DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Gene Schouw
v
Lek Supply Pty Ltd
(U2020/6350)

Application for an unfair dismissal remedy.

[1] Mr Gene Schouw (Mr Schouw, the Applicant) made an application to the Fair Work Commission (the Commission) pursuant to s.394 of the Fair Work Act 2009 (Cth) (the Act) for a remedy in respect of his dismissal by Lek Supply Pty Ltd (Lek Supply, the Respondent).

[2] Mr Schouw was employed by Lek Supply as a Sales Manager from 11 May 2015 until he was notified by letter dated 25 March 2020 that his employment had been terminated. The dismissal took effect on 22 April 2020. Mr Lek submits that his dismissal was unfair and is seeking reinstatement or compensation.

[3] Lek Supply sells kitchen hardware products to the wholesale market. They operate out of Melbourne, Sydney and Adelaide. Lek Supply submits that Mr Schouw was dismissed due to performance issues. Specifically, that Mr Schouw consistently lost customers in his assigned territories and failed to meet sales targets for the period of at least August 2019 until 25 March 2020.

Preliminary matters

[4] Section 396 of the Act requires that I decide four matters before considering the merits of Mr Schouw’s application. I find Mr Schouw’s application was made within the 21 day period prescribed by s.394(2) of the Act. Mr Schouw is a person protected from unfair dismissal, he earned less than the high-income threshold, and had completed a period of employment with Lek Supply that was at least the minimum employment period required by s.382. Lek Supply employed 15 employees including Mr Schouw at the time of his dismissal. Lek Supply is not a Small Business employer as defined under section 23 of the Act and Mr Schouw’s termination was not a case of redundancy. I am satisfied that Mr Schouw is a person protected from unfair dismissal.

Procedural Background

[5] The matter was conciliated on 12 June 2020 and subject to a further Member Assisted Conciliation on 1 July 2020, however the matter was unable to be resolved.

[6] Mr Schouw became unwell shortly after the matter was conciliated and the matter was adjourned until he was able to participate in a hearing. The matter was subsequently relisted for hearing before me on 6 and 7 October 2020.

[7] Mr Schouw was represented by Mr Stephen Dryley-Collins. Mr Schouw gave evidence on his own behalf. The following witnesses filed witness statements in these proceedings and gave evidence on behalf of the Applicant:

•  Mr Kim Kenny,

•  Mr Matthew Mullins,

•  Mr John Stefanou.

[8] Mr Stefanou, Mr Kenny and Mr Mullins are all former employees of Lek Supply. Mr Kenny and Mr Mullins commenced employment with Lek Supply in April 2019 and were both made redundant in May 2020. Mr Stefanou commenced employment with Lek Supply in May 2019 and was terminated in October 2019 during his probationary period.

[9] Lek Supply was represented by Mr John Douglas. The following witnesses gave evidence on behalf of Lek Supply:

•  Ms Christine Scheggia, General Manager,

•  Mr Ben Lek, CEO and Consultant,

•  Ms Kim Chea (Ms Chea), Sole Director,

•  Ms Tina Dao, General Manager of Procurement,

•  Ms Cherry Trinidad, Internal Sales Administration,

•  Ms Keang Chea (Ms Keang Chea), Internal Sales Administration.

Case Presented

[10] At the time of Mr Schouw’s dismissal, he performed the duties of a sales representative in charge of sales in Melbourne. Mr Schouw reported directly to Ms Tina Dao.

[11] Lek Supply’s sales representatives are allocated territories in which they are responsible for engaging customers and making sales. The territories are geographically assigned as:

•  VICBAY (Noble Park, Springvale, Clayton, Moorabbin, Braeside)

•  VICGIP (Starting from Hallam, including Cranbourne, Pakenham, Traralgon etc)

•  VICPIN (Carrum Downs, Frankston to Sorrento, Langwarrin & Hastings)

•  VICSE (Keysborough, Dandenong, Dandenong North, Dandenong South, Doveton).

[12] Mr Schouw relies on several historical events as factors he says led to his failure to achieve the budgeted sales figures between July 2019 to March 2020. Those events include changes in staffing and management, changes to Lek Supply locations and new pricing structures. Mr Schouw also relies on the more recent events of the 2019 Gippsland bush fires and Covid-19 pandemic. Lek Supply submit Mr Schouw failed to meet his monthly sales budget, failed to deliver his customer contract pricing report, he continued to apply ad-hoc pricing practices and requested staff provide customers with credits without appropriate approvals. I have summarised the submissions and the evidence of the parties and the facts as I find them to provide context for the conclusions I have reached.

[13] Sometime after Mr Schouw’s commencement in 2015, he entered into an arrangement based on him achieving a revenue of $100k turnover per month within 12 months. Mr Schouw submits he was able to achieve those figures until Lek Supply made changes to its management and pricing structures.

