[2018] FWC 6042
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
Section 394 - Application for unfair dismissal remedy

Mr Michael Constable
v
4WD Accessory Wholesale Pty Ltd T/A Caddy Adelaide
(U2018/5785)

DEPUTY PRESIDENT ANDERSON

ADELAIDE, 3 OCTOBER 2018

Application for an unfair dismissal remedy – whether employee dismissed – alleged repudiation by employer – section 386 Fair Work Act 2009 – alleged changes to contract of employment – meaning of termination “on the employer’s initiative” – meaning of “forced” resignation – employee dismissed by forced resignation – no valid reason – dismissal harsh, unjust and unreasonable – reinstatement inappropriate – compensation ordered

[1] Mr Michael Constable (the applicant) has applied to the Fair Work Commission (the Commission) under section 394 of the Fair Work Act 2009 (the FW Act) for an unfair dismissal remedy in relation to his (alleged) dismissal by 4WD Accessory Wholesale Pty Ltd trading as Caddy Adelaide (4WD Accessory Wholesale or ‘the employer’). He claims to have been unfairly dismissed on 25 May 2018. At the date of dismissal he was employed as a Sales Manager.

[2] 4WD Accessory Wholesale oppose the application and raise two jurisdictional issues.

[3] 4WD Accessory Wholesale says that Mr Constable could not have been unfairly dismissed because he was not dismissed. It says that Mr Constable ended his employment with 4WD Accessory Wholesale by action he took on 19 May 2018.

[4] 4WD Accessory Wholesale also says that the remedy of compensation sought cannot be granted as it concerns compensation for an alleged workplace injury.

[5] In response, Mr Constable says that 4WD Accessory Wholesale repudiated his contract of employment and that its conduct was a dismissal within the meaning of section 386(1)(a) of the FW Act. In the alternative, he says that if his conduct brought his employment to an end, he was forced to resign within the meaning of section 386(1)(b) of the FW Act. He seeks compensation. He says that there is no jurisdictional barrier to an award of compensation.

[6] On 3 July 2018 conciliation of the application was conducted by a Commission-appointed conciliator. It was not resolved. It was referred to me for hearing and determination.

[7] On 24 July 2018 I conducted a directions hearing. I issued directions on 25 July. I directed that the hearing deal with all issues in dispute, being the jurisdictional issues as well as merits and remedy.

[8] At the directions hearing the employer foreshadowed that it would seek to be represented by a legal practitioner. Mr Constable foreshadowed that he would be self-represented and opposed such a request. I granted permission for 4WD Accessory Wholesale to be represented up to and including 21 August 2018 but indicated that I would determine the issue of representation beyond that date after receiving further written submissions.

[9] At the directions hearing Mr Constable foreshadowed that he would seek determination by conference. 4WD Accessory Wholesale foreshadowed that it would seek determination by a formal hearing in a courtroom.

[10] The parties were directed to file written materials, including on these contested preliminary issues. Each did so. By decision dated 23 August 2018 1 I granted permission for 4WD Accessory Wholesale to be represented by a legal practitioner, on conditions. I also decided to hear the matter by determinative conference.

[11] It is noted that in its response to the application, 4WD Accessory Wholesale asserted that it was a small business employer. Mr Constable foreshadowed that this issue may be contested. At the directions hearing I drew the parties’ attention to the associated entities provisions of the FW Act. 2 In its written submissions of 21 August 2018 the employer submitted that it is not a small business employer having regard to employees of an associated entity.3 Accordingly, that matter does not require determination.

[12] I heard the matter by conference on 4 and 5 September 2018. Mr Constable was self-represented but assisted by a support person Mr Weeks. 4WD Accessory Wholesale was represented by Mr Healy of counsel and an instructing solicitor Mr Abbott. An audio file was taken of proceedings. Consistent with my decision of 23 August 2018 and my statutory obligation as an independent decision-maker, at the hearing I took steps to satisfy myself that Mr Constable understood each stage of proceedings, was able to advance his case and test the evidence of the employer. I asked more questions, and in some instances more probing questions, of employer witnesses than I might otherwise have done, whilst leaving the conduct of the respective cases to the parties.

[13] At the conclusion of the hearing I reserved my decision.

[14] I received oral and documentary evidence from both parties. Certain evidence, particularly sales data 4, is subject to confidentiality orders I made during the hearing.

[15] Mr Constable gave evidence in his own right. 4WD Accessory Wholesale called four witnesses: Mr Italo Formato (owner and sole director), Mrs Gisella Formato (Mr Formato’s wife and Payroll Administrator), Mr Alan Petherick (Business Manager) and Ms Sharaze Pentland (external Human Resources Consultant).

[16] Disputes of fact arose on the evidence. Some are material to the determination of this matter, particularly discussions between Mr Constable and both Mr Formato and Ms Pentland in the months preceding the alleged dismissal. Issues of credit are relevant. In this matter the demeanour of witnesses, the tone and manner of giving evidence, the consistency (or otherwise) between oral evidence and witness statements, the existence (or otherwise) of corroborating documentary evidence, and the inherent plausibility of versions are all relevant to my findings of fact.

[17] Mr Constable gave his evidence openly and with assurance. He displayed good and clear recall. He was an impressive witness. He placed very little gloss on his evidence and was willing to readily concede ground in cross examination or in answer to questions from myself if a proposition matched his recollection. Where he contested a proposition his evidence was firm and remained consistent.

[18] Mr Formato gave evidence in a business-like manner albeit with a degree of intensity. Although he claimed to have clear recall, he was imprecise on some detail and inconsistent in some areas. Although reliable in many respects, aspects of his evidence, and particularly certain of his denials, were more in the nature of reconstruction than recall.

[19] Mrs Formato’s evidence was of limited scope. While generally reliable, there was a degree of gloss in her evidence particularly about the allegedly welcoming approach she took to employees making workers compensation claims.

[20] Mr Petherick was a generally reliable witness, though appeared careful to avoid direct evidence that could cast Mr Formato in a poor light.

[21] Ms Pentland’s evidence strayed into the conversational and generality. Responses to some specific questions veered into lengthy discourse. She was keen to advance the employer’s case through her evidence beyond simply recounting facts.

[22] Where there is inconsistency in the evidence, unless I specifically find otherwise, I prefer the evidence of Mr Constable over the evidence of both Mr Formato and Ms Pentland.

[23] Some of the evidence before me strayed from factual matters into hearsay, opinion, assumption and commentary. I place reduced levels of weight on such evidence except where corroborated by direct evidence, is uncontested or inherently believable. I am not bound by the rules of evidence but consider them to be a good and useful general guide. I adopt the approach of a full bench of this Commission which has said:

“The Commission is obliged by statute to perform its functions in a manner that is fair and just pursuant to s. 577(a) of the Act. Although it is not bound by the rules of evidence and procedure, the Commission tends to follow the rules of evidence as a general guide to good procedure. However, that which is ultimately required is judicial fairness, and that which is fair in a given situation depends on the circumstances.” 5

The Facts

[24] I make the following findings based on the aforementioned considerations according to the relevant subject matter and all the evidence and material before me.

Contract of employment

[25] Mr Italo Formato owns and operates two related businesses, a wholesale business (4WD Accessory Wholesale Pty Ltd) and a retail business (Gumtop Pty Ltd trading as TJM Products).

[26] 4WD Accessory Wholesale wholesales, installs and supplies four wheel drive accessories and commercial vehicle equipment. TJM Products installs and supplies to the public four wheel drive accessories and camping equipment. 4WD Accessory Wholesale also wholesales products to the TJM retail arm and to other (external) customers. Although distinct companies, 4WD Accessory Wholesale and TJM Products operate from adjoining premises in suburban Adelaide (Nailsworth).

[27] Mr Michael Constable is 54 years of age.

[28] In 2015 4WD Accessory Wholesale was a relatively new business. It employed one sales person who was underperforming. Mr Formato decided to employ an experienced full time sales manager to manage the sales and projected growth of 4WD Accessory Wholesale and to deal with the underperforming employee. He recruited Mr Constable. Mr Constable had been working in the industry. He negotiated a contract directly with Mr Formato.

