P Murrihy v R Mechanical Services Pty Ltd

[2012] FWA 8416

[2012] FWA 8416

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

P Murrihy
v
R Mechanical Services Pty Ltd
(U2012/214)

SENIOR DEPUTY PRESIDENT WATSON MELBOURNE, 8 OCTOBER 2012

Application for unfair dismissal remedy - application dismissed.

[1] Mr P Murrihy (the applicant) has made an application under s.394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy. It is alleged that his dismissal by R Mechanical Services Pty Ltd (the respondent) was harsh, unjust or unreasonable.

[2] It was common ground prior to the hearing that the applicant commenced employment with the company on 7 February 2011 and that the date of the applicant’s redundancy was 24 January 2012.

[3] The application was listed for conciliation by telephone on 27 February 2012 but conciliation did not occur, due to the inability of the conciliator to contact the applicant on the day.

[4] On 28 February 2012, the employer lodged a jurisdictional objection on the grounds that the employer was a small business employer and, on that basis, the applicant was employed for less than 12 months and therefore unable to make a valid application. That jurisdictional objection was heard and dismissed by Commissioner Cribb on 11 May 2012, 1 who found that the applicant was protected from unfair dismissal. The Commissioner found that at the time of the termination of the applicant’s employment, the company employed 15 employees.2

Evidence and submissions

[5] The applicant contended that his dismissal from the respondent was not only harsh or unjust but also not a case of genuine redundancy. He submitted that there was no valid reason for the termination as there were other options available to the respondent to address its financial position, he was chosen for redundancy without adequate exploration of his contribution to the company, relative to the cost of his employment, and his selection was motivated by personal dislike of him by Mr R Roper, the Director of the respondent. The applicant contended that the termination occurred without any warning or reasoning prior and without giving him any notice period or opportunity to respond.

[6] The applicant filed a Witness Statement 3 and was cross-examined. He also relied on the:

● Apprenticeship Training Contract;
● Termination Letter; and
● National Code for good practice for Australian Apprentices.

[7] The applicant’s evidence was that:

a. From the beginning of his employment on 7 February 2011, the applicant had been forced to miss several different week blocks of his schooling, because as Mr Roper stated at the time the respondent was too busy. His evidence was that because of the company being so busy he and several other employees were forced to work overtime of at least 10 hours per week. Employees were told that they would receive the time they had worked in overtime, as time off in lieu, but this agreement was never met. The applicant believed that his questioning of Mr Roper about this issue caused Mr Roper to dislike him personally.

b. When the applicant was employed by the respondent, the applicant worked approximately 45-60 hours per week. For the majority of that time he worked alongside another employee Mr A Short, another fourth year apprentice. They completed several jobs per day ranging from gas ducted heating and split systems, to gas lines and hot water systems, invoicing clients for $1500 to $3000 per day.

c. From July 2011 Mr Roper hired another staff member Mr A Symes, to help with the workload. Nearly all of the respondent’s staff were working several hours overtime up until the day the applicant left.

d. Mr N Cole was also hired closer to the Christmas holidays to work with Mr Short as his apprentice. Just prior to this Mr Roper had promised the applicant his own van, which he had purchased, however he was then told that the insurance would be too expensive so the van was given to Mr Symes.

e. He was never given any warning as to his dismissal.

f. The applicant felt as though Mr Roper had a personal vendetta against him. After his dismissal the applicant spoke to Mr T Hancock a first year apprentice who mentioned to him that Mr Roper had said to him that he just didn’t like him.

g. On the day of his dismissal the applicant was called into the office at the end of the day’s work and told there was no longer a job for him at the company and that he was being made redundant effective immediately. Mr Roper then continued to further explain that the 1st year apprentice, Mr Hancock, would take his place working with Mr Short. This had taken effect and was confirmed by Mr Short the next day.

[8] At the direction of Fair Work Australia, the applicant tendered 4 information concerning his attempts to find alternate employment and earnings from his current employment, which commenced on 21 July 2012. His evidence in this respect is that he sought alternate employment immediately following the termination of his employment, directly and later through SEEK but found it difficult to obtain other employment as a fourth year apprentice, yet to complete his studies. He obtained an interview with his current employer shortly after the termination, but that did not result in an offer of employment until July 2012.

