Stephen Mowlam v R I Brown Pty Ltd

[2013] FWC 3267

[2013] FWC 3267

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Stephen Mowlam
v
R I Brown Pty Ltd
(U2012/10170)

COMMISSIONER BLAIR MELBOURNE, 30 MAY 2013

Termination of employment decision

[1] This decision arises out of an application made under s.394 of the Fair Work Act 2009 (the Act) for unfair dismissal remedy. The application was made by Mr Stephen Mowlam (the Applicant) against his former employer, R I Brown Pty Ltd (the Respondent). The matter was listed for jurisdiction and arbitration hearing before the Fair Work Commission (the Commission).

The Applicant’s submissions

[2] The Applicant commenced in employment on 31 May 2002 and continued in employment until 2 November 2012.

[3] The applicant was terminated by way of a letter dated 3 October 2012. That letter reads as follows:

“Following our conversation last Tuesday and from conversations previously, I formed the view that you have a desire to leave the firm and that your actions in going to the Fair Workplace Ombudsman also confirms this from my perspective. Therefore I believe that this document should be treated as notification and that after a four week period, last day 2/11/12 you would no longer be working for this office.

I believe this is in fact the only way in which the matters that have been discussed can be finalised in a fair and reasonable manner. At the end of the four weeks and/or earlier by mutual consent your long service leave entitlement will be part of your final payment.”

[4] The Applicant responded to the letter dated 3 October 2012 in the following terms:

“Apologies for the delay in reply, as you were aware I was away on holidays and only arrived home to the letter today.

I do not understand the grounds of my termination and your view “that you have a desire to leave the firm” this is simply not true.

Both yourself and Yan recently expressed to both Charlie Ritsikos and me the poor financial position of the company, and the possibility that wages needed to be reduced amongst other things. As discussed I did not believe this to be a fair and reasonable option. I therefore contacted the Fair Work Ombudsman to gain information on my (and other staff members) minimum entitlements. I made this information available to both yourself and Yan.

Based on this information and the companies position I offered to take a voluntary redundancy if you so wished. Initially Yan offered two options: 1. Become Technical Staff or 2. Take redundancy, which I considered and concluded that the second option was my preference.

You then decided that this was not possible and that option 1. was now the only option. In this meeting Yan expressed my long service leave entitlements could not be paid let alone redundancy, given the financial position of the company.

I will reiterate that I do not have a desire to leave the firm but would have done so in the best interests of the firm and more importantly other staff members. This is now not the case.

Therefore as there are no grounds for termination I do not accept this letter of termination.

I have tried to make contact with you to no avail but I look forward to discussing this further in a mature and honest way (the way I have conducted myself in all meetings with you).”

[5] The Applicant alleges that his termination was unfair in that he was totally open and honest with the Respondent about his contact with the Fair Work Ombudsman, so much so that he provided access and a reference number so that the Respondent could gain access to verify what was discussed.

[6] The Applicant also asserts that no other reason was given for his termination prior to the unfair dismissal claim.

[7] The applicant further asserts that “the reasons for dismissal identified in the Respondent’s form F3 (Employer’s Response to Application for Unfair Dismissal Remedy) had not been brought to the Applicant’s attention at any time during his employment with the Respondent.

[8] In response to the jurisdictional objection raised by the Respondent, that is that they are a small business and are therefore covered by the Small Business Fair Dismissal Code, section 388 of the Act, and have applied it accordingly, the Applicant asserts that the Respondent has not applied the Small Business Fair Dismissal Code correctly and are now attempting to use this Code after the fact.

[9] In dealing further with the jurisdiction objection, the Applicant said:

● he was not made redundant, as outlined in the Small Business Fair Dismissal Code,

● he had not committed theft, fraud, violence or any serious breach of occupational health and safety procedures,

● he had not received negative feedback let alone been informed that he was at risk of being dismissed, or

● he had never received written or verbal warnings that his employment was at risk of dismissal.

[10] The Applicant also asserts that no warnings had been provided and he did not have the opportunity to respond to such warnings and therefore was not given a reasonable chance to rectify any issue identified.

[11] The Applicant states that the issues raised in the form F3 were never brought to his attention prior to him receiving the form F3 on 14 November 2012.

[12] The Applicant states that he was fired and was not made redundant. He rejects the assertion that he had access to the Company’s confidential financial information or that he disclosed such information to third parties. He does, however, acknowledge that he rang his father to get verbal advice on what he should do. He also acknowledges that he obviously did disclose the information to the Respondent and that he believed that the information was quite damning.

[13] The Applicant also states that he had never been informed that his performance was unsatisfactory.

[14] The Applicant also disputes the statement contained in the form F3 that he made untruthful entry or manipulation of the timesheets.

[15] With regard to the issue of redundancy, the Applicant states that he preferred a redundancy package instead of decreased hours or pay, as raised by the Respondent in a meeting held on 25 September 2012, but he rejects that he wanted a redundancy package to leave the business.

The Respondent’s submissions

[16] The Respondent asserts that the Applicant’s position was redundant, along with two other engineers in similar positions.

