Jessica McGlashan v The Entrance Discount Variety Pty Ltd t/a the Base Warehouse - [2018] FWC 3284

[2018] FWC 3284

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009

s 394—Unfair dismissal

Jessica McGlashan

The Entrance Discount Variety Pty Ltd t/a The Base Warehouse

(U2018/455)

DEPUTY PRESIDENT SAMS

SYDNEY, 29 JUNE 2018

Application for an unfair dismissal remedy – Store Manager – applicant dismissed for alleged serious misconduct – alleged involvement in fraudulent activity and cover up – no warnings – no opportunity to respond – dismissed over the phone – no valid reason for dismissal – no procedural fairness – dismissal harsh, unjust and unreasonable – compensation ordered – Sprigg methodology applied – orders made.

BACKGROUND

On 30 August 2015, Ms Jessica McGlashan commenced employment as a Store Assistant at the Base Warehouse, a discount variety store at The Entrance, on the Central Coast of New South Wales. She was appointed the Full-time Store Manager on 9 October 2017 on a salary of $48,000 per annum under the General Retail Industry Award 2010 [MA000004]. Ms McGlashan was dismissed by the business owner, Mr Peter Zafiropoulos on 2 January 2018. He alleged the applicant had allowed fraudulent activity to happen under her management and attempted to cover it up. While Mr Zafiropoulos initially claimed the business was a small business (as defined) he later abandoned that contention.

On 12 January 2018, Ms McGlashan (hereafter the ‘applicant’) filed an application for an unfair dismissal remedy, pursuant to s 394 of the Fair Work Act 2009 (the ‘Act’). The application was subject to an unsuccessful telephone conciliation on 14 February 2018 and subsequently allocated to me for hearing and determination. In accordance with my usual practice, I convened a further ‘face to face’ conciliation on 12 March 2018 while at the same time issuing directions for a hearing of the matter on 26 April 2018, later brought forward to 19 April 2018. The matter was not resolved and proceeded to hearing.

At the hearing the applicant represented herself (assisted by her father, Mr McGlashan) and Mr P Leeson appeared for the respondent.

EVIDENCE

The following persons gave evidence in the proceeding:
·   Peter Zafiropoulos – Business owner;
·   The applicant;
·   Ashleigh Westling – Former employee.

Mr Peter Zafiropoulos

In his statement, Mr Zafiropoulos made clear the reasons for the dismissal of the applicant. He claimed that the applicant ‘colluded with a fellow staff member’ (Ms Jessica Tinker) in fraudulent activity; being the falsification of timesheets in respect to Ms Tinker’s annual leave. He described the circumstances leading to the applicant’s dismissal as follows.

On or about 28 December 2017, Mr Zafiropoulos was contacted by two Assistant Managers of The Entrance store to enquire as to the whereabouts of Ms Tinker, as she was rostered to work between the 27-29 December 2017. He was informed that she was not at work. He waited until 2 January 2018 to see what Ms Tinker put on her timesheets. Ms Tinker had claimed on her timesheet that she was at work between the 27-29 December 2017. Mr Zafiropoulos was concerned that Ms Tinker had claimed she was at work when she was not. He contacted the Fair Work Ombudsman (FWO) to enquire as to whether the falsification of timesheets is a situation which gives rise to instant dismissal. It was his evidence that the FWO advised him that fraud committed by an employee could give rise to instant dismissal.

Mr Zafiropoulos then phoned the applicant, (as she was not rostered to work on 2 January 2018), to question her about Ms Tinker’s timesheet. She advised him that Ms Tinker was on authorised leave for the dates in question; and she had approved the leave. Mr Zafiropoulos said the applicant would have been aware it is Company policy that staff are to fill out and submit a leave form, with 90 days’ notice, and to have the form co-signed by him and the Store Manager. Mr Zafiropoulos asked the applicant for a copy of Ms Tinker’s signed leave request form. However, it was not provided. Mr Zafiropoulos said he then provided the applicant with a further opportunity to tell the truth. As she maintained that Ms Tinker was on authorised leave which she had approved, Mr Zafiropoulos dismissed her for ‘covering up / participating in the fraudulent activity’.

Mr Zafiropoulos disputed the applicant’s assertion that she was not aware of the Company’s leave policy. Mr Zafiropoulos referred to an email to him from the applicant, dated 16 November 2017, in which she had requested leave for herself. This email clearly demonstrates that the applicant was aware of the Company’s leave policy; more specifically, the requirement to submit a leave request with 90 days’ notice. So much so is self-evident from the applicant’s acknowledgment in her email that her request for leave for the period 31 December 2017 to 2 February 2018 was made with only 76 days’ notice. The email reads as follows:
31/1/18-2/2/18
This is 76 days notice. On my short weeks so I will be gone for a whole week.

Thanks,
Jess.

Attached to the email is a PDF document which is titled ‘Jessica leave form.pdf’.

Mr Zafiropoulos annexed to his statement two letters from members of The Entrance Store’s Management team – Ms A Patton and Ms S Heginbotham, which he claimed confirm that the applicant was evasive as to Ms Tinker’s whereabouts between 27-29 December 2017. Ms Patton’s letter read:

To Whom It May Concern,
This letter is to certify that I, Alison Patton, former 2IC (assistant manager) of The Base Warehouse at The Entrance, was not aware nor notified of Jacqueline (Jakii) Tinker being on annual leave for the week of 25-12-17 to 32-12-17. (sic)
As Jaqueline was not present at work on any of the above mentioned dates, I asked the Manager at the time, Jessica McGlashan where Jakii was and was not given an answer.
I am fully aware of the procedure concerning Annual Leave application and was under the belief that all other full-time and part-time staff also understood this procedure.
Yours sincerely,
Alison Patton.

Ms Heginbotham’s letter read:

To Whom It May Concern,
This letter is to certify, that I, Shannon Heginbotham, full-time Manager of our Homewares section, was not aware or notified of Jacqueline (Jakii) Tinker being on annual leave for the week of 25/12/17 to 31/12/17.
I questioned where she was but was not answered and normally we are all aware when one another is taking holidays or on leave.
I am aware of the practices and necessary procedure for annual leave as you are taught this when you first commence.
Yours sincerely,
Shannon Heginbotham

It was Mr Zafiropoulos’ evidence that he did not provide the applicant with notice of termination of employment because:
‘this was my first time in this situation and wanted to check with my solicitors, they were on holidays and I had been contacted by Fair Work before they returned’.

Although the applicant’s Contract of Employment stipulated a 4-week notice period, in Mr Zafiropoulos view, compliance with this term was unnecessary because of the applicant’s actions and under the advice of ‘Fair Work’. However, he said that all of the applicant’s accrued entitlements were paid out on 3 January 2018.

In cross examination, Mr Zafiropoulos was asked why he did not contact the applicant, or enquire as to the whereabouts of Ms Tinker when he was initially made aware that Ms Tinker was not at work. He responded by saying that he was waiting ‘to see what was going to happen the following week’, as Ms Tinker had been problematic before, particularly with leave and ‘chucking sickies’ around public holidays. Mr Zafiropoulos ‘wanted to see what would actually happen through the paperwork and through the system’.

When asked how he reached the conclusion that the applicant had colluded with Ms Tinker to defraud his Company, Mr Zafiropoulos responded that Ms Tinker did not have her leave approved by him. When he contacted the applicant, and learnt that she had approved Ms Tinker’s holidays, without any approval from him, or through the system, he knew the applicant was ‘backing up’ Ms Tinker. She had clearly put her timesheet through as normal working hours. He believed this conduct amounted to a cover up or a fraud.

During questioning, I asked Mr Zafiropoulos what he meant in his written statement when he said ‘This was my first time in this situation’. He responded that the situation he was referring to is where staff have ‘played with the roster’ and defrauded the roster. That had never happened before.

