DECISION

Fair Work Act 2009
s 394 - Application for unfair dismissal remedy

Mr Ramin Gilani
v
GNZ Enterprises Pty Ltd t/a Right Price Conversions
(U2017/10839)

Application for an unfair dismissal remedy – Automotive Technician – modification of vehicles for disabled drivers – niche industry – Small Business Fair Dismissal Code –allegations of poor performance – serious misconduct – allegation employee operating competing business – no warnings – reasonable belief that employee operating a competing business – dismissal was compliant with Code – dismissal not unfair – application dismissed.

[1] Mr Ramin Gilani Yahvavi (the ‘applicant’) was employed by GNZ Enterprises Pty Ltd t/a Right Price Conversions (the ‘respondent’) as an Automotive Technician from 7 May 2012 until he was dismissed by Mr George Zisti, Director of the respondent, on 22 September 2017. While described as being in the business of bodymakers/panel beaters, the respondent is engaged in a niche business of converting and fitting out of vehicles for use by disabled drivers. The respondent is registered under the National Disability Insurance Scheme (‘NDIS’) for that important purpose. It is common ground that the respondent is a small business (5 employees) and accordingly, the Small Business Fair Dismissal Code (the ‘Code’) applied in respect to the summary dismissal of the applicant.

[2] In the Form F3 - Employer’s Response to Unfair Dismissal Application, Mr Zisti set out the reasons for the applicant’s dismissal as:

‘1. Safety and compliance risk (was already given warnings about negligence [sic] acts and warned on second occasion that the next serious breach of company policy would result in immediate termination of his employment);

2. Conflict of interest (running a business as a competitor, without informing me);

3. Excessive sick leave causing business disruption;

4. Risk/potentially theft of intellectual property (as a competitor);

5. Customer complaints, risk of loosing [sic] business (customer complaints were discussed with Ramin);

6. No improvement to prior warnings;

7. Relationship with staff was impacted, thus impacting productivity; and

8. Deletion of company records (Photos of defects removed from company’s system.’

[3] On 9 October 2017, the applicant filed an application, pursuant to s 394 of the Fair Work Act 2009 (the ‘Act’), in which he seeks a compensatory remedy for his alleged unfair dismissal. In accordance with my usual procedure, I convened a conference of the parties on 22 November 2017. However, no settlement was achieved and the matter proceeded to hearing on 23 January 2018. At the hearing both parties were unrepresented.

[4] The applicant and Mr Zisti both filed written material, although understandably it was difficult to disaggregate witness evidence from submissions/opinion/commentary. Nevertheless, I am satisfied both parties put all that they wished the Commission to consider in this matter, and fully argued their respective cases to the best of their ability.

THE EVIDENCE

[5] The applicant claimed that he was dismissed, without any warning, and was not given an opportunity to respond to the serious allegations against him. The accusations did not exist until he lodged his unfair dismissal claim. He alleged his dismissal was not the first time Mr Zisti had unfairly dismissed long term employees.

[6] The applicant believed the real reason he was dismissed was because of a neck injury he sustained some time earlier and the work Mr Zisti required him to do was ‘exhausting’ his neck. The applicant informed Mr Zisti he had doctors’ appointments on 21 and 22 September 2017, including a CT scan on his neck. That same day, Mr Zisti accused him of running a business in competition to him, after another staff member ‘stumbled on his Facebook page’ on the same day as he was at the doctor. The applicant claimed that not only was Mr Zisti aware he had registered a business, he had actually encouraged him to:

•  obtain an ABN;

•  register the business name of Gilani Engineering;

•  utilise his engineering skills in order to boost his income; and

•  apply for as many licences as possible, including RAWS workshop, pink slip/blue slip, Vehicle Safety Compliance Certification Scheme (VSCCS) certification and a dealer’s licence.

The applicant insisted he was not running a business in competition to the respondent’s business of ‘wheelchair vehicle conversions’. However, he now intends to do so, as he has no other source of income.

[7] The applicant believed that all of the respondent’s allegations were manufactured by the Company’s accountant, ‘Jag’, who is also a lawyer. He had created the scenarios for Mr Zisti to appear to have followed the correct processes.

[8] I set out below Mr Zisti’s submissions in italics and the applicant’s responses.

