[2015] FWC 3904

FAIR WORK COMMISSION

DECISION

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

Shannon Craddock
v
James Mawhinney; Digital Personnel Pty Ltd; Reeltime Media Limited
(U2014/10115)

DEPUTY PRESIDENT SAMS

SYDNEY, 11 JUNE 2015

Application for unfair dismissal remedy - identity of employer - failure of respondent/s to cooperate with the Commission - dismissal harsh, unreasonable and unjust both substantively and procedurally - reinstatement impractical - maximum compensation appropriate - orders made.

BACKGROUND
[1] This is an application, filed by Mr Shannon Craddock (the ‘applicant’) for a remedy for unfair dismissal, made pursuant to s 394 of the Fair Work Act 2009 (the ‘Act’). In his Form F2 application, the applicant named ‘Reel Time Media & Eleuthera Group’ as his employer. However, the identity of the true respondent to this application is a vexed question in this matter.

[2] The applicant was employed from 28 May 2013 and his contract of employment identified Digital Personnel Pty Ltd ACN 163 510 245 (‘Digital Personnel’) as his employer. Digitial Personnel is a wholly owned subsidiary of Reeltime Media Limited ACN 085 462 362 (RML). The applicant was the National Sales Manager for three brands within the ‘Reeltime Media Group’, being PositionMeOnline, Ocean Feather Digital and Level 91. The business was, broadly speaking, one involving digital search engine optimisation.

[3] The applicant was dismissed on 6 June 2014 in an email from Mr James Mawhinney, which was expressed as follows:

‘Dear Shannon,

It is with regret that we inform you that your employment with Reeltime Media Limited’s subsidiary, Digital Personnel Pty Ltd, has been terminated effective 6 June 2014.

You are being terminated due to not meeting the minimum sales criteria for in excess of a 4 months period. Regardless of the company’s position over the last 3 months, your performance for the period prior to this also did not meet the minimum required criteria of $15,000 of setups and $2,500 of monthly subscription services.

It is the policy of this company to protect its trade secrets, customer lists and other confidential or proprietary information as vigorously as possible. We remind you that we consider our clients, our business procedures and our business plans to be proprietary. Please remember that you have signed a confidentiality and non-disclosure agreement.

We request that you return any and all property that was generated or obtained during your employment with this company, including any documents, handbooks, account ledgers, financial documents, manuals, computers, computer programs, software, keys, security cards, etc.

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

Sincerely,

James Mawhinney

Managing Director
Eleuthera Group
Mob: [supplied]
Fax: [supplied]

[4] Regrettably, no named respondent has properly complied with the directions and processes of the Commission in relation to this application. Due to these unfortunate circumstances, the matter was not conciliated and was listed for hearing before me.

[5] The Commission conducted two hearings in relation to this application in Brisbane. The first was on 22 January 2015. The applicant appeared for himself and there was no appearance from the named respondent being, at that time, ReelTime Media Limited t/as PositionMeOnline. I note that Mr Gabriel Ehrenfeld, who was listed as a contact for this entity, had contacted my chambers prior to the hearing to complain that:

a) this was not a properly constituted entity; and

b) that he was not an officer or employee of Reel Time Media, Reeltime Media Limited, Digitial Personnel Pty Ltd or Eleuthera Group.

In short, he denied any connection with this matter. However, the applicant informed the Commission of his belief that Mr Ehrenfeld was ‘facing bankruptcy’.

[6] The applicant explained that while Mr Ehrenfeld had been the Acting CEO of RML at the time of his dismissal, he had since resigned from RML as of 5 December 2014. An examination of ASX demonstrated that Mr James Mawhinney was now the CEO of ReelTime Media Limited. The applicant had not been successful in contacting Mr Mawhinney. The applicant claimed that he had not been paid any of his contractual entitlements for the last three to four months of his employment with RML. No tax had been paid to the Australian Tax Office and he believed the ATO was investigating.

THE PROCEEDING

[7] In his witness statement dated 12 December 2014, the applicant set out that on 7 March 2014, Mr Mawhinney was removed from the Board of RML Board and took a number of staff and clients to his own business, Design Experts of the Eleuthera Group. The fallout from this was that the bills of RML were not paid.

