Grant Murray v Electric Light Hotel P/L T/A Electric Light Hotel Partnership
[2010] FWA 2613
•9 APRIL 2010
[2010] FWA 2613 |
|
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Grant Murray
v
Electric Light Hotel P/L T/A Electric Light Hotel Partnership
(U2009/9969)
Nate Scutter
v
Electric Light Hotel P/L T/A Electric Light Hotel Partnership
(U2009/9970)
SENIOR DEPUTY PRESIDENT O'CALLAGHAN | ADELAIDE, 9 APRIL 2010 |
termination of employment - arbitration.
[1] This decision deals with applications made by Mr Murray and Mr Scutter with respect to the termination of their employment by the Electric Light Hotel Pty Ltd (Electric Light Hotel). Both applications were lodged on 2 December 2009, pursuant to section 394 of the Fair Work Act 2009 (the Act).
[2] The applications were unable to be resolved through the conciliation process and were subsequently referred to me for arbitration. Both Mr Murray and Mr Scutter (hereafter referred to as the applicants) agreed that the matters should be joined for the purposes of this arbitration. The Electric Light Hotel did not object to this approach.
[3] The applications were the subject of a hearing on 29 March 2010. The parties were self represented with Mr Simon Modra appearing for the Electric Light Hotel.
[4] In reaching a conclusion in this matter I have taken into account all of the written material provided to me, together with the evidence of Mr Murray, Mr Scutter and Mr Modra.
Preliminary Issues
[5] Section 396 states:
“396 Initial matters to be considered before merits
FWA must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:
(a) whether the application was made within the period required in subsection 394(2);
(b) whether the person was protected from unfair dismissal;
(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;
(d) whether the dismissal was a case of genuine redundancy.”
[6] There is no dispute that the applications were made within time and that the applicants were protected from unfair dismissal.
[7] Mr Modra confirmed that the employer in this matter was the Electric Light Hotel Pty Ltd as distinct from the Electric Light Hotel Trust which owned that corporation.
[8] At the outset, Mr Modra also confirmed that the Electric Light Hotel did not argue that the applicants’ employment was terminated as a redundancy. The evidence put to me was not indicative of a restructuring of the functions undertaken by the applicants such that s.396(d) does not apply.
[9] At an early point in the hearing, the number of employees engaged by the Electric Light Hotel was the subject of consideration. Mr Modra subsequently confirmed his assessment of the full-time equivalent employee numbers, on the methodology set out in Schedule 12A of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, as between 10 and 11 employees. The applicants did not dispute this calculation.
[10] As a consequence, I am satisfied that the Electric Light Hotel was, at the time of the termination of the applicant's employment, a small business employer. Pursuant to section 388 I have considered the application in the context of section 388 and the Small Business Fair Dismissal Code.
[11] Mr Modra confirmed that the Electric Light Hotel had not applied, or considered this Code.
[12] The preamble to the Code states:
“The Fair Dismissal Code applies to small business employers with fewer than 15 full-time equivalent employees.
Small business employees cannot make a claim for unfair dismissal in the first 12 months following their engagement. If an employee is dismissed after this period and the employer has followed the Code then the dismissal will be deemed to be fair.
Employees who have been dismissed because of a business downturn or their position is no longer needed cannot bring a claim for unfair dismissal. However, the redundancy needs to be genuine. Re-filling the position with a new employee is not a genuine redundancy.”
[13] Both applicants had been employed for more than 12 months.
[14] On the information before me I am unable to conclude that the termination of the applicant's employment should be deemed to be consistent with the Code or that the applications could be dismissed pursuant to section 385. Had that Checklist been completed, such an assessment may have been possible. This does not however, make the dismissals unfair. To reach a conclusion in this respect I have considered the Code as it is set out below. Whilst the legislation clearly intended the Code to provide an expedited mechanism for the consideration of fairness in dismissal is involving a small business, I have not found it possible to do this in any way other than a detailed assessment of the criteria addressed in the Code in a form which is inherently similar to that set out in section 387 of the Act.
[15] The Small Business Fair Dismissal Code states:
“Commencement
The Small Business Fair Dismissal Code comes into operation on 1 July 2009.
