John Traill v Wrights Contractor Pty Ltd

[2014] FWC 8786

[2014] FWC 8786

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

John Traill
v
Wrights Contractor Pty Ltd
(U2014/8425)

COMMISSIONER JOHNS MELBOURNE, 10 DECEMBER 2014

Application for Relief of Unfair Dismissal - minimum employment period - transmission of business - Small Business Fair Dismissal Code.

Introduction

[1] On 20 July 2014 John Traill (Applicant) made an application pursuant to section 394 of the Fair Work Act 2009 (FW Act) for a remedy in respect of his dismissal by Wrights Contractor Pty Ltd (Employer/Respondent).

[2] On 29 July 2014 the Employer filed a response to the unfair dismissal application.

[3] On 23 September 2014 the unfair dismissal application was listed for conciliation before a Fair Work Commission (Commission) Conciliator, but remained unresolved at the end of the conciliation.

[4] Consequently the matter was listed for determination.

Permission to be represented

[5] Neither party elected to be represented by a lawyer or paid agent. Consequently, the issue of permission to be represented under the FW Act did not arise.

Conference or Hearing

[6] On 12 November 2014, the Commission sought submissions from the parties about whether the Commission should conduct either a conference (section 398) or a hearing (section 399) in relation to the matter.

[7] Taking account any differences in the circumstances and the wishes of the parties to the matter, and considering whether a hearing would be the most effective and efficient way to resolve to the matter, the Commission, as presently constituted, decided to conduct a conference.

The determinative conference

[8] At the conference:

a) the Applicant gave evidence on his behalf; and
b) the Respondent was represented by its principal Dan Wright, who gave evidence on its behalf.

Jurisdictional issue - minimum employment period

[9] The application was the subject of a hearing before the Commission, as presently constituted, on 13 November 2014 to determine whether the Applicant met the minimum employment period.

[10] In this matter:

a) the Respondent is a small business;
b) the minimum employment period is therefore 12 months;
c) the Applicant commenced employment with the Respondent on 1 February 2014;
d) the Applicant ceased employment with the Respondent on 1 July 2014 (i.e. 5 months after he commenced employment);
e) at first appearances the Applicant did not meet the minimum employment period;
f) the Applicant had prior service with the previous owner of the business, Willis Agricultural Services Pty Ltd (WAS);
g) the Applicant was paid out all accrued leave entitlements on ceasing work with WAS;
h) in commencing work with the Respondent prior service with WAS was not recognised by the Respondent;
i) the operation of s.384 of the FW Act was relevant because:

i. the Applicant was a transferring employee in relation to a transfer of business from an old employer (WAS) to a new employer (the Respondent), s.384(b)(i), and

ii. WAS and the Respondent are not associated entities, s.384(b)(ii).

j) the Respondent concedes that it did not inform the Applicant in writing before the new employment started that a period of service with WAS would not be recognised by the Respondent (as is required under s.384(b)(iii).

[11] Consequently, the jurisdictional issue was decided in favour of the Applicant and it became necessary to deal with the merits of the application.

Background

[12] The following matters are agreed or not contested:

a) the Respondent is a small business. 1
b) the Applicant commenced employment with the Respondent on 1 February 2014. 2
c) the Applicant had prior service with the previous owner of the business, WAS, which, under the FW Act, is to be recognised as service with the Respondent. 3
d) the Applicant earned $26.50 per hour 4 and averaged 40 hours per week5 (i.e. had average weekly earnings of $1,060 (Exhibit R10);
e) around 17 March 2014 the Applicant made a claim for compensation in relation to a workplace injury. 6 Liability was accepted.7
f) on or about 23 April 2014 the Respondent prepared, but never issued 8 the Applicant with a “Warning Letter” (Exhibit R3) in the following terms:

I am writing to you about your absence from work during your employment with Wright Contractors Pty Ltd t/a Wright Refrigeration & Engineering.

On 6th March you were informed verbally that you were required to let office management know when you were leaving work for the day, due to your work cover injury.

After considering the situation, it is expected that you will be required to notify Wendy Hanratty (Office Manager) and Dan Wright (Owner) each day if you are unable to perform a full days work.

You will also let us know if you have any appointments in relation to this workcover injury so as we can manage the workload efficiently.