Jessica McGlashan

In her statement, the applicant claimed that ‘all staff members’ were aware that Ms Tinker was on leave between 27-29 December 2017. The applicant knew that Ms Patton was aware of this as she ‘asked her directly if she minded that Jakii (Ms Tinker) have those days off to go and see family which she agreed was fine’. Moreover, Ms Patton had told other staff and customers that Ms Tinker was on leave. In fact, the applicant’s mother attended the store on the 27 of December 2017, and after enquiring as to Ms Tinker’s whereabouts (perhaps believing she was sick), Ms Patton confirmed that Ms Tinker was on holidays.

The applicant said Ms Heginbotham was not at work on 27 December 2017 and does not work in the same store (she works in a store across the road). That being so, even though Ms Tinker’s whereabouts should not have been Ms Heginbotham’s concern, she was sure that either she, or Ms Patton had told her that Ms Tinker was on leave. It was no secret.

The applicant claimed that Ms Tinker was a full-time employee and under no Contract of Employment. In these circumstances, she had not understood that 90 days’ notice of annual leave was needed and she had not been told otherwise. She had not received training on the processes for leave approval, when she was promoted to Store Manager. In fact, Mr Zafiropoulos had previously stated to Ms Tinker (just earlier that month, in fact) that if Ms Tinker wanted to take annual leave, it would be fine, provided the applicant approved it. This is what had happened previously. She had no reason to believe that she could not authorise annual leave between 27-29 December 2017. There were plenty of juniors to cover the store during that time. If Ms Tinker’s whereabouts was a concern, she should have been the one to receive a call from Mr Zafiropoulos. This did not happen.

On 31 December 2017, the applicant sent off paperwork to the Account section, but forgot a few documents. The next day, she asked Ms Patton to send off the remainder of the paperwork, and also mark Ms Tinker’s timesheet as her being on annual leave. Although Ms Patton should have sent that paperwork off, for some reason this did not happen. On 2 January 2018, Ms Tinker sent off her timesheet to the Account section. It was filled in incorrectly. The applicant believed that had Ms Patton sent off the paper work the day before, none of this would have happened.

On 2 January 2018, the applicant became aware Ms Tinker had been dismissed when she called her at 2:50pm. She then messaged Mr Zafiropoulos at 3:07pm asking why Ms Tinker had been fired, and that she had approved Ms Tinker’s leave for 27-29 December 2017. Mr Zafiropoulos informed her that she did not have the authority to approve leave on her own. This was surprising, given she was the Store Manager, and the only one who organised the rosters. In any event, they had enough staff to cover Ms Tinker’s absence.

Mr Zafiropoulos phoned the applicant at 3:30pm. He accused her of committing fraud with Ms Tinker. He stated that if she maintained her story, she too would be instantly dismissed, as he does not tolerate dishonesty. She asked what she would gain by lying about Ms Tinker’s leave arrangements, as there was no gain to her. She then asked who would cover Ms Tinker’s shifts with her gone. After the conversation ended, Mr Zafiropoulos called her back at 3:59pm and asked whether she was sticking to her story. She maintained her position. Mr Zafiropoulos then terminated her employment for conspiring to commit fraud. She was told that if her keys were not handed in the next morning, her annual leave would not be paid. This threat was repeated in a follow up email.

The applicant was only given a separation certificate when she had requested it. The respondent issued the certificate on 3 January 2018, which incorrectly stated she was made redundant. She then asked for a new separation certificate. The next day, the new certificate was provided, stating that she had been terminated, but did not provide any explanation or reason.

The applicant later phoned the Accounts section to enquire about her 4 weeks in lieu of notice, as set out in her Contract of Employment. She was told to ask Mr Zafiropoulos about it. When she did so, he advised her that there was no entitlement to 4 weeks’ pay in lieu of notice. He claimed the FWO gave him this advice. He also stated that he would be speaking to a lawyer. Mr Zafiropoulos also indicated that The Base Warehouse was a small business for the purposes of the unfair dismissal provisions in the Act. It was the applicant’s evidence that this was incorrect, as Mr Zafiropoulos has four stores and employs over 25 employees.

The applicant noted that Mr Zafiropoulos stated that he did not provide a reason for terminating the applicant’s employment, because she contacted the Commission before he could speak with a lawyer. This did not make sense, as she did not apply to the Commission until 12 January 2018, whereas Mr Zafiropoulos told her that he was speaking to a lawyer on 8 January 2018. Moreover, the applicant was not at The Entrance store on either 1 or 2 January 2018.

The applicant said she would not have risked her own employment to cover up for someone else, for any reason. She enjoyed her role and was making plans to improve sales. There was no reason not to tell Ms Patton what was happening. While the junior staff knew that Ms Tinker was on leave, she was unable to get witness statements from them in relation to these proceedings. As casual employees, they were too afraid of the ramifications if they spoke up, as Ms Patton is now their Store Manager. They believe that Ms Patton would ‘fire them’ if they spoke out.

In cross examination, Mr Leeson asked the applicant if it was standard practice to include persons approved for annual leave on the roster. She explained that while it was not standard procedure, the reason Ms Tinker was included on the roster between 27-29 December 2017 was because she requested annual leave after the roster had already been sent out. The applicant reiterated that additional staff were available to cover Ms Tinker’s absence.

Mr Leeson asked the applicant how she had gone about approving leave as Manager for other staff. She responded that she has not ‘had to do holiday leaves’ in the three months that she was Store Manager. She further stated that she ‘didn’t get any training when [she] was promoted so [she] wouldn’t know the procedures’. When asked about the Company’s policy of 90 days’ notice for annual leave, she said that while she was aware of this requirement for herself (as it was stated in her Contract of Employment), she did not know whether this rule also applied to other staff members.

When queried as to why she chose not to question Ms Patton as to whether she knew that Ms Tinker was on authorised leave, she responded that Ms Patton would just reaffirm her previous position that she did not know, ‘because if she said that in her statement she’s not going to change it’. She added that Ms Heginbotham was also aware that Ms Tinker was on authorised leave.

Ashleigh Westling

In her statement, Ms Westling confirmed that she knew Ms Tinker was on holidays from 27-29 December 2017. She was told this by both the applicant and Ms Tinker. Ms Westling further witnessed Ms Patton telling other staff members, as well as the applicant’s parents, that Ms Tinker was on holidays and would not be back until 2 January 2018. She added that both the applicant and Ms Tinker had been excellent to work for. Ms Westling was not required for cross examination.

SUBMISSIONS

For the respondent

In summary, Mr Leeson largely reiterated the respondent’s written and oral evidence. The reason Mr Zafiropoulos did not contact the applicant when he first became aware that Ms Tinker was not at work, was because he wanted to wait to see what Ms Tinker submitted in her timesheet the following week. The applicant and Ms Tinker were good friends, and Mr Zafiropoulos ‘just wanted to see what was going to happen on the Monday with the timesheets’. Mr Leeson added that ‘in the eighteen months I’d been at the company, every long weekend Jacquie (Ms Tinker) took the following days off and got a doctor’s certificate’.

Mr Leeson submitted that the applicant was aware of the Company’s policy in relation to leave requests. Further, she had previously filled out a leave application for herself. In any event, she could have asked other experienced staff if she was unsure as to the process for approving leave. Moreover, Mr Zafiropoulos should be able to trust staff members to be honest, particularly those engaged as Store Managers. Honesty is important when it comes to rostering staff. Mr Leeson indicated that ‘Fair Work Australia’ (although I assume he means the FWO) gave Mr Zafiropoulos advice that the applicant’s employment could be terminated, as her actions amounted to serious misconduct.

Mr Leeson asserted that the respondent has been willing to continue the employment relationship with the applicant, provided she admitted the truth; namely, that Ms Tinker was not on authorised leave between 27-29 December 2017. Mr Zafiropoulos afforded the applicant an opportunity to change her story in a conversation on 2 January 2018, prior to the termination of her employment.