[17] The Respondent asserts that there was no possibility of redeployment within the business and that the Applicant was extensively consulted about the redundancy to the extent that the Applicant requested redundancy as a final solution.

[18] The Respondent states that they are a small business and are covered by the Small Business Fair Dismissal Code.

[19] Section 388 of the Act, states as follows:

(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.

[20] The Small Business Fair Dismissal Code states as follows:

“Small Business Fair Dismissal Code

Commencement

The Small Business Fair Dismissal Code comes into operation on 1 July 2009.

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.”

[21] The Respondent also asserts that the dismissal was consistent with the Small Business Fair Dismissal Code for the following reasons:

(a) The business employed nine people at the time of the dismissal and hence was a small business employer;

(b) Consistent with the section 388(2)A Fair Work Act, at the time of giving notice of the dismissal the employer was a small business employer;

(c) The final straw leading to the dismissal was the serious misconduct of the Applicant in reading confidential financial material, disclosing it to a third party and another employee and accusing the principals of the business of fraud by illegally extracting funds from the business; and

(d) The Fair Work Regulations 2009 define serious misconduct as including “(a) wilful or deliberate behaviour by an employee that is consistent with the continuation of the contract of employment” and in the present case the conduct of the Applicant severely damaged the relationship of trust and confidence required to maintain the employment contract to the point where the employment contract could not continue.

[22] Section 387 of the Act states as follow:

“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.”

[23] The Respondent states that the dismissal is not harsh, unjust or unreasonable, for the purposes of section 387 of the Act, for the following reasons:

(a) there was a valid reason for dismissal being the redundancy and the serious misconduct;

(b) the Applicant was notified of the reason for dismissal;

(c) the Applicant was given an opportunity to respond to the reasons for dismissal and in any case wanted to leave the Respondent;

(d) the Applicant had ample opportunity to have a support person present at meetings with the Respondent and did so at times;

(e) the Applicant was well aware in advance of the performance related aspects of the redundancy;

(f) the Respondent is a very small business without the capacity to have a human resources professional employed;

(g) the Respondent is a very small business without the capacity to have a human resources professional employed;

(h)     (i) the termination was with four weeks’ notice, when no such notice was required;

(ii) the decision to terminate was sound, defensible and well founded: see Selvalchandran v Petron Plastics Pty Ltd (1995) 62 IR 371;

(iii) the termination was enacted in a way that minimised harm to the Applicant’s career;

(iv) the Applicant picked up full time employment immediately through an existing client of the Respondent who now doesn’t use the Respondent for its engineering services at all;

(v) the Applicant suffered no economic loss arising from the dismissal.

[24] The Respondent states that in looking at the factual analysis, the Applicant and the Respondent had a good relationship throughout his 11 years of employment.

[25] The Respondent was facing financial difficulties from February 2012 due to external factors and poor staff performance.

[26] The Respondent states that several meetings occurred in Feb 2012 with all staff to discuss the financial difficulties of the Respondent. They state that at each of such meetings the option of making staff redundant, including the Applicant, or increasing billings was discussed. A number of options were discussed between the Respondent and staff including going into receivership; filing for bankruptcy; downsizing staff numbers or injecting additional funding while restructuring the business.

[27] The Respondent states that the Applicant assured the Directors that he would be fine on his own if he left the Respondent. The Applicant committed to a further six months with the Respondent to see if the business could turn around.

[28] The Respondent asserts that the Applicant removed a document relating to the company finances from the company’s bookkeeper’s desk in September 2012. The Applicant then sought advice from his father, who had no role in the Respondent’s business, regarding the content of the document.

[29] A meeting took place on 25 September 2012 with another staff member, Charles Ritsikos, as the Applicant’s witness. The Respondent asserts that at that meeting an accusation of fraud was made by the Applicant against the principals of the Respondent. That accusation proved to be without any foundation but was based solely on a complete misunderstanding of the Respondent’s work-in-progress financial records.

[30] The Respondent states that the misconduct alone would have permitted the dismissal due to the destruction of the relationship of trust and confidence between the Applicant and the Respondent; however, the reasons for dismissal were primarily redundancy, with misconduct being the final straw.

[31] The Respondent asserts that the Applicant requested a redundancy package on 27 September 2012 and advice was sought from the Fair Work Ombudsman by both the Applicant and the Respondent regarding redundancy entitlements.

[32] The Respondent further states that a request by the Applicant for a redundancy package was reiterated on 2 October 2012. There was then a review as to whether or not the Applicant had worked continuously for the Respondent; however, the end outcome was that the Applicant received his long service payment on 5 November 2012.

[33] The Respondent accepts that the Applicant was not given a written warning on his performance. They do, however, assert that the Applicant knew his performance did not meet the target over an extended period and so his job would inevitably be made redundant.

Witnesses

[34] Witness statements were provided by the Applicant and the following witnesses:

● Charlie Ritsikos

● Tracey Curran

[35] Witness statements were provided for the Respondent by the following witnesses

● Russell Brown

● Yan Yan Sun

● Ganga Selvarajan

[36] All attested to their statements under oath.

