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

[2013] FWC 2970

[2013] FWC 2970

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, 23 MAY 2013

Summary: whether dismissal remedy application competent - whether genuine redundancy - s.389 of the Act - Modern Award consultation provisions - very small business unlikely to comply with written requirements.

[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] The Respondent’s business concerns a small financial planning practice which employed some four employees and three contractors (on an intermittent basis).

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

[4] The Applicant states that her position included the following range of duties: office administration, client services; office systems and processes; reception duties, welcoming visitors; IT management; cataloguing and storage of business documents; preparing documents and presentations for meetings; human resources; some limited staff supervision; and liaison with external suppliers, subject matter experts, industry providers and other third parties. The Applicant held she was the Director of Client Services. The Respondent contended she was a Business Manager/Client Services Administrator, who carried out a range of (but not all) client services in a small enterprise, and was recruited in this (advertised) context.

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

[6] The Respondent contends, however, that the Applicant cannot be said to have been unfairly dismissed for the purposes of s.385(a) of the Act because the dismissal was a case of genuine redundancy for the purposes of section 389 of the Act. It is to this objection to the substantive application being heard on jurisdictional grounds that I will now turn.

[7] Section 389 of the Act reads as follows:

389 Meaning of genuine redundancy

(1) 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.

[8] The Explanatory Memorandum to the Fair Work Bill 2008 provides as follows in relation to s.389 of 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 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, 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 employees;



• 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 dismissal is not a case of genuine redundancy if it would have been reasonable in all 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.

[9] Section 389 of the Act requires several findings.

[10] At first instance the Commission must determine whether there was a redundancy situation, for purposes of section 389(1)(a) of the Act. Whether or not a redundancy situation exists for purposes of s.389(1)(a) of the Act requires the establishment of two related facts. The initial fact concerns whether certain operational circumstances were in existence that justified the action purported to be taken in relation to the position. The further fact that needs to be established is whether the employer no longer required the position or job to be performed by anyone (such that the position or job was not simply filled by another person) because of those operational circumstances.

[11] It is then necessary to determine whether the employer complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy (for purposes of s.389(1)(b) of the Act). In this case the obligation to consult arises under the Banking, Finance and Insurance Award 2010 (“the Modern Award”), and this was accepted on the Respondent's materials.

[12] Finally, it is necessary to determine whether it would have been reasonable in all the circumstances for the person dismissed to have been redeployed within the employer’s enterprise (s.389(2)(a) of the Act), or in the enterprise of an associated entity of that employer (s.389(2)(b) of the Act).

[13] The Applicant was dismissed following a meeting with the Respondent’s director, Mr Adrian Headon, conducted on 2 November 2012.

[14] In correspondence of the same date, the Respondent stated that “the business had experienced a significant downturn [...] Due to economic issues in the Australian economy and effects on Financial Planning as a whole.” The correspondence went on to state that proposed new revenue streams such as through new referrals had not come to fruition and that as a consequence it would not be possible to continue to fund the work performed by the Applicant in running systems and processes in the office.

[15] Later in the same correspondence, it was indicated that compliance expenses and a lack of new business had left the Respondent with no alternative but to make the Applicant’s position redundant.

[16] I have heard the parties in relation both to the jurisdictional objection cited above as well as in relation to the substantive matter (that being whether the dismissal was harsh unjust or unreasonable for the purposes of s.387 of the Act). This is because the factual matrix that is relevant to the jurisdictional and the substantive matter is overlapping to a considerable degree.

Jurisdictional consideration

[17] The Respondent contends consistent with s.387 of the Act that the Applicant’s employment was terminated on the basis that her job was no longer required to be performed by anyone because of changes in the operational requirements of the Respondent’s business (as stipulated at s.389(1)(a) of the Act). The Respondent contends further that it complied with its obligations to consult the Applicant about the redundancy for the purposes of s.389(1)(b) of the Act.

[18] The Respondent contends, consistent with s.389(2) of the Act that that it would not have been reasonable in the circumstances for it to have redeployed the Applicant within its enterprise or any enterprise which was an associated entity of the Respondent.

Was there a redundancy situation?