For the applicant

The applicant submitted that there ‘is no evidence of me actually committing fraud’. She was not at work on either 1 or 2 January 2018 when Ms Patton sent off the remaining paperwork to the Accounts section and when Ms Tinker submitted the incorrectly completed timesheet. She had openly told Mr Zafiropoulos in their telephone conversation on 2 January 2018 that she had approved Ms Tinker’s leave.

The applicant said she not receive any training in relation to the Company’s leave approval policy when she was promoted from her part-time position to Store Manager. Her colleague who was the ‘2IC’ was casual before she was promoted, and she too did not receive training.

Mr McGlashan (the applicant’s father) advised that the applicant is currently employed as a casual nightshift employee at a local service station. She had been unable to obtain other full-time employment, as work on the Central Coast is difficult to find. Her dismissal has been mentally taxing and had also caused her financial hardship.

In reply, Mr Leeson reiterated that the applicant lied when she told Mr Zafiropoulos that she authorised Ms Tinker’s absence between 27-29 December 2017. The applicant ‘defrauded the company of that time’. Help was available to the applicant at the time, from both Mr Zafiropoulos and him, if she was unsure about how to approve leave. In any case, the applicant was clearly aware of the Company’s leave policy.

CONSIDERATION

Preliminary findings

There are no jurisdictional objections to the applicant’s unfair dismissal application being determined by the Commission. Specifically, I am satisfied that:

(a)Ms McGlashan was dismissed at the initiative of the employer on 2 January 2018 (ss 385(a) 386(1)(a));
(b)her unfair dismissal application was lodged within the 21 day statutory time limitation set out at s 394(2)(a) of the Act;
(c)Ms McGlashan was a person protected from unfair dismissal in that:
i.she had completed the minimum employment period set out in ss 382 and 383 of the Act, being a period of two years and four months; and

ii.a Modern Award applied to her employment; see: para [1] above (s 382(3)(b)(ii));

(d)her dismissal was not a case of genuine redundancy (s 385(d)); and
(e)her dismissal was not a case involving the Small Business Fair Dismissal Code, as the respondent employs more than 15 employees in a number of related entities (s 385(c)).

Section 385 of the Act defines an unfair dismissal based on the four criteria there set out; each of which must be satisfied if the person seeking a remedy from unfair dismissal is to succeed. The section reads:

385 What is an unfair dismissal

A person has been unfairly dismissed if the FWC is satisfied that:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

(d) the dismissal was not a case of genuine redundancy.

Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.

As I have just concluded that three of the above criteria have been satisfied ((a)(c) and (d)), this only leaves the question of whether Ms McGlashan’s dismissal was ‘harsh, unjust or unreasonable’ and therefore an unfair dismissal. To this end, one must direct attention to s 387 of the Act, which deals with the matters to be taken into account by the Commission in determining whether a dismissal was unfair. It is trite to observe that each of the matters must be considered, and a finding made on each of them, including whether they are relevant or not; for example, whether a person was (d) refused an opportunity to have a support person present may be irrelevant (neutral), if the request was not made, or the employee declined to take up the offer.

The matters to be taken into account under s 387 of the Act are:

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

(b) whether the person was notified of that reason; and
(c)whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and
(d)any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and
(e)if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and
(f)the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
(g)the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

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

All of the criteria in s 387 of the Act must be taken into account when the Commission considers whether a particular dismissal is unfair. The notion of ‘taking into account’ a matter (such as those described in s 387 of the Act) connotes a genuine consideration of the relevant section and the apportionment of the appropriate weight of each criterion in the circumstances. In Construction, Forestry, Mining and Energy Union v Hamberger and Another (2011) 195 FCR 74, Katzmann J pointed out that ‘[t]o take a matter into account means to evaluate it and give it due weight’ and that ‘mere advertence will not be enough’. That said, it must also be steadily borne in mind that no one matter is to be attributed any greater weight than another. That this is so is obvious from the Explanatory Memorandum to the Fair Work Bill 2008 where at para 1541, it reads:
‘1541. FWA must consider all of the above factors in totality. It is intended that Fair Work Act 2009 will weigh up all the factors in coming to a decision about whether a dismissal was harsh, unjust or unreasonable and no factor alone will necessarily be determinative.’ (My emphasis)

Allegations of serious misconduct

It is uncontested that Ms McGlashan was summarily dismissed by Mr Zafiropoulos for alleged serious misconduct by phone on 2 January 2018. ‘Serious misconduct’ is defined in the Act’s Regulations. Regulation 1.07 sets out the definition as follows:

1.07 Meaning of serious misconduct

(1) For the definition of serious misconduct in section 12 of the Act, serious misconduct has its ordinary meaning.

(2) For subregulation (1), conduct that is serious misconduct includes both of the following:

(a) wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;

(b) conduct that causes serious and imminent risk to:

(i) the health or safety of a person; or

(ii) the reputation, viability or profitability of the employer’s business.

(3) For subregulation (1), conduct that is serious misconduct includes each of the following:

(a) the employee, in the course of the employee's employment, engaging in:

(i) theft; or

(ii) fraud; or

(iii) assault;

(b) the employee being intoxicated at work;

(c) the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee's contract of employment [my emphasis].’

It may be comfortably assumed that Mr Zafiropoulos relied on Reg 1.07(3)(a)(ii) (‘fraud’). Mr Zafiropoulos claimed he was given advice by the FWO that falsification of time sheets is a matter that gives rise to instant dismissal. For my own part, I doubt the FWO would give any definitive advice as to justification for summary dismissal, without knowing all the relevant circumstances (which it would obviously not). That said, reliance on the Regulation or advice from the FWO is not determinative of whether an act of serious misconduct constitutes a valid reason for dismissal. In Sharp v BCS Infrastructure Support Pty Limited [2015] FWCFB 1033, the Full Bench of the Commission said at para [33]-[34]:

‘[33] The relevance of the definition of “serious misconduct” in reg.1.07 to the matter is also, with respect, obscure. Section 12 of the Act contains a definition of “serious misconduct” for the purposes of the Act which simply cross-refers to reg.1.07. Apart from s.12 itself, the expression “serious misconduct” is used in only three places in the Act. In s.123(1)(b), a dismissal for serious misconduct is a circumstance in which the notice and redundancy entitlement provisions of Pt 2-2 Div 11 are not applicable; in s.534(1)(b) a dismissal for serious misconduct is one to which the requirements for notification and consultation in Pt 3-6 Div 2 do not apply; and in s.789(1)(b) a dismissal for serious misconduct is one in relation to which the requirements established by Pt 6-4 Div 3 for notification and consultation do not apply. The expression “serious misconduct” is not used anywhere in Pt 3-2, Unfair Dismissal, of the Act. Section 392(3) requires the Commission, in relation to the award of compensation for an unfair dismissal, to reduce the amount that it would otherwise order by an appropriate amount where it is “satisfied that the misconduct of a person contributed to the employer’s decision to dismiss the person”. However, it is clear that conduct may constitute “misconduct” for the purpose of s.392(3) without necessarily being “serious misconduct”. The expression is used in the Small Business Fair Dismissal Code, but that had no application in this case (and it is at least highly doubtful in any event whether the reg.1.07 definition applies to the Small Business Fair Dismissal Code). Reg.1.07 therefore had no work to do in the application of the provisions of Pt 3-2 to the circumstances of this case.

