[2020] FWC 5048

FAIR WORK COMMISSION

DECISION

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

Ms Jing (Michelle) Mu
v
YES International Pty Ltd ATF YUAN Family Trust
(U2020/236)

COMMISSIONER SPENCER

BRISBANE, 18 SEPTEMBER 2020

Application for an unfair dismissal remedy – jurisdictional objection – genuine redundancy – downturn in business – role no longer required – disputed consultation – no suitable redeployment – application dismissed.

Introduction

[1] An application pursuant to s.394 of the Fair Work Act 2009 (the Act) was made by Ms Jing (Michelle) Mu (the Applicant), alleging that the termination of her employment from YES International Pty Ltd ATF YUAN Family Trust (the Respondent/the Employer) was harsh, unjust or unreasonable.

[2] The Respondent raised a jurisdictional objection to the application, stating that the dismissal was a case of genuine redundancy pursuant to s.389 of the Act. This decision deals with that jurisdictional matter.

[3] The Applicant had argued that the dismissal was not a case of genuine redundancy. Directions were issued for the filing of submissions and evidence and the matter was subject to a Determinative Conference. Further sets of Directions were required for submissions to satisfy the relevant legislative provisions.

[4] The Applicant was represented by Mr Wayne Hampton, Director of Hampton Law and the Respondent was represented by Ms Helen Stevenson, Human Resources Consultant for The HR People. Both representatives were granted permission to appear pursuant to s.596 of the Act.

BACKGROUND

[5] The Applicant was employed as a consultant with the Respondent’s business for more than 3 years when, the Respondent submitted, her position was made redundant. Prior to her dismissal, the Applicant was employed as the senior consultant for onshore, offshore (China-based) and sub-agent clients.

[6] There was no dispute as to whether the Applicant was a person protected from unfair dismissal under s.382 of the Act. The Applicant earned less than the high-income threshold and had worked the minimum employment period required.

[7] The Applicant was provided with the following redundancy:

“Private and confidential

Termination of your employment by reason of redundancy

Dear Jing MU:

The purpose of this letter is to confirm the outcome of a recent review by YES International Pty Ltd ATF Yuan Family Trust (the employer) of its operational requirements, and what this means for you.

As a result of business market drop and plan for one branch closing, your position is no longer needed. Regrettably this means your employment will terminate. This decision is not a reflection on your performance.

Based on your length of service, your notice period is THREE weeks.

Therefore, your employment will end on 10th January 2020. In lieu of receiving that notice, you will be paid the sum of $2,355.00 after tax ($2,850 before tax). You don't need to attend the workplace in the notice period, however, you are required to cooperating with us for any client's progress and update during normal business hours.

You will also be paid your accrued entitlements and any outstanding pay up to and including your last day of employment. This includes the balance of your unused annual leave, superannuation, referral commission and bonus if any.

You may seek information about minimum terms and conditions of employment from the Fair Work Ombudsman. If you wish to contact them you can call 13 13 94 or visit their website at

You should contact Centrelink to find out how long you have to wait to receive any applicable benefits. The best way to do this is to lodge a claim for payment.

We thank you for your valuable contribution during your employment with us.

Please contact me if you wish to obtain a reference in the future.

Sincerely yours,

Yun (Mary) Wang

Director”

[8] Whilst not all of the submissions and evidence are referred to in this decision, all of such have been considered.

RELEVANT LEGISLATION

[9] s.394 of the Act sets out:

“394 Application for unfair dismissal remedy

(1) A person who has been dismissed may apply to the FWC for an order under Division 4 granting a remedy.

Note 1: Division 4 sets out when the FWC may order a remedy for unfair dismissal.

Note 2: For application fees, see section 395.

Note 3: Part 6 1 may prevent an application being made under this Part in relation to a dismissal if an application or complaint has been made in relation to the dismissal other than under this Part.

(2) The application must be made:

(a) within 21 days after the dismissal took effect; or

(b) within such further period as the FWC allows under subsection (3).

(3) The FWC may allow a further period for the application to be made by a person under subsection (1) if the FWC is satisfied that there are exceptional circumstances, taking into account:

(a) the reason for the delay; and

(b) whether the person first became aware of the dismissal after it had taken effect; and

(d) prejudice to the employer (including prejudice caused by the delay); and

(e) the merits of the application; and

(f) fairness as between the person and other persons in a similar position.”

[10] Further, ss.385, 386 and 387 provide as follows:

“385 What is an unfair dismissal

A person has been unfairly dismissed if the FWC is satisfied that:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(d) the dismissal was not a case of genuine redundancy.

Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.”

[11] Relevantly, s.389 of the Act provides:

“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.”

[12] S.47 of the Act sets out when a Modern Award applies to an employer, employee, organisation or outworker entity, stating:

“When a modern award applies to an employee, employer, organisation or outworker entity

(1) A modern award applies to an employee, employer, organisation or outworker entity if:

(a) the modern award covers the employee, employer, organisation or outworker entity; and

(b) the modern award is in operation; and

(c) no other provision of this Act provides, or has the effect, that the modern award does not apply to the employee, employer, organisation or outworker entity.

Note 1: Section 57 provides that a modern award does not apply to an employee (or to an employer, or an employee organisation, in relation to the employee) in relation to particular employment at a time when an enterprise agreement applies to the employee in relation to that employment.

Note 2: In a modern award, coverage of an outworker entity must be expressed to relate only to outworker terms: see subsection 143(4).

Modern awards do not apply to high income employees

(2) However, a modern award does not apply to an employee (or to an employer, or an employee organisation, in relation to the employee) at a time when the employee is a high income employee.

Modern awards apply to employees in relation to particular employment

(3) A reference in this Act to a modern award applying to an employee is a reference to the award applying to the employee in relation to particular employment.”

SUMMARY OF THE RESPONDENT’S SUBMISSIONS AND EVIDENCE

[13] In accordance with s.389(1)(a) of the Act, the employer submitted this was a case of genuine redundancy as they no longer required the Applicant's job to be performed by anyone, because of changes in the operational requirements of the Respondent’s enterprise.

