Derek William Wilkins v Andrew Stranaghan
[2023] FWC 1935
•4 AUGUST 2023
| [2023] FWC 1935 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Derek William Wilkins
v
Andrew Stranaghan
(U2023/1230)
| COMMISSIONER PERICA | MELBOURNE, 4 AUGUST 2023 |
Application for an unfair dismissal remedy
On 15 February 2023, Mr. Derek William Wilkins (the Applicant) made an application to the Fair Work Commission under s 394 of the Fair Work Act 2009 (Cth) (the Act) for a remedy, alleging he had been unfairly dismissed from his employment with Mr. Andrew Stranaghan (the Respondent). The Applicant seeks compensation.
A jurisdictional hearing was heard by way of a determinative conference on 27 June and 7 July 2023 using Microsoft Teams. The Applicant represented himself, and the Respondent was represented by a solicitor, Mr. Allon Reeves.
The questions before me at the jurisdictional hearing were:
· Whether the Respondent was a small business employer under s 23 of the Act; and
· If the Respondent was a small business employer, whether the dismissal was consistent with the Small Business Fair Dismissal Code (the Code) under s 396(c).
I find, for the following reasons, the Respondent is a small business employer, and the dismissal of the Applicant was consistent with the Code. It follows the dismissal cannot be unfair and I dismiss the application.
OTHER INITIAL MATTERS UNDER s 396
None of the other initial matters under s 396 were contested. The application was lodged within the 21-day period prescribed by s 396(a). The Applicant was a person covered by the Hospitality Industry (General) Modern Award 2020 (MA0000009) (the Hospitality Award) and was therefore “protected from unfair dismissal” under s 396(b). Thirdly, this was not a case of a genuine redundancy under s 396(d).
BACKGROUND
The Respondent is the owner of three businesses in Australia: the Port Adelaide Backpackers (PAB) and the Whyalla Country Motor Inn Motel in South Australia; and the Turn In Motel in Warnambool in Victoria.
He is also a director and shareholder in a company registered in the Philippines named Stranaghan and Sons Incorporated (SASI) which employs staff in the Philippines that provide virtual administrative services for each of the three Australian businesses.
The Applicant began his employment with PAB on 27 April 2016. He was employed under what was described as his “contract of employment,” a two-page typewritten document. He was employed as a “casual Handyman/Manager”. The Applicant was paid the higher rate for a casual Manager under the Hospitality Award when he worked as a manager and the lower rate as a casual handyman when he worked as a handyman. The “contract” does not mention breaks. However, under clause 16.2 of the Award, there is an entitlement to unpaid meal and rest breaks dependent on the hours worked. During the period of his employment, the Applicant lived on site at PAB. $200.00 per week was deducted from his pay for room rental.
The Applicant was required to record his working hours through a computer terminal on what was known as the “Log In Log Out” (LILO) tracker. The Applicant was required to log in to record the hours worked and log out when he ceased working. If employees or contractors were having trouble logging on and off through the LILO system, they would call the virtual receptionist in the Philippines through Skype.
Around the end of January and early February 2023, the Applicant made an underpayment claim by phone and text message to the Respondent and his wife, Ms. Russel Stranaghan. As a result of this claim, the Respondent and Ms. Stranaghan inspected the LILO records of the Applicant and contacted their bookkeeper. The records showed the Applicant had logged in for blocks of hours and did not show any logging off for breaks.
A meeting took place at PAB on 6 February 2023 between the Applicant, his support person Mr. Shaun Brown, the Respondent, and Ms. Stranaghan. The Applicant was summarily dismissed at that meeting with no reason given. All the participants at the meeting knew the meeting was being recorded by Ms. Stranaghan.
The reason subsequently given in a separation certificate for the summary dismissal was an allegation that the Applicant had perpetrated a fraud and had been intoxicated at work.
CASE FOR THE RESPONDENT
Number of employees employed by the Respondent in Australia
A table was tendered into evidence by Mr. Reeves, the solicitor for the Respondent, that set out the number of employees employed by the Respondent in Australia.[1] That table demonstrates that, on a head count, the Respondent employed eight employees in Australia at the time of the Applicant’s dismissal.
It was the evidence of the Respondent that three of those employees, Ms. Rebecca Dempsey, Ms. Kylie Douglas and Ms. Dawn Aupe did not work to a roster and “were only called in when they were needed”.[2] Ms. Douglas and Ms. Aupe had only worked for the Respondent for a short period.
Number of employees employed by SASI in the Philippines.
SASI provide virtual receptionist services to PAB and the two other premises operated by the Respondent.
The articles of incorporation of SASI were tendered into evidence. SASI was incorporated on 26 July 2022.[3] The Directors of that company are the Respondent, his wife Ms. Russel Stranaghan, Ms. Lovelie Guido his sister-in-law, Mr. Joselito Guido, his brother-in-law and Ms. Cecilia Godinez, his mother-in-law.
The Respondent has 300,000 shares in SASI. Ms. Stranaghan has 427,500 shares, and each of the other directors have 7,500 shares. Between the Respondent and his wife, they have a shareholding of 727,500 of the 750,000 issued shares, or 97% of the issued shares.
According to the articles of association, this stock holding has been paid for by an investment of ₱200,000.00 (Philippine pesos) by the Respondent and ₱285,000.00 by Ms. Stranaghan. The other shareholders each have paid ₱5,000.00 for their investment.
The Respondent through his solicitor gave submissions of fact that “ninety percent of the work they do are in hotels run by the Respondent”.[4] Mr. Reeves also stated that the Respondent does not go to board meetings, rather that “his wife goes overseas four times a year to the Philippines…” and that “she runs the board”.[5]
According to a table tendered by the Respondent,[6] at the time the Applicant was dismissed, there were two full time employees employed at the “Philippines Office”: two
“full time regular” employees and three “trainees”. SASI also engaged a contractor, Mr. Kevin Noguera.