[34] It may be accepted that an assessment of the degree of seriousness of misconduct which has been found to constitute a valid reason for dismissal for the purposes of s.387(a) is a relevant matter to be taken into account under s.387(h). In that context, a conclusion that the misconduct was of such a nature as to have justified summary dismissal may also be relevant. Even so, it is unclear that this requires a consideration of whether an employee’s conduct met a postulated standard of “serious misconduct”. In Rankin v Marine Power International Pty Ltd Gillard J stated that “There is no rule of law that defines the degree of misconduct which would justify dismissal without notice” and identified the touchstone as being whether the conduct was of such a grave nature as to be repugnant to the employment relationship. “Serious misconduct” is sometimes used as a rubric for conduct of this nature, but to adopt it as a fixed standard for the consideration of misconduct for the purpose of s.387(h) may be confusing or misleading because the expression, and other expressions of a similar nature, have been considered and applied in a variety of contexts in ways which are influenced by those contexts. In McDonald v Parnell Laboratories (Aust) Pty Ltd Buchanan J said:

“[48] The terms ‘misconduct’, ‘serious misconduct’ and ‘serious and wilful misconduct’ are often the subject of judicial and administrative attention as applied to the facts of particular cases but there is relatively little judicial discussion about their content and meaning. Naturally enough, when the term ‘serious misconduct’ is under consideration an evaluation of what conduct represents ‘serious’ misconduct is influenced by the (usually statutory) setting in which the phrase must be given meaning and applied. Frequently, for example, the question at issue is whether an employee is disentitled by reason of his or her conduct to a statutory entitlement (eg. in New South Wales, where Ms McDonald was employed, see Long Service Leave Act 1955 (NSW) s 4(2)(a)(iii); Workers Compensation Act 1987 (NSW) s 14(2).”’ (footnotes omitted)

The notion of wilful or deliberate behaviour amounting to serious misconduct is conduct which strikes at the heart of the employment relationship. That concept has been considered in a number of well known authorities (although characterised in slightly different terms). In North v Television Corporation Ltd, (1976) 11 ALR 599 Franki J said at p 616:

‘It is clear that a single act of disobedience may be sufficient to justify dismissal on the ground of misconduct but it was held in Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 2 All ER 285, that to justify summary dismissal a single act must be such as to show that the employee was repudiating the contract of service or one of its essential conditions.’

Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 2 All ER 285 (referred to in the quote above) makes it plain that an act of disobedience or misconduct (justifying dismissal) requires also that the disobedience must be ‘wilful’:

‘... I do, however, think (following the passages which I have already cited) that one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one of its essential conditions; and for that reason, therefore, I think that one finds in the passages which I have read that the disobedience must at least have the quality that it is “wilful”: it does (in other words) connote a deliberate flouting of the essential contractual conditions (P288).’

In Concut Pty Ltd v Worrell (2000) 103 IR 160, His Honour, Kirby J, dealt with the ordinary relationship of the employer and employee at common law and said at para [51]:

‘The ordinary relationship of employer and employee at common law is one importing implied duties of loyalty, honesty, confidentiality and mutual trust. At common law:

“conduct which in respect of important matters is incompatible with the fulfilment of an employee’s duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal. ...[T]he conduct of the employee must itself involve the incompatibility, conflict, or impediment, or be destructive of confidence. An actual repugnance between his acts and his relationship must be found. It is not enough that ground for uneasiness as to its future conduct arises.”

In the present case, the findings at trial went beyond mere uneasiness as to the future. They necessitated, or at least warranted, a conclusion that the “confidence” essential to the relationship of employer and employee had been destroyed. Instead of pursuing the interests of the company and its shareholders, the employee had pursued his own private interests. Not only was the employee in breach of his duty of fidelity and trust owed to the employer, he had remained in breach of that duty to the date of the trial. Until that time he had not accounted for the benefits wrongly appropriated by him. Indeed, he had denied any wrongful appropriation. The issue so tendered at the trial was determined against the employee. He was then subject to the employer’s counter-claim for an order to make a refund. Such order was duly made at trial. It was not contested on appeal. Given his senior status in the company’s service and the nature and extent of the misconduct disclosed in the evidence and accepted by the primary judge, it was open to him to find that the employee had undermined the confidence essential to the ongoing relationship of employment. Prima facie, this had afforded a legal justification for the employee’s summary dismissal.

It is, however, only the exceptional circumstances that an ordinary employer is entitled at common law to dismiss an employee summarily. Whatever the position may be in relation to ‘isolated’ acts of negligence, incompetence or unsuitability, it cannot be disputed (statute or express contractual provision aside) that acts of dishonesty or similar conduct destructive of the mutual trust between the employer and employee, once discovered, ordinarily fall within the class of conduct which, without more, authorises summary dismissal. Exceptions to this general position may exist for trivial breaches of the express or implied terms of the contract of employment. Other exceptions may arise where the breaches are ancient in time and where they may have been waived in the past, although known to the employer. Some breaches may be judged irrelevant to the duties of the particular employee and an ongoing relationship with the employer. But these exceptional cases apart, the establishment of important, relevant instances of misconduct, such as dishonesty on the part of an employee like Mr Wells, will normally afford legal justification for summary dismissal. Such a case will be classified as amounting to a relevant repudiation or renunciation by the employee of the employment contract, thus warranting summary dismissal.’

In cases of summary dismissal, the onus rests on the respondent to prove, to the Commission’s satisfaction, that the misconduct, has in fact, occurred. This is why I have adopted the practice of requiring the employer to file and serve its evidence first when I issue directions in preparation for a serious misconduct unfair dismissal case (as I did in this case). While this evidentiary onus must be discharged on the civil onus of proof (on the balance of probabilities); Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 (‘Briginshaw’), the more serious the allegation, the higher the burden on the employer to prove the allegation. In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, the High Court said:

‘The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear proof is necessary "where so serious a matter as fraud is to be found". Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.’ (footnotes omitted)

That the Commission, for itself, must be satisfied that the misconduct occurred, is well established by the authorities of the Commission and its predecessors. In King v Freshmore (Vic) Pty Ltd [2000] AIRC 1019, a Full Bench of the AIRC said at paras [24], [26], [28] and [29]:

‘[24] The question of whether the alleged conduct took place and what it involved is to be determined by the Commission on the basis of the evidence in the proceedings before it. The test is not whether the employer believed, on reasonable grounds after sufficient enquiry, that the employee was guilty of the conduct which resulted in termination.

...

[26] As we have noted above, s.170CG(3)(a) obliges the Commission to make a finding as to whether there was a valid reason for the termination of employment. In circumstances where a reason for termination is based on the conduct of the employee the Commission must also determine whether the alleged conduct took place and what it involved.
...

[28] It is apparent from the above extract that his Honour answered the question of whether the alleged misconduct took place on the basis of whether it was reasonably open to the employer to conclude that the employee was guilty of the misconduct which resulted in termination. This is not the correct approach. The Commission's obligation is to determine, for itself and on the basis of the evidence in the proceedings before it, whether the alleged misconduct took place and what it involved.

[29] In our view the Senior Deputy President failed to determine for himself whether Mr King was guilty of misconduct in the way alleged by Freshmore and he should have done so as part of determining whether the termination had been harsh, unjust or unreasonable. When the reason for a termination is based on the misconduct of the employee the Commission must, if it is an issue in the proceedings challenging the termination, determine whether the conduct occurred. The absence of such a finding leads us to conclude that the member below failed to properly determine whether there was a valid reason for the termination of Mr King's employment.’ (my emphasis)

Even accepting that a finding of serious misconduct was open to Mr Zafiropoulos, it must not be confused with the statutory language and the relevant tests to be applied. The statute still requires the Commission to find that there was, or was not, a valid reason for dismissal (s 387(a)). In Royal Melbourne Institute of Technology v Asher[2010] FWAFB 1200, a Full Bench of Fair Work Australia (as the Commission then was) held at para [16]:

‘[16] In the circumstances of this matter the University purported to terminate Dr Asher’s employment for serious misconduct within the meaning of that term in the University’s enterprise agreement. If it successfully established that Dr Asher had engaged in serious misconduct it would necessarily follow that there was a valid reason for the dismissal. However, the converse is not true. As established by Annetta, the question that needed to be considered was whether there was a “valid reason” in the Selvachandran sense – whether the reason was sound, defensible or well founded. Whether it also amounted to serious misconduct may well be a factor relating to the overall characterisation of the termination but it was not an essential requirement in the determination of whether a valid reason exists.’

What is the meaning of ‘harsh, unjust or unreasonable’?

I earlier set out at para [38] the matters the Commission is required to take into account under s 387 of the Act when determining this question. I commence with ‘valid’ reason.

