Janice Shone v Compac Marketing (Australia) Pty Ltd T/A Compac Marketing Australia

[2013] FWC 7662

[2013] FWC 7662 Note: An appeal pursuant to s.604 (C2013/1706) was lodged against this decision - refer to Full Bench decision dated 20 February 2014 for result of appeal.

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Janice Shone
v
Compac Marketing (Australia) Pty Ltd T/A Compac Marketing Australia
(U2013/9092)

DEPUTY PRESIDENT MCCARTHY PERTH, 7 OCTOBER 2013

Application for relief from unfair dismissal.

Background

[1] Mrs Janice Shone (the Applicant) lodged an application for Unfair Dismissal Remedy (the application) on 1 May 2013 claiming that she was unfairly dismissed from her employment with Compac Marketing (Australia) Pty Ltd (the Respondent and the new company).

[2] The Applicant had been employed since 5 January 2009 as the Financial Controller of the Company and the predecessor entity Compac Marketing Pty Ltd (the previous company). The previous company went into liquidation in mid-2010. Two of the employees of the previous company, Mr Shannon Stawarz and Mr Thomas Harvey became the Directors of the new company and also became two of its employees. The new company took over the assets and liabilities of the previous company as well as all of the employees, including accrued leave obligations and other entitlements accrued.

[3] The majority shareholder in the new company was the Stawarz Family Trust. It appears that the beneficiaries of the Stawarz Family Trust include Mr Stawarz and his wife Mrs Zoe Stawarz. The other shareholder in the new company is Mr Thomas Harvey.

[4] The Respondent is a relatively small business employing about 24 employees. It was obvious from the evidence and proceedings that the Applicant had immense trust and confidence placed in her by Mr Stawarz and Mr Harvey.

[5] The evidence convinced me that Mr Stawarz and Mr Harvey were inexperienced in business affairs. Throughout the proceedings and evidence it was apparent that there was a lack of due diligence and oversight of the financial affairs of the company. Eventually they seemed to recognise this failure. They engaged Mr Andrew Grant as Business Manager whose role was to review the operations and to provide experienced support and training to Directors and staff. His initial role was to investigate and report on the management, performance and affairs of the new company.

[6] The Directors gave the Applicant a free reign on the financial side of the company. This included her having the only access to the financial information, the company’s bank account, and control over the accounts payable.

[7] The Applicant’s partner is an Accountant and he provided assistance to the Applicant in various accounting functions, although apart from advice on the setting up of the company, exactly what he provided was unclear. The shareholders and Directors were aware that Mr Shone provided some assistance to his wife.

[8] The Applicant became pregnant in 2012. She claims she was on maternity leave from 3 January 2013 until 3 April 2013. During her absence the Directors and owners became concerned about the financial health and management of the company’s affairs. It was then that they appointed Mr Grant.

The Applicant’s contract of employment

[9] A written contract of employment for the Applicant was dated 1 July 2010, although it came into operation in August 2010. It provided for a salary of $80,000. This salary included a recognition that the Applicant had previously worked and been compensated for overtime but would no longer be paid for any overtime worked. There was also recognition in the salary that the Applicant received assistance from Mr Shone.

[10] The Applicant asserts that the contract was replaced by another contract on 14 November 2010 (the November contract). A document was produced by the Applicant signed by her and the two Directors as evidence of that contract. The November contract was in almost identical terms except a new provision was included under the heading of Maternity Leave that stated “Maternity leave entitlement is 13 weeks fully paid to cover the period of childbirth”.

[11] The Applicant says she raised the issue of paid maternity leave on 12 November 2010. There is no evidence, nor does the Applicant assert, that it was agreed with at that time. The Applicant says she gave a draft of the new contract to Mr Stawarz in the week beginning 15 November. Her evidence is that he would take it away and have a look at it. This maternity leave provision was a significantly contentious issue and I will return to it later.

[12] When the Applicant became pregnant she advised the Directors in writing on 3 September 2012 as follows “I am writing to you as required by the Fair Work Act 2009. My parental period will start on 2nd of January and I will be returning to work 3rd April 2013”. She again wrote to the Directors on 26 November 2012 in the following terms “I am writing to you as required by the Fair Work Act 2009. As agreed in September my parental period will start on 2nd of January and I will be returning to work on 3rd April 2013”.

[13] The letters make no mention of the maternity leave being paid leave. She presented the letters in September and November 2012 to Mr Stawarz who responded along the lines of “that’s ok”. Her evidence does not suggest that when she presented the letters she made any comment on payment for the leave. The Applicant says later in the week of 15 November 2012 Mr Stawarz returned the new contract signed by both Directors. He apparently said “that’s fine”. There was no mention of the paid maternity leave provision.

