| FWC 6859|
|FAIR WORK COMMISSION|
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Smarter Insurance Brokers Pty Ltd [ABN: 15 601 405 323]
SYDNEY, 28 SEPTEMBER 2016
Application for unfair dismissal remedy - small business fair dismissal code - mistaken reliance upon terms of contract of employment - no valid reason for dismissal - significant procedural deficiencies - dismissal harsh, unjust ad unreasonable - compensation Ordered.
 This matter involves an application for unfair dismissal remedy made under s. 394 of the Fair Work Act 2009 (the Act). The application was lodged at Sydney on 8 February 2016, and it was made by Allan Stephen Croft (the applicant). The respondent employer was identified as Smarter Insurance Brokers Pty Ltd [ABN: 15 601 405 323] (the employer).
 The application indicated that the date that the applicant’s dismissal took effect was 27 January 2016. Consequently, the application was made within the 21 day time limit prescribed by subsection 394 (2) of the Act.
 The matter was not resolved at conciliation, and it has proceeded to arbitration before the Fair Work Commission (the Commission) in a Hearing conducted at Newcastle on 4 August 2016.
 At the Hearing, the applicant represented himself, and he was assisted by Ms T Kirk as a support person who also delivered some advocacy. The applicant provided evidence as the only witness called in support of the unfair dismissal claim.
 The Commission granted permission pursuant to s. 596 of the Act, for the employer to be represented by lawyers or paid agents. At the Hearing by Mr I Latham, barrister, appeared for the employer, instructed by Mr J Brigden, solicitor, from the firm of Priest Legal. Mr Latham called two witnesses who provided evidence on behalf of the employer.
 The applicant was dismissed from employment on Wednesday, 27 January 2016, at which time he had been employed for a period of about one year and two months. The applicant was engaged in a position which was described as General Insurance Manager.
 The employer conducts an insurance broking business which primarily operates from premises located in Short Street, in the New South Wales country town of Port Macquarie. The employer is a small business, and it, and any related companies, had between 6 to 11 employees at the time of the dismissal of the applicant.
 The employment of the applicant appeared to be beset with difficulties from an early stage. These difficulties mainly concerned the applicant’s interpersonal communications with the Directors of the employer. The applicant described these difficulties, particularly in respect to one of the employer’s Directors, as “a personality clash almost from day one.” 1
 From about June through to December 2015, there were a number of aspects of the applicant’s work performance and conduct which displeased the Directors of the employer. A considerable level of friction between the applicant and the Directors of the employer can be identified from various email communications that transacted during, in particular, November and December 2015.
 The dissatisfaction of the employer with the work performance and conduct of the applicant was said to have manifest in the form of a number of verbal warnings issued during November and December 2015. The applicant had no recollection of these verbal warnings and, importantly, the employer did not issue the applicant with any written warning concerning his employment.
 On the afternoon of 27 January 2016, the applicant was summoned to a meeting with one of the Directors of the employer. The applicant was not advised of the purpose of the meeting, and upon his attendance he was told that another employee would be present as a witness.
 Prior to the 27 January meeting, the Directors of the employer had determined to dismiss the applicant. However, rather than terminating the applicant for misconduct or unsatisfactory work performance, the employer decided to rely upon clause 21 of the applicant’s employment agreement, which provides that the employer may terminate the employment upon giving four weeks’ notice, or payment in lieu of notice. In this instance the employer decided to pay the applicant an amount equivalent to 4 weeks wages in lieu of notice.
 The applicant has attempted to find alternative employment since the dismissal. Approximately 17 weeks after the dismissal the applicant obtained alternative employment at a lower rate of remuneration.
 The applicant made oral submissions in addition to a documentary outline of submissions which had been filed.
 The written submissions which had been filed by the applicant rejected that the dismissal was consistent with the Small Business Fair Dismissal Code (the Code). The applicant noted that the dismissal was not related to work performance, capacity to do the job, conduct, nor any other of the reasons as outlined in the Code.
 The submissions of the applicant asserted that he had never been provided with any verbal or written warnings as required by the Code. Therefore, according to the submissions made by the applicant, the dismissal could not be considered to have been compliant with the Code.
 The applicant submitted that he had been unjustly and unreasonably dismissed without warning. The applicant also submitted that the dismissal was solely reliant upon clause 21 of his employment agreement, and it was only after the employer learnt that reliance upon clause 21 would not represent valid reason for dismissal, that it raised new allegations of the alleged basis for dismissal.
