Mr Frank FemiavPrima Pizza and Pasta

[2014] FWC 7816

[2014] FWC 7816

FAIR WORK COMMISSION

INTERIM DECISION

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

Mr Frank Femia
v
Prima Pizza and Pasta
(U2013/17374)

COMMISSIONER CLOGHAN PERTH, 1 DECEMBER 2014

Termination of employment - costs application.

[1] On 7 August 2014, I issued a Decision [2014] FWC 5293 and Order (PR553910) dismissing an application by Mr Frank Femia (Applicant) seeking a remedy for alleged unfair dismissal from his employment with Prime Pizza and Pasta (Employer).

[2] On 20 August 2014, the Employer made an application for costs. The “grounds” for seeking costs are, in summary form, as follows:

1. no reasonable prospect of success;
2. vexatious claim;
3. Applicant’s conduct of case; and
4. rejection of offer of settlement.

[3] On 18 September 2014, the Applicant provided a response to the application by the Employer for costs and the “grounds” set out in the application. In summary, the Applicant submits that he had not acted in a manner which renders him liable for costs pursuant to ss.376, 400A, 401, 611 or 780 of the Fair Work Act 2009 (FW Act).

[4] On 25 September 2014, I issued Directions in which the Employer was able to make further submissions in support of its application, the amount of costs sought and the particulars relating to those costs. The Applicant was able, and did, respond to those further submissions.

[5] The matter was set down for a hearing on 3 November 2014.

[6] On 2 November 2014, the Applicant requested that the application for costs be dealt with by written submissions. The Employer agreed and the hearing on 3 November 2014 was vacated.

[7] The Employer was represented by Mr Clifton of counsel. The Applicant was represented by Mr Jones, Agent.

[8] This is my decision and reasons for decision.

RELEVANT LEGISLATIVE FRAMEWORK

[9] Section 376 of the FW Act has no relevance for the purposes of this application.

[10] Section 400A of the FW Act is as follows:

“400A Costs orders against parties

(1) The FWC may make an order for costs against a party to a matter arising under this Part (the first party) for costs incurred by the other party to the matter if the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the matter.

(2) The FWC may make an order under subsection (1) only if the other party to the matter has applied for it in accordance with section 402.

(3) This section does not limit the FWC’s power to order costs under section 611.”

[11] I am satisfied that s.401 of the FW Act is not relevant for the purposes of this application.

[12] Section 611 of the FW Act is as follows:

“611 Costs

(1) A person must bear the person’s own costs in relation to a matter before the FWC.

(2) However, the FWC may order a person (the first person) to bear some or all of the costs of another person in relation to an application to the FWC if:

(a) the FWC is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or

(b) the FWC is satisfied that it should have been reasonably apparent to the first person that the first person’s application, or the first person’s response to the application, had no reasonable prospect of success.

Note: The FWC can also order costs under sections 376, 400A, 401 and 780.

(3) A person to whom an order for costs applies must not contravene a term of the order.”

[13] Section 780 of the FW Act has no relevance for the purposes of this application.

COSTS INCURRED BY THE EMPLOYER

[14] The actual costs incurred by the Employer are approximately $19 000.

[15] The costs sought by the Employer is $8 975. The costs are divided into: instructions; documents; letters; attendance at telephone conciliation and Commission conferences; attendance at arbitral hearing; and general care and conduct of client’s engagement.

CONSIDERATION

[16] The FW Act is generally described as a “no costs” jurisdiction. However, there are exceptions to the general rule.

[17] From 1 January 2013, the Fair Work Amendment Act 2012 provided the Commission, at s.400A of the FW Act, with the ability to order costs against a party (employee or employer) in unfair dismissal applications.

[18] The Fair Work Amendment Bill Explanatory Memorandum (Explanatory Memorandum) provides the following assistance with respect to s.400A of the FW Act commencing at paragraph 168:

“168. Item 4 inserts a new section 400A to enable the FWC to order costs against a party to an unfair dismissal matter (the first party) if it is satisfied that the first party caused the other party to the matter to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the matter.

