https://www.fwc.gov.au/documents/decisionssigned/html/2019fwc5567.htm

I don’t know about you, but I cringe when I am to defend an employer who receives an unfair dismissal notification where the applicant has been made redundant.

There were a number of interesting aspects to this decision, including:

  • It clearly spells out the criteria for a genuine redundancy, including what the employer must provide by way of evidence; and
  • This being a “jurisdictional” issue – once decided – automatically turned into an unfair dismissal decision (ie both matters were dealt with is the same determinative conference);
  • Defining the meanings of Valid, Harsh, Unjust or Unreasonable;
  • The authorities used in this decision; and finally
  • The relevant section of the Fair Work Act.

The Deputy President (His Honour) finding that the this was not a case of genuine redundancy, but a poor performing employee frustrating his supervisor to the extent that he made him redundant.

Interesting kick-off point

The Deputy President that presided over this matter decided that it was appropriate to hold a determinative conference rather than a hearing. A determinative conference is a proceeding which is conducted in private, and results in a decision. In private means that members of the public are excluded. Persons who are necessary for the Commission to perform its functions are permitted to be present. This different from a hearing, where it is a public forum (ie anyone can wander in and have a look).

Background

The applicant was employed by the respondent 4 September 2017 until 8 January 2019 and was employed by the respondent to work in its office in the position of internal salesperson, but that his position expanded during his employment to include duties additional to internal sales. The applicant was paid annual remuneration of $80,000.00 per annum. His employment was not subject to a written contract.

In August 2018, the respondent hired a casual who, within two weeks, was appointed full-time ongoing employment. This person was trained up by the applicant in the applicant’s duties.

[Ed: This, put in the correct context, is not unusual. Well-run businesses always have other people able to undertake other people’s duties when you are on (for eg) leave).]

Communication

The applicant’s supervisor was concerned with the applicant’s performance and let him know through less-than-subtle emails and conversations. o say that the language used towards the applicant was very direct, pointed but overall unhelpful. To the applicant’s credit he did not respond in kind.

For example, the supervisor send to the applicant the following email:

RE: WARNING

“Name,

We are not making any money at present and I will need to cut back on staff soon.

At present I am not seeing any value you are adding to the company. You cost me a total of $130,000 per year out of my pocket.

There are so many tasks that you have been given the opportunity to carry out effectively including internal sales, stock control, scheduling, HR, etc. and I am getting feedback from everywhere (and most importantly the customers) that you are not performing to their expectation. Steel purchasing is one exception however this only takes max 2 days out of the month for someone to do.

Steel purchasing should be only be 10% of your total time and reducing to 5% soon and then handing over the simple tasks to a junior.

I am giving you an opportunity to turn this around but I cannot take too long as I must reduce total labour cost very soon.

Don’t think product costing and steel purchasing are a full time position. Up until you joined I did both these tasks and it took up 5% of my total work time and I am happy to take them back as they are extremely simple tasks for me to carry out.

You can call me anytime to discuss.

Regards…”

The applicant responding:

“Hi Name

Firstly I have been doing things as necessary to keep the wheels turning but have not communicated that to you.

I want you to know that I am on your side and will work closely with yourself and Ivo to align my efforts with whatever is required to make the business succeed. It is my intention to have a strong working relationship with you, one that is good for the business.

I’m adaptable, not perfect, always learning and endeavour to be dependable, trustworthy and honest. This can be demonstrated in part by my zero lost time, the additional 900 plus hours I have put in outside normal hours and the generation of records that are transparent to you. There is no way I would be putting in that extra time if it wasn’t constructive.

I am also pleased to have Ivo on board and the stability that will bring to the office.

Happy to discuss. My goal is to utilise my efforts to help the business to succeed.

Regards…”

The supervisor did not respond to this email.

Business not making money and over stocked

In late December 2018, the supervisor and the applicant had a discussion about the business being overstocked. During this Conversation, the supervisor said to the applicant:

“Because of f**king you, I have to go and find millions of dollars. It’s your fault. What have you got to say? If you don’t admit it and say how sorry you are, I’m going to fire you right now!”

The applicant apologised to Mr Fitch, who responded to his apology with words to the effect “You come in and work through the Christmas break in your own time and fix it”. The applicant then said “I haven’t (sic) any time off since I started” with the supervisor responding “Well you think about it because I’m going to think about firing you if you don’t”. The applicant did not work through the Christmas break as ordered by his supervisor. [Ed: the decision is unclear whether the applicant would have been paid for “coming in his own time].

The supervisor’s interactions with the applicant deteriorated to the level that in January during a telephone conversation with the applicant he said to the applicant: “You’re a f**king muddle head”. The applicant responded “I’m not trying to argue with you. I’m trying to find a solution”. The supervisor then hung up on him.