[9] The respondent submitted that the applicant was made redundant due to financial losses incurred between 1 July 2011 and 23 January 2012. The respondent submitted that the redundancy was forced upon the company and was reasonable given the financial circumstances confronting it. It submitted that the applicant was selected on the basis of maintaining the best balance of employee teams having regard to the views of senior employees and relative costs, including the vehicle insurance costs associated with the applicant.

[10] The respondent relied on:

● A letter from JAS Partners (Chartered Accountants), the author of which was not subject to cross-examination, stating:

“We act as accountants and Advisors to R Mechanical Services Pty Ltd.

After preparing Financial Accounts we can confirm that the company has incurred substantial financial losses for the period 1 July 2011 to 23 January 2012.”

● Evidence of Mr R Wright, Chief Financial Officer, of the respondent, in the form of a witness statement, stating:

“Due to the current economic situation and the downturn in our company sales, losses were incurred by R Mechanical Services Pty Ltd for the period July 2011 to 12 January 2012 amounting to in excess of $200,000.

Consequently, between December 2011 and January 2012, five staff were made redundant, all casual staff hours were cut or eliminated, as well as a number of staff taking pay cuts (including the managing director). These actions did not put the company back into a profit situation, but moved it to a future improvement in results.

Mr Murrihy was chosen partially for the reason that the respondent could not obtain comprehensive vehicle insurance at a reasonable cost. Due to Mr Murrihy’s driving history, the cost to insure him to drive a company vehicle was in excess of $3,000, with a $3,000 excess in the event of an accident.”

[11] Mr Wright was not made available for cross-examination, the statement was not accepted into evidence and no weight is placed on his evidence. However, the substance of his statement, concerning financial losses, other redundancies affected and insurance costs, was the subject of evidence of Mr Roper. Further, the financial information within Mr Wright’s statement was verified by a summary of financial information tendered. 5 Mr Roper provided the source data, on a confidential basis, for the applicant and Fair Work Australia to examine prior to his cross-examination. That information substantiated the proposition in Mr Wright’s statement that losses in excess of $200,000 were incurred by the respondent for the period July 2011 to 12 January 2012 and reduced levels of sales from the middle of 2011.

[12] The substantive evidence on behalf of the respondent was that of Mr Roper, in the form of a witness statement, 6 stating:

a. The applicant was made “redundant on the 23 of January 2012 as a result of prolonged, substantial loss incurred by the company from July 2011 until May 2012”, due to a dramatic downturn in the economy and seasonal weather factors.

b. Between November 2011 and January 2012, five employees were made redundant and one staff member had his hours reduced:

● November 2011: Mr Wright’s position was made part-time and one apprentice made redundant;

● December 2011, one sales person and one apprentice made redundant; and

● January 2012, one sales person and the applicant made redundant.

c. When he advised the applicant of the redundancy, Mr Roper explained the reasons and advised that if work levels were to increase, he would contact the applicant to seek his interest in returning to work with the company in the future. This offer was rejected by the applicant.

d. The applicant and other staff were constantly advised that they should detail hours on the overtime forms which were readily available.

e. Most staff rarely used overtime sheets and advised Mr Roper when they would work overtime, on the basis that they made up for it by finishing early on other days. The applicant’s claim for unpaid overtime was subject to an investigation by the Fair Work Ombudsman and finalised on 17 May 2012, finding an under payment of $281.94 gross, with the ombudsman taking no further action.

f. The applicant was selected for redundancy for several reasons:

● Workloads for field staff had significantly reduced due to the downturn of the business and the company could no longer afford to keep all staff;

● Once it was decided that another member of the field staff would be made redundant, it was decided that it would be more financially appropriate to have a first year apprentice partner the employee the applicant worked with;

● Senior members of the field staff were consulted and the general consensus was that the applicant was the most appropriate choice for redundancy and this would achieve the best team balance; and

● The applicant’s driver’s license had been suspended on two occasions in recent years. He had no licence for part of the period of his employment. Once the applicant regained his licence, the cost of insurance involved an additional $3000 per annum due to his driving record.

g. During his working relationship with the applicant, Mr Roper has never held or expressed any personal ill feelings towards him and it would be negligent to make business decisions on anything but the best interests of the company.