This is your first warning letter, I propose that we meet again on <insert date> to review your progress.

g) On 19 May 2014 the Respondent issued the Applicant with a first “Warning Letter” (Exhibit R4) 9 in the following terms:

This warning is in regards to repair work carried out on Friday 16 / 5 / 14. Work which was carried out by yourself was unsatisfactory as no repair or investigatory work was carried out.

For all future repairs you will be required to call Dan Wright to confirm completion and repairs were made adequately.

This is your first warning letter, I propose that we meet again on 19/6/14 to review your progress.

h) On 1 July 2014 (i.e. the day the Applicant’s employment was terminated) the Respondent issued the Applicant with a second “Warning Letter” (dated 23 June 2014) (Exhibit R5)  10 in the following terms:

This warning is in regards to repair work carried out on the 13/6/13 (sic). Work which was carried out by yourself was unsatisfactory, this was due the pump being re-installed without testing. This lead to the pump running backwards and throwing the impeller.

For all future repairs you will be required to call Dan Wright to confirm completion and repairs were made adequately.

This is your second warning letter. I propose that we meet again on 2/8/14 to review your progress.

i) The Applicant ceased employment with the Respondent on 1 July 2014. The termination letter (Exhibit R6) was in the following terms:

I am writing to you about the termination of your employment with Wright Contractors.

On 19/05/14 you met with Dan Wright. In that meeting, you were advised that repairs that had been carried out were not satisfactory. You were issued with a formal warning letter on 19/05/14.

I consider that your performance is still unsatisfactory and it has been decided to end your employment with Wright Contractors.

Your employment will end immediately. Based on your length of service, your notice is one weeks. In lieu of receiving that notice, you will be paid that week’s wage.

You will also be paid your accrued entitlements and outstanding remuneration, including superannuation, up to and including your last day of employment.

Employees and employers may seek information about minimum terms and conditions of employment from the Fair Work Ombudsman. If you wish to contact them you can call 13 13 94 or visit their website at

j) Notwithstanding the reference to 1 week’s notice in the termination letter, the Respondent paid the Applicant an amount in lieu of 2 week’s notice.

[13] The Applicant submits he was unfairly dismissed and seeks an Order that he be compensated. 11 The Applicant does not seek reinstatement.

Protection from Unfair Dismissal

[14] An order for reinstatement or compensation may only be issued where the Commission is satisfied the Applicant was protected from unfair dismissal at the time of the dismissal.

[15] 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.

Note: High income threshold indexed to $133,300 from 1 July 2014.”

[16] For the reasons stated above, the Commission is satisfied the Applicant has completed the minimum employment period, and the sum of the Applicant’s annual rate of earnings is less than the high income threshold. Consequently, the Commission is satisfied the Applicant was protected from unfair dismissal.

[17] The Commission will now consider if the dismissal of the Applicant by the Respondent was unfair within the meaning of the FW Act.

Was the dismissal unfair?

[18] A dismissal is unfair if the Commission is satisfied, on the evidence before it, that all of the circumstances set out at s.385 of the FW Act existed. Section 385 provides the following:

“385 What is an unfair dismissal

A person has been unfairly dismissed if the Commission 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.”

Was the Applicant dismissed?

[19] It is not contested, and the Commission is satisfied that the Applicant was dismissed by the Respondent.

Was the dismissal consistent with the Small Business Fair Dismissal Code?

[20] A person has not been unfairly dismissed where the dismissal is consistent with the Small Business Fair Dismissal Code (the Code). It is useful to set out s.388(2) of the FW Act:

“388 The Small Business Fair Dismissal Code...

(2) A person’s dismissal was consistent with the Small Business Fair Dismissal Code if:

(a) immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happened first), the person’s employer was a small business employer; and

(b) the employer complied with the Small Business Fair Dismissal Code in relation to the dismissal.”

[21] To be satisfied that a dismissal was consistent with the Code the Respondent must be a “small business employer” for the purposes of the FW Act.

[22] It is not contested and the Commission finds that the Respondent was a small business employer within the meaning of s.23 of the FW Act.

[23] The Small Business Fair Dismissal Code was declared by the Minister for Employment and Workplace Relations on 24 June 2009:

“Small Business Fair Dismissal Code

Commencement
The Small Business Fair Dismissal Code comes into operation on 1 July 2009.

….