The meaning of ‘valid reason’ in s 387(a) is drawn from the judgement of North J in Selvachandran v Peterson Plastics Pty Ltd (1995) 62 IR 371 (‘Selvachandran’). This meaning has been considered and applied by members of the Commission and its predecessors for many years. For example, in Rode v Burwood Mitsubishi Print R4471, a Full Bench of the then Australian Industrial Relations Commission (‘AIRC’) discussed the meaning of ‘valid reason’ in the context of the relevant provisions of the Workplace Relations Act 1996, and cited Selvachandran . The following is an extract from the Full Bench’s decision at para [17]-[19]:

[17] In relation to the meaning of “valid reason” the following remarks of Northrop J in Selvachandran v Peteron Plastics Pty Ltd are relevant:

“Section 170DE(1) refers to a ‘valid reason, or valid reasons’, but the Act does not give a meaning to those phrases or the adjective ‘valid’. A reference to dictionaries shows that the word ‘valid’ has a number of different meanings depending on the context in which it is used. In The Shorter Oxford Dictionary, the relevant meaning given is: ‘2. Of an argument, assertion, objection, etc; well founded and applicable, sound, defensible: Effective, having some force, pertinency, or value.’ In The Macquarie Dictionary the relevant meaning is ‘sound, just or wellfounded; a valid reason’.

In its context in s 170DE(1), the adjective ‘valid’ should be given the meaning of sound, defensible or wellfounded. 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 reason 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 each treated fairly, see what was said by Wilcox CJ in Gibson v Bosmac Pty Ltd, when considering the construction and application of a s 170DC.”

[18] While Selvachandran was decided under the former statutory scheme the above observations remain relevant in the context of s.170CG(3)(a). A valid reason is one which is sound, defensible or well founded. A reason for termination which is capricious, fanciful, spiteful or prejudiced is not a valid reason for the purpose of s.170CG(3)(a).

[19] We agree with the appellant’s submission that in order to constitute a valid reason within the meaning of s.170CG(3)(a) the reason for termination must be defensible or justifiable on an objective analysis of the relevant facts. It is not sufficient for an employer to simply show that he or she acted in the belief that the termination was for a valid reason.

See also: Nettleford v Kym Smoker Pty Ltd (1996) 69 IR 370.

In B, C and D v Australian Postal Corporation, a majority of the Full Bench (Lawler VP and Cribb C) dealt with breaches by a number of employees of Australia Post’s IT policies, in respect to the sending, receiving and sharing of pornographic material. The majority said at paras [34] to [35]:

‘[34] In considering whether there was a valid reason for a dismissal under s.387(a), the reason(s) being considered are the employer’s reason(s). In a misconduct case, the Commission is concerned with whether the misconduct in fact occurred, not with whether the employer has reasonable grounds to believe that it occurred (eg. Yew v ACI Glass Packaging Pty Ltd (1996) 71 IR 201, Sherman v Peabody Coal Ltd (1998) 88 IR 408; Australian Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1).
[35] Subject to that, as indicated by Northrop J in Selvachandran, “valid reason” is assessed from the perspective of the employer and by reference to the acts or omissions that constitute the alleged misconduct on which the employer relied, considered in isolation from the broader context in which they occurred. It is the reason of the employer, assessed from the perspective of the employer, that must be a “valid reason” where “valid” has its ordinary meaning of “sound, defensible or well founded”. As Northrop J noted, the requirement for a valid reason “should not impose a severe barrier to the right of an employer to dismiss an employee”.’

Credit of witnesses

I found the applicant to be a witness of truth whose evidence was both credible and believable. For one so young and having to face some rather horrible and damaging allegations, at all times, she maintained her composure, was measured and thoughtful.

On the significant question of whether the other staff and Ms Patton (the Assistant Store Manager) in particular, were aware Ms Tinker was on annual leave (thereby rebutting the Company’s claim of a ‘cover up’), the applicant was supported by another employee Ms Westling, who stated that she had witnessed Ms Patton telling other staff (and even the applicant’s parents), that Ms Tinker was on annual leave and would not be back until 2 January 2018. Ms Westling was not required for cross-examination, so her evidence was not tested and must be accepted in that context. In any event, given my conclusions as to the credibility and honesty of the applicant, I accept Ms Westling’s evidence as corroborative of the applicant’s evidence on this point and their evidence is preferred.

This is so because I do not have any confidence that the letters of Ms Patton and Ms Heginbotham tendered by the respondent were wholly truthful. While they too were not required for cross examination, their statements, particularly that of Ms Patton, are directly in conflict with that of the applicant’s and Ms Westling’s evidence. Given their statements are in almost identical terms, as to wording and layout, and they remain employees of Mr Zafiropoulos, the veracity of their statements must be treated with a fair degree of caution. I also note that Mr Zafiropoulos claimed Ms Patton and another Assistant Manager contacted him around 27 – 28 December 2017 to enquire about Ms Tinker’s whereabouts. In her letter, Ms Patton made no reference, at all, to any contact with Mr Zafiropoulos. But in any event, I need go no further than accepting the truth of the applicant’s evidence in preference to Ms Patton and Ms Heginbotham. There was no cover up because it was well known that Ms Tinker was on leave and Ms Patton had, or should have sent documents to Accounts to that effect.

Was there a valid reason for the applicant’s dismissal?

Mr Zafiropoulos has made it absolutely clear as to why he dismissed the applicant. He had determined that she had allowed ‘fraudulent activity under her Management and attempted to cover it up’. He has not wavered from this conviction. In his statement for these proceedings he went even further when he said ‘Jessica colluded with a fellow staff member in fraudulent activity regarding the timesheets. As a business owner I do not tolerate lies, deception and fraud in my company’.

There could hardly be a more serious allegation against an employee than to be accused of fraud. If true, it would undoubtedly constitute a ‘valid reason’ for dismissal, including, dismissal without notice. However, before an employer starts throwing around accusations of lies, deception and fraud, he/she ought be certain they have a sound basis for such claims and more importantly understand what the meaning of ‘fraud’ is in a legal context, and as commonly understood in society.

Meaning of ‘fraud’

The Concise Macquarie Dictionary defines ‘fraud’ as ‘deceit, trickery, sharp practice or breach of confidence by which it is sought to gain some unfair or dishonest advantage’.

Section 192E of the Crimes Act (NSW) defines ‘fraud’ as:

(1)   A person who, by any deception, dishonestly:
(a)   obtains property belonging to another, or
(b)   obtains any financial advantage or causes any financial disadvantage,

is guilty of the offence of fraud.

Maximum penalty: Imprisonment for 10 years.

(2)   A person’s obtaining of property belonging to another may be dishonest even if the person is willing to pay for the property.
(3)   A person may be convicted of the offence of fraud involving all or any part of a general deficiency in money or other property even though the deficiency is made up of any number of particular sums of money or items of other property that were obtained over a period of time.
(4)   A conviction for the offence of fraud is an alternative verdict to a charge for the offence of larceny, or any offence that includes larceny, and a conviction for the offence of larceny, or any offence that includes larceny, is an alternative verdict to a charge for the offence of fraud.

In Macleod v R [2003] HCA 24, the High Court, Gleeson CJ, Gummow, Hayne JJ, said at paras [35]-[38]:

‘35. In Peters v The Queen, which concerned charges of conspiracy to defraud the Commonwealth under ss 86(1)(e) and 86A of the Crimes Act 1914 (Cth), Toohey and Gaudron JJ said that, ordinarily, fraud involves:

"the intentional creation of a situation in which one person deprives another of money or property or puts the money or property of that other person at risk or prejudicially affects that person in relation to 'some lawful right, interest, opportunity or advantage', knowing that he or she has no right to deprive that person of that money or property or to prejudice his or her interests". (emphasis added)

36. Their Honours explained that the term "dishonestly" in a statutory offence may be employed in its ordinary meaning or in some special sense. The line of authorities concerning the statutory offence of dishonestly obtaining property by deception provides an illustration of the latter.

