Troy Loughnan v ergonomicoffice Pty Ltd T/A ergonomicoffice

[2012] FWA 3863

Note: An appeal pursuant to s.604 (C2012/3863) was lodged against this decision - refer to Full Bench decision dated 12 July 2012 [[2012] FWAFB 5864] for result of appeal.

[2012] FWA 3863

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Troy Loughnan
v
ergonomicoffice Pty Ltd T/A ergonomicoffice
(U2011/14673)

COMMISSIONER DEEGAN CANBERRA, 3 MAY 2012

Unfair dismissal - sales staff - commissions.

[1] This matter arises from an application for an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (the Act) made by Mr Troy Loughnan (the applicant) in respect of the termination of his employment by ergonomicoffice Pty Ltd (the respondent) on 6 December 2011.

[2] The matter was the subject of a conciliation conference on Wednesday, 1 February 2012. The conference was unsuccessful. The matter was listed for arbitration and directions were issued requiring the lodgement of relevant documentation with Fair Work Australia (FWA).

[3] At the hearing, the applicant was represented by Mr Meagher from Bradley Allen Lawyers. Mr Greig, manager of the respondent, represented the employer.

Background

[4] The respondent is a business that sells office supplies to other businesses. The applicant commenced work with the respondent in September of 2010 as a member of the sales team. The respondent employs eight employees.

[5] All sales staff are paid a wage, together with commissions based on the value of any sales achieved. Each member of the sales staff is required to access a database and log all transactions with customers. These logged transactions provide the respondent with the information necessary to pay commissions to the sales staff and also enables the respondent to readily access the trading history for each customer.

[6] From July to October of 2011 the applicant accessed, through the database, the contact details of a number of customers. The applicant then sent emails to those customers offering his personal services to meet their purchasing requirements. These emails were not logged in the computer database and other sales staff members were not informed that the emails were being sent to their customers.

[7] The applicant commenced an extended period of sick leave on 10 October 2011. By late November it was anticipated that the applicant would return to work on 6 December 2011. The applicant was paid by the respondent for three weeks of his sick leave, despite him having already exhausted his full entitlement to paid sick leave.

On or about 1 December 2011 a member of the respondent’s sales staff, Mr Dunn, discovered and brought to the attention of Mr Greig, the Director of the respondent, the unlogged emails that the applicant had sent to customers earlier that year. Mr Greig met with the applicant on 5 December 2011 in order to discuss the email correspondence. Later that evening Mr Greig sent an email to the applicant about the matters that had been discussed. When the applicant attended the workplace on 6 December 2011 Mr Greig spoke with him, informed him that his employment had been terminated, and gave him a cheque for $2000.

The applicant’s case

[8] It was the applicant’s evidence that he had not sent the emails in an attempt to solicit business away from the other sales staff. Instead, he claimed that he sent the emails to “...tap into some additional information on the system where nobody had followed up with those customers and, basically, to obtain some more business for the actual ergonomicoffice 1.”

[9] The applicant conceded that he did process an order from one customer to whom he had sent an email, but claimed that the order resulted from a telephone conversation, unrelated to the email, and that he processed the order because the regular account manager was unavailable. It was his evidence that it was not a large order and that he was attempting to keep the customer happy. 2

[10] The applicant was also asked about an email that he had sent to another customer, DHL. The applicant stated that while he had not received an email response from DHL, he did receive a phone call on 4 October 2011 when he was the only sales person in the office. The applicant claimed that when he looked on the system he saw that DHL was a customer of another sales person, Dean Richardson, so he took the order and gave it to Mr Richardson for processing on his return to work.

[11] During cross examination the applicant was asked whether he recalled that DHL was Mr Richardson’s first big customer, for whom Mr Richardson had provided a quote for a very large sale, a sale that had been followed by the entire office for several weeks until the sale was made. The applicant agreed that the whole office, himself included, had congratulated Mr Richardson on the sale. Despite this, the applicant claimed that he only realised that DHL was Mr Richardson’s customer when he commenced processing the order in the system.

[12] It was the applicant’s evidence that in the meeting with him on 5 December Mr Grieg only raised concerns about two emails that the applicant had sent to customers. He also claimed that he did not anticipate from the content of that conversation or from the email sent by Mr Grieg that evening, that his employment was about to be terminated. His employment was terminated the following morning when Mr Grieg informed him that he no longer wanted the applicant working for the respondent.