‘Ramin has claimed he was never warned prior to his dismissal, he has been told many times he needs to improve his quality of work as the job we do has a big role in the lives of people. On two separate occasions he was verbally warned.’

[9] The applicant replied that he was never left with the impression his job was at risk. He claimed to have worked many extra hours, without pay, and was then ‘rudely dismissed’ for made up reasons. The applicant said he was unaware of a particular incident involving a blocked fuel hose on a customer vehicle. Further, he submitted that Mr Zisti broke crucial rules in respect to:

a) inappropriate testing on new vehicle models;

b) rushing jobs in order to be paid faster;

c) not properly inspecting vehicles; and

d) instructing him, and other workers, not to undertake certain Australian design rules tests.

‘He [the applicant] was warned again about his work and told this must improve and I cannot have this quality of work being produced in my factory, especially from my mechanical engineer who was hired to manage and improve the business.’

[10] The applicant said this allegation concerned a welding incident which left a gap in the weld. This was a result of the parts being handmade, using tape measures and angle grinders. The applicant claimed that all his attempts to manage and improve the business had been rejected by Mr Zisti. He had tried many times to convince Mr Zisti to improve quality and to have a parts machine made according to the correct specifications. Rather, Mr Zisti would instruct him to take the cheapest option.

‘He also had a grand opening for his shop early October 2017 days after he was dismissed, to set up a shop with signs, advertisement and signs on the vehicle is not done overnight.’

[11] The applicant emphasised that he was not providing, or even offering wheelchair conversions while working for the respondent. He became an agent for Mobility Engineering a month after his dismissal. He attached an incomplete email from Ms Laura Fletcher of Mobility Engineering, dated 19 October 2017, which commenced:

‘Hi Ramin,

Thank you for your interest in joining our network. As discussed with Ali, I have included in this email the paperwork you will need to complete and return to us to become a dealer and advertised on our website.

If this is something you would like to get involved with, we do offer training for all of our products. We understand that you may have installed other similar products in the past, however this is something that we always recommend to new dealers as it will give you a great overview of all the products we supply and is completely free to attend. I have attached to this email all the dealer information you will need. If you would like to be listed as a dealer on our website and receive enquiries in your area from us, we require our buyer agreement to be signed and the dealer important information to be returned to us, so that we ensure we have all the correct information when talking to customers.’

The applicant agreed he could not set up a shop overnight, and he did not do so. It was some weeks after his dismissal, when he had no income. Moreover, the vehicle hoists were already set up in the shop he had leased.

[12] The applicant agreed he had conducted an engineering test on a 1959 Volkswagen Beetle on Mr Zisti’s premises. This was with Mr Zisti’s consent. It was the first ever job he received after obtaining his VSCCS licence. The arrangement he had with Mr Zisti was he was paid $1000 per week, and could use the respondent’s premises, out of usual hours, to earn extra income. However, there were always problems with this arrangement caused by Mr Zisti. After one particular incident, where Mr Zisti changed his shop closing hours, he decided he needed to get his own premises and advertise for an engineer.

[13] The applicant denied deleting the respondent’s computer files. He was never told what files he was accused of deleting.

‘After he was warned and continually been told to improve his work quality you would think he as an educated mechanical engineer would know if he does not improve his work his job would be in jeopardy.’

[14] The applicant claimed that Mr Zisti placed all the blame on him when things went wrong. He said that the same problems were there before he commenced employment, while he was working for Mr Zisti, and after he left. He referred to a post on the respondent’s Facebook page of 10 November 2017, which read:

‘Seriously the worst experience we have ever encountered.

Shocking workmanship, shocking customer service, a disappointing second conversion in six months that has now failed, and an owner that shows very little responsibility for any of the above.

Purely from what we can gather from the experience is that this is only for making money and little regard for the safety of those the conversions are made for as no safety reports were issued on request and totally ignored.

I have never dealt with such unprofessional people in my life. Thousands out of pocket, a lift that doesn’t function reliably and an owner that ignores emails and phone calls.

Seriously people shop around! I would never recommend a conversion from this company.

If anyone else has had any trouble with this company I would be interested to hear from you.’

‘Ramin knows that I insist on everything being done to the Australian Standards.’

[15] The applicant said that this was an ‘absolute untruth’. It was he who was constantly trying to get the respondent to comply with the Australian Standards. He believed Mr Zisti ‘fooled’ the engineers into passing the modification work performed in his shop.