[14] The Respondent submitted that their business specialises in student recruitment and operates as an education agency, which includes marketing to students, ensuring that students’ plan requirements are met, finalising their educational enrolment and settling the required visas. The employer had offices in Brisbane CBD and Sunnybank Hills. The Respondent stated that they were in the process of shutting down the CBD office which was consistent with the Applicant’s job being made redundant.

Section 389 (1) (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

[15] The Respondent submitted that the business had experienced a significant downturn in business and as a result, substantial cost saving measures had to be implemented, including the closure of the CBD office and making the Applicant’s position redundant.

[16] The Respondent submitted an email, sent on 19 December 2019 to the Centre Manager, where the CBD office was located, requesting that a meeting be scheduled to discuss closing down and terminating the Respondent’s tenancy with the Centre. The Respondent argued that this demonstrated that there was a downturn in the performance of the business and that the company was needing to restructure and consider options to cut costs.

[17] The Respondent also provided photographs of the CBD office, showing the office cleared out. The Respondent submitted that these photographs were taken on 1 March 2020.

[18] The Respondent provided further email correspondence between Ms Wang, Director of the Respondent company and Mr Alan Simms, Commercial Property Manager for the CBD office site. Ms Wang emailed Mr Simms on 25 February 2020, stating:

‘Hi, Colleagues

I hope this finds you well!

As per notice to Alan, our tenancy will finish by Feb 2020, won’t continue in March 2020. Here I made electricity payment for 2020 Feb.

Thank you!

Mary WANG’

[19] Mr Simms responded to Ms Wang on 25 February 2020, stating:

‘Hi Mary,

We have made the adjustment over the tenancy terminating your occupation by 29/02/20.

Currently you have a nil balance however there will be an electricity amount plus the final read from 1st March.

I will advise you of this amount.

Thanks and regards,

Alan Simms

Commercial Property Manager’

[20] The Respondent submitted an email that was sent to all of their clients and contacts advising that the CBD office had closed, and that the Sunnybank Hills office would remain in operation. This email (with contact details removed) stated:

‘Dear Valued Partners:

Greeting from YES International! I hope my email finds you are all well!

Due the business restructure, our City office will be ceased for services by Feb 2020. The business will fully remove to Sunnybank Hills branch, our team will continue to conduct all our professional services and endeavour to work more closer with our institutes for student recruitment.

Please kindly update our contact details as below:

Office Address: [redacted] Sunnybank Hills QLD 4109

[contact details redacted]

YES international appreciates your support and help throughout the years and we are looking forward the prosperous achievement in future!

Thank you!

Mary WANG’

[21] The Respondent stated that there had been a number of reasons for the steady downturn of their business and in their industry, that supported why they could no longer operate the CBD Office. The Respondent submitted that when they first opened their CBD Office in 2009, the servicing of students required them to present face to face to sign documentation and conduct in person interviews. However, with improved technology such as signing and scanning, signing apps and face-time, the need for clients to physically come to the office has significantly reduced. There had also been a significant increase in competitors and no increase in demand, which has led to less business for the Respondent.

[22] At the end of 2018, Ms Wang stated that she met with the company’s long-term accountant Mr Zhiheng (Jerry) Zhao, at Leader Accountancy. A signed statement was provided from Mr Zhao confirming the meeting and the discussions regarding the business’ annual losses and recommendations to close an office and make necessary cutbacks. It is noted that the Applicant did not work out of the CBD office, she worked at the Sunnybank Hills office. It was also recognised by the Respondent that the closure of one office, didn’t mean the staff of that office were to be made redundant. However, Ms Wang noted that she had worked out of the CBD office, along with her Assistant, and therefore a restructure of staffing was required with the closure.

[23] At the beginning of 2019, Ms Wang submitted that she and her business partner, Mr Marvin Yuan, Director, discussed (at their 2019 Director’s meeting) the 3 staff members employed by the business. Records showed that the Applicant consistently had the least amount of cases, compared to the other staff. It was considered that this was due to a number of factors; including her lack of knowledge in other areas of the industry, customer service and communication, ability to work efficiently, document preparation, and statement writing. The Respondent submitted that the Applicant’s position was the least profitable of the business, and one that needed to be improved or made redundant.

[24] The Respondent submitted that at the time of the Applicant’s redundancy, the company records confirmed that the Applicant had only 7 active cases. All staff had been required to present their current workload prior to the 2019 Christmas holidays. The Respondent submitted that by way of comparison, the part time staff member Maria, who worked from the same office, had 64 active cases. The Respondent submitted that Maria was also unable to pass any of these cases onto the Applicant, as her knowledge and training was lacking in the areas required for the completion of these jobs and she had refused to be trained in these other areas of the business. The Respondent stated that the Applicant did not have the capacity to work completely independently and still required Management to oversee all her work. The Applicant refuted these submissions.

[25] Ms Wang stated that she was hopeful that throughout 2019, things would improve in the business and the CBD office would be able to stay open and that no redundancies would need to take place. However, this did not occur, and the decision was made, that the Applicant’s job was no longer required.

S.389 (1)(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

[26] The Respondent submitted that a number of meetings were held with the Applicant in relation to the redundancy. The Respondent submitted that the redundancy process was delayed as long as possible, as the Respondent didn’t want to have to make the Applicant’s job redundant. It was submitted that these discussions dated back to the 13th February 2019, where a discussion was held with the Applicant, regarding a downturn in business which was based on a number of factors. During this discussion Ms Wang set out that the Applicant’s job could potentially be made redundant in the future, if business didn’t improve.

[27] The Respondent stated that another meeting was held on the 8th May 2019, as it had become increasingly evident that there was not enough work to keep the Applicant busy in her position with the company. At this meeting the Respondent stated that the Applicant was offered training in other areas of the business and stated that they even offered for her to do this training around her schedule, as she had family commitments with school drop offs etc. The Respondent submitted that the Applicant made it clear that she didn’t want to be trained in another area of the business and wanted to see if things picked up in her current position instead. It was submitted that the company decided to hold off and see what was to come for the business and hoped for improvement.

