DECISION

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

Mr Ronald Law
v
Linehan Enterprises Pty Ltd T/A Service Assist
(U2017/10776)

Application for an unfair dismissal remedy; small business employer; compliance with Small Business Fair Dismissal Code; application dismissed.

Introduction

[1] Mr Ronald Law (Applicant) has applied under s.394 of the Fair Work Act 2009 (Act) for an unfair dismissal remedy. The Applicant commenced employment with Linehan Enterprises Pty Ltd (Respondent) on 16 February 2015 1 and was employed as a full time sales consultant2 until his employment was terminated on 4 October 2017.3 The Applicant was dismissed after failing to meet his sales budget for over twelve months.

[2] The Respondent is an engineering company and markets its products predominantly to the health care industry. It custom designs and builds manual handling equipment for businesses, examples of which include motorised trollies and lifting devices. 4

[3] It is uncontroversial that the Respondent is a small business employer within the meaning of s.23 of the Act as the Respondent employed twelve employees, including the Applicant, at the time the Applicant's employment ended.  5

[4] The Respondent maintains that the application should be dismissed because the Applicant’s dismissal was consistent with the Small Business Fair Dismissal Code (Code).

[5] For the reasons which will become apparent below, I am satisfied that the Applicant’s dismissal was consistent with the Code. Accordingly, the Applicant was not unfairly dismissed within the meaning of s.385 of the Act and his application is dismissed.

Background and factual context

[6] As indicated above, the Applicant was employed as a sales consultant by the Respondent from 16 February 2015 until 4 October 2017. The Applicant’s employment was terminated by the Respondent on 4 October 2017 following a meeting between the Applicant and the Respondent’s Managing Director, Mr Ronald Linehan.

[7] The Applicant’s duties included visiting prospective clients and assessing their current manual handling procedures, creating a design to assist the client’s business, liaising with the engineering team and Mr Linehan to finalise the design and cold calling and emailing businesses directly to generate sales. 6 It is not in dispute that the Applicant and Mr Linehan were the only two people engaged in sales by the Respondent.7

[8] It is uncontroversial that the Applicant was given a sales target and was expected to generate $500,000 in sales per financial year. Mr Linehan’s evidence is that at the end of each financial quarter, there would be a brief discussion between he and the Applicant about the Applicant’s sales performance. His evidence is that the Applicant was provided with a copy of his sales figures and that he could at any time request a copy from Ms Linda Snell, the Respondent’s Office Manager. 8 The Applicant agreed that there were discussions between him and Mr Linehan about the Applicant’s sales figures.9 This is not contested.

[9] The Respondent contends that the Applicant generated approximately $380,000 in sales in his first financial year (2015/2016). 10 Mr Linehan’s evidence is that the Applicant’s figures at first were “quite promising”,11 however his evidence is that in or around June 2016 he started having concerns about the Applicant’s sales performance.12 He said that prior to his meeting with the Applicant in December 2016, he had a “couple of little chats”13 with the Applicant about his sales figures.14

[10] The Applicant’s sales for the financial year ending June 2107 were $195,487. The table below illustrates the Applicant’s sales budget for each month compared to his actual sales. 15

[11] Mr Linehan’s evidence is that in or around December 2016 before the Christmas break, he had a discussion with the Applicant in his office about the Applicant’s sales performance. In short, Mr Linehan’s evidence is that he discussed the Applicant’s lack of sales and provided the Applicant with a copy of a year to date budget compared to the sales document. His evidence is that he encouraged the Applicant to seek sale opportunities outside of the healthcare industry and that he suggested helping the Applicant by, inter alia, attending site visits with him and offering additional product training. The Applicant declined the Respondent’s offer of assistance. Mr Linehan’s evidence is that he also indicated to the Applicant that if his sale figures did not improve that he would have to let the Applicant go. 16 Mr Linehan’s evidence is that he prepared a written note of the conversation later that afternoon.17 For the purposes of the proceeding, Mr Linehan produced a typed version note of the conversation18 which was prepared from his handwritten notes and his memory of the discussion. The note prepared by Mr Linehan is extracted below:

“December 2016

Discussion Notes with Ron, December 2016- Re: Poor Sales Results

● Indicated poor sales and gave a copy of budget document which shows monthly sales budget and results. Individually listed for Ron.

