Jordan Wales v Bake Life Pty Ltd t/a Picton Parkside Patisserie

[2017] FWC 6621

[2017] FWC 6621

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s 394—Unfair dismissal

Jordan Wales
v
Bake Life Pty Ltd t/a Picton Parkside Patisserie
(U2017/5042)

DEPUTY PRESIDENT SAMS SYDNEY, 15 DECEMBER 2017

Application for an unfair dismissal remedy – Café Manager – allegation of consuming the employer’s products – Small Business Fair Dismissal Code – whether employer had a reasonable belief that the applicant’s conduct justified summary dismissal – no reasonable warnings – no reasonable opportunity to respond to allegations – no valid reason for dismissal – procedural unfairness – dismissal ‘harsh, unjust and unreasonable’ – reinstatement inappropriate – compensation ordered.

[1] Mr Jordan Wales (the ‘applicant’) was employed by Bake Life Pty Ltd (the ‘respondent’) as the Manager of the Parkside Patisserie, a small café in Picton, New South Wales. The applicant commenced employment on 9 May 2016 and was dismissed on 22 April 2017. The applicant was dismissed by Mr John McMorran, a Director of the respondent, for serious misconduct, being an allegation that he was continuing to consume the café’s products, despite repeated warnings not to do so. Mr McMorran considered such conduct amounted to ‘theft’.

[2] On 11 May 2017, the applicant filed an application, pursuant to s 394 of the Fair Work Act 2009 (the ‘Act’), in which he sought ‘compensation for the weeks of notice that should have been given’. In the respondent’s Form F3 response to Mr Wales’s application, Mr McMorran objected to the application on the ground that the applicant had not completed the minimum employment period in a small business (10 employees), being less than 12 months. This jurisdictional objection was referred to Johns C for determination, but was ultimately withdrawn by the respondent on 18 July 2017. The matter was remitted to me for a hearing on the merits of the application.

[3] However, in accordance with my usual practice, I conducted two conferences with the parties; the first on 7 August 2017 (which the respondent did not attend) and the second on 18 August 2017, by telephone. No settlement could be reached. Accordingly, the matter was listed for hearing on 25 September 2017, with directions issued for the filing and service of witness statements and any other relevant documentation. At the hearing, the applicant was represented by his grandfather, Mr M Wales and the respondent was represented by Mr and Mrs McMorran (both Directors).

THE EVIDENCE

[4] The parties relied on the written statements and oral evidence of Mr McMorran and the applicant, and the respondent also relied on the oral evidence of another employee, Mr Hugo Camilo and Mrs McMorran.

Mr John McMorran

[5] Mr McMorran referred to an email sent to all staff on 8 December 2016 concerning staff food consumption during work time. The email read as follows:

‘Dear Parkside Staff,

Due to increased staff numbers at the shop we are implementing guidelines regarding staff food consumption at Parkside.

From today 8^th December you will be allowed to have per shift free of charge;

- a coffee and

- a simple sandwich (similar to a normal customer order (Avocados are $4 each right now – Please go easy on this!! A ¼ of one half of an avocado should be all that is used per 50c extra charged)

There are no substitutes to be made to the above, e.g. switching the coffee for a juice or sandwich for foccacia [sic]. If you feel like a juice or foccacia (or any other item) you will be paying half price but there is a catch;

- you will be recording this in the register as a full price sale with 50% discount

- you will record the sale as against a customer account in your name

- the final amount of the sale will be deducted rom your wages on pay day

Jordan can show you how to do this if the owner’s [sic] aren’t around.

It is not sustainable for the shop to allow more than this and we think it is a generous offer considering our neighbours at McDonald’s have to pay half price for everything.

The main thing to remember is shopping for replacement stock costs time and money and we’d rather be selling stock to our customers for a reasonable margin. Also please replace the item you used (e.g. make the same foccacia you just ate or peel the fruit if you want a juice).

I hope we can all work within the above guidelines. Abuse of the system will result in disciplinary action for the employee (counselling and/or reduced shifts or dismissal) and eventually a change in policy to full price lunch. Please don’t spoil it for the rest of the staff.

Acknowledge by return email that you have read this memo and if you are not clear on anything above please let us know.’