37. In a passage that has significance for the present appeal, Toohey and Gaudron JJ stated:

"In a case in which it is necessary for a jury to decide whether an act is dishonest, the proper course is for the trial judge to identify the knowledge, belief or intent which is said to render that act dishonest and to instruct the jury to decide whether the accused had that knowledge, belief or intent and, if so, to determine whether, on that account, the act was dishonest. ... If the question is whether the act was dishonest according to ordinary notions, it is sufficient that the jury be instructed that that is to be decided by the standards of ordinary, decent people."

Their Honours rejected any further requirement, derived from R v Ghosh, that the accused must have realised that the act was dishonest by those standards.

38. A question presented by s 173 of the Crimes Act is whether the taking or application was "fraudulent" or "dishonest" according to ordinary notions. The passage cited above from the joint judgment in Peters indicates the preferred approach to the meaning of the term "fraudulently" in s 173.’ (footnotes omitted)

In my opinion, the objective bystander would consider ‘fraud’ as being wrongful or criminal deception intended to result in financial or personal gain. In my assessment, the objective facts surrounding the circumstances of Ms Tinker’s annual leave and the applicant’s approval of that leave, cannot possibly support an allegation that the applicant acted in a fraudulent manner, consistent with serious misconduct. In my view, by making such a serious finding about what in fact occurred, was not only (perhaps deliberately) designed to elevate the incident to a level of seriousness which was grossly exaggerated, but the allegation of fraud or fraudulent conduct was simply wrong and ultimately prejudicial to the applicant. Let me set out some of the matters which corroborate my finding in this respect.

It is extraordinary that in a period of less than half an hour on 2 January 2018, Mr Zafiropoulos had jumped to the outrageous conclusion that the applicant had committed fraud and a cover up in circumstances in which:

(i)It was the applicant who first contacted Mr Zafiropoulos by text after learning of Ms Tinker’s dismissal and she informed him she had approved Ms Tinker’s leave as the Store Manager. It is highly implausible that a person involved in a cover up would initiate an innocent inquiry as to her actions in approving Ms Tinker’s leave.
(ii)Mr Zafiropoulos claimed the applicant knew all leave had to be approved by him. The applicant had only been the Store Manager for a few months and had not approved leave for a subordinate before. I accept the applicant’s evidence that she was unaware of Mr Zafiropoulos’s expectations as to the approval of staff leave.
(iii)The applicant had not been trained as to the processes for approving leave for staff. Mr Zafiropoulos produced no policy or training record to support his claim that the applicant was fully aware of what was required. He relied on an annual leave form of the applicant, dated 16 November 2017, which he asserted proved the applicant knew the correct procedure. This form proves nothing of the sort. Nowhere on the form is there any reference to a requirement of it being countersigned by him. Indeed, the only reference to ‘authorisation’ relates to unpaid leave being approved by the Authorising Manager. Mr Zafiropoulos was not a Manager.
(iv)Mr Zafiropoulos claimed he was contacted by two Assistant Managers around 27–28 December 2017 as to the whereabouts of Ms Tinker, but then waited until 2 January 2018 to see what the timesheets disclosed. Rather than making any enquiries with either Ms Tinker or the applicant (or Ms Patton for that matter) as to the explanation for the timesheets showing her to be at work, Mr Zafiropoulos made a general inquiry with the FWO to ask if he could summarily dismiss an employee for falsification of timesheets. (His decision to dismiss the applicant was clearly in his mind before raising the issue with her).
(v)Knowing the applicant was not rostered on 2 January 2018 he phoned her and demanded she confess to his allegations. Unsurprisingly, she explained what had happened and it made sense. He made no further enquiries. Understandably and correctly, she did not confess to something she did not do. It is unclear what Mr Zafiropoulos would have done had she done so, but I reject Mr Leeson’s submission that the applicant would have remained in employment, if she had admitted to fraud and cover up.
(vi)Ms Patton must have known Ms Tinker was on leave, as I accept the applicant’s evidence that she had asked her to complete Ms Tinker’s paperwork and mark her as on annual leave and forward it to Accounts. Ms Patton has not refuted this evidence.
(vii)Given the definition of fraud, Mr Zafiropoulos had no evidence at any time, what the applicant had to gain, or had gained, by approving Ms Tinker’s annual leave.

In my view, the circumstances surrounding the applicant’s dismissal warranted no more than further training as to the correct procedures expected by Mr Zafiropoulos in respect to Managers approving annual leave. To jump to a conclusion of fraud and cover up, without any investigation; let alone procedural fairness, to which I will return shortly, was a gross overreaction. In any event, there was no fraud or cover up. It could not possibly be a ‘valid reason’ for the applicant’s dismissal. The words of Selvachandran are particularly apposite for this case. The reasons for dismissal were capricious, fanciful, spiteful and prejudicial. This finding weighs in favour of a conclusion that the applicant’s dismissal was unfair.

Further matters to be considered under s 387 of the Act

Subsections (b)-(e) of s 387 are generally grouped under the rubric of ‘procedural fairness’ or ‘natural justice’ issues. To highlight the importance of procedural fairness issues, in unfair dismissal cases, I cite four authorities on the subject. In Crozier v Palazzo Corporation Pty Limited t/as Noble Storage and Transport (2000) 98 IR 137 (‘Crozier v Palazzo’), a Full Bench of the AIRC said at para [73]:

‘As a matter of logic procedural fairness would require that an employee be notified of a valid reason for their termination before any decision is taken to terminate their employment in order to provide them with an opportunity to respond to the reason identified. Section 170CG(3)(b) and (c) would have very little (if any) practical effect if it was sufficient to notify employees and give them an opportunity to respond after a decision had been taken to terminate their employment.’

In Wadey v YMCA Canberra [1996] IRCA 568, Moore J made clear that an employer cannot merely pay ‘lip service’ to giving an employee an opportunity to respond to allegations concerning an employee’s conduct. His Honour said:

‘In my opinion the obligation imposed on an employer by that section has, for present purposes, two relevant aspects. The first is that the employee must be made aware of allegations concerning the employee's conduct so as to be able to respond to them. The second is that the employee must be given an opportunity to defend himself or herself. The second aspect, the opportunity to defend, implies an opportunity that might result in the employer deciding not to terminate the employment if the defence is of substance. An employer may simply go through the motions of giving the employee an opportunity to deal with allegations concerning conduct when, in substance, a firm decision to terminate had already been made which would be adhered to irrespective of anything the employee might say in his or her defence. That, in my opinion, does not constitute an opportunity to defend.’

Nevertheless, procedural fairness steps should be applied in a commonsense and practical way. In Gibson v Bosmac Pty Ltd (1995) 60 IR 1 (‘Gibson’), Wilcox CJ said at [7]:

‘Ordinarily, before being dismissed for reasons related to conduct or performance, an employee must be made aware of the particular matters that are putting his or her job at risk and given an adequate opportunity of defence. However, I also pointed out that the section does not require any particular formality. It is intended to be applied in a practical, commonsense way so as to ensure that the affected employee is treated fairly. Where the employee is aware of the precise nature of the employer's concern about his or her conduct or performance and has a full opportunity to respond to this concern, this is enough to satisfy the requirements of the section.’