[14] Mr Schouw was initially influential when it came to Lek Supply’s hiring decisions. In the past he had recommended industry colleagues for employment positions at Lek Supply. Lek Supply employed some of the candidates recommended by Mr Schouw. However, when the employment arrangements did not work out, Mr Schouw concedes that he would become upset and disappointed. This was particularly the case when the employment arrangements did not work out for an ex-colleague who was engaged to run the operational aspects of the business.

[15] In 2016 and 2017 Lek Supply underwent a number of staffing changes. On 1 July 2017 Ms Dao commenced employment with Lek Supply as a General Manager based in New South Wales. Under Ms Dao’s management the scope of Mr Schouw’s role narrowed and his responsibilities were limited to Melbourne sales. It was at this time that some issues arose in relation to purchasing and finance that resulted in the termination of one of Mr Schouw’s colleagues, this greatly upset and disappointed him.

[16] Due to financial and operational reasons Lek Supply relocated its premises in Victoria. In 2017 a storage facility was set up in South Australia. Mr Schouw submits that an additional sales representative was employed to service the North and West Victoria region. Mr Schouw was dissatisfied with the new arrangements and the circumstances of the relocation. Mr Schouw’s view, which was not supported by Lek Supply, was that the move was disorganised and caused significant disruption to the business. Ms Dao submits that there was no interruption to the operation of the business during the relocation period and there were no new sales representatives employed during that time. Regardless, it is not in contention that Lek Supply’s sales figures did not fall behind its budgeted figures during the relocation period.

[17] Mr Schouw submits the product pricing at Lek Supply contributed to his inability to reach his budgeted sales targets. There are three pricing levels of products sold by Lek Supply. The three pricing levels are:

•  Listed,

•  Trade, and

•  Distributor pricing.

(The Distributor pricing is charged for distributor agreements and for large quantities such as pallets of goods.)

[18] Mr Schouw submits that in December 2018 Mr Lek and Ms Chea decided to increase prices by 5-7% without sending a letter of notification to its customers. Mr Schouw disagreed with this course of action and requested a letter of notification be provided to his customers. Mr Schouw submits this never occurred.

[19] In December 2018 Mr Schouw introduced Mr Kelleher to Mr Lek and Ms Chea as a prospective manager for the South Australian operation. It was at this stage Mr Schouw had formed the view that the business was suffering due to, what he perceived as, management’s incorrect business decisions made without proper planning. To put it plainly, Mr Schouw doubted the business owners’ and its managers’ capabilities in running the business.

[20] In February 2019 Ms Christine Scheggia commenced employment as the Marketing Manager. Ms Scheggia was responsible for reviewing the financial performance in each state. On 12 March 2019 Mr Kelleher commenced employment as the South Australia State Manager. Ms Tina Dao was engaged as the General Manager for Procurement. Mr Schouw formed the view that Lek Supply was now top heavy, he was concerned about the financial pressure these new engagements would place on the business. Mr Schouw submits that it is for those reasons Lek Supply increased its prices, which placed additional pressure on the sales staff.

[21] In April 2019 Lek Supply employed two additional Sales Representatives, Mr Kim Kenny and Mr Matthew Mullins.

[22] According to Mr Schouw a further increase was made to the pricing structure in April 2019, only two months after the previous increase came into effect. In May 2019 Mr John Stefanou was employed as the General Manager and was responsible for the national performance of Lek Supply’s personnel. Lek Supply had made a decision to formalise its pricing policies and Mr Stefanou took over the role of negotiating prices from Mr Schouw. Mr Schouw submits that these changes meant he was no longer permitted to negotiate prices with individual customers.

[23] Mr Schouw challenged the changes to the pricing policy and the increased prices of their products. Mr Schouw warned management that his customers would not be happy with the price increase and that, as a result, he would lose his customers. Mr Schouw was also concerned with the new rules requiring him to obtain special permission or authorisation every time he negotiated special pricing with a customer. Mr Schouw formed a view that the new rules were ridiculous and a waste of time for sales representatives.

[24] Ms Dao submits that Lek Supply has never had a price increase across all pricing levels. Lek Supply commenced its online store in March 2019 and the listed price of products have remained the same. Ms Dao’s evidence is that after conducting some market research the Hettich prices increased by 5% from 1 July 2019 and a further 3.95% from 1 January 2020. Ms Dao’s evidence is that Mr Schouw was selling products to customers at either the distributor or trade rates and below. Because the sales margins were too low to support the business, it was decided that sales representatives could only have discretion to sell between the trade and listed rates and not the distributors rate.

