Kevin Chapman v City Collision Centre (SA) Pty Ltd

[2019] FWC 2090

[2019] FWC 2090

FAIR WORK COMMISSION

DECISION

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

Kevin Chapman
v
City Collision Centre (SA) Pty Ltd
(U2018/12037)

COMMISSIONER HAMPTON ADELAIDE, 18 APRIL 2019

Application for an unfair dismissal remedy – no participation by employer in proceedings – respondent properly notified and given opportunity to be heard – matter conducted in employer’s absence – heard concurrently with related matter – minimum employment period – transfer of employment and business provisions considered – dismissal due to employer’s repudiatory conduct or resignation forced by employer’s conduct – small business employer – dismissal not consistent with the Small Business Fair Dismissal Code – dismissal harsh, unjust and unreasonable – reinstatement not appropriate – compensation ordered.

1. Background

[1] Mr Kevin Chapman has made an unfair dismissal application against City Collision Centre (SA) Pty Ltd (City Collision SA) under s.394 of the Fair Work Act 2009 (the FW Act). This matter has been dealt with concurrently with an application 1 for an unfair dismissal remedy brought by Ms Graziella Daminato against City Collision SA (the Daminato Application). The alleged dismissal in each case involves the same respondent and similar factual circumstances.

[2] Despite the Fair Work Commission (Commission) serving Mr Chapman’s application (and the Daminato Application) on City Collision SA, no substantive response has been provided by the employer in relation to this matter, or Ms Daminato’s matter.

[3] At the time of the events leading to this application, City Collision SA conducted a crash repair shop operating in metropolitan Adelaide. City Collision SA is a small business within the meaning of the FW Act. 2 Mr Chapman worked in the crash repair business from 11 January 2016 until 5 November 2018. Mr Chapman was the Manager from mid-June 2018, having previously held other positions including Leading Hand Spray Painter and Workshop Manager.

[4] Mr Chapman contends he was dismissed from his employment due to the conduct of City Collision SA; being a unilateral decision to significantly reduce his rate of pay with immediate effect. Mr Chapman suggests he was forced to leave the workplace and his employment as a result of this decision.

[5] No material has been filed by or on behalf of City Collision SA and the respondent did not appear before the Commission to challenge Mr Chapman’s contentions.

[6] Given the commonality of many of the facts between this matter and the Daminato Application, there are some shared elements to the decisions being issued in both matters. 3

[7] I note for completeness that Mr Chapman initially named the respondent as “City Collision Centre SA”. After conducting directions conferences on 9 January and 27 February 2019 I granted leave for Mr Chapman to amend his application to cite the full name of the respondent; namely City Collision Centre (SA) Pty Ltd.

2. The identity of the respondent and its non-participation in proceedings

[8] The proper identity of the respondent has been a matter of some complexity.

[9] Mr Chapman brought the application against City Collision SA but named a person (Ms N.I.), who the applicant had been informed was a Director of that company and apparently signed documents in that capacity, as its representative. Subsequent information 4 indicates that Ms N.I. may not have been a Director of the business; however the evidence of Mr Chapman and Ms Daminato confirms that Ms N.I. was acting with ostensible authority on behalf of City Collision SA at the time of the events leading to the application.

[10] The crash repair business of City Collision SA appears to now be carried on by another entity, Adelaide City Crash Pty Ltd – which trades as City Collision Centre. Ms N.I. is apparently directly involved with the management of Adelaide City Crash Pty Ltd. It is not necessary or appropriate for me to attempt to make findings about whether there has been some form of phoenixing 5 of the business or whether Ms N.I. purported to act as a Director of City Collision SA.

[11] What is clear is that:

•  The application was brought against City Collision SA;

•  The objective evidence supports the notion that City Collision SA was the employer of Mr Chapman at the time of the events leading to this application;

•  Although initially provided to City Collision SA via Ms N.I., the subsequent directions, notice of listing and other information (including the applicant’s materials) were provided to City Collision SA C/O one of its named Directors, Mr Nicholas Weber, at the registered office of the respondent; 6 and

•  When the registered office of City Collision SA was changed, coincidently with the service of the materials, the Commission’s materials were also forwarded to City Collision SA at its new registered office. 7

[12] I note that the fact that the registered office of City Collision SA was changed during the above events confirms that the interests of the respondent are presently being acted upon. It is also a reasonable inference that those interests are aware of these applications.

[13] On that basis, I am satisfied that City Collision SA is properly identified as the respondent, and has been given every reasonable opportunity to respond to the application and be heard at the Determinative Conference.

[14] A Determinative Conference was held in this matter on 3 April 2019. This conference also involved Ms Daminato’s application being heard in conjunction with this matter. At the conference, both Mr Chapman and Ms Daminato gave sworn evidence and made submissions about their respective applications. As indicated above, City Collision SA did not attend the Determinative Conference, provide any formal response to the applications, or otherwise engage in the process.

[15] Section 600 of the FW Act permits the Commission to deal with an application in the absence of a party and given the above I consider that it was appropriate and reasonable to do so in this case.