169. As with the new power to dismiss applications under section 399A, the power to award costs under section 400A is not intended to prevent a party from robustly pursuing or defending an unfair dismissal claim. Rather, the power is intended to address the small proportion of litigants who pursue or defend unfair dismissal claims in an unreasonable manner. The power is only intended to apply where there is clear evidence of unreasonable conduct by the first party.

170. The FWC's power to award costs under this provision is discretionary and is only
exercisable where the first party (whether the applicant or respondent) causes the other party to incur costs because of an unreasonable act or omission. This is intended to capture a broad range of conduct, including a failure to discontinue an unfair dismissal application made under section 394 and a failure to agree to terms of settlement that could have led to the application being discontinued.

171. However, the power to award costs is only available if the FWC is satisfied that the act or omission by the first party was unreasonable. What is an unreasonable act or omission will depend on the particular circumstances but it is intended that the power only be exercised where there is clear evidence of unreasonable conduct by the first party.”

CONSIDERATION

[19] In his application, the Applicant claims the dismissal was unfair for a number of reasons. The relevant reasons are as follows:

“ the applicant has a history of seeking proper treatment as an employee and has consistently sought for his rights as an employee to be recognised through proper recording of his pay and conditions, proper treatment of penalty payments due, proper treatment of PAYE taxation and proper treatment of superannuation entitlements;

• the applicant’s treatment by the employer amounts to bullying and harassment; and



• the applicant argues that the real reason for his termination is the repeated claim for proper treatment as an employee.”

[20] The Employer objected to the application both on the grounds of jurisdiction and the substantive merits of the application. Despite its jurisdictional objections, the Employer agreed to participate in a conciliation conference.

[21] On 12 February 2014, a reminder was sent to the parties for the conciliation conference on 13 February 2014.

[22] At the conciliation conference before the Conciliator, the Applicant failed to attend and the conciliation could not proceed.

[23] Both parties indicated to the Conciliator its preference for the matter to proceed to conference before a Commissioner in the first instance.

[24] At the conference before myself on 20 March 2014, the Employer made a verbal offer to resolve the application in the same terms as the written offer made previously to the Applicant on 17 February 2014.

[25] The Employer’s correspondence of 17 February 2014 was in response to prior correspondence from the Applicant on 25 November 2013. At that time, the Applicant was seeking “$26 000 in respect of his claim for damages arising out of the unfair dismissal”. This amount was in addition to other amounts of money.

[26] The Applicant’s correspondence of 25 November 2013, in fuller form, is as follows:

“Our client instructs us that:

1. ...

2. his wage was $1,000.00 per week. $500.00 was paid in cash and $500.00 on the basis that he was a sub-contractor. In fact he was not a sub-contractor but an employee. Accordingly, you have engaged in sham contracting contrary to the provisions of the Fair Work Act 2009 No. 28, 2009 as amended (Fair Work Act).

3. ...

We attach email dated 18 November 2013 from our client’s accountants A C Morris & Co Chartered Accountants, PO Box 483, South Perth WA 6951 advising that our client’s annual leave entitlements amount to the sum of $11,112.60 and his superannuation entitlements to $11,030.00.

Furthermore, our client contends that the termination of his employment was harsh, unjust and unreasonable. Importantly, no verbal or written warnings were given to our client. Our Client’s primary remedy is re-instatement. However, our instructions are that the relationship between Mr Adrian Abate and our client has deteriorated to the extent that this would be impracticable. Our client claims damages in the sum of $26,000.00 as a consequence of his unfair dismissal.

...

On 12 October 2013 our client was involved in a work related incident resulting in an avulsion fracture of his left thumb. We attach copy of radiology report by Dr Steve Cartoon, Perth Radiological Clinic - Innaloo dated 31 October 2013. You were obliged to ensure that our client was covered under the Workers’ Compensation and Injury management Act 1981 but did not do so. Accordingly, our client holds you liable for the compensation that he is entitled to.

...