Other Dismissal
In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.

The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.

The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee’s response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.

Procedural Matters
In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.

A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.”

[24] Mr Wright confirmed that the issue of serious misconduct is not relevant in this matter. 12

[25] The Commission, as presently constituted, explored with Mr Wright compliance with each element of the Code. Appropriately, Mr Wright conceded that he:

a) never told the Applicant that he was at risk of being dismissed; 13

b) did not indicate to the Applicant that he was at risk of being dismissed if there was no improvement (in his performance); 14

c) only gave the Applicant one warning (despite three having been drafted).

[26] In all the circumstances, the Commission, as presently constituted, is satisfied the dismissal of the Applicant was not consistent with the Code.

[27] As the Commission has found that the dismissal of the Applicant was not consistent with the Code, the Commission must proceed to consider s.387 of the Act.

Was the dismissal a genuine redundancy?

[28] Although the F3 filed by the Respondent indicated that a reason for the dismissal was “[a] downturn in pump repair jobs to keep the position open”, the issue of genuine redundancy was not pressed during the determinative conference and does not arise in this matter.

[29] Consequently, the Commission, as presently constituted, finds that the dismissal was not a case of genuine redundancy within the meaning of s.389 of the Act.

Harsh, unjust or unreasonable

[30] Having been satisfied of each of s.385(a),(c)-(d) of the Act, the Commission must consider whether it is satisfied the dismissal was harsh, unjust or unreasonable. The criteria the Commission 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.”

[31] 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.

[32] The Commission is under a duty to consider each of these criteria in reaching its conclusion. 15 Consequently, the Commission, as presently constituted, will now consider each of the criteria at s.387 of the FW Act separately.

Valid reason - s.387(a)

[33] The Respondent must have a valid reason for the dismissal of the Applicant, although it need not be the reason given to the Applicant at the time of the dismissal. 16 The reasons should be “sound, defensible and well founded”17 and should not be “capricious, fanciful, spiteful or prejudiced.”18

[34] The termination letter indicated that the Applicant’s “performance is still unsatisfactory…” Accordingly, in the present matter the reason for dismissal related to the Applicant’s performance and not his conduct.

[35] During the course of the determinative conference it became apparent that the performance concerns that Mr Wright had were extensive. He pointed to the following issues:

a) In May 2014 (the First Warning Incident) an issue arose when a pump was brought into the workshop and, in the opinion of Mr Wright, not sufficient investigation and repair was undertaken. As a result when the pump resumed operations it was damaged and it became necessary to attend onsite with the customer to repair the pump (at the Respondent’s cost of approximately $500-$600); 19
b) In June 2014 (the Glycol Chiller Incident) the Applicant was charged with repairing another pump. It was on a glycol chiller that needed bearings replaced. The Applicant replaced the bearings in the workshop, reinstalled the pump back onsite, but left the pump running backwards. The result was further damage because the impeller twisted off; 20
c) Assessing the Respondent’s “Jobs Diary” (Exhibit R7) it showed that the hours of work that the Applicant charged to customers each day was significantly less than the hours he work. That is to say, he was not covering his costs; 21
d) More and more work was going to competitors and as such the Respondent’s pump jobs were dropping off. When Mr Wright contacted customers to ask for the reason why, they told him the Applicant’s “performance on site wasn’t up to scratch”; 22
e) Post termination:

i. there was another complaint about the Applicant’s performance from Trevor Henry. The Applicant left the site leaving the pump leaking on 5 fittings which caused the pump to short cycle.
ii. Mr Wright discovered that the Applicant had been carrying too much stock in his vehicle such that there was an opportunity loss to the Respondent of about $2,000 (because the stock was not in the warehouse available for use and charge to clients).

[36] Mr Wright also tabled a document (Exhibit R9) in which he listed other incidents that he spoke to the Applicant about during his employment.

[37] The Applicant concedes that in relation to the First Warning Incident he did not “put a meter” on the pump to test it. 23 However, in response to the other matters above the Applicant says that he:

a) did not know about some of the issues (for example he did not know that in relation to the Glycol Chiller Incident that the pump ran backwards); 24 or
b) thought he had, in his opinion, done the job correctly (for example, in relation to the First Warning Incident the Applicant says that when he plugged the pump in it did not trip the circuit breakers, it sounded “okay” and the customer’s representative did not want to spend any money on further investigation 25).