[8] The applicant explained that in May 2014, Mr Ehrenfeld held an online meeting with the remaining staff setting out that ‘loyalty’ would be rewarded with shares in the company in the future. On 6 June 2014, Mr Erhenfeld directed the applicant to hand over the boxes he held in his apartment to Ms Sarah Liang from Design Experts as RML had acquired this ‘brand’. He was terminated by Mr Mawhinney later that afternoon by way of the email; see para [3] above.

[9] The applicant also enclosed an ASX announcement made by Reeltime Media Limited, dated 2 April 2014. It was expressed as follows:

‘Termination of Chief Operating Officer

TERMINATION OF JAMES MAWHINNEY
The Company announces that on 7 March 2014 it terminated the services of James Mawhinney, the Chief Operating Officer of the Company and its subsidiaries. The grounds for that termination arose from conduct of his that appeared antithetical to the interests of the Company.

SUPREME COURT ACT
Subsequent events have intensified the concerns of the Company and proceedings including an application for urgent relief have been commenced in the Supreme Court of New South Wales. Those proceedings seek orders restraining Mr Mawhinney from continuing his actions. The Company will keep the market advised of any material developments in the matter.’

A further announcement to the ASX revealed that the NSW Supreme Court had received a number of enforceable undertakings from Mr Mawhinney.

[10] The applicant relied on a number of emails which referred to the difficult financial circumstances faced by RML. There were numerous references to delays in payroll, the cancellation of RML’s utilities for non-payment and the events leading up to RML’s eviction from its premises on 14 May 2014. An email dated 12 May 2014 from Mr Craig Lawrence, Brand Development Manager disclosed that the applicant had sold a $7,000 website at this time, despite having no other staff, no office and no internet. An email dated 16 May 2014 from Mr Ehrenfeld set out that the Group was attempting to complete capital raising and referred to its customers being ‘poached’ (presumably by Mr Mawhinney’s Group).

[11] The applicant relied on two written statements of Mr Damian Newton and Mr Craig Lawrence. I reproduce Mr Newton’s signed, but not sworn statement, dated 11 December 2014 below:

‘I am writing in support of an unfair dismissal claim being filed by Shannon Craddock. At the time of Shannon’s termination, I was a Brand Manager at Level 91, a sister company to Position ME Online, within the Reeltime Media Ltd (RMA) group of companies.

On the 6/6/2014 Shannon was terminated from Position Me Online.

Prior to his termination, the QLD Position Me Online office had been evicted from their premises at 433 on Logan (433 Logan Rd, Stones Corner QLD) due to non-payment of rent. Subsequently, all sales staff also resigned due to fallout from a dispute between the CEO (Gabriel Ehrenfeld) and the COO (James Mawhinney), which resulted in James’ dismissal from RMA.

I am aware that post-eviction, Shannon had been required to store the company office equipment at his rental property, without any payment or support from the company; and with no direction provided as to what to do with that equipment. With no other staff in Queensland, he also had no way to hand the equipment back to the company.

Speaking with Shannon on several occasions during this stressful time, it was very clear that he was struggling financially, with no payments (including salary & entitlements understood to be in arrears) at the time. Further, it is my understanding he was dependent on loans from his father and friends to allow him to cover the essential costs of living, including rent, fuel and telephone.

Prior to his termination in June, CEO Gabriel Ehrenfeld held an online conference (via Google Hangouts) for all staff in late May, explaining that all staff who had “stuck it out” with RMA would be rewarded for their loyalty, and indicated that their positions were “safe and secure”.

It was also announced during this online meeting that RMA had completed terms for the acquisition of Design Experts, and that James Mawhinney’s company, Eleuthera Group, had been appointed to oversee operational management of the group.

It was shortly after this Google Hangout meeting where all positions were indicated to be secure that I heard of Shannon’s termination by James Mawhinney.’

[12] Mr Lawrence’s unsigned written statement, dated 10 December 2014, was expressed as follows:

‘My name is Craig Lawrence and I was the Victoria Sales Manager at the time of Shannon Craddock’s unfair dismissal 6th June 2014.

This is to confirm Shannon Craddock was employed as the State Area Manager for Queensland. He was terminated during a period when Gabriel Ehrenfeld, the CEO of Reeltime Media Group (ASX: RMA) at the time, stated that all employees who stayed loyal to RMA & PositionMeOnline and not follow James Mawhinney to Eleuthra Group or to Design Experts, would have job security and be rewarded for their loyalty with Shares and Job security.

