Mark O'Connell v Floor Grinding Services Pty Ltd
[2019] FWC 7791
•14 NOVEMBER 2019
| [2019] FWC 7791 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Mark O’Connell
v
Floor Grinding Services Pty Ltd
(U2018/3854)
COMMISSIONER JOHNS | MELBOURNE, 14 NOVEMBER 2019 |
Application for an unfair dismissal remedy; Whether dismissal was harsh, unjust or unreasonable; Appropriateness of remedy in all the circumstances of the case; Calculating the amount of compensation where reinstatement is inappropriate.
[1] This is a decision about whether Mark O’Connell (Applicant) was unfairly dismissed by Floor Grinding Services Pty Ltd (Respondent). It finalises this matter following two previous decisions involving the parties.
[2] In the first decision 1 (Jurisdictional Objections Decision) I dismissed jurisdictional objections raised by the Respondent in which it contended that:
a) the Applicant was not dismissed, but rather that he resigned on 31 January 2018 in order to pursue his own business, OCON Floor Prep Pty Ltd (OCON).
b) from the period of 1 February 2018 to 23 March 2018, the Applicant was operating through OCON, invoicing the Respondent for work performed.
c) In the alternative, that if the termination occurred at the initiative of the Respondent, the application for an unfair dismissal remedy was out of time by virtue of s.394(2) of the Fair Work Act 2009 (Cth) (FW Act).
[3] The background and findings of fact in relation to the matter are set out in the Jurisdictional Objections Decision. 2 I do not repeat them here.
[4] In the Jurisdictional Objections Decision I decided that the Applicant was dismissed and that the effective date of dismissal was 23 March 2018. Consequently, his application for an unfair dismissal remedy was made within the time limit specified in s.394(2) of the FW Act.
[5] In the second decision 3 (Costs Decision) I dismissed an application for costs made by the Applicant in relation to the need for him to answer the jurisdictional objections raised by the Respondent. In the Costs Decision I was not satisfied that it was unreasonable for the Respondent to maintain the jurisdictional objections.
[6] It is now necessary to decide the substantive unfair dismissal application following a hearing conducted on 23 October 2019.
[7] At the hearing:
a) the Applicant was represented by Mr S Tirtadjaja, a solicitor with Adam Ahmed & Co Pty Ltd. The Applicant gave evidence on his own behalf. He was not required for cross-examination. 4
b) The Respondent was represented by its Director, Mr E Sheehy. He gave evidence on its behalf and made himself available for cross-examination.
[8] In advance of the hearing the parties filed the following materials. I have had regard to all of the exhibits in coming to this decision:
Exhibit Number | Description |
1. | Form F2 – Unfair Dismissal Application |
2. | Form F3 – Employer Response to Unfair Dismissal Application |
3. | Jurisdictional Objection Decision |
4. | Costs Decision |
5. | Applicant’s submissions filed 1 October 2019 and exhibits 1 – 7 |
6. | Witness Statement of Mark O’Connell dated 30 September 2019 |
7. | Respondent’s submissions filed 15 October 2019 |
8. | Witness statement of Edmund “Ned” Sheehy filed 15 October 2019 and Attachments 1 – 8 |
9. | Applicant’s submissions in reply filed 22 October 2019 |
10 | Additional Witness Statement of Mark O’Connell |
[9] At the conclusion of the hearing I ordered the Respondent to produce additional financial material by 25 October 2019. The financial material produced by the Respondent was as follows:
Exhibit Number | Description |
N/A | Profit and Loss Statement and Balance Sheet for Floor Grinding Services Pty Ltd to 30 June 2019 (with comparison to 30 June 2018) |
N/A | Respondent’s bank statement for the period 18 June 2018 – 17 July 2018 |
N/A | Respondent’s bank statement for the period 18 June 2019 – 17 July 2019 |
[10] The parties were then given until 1 November 2019 to make any further submissions in relation the material produced by order of the Commission. Both did so. In coming to this decision I have also had regard to documents produced after the hearing and the final submissions about the same.
When can the Commission order a remedy for unfair dismissal?
[11] Section 390 of the FW Act provides that the Commission may order a remedy if:
(a) the Commission is satisfied that the Applicant was protected from unfair dismissal at the time of being dismissed; and
(b) the Applicant has been unfairly dismissed.