[13] During cross examination the applicant agreed that his base rate of pay was $55,000. He acknowledged that the commissions he was paid accounted for approximately $30,000 additional remuneration, and that these commissions were a significant component of his salary. The applicant further agreed that there was a big incentive for him to personally process orders.

[14] It was submitted that in taking a proactive approach to sales the applicant was trying to generate business for the company as a whole and that, as there was no evidence of the applicant stealing any commissions from other employees, there was no cause for summary dismissal. It was further submitted that the applicant was not notified of the reason for his dismissal and was only given a limited opportunity to respond to concerns about the email correspondence prior to his dismissal. Nor was he given the opportunity to rectify any deficient behaviour which, it was contended, was contrary to the requirements of the Small Business Code.

The respondent’s case

[15] The respondent filed two witness statements made by Mr Simon Greig, the sole Director and manager of the respondent, and Mr Dean Richardson, one of the respondent’s sales team.

Mr Richardson’s evidence

[16] It was the evidence of Mr Richardson that as a sales staff member most day to day customer transactions he processed were between $350 and $500. He stated that he had had only one big order (more than $10,000) in the first six months of his employment, and the order was from DHL. Mr Richardson agreed that everyone in the office was aware of that sale. He further agreed that he was concerned about the future working environment after having seen the email that was sent by the applicant to DHL as he believe that the wording of the email made it a ‘blatant grab for sales’ and there had been a ‘breach of trust’.

[17] Mr Richardson also stated that he had witnessed the applicant using his telephone handset in such a way so as to monopolise incoming calls, which were generally meant to be shared equally between the sales staff. According to the evidence the applicant explained to Mr Richardson that he was able to use his telephone handset in such a way that he could intercept phone calls and prevent other staff from answering them.

[18] Under cross examination Mr Richardson conceded that he was not aware of any commissions that he had lost to the applicant and agreed that he had remained courteous and polite to the applicant even after he became aware of the email that had been sent to DHL.

Mr Greig’s evidence

[19] Mr Greig’s evidence was that when he became aware of the emails that had been sent by the applicant that had not been logged in the database, he formed the opinion that this was a deceitful attempt to solicit customers, and consequently commissions, away from other sales staff. He believed that the behaviour of the applicant amounted, in effect, to stealing. He believed that had he continued to employ the applicant, the result would have been a soured work environment which, in turn, would have had a negative effect on the business through the loss of other sales staff.

[20] Under cross-examination Mr Greig conceded that despite the fact that Mr Dunn, upon discovering the email correspondence, had initially stated (referring to the applicant) that ‘he didn’t want to work with the “c”‘ 3, Mr Dunn did subsequently inform Mr Greig that he would be prepared to work with the applicant only ‘if all this shit stops’4.

[21] Mr Greig stated that during his meeting with the applicant on 5 December 2012 he had produced copies of emails sent by the applicant to customers other than the applicant’s regular customers. It was his evidence that the applicant did not provide a reasonable explanation that ameliorated the factual content of the emails. Mr Greig stated that, following the meeting, he had sent an email to the applicant to further outline his concerns. When he met with the applicant the next morning, the applicant had admitted to him that he had sent 100 unlogged emails to the respondent’s top customers, but also claimed that “he had changed”. The applicant’s assertion that he had changed did not alter Mr Grieg’s view that the applicant had committed serious misconduct that had undermined the other sales staff and the business. Mr Greig dismissed the applicant, having provided him with a cheque for $2000.

[22] Under cross examination Mr Greig was asked about the lack of any reference to termination of employment in the email he sent to the applicant on 5 December 2011. Mr Greig stated that his approach to running his business was not prescriptive, that he did not run his business like a corporation and that he has always taken a soft approach with his staff. It was his evidence that he had never fired anyone in the 23 years that he had run the business. It was Mr Grieg’s view that he had given the applicant the soft option of not returning to work but the applicant had not taken up that option so it had been necessary to terminate his employment.

[23] Mr Greig acknowledged that he was unaware of any instances of the applicant stealing, committing fraud, or breaching any serious occupational health and safety procedures.