● Asked what is happening and why we are not seeing many orders.

● Answer was, it's just quiet out there and the orders will come. Mentioned approx 6 orders imminent.

● I said that is was getting hard to justify his position as his costs were outweighing his results and I cannot keep running a business like that.

● I mentioned that my sales and the service side were doing well and covering for him. Explained that it is hurting the cash flow.

● Offered if there was anything that I could do to help him. Mentioned more product training, go on customer visits with him to see how he interacted with his customers, or if he wanted to come on some of mine so he could see how I interacted with my customers.

● I was told "it's not necessary, it will tum around. It's not that I don't know how to sell, it is just taking a long time to get the orders in"

● We spoke about getting out and doing some cold calling to see if he could generate more enquiries for himself, as it is important to have many quotes on the go, as the health industry can be slow getting orders through.

● I also mentioned going outside of Healthcare and calling on some of his old customers.

● I made the decision to give Ron more time to see if the cold calling would work.

● Finished the conversation telling Ron that I really needed and hoped that he could tum things around, as I need a good sales person to help me in that role.

Feedback and suggestions from Ron:

● Cold Calling

● No other ideas to improve sales” 19

[12] Ms Snell also gave evidence. Her evidence, though largely hearsay, corroborated that of Mr Linehan. 20 Her evidence is that management had discussions around what could be done to assist the Applicant to increase his sales.21 Her evidence is that the other office administrator indicated that she was happy to assist both the Applicant and Mr Linehan with appointment scheduling. Her evidence is that Mr Linehan spoke to her after his discussion with the Applicant in December 2016 and indicated that he was going to see if the Applicant’s sales improved over time.

[13] The Applicant does not dispute that a discussion took place with Mr Linehan however, his evidence is that it was not a formal meeting. 22 The Applicant’s evidence is that when Mr Linehan discussed his poor sales, he indicated that there were some “fairly large orders”23 which were not added to his sale figures. Mr Linehan’s evidence was that the Applicant did raise this issue with him and that a couple of the disputed sales were added to the Applicant’s sale figures but that the figures did not drastically change.24

[14] Both the Applicant and Mr Linehan struck me as honest individuals who gave their evidence about the meeting to the best of their recollections. It is not uncommon that recollections about detail differ, however, in the instance case, I prefer Mr Linehan’s evidence about the critical details of the discussion in or about December 2016 for the following reasons. First, Mr Linehan made notes about the discussion which were later reproduced in typed form for the purposes of this proceeding and which are consistent with the evidence he gave. Secondly, given the undisputed state of the Applicant’s sales performance as at December 2016, it is more likely that a discussion of the kind about which Mr Linehan gave evidence would have occurred than not.

[15] Thirdly, the Applicant agreed that discussions about his sales performance had occurred, but that he did not regard it as a “formal meeting”. This suggests to me that the Applicant’s view as to the formality of the discussion may have affected the Applicant’s processing of the message being communicated by Mr Linehan, and thus months later when giving evidence, his recollection of the detail of the discussion. Fourthly, Mr Linehan held conversations with Ms Snell both before and after the December 2016 discussions with the Applicant during which he told Ms Snell what he was going to say and what he did say to the Applicant which was largely consistent with his evidence about his discussion with the Applicant in or about December 2016. Though not evidence of what he had said to the Applicant, that Mr Linehan told Ms Snell before the December discussions what he was going to say to the Applicant and that afterward in a debrief with Ms Snell, what he had said to the Applicant, renders it more likely that he actually said those things to the Applicant than not.

