David Welsby v Artis Group Pty Ltd

[2016] FWC 2251

[2016] FWC 2251

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

David Welsby
v
Artis Group Pty Ltd
(U2015/9976)

COMMISSIONER PLATT ADELAIDE, 8 APRIL 2016

Application for relief from unfair dismissal.

Application for relief from unfair dismissal - whether valid reason - alleged poor performance - whether applicant afforded procedural fairness - failure to warn of termination and allow reasonable opportunity to improve – post termination misconduct - application granted – compensation

1. Summary

[1] Mr Welsby has lodged an application pursuant to s.394 of the Fair Work Act 2009 (the Act) seeking a remedy for an alleged unfair dismissal by his former employer Artis Group Pty Ltd (Artis).

[2] Mr Welsby was employed as Regional Manager, South Australia on 1 June 2014. On 24 July 2015, Artis terminated Mr Welsby’s employment as a result of the poor business performance of the Artis South Australian Branch (SA Branch). Following the unauthorised removal of information confidential to Artis and personal employee information, Artis purported to summarily dismiss Mr Welsby on 27 July 2015.

[3] Mr Welsby obtained alternative employment on 31 August 2015.

[4] I have found that Mr Welsby failed to manage the SA Branch in a manner that returned a sustainable financial contribution to the Artis business. This was a valid reason to terminate Mr Welsby’s employment.

[5] Ordinarily the removal of personal and confidential information would constitute a valid reason to dismiss Mr Welsby however, this conduct occurred post termination and is not able to form part of the basis for the dismissal.

[6] The failure of Artis to warn Mr Welsby that his employment was in jeopardy as a result of the SA Branch’s continued poor financial performance denied him an opportunity to improve and/or respond to the allegations and thus rendered the dismissal harsh, unjust or unreasonable.

[7] Applying the principles in Sprigg v Paul’s Licensed Festival Supermarket 1 and taking in account the conduct of Mr Welsby, I have determined to award compensation in the amount of $$4602.

[8] My reasons for this decision are detailed below.

2. Overview

[9] Mr Welsby contended that his dismissal was unfair because:

● the SA Branch’s performance targets had not been agreed with him and did not reflect the level of resources in the SA Branch;
● his performance should have been judged on the retention bonus contained in his contract of employment;
● Artis did not warn him that his performance was such that his continued employment was at risk; and
● he was not given an opportunity to improve his performance.

[10] Mr Welsby obtained employment 5 weeks following his termination with Artis and sought compensation as a remedy.

[11] Artis contended that that Mr Welsby’s dismissal was not harsh, unjust or unreasonable as:

● Mr Welsby was aware of the poor financial performance of the SA Branch as a result of the provision of weekly, monthly and quarterly information packs;
● the need for improved financial performance was discussed with Mr Welsby in person, at meetings held in October 2014, March 2015 and one other occasion in the first half of 2015;
● in these three meetings, Mr Welsby was advised that the continued poor performance was untenable;
● the financial performance of the SA Branch did not improve and Mr Chan, a significant fee earner resigned in July 2015;
● Mr Welsby’s initial dismissal was a result of the poor financial performance of the SA Branch.

[12] Artis further contended that Mr Welsby’s removal of confidential documents belonging to Artis and personal employee information justified the subsequent summary termination of his employment.

3. Factual matrix

[13] Mr Welsby owned a business called Tapestry Systems (Tapestry) which was sold to Artis in May 2015.

[14] Mr Welsby commenced employment with Artis on 1 June 2014, on a full time basis as Regional Manager, South Australia. The terms and conditions of his employment were recorded in a written contract of employment. Mr Welsby was not covered by a modern award or enterprise agreement. Mr Welsby’s base salary was $120,000 per annum or $2301.50 per week.

[15] At the time Artis purchased the business, approximately seven other Tapestry employees were also employed by Artis.

[16] Mr Welsby was a member of the Artis Executive Committee and was the most senior member of the SA Branch. He was responsible for marketing, sales and ensuring product delivery to clients in South Australia. Mr Welsby had a good understanding of how the business ran and its performance metrics.

[17] The Executive Committee met weekly and reviewed the performance of each branch and individual contributions. The monthly result for the SA Branch indicated that the turnover was insufficient to cover its labour costs.

