[2016] FWC 5743
The attached document replaces the document previously issued with the above code on 17 August 2016.
To correct the clause reference in paragraph [18].
Associate to Commissioner Roe
Dated 19 August 2016
| [2016] FWC 5743 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Dr Cong Li
v
Creative Water Technology
(U2016/2071)
COMMISSIONER ROE |
MELBOURNE, 17 AUGUST 2016 |
Application for relief from unfair dismissal – genuine redundancy.
[1] Dr Cong Li was employed by Creative Water Technology from September 2011 until 20 April 2016. It is not in dispute that Dr Cong Li is protected from unfair dismissal save for two issues:
● Creative Water Technology submit that the dismissal was a genuine redundancy.
● Creative Water Technology submitted that they were a small business and the dismissal was consistent with the Small Business Fair Dismissal Code.
[2] It is not in dispute that the company (together with any associated entities) is a small business which employed less than 15 employees at the time of the dismissal including Dr Cong Li. The business employed six persons immediately prior to the dismissal. The small business check list was completed on 20 May 2016, a month after the dismissal. The small business code is not relevant to the issue of dismissal for reasons of redundancy. I am not satisfied that the dismissal was consistent with the Small Business Fair Dismissal Code. At the start of proceedings Creative Water conceded this.
[3] Dr Cong Li is seeking compensation. There are some aspects of the compensation Dr Cong Li is seeking which are not matters which I can address under the Fair Work Act 2009 (the Act) and this application in particular:
● Dr Cong Li is seeking compensation for the emotional and other stress caused to her by the employer’s conduct. Although the impact on Dr Cong Li may be relevant in determining whether or not the dismissal was harsh and unfair, if I find that it was not a genuine redundancy, in considering the compensation remedy I am not permitted to consider the issue of compensation for the harm caused.
● Dr Cong Li is claiming that she has been underpaid and has also not received her entitlements including superannuation. This is a matter Dr Cong Li can pursue in the courts and with other agencies but it is not a matter with which I can deal and I cannot take underpayments into account in determining the level of compensation.
[4] Dr Cong Li alleges that the real reason for her dismissal is that:
● She raised complaints about her level of payment; and
● She refused the pressure from the employer to become a contractor rather than an employee to minimise taxation for her employer.
[5] For the dismissal to be a genuine redundancy the three conditions in Section 389 of the Act need to be satisfied:
“389 Meaning of genuine redundancy
(1) A person’s dismissal was a case of genuine redundancy if:
(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:
(a) the employer’s enterprise; or
(b) the enterprise of an associated entity of the employer.”
[1] Dr Cong Li’s employment agreement described her primary role as that of Physicist and that she was required to report to the Chief Technical Officer. Dr Cong Li amongst other things was required to achieve “the effective performance of research and development feasibility activities and the effective design and system analysis of designs.” Dr Cong Li says that she did perform other duties as an engineer.
[2] Creative Industries submits that it executed a construction agreement with Schulz Industries (SI) in September 2015 and it successfully installed and completed the GENESIS product in February 2016. This meant that Schulz Industries was taking responsibility for final design and construction of GENESIS products as well as being the manufacturer of the projects. Creative Industries submits that this had a direct impact on at least 50% of Dr Cong Li’s workload and left the position of Physicist without full time work from October 2015. She was allocated other duties from this time until her dismissal.
[3] Creative Industries submits that as at February 2016 it now had a product which could compete in the market and the main priority was to achieve sales rather than continuing to invest in development. Creative Industries has shifted resources from the role performed by Dr Cong Li to increased sales and marketing effort by employing a person in a new full time sales and marketing position.
[4] Creative Industries accepts that certain aspects of the job performed by Dr Cong Li are still required – for example preparation for manufacturing and drawings – these duties are now performed by a contractor or another employee, Mr Shelley.
[5] Creative Industries submits that the only available position for redeployment was the newly created role in marketing and sales. Creative Industries submit that Dr Cong Li does not have the skills for this role.
