DECISION

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

Miss Wendy Elton
v
Acupuncture Australia Pty Ltd
(U2014/7697)

Application for relief from unfair dismissal.

OVERVIEW

[1] Ms Wendy Elton applies for an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (the FW Act) in relation to her dismissal by Acupuncture Australia Pty Ltd (Acupuncture Australia). Ms Elton was employed from 10 January 2011 until her summary dismissal on 23 May 2014 on grounds which can be broadly categorised as theft and fraud.

[2] In relation to the initial matters to be considered: the application was made within the period required in s.396(2); Ms Elton was a person protected from unfair dismissal; and the dismissal was not a genuine redundancy. It is not in dispute that Acupuncture Australia is a small business as defined in s. 23 of the Act. The Company contends that the dismissal of Ms Elton was consistent with the Small Business Fair Dismissal Code (the Code).

[3] Evidence on behalf of Acupuncture Australia was given by its Managing Director, Mr Ian Kwoh-Gain, who made the decision to dismiss Ms Elton, and by an employee, Ms Amy Prassad. Mr Kwoh-Gain tendered a statutory declaration and a number of statements which were essentially character references stating that he would not unfairly dismiss an employee. The statutory declaration made by Mr Kwoh-Gain is discursive and difficult to follow as was Mr Kwoh-Gain’s oral evidence. Mr Kwoh’Gain’s statement also contained a series of rhetorical questions and Mr Kwoh-Gain’s answers to those questions. Further, Mr Kwoh-Gain tendered a police report that he had made in relation to the allegations against Ms Elton. Ms Elton gave evidence on her own behalf.

[4] I have considered all of the material tendered by the parties. Evidence relevant to the matters in dispute - and there was much that was not relevant - is summarised below.

EVIDENCE

[5] Acupuncture Australia is a business that sells acupuncture needles, Chinese herbs and related products to practitioners of acupuncture and traditional Chinese medicine. Orders for goods are mostly taken by telephone, facsimile or on-line. Goods are packed and picked up by Australia post. Customers can also come into the store to purchase products. Ms Elton states in her Form F2 Unfair dismissal application that she commenced employment with the Company on 10 January 2011. This is not in dispute. It is also not in dispute that Ms Elton was employed on a casual basis and that she worked 40 hours per week. At the time she was dismissed, Ms Elton was paid a rate of $35 per hour and 9.25% superannuation contributions. Ms Jenna Kim joined the Company in March 2011 and Ms Amy Prassad (who had previously worked for the Company in 2007) commenced work for the Company in early 2014.

[6] Mr Kwoh-Gain said that he summarily dismissed Ms Elton on the basis that he had evidence that she had engaged in corporate theft and fraud involving cash, credit card, paypal and direct deposit. Mr Kwoh-Gain started to investigate this matter in early May 2014 and submitted a report to the Police on 16 June 2014 in relation to the allegations. The following assertions by Mr Kwoh-Gain can be gleaned from his statutory declaration and a report he made to the Queensland Police Service on or around 14 October 2014.

[7] Mr Kwoh-Gain started his investigation after another employee, Ms Prasad, reported to him that Ms Elton was taking daily sales reports home and “acting secretly at work” and that Ms Elton had stated that she was printing and taking home records in case she became eligible for an employee bonus. Mr Kwoh-Gain’s suspicions were aroused because the bonus only applied if income reached $16,000 per week for 12 weeks and the sales at that time were only $12,000 per week. In his report to the Police, Mr Kwoh-Gain states:

“I suddenly became suspicious. Her explanation was an excuse. Why would any employee keep daily sales reports? She kept them because she needed a record of whom she stole money from and to cover up her tracks.”

[8] Mr Kwoh-Gain also asserted that Ms Elton only started printing and retaining sales reports in September 2013 at the time that he alleges she began defrauding the Company and demanded that the Commission require her to produce all sales reports she had printed. Mr Kwoh-Gain maintained that Ms Elton would not be able to produce reports for any period prior to September 2013. Ms Elton was able to produce a weekly sales report for the period 23 to 29 April 2012. Given that the production of that document demonstrated that Mr Kwoh-Gain’s assertions were incorrect, and for reasons which will become apparent, I did not require Ms Elton to produce any other sales reports.

[9] Mr Kwoh-Gain said that as a result of his concerns about what Ms Prasad told him, Mr Kwoh-Gain examined the cash deposit book and the sales register. This examination is said to have established that there were a number of missing or deleted invoices. The amount of deleted invoices was said to have doubled from 10.2 per month prior to September 2013 to 20.8 per month from September 2013 until April 2014. 24 to 40 invoices were deleted in January to February 2014 compared to 7 to 9 invoices deleted in January to February 2013. Mr Kwoh-Gain states that there is a daily average of 14 purchase orders giving rise to approximately 70 invoices per week and 300 per month.

[10] Mr Kwoh-Gain further states that while it is to be expected that there will be some invoices deleted on the basis that customers returned goods or with respect to back orders, the additional number of deleted orders was for fraudulent purposes. A reduction in deletions for a period in March and April is said by Mr Kwoh-Gain to be a “refining of their tactics to reduce suspicion”.