[6] Mr McMorran said that despite this being an all-staff email, it was really directed towards the applicant, who Mr McMorran said he then had to warn, at least twice, in February and April 2017, after receiving complaints from his wife about the applicant consuming the café’s products. Mr McMorran said that on Tuesday 18 April 2017, Mr Camilo noticed the applicant eating excessively while on shift. Mr Camilo reported this to his daughter (Mr McMorran’s wife).

[7] At around 2:50 pm on 22 April 2017, Mr McMorran sat down with the applicant and told him he ‘had to let him go’. He referred to the applicant’s excessive eating of the café’s products, the earlier warnings that he not do so and his belief that his conduct was ‘theft’, justifying summary dismissal. Mr McMorran claimed that when he asked the applicant if he had anything to say, he replied ‘It’s about time I left my mother’s shop anyway.’ (This was a reference to when the applicant worked for his mother, Renée Wales, as the owner of the business before Mr McMorran.)

[8] Mr McMorran conceded that given the respondent has no HR experience and had never dismissed anyone, the process of dismissal ‘may not have been executed properly’. However, Mr McMorran believed the applicant’s claim of $9,000, being 13.96 weeks’ pay, was ‘truly ridiculous’. He was a casual employee, who earned $32,238.56 at an average of $644.77 per week over his 50 weeks of employment.

[9] Mr McMorran rejected the applicant’s claim that he had been unfairly dismissed for theft. Even if his conduct was not ‘theft’, he had repeatedly breached the clear rules of the respondent (as set out in the all-staff email). Furthermore, Mr McMorran relied on an email from the applicant of 14 July 2017, in which he opened with the following:

‘May I say I am not disputing the termination that is your prerogative only the non payment of entitlements.’

(The applicant went on to claim unpaid overtime and superannuation.)

[10] In cross-examination, Mr McMorran denied the applicant’s dismissal was related to an earlier incident involving a disagreement the applicant had with his wife about cakes. Mr McMorran agreed that none of the alleged warnings he gave to the applicant about consuming the employer’s products were in writing. Nevertheless, both his wife and Mr Camilo observed the applicant doing so. Mr McMorran said because he was not there very often, he did not witness it himself. As for the 8 December 2016 all-staff email, Mr McMorran said he never mentioned to the applicant it was about him. He felt the best way to handle the issue was to direct it to all staff. He did not need to know it was directed at him.

[11] Mr McMorran was referred to the following text message he sent to the applicant on 29 May 2017:

‘Jordan I need you to pull your socks up. Since your hours were changed I have had some negative feedback about you from different sources. I felt I also experienced a bit of it this morning. I don’t expect the owners of a business to be receiving any disrespect least of all from the ‘Supervisor’. Sales are poor and I’ll be looking to swing the axe to save the business. Don’t be on the bottom of the list when I have to choose what to change to cut costs.’

[12] Mr McMorran denied this text message was related to the applicant’s dismissal; it was because of ongoing poor sales performance. Mr McMorran said he could not describe the applicant’s behaviour of consuming the respondent’s products, as anything other than theft. He rejected the suggestion the applicant’s dismissal related to poor sales or the applicant’s performance.

Mrs Cathie McMorran

[13] Mrs McMorran said that the business that she and her husband own has 10 employees. She also works in the business and would go into the café every second day. It was her evidence that on several occasions when she attended the café, she observed the applicant eating and drinking the café’s products, contrary to the email instruction of 8 December 2016. She claimed the applicant would even come in on his day off and help himself to a drink or coffee, without paying. She had mentioned it to her husband, but had been hesitant to pursue it. She had left it to her husband to resolve.

[14] In cross-examination, Mrs McMorran said that in the last month of the applicant’s employment, she was going into the café more frequently and had observed him eating the café’s products. It was at this point she had mentioned it to her husband. Mrs McMorran insisted there had been no dispute between herself and the applicant. In fact, she had been ‘very lenient’ with him for a long time.

Mr Hugo Camilo

[15] Mr Camilo has worked at the café for around 18 months and had worked alongside the applicant. During these times, Mr Camilo had observed the applicant frequently making himself sandwiches, eating sausage rolls and drinking numerous coffees.

[16] In oral evidence, Mr Camilo confirmed that he only worked Mondays and Tuesdays (the applicant had Mondays off). He described the applicant as a ‘good eater’.

