Mrs Linda Harrison v McDonalds Flooring Accessories

[2016] FWC 1576

[2016] FWC 1576

FAIR WORK COMMISSION

DECISION

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

Mrs Linda Harrison
v
McDonalds Flooring Accessories
(U2015/10512)

SENIOR DEPUTY PRESIDENT RICHARDS BRISBANE, 10 MARCH 2016

Unfair dismissal application - operational circumstances - market conditions - change in supplier requirements - position no longer required - redundancy.

[1] This decision concerns an application by Ms Linda Harrison under s.394 of the Fair Work Act 2009 (“the Act”). Ms Harrison is seeking an unfair dismissal remedy in relation to the termination of her employment from McDonalds Flooring Accessories (“the employer “). The manager who effected the termination was Mr Brent McDonald.

[2] Ms Harrison claims to have commenced work for the employer on a casual basis in January 2012. Her duties included gluing sample cards for carpets. Ms Harrison also did carpet labelling, product wrapping and used a cutter to cut out drapes and other jobs as required.

[3] Ms Harrison claims to have been paid incorrectly over the course of her employment, and to have raised this with her employer intermittently over her employment.

[4] Ms Harrison claims that she commenced work as a full-time employee from 2 July 2014, performing 40 hours of work a week, until her dismissal on 21 August 2015.

[5] On that day, Ms Harrison contends that she received a phone call from Mr Brent McDonald.

[6] Ms Harrison reconstructed the conversation in the following manner in her witness statement:

I said:

“I missed a call from you”

Brent said:

“Mystic Isle cards”

and then said:

“there had been a mix-up with yarn”

I said:

“I don’t understand what you’re asking”

Brent said:

“I no longer have a job for you because of the yarn mix-up at Beaulieu”

I said:

“there were lots of cards to do at work”

Brent said:

“the cards are to be given to the two sewing ladies to do as he didn’t want to lose them”

I said:

“I am full-time not casual and could not be sacked this way”

Brent said:

“no you are a casual”

I said:

“I get all the entitlements that full-time staff get”

Brent said:

“my decision stands. I’ll ring you at the end of September if I have any work for you”

[7] Ms Harrison claims that she returned to the factory on 24 August 2015 and had a discussion with Mr Philip McDonald, who is the manager, about “being made redundant”.

[8] Again, through her witness statement, Ms Harrison recalled the following conversation:

“I am full-time and I can’t be sacked this way, it is unlawful and there is a procedure on how it needs to happen. I also asked if I could be redeployed within the factory to work”

Philip said:

“There is no work for you at this time. Or words similar to that”

[9] Ms Harrison claimed that the work she was doing in the factory was allocated to other staff members to complete and that she was informed, following the dismissal, that Mr Brent McDonald had employed a new employee, by the name of Rina Donald. Ms Harrison also claimed that some three months prior to Ms Harrison’s redundancy, the employer had hired another person by the name of “Krissy”, who appears to have performed duties as a factory hand.

[10] Ms Harrison agitated issues relevant to the appropriate payment of redundancy in her materials (though she held in her viva voce evidence that she was unfairly dismissed).

[11] Ms Harrison claimed that the circumstances “put an incredible financial strain on our family. It has also put a major strain on my relationship with my husband and my children. I now suffer from anxiety and have had numerous panic attacks this whole thing has had a major effect on my life. I have a casual position at the moment every day I go to work I’m terrified at the end of every day that I am going to be told we no longer need you to work for us.”

[12] Ms Harrison did not wish to be reinstated to her position as she believed her relationships were untenable (notwithstanding the affable exchanges between the parties at the hearing).

[13] Mr Brent McDonald gave evidence on behalf of the employer that he had informed staff generally in mid- 2015 that Beaulieu – the carpet manufacturer which provided 90% of the sampling work for the business - was changing its practices and this may impact upon the business. This was particularly so in respect of carpet sampling orders, in respect of which Beaulieu was seeking to reduce its demand. At that time, Mr McDonald was hopeful a new order with a different manufacturer in the future might offset the decline in Beaulieu-driven work. As it was, that new order did not come to pass for a much longer period than Mr McDonald had anticipated, and well after Ms Harrison’s dismissal, it would appear.