Mr. Reeves gave submissions of fact about the employment of these persons:
“They have a roster. That roster is on a continuous basis. Their roster is confirmed on a weekly basis when they are rostered on and because they live in the Philippines, they may have other casual work; so each week or each roster they contact the person, ask them if they can complete their roster, they say yes.”[7]
LILO Records and pay slips
The Respondent through his solicitor tendered the LILO records, which were prepared by employees of SASI based on the log in and log out data recorded by the Applicant. They are for the period 18 July 2022 to 1 January 2023 and in the form of separate tables for the Handyman Hours and Managerial Hours which the Applicant worked.[8]
An example for the Handyman Hours for the period from 15 August to 21 August 2022 shows he worked the following hours:
| Date | Start time | Finish time | Total hours |
| 15 August | 9.00AM | 3.00PM | 6.00 |
| 16 August | 9.30AM | 3.30PM | 6.30 |
| 17 August | 9.00AM | 4.30PM | 7.30 |
| 18 August | 0 | ||
| 19 August | 8.30AM | 3.30PM | 7.00 |
| 20 August | 0 | ||
| 21 August | 0 |
Many of the hours recorded on the tables includes blocks of hours that would have entitled the Applicant for an unpaid meal break or rest breaks, but no such break is recorded.
The Respondent also tendered pay slips which confirm the Applicant was paid based on the hours confirmed in the LILO tracker tables over the period 18 July 2022 to 1 January 2023.[9] The Applicant did not dispute that the hours recorded on the LILO tracker documents matched the hours paid on the pay slips.
Evidence of the Respondent
The Respondent gave oral evidence which included the following topics:
Method of recording work at PAB
The Applicant was required to record his work in the LILO tracker. He was required to log in every morning and log out every night and he would be paid for the hours he worked. He was required to check in with the virtual receptionist. He would be paid on the hours he worked but not lunch breaks. The employees were required to log out for unpaid breaks and log back in when the break was complete. He described the self-reporting system as an “honorary system”.[10]
Late January and early February telephone call and text exchanges
In late January, the Respondent called the Applicant for “just standard every day work; what was to be done on that day”. The Applicant and Respondent had an exchange concerning the standard of work of a contractor who was working at PAB. Following this, the Applicant “got nasty” and said “he had a claim”, there was “big money involved”, and the Respondent “had been underpaying [the Applicant]; that he was getting paid for one hour at night when we should have been paid for two”.[11]
The Respondent said: “I am going to do a thorough and professional investigation. We’ll have a very good look into it” and hung up because the Applicant was “becoming abusive”.[12] The Respondent gave evidence that because the Applicant was becoming “nasty” from that point forward, the only communication between the Applicant, the Respondent and Ms. Stranaghan was by text messages which were tendered in the proceeding.[13]
There is a text from the Applicant to the Respondent at 10.55AM on Friday 3
February 2023:
It’s the truth. Get ready because I am going to go through with it.
Will be getting an answer before the end of the day. Also, no worries about any of the cash I wouldn’t take anything not in my nature.[14]
There was then a text message exchange between the Applicant and Ms. Stranaghan. The first text in the exchange is from Ms. Stranaghan (the time of the text is obscured on the tendered document):
Ms. Stranaghan
“From now on no more hours until we get this issue resolved, leave everything. We got the bookkeeper chasing it up now, he will get in contact with fair work. And we should have a fair and clear answer from him by the end of today. Tomorrow at the latest. I will get my in laws to arrange to look after the kids, me and ted (the Respondent) will be there soon.
If you have any paperwork or contracts that will help clear the issue up, please send then through. So we can get this resolved in a professional manner. Thanks
The Applicant
No worries, Russel I am happy with thatThe Applicant at 7.40A.M on Friday 3 February
Will I be getting an answer before the end of the day. Also, no worries about any of the cash. I wouldn’t take anything its not in my nature.
Ms. Stranaghan
No worries we are making it a priority today, please don’t call any communication just text
The Applicant
I can put all the money in the bank today if you like
Ms. Stranaghan
Just leave it don’t do anything, no work until we get there
The Applicant
And keep working as someone needs to be on site. Fine when will that be
Ms. Stranaghan
No work. We already planned to get there this weekend
The Applicant
Fine see when you get here would still need an answer by the end of the day as promised.
Ms. Stranaghan
We already have the message from the bookkeeper and at first look you are right; it is two hours minimum. But this is serious enough and a large sum of money and as you mentioned you have already consulted a lawyer. Ted has called Anderson solicitors in Port Adelaide to get a second opinion. We are planning to be there on Sunday, so do no work we will discuss everything in the main dining areas on Monday morning around 9.30 AM. Thanks.
The Applicant
No worries I wouldn’t do anything wrong.[15]
Investigation
The Respondent gave the evidence about the investigation made after the issue of the underpayment had been raised:
“We’d promised an investigation because he (the Applicant) was complaining about hours, the two-hour, one hour thing. He said there was a big claim, a lot of money involved. So, Russel and I looked through the LILO … With the LILO I seen (sic) it was inaccurate. There were hours there being charged I knew he hadn’t worked because I was there the week before with him and I’d seen his – there were days when he was charging eight, nine hours straight without a single break, okay? And it couldn’t have been possible because I sat there and watched him have cigarettes. And with this – the question was with this, Russel knew at the time that there had been fraud counted and that’s what she was saying...”[16]
He went on:
“With the LILO, it was obvious, which was quick and easy to do. We went back six months and there wasn’t a single cigarette break.”[17]
The discovery of the anomaly in the LILO records led Ms. Stranaghan to organise the meeting for the morning of Monday 6 February 2023 referred in her last text in the exchange with the Applicant referred to in paragraph [31] of this decision.
6 February 2023 meeting
At 9.30A.M on 6 February 2023 a meeting was held in the dining room of the PAB. The participants in the meeting were the Applicant, his support person Mr. Shaun Brown, the Respondent and Ms. Stranaghan.
The Respondent gave evidence of what transpired at that meeting and tendered a recording of that meeting which was played twice in the hearing.[18] It was uncontested that all participants in that meeting knew it was being recorded.
