Mr Brian Fletcher v Commodore Wreckers (Gold Coast) Pty Ltd T/A Commodore Wreckers
[2016] FWC 2225
•15 APRIL 2016
[2016] FWC 2225
The attached document replaces the document previously issued with the above code on 15 April 2016..
The Members name has been filled in at the top of the first page.
Brendan Pearce
Associate to Senior Deputy President Richards
18 April 2016
| [2016] FWC 2225 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Mr Brian Fletcher
v
Commodore Wreckers (Gold Coast) Pty Ltd T/A Commodore Wreckers
(U2015/15390)
SENIOR DEPUTY PRESIDENT RICHARDS | BRISBANE, 15 APRIL 2016 |
Unfair dismissal application – s.389 jurisdictional objection dismissed - non-compliance with consultation provisions in the award - consideration of the merits subject to section 387 - application dismissed – Long Service Leave - no ulterior motive - market conditions – small business
[1] This decision concerns an application by Mr Brian John Fletcher under section 394 of the Fair Work Act 2009 (“the Act”). Mr Fletcher is seeking an unfair dismissal remedy in relation to his dismissal from Commodore Wreckers Pty Ltd (“the Company”) for reasons of redundancy, which he alleges to have been falsely asserted. Mr Fletcher had been employed for a period approaching 7 years prior to his position being said to have been no longer required by the Company. Mr Fletcher maintained that his dismissal for redundancy was contrived for the purposes of allowing the Company to evade its obligation as it might be at a future point to discharge his pro rate Long Service Leave entitlement.
[2] The Company led evidence that the termination was a termination for the purposes of section 389 of the Act. I will deal with this matter further below following setting out the evidence from each side’s perspective.
Respective evidentiary claims
[3] Mr Fletcher’s position had been “on the front desk”, dealing with sales inquiries and administrative functions. The primary activity of the Company was mechanical servicing of motor vehicles, and for that purpose it employed six employees at the time of Mr Fletcher’s dismissal. Three employees (one of which was a Co-Director)) performed mechanical duties whilst three others (including Mr Fletcher) carried out administrative duties. The other two persons carrying out administrative duties were Mr Brian Rosenblatt, who was the Company’s Managing Director and Ms Sharon Rosenblatt, who was a Director of the Company.
[4] Mr Fletcher claims that he was informed of his redundancy on short notice after a long period of employment. That is to say, he attended a meeting on 27 November 2015 and was informed by Ms Sharon Rosemblatt, the Director, in his words, that: “work has been very quiet the last two weeks, I cannot afford you anymore. I’m going to have to let you go, effective immediately”.
[5] Mr Fletcher was paid five weeks in lieu of notice along with his outstanding entitlements (that there appear to have been an allegation that there was a miscalculation of hours in respect of those entitlements).
[6] Mr Fletcher claims that he was terminated just nine weeks short of seven years continual employment. Upon reaching seven years employment he believes he would have been due 6.0667 weeks Long Service Leave pro rata. That is, Mr Fletcher claimed that his employer had acted to terminate his employment in advance of it having to meet any legal entitlement for pro rata payment of his Long Service Leave, should it make him redundant at a later point in time.
[7] Ms Rosenblatt tendered in evidence the profit and loss statement for the Company for the financial years ending 30 June 2014 and 30 June 2015 as an annexure to her statement.
[8] Without disclosing all of the financial details of the Company, it is necessary to observe nonetheless that the small operating profit recorded in 30 June 2014 had been halved by 30 June 2015. That small operating profit for 2015 was a result of Ms Rosenblatt herself as Director reducing her modest annual gross income by almost 30%.
[9] By late October 2015 Ms Rosenblatt started to encounter cash flow difficulties in the business. She reports having found it difficult to meet business activity statement reporting and payment obligations, problems in meeting superannuation contributions, and significant invoices were outstanding.
[10] There had been no improvement in the Company’s finances and it became evident to Ms Rosenblatt that it would be necessary to make one the Company’s employees redundant.
Evidence led by the Company also was to the effect that Mr Fletcher was well aware of the Company’s financial position and the “downturn in business” and had discussed with at least one other employee the prospect that a redundancy would be necessary in the circumstances. Mr Fletcher agreed that he had made comment to another employee of the prospect of that person being made redundant but contended he did so out of humour and not as a prognostication about how the Company might address its financial issues.
