting together a business plan it would also be appropriate to register a business name, given that at some point in the future it would be his and Mr Mahony’s intention to operate a business together.
[11] The Commission accepts that explanation from Mr Russell, that in developing a business plan, as part of his schooling, and given it was his and Mr Mahony’s intention at some point in the future to operate a business together, it would be appropriate to register a company name.
[12] Both Applicants deny that they approached any of the Respondent’s suppliers with a view to obtaining similar products for the purpose of operating their new business. Both Applicants also deny that they approached a current employee of the Respondent with a view to poaching their services and to employ them in the business of the new company.
[13] The Respondent acknowledges that on 12 September 2012 each applicant was terminated from their employment. The Respondent acknowledges that neither dismissal was a case of genuine redundancy.
[14] The Respondent asserts that the dismissal of each applicant occurred at separate meetings on 12 September 2012. They assert that each applicant’s employment was terminated summarily for misconduct in circumstances where the Respondent believed, on reasonable grounds, that each applicant’s conduct was sufficiently serious to justify immediate dismissal.
[15] The Respondent asserts that the Applicants had, by their own admission, sought to go into business in competition with the Respondent; however neither of them had notified the Respondent of their intention to do so. The Respondent states that they became aware of the Applicants’ intentions through Mr Hunter, the former owner of the Respondent’s business and principal supplier of material to the Respondent. Those materials are specialised materials for the pipeline industry.
[16] The Respondent asserts a conversation occurred on 7 September 2012 between Mr Hunter, Mr Mahony and Mr Russell to the effect that:
(a) it was the Applicants’ intention to start their own business in direct competition with the Respondent’s business of pipe cleaning and related services;
(b) as part of operating their new business, the Applicants wished to source material from Mr Hunter and were willing to engage in fraudulent conduct in order to obtain such material, notwithstanding Mr Hunter’s exclusive supply arrangement with the Respondent in the geographical area within 200 kilometres of the Melbourne CBD; and
(c) comments alleged by the Applicants, “Pipe Hunter will not exist once we are finished”.
[17] It is further asserted by the Respondent that Mr Russell, through the Respondent’s former accountant, Carli - partner of Mr Russell, and potentially through Mr Russell’s previous discussions with Mr Hunter in relation to purchasing the Respondent’s business, and his obtaining of confidential documentation concerning the Respondent’s business in connection with those discussions, had the capacity to compete effectively with the Respondent as the possessor of such detailed knowledge about the Respondent’s operations.
[18] The Respondent further asserts that they became aware from Mr George Fisher, the Respondent’s employee, that on 11 September 2012 he was approached by the Applicants in a bid to obtain his services for their new business.
[19] The Respondent asserts that this conduct amounted to serious misconduct in direct conflict with each applicant’s obligations to his employer, the Respondent. They state that the conduct engaged in gave rise to a real incompatibility or repugnance between the duties of each employee to his employer and his own interests.
Each of the Applicants provided witness statement and Mr Russell also included a document signed by Mr Darren Hudson, a teacher at Box Hill Institute, which attests to Mr Russell’s claim that as part of his schooling he was encouraged to develop a business plan. That letter is as below:
[20] The Respondent provided witness statements from:
(a) Mr Tony Toce, Office Manager and Financial Controller of the Respondent;
(b) Mr Nathanial Dunn, Managing Director of the Respondent; and
(c) Mr George Fisher, Victorian Operations Manager of the Respondent
[21] Each witness attested to their statement in the witness box.
[22] As part of the process in dealing with the applications a CD was provided, which was a secretly recorded interview with both applicants by the Respondent on the 12 September 2012.
[23] The Commission has listened very carefully to that recording which included the conversation between Mr Dunn, who was the main speaker on behalf of the Respondent, and Mr Russell and also the conversation between Mr Dunn and Mr Mahony. Mr Tony Toce was in attendance at each recorded meeting.
[24] In listening to that recording the Commission came to the view that the Applicants were each honest in their responses to the assertions put to them by Mr Dunn. Both Applicants did not deny that they had established a company name. Mr Russell denies that he ever approached Mr Fisher about working for their new company. Mr Mahony states that any approach to Mr Fisher was long before any company was ever established and was some considerable time ago. The Commission accepts their version of events.
[25] In relation to the conversation with Mr Hunter, which is the conversation which ultimately led to their termination, Mr Hunter agrees that he had a discussion with Mr Mahony and Mr Russell but there are obviously some discrepancies in each party’s version of that discussion. Those discrepancies go to the name of the supplier to Mr Hunter, whether there was a comment by Mr Russell about getting company A in country B to supply materials or whether Mr Russell would use a friend in the bush to purchase the materials from Mr Hunter, given that that location was outside the 200 kilometre geographical location restriction zone that Mr Hunter had in his contract with the Respondent.
[26] In relation to the alleged comment “Pipe Hunter will not exist once we are finished”, the Commission simply puts that down to being somewhat of a blowhard comment made by Mr Russell.
