Jayson Harvey v Xtu Pty Ltd (ACN 140 390 307) T/A Blackwood Fitness

[2015] FWC 8457

[2015] FWC 8457

FAIR WORK COMMISSION

REASONS FOR DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Jayson Harvey
v
XTU Pty Ltd (ACN 140 390 307) T/A Blackwood Fitness
(U2015/3066)

COMMISSIONER HAMPTON ADELAIDE, 14 DECEMBER 2015

Application for relief from unfair dismissal – identity of respondent amended by consent – employer foreshadowed moves to be put business into voluntary administration – adjournment application rejected – hearing conducted in absence of respondent – matter determined – Order issued – reasons for decision now provided.

1. Background

[1] On 4 December 2015, I determined this application and made orders. This followed a hearing during which the respondent party initially sought an adjournment, and when this was refused, the representative of that party withdrew. The hearing then continued as scheduled without the participation of the respondent.

[2] The decision of the Commission was provided in transcript. At that time I indicated that I would subsequently issue edited reasons for decision, which I now do.

[3] Before setting out the reasons for decision, it is important to confirm the nature and history of the matter and the reasons for rejecting the application for the adjournment.

2. The nature and history of the matter and the request for an adjournment

[4] These reasons for decision arise out of an application by Mr Jayson Harvey (the Applicant) pursuant to s.394 of the Fair Work Act 2009 (the Act) claiming a remedy in relation to an unfair dismissal by his former employer, XTU Pty Ltd (ACN 140 390 307) T/A Blackwood Fitness (the Respondent).

[5] The application as filed cited the employer as Marpav Pty Ltd T/A Blackwood Fitness. Following the unsuccessful conciliation of the matter and a directions conference, the matter was set down for hearing on 4 June 2015. Each party filed evidence and submissions in the lead up that hearing. However, at the commencement of proceedings on 4 June 2015, Mr Manos (of counsel), who had only very recently been instructed and appeared with permission, 1 advised the Commission that Marpav Pty Ltd had not been the employer of Mr Harvey at any time. Further, the respondent sought that the unfair dismissal application be dismissed on that basis.

[6] Given the implications of that position and the fact that Mr Harvey was not on notice about the issue, the matter was adjourned to enable the applicant to obtain some advice.

[7] In due course it became apparent that XTU Pty Ltd was the applicant’s employer but that it was no longer trading. Although the applicant initially sought to amend his application to name another business said to be associated with Blackwood Fitness, ultimately the application was amended by consent, to name XTU Pty Ltd as the respondent employer.

[8] The amendment was made in the context of an indication on behalf of the respondent that XTU Pty Ltd had been re-registered at some stage after 3 June 2015. This apparently occurred in the context of dealing with taxation liabilities, and an undertaking was given to the applicant by the respondent that it would not seek to de-register prior to the determination of the matter. The respondent also indicted that it could provide “no undertaking in relation to the ongoing position of the Company.” 2

[9] The matter was then set down for a hearing on 4 December 2015, being a date specifically arranged to suit the convenience of the parties, including the respondent’s major witness.

[10] In the lead up to the scheduled hearing, a representative then acting for the applicant advised the Commission that he had become aware that the respondent was likely to be put into voluntary administration and was concerned that an application might be made for the matter not to proceed as scheduled.

[11] During the course of a directions conference conducted on 25 November 2015, Mr Manos advised that it was likely that the respondent would be put into voluntary administration in the next day or so, that it was not seeking the adjournment of the unfair dismissal matter, but that the position would ultimately be a matter for any Administrator appointed. The Commission advised the parties that the application would remain listed for hearing on 4 December 2015 and that it, and the applicant, should be advised immediately if any Administrator was actually appointed.

[12] At the commencement of proceedings on 4 December 2015, Ms Rudnick appeared for the respondent and sought the matter be adjourned on the following basis:

“MS RUDNICK:  I'm instructed that my client has sought advice from an external administrator with a view to putting the company into voluntary administration on the basis that obviously it simply has no money and doesn't want to take the risk of trading while insolvent.  I'm instructed that my client is getting together financial documents required by the administrator in order for the voluntary administration to take effect, and that that should come into effect within the next fortnight, at which point I'm instructed to hand over the file to the administrator of the company.  So my client seeks an adjournment of this matter to enable the file to be transferred to the administrator.” 3

[13] When questioned by the Commission about why this should lead to the application being adjourned and the whereabouts of the respondent’s director and witness (who was not in attendance) the Commission was advised that:

“MS RUDNICK:  Yes, he has instructed me that he's unable to attend today.” 4

[14] And later:

“Yes.  The director of the company is interstate.