[11] That said, Mr Fletcher did concede there were business cycles and the Company was in a slowdown, and that this had been on-going for about “six months”.
[12] Mr Fletcher was selected for redundancy because other employees of the business, according to Ms Rosenblatt, were involved in mechanical servicing and were critical to the on-going business. On the other hand, Mr Fletcher’s duties were capable of being absorbed by Mr Rosenblatt as Managing Director and Ms Rosenblatt herself, who also performed administrative related functions.
[13] Ms Rosenblatt’s unchallenged evidence was that she continued to perform Mr Fletcher’s prior duties and no new employee had been or would be employed to replace his position.
[14] Ms Rosenblatt gave evidence that there was no scope to redeploy Mr Fletcher elsewhere in the business. The business was a particularly small business and there were no other positions available at the time. Furthermore the business was attempting to reduce its labour costs not maintain them at the same or similar levels by redeployment.
[15] Ms Rosenblatt also gave evidence, which was tested in examination, that she was not aware whatsoever of Mr Fletcher’s Long Service Leave entitlements. Ms Rosenblatt led evidence that she had never had an employee who had approached their Long Service Leave entitlement previously and was of the view that the entitlement crystallised following 10 years of service. Ms Rosenblatt contended that she was unaware that there was a pro rata that could arise after seven years of service (let alone in what circumstances). Thus Ms Rosenblatt contended that she could not be said to have had an ulterior motive to terminate Mr Fletcher’s employment because she was unaware of the very issue Mr Fletcher agitates as being the source of her motivation.
[16] Ms Rosenblatt was also asked impromptu questions, by me, as to whether she had ever had any discussions with any other person about any Long Service Leave matters or Mr Fletcher’s Long Service Leave. She denied having done so.
[17] Evidence was also taken from Ms Sandra McSweeney, who looks after the wages system and performs the role of the Company’s Book Keeper and BAS Agent. Ms McSweeney was not present during my impromptu questions of Ms Rosenblatt. I enquired of her whether Ms Rosenblatt had ever discussed with her any issue regarding Long Service Leave or Mr Fletcher’s entitlements thereto. She affirmed that Ms Rosenblatt had never spoken to her about any Long Service Leave issues previously.
[18] I also enquired of Mr Fletcher whether he had ever raised any Long Service Leave issues with Ms Rosenblatt during the termination meeting or at any time prior. Mr Fletcher was candid in his response and indicated he had never had any discussion with Ms Rosenblatt about any such matters. Ms Rosenblatt could never have been said to have been put on alert to Mr Fletcher’s entitlements through this avenue.
Jurisdictional objection – s. 389 of the Act
[19] Section 389 of the Act provides as follows:
- 389 Meaning of genuine redundancy
A person’s dismissal was a case of genuine redundancy if:
(a) the person’s 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.
(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:
(a) the employer’s enterprise; or
(b) the enterprise of an associated entity of the employer.
[21] The Explanatory Memorandum to the Fair Work Bill 2008 provides some insight into the scope of meaning of a redundancy as contemplated under the Act:
- Clause 389 – Meaning of genuine redundancy
1546. This clause sets out what will and will not constitute a genuine redundancy. If a dismissal is a genuine redundancy it will not be an unfair dismissal.
1547. Paragraph 389(1)(a) provides that a person’s dismissal will be a case of genuine redundancy if his or her job was no longer required to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. Enterprise is defined in clause 12 to mean a business, activity, project or undertaking.
1548. The following are possible examples of a change in the operational requirements of an enterprise:
• a machine is now available to do the job performed by the employee;
• the employer’s business is experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five; or
• the employer is restructuring their business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore the person’s job no longer exists.
1549. It is intended that a dismissal will be a case of genuine redundancy even if the changes in the employer’s operational requirements relate only to a part of the employer’s enterprise, as this will still constitute a change to the employer’s enterprise.
1550. Paragraph 389(1)(b) provides that it will not be a case of genuine redundancy if an employer does not comply with any relevant obligation in a modern award or enterprise agreement to consult about the redundancy. This does not impose an absolute obligation on an employer to consult about the redundancy but requires the employer to fulfil obligations under an award or agreement if the dismissal is to be considered a genuine redundancy.
1551. Subclause 389(2) provides that a dismissal is not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise, or within the enterprise of an associated entity of the employer (as defined in clause 12).