[28] The Respondent submitted that a further meeting was held on 31st July 2019, where Ms Wang once again brought up a need for further training, as things did not appear to be picking up in the Applicant’s department and it was indicated that the business wouldn’t be able to sustain keeping her employed in her role. The Respondent stated that the Applicant continued to be resistant to this course of action and stated that she would rather work part time instead. This arrangement was not suitable to the Respondent. The Applicant had planned leave coming up in September, so the company held off plans for redundancy.

[29] In September 2019 a meeting was held, after the Applicant had returned from a lengthy holiday. At this meeting, Ms Wang stated she would soon have to make the Applicant redundant, as the company could no longer afford to keep her on as an employee and there was still not enough work coming in.

[30] On the 20th December 2019, Ms Wang held a meeting with the Applicant and told her that the Respondent would be going ahead with the redundancy and issued her the redundancy letter.

[31] The Respondent submitted that, given the prior discussions, the Applicant was fully expecting the decision, as it had been discussed numerous times throughout the year and in the weeks leading up to the final meeting. Ms Wang recalled that the Applicant looked quite relieved and then said “I have been working in Australia for 6 years and feel tired. My son is going to high school, he actually will have more activities and events for parents to pick up and drop off. My Dad has passed away and I really need more time to now accompany my Mum in China and bring her back to Australia.”

[32] Ms Wang then told the Applicant that, to assist her, the Respondent was happy for her not to work her notice period and the company would pay her instead so she could enjoy her Christmas break and start preparation for her future, as per the plans she had mentioned. The Respondent submitted that the meeting then ended on very good terms.

SUMMARY OF THE APPLICANT’S SUBMISSIONS AND EVIDENCE

[33] The Applicant submitted that the Respondent’s business facilitates the placement of foreign students into educational institutions in Australia. The Applicant stated that she was the only consultant working full-time for the Respondent during her employment. Further stating that she was the most senior and experienced consultant and held the position of lead consultant when the owner was on leave, or out of the office, for business or personal reasons. The Applicant submitted that there was no other consultant capable of managing the range and complexity of the cases that she managed.

Section 389 (1) (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

[34] Ms Wang’s redundancy letter stated that the Applicant’s position was no longer required, however, it was agreed that there were only three staff members in the company apart from her, and that the Applicant submitted that she was the only one, who dealt with offshore (China) and onshore clients. The Applicant also dealt with sub-agents. One other staff member was responsible for administration only, as she did not have the required qualifications and experience to consult with clients. The remaining staff member only dealt with sub-agents and does not work on Fridays. That employee was pregnant and was due to take maternity leave within the next 6 months. On Fridays, the Applicant was the only staff member to deal with offshore and onshore clients plus sub-agents, as the pregnant staff member did not work.

[35] The Applicant submitted that the letter also stated that the Applicant’s redundancy was a result of the “business market drop”, yet there was no evidence presented, no meetings, discussions or communication of any kind that demonstrates this. The Applicant submitted that Ms Wang was able to travel overseas on three occasions in 2019 and planned to travel overseas a further two times in 2020; the first occasion being on 17^th January. The Applicant further submitted that whenever Ms Wang had travelled overseas, the Applicant was responsible for handling all of her cases.

[36] The Applicant stated that when she took Wednesday, 18 December 2019 off work, and another staff member was given some of the Applicant’s cases to work on, however she was unable to complete them. These cases were left for the Applicant to complete, and the Applicant argued that this indicated that, there was still a need for her skills and experience in the company.

[37] The Applicant felt that the redundancy was unfair, unreasonable, harsh and vindictive, and a case of payback due to a discussion that occurred on Monday, 16 December 2019. The Applicant stated she had attempted to resolve the misunderstanding she considered occurred that day, by requesting a meeting on Thursday, 19 December 2019. This is set out below.

[38] The Applicant stated that there had been no changes to the operational requirements of the Respondent, as it still operated in the same manner it always had, with the same requirement for constant communication and consultation with clients, in the same manner as in previous years.The Applicant submitted that the Respondent could not offer the same range of services to their clients without the presence of a Registered Qualified Education Agent Consultant with the experience and skillset, that the Applicant possessed.

S.389 (1)(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

[39] The Applicant stated that she received no prior warning or counselling before the redundancy letter was issued. She stated that at the time of issuing the letter, Ms Wang did not say anything at all except to tell the Applicant to read the letter.

[40] On Monday, 16 December 2019, Ms Wang started a group chat via the messaging application ‘Wechat’. All company staff members were involved in the group chat and were able to see all communications from all other members. Ms Wang started the chat for the purpose of confirming work and holiday schedules for all of the staff. The Applicant was already scheduled to take leave from Monday, 23 December 2019, and to return to work on 2 January 2020. All other staff were due to return to work on 6 January 2020, and company communications informed all clients that offices would re-open on 6 January 2020.

[41] During the group conversation, Ms Wang stated to the Applicant that on returning to work on 2 January 2020, she should check any e-mails and then conduct a major clean of the Sunnybank Hills office. The Applicant asked if it was possible to clean up, before starting her leave so that she could take extra days off and also return to work on 6 January 2020 with the rest of the staff. The Applicant submitted that Ms Wang responded in an aggressive manner and among other things, stated that “anyone could have a long rest if they want, there’s no need to come back to work”. She also stated that “if anyone feels this work isn’t suitable, quit early” and that “if business continues like this, we will be cutting staff so whoever wants to leave, leave early”. The Applicant felt that this comment was a threat directed at her. She replied that she only wanted to discuss the matter, that returning on the 2January 2020 was fine, and apologized for causing any misunderstanding. Ms Wang further stated that the Applicant “couldn’t just stay in the office and do nothing but still get paid”.

[42] The Applicant submitted that she felt upset and stressed by this conversation and subsequently took Wednesday, 18 December 2019 off work. The Applicant did not mention that it was for stress, as she feared further anger from Ms Wang, instead she told her that her son wasn’t feeling well. Ms Wang did not respond to this message. This was the first time Ms Wang had not replied to this type of message. On Thursday, 19 December 2019, the Applicant messaged Ms Wang via Wechat, stating that she felt stressed by Monday’s conversation. The Applicant asked if she could come to the Sunnybank Hills office on Friday, 20 December 2019, so that they could have a discussion and try to clear up any communication misunderstandings which may have occurred. Ms Wang did not reply directly to the message. Later, Ms Wang said she would “drop by to hand over some things” and then leave quickly. The Applicant thought she intended to hand over some client documentation and then leave for her holiday.

