Rohan Veal v Sundance Marine Pty. Ltd. as trustee for Sundance Unit Trust T/A Sundance Marine
[2013] FWC 2653
•10 MAY 2013
[2013] FWC 2653 |
FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Rohan Veal
v
Sundance Marine Pty. Ltd. as trustee for Sundance Unit Trust T/A Sundance Marine
(U2012/13624)
COMMISSIONER BISSETT | MELBOURNE, 10 MAY 2013 |
Application for relief from unfair dismissal pursuant to s.364 of the Fair Work Act 2009 - no notification of reason for dismissal - no warning of unsatisfactory behaviour or opportunity to improve - dismissal was harsh and unreasonable - appropriate remedy is compensation - calculation of compensation - contingencies and failure to mitigate loss taken into account - compensation awarded.
[1] This is an application by Mr Rohan Veal for relief from unfair dismissal pursuant to s.364 of the Fair Work Act 2009 (the Act).
[2] Mr Veal was employed by Sundance Marine Pty Ltd as trustee for the Sundance Marine Unit Trust (Sundance Marine, the Respondent) as a sales person. Mr Veal was responsible for selling (new and used) yachts and other boats. The Respondent operates from Sandringham in Victoria and has a sales presence in Hobart.
[3] Mr Veal commenced employment with the Respondent on 14 September 2009. His employment was terminated on 13 September 2012.
[4] Mr Veal was represented, with permission, by Mr Champion.
[5] Sundance Marine was represented, with permission, by Mr Maher.
[6] Mr Veal gave evidence on his own behalf. Mr John Beck, a Director and co-owner of the Respondent, and Mr David Beck, also a Director and co-owner of the Respondent, gave evidence for the Respondent.
The employment contract
[7] Over the course of his employment the Respondent had put a number of employment contracts before the Applicant. Only the first of these was signed by the Applicant. Whilst an issue remains as to the status of the second contract, this is not a matter that I need to decide for the purposes of this decision. The third and fourth contracts put to the Applicant were not signed by him. The terms of the contracts and matters associated with the offering and requests to sign those contracts are relevant to the dismissal of the Applicant.
The first contract
[8] When the Applicant commenced his employment he signed a contract which included a commission structure (the first contract) in addition to a $40,000 retainer and a travel and phone allowance plus superannuation.
[9] That commission structure provided for a payment of 10% of retained earnings for all yacht sales conducted, completed and settled by the Applicant. Once retained earnings of $100,000 were achieved, and a minimum of 12 yachts sold, the commission payment would increase to 20% of retained earnings on each sale by the Applicant. 1
The second contract
[10] On 1 July 2010 the Respondent presented the Applicant with an amended pay and commission structure (the second contract). 2 Under this proposal the base salary increased to $45,000 and the car and telephone allowance and superannuation were maintained.
[11] The amended commission structure provided:
- For brokerage yachts a commission payment of 10% of retained earnings for each sale increasing to 20% once retained earnings on brokerage yachts reached $80,000 and 12 yachts sold within a six month period;
- For new yacht sales a commission payment of 10% of retained earnings increasing to 15% once retained earnings on new yachts reached $280,000 and seven such yachts sold within a six month period.
[12] The Applicant did not sign this proposed commission structure although it appears it, along with an increase in the retainer, was implemented. Nothing was put to suggest that the Applicant continued to dispute the new commission structure or the pay increase, although the Applicant says he never realised that the pay increase had gone through.
The third contract
[13] On 23 January 2012 the Applicant was given a letter by the Respondent that said, in part, ‘[a]s discussed, we have reviewed our Employment contracts...As part of this we have improved the format of our employment contract detail in relation to your terms and conditions...’ (the third contract). 3
[14] This contract contained a restraint clause that sought to restrain the Applicant from engaging in any business activity in direct competition to that of the Respondent nationally for a 12 month period. 4
[15] On 21 February 2011Mr David Beck of the Respondent sent an email to the Applicant which stated:
As discussed yesterday we are awaiting the return of your new employment contracts...
We request that you have the new employment contracts returned to John by the end of the day on Thursday and the applicable commissions on the 2 boats will be paid this pay period (Friday)...
If there is any reason remaining why you cannot sign these new contracts please advise me by Thursday. You have now had a month to consider this...
We are not prepared to continue with this being unresolved and lingering on. 5 (sic)
[16] On 22 February the Applicant responded:
Firstly, I get quite concerned when I am being pushed into signing or accepting anything (especially within two days). This is not different to the last commissions structure that was offered and regrettably accepted under duress...
I think it is important to also note that this is now the third commission and bonus payments system that I have been offered in just over two years...from the looks of this current offer, it seems to be better than my last commission payment scheme, so I am appreciative of this...
I have however attached a counter offer for the way bonuses are paid (not the amount), that I think will be fairer...
I have also added a few additional clauses to help clarify some concerns and definitions. I am happy to discuss these all with you and Pauline in more detail if you wish...
Finally, I have spoken to a solicitor regarding the serious geographic and time limitation of employment after termination of employment at Sundance. They have advised me that it is illegal to prohibit employees from working in a similar business...
As long as I do not feel like I am bullied, my work environment is enjoyable, and my annual renumeration is sufficient, I have absolutely no intentions of leaving Sundance...
If you are willing to accept the removal of these employment restraints in clause 23, then I will gladly sign the employment contract as requested... 6 (sic)
[17] This contract was not signed by the Applicant.
The fourth contract
[18] On 24 April 2012 the Respondent gave the Applicant a further contract (the fourth contract). 7 This contract introduced a restraint area of 100kms from each of the Sandringham and Hobart offices of the Respondent. This contract was not signed by the Applicant.
