Mr Vadim Kouzmenko v Renown Business Solutions Pty Ltd

[2012] FWA 6784

[2012] FWA 6784

FAIR WORK AUSTRALIA

DECISION

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

Mr Vadim Kouzmenko
v
Renown Business Solutions Pty Ltd
(U2012/3912)

DEPUTY PRESIDENT SMITH MELBOURNE, 31 AUGUST 2012

INTRODUCTION

[1] By application dated 9 January 2012, Mr Vadim Kouzmenko sought relief in relation to the termination of his employment by Renown Business Solutions Pty Ltd (Renown).

[2] When the matter came on for hearing it was adjourned into conference in accordance with ss.389 and 399 of the Fair Work Act 2009 (the Act). I discussed with the parties the most appropriate way to deal with the matter. The conference canvassed all the matters and possible areas of agreement but regrettably a solution was not possible and it was considered that a hearing would be the most effective and efficient way to resolve the matter.

[3] As a preliminary matter, Renown sought to argue that it employed 15 or fewer employees at the relevant time, being 30 December 2011. In a separate matter before the Tribunal, Jones C. considered a submission by Renown that it was a small business as defined in s.23 of the Act. 1 In Commissioner Jones’ interim decision in that matter, she found that Renown employed 15 employees at the relevant time and was, consequently, not a small business.2

[4] Given that the factual position was identical to that considered by Jones C, I see no reason why I should depart from her conclusion and I respectfully adopt it in this matter. It follows that Renown is not a small business and therefore the exclusion set out in s.121(1)(b) of the Act does not apply to the termination of Mr Kouzmenko’s employment.

[5] Mr Kouzmenko and Mr Colin Walker both appeared in person. Mr Kouzmenko represented himself and Mr Walker represented Renown.

BACKGROUND

[6] Mr Kouzmenko was employed by Renown from 12 November 2007 and the main responsibilities of his role related to the development of a project called ‘Empower’. He worked on this project with one other colleague, Mr Dennis Chee. (Mr Chee was the applicant in the matter before Jones C.)

[7] During a general staff meeting in September 2011, Renown informed its staff, including Mr Kouzmenko that it was facing a negative revenue forecast and that if the situation did not improve, some cost saving measures would be implemented.

[8] Mr Kouzmenko was on paid paternity leave and annual leave from 11 October 2011 until 31 October 2011. When Mr Kouzmenko returned from leave on 2 November 2011, he and Mr Chee attended a meeting with one of the directors of Renown at the time, Mr Garon Line.

[9] During this meeting, Mr Line advised the two staff members of his intention to sell his shares in Renown and to resign as an employee and a director. Mr Line also provided details about his plan to buy the intellectual property rights to the Empower project. Mr Line explained that he was going to set up a new company, Emportals Pty Ltd (Emportals), and that Renown had granted permission for him to interview and employ Mr Kouzmenko and Mr Chee so that they could continue their work on the Empower project.

[10] In early November 2011, there were further discussions between Mr Kouzmenko and Mr Line about the structure of the new company and Mr Kouzmenko expressed his interest in the proposition that he work for Emportals. However, he wished to continue to be employed by Renown until there was some clarity around the cessation of his employment and his accrued benefits from that employment.

[11] The copyright and other intellectual property rights for the Empower project were assigned from Renown to Emportals in accordance with a Deed of Copyright Assignment dated 16 December 2011.

[12] It was the evidence of Mr Walker that Renown continued to employ Mr Kouzmenko until on or around 21 December 2011 to allow Mr Line time to have Emportals registered and to set up a payroll system for the new company. Mr Walker argued that Mr Line had agreed to reimburse Renown the salary of Mr Kouzmenko for the applicable 7 week period between early November to 21 December and that he provided office space where Mr Kouzmenko, Mr Chee and Mr Line could work on the Empower project.

[13] Mr Kouzmenko worked from Renown’s Moorabbin office on 21 December 2011 and from home between 23 and 29 December 2011. When he returned to the office on 30 December 2011, Mr Kouzmenko discovered a letter dated 21 December 2011. The letter set out the breakdown of his termination entitlements and contained his final payslip from Renown. Mr Kouzmenko queried the contents of the letter with Mr Walker, who confirmed that his employment with Renown had ceased.

[14] On 30 December 2011 Mr Kouzmenko requested a formal notice of termination, which he received in a letter of the same date. The second letter stated that the termination of Mr Kouzmenko’s employment with Renown was effective from 30 December 2011. Mr Kouzmenko alleged that the termination was unfair because he was not given reasons.