… …

MS RUDNICK:  Well, my instructions are that the director of the company is interstate but I deal with the director's son, who speaks English.  The director doesn't, and he is unwilling and unable to attend.  Commissioner, I have obviously given him advice about that.

… …

MS RUDNICK:  That's right.  My instructions cease there, so if the adjournment is not granted then I would seek permission to, or seek leave to, cease acting and permission to be excused from the hearing.” 5

[15] The matter was adjourned briefly at that stage to enable the parties to explore a resolution, noting that there were issues between them beyond the unfair dismissal matter, and to enable me to consider the adjournment application. This also allowed Ms Rudnick to confirm her instructions more generally in light of the Commission’s initial response to the adjournment application. There was no resolution and nothing further was put to the Commission on behalf of the respondent.

[16] Having considered the history of the matter and the potential prejudice arising from the delay, I declined to adjourn the application. I note in that regard, that whilst a potential move into voluntary administration may have an impact upon the utility of any outcome of the matter, that prospect of itself, does not provide a basis not to proceed with an unfair dismissal application in this jurisdiction. Further, the long and troubled history of the matter, and the outcome of the 25 November 2015 directions conference, were also influential factors militating against an adjournment at that point. The Commission is also expressly empowered to determine a matter in the absence of a party who was required to attend proceedings. 6

[17] Ms Rudnick was then given leave to cease acting and was excused.

[18] During the course of the hearing which followed, the applicant gave sworn evidence in support of his case. Although he was not cross-examined, I questioned him in relation to the major issues apparently in dispute including the assertions originally advanced in the respondent’s materials.

3. The contentions of the parties

[19] In the circumstances, it is not necessary to outline all of the contentions of the parties. It is however desirable that some context for the decision be set.

[20] Mr Harvey was employed within the Blackwood Fitness operations on a full-time basis as a Business Development Manager from August 2012. He was primarily responsible for the development and operations of the personal training part of the business. His original salary was in the order of $87,000 however this was reduced, by consent in December 2014, to $70,000 in the context of cost cutting moves.

[21] It was common ground that at some point Mr Harvey had a personal relationship with a client of Blackwood Fitness and this created issues for those directly involved and others associated with them, including some individuals at the fitness centre. The other party to the relationship was at that time about to be, or was, featured in an advertising campaign for Blackwood Fitness.

[22] It is also common ground that there were some issues with the recruitment and retention of sufficient personal trainers to grow the business as sought by the employer and Mr Harvey.

[23] In early February 2015, the respondent indicated to Mr Harvey that there would need to be a further cut in his salary and if this did not occur, then the (employment) relationship might need to end. Mr Harvey reluctantly accepted the salary reduction, to $60,00 per annum plus entitlements.

[24] On 5 February 2015, there was discussion between Mr Harvey and Mr John Davlis, the Finance Manager of the respondent, about the applicant’s employment. There was a fundamental dispute about the content and outcome of this conversation.

[25] On 6 February 2015, a further discussion took place and during this meeting the concept of a “pay-out” being given to the applicant in the context of a release from any claims, was raised by the respondent.

[26] There was no agreement reached and Mr Harvey left the premises. He was not given notice or pay in lieu of notice, and there is also a dispute about outstanding entitlements.

[27] The substance of Mr Harvey’s contentions was that:

● He had been dismissed by Mr Davlis in the meeting of 5 February 2015 and did not resign;
● He had not been warned that his employment was in jeopardy due to his performance or conduct and had recently accepted a pay reduction in order to preserve his employment;
● The personal relationship had a significant impact upon him but was not against any policy or instruction and he had been informed that the employer was not concerned about it;
● He was not responsible for the resignations of the personal trainers and was implementing agreed changes to address the issue without the necessary assistance; and
● He was dismissed unfairly given all of the circumstances including the absence of warnings and notice.

[28] Mr Harvey gave sworn evidence in support of his case.

[29] Mr Harvey claimed compensation for the time that he was without employment following the alleged dismissal and payments to cover outstanding entitlements associated with work performed but not paid, notice, annual leave and telephone allowances. In respect to these “entitlements”, I advised Mr Harvey that these were not matters for the Commission in the present matter and that I would not be addressing them in any decision to be made.