[16] The applicant named at least 10 former or existing employees who would attest to Mr Zisti’s poor conduct and the tactics he used to get rid of people. (As none of these persons gave evidence in the proceedings, and in any event, this case is not about other people’s circumstances, I will say no more about these matters and merely note the applicant’s submissions in this regard).

[17] The applicant said that Mr Zisti’s claim of being unaware of his injury was untrue. Mr Zisti had observed his restricted movements on the security cameras. He had expressed to Mr Zisti on several occasions, a need for him to reduce the physical labour of his role.

[18] The applicant rejected Mr Zisti’s claims that he was manipulating his workers’ compensation claim by not using his full name - Ramin Gilani Yahvavi. He had lodged an appeal against the rejection of his workers’ compensation claim, as his doctor, all his specialists and physiotherapists confirm the injury to his neck, shoulder and back are work related.

[19] In summary, the applicant said:

‘It is quote [sic] ridicules [sic] to read the long list major errors Zisti claims that I have made and have had his employee Mohamed writing and signing. If even a fraction of that would have been true and I was such an incompetent mechanical engineer then how come I did not just simply receive the warnings then and be dismissed? The fact is that all problems are being unfairly blamed on me at this stage. All for the sake of making me look bad.’

[20] In oral evidence, the applicant estimated he opened his own business in April/May 2017. He said there was no reason to tell Mr Zisti he was opening a competitive business, because he was not in competition with him. Mr Zisti showed the applicant a list of functions approved by the NDIS, appearing on Gilani Engineering’s website, which the applicant had obtained authorisation to perform. These included:

•  Personal Mobility Equipment;

•  Vehicle Modifications;

•  Assistive Prod-Household Task;

•  Assistive Equip-Recreation;

•  Home Modifications;

•  Assistive Prod-Pers Cars/Safety; and

•  Specialised Training.

[21] The applicant said he had approached one of the largest companies working in the disability industry, Mobility Engineering, after he was dismissed. This had proved a good move for his business, because it takes a long time to establish a business, and by getting approved by them on 19 October 2017, he had access to hundreds of different types of disability equipment. He became the middle man, between the customer and Mobility Engineering. The applicant explained Mr Zisti’s work is a unique patented type of conversion. It is not the type of work he performs in his own business.

[22] The applicant claimed he did almost all Mr Zisti’s computer work until ‘Mohammed’ got involved. He believed Mr Zisti changed the respondent’s computer password because he had a ‘suspicious mind’ about everyone who worked for him.

[23] The applicant insisted that he could not be responsible for any errors in the vehicle modifications, because he had been prevented from inspecting vehicles a long time ago (two years). He believed that almost all vehicles modified in Mr Zisti’s business, were brought back in order for problems to be fixed. While Mr Zisti had produced a large number of inspection examples which were brought back with problems, and which were said to have occurred on ‘his watch’, vehicles came back for rectification before, during and after his employment.

[24] The applicant agreed he had joined Mr Zisti’s company after calling him and offering to work for him. While Mr Zisti had said that he did not employ engineers, he employed the applicant to work ‘on the tools’ to see if the business could be built up.

[25] The applicant insisted he did not take 27 days of sick leave in his last year of employment. He had a week off to get married and another week to move house. Having had no days off in three years and few off in his later years, he ‘possibly’ only had 10 days off over 5 years - not 27 days. In any event, he had worked more hours than anyone else employed by Mr Zisti.

[26] In oral evidence, Mr Zisti was asked about the provision of pay slips to his employees. He claimed that all his employees’ pay slips were available and could be produced.

[27] Mr Zisti denied taking shortcuts to save money. Further, Mr Zisti claimed he was never told the applicant had neck problems. However, he had noticed the applicant on the workshop cameras, stretching his neck.

[28] Mr Zisti believed that by advertising he could perform vehicle modifications, the applicant was in direct competition with him. Mr Zisti said he had stopped the applicant inspecting vehicles going out, not because it was a waste of time, but because he did not trust him. Mr Zisti said that the applicant had definitely not made suggestions about improving the quality of the business or controls. Mr Zisti insisted that the applicant had been warned about improving the quality of his work. Mr Zisti claimed the applicant even put a post on Facebook praising himself.