From my understanding Shannon was terminated with no warnings. As I worked closely with Gabriel Ehrenfeld and Shannon on the strategic direction of PositionMeOnline and other businesses with the RMA group, there was never any negative mention of Shannon’s performance. For that matter, there was rarely any performance talks of anyone within the business at a top-tier management level. Gabriel had also been talking with Shannon about moving Shannon into a more strategic role level. Gabriel had also been talking with Shannon about moving Shannon into a more strategic role as Brand Development Manager of Sticky Websites, a new business within the RMA group.

Another challenge for Shannon was losing 3 staff under him as RMA began to implode thanks to the actions of James Mawhinney and Gabriel Ehrenfeld. At the time, RMA were a Google Premier Partner - a big deal in our industry, and due to RMA owing Google over $250,000 dollars [sic], Google suspended our account and we lost clients. Due to losing clients, staff left in their drovers. Shannon and I, as state managers, were incapable of doing anything about this as we were told to “simply wither the storm” - the directive given by Gabriel Ehrenfeld at the time.

Shannon also had to store all PositionMeOnline assets at his house as RMA did not pay the rent or electricity for the office held in Brisbane, therefore evicting Shannon and the one other staff member from the location

I believe his termination was not legal and this forced me to begin looking for another job. Along with the fact that loyal employees of RMA & PositionMeOnline had not been paid in months and to this date, have still not been paid.

I apologise if you can feel frustration in this letter. All the above is factual and the fallout from the actions of James Mawhinney and Gabriel Ehrenfeld is still being felt to this very day be approximately 20+ ex-employees of the RMA group.

I implore you to investigate this matter with enthusiasm as the outcome of your findings will be truly bewildering.’

[13] The applicant also forwarded a letter from Mr Mawhinney dated 1 August 2014 addressed to ‘former team members’. It advised that Mr Ehrenfeld was no longer the Managing Director and that Mr Mawhinney was now the Chief Executive Officer and Executive Director. It stated further:

‘This means that decisions relating to the direction and operation of the company rest with me, and decisions relating to the operation of the brands rest with the Brand Decelopment Managers. My appointment to the RMA board also means I represent the group at board-level.’ The following entities were added to the RMA group:

Eleuthera Group;

Hot Click media;

The Debt guys;

Moneytree Loans;

Mr Mawhinney indicated the Company’s intention to address the staff’s outstanding pay entitlements.

[14] The applicant explained that he had been employed by Digital Personnel, a wholly owned subsidiary of RML. Digital Personnel had just gone into liquidation. ReelTime Media Group also encompassed brands, such as Level 91, PositionMeOnline, Digital Personnel, AdTraction and others.

[15] The applicant said that Mr Mawhinney was on the Board of RML prior to 7 March 2014, but had been forcibly removed. Mr Mawhinney then started his own Group, possibly attempting to take some of RML’s brands with him. The ‘brands’ had collapsed. The applicant described Mr Ehrenfeld as a ‘silent director’. This had been catastrophic for the applicant in his role as the Manager of PositionMeOnline. The staff went into ‘damage control’ in attempting to retain clients. Mr Ehrenfeld had decided to acquire Eleuthera Group and Design Experts, which were brought back into the ‘RMA Group’. This was how Mr Mawhinney had come to be a part of the ‘RMA Group’ again. As of 1 August 2014, he was appointed as CFO of RML. RML had contracted with Eleuthera Group to manage the Company. At the time of the hearing he was CEO of Reeltime Media Ltd and Managing Director of Eleuthera Group. The applicant agreed that Mr Ehrenfeld was ‘out of the picture now’.

[16] The applicant said that from approximately May 2014, a number of staff had left as the paying of employees’ entitlements became erratic. Mr Ehrenfeld had advised him to ‘weather the storm’ for a later reward of shares.

[17] The applicant set out the circumstance of his dismissal as follows. He said that he had received Mr Mawhinney’s email terminating his employment after an employee from Design Experts had arrived at his home to collect the respondent’s materials. Earlier, Mr Ehrenfeld had spoken to him and told him to hand over the office supplies and that he and the applicant would probably work together in Design Experts. He went back to his apartment and discovered Mr Mawhinney’s emails. He had never received any warnings or performance reviews. A number of other employees were terminated around the same time.