[14] The Applicant stated that she discussed her maternity leave with Mr Stawarz several times in the period September to December 2012 including the option of her husband, Mr Martin Shone, performing her duties during that period as a contractor providing those services. Her evidence is that Mr Stawarz “queried the cost”.

[15] The Applicant also says that “on or around” 30 November 2012 at a meeting between her and the Directors options were canvassed regarding how her work would be performed during her absence. She says it was agreed that Mr Martin Shone would perform the duties for reasons including the financial fragility of the company. She also says that “she pointed out to Mr Stawarz ‘again’” that “I [the Applicant] would be getting maternity leave pay and that Mr Shone will be paid as an independent contractor via the company that Mr Shone and I own: Elisha James Business Services & Accountants”.

[16] Mr Stawarz evidence was that he never agreed that the Applicant would be paid maternity leave, nor that Mr Shone would be paid for doing the Applicant’s work during her absence. Mr Stawarz evidenced that he did not care or even know who the money was paid to for the performance of the work. The thrust of his evidence was that he thought that the Applicant was performing the work and she was continuing to be paid whilst she was on maternity leave for the performance of that work. There is substantial confusion in Mr Stawarz’s evidence in this regard. He says the Applicant was on maternity leave but being paid and at the same time was continuing to work. The Applicant can only have been on maternity leave or not been on maternity leave. If she was not on maternity leave then presumably she was still working. If she was on maternity leave she should either have been paid during that leave for the leave itself or not paid for the leave itself.

[17] Mr Stawarz’s evidence seems to have two mutually exclusive positions confused. The impression I gained was that because the Applicant was not attending work but the work was being performed then Mr Stawarz considered the Applicant was working despite her absence. He also seems to have had the view that it did not matter who performed the work as long as it was being performed. It seems it was for that reason he believed that only one wage or its equivalent was being paid, although his position is confused.

[18] The Applicant’s evidence had a clear view of what the arrangements were. She was unwavering in her evidence that she was on maternity leave, that the Respondent had agreed for her maternity leave to be a paid entitlement, and that a separate contractual arrangement had been entered into that Mr Shone would perform her work during that period and payments would be made separately and in addition to the Applicant’s paid maternity leave.

[19] There was no forensic comparison of the November contract and it was accepted that it was genuine. An original of the November contract was not produced nor any explanation given as to why it was not produced. The November contract seems to be a copy of the July contract with the addition of the one line item that states “Maternity leave entitlement is 13 weeks fully paid to cover the period of childbirth”. Even the preamble of the July contract which refers to issues purely associated to the start-up of the new company was included. There are some small differences between the two contracts but no issue was taken with them and no explanation offered. These issues troubled me, but given the lack of challenge to the November contract I will regard it as genuine and authentic.

[20] There is evidence of the payment for maternity leave being discussed with Mr Stawarz but only in the sense of it having been discussed “as a possibility”. The Applicant then says she provided a letter with the proposal contained in it and it was returned signed by both Directors. Whilst the Directors acknowledge a lack of diligence on their part and both believe they did sign the document they say they had such faith in the Applicant that they would sign almost everything she put in front of them. In my view, the Applicant herself was not diligent either. She should have clearly explained the full content of the document and its implications. She should also have presented the new term in a way where there was little scope for oversight of anything that was not clear and precise consent.

[21] Thus an issue that arises from these two different understandings of the arrangements for the period from 3 January to April 3 2013, if the contract was entered into properly and with proper clear disclosures and considerations there should have been no confusion. Furthermore, if it was entered into in a transparent way with clear understandings and audit trails of it, commensurate with what a reasonable person would expect from a Financial Controller with the authority of the Applicant, there should have been no confusion. Importantly, had there been a substantial entitlement provided to the Applicant it was even more incumbent on her to ensure there is no issue that arose. It is also curious that if the arrangements for Mr Shone to perform the work were understood, why a contract to reflect that was not signed by Mr Stawarz until 7 March 2013.

[22] A position such as a Financial Controller, especially with the responsibility and control over finances that the Applicant had, carries with it an obligation to act with honesty and integrity and to avoid any actual conflict of interest or appearance of a conflict of interest. In my view, it is insufficient to discharge those obligations for establishing a paid maternity leave entitlement by relying on a photocopy or a scan of a signed document, where the provision in dispute is an additional single line item in a two page document identical but for that item. It is not surprising given how it was presented that both the Directors believe they unwittingly signed it. The Applicant asserts that at a meeting on 30 November 2012 she pointed out to Mr Stawarz that she would be getting maternity leave pay that Mr Stawarz indicated that he understood, Mr Stawarz however disputes that he ever agreed to paid maternity leave.

[23] The manner in which the Applicant went about obtaining the November contract in itself is a basis for the Respondent to lose confidence in her once they realised what the content of the November contract contained.