On 8 January 2019, another employee of the respondent told the applicant that his employment was terminated effective from that afternoon. The employee was acting on instructions from the supervisor, who had made the decision to dismiss the applicant. It was alleged that this employee said to the applicant: “[the supervisor] had it in for you and just wanted to get rid of you” and then handed the applicant his final payslip, which provided for two week’s pay in lieu of notice.

The applicant later received a Separation Certificate which described the applicant as an “Operations Manager” with the reason for separation as “Shortage of work”.

The employer no longer required the employee’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise

[Ed: His Honour’s commentary on this topic is very good.]

The Deputy President went on to determine whether the respondent no longer required the job of the applicant to be performed by anyone because of changes in the operational requirements of respondent’s’ enterprise. His Honour commenting that:

“A job involves ‘a collection of functions, duties and responsibilities entrusted, as part of the scheme of the employer’s organisation, to a particular employee’. Where there has been a reorganisation or redistribution of duties, the question is whether the employee has ‘any duties left to discharge’. If there is no longer any function or duty to be performed by that person, their job becomes redundant.

“An employee’s job may still be genuinely made redundant when there are aspects of the employee’s duties still being performed by other employees. The test is whether the job previously performed by the employee has survived the restructure or downsizing, not whether the duties have survived in some form. For example, an employer may redistribute all the tasks done by a particular person between several other employees, resulting in the person’s job no longer existing. [My emphasis].

“The reference to “changes in the operational requirements of the employer’s enterprise…includes circumstances where an employer restructures its business to improve efficiency, productivity, sales, revenue or some other aspect of performance. The operational circumstances of a business which may give rise to a redundancy will reside in the direct knowledge of the employer. The evidentiary onus is on the employer to provide direct evidence about the nature of the employee’s job and why it is no longer required to be performed as a result of changes in the operational requirements of the employer’s enterprise. [My emphasis].

“If a dismissal is found to be a genuine redundancy within the meaning of the Act, issues such as unfair selection procedures for redundancy are not relevant, because they go to the merits of the claim that the applicant was dismissed harshly, unjustly or unreasonably.” [My emphasis].

The respondent’s Form F3 Employer Response Form stated that the reasons for the applicant’s dismissal were as follows:

  • The applicant was in charge of the coil purchasing. This function has largely diminished over the last 12 months to be something that takes 4 hours per month to complete; and
  • The applicant was in charge of sale price costing and this function is now largely diminished and standardised.

The supervisor later stated was a downturn in work, and that there was not enough work to sustain a fourth job in the office.

Did the respondent no longer require the applicant’s job to be performed by anyone because of changes in the operational requirements of the respondents’ enterprise?

  • The applicant trained the new employee in the period leading up to his dismissal
  • The supervisor stated that the applicant was no longer required to perform coil purchasing and costing duties at the time of his dismissal. However, performing these duties only took 10 percent of the applicant’s time at work. The respondent did not forward any evidence as to how the remaining 90 percent of the applicant’s duties were redistributed amongst the other employees. His Honour deciding that:

“I accept, however, that the respondent no longer required anybody to do the applicant’s job after his dismissal – as supported by the fact the respondent now has only three employees in the office and the supervisor”.

Despite this finding, His Honour was not satisfied that Fortis no longer required Mr Hill’s job to be performed by anyone because of changes in the operational requirements:

“Instead, I find on the balance of probabilities that the real reason for [the applicant’s] dismissal was due to the supervisor’s frustration with the applicant, including in relation to his performance and attitude to work”. [My emphasis].

In summary, His Honour found:

  • The downturn in business was not supported by financial records.
  • No other employee had been affected by the downturn (eg loss of job, reduced hours).
  • Evidence given by the applicant’s “replacement” was that the respondent busy until the end of October 2018 and there being a slowdown in sales from the end of October or November 2018 was contradictory to the supervisors assertion “We are not making any money at present”. In fact, according to this employee, February starting to show some sign of picking up and that since March has been good.
  • The applicant’s rude treatment by the supervisor was supported by contemporaneous notes that included the supervisor’s comments in quotation marks.
  • The supervisor was clearly frustrated with the applicant’s attitude and work.
  • There was no reason given to the applicant for his dismissal.
  • “The fact that [the other employee] was made a permanent employee shortly before [the applicant’s] dismissal, calls into doubt the validity of the contention that a downturn in business was the reason for [the applicant’s] dismissal.
  • The separation certificate had no tick in the box next to “Redundancy” under the heading “Reason for Separation”. Instead, the box next to “Shortage of Work” is ticked as the “Reason for Separation”.
  • In relation to with the respondent’s obligation to consult with an employee to be made redundant, His Honour stated that:

“For there to be a genuine redundancy within the meaning of s 389 of the Act, [the respondent] must have complied with any obligation in an applicable modern award or enterprise agreement to consult about the redundancy.” [My emphasis].