[43] The Applicant stated that on Friday, 20 December 2019, at approximately 4:30pm, Ms Wang arrived at the Sunnybank Hills office. The Applicant was due to finish work at 5:00pm and go on holiday until 2 January 2020. Ms Wang told the Applicant to turn off the computer and come and talk. Upon entering the room, Ms Wang gave the Applicant an envelope with the redundancy letter inside and stated, “read that”. The Applicant submitted that there was no other discussion, counselling or communication of any sort before Ms Wang provided the letter. Following this, the Applicant stated that Ms Wang mentioned how the Applicant must feel stressed now, because she was sending her son to a private school and she had just been made redundant. The Applicant felt this was said, to deliberately make her feel bad.

[44] The Applicant contended that the Respondent could have changed her role to part time and had her work different days to those of the other part time employees, ensuring the office was staffed five days a week. The Applicant further stated that the Respondent could have retained her role and paid the Applicant on a ‘commission only’ basis for successful cases.

[45] The Applicant stated that following her dismissal, she had attempted to secure employment with another agency. She claimed that due to the restrictions on Chinese students entering Australia due to COVID-19 they were unable to offer her sufficient work to justify a role.

[46] The Applicant sought 23 weeks wages as a remedy, amounting to $21,850, citing that, but for the dismissal, the Applicant would likely have continued to be employed by the Respondent for at least a further 6 months. This is taking into account that the other consultant employed by the Respondent was about to undertake maternity leave, resulting in Ms Wang, being the only other consultant employed at that time.

CONSIDERATION

[47] The jurisdictional objection must first be determined prior to considering the merits of the application. The requirements for establishing that a dismissal was a case of genuine redundancy are set out in s.389 of the Act.

[48] In terms of the test for redundancy, Section 389(1) and (2) of the Act states a person's dismissal is a case of genuine redundancyif 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 they were consulted about such and were not able to be redeployed.

s.389(1)(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

[49] The Act does not define the term ‘operational requirements’. Rather, it is a broad term that permits consideration of a range of matters including:

• the past and present performance of the business;

• the state of the market in which the business operates;

• steps that may be taken to improve efficiency by installing new processes, equipment or skills, or by arranging labour to be used more productively, and;

• the application of good management to the business.

[50] The Respondent argued that the Applicant’s job was no longer required due to changes in the operational requirements of the employer’s enterprise. The Respondent’s business is to arrange for international students to come to Australia to undertake education. The vast majority of such students come from China. The Applicant’s role within the Respondent’s business was to facilitate students’ entering Australia and enrolling in courses here. The Applicant submitted that s.389 (1)(a) has not been satisfied, because the Respondent continues to undertake the same business.

[51] The Respondent submitted that the Applicant’s job was no longer required to be performed by anyone. The Respondent acknowledged that some of the Applicant’s duties remained. It was also conceded that the Respondent’s business continued with limited work on hand, when the redundancy was enacted and the duties were transferred to Ms Wang.

Business downturn

[52] The Respondent submitted that the spreadsheet provided by the Applicant, that tracked student enrolments, misrepresented the status of operations and provided a false indication of the success of the business. The Respondent claimed that the spreadsheet had been manipulated, to represent false totals, and that the copy provided by the Applicant was not consistent with business records. It was also stated that the spreadsheet included statistics for a number of subagents of the Respondent, whose work is 95% conducted and charged directly between the client and the subagent.

[53] The Applicant submitted that the Respondent had failed to provide evidence demonstrating financial distress or a downturn in the Respondent’s business. The Applicant alleged that the letter provided by the Respondent’s accountant, should not be afforded significant weight, as the accountant was likely unaware of payments made from clients directly to Ms Wang’s various offshore and personal accounts. A copy of various text messages was provided by the Applicant, displaying the payment details, for clients to make payments directly to Ms Wang’s personal and offshore accounts.

[54] The Respondent refuted the Applicant’s statement that the letter from the Respondent’s accountant did not hold much weight, in supporting their claim of significant financial downturn in the business. The Respondent submitted that their accountant was privy to the business’ financial data and history and was the most appropriate person to provide a statement as to the business’s financial position.

[55] In the letter (which is laid out in greater detail below), Mr Zhiheng Zhao, Principal, Leader Tax and Business Advisor Pty Ltd, said:

“6. I feel it is relevant to make the following statement in relation to overseas accounts. I am aware that Mary has offshore bank accounts and confirm that I have given Mary [Wang] training at our meetings in relation to reporting requirements for these. I am confident Mary has recorded those transactions correctly.” 1

Provision of financial information in support of downturn in business

[56] Following the Hearing in this matter, further Directions were issued by consent, for the Respondent to provide additional financial material. This material demonstrated the downturn in the Respondent’s business. The Applicant provided further submissions in response to this material and the Respondent then provided submissions in reply.

[57] The provision of the additional financial material included a further letter, dated 2 April 2020, from Mr Zhiheng Zhao FCPA, Principal, Leader Tax and Business Advisor Pty Ltd, who acted as the Respondent’s accountant. Mr Zhao set out that his firm had acted as the Tax Agent and accountant for the Respondent since 2013. Mr Zhao provided a profit and loss summary for the financial years ending 30 June 2018 and 30 June 2019. He stated that his firm was responsible for the preparation of these figures in the Accounting Statements filed with the Australian Taxation Officer (ATO) and that the summaries provided more information, as to the nature and description of the Respondent’s income and expenses.

[58] The accountant’s report provided the following comments:

“1. Though the business experienced a rise in turnover over the disclosed period, rising from $433k in 2018 to $469k in 2019, the increase in turnover is predominantly from the increase in activity from sub-agents.

Sub agents require significant commission payments relative to sales.