[38] Alternatively, the Applicant says that he expected Mr Wright to provide him with further training. 26 Mr Wright says that, having taken over the WAS business he was entitled to expect that the Applicant (who had had 13 months experience on the tools) was already competent and able to be a productive member of the team.

[39] In his final submissions Mr Wright wrote,

“Where there are many mistakes getting made which cause jobs to start costing more than they are making it greatly impacts on a business’s cash flow. Not just with the direct cost of having to rectify the faults caused but also from ‘word of mouth’ throughout a business’s customer base which can cause future loss of work. Many cases which I had mentioned there was a large amount of work which had been lost to competition businesses in the area, I don’t believe we will be getting many of those customers back.” 27

Consideration

[40] Having regard to the evidence of Mr Wright and the Applicant the Commission, as presently constituted, is satisfied that, on the balance of probabilities, the Applicant:

a) in relation to the First Warning Incident, the Applicant’s performance was inadequate. Very quickly and cost effectively, he could have undertaken a proper pump inspection beyond plugging it in and seeing that it did not trip the circuit breakers. Had he done so he would have discovered the broken impeller and the more extensive damage, which needed to be fixed at the Respondent’s cost, would have likely been avoided;
b) in relation to the Glycol Chiller Incident the Applicant reassembled the pump incorrectly such that it ran backwards;
c) failed to undertake enough work that could be charged back to customers;
d) left the Trevor Henry pump leaking on 5 fittings which caused the pump to short cycle; and
e) over-stocked his work vehicle.

[41] In any case, what is clear in this matter is that Mr Wright set high standards in respect of how he wanted work in his business performed. It is his business, his name, his reputation and capital that he has invested (having recently purchased the WAS business) that is at risk. Mr Wright was entitled to be concerned about the reputation of his business. As such he is entitled to set the standard that is required. In this matter they were not unreasonable standards. However, they were not standards that the Applicant could achieve even after having been in the industry for 13 months.

[42] That is not to say that the Applicant was lazy or that his failure to perform to the requisite standard was deliberate. The Applicant presented before the Commission as an honest man, hardworking and someone keen to work to support his family. More likely than not, this is a case where the Applicant’s aptitude for the reasonable performance standard required and his core competencies ill-suited continued employment with the Respondent.

[43] To the extent that the Applicant invited the Commission to find that the real reason for the termination was the workplace injury he suffered as a result of falling off a ladder in February 2014, the Commission, as presently constituted, cannot find any evidence that the workplace injury was a substantive and operative reason for dismissal. The Applicant’s contention in this regard is rejected.

[44] Consequently, the Commission, as presently constituted, finds there was a valid reason for the dismissal.

Notification of the valid reason - s.387(b) AND Opportunity to respond - s.387(c)

[45] Notification of a valid reason for termination must be given to an employee protected from unfair dismissal before the decision is made, 28 in explicit terms29 and in plain and clear terms.30 In Crozier v Palazzo Corporation Pty Ltd31 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.” 32

[46] Further, an employee protected from unfair dismissal must be provided with an opportunity to respond to any reason for dismissal relating to the conduct or capacity of the person. This criterion is to be applied in a common sense way to ensure the employee is treated fairly and should not be burdened with formality. 33

Consideration

[47] It is not contested in this matter that on 1 July 2014 the Applicant was provided with a second warning letter and a letter of termination.

[48] The termination letter indicated that the Applicant’s “performance is still unsatisfactory…”

[49] In respect of both the second warning letter and letter of termination the Applicant was not provided with any real opportunity to respond.

[50] Mr Wright says that,

“I think I gave [the Applicant] the opportunity to respond after I gave him the termination letter. I took him back out and showed him where he’d gone wrong on the last pump, where I thought he might have, with the rewire, and explained that he had to check those other three wires that were on there. At that time he showed me his little book. There’s three coloured wires which go into the pump, a blue, a brown and a white and he had a drawing of it but there was to Bs and a W. So I believe there was – that’s where the mix-up was with that job. So I think I gave him a bit of an opportunity, yes.” 34 (my emphasis)

[51] The Applicant conceded that the above conversation occurred. 35

[52] Notwithstanding the evidence above, it is apparent that the decision to terminate had been made. The letter of termination stated, in no uncertain terms, “your employment will end immediately.” Mr Wright was not, in any genuine sense, open to being persuaded otherwise.

