| [2016] FWCFB 144 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604 - Appeal of decisions
VICE PRESIDENT WATSON |
MELBOURNE, 4 FEBRUARY 2016 |
Appeal against decision [2015] FWC 4242 of Commissioner Ryan at Melbourne on 14 July 2015 in matter number U2014/15392 – Small Business Fair Dismissal Code – Summary dismissal – Whether reasonable grounds for employer’s belief that employee’s conduct is sufficiently serious to justify immediate dismissal – Fair Work Act 2009 - ss. 385, 388, 394, 400, and 604.
Introduction
[1] This decision concerns an appeal against a decision of Commissioner Ryan handed down on 14 July 2015. The decision of the Commissioner arose from an application made by Kirsten Suttie on 24 November 2014 under s.394 of the Fair Work Act 2009 (the Act) in relation to the termination of her employment with Lloyd & Co Pty Ltd T/A Lloyd & Co (Lloyd & Co). The decision of the Commissioner was that the dismissal was not consistent with the Small Business Fair Dismissal Code.
[2] The application for permission to appeal was heard in this matter by the Full Bench on 27 October 2015. On 11 November 2015, the Full Bench issued a decision granting Lloyd & Co’s application for permission to appeal. 1 Directions were issued for the filing of written submissions by both parties on the agreed basis that the appeal would be determined on the papers.
[3] We have summarised the background of this matter and the Commissioner’s conclusions that Ms Suttie’s dismissal was not consistent with the Code in our earlier decision in which we granted permission to appeal. It is convenient that we repeat the relevant extracts from that decision:
‘[5] The Commissioner considered two alternative bases whether the dismissal was consistent with the code. First he considered whether the dismissal was consistent with the summary dismissal aspects. He said:
“[29] In all of the circumstances of this case it is absolutely clear that Mr Shaun Lloyd had no reasonable grounds for believing that the Applicant’s conduct was sufficiently serious to justify immediate dismissal.
[30] The elephant in the room, which the Respondent’s case on summary dismissal clearly treated as not being there, was the fact that not only was the Applicant an employee of the Respondent she was also a 20% shareholder in the Respondent and had become a 20% shareholder in the Respondent by agreement with Mr Shaun Lloyd (previously the 100% owner of the Respondent) and with the intention of eventually buying out Mr Shaun Lloyd’s 80% remaining stake in the Respondent. The elephant in the room is an elephant of considerable size and value. After the Applicant was dismissed the Applicant commenced separate proceedings in the Supreme Court against Mr Shaun Lloyd for oppressive behaviour against the Applicant as a minority shareholder. Recently the Applicant sold her 20% interest in the Respondent for $200,000 to two other employees of the Respondent.
[31] Apart from the elephant in the room it also appears that the room was lined with magic mirrors which only reflected an image of Mr Shaun Lloyd which he had created for and of himself.
[32] It is clear that Mr Shaun Lloyd considered Lloyd and Co Pty Ltd to be his personal fiefdom in which he could employ family members as he saw fit regardless of their cost to the business or their benefit to the business. This was best epitomised by the fact that Mr Shaun Lloyd engaged his parents not as employees but as independent contractors to do filing work for the Respondent and for which they were paid a consultancy fee. The view expressed by the Applicant that, but for the necessary presence of Mr Shaun Lloyd, the Applicant preferred a “Lloyd free zone” at the Respondent was clearly not going to endear her to Mr Shaun Lloyd. Whilst the Applicant considered that some members of the Lloyd family were not adding value to the business of the Respondent and whilst such a view was a reasonable view for a part owner of the Respondent to hold, it jarred with Mr Shaun Lloyd’s view.
[33] The elephant in the room directly impacts on whether Mr Shaun Lloyd’s belief that the Applicant’s conduct was sufficiently serious to justify immediate dismissal was based on reasonable grounds.
[34] The inquiries made by Mr Shaun Lloyd into the conduct of the Applicant is insufficient to satisfy the “on reasonable grounds” test.