This is evidenced by a reduction in Gross Profit over the period of 73% to 68%, also specifically looking at 2018 to 2019, the Professional Fees increased $36k resulting in an increase of Gross Profit of only $3k.

2. The business experienced a net loss of $44k in 2018 and a small profit of only $471 in 2019.

The business underwent a significant cost saving strategy during 2019 as a result of discussions with our office regarding their financial viability.

As such the business was able to achieve substantial reductions in Advertising, Travel, Training & Conferences and a decline in value of assets. Also the business saw an employee departure in October 2018 resulting in a decline in wages and on-costs.

3. Despite the achievements in 2019 in costs reduction some had to come at the expense of future growth opportunities (such and advertising and travel).

Furthermore, the reduction in costs was not sufficient to maintain current staffing and rent levels, thus being the catalyst for further discussions with our client.

4. The business performance, throughout the displayed period are inflated by the fact the proprietor, Mary, has not drawn a wage. A market wage for strictly her productivity in the business would be at least $60,000 + Superannuation.

Thus each year Mary is essentially working for nothing (or a loss) and in doing so inflating the relative performance of the business.

If we advised to pay her a wage as she is entitled it is likely the business would be trading whilst insolvent without enacting further drastic cost saving measures.

5. We also include an extract from the 2018 & 2019 Lodged Income Tax Return for the business showing the business schedule, which itself shows income and expenses from business operations.

2019

We note for 2019 on the lodged tax return the difference between the reported income of $481,222 and the reported total expenses of $480,751 equals a profit of $471.

By adjusting this profit figure for the difference between tax and accounting depreciation and adding interest income which is reported elsewhere on the tax return, the tax return profit matches our Profit & Loss Statement profit of $12,397.

We attach the tax reconciliation document for your records.

2018

We note for 2018 the difference between the reported income of $441,485 and the reported total expenses of $485,164 equals a loss of $43,679, matching our provided statement.

Both P&L statements have been reported in full in the respective tax returns and lodged with the Australian Taxation Office.

6. I feel it is relevant to make the following statement in relation to overseas accounts. I am aware that Mary has offshore bank accounts and confirm that I have given Mary training at our meetings in relation to reporting requirements for these. I am confident Mary has recorded those transactions correctly.

If you have any further questions regarding this matter, please feel free to contact our office.

Yours Sincerely,

Zhiheng Zhao FCPA
Principal
Leader Tax & Business Adviser Pty Ltd”

[59] The Respondent as set out, provided the corresponding 2018 and 2019 tax returns for the business, confirming the figures referred to above. A comparison document was also provided, setting out a detailed comparison of the 2018 and 2019 financial year profit and loss statements. Notable in the documents is the stated reduction in profit.

[60] The Applicant provided submissions in response to the additional financial material tendered by the Respondent. The Applicant contended that the letter from Mr Zhao should only be considered as opinion and should not be considered evidence. The Applicant stated this should be compounded by the fact that Mr Zhao did not appear to have access to Ms Wang’s offshore accounts and is reliant on her unmonitored reporting. The Respondent strongly disputed that the accountant’s letter should be considered opinion, stating that the accountant’s letter should be considered as expert evidence, and that to dismiss that evidence would be considered as dismissing the expert nature of evidence of a qualified accountant. This would be dismissing their professional knowledge as per their qualification, as well as dismissing the informed relationship and knowledge that an accountant has of their client’s business.

[61] The Applicant also noted that the 2018 tax return that was submitted was not dated or signed. The Respondent stated that a signed tax return is not required for lodgement, rather, only a signed declaration for lodgement is required (and referred the Applicant to the ATO website). The Accountant had adopted the tax return in his evidence.

[62] The Applicant also questioned the accuracy of the tax returns that the Respondent provided, noting that ‘all other expenses’ accounted for more than half of the total expenses, yet those expenses were not identified on either document, (noting that other identified expenses included rent, superannuation, payment to contractors etc.) The Applicant noted that but for these unidentified expenses, the Respondent would have reported a significant profit for both 2018 and 2019.

[63] The Applicant submitted that particular weight should be attributed to the absence of financial material tendered by the Respondent in relation to Ms Wang’s offshore accounts. The Respondent had not disclosed the existence of the offshore accounts until after the Applicant filed documents indicating that the Respondent had received funds from clients into those accounts. The Respondent relied upon the letter from their Accountant where it was stated that Ms Wang had received training from the Accountant in relation to reporting requirements for offshore bank accounts. However, it was also submitted that simply the existence of an overseas bank account, did not make its disclosure relevant to the matter.

[64] The Applicant further submitted that the financial records disclosed by the Respondent did not contain the Company tax returns for the Employer, nor did they contain any of the records of turnover or activity, relied upon by the Respondent in arriving at its decision to terminate the Applicant’s employment. The Business Activity Statements had not been filed or disclosed. The most recent figures provided by the Respondent were current to 30 June 2019, with the Applicant’s termination occurring on 20 December 2019. The Applicant stated that no documents relevant to that decision had been disclosed.

[65] The Applicant had argued that the figures supplied in the 2018 and 2019 trust income tax return documents submitted by the Respondent had been largely comprised of ‘unidentified’ and ‘undefined’ expenses that had been recorded as ‘All other expenses’ on these documents. The Applicant had noted that these ‘unidentified’ expenses had accounted for approximately half the total listed expenses for both of these forms, and ‘but for’ these expenses, the total recorded profit for both years would not demonstrate a downturn in the Respondent’s business. The Respondent argued that the ATO utilises certain ‘labels’ for disclosure of expenses when completing a trust income tax return, and that it would be required that the Respondent use these labels when composing these documents. The Respondent also argued that the Applicant’s submission in relation to these documents amounted to an allegation of tax fraud by the Respondent and that this was completely refuted and there was no basis for such.

[66] The Applicant submitted that the Respondent’s profit and loss comparison for the 2018 and 2019 financial years indicated that the 2019 expenses were $49,185 less than those for 2018 and the professional fees for 2019 were $36,281 higher. The Applicant submitted that these figures indicated that the business was approximately $85,466 better off in 2019 than it was in 2018. The Respondent argued that these figures did not reference the increase in the costs of goods sold. The Respondent attributed these figures largely to the Respondent’s use of sub-agents and noted that the letter from the Accountant also referenced this.