Mr Jordan Wales

[17] Mr Wales claimed his dismissal was unfair as there was no written or verbal warning or notice of termination, and that the reason for his dismissal was unjust and unreasonable. He believed it may have been related to a disagreement he had had with Mrs McMorran. In oral evidence, the applicant described the events surrounding his dismissal as follows:

‘At the end of my shift - I finished in the afternoon on the Saturday. John came into the shop as I was about to leave and sat me down and basically told me that I had to go and I was being dismissed and the reason that was given to me had nothing to do with theft that they're talking about. In honesty, there was vague reasoning given. The only thing that Mr McMorran said to me was a dispute between another manager in the past - John asked me if I wished - if you wanted to discuss that. I was in a bit of shock and I just said, “No.” The talk continued and John just said, “I'm sorry that I have to do this but it's my decision and this is what has to happen.” That was it.’

[18] The applicant relied on the text message from Mr and Mrs McMorran, dated 29 May 2017; see: para [11] above. The applicant said that he did not reply to the text message and there was no follow-up.

[19] The applicant’s evidence was that he had only had one milkshake, but in any event, nothing was ever said to him by the owners about his alleged excessive eating in the café. In answers to questions from me, the applicant agreed he had received the 8 December 2016 email, and understood its purpose was to cut costs. He conceded he had not complied with the email ‘all the time’. The applicant said he secured alternative employment four weeks after his dismissal, and remains in that employment.

[20] In cross-examination, the applicant said he did reply to the respondent’s 29 May 2017 text message and had said something like ‘I’m having personal issues, I’ll do better.’

[21] In respect to eating or drinking in the café, the applicant claimed he may have done so, once or twice, but not often. However, no one ever told him not to do so. The applicant agreed the day after the 8 December 2016 email, Mr McMorran impressed upon him that as a supervisor, he needed to enforce the restrictions on consuming company product. He claimed Mr McMorran said it was not directed to him, as much as it was to other staff, particularly new employees.

Final summaries of the parties’ positions

[22] Both parties elected to give a short summary of their respective cases.

[23] Mr M Wales put that there was no warning given to the applicant and there is some doubt about the reason/s for dismissal. This was not a case involving theft, and even if it was, it was so minor that a simple warning was all that was necessary. Mr Wales relied on one of the applicant’s pay slips, which showed he earned $993.30 in the week of 20-26 March 2017. Mr Wales said the applicant also had a claim for unpaid overtime (he was a casual employee). The amount of compensation sought was $9,000.

[24] Mr McMorran said that the applicant had admitted to eating the café’s products. While the applicant denied receiving any warnings, he was told about his conduct in the dismissal meeting. Mr McMorran acknowledged the losses to the café may have been minor, but what troubled him most was that the applicant’s behaviour continued, after being told not to.

CONSIDERATION

[25] Section 385 of the Act sets out four jurisdictional prerequisites which must be satisfied in order for the Commission to find that a person was unfairly dismissed. By the use of the conjunction ‘and’ joining subsections (a), (b), (c) and (d) it is clear that each of the four requirements must be satisfied for a person to be unfairly dismissed. The section is set out as follows:

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.

[26] For present purposes, I am satisfied that the applicant was dismissed (subsection (a)) and his dismissal was not a case of genuine redundancy (subsection (d)). The question of whether the applicant’s dismissal was ‘harsh, unjust or unreasonable’ would need to be considered subsequent to a positive conclusion as to the preliminary matter, that his dismissal was not consistent with the Small Business Fair Dismissal Code (the ‘Code’). This question is the essential basis of this case, although, given both parties were unrepresented, it is understandable that this issue was not sufficiently understood such as to be properly articulated and argued by either of them. Accordingly, I shall explain the significance of the Code in this case.

[27] I begin with setting out the terms of the Code below:

Commencement

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

Summary dismissal

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.

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.

[28] It is apparent that the Code applies to a dismissal by an employer with fewer than 15 employees (at the time of the dismissal) in two circumstances – summary dismissal (usually for serious misconduct) and dismissal for poor performance (capacity to do the job) or conduct (which is not serious misconduct). A significant difference between the two circumstances is that the former does not require notice or warning to an employee and the latter requires warnings to the employee and opportunities for the person to respond and improve on any shortcomings in behaviour or conduct.

