Rerkchai Hongnipon, Mr Rerkrit Hongnipon & Wei Wei v Total Fire Stopping Pty Ltd
[2023] FWC 3412
•20 DECEMBER 2023
| [2023] FWC 3412 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Rerkchai Hongnipon, Mr Rerkrit Hongnipon & Wei Wei
v
Total Fire Stopping Pty Ltd
(U2023/7825, U2023/7815 & U2023/7918)
| DEPUTY PRESIDENT ROBERTS | SYDNEY, 20 DECEMBER 2023 |
This decision deals with three separate applications for relief from unfair dismissal made under s.394(1) of the Fair Work Act 2009 (Cth) (Act). The applications were brought by Mr. Rerkrit Hongnipon, Mr. Rerkchai Hongipon and Mr. Wei Wei (together, the Applicants). The Respondent in each matter was the former employer of the Applicants, Total Fire Stopping Pty Ltd (Respondent).
The employment of each applicant was brought to an end by the Respondent on 18 August 2023.
Because the Applicants were all terminated in similar circumstances by the Respondent, I determined that the matters should be listed for hearing at the same time. The matters were heard together in private conference on 4 December 2023.
Preliminary Issues
Two preliminary issues were dealt with at the commencement of the conference. The Applicants were self-represented. None of the Applicants sought reinstatement. In his written outline of argument filed with the Fair Work Commission (Commission), Mr. Rerkchai Hongnipon said he did not seek compensation, although at another point in the submissions he indicated that he would accept a sum determined by the Commission. Mr. Wei, in his outline, said he wanted an order for a formal letter of apology from the Respondent as a remedy. Mr. Rerkrit Hongnipon expressly sought the remedy of compensation.
After some discussions with the parties and clarification of their respective positions, the Applicants pressed their applications on the basis that their dismissals were unfair and that if the Commission were to conclude that to be the case, the Applicants would be seeking that an appropriate order for compensation be made under s.392 of the Act. I determined that I would amend the applications of Mr. Rerkchai Hongnipon and Mr. Wei under s.586(a) of the Act, to the extent necessary, to reflect that those Applicants were seeking an order for compensation.
Prior to the conference, directions were made about the filing of evidence, including witness statements. No witness statements were filed by the Respondent. Mr. Chen, a director of the Respondent attended the conference. His representative proposed that he be called to give evidence. I pointed out that the Applicants would be disadvantaged by not having heard that evidence in advance of the conference in circumstances where they had complied with the directions and put on their evidence in chief in writing. Mr. Wei said he wanted to see Mr. Chen’s evidence in chief in writing. The other applicants said they preferred to have the matter dealt with at the conference rather than delay the proceedings to allow for a written statement. I determined that the matter could be dealt with in a quick, fair and just manner by adopting the latter course. Mr. Chen gave his evidence in chief from the witness stand.
Legislation and Issues for Determination
Section 385 of the Act provides that a person has been unfairly dismissed if the Commission 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.
The Respondent objected to the applications on the basis that the termination of the employment of each of the Applicants was a case of genuine redundancy and that the dismissals were not harsh, unjust or unreasonable. No objection was taken on the basis of s.385(a) or (c).
Section 396 of the FW Act provides that before considering the merits of an application for an unfair dismissal remedy order, the Commission must decide some other matters. Section 396 is as follows:
396 Initial matters to be considered before merits
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.
I am satisfied that each of the applications was made within the requisite statutory time period and that the Applicants were persons who were at the relevant time, protected from unfair dismissal. The Respondent did not contend otherwise. Nor was it contended that the dismissals were consistent with the Small Business Fair Dismissal Code. The dismissals were unrelated to employee conduct or capacity. I am satisfied that they were not consistent with the Code. I do however need to decide whether the dismissals were a case of genuine redundancy. One effect of the combined operation of s.385 and s.396 of the Act is that if a dismissal was a case of genuine redundancy, the Commission does not need to consider whether it is satisfied the dismissal was harsh, unjust or unreasonable. I turn first to consider whether each of the dismissals was a case of genuine redundancy.
Section 389 of the Act sets out the meaning of “genuine redundancy” for the purposes of the unfair dismissal provisions. It is in the following terms:
389 Meaning of genuine redundancy
(1) A person’s dismissal was a case of genuine redundancy if:
(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:
(a) the employer’s enterprise; or
(b) the enterprise of an associated entity of the employer.