It appears to have been conceded the recording was incomplete because in cross examination, the Respondent appeared to concede that he said the words “I am done, I have had enough” before the recording commences. The recording includes the following exchange:
The Respondent: I think there's absolutely no doubt why we're here.
The Applicant: Yep.
The Respondent: After that conversation the other day, I'm done, okay? I'd like to give you the opportunity to resign.
The Applicant: We need to resolve the issue first.
The Respondent: Okay. Well go ahead. Let's try and resolve it.
The Applicant: How are you going to resolve it? [inaudible]
The Respondent: Well, give me a proposition. What do you want to do?
The Applicant: We'll, let's sort it out.
The Respondent: How?
Mr. Brown: Sorry to interrupt and I don't want to really but as I read it, I was shown a text from Russel, which stated that "If you're right, with regard to the claim, [inaudible] there is a large sum of money and I think we need to sit there and talk about it." So, it does appear so that the relationship has become strained.
The Respondent and Ms. Stranaghan: Yep.
Mr. Brown: And that you would like Derek to leave or…
The Respondent: Yep.
Mr. Brown: Or it would appear that you are going to terminate his employment.
The Respondent: Yep.
Mr. Brown: So, I think the point of this meeting is that they acknowledged and therefore the claim needs to be sorted.
The Respondent: Okay, so there we go. I've given the opportunity to resign, you said "no", so I'm telling you I'm firing you.
The Applicant: Yep.
The Respondent: Just so you know, I'm within my rights, less than 15 employees, I can do it, okay?
The Applicant: Yep.[19]
The Respondent conceded that at no time during this meeting did he put to the Applicant that he was being dismissed for committing fraud. The reason he gave for not putting the allegation to the Applicant was that Mr. Brown had interrupted. His evidence on this point was:
“I am certain the support person (Mr. Brown) intervened. I was in the middle of asking Derek how we are going to resolve the issue. I was clutching at straws, I- we all knew he committed fraud but I was hoping, by some miracle, I didn’t have to fire him. The support person intervened while we were still trying to fix it, and then step by step, he walked me through it to make sure Derek was fired, I thought it was unfair. I still wanted the opportunity – if he hadn’t interrupted, I still wanted the opportunity to – I still wanted the opportunity to – I still wanted the opportunity to get a clarification from Derek, his side of the story. I still wanted the opportunity to – I still wanted the opportunity to get a clarification from Derek, his side of the story. I still wanted to explain my side, but being interrupted, he just completely threw me off my game. I didn’t know what I was doing. I had no HR and I just – that’s what happened.”[20]
In cross examination by the Applicant, the Respondent said the following.
“I didn’t inform you (the Applicant), but the fraud was obvious. There was not a single lunch break. We did go through the LILO. We did not – I did not inform you, but you were informed of a complete investigation, fraud was obvious and easy to catch.”[21]
The Applicant asked the Respondent what his comment “I’m done; I’ve had enough at the start of the meeting” meant:
“Again it was about the fraud. I completely – I felt betrayed. We had a trust. I let you – [you] logged and hours in and logged the hours out. I’m done because I’d been cheated out of so much money. There was no way after that I could trust you. You were in charge of dealing with cash, of the laundry and with the guest thing. And I’m done, there’s no way I could work with you any more.”[22]
Post termination conduct
It was the Respondent’s evidence that after the termination meeting, he was “hoping [the Applicant] would do the right thing and leave quietly, but after two weeks [the Respondent] realised it was not going to happen, so [he] gave him an eviction notice which gave [the Applicant] another 30 days, so he had six weeks entitled after that”.[23]
In cross examination, the Respondent gave evidence that, because of an issue with his lawyer who declared a conflict of interest and could no longer act, no separation certificate was issued for the Applicant for three months.[24] The separation certificate indicated the Applicant was dismissed for fraud and for being intoxicated at work which the Respondent conceded had never been put to the Applicant.
Evidence of Nathan James Howard
Nathan Howard was a contractor with an ABN who was providing services at PAB in January 2023. The work was invoiced based on the hours that had been logged “through a login system that’s cross checked through reception” and would “log in and out on commencement and leaving the premises”.[25]
LILO Tracker
In his witness statement tendered in the proceeding, Mr. Howard[26] stated:
I had to log in the morning and log out when finished each block of work. Initially I was having trouble and sometimes would forget to log out, particularly if I had to leave to go to Bunnings, but I always calculated the actual hours worked before I invoiced.
At one point Derek said to me “not to worry about lunch breaks”, “just work straight through”. I took that to mean that I should not record the time that I had taken a break even when I had.
In his oral evidence, he gave this explanation for the circumstances this statement was made:
“It was over a conversation with times and what not and I believe that Andrew must have contacted Derek to reaffirm that I do the logging in and logging out, because I wasn’t probably being very diligent with the system. Being a contractor my thoughts were just to get in, do the job and, yes, that system was for employees. So Derek reaffirmed that to me, that I needed to log in and log out, even when I was off site to get materials or whatever and he said, ‘But don’t worry about logging in for your lunch or logging out for your lunch, you’re entitled to a paid break’ and, yes, so that’s the avenue I took.”[27]
He also gave oral evidence that when he left the premises, he knew he was supposed to log out. Mr. Howard stated that he “was not very diligent with that in the early stages, but it was also a form of them knowing if you were on site or not, obviously for safety reasons and for contracting reasons”.[28]
THE CASE FOR THE APPLICANT
Evidence of the Applicant
The Applicant gave oral evidence which included the following topics:
Number of employees
In response to a question on whether or not the Respondent operates a small business:
“Well, I believe Kevin is an employee. I've been dealing with Kevin on the phone for many years now. He comes under a different title as a contractor. Well, that's to be found. There's also been people cleaning in the virtual receptionist in the background. Well, I can't prove because I'm not in the Philippines. There's been talk through - I've heard through Mr. Stranaghan and Kevin, which is the one I'm talking about, that Mr. Stranaghan had a carpet cleaning business within the Philippines. I've got no evidence of that obviously. And I was under the impression always that there was an employee, two employees at the Turn-In Motel. That was through Andrew, Russel. I don't have any evidence on that.”[29]
6 February 2023 meeting
The Applicant gave evidence that the recording of the termination meeting was accurate but incomplete:
“Myself and my support person Shaun Brown we actually heard, we can still remember so clearly 'I've had enough', and I can't seem to find it on the recording. It was thought - well, we sort of had a little bit of a joke about it. Afterwards, or three or four weeks afterwards we both clearly remembered it and we can't - we can't seem to hear it within the recording. It was said at the start of the meeting. Mr. Stranaghan threw his hands in the air 'I've had enough', and that was - -”[30]
Breaks and the recording of breaks
The Applicant gave a series of reasons why he did not “steal hours” and did not record breaks.