 The applicant further submitted that he was given no opportunity to have a representative attend the dismissal meeting on 27 January 2016. Further, the applicant submitted that he was never advised by the employer that they were not happy with his conduct, performance or capacity to do the job. The applicant said that he was simply told out of the blue, that his services were no longer required.
 The applicant made further submissions which rejected evidence about other matters which the employer relied upon as the basis for dismissal. In particular, the applicant rejected that an event which occurred on 31 August 2015 involved any misconduct on his part. The applicant also made submissions about evidence which the employer discovered after dismissal which involved the applicant accessing pornography using a laptop computer provided by the employer. The applicant said that the pornography allegations related to events occurring six months before the dismissal.
 The applicant said that his dismissal was unfair. The applicant submitted that remedy for his unfair dismissal should be provided in the form of financial compensation for the weeks that he was out of work.
 Mr Latham, who appeared for the employer, made oral submissions in elaboration of a written outline. Mr Latham submitted that the criteria set out in s. 387 of the Act firstly involved the issue of whether there was a valid reason for the dismissal of the applicant.
 Mr Latham submitted that there was a valid reason for the dismissal of the applicant which involved both conduct and performance deficiencies relating to the way in which the applicant failed to treat other people with respect, failed to organise his time and concentrate on his work while at work, failed to ensure compliance with regulatory requirements, and failed to ensure that the workplace was free of sexual discrimination harassment. Mr Latham said that these issues of workplace conduct and performance, established grounds to provide for valid reason for the dismissal of the applicant.
 The submissions made by Mr Latham challenged the credibility of the applicant and asserted that the applicant was a most unimpressive witness. Mr Latham said that the applicant was argumentative, evasive, and he denied any responsibility for his actions. Consequently, according to the submissions made by Mr Latham, wherever the evidence provided by the applicant differed from that provided by the witnesses for the employer, the applicant’s evidence should be rejected, and the employer’s evidence preferred.
 The submissions made by Mr Latham examined a variety of aspects of the applicant’s workplace performance and conduct which he said established that the applicant was a person who simply did not know the boundaries between what was appropriate or inappropriate conduct in the workplace. Mr Latham submitted that having regard for the various aspects of the applicant’s workplace performance and conduct the employer could have terminated the employment of the applicant much earlier.
 Consequently, Mr Latham submitted that there were a number of different valid reasons for the dismissal of the applicant. Mr Latham acknowledged that there may have been some breach of procedural fairness associated with the way in which the employer implemented the dismissal of the applicant. Mr Latham submitted that some of the matters which had subsequently come to light could not have been put to the applicant before dismissal in any event.
 It was further submitted by Mr Latham that the employer had sufficient basis to justify the summary dismissal of the applicant and that any strict non-compliance with the Small Business Fair Dismissal Code did not alter the fact that there were clearly a number of valid reasons for dismissal. Mr Latham submitted that the applicant’s conduct was sufficiently serious to justify immediate dismissal.
 Mr Latham submitted that there was no impediment to the employer relying upon subsequently discovered conduct to provide proper basis for the dismissal of the applicant. Mr Latham also submitted that the Commission should have regard for the small size of the employer, and its lack of HR expertise.
 By way of an alternative submission, Mr Latham asserted that if the applicant was found to have been unfairly dismissed, reinstatement was clearly not appropriate, and that if any compensation was considered, the amount should be reduced to zero because of the applicant’s short length of service, and because of his misconduct. In conclusion, Mr Latham submitted that the dismissal of the applicant was not unfair.
 Section 385 of the Act stipulates that the Commission must be satisfied that 4 cumulative elements are met in order to establish that a dismissal was unfair. These elements are:
(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.
 In this instance, there was contest regarding subsections 385 (b), and (c) of the Act. The Commission has been required to determine whether the dismissal was; consistent with the Small Business Fair Dismissal Code; and potentially, whether it was harsh, unjust or unreasonable.
 The employer is a small business and the provisions of subsection 385 (c) of the Act require consideration. Specifically, it is necessary to determine whether the dismissal of the applicant was or was not consistent with the Small Business Fair Dismissal Code (referred to as “the Code”). Logically, a determination of any application of the Code should precede any more general contemplation of whether the dismissal was harsh, unjust or unreasonable.
 The Code is in the following terms:
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.