It goes without saying that any issue/s of procedural unfairness may not be of such significance as to outweigh the substantive reason/s for an employee’s dismissal, particularly in cases of misconduct where the proven misconduct is of such gravity (such as proven fraud) as to outweigh any other considerations in respect to ‘harshness’, such as age, length of service, employment record, contrition or personal and family circumstances. In Bostik Australia Pty Ltd v Gorgevski (No 1) [1992] FCA 271; 36 FCR 20, the Federal Court of Australia Industrial Division said at [37]:
‘Harsh, unjust and unreasonable
37. These are ordinary non-technical words which are intended to apply to an infinite variety of situations where employment is terminated. We do not think any redefinition or paraphrase of the expression is desirable. We agree with the learned trial judge’s view that a court must decide whether the decision of the employer to dismiss was, viewed objectively, harsh, unjust or unreasonable. Relevant to this are the circumstances which led to the decision to dismiss and also the effect of that decision on the employer. Any harsh effect on the individual is clearly relevant but of course not conclusive. Other matters have to be considered such as the gravity of the employee’s misconduct.’ [my emphasis]

Whether the person was notified of that reason (s 387(b))

The applicant was notified of her dismissal and the reasons for it in a 3 minute phone call from Mr Zafiropoulos at 3.57pm on 2 January 2018. There was no warning and no letter of termination. Bizarrely, the initial employment separation certificate recorded her as having been made redundant.

Whether the person was given an opportunity to respond to any reasons related to the conduct of the person (s 387(c))

The applicant was provided with no reasonable opportunity to respond to Mr Zafiropoulos’s allegations. She received no warning of his allegations or of her dismissal. It would seem the only explanation that Mr Zafiropoulos would accept was the applicant’s confession. This was unreasonable and unacceptable. In my view, Mr Zafiropoulos had predetermined the outcome of his phone call with the applicant and this was an abject breakdown in procedural fairness towards her. This factor tells in favour of a finding of unfairness.

Any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal (s 387(d))

Given the applicant had no warning of her dismissal, or any inkling she would be involved in a phone discussion in which she would be dismissed, she obviously had no opportunity to have a support person with her. This factor tells in favour of a finding of unfairness.

If the dismissal related to unsatisfactory performance by the person - whether the person had been warned about that unsatisfactory performance before the dismissal (s 387(e))

In this case, the reasons for dismissal related to the applicant’s conduct, not her performance - so this factor is not relevant. I note however, that the respondent raised no issue of concern as to the applicant’s performance. Indeed, she had been promoted to Store Manager three months earlier.

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 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 (ss 387(f) and (g))

The respondent has a number of stores and employs at least 25 employees. I accept Mr Zafiropoulos has some experience in the retail sector and in employing staff. However, these were not the actions of a naïve or ignorant employer. Even for someone with no industrial relations or employment experience or background, Mr Zafiropoulos’s approach to dismissing the applicant and the reason for the dismissal were appalling and contrary to any commonsense understanding of what constitutes decent and responsible employment procedures. I note Mr Zafiropoulos took trouble to contact the FWO to find out what he wanted to hear, but took no other steps to take sensible advice on the proper procedures for affecting an employee’s dismissal, or indeed, take advice as to whether it was justified at all - which it was not.

Subsections (f) and (g) s 387 of the Act provide no explanation or excuse for the respondent’s poor and unacceptable handling of the applicant’s dismissal and tell in favour of a finding of unfairness.

Any other matters the Commission considers relevant (s 387(h))

This section provides the Commission with a broad scope to consider any matters it considers relevant when determining whether a dismissal is unfair. I have taken into account the following:
(a)   Not only was there no valid reason for the applicant’s dismissal, there was no legitimate or justified reason at all.
(b)   The applicant’s age and the difficulty for young people in finding work on the Central Coast of New South Wales.
(c)   The applicant had an unblemished record of two years and four months service.
(d)   The applicant, at a relatively young age, had been appointed to a position of significant responsibility as Store Manager.
(e)   The applicant secured alternative casual employment three nights a week about two months after her dismissal.
(f)    Mr Zafiropoulos informed the applicant of her dismissal by phone. This exacerbated the unfairness of the applicant’s dismissal. I do not accept that he did so because she was not rostered on. His haste is dismissing her (and by phone) was unseemly and unacceptable. In my view, informing an employee of their dismissal by phone, text or email, is an inappropriate means of conveying a decision which has such serious ramifications for an employee. I consider it would only be in rare circumstances that a decision to dismiss an employee should not be conveyed in person. For example, it may be necessary where the employer believes a dismissed employee might be a threat to the safety of his/her employees, or because the employee expressly did not want a ‘face to face’ meeting to hear the outcome of any disciplinary process. I agree with Commissioner Cambridge when he said in Knutson v Chesson Pty Ltd t/a Pay Per Click [2018] FWC 2080 at [47]:

[47] The employer provided notification of dismissal by email communication sent at 8:53pm on 6 November 2017. Notification of dismissal should not be made by email communication. Unless there is some genuine apprehension of physical violence or geographical impediment, the message of dismissal should be conveyed face to face. To do otherwise is unnecessarily callous. Even in circumstances where email or electronic communications are ordinarily used, the advice of termination of employment is a matter of such significance that basic human dignity requires that dismissal be conveyed personally with arrangements for the presence of a support person and documentary confirmation.

Having considered each of the matters set out in s 387 of the Act, I am satisfied the dismissal of Ms McGlashan on 2 January 2018 was ‘harsh, unjust and unreasonable’.

Appropriate remedy

Section 390 of the Act sets out the circumstances in which the Commission may make an order for reinstatement or compensation with an emphasis on reinstatement. The section reads:

390     When the FWC may order remedy for unfair dismissal
(1)       Subject to subsection (3), the FWC may order a person’s reinstatement, or the payment of compensation to a person, if:
(a)       the FWC is satisfied that the person was protected from unfair dismissal (see Division 2) at the time of being dismissed; and
(b)       the person has been unfairly dismissed (see Division 3).

(2) The FWC may make the order only if the person has made an application under section 394.
(3)       The FWC must not order the payment of compensation to the person unless:
(a)       the FWC is satisfied that reinstatement of the person is inappropriate; and
(b)       the FWC considers an order for payment of compensation is appropriate in all the circumstances of the case.

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

The applicant does not seek reinstatement. Given the way she was treated, this is hardly surprising. To her credit, she has secured alternative casual night time work, albeit paying less than her wage as a Store Manager. Accordingly, I am satisfied that reinstatement would not be appropriate.

Section 392 of the Act sets out the matters the Commission must have regard to when determining:
(a)   whether compensation should be ordered;
(b)   if so, what amount of compensation should be ordered;
(c)   the effect of any order as to any findings of misconduct by the applicant;
(d)   the upper limit of compensation; and
(e)   specific matters not to be taken into account.

Section 392 reads as follows:

392 Remedy—compensation

Compensation

(1)       An order for the payment of compensation to a person must be an order that the person’s employer at the time of the dismissal pay compensation to the person in lieu of reinstatement.
Criteria for deciding amounts
(2)       In determining an amount for the purposes of an order under subsection (1), the FWC must take into account all the circumstances of the case including:
(a)       the effect of the order on the viability of the employer’s enterprise; and
(b)       the length of the person’s service with the employer; and
(c)       the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and
(d)       the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and
(e)       the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and
(f)       the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and
(g)       any other matter that the FWC considers relevant.

Misconduct reduces amount
(3)       If the FWC is satisfied that misconduct of a person contributed to the employer’s decision to dismiss the person, the FWC must reduce the amount it would otherwise order under subsection (1) by an appropriate amount on account of the misconduct.
Shock, distress etc. disregarded
(4)       The amount ordered by the FWC to be paid to a person under subsection (1) must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person’s dismissal.
Compensation cap
(5)       The amount ordered by the FWC to be paid to a person under subsection (1) must not exceed the lesser of:
(a)       the amount worked out under subsection (6); and
(b)       half the amount of the high income threshold immediately before the dismissal.

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

(a) the total amount of remuneration:

(i) received by the person; or
(ii) to which the person was entitled;

(whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal; and
(b) if the employee was on leave without pay or without full pay while so employed during any part of that period—the amount of remuneration taken to have been received by the employee for the period of leave in accordance with the regulations.