The Applicant never had a lunch break and worked “above and beyond”
“I've never stolen hours. I've never - I've gone above and beyond throughout my employment through Port Adelaide Backpackers. I never - never had lunch breaks. So that was - it was just the nature of the job. If I did have - I'm entitled to a 15-minute break, 15, 20 minute break, and, yes, I divide that out over my smoke breaks fairly.
So within the time of working at Port Adelaide Backpackers I never had a holiday (indistinct). So it's a long time. I pretty much gave it my all. I was living there, so I - you can understand that I would always be involved in anything that was happening. I could be contacted by guests because of my title, being the manager, and would - without hesitance I'd assist guests, I would help people and I wouldn't claim the hours.[31]
If there was an investigation, an investigation into all this we’d probably find out a bit more. I am a bit insulted that I’m being declared a fraudster – as I never- I’ve been an honest person throughout working at Port Adelaide Backpackers. I would go above and beyond. It actually says within the hours there when its two hours on the managerial hours its actually hours from 7 or 8 until 9 and then usually called out between 11 and 12. So the VRs, the virtual receptionist would put it in one block. So it's actually one hour instead of two.
It could have been 1.30 to 2PM, it just depends because there’s a lot of – well being a backpackers and dealing with people. Yes, so its never (indistinct) it was always in hour blocks.
I couldn’t believe that I was never told at all about the allegations that have been put forward, and that’s about it…”[32]
The Applicant was entitled to paid breaks based on a conversation with the Respondent in 2016
In cross examination, the Applicant gave new evidence that at the time he made his contract in 2016, the Respondent verbally agreed that the Applicant was entitled to a paid 20 minute break. He continued: “Mr. Stranaghan did discuss that with me once before that I was entitled to a break”.[33]
The Respondent gave evidence in response to this that “there was no verbal agreement at all”.[34]
The Applicant would on many occasions not take lunch breaks or other breaks
The Applicant was cross examined by the Respondent’s solicitor about his time sheets as follows:
“So when I look through your timesheets and I see a period of eight hours and 10 hours working; you never had a break during those times? ---No. There's many - many occasions I would just work straight through.
You never had a smoke break, you never had a cup of tea, you never did anything like that? ---I had a smoke break, yes.
So you admit you had smoko? ---A smoke break.
Did you clock on and clock off on the smoko? ---No, I didn't.
You didn't. So you're a handyman - - -? ---There were many times I - - -
Sorry - - -? ---No, that's fine, let's carry on.
You said many times you what? What were you going to say? Sorry, we can't hear you?---No. Sorry what was that? Carry on, that's fine. I was - - -
All right. So all the way through your six years you never clocked on or clocked off for a lunch break, you always worked through?---In the early stages I did clock in and clock off, but then because I was only doing four or five hours in the early stages of my employment, and which is a total of 15, 20 hours, so in 15, 20 hours
I don't believe that you need to have a break. So you think that if I was doing four hours I would have a break for half an hour? No, I never - never did. That's up until COVID, which is, what, 2019, my hours were a lot lower, and there was no, absolutely no need to have a break because the hours were between 15 and 20 hours per week and one hour at nighttime.
And you never clocked on and clocked off there, even if you worked four hours? ---No. Well, I'd never have a break within four hours.
Never ever had a break. All right? ---No, not within the four hours, and I never - never smoked back before 2018.
You never had a cup of coffee, you never had a cigarette, you never had anything? ---Don't - don't drink coffee, and never had a cigarette, no. It's four hours. This was already discussed before.
When you got up to six hours did you have a break? ---No, I didn't.
You never had a break in six hours?---No.
You never had a cup of coffee - again, you never had a cup of coffee and never had a cigarette?---I've already discussed that with you. I don't drink coffee.
All right, a cup of tea or whatever. You never had a drink? ---I don't drink tea. Never had a drink. Like as I'm working, I'm not allowed to have a drink.” [35]
The circumstances of dismissal
The Applicant thought the dismissal was unfair because he had worked at PAB for six years and 57 weeks which was “five weeks short of pro rata” long service leave, and that he was evicted and was homeless because of the dismissal. The delay in receiving his separation certificate has led to financial hardship and he did not know the reason why he was terminated until he received the Separation Certificate three months later.[36]
The evidence of Shaun Brown
Mr. Brown was the Applicant’s support person present at the 6 February 2023 meeting.
6 February 2023 meeting
Mr. Brown gave evidence of the termination meeting which he attended as a support person. He had assumed it was about the “one hour, two-hour underpayment issue” and then the “meeting took an abrupt U-turn when Stranaghan threw his hands in the air and said
“I have had enough”.[37] It was his evidence that this phrase was not included in the recording.
“Derek had showed me a text message from Russel which indicated there may be a resolution to the ongoing claims that Derek was making with regard to the one hour/two hour business. And I thought, 'Well, that sounds promising,' and I attended as a support person. And the meeting started very promisingly when Mr. Stranaghan indicated that we're all aware as to why we're here. I thought, 'Well that's a promising start, maybe there is a resolution here.' And as it says in my witness statement, that the meeting took an abrupt U-turn when Mr. Stranaghan threw his hands in the air and said, 'I've had enough.' And from there on it was difficult. I think I stated in my witness statement that I had an inclination not to interrupt and I really didn't want to, but I tried to ask him questions so as to determine exactly where we were because it was clear that Mr. Stranaghan had terminated Derek's employment and I was trying to understand why. But every time I looked like getting some form of confirmation or some form of an answer, Mr. Stranaghan appeared to take control again, as he did right from the start. Mr. Stranaghan stood before us as we sat down, in a very - not intimidating but assertive way, and that's fine. It was his meeting.”