[29] Mr Zisti said that because the applicant was a mechanical engineer, he was responsible for any problems with the vehicles. Mr Zisti was shown a standard inspection list which he accepted had been prepared by the applicant in September 2016. In re-examination, Mr Zisti said he had asked the applicant to prepare an inspection list, when he first hired him. However, he stopped him doing inspections in 2016, because he did not trust him. Mr Zisti explained that he had helped the applicant with operating his own business, in order to help his business. He had not interfered with his work.

SUBMISSIONS

For the applicant

[30] The applicant sought 26 weeks compensation for his unfair dismissal, based on a weekly pay rate of $1000. He insisted he was never warned his employment might be at risk. There had only been general discussions about improving the quality of the business. He was ‘fired’ without notice after returning from a medical appointment.

[31] The applicant said he was not guilty of any misconduct, either in respect to theft, fraud, violence or breaches of health and safety rules. His only interest was to increase the quality of the work, through proper inspections. He believed he was dismissed because his neck injury reduced his capacity for hard physical labour. His condition had not improved over three years. When Mr Zisti realised his limitations, had he decided he was no longer of any use to him.

[32] The applicant believed he was very lucky to have the funds to set up his own premises, but it was always with Mr Zisti’s express knowledge and approval. He stressed again that he was not in competition with him.

For the respondent

[33] Mr Zisti submitted that he had never advertised for an engineer and had never sought out the applicant to offer him a job. Although he hoped the applicant might develop and grow the business, this never happened.

[34] Mr Zisti said he started to get suspicious of the applicant in 2015 and changed the computer passwords and the locks to his premises. He claimed the applicant was arrogant and no one else liked him. He stopped him doing inspections in late 2016 after the problem with the fuel tank in a vehicle which had been returned by a customer.

[35] The applicant then opened his own business. Mr Zisti agreed he had been told about it, but not to the extent that he was in direct competition with him. This was subsequently accidentally found on Facebook, when a relative of his observed the applicant was working on disabled vehicles.

[36] Mr Zisti acknowledged that he had given no written warnings to the applicant. However, it was not his practice, as he did not want to embarrass him. However, the applicant’s mistakes (the gap in the welding) were photographed and recorded. ‘Strangely’, they were later deleted. Mr Zisti claimed that he told the applicant if it happened again ‘see ya later’. Mr Zisti said that one does not advertise photographs of converted vehicles on your website, if you have no intention of performing that work.

[37] In reply, the applicant denied he had been promoting the modification of vehicles. He did this after he had approached Mobility Engineering, which was two weeks after his dismissal. The applicant offered explanations for all the examples of problems with the work which Mr Zisti raised in his submissions.

CONSIDERATION

[38] Section 385 of the Act sets out four jurisdictional prerequisites which must be satisfied in order for the Commission to find that a person was unfairly dismissed. By the use of the conjunction ‘and’ joining subsections (a), (b), (c) and (d) it is clear that each of the four requirements must be satisfied for a person to be unfairly dismissed. The section is set out as follows:

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.

[39] For present purposes, I am satisfied that the applicant was dismissed (subsection (a)) and his dismissal was not a case of genuine redundancy (subsection (d)). The question of whether the applicant’s dismissal was ‘harsh, unjust or unreasonable’ would need to be considered subsequent to a conclusion as to the last preliminary matter, that his dismissal was not consistent with the Small Business Fair Dismissal Code (the ‘Code’). This question is the essential foundation of this case, although, given both parties were unrepresented, it is understandable that this question was not sufficiently understood, such as to be properly articulated and argued by either of them. Accordingly, I shall explain the significance of the Code’s application in this case.

[40] I begin with setting out the terms of the Code below:

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.

[41] It is apparent that the Code applies to a dismissal by an employer with fewer than 15 employees (at the time of the dismissal) in two circumstances – summary dismissal (usually for serious misconduct) and dismissal for poor performance (capacity to do the job) or behaviour, which is not serious misconduct. A significant difference between the two circumstances is that summary dismissal does not require notice or warning to the employee and the latter requires warnings to the employee and opportunities for the person to respond to, and improve on any shortcomings in behaviour or conduct.