[11] In relation to cash sales, Mr Kwoh-Gain conducted a count which he states showed that the quarterly average was $1,337 from January 2012 to June 2013 and $983 from July 2013 to March 2014 - a drop of 26%. This reduction was said by Mr Kwoh-Gain to establish cash theft on the part of Ms Elton.

[12] In addition Mr Kwoh-Gain asserts that Ms Elton acted in conjunction with two former employees - whom I will refer to as Ms VK and Ms MC - to defraud his Company. Mr Kwoh-Gain asserts that both of these employees were dismissed for theft and that neither made claims of unfair dismissal. In relation to the allegations of Ms Elton’s involvement with these employees, Mr Kwoh-Gain states that Ms VK attended his shop on 11 occasions. Mr Kwoh-Gain also produced a list of sales to Ms VK indicated that she had purchased goods from the shop on 10 occasions between July 2011 and October 2013. It was not apparent who had served Ms VK when she attended the shop.

[13] Mr Kwoh-Gain made a complaint to the Queensland Police Service Fraud and Cyber Crime Group on 14 June 2014. On 16 June the Queensland Police Service corresponded with Mr Kwoh-Gain and informed him that the proper manner in which to make his complaint was to attend at his local Police Station. Mr Kwoh-Gain did this on Friday 27 June and made a complaint.

[14] It is impossible to do justice to Mr Kwoh-Gain’s allegations about Ms Elton and Ms VK by summarising them. Those allegations as contained in the Police report tendered by Mr Kwoh-Gain (with names of other parties against whom Mr Kwoh-Gain makes allegations deleted) are as follows:

“2.3 Relation between Wendy Elton and Virginia Kinley

After ... was sacked in December 2010, I wrote a report for QLD Police (attachment 6.4). [VK] went quite and didn’t come to our shop for the first half of 2011. She made 6 visits in second half of 2011 no doubt trying to befriend Wendy. As Wendy probably was not approachable at that time, [VK] only attended our shop once in 2012 (August).

I am sure [VK] tried to influence Wendy from second half of 2011. I believe Wendy joined us with good faith and good intention. She never thought of becoming the way of [VK]. But two things changed Wendy, the ongoing influence from [VK] and her own financial situation. Wendy needed more money as she is building a house.

[VK] never gave up. She merely delayed her assault. She approached Wendy at least 11 times (based on the number of invoices) from April 2013 to October 2013. She usual brought small amount of herbs from our shop. But the real reason for this surge in visits was to entice Wendy to change her mind and to become a professional thief. We suspect the corporate fraud started from September 2013 onwards. Once Wendy was converted, [VK] stopped coming to our shop after 14 October 2013. She didn’t have to come any more.

Despite [VK’s] sophisticated scheme, Wendy needed more assurance. [VK] would reassure her by promising she would take the greater risk. That was payments from customers would go to her [VK’s] Credit Card or PayPaul account. Credit Card account could be set up in similar name, for example, Acupuncture Aus, Acupuncture Oz or Acupuncture Supplies Australia.

[VK] would then split the proceeds. Wendy’s job was to persuade as many customers as possible into making Credit Card or PayPal payment. The money stolen (via Credit Card or PayPal) was transferred into some one’s account first [VK’s]. Wendy felt more comfortable with this arrangement. This was what I believe went on. It is also however possible that Wendy Elton set up Credit Card account and Paypal account herself.” 1 (emphasis and errors in original)

[15] According to Mr Kwoh-Gain’s evidence, a Constable read his submission, went upstairs and spoke to a Sergeant and advised that the police needed more information in relation to the following matters before they would start an investigation:

• Proof of purchase of item from buyer;
• Proof of transaction from buyer to store;
• Proof that money has been fraudulently taken from the store.

[16] Mr Kwoh-Gain said that since that time he had conducted an internal investigation. In his statutory declaration in this case, Mr Kwoh-Gain outlines measures he has taken to offer a reward for information about the alleged fraud by posting a range of material on the Company’s website and states that he will fight to eternity and to the highest court if necessary in relation to his allegations. 2

[17] At the date this matter was heard, Mr Kwoh-Gain was not able to provide any update with respect to the progress of his internal investigations or the Police matter. Ms Elton said that she had made inquiries with the Queensland Police Service and had been informed that there was nothing in their system under her name and that if there was an investigation being undertaken she would have been contacted.

[18] Ms Prasad said in her evidence that the behaviour she reported to Mr Kwoh-Gain was that Ms Elton would print sales reports and put them into her bag. Ms Prasad did not say in her written statement whether these were weekly or daily reports. Ms Prasad also said that after printing documents Ms Elton would rush to the printer to get them before she and another employee saw what was printed. When Ms Prasad asked Ms Elton why she was printing the reports, Ms Elton said that “this is in case Ian doesn’t pay my bonus”.

[19] Under cross-examination, Ms Prasad agreed with the proposition that Ms Elton was printing weekly and not daily sales reports and that she did not see Ms Elton print any company documents other than weekly sales reports. Ms Prasad said that Ms Elton also printed out documents relating to the construction of her house. Ms Prasad also said that Ms Elton acted as though she was hiding something and would frequently reach into her handbag which was under her desk.