[29] A letter of offer dated 25 September 2015 was put to Mr Constable by a Mr Craig Stafford who was both General Manager of 4WD Accessory Wholesale and TJM Products. The contact was signed by Mr Constable. It is Exhibit A6 in these proceedings. 6

[30] Until the date Mr Constable’s employment ceased, he continued to be employed under the 25 September 2015 contract. He entered into no new contract, written or oral except that:

[31] Mr Constable’s contract of 25 September 2015 provided that his employment was governed by the terms of the Vehicle Industry Repair, Service and Retail Award 2010 “where not otherwise covered specifically in this letter of offer”. 7

[32] After giving eight weeks’ notice to his former employer, Mr Constable commenced work as Sales Manager of 4WD Accessory Wholesale on 30 November 2015.

[33] Mr Constable’s contracted remuneration was:

[34] After Mr Constable entered into his contract of employment, but two weeks before commencing, 4WD Accessory Wholesale purchased the rights to sell “Caddy” products. During the course of Mr Constable’s employment, the sale of Caddy products came to be a substantial portion (approximately 50%) of sales. The business came to trade as “Caddy Adelaide”.

[35] Mr Constable was manager in charge of the day-to-day operations of 4WD Accessory Wholesale. All persons employed by the employer reported to him. Initially this was two persons; an underperforming sales manager and an installer of Caddy products. Over time, a second installer was employed.

[36] Contractually, Mr Constable reported to persons employed by TJM Products being Mr Stafford and Mrs Gisella Formato. However, in practice, Mr Constable regularly reported to Mr Formato, who was a ‘hands-on’ business owner.

Commission payments

[37] In 2016 an issue arose concerning whether Mr Constable should receive commission on ‘internal’ sales of products from 4WD Accessory Wholesale to TJM Products. No dispute arose. Mr Constable agreed with Mr Formato that commission would not be payable to him on these internal sales.

[38] In August 2017 4WD Accessory Wholesale purchased the rights to sell “Hayman Reece” tow-bar products.

[39] The sale of Caddy products and the subsequent sale of Hayman Reece products contributed to substantial growth in sales volume of 4WD Accessory Wholesale. These were not the only products sold by the business, but came to be the two largest single contributors to sales. Mr Constable received 1% commission on sales of all products sold by 4WD Accessory Wholesale (except internal sales) including Caddy products and Hayman Reece products.

[40] From the time he was first employed (November 2015) until the date his employment ceased (May 2018) Mr Constable received no increase in base salary. However, as sales increased (from a low base) his remuneration increased on account of the 1% commission payable. The average monthly commission payments received by Mr Constable were as follows: 8

Proposed new contracts of employment

[41] Ms Pentland is an external human resources consultant who during the course of Mr Constable’s employment provided human resources services to the employer. In mid-2016 Mr Formato engaged Ms Pentland to review and “update” 9 employment contracts for staff employed by 4WD Accessory Wholesale (and TJM Products).

[42] In about September 2016 Mr Constable was sent a new written contract of employment. 10 He was asked to consider it and then accept and sign it. He chose not to.

[43] In November 2016 Mr Constable was again sent a new written contract of employment. 11 He was asked to consider it and then accept and sign it. He chose not to.

[44] In January 2017 Mr Constable was again sent a new written contract of employment. In a face-to-face meeting with Mr Formato and Ms Pentland he was asked to consider it and then accept and sign it. 12 He chose not to. He explained his areas of concern in the weeks that followed.13

[45] In February 2017 an amended new written contract of employment was sent to Mr Constable. 14 He was asked to consider it and then accept and sign it. The amendments did not satisfy his concerns. He chose not to sign it.

[46] Each of the new contracts of September 2016, November 2016, January 2017 and February 2017 proposed new terms and conditions governing his employment. They also included a proposed job description. Mr Constable was concerned with certain of the new proposed conditions of employment particularly relating to restraint of trade, consumption of drugs and alcohol, and tattoos.

[47] Mr Constable’s concern with the proposed new contracts became marked with the January 2017 and February 2017 proposals. Both proposed a change in remuneration, particularly commission payments:

[48] Unable to resolve his concerns, on 8 March 2017 Mr Constable gave Mr Formato six weeks’ notice of resignation. Approximately one month later (and two weeks prior to his resignation taking effect) Mr Constable and Mr Formato agreed that Mr Constable would withdraw his resignation and continue to be employed on his September 2015 contract.

[49] In November 2017 Mr Constable sustained an umbilical hernia whilst lifting tow-bars. He reported the incident. Mr Constable freely chose not to make a WorkCover claim. He was neither dissuaded nor encouraged from doing so.

[50] In January 2018 Mr Formato decided to make changes to 4WD Accessory Wholesale. These included separating the sale of Caddy products from the sale of other products. He remained dissatisfied with Mr Constable’s commission arrangements that he had unsuccessfully sought to change the year prior. He was particularly unhappy that Mr Constable was receiving commission on the sale of Hayman Reece products. He considered that he (Mr Formato) was responsible for the 2017 distribution agreement with Hayman Reece, that these products were sold without requiring particular effort by his Sales Manager and that Mr Constable was undeservingly receiving commission on those sales due to his September 2015 employment contract.

[51] On 7 February 2018 Mr Constable met Mr Formato to discuss sales. I prefer Mr Constable’s version of this meeting 15. Over thirty minutes Mr Formato became angry and made mention of a sales downturn and unjust commission payments to Mr Constable. He swore disrespectfully at Mr Constable. He told Mr Constable that he should not be receiving commission payments on Hayman Reece products. He told Mr Constable that it “feels like stealing from me” when paying him commission. When Mr Constable raised the issue of his hernia, Mr Formato said words to the effect “so I suppose you want me to fucking pay for that too”. Mr Stafford was brought into the meeting by Mr Formato to discuss the sales downturn. Mr Formato’s abusive language did not wane despite the presence of Mr Stafford.

[52] Mr Constable knew Mr Formato to be fiery but took exception to the suggestion that he was “stealing” from his employer by maintaining his contractual claim to commission on the Hayman Reece products.

[53] On 7 March 2018, unknown to Mr Constable, Mr Formato interviewed a Mr Alan Petherick as a possible employee in a yet to be determined managerial role in either 4WD Accessory Wholesale or TJM Products. 16

[54] On 19 March 2018 Mr Constable was summonsed to Mr Formato’s office. Unexpectedly, Ms Pentland was present. I prefer Mr Constable’s version of this meeting over the evidence of Ms Pentland and Mr Formato. Although sales were discussed, the meeting became primarily a discussion about Mr Constable’s employment and his contract. On multiple occasions Ms Pentland said that she wanted to re-visit the unsigned employment contract of twelve months earlier, wanted to introduce and monitor KPI’s and asked Mr Constable what he was seeking to achieve by continuing to work at 4WD Accessory Wholesale. I reject Ms Pentland’s evidence that Mr Constable showed an “aloof interest” and “lack of commitment”. 17 Her evidence was a reconstruction based on the fact that Mr Constable had not and would not willingly or easily agree to a new contract with a lesser commission structure. Mr Formato directly raised the issue of Mr Constable’s salary. He said that his salary was costly. He said that he wanted to change the commission structure because it was too high. He said words to the effect that signing a new contract was “not negotiable”. In separate but related parts of the conversation he said words to the effect that “you don’t work here” if a new contract is not signed. No mention was made of a business restructure or the possible employment of Mr Petherick.

Business restructure and proposed new contract 26 April

[55] Unknown to Mr Constable, on 16 April 2018 Mr Petherick was offered and accepted employment as the Business Manager of Caddy Storage, 4WD Accessory Wholesale and Hayman Reece.

[56] That same day, 16 April 2018, Mr Formato again summonsed Mr Constable to his office. Ms Pentland was again present. Mr Constable was told the following:

[57] At the meeting on 16 April Mr Constable was asked by Ms Pentland on multiple occasions whether he intended to “stay on” in light of the business restructure. Mr Constable, having only just heard of it, said that he would “sleep on it” and wanted to look at the new contract.

[58] Mr Constable left the meeting again believing that he was being squeezed out, believing that he had been demoted and particularly concerned at what the contractual change would mean for his remuneration.

[59] On the evening of 16 April 2018 Mr Constable exchanged text messages with Ms Pentland. He asked what was being proposed about commissions in the new contract. Ms Pentland said it was likely to be the same as the proposal a year ago except the 0.5% commission would commence at $55,000 (not $60,000).

[60] On 17 April 2018 Mr Petherick commenced employment at 4WD Accessory Wholesale. It was made clear to Mr Constable that he was reporting to Mr Petherick who assumed overall business management.

[61] On 18 April 2018 Mr Formato called Mr Constable into his office. Mr Formato wrongly accused Mr Constable of telling suppliers that he (Mr Constable) had been “screwed over”. I accept Mr Constable’s evidence that it was, in fact, the suppliers who made that observation to Mr Constable. Mr Constable challenged Mr Formato to disclose who had tipped off the suppliers.