[53] Consequently, the Commission, as presently constituted, finds the Applicant:

a) was not notified of the reason for the dismissal prior to the dismissal taking effect; and
b) was not given an opportunity to respond to the reason for the dismissal.

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

[54] 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.

[55] Because the Applicant did not request a support person be present with him, the Commission, as presently constituted, finds the Respondent did not unreasonably refuse to allow the Applicant to have a support person present at discussions relating to the dismissal.

Warnings regarding unsatisfactory performance - s.387(e)

[56] Where an employee protected from unfair dismissal is dismissed for the reason of unsatisfactory performance, the employer should warn the employee about the unsatisfactory performance before the dismissal. Unsatisfactory performance is more likely to relate to an employee’s capacity than their conduct. 36

Consideration

[57] The uncontested evidence in this matter is that only one warning was given to the Applicant. That occurred on 19 May 2014 in respect of the Applicant’s failure to undertake repair and investigatory work. It did not indicate to the Applicant that his job was in jeopardy.

[58] The Commission also accepts the evidence of Mr Wright that the Applicant was spoken to about other performance issues as they arose. However, these were ordinary conversations in the course of the working day. They were not characterised as warnings.

[59] There were two other written warnings, but neither of them was given to the Applicant.

[60] Consequently, the Commission, as presently constituted, finds the Respondent did not warn the Applicant about his unsatisfactory performance and the risk to his employment before the dismissal.

Impact of the size of the Respondent on procedures followed - s.387(f) AND Absence of dedicated human resources management specialist/expertise on procedures followed - s.387(g)

[61] The:

a) size of the Respondent’s enterprise; and
b) absence of dedicated human resource management or expertise in the Respondent’s enterprise,

may have impacted on the procedures followed by the Respondent in effecting the dismissal.

[62] In the present matter it is clear that the size of the Respondent’s undertaking and the absence of a dedicated human resources function impacted on the procedures followed by the Respondent. In particular, Mr Wright the business owner lacked the skill and experience to follow a proper procedure.

[63] Mr Wright also appears to have lacked the time to devote to the management of employees and lacked the will to have difficult conversations or to communicate to the Applicant that his job was on the line.

[64] Mr Wright’s evidence was,

“Look, I’m learning every day about business. I started my own business three years ago and took over this one at the start of the year, and I’ve – to be honest don’t have a massive knowledge of [the FW Act], which I should, and that’s one space where I really lack.

… we’re still growing and to be honest I don’t have a lot of spare time. By the time I get on the tools all day I will pull out 8 to 12 hour days on the tools then follow up with paperwork after that. So to add all this other stuff into it, it’s very hard.” 37

[65] Employees need to be given a fair go to ship up before they are shipped out. That did not happen in this matter.

[66] Conversations about performance are hard to have, but fairness dictates that employees, who are at risk of losing their job, are told in clear terms:

a) that their job is on the line;

b) where their performance is lacking;

c) what needs to be done to improve their performance;

d) over what period of time their ongoing performance will be assessed; and

e) about any further deficiencies in their performance.

[67] Termination of employment is not “rocket science”, however, it does require some skill, care and humanity if it is to be effected in a way that is not harsh, unjust or unreasonable. As a starting point employers and managers would be wise to reflect upon the Golden Rule 38 and to ask themselves “how would I like to be treated if I was in the employee’s position?”

[68] In his final submission Mr Wright wrote,

“Making the decision to terminate John’s employment with Wright Contractors was not [an] easy one to make. I know how much the decision would impact on John’s life. It was not something that I decided overnight, there were many sleepless nights, conversations with my partner and along with my office manager to try to decide what the best option would be.” 39

[69] However, while sympathetic to Mr Wright’s plight as a small businessman in a competitive environment, the problem is that he did not communicate openly and clearly to the Applicant. While Mr Wright is also honest and hardworking, at the very basic level of performance management, he failed as much as the Applicant failed as a pump repairer.