[18] Mr Greatrex detailed performance targets for the Branch, Mr Welsby contended that the sales targets were unilaterally set by Artis and were unrealistic and unachievable in South Australia. Mr Welsby argued that the sole performance target by which he should be judged was the retention bonus target in his contract of employment. I accept that Artis determined the sales targets however, Mr Welsby did little to contest them during his employment. I do not accept Mr Welsby’s contention that his performance was to be solely judged by the achievement of the retention bonus criteria. I accept that Mr Welsby’s retention bonus did not reflect the performance of the SA Branch, but was a device to secure Mr Welsby’s support of the sale of Tapestry to Artis. Artis was entitled to use the sales targets to review the performance of the SA Branch and Mr Welsby.

[19] The SA Branch needed to provide a contribution to the Artis business commensurate with its resources and the work available. On the basis of the reports provided and the resignations of key staff members, this contribution was not achieved.

[20] Artis contended that Mr Welsby and Mr Greatrex discussed the SA Branch performance on three occasions, in October 2014, March 2015 and on one further occasion prior to the termination.

[21] Mr Welsby agreed that a number of discussions took place between them, but did not accept that the performance of the Branch was discussed. Mr Greatrex’s evidence on this point was clear and definite and his concerns about the financial performance are supported by the content of the financial reports tendered. Mr Welsby’s recollection of any performance based discussion was poor, unless it related to the performance based retention bonus contained in his employment contract. Although it was evident that there is a high level of animosity between Mr Greatrex and Mr Welsby, this does not explain Mr Welsby’s inability to remember the content of any performance based discussion. In this regard, I accept the evidence of Mr Greatrex that there were three discussions where the poor performance of the branch was discussed.

[22] Whilst Mr Welsby was on notice that the SA Branch performance was unacceptable, he was never formally warned that his continued employment was at risk. It is evident that Mr Greatrex was hopeful that Mr Welsby would regain his focus and improve the financial performance of the SA branch however, this did not eventuate.

[23] At 2.45 pm on Friday 24 July 2015, Mr Greatrex telephoned Mr Welsby to discuss the recent resignation of Mr Chan, a key South Australian based employee and the continued decline in SA Branch revenue. Mr Greatrex invited Mr Welsby to resign. Mr Welsby asked if he was able to consider the resignation over the weekend. Mr Greatrex sought a response that could be announced in Management meeting which was to be held in 45 minutes. Mr Welsby said he needed more time.

[24] The parties did not talk further prior to Artis terminating Mr Welsby’s employment at 3.30 pm on 24 July 2015 by letter delivered by email. The letter advised that the notice would be paid in lieu. I find that the dismissal occurred at 3.30 pm on 24 July 2015.

[25] Whilst Mr Welsby asserts that the he did not receive payment for the notice period, this does not change the termination date.

Was Artis able to summarily dismiss Mr Welsby after having terminated his employment?

[26] After Mr Welsby received the letter of termination, he sought to keep information relevant to him including his employment contract, information about the sale of Tapestry to Artis, tax information, pay slips and information to support his claim of unfair dismissal.

[27] Mr Welsby forwarded a large number of Artis’ emails to his personal email account. Exhibit R7 provides details of the emails forwarded between 10:30 pm on 24 July 2015 and 7:55 am on 25 July 2015.

[28] Mr Greatrex gave evidence that the information sent went far beyond that described by Mr Welsby and included commercially sensitive client information, financial performance records and personal information of other Artis employees. Having reviewed Exhibit R7, I accept this position.

[29] It appears that Mr Welsby’s actions were in breach of his contract of employment (in so far as those provisions that survived the termination), the Privacy Act 1988 (Cth) and common law obligations concerning confidentiality.

[30] On 27 July 2015, Artis purported to summarily dismiss Mr Welsby as a result of this conduct. Had Mr Welsby been employed at the time Artis would have had grounds for the summary termination of his employment. The dismissal was however, ineffective on account of the prior termination of Mr Welsby. 2Unlike politics where a policy position can be dead, buried and cremated, an employer can only dismiss an employee once. Artis cannot therefore, rely on the post termination conduct to support its earlier decision to dismiss Mr Welsby. The conduct is however relevant to the remedy.

4. What the dismissal harsh unjust or unreasonable?

[31] Pursuant to s.387 of the FW Act, in considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

“(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant.”

[32] Access to a support person, the size of the employers business and access to human resources support are not relevant in this case. I have considered each of the remaining factors below.

