Ms Liwen Zhong v Shiman Australia Pty Ltd T/A Kamkoon Chinese Restaurant

[2014] FWC 1051

[2014] FWC 1051

FAIR WORK COMMISSION

DECISION

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

Ms Liwen Zhong
v
Shiman Australia Pty Ltd T/A Kamkoon Chinese Restaurant
(U2013/12688)

SENIOR DEPUTY PRESIDENT RICHARDS BRISBANE, 13 FEBRUARY 2014

Summary: whether dismissal harsh, unjust or unreasonable.

[1] On 19 August 2013 Ms Liwen Zhong (“the Applicant”) lodged an application under s.394 of the Fair Work Act 2009 (“the Act”) seeking an unfair dismissal remedy in respect of the alleged termination by Shiman Australia Pty Ltd T/A Kamkoon Chinese Restaurant (“the employer”).

[2] The Applicant had been employed as a casual waitress working rostered hours (generally comprising four three-hour shifts per week) since February 2011. She had remained employed over a period in which there were successive owners and managers of the business.

[3] Her period of employment appeared to be unremarkable and bar one minor incident (in which it was alleged the Applicant had been somewhat strong-willed in giving a direction to another employee) she had experienced no conduct or performance issues and had otherwise been considered a valuable employee.

[4] On 11 August 2013 she was approached by the operations manager, Mr Mark Koschker, and informed that the employer could offer her no further hours and that this was a decision taken by management. She was informed by the operations manager on her own evidence that he considered her to be “a very valuable asset to [the] restaurant.”

[5] The Applicant claims to have been given no other explanation for what she believed to be her dismissal. She subsequently lodged her application under s.394 of the Act.

[6] Mr Koschker contended that the business was unable to offer the Applicant any further hours owing to its operational circumstances. Its operational circumstances had been affected by a significant decline in the restaurant trade over the prior 12 month period. The employer’s evidence was that compared with the previous year, turnover in the restaurant (excluding takeaway) had fallen by between 30% and 40%.

[7] A number of other circumstances had also developed. The restaurant had lost its five-star rating which had impacted upon trade and the restaurant was entering the last quarter of its trading cycle which was a slow period (at least leading up to Christmas whereupon it usually recovered).

[8] In such circumstances the employer contended that it was necessary to find savings in order to maintain the restaurant’s viability. To this end, Mr Koschker introduced tighter stock management controls, did not replace staff who went on long leave, did not employee trainees, placed other staff on on-call duties only, and reduced the casual hours.

[9] Accordingly, the Applicant, Mr Koschker claimed, was informed that the employer had no further hours that it could offer her.

[10] Mr Koschker held that in so informing the Applicant he did not dismiss her but intended her to be available on short notice for further work as the restaurant entered a recovery at the end of the year. Indeed, further hours were offered to the Applicant in November but she declined the opportunity to return to the restaurant.

[11] I consider the employer’s evidence in this regard to be credible. Mr Koschker was well-placed as the operations manager to have direct knowledge about the performance of the business and his evidence was given in an authoritative manner. The steps Mr Koschker took assist in the business recovery were far from unconventional.

[12] The Applicant for her part believed that the downturn had been very limited, but she was not well-placed to give evidence in this regard.

[13] The Applicant contended that she was not given a comprehensive explanation for her dismissal. Her concerns in this regard were exacerbated by the fact that a trainee had been retained following her loss of hours.

[14] Mr Koschker contended that the trainee was being trained in order to provide a future resource (for later in the year) on an on-call basis, and was not to become a permanent employee. That is, the trainee was retained at that time in an attempt to ensure the restaurant had a larger pool of available staff which it could contact on an on-call basis. Mr Koschker took the view that the Applicant was simply another such person (or resource) and that by reducing her hours in the current circumstances merely meant that she was available on short notice to perform future work as a casual employee.

[15] Mr Koschker claimed, in the above context, that the application for a remedy under s.394 of the Act was jurisdictionally barred for reasons that the Applicant had not been dismissed from the employment of the employer. That is, the requirements of s.385(a) of the Act had not been met. I will return to this matter further below.

[16] Firstly, however I note that the employer may be a small business for purposes of s.23 of the Act. As such, it may be the case that it can effect a dismissal by way of the Small Business Fair Dismissal Code (“the Code”). I am obligated under the Act to consider the application of the Code because of the operative effect of s.396 of the Act, which provides as follows:

396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy. [My emphasis]

[17] I indicate that there was some uncertainty on the employer’s part as to the status of its predominantly casual workforce at the time of the Applicant’s alleged dismissal. It appears at that relevant time it had 17 employees comprising mostly casual employees (and one being a recent trainee). Whether all the casual employees could be counted as employees for purposes of s.23 of the Act was not made out ultimately. But in the event I am wrong, and the employer is a small business for the Act’s purposes, I do not consider that the Code was applicable in the circumstances.

[18] I have previously discussed in [2013] FWC 2971 that the Code has no application to a small business in respect of a decision taken to dismiss an employee for reasons of redundancy (which, as I will find below, is the reason for the dismissal in the current instance).

[19] My reasoning in this regard was set out as follows:

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

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

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



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



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



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

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

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

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

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

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

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

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

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

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

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

Other matters (s.387(h))

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

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

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

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

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

[20] I add that the employer did not agitate any objection under s.389 of the Act. If it had, the facts adduced in relation to consultation (see below), at the very least, meant it would have failed to have discharged the obligation arising under s.389(1)(b) of the Act, in any event.