Application
The Fair Dismissal Code applies to small business employers with fewer than 15 full-time equivalent employees.
Small business employees cannot make a claim for unfair dismissal in the first 12 months following their engagement. If an employee is dismissed after this period and the employer has followed the Code then the dismissal will be deemed to be fair.
Employees who have been dismissed because of a business downturn or their position is no longer needed cannot bring a claim for unfair dismissal. However, the redundancy needs to be genuine. Re-filling the position with a new employee is not a genuine redundancy.
The Code
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.
Other Dismissal
In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.
The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.
The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee’s response.
Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.
Procedural Matters
In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.
A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.”
[16] The background to the applications is summarised below.
[17] Mr Murray commenced working for the Electric Light Hotel on 6 February 2007. At the time of the termination of his employment on 23 November 2009 he was the Operations Manager and was paid an annual salary in the order of $60,000.
[18] Mr Scutter commenced working for the Electric Light Hotel on 1 October 2007. At the time of the termination of his employment he was the Assistant Venue Manager and was paid an annual salary of $55,000.
[19] There is no dispute that a change in the management of the Electric Light Hotel occurred in 2009 such that the owner’s representative, with overall management control of the Hotel left, and the applicants subsequently undertook their roles with minimal management guidance for some time.
[20] In early November 2009 Mr Modra assumed overall managerial control of the Electric Light Hotel. He met with senior management staff, including the applicants, on two occasions, during which he sought various improvements to the hotel cleaning, staffing arrangements and operational procedures. The manner in which he sought these changes is disputed as is the extent to which his instructions were met.
[21] Mr Modra was dissatisfied with the performance of the applicants. On 23 November 2009 both applicants were called to meet with him and were dismissed with the payment of 2 weeks pay in lieu of notice. The matters discussed at this termination of employment interview are disputed.
[22] The applicants assert that the termination of their employment was substantively and procedurally unfair.
[23] The Electric Light Hotel position is that neither applicant performed their position function satisfactorily or in a manner consistent with Mr Modra’s instructions and that, as the Hotel was facing a dire financial predicament, urgent action, in the form of the terminations of employment were both necessary and appropriate.
[24] On the evidence before me I have reached a number of conclusions.
[25] Firstly, I have concluded that around the time Mr Modra assumed effective management control of the Hotel, it was operating under some financial duress. I have relied on Mr Modra’s advice in this respect.
[26] I have concluded that the applicants’ managerial functions were limited in that payroll functions and the normal financial reporting mechanisms were largely undertaken off-site and this information was not readily available to the applicants. I have relied on the applicant’s undisputed advice in this regard.
[27] I have concluded that, prior to Mr Modra’s appointment, both applicants were involved in matters that were subsequently the subject of Licensing Court proceedings. One matter related to the admission into the hotel of a minor, and one related to persons in addition to the allowable number, on the pavement. Both matters ultimately resulted in Licensing Court reprimands being issued against the applicants, apparently, after the termination of their employment. Information which allows a conclusion about the extent to which the Licensing Court action was against the Electric Light Hotel as distinct from the applicants is not available to me.
[28] I have concluded that the applicants took steps to comply with Mr Modra’s instructions to improve the "staff to turnover" ratio, that they convened a "voluntary working bee" on the part of hotel staff to clean the hotel in preparation for painting it and that they addressed fire escape issues.
[29] I have concluded that neither applicant was warned that a failure to improve their work performance would result in termination of employment.
[30] Mr Modra asserts that, at the termination of employment interview on 23 November 2009, he advised both applicants of the following reasons for the terminations of the employment.
“1. The financial management of the Hotel. That given the Hotel had turned over $1.8 million and had lost $220,000 was directly related to over rostering and poor financial management practices and my request to reduce hotel wages by $2,500 per week had twice been ignored.
2. Negligent handling of employees pay details, super, tax and leave entitlements
3. The Filthy state of the Hotel
4. The complete ignorance of maintenance issues resulting in breach of OHS codes and our duty of care to the public and possibly voiding our public liability insurance
5. Poor practises relating to licensing resulting in breaches under the licensing act and threatening eviction of the operating company under our lease
6. Tolerance of attendance at the Hotel of known banned and unfit persons on a regular basis (twice witnessed on premises in 2 weeks). This particular individual had been convicted of a serious violent crime (manslaughter), on a licensed premise, for which he had been incarcerated.