[27] The Commission, in referring back to the recordings, and given that Mr Russell and Mr Mahony were put on the spot by the Respondent, and given the questions that were put to them, believes that Mr Russell and Mr Mahony gave honest answers as they didn’t have any time to contrive any answer that may have put them in a better light in the Respondent’s eyes.
[28] The Respondent appeared to be more concerned with not being told about the establishment of the business and when put to Mr Mahony why the Respondent wasn’t told of them establishing a business, he responded by saying that they would be “marched out the door” if the Respondent was told and there was a chance of being “sacked on the spot.” Both comments came to fruition on 12 September 2012.
[29] The termination letter to both Mr Mahony and Mr Russell is below:
[30] The Commission accepts, based on the balance of probabilities and after listening to the Recorded discussions held on the 12 September 2012, that the letters of termination had already been signed by the Respondent before either of the two discussions commenced. Therefore, any conversation regarding the Applicant’s actions was pointless.
Conclusion
[31] Was there a valid reason for the termination of Mr Russell and Mr Mahony?
[32] In the Commission’s view there was no valid reason for the termination of their employment. The only thing that Mr Russell and Mr Mahony did was register a company on 9 September 2012. Both employees were terminated on 12 September 2012 based upon some assumption by the Respondent, the registration of a company name three days earlier warranted summary termination.
[33] The Commission has already made comment in relation to the assertion that the Applicants tried to poach Mr Fisher during the conversations with Mr Russell and Mr Mahony.
[34] Again, in referring back to the recording, the Commission is inclined to believe that the version of events as outlined by the Applicants more accurately reflects the tenor of the conversation with Mr Hunter.
[35] The Commission has not been provided with any proof that would indicate that Mr Mahony or Mr Russell had deliberately set out to undermine the business of the Respondent, nor has there been any proof provided that Mr Mahony and Mr Russell had tried to entice existing clients of the Respondent to leave the Respondent and provide work to the new established business.
[36] Mr Russell, in the recorded conversation with the Respondent, made the comment that “this whole thing has been blown out of proportion”. The Commission would concur with that comment.
[37] Regarding the conversation with Mr Hunter, the Commission does accept that the question of supplying materials was raised but not to the extent that Mr Hunter asserts. It would make sense that such a question would be raised given that there are a small number of suppliers of such materials, and at some point in the future the applicants intended to work for their own business.
[38] Having found that there was no valid reason for the termination of each of the Applicants, the Commission now turns its mind to remedy. Reinstatement is not being sought by either applicant but an amount of compensation in the order of 16 weeks is being sought by each of the Applicants.
[39] In determining compensation, section 392 of the Act states:
392 Remedy—compensation
Compensation
(1) An order for the payment of compensation to a person must be an order that the person’s employer at the time of the dismissal pay compensation to the person in lieu of reinstatement.
Criteria for deciding amounts
(2) In determining an amount for the purposes of an order under subsection (1), FWA must take into account all the circumstances of the case including:
(a) the effect of the order on the viability of the employer’s enterprise; and
(b) the length of the person’s service with the employer; and
(c) the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and
(d) the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and
(e) the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and
(f) the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and
(g) any other matter that FWA considers relevant.
The effect of the order on the viability of the employer’s enterprise
[40] The Commission notes that no submissions have been made regarding any effect that any order of the Commission regarding compensation would have on the viability of the Respondent.
The length of the person’s service with the employer
[41] Mr Mahony has approximately 2.5 years service and Mr Russell has just over 3 years service with the employer.
The remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed
[42] Other than wanting at some point to go out on their own and establish a business, the Commission is satisfied both applicants would have continued in their employment for some time and therefore would have received a reasonable amount of income.
The efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal
[43] Commission is satisfied that, having been terminated on 12 September 2012, both applicants have put in a concerted effort to get their business operating on a profitable basis in order to draw an income.
The amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation
[44] Mr Russell and Mr Mahony have indicated that they only commenced drawing a salary from the new business from the last week in January 2013. Mr Mahony did derive money from CoINVEST however they were long service accruals over a 9 year period and were used to pay his mortgage and avoid foreclosure.
The amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation
[45] The Commission would determine that any amount which is earned between the making of the Order and the actual compensation would be minimal.
Any other matter that FWA considers relevant.
[46] The Commission, in determining the amount of compensation and taking into account section 392(2)(g) of the Act, believes that the Respondent failed to provide due process and natural justice. This is in line with the Commission already determining that the termination letter was signed prior to discussions occurring with both applicants on 12 September 2012.
[47] Taking into account the requirements of s.392(2) of the Act and having determined that there was no valid reason for the termination of each of the Applicants (the Commission does not believe it is appropriate to take into consideration s.392(3) of the Act), the Commission would order that each Applicant be paid an amount of 16 weeks at the rate of pay that they received as at the date of termination, 12 September 2012.
COMMISSIONER
Appearances:
J McKenna of Counsel on behalf of the Applicants.
J Tracey of Counsel on behalf the Respondent.
Hearing details:
2013
Melbourne
March 6, March 7.
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