1552. There may be many reasons why it would not be reasonable for a person to be redeployed. For instance, the employer could be a small business employer where there is no opportunity for redeployment or there may be no positions available for which the employee has suitable qualifications or experience.
1553. Whether a dismissal is a genuine redundancy does not go to the process for selecting individual employees for redundancy. However, if the reason a person is selected for redundancy is one of the prohibited reasons covered by the general protections in Part 3-1 then the person will be able to bring an action under that Part in relation to the dismissal. [...] [My emphasis]
[22] Section 389(1)(a) of the Act requires the employer to establish that the operational circumstances of the relevant business or enterprise was such that the position in question was no longer required to be performed by anyone.
[23] The evidence as set out above is led by Ms Rosenblatt was not seriously challenged under examination. The business had marginal operating profits over the 2014 and 2015 financial years and would have fallen into loss in 2015 but for the decision of Ms Rosenblatt to forego some 30% of her ordinary salary. On the evidence before me I am satisfied that Mr Fletcher himself appreciated the financial difficulties facing the business and new the market has slowed and that changes in the structure and operation of the business were imminent.
[24] Mr Fletcher was concerned by the loss of his emerging entitlement to Long Service Leave. But Ms Rosenblatt was unshaken on cross examination. She held that she had no knowledge of Mr Fletcher’s prospective entitlement to pro rata Long Service Leave and had never dealt with the matter of Long Service Leave at any time prior in her business dealings. Ms Fletcher’s knowledge of Long Service Leave was only that it was due after 10 years of continuous service and not before.
[25] Having heard the evidence, I am satisfied that this view was generally held by Ms Rosenblatt. The evidence of Mr Fletcher and Ms Rosenblatt, which I have set out above, presented no threat whatsoever to Ms Rosenblatt’s central claim.
[26] Thus, Ms Rosenblatt could not have been motivated by the ulterior motive - to avoid having to discharge Mr Fletcher’s Long Service Leave entitlement - when she made the decision to make Mr Fletcher’s position redundant.
[27] On all counts then, I am satisfied that the Company was exposed to a market downturn which reduced its profitability and required a change to the operating costs of the business. Given that there was some overlap in the three administrative positions and available capacity, Mr Fletcher’s position was selected for redundancy.
[28] The requirements of s.389(1)(a) of the Act are therefore made out.
[29] Section 389(1)(b) of the Act requires the employer to have given effect to the dismissal in accordance with the consultation provisions of the relevant award. The relevant award in this case is the Vehicle Manufacturing, Repair, Services and Retail Award 2010 (“the award”). The consultation provisions of the award are as follows:
- 8.1 Consultation regarding major workplace change
(a) Employer to notify
(i) Where an employer has made a definite decision to introduce major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the employer must notify the employees who may be affected by the proposed changes and their representatives, if any.
(ii) Significant effects include termination of employment; major changes in the composition, operation or size of the employer’s workforce or in the skills required; the elimination or diminution of job opportunities, promotion opportunities or job tenure; the alteration of hours of work; the need for retraining or transfer of employees to other work or locations; and the restructuring of jobs. Provided that where this award makes provision for alteration of any of these matters an alteration is deemed not to have significant effect.
(b) Employer to discuss change
(i) The employer must discuss with the employees affected and their representatives, if any, the introduction of the changes referred to in clause 8.1(a), the effects the changes are likely to have on employees and measures to avert or mitigate the adverse effects of such changes on employees and must give prompt consideration to matters raised by the employees and/or their representatives in relation to the changes.
(ii) The discussions must commence as early as practicable after a definite decision has been made by the employer to make the changes referred to in clause 8.1(a).
(iii) For the purposes of such discussion, the employer must provide in writing to the employees concerned and their representatives, if any, all relevant information about the changes including the nature of the changes proposed, the expected effects of the changes on employees and any other matters likely to affect employees provided that no employer is required to disclose confidential information the disclosure of which would be contrary to the employer’s interests.
[30] There is no evidence before me that the Company gave effect to the termination in accordance with the above prescriptive procedures. There was no discussion of the circumstances, Mr Fletcher’s views were not sought, and he was given no documented material that set out the circumstances facing the Company for the purposes of any discussions. Ms Rosenblatt readily conceded this in her evidence when I exposed her to the award requirements.