7. Breach of Fire codes”
[31] I am not satisfied that both applicants were told of these factors as reasons for their dismissal as distinct from Mr Murray's version of the meeting which was:
“At the meeting Simon commenced by describing the Hotel as “being shit”, which he attempted to clarify by saying that ‘the Hotel and business itself was not shit, but rather its financial position with regards to creditors and its overall state of disrepair was shit.’ Although not stated directly the tone of this statement and subsequent conversation implied that somehow Nate and myself were either directly or indirectly held accountable for this situation. This was reinforced when told that something has to give, and unfortunately it would be us and our jobs, effective immediately.”
[32] I prefer Mr Murray’s version of events.
[33] I have applied these background facts and findings to the Small Business Fair Dismissal Code.
Serious Misconduct
[34] The applicants were paid 2 weeks pay in lieu of notice. Whilst I do not consider that the dismissals were summary dismissals I am, in any event, not satisfied that the behaviour of either applicant can be described as serious misconduct.
[35] The nearest allegation of theft relates to Mr Modra’s concern that the applicant’s used their own credit cards to finance hotel stock purchases and were then reimbursed. This is not disputed. I accept the applicants’ versions of events to the effect that they used their credit cards in this way so as to keep the hotel operating. No management instruction to stop them doing this was issued and no element of theft has been made out.
[36] No allegations of fraud or violence have been established.
[37] On the evidence before me, I am not satisfied that the applicants committed serious breaches of occupational health and safety requirements. I am unable to conclude that Mr Modra’s assertion of Fire code breaches is established on the facts in that Mr Modra was himself involved in changes to fire escape routes and the extent of inappropriate conduct approximating serious misconduct on the part of the applicants in this regard has simply not been made out.
[38] I do not consider any other form of serious misconduct has been established.
The Dismissals
[39] On the basis that the termination of the applicant’s employment was with a payment in lieu of notice, I have considered the requirements specified in the Code.
Valid Reason
[40] The Code requires that there be a valid reason for a dismissal, based on the employees conduct or capacity to do the job. I have adopted the concept of a valid reason as it was articulated by North J in Selvechandron v Petersen Plastics 1 in the following terms:
“In its context in s.170DE(1), the adjective “valid” should be given the meaning of sound, defensible or well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of s.170DE(1). At the same time the reasons must be valid in the context of the employee’s capacity or conduct or based upon the operational requirements of the employer’s business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. The provisions must “be applied in a practical, commonsense way to ensure that the employer and employee are treated fairly”.
[41] To the extent that Mr Modra generally held the applicants’ responsible for what he concluded were substantial deficiencies in the operation of the Electric Light Hotel, I am not satisfied that a valid reason for the termination of the employment has been established.
[42] I have further considered this factor in the context of Mr Modra’s seven concerns about the applicant’s performance.
[43] Firstly, I am not satisfied that, given the limited extent of the applicants’ control over the operation of the hotel, they could be held responsible, over a three-week period, for the financial position of the hotel. I am satisfied that, on the applicants’ evidence, they took steps to improve the staff to turnover ratio and that these steps should have been recognised by Mr Modra. I am not satisfied that Mr Modra's instructions in this respect were clearly articulated, nor that the applicants had access to the normal complement of management financial tools to facilitate compliance with this request. Finally, in this respect, even if Mr Modra’s instruction to reduce the hotel wages by $2,500 per week had not been achieved over the 2 weeks in question, I cannot regard this as a valid reason for the termination of the applicants’ employment. It may have formed the basis for a more thorough investigation by Mr Modra, and for a warning, but it did not represent a basis for the termination of employment at that time.
[44] Mr Modra asserts that a basis that the termination of the applicants’ employment was their negligent handling of the employee pay details, superannuation, taxation and leave entitlements. I am not satisfied that this was specified as a reason for the termination of employment but, in any event, I have concluded that these tasks were primarily undertaken off-site and were outside of the responsibilities allocated to the applicants. In any event, there is no specific action in this respect which I could regard as indicative of such unsatisfactory conduct that it formed a valid reason for the termination of employment.
