| [2019] FWC 7842 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
John Ernest Harley
v
Salena Estate Pty Ltd
(U2019/7406)
COMMISSIONER PLATT |
ADELAIDE, 19 NOVEMBER 2019 |
Application for an unfair dismissal remedy.
[1] On 5 July 2019, Mr John Harley (Applicant) made an application to the Fair Work Commission (Commission) under s.394 of the Fair Work Act 2009 (Cth) (the Act) for a remedy, alleging that he had been unfairly dismissed from his employment with Salena Estate Pty Ltd (Salena or the Respondent).
When can the Commission order a remedy for unfair dismissal?
[2] Section 390 of the Act provides that the Commission may order a remedy if:
(a) the Commission is satisfied that the Applicant was protected from unfair dismissal at the time of being dismissed; and
(b) the Applicant has been unfairly dismissed.
[3] Both limbs must be satisfied. I am therefore required to consider whether the Applicant was protected from unfair dismissal at the time of being dismissed and, if I am satisfied that the Applicant was so protected, whether the Applicant has been unfairly dismissed.
When is a person protected from unfair dismissal?
[4] Section 382 of the Act provides that a person is protected from unfair dismissal if, at the time of being dismissed:
(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and
(b) one or more of the following apply:
(i) a modern award covers the person;
(ii) an enterprise agreement applies to the person in relation to the employment;
(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.
[5] There was no contrary submission and I find that Mr Harley was protected from unfair dismissal.
When has a person been unfairly dismissed?
[6] Section 385 of the Act provides that a person has been unfairly dismissed if the Commission is satisfied that:
(a) the person has been dismissed; and
(b) the dismissal was harsh, unjust or unreasonable; and
(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and
(d) the dismissal was not a case of genuine redundancy.
Background
[7] The uncontested factual background to the matter is as follows:
• Mr Harley commenced employment as a Sales Manager on 6 October 2015.
• Mr Harley was dismissed on 17 June 2019 having completed 3 years and 8 months.
• Mr Harley’s salary was $68,234 p.a. (or $1312.19 per week). 1
• Mr Harley was paid 5 weeks’ notice upon termination and his accrued leave entitlements.
• Mr Harley was 72 years of age at the time of dismissal.
• Salena employed 40 persons at the time of dismissal.
The hearing
[8] Salena contended that Mr Harley failed to follow its business plan and strategy, and that his work performance was substandard and this constituted a valid reason for his dismissal. This was disputed by Mr Harley.
[9] There being contested facts involved, the Commission is obliged by s.397 of the Act to conduct a conference or hold a hearing. I considered it appropriate to conduct a hearing (s.399 of the Act).
Permission to appear
[10] The Applicant sought to be represented before the Commission by Ms M.Hamlyn a lawyer. The Respondent sought to be represented before the Commission by Mr M.Franchitto a paid agent. It should be noted that Mr Bob Franchitto is the owner of Salena and references to ‘Mr Franchitto’ in this decision are not preferences to Salena’s representative unless expressly described.
[11] Section 596(1) of the Act provides that a party may be represented in a matter before the Commission by a lawyer or paid agent only with the permission of the Commission.
[12] Section 596(2) provides that the Commission may grant permission for a person to be represented by a lawyer or paid agent in a matter before the Commission only if:
(a) it would enable the matter to be deal with more efficiently, taking into account the complexity of the matter; or
(b) it would be unfair not to allow the person to be represented because the person is unable to represent himself, herself or itself effectively; or
(c) it would be unfair not to allow the person to be represented taking into account fairness between the person and other persons in the same matter.
[13] I determined that allowing both Mr Harley and Salena to be represented by a lawyer and a paid agent respectively would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter and exercised my discretion to grant permission for Mr Harley and Salena to be represented.
Witnesses
[14] Mr Harley submitted a witness statement dated 22 August 2019 2 and a further witness statement dated 28 August 2019.3 His relevant evidence is summarised as follows:
• Mr Harley had worked in the wine industry for 36 years and knew the industry well. 4
• On 6 October 2015 Mr Harley commenced employment as a Sales Manager. Mr Harley understood his duties as selling wine to general retail, restaurants, hotels, function centres and whoever he could sell the product to. Mr Harley contended that his KPIs were never documented. Mr Harley contended that the prices were set for him and there was no obligation as to the volume of wine to be sold. 5
• Mr Harley submitted an executed employment agreement dated 6 October 2015 6 which described his role as SA Sales Manager, and in Clause 6 (Performance Management) advised that [post probation] he was required to participate in 6 monthly performance reviews based on the KPIs, duties and objectives of the role. The contract of employment did not contain any specific KPIs, duties or objectives.
• Salena sells a range of wines including cleanskin and premium wines.
• Mr Harley contended that during his employment he sought a copy of the sales budget and sales reports from his respective managers and Mr Franchitto but was only ever supplied with actual sales from the previous month.
• Mr Harley contends he was never provided with any documentation advising of desired sales or KPIs. However, Mr Harley stated that Mr Powell (who has since left Salena) had set a sales requirement of $170K for FY2017, low $190K’s in FY2018 and just over $200K for FY2019. 7
• It was suggested to Mr Harley that his objective in 2017, 2018 and 2019 was to achieve $200K in ex tax sales with a fair product mix. Mr Harley rejected this contention. 8
• Mr Harley disputed the profit figures contained in Exhibit R2.