Valid reason - s.387(a)

[33] Notwithstanding its formulation under a different legislative environment, I have adopted the definition of a valid reason set out by Northrop J in Selvachandran v Peteron Plastics Pty Ltd³which requires the reason for termination to be “sound, defensible or well founded.”

[34] I find that the Applicant failed to manage the SA Branch in a manner that returned a sustainable financial contribution to the Artis business. This was a valid reason to terminate Mr Welsby’s employment.

Notification of valid reason - s.387(b)

[35] An employee protected from unfair dismissal must be advised of a valid reason for termination prior to the decision being made ⁴

[36] I have found that Mr Welsby was advised on three occasions prior to the termination of his employment that the performance of the SA Branch was unsustainable. Whilst this was not discussed immediately before the final decision to terminate Mr Welsby was made, I find that Mr Welsby should have been aware that absent an improvement in the SA Branch’s business performance, the status quo could not continue.

Opportunity to respond - s.387(c)

[37] An employee protected from unfair dismissal must be given an opportunity to respond to the reasons for termination prior to a decision to terminate is made. 5 Mr Welsby was not given an opportunity to respond to the proposed termination.

Warnings relative to unsatisfactory performance - s.387(e)

[38] Artis did not advise the Applicant that his continued employment would be in jeopardy if the performance of the SA Branch did not improve. Whilst it could be inferred that a person working at a senior level like the position occupied by Mr Welsby (acknowledging that he was the proprietor of the business prior to its purchase by Artis) should have known his role would be in jeopardy, there was no formal communication warning that his continued employment was at risk.

Other matters considered relevant - s.387(h)

[39] The Applicant’s post termination conduct was inconsistent the obligations under his contract of employment, his obligations under the Privacy Act 1988 (Cth) and common law requirements as to the treatment of confidential information.

5. Conclusion

[40] The Explanatory Memorandum to the Fair Work Act 6 explains the approach of the Commission in considering the elements of section 387:

“FWA must consider all of the above factors in totality. It is intended that FWA will weigh up all the factors in coming to a decision about whether a dismissal was harsh, unjust or unreasonable and no factor alone will necessarily be determinative.”

[41] In Byrne and Frew v Australian Airlines Pty Ltd, ⁷ the following observations made by McHugh and Gummow JJ are relevant to my conclusion:

“It may be that the termination is harsh but not unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment may be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted.”

[42] Having considered each of the factors detailed in s.387 of the Act, I have concluded that the termination of Mr Welsby’s employment was harsh, unjust or unreasonable.

6. Remedy

[43] The relevant provisions of Division 4 of Part 3-2 of the Act state:

“Division 4—Remedies for unfair dismissal

390 When the FWC may order remedy for unfair dismissal

(1) Subject to subsection (3), the FWC may order a person’s reinstatement, or the payment of compensation to a person, if:

(a) the FWC is satisfied that the person was protected from unfair dismissal (see Division 2) at the time of being dismissed; and
(b) the person has been unfairly dismissed (see Division 3).

(2) the FWC may make the order only if the person has made an application under section 394.

(3) the FWC must not order the payment of compensation to the person unless:

(a) the FWC is satisfied that reinstatement of the person is inappropriate; and
(b) the FWC considers an order for payment of compensation is appropriate in all the circumstances of the case.

Note: Division 5 deals with procedural matters such as applications for remedies.

…

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), the FWC 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 the FWC considers relevant.

Misconduct reduces amount
(3) If the FWC is satisfied that misconduct of a person contributed to the employer’s decision to dismiss the person, the FWC must reduce the amount it would otherwise order under subsection (1) by an appropriate amount on account of the misconduct.

Shock, distress etc. Disregarded
(4) The amount ordered by the FWC to be paid to a person under subsection (1) must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person’s dismissal.

Compensation cap
(5) The amount ordered by the FWC to be paid to a person under subsection (1) must not exceed the lesser of:

(a) the amount worked out under subsection (6); and
(b) half the amount of the high income threshold immediately before the dismissal.

(6) The amount is the total of the following amounts:

(a) the total amount of remuneration:
(i) received by the person; or
(ii) to which the person was entitled;
(whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal; and

(b) if the employee was on leave without pay or without full pay while so employed during any part of that period—the amount of remuneration taken to have been received by the employee for the period of leave in accordance with the regulations.

[44] The prerequisites contained in ss.390(1) and (2) have been met in this case.