[12] Both limbs must be satisfied. I am therefore required to consider whether the Applicant was protected from unfair dismissal at the time of being dismissed and, if I am satisfied that the Applicant was so protected, whether the Applicant has been unfairly dismissed.
When is a person protected from unfair dismissal?
[13] Section 382 of the FW Act provides that a person is protected from unfair dismissal if, at the time of being dismissed:
(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and
(b) one or more of the following apply:
(i) a modern award covers the person;
(ii) an enterprise agreement applies to the person in relation to the employment;
(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.
[14] In the present matter the Respondent did not contest that the Applicant was employed in 2011 and earned less than the high income threshold. 5 Consequently, I was satisfied that the Applicant was protected from unfair dismissal.
As stated above, in the Jurisdictional Objections Decision I decided that the application for an unfair dismissal remedy was made within time.
When has a person been unfairly dismissed?
[15] Section 385 of the FW Act provides that a person has been unfairly dismissed if the Commission is satisfied that:
(a) the person has been dismissed; and
(b) the dismissal was harsh, unjust or unreasonable; and
(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and
(d) the dismissal was not a case of genuine redundancy.
Has the Applicant been dismissed?
[16] A threshold issue to determine is whether the Applicant has been dismissed from their employment.
[17] Section 386(1) of the FW Act provides that the Applicant has been dismissed if:
(a) the Applicant’s employment with the Respondent has been terminated on the Respondent’s initiative; or
(b) the Applicant has resigned from their employment but was forced to do so because of conduct, or a course of conduct, engaged in by the Respondent.
[18] In the Jurisdictional Objection Decision I had already determined that the Respondent dismissed the Applicant within the meaning of s.385 of the FW Act.
Was the dismissal consistent with the Small Business Fair Dismissal Code?
[19] Section 388 of the FW Act provides that a person’s dismissal was consistent with the Small Business Fair Dismissal Code (Code) if:
(a) immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happened first), the person’s employer was a small business employer; and
(b) the employer complied with the Small Business Fair Dismissal Code in relation to the dismissal.
[20] It is agreed that the Respondent was a small business employer within the meaning of s.23 of the FW Act at the relevant time, having fewer than 15 employees (including casual employees employed on a regular and systematic basis).
[21] However, the Code is not relevant in the present matter because, although the Respondent is a small business employer within the meaning of the FW Act, it did not dismiss the Applicant in a manner consistent with the Code. It did not contend otherwise.
Was the dismissal a case of genuine redundancy?
[22] Under s.389 of the FW Act, a person’s dismissal was a case of genuine redundancy if:
(a) the employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
[23] It was not in dispute and I find that the Applicant’s dismissal was not due to the Respondent no longer requiring the Applicant’s job to be performed by anyone because of changes in the operational requirements of the Respondent’s enterprise.
[24] I am therefore satisfied that the dismissal was not a case of genuine redundancy.
Was the dismissal harsh, unjust or unreasonable?
[25] Section 387 of the FW Act provides that, in considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the Commission 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.
[26] I am required to consider each of these criteria, to the extent they are relevant to the factual circumstances before me. 6
[27] I set out my consideration of each below.
Was there a valid reason for the dismissal related to the Applicant’s capacity or conduct?
[28] In the present matter the Respondent conceded that it “had no problems with [the Applicant’s] work ethic.” 7 Mr Sheehy confirmed that the termination had “nothing at all” to do with the Applicant’s conduct or performance.8 The decision related entirely to the “massive pay rise” the Applicant was seeking from the Respondent.9
[29] In all the circumstances, I find that there was no valid reason related to the Applicant’s capacity or conduct. It is not a relevant consideration in the present matter.
Was the Applicant notified of the valid reason?
[30] Because there was no valid reason for termination related to the Applicant’s capacity or conduct, it necessarily follows that he was not notified of such a valid reason. For these reasons s.387(b) is not relevant in the present matter.
Was the Applicant given an opportunity to respond to any valid reason related to their capacity or conduct?
[31] Because I have not found that there was a valid reason related to dismissal this factor is not relevant to the present circumstances. 10
Did the Respondent unreasonably refuse to allow the Applicant to have a support person present to assist at discussions relating to the dismissal?
[32] This factor is not relevant to the present circumstances.