[70] Mr Wright further submitted that,

“Unfortunately as I am still learning about business as I am going, there are many lessons which I have learnt the hard way. I [rely] quite a lot on other business owners in the area for advice and mentoring where it is available…” 40

[71] In this regard, the Commission notes Mr Wright’s evidence that he is not a member of an employer association. 41 Such membership may have been more beneficial to him in this matter than the advice of other business owners. It may have meant that, on taking over WAS, he might have been advised that he should write to the Applicant and inform him that his service with WAS would not be recognised. Had that happened the Applicant would not have been a person protected from unfair dismissal. Further, membership of an employer association may have resulted in Mr Wright receiving advice about a proper system of warnings and counselling for the Applicant, thus putting the Respondent in a better position to defend its decision to terminate.

[72] In this matter the Commission, as presently constituted, finds the size of the employer’s enterprise and the absence of any human resources experience did impact on the procedures followed in effecting the dismissal. It was an unskilled, inadequate and ultimately unfair procedure.

Other relevant matters - s.387(h)

[73] Section 387(h) provides the Commission with a broad scope to consider any other matters it considers relevant. Neither the Applicant nor the Respondent made submissions about relevant other matters. Consequently, the Commission, as presently constituted, does not consider there to be any other matters relevant to the determination of whether the dismissal of the Applicant was harsh, unjust or unreasonable:

Conclusion

[74] Having considered each of the matters specified in s.387, the Commission, as presently constituted, is satisfied the dismissal of the Applicant was harsh, unjust or unreasonable. Accordingly, the Commission, as presently constituted, finds the Applicant’s dismissal was unfair.

Remedy

[75] Section 390 of the Act sets out the circumstances in which the Commission 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.

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

[76] The Commission has already dealt with the issues at s.390(1)(a)–(b) above. The Commission, as presently constituted, is satisfied the Applicant was protected from unfair dismissal pursuant to s.382 of the Act and the Applicant was dismissed unfairly. Accordingly, the Commission, as presently constituted, is required to determine whether to order the reinstatement of the Applicant or, in circumstances where reinstatement is inappropriate, an order for compensation if the Commission, as presently constituted, is satisfied such an order is appropriate in all the circumstances.

Reinstatement

[77] The Applicant seeks compensation as the primary remedy. Regardless of the remedy sought by the Applicant, s.390 of the Act requires that the Commission first determine whether reinstatement is appropriate before it may consider an order for compensation.

[78] The Applicant submits reinstatement would be inappropriate. He does not want to go back to work for Mr Wright. 42

[79] The Respondent submits reinstatement would be inappropriate. Mr Wright does not want the Applicant to return to his employment. 43

Consideration

[80] In Regional Express Holdings Ltd T/A Rex Airlines 44 a Full Bench of Fair Work Australia considered what factors may be taken into account when considering if reinstatement is inappropriate under s.390(3)(a) of the Act:

“[26] Whenever an employer dismisses an employee for misconduct, assuming the employer is acting honestly, there is an implied loss of trust and confidence in the employee. If it is subsequently found that the termination was harsh, unjust or unreasonable it is appropriate to consider whether the relationship can be restored if the employee is reinstated. That question cannot be answered solely by reference to the views of management witnesses. All of the circumstances should be taken into account. In this case there is a number of relevant matters. They include the fact that not all of the conduct alleged against the respondent has been proven, the respondent’s apparently unblemished record in the performance of his flying duties over a period of 14 years, the fact that the misconduct is not directly related to the performance of the respondent’s professional duties as a first officer and Rex’s failure to pursue any substantial disciplinary action against another pilot who, it is alleged, has been guilty of misconduct at least as serious as that of which the respondent was accused. The significance of the last consideration is that the pilot in question is still carrying out the full range of his duties, despite allegations of conduct of a kind which, in the respondent’s case, is said to have led to an irrevocable loss of trust and confidence. Assuming a positive approach on both sides we find there is a reasonable chance that the employment relationship can be restored with the necessary level of mutual trust.” 45

[81] In the present matter, having regard to the small business nature of the Respondent and the views expressed by the Applicant and Mr Wright, the Commission, as presently constituted, is satisfied that it would be very difficult to restore the employment relationship. Mr Wright has no confidence in the Applicant’s ability. The Applicant feels harshly done by and let down by the employment experience.

[82] In the circumstances the Commission, as presently constituted, is satisfied that it should order reinstatement is inappropriate.

Compensation

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

[84] The Applicant submits that an order for compensation is appropriate in all the circumstances of this case because of the unfairness of his dismissal.