• Salena suggested Mr Harley was counselled by Mr Castronini on 10 May 2017, Mr Harley contended he did not meet with Mr Castronini until 10 April 2019 in relation to a complaint he made on 5 April 2019. 9 Salena later withdrew that allegation.10
• On or about 29 March 2019 Mr Harley was asked by Mr Franchitto to attend a meeting. Mr Harley disagreed with the account of the meeting recorded in Exhibit R14. 11 Mr Harley contended he was introduced to Mr Matt Davidson who had been appointed as his Manager. The meeting discussed sales levels, business plans and strategies and was the first such discussion since September 2018 when Mr Bob Powell was his Manager. Mr Franchitto said he was not happy with Mr Harley’s performance and suggested that Mr Harley concentrate on selling the more premium ‘Ink Series’ to restaurants and requested that he obtain 50 new restaurant accounts within 2 weeks. Mr Harley advised he would attempt to do so, but this task would be difficult and that restaurants were often bad debt risks. Mr Harley was unable to obtain additional restaurant clients.12 The meeting also discussed the 2018 and 2019 YTD sales, however Mr Harley did not think that the information given matched up with his own records. Mr Harley was not provided with written reports. Mr Harley questioned the disparity and Mr Franchitto advised that he or Mr Davidson would get back to him. Near the end of the meeting, Mr Franchitto said that Mr Harley was past retirement age and it was about time he retired. Mr Harley advised he did not wish to retire.
• Mr Harley met with Mr Davidson on 1 April 2019. It was agreed to increase the case price. Mr Harley denied that he said he had too much of a cleanskin focus. 13
• Mr Harley agreed to try an improve the product mix and focus on more profitable business with existing customers. 14
• On 5 April 2019 Mr Harley made a complaint to Mr Michael Castronini, Salena’s HR Manager, about Mr Franchitto’s comment concerning his age. 15 Mr Castronini said he would follow up the matter.
• On 10 May 2019 Mr Harley met with Mr Castronini, Mr Harley rejected the description of that meeting as a performance review meeting, or that targets were discussed, 16 but accepts that the need for increased sales were discussed.17 Mr Harley complained he felt bullied by Mr Franchitto as a result of his age.18 In respect of that complaint Mr Castronini encouraged Mr Harley to try and get along better with Mr Franchitto.19
• On 7 June 2019 Mr Harley met with Mr Franchitto in the afternoon. The meeting lasted 5 minutes. Mr Harley contends that the meeting did not discuss sales performance or increasing same. The meeting discussed the return of a 205 litre drum from a customer to the Salena winery and there was a discussion about the price of organic cabernet sauvignon. Mr Franchitto said Mr Harley’s price was too cheap. Mr Harley said he smelt alcohol on Mr Franchitto’s breath, but disagreed that he left the meeting abruptly, contending he left so as to answer his mobile phone. 20
• On 13 June 2019 Mr Davidson requested a meeting with Mr Harley later that day. No reason for the meeting was advised. Mr Harley attended the meeting which was attended by Mr Davidson and Mr Max Franchitto (who is also Salena’s representative in these proceedings). Mr Harley disputes the account of the meeting in Exhibit R1A. 21 Mr Harley contends that Mr Max Franchitto advised he was conducting a management review and asked questions about Salena’s products, portfolios and ways in which Salena’s business could be increased. Mr Harley advised him that there was strong demand for the budget wines and that he was trying to increase sales in the premium range but customers were not requesting those wines. Mr Harley advised that some of the higher prices Montepulciano and Tempranillo wines from the Ink Series had been out of stock for 12 months. Mr Harley also advised it was proving difficult to sell aged white wines. The names of Mr Harley’s main customers were discussed.22 Mr Harley contended that Mr Max Franchitto said to him that Mr Harley and Salena Wines had reached their use by date and a redundancy was not being considered.23 Mr Harley alleged that at the end of the conversation Mr Max Franchitto said to him ‘you obviously do not have much faith in the company’. The meeting concluded without any outcome or agreed follow up. Mr Harley could see that Salena wanted to end the employment relationship.24
• On Monday 17 June 2019 Mr Harley was called into a meeting with Mr Davidson without warning. Mr Max Franchitto was also present. Mr Max Franchitto presented an undated letter to Mr Harley which had been signed by Mr Bob Franchitto. The letter advised that Salena was looking to adopt a different strategy and that Mr Harley did not have the experience, aptitude and qualifications to support the future strategy. The letter further advised that ‘due to these and other reconcilable differences in business focus & principles and therefore the consequential unacceptable sales performance’ … ‘your employment with Salena Estate Wines has reached an endpoint.’ The letter advised Mr Harley would be paid 4 weeks’ notice plus accrued entitlements. Mr Harley sought some time to seek independent advice and check his entitlements. Mr Harley contends that Mr Max Franchitto advised ‘John Harley and Salena Estate has reached a use by date.’
• At the hearing Mr Harley disputed the accuracy of the YTD sales figures 25 submitted by Salena. Mr Harley stated he had not been previously provided with these documents and described the suggested loss of $100K in 2018 as a fabrication. Mr Harley contended he sold up to $190K of product in FY2017, at a profit margin of 24%, approximately $196K in FY2018 at a 24-26% profit margin, and about $250K but at a higher profit margin than suggested.26
• Mr Harley accepted that sales of cleanskin wines are less profitable than premium wines 27 Mr Harley contended that he sold 70% cleanskin and 30% premium wines over the course of his employment.28 It was suggested to Mr Harley that the split was 90/10 (by volume) but he rejected that proposition. Mr Harley contended that on occasions the entire premiums range was not available to sell, and that Salena had a reputation for selling low end wine.29
• Mr Harley was instructed as to the price at which the wines were sold and could not lower the price without approval from his Manager. 30 Mr Harley was not privy to the cost of goods sold information.31
• Mr Harley accepted he had discussions about how to improve the premium/cleanskin mix so as to improve profit. 32 Mr Harley contended he was not responsible for the marketing strategy.33
• Mr Harley accepted Salena’s view that his sales were not as good as they could have been but that he was not given a reasonable opportunity to improve. 34
• Mr Harley advised he intended to work at Salena for a further five years.