[62] Between 23 and 26 April 2018 Mr Constable raised with Mr Petherick that he (Mr Constable) was waiting to receive a new contract. He was told by Mr Petherick that he (Mr Constable) would receive one soon as it was “almost ready”.

[63] At 10.08pm on 26 April 2018, by email, Mr Constable received a proposed new contract from Mr Formato. 18 The email read:

“From: Italo Formato

Sent: Thursday 26 April 2018 10.08pm

Subject: New Employment Contract

Mike as discussed please find attached new employment contract, please advise once you have read agreement and I will arrange copy for signing.

Thanks

Italo”

[64] The contract attached to the email proposed a new, and (to the extent he understood it) a lesser commission structure:

[65] On the morning of 27 April 2018 Mr Constable spoke to Mr Petherick about the proposed new commission structure in the contract he had been sent “for signing”. Neither he nor Mr Petherick fully understood how it would work. They agreed a meeting with Mr Formato was needed.

[66] Mr Constable and Mr Petherick met with Mr Formato at 5.15pm on 27 April 2018 to discuss the proposed new commission structure. The meeting commenced civilly but ended in a heated manner. I prefer Mr Constable’s version of this meeting over the evidence of Mr Petherick and Mr Formato. Mr Formato explained the commission structure. Mr Constable, using foul language, said that he believed he had been demoted (“feels like I’ve been fucked over”). He said that he would lose between $10,000 and $15,000 per year in reduced commissions under the new structure. Mr Formato said that he (Mr Formato) “had every right to change the commission structure” but would “look into” his complaint. Mr Formato said words to the effect that “the business can no longer afford” to pay his commission. Mr Formato said that over time Mr Constable could earn higher commissions than present if he got sales up. Mr Constable disputed that this was ever likely in practice given the commission structure. Mr Formato told Mr Constable that he needed to decide what he was going to do within a week (by 3 May). Both Mr Formato and Mr Constable became heated when Mr Formato made a personal remark about Mr Constable’s family.

Return of keys and alleged repudiation

[67] On 30 April 2018, feeling unwell due to the events, Mr Constable was certified by his medical practitioner to be unable to work due to hypertension and high blood pressure. He informed Mr Petherick. After further visits to his doctor on 4 and 11 May 2018, he was certified unfit until 18 May.

[68] During the week of 14 May 2018 Mr Constable reviewed his position and consulted a lawyer. His evidence, which I accept, was as follows: 19

“During the week commencing 14th May 2018 I reviewed my position with the circumstances and facts surrounding the old and new employment contracts, the greatly reduced income, the demotion of my position, the lesser responsibilities, the pressure endured dealing with it all and the disparagement that took place. I decided to seek some advice and met with a lawyer from Johnston Withers on the Thursday. My concerns were discussed and I received advice that in their opinion there was substantial evidence of repudiatory conduct by my employer in addition to constructive dismissal due to adverse actions at the initiative of my employer. I was provided some legal advice on best course of action to proceed on my concerns.”

[69] At 8.15am on the morning of Saturday 19 May 2018 Mr Constable drove to the company premises and returned the company vehicle, company supplied mobile phone (including its packaging) and keys to company buildings and locks.

[70] Fifteen minutes later, at 8.30am, Mr Constable telephoned a company officer (Mr Yates) “and let him know that I would not be returning to work as a result of the circumstances that had taken place leading up to my last working day prior to my sick leave that commenced Monday 30th April 2018”. 20

[71] Shortly thereafter, Mr Constable spoke to another company officer Mr Spaglonetti. He told Mr Spaglonetti “that I was not resigning but simply not returning to work because of what Mr Italo Formato had done to me”. 21

[72] At 11.03am Mr Constable sent an email to Mr Formato in the following terms:

“From Michael Constable

To Italo Formato

Sat, May 19 2018 at 11.03am

Subject: End of Employment

I have returned the Colorado, work keys and work phone this morning as recent circumstances with work have left me no other choice but to return them.

I will follow up soon with further a (sic) email outlining my position in greater detail.

In the meantime I would appreciate my payslip from Thursday 17.5.18 being sent through as previously requested.

Mike”

[73] In the afternoon of 19 May 2018 Mr Formato emailed Mr Constable seeking to discuss this turn of events. Mr Constable did not call back. He was troubled by distressing personal news which he had received earlier in the day concerning the death of a friend’s son.

[74] On 21 and 23 May 2018 Ms Pentland contacted Mr Constable and arranged to meet him on Friday 25 May 2018. It was a lengthy meeting attended only by the two. What was said is not in material dispute. 22 Mr Constable advised that he would not be returning to the business, that he had taken legal advice to the effect that his contract had been repudiated by the employer and that he remained offended by what had occurred and had been said to him. Ms Pentland said that Mr Petherick was employed in an “overarching” role and not replacing him and that he should give her time to “sort it out” with Mr Formato. Mr Constable reiterated that he would not be returning, that he was willing to settle for a negotiated sum but would otherwise take legal proceedings.

[75] Following the meeting with Ms Pentland on 25 May 2018, Mr Constable wrote to Ms Pentland confirming his position. His letter included the following: 23

“Good afternoon Sharaze,

…I hereby serve this letter as notice to you as you act for Mr Italo Formato of 4WD Accessory Wholesale Pty Ltd…of the repudiation of my employment contract dated 25th September 2015.

The recent actions in breaching the contract as well as other actions over recent months as discussed this morning have culminated in the resulted damage to the relationship, and therefore I find my position untenable. Furthermore I allege the repudiation of contract constitutes constructive dismissal from my employment contract….

Michael Constable”

[76] On Monday 28 May 2018 Mr Formato emailed Mr Constable in the following terms:

“From: Italo Formato

Sent: Monday 28 May 2018 2.39pm

Subject: Response to email

Mike thank you for making contact, I am surprised by the contents of your letter as there has been and is no dismissal, We have made a change to the business structure because the business has changed (addition of HR distribution and requirements from other suppliers) but your position has not, although we have had to revise the commission plan, (please refer to your contract over a year ago that was given to you and discussed with you in my (sic) at that time) this was always intended as a result of the change in business. Please return to work as soon as your health allows, I am glad to hear that your health is on the improve and are now off medical certificate.

Please contact me to discuss at any time as I am happy to listen to your concerns and if there is something in particular worrying you I am happy to work through it with you.

Sincerely

Italo Formato”

[77] Mr Constable did not reply to Mr Formato. He replied to Ms Pentland by email sent at 8.03pm that day (Monday 28 May). 24 He stated “it appears Italo does not understand his repudiation of my employment contract dated 15th September 2015 and the consequences of such action.” He proceeded to outline his objections to the proposed commission change and his belief that he had been demoted.

[78] Mr Constable issued these unfair dismissal proceedings on 5 June 2018.

Jurisdictional Issues

Issues to be determined

[79] The jurisdictional issue requiring determination is whether Mr Constable was dismissed by the employer.

[80] The exercise of the unfair dismissal jurisdiction under Part 3-2 of the FW Act is the exercise of a statutory jurisdiction. Whether an employee has been dismissed is to be assessed by reference to the statutory definition of dismissal in section 386(1):

(1) A person has been dismissed if:

(a) the person’s employment with his or her employer has been terminated on the employer’s initiative; or

(b) the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.

[81] The provisions of section 386(2)(c) may also be relevant to this matter:

(2) However, a person has not been dismissed if:

(c) the person was demoted in employment but:

(i) the demotion does not involve a significant reduction in his or her remuneration or duties; and

(ii) he or she remains employed with the employer that effected the demotion.

[82] I note that the employer also contends that a further jurisdictional issue arises concerning the remedy of compensation. I consider this later in this decision.

[83] Although much of the legal argument before me concerned repudiation of contract, this matter is not determined by answering the question whether Mr Constable’s contract was repudiated at common law. This jurisdictional matter is to be determined by considering whether Mr Constable was terminated on the employer’s initiative within the meaning of section 386(1)(a) of the FW Act or whether Mr Constable was forced to resign (if he did so) because of the employer’s conduct within the meaning of section 386(1)(b). The issue of repudiation is relevant in those contexts, but in those contexts only.

Was Mr Constable terminated on the employer’s initiative?

[84] In determining whether Mr Constable was “terminated on the employer’s initiative” I take into account that this expression is concerned with the termination of the employment relationship, not the employment contract. 25 For reasons that follow, the conceptual distinction between the related but distinct concepts of an employment relationship and an employment contract is not determinative in this matter.