However, our client wishes to resolve this matter amicably and as quickly as possible.

Our client is prepared to resolve this matter on the following basis:

(a) you make payment to him of his annual leave and superannuation entitlements of $22,142.60;

(b) you make payment to him of the sum of $26,000.00 in respect of his claim for damages arising out of his unfair dismissal;
...”

[27] On 9 December 2013, the Employer responded to the Applicant’s correspondence of 25 November 2013. The Employer denied that the termination of employment was harsh, unjust or unreasonable and that Mr Femia was dismissed following “countless warnings and opportunities over a long period of time to rectify his [Mr Femia’s] behaviour”. The Employer relied, in the hearing, upon these grounds in successfully defending Mr Femia’s application.

[28] The relevant background and a summary of the respective submissions of the parties at the arbitral hearing can be found at paragraphs [10] to [17] of the Decision.

[29] On 26 October 2013, the Employer advised Mr Femia that his employment would cease on 23 November 2013.

[30] On 9 December 2013, the Employer’s lawyer sets out the circumstances leading to Mr Femia’s engagement with the Employer and denied that he was an employee and entitled to any unpaid leave or superannuation Further, and importantly:

“We are instructed that Mr Femia’s contract was terminated on 1 November 2013, following a number of incidents involving Mr Femia (detailed below [in the correspondence]) and our client gave Mr Femia 4 weeks’ notice.”

[31] The Employer details eight (8) incidents. As a consequence of the incidents, the Employer informs Mr Femia’s lawyers that he was given “repeated verbal warnings about his behaviour” and that “he risked being terminated if he did not improve his performance and rectify his behaviour in the workplace”.

[32] Mr Femia was informed that the Employer had an insurance policy for injuries occurring at the workplace for employees and contractors and invited Mr Femia to provide the relevant details of any worker’s compensation claim.

[33] I consider it reasonable to infer that on ceasing employment with the Employer, Mr Femia pursued an assertion that he was an employee by seeking annual leave and superannuation payments. However, it would appear also that the alleged unfair dismissal was being used as “leverage” in relation to payment for annual leave and superannuation.

[34] Mr Femia advised his lawyer that, at the time, his alleged dismissal was “harsh, unjust and unreasonable. However, and importantly, “no verbal or written warnings were given to our client”. While Mr Femia cannot be held accountable for the former assertion as the Applicant is not legally trained, he is accountable for instructing his lawyer that he did not receive any “verbal warnings”. That was simply not true as was demonstrated in the hearing.

[35] On 17 February 2014, the following without prejudice offer was put to Mr Femia.

“...for commercial reasons, our client is prepared to pay Mr Femia the sum of $15 000 (inclusive of costs, interest, tax, superannuation and any other entitlements) by way of full and final settlement of the matter.

The offer is conditional upon the parties entering into a deed of settlement with the usual commercial terms and Mr Femia providing an indemnity to our client in relation to the payment of tax.

...In the event that it is necessary, our client will seek its costs of defending the proceedings from Mr Femia and we intend to produce this letter as evidence on the issue of costs.” (my emphasis)

[36] It would appear that the intention of the Employer was to “wrap up” all employment matters in dispute, which included the alleged outstanding annual leave and superannuation entitlements. For this reason, I am unable to agree with the Employer’s Ground 4 as set out in paragraph [2] that the Applicant acted unreasonably in rejecting the Employer’s offer of $15 000 to settle the matter without the expense of a hearing.

[37] In the circumstances of this particular application, there is a distinction between the Employer’s offer to settle all employment matters, and a discrete offer to settle the alleged unfair dismissal component of the dispute between the parties. For this reason, I am not satisfied that the Applicant acted unreasonably in refusing an offer to settle “all matters”.

Applicant’s conduct in the hearing before the Commission

[38] Following the conciliation conference before me on 20 March 2014, the Employer withdrew its jurisdictional objection that Mr Femia was a contractor and not an employee. Consequently, Mr Femia’s alleged unfair dismissal “stood or fell” on the substantive merits of the circumstances of his application.