[20] Ms Elton vehemently denies the allegations of theft and fraud and states that other than Mr Kwoh-Gain’s summaries, she has never been shown any proof of an increased number of deleted invoices or a reduction in cash sales and does not accept that this occurred. In relation to Ms VK, Ms Elton said that the only relationship she had with Ms VK was that Ms VK was a customer who came into the shop. When asked by Mr Kwoh-Gain under cross-examination whether she knew Ms VK, Ms Elton said:

“Yes. She was a customer of Acupuncture Australia and another employee you accused of stealing and dismissed”.

[21] In relation to printing weekly sales reports, Ms Elton said that in or around July 2011, she signed an agreement for an incentive bonus scheme. The agreement was tendered by Ms Elton and indicates that employees (Ms Elton and Ms Kim) were offered a bonus of $10,000 if in any 13 consecutive weeks or three consecutive months, gross sales reached $208,000 or $16,000 per week. Ms Elton also said that she was warned by Mr Kwoh-Gain on a number of occasions that if sales dropped below $12,000 per week or she averaged less than 12 sales per day, he would have to let her go.

[22] In support of this Ms Elton tendered an email from Mr Kwoh-Gain dated 26 April 2012 where he is expressing anger that she has discounted items sold to a customer. In that email, Mr Kwoh-Gain states “...For you as long as processing 12 orders a day your pay is transferred in advance and your super is paid on time...you may be content with 12 orders a day but we are not. If you are not prepared to work harder to grow the sales we may have to look at new staff members who are.”

[23] Ms Elton said that she began to print out weekly sales reports at this time because she was concerned that she may lose her job and wanted to monitor her own performance. In relation to deleted invoices, Ms Elton said that she did this when a customer did not want their order and had been instructed to delete invoices in such circumstances. Further, Ms Elton said that it was possible to disguise deletions because of the Company’s system for numbering invoices but she did not do this because she was deleting invoices for the legitimate reason that the customer did not want their order.

[24] Ms Elton said that invoices were able to be deleted by anyone at any time and it was not possible to identify who had deleted invoices. Invoices could also have been deleted if they contained errors and this could have occurred because Ms Prasad was a new employee learning the system. Ms Elton said that all staff had access to customer’s credit card details and to the EFTPOS terminal. There is no way of telling who performed a particular credit card transaction.

[25] Ms Elton produced all of her bank statements for the period she had worked for Acupuncture Australia to establish that no money had been fraudulently transferred to her. Ms Elton also said that she did not have access to the Company’s bank account to commit such fraud. Further, Ms Elton said that there are security cameras covering the shop and the area where the cash tin was kept and where cash handling took place. Ms Elton said that Mr Kwoh-Gain told her that there were hidden cameras in the workplace and that every conversation is recorded.

[26] Under cross-examination, Ms Elton said that she had trained Ms Prasad and told her to delete invoices if she made an error or the customer did not want the goods. In relation to cash sales, Ms Elton also said that while she had not been shown any data to establish a reduction that any reduction may have been for a number of reasons including increased numbers of on-line purchases or using credit card and EFTPOS facilities rather than cash. Ms Elton agreed that it could be due to theft but maintained that she did not steal from the Company and was not aware that any other employee had done so.

[27] Ms Elton also gave evidence about the manner in which her dismissal was carried out. That evidence, which was not disputed by Mr Kwoh-Gain, can be summarised as follows. On 23 May, Mr Kwoh-Gain told the other two employees to leave early. He had a discussion with Ms Elton during which he accused her of deleting invoices and fraudulently using customer’s credit cards, transferring money from the Company’s account to her own credit card account and committing paypal fraud. Mr Kwoh-Gain stated that if Ms Elton admitted fault she could keep her job but if she did not he would dismiss her and report the matter to the police.

[28] Ms Elton said that she told Mr Kwoh-Gain that this was the best job she had ever had and she would not do anything to risk losing it, particularly as she was building a house. Mr Kwoh-Gain responded by stating: “So you needed extra money for that? How can you afford to get a house built?” Ms Elton said that she told Mr Kwoh-Gain that she lived with her parents who did not charge her much rent and that she had not been taking holidays or having time off in order to save money.

[29] Ms Elton said that when she asked Mr Kwoh-Gain how much money he believed was missing, Mr Kwoh-Gain responded by saying that Ms Elton should know “to the cent” how much money was missing because she would have kept a record. Ms Elton said that Mr Kwoh-Gain did not show her anything to substantiate the allegations and did not provide her with anything in writing. After numerous requests, Ms Elton was provided with an Employment Separation Certificate by Mr Kwoh-Gain stating that the reason for her dismissal would be provided “on further information”. Ms Elton said that this evidenced that Mr Kwoh-Gain was still trying to come up with reasons for her dismissal.