[16] Despite City Collision SA’s non-attendance at the Determinative Conference, and non-participation in proceedings generally, I did require Mr Chapman to deal with the matters raised informally by a person purporting to advance a response, albeit indirectly, on behalf of the respondent during initial proceedings before the Commission. 8 I also sought additional evidence and tested his evidence more generally, noting that there was no alternative evidence or material properly before the Commission.

[17] I consider that Mr Chapman’s evidence (and that provided by Ms Daminato) was given honestly and openly. Despite the absence of a respondent at the Determinative Conference, Mr Chapman did not give the impression that he was filling in any gaps in his evidence, but rather, made appropriate concessions and confirmed when he could not exactly recall some context.

3. Findings on the context and the major issues

3.1 Mr Chapman’s employment

[18] Mr Chapman commenced employment with another entity, City Collision Centre Pty Ltd, on 11 January 2016. Mr Chapman worked for City Collision Centre Pty Ltd until it went into liquidation on 31 July 2018. The next day (1 August 2018) the business of City Collision Centre Pty Ltd was, in effect, purchased by Mr Nicholas Weber (and potentially others) and renamed City Collision Centre (SA) Pty Ltd. In addition, in effect, Mr Chapman continued in employment (then with City Collision SA) consequential upon the sale agreement.

[19] Mr Chapman held the full-time position of Leading Hand Spray Painter when first employed by City Collision Centre Pty Ltd. Mr Chapman continued in this position until early 2017 whereupon he was promoted to Workshop Supervisor. Mr Chapman was then promoted to Manager in mid-June 2018; a position held (initially at City Collision Centre Pty Ltd and maintained at City Collision SA) until the alleged dismissal. None of the positions held by Mr Chapman were accompanied by a written contract. The Manager position involved, amongst other matters, managing customer relations, quoting for jobs, production and staffing, quality control, and work health and safety.

[20] Mr Chapman’s salary as Manager was $45.87 per hour, based upon a nominal 38 hour week; being $1,743 per week, plus superannuation. There is no indication that Mr Chapman’s salary changed between June 2018 and 5 November 2018.

[21] As outlined earlier, Ms N.I. was introduced to Mr Chapman (and Ms Daminato) as being a Director of City Collision SA, and in any event, acted with ostensible authority for the new employer and sought to play an active role in the management of the business.

[22] Mr Chapman played an active role in the day to day management of the new business and was consulted by Ms N.I. and the (other) Director about initiatives that would further develop the business’ operations. There was no indication of any issues concerning Mr Chapman’s employment or job performance.

3.2 The events of 5 November 2018

[23] On the morning of 5 November 2018, Mr Chapman became aware of a discussion between Ms Daminato and Ms N.I. about pay rates.

[24] By way of background, Ms N.I. had earlier informed Ms Daminato that she could not be trusted and words to the effect of “and by the way we are cutting your wage to $22 per hour and if you don’t like it you can go” were said. This was a reduction of about 45 %.

[25] Mr Chapman entered the office and upon overhearing the above discussion between Ms Daminato and Ms N.I., came over and was advised by Ms Daminato that he “might want to listen to this.” 9

[26] Mr Chapman was advised by Ms N.I. that his wage was also being cut in the same manner and both Ms Daminato and Mr Chapman were informed to the effect of “well if you don’t like it, too bad, its effective immediately and you can leave”. There was no indication that there would be any reduction to responsibilities or hours of work and the reasonable inference was that the same job would be performed with a very significant reduction in pay.

[27] I note that at Ms Daminato’s insistence, Ms N.I. requested that the Accountant attend the business and when this occurred shortly afterwards, the Accountant indicated that the current rates could not be justified. When Ms Daminato indicated that they had been given an assurance that the all existing benefits and entitlements would be continued by the new business, the Accountant indicated that if you do not accept the pay cuts, you can leave now.

[28] Requests for clarification about the payment of outstanding entitlements were met with a response that the Accountant would look into the matter and get back to them in due course.

[29] Mr Chapman and Ms Daminato were both shown off the premises in what they have described were intimidating circumstances.

[30] No written confirmation of the end of the relationship was provided by either party, but it is clear that no future working relationship or employment was intended from that point. No notice of termination was provided and requests by the two applicants made to City Collision SA and Ms N.I. for the payment of outstanding entitlements have not been dealt with.

3.3 Whether Mr Chapman was protected from unfair dismissal

[31] This question arises from the requirement under s.382 of the FW Act that, amongst other matters, an applicant employee serve at least the minimum period of employment to be protected from unfair dismissal. Mr Chapman’s service would exceed the minimum period of 12 months required for an employee of a small business 10 if the service with the previous employer is eligible and counted for that purpose.

[32] Mr Chapman’s employment with City Collision Centre Pty Ltd commenced on 11 January 2016. His employment with City Collision SA commenced in August 2018 following the liquidation and subsequent sale of the business; being a period of only a few months before the events of 5 November 2018.

[33] “Period of employment” is relevantly defined by the FW Act as follows:

“384 Period of employment

(1) An employee’s period of employment with an employer at a particular time is the period of continuous service the employee has completed with the employer at that time as an employee.

… ….”