[29] There is no doubt that the applicant’s dismissal was without notice based on Mr McMorran’s belief that he was guilty of serious misconduct (theft). He was dismissed in the meeting with Mr McMorran on 22 April 2017. Viewed in this way, the applicant’s dismissal falls under the summary dismissal limb of the Code. Should the dismissal be found to be inconsistent with the Code, but the serious allegations are ultimately found to have been proven, it would seem highly likely that a positive finding of a valid reason for his dismissal would follow. However, that is not the test for the purposes of establishing whether there has been compliance with the Code. I shall come back to this crucial consideration shortly.

[30] Before leaving the statutory provisions, s 12 of the Act defines ‘serious misconduct’ as having ‘the meaning prescribed by the Regulations’. That is referable to reg 1.07 of the Fair Work Regulations 2009, which is expressed as follows:

‘1.07 Meaning of serious misconduct

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

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

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

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

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

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

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

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

(i) theft; or

(ii) fraud; or

(iii) assault;

(b) the employee being intoxicated at work;

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

(4) Subregulation (3) does not apply if the employee is able to show that, in the circumstances, the conduct engaged in by the employee was not conduct that made employment in the period of notice unreasonable.

(5) For paragraph (3)(b), an employee is taken to be intoxicated if the employee’s faculties are, by reason of the employee being under the influence of intoxicating liquor or a drug (except a drug administered by, or taken in accordance with the directions of, a person lawfully authorised to administer the drug), so impaired that the employee is unfit to be entrusted with the employee’s duties or with any duty that the employee may be called upon to perform.’

[31] Mr McMorran relies on his belief that the applicant had engaged in ‘theft’, and presumably, this amounted to ‘wilful or deliberate behaviour … inconsistent with the continuation of the contract of employment’. The seminal case – indeed the first Full Bench Decision which considered the Code – was Pinawin T/A RoseVi.Hair.Face.Body v Domingo [2012] FWAFB 1359 (‘Pinawin’). After setting out a number of passages from two earlier single-Member decisions about the application of the Code, the Full Bench of Fair Work Australia (FWA, as the Commission was then styled), said at paras [29]-[31]:

‘[29] We believe that the approach and observations in these two decisions are correct. There are two steps in the process of determining whether this aspect of the Small Business Fair Dismissal Code is satisfied. First, there needs to be a consideration whether, at the time of dismissal, the employer held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal. Secondly it is necessary to consider whether that belief was based on reasonable grounds. The second element incorporates the concept that the employer has carried out a reasonable investigation into the matter. It is not necessary to determine whether the employer was correct in the belief that it held.

[30] Acting reasonably does not require a single course of action. Different employers may approach the matter differently and form different conclusions, perhaps giving more benefit of any doubt, but still be acting reasonably. The legislation requires a consideration of whether the particular employer, in determining its course of action in relation to the employee at the time of dismissal, carried out a reasonable investigation, and reached a reasonable conclusion in all the circumstances. Those circumstances include the experience and resources of the small business employer concerned.

[31] The question we need to consider in this case is whether Mr and Mrs Pinawin believed on reasonable grounds that Mr Domingo’s conduct was sufficiently serious to justify immediate dismissal [my emphasis].’

[32] Continuing, para [38] reads:

‘[38] Normally in order to hold a belief on reasonable grounds it will be necessary to have a discussion with the employee about the perceived serious misconduct and pay regard to the explanations and views given by the employee. We are concerned in this case that no discussions took place about the implications of Mr Domingo’s conduct for his future employment. However this is a very unusual case. The employer was very small. The owners knew Mr Domingo well. They directly observed his behaviour. They believed that he had made lifestyle choices that involved drug-taking and this directly related to his capacity to perform his work. His work involved close personal dealings with clients. At the time they made their decision, Mr Domingo was hospitalised. They were conscientious in considering the grounds for summary dismissal in regulatory material available on the internet. In these unusual circumstances we are of the view that the employer, when considering Mr Domingo’s recent erratic and unusual behaviour, formed the belief that Mr Domingo had engaged in conduct that justified immediate dismissal on reasonable grounds. Our conclusion should not be seen as one that would necessarily be reached in all cases of out of hours misconduct or drug-taking [my emphasis].’

[33] Pinawin continues to be cited with approval in decisions of the Commission. Pinawin is authority for the proposition that, unlike a summary dismissal where the Code is irrelevant, the Commission is not required to find that serious misconduct occurred and that the allegations of serious misconduct against the dismissed employee had been proven. Under the Code, the tests are only that:

•  the employer held a reasonable belief that the employee’s conduct was sufficiently serious to justify immediate dismissal; and

•  that belief was based on reasonable grounds.