[19] On 20 June 2012 the Respondent advised the Applicant in writing that this contract and the contract of January 2012 were withdrawn. That letter also stated that ‘[w]e will therefore be continuing the Employment Contract and remuneration package which is currently in place’. 8
The letter of 7 September 2012
[20] Following the withdrawal of the third and fourth contracts by the Respondent on 20 June 2012, beyond a brief sales meeting (discussed below), nothing of great note appears to have occurred between the Applicant and the Respondent. The Applicant was absent for two weeks annual leave in August when he went sailing with a client of the Respondent and had some further absences in August due to illness.
[21] On 7 September 2012, the Applicant wrote a letter to the Respondent, addressed to both David and John Beck. That letter is relevant to events surrounding the termination of the Applicant’s employment and is set out in full:
I write to you concerning the attached “Employment Contract” dated 8 September 2009.
I draw your attention, in particular, to clause 51 of the contract which provides the only mechanism by which the contract can be amended. That clause requires any amendment of the contract to be agreed by both parties, namely Sundance and myself, in writing.
As you are aware, I have not been in agreement with the terms of the attached “Employment Contract Review” dated 1 July 2010 and never agreed to it in writing either, and accordingly the original Employment Contract governs our employment relationship.
I have received legal advice that the review document is not binding on me and has no legal effect, despite Sundance Marine paying my wages according to this document for more than two years.
I ask you to consider agreeing to a written amendment to that contract effective 1st July 2012, showing my base salary as being $46,575 and commission payments similar to what you have proposed on 24th April with some variations to be openly discussed and negotiated on.
If we are unable to come to an agreement within the next two weeks, then I will need to seek further legal advice on what action is available to me.
I would also like to formally raise my concerns that in addition to the reduction in boat sales felt across Australia since April 2012, there has been a substantial decline in the amount of work available for me to do each week, in particular new/used boat enquiries, inspections and listings. To make matters worse for me, more than half of what would have normally been available to me, is now distributed to another broker.
All of these concerns will obviously have a major impact on my income and therefore if you are unable to provide me more opportunities and work to do in the short term, then I will have no choice but to seek alternative employment.
I look forward to your favourable response to the matters I have raised in this letter as soon as possible. 9
[22] This letter was delivered by the Applicant at the end of the working day. Mr John Beck was due to go on leave for two weeks on 7 September 2012.
Sales performance
[23] The Applicant produced details of all of the boat sales he had been engaged in over the period of his employment. 10 Neither of the witnesses for the Respondent disputed that this was an accurate record of the Applicant’s performance even though it was the Applicant’s own record.
[24] A summary of the detailed sales record was also produced. 11 This was also not disputed. This summary shows:
Year | Retained profit | Total boats settled |
2009-10 (9 months employment) | $200,505.00 | 25 |
2010-11 | $330,831.00 | 30 |
2011-12 | $412,662.58 | 38 |
2012-13 (2 months employment) | $105,408.04 | 8 |
[25] The Applicant says that around July 2012 Mr David Beck sat down with him to go through some sales figure. The Applicant says he exceeded his target between January and March 2012 but not between April and June 2012. He says that Mr David Beck said not to worry. 12
[26] The Applicant’s evidence is that he responded to clients through the means by which they had contacted him: if the client he rang he would ring back, if the client emailed the Applicant would email back and so on. The Applicant also says that he visited yacht clubs and used social networking sites such as facebook to source leads for sales.
[27] The Respondent says that the Applicant was not proactive enough. That he only visited yacht clubs in response to enquiries instead of actively seeking listings and clients. Further, Mr John Beck says he spoke to the Applicant about the need to talk to clients and not to rely on email and text messages by phone.
Other matters
[28] The Respondent runs an annual regatta in March of each year. The Applicant was expected to attend the Regatta and use the opportunity to mix with clients, identify potential opportunities for sales and so on. The Applicant did attend the Regatta each year. The Respondent is not satisfied with what he did at the Regatta, in that the Applicant failed to talk to those present beyond a small circle of family and friends.
[29] In December 2011 the Applicant sent an email to John and David Beck of the Respondent requesting a pay rise for himself and for Filippo, another employee of the Respondent. The Applicant requested that each be offered a 5% increase effective from 1 July 2011 in recognition of the ‘increasing workload encountered over the last 5 months’. 13
[30] In April 2012 the Respondent employed an additional sales person. The Applicant alludes to this in his letter of 7 September 2012.
Meeting of 10 September 2012
[31] In response to the Applicant’s letter of the 7 September 2012 Mr David Beck called the Applicant to a meeting on 10 September 2012.
[32] At that meeting the Applicant was given a letter which set out two options for him - either to resign or have his employment terminated. 14 Some discussion was had about the commission payments due to the Applicant and payment of his accrued entitlements. At the conclusion of the meeting the Applicant asked Mr David Beck if he wanted him to leave straight away. Mr David Beck responded yes and the Applicant proceeded to pack his desk and leave. As the Applicant left the building he said to Mr David Beck that he has ‘made a big mistake. I am the best employee you will ever have.’15
Reason for termination of employment
[33] On 13 September 2012 the Applicant received a letter of termination of employment signed by Mr David Beck. That letter said, in part:
As discussed we confirm that we have been concerned for some time about your performance, low sales, refusal to do what is required to grow sales, failure to make a youtube video for a customer as directed, failure to undertake Beneteau Academy Training Modules as directed, and argumentative behaviour.
In your letter you also gave us an ultimatum that unless we agreed to your demands, you would resign...
We note that you have rejected out criticism and our concerns when it was put to you in our meeting...
We have now decided to terminate your employment immediately for poor performance, low sales, refusal to do what is required to grow sales, failure to make a youtube video for a customer as directed, failure to undertake Beneteau Academy Training Modules as directed, and argumentative behaviour (including your ultimatum).
We regret that our relationship will have to end in this way. 16
Consideration
[34] The Applicant claims that he has been unfairly dismissed in that the termination of his employment was harsh, unjust or unreasonable. He does not seek reinstatement.
[35] The Respondent is a small business having five or six employee at the time of the termination of the Applicant’s employment.
