Jesus David Navia Ortiz v Hit and Bounce Pty Ltd T/A FX Zone Sports Centre and Trampoline Park

[2016] FWC 1614

[2016] FWC 1614

FAIR WORK COMMISSION

DECISION

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

Jesus David Navia Ortiz
v
Hit and Bounce Pty Ltd T/A FX Zone Sports Centre and Trampoline Park
(U2015/6613)

DEPUTY PRESIDENT LAWRENCE SYDNEY, 22 MARCH 2016

Application for relief from unfair dismissal.

Introduction

[1] On 23 July 2015 Mr Jesus David Navia Ortiz (the Applicant) lodged with the Fair Work Commission (the Commission), pursuant to s.394 of the Fair Work Act 2009 (the Act), an application for a remedy for unfair dismissal against Hit and Bounce Pty Ltd /T/A FX Zone Sports Centre and Trampoline Park (the Respondent).

[2] The Applicant commenced employment with the Respondent on 7 March 2014. He says that he was notified of his dismissal on 7 July 2015 and it took effect on that day.

[3] The Applicant was dismissed by a text message by Mr Jaimie Merriam which advised him that he was terminated immediately. It stated:

“You are hereby terminated immediately from Hit and Bounce. Please note that if you have somehow become an employee of another company without my knowledge, I am the current lessee for 7 Carter Street, Lidcombe and therefore give you no authorisation to access the premises whatsoever until a legal investigation is concluded for missing company funds.”

[4] The Applicant says he did not deal with money and cannot understand the reason for the dismissal. Mr Merriam is Director and shareholder for the Respondent and “FX Building Group” so he knew the Applicant did work for both.

[5] The Applicant seeks compensation.

[6] The Respondent operated a trampoline park and fitness centre in Lidcombe in Sydney’s western suburbs. The F3 response was lodged by Ms Tania Merriam, Jaimie Merriam’s wife and the company secretary. No detail was provided of the Applicant’s salary or position. The F3 does concede that the Respondent had over 20 employees at the time of dismissal. It is submitted, however, that the Applicant was an employee of “FX Building Group Pty Ltd” and referred to action in the Supreme Court in relation to fraud. Payment records were attached which show the Applicant as an employee of “FX Building Group Pty Ltd” and not the Respondent.

Commission Proceedings

[7] A conciliation conference took place on 17 August 2015, but the matter did not settle.

[8] The matter was originally listed in the November roster but did not proceed because Jaimie and Tania Merriam were in the United States because of a sick child.

[9] I conducted a telephone programming conference on 27 November 2015. It was apparent that Ms Merriam would be in the United States for the hearing which was scheduled for 10 December 2015. We proceeded with Ms Merriam on the telephone. Unfortunately, the line dropped out during her submissions and could not be re-connected. The matter was listed for further hearing on 14 January 2016 when it was expected Mr Merriam would be in attendance. In the event, Ms Merriam represented the Respondent.

[10] The only submissions and evidence before the Commission was that of the Applicant and Ms Merriam respectively together with a range of documents such as corporate records and pay records.

Protection from Unfair Dismissal

[11] An order for reinstatement or compensation may only be issued where I am satisfied the Applicant was protected from unfair dismissal at the time of the dismissal

[12] Section 382 sets out the circumstances that must exist for the applicant to be protected from unfair dismissal:

“382 When a person is protected from unfair dismissal

A person is protected from unfair dismissal at a time if, at that time:

(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and

(b) one or more of the following apply:

(i) a modern award covers the person;

(ii) an enterprise agreement applies to the person in relation to the employment;

(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.”

[13] The Applicant was employed as an “architectural draftsperson/project co-ordinator”. The question of award coverage is uncertain. There was no enterprise agreement. The Applicant’s salary varied but it was clearly below the high income threshold. The Applicant estimated that he averaged about $1085 per week (Transcript PN105-117). The Applicant had over six month’s service, assuming his submission about the Respondent being the employer is accepted. I am satisfied, therefore, that he was a person protected from unfair dismissal in accordance with s.382.

[14] Section 396 provides that certain matters must be determined by the Commission before proceeding to deal with the merits of a matter. It provides:

“396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);
(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;
(d) whether the dismissal was a case of genuine redundancy.”

[15] None of these matters were at issue in this case. The Respondent had some 20 employees at the time of the dismissal.

Was the dismissal unfair?

[16] A dismissal is unfair if I am satisfied, on the evidence before me, that all of the circumstances set out at s.385 of the Act existed. Section 385 provides the following:

“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.”

[17] No issue was raised pursuant to s.385(a), (c) or (d).