[34] The meaning of “continuous service” is provided by s.22 of the FW Act in the following terms:

“22 Meanings of service and continuous service

General meaning

(1) A period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include any period (an excluded period) that does not count as service because of subsection (2).

(2) The following periods do not count as service

(a) any period of unauthorised absence;

(b) any period of unpaid leave or unpaid unauthorised absence, other than:

(i) a period of absence under Division 8 of Part 2-2 (which deals with community service leave); or

(ii) a period of stand down under Part 3-5, under an enterprise agreement that applies to the employee, or under the employee’s contract of employment; or

(iii) a period of leave or absence of a kind prescribed by the regulations;

(c) any other period of a kind described by the regulations.

(3) An excluded period does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service.

(3A) Regulations made for the purposes of paragraph (2)(c) may prescribe different kinds of periods for the purposes of different provisions of this Act (other than provisions to which subsection (4) applies. If they do so, subsection (3) applies accordingly.

Meaning for Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2

(4) For the purposes of Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2:

(a) a period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include:

(i) any period of unauthorised absence; or

(ii) any other period of a kind prescribed by the regulations; and

(b) a period referred to in subparagraph (a)(i) or (ii) does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service; and

(c) subsections (1), (2) and (3) do not apply.

Note: Divisions 4 and 5, and Subdivision A of Division 11, of Part 2‑2 deal, respectively, with requests for flexible working arrangements, parental leave and related entitlements, and notice of termination or payment in lieu of notice.

(4A) Regulations made for the purposes of subparagraph (4)(a)(ii) may prescribe different kinds of periods for the purposes of different provisions to which subsection (4) applies. If they do so, paragraph (4)(b) applies accordingly.

When service with one employer counts as service with another employer

(5) If there is a transfer of employment (see subsection (7)) in relation to a national system employee:

(a) any period of service of the employee with the first employer counts as service of the employee with the second employer; and

(b) the period between the termination of the employment with the first employer and the start of the employment with the second employer does not break the employee’s continuous service with the second employer (taking account of the effect of paragraph (a)), but does not count towards the length of the employee’s continuous service with the second employer.

Note: This subsection does not apply to a transfer of employment between non‑associated entities, for the purpose of Division 6 of Part 2‑2 (which deals with annual leave) or Subdivision B of Division 11 of Part 2‑2 (which deals with redundancy pay), if the second employer decides not to recognise the employee’s service with the first employer for the purpose of that Division or Subdivision (see subsections 91(1) and 122(1)).

(6) If the national system employee has already had the benefit of an entitlement the amount of which was calculated by reference to a period of service with the first employer, subsection (5) does not result in that period of service with the first employer being counted again when calculating the employee’s entitlements of that kind as an employee of the second employer.

Note: For example:

(a) the accrued paid annual leave to which the employee is entitled as an employee of the second employer does not include any period of paid annual leave that the employee has already taken as an employee of the first employer; and

(b) if an employee receives notice of termination or payment in lieu of notice in relation to a period of service with the first employer, that period of service is not counted again in calculating the amount of notice of termination, or payment in lieu, to which the employee is entitled as an employee of the second employer.

Meaning of transfer of employment etc.

(7) There is a transfer of employment of a national system employee from one national system employer (the first employer) to another national system employer (the second employer) if:

(a) the following conditions are satisfied:

(i) the employee becomes employed by the second employer not more than 3 months after the termination of the employee’s employment with the first employer;

(ii) the first employer and the second employer are associated entities when the employee becomes employed by the second employer; or

(b) the following conditions are satisfied:

(i) the employee is a transferring employee in relation to a transfer of business from the first employer to the second employer;

(ii) the first employer and the second employer are not associated entities when the employee becomes employed by the second employer.

Note: Paragraph (a) applies whether or not there is a transfer of business from the first employer to the second employer.

(8) A transfer of employment:

(a) is a transfer of employment between associated entities if paragraph (7)(a) applies; and

(b) is a transfer of employment between non‑associated entities if paragraph (7)(b) applies.

[35] “Associated entity” is defined in s.12 of the FW Act by reference to s.50AA of the Corporations Act 2001 and there is no evidence presently before the Commission that City Collision Centre Pty Ltd and City Collision SA were related corporations within that meaning.

[36] However, under s.22(5) of the FW Act, service between two employers potentially counts as continuous service where a transfer of employment (and a transfer of business) takes place.

[37] The meaning of transfer of business is dealt with in s.311 of the FW Act, which relevantly provides:

“311 When does a transfer of business occur

Meanings of transfer of business, old employer, new employer and transferring work

(1) There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied:

(a) the employment of an employee of the old employer has terminated;

(b) within 3 months after the termination, the employee becomes employed by the new employer;

(c) the work (the transferring work) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;

(d) there is a connection between the old employer and the new employer as described in any of subsections (3) to (6).

Meaning of transferring employee

(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business.

Transfer of assets from old employer to new employer

(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and

(b) the new employer or an associated entity of the new employer;

the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):

(c) that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and

(d) that relate to, or are used in connection with, the transferring work.