[85] Mr Constable contends that 4WD Accessory Wholesale’s conduct in the period prior to 25 May 2018 was a termination of his employment relationship in that the employer repudiated his contract of employment.

[86] 4WD Accessory Wholesale say that it made no decision to dismiss Mr Constable, that it did not intend to end its employment relationship with Mr Constable and that it did not, by conduct, terminate the employment contract by repudiation. It says that Mr Constable terminated the employment relationship by handing in the company vehicle, phone and keys on 19 May 2018 and thereafter not making himself available for work upon the restoration of his health.

[87] If 4WD Accessory Wholesale did in fact repudiate Mr Constable’s contract of employment it would be open for the Commission to find that it engaged in conduct that terminated the employment relationship on its initiative.

[88] Mr Constable relies on two primary issues to advance his repudiation submission. Firstly, the demands made on him to sign a new contract of employment (including changes to his commission arrangements) and secondly, changes to his employment duties upon the employment of Mr Petherick.

[89] Mr Constable says that either of these factors individually or in combination were acts of repudiation. He says that his letter to Ms Pentland of 25 May, or (in the alternative) his handing back of the store keys, phone and motor vehicle on 19 May was acceptance of the employer’s repudiation that then brought his employment relationship to an end.

[90] The concept of contractual repudiation in an employment context was summarised by a full bench of the Commission in City of Sydney RSL & Community Club v Balgowan 26 as follows:

“The question whether there has been a repudiation of the contract of employment is determined objectively, it is unnecessary to show a subjective intention to repudiate and is a question of fact not law. Relevantly, for present purposes, repudiation may exist where an employer reduces the wages of an employee without the employee’s consent or where there is a serious non-consensual intrusion on the nature of the employee’s status and responsibilities in a way which is not permitted by the contract. Similarly, if an employer seeks to bring about a change in the employee’s duties or place of work which is not within the scope of the express or implied terms of the contract of employment, the conduct may evince an intention to no longer be bound by those terms. Therefore, in these circumstances if an employee does not agree to the change, which if agreed would amount to a variation of the contract, the employee may claim to have been constructively dismissed.”

[91] More recently, in the context of employee repudiation, a full bench said: 27

“The test for repudiation is whether the conduct of the employee is such as to convey to a reasonable person, in the position of the employer, renunciation either of the contract as a whole or of a fundamental obligation under it. The issue turns upon objective acts and omissions and not on uncommunicated intention.”

[92] The High Court of Australia in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd 28 described the concept in the following terms:

“The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it.”

[93] I now apply these principles to the facts before me.

[94] Were the demands for new contracts of employment acts of repudiation? Although the evidence establishes that Mr Formato did not intend to end the employment relationship between his company and Mr Constable, repudiation does not require intention. 29 The evidence establishes that 4WD made multiple requests of Mr Constable to agree to a new contract of employment. Five versions of a new contract were put to Mr Constable in the space of nineteen months (September 2016, November 2016, January 2017, February 2017 and April 2018). On each occasion Mr Constable pushed back on the proposal, and provided his reasons. That being so, with a degree of reluctance, the employer did not (and could not) unilaterally impose its new contracts of employment on the relationship. I do not consider that the mere act of propositioning new contracts of employment constituted a repudiation of the existing contract of employment.

[95] Were the employer’s demands for new contractual commission arrangements acts of repudiation? Having regard to the terms of the 2015 contract and Mr Constable being employed as a sales manager, I find that commission payable on sales was a fundamental and “essential” 30 term of his contract with 4WD Accessory Wholesale. The final three new contracts submitted to Mr Constable (January 2017, February 2017 and April 2018) each proposed a new commission structure on sales. Although differing in material respects, I find that each was likely to significantly reduce in at least both the short and medium term the remuneration payable to Mr Constable, when compared to his 2015 contract of employment. The proposed changes were not simply to the rate of commission but were structural – commission would be payable on a narrower base of sales (excluding Hayman Reece products in particular, which accounted for nearly 50% of sales) and also a threshold of sales ($50,000) would be applied before any commission would be payable.

[96] I accept Mr Constable’s evidence that the 26 April 2018 proposal put to him was likely to reduce his commission payments by about $10,000 to $15,000 per annum, or at least two-thirds. Further, commission payable to Mr Constable represented about 17.5% of his total cash remuneration in his last year of employment. I find that the employer’s April 2018 proposal would have been likely to reduce his overall annual remuneration by about 15% in the short to medium term. Whilst he would have had (with the business restructure) a greater amount of time to generate Caddy sales (and commission), the prospect of Mr Constable reaching an equivalent let alone higher level of dollar commission was so remote and speculative that it could not reasonably be seen as an offer with balance or equilibrium. Rather, it was a deliberate decision by Mr Formato to reduce remuneration payable based on his view that Mr Constable was no longer deserving of commission on all sales.

[97] I find that Mr Formato was intensely frustrated that Mr Constable had refused to accept any of the employer’s new commission proposals. I also find that the adverse impact of the commission proposals were the primary reason why Mr Constable rejected the new contracts of January 2017, February 2017 and April 2018. I find that this frustration strained Mr Formato’s relationship with Mr Constable and contributed to the decisions Mr Formato made in 2018 to press on with his contractual demands, to restructure the business, to recruit a Business Manager to whom Mr Constable would report, to alter his duties and to speak to Mr Constable in the rude and demanding terms he did on 7 February, 19 March, 6 April and 27 April.

[98] In the context of employment contracts, a significant diminution in remuneration status or responsibility may constitute repudiation. The degree of change necessary to constitute repudiation has been variously described. One such formulation is where the changes are “profound”. 31

[99] On any objective analysis, the actions of 4WD Accessory Wholesale, had it implemented the changes to commission arrangements in the 26 April 2018 contractual proposal, would have been so egregious and profound as to represent a repudiation of Mr Constable’s contract of employment.

[100] However, they did not do so. Until his employment ceased the employer continued to pay commission on all sales on the contractual terms despite Mr Formato’s frustration and insistence that a new contract with different and less favourable terms (to Mr Constable) be executed.

[101] In these circumstances, I do not find that the employer repudiated Mr Constable’s contract of employment.

[102] Were the changes to Mr Constable’s duties consequent on the business restructure acts of repudiation?

[103] The business restructure implemented by Mr Formato in March 2018 concerned Mr Constable in three ways: it altered his duties by limiting his sales activities to Caddy products; it altered his managerial and supervisory responsibilities by limiting his supervision to persons installing Caddy products only with no broader human resource or store managerial responsibilities; and it altered his reporting responsibilities by requiring him to report to a new Business Manager Mr Petherick.

[104] The evidence before me is that Mr Formato started to plan this restructure as early as January 2018. The evidence before me is also that at no time was Mr Constable consulted on or advised about the restructure or its impact on him until the day prior to its implementation, when it was a fait accompli. Even though he had provided the employer with Mr Petherick’s CV in good faith, Mr Constable was never informed that Mr Petherick would be recruited to work in the very store he operated and be handed a large swathe of Mr Constable’s management responsibilities.

[105] I am satisfied that these were significant changes in Mr Constable’s day-to-day work activities when comparing his pre-restructure work with his post-restructure work. Although Mr Constable considered that he had been demoted and had grounds for believing that to be so, this is a question that needs to be determined objectively, not subjectively.

[106] The first point of reference is Mr Constable’s 2015 contract. Mr Constable was employed as a full time “Sales Manager”. After the business restructure he continued to be employed as a full time Sales Manager. Nor did Mr Constable’s contract specify a particular product he was contracted to sell. 32 In fact, at the time he entered his contract in September 2015 the business was in its infancy and was selling neither Caddy products nor Hayman Reece products. It was within the right of the employer to alter, at its discretion, which products Mr Constable as a sales manager would be asked to sell. Nor was there any term in his contract that provided the right to supervise other employees or certain types of employees.

[107] The question which then arises is whether, because Mr Constable was in fact performing managerial and supervisory functions and selling a broad range of products in the period immediately prior to the business restructure, these were established as terms of his contact. I think not. There is no evidence before me of any contractual representation in the period that followed which provided an enforceable right for Mr Constable to sell one or other of the company’s products, or supervise employees or manage the store.