[45] Mr Welsby did not seek reinstatement and I am satisfied that it is not appropriate in this case.

[46] Section 390 of the Act makes it clear that compensation is only to be awarded as a remedy where the Commission is satisfied that reinstatement is inappropriate and that compensation is appropriate in all the circumstances.

[47] I now turn to whether compensation in lieu of reinstatement is appropriate.

[48] A recent Full Bench in McCulloch v Calvary Health Care Adelaide⁸ confirmed, in general terms, the approach to the assessment of compensation as undertaken in cases such as Sprigg v Paul’s Licensed Festival Supermarket⁹ remains appropriate.

[49] Section 392(2) of the Act requires the Commission to take into account all of the circumstances of the case including the factors that are listed in paragraphs (a) to (g). Without detracting from the overall assessment required by the Act,¹⁰ it is convenient to discuss the identified considerations under the various matters raised by each of the provisions.

The effect of the order on the viability of Artis - s.392(a)

[50] Nothing has been put to the Commission on this issue.

The length of Mr Welsby’s service with Artis - s.392(b)

[51] Mr Welsby was employed by Artis for a little over a year. The period of service is relevant to my assessment of the remuneration that Mr Welsby would likely have received if not for the dismissal.

The remuneration Mr Welsby would have received, or would have been likely to receive if he had not been dismissed - s.392(c)

[52] This involves, in part, a consideration of the likely duration of Mr Welsby’s employment in the absence of what I have found to be an unfair dismissal.

[53] In the circumstances it is reasonable to assess compensation in this matter on the basis that Mr Welsby would, on the balance of probabilities, have remained in employment for a further period of 8 weeks (including notice). This arises from the length and nature of Mr Welsby’s employment, his work performance, the content and timing of the earlier performance discussions, and the circumstances of Artis. That estimate is subject to the later consideration of contingencies.

The efforts of Mr Welsby to mitigate the loss suffered by him because of the dismissal - s.392(d)

[54] Mr Welsby secured alternative employment 5 weeks after the dismissal. No discount to the award is warranted on this basis.

Remuneration earned by Mr Welsby during the period between the dismissal and the making of the order for compensation and the amount of any income likely to be earned by Mr Welsby during the period between the making of the order for compensation and the actual compensation - ss.392(e) and (f)

[55] Mr Welsby has continued in his alternative employment. I have taken into account the cessation of any financial loss after the 5 week break in employment. I have also taken into account the failure of Artis to pay the notice period.

Any other matter that the FWC considers relevant and the remaining statutory parameters - s.392(g)

[56] I have taken into account the post termination conduct of Mr Welsby. In this case, a discount of 60% per cent is appropriate. 11

[57] In accordance with s.392(4) of the Act, I make no allowance for any shock, distress or humiliation that may have been caused by the dismissal.

[58] The maximum compensation limit in this case would be the lesser of 26 weeks remuneration or $68,350. 12 The amount of compensation awarded is less than that limit.

[59] Taxation is to be paid on the amount determined.

[60] The compensation confirmed below is also appropriate having regard to all of the circumstances of this matter and the considerations specified by the Act.¹³

[61] I award compensation in the amount of $4602.

[62] An Order 14 reflecting this decision will be issued.

COMMISSIONER

Appearances:

D Welsby, the Applicant on his own behalf.

C Greatrex, on behalf of Artis Group Pty Ltd.

Hearing details:

2016.

Adelaide:

February 29.

 1 (1998) 88 IR 21.

 2   Metricon Homes Pty Ltd v Bradley [2009] AIRCFB 374.

3 Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373.

4 Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137.

 5   RMIT v Asher (2010) 194 IR 1 [26]-[30]; Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137 at [75].

 6   Explanatory Memorandum to the Fair Work Bill 2008.

7Byrne and Frew v Australian Airlines Pty Ltd [1995] HCA 24.

8 [2015] FWCFB 873.

9 (1998) 88 IR 21. See also Bowden v Ottrey Homes Cobram and District Retirement Villages Inc T/A Ottrey Lodge[2013] FWCFB 431.

10 Smith and Others v Moore Paragon Australia Ltd (2004) 130 IR 446.

 11   Applying the approach taken in McCulloch v Calvary Health Care Adelaide[2015] FWCFB 873 at [21].

 12   Section 392(5) of the Act.

13 Smith and Others v Moore Paragon Australia Ltd (2004) 130 IR 446 at par [32].

 14   PR578914.

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