The methodology to be adopted by the Commission in calculating compensation having regard for each of the matters set out in s 392 of the Act, (often referred to as the Sprigg formula), was considered by a Full Bench of the Commission in Bowden v Ottrey Homes Cobram and District Retirement Villages Inc. t/a Ottrey Lodge [2013] FWCFB 431 (‘Ottrey’); see also: Sprigg v Paul’s Licensed Festival Supermarket (1998) 88 IR 21 and Ellawala v Australian Postal Corporation [1999] AIRC 1250. A Full Bench said in Balaclava Pastoral Co Pty Ltd ATF O’Connor-Fifoot Family Trust v Nurcombe [2017] FWCFB429 (‘Balaclava’) at [42]- [43]:

‘[42] The correct approach to the assessment of compensation was summarised by the Full Bench in the recent decision in Double N Equipment Hire Pty Ltd t/a A1 Distributions v Alan Humphries as follows (footnotes omitted):

“[16] The well-established approach to the assessment of compensation under s.392 of the FW Act, taking into account the matters specified in s.392(2), is to apply the “Sprigg formula” derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul Licensed Festival Supermarket. This approach was articulated in the context of the FW Act in Bowden v Ottrey Homes Cobram and District Retirement Villages. Under that approach, the first step to be taken in assessing compensation is to consider s.392(2)(c) - that is, to determine what the applicant would have received, or would have been likely to receive, if the person had not been dismissed. In Bowden this was described in the following way:
‘[33] The first step in this process - the assessment of remuneration lost - is a necessary element in determining an amount to be ordered in lieu of reinstatement. Such an assessment is often difficult, but it must be done. As the Full Bench observed in Sprigg:
‘... we acknowledge that there is a speculative element involved in all such assessments. We believe it is a necessary step by virtue of the requirement of s.170CH(7)(c). We accept that assessment of relative likelihoods is integral to most assessments of compensation or damages in courts of law.’

[34] Lost remuneration is usually calculated by estimating how long the employee would have remained in the relevant employment but for the termination of their employment. We refer to this period as the ‘anticipated period of employment’...’

[17] The identification of this starting point amount “necessarily involves assessments as to future events that will often be problematic” . Once this first step has been undertaken, various adjustments are made in accordance with s.392 and the formula for matters including monies earned since dismissal, contingencies, any reduction on account of the employee’s misconduct and the application of the cap of six months’ pay. This approach is however subject to the overarching requirement to ensure that the level of compensation is in an amount that is considered appropriate having regard to all the circumstances of the case.”

[43] We would add to this that in quantifying compensation, it is necessary to set out with some precision the way in which the various matters required to be taken into account under s.392(2) (and s.392(3) if relevant), and the steps in the Sprigg formula, have been assessed and quantified. That is to say, the way in which a final compensation amount has been arrived at should be readily apparent and explicable from the reasons of the decision-maker.’ (footnotes omitted)(my emphasis)

In adopting the above methodology, I make specific findings as follows:

(a) As the respondent put no evidence as to the effect any order of compensation would have on the viability of its enterprise, I am not satisfied that the order I intend to make would have any deleterious effect on the respondent’s viability.
(b) The applicant had two and a half years’ service with the respondent – a reasonable period of employment.
(c) It is notoriously difficult to speculate, with any certainty, how long a period an unfairly dismissed employee would have continued in employment, but for their dismissal. In McCulloch v Calvary [2015] FWCFB 873, the Full Bench of the Commission put it this way and said at para [27]:

‘[27] We would also observe that, in our view, the evidence upon which the Commissioner relied was insufficient to sustain the inference that, but for the dismissal, the appellant would only have remained in employment for a further 8 weeks, at which time he would be summarily terminated. Implicit in the Commissioner’s finding is that the conduct which led to his dismissal (and which the Commissioner found did not constitute a valid reason for termination) would not only be repeated within a relatively short period of time but would in fact be repeated in a more serious form such as to constitute serious misconduct. While the task of determining an anticipated period of employment can be difficult, it must be done. In the context of this case it seems to us that the Commission would require cogent evidence to conclude that a person such as the appellant, who was dismissed without a valid reason, would only have worked another 8 weeks at which time he would have been summarily dismissed. The Commissioner’s s.392(2)(c) finding constitutes a significant error of fact, within the meaning of s400(2) of the Act.’

(i) Given the applicant had been appointed Store Manager on a full-time basis, I consider she would have had a reasonable expectation of at least another 12 months’ work. There are no performance issues which would give cause to think otherwise. It is common ground that the amount is $48,000, or $923 per week.
(ii) The applicant was successful in obtaining alternative casual employment on 8 March 2018 and continues to look for full time alternative employment. I am satisfied she has made a real and genuine effort to mitigate the losses suffered by her dismissal.
(iii) The applicant provided evidence of the remuneration she has earned since her dismissal. Since 8 March 2018, she has had casual night shift/shift work at a local service station. She earns an average of approximately $1,193 per fortnight ($597 per week (nearest dollar)). This is $326 per week less than she received as a Store Manager. I have no reason to doubt this evidence. For present purposes I am assessing a contingency that the applicant will earn $25,671 in the 12 month period following her dismissal; representing 43 weeks (8 March 2018 to 2 January 2019) earning $597 per week.

The applicant received no notice of termination and no payment in lieu of notice (presumably with the respondent relying on summary dismissal, without notice). Had the applicant been dismissed for poor performance (which she was not), she would have received 4 weeks pay in lieu of notice under the terms of her Contract of Employment. I have taken that matter into account. I make no deductions for other contingencies, including the fact she may have had a lesser salary before being promoted to Store Manager (about which I have no evidence).

Given I have found that there was no misconduct of the applicant, no deduction in compensation is made on that score (s 392(3)).

The order I intend to make contains no component by way of compensation for shock, distress, humiliation or other analogous hurt (s 392(4)).

Compensation assessment

The compensation cap in relation to the applicant is the lesser of the amount equivalent to the remuneration earned by her in the 26 weeks immediately before her dismissal (s 392(6)) and half the high income threshold immediately before the dismissal. The high income threshold is not relevant. Remuneration earnt in the 26 weeks’ before dismissal is $24,000. As mentioned, I have determined that the applicant would have remained in employment for a further period of 12 months from 2 January 2018 equating to $48,000. She has earnt, or will earn $25,671 during that period in alternative casual employment.

According to the Sprigg formula, the amount of nominal compensation is $48,000 - $25,671 which equals $22,329. This amount is below the cap of assessment the applicant earnt in the 26 weeks prior to her dismissal. Accordingly, I propose to order an amount of compensation of $22,329.

CONCLUSION

For the aforementioned reasons, I am satisfied the dismissal of the applicant by the respondent on 2 January 2018 was ‘harsh, unjust and unreasonable’, within the meaning of s 387 of the Act. Finally, s 381(2) of the Act is a significant and overreaching object of Part 3-2. It is expressed in these terms:

381 Object of this Part

(1) The object of this Part is:
(a) to establish a framework for dealing with unfair dismissal that balances:
(i) the needs of business (including small business); and

(ii) the needs of employees; and

(c) to establish procedures for dealing with unfair dismissal that
(i) are quick, flexible and informal; and

(ii) address the needs of employers and employees; and

(d) to provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement.

(2) The procedures and remedies referred to in paragraphs (1)(b) and (c), and the manner of deciding on and working out such remedies, are intended to ensure that a "fair go all round" is accorded to both the employer and employee concerned.

Note: The expression "fair go all round" was used by Sheldon J in in re Loty and Holloway v Australian Workers' Union [1971] AR (NSW) 95.’

In this case, I am satisfied reinstatement is inappropriate and compensation in an amount of $22,329, is appropriate having regard to all the circumstances of this case. I am satisfied that the remedy I have determined will ensure a ‘fair go all round’ is accorded to both the applicant and the respondent. The amount so ordered is subject to any deductions of appropriate taxation according to law. The amount of compensation is to be paid to the applicant within 21 days of today. Orders giving effect to my conclusions will be published contemporaneously with this decision.

DEPUTY PRESIDENT

Appearances:

Ms J McGlashan for herself.
Mr P Leeson for the respondent.

Hearing details:

2018.
Sydney:
April 19.

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