Ms Deborah Tew v Viemist Pty Ltd T/A Headon Financial Planning

[2013] FWC 2971

[2013] FWC 2971

FAIR WORK COMMISSION

DECISION

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

Ms Deborah Tew
v
Viemist Pty Ltd T/A Headon Financial Planning
(U2012/15794)

SENIOR DEPUTY PRESIDENT RICHARDS BRISBANE, 24 MAY 2013

Summary: arbitration - whether harsh, unjust or unreasonable - reason for dismissal sound etc but not a valid reason for purposes of s.387(a) - Small Business Code no assistance in relation to redundancy - “valid reason” under s.387(a) as opposed to s.387(h) - differences between Code and s.387 - Small Business Code Fair Dismissal Checklist and s.389.

[1] This is an application under section 394 of the Fair Work Act 2009 (“the Act”) made by Ms Deborah Marie Tew (“the Applicant”), who seeks an unfair dismissal remedy following her dismissal by Viemist Pty Ltd T/A Headon Financial Planning (“the Respondent”).

[2] I have previously dealt with this matter in the context of the Respondent’s jurisdictional objection under s.389 of the Act. I dismissed that objection in my decision in [2013] FWA 2970 (“the prior decision”).

[3] This decision relates to the determination of the substantive application. It must be read wholly in the context of the findings made in the prior decision.

[4] The Respondent’s business concerns a small financial planning practice which employed some seven or so employees in a variety of modes of employment.

[5] The Applicant had been employed for a period of some 15 months.

[6] The Applicant states that her position comprised the following range of duties: office administration; client services; office systems and processes; reception duties; IT management; human resources; some limited staff supervision; and liaison with external suppliers, subject matter experts, industry providers and other third parties.

[7] The Applicant was dismissed on 2 November 2012. The application has been subject to an unsuccessful conciliation conference and some protracted proceedings in relation to orders to produce.

[8] In order to reach a finding as to whether or not the dismissal of the Applicant was harsh, unjust or unreasonable, the Act requires that certain matters be taken into account. Thus s.387 of the Act provides 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.

[9] I point out at the start that whilst the dismissal was a dismissal made by a small business (as the Respondent’s enterprise attracts the definition of s.23 of the Act), the Small Business Fair Dismissal Code (“the Code”) does not apply. The Code is set out by reference at s.388 of the Act, which provides as follows:

388 The Small Business Fair Dismissal Code

(1) The Minister may, by legislative instrument, declare a Small Business Fair Dismissal Code.

(2) A person’s dismissal was consistent with the Small Business Fair Dismissal 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.

[10] The Code as it is at this time provides as follows:

Summary dismissal

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.

Other dismissal

In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee's conduct or capacity to do the job.

The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.

The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee's response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer's job expectations.

Procedural matters

In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.

A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.

[11] The summary dismissal element of the Code does not apply to the current case as the Applicant was not dismissed because of some species of serious misconduct.

[12] The question then arises as to whether the dismissal was consistent with the process and findings relating to “Other Dismissals”. For these purposes, the Code stipulates that an employer, amongst other procedural steps, must have:

• informed the employee prior to the dismissal that the employee was at risk of being dismissed;



• a “valid reason” for the dismissal, which is based on the employee’s conduct or capacity to do the job;



• “warned” the employee that he or she risks being dismissed if there is no improvement; and



• provided the employee with an opportunity to respond to the warning and given the employee a reasonable chance to rectify the problem (depending on the employee’s response).

[13] Unlike s.387 of the Act, the Code makes no express reference to “performance” (only to “conduct” and “capacity”). This means that the Code only has application in relation to matters relevant to a valid reason, which relate to conduct and capacity. It is therefore about “conduct and capacity” that warnings must be given if no improvement is evident, but not about “performance” (though I note the Small Business Fair Dismissal Check List - referred to below - imports the notion of “performance” in addition to “conduct and capacity”).

[14] Further, and more importantly for current purposes - the Code provides no scope for an evaluation as to whether or not a dismissal is harsh, unjust or unreasonable having regard to all the circumstances.

[15] There are further differences between s.387(a) of the Act and the Code, however, but only in so far as s.387(a) of the Act has an extended meaning in relation to the effect of an employee’s capacity or conduct on the safety and welfare of other employees.

[16] Other than that difference, both s.387(a) of the Act and the Code require an employer to possess a valid reason for the dismissal of the employee, as mentioned above.

[17] That said, does a redundancy provide a valid reason for the dismissal under the Code?

[18] The Full Bench in UES (Int’l) Pty Ltd v Leevan Harvey (“Re: UES”) found that an employer who dismissed an employee for reasons of redundancy did not have a “valid reason” for the dismissal in relation to the employees conduct or capacity (even though in certain circumstances the selection of a particular person for redundancy may be an indicator of relative capacity, such as capacity to generate income, add value etc arising from skill levels and qualifications possessed).