[19] The evidence led by the Applicant, to which I will refer relevantly below, was that she was aware that there were financial difficulties facing the Respondent’s business but that she had been given certain undertakings which comforted her in relation to her future employment. Moreover, she was made redundant some five weeks or so after Mr Brian Allen had been appointed (and had subsumed a range of her duties).

[20] In the former regard, Mr Adrian Headon had a conversation with the Applicant in October 2012 in which he informed the Applicant (so she claims) that her position was safe and stable within the business and that she was a vital member of the team, in fact considered to be part of the family. The Applicant claimed that Mr Headon said if the time came when the Respondent needed to put anyone off they would always make sure that the affected employee had found another position before that happened.

[21] Mr Headon’s own evidence was rather different than that. He claims he had informed the Applicant at the time (29 October 2012) that the business faced difficulties, and that he was closing a financial services arm – PPA – which he had only just established at some cost – as a consequence. Despite this, Mr Headon stated that he would use his contacts to find the Applicant another position in the event of redundancy. Mr Headon claims he informed the Applicant at that time that “no job is safe at the moment”.

[22] Mr Headon generally contends that his business had suffered a substantial downturn in activity which resulted in a decline in revenues. The Applicant’s position was declared redundant for reasons of cost savings, and as consequence Mr Headon claimed he was unable to “honour” his previous undertakings (which appears to be an unrelated claim as his only undertaking, if it can called that, was to do no more than to obtain alternative employment for a redundant employee).

[23] The Applicant’s own evidence periodically cited her awareness of the difficulties the Respondent faced financially from her own insights into the operation of the business.

[24] Some months prior to the Applicant being dismissed, the Applicant expressed concern that the new and existing business workflow had slowed and questioned the Respondent’s plans to engage another person (Mr Brian Allen) in various roles, including overseeing the general work of the office and client service work. The Applicant also stated that at a much earlier period and well prior to her dismissal she had alerted the Applicant to a “revenue hole” which would affect the business.

[25] Further, the Applicant understood that Mr Adrian Headon, the director, had cancelled a trip overseas because the numbers of client acquisitions were down and the costs could not be justified. There were also seemingly discussions of possibly disposing of part of the business (PPA). Further still, the Applicant was aware of a residential deal that had soured and which was emerging as a personal liability for Mr Headon.

[26] Despite the Applicant having such an awareness of the business circumstances of her employer over some time, she also claimed at other times that Mr Adrian Headon was upbeat about the business’s prospects, believing that the new client referral synergies would result in more work and that the current downturn would be reversed in three years time and that the business would be able to attract fee paying high net worth individuals.

[27] But these claims are not wholly inconsistent.

[28] 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.

[29] 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.

[30] 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).

[31] 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.

[32] According to Mr Headon he had few choices. Apart from himself there were only three other employees: his son, the Applicant and Mr Allen. I will return to this “choice”, and how it was effected below.

[33] The Applicant also expressed concern through her evidence as to the way in which her duties had changed with the appointment of Mr Allen, to whom reference has been made earlier.

[34] Mr Headon explained that he employed Mr Allen because he could no longer carry out technical client services work himself (as he was also establishing another financial advisory business arm (PPA)). A decision was therefore taken to employ Mr Allen and have him effectively subsume all the client services work, amongst other duties. It appears that Mr Allen on his evidence spent some considerable amount of time working with the “Para Planner” building the investment strategies provided in the financial plans recommended by Mr Headon.

[35] Mr Allen was to be paid at a (25%) higher rate than the Applicant for reasons of his apparent industry experience. Mr Allen’s role does not appear to have been exhaustively defined at the point of engagement. Mr Headon’s evidence was that Mr Allen not only had some years of industry experience, but that he was also RG 146 compliant. This means that Mr Allen was compliant with ASIC requirements for financial advisors to meet prescribed regulatory standards and was qualified, as a consequence, to give advice about financial products to retail clients when authorised. Mr Allen was therefore an employee qualified to undertake a particularly wide range of client service functions.

[36] Mr Allen was employed at a time before the PPA referral strategy and the property transaction, referred to above, had failed. While revenues were down, at this time Mr Headon remained somewhat buoyant that trading conditions would improve, no threat to the family trust revenue stream had arisen at that time, and the apartment referred to above was under a contract of sale (or at least not seen to be a personal liability). Mr Allen’s employment is therefore not counter-intuitive, as the Applicant claimed.