[25] Ms Kim Chea’s evidence was that sales representatives can apply customer pricing between listed and trade rates however the changes to the pricing policy meant that distributor pricing requires approval from management. Ms Kim Chea’s evidence is that since July 2019 there have been no price increases implemented companywide, and in July 2019 Lek Supply implemented “pricing protection” safeguards in their financial systems. Therefore, sales representatives had no scope to charge below trade prices without management approval. The pricing policy was implemented to prevent Sales Representatives from selling below trade prices which would result in Lek Supply not being able to make a profit on its sales margins.

[26] After the implementation of the new pricing policy Mr Schouw was instructed to get his pricing proposals approved by Mr Lek. If Mr Lek was not available for pricing approval, Mr Schouw would be referred to Ms Dao. Mr Schouw was not happy about these arrangements and submits that the delays in getting his pricing proposals approved resulted in him losing customers. Ms Chea’s evidence is that there were processes in place if Mr Lek was away, however Mr Schouw did not follow them.

[27] Ms Keang Chea gave evidence that she found Mr Schouw difficult to work with, rude and abusive to the administration staff. Ms Keang Chea’s gave evidence that Mr Schouw would make her change customers that weren’t his to his region. Mr Schouw would also make her process credit notes for customers even though the customers had paid and signed for their orders. Ms Keang Chea’s evidence is that she felt embarrassed having to carry out Mr Schouw’s requests however, she did so to avoid being subjected to Mr Schouw’s yelling and rude behaviour.

[28] Mr Kenny and Mr Mullins gave evidence that Mr Schouw would raise issues about Lek Supply’s pricing in meetings, and he tried to get Lek Supply to agree to what he proposed was more appropriate pricing. Mr Mullins submits that his customers expressed to him that Lek Supply was more expensive than the other suppliers. However, during cross examination, Mr Mullins conceded that this could have been a technique used by customers to lower his pricing. Mr Kenny submits that he would sometimes see the competitors’ prices and, by comparison, Lek Supply’s pricing was too high, which made it difficult to make sales. However, Mr Kenny also conceded during cross-examination that it was possible customers would provide him with misleading information to obtain better pricing.

[29] Ms Trinidad’s evidence is that Mr Schouw would frequently ask her to change the pricing on his orders to reflect prices below the trade rate. When Ms Trinidad directed Mr Schouw to get approval from management, he would get upset with her. Mr Schouw would also ask her to change accounts into his name that were not allocated to him.

[30] Mr Schouw submits that the revenue and distributor accounts that he set up and brought into the business were taken away from him when Mr Stefanou commenced. Mr Stefanou’s evidence is that some of Mr Schouw’s accounts were re-appointed to the Victorian office and another sales representative. Mr Stefanou’s evidence is that although Mr Schouw was disappointed that the accounts were not appointed back to him, he was still able to achieve sound sales results during Mr Stefanou’s time as his manager.

[31] Ms Dao submits that the distributor sales referred to by Mr Schouw were always under the house account and did not form part of Mr Schouw’s territory. The reason for this was because the General Manager held the responsibility of looking after the distributors because sales representatives did not have the authority to go below trade pricing. Ms Dao submits that although Mr Schouw assisted Mr Stefanou with the transition into taking responsibility from the General Manager for distributors, he cannot rely on a drop in the distributor sales as a reason for not meeting budget because they were never under his territory.

[32] Mr Schouw also raises the issue that the changes to the business meant he was no longer in contact with the suppliers. This was a factor that he said affected his performance results however he provided no evidence to explain why. Ms Dao submits that the company needed to improve internal processes consequently the supplier relationships became the responsibility of the General Manager of Procurement.

[33] Shortly after Mr Stefanou’s commencement he met with Mr Lek and Ms Chea to establish the sales representative’s budget for 2020. Mr Stefanou then met with Mr Schouw to discuss his individual sales budget. The budget was finalised on 20 June 2019 and sent to Mr Schouw, and although not entirely satisfied, he agreed to the set budget.

[34] Mr Lek’s evidence was that he became concerned about Mr Schouw’s sales in July 2019. He submits that he met with Mr Schouw to express his concerns that Mr Schouw was too focussed on servicing the top 10-20 customers and neglecting the rest. Mr Lek says that he warned Mr Schouw that his top customers work on projects and there would be a drop in sales when those projects ended. Mr Lek says that he continued to have the same conversation with Mr Schouw however, he formed the view that Mr Schouw seemed to think he knew better.

[35] Ms Chea’s evidence is that she discussed Mr Schouw’s declining sales with him after noticing a decline in his October and November 2019 sales. Ms Chea says that Mr Schouw informed her that this was because his customers’ projects had come to an end.