[19] In any event, the Full Bench in Re: UES found as follows:

As we have already indicated, in our view the reasons for the dismissal of Mr Harvey by UES were not related to his capacity or conduct [...]. accordingly, there cannot have been and was not a valid reason for his dismissal related to his capacity or conduct [...]. in the circumstances of this case we regard it as a neutral matter with respect to our consideration as to whether Mr Harvey's dismissal was harsh, unjust or unreasonable. 1

[20] In my view the reference here to a “valid reason” in the Full Bench decision in Re: UES, which I am obliged to follow sitting as a single member, has application to a valid reason for purposes of the Code (despite the differences referred to above).

[21] In the Full Bench decision in Re: UES the majority expressed the view that where a dismissal was for reasons of redundancy it should be considered under s.387(h) of the Act, but then in the context of whether or not the dismissal was harsh, unjust or unreasonable:

Other matters (s.387(h))

As we have earlier indicated, there were sound, defensible and well-founded reasons for Mr Harvey’s dismissal, being that UES no longer required his job to be performed by anyone because of changes in the operational requirements of its enterprise and it was not reasonable in all the circumstances to relevantly redeploy him. We regard such valid reasons as matters relevant to our consideration as to whether Mr Harvey’s dismissal was harsh, unjust or unreasonable. They are matters telling against a conclusion that the dismissal was harsh, unjust or unreasonable. 2

[22] A “valid reason” (according to the Full Bench) for the dismissal can therefore exist for reason of redundancy in relation to a consideration of whether the dismissal was harsh, unjust or unreasonable, but it would not be a “valid reason” for the purposes of s.387(a) of the Act.

[23] As I have indicated above, the Code does not provide an opportunity to evaluate globally the circumstances of a particular case relating to a small business in relation to whether the dismissal was harsh, unjust or unreasonable. Therefore, while a small business may have dismissed an employee for reasons of redundancy, the Code has no application, or more correctly, cannot have application, and the dismissal must revert to consideration under s.387 of the Act proper.

[24] Again, this is because a redundancy cannot provide a valid reason for a dismissal under the Code (following the Full Bench in Re: UES), and the Code does not make provision for a dismissal to be evaluated in respect of whether it is harsh, unjust or unreasonable (as it was in the Full Bench in Re: UES).

[25] It follows that the Code provides no assistance to a small business which dismisses an employee for reason of redundancy.

[26] I am aware that a small business checklist has been promulgated by the Fair Work Ombudsman. That checklist makes reference to whether or not the dismissal was a redundancy. However, the exclusion from further consideration of redundancy as suggested in that checklist is only available when the redundancy (in effect) is in the terms of a ‘genuine redundancy’ for purposes of s.389 of the Act. This means that amongst other things the employer must have met its consultation requirements under the modern award (or enterprise agreement) by which it is covered.

[27] Thus, whether I apply the Code or have regard to the checklist as promulgated, a small business (for the purposes of s.23 of the Act) which has made one or more of its employees redundant must have that action as it has taken subject to a consideration as to whether the dismissal was harsh, unjust or unreasonable taking into account the full range of matters set out under s.387 of the Act.

[28] It is to that consideration that I now, by statutory necessity, must turn.

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)

[29] The Applicant was not dismissed for a reason relating to her capacity or conduct. The Applicant was dismissed for reason that her position was no longer required. I have found as such in the prior decision. My principal findings about the Respondent’s financial circumstances were as follows:

What the evidence suggests is that Mr Headon came to realise that his view of the economic climate was to prove incorrect and that the financial planning market that he envisaged and which he was designing the business processes to capture had simply not eventuated. In May 2012, it appears Mr Headon’s plans for PPA (the establishment funds for which were borrowed from a family trust) had not come to fruition. New business was not being generated as he had planned. In late October 2012, the referral strategy on which PPA’s business plan was based, collapsed completely when an individual instrumental to the business (for referral synergies) ceased to be contactable.

In early November 2012, as events transpired, Mr Headon had to meet the liability for the apartment sale in Melbourne when the contract for sale fell through. Mr Headon was thereafter required to meet the $355,000 as a personal liability. This liability was to be funded from capital from the family trust, the earned income from which had been directed to meet the operational expenses in the business. But prior to that time, and at an earlier point in the year (as will be discussed below) the apartment had been under a contract of sale.

At the time of the dismissal, Mr Headon was said to have conceded to the Applicant that it was not until such time as he had completed the BAS that he had realised how badly the business was positioned (though the Applicant contends that he should have known well before that report had been completed). The Profit and Loss Statement tended in the proceedings show a net profit of around $13,000.00 for the six month period July 2012-December 2012 (with $60,00.00 income distribution from Mr Headon’s family trust and not as a revenue).

Despite his various plans and strategies, the business was in very serious difficulty by late October 2012 and Mr Headon was looking for avenues to save $10,000 per month.

According to Mr Headon he had few choices. Apart from himself there were only three other employees: his son, the Applicant and Mr Allen.

[30] The Respondent did not have a reason for the dismissal relevant to s.387(a) of the Act. I have discussed this above. But the Respondent nonetheless had a reason for the dismissal that was soundly based and reasonable in the circumstances and that was that the Applicant’s position was no longer required as it was unaffordable in the Respondent’s financial circumstances. I will return to this matter below.