• Since the dismissal, Mr Harley has started his own wine related business as a commission agent and has secured two clients and as at the time of the hearing had earnt $300. 35
• Mr Harley did not seek reinstatement.
[15] The following witnesses gave evidence on behalf of the Respondent:
• Mr Baldina (Bob) Franchitto (Owner and Managing Director)
• Mr Michael Castronini (Performance Improvement Manager)
• Mr Matthew Davidson (Global Sales Manager)
[16] The material submitted by Salena was unstructured. Salena provided a document titled ‘Points of Evidence’ which referred to a number of exhibits and was part submission and part statement. I have extracted portions of this document and the exhibits referred to and summarised them in the appropriate witness’s evidence.
[17] Mr Bob Franchitto submitted a witness statement dated 21 August 2019. 36 His relevant evidence is summarised as follows:
• Salena employed 40 persons and had an internal HR function – Mr Castronini.
• Mr Franchitto contended he discussed Mr Harley’s work performance on numerous occasions over his 3.5 year tenure. 37
• Originally Mr Franchitto sought that Mr Harley sell $400K p.a. but agreed with Mr Powell to reduce that to $200K p.a. 38 Mr Franchitto accepted that the contract of employment39 made no requirement to any required sales volume.40
• On Friday 7 June 2019 he met with Mr Harley between 4.00pm and 5.00pm. Mr Franchitto asked Mr Harley to discuss the sales performance and how sales could be increased by upselling with more premium wines. Mr Harley did not respond. Mr Franchitto then suggested he could try selling more premium wines into restaurants. Mr Harley sarcastically responded ‘do you want to get paid’ and then left the premises without explanation, returning the next day.
• Mr Franchitto said he had discussed with Mr Harley that Salena could not afford to keep operating like this if he could not lift sales and dramatically lift the number of accounts to improve sales.
• Mr Franchitto contended that the product mix was not profitable and he was losing money. 41
• Mr Franchitto accepted that he never gave Mr Harley a formal warning or advised Mr Harley that if he did not improve his performance his employment would be in jeopardy. 42
• Mr Franchitto was unable to produce any record of Mr Harley’s KPIs. 43
Mr Harley was given the price lists that he could sell wine at and that he could not unilaterally vary the price. 44
• Mr Franchitto accepted that if cleanskins were sold at the prices listed the profit outcome was unacceptable. 45
• Mr Franchitto signed the dismissal letter prior to the meeting on 17 June 2019. 46
• Mr Franchitto said he was aware of the age discrimination laws. 47
• Mr Franchitto submitted that Salena would not be able to pay a large award of compensation immediately. 48
[18] Mr Michael Castronini submitted a witness statement dated 20 August 2019. 49 His relevant evidence is summarised as follows:
• He has been employed by Salena as Performance Improvement Manager since 3 October 2017 and was responsible for the HR function and has HR management experience and qualifications. 50
• Mr Castronini was not aware of any documentation of Mr Harley’s KPIs, targets or performance indicators. 51 Mr Castronini did not see the need for written and agreed KPIs and indicators as a result of Salena operating in a capitalist economy and the need to ensure sales exceeds costs.52
• Mr Castronini accepted that whilst his statement only referred to one performance meeting, there were three or four meetings. 53 Mr Castronini contended he was not aware that it was intended to dismiss Mr Harley at the 13 June meeting.54
• On 17 August 2018 he received an email from Mr Tim Moen (who was not called to give evidence) to attend a meeting. 55 At around that time, Mr Castronini had some concerns in relation to Mr Harley’s performance.56
• In early April 2019 he commenced a review process with members of the sales team, Mr Matthew Davidson and Mr Harley.
• In April 2019 Mr Harley expressed concerns for his position and Mr Castronini suggested he improve sales and try and improve his working relationship with Mr Bob Franchitto. Mr Harley said he would try but he didn’t think it would work.
• On 10 May 2019 he conducted a performance review with Mr Harley at a café in Stepney. A discussion was had around sales processes and associated costs. Mr Castronini suggested targeting restaurants and hotel groups as a means of selling higher end products with larger margin potential. Mr Harley suggested that would not work and Salena would not be paid in time. Mr Castronini suggested that this direction was being set by Mr Bob Franchitto and Mr Harley should give it a go. Mr Harley disagreed. Mr Harley accepted that he and Mr Bob Franchitto did not have a good working relationship, and agreed that sales must cover costs, however there was no consensus as to how that should be achieved.
• Mr Castronini advised that Salena set the wine price and it could not be varied without authority. Mr Castronini stated that if the salesperson sold the goods at the nominated price it should not be possible to sell the wine at a loss. 57
• Mr Castronini advised that the cost of goods was determined at the end of the financial year and was impacted by non-budget item. For example, in 2018 a reverse osmosis machine had to be leased due to bacterial contamination, this was expensive. He agreed that it was possible that wine was sold at the agreed price and due to matters beyond the control of the employee the cost of goods was impacted. 58 Mr Castronini did not see issue with this stating ‘…that’s the process of business. One does not deal in fair matters always with business’.59
• Mr Castronini did not dispute that Mr Harley’s sales in 2018 or 2019 were at or near the $200K level, 60 and conceded that it was possible that cash sales made by Mr Harley may not have been attributed to him.61
• Mr Castronini accepted he did not advise Mr Harley at any time that his employment was at risk or provide any formal warnings. 62
[19] Mr Matthew Davidson submitted a witness statement dated 20 August 2019. 63 His relevant evidence is summarised as follows:
• He is employed by Salena as Global Sales Manager and commenced on 14 January 2019. His predecessor was Mr Bob Powell. Mr Harley reported to him. Mr Davidson’s function included setting the wine price. 64
• On 5 February 2019 he accompanied Mr Harley on a number of trade visits. He discussed with Mr Harley his focus on cleanskin and entry level products and flagged that as an issue. He discussed how the mix of products sold could be improved by selling more premium products with less focus on cleanskins. Mr Davidson said a strategy needed to be created to address this.