[21] As mentioned above, the employer took the view that the Applicant had not been dismissed but merely had her hours reduced (albeit to zero).

[22] The Applicant had been employed at the restaurant since 2011 and had worked a regular and consistent pattern of rostered hours (seemingly in the order of three hours by four days per week every week). That is, the Applicant had an expectation of continuing work on the basis of her history of engagement. Mr Koschker did not challenge the Applicant’s claim as to her rostered hours of work at the time.

[23] The evidence is sufficient to demonstrate that the Applicant was a person who was protected from unfair dismissal and was dismissed from her employment at the initiative of her employer on the basis that further hours of work may be available at an undefined point in the future.

[24] Having so concluded, and is now necessary to consider whether the Applicant was dismissed on terms that could be characterised as being harsh, unjust or unreasonable for the purposes of the Act.

Was the dismissal harsh, unjust or unreasonable?

[25] In order to determine whether the Applicant was dismissed harshly unjustly or unreasonably I must take into account the various matters set out at s.387 of the Act.

[26] Section 387 of the Act provides as follows.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and

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

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant.

Consideration

Section 387(a): whether there was a valid reason for the dismissal related to the person’s capacity or conduct

[27] The Applicant was not dismissed for reasons of her capacity or conduct, or for purposes of her performance as an employee. The Applicant was dismissed because her employer could no longer offer her any work owing to a decline in its business. This may not constitute a valid reason for the dismissal in the confined statutory meaning, but it is a matter that is materially relevant in my considerations under s.387(h) of the Act below (and which bear on whether the dismissal was harsh, unjust or unreasonable).

(b) whether the person was notified of that reason

[28] The Applicant was not provided notice in advance of the decision to dismiss her. In that sense, the Applicant was not notified of the reason for the dismissal.

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

[29] The conversation at the time of the dismissal between the Applicant and Mr Koschker was not elaborate. Mr Koschker claimed that he expressed his personal view that the Applicant was a very competent employee but that the employer was unable to offer her any further hours of work. Even on his own evidence he did not elaborate very much on this and certainly it does not appear that he engaged in an exercise in which he sought the views of the Applicant about the situation that had developed.

[30] But as I will discuss below, the circumstances were such that such an approach may have been of little material consequence.

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

[31] The circumstances of the communication of the decision to not offer the Applicant any further hours was not one given in advance and the Applicant consequently had no opportunity to seek the support of a support person. Consequently, there can be said to be no contravention of s.387(d) of the Act (though the compact of procedural fairness gives rise to issues for consideration).

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

[32] This was not a matter in which the performance of the Applicant was in question.

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

[33] The employer is a small business employing some 16 or so employees of which 12 are casual employees. Mr Koschker appears to exercise various business and human resource responsibilities. Communications within the business were informal, perfunctory and oral in format and this was a function of the size of the business. The manner of the dismissal was indicative of the way in which decision-making was effected in the business.

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal

[34] Reasonably, this was not a business that had an established Human Resource Department or which employed any dedicated HR skills or expertise. As I have mentioned immediately above, the employer gave effect to its processes in an informal manner.

(h) any other matters that the FWC considers relevant

[35] It may be a case that the Applicant did not receive a full explanation as to why she had been selected to have her hours reduced. As was evident over the course of the hearing, the Applicant took the decision to not offer further hours as a personal slight. The evidence suggests that Mr Koschker did not intend it to be that way.

[36] As it was, Mr Koschker took the view that the Applicant was a casual employee and that he could request her services at such times as there was a business need. Mr Koschker did not set out in any detail the trading circumstances with any specificity for the Applicant’s benefit. He did not explain that he was attempting to create a pool of trained on-call casual staff that he could utilise at short notice in the future.

[37] Further, the employer held a view that the Applicant had another position (with an unrelated employer) and that she would be able to accommodate the loss of hours somewhat more easily than others.

[38] But irrespective of these matters, the reasons for the Applicant having been selected for dismissal are not relevant to an application for relief under s.394 of the Act, and particularly so as to whether or not there was a valid reason for the dismissal. This much is made clear by the decision of the Full Bench in UES (Int'l) Pty Ltd v Leevan Harvey[2012] FWAFB 5241. 1

[39] Other matters have also come between the parties following the dismissal which have made their relationship all the worse and led the Applicant to refuse the offer of further hours with the recovery of the business (from last November).

[40] In the end, the Applicant was dismissed because of the downturn in business in the restaurant. The dismissal as it was did not reflect on her performance or her conduct or capacity, though I understand that the Applicant may believe that to be the case.

[41] The employer’s decision not to offer the Applicant any further hours for an undefined period because of its operational circumstances was a sound, defensible and well founded reason. It is telling against a conclusion that the dismissal was harsh, unjust or unreasonable.

Conclusion

[42] Taking all the circumstances into consideration, including that the processes leading to the dismissal were somewhat abrupt, the size of the employer and its available human resource expertise, the dismissal of the Applicant by the removal of her hours for an undefined period of time was not harsh, unjust or unreasonable. The application under s.394 of the Act for unfair dismissal remedy is therefore dismissed.

SENIOR DEPUTY PRESIDENT

Appearances:

Ms L. Zhong, Applicant (assisted by Mr M. Li)

Mr M. Koschker, of the Respondent

Hearing details:

Brisbane

2014

11 February

 1   At PNS27-29.

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