[36] Mr Schouw submits that although the overall budget figures did not change, the individual sales budgets would change depending on which territory the sales representatives were assigned to. Ms Scheggia submits that the budgets established took into account the territories allocated. She submits that Mr Schouw was allocated additional customers outside of his territory, however his budget was not amended to reflect those additional customers. This would have worked in Mr Schouw’s favour.

[37] From 1 July 2019 to 9 July 2019, and on 15 and 23 July 2019, Mr Schouw took leave to receive medical treatment. Mr Schouw says that during this time the sales territories and areas were amended. Ms Scheggia denies that this was the case. Ms Chea’s evidence was that the distributors accounts, that were not Mr Schouw’s accounts, were the only customer accounts moved.

[38] Ms Chea’s evidence is that Mr Schouw had established relationships with seven of the VICSE customers and these customers were included in his sales budget. Ms Chea says that she was aware that, in August 2019, Mr Schouw requested additional accounts that had not been allocated to a sales representative. As I understood it these customers had made purchases by phone order and not through contacts of a sales representative. Ms Chea says that she agreed to Mr Schouw servicing the customers on the condition that the sales accounts would not be added to his territory, but rather would form part of a new sales representative’s territory. Ms Chea says she did not allocate the accounts to Mr Schouw because the associated sales came from the office, rather than as a result of Mr Schouw servicing the customers. If the sales were allocated to Mr Schouw then his budget would have been adjusted accordingly. In September 2019, Ms Chea became aware that Mr Schouw had instructed administration staff to change those accounts into his name. The consequence to this was that those sales were incorrectly allocated to Mr Schouw. Ms Chea says that Mr Schouw’s actions breached the instructions she gave him.

[39] Mr Schouw submits that in November 2019 he was advised that a new sales representative was going to be employed to take over Mr Niall’s Northern area. Mr Niall would then take over the VICREP that Mr Schouw was servicing. Mr Schouw submits that when the new sales representative was employed, Mr Niall kept his responsibility of the Northern area and took over Mr Schouw’s VICREP customers.

[40] Mr Schouw says that he retained the areas that were underperforming because Lek Supply was too expensive and no longer competitive. Mr Schouw submits that his largest customers in the area were given to Mr Niall and his sales dropped from $100k a month to approximately $55k per month.

[41] Ms Scheggia denies that Mr Niall was provided with any of Mr Schouw’s customers and relied on the sales figures presented in these proceedings as evidence in support. It is notable however, that during cross-examination neither Mr Schouw nor Mr Stefanou were able to identify any of Mr Schouw’s customers that were allocated to Mr Niall.

[42] Mr Schouw submits that he told Ms Scheggia that Lek Supply were micromanaging him and reassigning all his customers to another sales representative in an attempt to force him to resign. Mr Schouw’s view is that without being able to negotiate his own pricing, he could not perform his role to his full potential.

[43] On 16 June 2019 Mr Schouw was requested to provide a copy of his contract pricing to Ms Chea. Ms Chea’s evidence was that Mr Schouw, along with the other representatives, were asked to review their accounts, including the contract pricing, and submit these to the general manager. Ms Chea would then approve the contract pricing. Ms Chea says that Mr Schouw was the only sales representative who did not submit the contract pricing and she followed him up on several occasions. On 30 June 2019 Ms Chea sent an email to Mr Stefanou stating that she had not received the requested information from Mr Schouw. Mr Schouw was copied into this email. Mr Schouw, again, did not reply. Consequently, Ms Chea reviewed his customer accounts and uploaded the new contract pricing. Mr Schouw gave evidence that Ms Chea advised him she would update the contract pricing in his absence however, this never occurred.

[44] On 24 February 2020 at 1:30pm, Mr Schouw attended a meeting to discuss sales and strategy with Ms Scheggia, Ms Chea and Mr Lek. At that meeting Mr Schouw was provided with a performance improvement plan, which he says he was not prepared for. Mr Lek says that Mr Schouw agreed to the performance improvement plan however, he never conformed to his obligations under it.

[45] During the meeting Mr Schouw was told to provide a strategic territory plan by 2 March 2020. Mr Schouw submits that he requested copies of the performance improvement plan that he signed during the meeting however, he never received them. He submits that during the meeting he also requested Ms Scheggia to put his customers back in his territory. Mr Schouw submits that Ms Scheggia said she would fix it up however, this was not done. Mr Schouw says that during the meeting Ms Scheggia, Ms Chea and Mr Lek made no suggestions as to how he should improve his performance, nor had he received any warnings.

[46] After the performance meeting Mr Schouw went on sick leave and took the rest of the week off. He says that he emailed the strategic plan to Ms Scheggia on 2 March 2020 and did not receive a confirmation reply.