[18] As I had some concerns that Mr Mawhinney had not been properly notified of the proceedings, the matter was relisted for a further hearing in March 2015. Further directions were issued and the following parties identified as real or potential respondents:

Digital Personnel Pty Ltd

Mr James Mawhinney; and

Reeltime Media Limited.

[19] After the transcript of this hearing was published, Mr Mawhinney emailed my chambers on 27 January 2015 in the following terms:

‘I have received a copy of the court transcript in relation to Mr Shannon Craddock dated 22 January 2015.

Apart from him having an incorrect understanding of the circumstances of the company, I wish to make you aware of a few important facts -

Shannon was never employed by Reeltime Media Limited, no staff ever have been employed by this company.

He was employed by Digital Personnel Pty Ltd, a subsidiary of Reeltime Media Limited

The company resolved to appointed liquidators to Digital Personnel Pty Ltd on 31/12/14 and has done so effective 31/12/14.

Gabriel Ehrenfeld was the director of Digital Personnel Pty Ltd until 6/12/14

Gabriel Ehrenfeld is currently under investigation by ASIC and the ATO for a string of offences

I was terminated from Reeltime Media in March 2013 not because of trying to take the companies out of the group as Mr Ehrenfeld made out to Shannon, but because I had started to expose Mr Ehrenfeld who was withdrawing money from company bank accounts and essentially running a public company like a private company for his benefit only.

Shannon and other former staff in a similar situation have been advised by the group's HR Manager to apply for FEG. There is a 6 month window to apply which has lapsed however we are providing evidence to the liquidators that the company was trading insolvent whilst Mr Ehrenfeld was the director, which should enable Shannon to still claim via FEG.

Should Shannon require any further information to assist with his FEG claim our HR Manager will gladly assist [email supplied].’

[20] A response was sought from the applicant, who replied on 4 February 2015 as follows:

‘The following statement is correct " Digital Personnel Pty Ltd, a subsidiary of Reeltime Media Limited" but what is also correct is if you look at my agreement it clearly states Reel Time Media who WHOLLY OWN Digital Personnel, therefore responsibility falls on RMA and its CEO James Mawhinney.

The dates outlined " The company resolved to appointed liquidators to Digital Personnel Pty Ltd on 31/12/14 and has done so effective 31/12/14." are after my Unfair Dismissal/ Termination.

The unfair dismissal case began 6/6/2014 the day of my termination by James Mawhinney who is now CEO or Reel Time Media that wholly owns Digital Personnel.

The facts are James Mawhinney also hired me on 1/6/2013 and also terminated me 6/6/2014 unfairly.

I am seeking justice for these actions by one man who represents many companies RMA, Digital Personnel, Position Me Online, Eleuthra Group etc etc.

I am begging His Honour to look at the facts and summons this individual who hides behind many companies to answer for at least this unfair dismissal case.’

[21] At the further hearing of the matter on 4 March 2015, the applicant appeared for himself. None of the three identified respondents appeared. I am satisfied that those three entities were advised of the hearing and did not take up an invitation to provide submissions. The applicant advised that he had completed the Fair Entitlements Guarantee (FEG) forms, as Digital Personnel is in liquidation and that he had no contact with Mr Mawhinney or RML. While FEG would cover a redundancy, he submitted that he had not been made redundant and pressed his application for relief from unfair dismissal. He believed Reeltime Media Group still existed. He agreed that Digital Personnel were a holding company through which wages were disbursed. The applicant asserted that the company he worked for still existed.

[22] The applicant reiterated that Eleuthera Group had been brought in as a contractor to manage Reeltime Media. The applicant was aware that the Commission could make orders, but that he would need to enforce any orders elsewhere. He submitted that orders should be made against the three respondents identified in para [18]. He sought the maximum of 26 weeks pay and believed he was being paid $65,000 per annum and subsequently confirmed this by email. The applicant said that while he was not employed, he had set up his own business, which was enjoying some success.

CONSIDERATION

Preliminary matters

[23] Section 396 of the Act sets out a number of matters which the Commission must determine prior to consideration of the merits of an application made pursuant to s 394 of the Act. These are expressed as follows:

‘396 Initial matters to be considered before merits

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

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

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

(d) whether the dismissal was a case of genuine redundancy.’