… …” 11

[38] In this case, the following is revealed by the evidence:

•  The business of City Collision Centre Pty Ltd was sold to City Collision SA, in effect, as a going concern;

•  The assets, the work and the employees were, in effect, carried forward to City Collision SA, which had the beneficial use of the assets in relation to the transferring work;

•  As part of the sale agreement, all staff entitlements and pay rates were to be honoured by City Collision SA;

•  All employees (including Mr Chapman and Ms Daminato) continued to be employed and were paid for the few days when the business was not operating in practice; and

•  Those of the transferred employees who subsequently left the employment of City Collision SA, had their entire service recognised and used to calculate entitlements.

[39] On that basis, I find that there was a transfer of employment for Mr Chapman between City Collision Centre Pty Ltd and City Collision SA and that his service was continuous for present purposes.

[40] Accordingly, Mr Chapman had completed the required minimum employment period. As Mr Chapman was paid below the high income threshold, I am also satisfied that the other relevant requirements of s.382 of the FW Act have been met and that Mr Chapman was protected from unfair dismissal and eligible to bring this application.

3.4 Whether Mr Chapman has been dismissed within the meaning of s.386 of the FW Act

[41] Section 386 of the FW Act relevantly provides as follows:

“386 Meaning of dismissed

(1) A person has been dismissed if:

(a) the person’s employment with his or her employer has been terminated on the employer’s initiative; or

(b) the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.

… …”

[42] Fundamental to this question is whether Mr Chapman was dismissed, either at City Collision SA’s initiative or by being forced to resign his employment due to conduct of City Collision SA.

[43] Although applied under the previous Act,¹² the following approach of the Full Bench of the Australian Industrial Relations Commission in O’Meara v Stanley Works Pty Ltd in my view remains generally apposite to the consideration of s.386(1) of the FW Act:

“[21] In this Commission the concepts have been addressed on numerous occasions and by a number of Full Benches. In Pawel v Advanced Precast Pty Ltd (Pawel) a Full Bench said:

“[13] It is plain that the Full Court in Mohazab considered that an important feature in the question of whether termination is at the initiative of the employer is whether the act of an employer results directly or consequentially in the termination of the employment and that the employment relationship is not voluntarily left by the employee. However, it is to be noted that the Full Court described it as an important feature. It plainly cannot be the only feature. An example will serve to illustrate this point. Suppose an employee wants a pay rise and makes such a request of his or her employer. If the employer declines and the employee, feeling dissatisfied resigns, can the resignation be said to be a termination at the initiative of the employer? We do not think it can and yet it can be said that the act of the employer i.e. refusing the pay rise, has at least consequentially resulted in the termination of the employment. This situation may be contrasted with the position where an employee is told to resign or he or she will be terminated. We think that all of the circumstances and not only the act of the employer must be examined. These in our view, will include the circumstances giving rise to the termination, the seriousness of the issues involved and the respective conduct of the employer and the employee. In the instant case the uncontested factual findings are that the applicant had for almost the whole of his employment performed welding duties; that there was no objective threat to his health and safety involved in the requirement that he undertake welding duties so long as it was not on a continuous basis and that the welding he was required to do was not continuous.”

[22] In the Full Bench decision of ABB Engineering Construction Pty Ltd v Doumit (ABB Engineering) it was said:

“Often it will only be a narrow line that distinguishes conduct that leaves an employee no real choice but to resign employment, from conduct that cannot be held to cause a resultant resignation to be a termination at the initiative of the employer. But narrow though it be, it is important that that line be closely drawn and rigorously observed. Otherwise, the remedy against unfair termination of employment at the initiative of the employer may be too readily invoked in circumstances where it is the discretion of a resigning employee, rather than that of the employer, that gives rise to the termination. The remedies provided in the Act are directed to the provision of remedies against unlawful termination of employment. Where it is the immediate action of the employee that causes the employment relationship to cease, it is necessary to ensure that the employer’s conduct, said to have been the principal contributing factor in the resultant termination of employment, is weighed objectively. The employer’s conduct may be shown to be a sufficiently operative factor in the resignation for it to be tantamount to a reason for dismissal. In such circumstances, a resignation may fairly readily be conceived to be a termination at the initiative of the employer. The validity of any associated reason for the termination by resignation is tested. Where the conduct of the employer is ambiguous, and the bearing it has on the decision to resign is based largely on the perceptions and subjective response of the employee made unilaterally, considerable caution should be exercised in treating the resignation as other than voluntary.”

[23] In our view the full statement of reasons in Mohazab which we have set out together with the further explanation by Moore J in Rheinberger and the decisions of Full Benches of this Commission in Pawel and ABB Engineering require that there to be some action on the part of the employer which is either intended to bring the employment to an end or has the probable result of bringing the employment relationship to an end. It is not simply a question of whether “the act of the employer [resulted] directly or consequentially in the termination of the employment.” Decisions which adopt the shorter formulation of the reasons for decision should be treated with some caution as they may not give full weight to the decision in Mohazab. In determining whether a termination was at the initiative of the employer an objective analysis of the employer’s conduct is required to determine whether it was of such a nature that resignation was the probable result or that the appellant had no effective or real choice but to resign.”