[6] Dr Cong Li says that she was allocated plenty of work just a few days before her dismissal. She also says that the design work on GENESIS is not completed and her job is still needed. Dr Cong Li says that she spent more time working as an engineer than as a physicist. Dr Cong Li points to the fact that her company business card describes her role as an engineer. Dr Cong Li points to emails to suppliers in which she describes herself as an engineer with a copy to the management. No issue had been taken with this description of her role previously. The duties have included “modelling, design, drafting, components sourcing, supervising manufacture, and instructing installation” in addition to “research and development as a physicist”. Dr Cong Li holds a Bachelor of Engineering and a Phd.
[7] I am satisfied and in the proceedings the parties accepted that the employment position before the restructure was six employees including Dr Cong Li’s role as a physicist/engineer. The employment position after the restructure was six employees, including the new sales and marketing role but not including Dr Cong Li’s role as physicist/engineer. Even if I accept everything Dr Cong Li says about the wide range of her duties, the fact is that the company is now operating without her so to the extent that those duties are still performed they are redistributed amongst the remaining five employees (i.e. the six employees not including the new marketing and sales role).
[8] I am satisfied that Creative Water Technology no longer required Dr Cong Li’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. Those changes in operational requirements include: the shift of manufacturing to another entity has removed some of the work formerly conducted by Dr Cong Li; the completion or near completion of design work on GENESIS; and most importantly the decision by the company to introduce a new role in the marketing and sales (including contract development and finalisation) area and to reduce costs in other areas of the business to pay for this.
[9] I am also satisfied that redeployment to the only other possible position in sales and marketing was not reasonable due to the different skills and experience requirements. A position description for this position was provided. 1 Dr Cong Li was questioned about the main elements of that position description. Dr Cong Li conceded that she did not have the skills or qualifications to adequately perform a number of those elements. Dr Cong Li submitted that the person appointed to the position did not have all the skills. I am not satisfied that there is a proper basis to conclude that the position description does not reflect the needs of the company determined on operational grounds. I am satisfied that Dr Cong Li does not have all of the essential skills and qualifications for the position and that she could not acquire those essential skills and qualifications with a short period of training. I am not satisfied that it would have been reasonable in the circumstances to redeploy Dr Cong Li to the position. The condition in Section 389(2) is met.
[10] I now turn to the remaining issue of consultation.
[11] The Professional Employees Award 2010 is an occupational award for professional employees. It is also an industry award for certain classifications in the information technology, quality auditing and telecommunications services industry. This part of the award’s coverage is not relevant in the present case. The Manufacturing and Associated Industries and Occupations Award 2010 is an occupational award for technical workers (See Clause 4.9(c)) and technical workers is defined as follows in Clause 3.1:
“technical workers are employees who are or who are mainly engaged:
(d) in the conducting of scientific or engineering work on:
(i) analytical, investigational, developmental, experimental or research work of a technical nature in connection with chemical, biochemical, physical chemical, bacteriological physics, physical testing or metallurgical processes; or
(ii) investigational, developmental, experimental, research or technical control work in manufacturing or pilot plants; or
(e) in assisting in the operations set out in (d)(i) and/or (d)(ii) by:
(i) the preparation or care of apparatus or materials; or
(ii) the recording or tabulating of results; or
(iii) any other means.”
[12] The job description attached to the employment agreement signed by Dr Cong Li clearly falls within the scope of either:
● Professional engineering duties within the scope of the Professional Employees Award 2010; or
● Professional scientific duties within the scope of the Professional Employees Award 2010; or
● Technical worker in the Manufacturing and Associated Industries and Occupations Award 2010.
[13] Dr Cong Li holds a PhD and a Bachelor of Engineering. The PhD was awarded in the field of Engineering by RMIT. A PhD is a degree significantly higher than the minimum requirement of a degree in science from an Australian university. I am satisfied that she meets the qualification requirements for engineer and scientists under the Professional Employees Award 2010. Creative Water argues that because her work is not supervised by a more senior engineer or scientist she does not meet the classification definition in the Award. If this is correct then the technical worker definition must be considered. In the proceedings Creative Water conceded that the work of Dr Cong Li did fall within the part of the definition of technical workers in (e)(i) or (e)(iii). I am therefore satisfied that the position fell within the coverage of the Manufacturing and Associated Industries and Occupations Award 2010.