Evidence and Submissions – ‘Genuine Redundancy’
The Applicants gave evidence about the circumstances leading up to their eventual termination by the Respondent by email on 18 August 2023. Mr. Wei’s evidence was that in about June 2023 he had become aware of an internal dispute between directors of the Respondent company and that one director, Mr. Chen, had approached him to gain his support against the other director. Mr. Wei said that Mr. Chen had threatened that he might lose his job if he did not cooperate with Mr. Chen and that he was subjected to other pressures, discriminatory behaviour and criticism of work performance. He said that Mr. Chen had terminated the Respondent’s employees so that he could selectively shift some of those employees to a new company under Mr. Chen’s control.
Both Mr. Rerkrit Hongnipon and Mr. Rerkchai Hongnipon gave evidence about changes that occurred at work at around the same time. They described meetings with Mr. Chen where they were asked to hand over company property. They were asked to work from home and directed not to talk with particular clients. They were asked to refer to Mr. Chen as the company’s only point of authority or contact. Mr. Rerkchai Hongnipon said his work email access had been disabled and he believed he was being used to resolve personal differences between the company’s two directors and pressured by Mr. Chen into resigning from the company. Mr. Rerkrit Hongnipon said that Mr. Chen had told him he had set up a new company to take over the Respondent’s work. Both of these applicants described extensive delays in the payment of their wages and the provision of pay slips in July 2023. They provided evidence that Mr. Chen had told all employees that the company’s operations would continue to run as normal, that the financial state of the Respondent was strong and healthy and that wages would be paid as soon as possible. Like Mr. Wei, they said that they believed that Mr. Chen had terminated the Respondent’s workforce to move some selected employees across to a new company.
Each of the Applicants said that their termination without notice on 18 August was unexpected.
Mr. Chen gave evidence for the Respondent. He described the background to the internal dispute between the directors. He said that by early June 2023 the other director had taken steps to ‘freeze’ the Respondent’s bank account and that this had created financial pressure, including the inability to pay employees on time. He said that by mid-June 2023 the company did not take on any more work because of the dispute between directors and the inability of the directors to agree on decisions affecting the company. He said that he had taken steps to remove the other director from his directorship and that this had resulted in proceedings in the New South Wales Supreme Court which were ongoing. Mr Chen said that he had tried unsuccessfully to ‘unblock’ the Respondent’s account so that employees could be paid. He said as part of the Supreme Court proceedings there were orders made that would allow him to operate the Respondent’s bank account for day-to-day business purposes provided certain conditions were met but that order was not made until 23 August 2023 by which time all of the Respondent’s employees had been terminated.
Mr Chen denied that he had transferred any of the Respondent’s employees to a new company. He said all employees were terminated at the same time. He said he had no option but for the company to cease trading and to make all employees redundant. He said all work in progress had stopped immediately and clients had to find alternative contractors to complete the work. Mr. Chen said that he had made employees aware that there was a dispute between directors and that this was causing the company difficulties. He said he had consulted his employees about these difficulties and that they were told the company was confident it would be able to continue to operate as usual.
Conclusion on ‘Genuine Redundancy’
I am satisfied on the evidence that at the time of the dismissals the Respondent no longer required the Applicants’ jobs to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. At that time the Respondent was unable to access company funds. It could not pay creditors, including its employees. In those circumstances it could no longer trade. I am also satisfied that redeployment was not an option. The evidence was that the business of the Respondent shut down in its entirety, aside from some residual certification by Mr. Chen personally in respect of work that had already been completed. No employees transferred to any associated entity of the Respondent and there was no evidence that would allow me to conclude that redeployment to such an entity was a reasonable or even viable option.
In order for there to be a genuine redundancy, s.389(1)(b) requires the employer to have complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy. The Respondent said that the Applicants’ employment was at all relevant times covered by the Manufacturing and Associated Industries and Occupations Award 2020. This was not put in issue by the Applicants. Clause 41 of that Award provides as follows:
41. Consultation about major workplace change
41.1 If an employer makes a definite decision to make major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the employer must:
(a) give notice of the changes to all employees who may be affected by them and their representatives (if any); and
(b) discuss with affected employees and their representatives (if any):
(i) the introduction of the changes; and
(ii) their likely effect on employees; and
(iii) measures to avoid or reduce the adverse effects of the changes on employees; and
(c) commence discussions as soon as practicable after a definite decision has been made.