Was the Applicant warned about unsatisfactory performance before the dismissal?
[33] Because the dismissal did not relate to unsatisfactory performance, this factor is not relevant to the present circumstances.
To what degree would the:
• size of the Respondent’s enterprise be likely to impact on the procedures followed in effecting the dismissal?
• absence of dedicated human resource management specialists or expertise in the Respondent’s enterprise be likely to impact on the procedures followed in effecting the dismissal?
[34] The Respondent is a small business. That is not contested. Mr Sheehy is its principal. It is very clear that from the evidence and the way in which the Respondent conducted these proceedings that in relation to both procedures relating to dismissal and human resource matters more generally the Respondent and its principal are unsophisticated. It is clear that, having regard to that unsophistication, it had an impact on the lack of procedure followed by the Respondent and the events as they unfolded.
What other matters are relevant?
[35] Section 387(h) requires the Commission to take into account any other matters that the Commission considers relevant.
Submissions
[36] The Applicant submitted that the following other matters are relevant to the Commission’s consideration of whether the dismissal was harsh, unjust or unreasonable:
“The applicant submits that the respondent never raised any issue in relation to the applicant’s capacity to do his job consistent with the respondent’s standards nor the applicant’s conduct [during] his employment with respondent. To the contrary, the director of the respondent regularly travelled abroad and left the applicant in charge. For a number of years the respondent’s only full-time employee with the applicant, suggesting the applicant was performing satisfactorily and the business was profitable. The applicant worked for the respondent the seven years.” 11
[37] The Respondent submitted it was relevant to the Commission’s consideration of whether the dismissal was harsh, unjust or unreasonable that Mr Sheehy and the Applicant could not reach a consensus about what the Applicant would be paid. Mr Sheehy said,
“Well, your Honour, every employer/employee, there has to be a relationship where they can reach a consensus regarding pay. As you can see from the submissions, there are been ongoing discussions for approximately two months and we couldn’t reach - there was no consensus coming - been achieved. Mark sent through the invoice, which I had him down as a contractor but you’ve ruled that he wasn’t so not going back over that. Mark even said to me himself on the evening of the 23rd, after we had kind of said - I said I couldn’t keep going anymore, he wanted to go back to his original PAYG start, as he sent a text message which have been entered into evidence there on my thing. Unfortunately, your Honour, we couldn’t reach a consensus regarding the pay just - it was wrecking my head, so I just decided the whole company just wasn’t worth going forward with.” 12
[38] I consider all the matters advanced by the Applicant and Respondent respectively are relevant to my consideration of whether the dismissal was harsh, unjust or unreasonable.
[39] I also consider it relevant that after the Applicant ceased employment with the Respondent he was not replaced. Although the dismissal was not characterised this way by the Respondent, as matters turned out, the Applicant’s position was made redundant. At all times the Respondent could have made that decision. It was Mr Sheehy’s business and he was entitled to make the decision (that he ultimately made) to cease to trade. In that event the Applicant would only have been entitled to a notice payment. As a small business, the Respondent would not have been obliged to pay any severance pay. 13 Had Mr Sheehy, gone down this path of making the Applicant’s position redundant, noting the absence of an applicable Award or enterprise agreement that would have mandated consultation and the non-existent opportunity to redeploy the Applicant, the termination of employment would likely have been a genuine redundancy and the Applicant would have been excluded from the unfair dismissal jurisdiction.
Is the Commission satisfied that the dismissal of the Applicant was harsh, unjust or unreasonable?
[40] I have made findings in relation to each matter specified in s.387 as relevant.
[41] I must consider and give due weight to each as a fundamental element in determining whether the termination was harsh, unjust or unreasonable. 14
[42] Having considered each of the matters specified in s.387 of the FW Act, I am satisfied that the dismissal of the Applicant was unreasonable. This is because, although the parties had spent some time trying to negotiate a new pay structure without success, that does not mean that the employment had to end. There were alternatives. The Respondent could have continued the existing employment arrangement. If the Applicant did not like that, he could have resigned. The Respondent could have made the Applicant’s position redundant. Because it is a small business it need only have paid the Applicant notice. It could have affected the dismissal in a fair manner.
Conclusion about dismissal
[43] I am therefore satisfied that the Applicant was unfairly dismissed within the meaning of s.385 of the FW Act.