[14] The consultation term in the Award is Clause 9 and it provides as follows:
“Consultation regarding major workplace change
(i) Where an employer has made a definite decision to introduce major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the employer must notify the employees who may be affected by the proposed changes and their representatives, if any.
(ii) Significant effects include termination of employment; major changes in the composition, operation or size of the employer’s workforce or in the skills required; the elimination or diminution of job opportunities, promotion opportunities or job tenure; the alteration of hours of work; the need for retraining or transfer of employees to other work or locations; and the restructuring of jobs. Provided that where this award makes provision for alteration of any of these matters an alteration is deemed not to have significant effect.
9.2 Employer to discuss change
The employer must discuss with the employees affected and their representatives, if any, the introduction of the changes referred to in clause 9.1, the effects the changes are likely to have on employees and measures to avert or mitigate the adverse effects of such changes on employees and must give prompt consideration to matters raised by the employees and/or their representatives in relation to the changes.
The discussions must commence as early as practicable after a definite decision has been made by the employer to make the changes referred to in clause 9.1.
For the purposes of such discussion, the employer must provide in writing to the employees concerned and their representatives, if any, all relevant information about the changes including the nature of the changes proposed, the expected effects of the changes on employees and any other matters likely to affect employees provided that no employer is required to disclose confidential information the disclosure of which would be contrary to the employer’s interests.”
[15] It is accepted that the proposed redundancy of Dr Cong Li is a significant change which requires consultation in accordance with the clause.
[16] Evidence was given by Mr Jones for Creative Water of information given to employees in 2014 about the financial difficulties of the company and that restructuring or redundancy might be an outcome of the situation. Dr Cong Li denied that she had received the specific written notices in July 2014 which Mr Jones produced in evidence. Mr Jones was confident that the two notices had been given to Dr Cong Li along with the other employees. Dr Cong Li accepted that Mr Shelley had verbally advised her of the situation at that time. Dr Cong Li accepted that she was given information when the company was in financial difficulties but she was not given information when things were going better including when R&D grants were provided to the company. I am satisfied that Dr Cong Li was aware of the financial difficulties of the company in 2014 and that it could result in some restructure or redundancy. I am also satisfied that the company kept Dr Cong Li generally informed from time to time when there were financial difficulties.
[17] On 20 October 2015 there was a meeting involving Dr Cong Li at which she was told about changes which would affect her position. Mr Jones gave evidence of the matters discussed at that meeting. 2 Dr Cong Li agreed that many of the matters raised by Mr Jones were discussed. The manufacturing work was to be taken over by another company. It was suggested that Dr Cong Li might become a contractor and be paid approximately 50% by the manufacturing company and 50% by Creative Water. Dr Cong Li accepted that as a result of the manufacturing work being taken over by another company a significant part of the work she had been performing was no longer performed by Creative Water. There is a sharp difference between the parties concerning the detail of the contractor proposal. Dr Cong Li gave evidence that it was presented as if the decision had been made and that her job would be at risk if it did not happen. Dr Cong Li gave evidence that Mr Jones explained that there would be taxation savings for the company in the new arrangement. It is not necessary to determine this question. The contractor arrangement was never implemented.
[18] Mr Jones says that one of the matters discussed was “that the work now being done on behalf of SI meant that the Applicant no longer had full time work with CWT.” 3 I am satisfied when considered in context that this is simply a restatement of the discussion about the possibility of Dr Cong Li working part of the time for Creative Industries and part of the time for SI. I am satisfied that Dr Cong Li was advised at the October 2015 meeting that as a result of the manufacturing being taken over by another company a significant part of her duties would no longer be performed or required by Creative Water. I am satisfied that Dr Cong Li was therefore on notice that her role was going to change as a result of this change in duties. However, between October 2015 and April 2016 this did not result in her becoming a contractor or working part time for SI. Rather it resulted in some changes to the work she performed for Creative Water. I am not satisfied that Dr Cong Li was advised on 20 October 2015 that her position would be redundant.