[45] Mr Modra asserted that the filthy state of the hotel was a reason for the termination of the applicants’ employment. Evidence in this respect was not provided to me. However, on the evidence before me, the applicants had recently changed the cleaning contract from the previous arrangement involving a domestic cleaner who also worked for one of the owners, to a commercial contract. The Electric Light Hotel was inspected by a local government authority some months earlier and, on the evidence before me, no issues were identified. Further, the applicants complied with Mr Modra’s demand that they organise an unpaid working bee, whereby staff cleaned the hotel on a nominated day. On this basis, I do not consider that the cleaning issue represented a valid reason for the termination of the applicants’ employment.
[46] Mr Modra asserted that the applicants’ ignorance of maintenance issues, leading to breaches of occupational health and safety codes and the hotel's duty of care, were also reasons for the termination of the employment of the applicants. In this respect I do not consider that these allegations have been made out such that they could be regarded as misdemeanours.
[47] Mr Modra relied on breaches of the Licensing Act as a basis for the applicants’ termination of employment. The alleged breaches occurred sometime previous to the termination of employment. I accept the applicants’ versions of these events and am unable to regard them as a valid reason for the termination of employment as distinct from other disciplinary action.
[48] Mr Modra specified a further reason for the termination of the applicants’ employment as their toleration of attendance at the hotel of "known banned and unfit persons on a regular basis". I am not satisfied that this allegation was substantiated, or that, in any event, it could form a valid reason for the employment termination unless it followed a breach of clear instructions to that effect, which has not been established.
[49] Finally, Mr Modra asserted that the applicants had breached the fire codes. The evidence before me is inconclusive with respect to actions taken by the applicants and by Mr Modra himself on the evening in question with respect to fire escape arrangements. No action on the part of the applicants’ in breach of fire codes has been made out in a fashion which would represent a valid reason for the termination of employment.
[50] In addition to these factors, Mr Modra asserted that two other factors justified the applicants’ dismissal, even though they were not put to them at the time of termination of employment.
[51] The first of these related to the applicants’ use of personal credit cards to purchase stock for the hotel on various occasions. Mr Modra asserted that this enabled the applicants to gain a personal benefit through credit card loyalty schemes, and, in any event, may have represented an agency arrangement which would involve the hotel in increased tax obligations.
[52] I have concluded that the applicants did use their personal credit cards for hotel purchases from time to time and were subsequently reimbursed. I find no evidence of fraudulent activity on the part of the applicants. Had Mr Modra wanted this practice to stop, he should have requested this, but, in the absence of such a request, I cannot regard the applicants’ behaviour as misconduct.
[53] Secondly, Mr Modra referred to an alleged fraudulent insurance claim. Evidence to support this allegation has not been provided and I do not regard this as a valid reason for the employment terminations.
[54] On the basis of these factors, viewed individually and collectively, I am not satisfied that the Electric Light Hotel had a valid reason for the termination of employment of the applicants.
[55] Further, I am not satisfied that the applicants were properly appraised of the reasons of the termination of the employment or that steps were taken by the Electric Light Hotel to properly ensure that the applicants were aware of Mr Modra’s expectations of them as employees. These steps must necessarily have extended beyond broad demands made in the course of the two meetings Mr Modra had with staff.
Warnings
[56] The Code requires that employees be given a reason why they are at risk of being dismissed. I do not consider that either applicant was warned that a failure to improve their work performance would result in termination of employment. I am satisfied that not long before Mr Modra’s appointment, both applicants received pay increases in recognition of their work performance and that there is no evidence of performance issues in the past.
Opportunity to respond
[57] I do not consider that the applicants were given any opportunity to respond to the proposition that their employment would be terminated. Cheques for payment in lieu of notice were prepared prior to the termination of employment interview on 23 November 2009 and the termination of employment decision was clearly made before the commencement of this discussion.
[58] I am not persuaded that the two meetings Mr Modra attended, provided training or clarification of requirements such that the applicants could be held personally accountable for the hotel’s failure to achieve the objectives Mr Modra had in mind.