[24] Given the confusing and unsatisfactory nature of the information supplied by Mr Mawhinney, I find as follows:

(a) the applicant lodged his application eleven days after he was notified of the dismissal, with immediate effect, on 6 June 2015. Accordingly, the application was made within statutory time limit set out in s 394(2) of the Act.

(b) the application of the Small Business Fair Dismissal Code was not argued in this case and is not relevant (s 396(c)).

[25] Section s 382 of the Act sets out when a person is protected from unfair dismissal. That section is expressed as follows:

‘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.’

[26] I accept that the applicant was an employee of Digital Personnel Pty Ltd, as reflected in his contract of employment and that his period of employment extended from 28 May 2013 to his dismissal on 6 June 2014. While the coverage of the applicant by an industrial instrument is not clear, the applicant believed that he was paid $65,000p.a., although his contract of employment identified his base wage/salary as $75,000, plus superannuation. In either case, his income is below the high income threshold. The applicant’s period of employment is linked to the identity of the employer and I address this issue below.

Identity of the respondent(s)

[27] Nothing was put to me to suggest that RML or Digital Personnel are not national system employers. Rather, the correspondence from Mr Mawhinney indicates that RML denies that it was the employer of the applicant and that he was only ever employed by Digital Personnel, the entity identified in his contract of employment. The question of minimum employment period will be relevant to this consideration.

[28] As none of the named respondents deigned to assist the Commission in determining the proper identity of the respondent to this application (other than to deny any and all liability), the Commission has made further inquiries; See: s 590 of the Act. A search of the Australian Securities and Investments’ (ASIC) online register reveals that Mr Mawhinney is correct to put that Digital Personnel resolved to appoint liquidators on 31 December 2014, effective that day. I note that s 500(2) of the Corporations Act 2001 is expressed as follows:

‘(2) After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.’

This applies to a creditors’ voluntary winding up, but not to a members’ voluntary winding up; See: Catto and Others v Hampton Australia (In Liq) and Another (1998) 29 ACSR 225; and Awada v Linknarf Ltd (In Liq) (2002) 55 NSWLR 745. It does not appear controversial that the Commission is precluded from proceeding in any action against Digital Personnel, by virtue of the barring provisions of the Corporations Act 2001 (Cth). There was no evidence that leave of a Court had been sought or granted.

[29] While the circumstances surrounding Mr Mawhinney’s ousting from and return to RML are convoluted and murky, I can see no basis on which it could be found that Mr Mawhinney was the employer of the applicant.

[30] A search of the online register in relation to RML reveals that while it has been under external administration since 21 April 2015, the Company is not in the process of being wound up. It does not appear that the Commission would be similarly precluded from making orders in relation this entity, should its liability under the Act be determined.

Relevant statutory provisions

[31] Section 383 of the Act sets out the meaning of minimum employment period as follows:

‘383 Meaning of minimum employment period

The minimum employment period is:

(a) if the employer is not a small business employer—6 months ending at the earlier of the following times:

(i) the time when the person is given notice of the dismissal;

(ii) immediately before the dismissal; or

(b) if the employer is a small business employer—one year ending at that time.’

[32] The phrase ‘period of employment’ for these purposes is set out at s 384 as follows:

‘384 Period of employment

(1) An employee’s period of employment with an employer at a particular time is the period of continuous service the employee has completed with the employer at that time as an employee.

(2) However:

(a) a period of service as a casual employee does not count towards the employee’s period of employment unless:

(i) the employment as a casual employee was on a regular and systematic basis; and

(ii) during the period of service as a casual employee, the employee had a reasonable expectation of continuing employment by the employer on a regular and systematic basis; and

(b) if:

(i) the employee is a transferring employee in relation to a transfer of business from an old employer to a new employer; and

(ii) the old employer and the new employer are not associated entities when the employee becomes employed by the new employer; and

(iii) the new employer informed the employee in writing before the new employment started that a period of service with the old employer would not be recognised;
the period of service with the old employer does not count towards the employee’s period of employment with the new employer.’

[33] Section 22 governs the meaning of ‘service’ and ‘continuous service’ including where there is a transfer of employment:

‘22 Meanings of service and continuous service

General meaning
(1) A period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include any period (an excluded period) that does not count as service because of subsection (2).