[108] It is well established that an employer has the right to organise its business affairs as it sees fit so long as it acts according to law. Absent any contractual right to manage the store, manage employees or sell a particular range of products, the impact of the business restructure on Mr Constable was practical, not contractual. Further, whilst the employment of Mr Petherick as an overarching Business Manager was, in practice, a major change in the workplace dynamic encountered by Mr Constable, there was no contractual barrier to the employer hiring a person in that role. Mr Constable’s contract (clause 1.3) specified that he would report to Mr Stafford and Mrs Formato. Reporting to a person more senior in the business hierarchy, even in a newly created position, was not inconsistent with his employment contract.

[109] The business restructure had real and significant adverse practical implications for Mr Constable. He considered that he was being marginalised and constricted, and in fact he was. However, I do not consider that Mr Constable was, in a contractual sense, demoted as a consequence of the restructure. Creating a new managerial tier and employing a person at a level above an existing manager but not denying the existing manager their right to perform their contractual duties is not a demotion. Given this finding, the considerations relating to demotion under section 386(2)(c) of the FW Act do not apply. Nor do I consider that restricting Mr Constable’s sales activities to Caddy products or reducing his supervisory or managerial duties was a repudiation of contract.

[110] For these reasons, I do not find that 4WD Accessory Wholesale repudiated Mr Constable’s employment contract or that the employment relationship was terminated on the initiative of the employer on account of repudiation.

[111] A related issue is whether the employer brought Mr Constable’s employment relationship to an end on its initiative other than by repudiation of contract.

[112] I think not. The disagreement between 4WD Accessory Wholesale and Mr Constable concerned the contractual issues (which primarily concerned commission payments) and the April 2018 business restructure. Although Mr Constable disagreed with the decision to restructure the business in April 2018 and was not consulted on it in any meaningful way, the decision was open to Mr Formato and was genuinely made. Mr Formato had commercial reasons to want to separate Caddy sales from other sales. As a business owner, it was within his province to structure his business in the manner he saw fit, including hiring a new business manager in an overarching role. I do not consider that the April 2018 business restructure was a termination at the employer’s initiative.

Was Mr Constable forced to resign because of the employer’s conduct?

[113] Two issues arise when considering whether Mr Constable was dismissed within the meaning of section 386(1)(b) of the FW Act: did Mr Constable resign; and if so, was he “forced to do so because of conduct, or a course of conduct” engaged in by 4WD Accessory Wholesale?

[114] I conclude that Mr Constable did resign from his employment. I find that this occurred on 19 May 2018 when he returned the store keys, company phone, motor vehicle keys and the company motor vehicle. This was an act by an employee demonstrating an intention to no longer continue working in the business. His subsequent conduct that day and over the following week supports this conclusion. He spoke to Mr Yates and Mr Spaglonetti that morning indicating that he was no longer working in the business (albeit making it clear at least to Mr Spaglonetti that he was driven to this by the employer’s conduct and was not “resigning” of his own free will). He emailed Mr Formato that day in a downcast tone advising that his employment was finished (“no other choice but to return them”). That email indicated that he (Mr Constable) would follow up with further details of his stance. That follow up was the meeting with and subsequent letter to Ms Pentland on 25 May.

[115] I find that Mr Constable’s employment (in the sense of both the employment relationship and his contract of employment) ceased on 19 May 2018. This was also the day up to which he was paid by Mrs Formato.

[116] The legal principles governing the application of section 386(1)(b) of the FW Act are well established.

[117] The test to be applied is whether the employer engaged in conduct with the intention of bringing the employment to an end or whether termination of employment was the probable result of the employer’s conduct such that the employee had no effective or real choice but to resign. 33

[118] An intention to repudiate need not be proved. The subjective intention of the parties is not determinative. The test is to be applied objectively:

“Where it is the immediate action of the employee that causes the employment relationship to cease, it is necessary to ensure that the employer’s conduct, said to have been the principal contributing factor in the resultant termination of employment, is weighed objectively. The employer’s conduct may be shown to be a sufficiently operative factor in the resignation for it to be tantamount to a reason for dismissal. In such circumstances, a resignation may fairly readily be conceived to be a termination at the initiative of the employer.” 34

[119] The legislature has chosen to use the word “forced” as the basis for the causal connection, rather than looser or weaker formulations. The word is not defined in the FW Act. It is the past tense of the noun “force” and the verb “to force”. The noun and verb are defined in recognised English dictionaries to mean (in relevant contexts): 35

“force (noun): coercion or compulsion”

“to force (verb): to cause or produce by effort; to attain by strength of effort”.

[120] The word “forced” suggests the existence of conduct of such a character which compelled the outcome in the sense that the outcome was at least the probable consequence of the conduct such that an effective or real choice was denied. Whether an employee is “forced” to resign by the “conduct or a course of conduct of the employer” is a question of fact.

[121] In making this submission Mr Constable relies on five acts by the employer which he says constituted a series of conduct that forced his resignation:

[122] I am satisfied that each of these were active and operating factors in the decision Mr Constable made when he returned the keys, phone and motor vehicle on 19 May.

[123] The first three factors relate to the business restructure. I have found that the business restructure was not, in a contractual sense, a repudiation of Mr Constable’s contract. This does not however make the restructure incapable of being conduct that “forced” Mr Constable’s resignation. I have found that the restructure was hostile to his interests, provided reasonable grounds for him to believe that he was being marginalised and was undertaken without any consultation. A reasonable employer showing respect to an employee who was, in a practical sense, its manager of an arm of their business would have made Mr Constable aware of the business case for the restructure, if not sought his views on its implementation. Mr Formato could have done so but chose to do neither. In those circumstances the employer cannot now reasonably argue that its conduct did not produce a consequent reaction by the manager. As with the laws of physics, action breeds reaction.

[124] The fourth factor (the employer’s contractual demands including the proposed reduction in commission payments) was a principal contributing factor to the decision Mr Constable took to leave the business. As Mr Constable said in his evidence: 36

“My problem all along was the change in the commission structure”.

[125] This factor, together with Mr Constable’s refusal to yield to those demands, is also central to understanding why Mr Formato undertook a business restructure that was hostile to Mr Constable’s interests and pressed forward with his proposals to materially reduce Mr Constable’s commission payments. I have found that these contractual demands were not a repudiation of contact because they were made but not implemented. However this does not make them incapable of being conduct that “forced” Mr Constable’s resignation.

[126] The demands made were adverse to Mr Constable’s interests and were pursued relentlessly by Mr Formato. In doing so, Mr Formato (together with Ms Pentland) placed unreasonable and excessive pressure on Mr Constable who simply wanted to work according to his contractual terms. I accept Mr Formato’s evidence that he gave Mr Constable time to think about his response to the demands, including a seven day period after 27 April 2018. However, Mr Formato did not indicate any willingness (prior to 19 May) to contemplate the maintenance of the existing commission arrangements. Quite the contrary. Mr Formato made it clear that a new contract had to be signed, that that was non-negotiable if Mr Constable wanted to remain in employment, and that his commission payments were too high and needed to be reduced. His email of 26 April 2018 submitted his latest proposal “for signing”, not for negotiation.

[127] The email sent by Mr Formato to Mr Constable on 28 May 2018 is revealing. By this time Mr Constable had made it very clear (in writing) that his return of the keys was final and had been based on legal advice that his contract had been repudiated. Mr Formato, recognising that he had lost a manager, adopted a more conciliatory tone. Yet in addressing the commission issue he said “we have had to revise the commission plan, (please refer to your contract over a year ago that was given to you and discussed with you in my (sic) at that time) this was always intended as a result of the change in business” (my emphasis). These are words of a business owner who had made a firm decision over a prolonged period to revise the commission plan notwithstanding Mr Constable’s contractual terms.

[128] Whether Mr Formato had a business case for asserting that the commission payments needed to be changed is not to the point. The issue is whether his demands and assertions, particularly in the context of the persistent way in which they were put, was conduct that forced the manager’s hand. I find that it was.

[129] I accept and take into account that Mr Formato did revise his commission offers, and that the 26 April 2018 offer was marginally less adverse to Mr Constable’s interests than the February 2017 proposal. However, the April 2018 proposal still represented a profound adverse outcome in at least the short and medium term when compared to his 2015 contract.

[130] The fifth factor (the disrespectful behaviour of the employer over the preceding four months) is also made out. I take into account that Mr Constable is a man of mature age and, as a manager in a family business, should expect a degree of robustness in dealing with the business owner especially when being called to account for sales performance. However, I accept Mr Constable’s evidence that Mr Formato was fiery and abusive in their exchanges (particularly concerning the contract), made unreasonable references to Mr Constable’s family and belittled and disrespected him. I also take into account that Mr Constable, having been provoked in this way, responded rudely in return and also displayed to Mr Petherick his disrespect for Mr Formato.