[14] Mr McDonald claimed that the business was also disrupted by Beaulieu having received from Europe, twofold yarn (Mystic Isle) that had been faulty, and that this yarn was required for five product lines, which included Ms Harrison’s work. Mr McDonald claimed that it would have taken several months for a new supply of yarn to have been shipped from the European suppliers.

[15] As a consequence, the turnover in the business had begun to decline sharply, with a 20% decline in sales between July and August 2015. Mr McDonald could foresee that his wages bill had to be adjusted to accommodate his diminishing turnover. As it was, Mr McDonald’s observations were well founded, it appears. This is because by January 2016 sales had dropped by some 80% since July 2015. The direct wages costs had been reduced in line with this decline in turnover – some 7 employees (including Ms Harrison) in the sampling line having been made redundant or not been replaced upon ceasing their employment.

[16] Mr McDonald claimed that the sales figures from September 2015 onwards were the lowest sales in 15 years of business.

[17] Given these circumstances, at least as they were at the time of the dismissal, Mr McDonald claimed that he informed Ms Harrison there was no work for her to do and that he had little choice but to “let her go”. He agreed with Ms Harrison’s comments above that he indicated that if the situation corrected itself he would contact her again at the end of September with “the potential of coming back” to work.

[18] Mr McDonald claimed that Ms Harrison was correct in saying that Ms Rina Donald had been employed in the business, but qualified Ms Harrison’s claims by indicating that Ms Donald had only been employed between 9 September 2015 and 30 September 2015. Ms Donald was employed, Mr McDonald claimed, to perform some ad hoc duties across the factory that had not been foreseen at the time of the Ms Harrison’s dismissal.

[19] Other than Ms Donald, Mr McDonald claimed that no other employee has been employed in the business to replace the seven employees referred to above.

[20] Mr McDonald claimed that he had made the decision to make Ms Harrison redundant with some difficulty, but that he was hoping to retain his longer serving staff (such as the sewing team, the members of which had been employed in the business for 18 years, and had a wide range of competencies, including in sampling).

Legislative context

[21] The employer’s business was not a small business under s.23 of the Act at the time of Ms Harrison’s dismissal. This was conceded by Mr McDonald, though he added his business was a small business of the requisite type currently. No issue arises for the purposes of s.385 of the Act as a consequence (in relation to the Small Business Fair Dismissal Code – s.388 of the Act).

[22] No issue arises under s.389 of the Act either. The manner of Ms Harrison’s dismissal did not accord with s.389(1)(b) of the Act. That is, few of the consultative provisions required under the Manufacturing and Associated Industries and Occupations Award 2010 (“the award”) were applied to Ms Harrison’s dismissal procedure. Clause 9 of the Award relevantly reads:

9.1 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 9.1(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 9.1(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.

[23] That all said, Mr McDonald’s business constitutes a national system employer and Ms Harrison is therefore a person protected from unfair dismissal for the Act’s purposes. Ms Harrison’s application is jurisdictionally competent.

[24] 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 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.

Consideration

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)

[25] Ms Harrison’s employment came to an end for reasons that her position was no longer required to be performed by anyone. This situation arose because of the downturn in business experienced by the employer (both changing supplier requirements and supply problems), which directly affected the duties performed by Ms Harrison.

[26] It is true that another employee (Ms Donald) was employed subsequent to Ms Harrison’s dismissal. However Mr McDonald’s explanation for that unanticipated circumstance was credible. An employer should not be constrained in responding to its future labour requirements by a decision taken at an earlier time when market or operational conditions were different.

[27] Ms Harrison complained that her duties were being performed by other employees in the factory - such as the sewing team - following her dismissal. This was evidence of a sham redundancy, it was suggested. That said, the arrangements in redundancy situations can be varied. An employer may reduce the number of positions in order to decrease its operational costs in a declining market, by distributing the duties across a smaller number of existing staff. In this case, Mr McDonald made a conscious decision to preserve particular skills in the interests of the business, by maintaining certain specific positions but dispensing with other positions (including that of Ms Harrison).

[28] Mr McDonald’s evidence was plainly given, and unadorned. He presented as a witness of truth, and did not seek even to disguise his limited efforts and capacity to properly explain himself to Ms Harrison, or to consult in a more comprehensive manner many did.