(2) The following periods do not count as service:

(a) any period of unauthorised absence;

(b) any period of unpaid leave or unpaid authorised absence, other than:

(i) a period of absence under Division 8 of Part 2-2 (which deals with community service leave); or

(ii) a period of stand down under Part 3-5, under an enterprise agreement that applies to the employee, or under the employee’s contract of employment; or

(iii) a period of leave or absence of a kind prescribed by the regulations;

(3) An excluded period does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service.

(3A) Regulations made for the purposes of paragraph (2)(c) may prescribe different kinds of periods for the purposes of different provisions of this Act (other than provisions to which subsection (4) applies). If they do so, subsection (3) applies accordingly.

Meaning for Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2
(4) For the purposes of Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2:

(a) a period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include:

(i) any period of unauthorised absence; or

(ii) any other period of a kind prescribed by the regulations; and

(b) a period referred to in subparagraph (a)(i) or (ii) does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service; and

(4A) Regulations made for the purposes of subparagraph (4)(a)(ii) may prescribe different kinds of periods for the purposes of different provisions to which subsection (4) applies. If they do so, paragraph (4)(b) applies accordingly.

When service with one employer counts as service with another employer
(5) If there is a transfer of employment (see subsection (7)) in relation to a national system employee:

(a) any period of service of the employee with the first employer counts as service of the employee with the second employer; and

(b) the period between the termination of the employment with the first employer and the start of the employment with the second employer does not break the employee’s continuous service with the second employer (taking account of the effect of paragraph (a)), but does not count towards the length of the employee’s continuous service with the second employer.

(6) If the national system employee has already had the benefit of an entitlement the amount of which was calculated by reference to a period of service with the first employer, subsection (5) does not result in that period of service with the first employer being counted again when calculating the employee’s entitlements of that kind as an employee of the second employer.

Meaning of transfer of employment etc.
(7) There is a transfer of employment of a national system employee from one national system employer (the first employer) to another national system employer (the second employer) if:

(a) the following conditions are satisfied:

(i) the employee becomes employed by the second employer not more than 3 months after the termination of the employee’s employment with the first employer;

(ii) the first employer and the second employer are associated entities when the employee becomes employed by the second employer; or

(b) the following conditions are satisfied:

(i) the employee is a transferring employee in relation to a transfer of business from the first employer to the second employer;
(ii) the first employer and the second employer are not associated entities when the employee becomes employed by the second employer.

(8) A transfer of employment:

(a) is a transfer of employment between associated entities if paragraph (7)(a) applies; and

(b) is a transfer of employment between non-associated entities if paragraph (7)(b) applies [my emphasis].’

[34] The material provided by the applicant paints RML and its ‘brands’ as suffering significantly from the loss of clients to the point where it was unable to pay its rent, utility bills and employee entitlements. It is obvious that as a result of the skirmish between Mr Ehrenfeld and Mr Mawhinney (which involved proceedings in the Supreme Court of New South Wales) there were severe consequences for RML’s business/es and employees.

[35] Immediately prior to the applicant’s dismissal on 6 June 2014, it appears that Eleuthera Group, of which Mr Mawhinney presented himself as the Managing Director, had been engaged by RML to manage its affairs. On 1 August 2014 it was announced to the ASX, that RML had acquired a number of entities, including Eleuthera Group Pty Limited. Mr Mawhinney was made CEO and a director of RML, pursuant to the agreement made to acquire these entities.

[36] The uncontradicted evidence of the applicant, which I accept, was that on 6 June 2014, he had been directed by Mr Ehrenfeld to provide the materials from the Queensland office that he had stored in his own apartment, to Ms Sarah Liang from Design Experts (which I note was linked to Mr Mawhinney). This was on the basis that RML had acquired Design Experts and that Mr Ehrenfeld and the applicant would be working together in this context. The applicant complied with this direction. Later that day, the applicant received the email from Mr Mawhinney terminating his employment. It seems clear to me that the direction given to the applicant by Mr Ehrenfeld was the commencement of what was subsequently announced to the ASX on 1 August 2014 and that materials were already being transferred between the parties to this end.

[37] It follows that I find that there was a transfer of the applicant’s employment between Digital Personnel and RML immediately prior to the applicant’s dismissal for the relevant purposes of s 311(3) of the Act. The fact that RML and Digital Personnel were essentially being controlled by Mr Mawhinney at this time serves to fortify this finding. For the avoidance of doubt, it is clear that RML and Digital Personnel are associated entities within the meaning of s 50AAA of the Corporations Act 2001.