[47] Mr Schouw’s evidence is that on 4 March 2020 he suffered chest pain and went to see his treating practitioner. He was booked in to have an ECG on 23 March 2020. Mr Schouw notified Ms Scheggia about the upcoming medical appointment.

[48] On 17 March 2020 all sales representatives were told to work from home due to the unfolding COVID-19 pandemic.

[49] On 23 and 24 March 2020 Mr Schouw attended his scheduled medical appointments. On 24 March 2020 Mr Schouw sent an email to Ms Scheggia informing her that, as advised by his doctor, he would potentially require surgery.

[50] On 25 March 2020 Ms Scheggia called Mr Schouw requesting him to attend a meeting in the office. Mr Schouw was informed at the meeting that he was being terminated. He was provided with a letter stating that he was being placed on “gardening leave” commencing 25 March 2020 until 22 April 2020.

[51] During the meeting Mr Schouw told Ms Scheggia that he did not understand why he was being terminated. Especially when his sales figures were higher than the other sales representatives. Mr Schouw also expressed that he felt his termination was unfair and that Mr Niall, who was not performing as well as he was, should be facing dismissal instead. He also raised the issue that his monthly budgets had not been amended after his customers had been taken away from him, and that he was always given the highest budget nationally.

[52] The “employment dismissal” letter dated 25 March 2020 provided to Mr Schouw states that Lek Supply had raised performance concerns on 2 March 2020, and he was subsequently advised that:

“•  The continual decline in sales performance was no longer acceptable.

•  Customer contract pricing was requested from you since Jun 2019. This must be documented and updated. Ad-hoc pricing practices through the support staff without prior approval was no longer acceptable.

•  The company policies in terms of credits must be adhered to. Support staff are not to be contacted directly to credit accounts and adjust pricing for you.

•  Approval for pricing must be received from management prior to committing to customers new pricing.” (sic)

[53] The termination letter stated that Mr Schouw had failed to improve on the above points and the rate of decline had continued. It also provided that Mr Schouw was unable to meet his sales targets, attract new customers, retain old customers and adhere to company policies. Mr Schouw was dismissed with 4 weeks’ notice and placed on “gardening leave”.

Consideration

Harsh, Unjust or Unreasonable

[54] Section 387 of the Act sets out the criteria for considering whether a dismissal was harsh, unjust or unreasonable:

“387 Criteria for considering harshness etc.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC 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.”

[55] The type of conduct which may fall within the phrase ‘harsh, unjust or unreasonable’ was explained by the High Court of Australia in Byrne v Australian Airlines Ltd.¹ McHugh and Gummow JJ explained 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.”2

[56] I will now consider each of the matters set out in s.387 of the Act.

Was there a valid reason for the dismissal- s.387(a)

[57] The employer must have a valid reason for the dismissal of the employee, although it need not be the reason given to the employee at the time of the dismissal. 3 The reason for the dismissal should be “sound, defensible and well founded”4 and should not be “capricious, fanciful, spiteful or prejudiced.”5

[58] 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. 6 The question the Commission must address is whether there was a valid reason for the dismissal related to the employee’s capacity or conduct (including its effect on the safety and welfare of other employees).⁷

[59] Lek Supply had made a business decision to restructure the business for future growth. In order to do this Lek Supply employed experienced staff in the areas of procurement, sales and marketing. It is clear the changes to the business did not sit well with Mr Schouw. The evidence supports a finding that he opposed many of the business decisions that were implemented, which ultimately had an adverse effect on the working relationship.

[60] There was conflicting evidence as to whether the sales budgets were set for each year by allocating budgets against each customer, which then became the budget for the sales representatives. However, the evidence supports a finding that Mr Stefanou, Mr Lek and Ms Chea met to establish the 2020 financial year sales budget. Mr Stefanou then met with Mr Schouw to discuss the 2020 budget as early as May 2020. The 2020 financial year sales budget was provided to Mr Schouw who agreed to the budget without objection.

[61] Regardless of how the budget was set, Mr Schouw did not reach his budgeted sales targets on a number of occasions. The percentage of Mr Schouw’s sales results, against his set budget, for the 10 months he worked during the 2020 financial year are as follows:

•  July 2019 = 83%

•  August 2019 = 102%

•  September 2019 = 99.6%

•  October 2019 = 82%

•  November 2019 = 79%

•  December 2019 = 79%

•  January 2020 = 40%

•  February 2020 = 56%

•  March 2020 = 37%

[62] In the period from September 2019 to March 2020, Mr Schouw’s percentage sales continued to decline. Mr Schouw had a continual decline in his sales performance and failed to meet his new customer quota of three customers per month and this was unacceptable to Lek Supply.