[44] Although determined by the English Court of Appeal, the following approach as taken in CF Capital PLC v Willoughby¹³ is generally consistent with that taken by Australian Court and Tribunals:

“37. The ‘rule’ is that a notice of resignation or dismissal (whether given orally or in writing) has effect according to the ordinary interpretation of its terms. Moreover, once such a notice is given it cannot be withdrawn except by consent. The ‘special circumstances’ exception as explained and illustrated in the authorities is, I consider, not strictly a true exception to the rule. It is rather in the nature of a cautionary reminder to the recipient of the notice that, before accepting or otherwise acting upon it, the circumstances in which it is given may require him first to satisfy himself that the giver of the notice did in fact really intend what he had apparently said by it. In other words, he must be satisfied that the giver really did intend to give a notice of resignation or dismissal, as the case may be. The need for such a so-called exception to the rule is well summarised by Wood J in paragraph 31 of Kwik-Fit’s case and, as the cases show, such need will almost invariably arise in cases in which the purported notice has been given orally in the heat of the moment by words that may quickly be regretted.

38. The essence of the ‘special circumstances’ exception is therefore that, in appropriate cases, the recipient of the notice will be well advised to allow the giver what is in effect a ‘cooling off’ period before acting upon it. Kilner Brown J, in paragraph [15] of his judgment in Martin’s case understandably referred to such a period as an opportunity for the giver of the notice to recant, or to withdraw his words; and this is in practice what is likely to happen. I would, however, be reluctant to characterise the exception as an opportunity for a unilateral retraction or withdrawal of a notice of resignation or dismissal since that would be to allow the exception to operate inconsistently with the principle that such a notice cannot be unilaterally retracted or withdrawn. In my judgment, the true nature of the exception is rather that it is one in which the giver of the notice is afforded the opportunity to satisfy the recipient that he never intended to give it in the first place – that, in effect, his mind was not in tune with his words.”

[45] Accordingly, the general legal principles to be applied in this case are well settled. Stated succinctly, they include:

•  A termination at the initiative of the employer involves the action of the employer as the principal constituting factor leading to the termination;

•  The employer must have engaged in some action that intended to bring the employment relationship to an end or which had that probable result;

•  Considerable caution should be exercised in treating a resignation as other than voluntary and it is necessary to determine whether the employer’s conduct was of such a nature that resignation was the probable result or that the employee had no effective or real choice but to resign;

•  In determining the question of whether the termination was at the initiative of the employer, an objective analysis of the employer’s conduct is required;

•  A termination (or resignation) has effect according to its ordinary terms however in some “special” circumstances the Commission needs to be cautious to ascertain the objective intention and to consider whether it would have been reasonable to permit a retraction or clarification; and

•  Subject to the above, a dismissal or resignation, once given, cannot be unilaterally withdrawn.

[46] It is not clear to me that Mr Chapman resigned. He was facing the reality of an immediate and unilateral reduction in pay. Although the precise reduction was not advised to Mr Chapman he was aware of the magnitude of the pay cut announced for Ms Daminato moments earlier, and would reasonably have understood that this would also apply in his case given the circumstances. When informed that the reduction would apply immediately and that he could take it or go, he left the workplace in a context where it was clear that the employment had concluded. Given the impact and magnitude of the pay reduction, the implication that there would be no change to responsibilities or hours of work, and that the reduction was immediate and was not open for discussion, the conduct of City Collision SA repudiated a fundamental term of the contract and Mr Chapman refused to accept that repudiation. 14 The employer’s conduct either intended to bring the employment to an end, or had the probable result of bringing the employment relationship to an end, and was a dismissal at the initiative of the employer.

[47] Even if Mr Chapman’s conduct in leaving the workplace could be taken to be a resignation, it was forced by the conduct of City Collision SA.

[48] Mr Chapman was dismissed by City Collision SA within the meaning of s.386 of the FW Act.

3.5 Whether the dismissal was consistent with the Small Business Fair Dismissal Code – s.388 of the FW Act

[49] City Collision SA is a Small Business within the meaning of the FW Act. Although not contended by the respondent, as a result of s.385 I have, as a matter of abundant caution, initially considered the implications of the Small Business Fair Dismissal Code established by s.388 of the FW Act (the Code)¹⁵ in this case.

[50] This provision means that if the Commission finds that Mr Chapman’s dismissal was consistent with the Code, it cannot be considered to be unfair within the meaning of the FW Act. Section 396 of the FW Act also requires, in effect, that matters arising from s.385 are to be decided before dealing with the merits of the application.

[51] The Code contemplates dismissals where the employer believes on reasonable grounds that an employee’s conduct was sufficiently serious to justify immediate dismissal. Alternatively, an “other” dismissal is based upon a valid reason connected to the employee’s conduct or capacity where a warning has been provided together with an opportunity to respond and rectify the concerns. In this case, there is no suggestion that the dismissal of Mr Chapman was on the basis of misconduct and it was not an “other dismissal” as contemplated in the Code. There is also no evidence to support any such notion. Taken at its very highest, the reasons stated for the decision concern the alleged finances of the business and this is not contemplated within the Code.