[67] The Applicant submitted that the Respondent failed to provide any documents relevant to the decision to terminate the Applicant, noting that the most current financial documentation provided by the Respondent was from 30 June 2019 and the Applicant’s termination was not until 20 December 2019. The Respondent refuted this submission, stating that case load information was provided at the date of redundancy, and that corroborated the financial data supplied and the decision by the Respondent to make the Applicant’s position redundant.

[68] The letter from the Respondent’s accountant, considered with the provision of the 2018 and 2019 tax returns constituted evidence demonstrating a substantial downturn in the Respondent’s business leading up to the decision to make the Applicant redundant. In addition, the earlier correspondence between Ms Wang and the building landlord was highlighted, where it was communicated that the CBD office would be closing as result of the business undergoing a restructure has been taken into account. It is noted that there is a disparity between the parties regarding prior consultation, however the Respondent’s evidence on the discussions correlates with the Directors’ prior meeting with the Accountant.

[69] The decision of Sams DP in Solari v RLA Polymers Pty Ltd 2 is relevant to the current circumstances. The decision considers a redundancy where the employer closed one of its two plants and only one employee was made redundant. That employee was a long-term employee of some 16 years. Sams DP found the respondent had a difficult choice to make on the basis of its operational requirements and its knowledge of the applicant’s skills and experience, and ultimately dismissed the applicant. Sams DP said:

“[15] It is perfectly understandable that the applicant would feel hurt, upset and even betrayed by the respondent’s decision to make him - and only him - redundant. It is also understandable that he believes he has the skills to perform the work of the other permanent employees. Most employees after 16 years service would feel they have the experience and knowledge to perform work across the broad spectrum of a company’s operations. This is a natural human reaction. However, when compared to others, this might not always be the reality. Ultimately however, it is the prerogative of Management to manage its business as it sees fit; subject to treating its employees fairly and honestly.

[16] Given the applicant’s 16 years of loyal and conscientious service (which I accept unreservedly), and the respondent’s genuine expressions of regret over the applicant’s redundancy (which I also accept), I have a great deal of sympathy for the applicant. However, sympathy alone does not overrule the legal position or the policy intent of the Act, which denies access to an unfair dismissal remedy where an employee’s termination of employment is a genuine redundancy, as defined. Any forced redundancy is always most regrettable and likely to have a severe impact on an employee and his/her family, particularly someone of the applicant’s age. This is, after all, why all employees are protected, in part, by redundancy payments under their relevant Award or Agreement and why minimum redundancy standards are now a legislated feature of the National Employment Standards (NES). I have no doubt that the respondent acted appropriately in that regard and, in fact, provided a greater period of notice than the Award provides.”

[70] As noted, in the consideration of a redundancy, operational requirements is a broad term and involves the past and present performance of the business, the state of the market in which the business operates, steps that may be taken to improve efficiency by installing new processes, equipment or skills, or by arranging labour to be used more productively, and the application of good management to the business.

[71] In this case, there is evidence of a downturn in business. The Respondent was entitled to take steps to improve efficiencies, which in this case resulted in a redistribution of duties across the organisation. Unfortunately, this left no duties for the Applicant in her job to perform, as all these duties were now performed by other staff. The Applicant at the time of her dismissal had only limited cases, which appear to have been taken on by other staff and the Director as a result undertaking case work. This is normal and expected where there is a business restructure, to protect the viability of the business.

[72] It is worth noting that since the Applicant’s dismissal, the escalation of the global COVID-19 pandemic has resulted and suspended international travel. Given the Respondent’s business is to allow international students to travel to Australia to undertake education, this has undoubtedly resulted in further disruption to the business.

[73] I consider that while some of the Applicant’s duties survived, the Applicant’s job was no longer required to be performed by anyone because of changes in the operational requirements of the Respondent’s business. The duties of the Applicant continued in a restructured form and in a falling market, with fewer clients.

s.389(1)(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

[74] The obligation on an employer to consult about redundancy arises when a Modern Award or Enterprise Agreement applies to an employee, and that Modern Award or Enterprise Agreement contains requirements to consult about redundancy.

[75] Both parties’ representatives were specifically further directed to consider this point and subsequently both had submitted that there was no relevant Enterprise Agreement or Modern Award that applied to the Applicant’s duties or employment.

[76] There was a dispute between the parties regarding the consultation process. There was no specific identification by the Applicant’s representative of what consultation should have occurred in terms of compliance with an industrial instrument or otherwise that covered the work.

[77] The Full Bench of the Commission considered the matter of Award coverage in Ms Deborah Hallam v Sodexo Remote Sites Australia Pty Ltd 3where it was set out that:

“[22] That leaves the question of whether Sodexo complied with any obligation in a modern award or enterprise agreement that applied to Ms Hallam’s employment to consult about the redundancy. To answer that question, it is necessary to determine whether any such obligation arose.

[23] According to Sodexo, the Hospitality Industry (General) Award 2010 (the Award) applies to Sodexo’s business. For present purposes, we accept Sodexo’s implicit concession that it is an employer in the hospitality industry to which the Award applies. However, neither party submitted that the Award covered Ms Hallam’s employment and we are satisfied that it did not.

[24] A modern award covers an employee if the award is expressed to cover the employee. 16 In this case, the Award is an industry award that covers:

“…employers throughout Australia in the hospitality industry and their employees in the classifications within Schedule D—Classification Definitions to the exclusion of any other modern award.”

[25] The “principal purpose test” is also relevant to whether an employee is covered by a modern award or enterprise agreement. The test was summarised in Carpenter v Corona Manufacturing as follows:

“In our view, in determining whether or not a particular award applies to identified employment, more is required than a mere quantitative assessment of the time spent in carrying out various duties. An examination must be made of the nature of the work and the circumstances in which the employee is employed to do the work with a view to ascertaining the principal purpose for which the employee is employed. In this case, such an examination demonstrates that the principal purpose for which the appellant was employed was that of a manager. As such, he was not "employed in the process, trade, business or occupation of ... soliciting orders, obtaining sales leads or appointments or otherwise promoting sales for articles, wares, merchandise or materials" and was not, therefore, covered by the Award.”