… yes, it took an abrupt turn, and I just couldn't get a straight answer. Even as far as asking if Derek could stay that night, there was a sort of a meek 'Yes' because it was apparent that Derek was going to become homeless, and that's why I asked the question. Yes, it was a disappointing meeting, and as I say I originally attended as a support person but found it necessary to ask some questions because Derek was shattered. Absolutely shattered at the - and there was no mention of the word 'fraud' or 'intoxication' or 'failing to follow duties'. [38]
The evidence of Amanda Mary Ely
Ms. Ely was employed as a cleaner at PAB for 3 years ending in 2022. She worked with the Applicant on a day-to-day basis as he would allocate cleaning tasks to her.
Ms Ely’s practice with respect to breaks at PAB
In her witness statement which was tendered in evidence, she stated:[39]
Derek and I Amanda Ely used to take 15-minute breaks only as the Respondent Andrew Stranaghan would not pay breaks what so ever.
I’ve known Derek Wilkins to assist guests, give laundry change and attend maintenance issues in his own time which he wasn’t being paid for.
If we both had a break and recorded it even just fifteen minutes it would be deducted from our daily hourly time.
In her oral evidence, she stated it was her practice to not log in and out for breaks but would record the hours she worked and deduct the time for the breaks. She gave an example, explaining “Say I finished at 5. I’d say I’d finished at 4.30, when I’d actually be clocking off at 5”.[40] This is the method she used to deduct the time in which she took unpaid breaks.
She suggested that the Applicant took breaks, stating “I’d see him with a fag in his mouth or you know, like I’m sure that’s a break”.[41]
CONSIDERATION OF WHETHER THE RESPONDENT WAS A SMALL BUSINESS EMPLOYER
I am required to consider whether the Respondent is a small business employer. The relevant section is s.23 which states:
Meaning of small business employer
(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.
(2) For the purpose of calculating the number of employees employed by the employer at a particular time:
(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and
(b) a casual employee is not to be counted unless, at that time, the employee is a regular casual employee of the employer.
(3) For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.
(4) To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee’s employment, the employees that are to be counted include (subject to paragraph (2)(b)):
(a) the employee who is being dismissed or whose employment is being terminated; and
(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated.
Evidence on the number of employees in Australia
It was the evidence of the Respondent that he employed 8 casual employees, including the Applicant, across his three businesses in Australia. Evidence was given that three of them were employed for short periods and only called upon for work “when needed”.[42]
The Applicant asserted the Respondent’s witness, Mr. Howard, was an employee. It is clear, however, from Mr. Howard’s own evidence that he works as a contractor who provides services to the Respondent by invoice through an ABN. I prefer the direct evidence of Mr. Howard.
The Applicant also stated that he was “under the impression always that there was an employee, two employees at the Turn-In Motel. That was through Andrew, and [Russel]. I don't have any evidence on that”.[43] This “impression” is not evidence.
The Applicant did not otherwise contest the evidence of the Respondent that three of the casual employees were employed irregularly or for a short period or place into question the other five casual employees.
On that basis, I find that the Respondent employed five casual employees in Australia, including the Applicant at the time of the Applicant’s dismissal on a regular and systematic basis under s 23(2)(b).
Is SASI an associated entity for the purposes of s 23(3)?
The question moves to whether the employees employed in the Philipines can be counted as employees of an “associated entity” under s 23(3). The evidence of the Respondent was that SASI employed five employees in the Philippines at the time of the Applicant’s dismissal and engaged one consultant, a Mr. Kevin Noguera.
The Applicant attempted to put into question the number of employees claimed by the Respondent as follows:
“There's also been people cleaning in the virtual receptionist in the background. Well, I can't prove because I'm not in the Philippines. There's been talk through - I've heard through Mr. Stranaghan and Kevin, which is the one I'm talking about, that Mr. Stranaghan had a carpet cleaning business within the Philippines. I've got no evidence of that obviously.”[44]
On the Applicant’s own admission this was not evidence.
Law on Associated Entities under s 23
Section 12 of the Act states that “associated entity has the meaning given by s 50AAA of the Corporations Act 2001”.
Section 50AAA of the Corporations Act 2001 states:
Associated entities
(1) One entity (the associate) is an associated entity of another entity (the principal) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.
(2) This subsection is satisfied if the associate and the principal are related bodies corporate.
(3) This subsection is satisfied ifs the principal controls the associate.
(4) This subsection is satisfied if:
(a) the associate controls the principal; and
(b) the operations, resources or affairs of the principal are material to the associate.
(5) This subsection is satisfied if:
(a) the associate has a qualifying investment (see subsection (8)) in the principal; and
(b) the associate has significant influence over the principal; and
(c) the interest is material to the associate.
(6) This subsection is satisfied if:
(a) the principal has a qualifying investment (see subsection (8)) in the associate; and
(b) the principal has significant influence over the associate; and
(c) the interest is material to the principal.
(7) This subsection is satisfied if:
(a) an entity (the third entity) controls both the principal and the associate; and
(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.
(8) For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:
(a) has an asset that is an investment in the second entity; or
(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset
It follows, if an entity has the characteristics of any subsection of s 50AAA,[45] it is an associated entity for the purposes of s 23.[46]
There is some support for the proposition that corporations incorporated in different countries can be an associated entity for the purposes of s 23. In Daniel Lau v Nelson (Australia) J A Pty Ltd,[47] Deputy President Booth held that:
“This question has been considered by single Members of the Commission but does not appear to have been determined by a Full Bench of the Commission or the Federal Court. Single Members have concluded that the offshore incorporation of the associated entity is not a constraint on finding that the employees of the associated entity are to be counted for the purpose of deciding whether an employer is a small business employer. A Full Bench of the Commission granted permission to appeal in relation to one of these instances but the substantive appeal did not proceed. I adopt the reasoning of these Members and conclude that there is nothing in the Act or the Corporations Act that means that I should not take into account the employees of the associated overseas based entity for the purposes of s 23 of the Act.”[48]
I am satisfied a company incorporated in the Philippines can be an associated entity for the purposes of s 23.