[35] The Respondent relied on the Full Bench decision in Steri-Flow Filtration Systems (Aust) P/L v Erskine and on the case cited therein of Concut P/L v Worrell. I accept the correctness of both decisions and apply them to the current matter. The key differentiating factor in the present matter is that for the Applicant to act in a manner which was incompatible with a continuation of the employment relationship and which justified summary dismissal requires the Applicant to act against her own interests as a 20% part owner of the respondent. The evidence of the Applicant which is unchallenged is that the Applicant was the highest income generator for the Respondent. The conduct of the Applicant as established by the evidence was to support and grow the business.
[36] The Applicant was not an employee of Mr Shaun Lloyd but an employee of the Respondent and the Applicant’s conduct was not conduct which was incompatible with the Applicant’s duties and obligations towards the Respondent, nor was the Applicant’s conduct incompatible with the continuation of the employment relationship existing between the Applicant and the Respondent.
[37] There was no reasonable grounds for Mr Shaun Lloyd holding the belief that the conduct of the Applicant justified immediate dismissal.”
(references omitted)
[6] In relation to the “Other Dismissals” part of the Code the Commissioner said:
“[45] In the context of the specific denials of the Applicant that she was so warned I am not satisfied that the Applicant was warned that she was at risk of being dismissed.
[46] Given that the Applicant was both an employee of the Respondent and a part owner of the Respondent it beggars belief that Mr Shaun Lloyd would not have put in writing the warnings which he says he gave to the Applicant especially when in relation to the alleged “loud, heated verbal stoush” on 27 August 2014 Mr Shaun Lloyd says that he “told her she would be terminated immediately if she did it once more”.
[47] Further I am not satisfied that the complained of conduct on 27 August 204 actually occurred. The evidence of the Applicant is consistent with the email exchanges on that day whereas the evidence of Mr Shaun Loyd that there was a loud verbal stoush is not consistent with the email exchange.
[48] The notes relied on by Mr Shaun Lloyd and included in his evidence may or may not have been made contemporaneous with the events that they refer to. However I do not accept that those notes accurately record the contents of discussions or conversations or interactions between the Applicant and Mr Shaun Lloyd. I also do not accept that some of the events recorded in the notes actually occurred.
[49] In relation to the “loud verbal stoush” on 27 August 2014 it would appear that the Mr Shaun Lloyd concocted the event and the contemporaneous notes.
[50] Apart from the oral evidence of Mr Shaun Lloyd and his notes of events, which on his evidence were made contemporaneously with the vents, there is nothing in the emails produced by Mr Shaun Lloyd which identifies warnings given to the Applicant or complaints as to her misconduct. By way of example:
● the email exchange on 5 June 2013 concerning the clean desk policy does not disclose any intention of the Applicant not to comply with the policy;
● the email exchange on 12 June 2013 only shows communications between the Applicant and other employees but there is nothing to support the claim from Mr Shaun Lloyd that he had given directions in relation to parking in his car parking space;
● the email exchange on 15 November 2013 clearly identifies that the Applicant accepted the position being put by Mr Shaun Lloyd;
● the email exchange on 10 October 2014 ended on the Applicant’s side with her asking a question of Mr Shaun Lloyd and then he replying dismissively and without bothering to answer the question put.
[51] The conclusion to be drawn is that none of the notes were made contemporaneous with the events allegedly described and the events as described appear not to have occurred. The contest between the conflicting evidence of the Applicant and Mr Shaun Lloyd is resolved in favour of the Applicant. Her evidence is consistent with the emails.
[52] As the Applicant was not warned that she was at risk of being dismissed, then there has been no compliance with an essential element of the Other Dismissal provisions of the Code.”’
(references omitted)
Grounds of Appeal
[4] Lloyd & Co appeals that part of the Commissioner’s decision that the dismissal was not consistent with the Code and also that the sum of Ms Suttie’s annual rate of earnings was less than the high income threshold. Lloyd & Co contends that the Commissioner erred in a number of respects.
[5] In relation to the application of the Code, Lloyd & Co submits as follows:
● The Commissioner erred in failing to provide any, or adequate, reasons for the conclusion that Ms Suttie’s proven conduct did not provide reasonable grounds for any belief held by it that her conduct was sufficiently serious to justify immediate dismissal. It also contends that there was no finding of fact as to what Ms Suttie’s proven conduct actually was.