Harsh, Unjust or Unreasonable

[18] I must consider whether I am satisfied the dismissal was harsh, unjust or unreasonable. The criteria I must take into account when assessing whether the dismissal was harsh, unjust or unreasonable are set out at s.387 of the Act:

“387 Criteria for considering harshness etc.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

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

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

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

(e) if the dismissal related to unsatisfactory performance by the person-whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

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

The Arguments of the Parties

[19] The Applicant submits that his dismissal was harsh, unjust and unreasonable because:

● He was dismissed for no reason by the Respondent for whom he worked for 16 months. He commenced with a related company, FX Building Group Pty Ltd (FX Building) in 2012. Both the Respondent and FX Building had the same directors and shareholders, Mr Jaimie Merriam and Mr Eduardo Araya.

● The Applicant says that from 7 March 2014 he became an employee of the Respondent and was paid from its account. He continued to do work for FX Building. He is also seeking payment for a range of entitlements.

● It is apparent that Mr Merriam and Mr Araya ended their business relationship in mid-2015 leading to considerable acrimony.

● The Applicant provided bank details and other documentation in support of his contention that he was an employee of the Respondent. It is obvious that the corporate entities were used loosely and inter-changeably.

● The Applicant seeks compensation because of his lost income. He advised the Commission that he had obtained another job in early August 2015.

[20] The Respondent submits that the dismissal was not harsh, unjust and unreasonable because:

● The Applicant was and remained an employee of FX Building. His work for the Respondent was on the basis of it being a client of FX Building.

● The Respondent conceded that the Applicant was paid his wage “from the Hit and Bounce bank account” (See submission 30.11.2015). It was said that this arose from an arrangements between Mr Merriam and Mr Rojas that the Respondent loan $1.6 million to FX Building.

● At the second hearing, Ms Merriam conceded that the Applicant was not responsible “for anything to do with the funds out of the bank account” (Transcript PN286). I note this had been given as the reason for termination in the text message dismissing him.

● The reason he was sent a termination notice from the Respondent was to make sure he did not enter the trampoline park together with the other employees who were terminated.

● The Respondent confirmed that the Applicant’s income was about $1,100 per week (Transcript PN268).

Approach of the Commission

[21] The ambit of the conduct which may fall within the phrase ‘harsh, unjust or unreasonable’ was explained in Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 465 by McHugh and Gummow JJ as follows:

“... It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment may be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted.”

[22] Vice President Ross, as he then was, in B Rose v Telstra Corporation Limited (1998) Q9292 (Rose) restated the above proposition and also stated:

“In my view whether there has been a `fair go all round’ is a matter which I think is relevant and hence I am to have regard to it determining whether the termination was harsh, unjust or unreasonable. It is not necessarily determinative but it is a factor to be taken into account.”

[23] There was a dispute about the facts in this case and a conflict of evidence. However, ultimately they related to the conflicts within the employing entity rather than the actual dismissal. I note that Commissioner Riordan dealt with a s.394 application by another employee of the Respondent, Ms Xiao Liu ([2016] FWC 834). The facts in that case are, of course, different but the dismissal arose from the same breakdown in the relationship between Mr Merriam and Mr Araya.

[24] It is clear to me that from the point of view of the employees the Respondent and FX Building were operated as one entity. Accounts and names were used interchangeably. It is not the responsibility of employees such as the Applicant to look behind these corporate structures. He received a notice of dismissal from the Respondent on 7 July 2015. There was no dispute about that fact from Ms Merriam. I must therefore decide whether that dismissal was hash, unjust or unreasonable.

Valid Reason

[25] In Container Terminals Australia Limited v Toby [2000] Print S8434, a Full Bench said ‘In our view, the consideration of whether there was a valid reason for termination is a separate issue from the determination of whether a termination was harsh, unjust or unreasonable’.

[26] Northrop J in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 said:

“In its context in s.170DE(1), the adjective “valid” should be given the meaning of sound, defensible or well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of s.170DE(1). At the same time the 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 ...”

[27] In Parmalat Food Products Pty Ltd v Wililo, [2011] FWAFB 1166, the Full Bench held:

“The existence of a valid reason is a very important consideration in any unfair dismissal case. The absence of a valid reason will almost invariably render the termination unfair. The finding of a valid reason is a very important consideration in establishing the fairness of a termination. Having found a valid reason for termination amounting to serious misconduct and compliance with the statutory requirements for procedural fairness it would only be if significant mitigating factors are present that a conclusion of harshness is open.”