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.
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.”
 In this case, the applicant was dismissed for reason which relied upon the terms of clause 21 of the applicant’s employment agreement document. The terms of clause 21 include provisions which relate to termination of employment without notice in cases of serious misconduct. In this instance, the employer sought to rely upon the other terms of clause 21 which are not connected with serious misconduct, and it provided payment to the applicant in lieu of notice. Therefore, that part of the Code relating to Other Dismissal would appear to have potential application to the particular circumstances surrounding the dismissal of the applicant.
 The Other Dismissal provisions of the Code generally introduce a requirement for some opportunity for an employee to offer explanation or suggestion, to address the concerns of any employer contemplating the dismissal of that employee. It is important to note that the Code stipulates that the small business employer must give the employee a reason why he or she is at risk of being dismissed. In this instance, the applicant was not told that his employment was at risk, and he was denied any opportunity to offer explanation or potential rectification of any problem that may have been identified during the meeting with the employer held on 27 January 2016.
 Consequently, the dismissal of the applicant cannot be held to have been consistent with the Code.
 The further contested element of s. 385 of the Act, namely, whether the dismissal was harsh, unjust or unreasonable, has required consideration.
 Section 387 of the Act contains criteria that the Commission must take into account in any determination of whether a dismissal is harsh, unjust or unreasonable. These criteria are:
(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.
No Contractual Right to Dismiss at Will
 The reason stated for the applicant’s dismissal involved reliance upon the terms of clause 21 of the employment agreement document. It appeared that the employer may have mistakenly believed that payment in lieu of notice in accordance with the terms of clause 21, somehow relieved it of any requirement to have substantive basis for the dismissal, and to provide the applicant with proper procedure.
 At paragraph 3.1 of the employer’s F3 response document, which was prepared by the employer’s solicitor, the following unfortunate propositions can be found:
“2. The reason for dismissal was pursuant to the Employer’s contractual right to terminate the Employee’s employment pursuant to, and upon conditions stipulated in, clause 21 of the employment contract annexed to this application and marked “A”.
3. The employer denies that termination was for any other reason.
4. The employee signed the contract and agreed to the conditions of employment, including clause 21 of the Employment Agreement, upon execution of the Employment Agreement.
5. All of the conditions required under clause 21 of the Employment Agreement were fulfilled by the employer upon termination.”
 Notwithstanding that at point 3 of paragraph 3.1 of the employer’s F3 document the employer denied that the dismissal of the applicant was for any reason other than the “contractual right to terminate… pursuant to… clause 21 of the employment contract”, other reasons for dismissal were advanced by the employer at the Hearing. There is potential for conduct of an employee which was not known at the time of dismissal, but which is subsequently established, to represent valid reason for dismissal.
 The reason for dismissal that was stated in the undated letter given to the applicant on 27 January 2016, and as subsequently confirmed in the employer’s F3 document, was manifestly invalid. A dismissal without identified reason but reliant upon a purported contractual entitlement to dismiss without reason, provided that notice or payment in lieu of notice was made, would plainly subvert the statutory unfair dismissal laws, and also offend the broader common law position that has developed in Australia. In the Australian jurisdiction there is no lawful foundation upon which employment can be created at will.
 The absence of any stated, valid reason for the applicant’s dismissal arose from the highly erroneous reliance upon a purported contractual right arising from clause 21 of the employment agreement. This severely flawed approach was consistent with broader deficiencies and errors in the procedure that was adopted by the employer when it implemented the dismissal during the meeting held on 27 January 2016, without providing the applicant even a suggestion of natural justice.
Performance and Conduct Deficiencies
 Notwithstanding the absence of any stated valid reason for dismissal, and despite a severely flawed procedure for the determination to dismiss from employment, the Commission is required to examine the evidence presented so as to ascertain whether valid reason existed to justify the dismissal, albeit not stated or perhaps even identified, at the time of the dismissal. Therefore, the Commission has been required to “go behind” the manifestly invalid reason for dismissal as stated by the employer at the time of the dismissal, and subsequently reaffirmed in its F3 response document, so as to determine whether any conduct of the applicant, including that subsequently discovered, represented valid reason for his dismissal.
