Putta Ayappagari v Australian Opal Cutters Pty Ltd

[2013] FWC 8553

[2013] FWC 8553

FAIR WORK COMMISSION

DECISION

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

Putta Ayappagari
v
Australian Opal Cutters Pty Ltd
(U2013/9081)

DEPUTY PRESIDENT SAMS SYDNEY, 31 OCTOBER 2013

Application for relief from unfair dismissal - serious misconduct - falsifying sales invoice to increase commission - lying to employer - Small Business Fair Dismissal Code - serious misconduct proven - valid reason for dismissal - dismissal not unfair - application dismissed.

BACKGROUND

[1] Mr Putta Reddy Ayappagari (the ‘applicant’) was employed as a sales consultant by Australian Opal Cutters Pty Ltd (the ‘respondent’) from 19 January 2009 to 16 April 2013 (four years and three months). The applicant was dismissed for serious misconduct following his suspension on 12 April 2013 and subsequent investigation into a sales transaction he had conducted on 9 April 2013. The relevant paragraphs of the applicant’s termination of employment letter were as follows:

‘This letter confirms the summary termination of your employment, due to serious misconduct, effective 16 April 2013.

As discussed with you on 16 April 2013, the reason for your dismissal is fraudulent altering of a sales invoice, and lying to the Chairman regarding a sale transaction on 10 April 2013.’

The actual customer sale was on 9 April 2013, but various documents, including this one, identify the date as 10 April 2013. In any event, nothing turns on which date it was.

[2] The applicant had been employed under a Contract of Employment which provided a relatively modest sum as a base salary (at the time of commencement in 2009, it was $33,000) with additional significant discretionary bonuses, based on discounts and commissions. Clause 6.5.2 of the Contract permits the immediate termination of the employee for serious misconduct. While the term ‘serious misconduct’ is not defined, I proceeded on the basis that when given its plain, ordinary English meaning, it would include fraudulent conduct of an employee. I will say more about the definition of serious misconduct later.

[3] The respondent is a small business, as defined by s 23 of the Fair Work Act 2009 (the ‘Act’), having 13 employees at the time of the applicant’s dismissal. It claimed that the applicant’s dismissal was consistent with the Small Business Dismissal Code (the ‘Code’). I shall return to the requirements of the Code later.

[4] The respondent regarded the actions of the applicant as constituting serious misconduct in that he knowingly made false declarations on a Sales Tax Local and International Client Form, fraudulently deprived the respondent of sales revenue, but more importantly, placed the respondent at risk of pecuniary penalties under the tax, customs and excise laws of the Commonwealth. In addition, the respondent claimed, which the applicant did not deny, that he had lied to the respondent’s Chairman, Mr Graeme Blaiklock as to the true nature of the transaction on 9 April 2013. I was advised the matter had been referred to the Police, but no information was available at the time of the hearing as to what, if any, action the Police proposed to take.

[5] In the result, the applicant filed a claim for a remedy from unfair dismissal, pursuant to s 394 of the Act. For reasons which are not relevant, the matter was not the subject of any pre-hearing conciliation in the usual way. However, in view of this, I conducted a private conciliation conference on the morning of the arbitration. However, this proved unsuccessful.

THE EVIDENCE

[6] The applicant and Mr Blaiklock were the only persons to give evidence in the proceeding.

For the applicant

[7] In his witness statement, the applicant did not directly address the details of the incident on 9 April 2013. His defence was explained in oral evidence which I will come to shortly.

[8] The applicant said that it was a busy morning in the shop on 10 April 2013. He was required to reconcile the previous day’s invoices and balance the cash and prepare for the day’s business. It was expected that 15-20 customers would be coming to shop at the store from a cruise ship. He was required to send two emails to a customer from the day before, but only sent one. However, he told the Chairman he had sent two. He later admitted his mistake and apologised to the Chairman. He was suspended on 11 April and the next day, he was told by Manager, Leigh Brown, that as a result of the inappropriate sales transaction on 9 April, he could resign or else he would be terminated.

[9] When the applicant was asked to come to a meeting with management the next day, he refused in order to have more time ‘to take a second opinion.’ It was agreed that they meet on 16 April 2013. On that day, the applicant met Mr Blaiklock and Mr Brown. He explained the invoice had been modified within the guidelines and he also apologised for lying to Mr Blaiklock, attributing this to how busy he had been that morning. The applicant told them that if he had known that changing the discounts was wrong, he would have asked for a better pay structure. He said he should have been corrected by the CFO or the accountant. He would forfeit his commission if he could have his job back. After the meeting was adjourned, Mr Brown returned and handed him the termination of employment letter.

[10] The applicant made a number of seemingly unrelated complaints that:

• he and the other sales staff had been told not to inform customers that the jewellery was sourced or made in Hong Kong and China;



• he was bullied and pushed down the sales ‘pecking order’;



• being last in the ‘pecking order’, the applicant served fewer customers and earned less commission. Nevertheless, he was a high achieving sales person; and



• he was racially discriminated against by being told not to answer the phone, because the company was an Australian company and not an Indian one.