[30] Mr Kwoh-Gain did not disagree with Ms Elton’s version of the manner in which her dismissal was carried out. In relation to the meeting Mr Kwoh-Gain said that he told Ms Elton that if she admitted fault and returned the money he would let her keep her job. If she did not, then her employment would be terminated and he would go to the Police. Mr Kwoh-Gain described this proposition in his statutory declaration in this case as “an offer of in-house conciliation”.

[31] In relation to the Police Report made by Mr Kwoh-Gain, Ms Elton said that she had contacted the Police on a number of occasions, and had been told each time that there was nothing listed under her name and that if Mr Kwoh-Gain supplied them with enough information to start an investigation, Ms Elton would be the first to know.

[32] Ms Elton said that since the loss of her employment she has applied for some 70 positions including cleaning, order picking, warehouse, office, sales and customer service positions. Ms Elton has also registered with employment agencies. Ms Elton said that she does not have a reference to show for her period of employment with Acupuncture Australia and that his may be impacting on her attempts to obtain other employment. Ms Elton has received $520 per fortnight in Centrelink payments since her dismissal. Ms Elton does not seek reinstatement but seeks the maximum amount of compensation.

[33] In relation to Ms Elton seeking financial compensation, and her efforts to find other employment, Mr Kwoh-Gain made the following assertions in his statutory declaration filed in these proceedings:

“13. Applicant Seeking Financial Compensation

Wendy Elton doesn’t deserve any monetary compensation. I haven’t accused her anything she hasn’t done. I never out rightly accused her of a crime. I said we had evidence and suspicion that she had stolen money from the business. I have proven that we did submit to QLD Police our report on 16 June 2014. We are working on further evidence to be submitted to the QLD Police. Just because an official police investigation has not been started, it doesn’t mean Wendy is innocent.

She doesn’t deserve compensation of any form. She would first return our lost money. She nearly bankrupted the business with her reckless action, she is now certain to kill the business with any monetary compensation she may fraudulently obtain. This statement is still true.

We are now experiencing more difficulty paying supplies on time compared to 12 months ago. We have a Korean shipment worth of $30,000 waiting several weeks for our advance payment, money that we don’t have. We suspect the fraud amount to be $20,000-$40,000, making my $10,000 American holiday pay cheque looking pale in comparison. Any money we can recover could ease our cash flow situation.

14. Job Reference

Miss Elton does not deserve any compensation let along the maximum amount. Wendy received 3 rave reviews from our customers and their references should suffice. Wendy should understand we are not obliged to provide job reference because the serious nature of the misconduct we suspected. If we did write a reference she wouldn’t use it because in the reference we will say: “... Miss Wendy Elton was dismissed under summary dismissal code for small business, for suspected serious misconduct - suspected corporate fraud and theft.”

15. Job Seeking

It’s good to see Wendy is trying to get on with her life. She needs to wake up to reality. It’s a pity she hasn’t had a job interview, despite rave reviews from her customers turned referees. She was given a $10,000 p.a. pay rise at the beginning of 2014. She had a wonderful job that paid her over $70,000 per annum plus super. She could have worked for at least another 3.5 years at Acupuncture Australia. It was a wasted opportunity.” (errors in original)

RELEVANT LEGISLATIVE PROVISIONS

Small Business Fair Dismissal Code

[34] By virtue of s.385 of the Act, a person has been unfairly dismissed if the Commission is satisfied that:

(a) the person has been dismissed;

(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.

[35] The effect of s.385(c) of the Act is that when a dismissal is consistent with the Small Business Fair Dismissal Code, it is not an unfair dismissal and that is the end of an unfair dismissal claim. If the dismissal is not consistent with the Code, the Commission must then consider whether the dismissal is unfair on the basis of the general criteria in s. 387 of the Act. The Small Business Fair Dismissal Code (the Code) deals with “summary dismissal” on the ground of serious misconduct and “other dismissal” on the basis of the employee’s conduct or capacity to do the job.

[36] The Code provides as follows:

“Summary Dismissal

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal.

Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair, it is sufficient, though not essential, than 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 either 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 may be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia. Evidence may include a completed check list, copies of written warning(s), a statement of termination or signed witness statements.”

[37] A dismissal is consistent with the Code if the employer was a small business at the time of the dismissal and complied with the Code when effecting the dismissal. If a dismissal is consistent with the Code it will be considered fair, and other factors relating to unfair dismissal do not need to be considered. If the employer has not complied with the Code, the claim is treated in the same way as any other unfair dismissal claim. Essentially, the Code is an alternative to the criteria in s. 387 which would otherwise apply as the basis for the Commission determining whether a dismissal is unfair.

[38] The terms of the Code are similar but less prescriptive to the criteria in s. 387. The critical differences are that in circumstances where an employee is dismissed for serious misconduct, the Code requires the employer to establish that it believed on reasonable grounds that an employee’s conduct was serious enough to justify summary dismissal, while s. 387(a) requires the Commission to be satisfied that the employee did engage in misconduct. There is no capacity when considering whether a dismissal is consistent with the Code for the Commission to consider whether it is unfair on the basis of other matters not referred to in the Code. This can be contrasted with s. 387(h) which provides that in addition to the matters specified from s. 387(a) to (g) the Commission may take into account any other matters that it considers relevant.

