Steven Young v Inovit Pty Ltd T/A Inovit

[2017] FWC 657

[2017] FWC 657

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Steven Young
v
Inovit Pty Ltd T/A Inovit
(U2016/11947)

DEPUTY PRESIDENT CLANCY MELBOURNE, 1 FEBRUARY 2017

Application for relief from unfair dismissal – no valid reason – dismissal unfair – compensation ordered.

[1] This is an edited version delivered ex tempore and recorded in transcript on 31 January 2017. Mr Steven Young has applied under s.394 of the Fair Work Act 2009 (the Act) for unfair dismissal remedy in relation to his dismissal from his employment with Inovit Pty Ltd T/A Inovit (Inovit).

[2] Inovit terminated the employment of Mr Young on what appeared to be grounds of its poor financial performance and its consequent inability to keep him in employment.

Protection from unfair dismissal

[3] Section 382 of the Act sets out the circumstances that must exist for Mr Young to be protected from unfair dismissal:

“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.”

[4] Mr Young worked at Inovit for a continuous period of just under 4 years and has therefore completed a period of employment of at least the minimum employment period.

[5] It is not contested and I am satisfied that the sum of Mr Young’s annual rate of earnings is less than the high income threshold. Consequently, I am satisfied that Mr Young was protected from unfair dismissal.

[6] Section 396 of the Act requires me to decide four specified matters before the merits of the application may be considered.

Whether the application was made within the period required in subsection 394(2)-s.396(a)

[7] Mr Young was notified that his employment was terminated on 12 September 2016 and his unfair dismissal application was received by the Commission on 28 September 2016. As is further discussed below, I am satisfied that Mr Young made his application within the required 21 day period in s.394(2) of the Act.

Whether the person was protected from unfair dismissal – s.396(b)

[8] As outlined previously, I am satisfied Mr Young was protected from unfair dismissal.

Whether the dismissal was consistent with the Small Business Fair Dismissal Code – s.396(c)

[9] There is no material before me suggesting that Inovit is a small business employer within the meaning of s.23 of the Act. I therefore find that the Small Business Fair Dismissal Code does not apply.

Whether the dismissal was a case of genuine redundancy – s.396(d)

[10] On the material and evidence before me I am unable to conclude that Mr Young’s dismissal was a case of genuine redundancy. Inovit did not file a Form F3 Response to Mr Young’s application. Inovit did not attend the Conciliation that was listed for 2 November 2016. Inovit did not file witness statements or submissions or any other material in response to the Directions made by the Commission dated 11 November 2016 and 11 January 2017. Finally, Inovit did not attend the hearing before me on 31 January 2017.

[11] I must now consider if the dismissal of Mr Young by Inovit was unfair within the meaning of the Act.

Was the dismissal unfair?

[12] A dismissal is unfair if I am satisfied, on the evidence before me, that all of the circumstances set out at s.385 of the Act existed. Section 385 provides the following:

“385 What is an unfair dismissal

A person has been unfairly dismissed if the FWC is satisfied that:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

(d) the dismissal was not a case of genuine redundancy.”

Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 3

Was Mr Young dismissed?

[13] A person has been unfairly dismissed if the termination of their employment comes within the definition of “dismissed” for the purposes of Part 3–2 of the Act. Section 386 of the Act provides:

“386 Meaning of dismissed

(1) A person has been dismissed if:

(a) the person’s employment with his or her employer has been terminated on the employer’s initiative; or

(b) the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.”

[14] As outlined above, on 12 September 2016, Inovit notified Mr Young that his employment was terminated (s.385(a) of the Act).

[15] As I have also outlined and found (at paragraphs [9] and [10] above), the Small Business Fair Dismissal Code does not apply in this matter. For reasons that will be apparent when I deal with the evidence before me, I am unable to conclude that this a case of genuine redundancy (s.385(c) and s.385(d) of the Act).

Harsh, unjust or unreasonable

[16] I must consider whether I am satisfied the dismissal was harsh, unjust or unreasonable within the meaning of s.385(b) of the Act.

[17] The criteria I must take into account when assessing whether the dismissal was harsh, unjust or unreasonable are set out at s.387 of the Act:

“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.”

Commission proceedings

[18] Mr Vasilaras was granted permission to appear for Mr Young at the hearing on 31 January 2017. Mr Young gave evidence and relied on his witness statement and written submissions filed prior to the hearing. I found Mr Young to be a truthful and credible witness.