[78] In circumstances where it was submitted that the Applicant’s employment was not explicitly subject to an industrial instrument, it is necessary to make an assessment as to whether the Applicant may have been covered by a Modern Award. Both parties’ representatives were directed to provide submissions, addressing the matter of Award coverage and the principal ‘purpose test’.

[79] The Applicant’s representative submitted that while no Modern Award expressly applied to the Applicant, the Applicants employment most closely aligned with the Educational Servies (Post-Secondary) Award 2020 (the Award). The Applicant’s representative submitted that the Applicant would be classified as General Staff, pursuant to Schedule C of the Award.

[80] The Respondent’s representative submitted that the Educational Servies (Post-Secondary) Award 2020 was not the appropriate Award to cover the Applicant’s employment, referring to section 4.5 and 4.6 of the Award, that sets out the coverage of the Award:

“4.5 This award covers any employer which supplies labour on an on-hire basis in the post-secondary educational services industry in respect of on-hire employees in classifications covered by this award, and those on-hire employees, while engaged in the performance of work for a business in that industry. Clause 4.5 operates subject to the exclusions from coverage in this award.

4.6 This award covers employers which provide group training services for trainees engaged in the post-secondary educational services industry and/or parts of that industry and those trainees engaged by a group training service hosted by a company to perform work at a location where the activities described herein are being performed. Clause 4.6 operates subject to the exclusions from coverage in this award.”

[81] The Respondent’s representative submitted that the Respondent’s business did not align with the Award description, and that the Applicant was subsequently Award free, with no obligation to consult arising.

[82] In assessing the principle purpose of the Applicant’s employment in this case, it is apparent that the principle purpose of the Applicant’s employment was that of an agent or consultant. In assessing this principle purpose against the Educational Services (Post-Secondary) Award 2020 it is evident thatthis principle purpose is not commensurate with the indicia set out in section 4.5 and 4.6 of the Award and would therefore not be covered by the Award.

[83] Based on a consideration of the Applicant’s employment and the representatives’ submissions the employment was not subject to any Modern Award. The duties of the Applicant were not commensurate with those of ‘General Staff’ for the purposes of the Educational Services (Post-Secondary) Award 2020 and on that basis no obligation for the Respondent, to consult in relation the redundancy arose for the purposes of s.389(1)(b) of the Act.

[84] Both parties provided conflicting submissions regarding the consultation process that was undertaken in relation to the Applicant being made redundant.

[85] The Applicant submitted that the Respondent failed to satisfy s.389 (1)(b) as they did not consult with the Applicant about the redundancy. It was submitted that no alternatives were explored by the parties, rather that the Respondent provided the Applicant a letter, styled as a redundancy, but effectively serving as a termination. The Respondent strongly refuted these claims and stated that a substantial consultation process between the Respondent and the Applicant had been conducted, in the lead up to the redundancy.

[86] The consultation process undertaken was a significant point of contention during cross-examination, with both Ms Wang and the Applicant providing contrasting accounts. Ms Wang submitted that several meetings occurred between herself and the Applicant, where the Respondent’s downturn in business was communicated to the Applicant, and it was discussed that the Applicant’s position may be made redundant if the business did not improve. The Applicant strongly denied that any of these meetings occurred.

[87] The Applicant also submitted that a negative inference could be drawn from the lack of evidence tendered in relation to the various alleged meetings held between the Applicant and Ms Wang to discuss the redundancy. The Respondent stated that handwritten diary notes had been taken of the meetings, however the Respondent had not submitted these as evidence.

[88] In Maswan v Escada Textilvertrieb t/a ESCADA 4, it was found that where an employer failed to consult about a redundancy, but consultation would not have been likely to alter the outcome of a dismissal, the failure to consult, while a serious procedural deficiency, would not result in the dismissal being harsh, unjust, or unreasonable. In Maswan, the Applicant was dismissed as a result of merging two managerial positions, and it was decided the Applicant was not qualified or appropriate for the merged role, as follows:

“[39] In my view a decision to dismiss on account of redundancy will only be harsh, unjust or unreasonable if the rationale for the decision is seriously undermined or if there is a serious error in procedure such that renders the termination unfair in the circumstances. Here the decision appears open to the employer to make. The failure to consult is not a trivial matter. But as it is clear that consultation was highly unlikely to have negated the operational reasons for the dismissal or lead to any other substantive change, I do not believe that the failure to consult prior to the date of termination rendered the dismissal unfair. Given the evidence in relation to the operational need to restructure, I am of the view that it is likely that Mr Maswan would have been dismissed in any event, even if timely consultation had occurred.”

[89] In this case, there is a dispute over whether consultation occurred. The representatives agreed that no obligation to consult arose as the Applicant’s employment was not subject to a Modern Award, however even if consultation did not occur, such consultation would not likely to have resulted in any other outcome, but the position being made redundant. While there is dispute as to whether the Applicant refused to undertake further training or simply was not given this training while being willing, the Applicant did not undergo any further training to qualify her for other roles or duties within the organisation. The duties of the Applicant were folded into other roles, and this appears to have been inevitable, based on the decline in business.

[90] Considering this disparity regarding consultation, in accordance with the principles as set out above in Masman, 5 it is considered a conclusion that the consultation was deficient would not have resulted in this dismissal being harsh, unjust or unreasonable. In this matter, the absence of consultation to the degree desired by the Applicant would not have altered the dismissal. This is further supported that in the further short term the additional significant effects of the pandemic and the government regulation to halt inbound flight traffic. Such would have, significantly further affected the industry and customer base that the Respondent relied on. As per the conclusion in Masman, even if a further period occurred for consultation, ultimately the decision would not have been altered.