 The applicant’s employment became increasingly more difficult towards the end of 2015 as his interpersonal engagements with the Directors of the employer traversed increasingly more fractious territory. However, in the absence of clear, documented warning about issues such as; delay with CPD training, contact with clients of previous employer via LinkedIn, direct contact with Ausure, late arrival for work, and extended lunch breaks; these matters could not represent valid reason for dismissal. These work performance and conduct issues could not represent sound and defensible basis for dismissal in the absence of any clear advice to the applicant that they were matters that potentially endangered his employment.
 There was an issue which represented a potentially valid reason for dismissal which was discovered after the termination of the applicant’s employment. The applicant’s mobile phone records and his laptop computer usage history revealed what might be rightly considered to be misconduct, particularly relating to the accessing, downloading and storage of pornographic material.
 The applicant did not deny that he had used the employer provided mobile phone and laptop computer to download “…hard core pornographic material in a OneDrive system in the Internet in the cloud…” 2 He defended these actions by suggesting that at the particular times that he downloaded pornographic material he was on a lunch break or outside of work hours and work premises. The applicant suggested that he probably downloaded some of the pornographic material while he was “walking the streets”3 of Port Macquarie.
 Further, the applicant did not contest the evidence involving the employer’s post dismissal discovery that his laptop computer also contained various images and a video recording of the applicant performing sex acts. In fairness to the applicant, it should be noted that there appeared to be only three occasions, 10 July 2015, 13 December 2015, and 2 January 2016, when the applicant used either the desktop or laptop computer to access or download hard core pornographic material.
 Ordinarily, the use of employer provided equipment to access, download and/or store hard core pornographic material would represent misconduct. Unless the employee worked in the Sex Industry it would be difficult to contemplate that the viewing, downloading and/or storage of pornographic material represented proper, work-related use of the employer’s equipment. The use of employer provided equipment for non-work-related purposes should be assessed carefully and in context. There are obvious differences between using an employer provided laptop computer to conduct, for example, personal internet banking, as opposed to accessing and downloading pornography. However, particularly if such conduct occurred in breach of the clearly stated and understood policy of the employer, an employee could expect to be disciplined or even dismissed for deliberately accessing, downloading and/or storing hard core pornographic material on the employer’s equipment, whether such conduct occurred within or outside of the ordinary hours of work.
 The applicant’s vigorous but questionable defence of his actions involving the downloading of pornographic material represented an underlying acknowledgement of the misconduct that he had committed. However, in this case there was no evidence that the employer had promulgated any particular policy regarding the use of its equipment being confined to work-related activities. Further, there was some contested evidence as to whether some of the Directors of the employer may have also participated in accessing, downloading and dissemination of pornographic material in the workplace. In addition, the applicant’s accessing and/or downloading of pornographic material appeared to be confined to a limited number (three) of occasions.
 On balance, an evaluation of all of the available evidence regarding the applicant downloading, storing and/or accessing pornographic material via the employer provided equipment, has led to a conclusion that the applicant was aware that his actions represented misconduct. However, in the particular circumstances of this case, the subsequently discovered misconduct involving the accessing, downloading and storage of pornographic material could not be properly held to represent valid reason for the dismissal of the applicant.
 Consequently, upon analysis of the various reasons for dismissal, including those stated and those subsequently discovered, the dismissal of the applicant was not for valid reason related to his capacity or conduct. Further consideration of the other elements contained in s. 387 of the Act must also be undertaken.
 The employer provided undated written notification of the manifestly erroneous reason for the applicant's dismissal.
 The employer’s extraordinary approach to the manner in which it determined and implemented the dismissal of the applicant, denied any opportunity for the applicant to make any responses or representations about the performance and conduct issues which appeared to have been the underlying reasons for his dismissal.
 The applicant was not provided with any opportunity to respond to the matters which represented the underlying but unstated basis for his dismissal.
 The employer’s approach ensured that the applicant was not permitted to have a support person present during the meeting on 27 January 2016, at which time he was advised of his dismissal.
 There was no evidence that the applicant had been provided with any formal, written warning that his unsatisfactory work performance and conduct jeopardised his employment.
 The Commission has recognised that the employer is a small business, and accommodation should be made for significant informality in respect to employment matters.
 Although the employer is a small business which did not have dedicated employee relations management specialists, it clearly had capacity to access legal advice. Unfortunately, in this instance, it appeared that the employer acted upon a fundamentally misconceived reliance placed on purported contractual rights arising from clause 21 of the employment agreement document.
 There were no other relevant matters which may have impacted upon the determination of this application for unfair dismissal remedy.