[16] I therefore accept Mr Linehan’s evidence about his discussions with the Applicant that occurred in or around December 2016. Specifically, I accept that during the discussion, Mr Linehan told the Applicant that if the Applicant’s sales performance did not improve, Mr Linehan would have to “let him go”.

[17] Mr Linehan’s evidence is that after the December 2016 discussion, he had informal discussions with the Applicant at the end of every quarter about the Applicant’s sales. 25

[18] At the end of the 2016/2017 financial year, Mr Linehan called the Applicant into his office to discuss with the Applicant the results for the financial year. 26 Mr Linehan’s evidence is that the discussion, which was held in or around July 2017, was similar to that held in December 2016. His evidence is that he gave a copy of the budget compared to sales document (details of which have been earlier reproduced) to the Applicant and explained that his sales had decreased 45% from the previous financial year. Mr Linehan’s evidence is that he explained his concerns to the Applicant and that the Applicant reassured him that there were sales coming. Mr Linehan’s evidence is that the Applicant suggested reducing his hours to part time but that Mr Linehan rejected the suggestion because he required a full-time sales consultant in order to generate sales.27 Mr Linehan’s evidence is that he again encouraged the Applicant to seek opportunities outside of the healthcare industry and further encouraged the Applicant to seek sales from country areas or interstate.28 His evidence is that he iterated that if sales had not improved “I am going to have to make a decision real quick here very soon if I don’t see things turn around, because I just can’t keep, you know, haemorrhaging money”.29 His evidence is that he was prepared to give the Applicant another quarter to see if his sales would improve. Mr Linehan also prepared a written note of the conversation later that afternoon. For the purposes of the proceeding, Mr Linehan produced a typed version note of the conversation which was prepared from his handwritten notes and his memory of the discussion.30 The note prepared by Mr Linehan is extracted below:

“Discussion Notes with Ron, July 2017 - Re: Sales results from EOFY and concerns with results

● Called Ron into my office to show him final results from 2016/2017 fin year

● Gave a copy of results which show his results separately from overall company, this also includes next year's budget set out per months.

● Results show a 45% decrease in sales from Ron over the year from previous year. (only 39% of budget achieved)

● Ron mentioned that some of the phone calls coming into the office were not being passed to him, and that he should have those sales on his figures as well.

● I said that most of those sales were from our mail outs and for the basic stuff that

● the office staff have authority to do a quick quote and get the order. I wanted him to be doing the more complex larger items that require a rep to handle.

● I again said it was getting very difficult to keep him in his position and that I might have to let him go if things don't improve.

● He again assured me that he had some good orders coming.

● I asked why he was not getting many enquiries from his cold calling, as no phone calls were coming in asking for Ron.

● He again said he believed the office staff were taking them. I assured him that I had instructed the office staff to send all non standard and complex enquiries to the sales staff (Paul and Ron)

● I mentioned if he had tried looking outside health care, as his previous experience was in general industry. I thought he might have been able to call on some of his old customers.

● I mentioned getting a bit out of Melbourne and into the country areas and interstate, as we sell nationwide. (As we have always serviced our country customers)

● I again asked if he needed any help with products or visits, and he again declined.

● I again reinforced the need for his sales to improve or I will have to make the hard decision on him.

I decided to give him one more quarter to see if anything came from the last 6 months of cold calling and some country trips.

Suggestions from Ron:

● None that were not already suggested by me.” 31

[19] Ms Snell’s evidence is that Mr Linehan had discussions with her prior to the July 2017 meeting. 32 Her evidence is that Mr Linehan had indicated that he was going to let the Applicant go as he had already given the Applicant the benefit of the doubt for two quarters. Her evidence is that after the meeting, Mr Linehan told her that he was going to give the Applicant another quarter to improve his sales performance. Her evidence is that Mr Linehan told her that he said to the Applicant words to the effect that he could not afford to keep the Applicant and that the outcome would be to let the Applicant go.33

[20] The Applicant says that he was never warned that he was at risk of losing his job. Further, he says that he was not provided with any verbal or written warnings. 34 The Applicant cross-examined Mr Linehan about his evidence as follows:

“MR LAW:  Paul, I would like to say why didn't you ever tell me that – and why wasn't I informed that you were going to let me go, because if you had said those words then I think you know me, that I wouldn't have still been around?---I did say those words.  I said, "Ron, if things don't improve I'm going to have to make some hard decisions and let you go."  As far as the time frames – and that is the evidence I gave – as far as the time frames that Ms Snell and I spoke about, they were, "Let's have a look again in three months, let's have a look again at the end of the quarter."  They weren't hard-and-fast decisions.  They were, "Let's have a look at it."  Now, it was quite obvious that I didn't make hard-and-fast decisions because if I had have said at the end of the next quarter, "If he hasn't improved his sales, I'll let him go",  I would have said that to you as well, if I had made my decision.  I hadn't made a decision so therefore I warned you that your job was in jeopardy if the figures didn't improve and that was discussed and you acknowledged that and one of your comments to that was, "I don't want to be a burden to the company."  So I believe you were quite aware of that situation and the figures pretty much should have told you that you would have been aware of that situation.

Isn't it true that these – we'll call them meetings – took place as I was leaving work?---They would take place in the afternoon.  As I stated in my first evidence I always like to do them later in the afternoon when the majority of the staff had left the building to insure us more privacy because I had delicate matters to talk about.  The fact that you chose to leave at 4 o'clock on the dot every day made it difficult to fit it in at any other time.  So that's when those discussions took place.

So you're saying you actually arranged a meeting with me.  What I'm saying is you never arranged any meetings.  It was just that as I was leaving work, already being hammering for 11 hours, and not expecting any discussion on anything to do with sales that my recollection is that you just started talking to me in your doorway as I was leaving work?---So the question I would always ask you, "Hey, Ron, you got time for a chat?"  It was generally before you were leaving.  Sometimes it was as you were leaving.  You say, "Yes, sure."  Now, if you had no time for the chat or wanted to set a formal time for the chat you could have done that at that stage.  I dispute your 11 hours because that would mean you would be starting work at 5 am and no hospital is open at 5 am for people to come and see a rep.  You never told me what time you start work.  I let you leave at 4 o'clock every day because I believed you were starting earlier.  But 11 hours, I think, might be stretching it there.  I can't attest to that completely.  But, yes, those talks were – tried to be relatively informal but discussing a fairly serious issue because I didn't want to work you up.  I just thought, "We've got to have a chat about your figures, Ron."  We had a chat and in those chats, which were clearly marked and clearly spoken about, I did warn you that if those figures don't improve I would have to let you go because I can't sustain that as a small business.” 35

[21] As is apparent from the above, Mr Linehan’s evidence under cross examination remained consistent. For substantially the same reasons I have earlier given, I prefer Mr Linehan’s evidence about the discussion he had with the Applicant in or about July 2017. I therefore accept Mr Linehan’s evidence that during the discussion with the Applicant in or around July 2017, he told the Applicant, or made it known to him, that his sales performance needed to improve and that if it did not, he would need to make hard decision “about the Applicant”.

[22] Mr Linehan’s evidence is that in September 2017 after looking at the Applicant’s sales figures, he had made a decision to terminate the Applicant’s employment. 36

[23] On 4 October 2017, Mr Linehan had a meeting with the Applicant and indicated that he could no longer employ the Applicant as his sales figures were not improving. 37 His evidence about the meeting was as follows:

“Okay, and what did you say to Mr Law?---I basically called Ron in and just said, "Look, mate, the figures aren't improving.  I'm going to have to let you go.  I can't sustain it anymore.  It's putting a real strain on the company."  I referred to the small business dismissal code to make sure I was doing everything right, because I didn't want to go through this stuff.  No one does.  But I also wanted to be fair to Ron as well and do it the right way and pay him out all his entitlements.  I didn't think it was worth hanging around for notice and all that sort of stuff because I'd made a decision.  I said, "Look, happy to finish you up on Friday.  You could actually get an extra week of pay because of that."  So, I made a financial sacrifice to do that as well.  I didn't have to.  I could have kept him on for his two weeks and he just go his two weeks but I gave him the extra week to, you know, just cut it and be done because I needed to move on.