● The Commissioner erred in finding that it must carry out a reasonable investigation in order to establish that it had reasonable grounds for its belief that Ms Suttie’s conduct was sufficiently serious to justify immediate dismissal. In the alternative, it submits that the Commissioner erred by failing to provide adequate reasons for finding that the inquiries made by the company were insufficient to satisfy this test. Lloyd & Co further contends that the Commissioner erred by failing to make any, or adequate, findings of fact about what the inquiries made by the company actually were and what other inquiries should have been made.
● The Commissioner erred in having regard to Ms Suttie’s 20% shareholding in the company when considering whether she had acted in a manner incompatible with the continuation of the employment relationship and/or contrary to the company’s interests, and in finding that she had not acted in a manner incompatible with her duties and obligations to the company or with continuation of the employment relationship.
● The Commissioner erred by failing to give any, or adequate, reasons for finding that Ms Suttie was not warned that she risked being dismissed, that he failed to give any, or adequate reasons that Mr Lloyd’s notes did not accurately record the contents of discussions or interactions between himself and Ms Suttie, that the events did not actually occur or were concocted, and that the notes were not made contemporaneously with the events described. It is also submitted that the Commissioner had regard to a number of irrelevant considerations in finding that the notes produced by Mr Lloyd were not contemporaneous with relevant events or that the events in them did not occur.
[6] In relation to the high income threshold, Lloyd & Co submits that the Commissioner:
[7] We propose to consider these grounds in turn.
Summary Dismissal
[8] The Commissioner was required by ss. 385 and 388 of the Act to determine whether the employer complied with the Code. The summary dismissal part of the Code states:
“Summary Dismissal
It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.”
[9] In order to comply with this aspect of the Code the employer must have a subjective belief that the employee’s conduct is sufficiently serious to justify immediate dismissal. In addition, this belief must be based on reasonable grounds.
[10] Lloyd & Co submits that the Commissioner’s decision does not identify the conduct relied upon by Lloyd & Co in making its decision, nor consider the reasonableness of the employer’s relevant belief. Ms Suttie submits that the Code itself defines serious misconduct and includes things such as theft, fraud, violence, and serious breaches of occupational health and safety procedures. She contends that because her conduct does not fall into the parameters of this definition, or other the commonly identified ranges of conduct, this limb cannot be made out. In order to assess this argument it is necessary to consider the evidence in the matter before the Commissioner.
[11] Mr Lloyd is the Managing Director of the employer and made the decision to terminate Ms Suttie’s employment. In his evidence to the Commission he said:
“Reasons for termination
24 I decided to direct Ian to terminate Kirsten's employment because of behaviour which she had engaged in that was completely unacceptable and incompatible with her continuing employment with Lloyd & Co. Key to my decision was evidence I found during my review of her emails of her undermining my authority to other staff and behaving in such a manner that meant she simply could not remain as a staff member of Lloyd & Co. I also took into account a number of other concerns that I had had with Kirsten's conduct and performance over a prolonged period, and the unsuccessful efforts I had made to rectify these concerns. I address these issues below.
25 Based upon all these issues, I did not feel that I had any choice but to terminate Kirsten's employment, as I considered her continued presence in such a small workplace to carry a significant risk that it would seriously damage the business.
26 In particular, I believed that Kirsten's conduct, and in particular the comments she had made about me in the emails I found when conducting my review, were so serious that they warranted Kirsten's summary dismissal. I spoke with Ian about this prior to instructing him on 24 October 2014 to terminate her employment, and he agreed that summary dismissal was appropriate. On 5 November 2014, I completed the "Small Business Fair Dismissal Checklist" which I found on google. In this checklist, I identify that Kirsten was dismissed for serious misconduct.
Attached and marked "SL-5" is a true copy of the "Small Business Fair Dismissal Checklist".
27 Also as I describe in further detail below, during the 12 months leading up to Kirsten's dismissal, I had raised each of my concerns with her (other than those I discovered when reviewing her emails) on a number of occasions. I had given her clear directions on my expectations of her, and on a number of occasions she simply refused to comply with them. This was despite me informing her that her employment would be at risk if she did not fix her behaviour. In fact, she would often dismiss my concerns with a simple roll of her eyes and return her gaze to her computer, as if I was not even in her presence. She was not talking to me and ignoring me for months before her dismissal.”