[131] Considered objectively and in isolation, and in the context of a manager/owner relationship, I do not consider that this level of disrespectful behaviour to be sufficient to have “forced” Mr Constable’s resignation. However, in the context of the other factors in play it weighs in favour of such a conclusion.

[132] Weighing against that conclusion however are a number of other considerations:

[133] When viewed objectively, I conclude that on 19 May 2018 Mr Constable had no effective or real choice but to end the employment relationship. I am satisfied that whilst termination of the relationship was not intended by 4WD Accessory Wholesale that was the probable result of its conduct. I am satisfied that this conclusion is open simply by reference to the course of the employer’s conduct in the form of persistent demands it made that Mr Constable enter into new contracts of employment with a substantial and material reduction in his commission payments.

[134] Mr Constable exercised his right to reject those demands; but having communicated that decision the employer persisted in pursuing its view that the commission payments were too high, were being paid undeservingly and needed to be reduced. Given that the remuneration he received (including commission) was of significant importance to his contractual entitlements, the pressure placed on Mr Constable was immense, particularly when told this directly by the business owner. By making it clear to Mr Constable that signing a new contract was non-negotiable and in the same context pursuing its demands for reduced commission, Mr Constable was entitled to put one and one together and conclude that agreeing to materially reduce his remuneration was necessary to continue working in the business. His choice to remain in employment or to resign was thereby not a real or effective choice. It was a ‘claytons’ choice, one tainted by the pressure to agree to disadvantage his own interests.

[135] Although Mr Constable had time and space to consider and take advice on his options between 27 April and 19 May the material facts that were denying him a real and effective choice remained unaltered over that period. I find that on 27 April 2018 Mr Formato gave Mr Constable time to consider whether he would enter into the contract of 26 April 2018, not time to re-negotiate the employer’s demand. Although Mr Formato had said on 27 April that he would listen to his concerns, the fact is that Mr Formato (and Ms Pentland) had already heard Mr Constable’s concerns at having his commission reduced, and yet had rejected the idea that his 2015 contract could stand.

[136] In arriving at this decision I do not consider it necessary to take into account the conduct of the employer relating to the business restructure. Were I to do so, my conclusion would be more starkly made in the sense that the combination of the contractual demands (item 4 above) and the practical effect of the business restructure (items 1 – 3 above) and the way Mr Constable was treated (item 5 above) were overwhelmingly operative factors in his resignation for it to be a forced dismissal. It was no coincidence that the contractual demands were re-agitated by the employer on 19 March 2018 shortly after the business restructure had been decided and Mr Petherick had been interviewed for the new position.

[137] Mr Constable was, in the words of the court in Barclay v City of Glasgow District Council 37 referred to in Minato v Palmer Corporation Ltd38, “being jostled into a decision” to resign. Or in the words of Olsen J in the Supreme Court of South Australia in Easling v Mahoney Insurance Brokers Pty Ltd, judged reasonably and sensibly, the employer’s conduct was such “that the employee cannot be expected to put up with it”.39

Conclusion on jurisdictional issue

[138] Mr Constable was dismissed within the meaning of section 386 of the FW Act in that he was forced to resign on 19 May 2018 because of a course of conduct engaged in by his employer. His application is within jurisdiction.

Merits

[139] I now consider whether Mr Constable’s dismissal was harsh, unjust or unreasonable within the meaning of Part 3-2 of the FW Act. In doing so I take into account the factors set forth in section 387.

Valid reason

[140] Whilst 4WD Accessory Wholesale did not intend to dismiss Mr Constable, I have found that the principal operating factor which brought the employment relationship to an end was persistent demands the employer made that Mr Constable enter into a new contract of employment with a substantial and material reduction in his commission payments. Those demands were made in the context of a business restructure that he found unwelcome and which constricted his role.

[141] For the purposes of assessing whether there was a valid reason, I will consider both of these issues.

[142] A valid reason is one that is sound, defensible and well founded and should not be capricious, fanciful, spiteful or prejudiced. 40

[143] There was no seriously advanced proposition put to me that Mr Constable’s conduct or performance was deficient. Moreover, there is no evidence to support such a claim. Mr Formato formed a view in early 2018 that sales had declined and this had been put to Mr Constable in the meeting on 7 February 2018. Mr Constable disputed that the decline was significant or structural. There is no evidence before me that Mr Constable was not making his best endeavours to achieve a satisfactory level of sales, even if Mr Formato’s views about the level of sales were soundly based. Mr Formato’s evidence, which I accept was that he was frustrated that Mr Constable did not spend more time on the road sourcing sales. Equally I accept Mr Constable’s evidence that whilst he did so, as the de facto manager of the store he had limited operational time to get out ‘on the road’. I received into evidence, on a confidential basis, sales and profit and loss data. 41 That data does support a conclusion that there was a significant reduction in sales in the three months of December 2017, January 2018 and February 2018 compared to the preceding three months (September, October and November 2017). The evidence before me is that this related largely to sales of Hayman Reece products, and could possibly be explained by an earlier spike in sales of that product which the market could not sustain.

[144] It is not possible on the evidence before me to conclude that any of the upwards or downward swings in monthly sales were seasonal or sustained, much less whether they were the product of efficient or deficient performance by Mr Constable. The case is simply not made out that Mr Constable’s sales performance was sub-standard.

[145] Was there a valid reason for the employer seeking to have Mr Constable enter new employment contracts? The first two contract proposals did not concern commission payments. The changes proposed were said by Ms Pentland to be a form of “updating”. The updating proposed new and additional employment conditions and a formal job description. Mr Constable did not reject these proposals outright, but outlined concerns he had with some of the new employment conditions which he believed did not match accepted and continuing practice in the workplace. He was concerned that accepted practices (such as an evening drink after work with colleagues) could technically be in breach of the new employment condition against the consumption of alcohol, exposing him (and others) to breach of contract. He held similar views about the new term concerning tattoos.

[146] Mr Constable expressed his reservations with the first two contracts in an orderly and professional manner. He was willing to negotiate appropriate terms that could meet the employer’s needs but not wittingly or unwittingly expose himself to breach. His position was not unreasonable. Therefore, his unwillingness to enter into the contracts of September and November 2016 was not a valid reason for dismissal.

[147] I have found that Mr Constable refused to enter into the new contacts of January and February 2017 and April 2018 primarily because of the adverse impact on his remuneration due to the changed commission structure. I have found that he had reasonable grounds for forming that view on each of the proposals that were put.

[148] The employer says that it had sound business grounds to seek a change in the commission arrangements. Mr Formato’s evidence was that the business developed significantly between 2015 and 2018. I accept that evidence. In that time Caddy products came to be sold as did Hayman Reece products. Both were large in terms of sales volume and were the product of negotiated distribution agreements. There is some force to the employer’s submission that the Hayman Reece distribution agreement could not have been foreseen at the time Mr Constable commenced employment. However, the evidence also is that Mr Constable was not indifferent to the employer’s view on how his contracted commission arrangements would work. He readily agreed to exclude internal sales from commission calculations. He refused to forego commission on the Hayman Reece sales in part because he was party to the distribution agreement discussions between Mr Formato and Hayman Reece, and was actively involved in making the sales of these products.

[149] The total quantum of commission earned by Mr Constable in each of the years of employment was $2,877.19 (7 months to June 2016), $9,003.48 (12 months to June 2017) and $12,299.53 (11 months to May 2018). In the context of Mr Constable’s base salary not increasing by any dollar amount over these three years of employment, and in the context of growing sales and the total value of revenue from sales, these amounts are not so large as to justify a decision to dismiss even if a business case for their reduction could be made out.

[150] Was there a valid reason for the employer seeking to alter Mr Constable’s employment arrangements through the business restructure?

[151] The evidence before me is that Mr Formato considered that Caddy sales should be separated from other sales activities. Mr Formato says that he was under commercial pressure to organise his business in that manner. Whether or not that was so, the fact is that Mr Formato’s decision to restrict Mr Constable’s sales to Caddy sales only was interrelated with his intention to find a way to reduce Mr Constable’s commission payments. In these circumstances the business restructure was not a valid basis to dismiss Mr Constable.

[152] I find there was no valid reason to dismiss.

Notification

[153] Mr Constable was notified of the demands made on him to enter into new employment contracts and to restructure his commission arrangements. He was also notified, albeit on one days’ notice, of the business restructure.