41.2 For the purposes of the discussion under clause 41.1(b), the employer must give in writing to the affected employees and their representatives (if any) all relevant information about the changes including:
(a) their nature; and
(b) their expected effect on employees; and
(c) any other matters likely to affect employees.
41.3 Clause 41.2 does not require an employer to disclose any confidential information if its disclosure would be contrary to the employer’s interests.
41.4 The employer must promptly consider any matters raised by the employees or their representatives about the changes in the course of the discussion under clause 41.1(b).
41.5 In clause 41 significant effects , on employees, includes any of the following:
(a) termination of employment; or
(b) major changes in the composition, operation or size of the employer’s workforce or in the skills required; or
(c) loss of, or reduction in, job or promotion opportunities; or
(d) loss of, or reduction in, job tenure; or
(e) alteration of hours of work; or
(f) the need for employees to be retrained or transferred to other work or locations; or
(g) job restructuring.
41.6 Where this award makes provision for alteration of any of the matters defined at 41.5, such alteration is taken not to have significant effect.
Although the evidence establishes that the Applicants were made aware that there was an internal dispute between the company’s directors, it does not establish that the consultation provisions of the Award were complied with. The Award clause required notice, consultation and discussions with employees once the definite decision to make major changes of a particular type is made. It required the Respondent to promptly consider matters about the changes raised by employees. It required the Respondent to provide certain information in writing. These are well-established and important protections to provide a measure of fairness to employees during periods of major change.
No doubt Mr. Chen was in a difficult situation because of the internal dispute but that dispute had been developing for some months and the prospect that it would lead to a closure of the company was a real one. Mr. Chen said that from mid-June the Respondent was not taking on any new work. Mr. Chen said the decision to close down the Respondent’s operations was made on or about 11-12 August 2023. That decision was clearly a decision to make major changes in production. It was likely to have significant effects, as inclusively defined in clause 41.5, on employees. There was no evidence to suggest that it was not practicable to discuss changes with employees at that point or shortly thereafter. Mr. Chen’s evidence on the point was inconclusive and at times inconsistent. He appeared to accept that he had no discussion with Mr. Wei about major changes since Mr. Wei was on sick leave at the time. In relation to the other applicants, the evidence was as follows:
No. Mr Hongnipon and Mr Hongnipon were they told the week before?---We have discussed on the phone regards potentially but nothing really confirmed because I wasn't sure - 100 per cent sure regards to the whole situation. I was still trying to unfreeze the bank account.[1]
So what did you tell them?---I told them to, 'Focus on the daily task that we're still
doing every day and I will keep you guys update as soon as I have had any updates.'[2]What did you tell them in the week before 18 August? Did you tell them that the company was going to cease trading?---A week before I didn't but we'd been communicating with - to regards the workers but nothing regards to actual cease of the operation of the company.[3]
Employees, including the Applicants, were told by email on 18 August that their employment had come to an end, effective immediately. There was no notice and no discussion as required by clause 41. Nor was there any consideration, prompt or otherwise, of matters raised by employees about the changes. The changes had already been put into effect.
In my view there was no consultation with the Applicants once a definite decision had been made as required by clause 41 of the Award. Accordingly, the dismissal of the Applicants on that date was not a genuine redundancy within the meaning of s.389 of the Act.
Was the dismissal harsh unjust or unreasonable?
As the dismissal was not a case of genuine redundancy, it is left to consider whether the dismissal was harsh, unjust or unreasonable. In considering that question I must take into account the matters set out in s.387 of the Act. That section provides:
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.
Note: For the purposes of paragraph (a), the following conduct can amount to a valid reason for the dismissal:
(a) the person sexually harasses another person; and
(b) the person does so in connection with the person’s employment
The Applicants were dismissed because of the dispute between the directors which had resulted in company funds being inaccessible. The Respondent was unable to continue to trade. The Applicants were not dismissed for any reason related to their capacity or conduct. I therefore regard this as a neutral consideration in the overall assessment as to whether the termination of the Applicants’ employment was harsh, unjust or unreasonable.[4]
The matters in s.387(b) and (c) relate to whether there was procedural fairness in respect of any reason or reasons related to the Applicants’ conduct or capacity. Here there were no such reasons. Again, I regard these as neutral considerations.