[12] Mr Lloyd gave further extensive detail of the conduct that led him to this conclusion in relation to various topics which he categorised as “undermining his authority”, “improperly taking leave”, “referrals to non-approved financial service firms”, “failing to return to work following lunch”, “collection of debts”, “refusal to prepare superannuation accounts and other performance concerns”, “supervision of staff” and “other conduct showing poor attitude towards the business and other employees.”
[13] In order to assess the existence of a belief and the reasonableness of the grounds of this belief it was necessary for the Commissioner to consider this evidence. The decision does not disclose the requisite consideration. Rather, it appears to place significant reliance on Ms Suttie’s shareholding and expressed some sympathy for the views expressed by Ms Suttie about the involvement in the business of members of Mr Lloyd’s family. We do not consider that the reasoning of the Commissioner was appropriately focussed on the question he needed to consider, and consequently he did not properly consider the relevant evidence. Further, his reasoning was influenced by extraneous considerations. It follows therefore that his findings in relation to the employer’s belief and the reasonableness of that belief cannot stand. It is necessary for us to review the evidence in relation to the relevant enquiry.
[14] Lloyd & Co had 7 employees at the time of the dismissal. Mr Lloyd was Managing Director and had responsibility for the day to day operation of the accounting business of which he held a 74% shareholding. Ms Suttie was the most senior accounting employee and held 20% of the shares of the company. The evidence of Mr Lloyd, summarised above describes a situation that he clearly regarded as intolerable. We find on the evidence that Mr Lloyd’s reasons for his decision were those set out at paragraphs 24-27 of his witness statement set out above. It is clear on that evidence that he had the view that Ms Suttie’s conduct warranted instant dismissal. We find therefore that the first element of the test in the code is satisfied.
[15] The second element is whether the belief was on reasonable grounds. The evidence establishes that the relationship between Mr Lloyd and Ms Suttie had virtually broken down and there was little constructive interaction between them. The ultimate trigger for the termination was Mr Lloyd’s review of Ms Suttie’s email account after a discussion Mr Lloyd had with his human resources consultant, Ian McDonald. Mr Lloyd gave the following evidence:
“18 On 19th September 2014 I had dinner with Ian in South Yarra and we spoke about what the staff had spoken to him about. Ian told me that all the staff had great ideas on how to positively improve the business, except Kirsten. He said to me that Kirsten thought a good way to improve the business was to remove me from it. Ian said to me that she was unnecessarily hostile in the interview. I actually thought he was joking when he told me what Kirsten had said but he said she was quite serious. Ian said she offered no other suggestions on how to improve the business, other than to remove me from it. I was very distressed to hear she thought like this.
19 As a result of what Ian told me about his meeting with Kirsten and her behaviour in the month following it, I decided to review her emails which were saved on Lloyd & Co's server to explore whether or not she was engaging in other conduct that may damage the business, consistent with Lloyd & Co's "Internet and Electronic Communication Systems Policy" (IT Policy). I conducted this review on 22 October 2014. I did this because I was concerned about the attitude she had towards the business based upon what Ian told me about their meeting.
Attached and marked "SL-3" is a true copy of the IT Policy.
20 During this review, I found information that I considered to be appalling and most distressing, destroying all confidence I had in her to function as part of the Lloyd & Co team, and breaching her employment obligations, including those under her Contract to:
(a) "serve faithfully and diligently and exercise all due care;
(b) act in the best interests of [Lloyd & Co] at all times;
(c) refrain from acting or giving the appearance of acting contrary to the best
interests of [Lloyd & Co];
(d) use [her] best endeavours to protect and promote Lloyd & Co Pty Ltd's good name and reputation; and
(e) perform [her] duties to the best of [her] abilities."”
[16] The breakdown in trust as a result of Ms Suttie’s personal hostility and disloyalty was a very serious matter in a small business of this nature. Mr Lloyd was clearly angry and felt betrayed. He obtained the advice of this human resources consultant who agreed that summary dismissal was appropriate. We are of the view that the evidence before the Commission establishes that Mr Lloyd’s beliefs were manifestly based on reasonable grounds.