[37] The Applicant holds no relevant, formal qualifications of any kind and Mr Headon was of the view her role extended to no more than assisting in relation to client service matters and would otherwise be subject to instruction and supervision. She was not able to perform the technical end of the client services work.

[38] Up until the time of Mr Allen’s engagement, it appears that the Applicant had been pursuing work relating to updating and upgrading business workflow procedures as well as performing a client service role, amongst other roles. Mr Allen took over some of the client service role work previously performed by the Applicant. Upon Mr Allen’s appointment the Applicant became the administration manager proper, with what appears to be some emerging project manager roles in relation to information integration within the business and the rollout of various software programs. It is not abundantly clear how the office structure was to be defined, with there being some considerable scope for overlap in the duties of the Applicant and those of Mr Allen.

[39] I add that I do not see these circumstances as being suggestive that the Applicant was dismissed from her substantive position in which she was originally employed. Her remuneration did not decrease and she was not otherwise demoted such that the circumstances could be taken to have indicated the Respondent had repudiated her contract of employment by some unilateral action. The very wide range of the Applicant’s duties provided for some scope for modification and reallocation over time, and Mr Allen’s recruitment (as RG 146 qualified) triggered that rearrangement of duties.

[40] The evidence does not suggest that there was a nefarious intent afoot in this regard. Mr Headon’s conduct appears explicable (even though the Applicant holds that they were not in the Respondent’s best commercial and other interests).

[41] Further, while I know that the Applicant took umbrage at not being included in the management group meetings on a regular basis following the appointment of Mr Allen, not a great deal of material significance turns on this as an indicator in some fashion of a dismissal. The Respondent’s business was a particularly small business, and seems to have been driven by practicality and functionality rather than any particular regard to hierarchy. Indeed, in the small confines of the Respondent’s business informality seems to have been the keynote (though the Respondent may characterise that informality as mere confusion).

[42] The upshot of the Applicant’s argument about the circumstances is that if she had retained her client services functions she would have retained her position. As it was, the fact that her functions came to be focused on business practices and the rollout of the IT programme, perhaps amongst other non revenue creating activities, her position came to be redundant in the financial context in which the Respondent found itself.

[43] More specifically, with PPA closing down (as referred to above) there was no longer any requirement that the Applicant roll out the IT software and establish the processes for that business. There was no longer any commercial basis for continuing the Applicant’s employment. The various administrative duties that the Applicant performed were to be absorbed within the roles of the small number of other employees remaining.

[44] The Applicant therefore complained that had Mr Allen not been employed, she would have remained in employment.

[45] This is a speculative consideration. What matters only is that the position in which the Applicant was employed at the time was no longer required to be performed for the requisite reason, and that was the case here.

[46] The Applicant seemed to suggest, although it is not entirely clear, that Mr Matthew Headon might have been made redundant in her place. In this respect I can only observe that the reason for selection for redundancy is not relevant to a finding under s.389 of the Act. That is made clear at Item 1553 of the Explanatory Memorandum, which provides:

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.

[47] Mr Headon claims further that that there were no other positions within the business into which the Applicant could have been redeployed once her position was no longer required. Given the size of the Respondent’s business, this is entirely explicable. There were some four entities (including the Headon Family Trust) in the business group, and they employed no more than the workforce I have set out earlier. There is no likelihood of redeployment whatsoever.

[48] As I have already alluded to above, there is nothing in the evidence as led over these proceedings that suggested there was any plan or subterfuge afoot to dismiss the Applicant for any personal or performance or conduct-related reason. Nor is there any suggestion in the evidence that there were circumstances that demonstrate (for example in the post redundancy period) that the Applicant’s job was required, in fact. No new employees have been employed. Indeed, the Respondent appeared genuinely appreciative of the commitment the Applicant had given its business over the course of her employment.

[49] The changes in the Applicant’s duties appear to have occurred in an ad hoc manner with the Respondent engaging a person with industry experience and regulatory qualifications to perform particular retail functions. The Applicant’s duties retracted over the next month and her position (unfortunately) became unaffordable to the Respondent (in the context of the demise of PPA and the referral strategy, and the liability that arose in relation to the Melbourne apartment which impacted on the family trust cash flow). The consequence of these developments in hand with the very low revenues evident from the P&L Statement resulted in the dismissal of the Applicant on grounds of redundancy.