[52] Accordingly, I cannot be satisfied that the dismissal was consistent with the Code.

3.6 Whether the dismissal was unfair (harsh, unjust or unreasonable) – s.387 of the FW Act

[53] Given the above findings, I need to consider whether the dismissal of Mr Chapman was unfair.

[54] Section 387 of the FW Act provides 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.”

[55] It is clear that s.387 of the FW Act contemplates that an overall assessment as to the nature of the dismissal must be made by the Commission. In so doing, the FW Act sets out a number of considerations that must, where relevant, be weighed up in totality.

[56] It is convenient therefore to use the various provisions of s.387, with reference to the relevant circumstances, to outline my consideration of the matter.

Section 387(a) – whether there was a valid reason for the dismissal related to Mr Chapman’s capacity or conduct (including its effect on the safety and welfare of other employees)

[57] Valid in this context is generally considered to be whether there was a sound, defensible or well-founded reason for the dismissal. Further, in considering whether a reason is valid, the requirement should be applied in the practical sphere of the relationship between an employer and an employee where each has rights, privileges, duties and obligations conferred and imposed on them. That is, the provisions must be applied in a practical, common sense way to ensure that the employer and employee are each treated fairly.¹⁶

[58] It is also clear from the authorities that the reason for termination must be defensible or justifiable on an objective analysis of the relevant facts before the Commission. That is, it is not enough for an employer to rely upon its reasonable belief that the termination was for a valid reason.¹⁷ Equally, facts justifying dismissal, which existed at the time of the termination, should be considered, even if the employer was unaware of those facts and did not rely on them at the time of dismissal.¹⁸

[59] City Collision SA has not provided a formal response to Mr Chapman’s application and did not participate in the Determinative Conference. There is no suggestion of a valid reason associated with his capacity or conduct.

Section 387(b) – whether Mr Chapman was notified of the reasons for dismissal

[60] This consideration requires the Commission to assess whether the applicant concerned was relevantly notified of the reasons leading to the dismissal before that decision was taken.¹⁹

[61] There was no valid reason and no notification.

Section 387(c) – whether Mr Chapman was given an opportunity to respond to any reason related to his capacity or conduct

[62] The process contemplated by the FW Act does not require any formality and is to be applied in a common sense way to ensure the employee has been treated fairly. This question becomes whether Mr Chapman was aware of the precise nature of the employer’s concern about his capacity and had a reasonable opportunity to respond to these concerns.²⁰

[63] There was no valid reason, no notification and no opportunity to respond.

Section 387(d) – any unreasonable refusal by the respondent to allow Mr Chapman a support person

[64] There was no meeting to discuss any concerns held by the employer and no request for a support person arose. Accordingly, this consideration is not relevant.

Section 387(e) – if the dismissal is related to unsatisfactory performance by Mr Chapman – whether he has been warned about that unsatisfactory performance before the dismissal.

[65] This consideration relates to performance of the job. Performance in this context includes the employee’s capacity to do the work, and the diligence and care taken with that work.²¹

[66] The dismissal was not related to unsatisfactory performance and no warning was provided more generally.

Section 387(f) – the degree to which the size of the respondent’s enterprise would be likely to impact on the procedures followed in effecting the dismissal.

Section 387(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.

[67] I deal with these two considerations together.

[68] City Collision SA is a small business and there were no dedicated human resource management specialists or expertise in the enterprise. This may have impacted upon how the issues leading to the dismissal were handled in a number of ways and is a relevant consideration.

[69] However, the appalling manner in which the dismissal was conducted is not explained by that context and this consideration is not a significant factor in mitigating, or assessing, the unfairness of the dismissal.

Section 387(h) - other matters considered to be relevant

[70] Amongst other considerations, the Commission should consider the impact of the dismissal upon the applicant given all of the circumstances.

[71] Mr Chapman lost his employment without warning, notice or any proper process. It had the potential for significant personal and financial consequences for him.

[72] There is no evidence before the Commission as to the financial health of the business and whether the dismissal was actually based upon any objective criteria or business necessity.

Conclusion on the nature of the dismissal

[73] Having considered all of the factors in s.387 of the FW Act in the context of this matter, I am satisfied that Mr Chapman’s dismissal was harsh, unjust and unreasonable.

4. Remedy and compensation

[74] Mr Chapman does not seek reinstatement to his former position, but rather, compensation.

[75] Division 4 of Part 3-2 of the FW Act relevantly provides as follows:

“Division 4—Remedies for unfair dismissal

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.

… …

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.

393 Monetary orders may be in instalments

To avoid doubt, an order by the FWC under subsection 391(3) or 392(1) may permit the employer concerned to pay the amount required in instalments specified in the order.”

[76] The prerequisites of ss.390(1) and (2) have been met in this case.

[77] Section 390 of the FW Act makes it clear that compensation is only to be awarded as a remedy where the Commission is satisfied that reinstatement is inappropriate and that compensation is appropriate in all the circumstances. Reinstatement is not sought and I find that reinstatement would be inappropriate.