• On 29 March 2019 he attended a meeting with Mr Harley and Mr Bob Franchitto. The meeting discussed Mr Harley’s role and Mr Bob Franchitto’s dissatisfaction. The meeting reviewed the 1/7/18-26/3/19 sales of $170,000 and FY2018 sales of $197,339 with an average case price of $33-$31 65 - which was viewed as a non-profitable position. Mr Harley was advised that he should not be delivering products and if he sold more premium wine an external delivery agent could be engaged. Mr Harley said he would be increasing pricing in the next month or so by $1 per case which he was advised was not enough. Mr Bob Franchitto advised that things needed to change and he was not happy with Mr Harley’s performance. In his evidence Mr Davidson contended that it was clearly indicated to Mr Harley that he needed to increase the sales volume and profitability of his territory.66
• On 1 April 2019 he met with Mr Harley. Mr Harley reaffirmed he would be discussing price increases with customers. Mr Harley questioned profitability at $28 per case, Mr Davidson said this was not an issue and that he needed to sell at prices dictated by Management. Mr Harley suggested a new focus on ‘on-premise’ business. It was agreed that the cleanskin price would increase by $2 per case as a starting point. Mr Harley accepted he had a cleanskin only focus and this needed to change, agreement was reached on a focus on more profitable business with existing customers (including increasing prices and product mix by focussing on premium ranges) and increasing the customer base.
• Mr Davidson’s notes of the meeting conducted on 1 April 2019 revealed a discussion about age based retirement with Mr Harley offended by the way he was being treated, this information was contained in the original notes of the meeting but omitted from Mr Davidson’s statement. 67
• On 13 June 2019 Mr Davidson met with Mr Harley in the presence of Mr Max Franchitto. Mr Davidson said that Mr Max Franchitto raised the meeting of 29 March 2019 and asked if it was appropriate for Mr Harley to walk out on the Managing Director. Mr Harley suggested it was not a meeting. It was suggested to Mr Harley that he and Salena had ‘drifted apart.’ Mr Harley suggested that Salena did not have a strategic plan. Mr Max Franchitto questioned Mr Harley’s performance, and asked how could the parties part amicably. Mr Harley said he did not want that and he believed he had the ability to do the job. Mr Max Franchitto told Mr Harley that he had the authority to negotiate a separation package, but it was not a redundancy discussion. Mr Max Franchitto said there is no team here and the relationship is over. Mr Harley said he would go away to think about the options. Mr Max Franchitto said he would go away and work out the separation and suggested they reconvene on 17 June 2019.
• On 17 June 2019 Mr Davidson advised that he and Mr Max Franchitto met with Mr Harley. Mr Max Franchitto summarised Salena’s position – that they were looking for an amicable separation and verbally explained the payment/payout to Mr Harley. Mr Harley asked to take the offer away and consider it. Mr Max Franchitto said you can but this is the final discussion, the decision is all but made based on the previous events and discussions relating to performance. A discussion ensued about the details of the package. Mr Harley was asked if he had any questions and said he had nothing left to say. Mr Max Franchitto advised the payment would be made as per standard payroll and confirmed a few processes. The meeting concluded.
• Mr Davidson accepted that Mr Harley could sell wine at the stated price but it would not be profitable. When asked how he could be critical of Mr Harley selling a bottle of wine for the price dictated Mr Davidson said ‘ He was selling the wine at the price we dictated, so that is in line with his job requirements at the time.’ 68 Mr Davidson accepted that Mr Harley could not be blamed for the consequences of complying with the price directive.69
• Mr Davidson felt that there was no alignment between Salena and Mr Harley on the sales strategy. 70
• Mr Davidson accepted that Mr Harley would not have been aware that his employment was at risk as result of the meetings on 29 March and 1 April 2019. 71
[20] Mr Max Franchitto did not give evidence.
[21] Salena submitted a document which was titled ‘Sales by Sales Rep’. 72 It appears to be a summary of the years sales for FY2016, FY2017, FY2018 and YTD 2019. The document recorded that in FY2016 Mr Harley had sold $60,681 of stock for a profit of $20,374.78; and in FY2017 Mr Harley had sold $144,521.28 of stock for a profit of $11,689.17. In FY2018 Mr Harley sold $196,182.06 at a profit of -$101,443.74 and in YTD2019 Mr Harley sold $249,443.79 with a profit of $41,252.98. Mr Harley disputed the figures. The spreadsheet contained cost calculations.
[22] During the evidence it was revealed that Salena would determine its cost of production at the end of the financial year and apportion all costs (including capital works) to sales. In FY2018 there had been some considerable works which resulted in a cost of $297,605 be apportioned against Mr Harley’s product sales.
Factual Findings
[23] Despite the express references in Mr Harley’s contract of employment, there was no formal business plan or KPIs. The only criteria capable of measurement was the gross sales volume.
[24] As to the amount of gross sales required, I prefer Mr Harley’s evidence over that of Salena’s witnesses and find that his sales requirements were $170K for FY2017, approximately $190K in FY2018 and approximately $200K for FY2019. 73 I find that Mr Harley sold $144K in FY2017, $196K in FY2018 and $249K in FY2019.