[39] It is also apparent from the words in the provisions of the Code dealing with summary dismissal, that the belief that an employee has engaged in misconduct that is sufficiently serious to justify summary dismissal must be held at the point the employee is dismissed. This is consistent with the provisions of the Code dealing with other dismissal, which also make it clear that the reason must be given to the employee prior to the dismissal and that the reason given must be a valid reason based on the conduct or capacity of the employee to do the job.

[40] An employer is stuck with the circumstances that were known to the employer at the time of the dismissal or the reasons for the dismissal given at that time and cannot rely on information obtained subsequent to the dismissal as a basis for asserting that the dismissal is consistent with the Code. This can be contrasted with the consideration in s. 387(a) where it has been held that an employer may rely on matters that were not known and were not asserted at the time of the dismissal as a valid reason for the dismissal.

[41] The approach to determining whether the serious misconduct provisions of the Code are satisfied, as set out in a Decision of a Full Bench of the Commission in Pinawan v Domingo, is to consider whether:

1. at the time of the dismissal the employer held a reasonable belief that the conduct was sufficiently serious to justify immediate dismissal; and
2. the belief was based on reasonable grounds. 3

[42] In relation to the reasonableness of the grounds upon which an employer’s belief that an employee has engaged in serious misconduct was based, the Full Bench in that case said that this:

“...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. 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 the dismissal, carried out a reasonable investigation, and reached a reasonable conclusion in all of the circumstances. Those circumstances include the experience and resources of the small business employer concerned.” 4

[43] The Code must be viewed in the context of the overall Objectives of Part 3-2 of the Act, which, by virtue of s. 381(2), include that the procedures and remedies relating to the unfair dismissal provisions and the manner of deciding on and working out such remedies are intended to ensure that a “fair go all round” is accorded to the employer and the employee.

[44] Theft is a serious allegation and can have devastating consequences for an employee against whom such an allegation is levelled. The Small Business Fair Dismissal Code does not give small business employers carte blanche to make such serious allegations without a reasonable basis. As previously noted, if a dismissal is not consistent with the Code, a dismissal is considered in accordance with the general provisions of the Act in relation to unfair dismissal.

Unfair dismissal provisions

[45] In deciding whether a dismissal is harsh, unjust or unreasonable, the Commission must take into account procedural and substantive matters set out in s.387 of the Act as follows:

“387 Criteria for considering harshness etc.

(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 the dismissal; and

(e) If the dismissal related to unsatisfactory performance – 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 the FWC considers relevant.”

[46] A valid reason for termination of employment is “sound, defensible or well founded” and not “capricious, fanciful, spiteful or prejudiced.” 5 The reason for termination must also be defensible or justifiable on an objective analysis of the relevant facts6, and the validity is judged by reference to the Tribunal’s assessment of the factual circumstances as to what the employee is capable of doing or has done.7 The matters in s.387 go to both substantive and procedural and substantive fairness and it is necessary to weigh each of those matters in any given case, and decide whether on balance, a dismissal is harsh, unjust or unreasonable. A dismissal may be:

Harsh - because of its consequences for the personal and economic situation of the employee, or because it is disproportionate to the gravity of the misconduct;

Unjust - because the employee was not guilty of the misconduct on which the employer acted; and/or

Unreasonable - because it was decided on inferences that could not reasonably have been drawn from the material before the employer. 8

CONSIDERATION

Was Ms Elton’s dismissal consistent with the Small Business Fair Dismissal Code?

[47] Ms Elton was summarily dismissed and her dismissal is said by Mr Kwoh-Gain to be consistent with the summary dismissal provisions of the Small Business Fair Dismissal Code. I do not accept that this is the case. To the contrary, I am of the view that there is nothing reasonable about Mr Kwoh-Gain’s belief that Ms Elton engaged in conduct that was sufficiently serious to justify summary dismissal. There is also nothing reasonable about the grounds upon which that belief was based. It is difficult to conceive of a case where the employer’s belief that an employee has engaged in misconduct could be more unreasonable or could have a less reasonable basis.

[48] Mr Kwoh-Gain asserts that he was informed by Ms Prasad that Ms Elton was behaving suspiciously because she was engaging in conduct including printing out daily sales reports, putting things into her handbag under her desk and rushing to get documents from the printer. Mr Kwoh-Gain also asserts that Ms Elton had no legitimate reason to print out daily sales reports or any other reports, and that this aroused his suspicions.

[49] I accept that Mr Kwoh-Gain was concerned about Ms Prasad’s reports of Ms Elton’s behaviour and that he was entitled to look into the matter further and to discuss his concerns with Ms Elton. However, I do not accept that the factual information relied on by Mr Kwoh-Gain was correct or that inferences drawn by Mr Kwoh-Gain from the factual material were reasonable.