Remedy
[44] Being satisfied that the Applicant:
• made an application for an order granting a remedy under s.394;
• was a person protected from unfair dismissal; and
• was unfairly dismissed within the meaning of s.385 of the FW Act,
I may, subject to the FW Act, order the Applicant’s reinstatement, or the payment of compensation to the Applicant.
[45] Under s.390(3) of the FW Act, I must not order the payment of compensation to the Applicant unless:
(a) I am satisfied that reinstatement of the Applicant is inappropriate; and
(b) I consider an order for payment of compensation is appropriate in all the circumstances of the case.
Is reinstatement of the Applicant inappropriate?
[46] No party contended that the Applicant should be reinstated into his employment, although the Applicant said he would accept reinstatement if it was ordered. However, I note that the Respondent ceased to trade on 30 June 2018.
[47] Having regard to the matters referred to above, I consider that reinstatement is inappropriate. I will now consider whether a payment for compensation is appropriate in all the circumstances.
Is an order for payment of compensation appropriate in all the circumstances of the case?
[48] Having found that reinstatement is inappropriate, it does not automatically follow that a payment for compensation is appropriate. As noted by the Full Bench, “[t]he question whether to order a remedy in a case where a dismissal has been found to be unfair remains a discretionary one…” 15
[49] In all the circumstances, I consider that an order for payment of compensation is appropriate because of the unreasonableness of the dismissal. There were alternatives to dismissal available to the Respondent.
Compensation – what must be taken into account in determining an amount?
[50] Section 392(2) of the FW Act requires all of the circumstances of the case to be taken into account when determining an amount to be paid as compensation to the Applicant in lieu of reinstatement including:
(a) the effect of the order on the viability of the Respondent’s enterprise;
(b) the length of the Applicant’s service;
(c) the remuneration that the Applicant would have received, or would have been likely to receive, if the Applicant had not been dismissed;
(d) the efforts of the Applicant (if any) to mitigate the loss suffered by the Applicant because of the dismissal;
(e) the amount of any remuneration earned by the Applicant from employment or other work during the period between the dismissal and the making of the order for compensation;
(f) the amount of any income reasonably likely to be so earned by the Applicant during the period between the making of the order for compensation and the actual compensation; and
(g) any other matter that the Commission considers relevant.
[51] I consider all the circumstances of the case below.
Effect of the order on the viability of the Respondent’s enterprise
Submissions
[52] As part of its submissions filed 1 November 2019 the Applicant submitted that:
“…
6. From the financial statements provided by the respondent on 25 October 2019, there was no evidence of asset disposal in their balance sheet or tax return for the 17/18 financial year, which was the year the respondent claimed the transfers took place. There was no evidence in the financial statement of a reduction of debt.
7. The respondent financials and tax return shows high amount of equipment expenses including vehicle expenses.
8. We submit that the respondent transferred all its assets to AAA for no consideration and then claimed it all back as equipment hire expenses to hide their assets from creditors and inflate their expenses.
9. Even if there is debt owed to AAA, the respondent still chose to pay its debt in prejudice of the entitlements owed to the applicant. The respondent claimed that he offered the applicant $35,000 which was less than his entitlements on the basis that this was all he could afford but at the same time paid $41,818 out as a dividend (as disclosed in the tax return). Dividends are traditionally paid out of profits and section 254T requires that dividends only be paid if it does not prejudice creditors (such as the applicant). The dividend was paid anyway.
10. Mr Sheehy admits under cross examination that some of the equipment is still in the possession of AAA. Mr Sheehy claimed that no floor grinding business has been done since June 2018, with the exception of some contracts. Mr Sheehy confirmed that AAA is not in the floor grinding business and does not hire out floor grinding equipment.
11. The applicant questions the validity of Mr Sheehy’s claim and questions why either AAA or the respondent still has in its possession floor grinding equipment, including motor vehicle and a large trailer mounted power generator, over one year it has stop operating. We submit that the respondent still operating their business under their current name or new an undisclosed business name.