[25] Whilst I accept there was some discussions around product mix, they are so imprecise as to allow measurement.
[26] It appears that Salena’s complaint with respect to Mr Harley was the volume and pricing of sales. There were no measurable volume requirements stipulated.
[27] Salena dictated the minimum price and I accept that Mr Harley sold goods at those prices determined by Salena. There is no evidence that Mr Harley exceeded his authority as to pricing.
[28] Owing to the method used to retrospectively calculate product costs and the inclusion of items over which Mr Harley has no control, Mr Harley had little control over profit. I accept that sales at the prices set by Salena could have been unprofitable.
[29] Other than the nomination of gross sales figure, it appears that Mr Harley’s sales requirements were so ill defined that measurement of Mr Harley’s performance against them is not possible.
[30] I accept that Mr Harley met his sales volume targets in FY2018 and exceeded the same in FY2019.
[31] Mr Harley met with Salena on 29 March, 1 April, 10 May, 7 June, 13 June and 17 June 2019. A review of the various discussions conducted with Mr Harley indicates that there was a level of dissatisfaction expressed over his work performance.
[32] Whilst there was some discussion about options to increase sales, there does not appear to have been a structured performance improvement process with measurable outcomes, nor was Mr Harley clearly made aware that if he did not improve his performance, his employment was at risk.
[33] It appears that Mr Max Franchitto was engaged to manage Mr Harley out of the business, and/or reach a basis for mutual separation. The latter did not occur, and I find that Mr Harley was dismissed on 17 June 2019 upon notice.
[34] It appears to me that Mr Harley’s age was a factor as early as 19 March 2019 and that it influenced Salena’s decision to dismiss him. It appears that Mr Franchitto was hoping that Mr Harley would retire in 6 months or so rather than dismiss him. 74
Submissions
[35] Mr Harley filed a written submission. Mr Harley’s submissions are summarised as follows:
• His dismissal was unfair as:
• there was no valid reason for the dismissal;
• he was given no opportunity to respond;
• he was not given an opportunity to request a support person;
• there were no warnings in relation to the alleged unsatisfactory performance;
• Salena is of a size that it should have afforded him procedural fairness and Salena had internal HR expertise.
• Mr Harley contends he was never provided with KPIs in accordance with his contract of employment.
• The demand for 50 new customers in 2 weeks advised on 29 March 2019 was unreasonable.
• The Applicant’s age (and its impact on obtaining employment) and the economic and personal circumstances of Mr Harley makes the dismissal harsh.
• The reference to Mr Harley’s age as a basis for the dismissal makes the dismissal harsh.
[36] Salena filed written submissions. Salena’s submissions are summarised as follows:
• Mr Harley failed to follow the business plan and strategy assigned to him.
• Mr Harley had three critical performance reviews and was offered an opportunity to improve.
• Mr Harley was inefficient at offering products and services and had consistent poor sales figures.
• Mr Harley made decisions as to pricing and dealing that were outside of his authority.
• Mr Harley was employed on a goodwill basis when he was already passed the legal retirement age and had the company determined to discriminate against him he would have not been offered the role.
• Mr Harley disagreed with Mr Bob Franchitto as to the appropriate business direction.
• Mr Harley was given four days between the 13 June and 17 June 2019 meeting to seek assistance, counsel or consider the concerns of Salena.
Has the Applicant been dismissed?
[37] A threshold issue to determine is whether the Applicant has been dismissed from their employment.
[38] I am satisfied that Salena’s actions (including that of its representative Mr Max Franchitto) at the meeting on 17 June 2019 had the effect of dismissing Mr Harley. I find that Mr Harley’s employment with Salena was terminated at the initiative of the Salena.
[39] I am therefore satisfied that the Applicant has been dismissed within the meaning of s.385 of the Act.
Initial matters
[40] Under section 396 of the Act, the Commission is obliged to decide the following matters before considering the merits of the application:
(a) whether the application was made within the period required in subsection 394(2);
(b) whether the person was protected from unfair dismissal;
(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;
(d) whether the dismissal was a case of genuine redundancy.
[41] There was no jurisdictional objection made by Salena in respect of the matters contained in s.396 of the Act and in addition, based on the information before me, there could not be any successful challenge made on these grounds.
[42] Having considered each of the initial matters, I am required to consider the merits of the Applicant’s application.
[43] Section 387 of the Act provides that, in considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the Commission must take into account:
(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.
[44] I am required to consider each of these criteria, to the extent they are relevant to the factual circumstances before me. 75
[45] I set out my consideration of each below.
Was there a valid reason for the dismissal related to the Applicant’s capacity or conduct?
[46] In order to be a valid reason, the reason for the dismissal should be “sound, defensible or well founded” 76 and should not be “capricious, fanciful, spiteful or prejudiced.”77 However, the Commission will not stand in the shoes of the employer and determine what the Commission would do if it was in the position of the employer.78
[47] Where a dismissal relates to an employee’s conduct, the Commission must be satisfied that the conduct occurred and justified termination. 79 The question of whether the alleged conduct took place and what it involved is to be determined by the Commission on the basis of the evidence in the proceedings before it. The test is not whether the employer believed, on reasonable grounds after sufficient enquiry, that the employee was guilty of the conduct which resulted in termination.80
[48] There were no KPIs issued in accordance with Mr Harley’s contract of employment.
[49] It appears that the only measure agreed was the level of Mr Harley’s gross sales. Mr Harley achieved that objective in FY2018 and FY2019.
[50] The profitability concerns expressed by Salena were not matters within Mr Harley’s control and for reasons detailed earlier, Mr Harley could comply with pricing and volume directives but ‘underperform’ due to foreseen expenses (such as in 2018).
