| FWC 6154|
|FAIR WORK COMMISSION|
Fair Work Act 2009
Lek Supply Pty Ltd T/A Lek Supply
MELBOURNE, 4 OCTOBER 2018
Application for an unfair dismissal remedy.
 Abigail Jackman was employed by cabinetry hardware importer Lek Supply Pty Ltd (Lek Supply) in Internal Sales from 2 February 2015 until 23 April 2018. On 23 April 2018, her employment was terminated for alleged breach of conflict of interest, relating to her conduct of a hobby business making and selling candles, bath products and related goods.
 On 24 April 2018, Ms Jackman applied to the Commission for a remedy for unfair dismissal under section 394 of the Fair Work Act 2009 (Act). She says there was no valid reason for dismissal and that dismissal was a disproportionate response to the alleged conduct.
 On 27 April 2018, Lek Supply filed a response to the unfair dismissal application. It says Ms Jackman was dismissed after being caught stealing from the business between 5 and 13 April 2018 by conducting her own business during working hours. It says it is a small business employer for the purposes of the Act and the dismissal was consistent with the Small Business Fair Dismissal Code (the Code). That assertion is disputed by Ms Jackman, who says Lek Supply is an associated entity of Sky Communications Pty Ltd (Sky Communications). The parties agree it had approximately 70 employees at the relevant time. 1
 The matter was conciliated on 23 May 2018 and 24 July 2018 and was not settled. After seeking the views of the parties, I decided to hold a hearing in the matter in Melbourne on 30 July 2018. Ms Jackman was represented with permission by Just Relations Consultants. Lek Supply was unrepresented.
 There is no dispute that the application was filed within the 21 day timeframe required by the Act.
 Section 382 of the Act provides that a person is protected from unfair dismissal if, at the relevant time:
• they have completed at least the minimum employment period; and
• they are either covered by a modern award, employed under an enterprise agreement that applies to them or earn an annual income of less than the “high income threshold”.
 I am satisfied on the material before me that Ms Jackman had more than twelve months’ continuous service at the time of her dismissal. 2 She has completed at least the minimum employment period.
 There is no dispute that at all times, Ms Jackman’s annual income was less than the high income threshold.
 Ms Jackman is a person protected from unfair dismissal for the purposes of section 382.
 A person has been unfairly dismissed if the Commission is satisfied that:
(a) the person has been dismissed;
(b) the dismissal was harsh, unjust or unreasonable;
(c) the dismissal was not consistent with the Code; and
(d) the dismissal was not a case of genuine redundancy. 3
 There is no dispute that Ms Jackman was dismissed on conduct grounds. No issue of redundancy arose and I am satisfied that the dismissal was not a case of genuine redundancy.
 The Code applies to small business employers with less than 15 employees. 4 The question is whether Lek Supply was a small business employer at the earlier of the time immediately before dismissal or when notice of the dismissal is given, which in this case was 23 April 2018.5
 Lek Supply says it had 13 employees at the relevant time, not including Ms Kim Chea (Sole Director), Mr Ben Lek (Chief Executive Officer) or Vincent Lim who processes the payroll for Lek Supply. 6 Lek Supply says Ms Chea is a Director, but not an employee, of Lek Supply. It says that Mr Lek and Mr Lim are employed and paid by Sky Communications. There is nothing before me to contradict this evidence and I accept it. In circumstances where the two businesses share office space, it is likely they also share resources to reduce their costs. In that scenario it is not surprising that employees of one company might undertake certain functions for the other. On the materials before me, I find that Lek Supply had 13 employees on 23 April 2018.
 In calculating the number of employees employed by an employer at a particular time, employees of the employers’ “associated entities” are also counted. The phrase ‘associated entities’ has the meaning given to it by section 50AAA of the Corporations Act 2001 (Cth) (Corporations Act). That includes the concept of ‘control’ in section 50AA of the Corporations Act.
