Shui Ping Kwong v Seahorse Mercantile Pty Ltd T/A Seahorse Bedroom Essentials
[2014] FWC 5910
•18 SEPTEMBER 2014
| [2014] FWC 5910 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Shui Ping Kwong
v
Seahorse Mercantile Pty Ltd T/A Seahorse Bedroom Essentials
(U2014/6275)
COMMISSIONER ROBERTS | SYDNEY, 18 SEPTEMBER 2014 |
Application for relief from unfair dismissal - jurisdiction - whether termination was a genuine redundancy. Jurisdictional objection dismissed - consideration of unfair dismissal.
[1] This decision concerns an application lodged on 6 April 2014 by Ms Kwong pursuant to s.394 of the Fair Work Act 2009 (the Act) in relation to the alleged unfair termination of her employment by Seahorse Mercantile Pty Ltd T/A Seahorse Bedroom Essentials (Seahorse or the Company).
[2] The Company initially raised a jurisdictional objection arguing that the dismissal of Ms Kwong was for genuine redundancy and therefore was not an unfair dismissal. The matter was set down for jurisdiction and arbitration hearing in Sydney on 15 August 2015. Directions were issued for the filing of written submissions, witness statements and any supporting documents. That process was completed on or about 1 July 2014.
[3] At the hearing Ms Kwong was represented by Mr G Chan. The Company was represented by Mr C Merlino. Mr Merlino and Ms J Hill (Director) gave sworn evidence for the Company.
Legislative Framework
[4] Sections 385, 388 and 389 of the Act provide:
“385 What is an unfair dismissal
A person has been unfairly dismissed if FWA is satisfied that:
(a) the person has been dismissed; and
(b) the dismissal was harsh, unjust or unreasonable; and
(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and
(d) the dismissal was not a case of genuine redundancy.
Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.”
388 The Small Business Fair Dismissal Code
(1) The Minister may, by legislative instrument, declare a Small Business Fair Dismissal Code.
(2) A person’s dismissal was consistent with the Small Business Fair Dismissal Code if:
(a) immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happened first), the person’s employer was a small business employer; and
(b) the employer complied with the Small Business Fair Dismissal Code in relation to the dismissal.”
389 Meaning of genuine redundancy
(1) A person’s dismissal was a case of genuine redundancy if:
(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:
(a) the employer’s enterprise; or
(b) the enterprise of an associated entity of the employer.”
[5] The Explanatory Memorandum to the Fair Work Bill 2008 (Explanatory Memorandum) provides as follows:
- a machine is now available to do the job performed by the employee;
- the employer’s business is experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five; or
- the employer is restructuring their business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore the person’s job no longer exists.
“Clause 389 – Meaning of genuine redundancy
1546. This clause sets out what will and will not constitute a genuine redundancy. If a dismissal is a genuine redundancy it will not be an unfair dismissal.
1547. Paragraph 389(1)(a) provides that a person’s dismissal will be a case of genuine redundancy if his or her job was no longer required to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. Enterprise is defined in clause 12 to mean a business, activity, project or undertaking.
1548. The following are possible examples of a change in the operational requirements of an enterprise:
1549. It is intended that a dismissal will be a case of genuine redundancy even if the changes in the employer’s operational requirements relate only to a part of the employer’s enterprise, as this will still constitute a change to the employer’s enterprise.
1550. Paragraph 389(1)(b) provides that it will not be a case of genuine redundancy if an employer does not comply with any relevant obligation in a modern award or enterprise agreement to consult about the redundancy. This does not impose an absolute obligation on an employer to consult about the redundancy but requires the employer to fulfil obligations under an award or agreement if the dismissal is to be considered a genuine redundancy.
1551. Subclause 389(2) provides that a dismissal is not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise, or within the enterprise of an associated entity of the employer (as defined in clause 12).
1552. There may be many reasons why it would not be reasonable for a person to be redeployed. For instance, the employer could be a small business employer where there is no opportunity for redeployment or there may be no positions available for which the employee has suitable qualifications or experience.
1553. Whether a dismissal is a genuine redundancy does not go to the process for selecting individual employees for redundancy. However, if the reason a person is selected for redundancy is one of the prohibited reasons covered by the general protections in Part 3-1 then the person will be able to bring an action under that Part in relation to the dismissal.”
[6] The modern award which applied to Ms Kwong’s employment was the General Retail Industry Award 2010 (the Award). Clause 8 of the Award relevantly provides at subclause 8.1:
“8.1 Consultation regarding major workplace change
(a) Employer to notify
(i) Where an employer has made a definite decision to introduce major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the employer must notify the employees who may be affected by the proposed changes and their representatives, if any.
(ii) Significant effects include termination of employment; major changes in the composition, operation or size of the employer’s workforce or in the skills required; the elimination or diminution of job opportunities, promotion opportunities or job tenure; the alteration of hours of work; the need for retraining or transfer of employees to other work or locations; and the restructuring of jobs. Provided that where this award makes provision for alteration of any of these matters an alteration is deemed not to have significant effect.
