Joanna Sinclair v The Lotus Spa at Barwon Heads

[2017] FWC 3394

[2017] FWC 3394

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Joanna Sinclair
v
The Lotus Spa at Barwon Heads
(U2016/13028)

COMMISSIONER HARPER-GREENWELL MELBOURNE, 23 JUNE 2017

Application for relief from unfair dismissal - remedy.

[1] I issued a decision 1 in which I found that Ms Sinclair’s termination by the Respondent, The Lotus Spa at Barwon Heads (Lotus Spa), was harsh, unjust or unreasonable. I was unable to come to a concluded view, based on the materials that were before me, on an appropriate remedy. I advised the parties that directions would be issued following my decision with respect to the filing of submissions addressing remedy.

[2] Directions were issued and the parties each filed written submissions addressing remedy. In the directions the parties were notified that I intended to determine the issue of remedy on the papers, however if either party sought a hearing they were to advise my chambers by the date set down.

[3] Ms Sinclair filed brief submissions which did not go to dealing with the matters I am required to consider when deciding remedy. Further directions were issued and again the parties were advised in the absence of a request for a hearing the matter would be determined on the papers. Neither party made a request to be heard.

Written Submissions of the Applicant

[4] Ms Sinclair submitted that reinstatement was not appropriate in the circumstances due to the relationship between herself and the owner of Lotus Spa, Ms McKechnie. Ms Sinclair had recently secured part-time employment and as such the only remedy fitting would be compensation.

[5] Ms Sinclair submitted that she believed 10 weeks compensation would be an appropriate remedy to her claim as she was unable to obtain work during the time of year her dismissal took place.

[6] Ms Sinclair also made submissions regarding what she believed was an incorrect termination payment, however these submissions are not relevant to the considerations that I am required to make.

Written Submissions of the Respondent

[7] Lotus Spa submitted that they believe Ms Sinclair’s dismissal was fair however they did not follow the correct procedures.

[8] They submitted that rumours and innuendo in the small town of Barwon Heads regarding Ms Sinclair’s dismissal had damaged the business and resulted in a decrease in sales, and that an order for a significant sum of money to be paid to Ms Sinclair may force the business to close.

Consideration

[9] The Fair Work Act 2009 (Cth) (the Act) provides the following with respect to remedy:

“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.”

[10] Ms Sinclair does not seek reinstatement, submitting that she would find it difficult to return to Lotus Spa due to her relationship with Ms McKechnie 2 and that she has recently secured part-time employment. Lotus Spa strongly opposes reinstatement, submitting that it would be impossible for Ms Sinclair and Ms McKechnie to work together again.3

[11] In all of the circumstances I am satisfied there would be no prospect of re-establishing a productive and cooperative relationship, the relationship between the parties remains somewhat volatile and I do not consider reinstatement would be appropriate or practical. I find an order for compensation is appropriate.

[12] Section 392 of the Act sets out the criteria to which I must give regard in determining any amount of compensation I might order Lotus Spa to pay Ms Sinclair. I will consider each of these in succession below.

[13] In determining the amount of compensation to be ordered, the Act 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.”

The effect of the order on the viability of the employer’s enterprise

[14] Lotus Spa submitted that the business was fragile and that an order for a significant sum would likely force the business to close.

[15] They also submitted that even a relatively small amount would be a hardship, as due to Ms McKechnie’s illness she had been unable to work and as a result had to pay staff for the work she would normally undertake as the business owner. 4

[16] Where an employer seeks to rely on the circumstances referred to in s.392(2)(a) of the Act, the employer must present evidence and/or argument as to the financial situation of the enterprise and the likely effect that an order for compensation would have on the viability of the enterprise. 5

[17] In K. Beames v BDRP Falconer Pty Ltd 6, Deputy President Hamilton made the following observation:

“[48] In this present matter the employer is experiencing difficult business conditions, and further redundancies have been made. This is not in contention. However, no witness evidence was led that an order of the amount sought would have an effect on the viability of the employer, or what the effect would be of such an order, or what extent that effect would relate to the viability of the business. The submission was however made by Tercel that ‘any additional expense will certainly be a problem for the business’ [PN478].