[19] There was no appearance by Inovit. Telephone calls were made to Inovit’s contact number by my Associate on 31 January 2017. Requests were made to be connected to Directors, Mr Mau or Ms Lee regarding attendance at the hearing, the date of which had been advised by the Commission in Notices of Listing sent to Inovit on 11 November 2016 and 11 January 2017. My Associate was informed that both Mr Mau and Ms Lee were based in China and the only contact for them was an email address. When my Associate inquired as to whether anyone else could attend on behalf of the Respondent, he was told that there was no-one authorised to attend for the Respondent as the Australian branch is not operating. I had instructed my Associate to advise Inovit that in the absence of anyone from Inovit attending, the matter would be heard in its absence and requested that this message be sent to the contact persons for Inovit.

[20] No application for adjournment was ever received from Inovit and there was no response to the contact from my Associate.

Evidence

[21] Mr Young commenced employment as a Sales Manager with Inovit on 12 November 2012. At the time of his termination on 12 September 2016, his annual remuneration was $72,000 (gross). Mr Young was also eligible for commission payments but his evidence was that the quantum varied. He was not able to provide me with an average figure that he earned in commission payments.

[22] On 8 September 2016, Mr Young sent Mr Mau and Ms Lee an email. In this email he sought payment for wages for the periods 12-26 July 2016, 27 July-11 August 2016 and 12 August-8 September 2016. He also sought reimbursement for toll, mobile phone and fuel expenses and payment for accrued annual leave and outstanding superannuation entitlements. He indicated he had sought advice from the Fair Work Ombudsman and that he would commence proceedings against Inovit for recovery if he was not paid and that he would notify ASIC on the basis that he believed Inovit was trading while insolvent.

[23] The email response that day from Mr Mau was that Mr Young would be paid when Inovit had been paid by a customer. This prompted a further email exchange which ended with Mr Mau stating he would obtain legal advice and report back to Mr Young.

[24] On 12 September 2016, Mr Mau sent Mr Young an email 1 stating:

[25] While the email stated Mr Young’s employment was terminated by Mr Mau with effect from 30 September 2016, Mr Young gave uncontested evidence that upon the arrival of Ms Lee soon after, there was no formal handover and he was told he was not required to serve his notice period but instead, finish immediately and hand back company equipment in his possession. I am therefore satisfied that at the time Mr Young filed his application with the Commission on 28 September 2016, his employment had already terminated.

[26] While Mr Mau raised the question of the financial performance of Inovit and claimed it was not able to continue to keep Mr Young as a Sales Manager, no material in support was ever filed and Mr Mau did not make himself available to give evidence.

[27] The uncontested evidence from Mr Young was that Inovit is a company that trades internationally, with its branch in Australia being one of a number of branches internationally. He said he reported to managers based in China and was not privy to the financial performance of Inovit. Mr Young also said that cash-flow issues had never been apparent to him before and nor had concerns about either his or the company’s performance. In relation to his personal performance, Mr Young’s evidence was that no issues of poor performance had been raised with him previously and the only performance review he had completed while employed by Inovit had resulted in him receiving commendation and a new car allowance of $500 per month. He said he was told he was doing a good job.

[28] Mr Young also gave evidence that as far as he is aware, the Australian operation of Inovit continues and the warehouse where he was based continues to operate and employ other individuals.

Was the dismissal harsh, unjust or unreasonable?

[29] The ambit of the conduct which may fall within the phrase ‘harsh, unjust or unreasonable’ was explained in Byrne v Australian Airlines Ltd 2 by McHugh and Gummow JJ as follows:

“.... 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.”

[30] As outlined above, the criteria I must take into account when assessing whether the dismissal was harsh, unjust or unreasonable are set out in s.387 of the Act. I am under a duty to consider each of these criteria in reaching my conclusion. 3

[31] I will now consider each of the criteria at s.387 of the Act separately.

Valid reason - s.387(a)

[32] Inovit must have a valid reason for the dismissal of Mr Young, although it need not be the reason given to him at the time of the dismissal. 4 The reasons should be “sound, defensible and well founded”5 and should not be “capricious, fanciful, spiteful or prejudiced.”6

[33] The Commission will not stand in the shoes of the employer and determine what the Commission would do if it was in the position of the employer. 7 The question the Commission must address is whether there was a valid reason for the dismissal related to the employee’s capacity or conduct (including its effect on the safety and welfare of other employees).8

Capacity - Dismissal for poor performance

[34] On 12 September 2016, Inovit appears to have dismissed Mr Young ostensibly on the ground of its unsatisfactory financial performance but I am not satisfied that the evidence could sustain a finding that Mr Young was terminated for poor performance. Inovit provided no material to the Commission or evidence before me and Mr Young’s evidence was uncontested and credible.