[51] I find that there was no valid reason related to Mr Harley’s capacity and/or conduct.
Was the Applicant notified of the valid reason?
[52] Notification of a valid reason for termination must be given to an employee protected from unfair dismissal before the decision is made to terminate their employment, 81 and in explicit82 and plain and clear terms.83
[53] Whilst Mr Harley’s sales performance was the subject of discussion on a number of occasions prior to his dismissal, he was not given detailed facts about the alleged deficiencies. I accept that Mr Harley was aware of Salena’s concerns, however Mr Harley was not notified of the reason for his dismissal in explicit and plain and clear terms prior to the decision to dismiss being made, and appears to have been dismissed after refusing to agree a basis to voluntarily cease employment.
Was the Applicant given an opportunity to respond to any valid reason related to their capacity or conduct?
[54] Mr Harley had an opportunity to respond to the general concerns raised by Salena, but not the proposal to dismiss him.
Did the Respondent unreasonably refuse to allow the Applicant to have a support person present to assist at discussions relating to the dismissal?
[55] Where an employee protected from unfair dismissal has requested a support person be present to assist in discussions relating to the dismissal, an employer should not unreasonably refuse that person being present.
[56] There is no positive obligation on an employer to offer an employee the opportunity to have a support person:
“This factor will only be a relevant consideration when an employee asks to have a support person present in a discussion relating to dismissal and the employer unreasonably refuses. It does not impose a positive obligation on employers to offer an employee the opportunity to have a support person present when they are considering dismissing them.” 84
[57] There was no request by Mr Harley to have a support person present.
[58] In all the circumstances, I find that Salena did not unreasonably refuse to allow Mr Harley to have a support person present at discussions relating to the dismissal.
Was the Applicant warned about unsatisfactory performance before the dismissal?
[59] A mere exhortation for an employee to improve their performance would not be a sufficient warning. A warning must:
• identify the relevant aspect of the employee’s performance which is of concern to the employer; and
• make it clear that the employee’s employment is at risk unless the performance issue identified is addressed. 85
[60] Based on my factual findings it is clear that Mr Harley was not appropriately warned about his unsatisfactory performance prior to dismissal or that his employment was at risk.
To what degree would the size of the Respondent’s enterprise be likely to impact on the procedures followed in effecting the dismissal?
[61] Neither party submitted that the size of the Respondent’s enterprise impacted on the procedures followed in effecting the dismissal and I find that the size of Salena’s enterprise had no such impact.
To what degree would the absence of dedicated human resource management specialists or expertise in the Respondent’s enterprise be likely to impact on the procedures followed in effecting the dismissal?
[62] Salena had internal HR support and engaged external assistance.
[63] It appears to me that that the expertise of the external assistance had an adverse impact on the procedures followed in effecting the dismissal.
What other matters are relevant?
[64] Section 387(h) requires the Commission to take into account any other matters that the Commission considers relevant.
[65] I have taken into account Mr Harley’s personal attributes and their impact on potential re-employment.
[66] On the evidence before me it appears that Mr Harley’s age factored into the reason for dismissal. This may have been a breach of the General Protections provision of the Act.
Is the Commission satisfied that the dismissal of the Applicant was harsh, unjust or unreasonable?
[67] I have made findings in relation to each matter specified in s.387 as relevant.
[68] I must consider and give due weight to each as a fundamental element in determining whether the termination was harsh, unjust or unreasonable. 86
[69] Having considered each of the matters specified in s.387 of the Act, I am satisfied that the dismissal of the Applicant was harsh and unjust and unreasonable.
Conclusion
[70] I am therefore satisfied that the Applicant was unfairly dismissed within the meaning of s.385 of the Act.
Remedy
[71] Being satisfied that the Applicant:
• made an application for an order granting a remedy under s.394 of the Act;
• was a person protected from unfair dismissal; and
• was unfairly dismissed within the meaning of s.385 of the Act.
[72] I may, subject to the Act, order the Applicant’s reinstatement, or the payment of compensation to the Applicant.
[73] Under s.390(3) of the Act, I must not order the payment of compensation to the Applicant unless:
(a) I am satisfied that reinstatement of the Applicant is inappropriate; and
(b) I consider an order for payment of compensation is appropriate in all the circumstances of the case.
Is reinstatement of the Applicant inappropriate?
[74] Mr Harley did not seek reinstatement and considering the breakdown of the employment relationship, I accept it would not be an appropriate remedy.
Is an order for payment of compensation appropriate in all the circumstances of the case?
[75] Having found that reinstatement is inappropriate, it does not automatically follow that a payment for compensation is appropriate. As noted by the Full Bench, “[t]he question whether to order a remedy in a case where a dismissal has been found to be unfair remains a discretionary one…” 87
[76] In all the circumstances, I consider that an order for payment of compensation is appropriate.
Compensation – what must be taken into account in determining an amount?
[77] Section 392(2) of the Act requires all of the circumstances of the case to be taken into account when determining an amount to be paid as compensation to the Applicant in lieu of reinstatement including:
(a) the effect of the order on the viability of the Respondent’s enterprise;
(b) the length of the Applicant’s service;
(c) the remuneration that the Applicant would have received, or would have been likely to receive, if the Applicant had not been dismissed;
(d) the efforts of the Applicant (if any) to mitigate the loss suffered by the Applicant because of the dismissal;
(e) the amount of any remuneration earned by the Applicant from employment or other work during the period between the dismissal and the making of the order for compensation;
(f) the amount of any income reasonably likely to be so earned by the Applicant during the period between the making of the order for compensation and the actual compensation; and
(g) any other matter that the Commission considers relevant.
[78] I consider all the circumstances of the case below.