Cash paid out
12. Mr Sheehy claimed the respondent have no money to pay any creditor. The 17/18 financial statements of the respondent shows that he paid himself as a director’s wage of $78,439 and paid out a dividend of $41,818. Mr Sheehy claimed that it was money owed to a previous share holder of the respondent but usually dividends are not paid to creditors – rather creditors are paid by way of loan repayment. Mr Sheehy also never considered the money owed to the applicant. Mr Sheehy prioritised paying everyone else, including himself, and made sure there is no money left to pay the applicant’s entitlement that was owing.
13. The respondent is in breach of s.254T(1)(c) of the Corporations Act, where it states “A company must not pay a dividend unless the payment of the dividend does not materially prejudice the company's ability to pay its creditors”. The applicant is creditor and paying the dividend prejudice the company’s ability to pay the applicant as claimed by Mr Sheehy.
14. We also submit that the respondent has not paid the applicant’s wages for the last day he worked on 23 March 2018.
15. There is also a superannuation expense of $49,529. The applicant does not think this is mandated Employer Super Guarantee payments. Based on a 9.5% contribution rate, the respondent would have paid a base wage of $521,357.89. We submit that most of this payment is personal contribution to the Mr Sheehy’s super account to the benefit himself and or his wife.
16. The respondent made an offer of $35,000 to the applicant. The applicant rejected this offer, because this amount fell well short of what is owed to the applicant in terms unpaid overtime, loadings, notice period and redundancy.
17. The respondent offer is an offer to partially cover the applicant’s unpaid entitlements and is not related to and should not prejudice any unfair dismissal compensation owed to the applicant.
18. Bank statement transactions from 01/06/2018 to 17/06/2018 and 01/06/2019 to 17/06/2019 has not been provided despite the Commissioner’s orders. The transactions are also redacted which hide where the payments are being made to.”
Evidence
[53] The declining nature of the Respondent’s income was put into evidence by the Applicant and included that:
a) Income to 30 June 2016 was $612,279.04.
b) Income to 30 June 2017 was $415,079.08.
[54] The Respondent produced financial information to the Commission as follows:
To 30 June 2018 | To 30 June 2019 | |
Income | $378,408.00 16 | $0.00 |
Director income | $78,439 | $0.00 |
Other salaries | $76,010 | $0.00 |
Superannuation | $49,529 17 | $0.00 |
Profit | $0.00 18 | $0.00 |
Cash assets | $4,774 | $1,439 |
Receivables | $4,334 | $0.00 |
Total assets | $9,108 | $1,439 |
Liabilities | $9,106 | $1,437 |
Shareholder equity | $2 | $2 |
Cash at bank | $2,803.71 | $1,429.18 19 |
Findings
[55] I find that, having regard to the financial information produced to the Commission (which I accept 20), it is apparent that an award of compensation to the Applicant would cause the Respondent to the position where it is unable to satisfy the debt when it falls due. That may have some implications for Mr Sheehy as the Director of the Respondent. The Applicant will then be in a position where he could seek to have the Respondent wound up.
[56] However, noting the balance sheet, it would appear that there are inadequate assets that could be realised to satisfy an order of compensation. Notwithstanding, the Applicant presses an order for compensation be made in favour as against the Respondent.
[57] It might be that Mr Sheehy will put his hand in his own pocket to pay the amount of compensation awarded against the Respondent. However, that is not something I can compel him to do and it is entirely a matter for him.
[58] In circumstances where the Respondent has already ceased to trade an award of compensation will not further affect its ability to do so. For this reason I have decided that this consideration should not deter me from awarding compensation in favour of the Applicant.
Length of the Applicant’s service
[59] The Applicant’s length of service was 7 years. That length of service favours the determination of a greater amount of compensation.
Remuneration that the Applicant would have received, or would have been likely to receive, if the Applicant had not been dismissed
[60] As stated by a majority of the Full Court of the Federal Court, “[i]n determining the remuneration that the Applicant would have received, or would have been likely to receive… the Commission must address itself to the question whether, if the actual termination had not occurred, the employment would have been likely to continue, or would have been terminated at some time by another means. It is necessary for the Commission to make a finding of fact as to the likelihood of a further termination, in order to be able to assess the amount of remuneration the employee would have received, or would have been likely to receive, if there had not been the actual termination.” 21
Submissions
[61] The Applicant submitted that the Applicant’s employment would have been likely to continue for a further period of 3 years and the amount of remuneration that the Applicant would have received or would have been likely to receive during that period is $280,800 (being 52 x weekly rate of $1,800 = $93,600 per annum). Noting the application of the statutory cap on compensation, the Applicant contended that he should be compensated in the amount of six months remuneration being $46,800.