 Lek Supply is wholly owned by Skycomms Investments Pty Ltd (ABN 167 074 339) (Skycomms Investments). 7 Ms Chea is the sole director of Skycomms Investments.8 Skycomms Investments is trustee for the Skycomms Discretionary Trust, of which Mr Lek and Ms Chea are beneficiaries.9
 As well as being Chief Executive Officer of Lek Supply, Mr Lek is Chief Executive Officer of Sky Communications. According to Mr Lek, it is a separate business 10 that is unrelated to Lek Supply. It is currently in liquidation. It is in a different industry, has different shareholders and is owned by Skycomms Holdings Pty Ltd.11 Other than the evidence of Mr Lek, there is no material before me about the corporate structure, ownership, resources or affairs of either Sky Communications or Skycomms Holdings.
 Sky Communications is neither a holding nor subsidiary company of Lek Supply. 12 There is no evidence Sky Communications controls Lek Supply or that the reverse is true. The evidence is that the two businesses are separate and distinct. There is no evidence of any material qualifying investment by one in the other before me.
 Of the five limbs of the associated entities definition in section 50AAA, only the last appears to me to be relevant in this case based on the available information. 13 That is, it may be that a third entity (either Ms Chea or Mr Lek) controls both Lek Supply and Sky Communications in circumstances where the operations, resources or affairs of both entities are material to them.
 “Control” in this context means having the “capacity to determine the outcome of decisions about financial and operating policies” of the relevant entity. Capacity is determined by reference to the practical influence one can exert over the other, taking into account any practice or pattern of behaviour affecting the financial or operating policies of the entity said to be under control. It is not enough to hold joint control over an entity. It is also not sufficient if the capacity to influence decisions arises in the context of a legal obligation to act beneficially for someone other than one’s own shareholders. 14
 I accept the evidence of Mr Lek that as its sole director, Ms Chea controls Lek Supply and that she does so ultimately as the director of a trust operating for the benefit of both herself and Mr Lek. That evidence is consistent with the evidence of Tina Dao, General Manager, that while Mr Lek is part of senior management, she reports to Ms Chea. 15 As Chief Executive Officer of both entities, Mr Lek clearly has a degree of practical influence over Lek Supply and Sky Communications. However, I am not satisfied on the material before me that it falls within the meaning of ‘control’ for the purposes of section 50AAA of the Corporations Act.
 It follows that I am not satisfied that Lek Supply was an associated entity of Sky Communications at the time of dismissal. Lek Supply is to be treated as a small business employer in this matter.
 As noted above, a person is not unfairly dismissed if the dismissal is consistent with the Code and immediately before dismissal or at the time notice of the dismissal is given, whichever is earlier, the employer is a small business employer. 16
 The Code provides as follows:
The Small Business Fair Dismissal Code comes into operation on 1 July 2009.
It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.
In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee's conduct or capacity to do the job.
The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.
The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee's response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer's job expectations.
In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.
A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.
 In Ryman v Thrash Pty Ltd t/a Wisharts Automotive Services 17, a Full Bench of this Commission considered the proper application of the ‘Summary Dismissal’ section of the Code and concluded that it applies to dismissals without notice on the ground of serious misconduct as defined in regulation 1.07 of the Fair Work Regulations 2009.
 In this matter, Lek Supply says Ms Jackman was summarily dismissed. However, while the dismissal took immediate effect, it occurred in circumstances where Ms Jackman was paid one week’s wages in lieu of notice and was not required to work during the notice period. There is no mention of serious misconduct in the letter of termination. I find that the Code is to be applied as it relates to ‘other dismissal’.
 There is no contention that any warning was given to Ms Jackman that she was at risk of being dismissed prior to it taking effect. Lek Supply gave clear evidence that Ms Jackman was not given a chance to rectify the problem. I find that the dismissal was not consistent with the Code.
 The phrase ‘harsh, unjust or unreasonable’ was explained in Byrne v Australian Airlines Ltd 18 as follows:
“....It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment may be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted.”
 Whether a particular dismissal was harsh, unjust or unreasonable will depend on a range of factors, including those set out in section 387 of the Act:
(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and
(b) whether the person was notified of that reason; and
(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and
(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and
(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and
(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
(h) any other matters that the FWC considers relevant.