[30] The substance of the respondent’s contentions was, in effect, that:

● Mr Harvey resigned during the course of a meeting on 5 February 2015;
● It had offered to make a payment to Mr Harvey in light of his resignation but only in the context of a release agreement;
● There were work performance issues including those associated with the recruitment and retention of personal trainers and Mr Harvey was responsible for this and the failure to meet budget targets;
● Mr Harvey’s personal relationship was an abuse of his position and had impacted upon the business including the need to cancel an advertising campaign featuring the other party; and
● It had raised performance concerns with Mr Harvey during the course of his employment.

[31] There was, given the absence of the respondent at the hearing, no witness evidence to support these notions. Some relevant documents supplied by the respondent were however put to the applicant by the Commission during the course of the hearing.

4. The reasons for decision

[32] The following reasons, now edited, were provided at the conclusion of the hearing. 7 I have also added appropriate references consistent with the terms of the decision.

I have heard this matter today in the absence of the respondent party and I am in a position to determine this application now, and I consider it appropriate to do so.

I will subsequently issue formal reasons for a decision including the circumstances leading to the amendment of the application to cite XTU Pty Ltd trading as Blackwood Fitness as the respondent party. The decision to be issued in due course will also canvass the circumstances leading to the hearing of this matter in the absence of the respondent or the respondent's representative.

In determining this application I would make it clear that this is not a default judgment and it is based upon sworn evidence and submissions applied to the relevant considerations under the Act and determined on merit. Although not subject to cross examination, I did appropriately test the evidence of Mr Harvey under oath and I consider it to be reliable.

I am also satisfied that Mr Harvey was protected from unfair dismissal within the meaning of the Act 8 and there was a valid application before the Commission.9

Given the circumstances of the matter, three key issues arose under the provisions of the Act. Firstly, whether Mr Harvey was dismissed within the meaning of the Act. This requires consideration of section 386 of the Act in the context of the evidence. I find that Mr Harvey was dismissed by Mr Pavlis during the course of a discussion on 5 February 2015.

I am satisfied that Mr Harvey did not resign. In that regard, I note his own direct evidence and the improbability of that alleged course of action given the acceptance of two relatively recent salary reductions in order to facilitate his on-going employment. In light of the evidence, I am satisfied that the dismissal was at the initiative of the respondent employer and this satisfies section 386(1)(a) of the Act.

The second key issue that arises is having found there was a dismissal, whether that dismissal was unfair. This requires a consideration of the various factors set out in section 387 of the Act. The first of those is section 387(a) and in particular whether there was a valid reason for the dismissal related to Mr Harvey’s capacity or conduct, including its effect on the safety and welfare of employees. Valid in this context is generally considered to be whether there was a sound, defensible or well-founded reason for dismissal.

Further, in considering whether a reason is valid the requirement should be applied in the practical sphere of relationships between the employer and the employee where each has rights, privileges, duties and obligations conferred and imposed on them. That is, the provisions must be applied in a practical common sense way to ensure that both parties are treated fairly. In applying this approach it is also important to recognise the conduct occurs in a practical context and this must be taken into account. 10

It is also clear from the authorities binding on the Commission that the reason for termination must be defensible or justifiable on an objective basis of the relevant facts before the Commission. That is, it is not enough for an employer to rely upon its reasonable belief that the termination was for a valid reason. 11 Equally, facts justifying dismissal, which existed at the time of the termination but discovered later, should be considered even if the employer was unaware of the facts and did not rely on them at the time.

Based on the evidence before the Commission I am satisfied; firstly, that there were issues arising from the personal relationship that took place and that this did have some consequences for the workplace. However, the issue was not originally raised by the respondent as a significant issue of concern. In addition, it was not in breach of any workplace policy or instruction, and further, it did not lead to the advertising campaign being abandoned as was originally suggested by the respondent.

Secondly, the resignation of a number of the personal trainers was also an issue. This is somewhat explained by seasonal and industry norm factors, however, the applicant must take some responsibility for that circumstance given his role. That responsibility was to take initiatives to deal with the issues that arose and the issues that were created by those resignations, and there is some evidence to support the fact that this was being done.

Thirdly, in relation to budget results it is not clear on the evidence but I suspect that the budget results were not all being achieved, given the issues associated with the recruitment and retention of the personal trainers. Having regard to all of the evidence before the Commission I find that there were concerns, which in other circumstances would be legitimately raised by the employer with Mr Harvey, but there was not a valid reason for dismissal as contemplated by the Act given all of the circumstances.

The second issue to be considered arises from section 387(b) and that is whether Mr Harvey was notified of the reasons for dismissal. This consideration requires the Commission to assess whether the applicant concerned, in this case Mr Harvey, was relevantly notified of the reasons leading to the dismissal before that decision was taken. 12

The evident purpose of this consideration is that notification of the valid reason to terminate must be given to the employee before the decision to terminate the employee is made, and the notification needs to be in explicit and plain and clear terms. Mr Harvey was not notified of the reasons as required and this is clearly demonstrated by the evidence.