[42] There is no doubt that the applicant’s dismissal was without notice on 22 September 2017, based primarily on Mr Zisti’s belief that he was guilty of serious misconduct (conducting a business in direct opposition to Mr Zisti’s business) and other matters; see: para [2] above. Viewed in this way, the applicant’s dismissal falls under the summary dismissal limb of the Code. Should the dismissal be found to be inconsistent with the Code, but the serious allegations are ultimately found to have been proven, it would seem highly likely that a positive finding of a valid reason for dismissal would follow. However, that is not the test for the purposes of establishing whether there has been compliance with the Code. I shall come back to this crucial consideration shortly.

[43] Before leaving the statutory provisions, s 12 of the Act defines ‘serious misconduct’ as having ‘the meaning prescribed by the Regulations’. That is referable to reg 1.07 of the Fair Work Regulations 2009, which is expressed as follows:

‘1.07 Meaning of serious misconduct

(1) For the definition of serious misconduct in section 12 of the Act, serious misconduct has its ordinary meaning.

(2) For subregulation (1), conduct that is serious misconduct includes both of the following:

(a) wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;

(b) conduct that causes serious and imminent risk to:

(i) the health or safety of a person; or

(ii) the reputation, viability or profitability of the employer’s business.

(3) For subregulation (1), conduct that is serious misconduct includes each of the following:

(a) the employee, in the course of the employee’s employment, engaging in:

(i) theft; or

(ii) fraud; or

(iii) assault;

(b) the employee being intoxicated at work;

(c) the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee’s contract of employment.’ (my emphasis)

[44] Mr Zisti’s belief that the applicant was operating a competitive business to his own, presumably falls within the rubric of ‘conduct that causes a serious and imminent risk to the viability or profitability of the employer’s business’. The seminal case – indeed the first Full Bench Decision which considered the Code – was Pinawin T/A RoseVi.Hair.Face.Body v Domingo [2012] FWAFB 1359 (‘Pinawin’). After setting out a number of passages from two earlier single-Member decisions concerning the application of the Code, the Full Bench of Fair Work Australia (‘FWA’, as the Commission was then styled), said at paras [29]-[31]:

‘[29] We believe that the approach and observations in these two decisions are correct. There are two steps in the process of determining whether this aspect of the Small Business Fair Dismissal Code is satisfied. First, there needs to be a consideration whether, at the time of dismissal, the employer held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal. Secondly it is necessary to consider whether that belief was based on reasonable grounds. The second element incorporates the concept that the employer has carried out a reasonable investigation into the matter. It is not necessary to determine whether the employer was correct in the belief that it held.

[30] Acting reasonably does not require a single course of action. Different employers may approach the matter differently and form different conclusions, perhaps giving more benefit of any doubt, but still be acting reasonably. The legislation requires a consideration of whether the particular employer, in determining its course of action in relation to the employee at the time of dismissal, carried out a reasonable investigation, and reached a reasonable conclusion in all the circumstances. Those circumstances include the experience and resources of the small business employer concerned.

[31] The question we need to consider in this case is whether Mr and Mrs Pinawin believed on reasonable grounds that Mr Domingo’s conduct was sufficiently serious to justify immediate dismissal.’ (my emphasis)

[45] Continuing, the Full Bench said at [38]:

‘[38] Normally in order to hold a belief on reasonable grounds it will be necessary to have a discussion with the employee about the perceived serious misconduct and pay regard to the explanations and views given by the employee. We are concerned in this case that no discussions took place about the implications of Mr Domingo’s conduct for his future employment. However this is a very unusual case. The employer was very small. The owners knew Mr Domingo well. They directly observed his behaviour. They believed that he had made lifestyle choices that involved drug-taking and this directly related to his capacity to perform his work. His work involved close personal dealings with clients. At the time they made their decision, Mr Domingo was hospitalised. They were conscientious in considering the grounds for summary dismissal in regulatory material available on the internet. In these unusual circumstances we are of the view that the employer, when considering Mr Domingo’s recent erratic and unusual behaviour, formed the belief that Mr Domingo had engaged in conduct that justified immediate dismissal on reasonable grounds. Our conclusion should not be seen as one that would necessarily be reached in all cases of out of hours misconduct or drug-taking.’ (my emphasis)

[46] Pinawin continues to be cited with approval in decisions of the Commission involving the Code. Pinawin is authority for the proposition that when the Code applies, the Commission is not required to find that serious misconduct occurred or that the allegations of serious misconduct against the dismissed employee had been proven. Under the Code, the tests are only that:

•  the employer held a reasonable belief that the employee’s conduct was sufficiently serious to justify immediate dismissal; and

•  that belief was based on reasonable grounds, after a reasonable investigation.