[11] In cross examination, the applicant was asked to explain the creation of the three invoices in respect to the sales transaction to Mr Michael Bath. The first invoice (17188) disclosed that two items - a dark opal and a loose boulder opal were sold for $14,500 and $10,500 respectively. The applicant agreed these prices were not the agreed prices for the items. The applicant claimed the customer’s credit card was causing problems and he was rushing to catch a flight. So he prepared the invoice as quickly as possible as it was this invoice, totalling $25,000, which needed to be produced at Customs to take the gems out of the country. As the customer was in a hurry and his credit card was not working, they had negotiated a total price. The applicant did not accept this was a fraudulent invoice, because it still totalled $25,000. In fact, the customer had plans to buy four stones for $47,000, but could not do so because of his credit card issues. The second invoice reversed both amounts completely and disclosed a nil balance (171944). The third invoice (17195) now disclosed the first item was worth $18,100 and the second item as $6,900.

[12] The applicant said the gems were required to be placed in a sealed bag with the invoice for Customs purposes. In this case, he put the first invoice in the sealed bag and gave the customer the goods. The customer provides the customs declaration at the airport. He said that the total amount for the invoice did not change, but a new invoice was required to indicate the discounting factor was different. However, the customer had not requested a different invoice to the amounts he actually paid for each stone. All of the invoices were seemingly dated the same day. However, the applicant claimed that shortly after the transaction, the customer called him and said that the invoice did not reflect the actual price paid for each stone. He agreed to reissue the invoice, cancel the product valuation certificate and send him the new invoice.

[13] The applicant said that when he negotiated a price with a customer, he did so based on the commission he would receive. It did not matter to the customer as he was paying the same amount. The applicant claimed he had made a similar transaction in January and Mr Blaiklock had approved his commission for that sale. The applicant claimed that once commission is calculated on a sale, the statement is emailed to Mr Blaiklock and after the audits, it goes to the accounts. The applicant claimed he did not know what he had done was wrong, as he was not an accounts or an IT person. Keeping the customer happy was the imperative. Even so, if someone had told him not to do what he did, he would have accepted it. He had told Mr Blaiklock and Mr Brown this and offered to forego his commission, if he could get his job back.

[14] The applicant agreed that in 4 ¼ years of employment creating 5-6 invoices a day, he was very familiar with the process for invoicing a sale. He agreed the accounts department would want details of a reversed invoice and, having done this at least ten times, no one had ever raised it as an issue.

[15] The applicant stressed that he had apologised to the Chairman for lying when he told him he had emailed the invoice to the customer.

For the respondent

[16] In a written statement, Mr Blaiklock said that the conduct of the applicant in voiding a ‘Sealed Bag Declaration’ customer invoice, while rewriting another in order to gain a financial advantage of $2500, disregarded ATO rules and constituted gross misconduct. The respondent was liable for $2272.72 in these circumstances.

[17] Mr Blaiklock described what had been put forward by the applicant as ‘untrue and peripheral’. He had deliberately and falsely declared the terms of a sale so as to increase his commission by dishonestly voiding an invoice and replacing it with another. He had also lied that this had been done with the consent of the client. If this was so, it could constitute a conspiracy with the client to mislead the ATO, resulting in a $5,000 fine or 12 months imprisonment. It also breached GST regulations, leaving the respondent open to further sanction.

[18] Nevertheless, Mr Blaiklock deposed that the respondent regretted no longer having the benefit of the applicant’s sales. However, the risk of having an employee who engages in conduct that left the respondent open to serious liabilities, could not be countenanced. He had engaged in the conduct, without the knowledge of the Chairman, and later lied to him about it. Mr Blaiklock rejected any evidence of the applicant that the respondent had acted in a similarly dishonest fashion in the past.

[19] Mr Blaiklock set out the wording on the Sealed Bag Declaration which is as follows:

‘I will surrender the sealed bag for examination and for invoice detachment to an authorised collection office at the baggage check-in counter to allow for invoice detachment. I will not interfere or break the seals of the bag or other package until the invoices attached to the outside have been detached by authorised collection officers ... I will not remove or alter any invoice attached to the outside of the sealed bag, or any other sealed package, or break the seals of the package until departure from Australia. I am aware that the Taxation Administration Act 1953 may provide for penalties of up to $5,000 and/or imprisonment for up to 12 months where a person makes a false or misleading statement. In this declaration and the Customs Act 1901 and Excise Act 1901 provides severe penalties are interfered with or not exported ... The Taxation Administration Act 1953, the Customs Act 1901, the Excise Act 1901, provide for severe penalties for persons who make statements to officers which are false or misleading in a material way.’

[20] Mr Blaiklock noted that, prior to his dismissal, the applicant had told him that he had another job that would begin in two months.