[36] The Act relevantly provides that:
382 When a person is protected from unfair dismissal
A person is protected from unfair dismissal at a time if, at that time:
(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and
(b) one or more of the following apply:
(i) a modern award covers the person;
(ii) an enterprise agreement applies to the person in relation to the employment;
(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.
385 What is an unfair dismissal
A person has been unfairly dismissed if the FWC is satisfied that:
(a) the person has been dismissed; and
(b) the dismissal was harsh, unjust or unreasonable; and
(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and
(d) the dismissal was not a case of genuine redundancy.
Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.
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.
[37] I am satisfied that the Applicant is protected from unfair dismissal. The Respondent does not seek to rely on the Small Business Fair Dismissal Code, it is not argued that this is a case of genuine redundancy and there is no dispute that the Applicant was dismissed.
[38] What is left is to determine is if the dismissal was harsh, unjust or unreasonable.
Whether there was a valid reason for the dismissal related to the person’s capacity or conduct
[39] The letter of termination of the Applicant’s employment of 13 September 2012 states that the Applicant’s employment was terminated for:
- Poor performance;
- Low sales;
- Refusal to do what is required to grow sales;
- Failure to make a youtube video for a customer as directed;
- Failure to undertake Beneteau Academy Training Modules as directed, and
- Argumentative behaviour (including [his] ultimatum).
[40] No additional reasons for the termination of the Applicant’s employment were put to me.
[41] I will now consider the evidence with respect to each of these in turn.
Poor performance
[42] The only substantive evidence of the Applicant’s performance in his role is the sales figures put in evidence by him. The Respondent does not dispute these figures and has placed no other performance issues in evidence.
[43] The only thing the sales figures of the Applicant can be measured against is the commission structure contained in the first and possibly the second contract. It should be noted however that neither the commission structures, nor the first contract in any other respect, establishes the minimum performance levels expected of the Applicant. This is particularly so as each of the commission structures pay commission from the first boat sale and increase the commission payable once a certain number and value (in retained earnings) of sales is reached.
[44] Even if it is accepted that the six monthly sales figures in the commission structure that applied prior to the higher commission kicking in provides a minimum performance level it is not put in evidence or submissions by the Respondent that the Applicant did not achieve these levels.
[45] Mr David Beck’s evidence is that the Applicant’s sales were not in line with the company’s expectations and that his sales figures needed to be looked at in the context of what David and John Beck had achieved in the past. Mr David Beck’s evidence is that the Applicant’s performance was not satisfactory.
[46] Mr John Beck provides evidence that he did not, at the time of the termination of the Applicant’s employment, believe the Applicant was achieving the results he could have achieved.
[47] There is no evidence of anything being put to the Applicant by the Respondent, prior to his dismissal, which indicates his performance was considered to be poor or that clearly articulated the performance standards required of him.
Low sales
[48] Again, to the extent that there is any evidence before me, it is that the Applicant met the sales requirements. The Applicant’s uncontested evidence is that on the one occasion when Mr David Beck met with the Applicant and suggested he was not meeting his targets the Applicant was told not to worry.
[49] Mr John Beck’s evidence is that the contracts set the base line, minimum requirements. If this is the case then it would appear, on the sales evidence, that the Applicant was meeting sales requirements.
Refusal to do what is required to grow sales
[50] Mr John Beck’s evidence is that he considered the Applicant too passive in that he responded to clients based on how the client had initiated communication with the business. Mr David Beck says he wanted the Applicant to be more proactive, to pick up the phone and get a feel for what the client might want or what boat may be most suitable. His evidence is that he raised this issue with the Applicant because they sat side by side. He says he did not want the business run the way the Applicant went about selling.
[51] Mr John Beck also gives evidence that the Applicant went out to visit yacht clubs only in response to telephone calls to the Respondent and not in a proactive sense. He also says that the Regatta was a big day for the Respondent. He does not criticise the time the Applicant spent at the Regatta but does say that
[W]e specifically asked that he be more proactive with attending to other clients, boat owners, and to mingle a lot more; rather than sit at the one table with family and friends, to get out and be around every table there; those that didn’t know him, introduce himself to them so that they know who he is and what he was doing; and just be part of promoting himself and the company. 17
[52] Mr John Beck gives evidence that the Applicant said to him that it was not his role to develop new business for the Respondent. 18
[53] John Beck and David Beck both agreed in their evidence that the Applicant worked on Saturdays (and had a day off during the week) and accepted that, at close up time on a Saturday the Applicant stayed beyond his finishing time if there was a client in the office.
Failure to make a youtube video
[54] No evidence was given by either John or David Beck on this issue.
Failure to undertake Beneteau Academy Training Modules
[55] No evidence was given by either John or David Beck on this issue.
Argumentative behaviour
[56] The Applicant says that he raised concerns about his employment and the proposed contracts with the Respondent and that this does not constitute argumentative behaviour.
[57] Both Mr John Beck and Mr David Beck, in their evidence, variously describe their communications with the Applicant as abrupt, 19 hostile,20 and negative.21 Mr John Beck accepts that the Applicant had the right to raise legitimate queries. His concern is with the way the Applicant raised them, in particular that the issues were only put in writing and the Applicant did not sit down and discuss them with the Respondent.
[58] Mr David Beck says he was shocked, frustrated and annoyed by letter from the Applicant of the 7 September 2012. He took the letter as, “‘Here’s my demands. You meet then or I’ll leave.”’ 22
Conclusion as to valid reason
[59] In Selvachandran v Peteron Plastics Pty Ltd Northrop J held that ‘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.’ 23
[60] In Rode v Burwood Mitsubishi a Full Bench of the AIRC held that ‘the reason for termination must be defensible or justifiable on an objective analysis of the relevant facts. It is not sufficient for an employer to simply show that he or she acted in the belief that the termination was for a valid reason.’ 24
[61] No evidence has been put by the Respondent of the alleged poor performance of the Applicant. Whilst the Respondent says that the sales performance of the Applicant was not in line with expectations, there is no evidence that either John or David Beck clearly set out for the Applicant what those expectations were. Nothing has been put that establishes the required performance levels of the Applicant and which measures his actual performance against these standards. That neither John nor David Beck thought the Applicant was achieving what was possible does not allow me to conclude, on any objective measure, that the Applicant’s performance was poor. I have no doubt as to the sincerity with which the Becks held this view, but it does not allow me, on the evidence, to conclude that the Applicant’s work performance was poor or that his sales were low.