[19] The decision to make the position redundant was made on 17 April 2016. There were further management discussions on 19 April 2016. On 20 April 2016 there was a meeting between Mr Shelley, Mr Jones and Dr Cong Li. Dr Cong Li was advised that due to change in the operational focus of the company following completion of the GENESIS product range her position was redundant and she was provided with a termination letter. There is nothing in the statements of Mr Shelley or Mr Jones which suggest that the information was provided in writing for the purpose of the discussion – rather the letter was provided at the time of the termination. There is nothing in the statements of Mr Shelley or Mr Jones which suggest that there was a bona fide opportunity to discuss alternatives to the redundancy or measure to mitigate its effect.
[20] I am not satisfied that the general information provided in 2014 about the possibility of restructure or the information provided in October 2015 about the manufacturing work being taken over by another company meets the consultation requirements of the relevant Award. I am not satisfied that Creative Water provided written advice to Ms Cong with all relevant information about the changes including the nature of the changes proposed and the expected effects of the changes for the purposes of discussion. The relevant information would have included the issue of the completion of GENESIS, the proposal to create the new marketing and sales position, the financial position of the company, and the manufacturing being taken over by another company. The written information provided in 2014 does not meet this requirement. For this reason it is not necessary to decide whether or not Dr Cong Li actually received the written communications. I am also not satisfied that there was any meaningful opportunity for discussion about the effects the changes were likely to have on Dr Cong Li and measures to avert or mitigate the adverse effects of such changes on Dr Cong Li. I am not satisfied that Dr Cong Li had a real opportunity to influence the decision maker or that the decision maker was open to change their mind.
[21] I am not satisfied that the consultation requirements of the Award were met. The failure was not a minor technical failure. It was a substantial failure to provide Dr Cong Li with the opportunity to influence the decision maker or to mitigate the impact of the changes.
[22] As a consequence I must find that the dismissal was not a genuine redundancy.
[23] In deciding whether or not the dismissal was unfair I am required to consider the following:
“387 Criteria for considering harshness etc.
In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:
(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and
(b) whether the person was notified of that reason; and
(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and
(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and
(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and
(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
(h) any other matters that the FWC considers relevant.”
[24] Dr Cong Li was dismissed due to shortage of work and not because of conduct or performance. Section 392(a), (b), (c) and (e) are therefore not relevant.
[25] Dr Cong Li was not refused a support person. Section 392(d) is a neutral factor.
[26] Creative Water Technology is a small business and it does not have specialised human resource personnel. The size of the business may have influenced the procedures adopted however this does not excuse the failure to comply with the consultation requirements. The Award requirement is an enforceable obligation subject to penalty. This is to be contrasted with other potential procedural failing in a dismissal process. Sections 392(f) and (g) are therefore neutral factors.
[27] The relevant other factors (Section 392(h)) are:
● My finding that the dismissal was for reasons of redundancy.
● My finding that consultation obligations were not met.
● My finding that redeployment was not reasonable.
[28] The fact that there was a defensible business reason for the redundancy and it is not established that the redundancy was a sham means that there was a sound, defensible and well founded reason for the termination. This stands in favour of a finding that the dismissal was not unreasonable. The fact that there were no reasonable opportunities for redeployment also stands in favour of a finding that the dismissal was not unreasonable or unjust. However, the failure to properly consult stands in favour of a finding that the dismissal was unjust and harsh.
[29] The opportunity to consult is about justice and procedural fairness. However, it is also a recognition of the negative impacts redundancy causes to employee wellbeing and that it is harsh to terminate employees for reason of redundancy without giving them the dignity and opportunity provided by the consultation process. In my view in the circumstances of this case it is difficult to conclude that nothing would have changed if the consultation process had occurred. This is the case even where other viable options have not been specifically identified. The whole idea of the consultation process is to allow for exploration of options both known and unknown. Employees often have information and ideas which are not apparent to management. In an unfair dismissal hearing the protagonists are not engaging in such a consultative exploration. Opportunities for redeployment can be assessed on the evidence but alternatives to a restructure and options for modification to a restructure and its impacts are difficult to assess in the context of an unfair dismissal hearing. It is often not possible to determine what might or might not have resulted from consultation which did not occur.