(b) Employer to discuss change
(i) The employer must discuss with the employees affected and their representatives, if any, the introduction of the changes referred to in clause 8.1(a), the effects the changes are likely to have on employees and measures to avert or mitigate the adverse effects of such changes on employees and must give prompt consideration to matters raised by the employees and/or their representatives in relation to the changes.
(ii) The discussions must commence as early as practicable after a definite decision has been made by the employer to make the changes referred to in clause 8.1(a).
(iii) For the purposes of such discussion, the employer must provide in writing to the employees concerned and their representatives, if any, all relevant information about the changes including the nature of the changes proposed, the expected effects of the changes on employees and any other matters likely to affect employees provided that no employer is required to disclose confidential information the disclosure of which would be contrary to the employer’s interests.”
[7] It is not contentious that Seahorse is a small business and therefore is subject to the Small Business Fair Dismissal Code (the Code). The Code provides:
“Summary Dismissal
It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.
Other Dismissal
In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.
The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement. The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee’s response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.
Procedural Matters
In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity. A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.”
Jurisdictional objection
[8] During the evidence of Ms Hill, it became apparent that no consultation had occurred in relation to the alleged redundancy of Ms Kwong. Mr Merlino did not demur. Accordingly, at that point in Ms Hill’s evidence, I advised the parties that if no consultation had occurred then a genuine redundancy could not exist. I then made the following statement to the parties:
“The former employer now concedes that the jurisdictional objection cannot be made out and to the extent necessary and based particularly on the evidence of the principal of the company Ms Hill, I dismiss the jurisdictional objection and the matter now proceeds by way of hearing as to the merits.” 1
[9] Following my ruling on the jurisdictional point, I asked the parties “whether they believe I have enough material before me to decide the merit issue and any possible arising compensation.” 2 Both parties agreed and my decision was then reserved.
Background
[10] Ms Kwong was employed by Seahorse from October 2006 until her dismissal delivered orally on 18 March 2014 during a meeting with Ms Hill. A formal written notice of termination of employment was received by Ms Kwong by mail on 20 March 2014. Ms Kwong states that she was on sick leave at the time that her employment was terminated.
[11] At the time her employment was terminated, Ms Kwong was the only full time employee at Seahorse’s retail premises in Chatswood New South Wales.
[12] Ms Kwong claims that the termination of her employment was harsh, unjust and unreasonable and seeks financial compensation, she does not seek reinstatement.
Evidence
Mr Merlino
[13] Mr Merlino gave sworn evidence. Mr Merlino’s evidence overwhelmingly dealt with his role as Seahorse’s Accountant and Financial/Business Advisor to Ms Hill.
[14] Mr Merlino was questioned extensively by Mr Chan about the financial state of Seahorse, particularly in the context of the termination of Ms Kwong’s employment being classed as a redundancy.
[15] In the light of subsequent events during Ms Hill’s evidence, there is no need for me to consider those financial aspects except to note that he had advised Ms Hill to reduce her outgoings for wages. In relation to the termination of Ms Kwong’s employment, Mr Merlino said: “It was just an economic decision necessary to be made for trying to keep Seahorse afloat.” 3
Ms Hill
[16] Ms Hill gave sworn evidence and submitted a witness statement 4 She said that she was happy with Ms Kwong’s employment performance. The company’s economic situation was the only reason for the termination of Ms Kwong’s employment.
[17] Ms Hill initially maintained that the termination of employment complied with the Small Business Fair Dismissal Code as it was for a genuine redundancy. However, Ms Hill later admitted that she did not undertake any consultation with Ms Kwong as required by the Award, on the basis that she was afraid what Ms Kwong might say to the Company’s customers. This concession by Ms Hill led to my ruling set out at paragraph 8 above.
[18] Ms Hill went on to detail the events of 18 March 2014. She said that on that date she presented a notice of termination to Ms Kwong who was accompanied by Mr Chan. Ms Kwong had refused to accept the termination and “would not offer me any chance to discuss further on her compensation.” 5 She had asked Ms Kwong to sign the termination notice but Ms Kwong had refused. She and Mr Chan had left the shop in an angry mood.
[19] Ms Hill went on to say that she became angry with Ms Kwong on 18 March 2014 due to Ms Kwong’s abusive behaviour. Ms Hill said that she locked Ms Kwong and Mr Chan in the shop with her for a period of time to force Ms Kwong to resolve their disagreement: “We need to resolve our disagreement now and settle the matter once for all before you are allowed to leave the premises.” Mr Chan had then started to telephone the police and on the advice of her sister, Ms Hill had then allowed Ms Kwong and Mr Chan to leave the shop. She then forwarded a formal written notice of termination to Ms Kwong by mail.
Conclusions and Findings
[20] It is clear from the provisions of s.389 of the Act that a genuine redundancy could only have occurred if Seahorse had complied with the consultation obligations contained in clause 8 of the Award. Section 1550 of the Explanatory Memorandum emphasises this point.