[62] Clearly there were divergent views as to how best to grow the business. John and David Beck, as Directors and co-owners of the business, expected the Applicant to be out and about being proactive in meeting existing and prospective clients and developing relationships. The Applicant had strong views about the use of technology. I accept that John and/or David Beck did raise with the Applicant their desire that he pursue business opportunities in a more proactive manner, that he get out of the office to develop opportunities and that he not rely as heavily on the use of text messaging and email.
[63] I accept that the Respondent had a right to determine how it wished to deploy its staff and the way it wanted its staff to go about their jobs. A successful sales person does not just sell a product but develops and strengthens relationships with existing and new clients of the business. The Respondent had reasonable expectations as to how it wanted the Applicant to assist in growing the business. The Applicant acknowledged the Respondent’s preference for face to face contact but says he used the method dictated by the customer.
[64] I accept that the Applicant did not conduct himself in a way preferred by the Respondent. The extent to which this impeded business growth is, however, difficult to determine. Nothing was put to me on past growth rates and how these might have changed once the Applicant commenced his employment with the Respondent.
[65] The tone of the Applicant’s communications could be seen as being abrupt or hostile. The implication in the email of 22 February 2012, for example, suggests that the Applicant was under some duress to sign the first contract. A reasonable person would infer from this that he was put under duress by the Respondent, but this is not the case - the duress was his own personal circumstances and not due to any actions of the Respondent. 25
[66] The Applicant’s letter of 7 September 2012 said ‘if we are unable to come to an agreement within the next two weeks, then I will need to seek further legal advice...if you are unable to provide me more opportunities and work to do in the short term, then I will have no choice but to seek alternative employment.’ 26 The reference to legal advice and seeking a ‘short term’ deadline in the letter could be seen as an ultimatum, threatening and hostile.
[67] The evidence of the Applicant indicates that he was prone to exaggeration to get his point across or at least explain circumstances in a way which placed him in the best light. He says for example that the various contracts were put in front of him and he was told to sign them or else and given no time to consider them. 27 This, as he agrees, was not the case and he was asked for feedback on the contracts.28 He had the third contract, for example, for over a month.
[68] Further, the Applicant gives evidence that he did not attend the company Christmas function because he ‘just prefer[s] not to engage in social occasions with them because we just didn’t have a good social arrangement’ 29 but then proceeded to organise an alternative Christmas party for staff and contractors,30 asserting that this was the preference of all the staff.31
[69] The Applicant considers that he was overqualified for the position and was ‘suspicious’ of Mr David Beck who interviewed him 32 because ‘it wasn’t much of an interview,’33 it was more a case of him interviewing the company, ‘it just didn’t feel right’34 and he ‘didn’t get to speak during the interview.’35
[70] The Applicant clearly considers he was the best employee the employer would ever have. 36
[71] The tone of the communications between the Applicant and Respondent, as shown through his communications with the Respondent and based on his evidence suggest a level of self confidence that could have been perceived as hostile or abrupt - particularly if this was reflected in his day to day dealings with the Respondent. Whilst this may have been annoying or irritating it would not appear, on the evidence, to be of such a level to provide a valid reason for dismissal. There is no evidence that the Applicant either privately or publicly sought to undermine the Respondent or that the Applicant was insubordinate. Further, there is no evidence that the Respondent ever raised concerns about his abrupt or hostile communications.
[72] Whilst the hostile or abrupt tone of the communications does not provide a valid reason for the dismissal of the Applicant there is no doubt that it contributed to a breakdown in the relationship between the Applicant and Respondent.
[73] Overall I do not consider that the matters which formed the reason for the dismissal of the Applicant, viewed objectively, either individually or collectively, provide a sound or defensible basis for the dismissal of the Applicant. I therefore find that there was no valid reason for the termination of his employment.
Whether the person was notified of that reason
[74] The Applicant was advised on 10 September 2013 of the reason for his dismissal.
[75] In Crozier v Palazzo Corporation Pty Limited t/as Noble Park Storage and Transport a Full Bench of the AIRC found that:
As a matter of logic procedural fairness would require that an employee be notified of a valid reason for their termination before any decision is taken to terminate their employment in order to provide them with an opportunity to respond to the reason identified. Section 170CG(3)(b) and (c) would have very little (if any) practical effect if it was sufficient to notify employees and give them an opportunity to respond after a decision had been taken to terminate their employment. 37
[76] What Crozier stands for, in the circumstances of this case, is that if the decision to terminate the Applicant’s employment was reached prior to the meeting with the Applicant on 10 September 2013 then the Applicant was not given a genuine opportunity to respond to the reason for the termination of his employment.
[77] The evidence of Mr John Beck is that the letter from the Applicant on 7 September 2012 was the ‘final straw’ and on 8 September he spoke to Mr David Beck and they agreed that the employment relationship had come to an end. 38
[78] This was confirmed in the evidence of Mr David Beck. As his evidence makes clear, it was the Respondent’s view that the employment relationship ‘could not continue limping along... It needed to be brought to a head’ by a resignation on agreed terms or termination of the Applicant’s employment.’ 39
[79] It is clear from the evidence that the decision that the employment relationship must end was made by David and John Beck prior to the Applicant being notified of the reason.
[80] It is of concern that the representatives of the Respondent at no stage raised their issues of concern with the Applicant such that he might be able to consider the matters raised and how he might properly respond prior to the decision being made by the Respondent to end the employment relationship.