The evidence in this case is:
· The Respondent has 300,000 shares in SASI, which is the second largest shareholding.
· He has invested ₱200,000.00 into that company, which makes him the second largest investor.
· The Respondent and his wife, Ms. Stranaghan, together are the major investors and majority shareholders.
· All the other directors are relatives of the Respondent.
· The solicitor for the Respondent admitted that “Ninety percent of [SASI’s] work in Australia” is for the Respondent.
The solicitor for the Respondent argued the Respondent had no control over the company because the Respondent was not the majority shareholder, did not attend board meetings, and that the company was run by Ms. Stranaghan.
The Respondent has a qualifying investment in SASI. As the second largest investor and shareholder, and the major client of SASI, he could have significant influence over the company. Further, his interest in SASI is material to his Australian businesses because of the administration services it provides to them. The Respondent and his wife together are the major shareholders and investors. This cannot be ignored when making a practical assessment of the Respondent’s capacity to influence SASI.
The solicitor for the Respondent relied on the similar fact circumstances in Andreas Prill v Leafbrook Pty Ltd[49] which also involved a company incorporated in the Philippines. The facts of that case can be distinguished because there, the principal was not a shareholder or investor of the purported associate, but merely the major client.
If I had to find that SASI was an associated entity for the purposes of s 23, I would have done so on the basis that the relationship between the principal and the associate meets the requirements of s 50AAA(6).
However, given my finding that there are only five regular and systematically employed casuals in Australia at the time the Applicant was dismissed, even with the SASI employees, the total number would only be ten employees. It is therefore not necessary for me to find whether SASI was an associated entity because in either case, the number of employees is less than fifteen.
The Respondent was a small business employer
I therefore find the Respondent was a small business employer at the time the Applicant was dismissed under s 388(2)(a) of the Act.
WAS THE DISMISSAL CONSISTENT WITH THE SMALL BUSINESS FAIR DISMISSAL CODE?
The next question is whether the summary dismissal of the Applicant was consistent with the Code. The Code states the following regarding summary dismissal:
“It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.”
The question to be considered is whether the Respondent believed on reasonable grounds that the conduct of the Applicant, in failing to log off for breaks and his consequent payment for this break time, was sufficiently serious to justify immediate dismissal.
John Pinawin T/A RoseVi.Hair.Face Body v Edwin Domingo
The summary dismissal aspect of the Code has been considered by the Full Bench in John Pinawin T/A RoseVi.Hair.Face Body v Edwin Domingo[50] (Pinawin):
“There are two steps in the process of determining whether this aspect of the Small Business Fair Dismissal Code is satisfied. First, there needs to be a consideration whether, at the time of dismissal, the employer held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal. Secondly it is necessary to consider whether that belief was based on reasonable grounds. The second element incorporates the concept that the employer has carried out a reasonable investigation into the matter. It is not necessary to determine whether the employer was correct in the belief that it held.
Acting reasonably does not require a single course of action. Different employers may approach the matter differently and form different conclusions, perhaps giving more benefit of any doubt, but still be acting reasonably. The legislation requires a consideration of whether the particular employer, in determining its course of action in relation to the employee at the time of dismissal, carried out a reasonable investigation, and reached a reasonable conclusion in all the circumstances. Those circumstances include the experience and resources of the small business employer concerned.”[51]
The Full Bench also found:
“Normally in order to hold a belief on reasonable grounds it will be necessary to have a discussion with the employee about the perceived serious misconduct and pay regard to the explanations and views given by the employee.”[52]
Was the Applicant entitled to paid breaks?
The Respondent’s reason for the dismissal is based on the proposition that the Applicant was not entitled to payment for breaks. The entitlement for paid breaks could arise either from the Hospitality Award or from his contract of employment.
The Hospitality Award
It was common ground that the employment of the Applicant was regulated by the Hospitality Award. Clause 16.2 of that Award deals with meal and rest breaks as follows:
16.2 Frequency of breaks
An employee who works the number of hours in any one shift specified in column 1 of Table 2—Entitlements to meal and rest break(s) is entitled to a break or breaks as specified in column 2.
Table 2—Entitlements to meal and rest break(s)
Column 1
Hours worked per shift
Column 2
Breaks
More than 5 hours and up to 6
Elective unpaid meal break of up to 30 minutes in accordance with clause 16.4 – request for unpaid meal break
More than 6 hours and up to 8
An unpaid meal break of no less than 30 minutes (to be taken after the first 2 hours of work and within the first 6 hours of work).
More than 8 hours and up to 10
An unpaid meal break of no less than 30 minutes (to be taken after the first 2 hours of work and within the first 6 hours of work).
One 20 minute paid rest break (may be taken as two 10 minute paid rest breaks).
More than 10 hours
An unpaid meal break of no less than 30 minutes (to be taken after the first 2 hours of work and within the first 6 hours of work).
Two 20 minute paid rest breaks.
The LILO tracker sheets tendered in these proceedings, which the Respondent gave evidence are based on the hours logged by the Applicant, frequently show hours worked in excess of five hours. According to the data, he often worked more than six hours which would have entitled him to an unpaid meal break. There is no provision for paid rest breaks in the Award under eight hours worked.
The Applicant’s employment contract
The Respondent tendered a document entitled “General Terms and Conditions for Derek Wilkins”[53] which was given to the Applicant around the time his employment commenced. It is silent on the issue of breaks.
In cross examination by the solicitor for the Respondent, the Applicant raised for the first time that, at the time he was first employed in 2016, he had a verbal agreement with the Respondent that he was entitled to a paid twenty-minute break. The Respondent denied any such verbal agreement.