[62] The Respondent submitted that the Applicant’s employment would likely only have continued for a further period until it ceased to trade on 30 June 2018. This is a period of 14 weeks and 1 day (from the date of termination on 23 March 2018 – 30 June 2018). The amount of remuneration that the Applicant would have received or would have been likely to receive during that period is 14 weeks’ and 1 day’s pay = $24,457.14.
Evidence
[63] The evidence of Mr Sheehy was that the Respondent ceased to trade on 30 June 2019. He said,
“I had a couple of contracts there, your Honour, with people like Meyer and that, so I had to fulfil them because otherwise - there were penalty clauses, so I had to bring in outside contractors to do that work, which cost me more than I received for the job, but that’s the way business is.” 22
[64] Above I have made findings of fact about the financial documents produced to the Commission.
[65] As part of its submissions filed 1 November 2019 the Applicant submitted that:
“…
Stop trading due to down-turn in business.
21. During the last two years the applicant was employed, Mr Sheehy was physically working at Floor Grinding Services job sites at best 20% of the total hours.
22. It was admitted by Mr Sheehy that most job are handled by the applicant independently with very minimal supervision.
23. My Sheehy would spend most of the working days working with his wife at AAA where he is currently the operations manager. Prior to September 2018 My Sheehy was also a shareholder, director and secretary of AAA.
24. Despite claiming business down-turn in the respondent’s business, Mr Sheehy was still managed to pay himself a director’s wage of $78,439. This is a decent amount of wages considering the limited physical involvement Mr Sheehy have in the business. In comparison, the applicant who worked 100% of the time at job sites, with the exception of leave, is only being paid a base wage of $76,010 in the 2018 financial year.
25. It is very hard to believe Mr Sheehy shutting down the respondent’s business claiming business downturn where it can pay itself close to $80,000 in wages and can almost be considered as passive income.
26. Notwithstanding Mr Sheehy’s claim of business downturn, in the year leading to applicant’s termination, the applicant was still working full time at job sites. There would be odd days where there were no work to be done, but never there were three to four days in a row of down time. We question the respondent’s claim of a business down turn, where the applicant was consistently booked at job sites.
27. Mr Sheehy also admitted that the applicant made no threat to leave the employment had the negotiations with OCON fell through. The applicant was more than happy to carry on its work with the current pay structure. Had the applicant stayed employed with the respondent, he does not have any reason to leave and would most likely stayed employed with the respondent for years to come as shown in his employment history with the respondent. This would have allowed the business to continue in the merged form, which it could, given AAA now apparently has all the assets.”
28. Mr Sheehy admitted that after he terminated the applicant, that the respondent had to keep on working for a while due to outstanding contracts. He had to subcontract the jobs to others. Had the applicant had not been dismissed he would have been the one working on those jobs.
29. We question the real motive of the respondent in terminating the applicant. Mr Sheehy admits that there were no performance or conduct issues with the applicant and there were no threat made by the applicant that it would quit its job, yet, the respondent would rather terminate the applicant and use labour hire and subcontractors instead.
Findings
[66] I am satisfied that the Respondent ceased to trade on 30 June 2018. Mr Sheehy presented as a witness of truth. For a variety of personal and business reasons (including its diminishing earnings) 23 he lost interest in the business of the Respondent.
[67] Consequently, I find that the Applicant would have continued employment with the Respondent for a period of 14 weeks and 1 day after the date of dismissal (i.e. until the Respondent ceased to trade on 30 June 2018).
Efforts of the Applicant to mitigate the loss suffered by the Applicant because of the dismissal
[68] The Applicant must provide evidence that they have taken reasonable steps to minimise the impact of the dismissal. 24 What is reasonable depends on the circumstances of the case.25
[69] The Applicant submitted that he had taken reasonable steps to minimise the impact of the dismissal. He submitted that:
“The applicant went to look for work straight away after the dismissal and found a new job offer after five weeks of being unemployed. The applicant also sought to obtain the highest-paid that he could.” 26
[70] The Respondent did not submit that the Applicant had not taken reasonable steps to minimise the impact of the dismissal.