[31] I note that the Applicant possibly might be taken to be arguing, in effect, that her dismissal arose not at the time of her stated redundancy, but at an earlier point in time when her duties were unilaterally altered upon the direction of Mr Headon. I have dealt with this matter in the prior decision. It is sufficient to say at this point that the Applicant’s duties were wide ranging and the Respondent reasonably folded (at an earlier point) the customer services work into another position, where the incumbent held the necessary regulatory qualifications to carry out the full scope of retail advice. The Applicant’s duties were not so altered so as to constitute unilateral contractual repudiation (and her remuneration was unchanged).

[32] There is, in the event this amounted to an argument that was ever put forward by the Applicant, nothing bearing materially on the matter arising from these circumstances. I also add, as I commented in the prior decision, that the Applicant’s position would likely to have been made redundant at the time it was irrespective of the earlier change that took place in respect of her scope of duties. This is because the Applicant’s position remained principally an administrative position in character, and (amongst other things) given the collapse of the Respondent’s other business arm (PPA) her position was operationally and financially untenable.

whether the person was notified of that reason

[33] The Applicant was notified of the reason for the dismissal, but that reason was conveyed after such time as the dismissal decision had been reached and at the time the actual dismissal took effect. While there may have been a departure from the statutory requirements in a formal sense in this regard, the Applicant was on notice (if only from her own observations of the difficulties the Respondent was facing) that her employment status was not as secure as it might be.

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

[34] The decision to dismiss the Applicant for reason of redundancy was not subject to a discussion in which the Applicant was able to resist or challenge or pose alternative positions to her employer. This was because the circumstances were not such that there were ready alternatives, as there may be in a larger enterprise, and I discuss this below.

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

[35] No circumstances arise in this regard that require my consideration.

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

[36] The dismissal was unrelated to the Applicant’s performance of her duties and therefore no consideration of this statutory provision is warranted.

the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal

[37] The Respondent’s enterprise is very small, employing some four direct employees (and three other intermittent contractors.) Decision making was vested in those who have principal operational functions. The practices and procedures of the business were relatively informal when it came to human resources and there was little opportunity for investment in process in that regard, as there may be in larger enterprises.

[38] The size of the Respondent’s business impacted on the procedures followed in relation to the dismissal. It caused the Respondent to adopt a less process-rich approach to consultation and discussion (prior to the decision making taking effect) than perhaps ought to have been the case. The size of the business also caused the discussion to be truncated in respect of the wider exploration of alternatives and so forth with the Applicant. There were very few employees and no opportunities for redeployment.

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

[39] The Respondent has no human resource management skills to apply to the situation in which it found itself. I have explained the Respondent’s circumstances above. The absence of the relevant specialist or expertise affected the procedures making for the dismissal, and particularly so in regard to the observance of the consultation provisions of the Modern Award and otherwise.

any other matters that the FWC considers relevant

[40] While the Respondent did not dismiss the Applicant for reason of conduct, capacity or performance, it nonetheless had a sound, defensible and reasonable basis to the decision to dismiss the Applicant; and that was because her position was redundant. In this regard, the Respondent had a “valid reason” for the dismissal (for the same reasons as found by the Full Bench in Re: UES):

We regard such valid reasons as matters relevant to our consideration as to whether Mr Harvey's dismissal was harsh, unjust or unreasonable. They are matters telling against a conclusion that the dismissal was harsh, unjust or unreasonable.

[41] It appears to me that with that as its reason for the dismissal, the deficiency in the due quantum of consultation (which arises largely because of the Respondent’s size and absence of relevant HR expertise) would not have yielded any different outcome, nor would the provision of those opportunities have meant that the dismissal would have been delayed for any meaningful period of time (let alone one that ought to be compensable). The Respondent was a very small employer; it was financially stressed; and had no opportunities for redeployment: there would not have been a great deal more to discuss or put in writing.

[42] Therefore in my view, in the circumstances of this particular matter, the absence of consultation and the procedural defects relating to the dismissal are not telling in relation to whether or not the dismissal was harsh, unjust or unreasonable.

Conclusion

[43] The Respondent did not possess a valid reason for the dismissal in relation to the Applicant’s capacity or conduct (though this is of neutral effect in relation to the ultimate finding), and there were deficiencies in relation to its approach to communicating and discussing the redundancy. But these latter procedural deficiencies are explicable for reason of the Respondent’s circumstances. The Respondent was a small business with very limited resources and the redundancy was for genuine operational circumstances relating to the Respondent’s failing financial situation, which meant the reason for the dismissal, as I said above, was sound, defensible and reasonable.

[44] The dismissal, in the context of s.381 of the Act, therefore was neither harsh or unjust nor unreasonable.

[45] The application under s.394 of the Act itself is dismissed, as a consequence.

SENIOR DEPUTY PRESIDENT

Appearances:

Ms D. Tew, Applicant

Mr A. Headon, for the Respondent

Hearing details:

2012

17 May

Brisbane

 1   UES (Int’l) Pty Ltd v Leevan Harvey[2012] FWAFB 5241 at [42].

 2   UES (Int’l) Pty Ltd v Leevan Harvey[2012] FWAFB 5241 at [47].

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