[81] Whilst it might be true that there were two potential outcomes of the meeting on 10 September -- resignation or termination -- there is no doubt that Mr David Beck intended that the employment relationship would not continue from that time. Further, it is plainly true, on the evidence of each of John and David Beck that the decision that the employment relationship must end was reached prior to 10 September 2012.
[82] It is not always the case that, because the employer has prepared a letter of termination prior to a meeting (as had occurred in this case) with an employee to discuss conduct or capacity of the employee, that the decision to terminate the employment has been reached prior to the meeting. What is more relevant is the behaviour of the employer at the meeting - is it truly prepared to put matters before the employee and give the employee a real opportunity to respond and consider that response prior to making a final decision. In this case the evidence clearly indicates that the decision had been firmly made prior to the meeting of 10 September 2012.
[83] On this basis I must conclude that the Applicant was not notified of the reason for the termination of his employment prior to the decision to terminate his employment having been made.
Whether the person was given an opportunity to respond to any reason related to the capacity or conduct
[84] By virtue of my findings that the Applicant was not notified of the reason for his dismissal prior to the decision having been taken by the Respondent I must also conclude that he was not given an opportunity to respond to that reason.
Any unreasonable refusal by the employer to allow the person to have a support person present
[85] The Respondent did not unreasonably refuse to allow the Applicant to have a support person present.
Whether the person had been warned about that unsatisfactory performance before the dismissal
[86] The purpose of a warning about unsatisfactory performance must be to identify the performance that is of concern and must make it clear that a failure to heed the warning places the Applicant’s employment at risk. 40 Such a warning gives an employee an opportunity to improve in those areas identified as requiring improvement. An integral part of such a warning must be to clearly identify the areas of deficiency, the assistance or training that might be provided, the standards required and a reasonable timeframe within which the employee is required to meet such standards.
[87] In this case, whilst there were general discussions with respect to the Applicant’s performance, there is no evidence that he was ever warned with respect to his performance nor told that a failure to improve his performance may lead to an outcome such as termination of his employment. Further, there is no evidence that the Applicant was ever told the standard that was required of him in respect of sales - that is the number of sales he was actually expected to achieve. If it is the case that the minimum sales figures are those mentioned in the commission structures, the evidence suggests that the Applicant met these requirements.
[88] I therefore find that the Applicant was not given any warning about his unsatisfactory work performance.
The degree to which the size of the employer’s enterprise and the absence of dedicated human resource management specialists or expertise would be likely to impact on the procedures followed in effecting the dismissal
[89] The Respondent is a small business with five or so employees. It does not have access to human resources expertise although I do note that it did have a lawyer present at the meeting with the Applicant on 10 September 2012.
[90] The Respondent had also, in early 2012, sought the assistance of an outside HR firm in developing the third contract for the Applicant to consider.
[91] No submission is made by the Respondent as to what effect the size of the enterprise or lack of access to appropriate expertise had on the procedures followed in effecting the dismissal. I therefore consider this a neutral issue. This should not be taken to read that the size of the enterprise somehow excuses the method by which the dismissal was effected. The Applicant was entitled to procedural fairness. The evidence suggests he was not afforded this.
Other matters
[92] There are no other matters to consider.
Was the dismissal harsh, unjust or unreasonable?
[93] In Bryne & Anor v Australian Airlines the High Court found that:
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. 41
[94] In considering the decision in Byrne a Full Bench of the AIRC found that
- unjust, because the employee was not guilty of the misconduct on which the employer acted;
- unreasonable, because it was decided on inferences which could not reasonably have been drawn from the material before the employer; and/or
- harsh, because of its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct.
The above extract is authority for the proposition that a termination of employment may be:
The joint judgment also supports the proposition that the task of the judge at first instance was to consider whether, on the evidence given at the trial, the employer was in breach of the relevant award provision, provided that the evidence concerned circumstances in existence when the decision to terminate the employment was made. 42
[95] In this case I have decided that the dismissal of the Applicant was unjust as there was no valid reason for the dismissal and unreasonable because of the lack of evidence, particularly of poor performance, to ground the decision.
[96] There is no evidence of poor performance, low sales, a failure to make a youtube video, or undertake some specified training.
[97] Whilst I have found that the Applicant was not without fault in the breakdown in the relationship (which is related to his argumentative behaviour and refusal to grow sales as the Respondent required) the relationship had not deteriorated to such an extent that dismissal was justified. In any event there is scant evidence of the Respondent raising these issues with the Applicant.
[98] I have considered the manner in which the dismissal came about, the failure to afford the Applicant an opportunity to respond, and the behaviour of the Applicant. Overall I am satisfied that the dismissal was unjust and unreasonable.
Conclusion
[99] On the basis of my findings I therefore find that the Applicant was unfairly dismissed from his employment with the Respondent.
Remedy
[100] As to remedy, the Act provides that an order of payment for compensation should not be made unless the Commission considers that reinstatement is not appropriate and that an order for payment of compensation is appropriate in all of the circumstances of the case. 43
[101] In this case the Applicant does not seek reinstatement. Given the breakdown in the relationship between the Applicant and the Respondent and the small size of the enterprise I do not consider reinstatement to be appropriate. I shall therefore consider if an order for compensation is appropriate in the circumstances.
[102] In considering an order for compensation the Act states:
392 Remedy—compensation
Compensation
(1) An order for the payment of compensation to a person must be an order that the person’s employer at the time of the dismissal pay compensation to the person in lieu of reinstatement.
Criteria for deciding amounts
(2) In determining an amount for the purposes of an order under subsection (1), the FWC must take into account all the circumstances of the case including:
(a) the effect of the order on the viability of the employer’s enterprise; and
(b) the length of the person’s service with the employer; and
(c) the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and
(d) the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and
(e) the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and
(f) the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and
(g) any other matter that the FWC considers relevant.
Misconduct reduces amount
(3) If the FWC is satisfied that misconduct of a person contributed to the employer’s decision to dismiss the person, the FWC must reduce the amount it would otherwise order under subsection (1) by an appropriate amount on account of the misconduct.