[50] I do not accept that Mr Kwoh-Gain has established that there was any theft or fraud perpetrated against the Company. Mr Kwoh-Gain’s starting point was to assert that cash and credit card sales are down and that there have been invoices deleted. He provided no primary evidence in the form of business or accounting records upon which to base this assertion. He did not do so at that time that he dismissed Ms Elton or when he referred the matter to the Police. At the point this matter was heard, Mr Kwoh-Gain did not provide any primary or source material upon which his assertions about the reductions in cash and credit card revenue or about the numbers of deleted invoices

[51] Even if it is accepted that Mr Kwoh-Gain’s figures are correct, and can be substantiated, these matters are not of themselves sufficient to justify a suspicion of theft. There is nothing inherently suspicious about a retail business having reduced sales. Mr Kwoh-Gain operates a small business that sells acupuncture supplies and Chinese medicinal herbs to other small businesses and to members of the public. A reduction in the sales or income of such a business does not of itself provide a reasonable basis for a belief that staff are stealing from the business. It is equally probable that the reduction in Mr Kwoh-Gain’s sales is due to economic conditions impacting his customers. It is also equally probable that a reduction in cash or credit card sales may be because customers are buying on line.

[52] Mr Kwoh-Gain also failed to establish that a larger than usual number of invoices had been deleted. Even if this was the case, Ms Elton also provided an explanation of the reasons for the deletion of invoices and the circumstances in which this occurs. That explanation was both credible and reasonable. Particularly given that there was a new employee undertaking invoicing. Further, as Ms Elton’s evidence (which was not contradicted) establishes, there were three employees who undertook invoicing, cash sales, credit card sales and on-line sales

[53] The basis for Mr Kwoh-Gain concluding that Ms Elton was responsible for the theft he believed had occurred was also unreasonable. Mr Kwoh-Gain did not establish that Ms Elton printed and took home daily sales sheets. Ms Prasad’s evidence is that the only work related document that Ms Elton was printing out was the weekly sales report. It is also apparent that Ms Elton was printing out personal material relating to the construction of her house. Ms Elton agreed that she printed out weekly sales reports and put them into her bag to retain for her personal records.

[54] It is evident from emails and the bank statement annotated by Mr Kwoh-Gain and tendered by Ms Elton, that he was monitoring her level of sales and had advised her that if she did not achieve 12 sales per day, her employment may be in jeopardy. Ms Elton was also able to produce weekly sales sheets that pre-dated the implementation of the bonus system and dated from the time when the requirement to make 12 sales per day was communicated to her. In short Ms Elton provided a comprehensive, credible and reasonable explanation for printing and taking home the weekly sales reports and I accept it.

[55] That Ms Elton also printed out documents relevant to the construction of her house was not a reasonable basis to conclude that she had engaged in theft and fraud. It is also a reasonable explanation for the behaviour viewed by Ms Prasad as suspicious as it probably explains Ms Elton’s eagerness to get documents from the printer before other employees saw them given the documents related to the construction of her house. In any event, Ms Elton was not dismissed for printing out personal documents on the Company’s printer.

[56] Mr Kwoh-Gain’s theories about Ms Elton’s involvement with VK are also ludicrous. It is only necessary to quote Mr Kwoh-Gain’s report to the Police to see that this is so. He has not a scintilla of evidence upon which to base his hypothesis and has nonetheless documented it and provided a report to the Queensland Police Service. Unsurprisingly, there is no evidence that there has been any action taken in relation to Mr Kwoh-Gain’s report. It is also apparent from Mr Kwoh-Gain’s evidence that even at the point that this application was heard, he is continuing to attempt to make a case that Ms Elton engaged in the conduct he alleges.

[57] Mr Kwoh-Gain had no reasonable basis for his belief that Ms Elton had engaged in misconduct sufficiently serious to justify immediate dismissal when he dismissed her, and that situation continues. Accordingly, I find that Ms Elton’s dismissal was not consistent with the Small Business Fair Dismissal Code and turn to consider whether it was otherwise unfair on the grounds in s. 387 of the Act

Was Ms Elton’s Dismissal unfair?

Was there a valid reason for Ms Elton’s dismissal?

[58] A valid reason for termination of employment is “sound, defensible or well founded” and not “capricious, fanciful, spiteful or prejudiced.” 9 The reason for termination must also be defensible or justifiable on an objective analysis of the relevant facts10, and the validity is judged by reference to the Tribunal’s assessment of the factual circumstances as to what the employee is capable of doing or has done.11

[59] There was no valid reason for Ms Elton’s dismissal. On the basis of the evidence before me I am unable to be satisfied that Ms Elton engaged in the misconduct alleged by Mr Kwoh-Gain. The decision was not sound defensible or well founded and neither was it justifiable on an analysis of the relevant facts. Quite simply, there is no valid basis for a conclusion that Ms Elton had engaged in any of the conduct alleged either at the time the dismissal was effected or when her application was heard. I am also of the view that the conclusions reached by Mr Kwoh-Gain went beyond being incorrect and were capricious and fanciful.

[60] There was no evidence that the allegations made by Mr Kwoh-Gain have been found to have any substance after the dismissal and at the time Ms Elton’s application was heard by the Commission. There was no evidence of other conduct that could constitute a valid reason for Ms Elton’s dismissal.

Was Ms Elton notified of the reason for her dismissal?