[28] The Full Bench majority in B, C and D v Australian Postal Corporation T/A Australia Post [2013] FWCFB 6191 provides a useful summary of the approach to be taken by the Commission in weighing the factors to be considered under s.387:

“[20] Northrop J’s reasoning anticipated the reasoning of the High Court in Victoria v Commonwealth – that s.170DE(2) by its operation could render invalid a reason that would otherwise have been a valid reason. The fact that some dismissals are “harsh, unjust or unreasonable” notwithstanding the existence of a “valid reason” means that the class of dismissals that are “harsh, unjust or unreasonable” is greater than the class of dismissals where there is no “valid reason” for the dismissal.

[21] Section 387 specifies a range of matters that must be considered in each case. Section 387(h) requires consideration of “any other matters that FWA considers relevant”. In any given case, there will be a range of matters, beyond those specified in s.387(a) to (g), that rationally bear upon whether the dismissal is “harsh, unjust or unreasonable” and thus are “relevant matters” that must be considered pursuant to s.387(h).

[22] Often it will not make any difference to the ultimate outcome whether a particular circumstance is considered pursuant to s.387(a) in determining whether there is a valid reason, or as a relevant matter pursuant to s.387(h), leading to the ultimate determination of whether the dismissal was “harsh, unjust or unreasonable”. However, in some cases it may matter greatly. That will tend to be so when the particular misconduct, shorn of the personal circumstances of the employee and the broader context beyond the particular acts or omissions that are said to constitute the misconduct, is clearly a matter that a reasonable employer is entitled to take seriously. This is such a case.

...

[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”.

[36] A failure to comply with a lawful and reasonable policy is a breach of the fundamental term of the contract of employment that obliges employees to comply with the lawful and reasonable directions of the employer. In this way, a substantial and wilful breach of a policy will often, if not usually, constitute a “valid reason” for dismissal.
. . .

[58] Reaching an overall determination of whether a given dismissal was “harsh, unjust or unreasonable” notwithstanding the existence of a “valid reason” involves a weighing process. The Commission is required to consider all of the circumstances of the case, having particular regard to the matters specified in s.387, and then weigh:

(i) the gravity of the misconduct and other circumstances weighing in favour of the dismissal not being harsh, unjust or unreasonable;

against

(ii) the mitigating circumstances and other relevant matters that may properly be brought to account as weighing against a finding that dismissal was a fair and proportionate response to the particular misconduct.”

[29] I respectfully adopt this approach.

[30] Ms Merriam conceded that the reference to missing company funds had no relevance to the Applicant. He was dismissed as collateral damage in the breakdown of the relationship between Mr Merriam and Mr Araya. The only defence of the Respondent was that the Applicant was really an employee of FX Building. However, the dismissal notice terminates him “from Hit and Bounce”. In any event, I am satisfied that the two companies operated as one entity. There was no other reason for the Applicant’s dismissal relating to his capacity or conduct advanced by the Respondent.

[31] I am satisfied that there was not a valid reason for the dismissal of the Applicant.

Notification of a valid reason – s.387(b)

[32] Notification of a valid reason for termination must be given to an employee protected from unfair dismissal before the decision is made, Chubb Security Australia Pty Ltd v Thomas Print S2679 at [41] in explicit terms, Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137, 151 and in plain and clear terms, Presvisic v Australian Quarantine Inspection Services Print Q3730. In Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137 a Full Bench of the Australian Industrial Relations Commission dealing with similar provision of the Workplace Relations Act 1996 stated the following:

“[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 170(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. Much like shutting the stable door after the horse has bolted.”

[33] No prior notification was provided to the Applicant. I find therefore that the Respondent acted contrary to s.387(b).

Opportunity to respond s.387(c)

[34] An employee protected from unfair dismissal must be provided with an opportunity to respond to any reason for dismissal way to ensure the employee relating to the conduct or capacity of the person. This criterion is to be applied in a common sense is treated fairly and should not be burdened with formality RMIT v Asher (2010) 194 IR 1, 14-15.

[35] It follows that the Applicant had no real opportunity to respond to the reason for the dismissal.

Unreasonable refusal by the employer to allow a support person – s.387(d)

[36] Where an employee protected from unfair dismissal has requested a support person be present to assist in discussions relating to the dismissal, the employer should not unreasonably refuse that person being present.

[37] This factor is not relevant.

Warnings regarding unsatisfactory performance – s.387(e)

[38] This factor is not relevant.

Impact of the size of the Respondent on procedures followed – s.387(f)

[39] This factor is not relevant.

Absence of dedicated human resources management specialist/expertise on procedures

followed - s.387(g)

[40] The lack of human resources specialists did contribute to the procedural failures, but does not excuse them.