Was there a valid reason for the dismissal related to capacity or conduct?
 At the core of this matter is Ms Jackmans’ alleged conduct in running a private business on company time in breach of her contract of employment. The facts are generally not in dispute.
 Ms Jackman was on maternity leave from May 2017 until 27 January 2018.
 On 27 July 2017, Ms Jackman registered a business name “Royal Scent & Co”. Facebook and Instagram pages were also established for the business, which sells candles, reed diffusers, bath and body products and other items from Ms Jackman’s home. The business derives revenue of less than $10,000 per year.
 Ms Jackman resumed work with Lek Supply on a part-time basis (3 days per week) on 28 January 2018.
 After a discussion between the parties about Ms Jackman’s working arrangements, the parties agreed on a pay rise for Ms Jackman in return for her agreeing to work full time.
 Ms Jackman commenced full time employment with Lek Supply on 3 April 2018 and signed an employment contract for the revised role on 11 April 2018. Handwritten amendments to the contract show the outcome of negotiations between the parties over terms dealing with the probationary period and superannuation.
 The contract of employment includes the following terms:
“You must at all times… devote your full working hours to the requirements of your role.”
“Your hours of work are 8am to 5pm, Monday to Friday plus any reasonable additional hours as required from time to time.”
“While employed by Lek Supply Pty Ltd, you must not engage in private business or undertake other employment in direct or indirect competition with Lek Supply Pty Ltd using any knowledge or materials gained during the course of your employment under this agreement. Any such activity will be deemed to be a conflict of interest with Lek Supply Pty Ltd and may lead to the termination of your employment under the terms of this agreement.”
“Use of Lek Supply Pty Ltd’s internet facilities to access social media applications or services is prohibited during working hours, unless specifically approved for your role. This includes accessing such sites during working time on your business or personal mobile. Making excessive personal calls and sending personal text or chat messages, is also prohibited.”
 Ms Dao became aware of a customer complaint about Ms Jackman placing a wrong customer order. While Ms Dao was making inquiries about the customer complaint, Keang Sun (Internal Sales and Administration), told her that Ms Jackman was always on the phone and that she had her own business. She told her the name of the business. Ms Dao says she spoke to three team members individually and each had similar accounts. From those discussions, she formed the view that while Ms Jackman was completing her work, she was “constantly on her personal phone, and not for work purposes”. According to Ms Dao, there was no reason for Ms Jackson to use her personal phone at work. 19
 Over the weekend of 21 and 22 April 2018, Ms Dao decided to look into Royal Scent & Co. She found the business on Facebook and Instagram, with Ms Jackman’s profile showing her as the sole ‘team member’ of the business and containing her mobile phone number. She saw its hours of operation advertised from Monday to Friday, 9am to 5pm. She noted a Facebook statistic reporting that the business “typically replies within a few hours”. She discovered daily posts on Facebook, 20 including the following posts21:
1. Post dated “Monday at 1.27pm”
2. Post dated “Monday at 4.20pm”
3. Tuesday 3 April 2018 at 3.27pm (including the hashtag #smallbusiness)
4. Thursday 5 April 2018 at 9.57am
5. Monday 9 April 2018 at 9.16am
6. Monday 9 April 2018 at 9.51am
7. Tuesday 10 April 2018 at 3.11pm (including the hashtag #smallbusiness)
8. Tuesday 10 April 2018 at 3.14pm
9. Wednesday 11 April 2018 at 2.43pm
10. Thursday 12 April 2018 at 9.18am (including the hashtag #smallbusiness)
11. Thursday 12 April 2018 at 10.28am
12. Friday 13 April 2018 at 11.57am.
 Ms Dao decided to dismiss Ms Jackman in consultation with Ms Chea. She felt her operating her business at work was serious misconduct. She held the view that nothing Ms Jackman could say would provide an adequate response. She asked Mr Lek to meet with Ms Jackman and dismiss her. 22
 On 23 April 2018, Mr Lek asked Ms Jackman to meet with him. Ms Jackman was not told the purpose of the meeting before it commenced. He did not ask her about anything. He simply handed her a letter of dismissal and then had a brief discussion with her about what it meant. 23 Ms Jackman asked ‘why’ and he said the home business was a conflict of interest. Ms Jackman denied using the company’s internet and demanded proof of the allegations.24
 Ms Jackman was asked in the hearing if she was ever preoccupied on her phone at work. She said she didn’t “recall that ever happening” and that “there’s no proof” she got phone calls during business hours. She said she communicated instead by text with her friend, Jessica Walker, who would help her with the business when she was at work. Ms Walker was not called to give evidence.
 Ms Jackman said she did post business ads for Royal Scent & Co on social media during work hours but that most of the time it was during her break times. She agreed that she responded to inquiries during business hours through personal message, because that was where a lot of her orders came from. 25
 Ms Jackman said she hadn’t noticed the conflict of interest clause in her contract of employment when she signed it, and she didn’t think she had a reason to tell Lek Supply about her home business. She did not think it needed to know about Royal Scent & Co, because it wasn’t affecting her work ethic for Lek Supply. She denied using any company resources (email, work printer or computer) for her business and said she didn’t have any paper records for the business. She agreed that her sales skills had improved while employed with Lek Supply and that she used those skills in her home business. 26
 I find that Ms Jackman engaged in private business activities while at work and that she did so during working hours. I do not accept that these activities were always conducted during breaks. Ms Jackman conceded as much. Whether she did so verbally or in written form is beside the point. It was activity that detracted from her duty to Lek Supply.
 I do not accept that Ms Jackman was unaware of her obligations under her contract of employment. The handwritten notations make it more likely that the contract was read carefully before it was signed, with negotiations taking place to address any concerns. I also do not accept the submission of Ms Jackman that the contract only prevents private business that is in “direct or indirect competition” with Lek Supply. There is no reason to read the conflict of interest term in such a limited way. On a fair reading, it prevents employees from engaging in private business during their employment as well as other employment in competition with Lek Supply. It requires employees to devote their “full working hours” to the requirements of their role. It prohibits access to social media applications or services during working hours, unless specifically approved for the role, either on a business or personal mobile phone. It prohibits the sending of personal text or chat messages at work.
 Ms Jackman’s conduct of her private business during working hours on her mobile phone was in breach of her contract of employment and a valid reason for dismissal.
 This factor weighs against a finding of unfair dismissal.
Notice of reason for dismissal
 There is no dispute that the dismissal of Ms Jackman occurred without warning. There was no notice of the reason for dismissal until the time of dismissal. This weighs in favour of a finding of unfair dismissal.
Opportunity to respond
 I am not satisfied that Ms Jackman was given any opportunity to respond to the reasons for dismissal. She was dismissed before the reason for dismissal was communicated to her. This weighs in favour of a finding of unfair dismissal.
Any unreasonable refusal to allow a support person to assist in discussions relating to the dismissal
 There is no evidence of any refusal to allow a support person to participate in discussions relating to the dismissal. This is a neutral consideration in this case.
Warnings about unsatisfactory performance
 There is no evidence of any warnings given to Ms Jackman about her conduct or performance. This weighs in favour of a finding of unfair dismissal.
The size of the employer’s business and access to dedicated human resources management specialists or expertise
 As a small business employer, there is no evidence that Lek Supply had access to dedicated human resources management specialists or other similar expertise. The evidence was that the business did not get a lawyer. 27 I accept that the financial position of the business is not strong. While things have improved since 2017, Lek Supply remains in a net debt position.28 That is likely to have affected its capacity and decision-making about sourcing external advice. Had advice been sought, it is likely that the process adopted in relation to the dismissal would have been much improved.
 I am satisfied that both the size of Lek Supply’s enterprise and its lack of access to human resources expertise contributed to a denial of procedural fairness in relation to the dismissal. This factor weighs marginally against a finding of unfair dismissal.