[85] The Respondent did not make any submissions about a possible order for compensation.

[86] Having regard to the inadequate procedure followed by the Respondent and the unfairness that visited upon the Applicant, the Commission, as presently constituted, is satisfied that an order for compensation is appropriate in all the circumstances of this case.

[87] Section 392 of the Act 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:

“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.

Note: subsection 392(5) indexed to $66,500 from 1 July 2012

(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.”

[88] The method for calculating compensation under s.392 of the FW 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 46 (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 Supermarket47 and Ellawala v Australian Postal Corporation48. The Commission has adopted the methodology utilised in Bowden in determining the amount of a payment of compensation.

[89] The Commission will now consider each of the criteria in s.392 of the Act.

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

[90] The Applicant’s remuneration with the Respondent averaged $1,060 per week.

[91] The Commission should now determine the period of time the Applicant would have remained employed by the Respondent, or would have likely remained employed with the Respondent, had they not been dismissed.

[92] In undertaking this exercise I note that:

a) Mr Wright held concerns about the Applicant’s performance for some time and in a casual manner discussed these matters with the Applicant;

b) the first warning letter was issued on 19 May 2014;

c) the second warning letter was issued on 1 July 2014;

d) other performance issues were discovered after the termination of the Applicant’s employment.

[93] I also note that Mr Wright did not properly put the Applicant on notice that his job was in jeopardy. Notwithstanding the procedural errors, in all likelihood, had Mr Wright followed a more appropriate procedure of warnings, counselling and providing the Applicant with an opportunity to respond and improve his performance, in all likelihood, the Applicant would still have fell short of Mr Wright’s performance expectations. In all probability the employment relationship would have ended in any case.

[94] Having regard to the dates of the first and second warnings it is reasonable to conclude that a third and final warning would have been issued in early August 2014 and, assuming no improvement in performance, termination would have occurred in early September 2014.

[95] Therefore, the Commission, as presently constituted, finds that the Applicant would have continued to be employed by the Respondent for a period of 8 weeks had he not been dismissed. The amount the Applicant would have received between 1 July 2014 and 1 September 2014 is therefore $8,404.

Remuneration earned: s.392(2)(e)

[96] From the 8 week payment it is first appropriate to deduct the 2 week notice payment made to the Applicant when his employment was terminated. The Applicant concedes that such a payment was made to him. 49 That leaves a balance of 6 weeks in respect of which compensation should be ordered (i.e. $6,360).

[97] In the subsequent 6 weeks the Applicant says he earned $3,222 doing subcontracting work. 50

[98] Consequently, the Commission, as presently constituted, finds the Applicant has earned $3,222 in remuneration (in addition to the 2 week notice payment made to him on termination) for employment or other work during the 8 week period since the dismissal and deducts this amount from the compensation to be ordered.

[99] This leaves a compensation amount of $3,138.

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

[100] Noting that the Commission has found that the employment would have ended in early September 2014 and that date has already passed the issue of income likely to be earned between the date of termination and early September 2014 does not arise.

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

[101] Neither the Applicant nor the Respondent made any submissions about other matters that the Commission should have regard to in considering compensation or the application of any contingencies.

[102] Consequently, the Commission, as presently constituted, finds it is not appropriate in the circumstances that a contingency should be applied.

Viability: s.392(2)(a)

[103] No evidence was led, nor submissions made by the Respondent about the effect on its viability of an order for compensation being made.

[104] Consequently, the Commission, as presently constituted, finds an order for compensation in the amount proposed will not affect the viability of the Respondent’s enterprise.

Length of service: section (s.392(2)(b))

[105] The Commission, as presently constituted, finds that the Applicant’s period of service with the Respondent, being 5 months, should not affect the amount of compensation to be ordered.

[106] The Commission will neither reduce nor increase the amount of compensation to be ordered by taking into account the length of the Applicant’s period of service with the Respondent.

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

[107] In considering whether the Applicant has taken steps to mitigate the loss suffered as a result of the dismissal, the Commission should take into account whether the Applicant acted reasonably in the circumstances. 51

[108] In the period after his employment the Applicant sought out and undertook subcontracting work. From the work (up until the week beginning 24 August 2014) the Applicant earned $3,222. Thereafter, the Applicant secured work through Work Hire Australia Pty Ltd. Consequently, the Commission, as presently constituted, finds that the Applicant has made efforts to mitigate his loss suffered as a result of the dismissal.