[63] One of the reasons Mr Schouw relied on for not meeting his budget, is that the product pricing was unrealistic and affected his ability to produce sales. There is no objective evidence before me that supports a finding that there was an increase to product prices across the entire product range that would have greatly affected Mr Schouw’s sales. Further, there is no objective evidence that Lek Supply’s prices were significantly higher than its competitors and therefore affecting its sales. There is insufficient evidence to support a finding that the product pricing increase caused Mr Schouw to lose sales, nor that the implemented increases adversely affected Mr Schouw’s ability to make sales.

[64] Mr Schouw also submitted that he was unable to negotiate prices with his customers. Whilst I agree there were restrictions on his ability to negotiate the distributor prices, he was not strictly unable to negotiation. The issue for Mr Schouw was that the changes to the business required him to seek approval to negotiate outside the set prices. This did not sit well with Mr Schouw because he was previously able to negotiate with his customers on his own terms.

[65] There was some contention as to whether Mr Schouw’s customer base had been taken from him by Ms Chea and Ms Scheggia, and whether those customers were allocated to other sales representatives. Mr Schouw’s evidence did not specifically identify any of his accounts that were allocated to other sales representatives. Mr Schouw was also critical of the other sales representatives. He submitted that a number of his customers were taken from him to increase the sales of an underperforming sales representative, however Ms Scheggia’s evidence does not support Mr Schouw’s submission. Ms Scheggia’s evidence supports her submission that the customer reassignment had not occurred in February 2020 when the emails were sent. Therefore, Mr Schouw could not rely on the customer reassignment to explain his drop in sales between September 2019 and January 2020.

[66] Mr Stefanou gave evidence that he recalled Mr Schouw being upset when his territory was re-apportioned. Mr Stefanou also gave evidence that Mr Schouw’s customers were taken from him and given to other sales representatives. I note that on 8 October 2019, Mr Stefanou’s employment with Lek Supply ended on unfavourable terms. In any case, Mr Stefanou’s evidence on this matter was unconvincing. During cross-examination, Mr Stefanou could not identify any of Mr Schouw’s customers that were taken from Mr Schouw and allocated to other sales representatives.

[67] I further note that Mr Schouw’s sales figures were still reasonable in the months of July, August and September 2019. Mr Stefanou’s evidence suggests that the re-distribution of territories occurred prior to the budget being set, which is consistent with Ms Scheggia’s evidence. Mr Schouw’s sales figures did not significantly decline until well after the re-apportioning mentioned by Mr Stefanou.

[68] Ms Scheggia’s evidence is that Mr Schouw had more customers than any other sales representative. When his request to have some customers reassigned to his account was granted, his budget was not adjusted to take into account those additional customers. Mr Mullins gave evidence that Mr Schouw was one of the highest performing sales representatives of the company, which was not solely attributed to his customer portfolio. In addition to the above, Mr Schouw’s own evidence was that he was expected to generate new customer accounts despite the fact that his current customers took up a lot of his time.

[69] Evidence was given in these proceedings that illustrated Mr Schouw’s conduct of directing sales to his account without authorisation, and still being unable to achieve his sales budget. Although Mr Schouw claims his performance was affected by Lek Supply removing customers from his account, he was unable to identify which of those customers were removed. The evidence suggests that Mr Schouw was not devoid of customers. There is no objective evidence before me that would lead me to find that Mr Schouw’s inability to meet budget was as a consequence of his customer base being removed.

[70] Mr Schouw’s evidence focussed largely on arguing that Lek Supply had not provided the sales figures of its other employees. And, if he was compared to those employees, he would be able to demonstrate that he was achieving higher sales than the other sales representatives. The issue for Mr Schouw is that his performance was not being measured against other employees who were servicing different territories to his own. The budgeted targets were set for each employee and those targets were based on the individual territories allocated. Mr Schouw’s budget was similarly determined.

[71] One of the performance issues relied upon by Lek Supply was that Mr Schouw failed to provide his customer contract pricing after they requested it from him on several occasions. Mr Schouw says Ms Chea had offered to do this for him. Whilst Ms Chea did ultimately end up performing the task for Mr Schouw, he had ample opportunity to provide Lek Supply with the information they requested prior to his medical leave and failed to do so.

[72] I acknowledge that it is an unfortunate situation that Mr Schouw had to take leave for a serious medical condition in July 2019 however, Mr Schouw’s leave commenced some two weeks after he was sent a request to provide the customer pricing. It does not excuse him from failing to provide the required information.

[73] Mr Schouw also relied on the Covid-19 pandemic and the Gippsland bush fires as a reason for the reduction in sales that led to him not reaching his sales targets. I am not convinced that Mr Schouw is able to rely on the Covid-19 pandemic as a reason for why he failed to meet his sales targets prior to the first lock down in March 2020.