[21] In cross examination, Mr Blaiklock denied that the Company permitted invoices to be issued without the customer filling in details of sales tax on the form. Rather, the respondent always required staff to fill in these declarations, although this was sometimes a ‘challenge’. He had no record of any other staff voiding invoices to obtain a higher commission. He was aware of a Chinese-speaking staff member who had difficulty with the forms, but he was closely supervised. If any staff member had been allowed to discount 90%, they would need Mr Blaiklock’s approval. Any discount over 50% required his permission. The dismissal of the applicant was largely due to his dishonesty, which he had subsequently admitted, when he said that he had sent an email to the client when he had not.

[22] Mr Blaiklock noted that the applicant had admitted his lie about sending the client an email with the revised invoice. The impact of his lie to the client was that the client had gone through Customs with a false Sealed Bag Declaration. That act could have potential consequences of a $5,000 fine or twelve months’ imprisonment.

[23] Mr Blaiklock agreed that on one occasion, he had given permission to a Chinese-speaking employee to give away a $50,000 ring which was not mentioned on the invoice. He subsequently had to contact the customer to get the ring back. While he did not disagree that the loss to the Company was higher in that case, the issue for which the applicant had been dismissed was not about financial loss - it was about dishonesty. The applicant had put him in the embarrassing situation of having to question the client as to the price charged by the applicant. The applicant lied to Mr Blaiklock about the email to the client.

[24] Mr Blaiklock accepted that the respondent had lost a good salesperson when he dismissed the applicant. Sales were down as a result. However, there was an issue of being able to trust him. He agreed that he had had no problem with the accuracy of the in-house accounts and cash-counting performed by the applicant over the previous four and a half years. When asked why he had lost faith in the applicant for a ‘simple lie’, Mr Blaiklock answered:

‘That simple lie was to gain a sum of $2,500 and odd, an extra $2,500 or roughly that amount of money. That’s what the lie was about. That was the point of your lie and if you can lie to the company and to me in order to earn yourself another $2,500 how can I trust you not to take a $2,500 piece of jewellery which you could sell for the same amount to somebody? This is about integrity. This is about the fact that you lied about what you did.’

[25] Mr Blaiklock conceded that his statement should have set out that the applicant had attempted to fraudulently deprive the Company of revenue. He had not actually been paid the amount to which he was not entitled. He had been paid what he would normally have been paid, if he had processed the invoice appropriately.

[26] When asked about his statement that the applicant had made a false declaration on the sale, Mr Blaiklock agreed that it was actually the customer who signed the Sealed Bag Declaration. Nevertheless, by changing the invoice, the applicant was falsifying the Sealed Bag Declaration, unbeknownst to the customer. The customer had signed the Declaration in good faith. The respondent had never given permission for an invoice to be changed after it was placed in a Sealed Bag Declaration signed by the customer.

[27] Mr Blaiklock agreed that he set the pricing before any discounts were available and that discounts could be applied of between 0-75%. However, permission was always required for a discount of 50% or more on an individual item. He emphasised that the discount was not averaged across the sale, but on each item. If the applicant had not previously followed this policy, then it had gone ‘under the radar’.

[28] Mr Blaiklock agreed that the calculation of the applicant’s commission was done by Mr Stephen Case, the accountant. This was then approved by him and paid to the applicant. Even so, he was sure the applicant kept track of his commissions. Mr Blaiklock agreed that the current commission structure had been introduced and administered two years previously by Mr Glen Thompson, the CFO and Financial Officer. He could not say why Mr Thompson had not approached the applicant to correct inappropriate discounts. If the Company had known about it, it would have stopped it.

[29] Mr Blaiklock denied that the applicant had been dismissed for raising the fact that the respondent’s products were manufactured overseas, contrary to its own marketing materials.

[30] In re-examination, Mr Blaiklock said that the gems sold by the respondent were individually priced, although there were ‘bargain’ items in a barrel, which are sold for $30. He understood that the two gems sold by the applicant would have ordinarily retailed for $50,000 and that the customer had actually got them for a total of $25,000. There was no possibility that the two gems would have been presented as a job lot.

[31] In response to a question from me, Mr Blaiklock acknowledged that where a customer asked for a discount on the basis of buying numerous opals, it would vary the discount on the individual item. However, for an individual discount of 50%, approval was required. He noted that the pearl earrings on the invoice were ‘always a freebie’ for good customers.

[32] Mr Blaiklock said that the applicant had been given a copy of his employment contract which set out the rules for discounting and commissions.

SUBMISSIONS

For the applicant

[33] The applicant provided a document marked ‘Outline of Submissions’. It was similar in content to his statement and I will not repeat it to that extent, although he did make some further submissions and assertions.

[34] The applicant believed that the decision to dismiss him was harsh and unfair. He said that he had been notified of the decision to dismiss him after the meeting, when he was handed the dismissal letter. He had not had a chance to respond to the reason given as the respondent had already made a firm decision to dismiss him, if he did not agree to resign.

[35] The applicant submitted that he had not breached any Company policy. He was allowed to discount jewellery within a range of 0-75% and he was paid commission based on those discounts. There were no set rules as to how the discounts were applied. His pay structure meant that his income was highly dependent on commission. This was not the first time that an invoice had been modified, so as to earn more commission.