[21] In UES (Int’l) Pty Ltd v Harvey 6(Harvey), the majority of the Full Bench found that a dismissal was not a case of genuine redundancy within the meaning of s.389 because the company had not consulted about the redundancy in accordance with its obligation in the applicable modern award.7
[22] In Maswan v Escada Textilvertrieb T/A ESCADA 8 (Escada), Vice President Watson said: “The failure to notify and consult with Mr Maswan in accordance with the award is a serious defect in the procedure.”9 His Honour went on to say: “The failure to consult is not a trivial matter.”10 Subsequent case law has been consistent with Harvey and Escada.
[23] In the present case, Seahorse via Ms Hill conceded that no consultation occurred between the company and Ms Kwong and the provisions in the Award were therefore not followed. Therefore there was no valid reason for the termination of employment and I so find.
[24] In a recent decision 11, his Honour Vice President Hatcher said:
“My conclusion is that because I cannot find on the evidence that there was a valid reason for the dismissal, the dismissal was therefore harsh, unjust and unreasonable.” 12
[25] I now move to determine the questions of harsh, unjust and unreasonable and any resulting award of compensation. In this regard, I do not intend to traverse the evidence and submissions of the parties but I have paid regard to all the relevant material in making my determination.
[26] The question of valid reason is dealt with above. There was no allegation against Ms Kwong relating to her performance or behaviour as an employee. In relation to the remaining criteria set out in s.387 of the Act, I find that Ms Kwong did not have an adequate opportunity to respond to the reasons given by Ms Hill for Ms Kwong’s dismissal and that there were no adequate discussions relating to the dismissal. The size of Seahorse’s enterprise may have impacted to a significant degree upon the procedure followed by Ms Hill in effecting the dismissal. It is clear that Seahorse does not have access to dedicated human resource management specialists or expertise. Mr Merlino’s advice to Ms Hill was almost entirely of a financial nature.
[27] I have also taken into account a number of other factors. These include Ms Kwong’s relatively lengthy employment history with Seahorse, the fact that no performance or behaviour issues are alleged against her, her age and future employment prospects together with the personal effects of the termination of employment on her. I have also given significant weight to Ms Hill’s behaviour on 18 March 2014 in attempting to detain Ms Kwong and Mr Chan against their will. It is my view that that action alone would render the termination of employment unfair. I have also given significant weight to Seahorse’s financial situation and in this regard I am satisfied that the evidence of Mr Merlino and Ms Hill was entirely truthful. Seahorse had reasonable operational reasons to end its employment relationship with Ms Kwong. If it had followed its legal obligations in that regard, it would probably not find itself in the position that it is now in.
[28] Section 390 of the Act sets out the criteria concerning the ordering of remedy for unfair dismissal and I have paid regard to each of those criteria.
[29] It is not controversial that the first remedy to be considered by the Commission after making a finding that a dismissal was unfair is the possibility of reinstatement. Ms Kwong does not seek reinstatement. In all of the circumstances of this case, reinstatement would be both impracticable and undesirable. The employment relationship between Ms Kwong and Ms Hill could never be restored. In addition, the financial situation of the Company would most likely make reinstatement impossible in any event.
[30] Where reinstatement is not ordered, the Commission may order the payment of monetary compensation. Section 392(2) of the Act sets out the criteria for deciding a suitable level of compensation and I have paid regard to each of those criteria.
[31] I am concerned about the possible effect of any order I will make on the viability of Seahorse and I have also taken into account the length of Ms Kwong’s service and the remuneration she would have been likely to receive if she had not been dismissed. It is clear to me that the employment relationship between Seahorse would have ended about the same time anyway due to the Company’s financial situation.
[32] All in all, I find that the termination of the Applicant’s employment lacked a valid reason and was harsh, unjust and unreasonable in the manner in which it was carried out. An order will be issued that Seahorse pay her a total of $2000 (less appropriate tax according to law). This figure does not include any obligation on the employer in relation to compulsory superannuation contributions or any other statutory entitlement(s). I have arrived at the awarded figure after considering the arguments put by each side.
[33] In the light of the financial situation of the Company and in accordance with s.393 of the Act, I further determine that Seahorse shall pay the amount awarded to Ms Kwong in four equal instalments, the first instalment to be paid on or before 2 October 2014, the second instalment to be paid on or before 16 October 2014, the third instalment to be paid on or before 30 October 2014 and the fourth instalment to be paid on or before 13 November 2014.
[34] In accordance with s.381(2) of the Act, I am further satisfied that each party has been accorded a ‘fair go all round’.
[35] An order reflecting this decision is in PR554756.
COMMISSIONER
Appearances:
G Chan, for Shui Ping Kwong.
C Merlino, for Seahorse Mercantile Pty Ltd T/A Seahorse Bedroom Essentials.
Hearing details:
2014.
Sydney:
August 15.
1 Transcript PN635.
2 Ibid.
3 Transcript PN489.
4 Exhibit Hill 2.
5 Ibid.
6 [2012] FWAFB 5241 per Senior Deputy President Acton, Senior Deputy President Kaufman and Commissioner Bissett.
7 Ibid at para 40.
8 [2011] FWA 4239.
9 Ibid at para 37.
10 Ibid at para 39.
11 [2014] FWC 6202.
12 Ibid at para [29].
Printed by authority of the Commonwealth Government Printer
<Price code C, PR554755>
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