[24] It was submitted for the respondent that the application should be dismissed because the respondent had complied with the Small Business Code when terminating the applicant’s employment. It was contended that the respondent believed on reasonable grounds that the applicant had committed serious misconduct in emailing other employees’ customers in an attempt to solicit their business and commissions, and that this misconduct resulted in lost trust and confidence between the applicant and the respondent. In the alternative it was submitted that by virtue of the payment of sick leave by the respondent (a payment that the respondent was not required to make as the applicant had used all accrued leave) during the applicant’s absence, and the $2000 cheque presented to the applicant upon the termination of his employment, the applicant had suffered no loss and therefore his claim should be dismissed.

Consideration

[25] There is no dispute in this matter that the applicant has been dismissed 5 and has completed the minimum employment period6. There was no claim that the dismissal was for reasons of genuine redundancy7. The respondent employed only 8 employees at the time the dismissal took effect. It is necessary to determine whether the dismissal was consistent with the Small Business Fair Dismissal Code.

The Small Business Code

[26] Section 385 of the Act provides:

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.

[27] Section 388 of the Act states:

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.

[28] The Respondent claimed that the dismissal was consistent with the Small Business Fair Dismissal Code as it “believed on reasonable grounds that the applicant had committed serious misconduct [within the meaning given in the Code checklist].”

[29] The Small Business Fair Dismissal Code deals with summary dismissal as follows:

“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.”

[30] Having heard the evidence of the employer as to the reasons for the termination of the applicant’s employment I am not satisfied that the employer had reasonable grounds for believing that the applicant’s conduct was sufficiently serious to justify immediate dismissal. I note that although the employer acknowledged that the termination amounted to a summary dismissal a payment ($2000) was made to the applicant upon termination which, although not characterised as a payment in lieu of notice, represented an amount only slightly less than two weeks’ net salary (including guaranteed commissions).

[31] Having determined that the Small Business Fair Dismissal Code was not complied with in effecting the termination of the applicant’s employment I am required to consider whether the termination was unfair. For this purpose I must have regard to those matters set out in s.387 of the Act.

Section 387(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)

[32] Having heard the evidence of the witnesses I am satisfied that there was a valid reason for the applicant’s dismissal. Clearly the employer had lost trust in the applicant. The applicant acknowledged that he had sent emails to the respondent’s 100 best customers offering his services for the purpose of taking orders. Clearly a number of these customers were the regular customers of other sales staff. I am satisfied that the applicant sent emails to the customers of other sales team members in a deliberate attempt to gain orders from those customers to his own advantage and to the detriment of the other salespersons ie to secure the relevant commission. I am also satisfied that the applicant was well aware that such conduct was not only unfair to the other sales staff but inconsistent with his obligation (as set out in his duty statement) to qualify all enquiries “against the ACTI /Sage database for any ongoing relationships history! “

[33] Having seen copies of the emails and having spoken to the other staff about the applicant’s activities Mr Grieg took the decision that it was in the best interests of harmony in what was a very small workplace if the applicant’s employment was terminated.

Section 387(b): Whether the person was notified of that reason

[34] The applicant was notified of the reason for his termination. At the meeting on 5 December 2011 Mr Grieg raised his concerns about the applicant attempting to take customers’ orders from other staff in an effort to boost his own commissions. In the email Mr Grieg sent to the applicant on the evening of 5 December he expressed his disappointment in the applicant’s actions and indicated that he considered that the applicant’s “integrity” as a team member had been compromised. He also referred to the allegation that the applicant had been observed in the office “making a grab for as many incoming phone enquiries as possible”.

[35] Although the email of 5 December does not state directly that the applicant’s employment is being terminated as a result of his actions it does point out that “this situation continues to sour the working environment and makes it difficult to maintain an honourable and harmonious working environment among all employees at ergonomicoffice”. It was the evidence of Mr Grieg that the email was framed in this manner to allow the applicant the ability to take his own decision not to return to the workplace to avoid Mr Grieg having to terminate his employment. When the applicant did not take up that option and arrived at the workplace the following morning Mr Grieg was obliged to terminate the applicant’s employment.

Section 387(c): Whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person

[36] The applicant was given an opportunity at the meeting on 5 December to respond to the allegations concerning his conduct. He also had an additional opportunity to respond on 6 December 2011, when he took the opportunity to advise Mr Grieg that “he had changed”.

Section 387(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

[37] There is no evidence to the effect that the applicant was denied the assistance of a support person during the discussion with Mr Grieg on 5 December 2012. The applicant was not made aware of the purpose of the discussion in advance and there is no suggestion that he was offered the opportunity to be accompanied by a support person.