[36] The applicant denied the accusations by Mr Blaiklock that he had engaged in serious fraud. The commission was calculated by a third person. After the new commission structure was implemented, the commission was calculated by the CFO, Mr Glen Thompson, and then by the accounts intern and then the IT Manager. After it was calculated, it would be sent to Mr Blaiklock, Mr Brown, the accounts department and himself. He asked rhetorically: if he had been doing something wrong, why had he not been cautioned or warned in the past?

[37] The applicant submitted that another employee had discounted an item to less than cost price and had given away a signature piece opal ring worth $50,000, without having listed it on the invoice. The applicant considered that this was far more serious than his own conduct and noted that this employee was still employed. He accused the respondent of differential treatment.

[38] The applicant claimed that he had a long and excellent work history. Mr Blaiklock had expressed his appreciation by saying that he was one of the best salespersons he had seen in his life.

[39] The applicant set out a number of factors which he believed were the true reasons behind his dismissal. Firstly, he had raised concerns as to a Company advertisement which used the phrase, ‘Buy direct from the manufacturer and save’. He had discreetly mentioned to Mr Blaiklock that he thought this was misleading. He had been told that he was Asian and he should just do what the Australian Company told him to do and that he did not understand the proper definition of ‘manufactured’. In addition, he was told to tell customers that the opals were cut and the jewellery made by the respondent. However, this was not true. 100% of the pearl jewellery is sourced from China and 70% of the opal jewellery was sourced from Hong Kong. He said he had been asked to remove ‘Made in Hong Kong’ stickers from the watches. The applicant said he found lying to customers distressing.

[40] Secondly, the applicant submitted that the ‘personal selfish agenda’ of a Cruise Ship manager was responsible for his termination. This manager was on a 457 visa and might have wanted to recruit some of his colleagues on 457 visas.

[41] The applicant further alleged that the respondent was unhappy with him earning more commission. He noted that another employee had sold two items for $11,000 at 85% discount. He could not understand that simply because he had earned more commission, this somehow constituted ‘serious misconduct’. He did not believe he had caused any loss to the Company. If he had conducted the second modified discount in the first place, there would not have been any action taken against him.

[42] The applicant believed that, as an alternative to dismissal, it would have been possible for the respondent to deny him his commission and issue him with a warning. Really, they had dismissed him because they did not want him to raise the issues above. The applicant sought his commission for the sale to be paid in full and sought orders for compensation for the loss of income and for the stress caused in forcing him to mislead customers.

[43] In oral submissions, the applicant repeated that he had not been given an opportunity to respond to the decision to terminate him on 16 April 2013. He had asked Mr Brown if he could speak to Mr Blaiklock again, but Mr Brown had replied, ‘No use’.

[44] The applicant emphasised that he had not breached Company policies - he had applied discounts within his limit of 75%. He claimed that if he had been the person calculating the commission, then he would be guilty of fraud, if indeed it was fraud. Nobody had told him that what he was doing was wrong. He would not have risked his ongoing employment for a mere $2,000.

[45] The applicant responded to Mr Blaiklock’s assertions that he had lost trust in him by noting that he handled cash everyday for the Company. He could not see how Blaiklock’s statement could be right.

[46] The applicant closed his submission by seeking either to be reinstated, or for appropriate compensation for the loss of income from the time he was dismissed.

For the respondent

[47] The respondent did not prepare formal submissions, but provided an amended Form F3 - Employer’s response immediately prior to the hearing, to which was attached a short, unsigned document marked ‘Submission on Objection to the unfair dismissal application’. It set out that the respondent employed less than 15 employees and that the applicant’s dismissal was consistent with the Small Business Fair Dismissal Code.

[48] Further, the statement outlined how the applicant had fraudulently altered a sales invoice, which caused a loss of revenue to the respondent and made it liable to prosecution, with consequences, including imprisonment. The actions of the applicant constituted serious misconduct and he was dismissed pursuant to clause 6.5.2(b) of his employment contract. The relevant clause is set out as follows:

‘5.2 The Company may immediately terminate the Employee’s engagement if:

(a) the Employee fails to observe and perform any of the obligations of this deed; or

(b) the Employee is guilty of serious misconduct in relation to the Employee’s engagement as a Employee of the Company.’

[49] The statement explained that the applicant had been given an opportunity to respond to the allegations, and had done so, by way of email on 11 April 2013. Subsequent to this, the applicant was dismissed. The respondent described the application as ‘vexatious’ and having ‘little reasonable prospects of success given the enormity of the misconduct.’

[50] In oral submissions, Mr B Gelonesi, Solicitor, referred to Jarvis v Anderson Plumbing & Roofing Pty Limited[2010] FWA 8896.He said that the evidence given by the applicant demonstrated that he was aware that he had been changing invoices in a way that would affect his commission and have possible adverse consequences for his employer in the event of an audit. The amount of money in question was approximately equivalent to one month’s wages. He had raised the cost of one item to approximately $18,000 and lowered the price of the other to less than $7,000. The effect was that he received a commission that was approximately $2,000 higher, than it would have been otherwise.