[37] Both parties have provided final submissions.

Conclusion

[38] Having considered the material before it, the Commission would first determine that the Respondent is a small business within the meaning of s388(2) of the Act, as the company has less than 15 employees.

[39] Second, there was a termination at the instigation of the employer.

[40] Third, the Commission rejects the argument that it was a case of a genuine redundancy on the part of the Respondent.

[41] The Commission does accept that the Company was in financial difficulty and that several discussions had occurred between the Respondent and a number of its employees regarding ways of progressing forward.

[42] The Commission accepts that at some point the Applicant sought a redundancy package but that was not available due to the financial constraints placed upon the Respondent.

[43] Fourth, the letter of termination dated 3 October 2012 does convey a misconceived view that the mere fact that, at some point, the Applicant volunteered to be made redundant and by approaching the Fair Work Ombudsman confirmed some view that it was the Applicant’s intention to leave, is terribly misguided and naive on the part of the Respondent.

[44] Fifth, the Commission accepts that the issues raised in the form F3 by the Respondent that go to the issue of performance, on the balance of probabilities, were not raised with the Applicant.

[45] It is accepted that the issues of the financials, ie. the cost of each engineer, as opposed to the monies that were coming into the Respondent’s business, identified a huge gap between incomings and outgoings. This, in the Commission’s view, could not be put in the context of performance and discussions relating to performance, particularly by the Applicant in this instance is an argument that can be relied upon by the Respondent.

[46] The Commission accepts that the financials of the Respondent played some part in the considerations to terminate the services of the Applicant, but the overriding issue that gave rise to the termination was the allegation of serious misconduct which lead to the breakdown in the relationship of trust and confidence in the relationship between the Applicant and the Respondent.

[47] That alleged serious misconduct is in relation to the Applicant removing the confidential document from the company’s bookkeeper’s desk in September 2012 without authority to do so. Then the activities of the Applicant in seeking advice from his father, a third person who had no role in the Respondent’s business, regarding the content of the document and finally the Applicant arranging a meeting on 25 September 2012 where, it is alleged, the Applicant accused the company directors of fraud on a large scale. That accusation proved to be incorrect and was based on a misunderstanding of the Respondent’s work-in-progress financial records.

[48] In relation to summary dismissal, the Small Business Fair Dismissal Code states as follows:

“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.”

[49] The Commission is satisfied that the Applicant did not commit theft, fraud, violence or serious breaches for occupational health and safety procedures, but the summary does say that it is fair for an employer to dismiss any employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal.

[50] The Commission is satisfied that the conduct of the Applicant, in withdrawing a financial document which he was not authorised to have, then conveying the contents of that document to a third party and then asserting at a meeting on 25 September 2012 that there was a large scale fraud involving the sum of approximately $1 million on the part of the Respondent, is serious misconduct.

[51] The actions on the part of the Applicant placed the relationship between the Applicant and the Respondent in an irretrieveable position, particularly given that the Respondent, and the Commission accepts the evidence of the Respondent’s directors, that the Applicant was treated like a son over his 11 year period of employment and the actions of the Applicant cause irreparable damage to the relationship.

[52] In the Commission’s view, having stated the above, there was a valid reason for the termination, that is serious misconduct on the part of the Applicant.

[53] Having determined that there was a valid reason for the termination, the Commission then turns its mind to s.387 of the Act:

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.

[54] In relation to s.387(a) of the Act, the Commission is satisfied that the conduct of the Applicant in this matter constituted serious misconduct and provided a valid reason for termination.

[55] In relation to s.387(b) of the Act, the Commission is satisfied that the Applicant would have been well aware following the meeting of 25 September 2012, although not formally advised, that there was a breakdown in the relationship between the Applicant and the Respondent due to the serious allegations of fraud made against the Respondent’s directors.

[56] In relation to s.387(c) of the Act, the Commission relies upon the summary dismissal provisions of the Small Business Fair Dismissal Code.

[57] In relation to s.387(d) of the Act, the Commission relies upon the summary dismissal provisions of the Small Business Fair Dismissal Code.

[58] In relation to s.387(e) of the Act, the Commission has found that the dismissal did not relate to any unsatisfactory performance by the Applicant

[59] In relation to s.387(f) of the Act, the Commission has made comments regarding the termination letter dated 3 October 2012 and the naivety with which that letter was written.

[60] In relation to s.387(h) of the Act, the Commission is satisfied that there no other matters that would assist the Commission.

[61] The Commission would therefore determine that the termination was not harsh in that the Applicant obtained documents they were not entitled to and disclosed the contents of those confidential documents dealing with the finances of the Respondent to a third party.

[62] The Commission determines that the termination was not unjust, in that the Applicant, made serious allegations alleging that the Respondent’s directors committed fraud, which was found to be untrue.

[63] The Commission determines that based on the above, the termination was not unreasonable.

[64] The Commission, therefore, dismisses the Applicant’s claim and, accordingly, closes the file.

COMMISSIONER

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