His Honour, in finding that there was no genuine redundancy, went on to examine the dismissal against the unfair dismissal provisions of the Fair Work Act, finding:

“On the basis of the evidence adduced in these proceedings, I am not satisfied that there was any sound, defensible or well-founded reason for [the applicant’s] dismissal related to his capacity or conduct. Accordingly, there was no valid reason for [the applicant’s] dismissal…”

The applicant was not provided any valid reason(s) for his dismissal and whether he was given an opportunity to respond to any reason(s) related to his conduct.

Where an employee protected from unfair dismissal is dismissed for the reason of unsatisfactory performance, it is relevant to consider whether the employer warned the employee about the unsatisfactory performance before the dismissal.

A warning should clearly identify:

  • The areas of deficiency in the employee’s performance;
  • Any assistance or training that might be provided;
  • The standards required. A mere exhortation to improve is not sufficient; and
  • A reasonable timeframe within which the employee is required to meet such standards.

And the warning should make it clear that the employee’s employment is at risk unless the performance issue identified is addressed.

His Honour adding:

“The basis upon which a dismissal may be found to be harsh, unjust or unreasonable, notwithstanding a finding that there was a valid reason for dismissal based upon conduct in breach of employer policy was explained by the Full Bench majority in B, C and D v Australian Postal Corporation T/A Australia Post in the following terms:

“Nevertheless, it remains a bedrock principle in unfair dismissal jurisprudence of the Commission that a dismissal may be “harsh, unjust or unreasonable” notwithstanding the existence of a “valid reason” for the dismissal.” That principle reflects the approach of the High Court in Victoria v Commonwealth and is a consequence of the reality that in any given case there may be “relevant matters” that do not bear upon whether there was a “valid reason” for the dismissal but do bear upon whether the dismissal was “harsh, unjust or unreasonable”.

His Honour then considered that the applicant:

  • Was employed by [the respondent] for one year, four months and four days prior to his dismissal. This is a relatively short period of time.
  • Did not receive any written warnings.
  • Is 57 years old.
  • Intended to work for another 12 years before retiring.
  • Had not obtained alternative employment or earnt income from any other source following his dismissal.

Concluding that:

The applicant’s dismissal was:

  • Unjust because, on the evidence before me, there was no valid reason for the dismissal;
  • Unreasonable because he was not accorded procedural fairness in the process leading to his dismissal; and
  • Harsh in its consequences for his personal situation, given his age and the fact that he has not been able to obtain alternative employment following his dismissal.

Compensation

In ruling out reinstatement, His Honour determined that the applicant would have lasted another three months with the respondent and award him compensation in the sum of $20,000 (less taxation as required by law).

Authorities mentioned in this decision (references to” harsh, unjust or unreasonable” and “valid reason”

Broadly speaking, circumstances bearing upon whether a dismissal for misconduct is harsh, unjust or unreasonable fall into three broad categories:

(1) The acts or omissions that constitute the alleged misconduct on which the employer relied (together with the employee’s disciplinary history and any warnings, if relied upon by the employer at the time of dismissal) but otherwise considered in isolation from the broader context in which those acts or omissions occurred.

(2) The broader context in the workplace in which those acts or omissions occurred. [This may include such matters as a history of toleration or condonation of the misconduct by the employer or inconsistent treatment of other employees guilty of the same misconduct.]

(3) The personal or private circumstances of the employee that bear upon the substantive fairness of the dismissal. [This includes, matters such as length of service, the absence of any disciplinary history and the harshness of the consequences of dismissal for the employee and his or her dependents.]

The determination of whether there was a “valid reason” proceeds by reference to the matters in category (1) and occurs before there is a consideration of what Northrop J described as “substantive fairness” from the perspective of the employee. Matters in categories (2) and (3) are then properly brought to account in the overall consideration of the whether the dismissal was “harsh, unjust or unreasonable” notwithstanding the existence of a “valid reason”.

***

In Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 41 IR 452 Sheppard and Heerey JJ observed (at p 460):

“Employers can promulgate polices and give directions to employees as they see fit, but they cannot exclude the possibility that instant dismissal of an individual employee for non-compliance may, in the particular circumstances of an individual case, be harsh, unjust and unreasonable.”

“Thus, a finding that an employee has failed to comply with policies and procedures does not mean that a dismissal is not harsh, unjust or unreasonable. The Commission has consistently applied the proposition that instant dismissal of an employee for non-compliance with his or her employer’s policies may, in the particular circumstances of an individual case, be harsh, unjust and unreasonable”.

***

In Crozier v Palazzo Corporation Pty Ltd, a Full Bench of the Australian Industrial Relations Commission dealing with a similar provision of the Workplace Relations Act 1996 (Cth) stated the following:

“As a matter of logic procedural fairness would require that an employee be notified of a valid reason for the 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.”

The law

Fair Work Act

Genuine redundancy

[23] Section 389 of the Act defines genuine redundancy as follows:

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.”

“Associated entity” has the meaning given by s 50AAA of the Corporations Act 2001 (Cth).