[78] As set out above, under the FW Act, it is then necessary to consider whether compensation in lieu of reinstatement is appropriate.

[79] A Full Bench in McCulloch v Calvary Health Care Adelaide²² (McCulloch) confirmed, in general terms, that the approach to the assessment of compensation as undertaken in cases such as Sprigg²³ remains appropriate in that regard.

[80] Section 392(2) of the FW Act requires me to take into account all of the circumstances of the case including the factors that are listed in paras (a) to (g). Without detracting from the overall assessment required by the FW Act,²⁴ it is convenient to discuss the identified considerations under the various matters raised by each of the provisions.

The effect of the order on the viability of City Collision SA

[81] Given the non-participation of the respondent, nothing was put on this aspect.

The length of Mr Chapman’s service with City Collision SA

[82] Mr Chapman served with City Collision SA from 11 January 2016 to 5 November 2018; approximately 2 years and 9 months. This is not an insignificant period of service and reflects my earlier finding regarding the transfer of Mr Chapman’s employment, and service, from City Collision Centre Pty Ltd to City Collision SA.

The remuneration Mr Chapman would have received, or would have been likely to receive, if he had not been dismissed

[83] This involves, in part, a consideration of the likely duration of Mr Chapman’s employment in the absence of what I have found to be an unfair dismissal. That is, the establishment of the anticipated period of employment.²⁵

[84] As with many cases, the assessment of the anticipated period of employment in this case requires a broad assessment of competing considerations. Mr Chapman was a senior employee that had no intention of leaving the business. There was no history of performance or conduct concerns and Mr Chapman had a reasonable expectation that his employment would continue for some time. Indeed Mr Chapman had already been consulted by the employer about proposals on how to expand the business’ operations.

[85] However, the business had recently been acquired by City Collision SA and based upon the evidence of Mr Chapman and Ms Daminato there were some issues that had started to arise with the involvement of the new Directors and Ms N.I.. It is also likely that City Collision SA was seeking to make room for a wage payment to Ms N.I. by reducing its payments to the applicants. There is of course no evidence before the Commission as to the financial health of the business and whether the decision to reduce the wages was based upon any objective criteria or business necessity.

[86] In all of the circumstances evident here, I consider that the anticipated period of employment for Mr Chapman should be 20 weeks (a period of approximately five months). This reflects the balancing of the considerations set out above.

[87] In the absence of the dismissal, Mr Chapman would have been paid at the rate of $1,743 per week (plus superannuation) for each of those weeks.

[88] The projected remuneration that Mr Chapman would have received based upon the anticipated period of employment with City Collision SA would therefore have been $34,860 (plus superannuation).

The efforts of Mr Chapman to mitigate the loss suffered by his because of the dismissal

[89] I accept that Mr Chapman has made extensive efforts to mitigate his losses.

[90] No discount to the amount of compensation is warranted based upon this consideration.

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

The amount of any income reasonably likely to be so earned by Mr Chapman during the period between the making of the order for compensation and the actual compensation

[91] After the dismissal Mr Chapman worked in a casual capacity on three occasions prior to Christmas 2018; earning a total of $730. 26 On 2 January 2019 Mr Chapman found full-time employment as a Production Manager. He is now paid $39.22 per hour for a nominal 38 hour week; being a salary of $1,490 per week, plus superannuation.27

[92] Mr Chapman’s remuneration from the new employment during the 20 week anticipated period of employment is $17,120 (plus superannuation). This includes both Mr Chapman’s income from his Production Manager position and the casual work undertaken previously.

[93] I consider that this amount should be taken into account and deducted from the projected remuneration loss. In this case, I do not consider that it reasonable or fair to deduct any remuneration earned beyond the projected period of employment given the closed period of that projection.

Any other matter that the FWC considers relevant and the remaining statutory parameters

[94] I have taken into account the projected nature of the anticipated loss of remuneration over a known period and given the circumstances of this case it is not appropriate to make a further allowance for contingencies.²⁸

[95] Mr Chapman is presently 53 years of age.

[96] There is no demonstrated misconduct that should be taken into account as provided by s.392(3) of the FW Act.

[97] In accordance with s.392(4) of the FW Act, I make no allowance for any shock, distress or humiliation that may have been caused by the dismissal. I also observe that compensation in this context is not in the nature of damages or a penalty for the actions of the employer.

[98] The maximum compensation limit in this case is the lesser of 26 weeks remuneration or the statutory cap of $69,450²⁹ and does not impact upon the compensation order.

[99] Taxation would be payable on any amount determined.

[100] Given Mr Chapman’s lost remuneration and his post-dismissal income included superannuation, I consider that this should be reflected in the compensation order as an additional payment having regard to the rate of superannuation provided by the Superannuation Guarantee (Administration) Act 1992; being 9.5%. 30

Conclusions on remedy

[101] Having regard to the circumstances of this matter applied to the considerations established by s.392 of the FW Act, I consider that it is appropriate to make an award of compensation in lieu of reinstatement to Mr Chapman. Further, I consider that the compensation should amount to $17,740 (plus an amount to be paid as superannuation to a relevant Superannuation fund on Mr Chapman’s account); which has been derived having regard to the projected remuneration loss and the other factors discussed above. I consider this award to be fair and reasonable given all of the circumstances set out above.