Opportunity to respond

[154] Mr Constable was given opportunities to respond to both Mr Formato and Ms Pentland on the issue of the new contract demands (including the commission arrangements). However, at least by 2018, he was not given an opportunity to have an open discussion about these issues absent coercive pressure designed to secure his signature to new contracts or have him leave the business. For example, Ms Pentland quite unjustifiably put to Mr Constable questions on 19 March 2018 that made him feel as though he was unwelcome in remaining in the business. I have found that on 27 April 2018 Mr Formato gave Mr Constable seven days to respond to his latest contractual demand, not respond in a realistic expectation that the employer would negotiate arrangements that would maintain Mr Constable’s overall remuneration.

[155] Moreover, I have found that Mr Constable had no opportunity to input into the business restructure. He was blindsided. It was presented to him as a fait accompli. There was no opportunity to have his views considered in a meaningful way.

Support person

[156] Mr Constable neither sought nor was denied permission to have a support person present in discussions with the employer concerning his employment.

Performance warnings

[157] Mr Constable received no warnings or counselling concerning his performance. I do not accept Ms Pentland’s evidence that a discussion in February 2017 about events at a Caravan and Camping Show was a “performance management meeting”. I prefer Mr Constable’s evidence that this was a discussion about a supplier complaint. Mr Constable explained what had occurred. He was not happy that Mr Formato and Ms Pentland were criticising the actions he took on the day. In that sense there was an informal disagreement between an owner and a manager about a supplier complaint. There is no record of formal counselling.

Size of employer’s business

[158] 4WD Accessory Wholesale is a family business but although it employed approximately five employees at the date Mr Constable’s employment ceased, it is an associated entity with Gumtop Pty Ltd trading as TJM Products and thus the business employed more than fifteen employees (thereby not being a small business under Part 3-2 of the FW Act).

[159] Although not a small business, the business is a family business, with direct involvement by the business owner.

Human resource specialists

[160] The employer does not have an internal human resource capacity other than payroll and related functions (for example, workers compensation claims) performed by Mrs Formato. For this reason the employer has contracted since November 2015 to Ms Pentland’s business to undertake human resource activities, including preparation of employment contracts, performance management and workplace compliance.

Other matters

[161] There are no other matters relevant that have not been otherwise considered.

Conclusion on merits

[162] There being no valid reason for dismissal I find that Mr Constable’s dismissal was unreasonable.

[163] Although 4WD Accessory Wholesale did not breach the express terms of Mr Constable’s contract of employment, I find that it treated him harshly and unjustly by repeatedly demanding that he reduce his contractual commission payments and then, in light of his refusal, by restructuring the business with no notice and in a manner that marginalised and constricted his role. His dismissal was harsh, unjust and unreasonable.

Remedy

Appropriateness of remedy

[164] I consider that it is appropriate to order a remedy. The circumstances giving rise to the employment relationship ceasing are real and substantive. It would not be in the interests of justice for an employee, in light of my findings, to be denied a remedy.

[165] I do not consider that reinstatement in the same role or in an alternate role to be appropriate. A family business of this relatively small scale operates with hands-on involvement by its owner, and requires a high degree of trust and confidence between the owner and its managers. Both 4WD Accessory Wholesale and Mr Constable acknowledge that the relationship has broken down irretrievably such that reinstatement is inappropriate. I agree.

[166] In these circumstances I consider that a remedy in the form of compensation as provided by statute is appropriate.

[167] Section 392 of the FW Act provides as follows:

“392 Remedy—compensation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(a) the total amount of remuneration:

(i) received by the person; or

(ii) to which the person was entitled;

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

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

[168] I now consider each of the criteria in section 392 of the FW Act.

Viability: section 392(2)(a)

[169] This is a small scale family enterprise albeit not a small business (as defined). It is a business of a relatively young age. Although it has traded through a period of growth it faces the vicissitudes of an emerging business in a competitive wholesale and retail market.

[170] The business is currently profitable. The quantum of the compensation order I will make will be a cost and in all likelihood an unbudgeted cost to the business. However, I have no evidence before me to suggest that the order will affect business viability.

[171] Further, the business has had time to prepare for this contingency, should it have wanted to do so. It has been on notice since at least 5 June 2018 (when proceedings were filed) that its former manager was litigating this matter and seeking orders by way of reinstatement or compensation. It was also put on notice by Mr Constable on an earlier date (28 May 2018) that he was seeking a settlement sum. It rejected that offer outright. 42

Length of service: section (section 392(2)(b))

[172] Mr Constable worked for 4WD Accessory Wholesale for two years and six months.

Remuneration that would have been received: section 392(2)(c)

[173] When Mr Constable’s employment ceased on 19 May 2018 he was paid until 30 May 2018. 43 He was also paid accrued annual leave.44

[174] Following termination a dispute arose between Mr Constable and the employer over the non-payment of superannuation on commission payments. This issue was rectified on 7 June 2018. 45

[175] Mr Constable would have received base salary, commission on sales and superannuation on base salary and commissions had his employment not ceased. Although he had use of a company motor vehicle, he makes no claim for compensation on the personal use component. In the absence of a claim and evidence to support a claim I do not include an amount of compensation on this account.

[176] His base salary was $1,346.16 gross per week.

[177] His commission payments would have been based on actual sales in the period following termination. The average commission on sales received by Mr Constable in 2017/18 was $1,230.47 (or $284 per week). I consider it reasonable to estimate that Mr Constable would have received commission of $284 per week had he not been terminated. I do so because the sales data in evidence before me 46 includes sales to 30 June 2018. Sales for June 2018 are close to the average of monthly sales in the preceding five months of 2018 (January to May).

[178] His superannuation was 9.5% of salary and commissions.

[179] Mr Constable had a reasonable expectation of ongoing full time employment, though the business restructure (including the employment of Mr Petherick) strained relationships at both a management and operational level. Mr Constable had, by virtue of these events, formed a negative view about Mr Formato, and had expressed those views to Mr Petherick. Customers and suppliers had also been drawn into the controversy, and some had expressed opinions to the effect that Mr Constable had been ‘screwed over’. Their loyalties to Mr Formato and their dealings with Mr Constable would also have put further strain on the work relationship. Mr Constable had demonstrated a resilience in pushing back against the demands to reduce his commission payments, but he had on one earlier occasion resigned (but then withdrew the resignation) after a disagreement with Mr Formato.

[180] In these circumstances (and particularly given the strained workplace environment and damaged relationships arising from the business restructure) I consider that Mr Constable would have had a reasonable expectation of at least two months (8 weeks) further employment. By the expiry of that period a high probability would have existed of a further altercation with Mr Formato, resulting in either a mutual or forced parting of the ways.

[181] Had Mr Constable worked for a further two months (8 weeks i.e. to 14 July 2018) he would have received $10,769.28 in base salary (gross), $2,272 in commission on sales and $1,238.92 in superannuation on salary and commissions. He would also have accrued 75% of one extra week of annual leave including 17.5% loading ($1,186.30 gross).

[182] Thus had he worked for a further eight weeks he would have earned $14,227.58 (gross) plus $1,238.92 in superannuation.

Mitigating efforts: section 392(2)(d)

[183] Mr Constable applied for work after his employment with 4WD Accessory Wholesale ceased. He was cleared by his doctors to work after 18 May 2018 (that being the final day of his medical certificates).

[184] He secured broadly comparable work in August 2018. At the hearing of the matter (4 and 5 September 2018) he had yet to negotiate a start date.

[185] Mr Constable had day surgery on 30 July 2018 for the umbilical hernia he believes he sustained in November 2017 in the course of his employment. He was unable to work for two weeks and for a period thereafter would have been working on light duties. 47

[186] Mr Constable attributes the fact that he had (and disclosed to prospective employers) a pre-existing injury as a reason why he did not secure employment in the weeks after termination. He attributes the fact that he no longer had a pre-existing injury (and thereby no need to disclose) as a reason why he secured employment shortly after the surgery. Be that as it may, it is apparent that Mr Constable was unable to work for a period of two weeks from 30 July to 13 August 2018.

[187] 4WD Accessory Wholesale submit that a compensation order cannot, as a matter of jurisdiction, include a period of absence on account of a workplace injury in circumstances where the employer could have but did not make a workers compensation claim. 48 This submission follows an assertion made by Ms Pentland to Mr Constable by email on 7 June 201849 to the effect that “section 191 of the Return to Work Act 2014 (SA) prohibits 4WD Accessory Wholesale Pty Ltd and you from directly entering an agreement for a settlement in relation to that alleged injury”.