Section 387(e): If the dismissal related to unsatisfactory performance by the person - whether the person had been warned about that unsatisfactory performance before the dismissal

[38] The dismissal was not related to unsatisfactory performance. Although the matter of the applicant’s failure to follow through with some administrative tasks was mentioned in the email of 5 December, I am satisfied on all the evidence before me that the applicant’s employment was terminated as a consequence of his conduct in emailing the clients of other sales persons and “grabbing” an unfair number of phone calls, to the financial detriment of other sales staff. It was this conduct which resulted in the employer’s loss of trust in the applicant and “soured the workplace”.

Section 387(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

[39] It is my assessment that the size of the workplace had a substantial impact on the procedures followed in effecting the dismissal. It is a very small workplace and all the staff work closely together. Mr Grieg, the sole director, also works closely with the staff. Clearly it is Mr Grieg’s preferred method of operation to seek harmony in the workplace and to avoid confrontation. He would have preferred that the applicant had chosen to “walk away” when confronted with the matter of the emails and to avoid the necessity for terminating his employment. When the applicant did not take the opportunity offered Mr Grieg was obliged to effect the dismissal.

Section 387(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

[40] I am satisfied that the lack of dedicated human resource expertise available to the respondent impacted on the procedures adopted in effecting the dismissal. It was clear from the evidence that Mr Grieg was personally affronted by what he considered to be a “very low act” on the applicant’s part. Any lack of procedural fairness afforded to the applicant was, in my view, a direct result of the fact that Mr Grieg is solely responsible for human resource management in the business, is very personally involved in the business and was clearly unaware of the “best practice” procedures that should be adopted when effecting the dismissal of an employee. With advice Mr Grieg may have elected not to pursue a summary dismissal. Clearly, however, Mr Grieg was of the opinion that it was not in the best interests of harmony in his very small workplace for the applicant to return to work. In those circumstances it would have been difficult for Mr Grieg to comply with the Small Business Fair Dismissal Code as, except in matters of summary dismissal, the Code appears to require an employer to allow an employee “a second chance”.

Section 387(h): Any other matters that FWA considers relevant

[41] There are a number of other matters that I consider relevant to this matter. I note that the applicant was absent from the workplace for a considerable period immediately prior to his dismissal. The evidence was that he had injured himself outside work and needed a lengthy period to recover. It was also the evidence that the employer made significant payments to the applicant during his absence despite the applicant having exhausted any entitlements to paid leave. Until the matter of the emails came to light immediately before the applicant’s intended return to work, the evidence was that the employer was expecting that the applicant would return as soon as he was able. The employer had been supportive throughout the applicant’s absence and had actively sought the applicant’s attendance at the respondent’s Christmas party.

[42] I also take into account the cheque given to the applicant by the employer on 6 December which was intended to assist the applicant “in his efforts to find work”.

[43] Finally I have reached the view that the employer’s decision to terminate the applicant’s employment was motivated purely by Mr Grieg’s desire to ensure a harmonious workplace for his other staff and not by any vindictive or punitive factors. Overall it appeared that Mr Grieg was disappointed in the applicant’s behaviour rather than angry with him. He appeared to be at a loss to understand how the applicant could have engaged in conduct designed to “steal” commissions from the other sales team members who were equally as dependent upon their commissions.

Conclusion

[44] Taking all of the circumstances of this matter into account, and noting some reservations about the manner in which the termination occurred, I am not satisfied that the dismissal was harsh, unjust or unreasonable. While there were some deficiencies in the procedures adopted in effecting the dismissal I do not consider that these deficiencies, in all the circumstances of this matter, were sufficient to render the dismissal unfair.

[45] The dismissal was not unfair. The application is dismissed.

COMMISSIONER

Appearances:

Mr I Meagher, of Bradley Allen Lawyers, for the applicant.

Mr S Greig, for the respondent.

Hearing details:

2012.
Canberra:
28 March.

 1   Transcript PN76

 2   Transcript PN87

 3   Transcript PN 589

 4   Transcript PN569

 5   Fair Work Act 2009 s.385(a)

 6   Fair Work Act 2009 s.384(1)

 7   Fair Work Act 2009 s.385(d)

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<Price code C, PR523421>