[102] The compensation is to be paid within 14 days of this decision.

5. Conclusions and Orders

[103] For reasons set out above, I have found that Mr Chapman:

1. Is protected from unfair dismissal;

2. Was unfairly dismissed within the meaning of the FW Act; and that

3. Compensation in lieu of reinstatement is appropriate and is to be $17,740 plus $1,685 to be paid as superannuation.

[104] An order 31 giving effect to this decision is being issued concurrently.

COMMISSIONER

Appearances:

K Chapman, the applicant, on his own behalf.

No appearance on behalf of City Collision Centre (SA) Pty Ltd, the respondent.

Hearing details:

2019

Adelaide

3 April.

Printed by authority of the Commonwealth Government Printer

<PR706357>

 1   U2018/12216.

 2 Section 23 of the FW Act.

 3   See [2019] FWC 2088 for the Daminato Decision.

 4   ASIC extracts provided by an Accounting firm acting on Ms N.I.’s behalf – exhibit 9.

 5   See the definition provided in Phoenix Activity: Sizing the problem and matching solutions, a report for the Fair Work Ombudsman by PwC, June 2012.

 6   For completeness, service was also provided C/O Ms N.I. and C/O Adelaide City Crash.

 7   Exhibit 8.

 8   An email purporting to suggest that Mr Chapman had resigned and was not therefore dismissed – exhibit 6.

 9   Exhibit 2.

 10 Section 383 of the FW Act.

 11 The remaining subsections of s.311 are not relevant to this matter. See John Lucas Hotel Management Services v Hillie (2013) 224 IR 260; [2013] FWCFB 1198 in relation to the operation of s.311 of the FW Act.

12 Workplace Relations Act 1996 (Cth).

13 Court of Appeal (Civil Division) per Rimer LJ [2011] EWCA 1115. See also Gunnedah Shire Council v Grout (1995) 134 ALR 145.

 14   See Allied Express Transport Pty Ltd v Maria-Anna Owens[2011] FWAFB 2929 at [25] to [29] and Tamicka Louise Dover-Ray v Real Insurance Pty Ltd[2010] FWAFB 2670 at [21] to [26].

15 See Ryman v Thrash Pty Ltd t/a Wisharts Automotive Services[2015] FWCFB 5264 for a discussion of the relevant requirements.

16 Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 as cited in Potter v WorkCover Corporation, (2004) 133 IR 458 per Ross VP, Williams SDP, Foggo C and endorsed by the Full Bench in Industrial Automation Group Pty Ltd T/A Industrial Automation [2010] FWAFB 8868, 2 December 2010 per Kaufman SDP, Richards SDP and Hampton C at par [36].

17 See Australia Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1; King v Freshmore (Vic) Pty Ltd AIRCFB Print S4213 per Ross VP, Williams SDP, Hingley C, 17 March 2000; Edwards v Giudice (1999) 94 FCR 561; Crozier v Palazzo Corporation Pty Limited t/as Noble Park Storage and Transport AIRCFB Print S5897 per Ross VP, Acton SDP and Cribb C, 11 May 2000 and Rode v Burwood Mitsubishi AIRCFB Print R4471 per Ross VP, Polites SDP, Foggo C, 11 May 1999.

18 Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359, 373, 377‒378; Australia Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1, 14. See also Dundovich v P & O Ports AIRC PR923358 8 October 2002, per Ross VP, Hamilton DP, Eames C at [79]; Lane v Arrowcrest (1990) 27 FCR 427, 456; cited with approval in Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410, 467 and 468.

19 See Trimatic Management Services Pty Ltd v Daniel Bowley [2013] FWCFB 5160.

20 RMIT v Asher (2010) 194 IR 1. See also Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137 at [75].

21 See Anetta v Ansett Australia Ltd (2000) 98 IR 233.

22 [2015] FWCFB 873.

23 Sprigg v Paul’s Licensed Festival Supermarket (1998) 88 IR 21. See also Bowden v Ottrey Homes Cobram and District Retirement Villages Inc T/A Ottrey Lodge[2013] FWCFB 431.

24 Smith and Others v Moore Paragon Australia Ltd (2004) 130 IR 446.

25 McCulloch v Calvary Health Care Adelaide[2015] FWCFB 873.

 26   Exhibit 3.

 27   Attachment 15 or exhibit 5.

28 See the discussion of contingencies in McCulloch at [20] – [23]; Bowden v Ottrey Homes Cobram and District Retirement Villages Inc T/A Ottrey Lodge[2013] FWCFB 431, at par [52]; Ellawala v Australian Postal Corporation AIRC Print S5109, per Ross VP, Williams SDP and Gay C, 17 April 2000 and in Enhance Systems Pty Ltd v James Cox AIRC Print PR910779, per Williams SDP, Acton SDP and Gay C, 31 October 2001.

29 Section 392(5) of the FW Act.

 30   Superannuation Guarantee (Administration) Act 1992 s 19(2).

 31   PR707099.