Effect of the order on the viability of the Respondent’s enterprise
[79] There is no submission, and I am satisfied, that an order for compensation would not have an effect on the viability of the employer’s enterprise. I accept that Salena seeks an extended time (which was not specified) to pay any award of compensation.
Length of the Applicant’s service
[80] Mr Harley’s length of service was 3 years and 8 months.
[81] I consider that the length of service does not support reducing or increasing the amount of compensation ordered.
Remuneration that the Applicant would have received, or would have been likely to receive, if the Applicant had not been dismissed
[82] As stated by a majority of the Full Court of the Federal Court, “[i]n determining the remuneration that the Applicant would have received, or would have been likely to receive… the Commission must address itself to the question whether, if the actual termination had not occurred, the employment would have been likely to continue, or would have been terminated at some time by another means. It is necessary for the Commission to make a finding of fact as to the likelihood of a further termination, in order to be able to assess the amount of remuneration the employee would have received, or would have been likely to receive, if there had not been the actual termination.” 88
Submissions
[83] Mr Harley submitted that his employment would have been likely to continue for a further period of 5 years.
[84] There was ample evidence of tension between Mr Bob Franchitto and Mr Harley over sales strategy. This had resulted in the deterioration of the working relationship as evidence by Mr Harley’s engagement with Mr Bob Franchitto and Mr Max Franchitto being engaged to end the employment relationship.
[85] It was possible that Mr Harley’s current sales would have recovered his employment costs and made an acceptable profit for the employer. I note that Mr Harley’s gross sales increased year on year. As a result of Salena’s accounting practices I cannot be sure about profitability.
[86] It is also possible that Salena may sought some professional HR advice and imposed appropriate ‘S.M.A.R.T.’ 89 sales targets which if not achieved and a proper performance process had occurred would have resulted in Mr Harley’s dismissal.
[87] In my view it is reasonable to assume that Mr Harley would have continued in his employment for 16 weeks and the amount of remuneration that the Applicant would have received or would have been likely to receive during that period is $20,995.04.
Efforts of the Applicant to mitigate the loss suffered by the Applicant because of the dismissal
[88] An employee has a duty to mitigate their loss, what is reasonable depends on the circumstances of the case. 90
[89] Mr Harley has provided evidence that he did not believe he would be able to secure employment and as a result had started a business selling wine. In my view taking into account Mr Harley’s personal experience and attributes, self-employment is a reasonable strategy to mitigate the loss as a result of the dismissal.
Amount of remuneration earned by the Applicant from employment or other work during the period between the dismissal and the making of the order for compensation
[90] The Applicant’s evidence is that the Applicant has earned $300 from employment or other work since the dismissal.
[91] That evidence is not challenged by the Respondent.
Amount of income reasonably likely to be so earned by the Applicant during the period between the making of the order for compensation and the actual compensation
[92] Mr Harley’s evidence is that he is likely to earn a further $5,000 (including monies earnt as at the date of the hearing) in the period between the making of the order for compensation and the payment of compensation. 91
[93] That evidence was not challenged by Salena.
[94] I am satisfied that the amount of income reasonably likely to be earned by the Applicant between the making of the order for compensation and the payment of compensation is $5,000.
Other relevant matters
[95] Salena contended that Mr Harley was paid 5 weeks as severance payment and that this should be deducted from any award. It appears to me that that amount was paid as notice, which was appropriate in the circumstances. I do not believe it is appropriate to make a deduction for payment of notice as it would have applied in any event.
Compensation – how is the amount to be calculated?
[96] As noted by the Full Bench, “[t]he well-established approach to the assessment of compensation under s.392 of the Act… is to apply the “Sprigg formula” derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul’s Licensed Festival Supermarket (Sprigg). 92 This approach was articulated in the context of the Act in Bowden v Ottrey Homes Cobram and District Retirement Villages.”93
[97] The approach in Sprigg is as follows:
Step 1: Estimate the remuneration the Applicant would have received, or have been likely to have received, if the employer had not terminated the employment (remuneration lost).
Step 2: Deduct monies earned since termination.
Step 3: Discount the remaining amount for contingencies.
Step 4: Calculate the impact of taxation to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.
Step 1
[98] I have estimated the remuneration Mr Harley would have received, or would have been likely to have received, if Salena had not terminated the employment to be $20,995.04 on the basis of my finding that that Mr Harley would likely have remained in employment for a further period of 16 weeks. This estimate of how long the Applicant would have remained in employment is the “anticipated period of employment”. 94
Step 2
[99] I have found that the amount of remuneration earned by Mr Harley from the date of dismissal to the date of hearing was $300.
[100] Only monies earned since termination for the anticipated period of employment are to be deducted. 95 I therefore deduct the sum of $300 from $20,995.
Step 3
[101] I now need to consider the impact of contingencies on the amounts likely to be earned by the Applicant for the remainder of the anticipated period of employment. 96
[102] I accept that Mr Harley may earn up to $4,700 in the anticipated period of employment and deduct that amount.
Step 4
[103] I have elected to settle on a gross amount of $15,995.
[104] Having applied the formula in Sprigg, I am nevertheless required to ensure that “the level of compensation is an amount that is considered appropriate having regard to all the circumstances of the case.” 97
[105] I am satisfied that the amount of compensation that I have determined above takes into account all the circumstances of the case as required by s.392(2) of the Act.
[106] I have not made any allowance for shock, distress etc. (s.392(4)).
Compensation – is the amount to be reduced on account of misconduct?
[107] If I am satisfied that misconduct of Mr Harley contributed to the employer’s decision to dismiss, I am obliged by s.392(3) of the Act to reduce the amount I would otherwise order by an appropriate amount.