[15] On 6 January 2012 Mr Kouzmenko and his colleague Mr Chee had a meeting with both Mr Walker and Mr Line to clarify the status of their entitlements arising from their respective periods of employment with Renown. It was during this conversation that Mr Walker explained that their employment was not terminated but instead transferred to Emportals. Mr Walker’s position was repeated in an explanatory letter to Mr Kouzmenko dated 9 January 2012, which states, inter alia:

“...there was a commercial transaction that was completed which was, part of the Renown company was sold to the Emportals Company, which included the transfer of Staff members, Dennis Chee and Vadim Kouzmenko.

So you have not been retrenched from Renown, however like all business transactions of this nature, when a Company Division is sold, the Staff form part of that transaction. You have not lost your job, however you have a new owner of the software that you have developed over the last 3 years, and you will be paid and have been paid, by that new company.”

[16] On 10 January 2012, Mr Kouzmenko wrote to Renown advising that he had rejected the offer of employment with Emportals because, in his words:

“...the terms and conditions of the new employment are less favourable than at Renown Business Solutions. In particular I believe that by accepting the transfer of employment offer I would lose the following employment entitlements that I currently have at Renown Business Solutions”.

[17] The entitlements identified by Mr Kouzmenko went to the question of continuity of employment as a lack of such continuity may have affected his rights to redundancy, long service leave and a minimum period of notice of termination of his employment with Emportals. It was also Mr Kouzmenko’s evidence that the offer of employment with Emportals did not provide him with adequate job security.

[18] On 11 January 2012, Mr Kouzmenko attended for work at Renown’s office. He had a meeting with Mr Walker to discuss the prospect of reinstatement and he was assigned several tasks. At around 4:00 p.m. that afternoon, he was provided with a letter from Mr Walker which stated, inter alia, that the letter constituted an offer to:

“...re-instate Mr Kouzmenko as a full-time employee on the same terms and conditions prior to 21^st December 2011”.

[19] There was one important difference to the previous arrangements and that was that Mr Kouzmenko had been working from home for two days per week and this did not form part of the offer of reinstatement. Mr Kouzmenko argued that it was not a genuine offer of reinstatement for two main reasons. The first reason was that the offer did not include working from home and the second reason was that he did not have the relevant qualifications or experience in developing the product for which he was going to be responsible. He had only worked on the Empower Project and the skills were different.

[20] On 12 January 2012 Mr Kouzmenko was unwell; he obtained a medical certificate.

[21] On 16 January 2012 Mr Line sent to Mr Walker an email setting out the proposed terms of his departure from Renown and the engagement of Mr Kouzmenko and Mr Chee as employees of Emportals (the Termination Offer). Mr Line sought a response to the Termination Offer by 4:00 p.m. that day and expressed that if he did not receive a response that he intended to take legal action.

[22] In Mr Walker’s response to Mr Line on 18 January 2012 he agreed to the terms of the Termination Offer, including provision 1.5 of the Termination Offer which stated that:

“Vadim and Denis will be released from Employment from Renown immediately and free to seek and engage in other employment with any other employer including Emportals. They would not be required to work a notice period.

[23] On 19 January 2012, Renown began paying accrued but untaken annual leave to Mr Kouzmenko in instalments.

[24] These are largely uncontested facts.

[25] There is a difference of view as to whether or not there was a transfer of business from Renown to Emportals because it took over the work that was previously done by Mr Kouzmenko. This transfer of business was not tested but Mr Kouzmenko believed that his accrued benefits such as long service leave and the possibility of redundancy had not been transferred to Emportals. This was the reason he declined to take up the offer of employment.

[26] Despite this, he did take up employment with Emportals. On his evidence, this occurred on 30 December 2011. It is the evidence of Mr Kouzmenko that he needed to do so, in order to support his young family.

[27] It was also the evidence of Mr Kouzmenko that he earned more than he did when employed by Renown.

THE ISSUES

[28] Renown believed that it had the capacity to transfer employees to Emportals because that company took over the Empower Project on which both Mr Kouzmenko and Mr Chee had been employed. Emportals did not share this view and advised Mr Kouzmenko and Mr Chee that they would start as new employees. This concerned Mr Kouzmenko as he believed that he was entitled to redundancy pay and that he would lose service associated with Long Service Leave. In addition, he would lose the protection of the Act as he would become a new employee subject to a minimum period of employment.

[29] In many ways this is a commercial dispute as well.

[30] However, as the background discloses, Mr Kouzmenko did commence employment with Emportals immediately.

THE LEGISLATIVE FRAMEWORK AND CONCLUSIONS

[31] To begin, Renown did not argue that Mr Kouzmenko was not a person protected from unfair dismissal and it is appropriate that I find that Mr Kouzmenko is a person so protected.