The next consideration arises from section 387(c), whether Mr Harvey was given an opportunity to any reason related to his capacity or conduct. The relevant reasons are those related to the valid reasons and this therefore requires consideration of the earlier findings. The process contemplated by the Act does not require any formality and it is to be applied in a common sense way to ensure that the employee has been treated fairly.

The question becomes whether Mr Harvey was aware of the precise nature of the employer's concerns about his conduct and had a full opportunity to respond to those concerns. Whilst some of those issues were raised in an informal way, an opportunity was not provided in a manner that is contemplated by this consideration of the Act.

The next consideration is section 387(d), any unreasonable refusal by the respondent to allow Mr Harvey a support person. There is no evidence of a request being made and this consideration therefore does not arise.

The next consideration is section 387(e), if the dismissal is related to unsatisfactory performance of Mr Harvey, whether he has been warned about the unsatisfactory performance before the dismissal. This consideration relates to the performance of work and I apprehend that performance issues were part of the reasons for dismissal.

It is clear on the evidence that Mr Harvey was not warned that his employment was in jeopardy. There was also no performance management or similar process underway and accordingly I am not satisfied that there was a warning provided, at least as contemplated by section 387(e) of the Act.

The next series of considerations arise from section 387(f) and 387(g) of the Act and they go to the size of the respondent's enterprise and the absence of any human resource management expertise. The evidence indicates there are about 30 employees so it is not a large employer. I presume, in the absence of evidence to the contrary, that there are no apparent human resource management specialists or expertise and accordingly this is a factor to be taken into account, particularly as regards the procedural fairness elements of the dismissal.

Section 387(h), refers to other matters considered to be relevant. Amongst other considerations the Commission should consider the impact of the dismissal upon Mr Harvey, given all the circumstances. This includes considerations of whether the dismissal was harsh in the sense that it was disproportionate to any actual conduct found by the Commission.  13

The factors to be considered in this conduct include the nature of any conduct and the circumstances of the workplace, and the circumstances of Mr Harvey and the impact of the dismissal upon him.

In terms of other factors I have considered what I have found to be the harsh impact of the dismissal. This includes the fact that there was no notice or pay in lieu of notice provided at the time of the dismissal in the context of someone who was clearly a full time employee. Further, although there were concerns about conduct in the workplace, these were not serious misconduct within the meaning of the Act which would otherwise justify a dismissal without notice.

Having considered all of the considerations raised by section 387 of the Act and those other factors, I consider that the dismissal was harsh, unjust and unreasonable.

Having found the dismissal was unfair, I now need to consider whether a remedy should be given and if so, to what extent. Mr Harvey does not seek reinstatement but rather, compensation. This means that I must consider the terms of section 392 of the Act in the context of the other provisions. The Act again sets out a series of matters that the Commission must have regard to in this respect.

Firstly, the effect of any order on the viability of the respondent. 14 Issues have been raised about the trading capacity of the respondent including the potential for it to go into insolvency, or at least to enter voluntary administration. In that context, whilst there is no evidence, I am prepared to allow for the fact that that is likely to be the case and I have taken that into account. However, I am also satisfied that any orders that the Commission can make in the circumstances of this matter are unlikely to make a practical difference in that respect.

Next, I have to consider the length of Mr Harvey’s service, 15 in this case being over two years. Thirdly, the remuneration that Mr Harvey would have received or was likely to have received if he was not dismissed.16 This involves, in part, a consideration of the likely duration of Mr Harvey's employment in the absence of what I have found to be an unfair dismissal.

The Full Bench in a recent decision (McCulloch v Calvary Health Care Adelaide17) also confirmed that when assessing likely loss remuneration, cogent evidence is required where the Commission has not found a valid reason for dismissal. In this case I have not found a valid reason, albeit with the existence of certain issues that were present in the workplace. This must all be weighed along with the nature and length of the employment and the concerns that were present in the relationship.

In all of the evident circumstances it is reasonable to assess compensation in this matter on the basis that the applicant would on the balance of probabilities have remained in employment at least for the period until he gained his new employment. Mr Harvey's salary at the time was $60,000 per annum, having recently been reduced by consent, or $1,154 per week plus statutory superannuation. The evidence reveals that the applicant was out of work for approximately 14 weeks. Accordingly the projected remuneration loss in this case is $16,154 plus superannuation.