Self-evidently, both of these tests do not require findings of unfairness, in a statutory sense, within the meaning of s 387 of the Act, unless the Code has not been complied with.

[47] That said, the Full Bench of the Commission had further occasion to consider the Code and the conclusions in Pinawin. In Ryman v Thrash Pty Ltd [2015] FWCFB 5264 (‘Ryman’), the Full Bench, after expressing a view that the summary dismissal section of the Code is ‘very poorly drafted’ (with which I respectfully agree), because it uses discordant expressions such as ‘without notice or warning’, ‘immediate dismissal’ and ‘summary dismissal’ synonymously, went on to say at paras [37]-[41]:

‘[37] Notwithstanding that the Code, and its accompanying checklist, were apparently designed to be read as “stand alone” documents by small business employers, we prefer the view that the reference to “serious misconduct” is to be read as bearing the meaning in reg.1.07. The types of conduct expressly referred to in the Code as constituting serious misconduct are all encompassed by the reg.1.07 definition, so no direct inconsistency is apparent. The fact that the checklist invites inclusion of “some other form of serious misconduct” suggests that the identified types of conduct were not meant to be exhaustive, and it is otherwise difficult to conclude that they were meant to be exhaustive given that they do not include other types of behaviour which may well constitute misconduct justifying summary dismissal, such as sexual harassment, bullying or significant non-compliance with a lawful and reasonable direction. And, as earlier discussed, the lack of any recognised meaning at law of the expression “serious misconduct” means that the definition in reg.1.07 is necessary to give the expression a clear content.

[38] We therefore consider that the “Summary dismissal” section of the Code applies to dismissals without notice on the ground of serious misconduct as defined in reg.1.07.

[39] To be clear, nothing stated above is to be taken as suggesting that in relation to such a dismissal it is necessary for the Commission to be satisfied that the serious misconduct which is the basis for the dismissal actually occurred in order for the dismissal not to be unfair. As was explained in Pinawin T/A RoseVi.Hair.Face.Body v Domingo:

“[29] … There are two steps in the process of determining whether this aspect of the Small Business Fair Dismissal Code is satisfied. First, there needs to be a consideration whether, at the time of dismissal, the employer held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal. Secondly it is necessary to consider whether that belief was based on reasonable grounds. The second element incorporates the concept that the employer has carried out a reasonable investigation into the matter. It is not necessary to determine whether the employer was correct in the belief that it held.”

[40] Whether the employer had “reasonable grounds” for the relevant belief is of course to be determined objectively.

[41] In summary, drawing on the conclusions stated above and the ratio in Pinawin, we consider that the “Summary dismissal” section of the Code operates in the following way:

(1) If a small business employer has dismissed an employee without notice - that is, with immediate effect - on the ground that the employee has committed serious misconduct that falls within the definition in reg.1.07, then it is necessary for the Commission to consider whether the dismissal was consistent with the “Summary dismissal” section of the Code. All other types of dismissals by small business employers are to be considered under the “Other dismissal” section of the Code.

(2) In assessing whether the “Summary dismissal” section of the Code was complied with, it is necessary to determine first whether the employer genuinely held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal, and second whether the employer’s belief was, objectively speaking, based on reasonable grounds. Whether the employer has carried out a reasonable investigation into the matter will be relevant to the second element.’ (my emphasis, endnotes omitted)

See also: Hart v Forex 1 Pty Ltd ATF Trading Rental Trust [2018] FWC 942.

[48] There could not possibly be any doubt, where an employee is operating a business, or has an interest in a business, in direct competition to the business in which he/she is employed, that such conduct ‘causes a serious risk to the viability and profitability of the employer’s business’ which justifies summary dismissal for serious misconduct. Such conduct ‘strikes at the heart’ of the employment relationship, rendering the continuation of the relationship utterly untenable; see: North v Television Corporation Ltd (1976) 11 ALR 599, Laws v London Chronicle (Indicator Newspapers) Ltd [1959] All ER 285, Concut Pty Ltd v Worrell and Anor (2000) 103 IR 160.