Yes, all right.  All right, Mr Linehan, is there anything else you want to say at this stage as part of your evidence before I allow Mr Law to ask you some questions?---Not specifically – the day that Ron finished on the Friday, his last words to me were, you know, "Wishing you all the best, is there anything you need, any help you need, give me a call."  I thought we left on good terms.  We had a great discussion on the Friday during the day about the things he thought I could do better as a businessman.  I'm a young businessman, there were things he thought we should do better.  It was a pretty frank discussion, he gave me some pretty good home truths and I took those on board.  We didn't raise our voices or anything like that.  I thought that was a good conversation to have and to finish on and I'd take a few of those things on board.  Some things I can't because of the nature of our business and how we work and how I work.  It's my business, I sort of do things how I think are right.  Yes, when he left he said, "Anything you need", and then one of the words he said to me was, "I don't want to be a burden on the company so I understand."  Then to receive notification of this on the following Monday was a real blow.  It hit me hard.” 38

[24] The Applicant maintains that the Respondent did not give him a warning and that he has not received a warning in his working career. His evidence is that had the Respondent warned him, he would have either resigned or started looking for another position. 39

[25] Further, the Applicant’s evidence is that his sales figures were as a result of “extraordinary conditions” under which he was employed. 40 He says that over the last twelve months of his employment he was given no enquiries or leads from within the company.41 Mr Linehan’s evidence is that if the Applicant was consistently generating sales around $400,000 he would have retained the Applicant given the nature of the business and because it is an expensive and very labour intensive company to run.42

[26] I accept the evidence of the Applicant that he worked hard in a difficult environment however, as it will become apparent below, Mr Linehan was able to generate sales in excess of the Applicant’s budget working under the same conditions whilst also managing the company.

[27] The Applicant also contends that the hospitals which had been previously engaged by the Respondent were having a lot of budgetary issues with the State Government and Federal Government. 43 This is not in dispute, however, Mr Linehan’s evidence is that the Respondent’s business was not, or need not be, confined to the healthcare industry and says that he encouraged the Applicant to explore opportunities outside the healthcare industry.44 Mr Linehan’s evidence is that under the same circumstances he was able to generate $1.2 million dollars in sales as well as run the company.45 I accept this evidence.

[28] The Applicant also contends that the Respondent won a large contract with the Reserve Bank in relation to the new notes and that this affected the Respondent’s capacity to take on any new work. 46 The Applicant did not lead any evidence suggesting how this fact affected his sales performance.

[29] The Applicant’s evidence is that there are only so many times you can pester someone before they say “I know what to do, I’ve got your details, I will contact you when I need something. I just don’t need anything at the moment”. 47 The Applicant says that he was willing to reduce his hours given that his sales performance had decreased.48

[30] The Applicant accepts that his lack of sales was uneconomic for the Respondent and says in light of that he offered to work reduced hours. 49 The Applicant says that the Respondent should have accepted his reduced hours offer instead of terminating his employment. He contends that the Respondent could have taken on board his suggestions to increase sales by spending money on advertising and marketing costs. Mr Linehan’s evidence is that the Respondent could not implement the Applicant’s suggestions because it could not afford the costs associated with them.50

[31] The Applicant submits that the Respondent did not comply with the Code. His contention was as follows:

“MR LAW:  Well, I definitely don't think that Paul did abide by the Code.  I don't think that there were the necessary discussions and necessary warnings and I don't think I was put in a position where I could justify my existence by getting the sales and, yes, really that's it.  I just don't think I was warned.  There was no official organised meetings.  Any talking from Paul was sort of late in the day.  I wasn't prepared to discuss the things so most of the time he talked and I listened, and sometimes it didn't make sense and I didn't really have a lot of response, because I was in the situation where I could only work as hard as I could work.  So I had the ability and I was working the hours.  That's all I can say.” 51

Consideration

[32] Section 385 of the Act of the Act sets out that which is an unfair dismissal as follows:

“What is an unfair dismissal

A person has been unfairly dismissed if the FWC is satisfied that:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

(d) the dismissal was not a case of genuine redundancy.

Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.”

[33] Section 396 of the Act requires that certain matters must be determined by the Commission in relation to any unfair dismissal remedy application before the merits of the application may be considered. Section 396 of the Act provides the following:

“396  Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);
(b) whether the person was protected from unfair dismissal;
(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;
(d) whether the dismissal was a case of genuine redundancy.”

[34] In respect of the matters identified above in paragraphs (a), (b) and (d) of s.396, it was not in dispute and I find that:

1. the application was made within the 21-day period required in s.394(2)(a);

2. the Applicant was a person “protected from unfair dismissal” within the meaning of that expression in s.382 at the time of his dismissal by the Respondent; and

3. the dismissal was not a case of “genuine redundancy” as that expression is defined in s.389.

[35] In respect of s.396(c) of the Act, as indicated above it is not in dispute that the Respondent was at the time of the Applicant’s dismissal a “small business employer” within the meaning of s.23 of the Act. Mr Linehan gave evidence that his business had twelve employees at the time of the dismissal. 52 The issue of compliance with the Code therefore requires consideration.

[36] The Respondent contends that the dismissal of the Applicant was consistent with the provisions of the Code. He says that the Applicant was verbally warned on several occasions that if his sales performance did not improve, the Respondent would have to let him go. The Applicant disputes that the Respondent complied with the Code and submits that his dismissal from the Respondent was unfair.

[37] I turn then to consider whether the Applicant’s dismissal was consistent with the Code.

[38] Section 388(2) of the Act sets out the circumstances in which a person’s dismissal was consistent with the code as follows:

“388 The Small Business Fair Dismissal Code
…
(2) A person’s dismissal was consistent with the Small Business Fair Dismissal Code if:

(a) immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happened first), the person’s employer was a small business employer; and
(b) the employer complied with the Small Business Fair Dismissal Code in relation to the dismissal.”

[39] As earlier indicated, there is no dispute that the Respondent was at the relevant time a small business employer. The issue that therefore arises for consideration is whether the Respondent complied with the Code in relation to the Applicant’s dismissal.

[40] The dismissal was not a summary dismissal and hence the relevant section of the Code against which compliance is to be assessed is as follows:

“…

Other dismissal

In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.
The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.
The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee’s response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.
Procedural matters
In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.
A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.”

[41] The Applicant’s dismissal is that which relates to his capacity or conduct and so it is the “other dismissal” described above which concerns this application.

[42] As is apparent from the above, there are a number of elements to compliance with the Code in relation to a dismissal based on an employee’s conduct or capacity.

[43] First, the employer must give the employee a reason why he or she is at risk of being dismissed. Secondly, that reason must be a valid reason based on the employee’s conduct or capacity to do the job. Thirdly, the employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement. Fourthly, the employer must provide the employee with an opportunity to respond to the warning. Fifthly, the employer must give the employee a reasonable chance to rectify the problem, having regard to the employee’s response. Sixthly, in discussions with an employee where dismissal is possible, the employee may have another person present to assist the employee.

[44] As to the first matter, it is clear on the evidence that I have earlier accepted that Mr Linehan told the Applicant during discussions in or about December 2016 and again in or about July 2017, that the Applicant was not meeting agreed sales targets and that if he did not improve his sales performance that the Respondent “may need to let him go” or words to that effect. The “reason” given by the Respondent to the Applicant why he was at risk of being dismissed was the Applicant’s failure to achieve agreed sales targets. I am therefore satisfied on the evidence that the Respondent gave the Applicant a reason why he was at risk of being dismissed.