[61] I accept that at a meeting on 23 May 2014, Ms Elton was informed that Mr Kwoh-Gain believed that she had stolen from the business and that she was to be dismissed for that reason. To that extent Ms Elton was notified of the reason for her dismissal.

Was Ms Elton given an opportunity to respond to any reason related to her conduct?

[62] In my view, the manner of Ms Elton’s dismissal resulted in a situation where Ms Elton was not given any real opportunity to respond to very serious allegations about her conduct. Ms Elton was called to a meeting with no warning about the subject matter and had very serious allegations put to her without warning. There was no source information provided to establish the basis for the allegations. Had there been some reasonable basis for the allegations, the element of surprise employed by Mr Kwoh-Gain may have been justified.

[63] However there was no reasonable basis for the allegations to have been put to Ms Elton at all, and the manner in which this occurred resulted in a situation where Ms Elton had no opportunity to respond to allegations related to her conduct.

Was there an unreasonable refusal for Ms Elton to have a support person?

[64] Ms Elton had no notice that the meeting with Mr Kwoh-Gain on 23 Mah 2014 was for the purpose of putting serious allegations of theft and fraud to her. Accordingly Ms Elton made no request for a support person to be in attendance and there was no refusal, unreasonable or otherwise, of a request in this regard.

Was Ms Elton warned about any unsatisfactory work performance before the dismissal?

[65] Ms Elton was not dismissed on the grounds of unsatisfactory work performance and this criterion is not relevant. The question of whether Ms Elton had received prior warnings in relation to poor work performance and the validity of those warnings is dealt with in more detail below.

Did the employer’s size and lack of human resource management specialists impact on the procedures to effect the dismissal?

[66] Acupuncture Australia is a small business employer. Mr Kwoh-Gain does not appear to have had or sought any independent legal advice in relation to the procedures he followed to effect the dismissal. Acupuncture Australia does not engage any human resource management specialists.

[67] Even when allowances are made for the fact that Acupuncture Australia is a small business employer and lacks human resource management specialists or that access to such assistance is limited, there is no justification for the appalling manner in which Mr Kwoh-Gain dealt with Ms Elton’s dismissal.

[68] Ms Elton was subjected to baseless and extremely damaging allegations and summarily dismissed after almost 3.5 years of service. Those allegations were promulgated in a report to the Queensland Police Service and repeated in many documents filed by Mr Kwoh-Gain in the Commission. Mr Kwoh-Gain’s conduct is inexcusable even when the size of his business and lack of human resource management expertise are taken into account.

[69] It should have been patently obvious, even to a small business owner such as Mr Kwoh-Gain, that his allegations against Ms Elton could not be substantiated. Instead, Mr Kwoh-Gain continued with those allegations and even resorted to hypothesising about the involvement of other persons to an extent that his account of events resembles very poorly executed fiction

Conclusion in relation to whether Ms Elton was unfairly dismissed

[70] For the reasons set out above I am satisfied and find that Ms Elton was unfairly dismissed. Her dismissal was harsh because of its consequences for her personal and economic situation. Ms Elton has lost her employment of some 3.5 years standing in circumstances where her honesty has been impugned without any basis for the allegations made against her. The dismissal has also had a significant economic effect on Ms Elton.

[71] Ms Elton’s dismissal was unjust because she was not guilty of the extremely serious misconduct alleged against her. Ms Elton’s dismissal was also unreasonable because it was decided on inferences that could not reasonably have been drawn from the material before Mr Kwoh-Gain. Having found that Ms Elton was unfairly dismissed, I turn now to the question of remedy.

REMEDY

Legislation

[72] Section 390 of the Act provides as follows:

“390 When the FWC may order remedy for unfair dismissal

(1) Subject to subsection (3), the FWC may order a person’s reinstatement, or the payment of compensation to a person, if:

(a) the FWC is satisfied that the person was protected from unfair dismissal (see Division 2) at the time of being dismissed; and

(b) the person has been unfairly dismissed (see Division 3).

(2) The FWC may make the order only if the person has made an application under section 394.

(3) The FWC must not order the payment of compensation to the person unless:

(a) the FWC is satisfied that reinstatement of the person is inappropriate; and

(b) the FWC considers an order for payment of compensation is appropriate in all the circumstances of the case.

Note: Division 5 deals with procedural matters such as applications for remedies.”

[73] For reasons set out below, s. 391 of the Act in relation to remedy is not relevant. In relation to compensation s. 392 of the Act provides:

“392 Remedy—compensation

Compensation

(1) An order for the payment of compensation to a person must be an order that the person’s employer at the time of the dismissal pay compensation to the person in lieu of reinstatement.

Criteria for deciding amounts

(2) In determining an amount for the purposes of an order under subsection (1), the FWC must take into account all the circumstances of the case including:

(a) the effect of the order on the viability of the employer’s enterprise; and

(b) the length of the person’s service with the employer; and

(c) the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and

(d) the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and

(e) the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and

(f) the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and

(g) any other matter that the FWC considers relevant.

Misconduct reduces amount

(3) If the FWC is satisfied that misconduct of a person contributed to the employer’s decision to dismiss the person, the FWC must reduce the amount it would otherwise order under subsection (1) by an appropriate amount on account of the misconduct.