[91] Taking into account the associated operational requirements causing a dramatic drop in the student numbers that formed the Respondent’s customer base, it is considered that the dismissal would have occurred in any event. The operational pressures would have escalated due to this reduction in the market. The employer does have a discretion to view the pressures on its business and to respond to the operational requirements of the business. It is not for the Commission to step into the shoes of the employer. The employer was able to assess the need to take steps to rationalise the business, and this coincided with the closing of the branch and the necessity to reduce the employment accordingly.

s.389(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

[92] The Applicant submitted that as an alternative to redundancy she could have entered into a job sharing arranging with the other employed agent, as the other agent was expected to take maternity leave in the near future. The Respondent argued against this course of action, stating that the other agent was not due to take maternity leave until June 2020, six months after the Applicant had been made redundant and the Respondent maintained that there was not enough work for the Applicant to remain employed, even in a part-time capacity, due to the significant downturn in business. The Respondent also stated that this would have resulted in the Applicant taking work from the other employee. This arrangement would not have reduced the business costs, related to the sharing of the reduced work.

Training

[93] The Respondent submitted that the Applicant was offered additional training in order to develop her skillset and enable her to perform other duties within the Respondent business. It was conceded that the additional training was not undertaken by the Applicant, however the circumstances surrounding the offer of additional training were disputed.

[94] The Applicant submitted that she did not refuse the Respondent’s offer for further training in her role, rather, that she stated she inquired about the dates and times for the proposed training, so that she could ensure that she would be able to organise her child to be dropped off and picked up from school. The Applicant submitted that it was Ms Wang who decided not to pursue and arrange the training. An exchange of text messages was provided by the Applicant in support of this claim.

In response, the Respondent submitted that the Applicant had on several occasions indicated to the Respondent that she was experienced and didn’t require further training, as she knew how to perform her role. This matter was subject to extensive discussions during the proceedings, with neither party conceding their position. Based on all the circumstances the further training would not have averted the redundancy.

Applicant’s performance

[95] The Respondent had submitted that the Applicant’s performance within the business was poor and could not support her redeployment within the business.

[96] The Applicant submitted that she had eight active cases at the time of her being made redundant, not three as the Respondent had claimed. The Applicant provided a spreadsheet that recorded the applications and enrolments for July 2019, including several of the Applicant’s clients. A spreadsheet showing enrolments from January to June 2019 and July to December 2019 was also provided. The Applicant relied on this spreadsheet to demonstrate the substantial increase in enrolments from 2018 to 2019.

[97] The Respondent submitted that the Applicant at the time of dismissal only had three successful cases, and conceded that she may have had more cases open at the time, although the number of successful cases was only three, and that this was not enough to sustain the Applicant, as profitable with the business.

[98] The Applicant submitted that she was the most senior and experienced Agent employed by the Respondent at the time of her dismissal. The Applicant stated that when Ms Wang was out of the office, the Applicant was the point of contact for Ms Wang’s clients. A series of text messages between the Respondent’s staff were provided corroborating this statement. The Applicant submitted that this protocol was in place during Ms Wang’s March 2019 trip to China and during her trip to Finland in October 2019. The Applicant stated that this demonstrated her capacity to work independently to finalise her claims, refuting the Respondent’s claim that she did not possess this capacity to work independently.

[99] The Respondent refuted the Applicant’s description of her role as being that of a Senior Agent. The Respondent confirmed the duties that the Applicant performed, although it was stated that Ms Wang was the only Agent accredited and authorised to sign off on documentation and lodgements with the Immigration Department. The Respondent strongly contended that the Applicant was a Junior Agent.

[100] The Respondent additionally submitted that the Applicant’s performance was inadequate and that her work was the subject of a complaint by a student. The Respondent provided a series of text messages between Ms Wang and the student in support of this statement. The Applicant strongly denied that she had made the mistake (during cross-examination), arguing that the exchange of text messages showed that Ms Wang had supported the Applicant’s approach to the work that was undertaken. Ms Wang denied this in cross-examination, stating that whilst she did support the Applicant’s work in the text message exchange with the client, she maintained that this approach was undertaken in order to protect the integrity of the Respondent’s business.

[101] In this matter the employer is a small business employer without a dedicated human resources department to provide advice regarding disciplinary matters or on the redundancy. However, the business circumstances as set out, justified the redundancy of the Applicant’s role. In assessing the decline in the business, management prerogative is recognised for taking decisions to preserve the business, as the employer saw necessary. At the time of the redundancy, the decision was made on the basis of reduced workload, this was reinforced by the employer’s actions to protect the business.

[102] It is noted that as the Respondent is a small business employer, the Applicant is not entitled to a redundancy payment, pursuant to s.121(1)(b) of the Act.

CONCLUSION

[103] For the reasons set out above, with respect to the requirements of s.389(1) and 389(2) of the Act, the Respondent has satisfied that the termination of the Applicant’s employment was a case of genuine redundancy.

[104] The redundancy correlates with the downturn in the Respondent’s business. The evidence demonstrates that the Respondent was experiencing a significant decrease in business in the 12 months prior to the Applicant’s position being made redundant. Discussions were held on this basis; one of the branches of the business was closed in accordance with required cost cutting measures. This downturn in business was commensurate with the Applicant’s position being made redundant. The industry within which the business operates has been significantly further impacted by the pandemic.

[105] Having taken into account all of the facts and circumstances against the legislative tests, all of which have been set out, the dismissal is determined as a case of genuine redundancy, in accordance with s.389 of the Act and therefore, the termination is not an unfair dismissal. The substantive application made pursuant to s.394 of the Act, is therefore, dismissed.

[106] I Order accordingly.

COMMISSIONER

Appearances:

Mr Wayne Hampton for the Applicant.
Ms Helen Stevenson for the Respondent.

Printed by authority of the Commonwealth Government Printer

1 Respondent’s Submission of Evidence, Appendix A

2 [2010] FWA 5676

3 [2018] FWCFB 1496

4 [2011] FWA 4239

5 Maswan v Escada Textilvertrieb t/a ESCADA [2011] FWA 4239

Ms Jing (Michelle) Mu v Yes International Pty Ltd ATF Yuan Family Trust

[2020] FWC 5048

18 SEPTEMBER 2020

DECISION

Introduction

BACKGROUND