Any other matter that the FWC considers relevant

[41] Section 387(h) allows the Commission to consider any other matters it considers relevant. These must be considered in the context of the object of Part 3 - 2 of the Act contained in s.381(2) to “ensure that a ‘fair go all round’ is accorded to both the employer and the employee concerned”.

[42] In this case, however, I do not consider that there are such matters.

[43] Accordingly, I find that the dismissal of the Applicant was harsh, unjust and unreasonable. I find that the dismissal was unfair within the terms of s.385.

Compensation

[44] Having found that the dismissal was unfair, I now turn to the appropriate remedy.

[45] Section 390 of the Act sets out the circumstances in which I may make an order for reinstatement or compensation:

“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.”

[46] The Applicant does not seek reinstatement and it would not be appropriate given the circumstances of the breakdown in relations.

[47] Section 390(3)(b) provides that I may only issue an order for compensation to the Applicant if it is appropriate in all the circumstances.

[48] I have found that the applicant has been unfairly dismissed and that reinstatement is not appropriate in all the circumstances. I am satisfied that an order for compensation should be made.

[49] Section 392 of the Act which sets out the circumstances that must be taken into consideration when determining an amount of compensation, the effect of any findings of misconduct on that compensation amount and the upper limit of compensation that may be ordered provides:

“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.”

[50] The method for calculating compensation under s.392 of the Act was dealt with by a Full Bench of the Commission in Bowden, G v Ottrey Homes Cobram and District Retirement Villages Inc. T/A Ottrey Lodge,[2013] FWCFB 431 (Bowden). In that decision the Full Bench set out the order in which the criteria and other factors should be applied, taking into account authority under the Workplace Relations Act 1996 in Sprigg v Paul’s Licensed Festival Supermarket, (1998) 88 IR 21 and Ellawala v Australian Postal Corporation, Print S5109 (Ellawala). I have adopted the methodology utilised in Bowden in determining the amount of a payment of compensation.

[51] I will now consider each of the criteria in s.392 of the Act.

Remuneration that would have been received: s.392(2)(c)

[52] The Applicant earned $1,085 per week. Given the issues that had arisen it is difficult to see that his employment would have continued for a long time.

[53] I determine that the period of time the Applicant would have remained employed by the Respondent, or would have likely remained employed with the Respondent, had he not been dismissed is three months. The remuneration he would have received is therefore $13,020.

Remuneration earned s.392(e)

[54] The Applicant found a job which paid more in early August 2015, on his own admission. He was unemployed for only a month. Therefore, I have reduced the compensation to $6,000 on account of this factor.

Income likely to be earned: - s.392(2)(f)

[55] This matter is not relevant.

Other matters: - s.392(2)(g)

[56] There are no other matters that I consider appropriate to consider.

Viability: - s.392(2)(a)

[57] There was no evidence about this factor.

Length of Service: - s.392(2)(b)

[58] The Applicant’s short service is not a factor which can be taken into account.

Mitigating efforts: - s.392(2)(b)

[59] In considering whether the Applicant has taken steps to mitigate the loss suffered as a result of the dismissal I should take into account whether the Applicant acted reasonably in the circumstances, (Ellawala).

[60] I consider that the Applicant has taken steps to mitigate his loss by seeking comparable employment.

Misconduct: s.392(3)

[61] No adjustment to the compensation is appropriate on this ground.

Shock, Distress: s.392(4)

[62] I note that the amount of compensation calculated does not include a component for shock, humiliation or distress.

Compensation cap: s.392(5)

[63] I must reduce the amount of compensation to be ordered if it exceeds the lesser of the total amount of remuneration received by the Applicant, or to which the Applicant was entitled, for any period of employment with the employer during the 26 weeks immediately before the dismissal, or half the amount of the high income threshold immediately prior to the dismissal.

[64] The high income threshold component is $68,350.

[65] The amount of compensation I will order does not exceed the compensation cap.

[66] I will order the Respondent to pay to the Applicant an amount of $6,000.

Conclusion

[67] I am satisfied that the Applicant was protected from unfair dismissal, and that the dismissal was unfair and a remedy of compensation is appropriate. In accordance with s.381(2) of the Act, I am further satisfied that each party has been accorded a ‘fair go all round’.

[68] An Order (PR578240) will be issued with this decision.

DEPUTY PRESIDENT

Appearances:

J. D. Navia Ortiz, Applicant.

T. Merriam for the Respondent

Hearing details:

2015

Sydney:

November 27 (Telephone mention);

December 10.

2016

January 14.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR577981>