[50] The Applicant was not dismissed on a summary basis or for reasons of misconduct of a serious kind. The circumstances relevant to this matter are that the Applicant was made redundant for operational reasons relating to a business downturn. Various issues arise in relation to this finding (relating to the Small Business Fair Dismissal Code) and I make further expanded comment in this regard in my subsequent decision in [2013] FWC 2971.

[51] I mentioned above that in order to meet the requirements of s.387(1) of the Act it must be determined thata redundancy situation exists in that certain operational circumstances were in existence that justified the action purported to be taken in relation to the position. The further fact that needs to be established is whether the employer no longer required the position or job to be performed by any one (such that the position or job was not simply filled by another person) because of those operational circumstances.

[52] The circumstances facing the Applicant precisely satisfy these two findings.

[53] I make one further point. The Applicant seemed to presume that because her duties continued at least in part to be performed in the business after her dismissal that she could not have been made redundant as a consequence. Item 1548 of the Explanatory Memorandum to the Act provides as follows:

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 employees;



• 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. [My emphasis]

[54] A position may be made redundant but the tasks associated with that position may still need to be performed (albeit by someone else, or others).

[55] Having found as I have above, it is necessary now to determine whether the employer complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy (for purposes of s.389(1)(b) of the Act). In this case the obligation to consult arises under the Modern Award.

[56] It appears to me that the Applicant’s position was likely to be a Level 4 under the Modern Award, though it is not necessary for me (nor am I tasked) to make a finding in that regard. It is the consultation provisions of the Modern Award which are more to the point. Clause 8 of the Modern Award provides as follows:

8.0 Consultation regarding major workplace change

8.1 Employer to notify

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.

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.

8.2 Employer to discuss change

The employer must discuss with the employees affected and their representatives, if any, the introduction of the changes referred to in clause 8.1, 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.

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.

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.

[57] The Respondent contends it had adequate discussions with the Applicant about the emerging possibility of a redundancy, proposed that it would do whatever it could to obtain her alternative employment, but in the context of the size of the business and the nature of its financial problems, in the end it could do little but bring her employment to an end for reason of redundancy. This was communicated to the Applicant directly.

[58] While this might appear to be sufficient from a practical perspective in the circumstances (given that any additional process, reasonably, was unlikely to change the outcome), the statutory provisions require more.

[59] There is no evidence that the Respondent met the requirements of sub clause 8.2(c) of the Modern Award. The Respondent could take me to no document that demonstrates that it provided:

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.

[60] It would surprise me if many small businesses of the Respondent’s very small size, experiencing its financial circumstances and with no scope for redeployment (see below) would ever meet the Modern Award’s requirement to reduce “all relevant information about the changes” (bar confidential information) to writing for the purposes of holding a “discussion” with an employee about a (proposed) redundancy. The detailed, written process requirement which serves as a basis for a discussion (and not a dismissal) is likely to be overlooked in many instances (as was the case here), or else construed as being itself redundant process.

[61] But be that as it may, because the Respondent did not set down the relevant matters in writing, it cannot be found that it met the requirements of s.389(1)(b) of the Act, which mandate that:

(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.

[62] This is not an obligation that can be avoided in particular circumstances. This is made clear not just from the express provisions of s.389(1)(b) of the Act itself but from the Explanatory Memorandum:

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.

[63] It is only those employers to whom no modern award or enterprise agreement (containing a consultation obligation as above) applies that have no obligation to consult with an employee about a redundancy.

[64] The Respondent’s jurisdictional objection cannot be upheld for this reason.

[65] For reason of completeness, I reiterate my finding that the Respondent had met the requirements of s.389(2) of the Act, which requires as follows:

(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.

[66] There was no scope to redeploy the Applicant within the very small business, and the only entity likely to be an associated entity – PPA – was to be closed down.

Conclusion

[67] Because the Respondent had not met the requirements of s.389(1)(b) of the Act, its jurisdictional objection is dismissed. The Applicant’s substantive application under s.394 of the Act will now be determined. A further decision will be published shortly in this regard.

SENIOR DEPUTY PRESIDENT

Appearances:

Ms D. Tew, Applicant

Mr A. Headon, for the Respondent

Hearing details:

2012

17 May

Brisbane

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