[35] I am therefore not satisfied that Inovit had a valid reason for dismissing Mr Young on the basis of poor performance.

Conduct

[36] There was no allegation made by Inovit relating to the conduct of Mr Young.

Notification of the valid reason - s.387(b)

[37] Notification of a valid reason for termination must be given to an employee protected from unfair dismissal before the decision is made, 9 in explicit terms10 and in plain and clear terms.11 In Crozier v Palazzo Corporation Pty Ltd12 a Full Bench of the Australian Industrial Relations Commission dealing with a similar provision of the Workplace Relations Act 1996 stated the following:

“[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 170(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. Much like shutting the stable door after the horse has bolted.”

[38] On the basis of the evidence before me, I am satisfied Mr Young was not notified of the reason for the termination of his employment before the decision was made. This is a factor indicative of unfairness.

Opportunity to respond to any reason related to capacity or conduct - s.387(c)

[39] Ordinarily, an employee protected from unfair dismissal must be provided with an opportunity to respond to any reason for dismissal relating to the conduct or capacity of the person. This criterion is to be applied in a common sense way to ensure the employee is treated fairly and should not be burdened with formality. 13

[40] Issues regarding his performance or conduct were never raised with Mr Young. Therefore, even if there were, and I find there were not on the evidence before me, Mr Young was not given any opportunity to respond to any reason of capacity or conduct at the time of his dismissal. I find this is also a factor indicative of unfairness.

Unreasonable refusal by the employer to allow a support person - s.387(d)

[41] Where an employee protected from unfair dismissal has requested a support person be present to assist in discussions relating to the dismissal, the employer should not unreasonably refuse that person being present.

[42] There is no positive obligation on an employer to offer an employee the opportunity to have a support person:

“This factor will only be a relevant consideration when an employee asks to have a support person present in a discussion relating to dismissal and the employer unreasonably refuses. It does not impose a positive obligation on employers to offer an employee the opportunity to have a support person present when they are considering dismissing them.” 14

[43] Mr Young was terminated via email communication in a process that did not lend itself to the involvement of a support person and nor did he request a support person. Therefore, I consider this to be a neutral consideration.

Warnings regarding unsatisfactory performance - s.387(e)

[44] Where an employee protected from unfair dismissal is dismissed for the reason of unsatisfactory performance, the employer should warn the employee about the unsatisfactory performance before the dismissal. As indicated above, unsatisfactory performance is more likely to relate to an employee’s capacity than their conduct. 15

[45] There is no written material before me, nor was there any direct evidence given at the hearing, that Mr Young was warned his performance was sufficiently poor such that his employment was at risk. Therefore, I consider this to be a neutral consideration.

Impact of the size of the Respondent on procedures followed - s.387(f)

[46] Inovit made no submissions on the size of its enterprise and its impact on procedures followed.

[47] In the circumstances of this case, I consider this criterion to be neutral.

Absence of dedicated human resources management specialist/expertise on procedures followed - s.387(g)

[48] Inovit made no submissions concerning the absence of dedicated human resource management specialists or expertise and any impact that may have had on procedures followed. In the circumstances of this case, I consider this criterion to be neutral.

Other relevant matters - s.387(h)

[49] Section 387(h) of the Act provides the Commission with a broad scope to consider any other matters it considers relevant.

[50] I have noted that Mr Young’s employment with Inovit was of just under 4 years’ duration.

Conclusion – harsh, unjust or unreasonable

[51] Taking into account all material before me, I consider that the termination of Mr Young’s employment was harsh, unjust and unreasonable. I am not satisfied there was a valid reason for his termination and in any event, he was not notified of the reason Inovit gave nor afforded an opportunity to discuss his termination before it was notified and put into effect.

Remedy

[52] In circumstances where I have found that Mr Young was protected from unfair dismissal at the time of being dismissed and he has been unfairly dismissed, s.390 of the Act prescribes that a remedy is available. Accordingly, I am required to determine whether to order the reinstatement of Mr Young or, in circumstances where reinstatement is inappropriate, an order for compensation if I am satisfied such an order is appropriate in all the circumstances.