There was no unreasonable refusal to allow the Applicants to have a support person present to assist in discussions relating to the dismissals. This is a neutral consideration.
As the dismissal did not relate to unsatisfactory performance, the issue of a warning does not arise here. This is a neutral consideration.
Subsections (f) and (g) of s. 387 relate to whether the size of the Respondent’s enterprise or the absence of a dedicated human resource management expertise had an impact on the dismissal processes that were followed. At the time the Respondent ceased to operate there were 10 employees. There was no evidence that the business had any human resource management expertise. I do not regard the size of the enterprise as having any impact on the procedures that were followed here. However, the absence of human resource expertise had some impact on the processes that were followed. In particular, knowledge of the consultation requirements in the Award and advice about those provisions would more likely have resulted in compliance with the Award. In circumstances where there was an ongoing dispute that affected the Respondent’s ability to draw on company funds, it would have been apparent that a decision about major change would have to be made and that employees would have to be consulted and made aware that redundancy was a realistic possibility. I regard this to be a factor in favour of a finding that the dismissal was harsh, unjust or unreasonable.
There are other relevant considerations. Although the termination of the employment of the Applicants was not a genuine redundancy within the meaning of the Act, I am satisfied that the Respondent no longer required their work to be done by anyone because of changes in operational requirements and that it was not reasonable in the circumstances to redeploy the Applicants. This was a legitimate reason for the terminations. I am not satisfied on the evidence that the terminations were driven by some other reason. I regard these findings as counting against a conclusion that the dismissals were harsh unjust, or unreasonable.
However, there was a clear failure on the part of the Respondent to adequately consult about major workplace change. Consultation may not have altered the ultimate outcome of termination but the failure to consult had the effect that the Applicants found themselves unexpectedly out of work. This lack of consultation and information worked harshly against them. It would have been a relatively simple step for the Respondent to keep its workforce fully apprised of the situation. That situation was serious and the Respondent would have known that the termination of the Applicants, if not the entire workforce, was a likely outcome.
I also regard the length of satisfactory service by the Applicants to be a relevant consideration here. There was no suggestion that they had been anything other than diligent in the performance of their duties which, in the case of Mr. Wei, extended over a period of more than 7 years and for Messrs. Rerkrit Hongnipon and Rerkchai Hongnipon, some 4 and 3 years respectively. This tells in favour of a conclusion that the terminations were harsh.
Conclusion on ‘harsh unjust or unreasonable’
A failure to consult does not necessarily mean that a dismissal was harsh, unjust or unreasonable.[5] However, having weighed the various considerations in this case I am satisfied that the termination of each of the Applicants in the circumstances of this case was harsh. I now turn to consider the issue of remedy.
Remedy
Each Applicant was a person protected from unfair dismissal at the time they were dismissed. Given my conclusions in relation to s.385 and s.387, I am satisfied that the Applicants were unfairly dismissed. It is open to me to make an order granting a reinstatement[6] or compensation[7] remedy. The Applicants did not seek reinstatement. They were terminated for reasons of ‘redundancy’ because the company had ceased to trade. The company is not presently trading. Court proceedings involving the management and future of the Respondent are ongoing. I do not regard reinstatement as appropriate in the circumstances.
The Commission can only make an order for compensation where it is considered appropriate in all the circumstances to make such an order.[8] Having concluded that the dismissals were harsh, I consider it to be appropriate to make an order for compensation. The amount, if any, of such order is determined by applying the relevant statutory provisions and accepted principles derived from the authorities.
Section 392(2) of the Act requires all of the circumstances of the case to be taken into account when determining an amount to be paid as compensation, including the criteria set out in s.392(2).