Shock, distress etc. disregarded
(4) The amount ordered by the FWC to be paid to a person under subsection (1) must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person’s dismissal.
Compensation cap
(5) The amount ordered by the FWC to be paid to a person under subsection (1) must not exceed the lesser of:
(a) the amount worked out under subsection (6); and
(b) half the amount of the high income threshold immediately before the dismissal.
(6) The amount is the total of the following amounts:
(a) the total amount of remuneration:
(i) received by the person; or
(ii) to which the person was entitled;
(whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal; and
(b) if the employee was on leave without pay or without full pay while so employed during any part of that period—the amount of remuneration taken to have been received by the employee for the period of leave in accordance with the regulations.
Evidence
[103] The evidence of the Applicant is that he had not intended to leave his employment. When asked what he would do if nothing changed the Applicant said:
I’d just do the same, same job that I was doing. I mean, nothing would have changed so we had a baby at home, and it would have just been ongoing. I mean, this had been ongoing for a few years, or two years. I thought, “Well, if this was the case and they were unwilling, I may go out and see if there are any other jobs,” but I made it clear to them in the past that if I ever was approached by someone to offer me a job, that I would always talk to them first, and to let them know that this had happened, to give them an opportunity to respond if they wanted to, but nothing had happened, because I had no intention of leaving. 44
[104] The Applicant also gave evidence that he would not have left his job without finding another job to go to first.
[105] The Applicant’s evidence is that, upon the termination of his employment he immediately started calling people and trying to find alternative employment although his priority at the time was to talk to a lawyer about the dismissal. 45
[106] He says he was on Seek.com constantly and had job advertisements emailed to him that were suitable for his experience and line of work. He spoke to yacht brokers in Melbourne but they said there was no work. He rejected approaches from potential employers that were too remote, interstate or selling products he did not think there was much future in. 46
[107] The Applicant says he commenced working for 38 South Boat Sales in mid-January but he earns no income from that. He has ‘invested with the business’ but ‘the company has debts’ and he has been ‘trying to help bring that company back and just try and pay off those debts first.’ 47
Consideration
[108] I do not consider that the making of an order for compensation will affect the viability of the Respondent (s.392(2)(a)) and nothing has been put to me to suggest otherwise.
[109] The Applicant was employed by the Respondent for three years prior to his dismissal (s.392(2)(b)).
Lost remuneration
[110] It is my opinion that the Applicant would not have remained with the Respondent for much more than another six months.
[111] The Applicant had clearly indicated to the Respondent a level of dissatisfaction with his working arrangements. In his letter of 7 September 2012 the Applicant said that ‘if we are unable to come to an agreement within the next two weeks, then I will need to seek further legal advice on what action is available to me’ and ‘if you are unable to provide me more opportunities and work to do in the short term, then I will have no choice but to seek alternative employment.’ 48 (emphasis added)
[112] The representative of the Applicant says it is wrong of the Respondent to view this letter as an ultimatum and to use it to argue that the Applicant should be awarded minimum compensation. However, the letter, on its face, indicates a level of dissatisfaction of the Applicant with his employment and a clear indication that, should things not improve to his satisfaction, he would be looking for other work in the short term. The Applicant appeared, from his record, to be a competent sales person. I see no reason why he would not, given his competence and his apparent confidence in his abilities, be actively seeking alternative employment had he not been dismissed.
[113] The Applicant’s evidence that if nothing had changed he would have remained where he was, unchanged, does not align with the letter he gave to the Respondent on 7 September 2012. I do not accept the evidence of the Applicant on this point. I have found above that the Applicant contributed to the deterioration of the relationship between himself and the Respondent. Previous points of conflict between the Applicant and the Respondent were approaching - Christmas and the annual Regatta. The tension caused by these in past cannot be ignored. It is possible that either, or both of these, may have brought the employment issues to a head.
[114] In addition to the indication from the Applicant that he would leave I cannot discount the possibility that the Respondent may, had it not done so at this time, have taken action to bring the employment relationship properly to an end given the deterioration in the relationship and the inability to successfully negotiation a new commission structure with the Applicant.
[115] For these reasons I consider that the Applicant would have remained employed by the Respondent for no more than a further six months.
[116] The Applicant was paid a base salary plus commission plus 9% superannuation plus a car and phone allowance. In the financial year immediately prior to the termination of his employment the Applicant earned $89,141 made up of $46,575 retainer plus $42,566 in commission payment. In addition $8,022 was paid in superannuation payments.
[117] Section 392 of the Act requires that, in considering an amount of compensation, a matter to be taken into account is the remuneration that the Applicant would have received had he not been dismissed. Remuneration is a broader concept than just wages or retainer paid to the Applicant in this case. In Rofin Australia v Newton a Full Bench of the AIRC held that:
‘Remuneration’… is properly defined as the reward payable by an employer to an employee for the work done by that employee in the course of his or her employment with that employer. It is a term that is confined neither to cash payments nor, necessarily, to payments actually made to the employee. It would include non-pecuniary benefits and payments made on behalf of and at the direction of the employee to another person out of moneys otherwise due to that employee as salary or wages. 49
[118] For this reason, in considering remuneration likely to have been earned, it is appropriate that I consider the Applicant’s retainer, the commission he would likely have earned for the period, superannuation, phone and car allowance. As such I reject the Respondent’s submission that I should consider commission payments as contingent payments 50 for the purpose of the assessment of remuneration lost.
[119] I estimate the remuneration due to the Applicant for six months to be:
Retainer | $23,287.50 |
Commission | $21,283 51 |
Superannuation | $4,011.35 |
Phone and car allowance | $1,300.00 52 |
TOTAL | $49,881.85 |
[120] I therefore find that, had the Applicant not been dismissed the remuneration he was likely to have received for the six months I consider he would have remained in employment is $49,881.85 (s.392(2)(c)).