[49] The question is whether I should be prepared to infer an effect on viability from the material before me about difficult trading conditions, and ongoing redundancies. Such an inference must not be simply ‘conjecture or speculation’, and there must be facts which in my view make an effect on viability of the enterprise sufficiently probable. The existence of trading difficulties and a general submission that ‘any additional expense will certainly be a problem for the business’ is not a submission that the viability of the business will be affected or even that it will probably be affected. On those submissions, even if accepted, the problem may or may not affect viability, and the factor I must have regard to is of course effect on viability: ‘(a) the effect of the order on the viability of the employer’s undertaking, establishment or service;’. At most it is a submission that problems will occur that might or might not, with no real likelihood either way, extend to affecting the viability of the business. Nor has the applicant been given an opportunity to respond to any submission or evidence that the problem will or probably will affect viability. Nor am I able to predict what the result of such a contest, if it had taken place, would have been. A mere submission that difficulties for the business will occur is, with respect, not enough. If some specific evidence had been led on the point perhaps the result would be different, or perhaps not.” (endnotes omitted)

[18] Lotus Spa submitted that they would provide evidence regarding their financial position but only on the proviso that the information not be made available to Ms Sinclair.

[19] I advised Lotus Spa that I would accept this evidence despite it being filed after the deadline for submissions given in the directions issued by my chambers, however noted that due to the principles of natural justice I would be required to provide a copy to Ms Sinclair.

[20] It is well established that Commission Members are required to act judicially and accord all parties procedural fairness. 7 The Commission has additional duties when parties represent themselves to ensure justice to all parties is achieved.8

[21] If I were to permit Lotus Spa to provide evidence without providing Ms Sinclair the opportunity to test that evidence I would be putting Ms Sinclair at a disadvantage in conducting her case. 9

[22] Lotus Spa declined to file any evidence in support of their submission in these circumstances.

[23] Accordingly, on consideration of the evidence I am unable to find that any order I make will affect the viability of the Lotus Spa.

Length of the person’s service with the employer

[24] Ms Sinclair was employed at the Lotus Spa in a part-time capacity for a period of 14 months. As she was an employee for a short period of time the length of Ms Sinclair’s service with the Lotus Spa does not necessarily support the making of an order for compensation of any significant quantum.

Remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed

[25] Ms Sinclair submitted that she believed she would have continued managing the Lotus Spa with the care and diligence she would have put into her own business.

[26] However, at the time of Ms Sinclair’s dismissal, it is clear that the relationship between Ms Sinclair and Ms McKechnie had completely broken down. Ms Sinclair had advised Ms McKechnie that she would no longer speak to her and would only speak to her father, Mr McKechnie who was taking care of the business affairs at the time. 10

[27] Lotus Spa submitted that the relationship between the parties had reached such a stage that, even if they had followed the correct procedures in terminating Ms Sinclair, she would have only continued employment for a matter of days.

[28] I have considered the events leading up to the dismissal and I prefer the evidence of Ms McKechnie in that I do not accept Ms Sinclair would have continued managing the Lotus Spa with care and diligence.

[29] In reaching this conclusion I have given consideration to the likelihood of the employment relationship having been sustained over time. I prefer the submission of the Lotus Spa being that the relationship between the parties had in fact broken down and consequently Ms Sinclair’s employment would not have continued. The evidence is overwhelmingly in support of that premise.

[30] I accept that Ms Sinclair’s employment would have been terminated in a matter of weeks. Given the evidence and in the circumstances I could not reach a conclusion that Ms Sinclair’s employment would have endured beyond the period of two weeks from the date of her dismissal.

[31] The parties gave conflicting evidence as to the rate of pay Ms Sinclair was receiving at the time of her dismissal. The parties agreed that Ms Sinclair accepted the rate of $35 per hour both verbally and via text message on 3 October 2016. 11

[32] Ms Sinclair submitted that at a meeting on 7 October 2016 she confirmed she was satisfied with a wage of $35 per hour. 12 Lotus Spa submitted that Ms Sinclair was informed at this meeting that she would no longer receive $35 per hour, but would instead receive the rate of a Level 6 Beauty Therapist in the Hair and Beauty Industry Award 2010 plus a 10% loading.13

[33] However at the hearing Mr McKechnie gave evidence that at this meeting he told Ms Sinclair that the offer of $35 per hour was no longer on the table 14 and gave her a letter outlining what Lotus Spa was prepared to pay.15

[34] I am not satisfied that there was any subsequent agreement between Lotus Spa and Ms Sinclair regarding her rate of pay and note that an employer cannot unilaterally alter an employee’s wage rate. Therefore, I conclude that at the time of her dismissal Ms Sinclair’s rate of pay was $35 per hour.

[35] Based on the submissions of the parties that Ms Sinclair worked on average 30 hours per week 16, this amounts to $2,100.00 gross over the two weeks I believe she would have remained employed.

The efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal

[36] Ms Sinclair submitted that she had difficulty securing employment following her dismissal as students had taken on most of the summer jobs in town and the surrounding areas. 17

[37] Between the time of her dismissal and the hearing on February 14, Ms Sinclair submitted that she had registered with online employment services and applied for roughly 15 jobs in her local area. 18 However in her written submissions addressing remedy she identified only 7 employers. Ms Sinclair also gave evidence during the hearing that for no specific reason she concentrated her job search to the local area only.

[38] Ms Sinclair had secured intermittent employment as a barista in November 2016 as well as performing child-minding work in January 2017. She also performed the occasional massages and beauty treatments for friends and family.

[39] However, Lotus Spa contends Ms Sinclair’s efforts to find employment submitting that the busiest period for all businesses in Barwon Heads has always been from early November through to the end of February. Lotus Spa further submits Ms Sinclair’s had already made travel arrangements for a holiday which she was away during December 2016.

[40] Ms Sinclair’s evidence supports a finding that she had made efforts to mitigate the effects of unemployment and, although she had confined that effort to only the local area, given her skill set she had made an effort within what was likely to be her capability and capacity. Therefore, I make no deduction for reasons of absence of attempts to mitigate the loss she has suffered.

The amount of remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation.

[41] I have adopted the approach of the Full Bench of the AIRC in Ellawala v Australian Postal Corporation 19 as follows;

“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”. This amount is then reduced by deducting monies earned since termination. Only monies earned during the period from termination until the end of the “anticipated period of employment” are deducted. An example may assist to illustrate the approach to be taken.

In a particular case the Commission estimates that if the applicant had not been terminated then he or she would have remained in employment for a further 12 months. The applicant has earned $3,000 a month for the 18 months since termination, that is $54,000. Only the money earned in the first 12 months after termination (that is $36,000) is deducted from the Commission’s estimate of the applicant’s lost remuneration. Monies earned after the end of the “anticipated period of employment”, 12 months after termination in this example, are not deducted. This is because the calculation is intended to put the applicant in the financial position he or she would have been in but for the termination of their employment.”

[42] Ms Sinclair submitted that the first job she obtained after her termination from Lotus Spa was at Fcuppa in November. Accordingly, as no remuneration was received by Ms Sinclair I make no deduction for remuneration earned by her between 8 October 2016 and 22 October 2016.

Any amount of income reasonably likely to be earned during the period between the making of the order and the actual compensation.

[43] I have considered this requirement in the context of the above.

Any other matter that the FWC considers relevant.

[44] There are no other reasons relevant to my consideration.

[45] I do not consider there has been any misconduct which would require me to reduce the amount of compensation.

[46] I do not include any component by way of compensation for shock, distress or humiliation caused by the manner of the dismissal.

Conclusion

[47] There were no objections by the parties to making a decision on remedy based on the materials before me.

[48] For the reasons I have discussed above, Lotus Spa must pay to Ms Sinclair the amount of $2,100.00 plus 9.5% superannuation, less appropriate taxation as required by law.

[49] I take into account that Lotus Spa is not likely to have budgeted for an order of compensation in these circumstances. Lotus Spa is a small business operator which I accept is operating under some difficult circumstances given Ms McKechnie’s current illness. I therefore deem it appropriate that the compensation be paid in four equal monthly instalments commencing thirty days from the date of this decision and consequential order 20. Lotus Spa is at liberty to apply for a variation to this time period.

COMMISSIONER

Final written submissions:

Applicant 26 May 2017

Respondent 1 June 2017

 1   Sinclair v The Lotus Spa at Barwon Heads [2017] FWC 2559

 2   PN1827

 3   PN1831

 4   PN1833

 5   D.A. Moore v Highpace Pty Ltd (AIRCFB, Boulton J, Watson SDP, Whelan C, 18 May 1998) Print Q0871

 6   K. Beames v BDRP Falconer Pty Ltd (AIRC, Hamilton DP, 28 March 2002) PR916075 [49]

 7   Coal and Allied Services v Lawler (2011) 192 FCR 78 at [25]

 8   John Holland Pty Ltd t/a John Holland Aviation Services Pty Ltd [2014] FWCFB 7813 at [19]

 9   Ibid at [31]

 10   Exhibit R5

 11   PN 158, 159 and 168; Exhibit A6

 12   Exhibit A2

 13   Exhibit R2 and R4

 14   PN 1160

 15   PN1162

 16   PN1934 – PN1937

 17   Exhibit A2

 18   PN1919-PN1921

 19   Ellawala v Australian Postal Corporation (unreported, AIRCFB, Ross VP, Williams SDP, Gay C, 17 April 2000) Print S5109

 20   PR594054

Printed by authority of the Commonwealth Government Printer

<Price code C, PR594053>