The Applicant had the opportunity to raise this verbal agreement in his application, in his witness statement and his examination in chief. The circumstances in which such an important piece of evidence was revealed affects the credit I ascribe to it. I find that no such verbal agreement was made.
It follows the Applicant was not entitled to payment for meal or rest breaks where he worked under 8 hours.
Did the employer hold a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal?
The first limb of Pinawin requires a consideration of whether the Respondent held a belief that the employee’s conduct justified immediate dismissal.
The evidence of the Respondent was the examination of the LILO tracker records, was undertaken because Applicant raised the underpayment issue. The Respondent and Ms. Stranaghan then examined the LILO tracker records of the hours the Applicant had logged over a period of six months. That investigation revealed the Applicant had not logged out for a meal or rest break over that period.
He gave the following oral evidence:
“With the LILO it was obvious, which was quick and easy to do. We went back about six months and there wasn’t a single cigarette break. From a smoker, I’d know, maybe half a dozen smokes a day. I’d seen him have lunch a few times a week, usually in the hostel.”[54]
Later in cross examination, the Respondent said:
“It was about fraud…. I felt betrayed. We had a trust. I let you – [you] logged the hours in and logged the hours out. I’m done because I’d been cheated of so much money. There was no way I could trust you. You were in charge of dealing with cash, of the laundry and the guest thing, I’m done, there’s no way I could work with you anymore.[55]
This is compelling evidence the Respondent sincerely believed, at the time of the dismissal, the Applicant had committed a fraud by claiming payment for breaks where he had no entitlement for such a payment.
Was the belief the Respondent held based on “reasonable grounds”?
The second limb of Pinawin requires an enquiry into whether the belief that the Applicant had committed a fraud by claiming payment for unpaid breaks was based on “reasonable grounds”.
Consideration of the circumstances leading up to the dismissal
The circumstances that lead to the investigation by the Respondent and Ms. Stranaghan was brought about because of a claim the Applicant had made in late January that he had been underpaid.
The Respondent consulted with his bookkeeper and he and Ms. Stranaghan examined the LILO records for the Applicant. These records were based on the hours logged by the Applicant. The oral evidence of the Respondent is that those records revealed the Applicant had not logged off for a break for six months.
The fraud allegation was not raised in the subsequent texts exchanges between the Applicant and the Respondent, or between the Applicant and Ms. Stranaghan. The Respondent gave oral evidence that Ms. Stranaghan “knew without doubt that he had committed fraud”.[56]
Those exchanges culminated in Ms. Stranaghan sending the Applicant the following text:
We already have the message from the bookkeeper and at first look you are right, it is two hours minimum. But this is serious enough and a large sum of money and as you mentioned you have already consulted a lawyer. Ted has called Anderson solicitors in Port Adelaide to get a second opinion. We are planning to be there on Sunday, so do no work we will discuss everything in the main dining areas on Monday morning around 9.30AM. Thanks[57]
The Respondent in his evidence suggested that she mentioned “the large sum of money” because “we estimate he’d done about three hours per week over six years or whatever it was that came to a large sum of money”.[58] The Respondent asserted in his evidence that the Applicant “knew there was a thorough investigation” and therefore should have known that his employment was in danger.[59]
The Applicant and his support person contended in their evidence that this text message of Ms. Stranaghan led them to think the 6 February 2023 meeting would concern the underpayment issue. I prefer this interpretation. The words “We already have the message from the bookkeeper and at first look you are right; it is two hours minimum”, followed by the sentence “But this is serious enough and a large sum of money and as you mentioned you have already consulted a lawyer”, could only lead to an impression the proposed meeting would be about the underpayment issue. I prefer the evidence of the Applicant and his support person, Mr. Brown that they entered the meeting on 6 February believing it would be about the underpayment question.
6 February 2023 meeting
It is uncontested the Respondent did not raise the fraud allegation at any time during the meeting or seek to allow the Applicant to explain or defend himself against it. The audio recording of the meeting of 6 February 2023 confirms these facts.
The explanation of the Respondent for his failure to raise the fraud allegation was that Mr. Brown, his support person, “interrupted” and “he walked me through it to make sure that Derek was fired”.[60]
“I thought it was unfair. I still wanted the opportunity – if I hadn't been interrupted, I still wanted the opportunity to – I still wanted the opportunity to get a clarification from Derek, his side of the story. I still wanted to explain my side, but being interrupted he just completely threw me off my game. I didn't know what I was doing. I had no HR, and I just – that's what happened.”[61]
The recording of the meeting does not support this explanation. The second sentence uttered by the Respondent in the recording was “after the conversation the other day, I’m done OK, I’d like to give you the opportunity to resign”. The meeting and its tone were set by the Respondent from the beginning. Mr. Brown never raised his voice and was responding to propositions put by the Respondent. It follows that in this case the Applicant was not told that he was being dismissed for fraud, and no discussion was held with the Applicant about the fraud allegation.
Evidence on Breaks
The evidence of the Respondent and the witness called by the Applicant, Ms. Ely, both give evidence that they saw the Applicant taking breaks. The Applicant’s own evidence is clear; he took breaks, particularly “smokos”, but did not log on and log off and as a result, he was paid for breaks when he had no entitlement under his Award.
The Applicant stated in his evidence:
“I never - never had lunch breaks. So that was - it was just the nature of the job. If I did have - I'm entitled to a 15 minute break, 15, 20 minute break, and, yes, I divide that out over my smoke breaks fairly.”[62]
He was cross examined on the issue of breaks by the Respondent’s solicitor and said:
“So when I look through your timesheets and I see a period of eight hours and ten hours working you never had a break during those times? ---No. There's many - many occasions I would just work straight through.
You never had a smoke break, you never had a cup of tea, you never did anything like that? ---I had a smoke break, yes.
So you admit you had smoko? ---A smoke break.
Did you clock on and clock off on the smoko? ---No, I didn't.
You didn't. So you're a handyman - - -? ---There were many times I - - -
Sorry - - -? ---No, that's fine, let's carry on.