[121] The Applicant received three weeks’ pay in lieu of notice at the time of his dismissal equal to $2687.00. I have not been advised of any other payments made to the Applicant. The deduction of this amount from the amount he would have received had he not been dismissed results in lost remuneration of $47,194.85 ($49,881.85 - $2687.00).
[122] This amount should then be adjusted for contingencies. In Ellawala v Australian Postal Corporation a Full Bench of the AIRC said:
[36] The next step is to discount the remaining amount for “contingencies”. This step is a means of taking into account the possibility that the occurrence of contingencies to which the applicant was subject might have brought about some change in earning capacity or earnings.
[37] In Wynn v NSW Insurance Ministerial Corporation the High Court (per Dawson, Toohey, Gaudron and Gummow JJ) made the following observations about deductions for contingencies:
“It is necessary to say something as to contingencies or ‘vicissitudes’. Calculation of future economic loss must take account of the various possibilities which might otherwise have affected earning capacity. The principle and the relevant considerations were identified by Barwick CJ in Arthur Robinson (Grafton) Pty Ltd v Carter as follows:
“Ill health, unemployment, road or rail accidents, wars, changes in industrial emphasis, so that industries move their location, or are superseded by new and different techniques, the onset and effect of automation and the mere daily vicissitudes of life are not adequately reflected by merely and blindly - taking some percentage reduction of a sum which ignores them.” [(1968) 122 CLR 649 at 659]
It is to be remembered that a discount for contingencies or ‘vicissitudes’ is to take account of matters which might otherwise adversely affect earning capacity and as Professor Luntz notes, death apart, ‘sickness, accident, unemployment and industrial disputes are the four major contingencies which expose employees to the risk of loss of income’. Positive considerations which might have resulted in advancement and increased earnings are also to be taken into account for, as Windeyer J pointed out in Bresatz v Przibilla, [(1962) 108 CLR 541 at 544] ‘(a)ll “contingencies” are not adverse: all “vicissitudes” are not harmful’. Finally, contingencies are to be considered in terms of their likely impact on the earning capacity of the person who has been injured, not by reference to the workforce generally. Even so, the practice in New South Wales is to proceed on the basis that a 15% discount is generally appropriate, subject to adjustment up or down to take account of the plaintiff’s particular circumstances.”
[38] Four points may be drawn from this extract:
- calculations of future economic loss must take account of the various probabilities which might otherwise have affected earning capacity;
- apart from death, the four major contingencies which expose employees to the risk of loss of income are sickness, accident, unemployment and industrial disputes;
- positive might have resulted in advancement and increased earnings are also taken into account; and
- contingencies are to be considered in terms of their weekly impact on the earning capacity of the applicant, not by reference to the workforce generally.
[39] Assessing the impact of contingencies requires the exercise of a broad general discretion. As the Full Court of the Federal Court said in Hall and another v Tarlinton:
“. . . it is not the law, in our opinion, that unfavourable contingencies are always to be assumed, and that the plaintiff has the onus of establishing that there are countervailing favourable contingencies. In our opinion, in each particular case, the question is one for the trial judge or jury: on all the evidence, does it appear that the calculation of the plaintiff’s loss of earning capacity, based on his wages at the time of the accident, should be increased for favourable contingencies, decreased for unfavourable contingencies, or left unchanged for the combination of both . . . the matter is not one for calculation, but for the exercise of a broad general discretion.”
[40] We note that in Sprigg the Commission adopted a 25 per cent discount for contingencies in accordance with the deduction made by North J in Slifka v JW Sanders Pty Ltd. In that case his Honour dealt with this issue in the following terms:
“In relation to the loss of wages after 27 October 1995 (paragraph (d)), the existing significant differential between the applicant’s current actual earnings and the earnings he would have received from continued employment with the respondent may well reduce in the remaining 2½ years. Although the applicant’s wages have not increased in the last 12 months, there is some chance that the longer he remains in employment the more likely an increase in wages becomes, with a consequent reduction in the differential. The applicant was a very experienced employee in the electrical wholesaling trade. This experience should prove valuable to his new employer. Of course, against this must be balanced the chance that he will lose his current job and find it difficult to obtain a new one.
In relation to the items referred to in paragraphs (d), (e) and (g), some allowance should be made for the contingency that the applicant may not have served the whole of the remaining 2 ½ years as an employee of the respondent, for reasons such as ill health, lawful termination by the respondent, voluntary resignation, or closure of the respondent’s business. None of these contingencies should attract a high allowance.
Finally, some allowance should be made for the fact that some part of the compensation will be received up to 2 ½ years earlier than if the applicant had completed his employment with the respondent.
In all the circumstances, it appears to me that an appropriate reduction for contingencies relating to the future is 25%. As the total of the items referred to in paragraphs (d), (e) and (g) is $30, 00, a reduction of 25% brings these items to a total of $22, 500.” 53
(footnotes omitted)
[123] The Full Bench in Ellawala concluded that:
We note that in Slifka North J only applied the deduction for contingencies to prospective loss, that is loss occasioned after the date of the hearing. This approach has also been adopted in a number of first instance arbitrations by members of the Commission. As a matter of logic this approach has some appeal. A discount for contingencies is a means of taking account of the various probabilities that might otherwise affect earning capacity. At the time of hearing any such impact on an applicant’s earning capacity between the date of termination and the hearing will be known. It will not be a matter of assessing prospective probabilities but of making a finding on the basis of whether the applicant’s earning capacity has in fact been affected during the relevant period. But this matter was not raised before us and we were not directed to any evidence upon which we could make a finding as to whether Ms Ellawala’s earning capacity was adversely effected by some event which took place in the period between her termination and the hearing of the matter at first instance. 54
(footnotes omitted)
[124] The primary reason for which I intend to deduct for contingencies is the likelihood that the Applicant would not have remained in employment for the entirety of the six months. I consider it appropriate to make such an allowance even though that six month period has now passed. Had my contingency considerations related to matters such as ill health it would not have been appropriate to make any adjustment given that the six month period has elapsed with no evidence of an inability to earn during the period.