[71] I am satisfied that the Applicant took reasonable steps to mitigate his loss.
Amount of remuneration earned by the Applicant from employment or other work during the period between the dismissal and the making of the order for compensation
[72] The Applicant’s evidence is that in his new employment (commenced on 30 April 2018) he was being paid $30 per hour ($1,200 per week). That rate increased to $34 per hour from 29 August 2018 after the successful completion of a probation period.
[73] That evidence is not challenged by the Respondent.
[74] I am satisfied that the amount of remuneration earned by the Applicant from employment or other work during the period between the dismissal (23 March 2018) and 30 June 2018 (i.e. the date I have determined the employment would have ended when the Respondent ceased to trade) was:
a) 23 March 2018 – 30 April 2018 (5 weeks and 3 days) = $0.00.
b) 30 April 2018 – 30 June 2018 (8 weeks and 5 days) = $10,457.14.
Amount of income reasonably likely to be so earned by the Applicant during the period between the making of the order for compensation and the actual compensation
[75] This is not a relevant consideration in the present matter.
Other relevant matters
[76] There are no other relevant matters that I have considered in deciding the amount of compensation to award the Applicant.
Compensation – how is the amount to be calculated?
[77] As noted by the Full Bench, “[t]he well-established approach to the assessment of compensation under s.392 of the FW Act … is to apply the “Sprigg formula” derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul’s Licensed Festival Supermarket (Sprigg). 27 This approach was articulated in the context of the FW Act in Bowden v Ottrey Homes Cobram and District Retirement Villages28.”29
[78] The approach in Sprigg is as follows:
Step 1: Estimate the remuneration the Applicant would have received, or have been likely to have received, if the employer had not terminated the employment (remuneration lost).
Step 2: Deduct monies earned since termination.
Step 3: Discount the remaining amount for contingencies.
Step 4: Calculate the impact of taxation to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.
Step 1
[79] I have estimated the remuneration the Applicant would have received, or would have been likely to have received, if the Respondent had not terminated the employment to be $25,457.14 on the basis of my finding that the Applicant would likely have remained in employment for a further period of 14 weeks and 1 day. This estimate of how long the Applicant would have remained in employment is the “anticipated period of employment”. 30
Step 2
[80] I have found that the amount of remuneration earned by the Applicant from the date of dismissal to 30 June 2018 was $10,457.14.
[81] Only monies earned since termination for the anticipated period of employment are to be deducted. 31 I therefore deduct the sum of $10,457.14 from $25,457.14 = $15,000.
Step 3
[82] No submissions were made about the need to consider the impact of contingencies on the amounts likely to be earned by the Applicant for the remainder of the anticipated period of employment. 32
Step 4
[83] I have considered the impact of taxation but have elected to settle a gross amount of $15,000 and leave taxation for determination.
[84] However, I note that, in circumstances where the Applicant’s position was made redundant (i.e. he was not replaced) and the Respondent has ceased to trade, it seems that the termination payment could properly be treated as a redundancy payment. Noting further that, in the 2017/2018 financial year, the tax-free component of a genuine redundancy payment was a base amount of $10,155 and then a further $5,078 for each complete year of service, the $15,000 may be entirely tax free. The parties should seek their own independent taxation advice about the same.
[85] Having applied the formula in Sprigg, I am nevertheless required to ensure that “the level of compensation is an amount that is considered appropriate having regard to all the circumstances of the case,” 33 including my findings that the termination was unreasonable.
[86] I am satisfied that the amount of compensation that I have determined above takes into account all the circumstances of the case as required by s.392(2) of the FW Act.
Compensation – is the amount to be reduced on account of misconduct?
[87] I am satisfied that misconduct of the Applicant did not contribute to the employer’s decision to dismiss. Therefore the amount of the order for compensation is not to be reduced on account of misconduct.
Compensation – how does the compensation cap apply?
[88] Section 392(5) of the FW Act provides that the amount of compensation ordered by the Commission must not exceed the lesser of:
(a) the amount worked out under section 392(6); and
(b) half the amount of the high income threshold immediately before the dismissal.
[89] The amount worked out under section 392(6) is the total of the following amounts:
(a) the total amount of the remuneration:
(i) received by the Applicant; or
(ii) to which the Applicant 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 Applicant 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 Applicant for the period of leave in accordance with the regulations.