[108] I am satisfied that there was no misconduct by Mr Harley that contributed to the employer’s decision to dismiss. Therefore, the amount of the order for compensation is not to be reduced on account of misconduct.
Compensation – how does the compensation cap apply?
[109] Section 392(5) of the Act provides that the amount of compensation ordered by the Commission must not exceed the lesser of:
(a) the amount worked out under section 392(6); and
(b) half the amount of the high income threshold immediately before the dismissal.
[110] The amount worked out under s.392(6) is the total of the following amounts:
(a) the total amount of the remuneration:
(i) received by the Applicant; or
(ii) to which the Applicant 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 Applicant 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 Applicant for the period of leave in accordance with the regulations.
[111] The Applicant was not on leave without pay or without full pay during the 26 weeks immediately before the dismissal.
[112] There was no dispute and I find that the total amount of the remuneration received by the Applicant during the 26 weeks immediately before the dismissal was $34,117.
[113] The high income threshold immediately before the dismissal was $148,700. Half of that amount is $74,350. The amount of compensation ordered by the Commission must therefore not exceed $74,350.
[114] In light of the above, I will make an Order 98 that the Respondent pay $15,995 gross less taxation as required by law to the Applicant in lieu of reinstatement within 28 days of the date of this decision. I have extended the time to pay by two weeks to account for the cash flow issues indicated by Salena at the hearing.
COMMISSIONER
Appearances:
M.Hamlyn of counsel on behalf of the Applicant.
M.Franchitto of counsel on behalf of the Respondent.
Hearing details:
2019.
Adelaide:
September 6.
Printed by authority of the Commonwealth Government Printer
<PR714355>
1 PN1805-1808
2 Exhibit A1 including attachments
3 Exhibit A2
4 PN132-135
5 PN274-282
6 Exhibit A1, attachment JH1
7 PN287-293
8 PN381-PN448
9 PN522-546
10 PN556
11 PN614
12 PN702-704
13 PN666
14 PN670
15 PN546
16 PN696-702
17 PN713
18 PN707
19 PN719
20 PN821-827
21 PN786-808
22 PN798
23 PN833
24 PN836-840
25 Including Exhibit R2
26 PN39, PN70-119
27 PN154
28 PN169-171
29 PN193-196
30 PN155, PN247, PN296-303
31 PN306
32 PN154-159
33 PN244
34 PN939943
35 PN906-909
36 Exhibit R15
37 PN984
38 PN990
39 Exhibit JH1
40 PN1004
41 PN993
42 PN1082, PN1048-49
43 PN1060-1061
44 PN1175
45 PN1191-1197
46 PN1142
47 PN1214
48 PN1235
49 Exhibit R14
50 PN1449-1453
51 PN1464
52 PN1465
53 PN1480-1484
54 PN1456
55 Exhibit R5 (I have ignored handwritten additions made to the original document and have not received this document as evidence of the facts contained therein)
56 PN1344
57 PN1404-1413
58 PN1441-1447
59 PN1467
60 PN1519
61 PN1437-1440
62 PN1500
63 Exhibit R14
64 PN1662
65 PN1628
66 PN1638
67 Exhibit R9
68 PN1660
69 PN1661
70 PN1685
71 PN2040-2041
72 Exhibit R2
73 PN287-293
74 PN1217
75 Sayer v Melsteel Pty Ltd [2011] FWAFB 7498, [14]; Smith v Moore Paragon Australia Ltd PR915674 (AIRCFB, Ross VP, Lacy SDP, Simmonds C, 21 March 2002), [69]
76 Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371, 373
77 Ibid
78 Walton v Mermaid Dry Cleaners Pty Ltd (1996) 142 ALR 681, 685
79 Edwards v Justice Giudice [1999] FCA 1836, [7]
80 King v Freshmore (Vic) Pty Ltd Print S4213 (AIRCFB, Ross VP, Williams SDP, Hingley C, 17 March 2000), [23]-[24]
81 Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137, 151
82 Previsic v Australian Quarantine Inspection Services Print Q3730 (AIRC, Holmes C, 6 October 1998)
83 Ibid
84 Explanatory Memorandum, Fair Work Bill 2008 (Cth), [1542]
85 Fastidia Pty Ltd v Goodwin Print S9280 (AIRCFB, Ross VP, Williams SDP, Blair C, 21 August 2000), [43]-[44]
86 ALH Group Pty Ltd t/a The Royal Exchange Hotel v Mulhall (2002) 117 IR 357, [51]. See also Smith v Moore Paragon Australia Ltd PR915674 (AIRCFB, Ross VP, Lacy SDP, Simmonds C, 21 March 2002), [92]; Edwards v Justice Giudice [1999] FCA 1836, [6]-[7]
87 Nguyen v Vietnamese Community in Australia t/a Vietnamese Community Ethnic School South Australia Chapter [2014] FWCFB 7198, [9]
88 He v Lewin [2004] FCAFC 161, [58]
89 SMART is an acronym that stands for Specific, Measurable, Achievable, Realistic, and Timely
90 Biviano v Suji Kim Collection PR915963 (AIRCFB, Ross VP, O’Callaghan SDP, Foggo C, 28 March 2002), [34] citing Payzu Ltd v Saunders [1919] 2 KB 581
91 PN2227
92 (1998) 88 IR 21
93 Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries [2016] FWCFB 7206, [16]
94 Ellawala v Australian Postal Corporation Print S5109 (AIRCFB, Ross VP, Williams SDP, Gay C, 17 April 2000), [34]
95 Ibid
96 Enhance Systems Pty Ltd v Cox PR910779 (AIRCFB, Williams SDP, Acton SDP, Gay C, 31 October 2001), [39]
97 Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries [2016] FWCFB 7206, [17]