[53] The primary remedy is reinstatement, however Mr Young has not sought reinstatement and Inovit has made no submissions. In any event, given the allegations Mr Young has made regarding non-payment of wages and other benefits which were not responded to nor satisfied despite indications that they would be, and the fact he has started new employment, I am satisfied it is not appropriate to order reinstatement (s.390(3)(a)).

[54] I must therefore consider whether it is appropriate in all the circumstances to make an order for payment of compensation (s.390(3)(b)).

[55] Section 392 of the Act sets out the circumstances that must be taken into consideration when determining an amount of compensation, the effect of any findings of misconduct on that compensation amount and the upper limit of compensation that may be ordered.

[56] I will now consider each of the criteria in s.392 of the Act.

Remuneration that would have been received: s.392(2)(c)

[57] Mr Young’s remuneration with Inovit was $72,000 per annum (gross).

[58] As has been outlined, there was nothing in evidence to suggest that Mr Young’s employment would not be ongoing and Inovit continues to operate in Australia. I therefore find that Mr Young would have continued to be employed by Inovit for 6 months. The remuneration he would have received during that period would have been $36,000 (gross).

Remuneration earned: s.392(2)(e)

[59] There was no evidence that Mr Young earned any remuneration from 12 September 2016 until he commenced new employment 17 weeks later on 9 January 2017, at the rate of $65,000 gross per annum. As at the date of making the order for compensation, he has been newly employed 3 weeks and the earnings from this, I deduct.

Income likely to be earned: s.392(2)(f)

[60] The evidence as to what income if any Mr Young is reasonably likely to earn during the period between the making of the order for compensation and the actual compensation was that from 9 January 2017, he now earns $65,000 per annum or $1250 per week (gross). There will be approximately 6 weeks’ earnings in the new role between the making of the order for compensation and the 6 months’ compensation, which I also deduct.

Other matters: s.392(2)(g)

[61] I find it is not appropriate in the circumstances of this case that a contingency should be applied.

Viability: s.392(2)(a)

[62] There was no evidence before me that would support a finding that an order for compensation in the amount I propose will affect the viability of Inovit.

Length of service: section s.392(2)(b)

[63] I find that the Mr Young’s period of service with Inovit, being nearly four years, should not affect the amount of compensation to be ordered.

Mitigating efforts: s.392(2)(d)

[64] In considering whether Mr Young has taken steps to mitigate the loss suffered as a result of the dismissal I should take into account whether he acted reasonably in the circumstances. 16 I find he has.

[65] Mr Young’s evidence was that he applied for approximately twenty new roles in order to mitigate his loss suffered as a result of the dismissal and that he was successful in obtaining new employment which commenced on 9 January 2017.

Misconduct: s.392(3)

[66] There was no allegation or evidence of misconduct by Mr Young that contributed to the dismissal.

Shock, Distress: s.392(4)

[67] I note that the amount of compensation calculated does not include a component for shock, humiliation or distress.

Compensation cap: s.392(5)

[68] The amount of compensation I will order does not exceed the compensation cap.

Conclusion

[69] I am satisfied that Mr Young was protected from unfair dismissal, that the dismissal was unfair and a remedy of $24,750 plus 9.5% superannuation, less taxation as required by law is appropriate. This figure is calculated by deducting 9 weeks earnings from Mr Young’s new employment from the remuneration he would have received had he not been dismissed.

[70] An order will be issued with this decision.

DEPUTY PRESIDENT

Appearances:

Mr Vasilaras for Mr Young

No Appearance for Inovit Pty Ltd.

Hearing details:

2017.

Melbourne:

January 31.

 1   Exhibit A1, Attachment B.

 2 [1995] HCA 24; (1995) 185 CLR 410 at 465.

 3   Sayer v Melsteel[2011] FWAFB 7498.

 4   Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 373, 377-378.

 5   Selvachandran v Peterson Plastics Pty Ltd (1995) 62 IR 371, 373.

 6   Ibid.

 7   Walton v Mermaid Dry Cleaners Pty Ltd (1996) 142 ALR 681 at 685.

 8   Ibid.

 9   Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137, 151.

 10   Previsic v Australian Quarantine Inspection Services Print Q3730.

 11   Ibid.

 12 (2000) 98 IR 137 at 151.

 13   RMIT v Asher (2010) 194 IR 1, 14-15.

 14 Explanatory Memorandum, Fair Work Bill 2008 (Cth) [1542].

 15   Annetta v Ansett Australia Ltd (2000) 98 IR 233, 237.

 16   Biviano v Suji Kim Collection PR915963 at [34].

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