You said many times you what? What were you going to say? Sorry, we can't hear you?---No. Sorry what was that? Carry on, that's fine. I was - - -
All right. So all the way through your six years you never clocked on or clocked off for a lunch break, you always worked through?---In the early stages I did clock in and clock off, but then because I was only doing four or five hours in the early stages of my employment, and which is a total of 15, 20 hours, so in 15, 20 hours.
I don't believe that you need to have a break. So you think that if I was doing four hours I would have a break for half an hour? No, I never - never did. That's up until COVID, which is, what, 2019, my hours were a lot lower, and there was no, absolutely no need to have a break because the hours were between 15 and 20 hours per week and one hour at nighttime.
And you never clocked on and clocked off there, even if you worked four hours? ---No. Well, I'd never have a break within four hours.” [63]
The LILO inspection
The Respondent’s evidence was the discussion he had with the bookkeeper following the underpayment issue being raised was only about that issue.
The investigation on which the Respondent based his decision to dismiss the Applicant was the examination of six months of the LILO records that occurred prior to the 6 February meeting.[64] This is the only investigation undertaken by the Respondent.
Consideration of reasonable grounds
The investigation was of the LILO records over a period of six months. It was reasonable for the Respondent to expect the Applicant to have logged on and off for some meal and rest breaks over that period. The Respondent’s evidence is that the investigation revealed no logging off for breaks during the period.
The examination of six months of records goes to the reasonableness of the investigation the Respondent conducted. If the investigation had examined records over a shorter period, the investigation may not have been reasonable.
The Applicant had worked as the manager and was in a position of trust. He handled cash for the Respondent at PAB. He worked autonomously and in a different location from his employer. The Respondent was reliant on the honesty of the Applicant to record his hours accurately. The trust position of the Applicant gives support to the reasonableness of a decision to immediately dismiss the Applicant on the grounds of an investigation revealing a failure to log off for breaks over a period of six months.
The fact the Applicant was not given an opportunity to respond to the allegation and was not informed of the reason for his termination until three months after he was terminated is a difficult issue in this case.
The Full Bench in Pinawin states that “normally it will be necessary to have a discussion with the employee about the perceived serious misconduct”.[65] The purpose of this discussion is for the employee to rebut the reasons given for the summary dismissal. In the evidence he gave in this case, the Applicant conceded that he took rest breaks but not meal breaks. He conceded that he did not log off for any breaks. In those circumstances it is difficult to see how an opportunity to respond would have averted the conclusion of the employer.
I therefore find, in the particular circumstances of this case, the inspection by the Respondent of six months of LILO records establishing the Applicant had not logged off for breaks provided reasonable grounds to found a belief that the conduct of the Applicant was sufficiently serious to justify dismissal.
I am not required to make a finding that the Applicant’s conduct constituted a fraud and I do not do so.
CONCLUSION
I am therefore satisfied the Respondent held a belief on reasonable grounds that the Applicant’s conduct was sufficiently serious to justify immediate dismissal.
It follows that the termination of the Applicant’s employment was consistent with the Small Business Fair Dismissal Code. Under s 385 of the Act, the dismissal therefore cannot have been unfair. The Application is dismissed.
COMMISSIONER
Appearances:
Mr. Derek Wilkins, the Applicant, appeared for himself.
Mr. Allon Reeves, solicitor, of A K Reeves and Associates, appeared for the Respondent.
Hearing details:
Tuesday 27 June 2023 and Friday 7 June 2023
Microsoft Teams
Final written submissions:
Mr. Derek Wilkins: 19 June 2023
Mr. Andrew Stranaghan: 26 May 2023
[1] Exhibit R7.
[2] Transcript (27 June 2023) at PN126.
[3] Exhibit R10.
[4] Transcript (7 July 2023) at PN275.
[5] Ibid PN309.
[6] Exhibit R7.
[7] Transcript (27 June 2023) at PN47.
[8] Exhibit R8.
[9] Exhibit R6.
[10] Transcript (27 June 2023) at PN246.
[11] Ibid PN262.
[12] Ibid PN263.
[13] Exhibit R4.
[14] Ibid.
[15] Ibid.
[16] Transcript (27 June 2023) at PN361.
[17] Ibid PN365.
[18] Exhibit R5.
[19] Ibid.
[20] Transcript (27 June 2023) at PN521-522.
[21] Ibid PN571.
[22] Ibid PN590.
[23] Ibid PN530.
[24] Ibid PN594.
[25] Ibid PN669.
[26] Exhibit R9.
[27] Transcript (27 June 2023) at PN706.
[28] Ibid PN674.
[29] Ibid PN809.
[30] Ibid PN829.
[31] Ibid PN843-844.
[32] Ibid PN803-807.
[33] Ibid PN863.
[34] Ibid PN1084.
[35] Ibid PN930-943.
[36] Ibid PN843.
[37] Ibid PN1048.
[38] Ibid 1048.
[39] Exhibit A5.
[40] Transcript (27 June 2023) at PN1236.
[41] Transcript (7 July 2023) at PN149.
[42] Transcript (27 June 2023) at PN126.
[43] Ibid PN809.
[44] Ibid.
[45] Corporations Act 2001.
[46] Fair Work Act 2009.
[47] [2016] FWC 7490.
[48] Ibid [17].
[49] [2019] FWC 7542.
[50] [2012] FWAFB 1359.
[51] Ibid [29]-[30]
[52] Ibid [38]
[53] Exhibit R2.
[54] Transcript (27 June 2023) at PN365.
[55] Ibid PN590.
[56] Ibid PN585.
[57] Exhibit R4.
[58] Ibid.
[59] Transcript (27 June 2023) at PN643.
[60] Ibid PN522.
[61] Ibid.
[62] Ibid PN843.
[63] Ibid PN929-937.
[64] Ibid PN361-362.
[65] John Pinawin T/A RoseVi.Hair.Face Body v Edwin Domingo[2012] FWAFB 1359, [38]
Printed by authority of the Commonwealth Government Printer
<PR764900>
0
2
0