[90] The Applicant was not on leave without pay or without full pay during the 26 weeks immediately before the dismissal.
[91] There was no dispute and I find that the total amount of the remuneration received by the Applicant during the 26 weeks immediately before the dismissal was $46,800.
[92] The high income threshold immediately before the dismissal was $142,000. Half of that amount is $71,000.
[93] The amount of compensation ordered by the Commission must therefore not exceed $46,800.
[94] In light of the above, I will make an order that the Respondent pay $15,000 gross less taxation as required by law to the Applicant in lieu of reinstatement within 21 days of the date of this decision.
[95] An order [PR714281] to that effect will be issued with this decision.
COMMISSIONER
Printed by authority of the Commonwealth Government Printer
<PR714280>
Appearances:
Mr S Tirtadjaja for the Applicant.
Mr E Sheehy, for the Respondent.
Hearing details:
2019.
Sydney:
23 October
1 [2018] FWC 4065.
2 [2018] FWC 4065, para [7].
3 [2018] FWC 7675.
4 Transcript PN175-176.
5 Transcript PN352 - 353
6 Sayer v Melsteel Pty Ltd[2011] FWAFB 7498, [14]; Smith v Moore Paragon Australia Ltd PR915674 (AIRCFB, Ross VP, Lacy SDP, Simmonds C, 21 March 2002), [69].
7 Transcript PN356.
8 Transcript PN358.
9 Transcript PN357.
10 Chubb Security Australia Pty Ltd v Thomas Print S2679 (AIRCFB, McIntyre VP, Marsh SDP, Larkin C, 2 February 2000), [41]; Read v Cordon Square Child Care Centre [2013] FWCFB 762, [46]-[49].
11 Exhibit 5.
12 Transcript PN 383
13 Fair Work Act 2009, s.121.
14 ALH Group Pty Ltd t/a The Royal Exchange Hotel v Mulhall (2002) 117 IR 357, [51]. See also Smith v Moore Paragon Australia Ltd PR915674 (AIRCFB, Ross VP, Lacy SDP, Simmonds C, 21 March 2002), [92]; Edwards v Justice Giudice [1999] FCA 1836, [6]–[7].
15 Nguyen v Vietnamese Community in Australia t/a Vietnamese Community Ethnic School South Australia Chapter[2014] FWCFB 7198, [9].
16 $699 was gross interest. The balance of $377,709 was sales of services.
17 Likely around $41,000 to Mr Sheehy’s superannuation fund.
18 Expenses equalled income in the period. $26,915 was a motor vehicle expense. $41,818 was paid as a franked dividend (Mr Sheehy says to a former co-owner of the Respondent).
19 As at 17 July 2019.
20 The Applicant had every opportunity to interrogate the Respondent about its financial position. However, it served no Notices to Produce about the same. The documents produced to the Commission were as a result of orders being made by the Commission of its own motion. It is not enough for the Applicant to doubt the veracity of the Respondent’s financial position or the claim that it has ceased to trade, without bring before the Commission evidence about the same.
21 He v Lewin [2004] FCAFC 161, [58].
22 Transcript PN384.
23 See exhibit 2.
24 Biviano v Suji Kim Collection PR915963 (AIRCFB, Ross VP, O’Callaghan SDP, Foggo C, 28 March 2002), [34] citing Lockwood Security Products Pty Ltd v Sulocki and Ors PR908053 (AIRCFB, Giudice J, Lacy SDP, Blair C, 23 August 2001), [45].
25 Biviano v Suji Kim Collection PR915963 (AIRCFB, Ross VP, O’Callaghan SDP, Foggo C, 28 March 2002), [34] citing Payzu Ltd v Saunders [1919] 2 KB 581.
26 Exhibit 5.
27 (1998) 88 IR 21.
28 [2013] FWCFB 431.
29 Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries[2016] FWCFB 7206, [16].
30 Ellawala v Australian Postal Corporation Print S5109 (AIRCFB, Ross VP, Williams SDP, Gay C, 17 April 2000), [34].
31 Ibid.
32 Enhance Systems Pty Ltd v Cox PR910779 (AIRCFB, Williams SDP, Acton SDP, Gay C, 31 October 2001), [39].
33 Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries[2016] FWCFB 7206, [17].
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