Remuneration that would have been received or would have been likely to receive (s.392(2)(c))
In UES the majority concluded that in circumstances where there had been a failure to consult in accordance with the applicable industrial instrument, an amount of two weeks remuneration was the amount that an employee would have received if the employee had not been dismissed. The majority reasoned that this was the period the employer would have taken to comply with its obligation to consult about the redundancy.[9] That case involved the redundancy of one employee who worked in a particular part of a business. The business continued to operate after the redundancy was implemented. The circumstances here are different. The business ceased to operate on the 18 August 2023 and the entire workforce was made redundant. There was no detailed explanation as to why the 18 August was the date chosen to close the Respondent’s operations other than Mr. Chen deciding that it was no longer feasible to continue to trade. There was some evidence that even though a consent order was made in the Supreme Court proceeding on 23 August, this did not ultimately have the effect of freeing up the Respondent’s funds such that the Applicants’ employment could have continued. I conclude that the company was unable to continue to trade beyond 18 August and that the Applicants would therefore not have received or been likely to receive any remuneration beyond the date of their dismissal.
Mitigation, Remuneration earned and Income reasonably likely to be earned (s.392(2)(d), (e) and (f))
Having regard to my conclusion above, the matters refer to in s.392(2)(d),(e), (f) do not apply to reduce any amount calculated by reference to potential earnings in the absence of dismissal.
Viability (s.392(2)(a))
Although the Respondent company has ceased trading, there is no evidence as to its financial situation. I am unable to conclude that the proposed orders would affect the viability of the company and I do not propose to change the amount of the proposed orders on that account.
Length of Service (s.392(2)(b))
The Applicants had between 3 and 7 years’ service with the Respondent. This amount of service does not provide any basis for a reduction of the amounts in the proposed orders.
Other matters (s.392(2)(g))
I consider that the fact that the Applicants were dismissed without consultation and forewarning to be relevant in the overall assessment for compensation. I also take into account the absence of any evidence to indicate that their employment history with the respondent was anything but unblemished.
I also note that the Applicants were ultimately paid, albeit some weeks after their termination, an amount in lieu of notice and redundancy entitlements.
Neither misconduct (s.392(3) nor the compensation cap (s.392(5)) necessitate any reduction in the amount to be ordered.
The well-established approach to the assessment of the quantum of compensation under s.392 of the Act is to apply the “Sprigg formula” derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul’s Licensed Festival Supermarket.[10] The approach in Sprigg is as follows:
Step 1: Estimate the remuneration the employee would have received, or have been likely to have received, if the employer had not terminated the employment (remuneration lost).
Step 2: Deduct monies earned since termination. Workers’ compensation payments are deducted but not social security payments. The failure of an applicant to mitigate his or her loss may lead to a reduction in the amount of compensation ordered.
Step 3: Discount the remaining amount for contingencies.
Step 4: Calculate the impact of taxation to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.
Applying the approach described above, in this case yields the result that the amount in any orders for compensation would be zero since there is no remuneration that the Applicants would have received or been likely to receive beyond their termination date. However, as was restated by the Full Bench in McCulloch v Calvary Health Care Adelaide:[11]
‘..if the application of the Sprigg formula ‘yields an amount which appears either clearly excessive or clearly inadequate’ then the Commission should reassess the assumptions made in reaching that amount. The order for the payment of compensation must be appropriate having regard to all the circumstances of the case (see s.390(3)(b) and s.392(2)).’
In my view it would be clearly inadequate in the circumstances for no order for monetary compensation to follow, particularly given the overall conclusion that the terminations were harsh in each case. It is appropriate to make an order for compensation.
I propose to make an order that each of the Applicants be paid an additional amount of 3 day’s wages as compensation. Such an order will, in my view, accord a “fair go all round” to the Applicants and the Respondent.
Orders to this effect will issue separately.
DEPUTY PRESIDENT
Appearances:
Rerkrit Hongnipon, Rerkchai Hongnipon and Wei Wei for the Applicant.
Terry Leung of Link Lawyers for the Respondent.
Shiliang Chen for the Respondent.
Hearing details:
2023.
Sydney:
December 4.
Final written submissions:
Applicant, 29 November 2023.
Respondent, 29 November 2023.
[1] Transcript PN 1262.
[2] Transcript PN 1263.
[3] Transcript PN 1267.
[4] UES (Int’l) Pty Ltd v. Harvey[2012] FWAFB 5241 at [42] (‘UES’).
[5] Ibid at [49].
[6] Section 391.
[7] Section 392.
[8] Section 390(3)(b).
[9] UES (n 1) at [53].
[10] (1998) 88 IR 21.
[11] [2015] FWCFB 873 at [29].
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