[51] Mr Gelonesi acknowledged that the applicant’s excuse that he had processed the sale as a ‘job lot’ would have been reasonable if the gems had been listed as such. However, where the customer required the specific sale price for the purposes of insurance evaluation, the gems were always individually priced. There was no credible evidence to show that the customer had asked for this to be altered.

[52] Mr Gelonesi submitted that the evidence disclosed that there were three invoices issued on the same day. The applicant was unable to account for when the emails had been sent and recovered. The applicant’s evidence that the date of 9 April 2013 being shown on all three invoices, as being due to a software fault, was not credible. The Commission should accept that the applicant had manipulated the invoices to his advantage. They could not have physically been generated within one second of each other.

[53] Mr Gelonesi submitted that the applicant had attempted to hide the fact of his misconduct by an argument as to whether or not he had authority to charge the commission he had in fact charged.

[54] Mr Gelonesi characterised the misconduct of the applicant as fraudulent. As the respondent was a small business employer, it had behaved consistently with the Small Business Fair Dismissal Code. The application should be dismissed.

CONSIDERATION

Relevant statutory provisions and authorities

[55] Earlier in this decision, I dealt with the jurisdictional prerequisites which must be satisfied before an unfair dismissal application is determined by the Commission on its merits. The remaining matters for the Commission to determine under s 385 of the Act, are whether the applicant’s dismissal was consistent with the Code and whether the dismissal was ‘harsh, unreasonable or unjust’, within the meaning of s 387 of the Act. This later section is expressed as follows:

‘387 Criteria for considering harshness etc.

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

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

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

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

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

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

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

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

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

[56] The oft-quoted passage below from Byrne & Frew v Australian Airlines Ltd [1995] HCA 24 explains the meaning, in short terms, of the expression ‘harsh, unjust or unreasonable’. Their Honours McHugh and Gummow JJ said at para [128]:

‘It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment may be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted’.

Serious misconduct and the Act’s Regulations

[142] There is no doubt that this is a case involving allegations of serious misconduct, namely, the applicant’s alleged fraudulent conduct on 9 April 2013 and his subsequent lying to the respondent. In this respect, it is helpful to refer to the Act’s meaning of serious misconduct where, at s 12, it says:

‘12 The Dictionary

In this Act:

...

serious misconduct has the meaning prescribed by the regulations.’

The regulations referred to are r 1.0.7(1), (2) & (3) of the Fair Work Regulations 2009, (the ‘Regulations’). They are expressed as follows:

‘1.07 Meaning of serious misconduct

(1) For the definition of serious misconduct in section 12 of the Act, serious misconduct has its ordinary meaning.

(2) For subregulation (1), conduct that is serious misconduct includes both of the following:

(a) wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;

(b) conduct that causes serious and imminent risk to:

(i) the health or safety of a person; or

(ii) the reputation, viability or profitability of the employer’s business.

(3) For subregulation (1), conduct that is serious misconduct includes each of the following:

(a) the employee, in the course of the employee’s employment, engaging in:

(i) theft; or

(ii) fraud; or

(iii) assault;

(b) the employee being intoxicated at work;

(c) the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee’s contract of employment.’

[57] If the Commission concludes that the applicant had engaged in fraud by reversing the invoices to gain a financial advantage, then there could be little doubt that the applicant would be found to have engaged in serious misconduct. Such conduct would invariably constitute a valid reason for the applicant’s dismissal. The respondent also highlighted the risks to its business and perhaps to Mr Blaiklock personally, if a breach of the customs and/or the tax laws had been committed by the applicant altering the invoices. I do not understand the applicant contends otherwise. This was rightly viewed as a very serious matter by the respondent. In addition, the applicant acknowledged that he lied to Mr Blaiklock when questioned about emailing the customer with the correct invoice.

[58] Lucev J recently summarised the meaning of serious misconduct in Wintle v RUC Cementation Mining Contractors Pty Ltd (No.3) [2013] FCCA 694. At paras [97]-[103], His Honour said:

‘97. To define “serious misconduct” by reference to its “ordinary meaning” as is done in reg.1.07(1) of Div.2 of Part 1-2 of Ch.1 of the FW Regulations is not of particular assistance in determining whether or not the conduct for which the employee has been terminated is serious misconduct disentitling an employee to the minimum period of notice prescribed under the NES. That is because, both historically and in more modern times, courts have been wary of defining the extent of “misconduct” which justifies dismissal, and where they have attempted the task have made it clear that the misconduct must be sufficiently “serious” as to warrant non-continuation of the contract between employer and employee. Thus, the “ordinary meaning” definition of “serious misconduct” adds little, if anything, to the content of the meaning of “serious misconduct”.

98. In Clouston & Co Limited v Corry it was observed that there “is no fixed rule of law defining the degree of misconduct which would justify dismissal”.