Self-evidently, both of these tests do not require findings of unfairness, in a statutory sense, within the meaning of s 387 of the Act, unless the Code has not been complied with.

[34] That said, the Full Bench of the Commission had further occasion to consider the Code and the conclusions in Pinawin. In Ryman v Thrash Pty Ltd[2015] FWCFB 5264 (‘Ryman’), the Full Bench, after expressing the view that the summary dismissal section of the Code is ‘very poorly drafted’ (with which I respectfully agree), because it uses discordant expressions such as ‘without notice or warning’, ‘immediate dismissal’ and ‘summary dismissal’ synonymously, nevertheless went on to say at paras [37]-[41]:

‘[37] Notwithstanding that the Code, and its accompanying checklist, were apparently designed to be read as “stand alone” documents by small business employers, we prefer the view that the reference to “serious misconduct” is to be read as bearing the meaning in reg.1.07. The types of conduct expressly referred to in the Code as constituting serious misconduct are all encompassed by the reg.1.07 definition, so no direct inconsistency is apparent. The fact that the checklist invites inclusion of “some other form of serious misconduct” suggests that the identified types of conduct were not meant to be exhaustive, and it is otherwise difficult to conclude that they were meant to be exhaustive given that they do not include other types of behaviour which may well constitute misconduct justifying summary dismissal, such as sexual harassment, bullying or significant non-compliance with a lawful and reasonable direction. And, as earlier discussed, the lack of any recognised meaning at law of the expression “serious misconduct” means that the definition in reg.1.07 is necessary to give the expression a clear content.

[38] We therefore consider that the “Summary dismissal” section of the Code applies to dismissals without notice on the ground of serious misconduct as defined in reg.1.07.

[39] To be clear, nothing stated above is to be taken as suggesting that in relation to such a dismissal it is necessary for the Commission to be satisfied that the serious misconduct which is the basis for the dismissal actually occurred in order for the dismissal not to be unfair. As was explained in Pinawin T/A RoseVi.Hair.Face.Body v Domingo:

“[29] … There are two steps in the process of determining whether this aspect of the Small Business Fair Dismissal Code is satisfied. First, there needs to be a consideration whether, at the time of dismissal, the employer held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal. Secondly it is necessary to consider whether that belief was based on reasonable grounds. The second element incorporates the concept that the employer has carried out a reasonable investigation into the matter. It is not necessary to determine whether the employer was correct in the belief that it held.”

[40] Whether the employer had “reasonable grounds” for the relevant belief is of course to be determined objectively.’

[41] In summary, drawing on the conclusions stated above and the ratio in Pinawin, we consider that the “Summary dismissal” section of the Code operates in the following way:

(1) If a small business employer has dismissed an employee without notice - that is, with immediate effect - on the ground that the employee has committed serious misconduct that falls within the definition in reg.1.07, then it is necessary for the Commission to consider whether the dismissal was consistent with the “Summary dismissal” section of the Code. All other types of dismissals by small business employers are to be considered under the “Other dismissal” section of the Code.

(2) In assessing whether the “Summary dismissal” section of the Code was complied with, it is necessary to determine first whether the employer genuinely held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal, and second whether the employer’s belief was, objectively speaking, based on reasonable grounds. Whether the employer has carried out a reasonable investigation into the matter will be relevant to the second element [my emphasis, endnote omitted].’

[35] I intend to apply, the principles set out in Pinawin, as reaffirmed in Ryman, to the facts and circumstances of this case.

[36] It is plain enough that Mr McMorran had more than a belief that the applicant had been eating and drinking the café’s products. The applicant did not dispute that he did so; although I understand his evidence was that his consumption of café products was not as excessive as Mr McMorran claimed. However, the point here is not that the applicant denied his conduct, but whether it amounted to ‘theft’ and a breach of the respondent’s 8 December 2016 direction as to what employees could consume. In one view, it is unnecessary to make findings of ‘theft’ in the strict sense, because the notion of ‘theft’ is not usually associated with a person who is consuming company product in full sight of other employees (Mr Camilo) and the other Director Mrs McMorran, who seemingly did very little about it for months. The concept of condonation might have application in these circumstances, although I need take that matter no further.