[29] 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.

[30] I found above that the decision to bring about the dismissal of Ms Harrison was because of an operational reason. This is not a matter relevant to s.387(a) of the Act. As a consequence, the circumstances bear in neutral terms upon the ultimate finding as to whether or not Ms Harrison was dismissed harshly, unjustly or unreasonably.

Whether the person was notified of that reason

[31] Given the circumstances referred to immediately above, Ms Harrison cannot be said to have been notified of the reason in respect of his capacity or conduct. Again, because Ms Harrison was dismissed because of an operational reason, the absence of notification in the terms of s.387(b) of the Act is a neutral consideration for purposes of my ultimate finding.

Whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person

[32] Once more, for the reasons referred to immediately above, the failure to be notified of the “reason” for the dismissal (which is a reason for the purposes of s.387(a) of the Act) is a neutral consideration as to whether or not the dismissal was harsh, unjust or unreasonable. This is because there is no valid reason for the dismissal, as the dismissal was for reasons unrelated to Ms Harrison’s’ capacity or conduct.

Any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal

[33] The employer did not unreasonably refuse to allow Ms Harrison to have a support person present to assist in any discussions relating to dismissal. This is a neutral matter in respect of whether or not the dismissal was harsh, unjust or unreasonable.

If the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal

[34] This is a neutral matter in respect of whether or not the dismissal was harsh, unjust or unreasonable, given the circumstances referred to above.

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

[35] The size of the employer’s enterprise was not expressly said to have played a role in respect of the procedures applied to the dismissal. But the business is a smaller business (and currently a small business for purposes of s.23 of the Act following the downsizing). It is reasonable to presume that the size of the business impacted upon the procedures followed in effecting the dismissal.

[36] The absence of dedicated human resource expertise is a relevant consideration in respect of the procedures effecting the dismissal. Mr McDonald did not have any relevant expertise and he had no relevant human resource expert at his disposal. These facts - disclosed in the hearing - reasonably assist in explaining the informal nature of the termination procedure.

Any other matters that the FWC considers relevant

[37] I have found earlier that I consider the reason for Ms Harrison’s dismissal to have been because of an operational reason - the enterprise in which Ms Harrison had been employed had suffered a significant drop in sales and a decline in orders from its principal client.

[38] Because of this, the employer’s reasons for the dismissal of Mr Carnes were sound, defensible and well founded.

[39] It may be the case that Ms Harrison was informed of this development in a relatively informal manner (by telephone conversation) and without any regard to procedural niceties. This is no doubt the result of the absence of human resource expertise in the business. I take into account that Mr McDonald conducts a business at the smaller end of the scale and he does not have any human resource expertise at his disposal.

[40] Even if I were to put this aside, in the end, no amount of procedural fairness would have altered the fundamental reality that the employer could no longer afford to carry Ms Harrison’s position in the rapidly deteriorating market in which the business operated. The gap between Mr McDonald’s direct wage costs (excluding overheads) and his sales was reducing markedly and Mr McDonald could reasonably foresee the commercial situation that was confronting his business. I have mentioned the causes of the situation above.

[41] I add that there does not appear to have been any practical basis on which to redeploy Ms Harrison – the extent of the downturn in the business was extreme and the employer was seeking to reduce labour costs, to reflect its diminished turnover. The issue before Mr McDonald was to reduce labour costs, not to maintain them at current levels (through re-deployment). In any event, Ms Harrison herself was not aware of any vacancies in the business or otherwise for which she was qualified.

Conclusion

[42] In these circumstances, I consider that Ms Harrison was dismissed from her employment for reasons that her position was no longer required to be carried out by any person. Ms Harrison was not dismissed for reasons that related to her capacity or conduct, and Mr McDonald spoke highly of her particular skills as an employee. Ms Harrison was dismissed because of compelling operational circumstances that made her position redundant.

[43] The parties are aware that relief in relation to matters of alleged underpayment, or redundancy, can be sourced other than by an application under section 394 of the Act.

SENIOR DEPUTY PRESIDENT

Appearances:

Ms Harrison for the Applicant

Mr McDonald for the Respondent

Hearing details:

10am

Wednesday 9 March 2016

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