[74] There was uncontested evidence in these proceedings that showed Mr Schouw’s daily travel routes in which he largely repeated the same travel route, servicing the same customers in the same areas on a regular basis. I note that Mr Schouw serviced the South Gippsland area, which was not subject to the bush fires. Mr Schouw’s territory included the Pakenham area, which was also not affected by bush fires. For reasons unknown, Mr Schouw did not frequent this area nor did he proactively engage with potential customers in that area. Mr Schouw largely serviced a route within a 10km radius of his home. This would have likely affected his capacity to meet his sales targets.

[75] Mr Schouw failed to meet his sales budget in July 2019 and in each month from September 2019 through to March 2020. In January and March 2020, Mr Schouw’s figures are less than half the budgeted figures. Mr Schouw’s submission was that this was due to the reduction in his customer base, increased pricing and the Gippsland bush fires. The evidence in these proceedings does not support such a finding. Mr Schouw’s relationship with Lek Supply was affected by Mr Schouw losing confidence in the business operation over a period of time. Mr Schouw was affected by the employment terminations of staff members whom he had professional relationships with. Whilst the new processes and rules may have inhibited Mr Schouw’s performance, I have formed the view that it was because he made no obvious attempts to work with the new processes Lek Supply implemented.

[76] Mr Schouw may or may not be correct in his assessment of some managers competencies within Lek Supply. However the incompetence of others and Mr Schouw’s disagreement with Lek Supply’s strategic direction, does not assist in establishing that Lek Supply contributed to Mr Schouw failing to meet his budgeted sales. Even if I am wrong about Mr Schouw’s customer base, considering the size of business, the evidence supports a finding that Mr Schouw did not view the business or its management favourably. As a result, his attitude started to have a negative effect on the business and his performance. Regardless, I am satisfied that there is sufficient evidence to support a finding that Lek Supply had a valid reason to terminate Mr Schouw. This termination was on the basis of his performance and that he had failed to meet his budgeted sales targets.

Notification of the Valid Reason –s.387(b) and an Opportunity to Respond –s.387(c)

[77] Notification of a valid reason for termination must be given to an employee protected from unfair dismissal, before the decision is made, 8 in explicit,9 plain and clear terms.10 In Crozier v Palazzo Corporation Pty Ltd a Full Bench of the Australian Industrial Relations Commission dealing with a similar provision of the Workplace Relations Act 1996 stated the following:

“As a matter of logic procedural fairness would require that an employee be notified of a valid reason for the termination before any decision is taken to terminate their employment in order to provide them with an opportunity to respond to the reason identified. Section 170(3)(b) and (c) would have very little (if any) practical effect if it was sufficient to notify employees and give them an opportunity to respond after a decision had been taken to terminate their employment. Much like shutting the stable door after the horse has bolted.” 11

[78] An employee protected from unfair dismissal should be provided with an opportunity to respond to any reason for their dismissal relating to their conduct or capacity. This criterion is to be applied in a common sense way to ensure the employee is treated fairly and should not be burdened with formality. 12

[79] Mr Schouw was called to a meeting on 25 March 2020 during which he was advised his employment was being terminated. I am not satisfied that Mr Schouw had an opportunity to respond to the reasons for the dismissal. I also find that Mr Schouw’s conduct at that meeting led to Lek Supply’s speedy decision to proceed with his termination.

[80] Evidence was given in these proceedings that Mr Schouw could be disrespectful and at times intimidating. I accept Ms Scheggia’s evidence that she received a verbal barrage from Mr Schouw, which unfortunately for Mr Schouw provided the perfect circumstance for Ms Scheggia to carry out what Mr Schouw submits to be a predetermined termination. Mr Schouw’s conduct during the meeting unfortunately negates any failings by Lek Supply in the process.

Unreasonable Refusal of a Support Person – s.387(d)

[81] The Commission must take into account any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal.¹³ With respect to this consideration, the Explanatory Memorandum states:

“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.”14

[82] I do not accept that Ms Chea was a support person for Mr Schouw. In any case it was not up to the Respondent to nominate or offer Mr Schouw a support person. Mr Schouw did not request, at any stage, to have a support person present, nor did he request to adjourn the meeting to obtain a support person. I find this to be a neutral consideration.

Warnings regarding Unsatisfactory Performance – s.387(e,) Impact of the Size of the Respondent on Procedures Followed and Absence of dedicated human resources management specialist/expertise on procedures followed – s.387(f)-(g)

[83] If the dismissal related to unsatisfactory performance by the person, the Commission must take into account whether the person had been warned about that unsatisfactory performance before the dismissal.¹⁵ Unsatisfactory performance is more likely to relate to the employee’s capacity to do the job rather than their conduct.¹⁶ The Commission must take into account whether there was a period of time between an employee being warned about unsatisfactory performance and a subsequent dismissal. This period of time gives the employee the opportunity to understand their employment is at risk and to try and improve their performance.¹⁷

[84] I accept Ms Scheggia’s evidence that Mr Schouw was aware that he was underperforming and not meeting his sales targets. Further, on 18 February 2020 she’d had a conversation with Mr Schouw about not receiving the Territory Planning Worksheet she had requested from him.