99. In Laws v London Chronicle (Indicator Newspapers) Ltd it was observed that:

… if summary dismissal is claimed to be justifiable, the question must be whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service.

… one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one of its essential conditions; and for that reason, therefore, I think that one finds in the passages which I have read that the disobedience must at least have the quality that it is “wilful”: it does (in other words) connote a deliberate flouting of the essential contractual conditions.

100. In North v Television Corporation Ltd the Australian Industrial Court was called upon to consider the word “misconduct” as used in an industrial award covering journalists. In the joint judgment in North it was observed that:

It is of assistance to consider the expression “misconduct” by reference to subject matter to which it is related and the context in which it appears. The subject matter is the termination by one party against the will of another of a continuing contract of employment on the ground of breach of one of the terms of the contract. And the context is such as to indicate that certain breaches of a non-serious nature, some of which would be within the connotation of misconduct, are not regarded as grounds for termination. In such a situation it is reasonable to interpret the expression “misconduct” as referring to conduct so seriously in breach of the contract that by standards of fairness and justice the employer should not be bound to continue the employment.

This situation would arise if there were conduct inconsistent with the fulfillment of the express or implied conditions of service. It is conduct of that kind which will justify dismissal at common law.

101. It was also observed in North by a single judge that although the conduct of the journalist concerned was “reprehensible” it fell short of misconduct justifying summary dismissal because it was an isolated incident which occurred “under [the] considerable strain” of preparing for a nightly news bulletin.

102. In Gera v Commonwealth Bank of Australia Ltd the employee’s Australian Workplace Agreement provided for termination without pay in lieu of notice for misconduct if the misconduct was serious. In that case it was observed that:

The use of the adjective “serious” imposes an additional requirement before the Bank can terminate employment without notice. Something more than mere misconduct is required.

103. In Gera the Court went on to find that there was no doubt that the sexual or indecent assault of a fellow employee was serious misconduct warranting summary termination without payment in lieu of notice, as it constituted a fundamental breach of an employee’s duty, particularly where the employee was a senior employee and mentor to the employee who had been assaulted [footnotes omitted].’

[144] Before leaving the general statutory provisions, I repeat the statutory instruction in s 381(2) of the Act to apply the principle of a ‘fair go all round’:

‘(2) The procedures and remedies referred to in paragraphs (1)(b) and (c), and the manner of deciding on and working out such remedies, are intended to ensure that a “fair go all round” is accorded to both the employer and employee concerned.’

Meaning of valid reason

[59] As mentioned earlier, the applicant was summarily dismissed for serious misconduct. Given the applicant does not deny the conduct, there is no onus on the respondent to prove that the conduct occurred. What the Commission must determine is whether the conduct constituted serious misconduct, whether the conduct constituted a valid reason for the applicant’s summary dismissal and whether the applicant’s dismissal was consistent with the Small Business Fair Dismissal Code.

[60] The finding of a valid reason for dismissal is an essential ingredient in an unfair dismissal case. So much so is clear from the decision in Parmalat Food Products Pty Ltd v Wililo (2011) 207 IR 243, where the Full Bench said at para [24]:

‘24. We do not consider that the decision discloses a clear line of reasoning leading to the decision reached. The existence of a valid reason is a very important consideration in any unfair dismissal case. The absence of a valid reason will almost invariably render the termination unfair. The finding of a valid reason is a very important consideration in establishing the fairness of a termination. Having found a valid reason for termination amounting to serious misconduct and compliance with the statutory requirements for procedural fairness it would only be if significant mitigating factors are present that a conclusion of harshness is open. We do not believe that any of the circumstances involved in this matter amount to such factors.’

[61] The meaning of ‘valid reason’ in s 387(a) is drawn from the judgment of Northrop Jin Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 (‘Selvachandran’). This meaning has been applied by members of the Commission and its predecessors for many years:

‘In its context in s 170DE(1), the adjective ‘‘valid’’ should be given the meaning of sound, defensible or well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of s 170DE(1). At the same time the reason must be valid in the context of the employee’s capacity or conduct or based upon the operational requirements of the employer’s business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. The provisions must ‘‘be applied in a practical, commonsense way to ensure that’’ the employer and employee are each treated fairly, see what was said by Wilcox CJ in Gibson v Bosmac Pty Ltd (1995) 60 IR 1, when considering the construction and application of s 170DC.

The requirements of s 170DE(1) should not impose a severe barrier to the right of an employer to dismiss an employee. Nevertheless, in cases similar to the one before the Court, the application of s 170DE(1) should always be considered and decided before consideration is given to the additional limitations on the right of an employer to terminate the employment of an employee imposed by ss 170DE(2) and 170DC. The purpose of these two provisions is to confer a greater protection on employees from termination of employment. In this regard the provisions are not very different from the consequences flowing from an award provision similar to that considered in Byrne v Australian Airlines Ltd (1995) 47 FCR 300; 52 IR 10 and discussed in Johns. There procedural fairness was held to have been imported by implication as well as the substantive protection conferred by the award. The statutory provisions now apply, by reason of the Act, with minor exceptions, to all employees.’