[38] It follows that I am satisfied that the applicant was employed by RML at the time of his dismissal. For these reasons, I find that he has served a minimum employment period with Reeltime Media Pty Limited and he has therefore completed the minimum employment period within the meaning of s 383 of the Act. Accordingly, the applicant is a person protected from unfair dismissal, within the meaning of 396(b). I turn now to consider the merits of the application.

Was the dismissal unfair?

[39] On the material outlined above, it is difficult to see how the applicant’s dismissal by RML could not be found to be both substantively and procedurally unfair. I would add that the employer’s treatment of the applicant up to, and including his dismissal, was appalling and unacceptable. Nevertheless, there is a statutory obligation on the Commission to consider whether the applicant’s dismissal was ‘harsh, unreasonable or unjust’, within the meaning of the criteria outlined in s 387 of the Act 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.’

[40] The well known passage from Byrne & Frew v Australian Airlines Ltd [1995] HCA 24 (‘Byrne’) is relevant to the consideration of whether a dismissal is ‘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’.

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

‘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 reasons 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 treated fairly.’

[42] Subsections (b) - (e) of s 387 of the Act might be broadly characterised as issues relevant as to whether a dismissed employee was afforded procedural fairness/natural justice. It is trite to observe that even if there was a valid reason or reasons for an employee’s dismissal, the dismissal may still be held to be unfair, if the employee was not afforded procedural fairness. This has been a long held industrial principle adopted and applied by this Commission, its predecessors, other Courts, industrial tribunals and the High Court. In the High Court case of Byrne, supra above, their Honours McHugh and Gummow JJ said at para [130]:

‘130. That is not to say that the steps taken, or not taken, before termination may not in a given case be relevant to consideration of whether the state of affairs that was produced was harsh, unjust or unreasonable. Thus, it has been said that a decision which is the product of unfair procedures may be arbitrary, irrational or unreasonable (168). But the question under cl 11(a) is whether, in all the circumstances, the termination of employment disobeyed the injunction that it not be harsh, unjust or unreasonable. That is not answered by imposing a disjunction between procedure and substance. It is important that matters not be decided simply by looking to the first issue before there is seen to be any need to enter upon the second.’

[43] Three further authorities on the subject of procedural fairness in an unfair dismissal are relevant to this matter. In Crozier v Palazzo Corporation Pty Limited t/as Noble Park Storage and Transport (2000) 98 IR 137 (‘Crozier v Palazzo’), a Full Bench of the AIRC said at para [73]:

‘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.’

[44] In Wadey v Y.M.C.A. Canberra [1996] IRCA 568, Moore J made clear that an employer cannot merely pay ‘lip service’ to giving an employee an opportunity to respond to allegations concerning the employee’s conduct or performance. His Honour said:

‘In my opinion the obligation imposed on an employer by that section has, for present purposes, two relevant aspects. The first is that the employee must be made aware of allegations concerning the employee's conduct so as to be able to respond to them. The second is that the employee must be given an opportunity to defend himself or herself. The second aspect, the opportunity to defend, implies an opportunity that might result in the employer deciding not to terminate the employment if the defence is of substance. An employer may simply go through the motions of giving the employee an opportunity to deal with allegations concerning conduct when, in substance, a firm decision to terminate had already been made which would be adhered to irrespective of anything the employee might say in his or her defence. That, in my opinion, does not constitute an opportunity to defend.’

[45] Nevertheless, procedural fairness steps should be applied in a commonsense and practical way. In Gibson v BosmacPty Ltd (1995) 60 IR 1 (‘Gibson’), Wilcox CJ said at 7:

‘Ordinarily, before being dismissed for reasons related to conduct or performance, an employee must be made aware of the particular matters that are putting his or her job at risk and given an adequate opportunity of defence. However, I also pointed out that the section does not require any particular formality. It is intended to be applied in a practical, commonsense way so as to ensure that the affected employee is treated fairly. Where the employee is aware of the precise nature of the employer's concern about his or her conduct or performance and has a full opportunity to respond to this concern, this is enough to satisfy the requirements of the section.’

[46] Superintending the Commission’s unfair dismissal jurisdiction is the principle of ‘a fair go all round’. This principle is set out at s 381(2) of the Act as follows:

‘381 Object of this Part
...
(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.’