 In this instance, the applicant was dismissed on the basis of a purported contractual right to terminate employment pursuant to, and upon conditions stipulated in, clause 21 of an employment agreement document. This stated reason for dismissal must be held to be invalid.
 The Commission has undertaken a further examination of other aspects of the conduct and performance of the applicant which, although not stated at the time of dismissal, may have represented valid reason for the dismissal of the applicant.
 Following from the extensive examination of all of the evidence regarding the various potential reasons for dismissal, and the procedure used to determine and implement the dismissal, the Commission has found that the dismissal of the applicant was not consistent with the Code.
 Upon a balanced and objective analysis of all of the evidence and filed material, the Commission has concluded that the dismissal of the applicant was without valid reason relating to his capacity or conduct.
 The abrupt processes that the employer adopted for dealing with the dismissal of the applicant was severely flawed, such that the applicant was denied any opportunity to respond to what may have been the underlying reasons for his dismissal. The employer completely failed to deal with the dismissal of the applicant in any fundamentally fair manner.
 The dismissal of the applicant was harsh, unjust and unreasonable. It was harsh, unjust and unreasonable because it was without sound or defensible reason. In addition, the dismissal of the applicant was unreasonable and unjust because it was implemented in a manner which denied the applicant any opportunity to provide any response to the underlying but unstated reasons for his dismissal. Consequently, the application for unfair dismissal remedy has met the legislative requirements, and it is granted.
 The applicant has not sought reinstatement as remedy for his unfair dismissal. Instead, he has sought remedy in the form of payment of an amount of monetary compensation. The amount of monetary compensation sought by the applicant was stated to be the remuneration lost during a period of unemployment in the 17 weeks following his dismissal.
 I have decided that compensation would be an appropriate remedy for the applicant’s unfair dismissal, and I turn to the factors which involve the quantification of any amount of compensation.
 Section 392 of the Act prescribes certain matters that deal with compensation as a remedy for unfair dismissal. I have approached the question of compensation having regard for the guidelines that have been established in the Full Bench Decision in Sprigg v Paul’s Licensed Festival Supermarket 4 and as commented upon in the subsequent Full Bench Decision in Smith and Ors v Moore Paragon Australia Ltd 5.
 Firstly, I confirm that an Order for payment of compensation to the applicant will be made against the employer in lieu of reinstatement of the applicant.
 Secondly, in determining the amount of compensation that I Order, I have taken into account all of the circumstances of the matter, including the factors set out in paragraphs (a) to (g) of subsection 392 (2) of the Act.
 There was no evidence that an Order of compensation would impact on the viability of the employer’s enterprise.
 The applicant had about one year and two months service with the employer. The applicant would have been likely to have received remuneration of approximately $1,250.00 per week if he had not been unfairly dismissed.
 There was significant prospect that the employment of the applicant may not have endured for any period beyond a further few months because of the deterioration in the interpersonal relationships between the applicant and the Directors of the employer. The applicant was likely to have been dismissed upon proper basis that did not erroneously rely upon clause 21 of the employment agreement document, if the employer had obtained and acted upon sound employment law advice.
 Following the dismissal, the applicant made efforts to mitigate the loss suffered because of the dismissal. The applicant has secured alternative employment which provided lower remuneration.
 Thirdly, in this instance there was some misconduct discovered after the dismissal, and as such, that misconduct could not have contributed to the employer's decision to dismiss.
 Fourthly, I confirm that any amount Ordered does not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt caused to the applicant by the manner of the dismissal.
 Consequently, for the reasons outlined above, I have decided that an amount approximating with 8 weeks remuneration should be Ordered as compensation to the applicant. That amount is $10,000.00. Accordingly, separate Orders [PR585732] providing for remedy in these terms will be issued.
Mr A Croft, assisted by Ms T Kirk appeared for himself.
Mr I Latham, of Counsel instructed by Mr J Brigden of Priest Legal appeared for the employer.
1 Transcript PN198.
2 Transcript PN345.
3 Transcript PN350.
4 Sprigg v Paul’s Licensed Festival Supermarket, (Munro J, Duncan DP and Jones C), (1998) 88IR 21.
5 Smith and Ors v Moore Paragon Australia Ltd, (Lawler VP, Kaufman SDP and Mansfield C), (2004) PR942856.
Printed by authority of the Commonwealth Government Printer
<Price code C, PR585731>