[62] Even accepting that a finding of serious misconduct was open to the respondent, it must not be confused with the statutory language, which still requires the Commission to find that there was, or was not, a valid reason for dismissal (s 387(a)). In Royal Melbourne Institute of Technology v Geoffrey Asher[2010] FWAFB 1200, a Full Bench of Fair Work Australia (FWA) held at para [16]:

‘[16] In the circumstances of this matter the University purported to terminate Dr Asher’s employment for serious misconduct within the meaning of that term in the University’s enterprise agreement. If it successfully established that Dr Asher had engaged in serious misconduct it would necessarily follow that there was a valid reason for the dismissal. However, the converse is not true. As established by Annetta, the question that needed to be considered was whether there was a “valid reason” in the Selvachandran sense – whether the reason was sound, defensible or well founded. Whether it also amounted to serious misconduct may well be a factor relating to the overall characterisation of the termination but it was not an essential requirement in the determination of whether a valid reason exists.’

Issues of procedural fairness

[63] Subsections (b) - (e) of s 387 of the Act might be broadly characterised as issues relevant to whether a dismissed employee was afforded procedural fairness. In this case, I do not apprehend that the applicant seriously challenged the procedural process of the dismissal. However, he did complain that when he asked to speak to Mr Blaiklock after Mr Brown handed him the termination letter, Mr Brown had replied ‘No use’. I do not see how this could be a denial of procedural fairness, in that Mr Blaiklock was in the meeting of 16 April and the applicant had already had an opportunity to respond to the allegations directly to him. In addition, the applicant had also already responded in a detailed way by email of 11 April 2013. Nevertheless, notwithstanding the statutory requirements of s 387, the Code permits a small business employer to dismiss an employee, without notice or warning. In respect to summary dismissal, the Code sets out the following:

‘Summary dismissal

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

[64] The applicant’s defence was that no one ever told him that the practice he adopted with the transaction on 9 April 2013 was not acceptable. Indeed, to the contrary, he claimed he had done exactly the same thing on more than ten occasions previously, without anyone, including Mr Blaiklock, challenging his subsequent commission. Moreover, he had offered to forego the commission for this transaction, if only he could have his job back. A number of things may be said about this submission.

[65] Firstly, it may be readily observed from the preceding discussion of the evidence, that the applicant brought no corroborative evidence of him, or anyone else, engaging in the practice of reversing properly issued invoices in order to enhance the commission payable and without the knowledge of the customer or approval of Management.

[66] Secondly, offering to repay the commission for this transaction does not enhance the applicant’s credibility. The choice of repaying the commission and keeping his job was little more than a desperate plea to save his employment. It lends force to the argument that he knew he had done something wrong and had been caught out.

[67] Thirdly, the applicant argued, in any event, that the transaction fell within the Company’s guidelines for the giving of discounts. On one view, this is irrelevant, because the issue is not whether the applicant was acting within the policy, but that he had falsified the invoice. That said, I accept Mr Blaiklock’s evidence that any discount over 50% required his permission. His permission was not obtained on this occasion.

[68] I am troubled by the applicant’s claims of him routinely reversing invoices, without criticism. His doing so does not sit rationally with the serious implications for the respondent’s business if it is found out to be making false or altered invoices, contrary to the scrupulous guidelines expected of Customs and the Tax Office. I have difficulty in accepting that the respondent willingly condoned the practice. It strenuously rejects any suggestion that altering official documentation was commonplace. I accept that submission.

[69] In addition, there are other aspects of the applicant’s evidence which do not appear to be consistent with his claim of being unaware of any wrongdoing by reversing the invoice. For example, why would it have been necessary to lie to Mr Blaiklock that he had emailed the customer to provide him with the correct invoice? It has all the hallmarks of seeking to cover one’s trail by not alerting the customer to any discrepancy with the invoices. What the applicant was not to know, and why he got caught out, is that Mr Blaiklock had independently contacted the customer. He had told him he had no knowledge of the reversed invoices. Faced with this information, the applicant had little choice but to acknowledge his lie. This does not reflect well on the applicant’s credibility.

[70] Significantly, however, it is abundantly plain that the applicant had deliberately and intentionally sought to manipulate the purchase in order to maximise the financial benefit to himself by an amount of at least $2,000. There was no dispute that this was the effect of the reversed invoices. Of course, the customer made no complaint because, as far as he was concerned, the total price of the gems was all that concerned him at the time. I do not believe that the applicant told the customer, or ever intended to tell the customer, that he would manipulate the prices by changing their value to maximise the financial gain to himself. While it may not necessarily have mattered very much to the customer, it may well have had, if he had sought verification of the prices for insurance purposes or had been questioned by Customs over the different invoices. It is curious that the applicant claimed he rushed the first invoice because the customer was in a hurry to catch a plane. However, the signed sales tax and client form of the customer disclosed he was departing Sydney the next day.