[85] Mr Schouw had been aware for several months prior to the 24 February 2020 performance meeting that he was failing to meet budget. Further, Mr Schouw received monthly reports that detailed he was failing to meet his budgeted sales. On 24 February 2020 Mr Schouw attended a performance meeting and was provided with a performance improvement plan. A second meeting was also scheduled. I accept that, at the time of the meeting, the nature of the meeting was not made clear to Mr Schouw. However, Mr Schouw’s performance issues were discussed at that meeting and as a result he was made aware of Ms Scheggia’s concerns.

[86] Mr Schouw was aware for some time that he was underperforming however the formal performance management process being from the time the performance improvement plan was implemented to the time of Mr Schouw’s dismissal was rushed. Lek Supply did not take into account the time Mr Schouw had been absent from the workplace and engaged in a less sophisticated approach to the performance management of Mr Schouw.

[87] The Commission must take into account the degree to which the size of the employer’s enterprise would likely impact on the procedures followed to exercise the dismissal.¹⁸ Further, the Commission must take into account the degree to which the absence of dedicated human resource management specialists or expertise would be likely to impact on the procedures followed in effecting the dismissal.¹⁹

[88] Whilst Lek Supply is not a small business as defined by section 23 of the Act, they are a small operator. At the time of Mr Schouw’s dismissal Lek Supply had 15 employees and no dedicated Human Resources expertise, which affected the processes it followed in managing Mr Schouw’s performance.

[89] The performance management process was rushed and lacked sufficient planning that would have resulted in a reasonable opportunity to address the sales performance concerns raised by Ms Scheggia. However, considering Mr Schouw and Lek Supply’s declining relationship, Mr Schouw’s perception of Lek Supply, and his responses during the termination meeting, I have formed the view that Mr Schouw’s conduct would have resulted in the same outcome.

Other Relevant Matters – s.387(h)

[90] Mr Schouw submits that he was a hard, diligent worker with significant knowledge of the business and always acted in Lek Supply’s best interest. Mr Schouw also submits that the Commission should take into consideration the fact that he worked for Lek Supply for almost five years without Lek Supply raising any significant performance issues.

Finding

[91] There were failures by Lek Supply in the way they managed Mr Schouw’s underperformance. Although Lek Supply’s approach was less than sophisticated and lacked the formal processes you would typically see in larger companies with a dedicated human resources team, I have formed the view that the outcome would not have changed had the process being different.

[92] I am satisfied that there is sufficient evidence to support a finding that Lek Supply terminated Mr Schouw on the basis of his performance and failure to meet his budgeted sales targets. Therefore Lek Supply had a valid reason to terminate Mr Schouw’s employment. I find the Mr Schouw’s termination of employment was not unjust or unreasonable and I therefore dismiss his application. An order 20 to this effect will accompany this decision.

COMMISSIONER

Appearances:

S. Dryley-Collins of Supportah Ops Pty Ltd T/A Industrial Relations Claims for the Applicant
J. Douglas of Maddison & Associates for the Respondent

Hearing details:

2020.
Melbourne (by video link via Microsoft Teams):
October 6 and 7.

Printed by authority of the Commonwealth Government Printer

<PR727078>

1 (1995) 185 CLR 410

2 Ibid at 465

 3   Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 373, 377-8

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

 5   Ibid

 6   Walton v Mermaid Dry Cleaners Pty Ltd (1996) 142 ALR 681 at 685

7 Ibid

 8   Chubb Security Australia Pty Ltd v Thomas Print S2679 at [41]

 9   Previsic v Australian Quarantine Inspection Services Print Q3730

 10   Ibid

 11   Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137 at [73]

 12   RMIT v Asher (2010) 194 IR 1 at 14-15

13 Fair Work Act 2009 (Cth) s.387(d)

14 Explanatory Memorandum, Fair Work Bill 2009 (Cth) [1542]

15 Fair Work Act 2009 (Cth) s.387(e)

16 Annetta v Ansett Australia Ltd (2000) 98 IR 233, 237

17 Johnston v Woodpile Investments Pty Ltd T/A Hog’s Breath Café – Mindarie [2012] FWA 2 [58]

18 Fair Work Act 2009 (Cth) s.387(f)

19 Fair Work Act 2009 (Cth) s.387(g)

 20   PR731811