[31] Because the Company has not complied with the requirements of s.389(1)(b) of the Act, it does not have the defence against the claim by Mr Fletcher under s394 of the Act. Mr Fletcher’s application therefore must be heard on its merits, and the determination as to whether or not his dismissal was harsh unjust or unreasonable must be reached having regard to the requirements of section 387 of the Act. I note in this regard that the Small Business Fair Dismissal Code (see s.388 of the Act) has no application in the circumstances where the reason advanced for the dismissal is redundancy.
Legislative context
[32] Section 387 of the Act sets out the criteria for considering whether a dismissal was harsh, unjust or unreasonable. Section 387 is 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; 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.”
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)
[33] As set out above, Mr Fletcher’s employment was terminated for reasons that his position was no longer required to be performed by anyone. The evidence also demonstrates that the Company was not in a position to redeploy Mr Fletcher to an alternative position. As a consequence, Mr Fletcher was dismissed by his employer.
[34] The Full Bench in UES (Intl) Pty Ltd v Leevan Harvey [2012] FWAFB 5241 (Re: Harvey) indicated that a dismissal for operational reasons was not a dismissal related to an employee’s capacity or conduct.
[35] I found above that the decision to bring about the dismissal of Mr Fletcher was because of an operational reason. This is not a matter relevant to s.387 of the Act. As a consequence, the circumstances bear in neutral terms upon the ultimate finding as to whether or not Mr Fletcher was dismissed harshly, unjustly or unreasonably.
Whether the person was notified of that reason
[36] Mr Fletcher was not notified of a valid reason for his dismissal for reasons that his dismissal was for an operational reason unrelated to his conduct or performance. Thus this is a consideration that bears in neutral terms upon my ultimate finding.
Whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person
[37] Mr Fletcher was not dismissed for reasons of his capacity or conduct. As I found above, he was dismissed for operational reasons arising from the financial difficulties experienced by his employer. As a consequence, this matter is of neutral implication for my finding as to whether or not Mr Fletcher was harshly, unjustly or unreasonably dismissed.
Any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal
[38] No relevant circumstances arose of the kind contemplated by the subsection. Therefore this is a matter that does not bear in my considerations in any positive manner.
If the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal
[39] As mentioned above, Mr Fletcher was not dismissed for reasons of unsatisfactory performance (let alone for conduct or capacity). This matter therefore bears on my ultimate decision in neutral terms.
The degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
The degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal
[40] The size and absence of dedicated human resource expertise on any reasonable inference provides a strong indicator of the reason for the lack of procedural opportunities afforded Mr Fletcher in effecting the redundancy. The employer was a small mechanical servicing business employing some five employees at the time of the redundancy. It had no dedicated human resource expertise either. Ms Rosenblatt would ask her book keeper to seek advice from “Fair Work” from time to time when an issue arose. These are considerations which favour the employer in the global assessment I must ultimately make.
Any other matters that the FWC considers relevant
[41] The reason for Mr Fletcher’s dismissal was the operational circumstances which had affected the viability of the Company’s business. There was no opportunity for redeployment in the confined nature of the business which was seeking to reduce the costs of its operations.
The dismissal therefore was sound, reasonable and defensible.
[42] Mr Fletcher was concerned that the decision was taken with some urgency and he was paid five weeks in lieu of notice. Despite the matter of his dismissal having been discharged with such expedition, that does not signal that the dismissal itself was harsh unjust or unreasonable.
[43] Further to the reasons I have given above, I do not accept that Ms Rosenblatt acted for an ulterior purpose in dismissing Mr Fletcher. Ms Rosenblatt appeared to have been motivated singular by a desire to restore to the business a positive cash flow, albeit with marginal success.
Conclusion
[44] When all the circumstances are taken to account and the interests of both the employer and the employee are considered, I do not find that Mr Fletcher’s dismissal was harsh unjust or unreasonable. Though the circumstances are regrettable, and Mr Fletcher understandably feels that he was denied an opportunity to access his Long Service Leave with only seven weeks to go before he was entitled to pro rata payment, for the reasons I have given this has no bearing on the ultimate conclusion.
[45] Mr Fletcher’s application for an unfair dismissal remedy under s.394 of the Act is dismissed.
SENIOR DEPUTY PRESIDENT
Appearances:
Mr Fletcher for the Applicant
Ms Rosenblatt and Ms McSweeney for the Respondent
Hearing details:
10am 14 April 2016
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