Shock, distress etc. disregarded

(4) The amount ordered by the FWC to be paid to a person under subsection (1) must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person’s dismissal.

Compensation cap

(5) The amount ordered by the FWC to be paid to a person under subsection (1) must not exceed the lesser of:

(a) the amount worked out under subsection (6); and

(b) half the amount of the high income threshold immediately before the dismissal.

(6) The amount is the total of the following amounts:

(a) the total amount of remuneration:

(i) received by the person; or

(ii) to which the person was entitled;

(whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal; and

(b) if the employee was on leave without pay or without full pay while so employed during any part of that period—the amount of remuneration taken to have been received by the employee for the period of leave in accordance with the regulations.”

Consideration in relation to remedy

[74] Pursuant to ss. 390(1)(a) and (b) of the Act, I am satisfied that Ms Elton was a person protected from unfair dismissal and that she has been unfairly dismissed. Ms Elton has made an application for an unfair dismissal remedy under s. 394 of the Act and should have a remedy for her unfair dismissal. Unsurprisingly given her treatment by Mr Kwoh-Gain, Ms Elton does not seek reinstatement. Given the attitude displayed by Mr Kwoh-Gain during the hearing of this matter and his declaration that he will pursue his allegations against Ms Elton to eternity, I have no doubt that the relationship cannot be re-established. I am therefore satisfied and find that in the circumstances of this case, reinstatement is not appropriate.

[75] I also consider that an Order for compensation is appropriate. In relation to the consideration in s. 392(2)(a) Mr Kwoh-Gain has made various statements alleging that the business is in a precarious financial position and estimating the extent of the alleged theft on the part of Ms Elton. As previously stated, there is no basis for the allegations of theft, and Mr Kwoh-Gains assertions about the financial position of Acupuncture Australia are unsupported by any evidence. Notwithstanding the lack of evidence in the form of accounting information, I am prepared to accept - for the purpose of calculating compensation - that any order will have an impact on the viability of Mr Kwoh-Gain’s business

[76] It is not in dispute that Ms Elton had 3 years and 4 months service with Acupuncture Australia. Notwithstanding Mr Kwoh-Gain’s assertion that but for Ms Elton’s misconduct she would have remained in employment for 3 to 5 years, I have concluded for the purposes of s. 392(2)(c) that Ms Elton would have remained in employment for a period of no more than 8 months. I have based this conclusion on the tone of the email communications tendered by Ms Elton which indicate that there was some volatility in the relationship between Ms Elton and Mr Kwoh-Gain. I have also taken into account that Ms Elton was a casual employee.

[77] Had Ms Elton remained in employment, for the 8 month period I have adopted for the purpose of calculating compensation, she would have earned an amount of $47,600.00. I am satisfied that Ms Elton has gone to considerable effort to mitigate the loss of her employment by seeking alternative employment. In doing so she has sought employment outside of the area in which she was employed. I accept that the circumstances of her dismissal and her inability (confirmed by Mr Kwoh-Gain’s evidence about what he would say if a potential employer sought to confirm Ms Elton’s service) to refer to her previous employer in her resume would have impacted on her ability to obtain other employment.

[78] In that 8 month period Ms Elton has not earned any other amounts from employment or other work, and given the period over which I have assessed compensation it is not necessary to consider any amount likely to be earned in the period between the making of the order and the actual compensation. In relation to s. 392(2)(g) I also consider that it is that Ms Elton has received an amount of $8,840 from Centrelink payments which I intend to take into account in my assessment of compensation. I also consider that an adjustment of 25% for contingencies should be made on the basis that Ms Elton may have ceased employment for some other reason - either at her own volition or because of some other factor such as the economic conditions impacting on retail generally.

[79] Ms Elton’s conduct in no way contributed to her dismissal and I make no adjustment on that basis.

[80] I determine that compensation in the amount of $29,070, less taxation at the appropriate rate, should be paid to Ms Elton within 21 days of the date of this Decision. An Order to that effect will issue with this Decision.

DEPUTY PRESIDENT

 1   Respondent’s submissions, Annexure 5, paragraph 2.3.

 2   Statutory declaration of Ian Kwoh-Gain, paragraph 8.2.

 3   [2012] FWAFB 1359.

 4   Ibid at [30].

 5   Selverchandron v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373.

 6   Rode v Burwood Mitsubishi Print R4471 at [90] per Ross VP, Polites SDP, Foggo C.

 7   Miller v University of NSW [2003] FCAFC 180 at pn 13, 14 August 2003, per Gray J.

 8   Stewart v University of Melbourne (U No 30073 of 1999 Print S2535) Per Ross VP citing Byrne v Australian Airlines (1995) 185 CLR 410 at 465-8 per McHugh and Gummow JJ.

 9   Selverchandron v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373.

 10   Rode v Burwood Mitsubishi Print R4471 at [90] per Ross VP, Polites SDP, Foggo C.

 11   Miller v University of NSW [2003] FCAFC 180 at pn 13, 14 August 2003, per Gray J.

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