[24] An issue also arises as to meaning of the sentence in the November contract “Maternity leave entitlement is 13 weeks fully paid to cover the period of childbirth”. On one reading it means that there is an entitlement to maternity leave and thirteen weeks of that leave is payable. However the payment also seems to be linked to covering the period of childbirth. Whilst there is no evidence of any detailed discussion it might have been intended to mean for the Applicant to have 13 weeks absence from work on maternity leave and that a payment for the period of childbirth be fully paid. The lack of clarity in the sentence is probably also a product of the manner in which the November contract was established. The terminology used casts some additional doubt on the express consent by the Respondents, and if there was consent exactly what they consented to. However, the meaning of the sentence was not challenged and it seemed to be accepted that the November contract did provide for 13 weeks of normal wages during maternity leave.

The payment of claimed “entitlements”

[25] The Applicant was responsible for payments made to staff. She asserts that during the period that she claims she was on maternity leave that her husband was responsible for the payments. The Respondents do not appear to have ever agreed that the Applicant could ever provide or delegate access to bank accounts and payroll to her husband.

[26] Mr Stawarz gave evidence that the accounting records and data were manipulated to enable the Applicant to take and be paid for annual leave well in excess of any accrued entitlement, be paid ordinary pay whilst purporting to take annual leave, paying herself 98 hours of alleged Time in Lieu (TIL) and excessive use of her fuel card. He referred to the evidence of Mr Grant for the details. He also evidenced that “many of the Applicant’s entitlements were trusted by me as to be issued as accrued and paid within the entitlement structures of the business. As a Director I entrusted this work to Mrs Shone as the company’s Financial Controller and she was in the powerful position of controlling all payments and had sole access to the company’s bank account.”

[27] Mr Grant itemised a series of transactions he had extracted from his analysis of the financial records. That analysis showed that payments had been made in addition to her salary. The Applicant did not dispute that the payments had been made but that she either had verbal agreement from Mr Stawarz to make those payments or she had some contractual entitlements to them. Unfortunately, Mr Stawarz was not questioned by either the Applicant’s representative or the Respondent’s representative on the Applicant’s evidence in that regard. I make no inferences from that.

[28] There was no paper trail that established approval for many of the transactions. The Applicant explained that many of the approvals were verbal from Mr Stawarz, or were contractual terms. The evidence of Mr Grant was that there was no paper trail that could be found.

[29] Some of the explanations of the Applicant were illogical. For example on 24 March 2011 the Applicant was paid for a week’s work and a further 23 hours. She explained that the extra 23 hours was for sick leave. She could not recall the nature or timing of the sick leave nor whether she provided a Medical Certificate. Presumably it was for days where she was absent and not paid. However, there is no evidence of any days where she was not paid whether because of an absence or for any other reason. I conclude that she was paid 38 hours for the weeks work plus 23 hours for days she was absent and had already been paid, effectively being paid double time for sick leave, if indeed she had been absent.

[30] On 12 December 2012 she was paid an extra 98 hours. The Applicant explained that this represented 98 hours for Time in Lieu, apparently meaning payment for overtime that had been worked. The notation she put on the records showed “Approved by Shon (Stawarz) to pay out” as he issued an instruction “to pay all employees that (are) on a TIL system”. However this clearly would not have been intended to apply to the Applicant because at that time she was on a salary that had been increased from a base of $49,000 to $80,000 on the basis that she would not be entitled to overtime payments. She claimed she had an additional contract, but it was not produced.

[31] The Applicant gave evidence that she paid out what she regarded as her right to payment in lieu of taking “smoko breaks”. She asserted that Mr Stawarz had verbally agreed to such a payment. Apparently in accordance with that agreement she paid herself a total of $7,540.05 or 152 hours. The Applicant later provided the calculation method she used to make the payment, but there was no evidence of any written consent to entitlement to the payment. She also provided what are purported amended contracts for two employees in support of her contention that she was entitled to the payment. The purported amended contracts are unsigned. All that those purported contracts do is provide for those employees for a paid 15 minute break at 10:00am. I do not understand how the Applicant can rely on those two contracts as evidence that she was entitled to an extra payment of 15 minutes because she did not have the breaks. There is not any evidence other than her own of a verbal consent by Mr Stawarz that there was any agreement that she be paid for the smoko time. In any event she had already been paid for the equivalent for smoko time in her ordinary 38 hours. What she was really asserting was that she should be paid double time for those hours because others were being paid single time when they were not working. I stated during the proceedings that was a bizarre approach.

[32] There was a series of payments for what the Applicant asserted was cashing out of annual leave. Mr Grant gave evidence that showed the total of the payment made and the leave taken and paid for, significantly exceeded any possible entitlement. Mr Stawarz gave evidence that he did give authority to cash out annual leave on one occasion. Perhaps the Applicant took this as a permission to cash out annual leave at any time. However there is no evidence that approval was given on an open ended and perpetual basis although the Applicant seems to assert that the approval was open ended. Mr Mark Pimlott, another employee of the Respondent gave evidence that it was understood that annual leave could be cashed out and that it was a “verbal policy”. Even if there was authority to cash out any accrued annual leave at any time, this does still not explain the excess between the leave paid for and that which the Applicant was entitled to. It also does not explain the poor record keeping of the transactions and the approvals for it.