[39] The Applicant did not file a Statement of Facts with the Commission pursuant to the Directions issued on 28 March 2014.

[40] The Applicant’s witness statement consisted of 11 points. Ten of those points are two lines or less. The only paragraph of substance is an assertion that the dismissal was not consistent with the Small Business Fair Dismissal Code (Code). The essence of this paragraph is essentially a rejection that the various criterion in the Code were complied with by the Employer.

[41] As a written witness statement, it was hopeless and a “distant cousin” to being true and accurate as claimed by Mr Femia.

[42] The Applicant did not file any documentary material in support of his application.

[43] Finally, the Outline of Submissions was, in part, a “skeleton” of argument, and an attempt to introduce other evidence, irrelevancies, hearsay and opinion.

[44] The importance of complying with Directions is emphasised to all parties in correspondence from the Conciliator following unsuccessful conciliation.

[45] The parties were also provided with an explanation of the meaning of an “outline of submission” and “witness statement”. In this particular instance, Mr Femia’s witness statement was only remotely connected to “his knowledge and/or observations about relevant issues or events”.

[46] The Applicant’s failure to follow all the Commission’s Directions and adequately set out his case and witness evidence, is not something the Employer can rely upon. However, what Mr Femia stated in cross examination, can be relied upon. Mr Femia’s evidence was contradictory, unconcerned with, or a denial of the facts and generally lacked credibility.

[47] While Mr Femia may have had concerns regarding the status of his engagement with the Employer, in my view, the application alleging unfair dismissal was a misuse of the provisions of the FW Act to press home a claim that he was an employee; it was certainly not an allegation that stood on its merits as demonstrated by the material provided in accordance with the Directions and eventually the evidence during the hearing.

[48] Mr Femia embarked on a risky course of action not based on fact or evidence for an ulterior purpose. In my view, Mr Femia is one of those “small proportion of litigants who pursue...unfair dismissal claims in an unreasonable manner...where there is clear evidence of unreasonable conduct”. In doing so, the Applicant caused the Employer to incur costs.

CONCLUSION

[49] In conclusion, I am satisfied that the Applicant caused costs to be incurred by the Employer in this matter because of his unreasonable actions in how he conducted and continued with the matter. From the evidence, it was clear from the outset that Mr Femia had no reasonable prospects of success as asserted by the Employer.

[50] The ordinary meaning of vexatious is an action instituted without sufficient grounds for winning purely to cause trouble or annoyance to the other party. In my view, Mr Femia’s actions meet this ordinary meaning. I am satisfied that Mr Femia’s unfair dismissal application was a misuse of what he saw, as his armoury, in pursuing a claim that he was an employee.

[51] The materials provided prior to the hearing and Mr Femia’s conduct at the hearing very much demonstrate that “what’s done cannot be undone”. The facts relating to Mr Femia’s dismissal do not go away irrespective of whether he was trying to establish that he was an employee and not a contractor.

[52] Having arrived at this conclusion, it is necessary to determine at what point in time did the Applicant cause the Employer to incur additional and unnecessary costs.

[53] On 26 March 2014, the Employer’s representative withdrew its jurisdictional objection that the Applicant was not an employee. From that time onwards Mr Femia’s application would succeed or fail on the substantive merits. If, as I have concluded, on the evidence and Mr Femia’s conduct, that the unfair dismissal application was leverage designed to achieve the ulterior purpose of designating Mr Femia as an employee, this changed on 26 March 2014.

[54] Accordingly, pursuant to s.400A(1) of the FW Act, I am satisfied that the action of Mr Femia continuing his application after 26 March 2014, was unreasonable and caused costs to be incurred by the Employer as a consequence of that action.

[55] For the above reasons, I shall require the Employer to provide a schedule of costs incurred after 26 March 2014. Having received that material, I shall conduct a conference with the parties for the purpose of determining the appropriate order.

COMMISSIONER

Final written submissions:

Applicant: 2 November 2014.

Respondent: 9 October 2014.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR557358>