I turn now to the specific matters required to be taken into account in respect to s 387 of the Act.

Was there a valid reason for the applicant’s dismissal (s 387(a))?

[47] In the letter of termination, Mr Mawhinney set out that the applicant was dismissed for failing to meet his sales targets. The applicant provided evidence, which was not contradicted, that he had made a sale of $7,000 in circumstances where his employer was not able to provide him an office, an internet connection or support staff. Given the circumstances involving Mr Mawhinney, Mr Ehrenfeld and RML, and in the absence of any contradictor, I am unable to find that there was a valid reason for the applicant’s dismissal. It seems far more likely that the applicant was dismissed as the backlog and severity of the respondent’s liabilities in relation to its employees continued to grow.

Was the applicant notified of the reason for his dismissal and given an opportunity to respond (ss 387(b), (c))?

[48] The applicant was notified of the reason for his dismissal in his letter of termination, in which he was dismissed with immediate effect. I accept the applicant’s evidence that his performance had not previously been raised by the respondent. It is clear that he was not given an opportunity to respond to that reason.

Any unreasonable refusal by the respondent to allow the applicant to have a support person present (s 387(d)).

[49] The evidence of the applicant was that he had never had any discussion in relation to his performance prior to his dismissal by email with immediate effect. Accordingly, this criterion is not relevant.

Was the applicant was warned about unsatisfactory performance prior to the dismissal (s 387(e))?

[50] In the absence of contradiction, I accept the applicant’s evidence that he had never been warned in relation to poor performance and, especially in relation to his sales targets.

The degree to which the size of the employer’s enterprise and its access to dedicated human resources specialists would be likely to impact on the procedures leading to the applicant’s dismissal (ss 387(f),(g)).

[51] This was not specifically addressed by the applicant. This is a neutral factor in my consideration.

Any other matters considered relevant by the Commission (s 387(h))

[52] The respondents’ conduct in relation to the applicant and to these proceedings has been dismissive and disrespectful to the Commission. Their failures to acknowledge the applicant’s claims or to assist the Commission in resolving those claims are relevant to my consideration of the merits of this application.

[53] For the above mentioned reasons, I find that the applicant’s dismissal was ‘harsh, unreasonable and unjust’ within the meaning of s 387 of the Act. As I am satisfied that the applicant is a person protected from unfair dismissal and that he has been unfairly dismissed, he is entitled to a remedy for his unfair dismissal pursuant to s 392 of the Act (s 390).

REMEDY

[54] The applicant sought the maximum 26 weeks payable under s 392 of the Act. The primary remedy for unfair dismissal is reinstatement and before the discretion of the Commission to award compensation is enlivened, it is necessary for it to make a positive finding that that reinstatement is inappropriate. The Explanatory Memorandum to the Fair Work Bill 2008 lends weight to this proposition as follows:

‘r.218 Reinstatement will be the preferred remedy. However, if it is not in the interests of the employee or the employer’s business, compensation in lieu of reinstatement may be ordered. Compensation will be capped at half of the high income threshold (i.e. 6 months pay) immediately before the dismissal or worked out from the total remuneration received by the person or to which they were entitled during the 26 weeks immediately before the dismissal. The factors for determining compensation within the maximum amount will be specified.’

[55] Given the circumstances and the evasive conduct engaged in by RML and Mr Mawhinney, it is unsurprising that the applicant does not seek reinstatement. It is difficult to see what entity, if any, still exists in a practical sense, the applicant could be reinstated to. Having considered these circumstances and the apparent dire financial state of the respondents, I determine that reinstatement would not be appropriate. It is left to the Commission to determine what quantum of compensation is to be ordered, having regard to each of the criteria in s 392 of the Act, which are set out as follows:

‘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.

[56] Having considered all of the matters under s 392 of the Act, I see no reason why the applicant should not receive the maximum compensatory remedy for his unfair dismissal of 26 weeks pay based on $65,000p.a. I am satisfied that there are no merit or statutory grounds to discount this figure.

[57] Orders to that effect will accompany the publication of this decision.

DEPUTY PRESIDENT

Appearances:

Applicant in person.

No appearance for the respondents.

Hearing details:

2015:

Brisbane

22 January, 4 March

Printed by authority of the Commonwealth Government Printer

Shannon Craddock v James Mawhinney