[30] Given that it is a small business I conclude that the only possible full time available position was the sales and marketing job to which I have found it would not have been reasonable to redeploy Dr Cong Li. However, in the circumstances of this case there are a number of issues which could have been explored through consultation. These might have included:
● The options of part time work or job sharing.
● The option of some change to the timing of the redundancy.
● The option of some alteration or redistribution of the duties of the sales and marketing position.
● Other measures to mitigate the impact on Dr Cong Li.
[31] There was no evidence about any of these matters. I am not suggesting that this exploration would have produced a different outcome. I am not even suggesting that the exploration was likely to produce a different outcome. What I am satisfied of is that it is possible that exploration of different ideas and the sharing of information through consultation would have produced a different outcome and that that possibility is not remote or fanciful. Even if that different outcome was not a continuation of Dr Cong Li’s employment on a full time basis the denial of this opportunity could contribute to a finding that the dismissal at that time was harsh and unfair.
[32] I am satisfied taking into account all of these factors that on balance the dismissal was unfair because it was harsh and unjust to terminate Dr Cong Li without the opportunity for the consultation process provided for in the Award.
[33] Dr Cong Li does not seek reinstatement. Creative Water Technology opposes reinstatement. In circumstances where I have accepted that there was a redundancy situation and the employee does not seek reinstatement I accept that reinstatement is inappropriate.
[34] I consider it appropriate to make an order for compensation.
[35] I am required to consider the following matters in determining compensation (Section 392(2)):
“Criteria for deciding amounts
(1) 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.”
[1] There was no evidence before me that demonstrated that the viability of Creative Water Industries will be adversely affected by any order I make. Creative Water submitted that if I made a substantial award of compensation it may affect the viability of the company given that it is in financial difficulties. I am not satisfied that any order I may make is likely to affect the viability of the company.
[2] The length of service of more than four years is significant.
[3] I estimate that effective consultation, including consideration of alternatives, would have taken two weeks. It is not possible to exclude the possibility that consultation would have resulted in an alternative which continued Dr Cong Li’s employment being found. This is the whole purpose of the provision. However, I consider the probability of continuing employment to be low. Allowing for the possibility that a longer period of employment may have resulted, in all of the circumstances, I am not satisfied that the employment would have continued beyond three weeks.
[4] During that three week period Dr Cong Li did not earn any income other than her notice payment. I do not consider that the notice payment should be deducted as Dr Cong Li would be entitled to that payment at the end of the three week period.
[5] I do not anticipate that Dr Cong Li will earn any income from employment during the period between the dismissal and the making of the order for compensation or in the period between the order and the payment of the actual compensation.
[6] Dr Cong Li has not applied for any work. She is working to establish her own business. She referred to a number of activities directed to this outcome. Those efforts to establish her own business are efforts to mitigate her loss. Although there may be some question about the adequacy of the efforts to mitigate the loss, given the low level of compensation I do not consider it appropriate to make any deduction for this reason.
[7] Other than the issue of the length of further employment had the dismissal not occurred there are no factors which are uncertain. For this reason I make no deduction for contingency.
[8] There is no issue of misconduct.
[9] There are no other factors I consider relevant.
[10] Taking into account all the factors specified in the legislation I consider three weeks’ compensation to be appropriate. The weekly pay was $961.50. I will therefore order payment of $2,884.50 with appropriate taxation to be deducted by paid within fourteen days.
COMMISSIONER
Appearances:
Dr Cong Li represented herself.
Mr A Denton appeared for the Respondent.
Hearing details:
2016
Melbourne
August 4
1 Exhibit C3.
2 Exhibit C1, at para 21.
3 Exhibit C1, at para 21.
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