[17] We agree with the submissions of the employer that having formed this view there is no significance in the failure of Mr Lloyd to undertake an additional investigation. The enquiries he made, the final trigger of written communications by Ms Suttie and the reliance he placed on matters within his direct knowledge establish that Mr Lloyd’s belief was on reasonable grounds. This is the test for the purposes of the Code. We do not consider that previous authorities establish any different test.
The “Other Dismissal” limb
[18] The Code states the following in relation to dismissals other than summary dismissals:
“Other Dismissal
In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.
The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.
The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee’s response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.”
[19] The crucial considerations under this limb are whether the employer gave the employee a valid reason why he or she was at risk of being dismissed, warned the employee of the risk of being dismissed if there is no improvement, gave the employee an opportunity to respond to the warning, and gave the employee a reasonable chance to rectify the problem.
[20] In his decision, the Commissioner made a number of findings of fact in which he believed the evidence of Ms Suttie and disbelieved the evidence of Mr Lloyd. Lloyd & Co submits that the evidence of Mr Lloyd was clear and resolute in cross-examination before the Commissioner, and that it was supported by contemporaneous typed notes of conversations or matters between he and Ms Suttie. It contends that:
[21] For these reasons, Lloyd & Co contends that it should be accepted that Mr Lloyd did warn Ms Suttie about these matters and his notes are a reliable account of these events. Therefore, in the alternative, Lloyd & Co submits that this limb of the Code is made out and Ms Suttie’s application should be dismissed.
[22] Ms Suttie submits that there is no appealable error regarding the adequacy of the Commissioner’s reasons or any other aspect of dealing with this limb.
[23] The Commissioner’s findings on this matter involve a consideration of the credibility of the witnesses and a review of the detailed written material provided by the parties in their evidence. The Commissioner clearly preferred the evidence of Ms Suttie and rejected much of the evidence of Mr Lloyd. We consider that the Commissioner’s written reasons sufficiently explained the justification for reaching his conclusions. We do not consider that there is a sufficient basis to disturb the finding of the Commissioner in this regard.
The High Income threshold
[24] Lloyd & Co also submits that Ms Suttie’s income exceeded the high income threshold, which was $133,000 per annum at the time of her dismissal. The company contends that Ms Suttie was paid a salary of $120,000 per annum plus a monthly $3,000 consulting fee as part of her annual rate of earnings. This would mean that Ms Suttie’s rate of earnings over the relevant time period was $156,000. Lloyd & Co submits that regardless of how the amount is described, it was an agreed amount that was paid monthly and was merely part of her remuneration for her work. Lloyd & Co submits that the Commission should hear and dismiss this application also, as once the relevant material was before the Commissioner he was placed in a position where there was significant uncertainty over whether there was jurisdiction to proceed.
[25] Ms Suttie submits that the high income threshold was determined at an earlier hearing before Commissioner Blair, and that no appeal has been made against that decision. She submits that revisiting this jurisdictional objection would be undesirable in these circumstances. Further Ms Suttie submits that the $3,000 per month payment was in the nature of a profit distribution relating to her shareholding.
[26] This matter is essentially a question of fact based on evidence of the nature of the $3,000 per month payment. As the matter was considered in an earlier decision of Commissioner Blair, and in the light of the conclusion we have reached above, it is unnecessary that we determine this matter.
Conclusion
[27] We have concluded that the Commissioner’s analysis of the Summary Dismissal requirements of the Small Business Fair Dismissal Code is attended by errors of an appealable nature. We have considered the evidence in the matter and concluded that the dismissal was consistent with the Code because Mr Lloyd believed on reasonable grounds that Ms Suttie’s conduct was sufficiently serious to justify immediate dismissal. We therefore allow the appeal, quash the decision of the Commissioner and dismiss Ms Suttie’s unfair dismissal application.
VICE PRESIDENT
Final written submissions:
Lloyd & Co on 7 December 2015.
Ms K. Suttie on 15 December 2015.
Lloyd & Co in reply on 21 December 2015.
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