The next consideration is the efforts Mr Harvey went to mitigate the loss suffered by his dismissal. 18 Mr Harvey, based on the evidence, has made significant efforts to mitigate his loss and no discount of compensation otherwise due is appropriate in this regard.

The next series of considerations under the Act relate to the amount of remuneration earned by Mr Harvey from employment or other work during the period between the dismissal and the making of the order for compensation, and the amount of income reasonably likely to have been earned during the period between the making of the order and the actual compensation order. 19

As I have only projected employment for 14 weeks, there was no relevant employment or work related income in that period and on that basis I do not believe it is appropriate or reasonable to take into account the income subsequently received by the applicant so as to reduce the projected amount.

The last series of considerations directed by the Act is any other matters that the Commission considers relevant, 20 and there are also some remaining statutory parameters. Firstly, I have taken into account the projected nature of the anticipated loss of remuneration over a short period that has already taken place and in that light I do not need to make a further allowance for contingencies.²¹

There was no demonstrated misconduct 22 within the meaning of section 392(3) of the Act and in accordance with section 392(4) of the Act I make no allowance for any shock, distress or humiliation that may have been caused by the dismissal. The amount of compensation that I have determined is less than the limit established by the Act. Taxation is to be paid on the amount that is determined and I have therefore taken that into account.

There is no application by the Commission for the payment of the compensation in instalments and in my view the compensation that I will confirm in a moment is also appropriate, having regard to all of the circumstances of the matter and the considerations specified by the Act.

In light of my findings I have found that Mr Harvey was dismissed, that the dismissal was unfair and that compensation should be granted. I have determined that an order is to be made awarding Mr Harvey 14 weeks’ pay at the annual rate of $60,000 per annum, being a figure of $16,154 gross less taxation plus statutory superannuation. This order will take effect immediately and will require payment to Mr Harvey within seven days.

[33] The order 23 was issued in writing on 4 December 2015.

COMMISSIONER

Appearances:

J Harvey, the applicant on his own behalf.

A Manos, of counsel, and later K Rudnik, of Commercial and Legal,with permission for XTU Pty Ltd.

Hearing details:

2015

Adelaide

June 4

December 4.

 1   S.596 of the Act. Permission was given for the purposes of raising the issues surrounding the identity of the respondent.

 2   Correspondence on behalf of the respondent on 28 August 2015 and an email on 29 September 2015.

 3   Transcript PN185.

 4   Transcript PN187.

 5   Transcript PN193-203.

 6   S.600 of the Act.

 7   Taken from the partial transcript of proceedings.

 8   S.382 of the Act.

 9 The application was made within the time specified by the Act – s.394 and was otherwise in order.

 10   Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 as cited in Potter v WorkCover Corporation, (2004) 133 IR 458 and endorsed by the Full Bench in Industrial Automation Group Pty Ltd T/A Industrial Automation [2010] FWAFB 8868, at par [36].

 11  See Australia Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1; King v Freshmore (Vic) Pty Ltd AIRCFB Print S4213 per Ross VP, Williams SDP, Hingley C, 17 March 2000; Edwards v Giudice (1999) 94 FCR 561; Crozier v Palazzo Corporation Pty Limited t/as Noble Park Storage and Transport AIRCFB Print S5897 per Ross VP, Acton SDP and Cribb C, 11 May 2000 and Rode v Burwood Mitsubishi AIRCFB Print R4471 per Ross VP, Polites SDP, Foggo C, 11 May 1999.

 12  See Trimatic Management Services Pty Ltd v Daniel Bowley [2013] FWCFB 5160.

 13   Australia Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1.

 14   S.392(2)(a) of the Act.

 15   S.392(2)(b) of the Act.

 16   S.392(2)(c) of the Act.

17 [2015] FWCFB 873.

 18   S.392(2)(d) of the Act.

 19   S.392(2)(e) and (f) of the Act.

 20   S.392(2)(g) of the Act.

21 See the discussion of contingencies in McCulloch at [20] – [23]; Bowden v Ottrey Homes Cobram and District Retirement Villages Inc T/A Ottrey Lodge[2013] FWCFB 431, at par [52]; Ellawala v Australian Postal Corporation AIRC Print S5109, per Ross VP, Williams SDP and Gay C, 17 April 2000 and in Enhance Systems Pty Ltd v James Cox AIRC Print PR910779, per Williams SDP, Acton SDP and Gay C, 31 October 2001.

 22   The evidence was that there were no policies or instructions about personal relationships with clients and Mr Harvey was not disciplined in relation to that matter.

 23   PR574753.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR574803>