[188] In final submissions before me, the employer modified its submission; not presenting it as a jurisdictional bar but as an issue relating to mitigation. It submitted that because Mr Constable could have made a WorkCover claim, then he has not mitigated his loss for the period of incapacity.

[189] In circumstances where I have assessed compensation payable only to 14 July 2018 and where Mr Constable’s incapacity on account of surgery did not occur until 30 July 2018, the issue is moot. I have not included this period in my compensation order for that reason alone, not because of the employer’s submission, which I do not accept.

[190] Section 191 of the Return to Work Act 2014 (SA) is a statutory bar on contacting out from the provisions of that Act. An order compensating an unfairly dismissed employee under the FW Act is not contracting out rights under the Return to Work Act 2014 (SA). If Mr Constable has a right to lodge a WorkCover claim under that Act those rights exist irrespective of any compensation order. To accept the employer’s submission would be also to wrongly assume that a claim (if made) under that Act would be accepted by the insurer as compensable. This is not an assumption open to me to make.

[191] Nor is it reasonable to conclude as a broad principle that an employee has not mitigated their loss by virtue of a period of ill health or surgery post termination. Those considerations must turn on each set of facts. The evidence before me is that Mr Constable would have had to undertake surgery on his hernia irrespective of whether his employment terminated or continued.

[192] I am satisfied that Mr Constable sought to mitigate his loss by seeking alternate work during this period. I will not make a deduction from the compensation order on this account.

Remuneration earned: section 392(2)(e)

[193] Mr Constable earned no remuneration in the eight week period from 19 May 2018 other than payment of the two weeks ex gratia additional wages to 30 May 2018. I will deduct from the compensation order the value of those two weeks already paid ($2,692.32 gross).

Income likely to be earned: section 392(2)(f)

[194] As compensation is not calculated for a period beyond 14 July 2018, there is no income likely to be earned that is to be taken into account by way of discount.

Other matters: section 392(2)(g)

[195] There are no other matters or contingencies that need to be provided for.

Misconduct: section 392(3)

[196] As Mr Constable was not dismissed for misconduct no discount is to be applied on this ground.

Shock, Distress: section 392(4)

[197] I note that the amount of compensation allowable by the statute does not include a component for shock, humiliation or distress. Nor does it include any basis for punitive damages.

Compensation cap: section 392(5)

[198] The amount of compensation I will order does not exceed the six-month compensation cap.

Payment by instalments: section 393

[199] Given the business of the employer is of relatively small scale and given the quantum of compensation I will order, I will provide 21 days (i.e. by 24 October 2018) for the employer to give effect to my order. In these circumstances, no order for payment by instalments will be made.

Conclusion on compensation

[200] The compensation order I will make will be the sum of remuneration that would have been received ($14,227.58 gross) less income received ($2,692.32 gross) being a total of $11,535.26 gross, to be taxed according to law plus an amount of $1,238.92 into the superannuation fund in respect of which payments were made by the employer on behalf of Mr Constable.

Conclusion

[201] I find that Mr Michael Constable was dismissed by 4WD Accessory Wholesale within the meaning of the FW Act by virtue of forced resignation.

[202] I find that Mr Constable’s dismissal was harsh, unjust and unreasonable.

[203] I consider that a remedy is appropriate but that reinstatement is inappropriate.

[204] I consider that a remedy of compensation is appropriate. In conjunction with the publication of this decision I issue an order granting Mr Constable’s application and ordering that by 24 October 2018 4WD Accessory Wholesale Pty Ltd:

DEPUTY PRESIDENT

Appearances:

M. Constable and D. Weeks, for the Applicant

N. Healy and J. Abbott, with permission, for the Respondent

Hearing details:

2018.

Adelaide.

4 and 5 September.

Printed by authority of the Commonwealth Government Printer

<PR700873>

 1   [2018] FWC 4941

 2   Section 23(3) FW Act

 3   Written Submissions of the Respondent 21 August 2018 paragraph 23

 4   R6

 5   Pearse v Viva Energy Refining Pty Ltd [2017] FWCFB 4701 at [14]. See also section 591 of the FW Act and King v Freshmore (Vic) Pty Ltd (unreported, AIRCFB, 17 March 2000) Print S4213 at [61] - [62]; Enterprise Flexibility Agreement Test Case (Print M0464) at page 13; Pochi v Minister for Immigration and Ethnic Affairs (1979) 36 FLR 482 at 509

 6   The employer claimed that it had only seen and possessed an unsigned, not signed, copy of the 25 September 2015 contract on its personnel file. In his evidence Mr Constable produced a signed copy. The employer questioned the validity of Mr Constable’s signed copy. Although nothing turns on this (given that the signed and unsigned copies are in same form), I accept Mr Constable’s evidence that the signed copy is an accurate record with contemporaneous signatures.

 7   A6 Clause 20.1

 8   A24

 9   R5 Statement of Sharaze Pentland paragraph 4

 10   R5 Statement of Sharaze Pentland paragraph 5

 11   R5 Statement of Sharaze Pentland paragraph 6

 12   R5 Statement of Sharaze Pentland paragraph 7

 13   A4 Statement of Michael Constable paragraph 19; R5 Statement of Sharaze Pentland paragraph 9

 14   R5 Statement of Sharaze Pentland paragraph 8

 15   A4 Statement of Michael Constable paragraph 29

 16   Somewhat ironically, Mr Petherick came to Mr Formato’s attention as a result of Mr Constable knowing of him through industry contacts and providing his CV after learning that Mr Formato was looking to recruit in TJM Products

 17   R5 Statement of Sharaze Pentland paragraph 16(d)

 18   A13; IF4

 19   A4 Statement of Michael Constable paragraph 49

 20   A4 Statement of Michael Constable paragraph 51

 21   A4 Statement of Michael Constable paragraph 53

 22   A4 Statement of Michael Constable paragraphs 59 and 60; R5 Statement of Sharaze Pentland paragraphs 26 and 27

 23   A15

 24   A17

 25   Metropolitan Fire and Emergency Services Board v Duggan [2017] FWCFB 4878 at [21]; Mahoney v White [2016] FCAC 160 at [23]; Ayub v NSW Trains [2016] FWCFB 5500 at [24]

 26   [2018] FWCFB 5 at [18]

 27   Gelagotis v Esso Australia Pty Ltd [2018] FWCFB 6092 at [119]

 28   (2007) 233 CLR 115 at 44

 29   Whittaker v Unisys Australia Pty Ltd [2010] VSC 9 at 33

 30   Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) SR (NSW) 632 at 641

 31   Keays v JP Morgan Administrative Services Australia Ltd [2012] FCAFC 100 at 81; Quinn v Jack Chia (Aust) Pty Ltd [1992] 1 VR 567 at 576; Rigby v Ferodo Ltd [1988] LCR 29 at 33

 32   Clause 2.2: “Duties. You will be employed to conduct the duties as discussed at the interview. However, given the nature of a retail business, you may be required to assist in any aspect of the business from time to time.”

 33   Bupa Aged Care Australia Pty Ltd v Tavassoli [2017] FWCFB 3941 at [47]; see also Mohazab v Dick Smith Electronics Pty Ltd 1995] IRCA 625; 62 IR 200; Rheinberger v Huxley Marketing Pty Limited (1996) 67 IR 154; O'Meara v Stanley Works Pty Ltd PR973462 [2006] AIRC 496 (11 August 2006)

 34   ABB Engineering Construction Pty Ltd v Doumit Print N6999 (9 December 1996); see also Easling v Mahoney Insurance Brokers Pty Ltd [2001] SASC 22 as cited in Thomson v Orica Australia Pty Ltd (2002) 116 IR 186 at [141] and Kilcran v Gothard [2014] FCAFC 6 at [84]

 35   Australian Concise Oxford Dictionary (2nd edition)

 36   Audio transcript 4.9.18 12.03pm

 37   [1983] IRLR 313

 38   (1995) 63 IR 357 

 39   Easling v Mahoney Insurance Brokers Pty Ltd [2001] SASC 22 at [99]

 40   Selvachandran v Peterson Plastics Pty Ltd (1995) 62 IR 371, 373

 41   R6

 42   A19

 43   Payslips GF1

 44   A23

 45   A19

 46   R6

 47   Further Submissions of Applicant 28 August 2018 paragraph 8

 48   Written Submissions of the Respondent 21 August 2018 paragraph 20

 49   A19