Support Persons
[59] It is not clear that either applicant requested a support person be present at the 23 November 2009 termination of employment interview. However, it is clear that the opportunity to have a support person present was not detailed to either applicant.
Conclusion – Small Business fair Dismissal Code
[60] For the foregoing reasons I have concluded that the termination of employment of the applicants was not consistent with the Small Business fair Dismissal Code such that the applications should be dismissed pursuant to section 396.
Harsh, Unjust or Unreasonable
[61] I have consequently applied the factors prescribed in section 387 to the circumstances outlined above. This section states:
“387 Criteria for considering harshness etc.
In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, FWA 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 FWA considers relevant.”
[62] This necessitates a largely repetitive consideration of the factors addressed in the Small Business Fair Dismissal Code.
[63] For the same reasons set out above I do not consider that there was a valid reason for the termination of the applicant’s employment, that they were properly notified of the reason for their dismissal or given an opportunity to respond. I do not consider the applicants were given an opportunity to respond to the proposition that their employment should be terminated or that they had the opportunity to have a support person present at the termination of employment interview. Neither applicant was warned in a fashion which I consider was fair. The size of the Electric Light Hotel and the absence of access to Human Resource management expertise are factors which mitigate against finding the terminations to be unfair. Finally, in terms of section 387 I consider that the objective Mr Modra apparently had to improve the Hotel’s performance reasonably required rapid action but that this could not be at the expense of the concept of fairness.
[64] Having considered these factors I have concluded that the termination of the applicants’ employment was harsh, unjust and unreasonable. It was based on flawed grounds and was implemented in a procedurally unfair fashion. The fact that Mr Modra had the objective of improving the hotel's profitability did not give him a license to premise the termination of the applicants’ employment on a series of vague and unsubstantiated allegations.
Remedy
[65] Section 381 of the Act establishes an obligation on Fair Work Australia to provide remedies, if a dismissal is found to be unfair, with an emphasis on reinstatement.
[66] Notwithstanding this, neither the applicants nor the Electric Light Hotel proposed reinstatement as a possible remedy. Given the antipathy between the parties I would expect any reinstatement to be doomed to immediate failure and have decided that it would be quite inappropriate in this situation.
[67] Section 392 specifies the factors to which I must have regard in considering an order for an amount of compensation in lieu of reinstatement. I have considered these factors.
[68] I have noted Mr Modra’s assertions that the Electric Light Hotel remains in a parlous financial state, although evidence to that effect has not been provided.
[69] I have noted that both applicants had in excess of 2 years service. Whilst this is not a long time, and the industry has a high incidence of itinerant workers, I accept that they intended to remain with the Electric Light Hotel for the indefinite future had they not been dismissed.
[70] Had the applicants had received performance-based warnings from Mr Modra instead of the termination of their employment, I have concluded that their performance would most likely have improved.
[71] I am satisfied that both applicants have sought other employment since the termination of their employment. I have noted Mr Murray's evidence is that he has earned only $1600 since the termination of his employment but that he has applied for some 8 to 10 jobs in a variety of industries. Mr Scutter gained employment some 6 weeks ago at what I have taken to be a remuneration rate of $400 per week.
[72] I have also noted that both applicants received 2 weeks pay in lieu of notice. I have also noted that Mr Scutter anticipates his new position to be a continuing function and that Mr Murray is optimistic of gaining casual employment in the near future.
[73] Finally, in terms of other matters, I do not consider that the applicants’ behaviour led to the termination of their employment such that the amount contemplated should be substantially reduced.
[74] I will provide an opportunity for the Electric Light Hotel to apply for the compensation amounts to be paid over a period of weeks. Should such an application be made, a factual basis for it will need to be established.
[75] Having considered these factors, I have concluded that Mr Murray should receive 15 weeks pay as compensation in lieu of reinstatement, and Mr Scutter, 12 weeks pay.
[76] Orders (PR995658 and PR995659) reflecting this decision will be issued.
SENIOR DEPUTY PRESIDENT
Appearances:
G Murray and N Scutter on their own behalf.
S Modra representing the Electric Light Hotel Pty Ltd.
Hearing details:
2010.
Adelaide:
March 29.
1 (1995) 62 IR 371 at 373
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