[37] In any event, I do not intend to complicate or over-analyse what is a simple set of circumstances. It is sufficient to find that I do not consider Mr McMorran had reasonable grounds for his belief that the applicant’s conduct was sufficiently serious to justify ‘immediate dismissal’ (in the words of the Code). It follows that the Code has not been complied with.

[38] Before turning to the merits of the case, the Commission must deal with a number of preliminary matters under s 396 of the Act. That section reads:

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.

[39] Mr Wales’ unfair dismissal application was lodged on 11 May 2017. As he was dismissed on 22 April 2017, his application was lodged within the 21-day statutory time period set out in s 394(2) of the Act.

[40] Mr Wales is a person protected from unfair dismissal in that:

i. he had completed the minimum employment period set out in ss 382 and 383 of the Act; and
ii. his remuneration was below the high income threshold (s 382(b)(iii) of the Act).

Was the dismissal ‘harsh, unjust or unreasonable’?

[41] Section 387 of the Act sets out each of the matters the Commission is required to take into account when determining this question. The section reads as follows:

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.

[42] All of the criteria in s 387 of the Act must be taken into account when the Commission considers whether a particular dismissal is unfair. Nevertheless, it must be steadily borne in mind that no one matter is to be attributed any greater weight than another. That this is so is obvious from the Explanatory Memorandum to the Fair Work Bill 2008 at para 1541, which reads:

‘1541. FWA must consider all of the above factors in totality. It is intended that Fair Work Act 2009 will weigh up all the factors in coming to a decision about whether a dismissal was harsh, unjust or unreasonable and no factor alone will necessarily be determinative.’

Whether there was a valid reason for dismissal (s 387(a))

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

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

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

In its context in s 170DE(1), the adjective ‘valid’ should be given the meaning of sound, defensible or wellfounded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of s 170DE(1). At the same time the reason must be valid in the context of the employee’s capacity or conduct or based upon the operational requirements of the employer’s business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. The provisions must `be applied in a practical, commonsense way to ensure that’ the employer and employee are each treated fairly, see what was said by Wilcox CJ in Gibson v Bosmac Pty Ltd, when considering the construction and application of a s 170DC.”

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

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

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

[44] Given my earlier conclusions, I am not satisfied that there was a valid reason for the applicant’s dismissal. However, even if the valid reason was the refusal to comply with the employer’s reasonable direction, the applicant’s conduct was outweighed by a manifest denial of procedural fairness. To highlight the importance of procedural fairness issues, I cite three authorities on the subject in an unfair dismissal case. In Crozier v Palazzo Corporation Pty Limited t/as Noble Storage and Transport (2000) 98 IR 137 (‘Crozier v Palazzo’), a Full Bench of the AIRC said at para [73]:

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

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

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

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

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

[46] It goes without saying that any issue/s of procedural unfairness may not be of such significance as to outweigh the substantive reason/s for an employee’s dismissal, particularly in cases of misconduct where the proven misconduct is of such gravity as to outweigh any other considerations such as age, length of service, employment record or contrition.

[47] Subsections (b)-(e) of s 387 are generally accepted as matters going to procedural fairness, or in other words, natural justice. I set out below each of my findings on these sections:

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

[48] While I accept Mr McMorran’s characterisation of the applicant’s dismissal, the applicant was given no notice of his dismissal on 22 April 2017. This weighs in favour of the applicant’s dismissal being found to be unfair.

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

[49] The applicant was given no reasonable opportunity to respond to, or explain his conduct. Dismissing an employee for serious misconduct, even under the Code and without notice, requires at least some measure of inquiry into the allegations, which must include putting allegations directly to the employee and giving the employee a reasonable opportunity to respond. There was no evidence of any genuine inquiry or investigation of the applicant’s conduct.

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

[50] The applicant was not given an opportunity to have a support person present at the dismissal meeting, although it must be said the applicant did not ask for a support person. However, this is understandable given he had no idea what the dismissal meeting was about or how serious its consequences were.

Whether the person had been warned about unsatisfactory performance before the dismissal (s 387(e))

[51] Putting the applicant’s conduct at its highest, perhaps unsatisfactory performance, he had received no warnings about his performance. I doubt Mr McMorran’s evidence that he had warned the applicant in February and April 2017; but even if he had warned him, there was no evidence it was a warning his job was in jeopardy. Moreover, I do not accept a generalised instruction directed to all staff, some four months before his dismissal and being fully aware of the applicant’s conduct over this period, amounts to a warning of the type envisaged by sub-s (e) of s 387. Sending an email directive to all staff, in order to address the conduct of a single employee, is not only insulting to all the other employees, but it is an abrogation of management’s responsibility and is poor management practice. Usually the targeted employee will not even think the directive is about him/her. This is a practice which I strongly discourage. It is more appropriate to confront, head on, the conduct or behaviour of an individual employee by utilising a fair and reasonable process.

The degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal, and the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal (ss 387(f) and (g))

[52] I accept unreservedly, that the respondent is a small employer with little or no human resources or industrial relations expertise and had no advice about the process for dismissing the applicant. I am prepared to accept that the respondent’s inexperience in this respect contributed to an understandable lack of understanding of what was to be expected in such circumstances.

Any other matters that the FWC considers relevant (s 387(h))

[53] As a manager, I consider that the applicant displayed poor judgement in not providing an example as to what was expected by all staff in respect to consuming the café’s products. I have taken this into account.

[54] As I have found that the applicant’s conduct was not serious misconduct, he should have at least been given notice of termination or payment in lieu. I have also taken into account that the applicant had secured alternative employment after four weeks.

[55] For all the above reasons, I am satisfied that the applicant’s dismissal on 22 April 2017 was unjust, within the meaning of s 387 of the Act. His dismissal was very much procedurally unfair.

Appropriate remedy

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

390 When the FWC may order remedy for unfair dismissal

(1) Subject to subsection (3), the FWC may order a person’s reinstatement or the payment of compensation to a person, if:

(a) the FWC is satisfied that the person was protected from unfair dismissal (see Division 2) at the time of being dismissed; and

(b) the person has been unfairly dismissed (see Division 3).

(2) The FWC may make the order only if the person has made an application under section 394.

(3) The FWC must not order the payment of compensation to the person unless:

(a) the FWC is satisfied that reinstatement of the person is inappropriate; and

(b) the FWC considers an order for payment of compensation is appropriate in all the circumstances of the case.

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

[57] The applicant has obtained alternative employment. He does not seek reinstatement. In addition, given the circumstances of the applicant’s dismissal, I am satisfied that reinstatement would not be appropriate. I find accordingly.

[58] Section 392 of the Act sets out the matters the Commission must have regard to when determining:

(a) whether compensation should be ordered;

(b) if so, what amount of compensation should be ordered;

(c) the effect of any order as to any findings of misconduct by the applicant;

(d) the upper limit of compensation; and

(e) specific matters not to be taken into account.

[59] Section 392 reads as follows:

392 Remedy—compensation

Compensation

(1) An order for the payment of compensation to a person must be an order that the person’s employer at the time of the dismissal pay compensation to the person in lieu of reinstatement.

Criteria for deciding amounts

(2) In determining an amount for the purposes of an order under subsection (1), the FWC must take into account all the circumstances of the case including:

(a) the effect of the order on the viability of the employer’s enterprise; and

(b) the length of the person’s service with the employer; and

(c) the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and

(d) the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and

(e) the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and

(f) the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and

(g) any other matter that the FWC considers relevant.

Misconduct reduces amount

(3) If the FWC is satisfied that misconduct of a person contributed to the employer’s decision to dismiss the person, the FWC must reduce the amount it would otherwise order under subsection (1) by an appropriate amount on account of the misconduct.

Shock, distress etc. disregarded

(4) The amount ordered by the FWC to be paid to a person under subsection (1) must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person’s dismissal.

Compensation cap

(5) The amount ordered by the FWC to be paid to a person under subsection (1) must not exceed the lesser of:

(a) the amount worked out under subsection (6); and

(b) half the amount of the high income threshold immediately before the dismissal.

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

(a) the total amount of remuneration:

(i) received by the person; or

(ii) to which the person was entitled;

(whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal; and

(b) if the employee was on leave without pay or without full pay while so employed during any part of that period—the amount of remuneration taken to have been received by the employee for the period of leave in accordance with the regulations.