[33] The Applicant also gave evidence that a fuel card was provided to her. Mr Grant gave evidence of obvious use of the card by others. The Applicant explained that she gave the card to other employees to use and from January 2013 her husband used the card. There is no evidence of any approval for other employees using the card. She says that approval for her husband to use the fuel card was by the contract Mr Stawarz signed for Mr Shone to become a contractor. The document stated that “The pay rate shall be the same as Tammy’s [the Applicant’s] remuneration rate as agreed”. The Applicant interpreted the words remuneration as including use of the fuel card as she regarded that as remuneration. There is no evidence of any express approval for Mr Shone to use the fuel card. Indeed the written document she relies on was not signed until 7 March 2013, well after the card had been used by Mr Shone. There is also no evidence that Mr Shone used the card without the Applicant’s knowledge and consent.

[34] The Applicant also for a period did not withhold tax from her salary. She claims this was agreed to by Mr Stawarz. Apparently the Applicant has little idea of the taxation obligations of a company with respect to deducting income tax and the liability a company has in that regard. Even if it had been agreed by Mr Stawarz, which I do not find, it would be a grossly irresponsible and inappropriate act for a person with responsibilities for the financial affairs of a company.

[35] I find that in each of the matters above the Applicant did not display the competence and responsibilities of a Financial Controller in a manner that was transparent and appropriate.

Conclusions

[36] The Applicant was dismissed for reason that the Respondent had a lack of faith and confidence in her.

[37] The catalyst for the Directors concerns about the Applicant appears to be the lack of trust and confidence in the Applicant being able to keep payments to suppliers under control. That was then exacerbated by the Directors becoming aware that payments were being made to a company part owned by the Applicant and her husband. The payments were purportedly for the duties of the Applicant being performed by her husband under a contract by their company for the Respondent. The duties would otherwise have been performed by her. The Respondent through that period also paid the Applicant her normal salary. The problem emanates from a lack of proper process within the Respondents operations. There were also fundamental flaws in the establishment of such a relationship and a lack of understanding and clarity of what it entailed. The Respondent disputes any such arrangement was ever established. However the Respondent displayed a carelessness by not caring who did the work and how it was paid for.

[38] However, there are a range of other issues that I have canvassed above that I find that there was conduct that did occur to sustain a view that the Respondents had grounds to have lost trust and confidence in the Applicant. The reasons they provided in the letter of termination contain some flaws, however, the Applicant’s actions and responsibilities for the payroll were applied in such a way to gouge benefits from the company. She had a responsibility to maintain an audit trail and authorities for payments made. Little supporting documentation could be provided. It is clear from the evidence and my assessment and findings above that there were overwhelming grounds supporting a view being formed by the Respondents that they could no longer have confidence in her. In her position the Applicant had an obligation to act in good faith in the best interests of the company, to ensure thorough fulsome disclosure where there was a conflict of interest or even a potential for the appearance of a conflict of interest. She also had obligations to act with due care and diligence. I consider that the Applicant had little understanding of these obligations or if she did she did not properly apply them.

[39] I find that the conduct of the Applicant occurred and was such that the Respondents lost confidence in her. There was thus a valid reason for dismissal.

[40] The Applicant was notified of the reasons for her dismissal but only when the decision had been taken to notify her. I find that she was therefore not notified, but in the circumstances of the nature of the assertions against her and the overwhelming evidence, the Respondent eventually provided to establish that they could not have faith and confidence in her.

[41] Similarly, the Applicant was not given an opportunity to respond but for the previous paragraph I give little weight to this criteria. Section 387(c) of the Fair Work Act 2009 (the FW Act) is not relevant.

[42] I do not consider s.387(e) of the FW Act as being relevant but even if it is, there was no warning for the matters and I find gives rise to a valid reason for dismissal. However, I give little weight to this criteria for reasons outlined above.

[43] The Respondent is a relatively small employer and it is obvious form the evidence that there was little proper procedure. This does weigh in favour of the Applicant for failures of procedure, but I give little weight to this criteria as well. There is no dedicated human resource support.

[44] There are no other relevant matters that I have not considered in relation to the other criteria above. I find the dismissal was not unfair. The application is dismissed.

DEPUTY PRESIDENT

Appearances:

Mr Pinchen for the Applicant

Mr Mullaly for the Respondent

Hearing details:

2013.

Perth:

September 17, 18.

Final written submissions:

Applicant, 26 September and 6 August 2013

Respondent, 3 September 2013 and 4 October 2013

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