[45] As to the second matter, it was not controversial that at the commencement of the Applicant’s employment with the Respondent, the Applicant was advised of the sales targets that he was required to meet. It is also not controversial that in the first period of employment, though the Applicant did not meet sales targets, he performed well as against the budget set for him. It is also not controversial that for the financial year ended 30 June 2017, the Applicant did not meet his sales budget, indeed his sales performance was substantially short of his budget ($195,487 in actual sales compared to a budget of $500,000). It is also not in dispute that in each of the months of July, August and September 2017, the Applicant’s actual sales figures fell well short of budget ($40,096 in actual sales compared to the budget for the three months of $114,000). There is no suggestion that the budget established for the Applicant at the outset of the employment was unreasonable or that the Applicant did not possess the necessary sales skills and experience to carry out his duties with the Respondent.

[46] A valid reason in the context of a valid reason for dismissal as set out s.387(a) of the Act is one that is sound, defensible or well-founded. 53 There is no reason to suppose, nor was it suggested, that the reference to “valid reason” in the Code should carry meaning that is different to that which has been ascribed to that phrase in s.387(a) of the Act.

[47] The Applicant’s job with the Respondent was essentially to generate sales activity for the products produced by the Respondent. In order to assess the Applicant’s capacity to carry out his job and to make economic sense of the Applicant’s employment, a sales budget was established. The Applicant’s performance was to be measured against the sales budget. The Respondent rightly expected the Applicant to meet the sales budget that had been established. It was satisfied with his performance against the budget in the first year of the Applicant’s employment. Thereafter, the Applicant failed to meet his budget, and as the figures discussed above reveal, failed by a long way.

[48] As previously mentioned, “the reason” the Applicant was given for him being at risk of dismissal was his failure to meet the sales budget. It seems to me that an employer that engages a person to deliver sales of its product has a valid reason, that is, one that is sound, defensible or well-founded, when it tells an employee in effect that the consistent and continued failure to meet the sales budget puts the employee at risk of being dismissed. That is precisely what happened in this case. I am therefore satisfied that the reason given by the Respondent to the Applicant as to why he was at risk of being dismissed was a valid reason based on the Applicant’s capacity to do the job.

[49] Turning next to the question of whether a warning that the Applicant risks being dismissed if there is no improvement was given. As is evident from the text of the Code, though preferable that an employee be warned in writing, the requirement that an employee be warned that he or she may be dismissed if there is no improvement may be given verbally.

[50] It seems to me contextually, that an employee is warned that he or she risks being dismissed if there is no improvement, if the employee is told, cautioned or alerted to the real possibility that he or she risks being dismissed if there is no improvement. In the present context, the improvement required of the Applicant was an improvement in the Applicant’s sales performance. On the basis of the evidence that I have accepted earlier in this decision, it seems to me clear that the Respondent alerted the Applicant during the discussion in about December 2016 that if there was not an improvement in the Applicant’s sales performance, the Respondent may “have to let him go” and again during the discussion in or about July 2017 that if the Applicant’s sales did not improve, the Respondent “will have to make the hard decision on him”. Whilst in neither discussion did the Respondent use the word “dismissed” or “dismissal”, it seems to me plain, and I consider it ought to have been plain to the Applicant, that the Respondent was alerting the Applicant to the risk of being dismissed if his sales performance did not improve.

[51] The Applicant maintained that he did not receive any written warning or otherwise. However, when one examines the Applicant’s evidence in context, he seems really to be quarrelling with the formality (or lack thereof) surrounding the discussions during which the Respondent says the warnings were communicated. I do not accept that the Code requires any particular formality in the way in which, or in the circumstances under which a relevant warning of the risk of dismissal is communicated. I consider this to be so for the following reasons. First, and self-evidently from the text of the Code, there is no requirement that the warning be communicated in writing. Secondly, there is no requirement of any particular formality surrounding the giving of the warning. Thirdly, there does not appear to me to be any requirement that the warning be disciplinary in nature. A warning may be disciplinary, but it may also simply be cautionary or part of a genuine desire by an employer to encourage improvement in performance rather than a precursor to actual dismissal. Fourthly, to read into the Code some additional requirement for particular formality in the giving of a warning in the context of the Code would be undermined of its evident intention and purpose by adding unnecessary complexity to an instrument which is designed to reduce the imposition of technical requirements on small business employers in effecting a fair dismissal.