[13] The respondent also filed a statement of Ms N Hancock, administrative staff member, concerning an issue between the parties relating to alleged unpaid overtime. Ms Hancock was not made available for cross-examination. For this reason, and given the lack of relevance of the overtime matter, save that it is accepted that there was a dispute about payment for overtime between the applicant and Mr Roper, 7 Ms Hancock’s statement was not accepted into evidence.

[14] The letter of termination from Mr Roper to the applicant, dated 24 January 2012, stated:

“The purpose of this letter is to confirm the outcome of a recent review by R Mechanical Services Pty Ltd of its operational requirements and what this means to you.

As a result of the economic downturn and the downturn in our business income your position as an apprentice plumber is no longer needed. Regrettably this means your employment will terminate.

Your employment will cease immediately. Based on your length of service you will be paid a redundancy payment of $1,588.74 in accordance with The Plumbing and Fire Sprinklers Award 2010. This amount represents 2.26 weeks pay which is based on your employment period commencing the 11th February 2011.

You will also be paid your accrued entitlements and any outstanding pay, including superannuation up to and including your last day of employment.

Employers and Employees 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.

We thank you for your contribution during your employment with us. Please contact us if you wish to obtain a reference in the future.”

Was the applicant unfairly dismissed?

[15] Section 385 of the Act, provides that:

“A person has been unfairly dismissed if FWA is satisfied that:

(a) the person has been dismissed; and

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

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

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

Was the applicant dismissed? (s.385(a))

[16] It is agreed that the applicant has been dismissed from his employment with the respondent. The evidence establishes that the applicant was dismissed.

[17] I return later to whether the dismissal was harsh, unjust or unreasonable (s.385(b)).

The Small Business Fair Dismissal Code (s.385(c))

[18] The definition of “consistent with the Small Business Fair Dismissal Code” is found in s.388 of the Act as follows:

“388 The Small Business Fair Dismissal Code

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

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

(a) immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happened first), the person’s employer was a small business employer; and

(b) the employer complied with the Small Business Fair Dismissal Code in relation to the dismissal.”

[19] The Small Business Fair Dismissal Code was declared on 24 June 2009 pursuant to s.388(1) of the Act.Section 23 of the Act defines “small business employer” who employs at a particular time fewer than 15 employees at that time. Given the finding of Commissioner Cribb that at the time of the termination of the applicant’s employment, the company employed 15 employees, 8 a finding which was not challenged on appeal or in the proceedings before me, I am satisfied that the respondent, was not a small business employer at the relevant time. The Small Business Fair Dismissal Code does not apply.

Genuine redundancy (s.385(d))

[20] A further statutory consideration which arises for determination is whether or not the termination of the applicant’s employment was a genuine redundancy, as defined in s.389 of the Act. Genuine redundancy, as defined in s.389 has a particular statutory meaning and purpose, beyond the issue of whether the person’s job is no longer required. It is of significance because, if a dismissal was a case of genuine redundancy within the meaning of s.389 of the Act, a person has not been unfairly dismissed within the meaning of s.385 and has no basis of action in relation to the termination of their employment and no remedy may be ordered (s.395(1)(b)).

[21] Section 389 provides:

“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.”

[22] It is agreed that the employment of the applicant was subject to the terms of the Plumbing and Fire Sprinklers Award 2010 9 (the Award) clause 8 of that Award - Consultation regarding major workplace change - provides:

“8.1 Employer to notify

(a) 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.

(b) 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

(a) 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.

(b) 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

(c) For the purposes of such discussion, the employer must provide in writing to the employees concerned and their representatives, if any, all relevant information about the changes including the nature of the changes proposed, the expected effects of the changes on employees and any other matters likely to affect employees provided that no employer is required to disclose confidential information the disclosure of which would be contrary to the employer’s interests.”

[23] It is accepted by the respondent that prior to the termination it made a definite decision to introduce major changes which resulted in termination of employment and major changes in the composition, operation or size of the employer’s workforce and did not discuss with the applicant the changes and their effect on him, or measures to avert or mitigate the adverse effects of such changes on him or provide, in writing, to the applicant information about the changes, prior to making the decision to terminate his employment and advising him of that decision on 24 January 2012.