Other relevant matters
 Ms Jackman was generally a competent and valued employee of Lek Supply. At the time of dismissal, Lek Supply was getting busier and had agreed to increase her remuneration so as to secure her services on a full time basis. It had not found a replacement for her role at the time of the hearing.
 Ms Jackman was paid one week’s wages in lieu of notice. On the available information, Ms Jackman’s period of continuous service was more than one year and less than three years (not including the period of maternity leave). That would mean an entitlement to two weeks’ notice of termination, which is more than the amount paid.
 Having considered each of the matters specified in section 387, on balance I am satisfied that the dismissal was harsh. It was a disproportionate response to a valid concern, which had only recently become apparent. A warning would have been a more appropriate response.
 The view expressed by Ms Dao that nothing Ms Jackman could have said would have made any difference denied Ms Jackman the chance to acknowledge the inappropriateness of her conduct and to adjust her behaviour accordingly. In my view, her history as a valued employee of the business suggests she would have done just that.
 I find that Ms Jackman was unfairly dismissed.
 In this case, reinstatement is an appropriate remedy and consistent with a ‘fair go all round’. Other than her conduct in relation to Royal Scent & Co, Lek Supply had no concerns with Ms Jackman’s performance. Ms Jackman has found alternative employment but it involves longer working hours and lower wages. These concerns can be remedied by restoring her to her former position. In returning to work, Ms Jackman is on notice that it is not appropriate for her to conduct her personal business at work, whether by phone, text message, or otherwise. If her business is to continue to operate, Ms Jackman will need to make arrangements for it to occur outside of working hours.
 I consider it appropriate to make an order for continuity of service under section 391(2).
 As to lost pay, Lek Supply is a small business and its financial position is not strong. I am also mindful that Ms Jackman’s conduct was the sole catalyst for the events leading to her dismissal. I do not consider that an order under section 391(3) of the Act is appropriate in this case.
 An Order giving effect to this decision will be issued separately in PR701028. To allow time for necessary notice and other workplace arrangements to be made, the Order will take effect in 14 days.
G Dircks for the Applicant
B Lek for Lek Supply Pty Ltd
Printed by authority of the Commonwealth Government Printer
1 Audio recording of hearing on 30 July 2018, Evidence of Ben Lek
2 Form F2 application filed on 24 April 2018; Form F3 Employer Response filed on 27 April 2018; Respondent’s Outline of arguments: merits filed on 25 June 2018
3 Fair Work Act 2009 (Cth), s.385
4 Fair Work Act 2009 (Cth), s.23
5 Fair Work Act 2009 (Cth), s.385; s.388
6 Exhibit 7, Payroll list of employees
7 ASIC Company Extract, Lek Supply Pty Ltd (ACN 113 176 659), 8 August 2018
8 ASIC Company Extract, Skycomms Investments Pty Ltd (ACN 167 074 339), 8 August 2018
9 Email from Ben Lek to the Commission, 6 August 2018
10 Audio file of hearing 30 July 2018, Evidence of Ben Lek
11 Exhibit 4, Statement of Ben Lek
12 ASIC Company Extract, Lek Supply Pty Ltd (ACN 113 176 659), 8 August 2018
13 Corporations Act 2001 (Cth), s.50AAA(7)
14 Corporations Act 2001 (Cth), s.50AA
15 Audio file of hearing 30 July 2018, Evidence of Tina Dao
16 Fair Work Act 2009 (Cth), s.385; s.388
17  FWCFB 5264
18  HCA 24; (1995) 185 CLR 410 at 465
19 Exhibit 3, Statement of Tina Dao
20 Exhibit 3
21 Exhibit 6, Facebook Screenshots
22 Exhibit 4
23 Exhibit 4
24 Audio recording of hearing on 30 July 2018, Evidence of Ben Lek
25 Audio recording of hearing on 30 July 2018, Evidence of Abigail Jackman
26 Audio recording of hearing on 30 July 2018, Evidence of Abigail Jackman
27 Audio recording of hearing on 30 July 2018, Evidence of Ben Lek
28 Lek Supply Management Report for the year ended 30 June 2017, filed on 6 August 2018