[71] The applicant seems to believe that this is all about his right to maximise his commission. He does not acknowledge that he had done anything wrong. In an email to Mr Blaiklock of 11 April 2013, he said, inter alia:

‘This is about the $25,000 sale and commission structure in general. Let’s put the customer aside for a while. Let’s think that I did the invoice to get more commission for me, what’s wrong with that?’

Apart from the fact the customer had unknowingly carried a false invoice in the sealed bag and could have faced serious trouble if found out, this email demonstrates that the applicant was not the least bit concerned that altering the invoice was a serious matter involving breaches of Commonwealth laws. To him, nothing mattered, except that he should be able to maximise his commission in a fraudulent and dishonest way and then seek to cover it up by lying. I am afraid this self-serving email does not wash with me at all. He was the architect of his own demise.

[72] In my view, the applicant’s conduct was not an accident or some innocent mistake. It cannot be explained away by claiming, without any evidence, that he had done the same thing on numerous occasions, without question or criticism. His conduct represented a deliberate and wilful attempt to gain a financial benefit by deception. He effectively increased the commission payable to himself for two gems by falsely altering their individual value. I have no hesitation in concluding that this conduct was serious misconduct and constituted a valid reason for dismissal.

[73] Moreover, the applicant compounded his misconduct by lying to the Chairman in order to cover his tracks. I reject the applicant’s defence that he had lied to the Chairman because he was so busy that morning. There was no corroborative evidence that the work the applicant was performing that day was any different or more onerous than any other busy day. In my opinion, ‘Blind Freddy’ could see what the applicant was intending to do by lying to the Chairman. He was covering his tracks with the customer. However, as mentioned earlier, he was caught out.

[74] The applicant sought to minimise his culpability for his conduct by claiming dissatisfaction with his salary and the commission structure. This is irrelevant. While he may well have had a legitimate grievance to complain about his base remuneration, the answer is not to defraud the employer and, more critically, place the employer’s viability in jeopardy with the relevant Government authorities. Such behaviour cannot be tolerated, under any circumstances and most certainly will not be tolerated by this Commission.

[75] The applicant speculated that there were other, unrelated reasons why he was dismissed; that he had complained about having to mislead customers as to the source and manufacture of the jewellery and that a ‘selfish’ cruise ship manager was responsible for his dismissal. In my view, these assertions were no more than unsubstantiated diversions to deflect attention from the seriousness of his own misconduct.

[76] The applicant raised a number of unrelated complaints against the respondent, such as bullying and racial discrimination; See para [10]. None of these complaints were corroborated and there was no evidence that the applicant had previously raised these matters with Management. It seems that these were afterthoughts, thrown into the mix, as if in some way, to discredit the respondent and enhance the applicant’s credibility. Unfortunately for him, they did neither. Even if there was some basis for the applicant’s beliefs, they do not serve as a counterbalance to his serious misconduct.

Specific matters under s 387 of the Act

[77] On 10 April 2013, the applicant was suspended and he knew the basis of his suspension. The next day he was invited to resign or face the termination of his employment (ss 387(b) and (c)). He was asked to a meeting the next day, but declined in order to seek ‘a second opinion’ (This notion of a ‘second opinion’ was not explained). He responded to the allegations in a detailed email of 11 April 2013. The applicant ultimately attended a meeting with Mr Blaiklock and Mr Brown on 16 April 2013. In other words, he had at least five days to prepare his defence. He knew what the meeting was about and was given an opportunity to respond to the allegations, which he did, in writing and during the meeting (s 387(c)).

[78] There was no evidence that the applicant asked for, and was refused a support person to attend the meeting (s 387(d)) and the Code). The dismissal was not for unsatisfactory performance. S 387(e)) is therefore not relevant. Nor are the sections dealing with the size of the employer or whether it had any dedicated human resource advice (s 387(f) and (g)).

[79] Notwithstanding the less stringent provisions in the Code, I am satisfied the applicant was afforded procedural fairness in respect to his dismissal and had the Code not been relevant, the procedural requirements of s 387 were met.

[80] In any event, I am satisfied that the applicant’s dismissal was not inconsistent with the Code. The respondent not only had reasonable grounds to believe the applicant’s conduct justified immediate dismissal, but had clear and cogent documentary evidence that a fraud had been committed. It had reasonable grounds for reporting the matter to the Police.

[81] For the aforementioned reasons, I conclude that the applicant’s dismissal on 16 April 2013 was not ‘harsh, unreasonable or unjust’ within the meaning of s 387 of the Act. There is no basis for the Commission to intervene in respect to the respondent’s decision to dismiss the applicant for serious misconduct. The dismissal was not inconsistent with the Small Business Fair Dismissal Code. For completeness, this result is consistent with the principle set out in s 381(2) of ensuring a ‘fair go all round’ for both employer and employee. The application for a remedy from alleged unfair dismissal must be dismissed. An order to that effect will accompany the publication of this decision.

DEPUTY PRESIDENT

Appearances:

Applicant in person.

Mr B Gelonesi, Solicitor, for the respondent.

Hearing details:

Sydney:

2013.

6 September.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR543981>