[125] The Applicant proposes a contingency of 40% ‘because of the difficulties in the employment relationship between the parties. This contingency has regard to what Mr Veal wrote in the letter of 7 September 2012, namely that he may resign if things did not improve or he found another position. The Applicant says this contingency amount is based on an anticipated employment period of 12 months and should be reduced for a shorter employment period. I agree with the Applicant on this point. I reject the Respondent’s submission that a reduction for such a contingency should not be considered here. I agree that the difficulties in the employment relationship are appropriately taken into account in determining the likely further period of employment (and they have been). However, having remained in employment there were matters associated with the day to day operations (including the employment of additional staff, the offering of a further contract/commission structure) that may have had an effect on the likelihood of the Applicant remaining in employment for the entire six month period. This is properly considered as a contingency for which a deduction should be made. The contingency reduction here is based on a likelihood that the Applicant would have acted successfully on his implied intention in his letter of 7 September 2012. His capacity to do so would be effected by a range of factors not easy to predict including the state of the labour market, personal considerations of his family etc.
[126] For these reasons I have decided that a reduction for contingencies of 10% is appropriate.
[127] The application of a 10% contingency results in a sum of $42,475.36 ($47,194.85 - 10%).
[128] Had the Applicant not been dismissed the remuneration he would have received, taking into account contingencies and monies received, is therefore $42,475.36 (s.392(2)(c)).
Failure to mitigate loss
[129] I am not satisfied the Applicant has taken positive steps to mitigate his losses (s.392(2)(d)). He has rejected a number of jobs selling products he ‘was not aware of’ or where he ‘didn’t think there was much future’. 55 Instead he decided to invest in a business that has a debt problem.
[130] I am not convinced that I should accept the Applicant’s decision to invest in a company in debt as an effort by the Applicant to mitigate the loss he suffered. Rather, it seems to me, the Applicant has compounded his loss. Whilst this may turn into a positive investment for him in the future, it suggests a decision not to actively mitigate his loss at the time of his dismissal.
[131] For this reason I have reduced the amount by a further 50% resulting in a sum of $21,237.68 ($42,475.36 - 50%).
Other matters
[132] On the evidence before me the Applicant has earned no income since the time of his dismissal which includes the period of his likely employment. (s.392(2)(e)).
[133] There is no evidence to suggest that the Applicant is likely to earn any income between the making of any order arising from this decisions and the actual compensation that would have a bearing on the basis or amount of compensation (s.392(2)(f)).
[134] There are no other matters that I consider relevant (s.392(2)(g)).
[135] I have not considered the taxation treatment of the amount I have determined.
[136] I have not reduced the amount for misconduct (s.392(3)) and I have not included any component for shock, humiliation or distress (s.392(4)).
[137] The amount I intend to award as compensation is less than the amount the Applicant would have received had he remained in employment for 26 weeks and is less than the high income threshold (s.392(5)).
[138] No application has been made that any award of compensation should be able to be paid in instalments.
Conclusion
[139] For all of the reasons given I have decided that the Respondent pay compensation to the Applicant the amount of $21,237.68 gross, to be taxed according to law, in lieu of reinstatement. It is appropriate that the compensation be paid within 14 days.
[140] An order to this effect will issue in conjunction with this decision.
COMMISSIONER
Appearances:
M. Champion of Counsel with O. Pels for the Applicant.
A. Maher and A. Hobson, for the Respondent.
Hearing details:
2013.
Melbourne;
March 4.
Final written submissions:
Applicant, 25 March 2013 and 9 April 2013.
Respondent, 3 April 2013.
1 Exhibit A2.
2 Exhibit A4.
3 Exhibit A5.
4 Exhibit A5, clause 23.
5 Exhibit A7.
6 Exhibit A7.
7 Exhibit A8.
8 Exhibit A9.
9 Exhibit A12.
10 Exhibit A10.
11 Exhibit A11.
12 Exhibit A1, paragraph 37.
13 Exhibit R1.
14 Exhibit A13.
15 Exhibit A1, paragraph 64.
16 Exhibit A14.
17 Transcript PN726.
18 Exhibit R3, paragraph 14.
19 Transcript PN1455.
20 Transcript PN743.
21 Transcript PN758-9.
22 Transcript PN1073.
23 (1995) 62 IR 371, 373.
24 Print R4471, [19].
25 Transcript PN309-10.
26 Exhibit A12.
27 Transcript PN376, 384.
28 Transcript PN382.
29 Transcript PN437.
30 Transcript PN442.
31 Transcript PN439.
32 Form F2 - application for unfair dismissal remedy, paragraph [4].
33 Transcript PN287.
34 Transcript PN287.
35 Transcript PN286.
36 Exhibit A1, paragraph 64.
37 AIRC Print S5897, [73].
38 Exhibit R3, paragraph 37.
39 Exhibit R4, paragraph 18.
40 Fastidia Pty Ltd v Goodwin, Print S9280, [43].
41 (1995) 185 CLR 410, 465 per McHugh and Gummow JJ.
42 McLauchlin v Australia Meat Holdings Pty Ltd (1998) 84 IR 1,10.
43 Section 390(3).
44 Transcript PN512.
45 Transcript PN257.
46 Transcript PN258-9.
47 Transcript PN263.
48 Exhibit A12.
49 (1997) 78 IR 78, 81.
50 Respondent final submission, 3 April 2013, paragraphs 53 and 55.
51 This is based on the previous 12 months commission payments. To this extent I accept the submission of the Applicant that there is no evidence his sales performance had declined.
52 This figure is based on the amount specified in the second contract. No other amount was indicated in any evidence. Whilst the Applicant says he never signed the second contract he was paid on its basis.
53 Print S5109 (17 April 2000).
54 Print S5109 (17 April 2000), [43].
55 Transcript PN259.
Printed by authority of the Commonwealth Government Printer
<Price code G, PR536158>
3
7
0