[109] The Commission will not reduce the amount of compensation because it is evident that the Applicant made all reasonable efforts to mitigate his loss because of the dismissal.

Misconduct: s.392(3)

[110] The Commission has not found any misconduct by the Applicant that contributed to the dismissal.

Shock, Distress: s.392(4)

[111] The Applicant submitted that the Commission should have regard to the fact that the dismissal “caused a lot of stress”. He said “you can imagine going home and telling your wife and kids that you’ve lost your job. Since I lost my job it’s caused a lot of pain and suffering in our household.” 52

[112] Notwithstanding the submission made by the Applicant, the amount of compensation calculated does not include a component for shock, humiliation or distress.

Compensation cap: s.392(5)

[113] The Commission 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 the high income threshold immediately prior to the dismissal.

[114] The high income threshold immediately prior to the dismissal was $133,000.

[115] The amount the Applicant would have earned, or to which the Applicant was entitled, for the 26 week period immediately prior to the dismissal was $27,560.

[116] The amount of compensation the Commission will order $3,138 does not exceed the compensation cap.

Payment by instalments: s.393

[117] The Respondent is a small business. And although there was no evidence before the Commission about what impact an order for compensation would have on the Respondent’s viability, the Commission can take judicial notice of the fact that, in a small business, cash flow is an important consideration.

[118] Consequently, the Commission will order the Respondent to pay to the Applicant an amount of $3,138 in 2 equal instalments over 4 weeks (i.e. 2 x fortnightly payments of $1,569 each).

Conclusion

[119] The Commission, as presently constituted, is satisfied that:

a) the Applicant was protected from unfair dismissal;
b) the dismissal was unfair; and
c) a remedy of compensation (in the amount of $3,138), to be paid in instalments, is appropriate.

[120] An order will be issued with this decision.

COMMISSIONER

Appearances:

Mr Traill representing himself.

Mr Wright representing the Respondent.

Hearing details:

2014.

13 November.

Melbourne.

 1   Applicant at PN37.

 2   Applicant at PN40, Respondent at PN39.

 3   Applicant at PN42, Respondent at PN44.

 4   PN353.

 5   PN357.

 6   Applicant at PN46.

 7   Applicant at PN57.

 8   Respondent at PN75.

 9   Applicant at PN95.

 10   Applicant at PN142, Respondent at PN144.

 11   PN414.

 12   PN471.

 13   PN475.

 14   PN479.

 15   Sayer v Melsteel[2011] FWAFB 7498.

 16   Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 373, 377-378.

 17   Selvachandran v Peterson Plastics Pty Ltd (1995) 62 IR 371, 373.

 18   Ibid.

 19   PN100.

 20   PN149.

 21   PN192 – 206.

 22   PN213.

 23   PN128.

 24   PN151.

 25   PN111.

 26   PN118.

 27   Respondent’s Final Submissions dated 28 November 2014.

 28   Chubb Security Australia Pty Ltd v Thomas Print S2679 at [41].

 29   Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137, 151.

 30   Previsic v Australian Quarantine Inspection Services Print Q3730.

 31 (2000) 98 IR 137.

 32   Ibid at 151.

 33   RMIT v Asher (2010) 194 IR 1, 14-15.

 34   PN527.

 35   PN530.

 36   Annetta v Ansett Australia Ltd (2000) 98 IR 233, 237.

 37   PN552 – 554.

 38   Matthew 7:12 and Luke 6:31, but noting that the ethic of reciprocity appears prominently in many religions and cannot be claimed by Christianity alone.

 39   Respondent’s Final Submissions dated 28 November 2014.

 40   Respondent’s Final Submissions dated 28 November 2014.

 41   PN554.

 42   PN414.

 43   PN416.

 44   [2010] FWAFB 8753.

 45 Ibid at [26].

 46   [2013] FWCFB 431.

 47 (1998) 88 IR 21.

 48   Print S5109.

 49   PN469.

 50   Final submission from the Applicant dated 28 November 2014.

 51   Biviano v Suji Kim Collection PR915963 at [34].

 52   PN608.

Printed by authority of the Commonwealth Government Printer

<Price code G,  PR558644>