[24] It follows, and I find, that the respondent did not comply with its obligation under clause 8 of the Plumbing and Fire Sprinklers Award 2010 to consult about the redundancy. On that basis, even though, on the evidence, the respondent no longer required the applicant’s job to be performed by anyone because of changes in the operational requirements of the enterprise, I find that the applicant’s dismissal was not a case of genuine redundancy.

Was the dismissal was harsh, unjust or unreasonable? (s.385(b))

[25] I return to s.385(b) of the Act, the remaining issue for determination: whether the dismissal was harsh, unjust or unreasonable?

[26] Section 387 of the Act sets out the matters the Fair Work Australia must take into account in considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable:

“(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 FWA considers relevant.”

Valid reason (s.387(a))

[27] In this case, the respondent no longer required the applicant’s job to be performed by anyone because of changes in the operational requirements of the enterprise but the dismissal was not a genuine redundancy, within the meaning of s.389 of the Act, because the respondent did not comply with its obligation under clause 8 of the Award to consult about the redundancy. The application of s.387(a) of the Act in such circumstances was recently considered by a Full Bench in UES (Int’l) Pty Ltd v Leevan Harvey 10(UES).

[28] By majority, the Full Bench in UES found that:

● “s.387(a) of the FW Act regarding the matter of whether there was a valid reason for the dismissal related to the person’s capacity or conduct does not go to the process for selecting the person for redundancy.” 11

● “FWA only needs to consider s.387(a) concerning whether there was a valid reason for a person’s dismissal related to the person’s capacity or conduct if one or more of the criteria in s.389 of the FW Act, which sets out the meaning of genuine redundancy, have not been met. The criteria in s.389 which have not been met can be taken into account in FWA’s consideration as to whether the dismissal was harsh, unjust or unreasonable as part of s.387(h), being ‘any other matters that FWA considers relevant’.”; 12 and

● the reasons for the dismissal of the employee - “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 redeploy him” 13 - “were not related to his capacity or conduct (including its effect on the safety and welfare of other employees). Accordingly, there cannot have been and was not a valid reason for his dismissal related to his capacity or conduct (including its effect on the safety and welfare of other employees).”14

[29] Sitting as a single Member, I am obliged to follow the Full Bench decision 15 which is directly on point.

[30] On the evidence, the applicant was dismissed because the respondent no longer required his job to be undertaken due to the financial necessity of the respondent to reduce staff levels, amongst other measures, to reduce costs and address significant losses being incurred over the last half of 2011. The reasons for the dismissal were not related to the applicant’s capacity or conduct. Accordingly, there was not a valid reason for his dismissal related to his capacity or conduct. This is a neutral matter with respect to whether the applicant’s dismissal was harsh, unjust or unreasonable.

Notification and opportunity to respond (ss.387(b) and (c))

[31] The matters in ss.387(b) and (c) of the Act deal with procedural fairness in respect of a reason for dismissal related to an applicant’s capacity or conduct. The applicant’s employment was not terminated for reasons related to his capacity or conduct. In the context that the termination did not relate to his capacity or conduct, the applicant was not notified of or given an opportunity to respond to a reason for his dismissal related to his capacity or conduct. In those circumstances, ss.387(b) and (c) of the Act are neutral matters with respect to my consideration as to whether the applicant’s dismissal was harsh, unjust or unreasonable.

Support person (s.387(d))

[32] There was no evidence of a refusal by the respondent to allow the applicant to have a support person present to assist at any discussions relating to dismissal. No request was made by the applicant to have a support person present to assist at any discussions relating to dismissal, nor was he offered such an opportunity.

Unsatisfactory performance (s.387(e))

[33] The dismissal did not relate to unsatisfactory performance by the applicant.

Size of the enterprise and human resource management (ss.387(f) and (g))

[34] The size of the employer’s enterprise - 15 persons at the time of the termination - and the absence of dedicated human resource management specialists or expertise within the company undoubtedly impacted on the flawed process followed in effecting the dismissal. Mr Roper’s evidence was that this group of redundancies was his first experience in giving effect to redundancies and he conceded that he failed to consult employees in relation to them as required by the Award. My consideration of the failure of the respondent to consult the applicant in accordance with the Award requirements, considered in the context of s.387(h) below, is informed by this context.