[49] Such conduct is unusual, largely because the employee will be taking an enormous risk in doing so, with every prospect, no matter how well concealed, of being found out. Usually, as suspicions turn to investigation, the employee concerned will resign before being dismissed. In this case, the applicant claimed his conduct was all known (even approved) by Mr Zisti and, in any event, he was not in direct competition with Mr Zisti’s business. I disagree on both counts and will explain why shortly.

[50] As just mentioned, cases such as this are unusual. However, I have had recent cause to consider a similar set of circumstances. In Alverson v Artcraft Pty Ltd [2017] FWC 5501, the applicant was employed by a large road sign distributor in Australia to sell electronic road signs (VMS units). At the same time, he had his own business of renting out the same signs. At [204] and [209] of that decision, I said:

‘[204] Earlier I referred to the applicant’s differing explanations as to his business of renting out a VMS unit/s in a conversation with Mr Reed in early 2016. In my opinion, Artcraft was entitled, as it were, to ‘connect the dots’ of the applicant sending confidential information to his personal email, his failure to sign a statutory declaration confirming he had destroyed or returned all of the Company’s documents, and the renting of a VMS unit for personal gain, to draw a firm conclusion that the applicant had placed himself in a conflict of interest with his duty and obligation to Artcraft’s interests. The applicant’s consistent trope in the proceeding was that he had not breached cl 11.1 of his contract of employment, or the general duty of fidelity owed to his employer, because his private business was not in competition with Artcraft. He rented his VMS unit and Artcraft only sold VMS units. Putting aside the conceded breach of cl 2.2 of the contract (in that he had not sought written approval to be engaged in any other business or occupation), his claimed distinction between his activities and Artcraft’s business, is illusory. It is a ‘distinction without a difference’.

…

[209] In my assessment, the conflict of interest exposed and confirmed by the evidence was serious misconduct for which dismissal was an appropriate outcome. The evidence which emerged in this case, as I have attempted to set out above, concerning the implausibility of the applicant’s explanation for offering a rental option to Artcraft’s potential customers, was an obvious conflict of interest. This evidence demonstrated the correctness of the respondent’s decision that it had a valid reason for the applicant’s summary dismissal. The reason for the decision was ‘sound, defensible and well founded’; see: Selvachandran. The decision, based on the applicant’s serious misconduct, was validated by facts discovered after the dismissal and unknown to the employer at the time of dismissal; see: McLaughin v Meat Holdings supra above.’

Reasons for dismissal

[51] It is not in dispute that there was no letter of termination or a show cause letter informing the applicant that Mr Zisti had concerns as to the applicant’s performance and conduct. Mr Zisti identified eight reasons for the applicant’s dismissal in the Form F3 - employer’s response to the unfair dismissal application; see: para [2] above.

[52] It seems to me that the most egregious of these reasons and the one, which in the ordinary course, would constitute a valid reason for dismissal, was Mr Zisti’s view that the applicant owned and operated a business in competition to his own (the ‘competitive business’ reasons). That said, absent that reason, it is difficult to see how the other reasons, either individually or in combination, would constitute a sufficient justification for the applicant’s dismissal, under the ‘other dismissal’ provisions of the Code.

[53] More significantly, though I agree with the applicant that none of these concerns were raised by Mr Zisti in the context that a failure to rectify his performance or conduct might result in his employment being put at risk. There was no evidence that the applicant was expressly warned about:

•  the two incidents which Mr Zisti said resulted in verbal warnings to the applicant (the fuel hose and welding gap incidents);

•  his alleged excessive sick leave and alleged unexplained absences;

•  a poor relationship with other staff; or

•  the deletion of company records.

At best, the highest Mr Zisti’s evidence got, was that he had told the applicant if he made the same mistake again, he had said ‘see ya later’.

[54] In my view, the above reasons were little more than unsupported ornamentation, intended to buttress the respondent’s case in order to convince the Commission there was far more to the employer’s concerns than was really the case. It seems plainly apparent that Mr Zisti had become increasingly frustrated with the applicant since late 2016. The applicant’s two days off for treatment of his neck injury on 21 to 22 September 2017, was enough for Mr Zisti to bring forward the trajectory of what was inevitably going to happen – the applicant’s dismissal. Whether that was a coincidence or as the applicant submitted, a convenient and unlawful reason for his dismissal, is really not the point.