[52] In my view that which is required by the “employee must be warned” component of the Code is that the employee be told in clear terms that there is a risk of the employee being dismissed if there is no improvement. I am satisfied that the Respondent so warned the Applicant. It did so during the discussions with the Applicant and Mr Linehan in about December 2016 and in about July 2017.

[53] It is evident from the notes of the discussions in about December 2016 and in about July 2017 prepared by Mr Linehan, that the Respondent provided the Applicant with both an opportunity to respond and with a reasonable chance to rectify or improve the Applicant’s sales performance. Moreover it is plain from the evidence of Mr Linehan, which I accept, that the Applicant was offered additional assistance from Mr Linehan and additional product training. The Applicant declined the offer of further assistance.

[54] As earlier indicated, Mr Linehan met with the Applicant on 4 October 2017 and at this meeting he told the Applicant that he could no longer employ the Applicant because his sales figures were not improving. As set out in the Code, the Applicant was entitled to have another person present during this meeting to assist him. The Code does not mandate that this be the case, nor does it require an employer to alert an employee to this right. This may be a flaw in the Code. Be that as it may, there is no suggestion that the Applicant sought assistance or that the Respondent refused any request by the Applicant to be assisted by another person during the meeting.

[55] In the circumstances set out above it seems to me on the evidence that the Respondent complied with the Code in relation to the Applicant’s dismissal. As a consequence, the Applicant has not been unfairly dismissed within the meaning of s.385 of the Act.

[56] It follows that the application for an unfair dismissal remedy must be dismissed. An order dismissing the application is separately issued.

DEPUTY PRESIDENT

Appearances:

Mr R Law, on his own behalf.

Mr P Linehan, on behalf of the Respondent.

Hearing details:

2017.

Melbourne.

16 December.

 1   Transcript PN49, Exhibit 5

 2   Exhibit 2

 3   Transcript PN167 – PN169

 4   Transcript PN76

 5   Transcript PN80 – PN82, Exhibit 1 at [4]

 6   Transcript PN83

 7   Transcript PN153

 8   Transcript PN122

 9   Transcript PN361

 10   Transcript PN127

 11   Transcript PN125

 12   Transcript PN128 – PN129

 13   Transcript PN129

 14   Ibid

 15   Exhibit 10

 16   Transcript PN134 – PN138

 17   Transcript PN139 – PN150

 18   Exhibit 3

 19   Ibid

 20   Transcript PN270 – PN281

 21   Transcript PN279

 22   Transcript PN183 – PN189

 23   Transcript PN191

 24   Transcript PN194

 25   Transcript PN158

 26   Exhibit 4, PN159

 27   Transcript PN159

 28   Exhibit 4

 29   Transcript PN160

 30   Exhibit 4

 31   Ibid

 32   Transcript PN283

 33   Transcript PN286 – PN290

 34   Transcript PN361

 35   Transcript PN334 – PN336

 36   Transcript PN163 – PN166

 37   Transcript PN167

 38   Transcript PN169 – PN170

 39   Transcript PN175 and PN468

 40   Exhibit 11 at [1]

 41   Ibid

 42   Transcript PN221

 43   Transcript PN224

 44   Transcript PN232

 45   Ibid

 46   Transcript PN219

 47   Transcript PN224

 48   Transcript PN225

 49   Transcript PN367 – PN368

 50   Transcript PN414

 51   Transcript PN464

 52   Transcript PN80 – PN82

 53   Selvachandran v Peterson Plastics Pty Ltd (1995) 62 IR 371 at 373

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