[32] Whilst it was not argued, it is still nonetheless important to consider whether or not there was a genuine redundancy in accordance with s.389 of the Act. As Renown offered to reinstate (as will be discussed later ) Mr Kouzmenko, it cannot be argued that the employer no longer wanted the persons job to be performed by anyone.

[33] I now turn to whether or not the termination of employment was harsh, unjust or unreasonable. Section 387 directs the considerations necessary for this purpose.

Section 387 Criteria for considering harshness etc.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, FWA 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 FWA considers relevant.

[34] I will deal with each of these statutory considerations. Firstly, was there a valid reason related to the capacity or conduct? Given that this was a redundancy which excised a complete function from Renown and there were no relative performance issues which might have been relevant to a selection process for redundancy, the termination of employment did not relate to capacity or conduct.

[35] It follows that s.387(b) and (c) have no relevance. As to s.387(d), no issue was raised. There was no issue as to unsatisfactory performance and therefore s.387(e) has no work to do in this case. Section 387(f) and (g) are relevant in that whilst not a small business as defined by the Act, nevertheless its size and the lack of good advice is a relevant factor.

[36] I turn now to consider s.387(h).

[37] The kernel of this matter relates to the concern of Mr Kouzmenko that he did not receive a redundancy payment and that he could not take with him his service from Renown. The purported “transfer” of Mr Kouzmenko did not equate to the commercial arrangement with Emportals. When this transfer was rejected by Mr Kouzmenko, Renown offered immediate reinstatement. Mr Kouzmenko rejected this for two reasons; he could no longer work from home and he lost accruals associated with service.

[38] I find the termination of Mr Kouzmenko to be harsh. I do so because it is harsh to purport to transfer someone’s employment and use that as the basis of the termination of employment. 3 An employee is not a tradable commodity. The harshness is particularly evident by the fact that no commercial arrangement was made with Emportals to cover any accrued benefits.

[39] I now turn to remedy and in this connection ss.390, 391 and 392 are to be followed.

[40] To begin, I find that reinstatement is inappropriate. Mr Kouzmenko did not seek such a remedy and he is employed by Emportals. Therefore, consideration must be given to compensation. In this connection, two facts are relevant. They are:

● Renown offered reinstatement on the same terms and conditions with effect from the date of termination and with the maintenance of all accrued entitlements.

● Mr Kouzmenko was employed at all relevant times. Either by Renown or Emportals.

● Mr Kouzmenko enjoyed a higher salary at Emportals than he did at Renown.

[41] Firstly, there is no issue raised as to the viability of the enterprise and the length of service of Mr Kouzmenko was four years.

[42] As to the other criteria contained in s.392 there has been no relevant loss. In relation to his new employment, long service leave and redundancy payments are contingent liabilities which may never eventuate. Mr Kouzmenko could not have been said to have any break in employment and he is earning a higher salary. True it is that the new employment does carry a minimum period of employment, but Mr Kouzmenko was offered reinstatement which would have overcome that issue.

[43] I do not accept his reasons for refusing that employment. Firstly, the employer is entitled to review working from home arrangements to ensure that the operational requirements of the business are satisfied and that the decision is reasonable in all the circumstances. Nothing has been put which would give rise to a conclusion that the new working arrangements sought were unreasonable other than them being a change from what was previously experienced. Renown provided reasons for the proposed change. Secondly, the different technology on which Mr Kouzmenko would be asked to work. If the employer was prepared to offer training without any diminution is salary then this does not amount to a good reason for refusing a position. I understand the concern of Mr Kouzmenko but there wasn’t sufficient evidence for me to form the view that he was being set up to fail and therefore suffer a termination of employment for not carrying out the inherent requirements of the job.

[44] I have considered the loss of a redundancy payment to which Mr Kouzmenko believed was an entitlement. Given the commercial approach taken by Renown I can understand the argument that a redundancy payment should have been made at the time. However the offer of reinstatement appeared to be genuine. The statutory definition led to my earlier finding, but there is little doubt that Renown sought to avoid a redundancy payment by “transferring” employees without making the necessary commercial arrangements which would normally attend a transfer of business. It is not the role of the Tribunal to enforce entitlements be they against Renown or Emportals; that is a matter for a court of competent jurisdiction.

[45] I decline to make any orders.

DEPUTY PRESIDENT

Appearances:

V. Kouzmenko on his own behalf.

C. Walker on behalf of the Respondent.

Hearing details:

2012.
Melbourne:
August, 9.

 1   U2012/3911

 2   [2012] FWA 5137

 3   Letter to Mr Kouzmenko dated 9 January 2009

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