[55] This is so because I am satisfied that the applicant was operating a business in direct competition to Mr Zisti’s business. It is irrelevant that the applicant may not have secured any business during his employment, (although I have my doubts on this score). On his own admission, he opened his own shop in around April/May 2017, some five months before his dismissal and was advertising on his Facebook page as performing, inter alia, vehicle modification work in accordance with the NDIS standards. This is the same niche market Mr Zisti operates in. Both businesses are registered with the NDIS. I agree with the proposition that one would hardly advertise to do the work identified in para [20] above, if you had no intention or capacity to do so. That no business was generated, is irrelevant.

[56] Was Mr Zisti’s belief based on reasonable grounds? It is clear that Mr Zisti is not particularly ‘computer savvy’. It is unlikely he would have personally accessed Facebook to seek evidence of the applicant’s operations. While there might be some suspicion that Mr Zisti’s relative just happened to stumble on the applicant’s Facebook page on the very day the applicant was at the Doctor, that does not detract from the factual circumstances which existed at that time. These were:

•  The applicant’s business had been in existence for some months;

•  The applicant was, at the very least, advertising to perform work of the same kind performed in Mr Zisti’s business; and

•  The applicant used promotional material for his own business of a vehicle fitted out for a disabled driver.

[57] On the other hand, it seems unarguable that Mr Zisti’s investigation was little more than a consideration of the content of the Facebook site. He did not seek any explanation from the applicant. However, notwithstanding it might have been preferable to have given the applicant an opportunity to explain the Facebook page, it would seem that the evidence was so incontrovertible, that it would have been difficult to explain away; see: Ryman supra above. Whatever might be said about Mr Zisti’s business methods and employment practices, (and I do not think Mr Zisti to be ‘lily white’ on either count), I am satisfied that Mr Zisti’s belief was based on reasonable grounds which justified the applicant’s dismissal. I emphasise that a reasonable held belief does not have to be found to be correct; see: Pinawin supra above.

[58] The applicant’s contention was that as Mr Zisti had encouraged him to obtain extra licences and set up his own ABN and business name, he had never misled or deceived Mr Zisti as to his own business. Mr Zisti did not deny that he had encouraged the applicant to take those steps. That said, I do not believe Mr Zisti was motivated by some altruistic motive of improving the applicant’s capacity to earn more income by doing ‘side jobs’ out of hours on his premises and with his support and consent. Indeed, the evidence is that Mr Zisti had taken a number of steps to positively discourage the applicant from earning more income (removing his inspection role in late 2016). In my opinion, Mr Zisti’s only motivation in encouraging the applicant to obtain extra licences and qualifications was to make the applicant more valuable to his own business. However, when Mr Zisti barred him from conducting inspections in late 2016, the applicant responded by focusing on his own business prospects with the knowledge that the employment relationship was not likely to remain on foot in the long term and would soon end in a bad way (which it did).

[59] While I consider Mr Zisti’s motives were purely based on self interest, he did not expect that his encouragement of the applicant, would lead him to running a business in direct competition to his own. After all, it does not make logical sense that an employer would arm an employee with all the wherewithal to operate a business in direct competition to its own. In one sense, Mr Zisti’s hostility to the applicant (and vice versa), which was evident in the proceeding, is explicable, given these circumstances.

CONCLUSION

[60] Had this matter not arisen under the statutory constraints applicable under the Code, in respect to procedural unfairness considerations, I am confident that the applicant’s summary dismissal, without notice or warning, would have found to be unfair, but given that I accept Mr Zisti believed, on reasonable grounds, that the applicant’s conduct was sufficiently serious to justify his immediate (summary) dismissal, the respondent must have complied with the Code. Accordingly, the applicant could not have been unfairly dismissed, pursuant to s 385(c) of the Act. It follows that the applicant’s unfair dismissal application must be dismissed. An order to this effect will be published contemporaneously with this decision.

DEPUTY PRESIDENT

Appearances:

Mr R Gilani Yahvavi on his own behalf.

Mr G Zisti for the respondent.

Hearing details:

2018.

Sydney:

23 January.

Printed by authority of the Commonwealth Government Printer

<PR601427>