[60] The methodology to be adopted by the Commission in calculating compensation, having regard to each of the matters set out in s 392 of the Act, (often referred to as the Sprigg formula), was considered by a Full Bench of the Commission in Bowden v Ottrey Homes Cobram and District Retirement Villages Inc. t/a Ottrey Lodge [2013] FWCFB 431 (‘Ottrey’); see also: Sprigg v Paul’s Licensed Festival Supermarket (1998) 88 IR 21 and Ellawala v Australian Postal Corporation [1999] AIRC 1250. A recent Full Bench said in Balaclava Pastoral Co Pty Ltd ATF O’Connor-Fifoot Family Trust v Nurcombe [2017] FWCFB 429 at [42]-[43]:

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

“[16] The well-established approach to the assessment of compensation under s.392 of the FW Act, taking into account the matters specified in s.392(2), is to apply the “Sprigg formula” derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul Licensed Festival Supermarket. This approach was articulated in the context of the FW Act in Bowden v Ottrey Homes Cobram and District Retirement Villages. Under that approach, the first step to be taken in assessing compensation is to consider s.392(2)(c) - that is, to determine what the applicant would have received, or would have been likely to receive, if the person had not been dismissed. In Bowden this was described in the following way:

‘[33] The first step in this process - the assessment of remuneration lost - is a necessary element in determining an amount to be ordered in lieu of reinstatement. Such an assessment is often difficult, but it must be done. As the Full Bench observed in Sprigg:

‘... we acknowledge that there is a speculative element involved in all such assessments. We believe it is a necessary step by virtue of the requirement of s.170CH(7)(c). We accept that assessment of relative likelihoods is integral to most assessments of compensation or damages in courts of law.’

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

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

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

[61] In applying the above principles, I make the following observations and findings under s 392 of the Act.

(a) The respondent advanced no evidence as to the effect an amount of compensation ordered in the applicant’s favour, would have on the viability of Mr McMorran’s business. Given the limited compensation I intend to order, I find there would be no significant impact on the respondent’s viability.

(b) The applicant had relatively short service with the respondent.

(c) As mentioned in other decisions of the Commission, it is difficult to speculate as to how long the applicant would have remained in employment, but for his dismissal. Nevertheless, this statutory command - to make such an assessment - must be undertaken. I am prepared to accept that the applicant would have remained in employment for a further six weeks.

(d) The applicant obtained alternative employment four weeks after his dismissal. This must result in a positive finding that the applicant made genuine efforts to mitigate the losses he suffered by his dismissal.

(e) The applicant has been earning income (although I do not know to what extent) in his alternative employment. I make no deduction on this score.

[62] The applicant was given no notice of termination or payment in lieu of notice. I have taken this into account.

[63] While the applicant may have engaged in poor judgement, it was not misconduct, let alone serious misconduct. I make no deduction in compensation on that score (s 392(3)). The order I intend to make contains no component by way of compensation for shock, distress, humiliation or other analogous hurt (s 392(4)).

[64] Considerations of the compensation cap of 26 weeks’ pay (s 392(6)) are not relevant. I intend to order that the applicant be paid an amount of compensation equivalent to six weeks’ pay. I am prepared to adopt the respondent’s submission that the applicant earned $32,238.56 over his full period of employment, resulting in an average of $644.77 a week. The order will therefore be in the amount of $644.77 x 6 = $3,862.62.

CONCLUSION

[65] For the aforementioned reasons, I am satisfied that the dismissal of the applicant by the respondent on 22 April 2017 was ‘unjust’, within the meaning of s 387 of the Act. Finally, s 381(2) of the Act is a significant and overarching object of Part 3-2. It is expressed in these terms:

381 Object of this Part

(1) The object of this Part is:

(a) to establish a framework for dealing with unfair dismissal that balances:

(i) the needs of business (including small business); and

(ii) the needs of employees; and

(b) to establish procedures for dealing with unfair dismissal that:

(i) are quick, flexible and informal; and

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

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

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

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

[66] In this case, I am satisfied reinstatement is inappropriate and compensation in an amount of $3,862.62, is appropriate have regarding to all the circumstances of this case; see: Bowden v Ottrey Homes at para [17]. The amount so ordered will be with any deductions of taxation according to law. I am satisfied that the remedy I have determined will ensure a ‘fair go all round’ is accorded to both the applicant and the respondent. The amount of compensation is to be paid to the applicant within 21 days of today. Orders giving effect to my conclusion will be published contemporaneously with this decision.

DEPUTY PRESIDENT

Appearances:

Mr M Wales for the applicant.

Mr M McMorran & Mrs C McMorran for the respondent.

Hearing details:

Sydney.

2017.

September 25.

Printed by authority of the Commonwealth Government Printer

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