Other matters (s.387(h))

[35] Although there was no valid reason for the termination related to the applicant’s capacity or conduct, I am satisfied that there was a sound, defensible and well-founded reason for the applicant’s dismissal - the financial necessity of the respondent to reduce staff levels, amongst other measures, to reduce costs and address significant losses being incurred over the last half of 2011. The fact of those losses is substantiated by the evidence as to the financial situation provided by the respondent and the evidence of Mr Roper. The financial information provided supports the evidence of Mr Roper that his accountants advised him to significantly reduce costs to avoid insolvency and substantial savings were achieved through reductions in staff, salary reductions in some instances and reduction in materials and other expenses.

[36] The evidence is that the applicant was one of five employees made redundant between November 2011 and January 2012. Two other apprentices were made redundant and two sales persons were made redundant over that period. The respondent no longer required the applicant’s job to be performed by anyone because of changes in the operational requirements of its enterprise resulting from its financial circumstances. This consideration is relevant to my consideration as to whether the applicant’s dismissal was harsh, unjust or unreasonable and goes against a conclusion that the dismissal was harsh, unjust or unreasonable.

[37] The choice of the applicant was made, following discussion with senior staff, to achieve a preferred balance of remaining staff, having regard to the relative cost of the applicant and other apprentices and additional vehicle insurance costs in relation to the applicant. It was reasonable in the circumstances. There is no evidence that the applicant was selected because of a personal dislike of him by Mr Roper and the offer from Mr Roper to reemploy the applicant should business conditions improved is inconsistent with that proposition.

[38] As already noted, the respondent did not comply with its obligation under clause 8 of the Award to consult about the redundancy of the applicant. The failure to consult was unreasonable. The failure to consult is also a relevant matter as to whether the applicant’s dismissal was harsh, unjust or unreasonable, supporting the conclusion that the dismissal was harsh, unjust or unreasonable. Against that, however, the evidence suggests that given the circumstances of the reduction in staff numbers involving a demonstrated need to reduce costs and the selection of one out of a very limited number of service staff and the basis for selecting the applicant - relative cost and team balance - the failure to consult would not have affected the ultimate outcome.

[39] There is no doubt that the termination impacted adversely and harshly upon the applicant, as a fourth year apprentice, with outstanding schooling to be completed. However, the selection of another apprentice, instead of the applicant, would have had an adverse effect upon that employee. I am not persuaded that the applicant was more harshly affected than any other employee would have been if selected for redundancy.

Conclusion regarding harsh, unjust or unreasonable

[40] Taking into account the matters arsing under s.387 of the Act referred to above, I am not satisfied that the applicant’s dismissal by the respondent was harsh unjust or unreasonable. A failure to consult can, when considered against all other relevant matters within s.387 of the Act, mean a dismissal was harsh, unjust or unreasonable. However in the circumstances of this matter, I find that the failure to consult, although unreasonable, does not lead to a conclusion that the dismissal was harsh, unjust or unreasonable, given the valid reason for the dismissal and proper regard to the effect of the size of the enterprise and the absence of human resource management specialists or expertise on the processes applied (or not applied) by the respondent.

[41] Balancing all of the relevant considerations under s.387 of the Act in the circumstances of the matter, I find that the termination was not harsh, unjust and unreasonable. The application is dismissed.

SENIOR DEPUTY PRESIDENT

Appearances:

C Komodromos for the Applicant.

R Roper for the Respondent.

Hearing details:

2012.

Melbourne:

October 1.

 1   [2012] FWA 3754.

 2   [2012] FWA 3754, at para 28.

 3   Exhibit M1.

 4   Exhibit M2.

 5   Exhibit R2.

 6   Exhibit R1.

 7   The applicant indicated that an application will be made to the Court in respect of it.

 8   [2012] FWA 3754, at para 28.

 9   MA000036.

 10   [2012] FWAFB 5241.

 11   [2012] FWAFB 5241 at para 26.

 12   [2012] FWAFB 5241 at para 27.

 13   [2012] FWAFB 5241 at para 31.

 14   [2012] FWAFB 5241 at para 42.

 15   Pacific Access Pty Limited v Community and Public Sector Union (1998) 83 IR 323.

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