Fair Work Act 2009
s.604 - Appeal of decisions

Appeal against decision [[2017] FWC 2866] and order [PR593193] of Deputy President Hamilton at Melbourne on 1 June 2017 in matter number U2017/1404.

[1] Mr Robert Johnson’s employment with Northwest Supermarkets t/a Castlemaine IGA was terminated summarily on 7 February 2017. He was found to have taken three items of produce from the Castlemaine IGA where he worked.

[2] On 9 February 2017, Mr Johnson made an application to the Fair Work Commission (the Commission) seeking relief from unfair dismissal pursuant to s.394 of the Fair Work Act 2009 (Cth) (the Act). The application was heard by Deputy President Hamilton on 23 May 2017 and a decision was issued on 1 June 2017. 1 The Deputy President found that, although Mr Johnson’s action was authorised by a supervisor, it breached company policy and constituted a valid reason for his dismissal. The Deputy President dismissed Mr Johnson’s application.

[3] Mr Johnson applied for permission to appeal the Deputy President’s decision. On 25 July 2017 we issued a decision 2 granting permission to appeal. In our view the Appellant had made out an arguable case that the proportionality of summary dismissal to the conduct in the case was not considered. In this respect, we were satisfied that the appeal attracted the public interest as the decision at first instance was disharmonious with other decisions of the Commission which have emphasised the importance of proportionality being considered.

[4] Directions were issued on 2 August 2017 inviting parties to make any supplementary written submissions addressing ‘the determination of the appeal, whether the appeal should be upheld and, in the event that the appeal is upheld, what the appropriate outcome should be upon a re-hearing of the matter’. The directions also required the parties to notify us if an oral hearing was required. Neither party requested an oral hearing, and it was common ground that should the matter proceed to a rehearing then that would occur on the basis of evidence and material that was before the Deputy President in matter U2017/1404, and the supplementary submissions filed by the parties.

[5] We have decided to uphold the appeal and quash the Deputy President’s decision to dismiss Mr Johnson’s application for relief. We have concluded that the Deputy President’s decision was affected by appealable error for the reason we identified in our decision on permission to appeal, namely the failure to consider the question of proportionality of summary dismissal to Mr Johnson’s conduct. This is an important consideration that bears on the question of whether or not the termination was harsh, unjust or unreasonable. 3 It will sometimes be possible to establish that a particular matter requiring consideration by a member has been taken into account, even though it is not expressly and specifically dealt with in the decision. However, based on our review of all of the materials filed in this appeal, there is not in our view a sufficient basis to conclude that the Deputy President considered, but simply did not record, that he took into account the proportionality of summary dismissal in this case.

[6] We have decided to proceed with a rehearing of the application on the papers, and propose to make a further decision in relation to the matter that was the subject of the appeal, pursuant to s.607(3)(b).

[7] The Commission may order a remedy for an unfair dismissal (reinstatement or the payment of compensation to a person) if:

(a) the Commission is satisfied that the person was protected from unfair dismissal at the time of being dismissed; and

(b) the person has been unfairly dismissed (see s. 390).

[8] It is not in dispute that the Appellant is a person who was ‘protected from unfair dismissal’ within the meaning of s. 382 of the Act.

[9] The jurisdictional facts relevant to the determination that a person ‘has been unfairly dismissed’ are set out in s. 385:

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

(a) the person has been dismissed; and

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

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

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

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

[10] It is common ground that the Appellant was dismissed and it is not contended that the dismissal was a case of genuine redundancy. The Respondent company employs approximately 230 employees, hence it is not a small business employer and, accordingly, s.385(c) is not relevant.

[11] The only issue in contention is whether the dismissal was ‘harsh, unjust or unreasonable’ (s. 385(b)).

[12] The criteria we must take into account when considering whether a dismissal was ‘harsh, unjust or unreasonable’ is set out in s.387.

387 Criteria for considering harshness etc.

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

[13] We now turn to the particular matters we must take into account.

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

[14] It is undisputed that on the day of his dismissal Mr Johnson left the store with three products for which he had not paid. The products were a ham bone, a 100g sample of smoked salmon, and a 100g sample of prosciutto. The samples and the ham bone were wrapped and signed by Mr Johnson’s manager, Ms Royal. Mr Blake, a director of the company, stopped Mr Johnson as he was leaving work, searched his bag and discovered the items. Mr Johnson said that his supervisor had authorised him, and others, to take certain items (samples and offcuts) without payment. Mr Blake’s evidence was that the items were ‘saleable items’ and there were clear policies against theft and removing stock without payment. Mr Johnson signed the relevant policy when he commenced employment in 2008. 4 The police were called to the store but no charges were laid.

[15] Mr Johnson’s primary position is that there was no valid reason for his dismissal as he had been authorised by his manager, Ms Royal, to take the items. He also contends that, a number of other employees were authorised to take excess items of stock home and this had been occurring over a period of approximately 18 months. It is in this context that Mr Johnson submits that a clear practice existed in the workplace that employees were authorised to take excess items home when managers formed the view that they could not be sold.

[16] Mr Johnson also contended that he was at all times acting honestly and would not have taken the items without authorisation. He submits that his breach of the Respondent’s policy cannot be characterised as substantial and wilful and it therefore should not be seen to be a valid reason for his dismissal.

[17] The Respondent contended that Mr Johnson’s actions of removing items from the store without making payment amounted to serious misconduct justifying summary dismissal, regardless of the value of those goods. The Respondent produced a copy of the Policy and Procedures Manual and Mr Johnson’s Probation Agreement, both signed by Mr Johnson, which expressly dealt with taking stock without payment and placing samples into stock.

[18] We note that the “Maxi Foods Group: Staff Policies and Procedures Manual” dated August 2008 was in evidence in the proceedings before Deputy President Hamilton. 5 The Policy document relevantly provides:

“Any person found consuming or removing goods, regardless of value, from the store without sufficient evidence of payment will be immediately terminated and prosecuted” (page 5, paragraph 3)

And further:

“All samples received by staff must be places into stock. Samples or gifts are not to be taken from the store by management or staff.”(page 7, paragraph 1)

[19] It is not in dispute that Mr Johnson took the items in question and the above extracts from the relevant policy make it clear that the removal of any goods or samples from the store is prohibited and will result in termination of employment.

[20] We accept that Mr Johnson acted in breach of the Respondent’s policy and that this constitutes a valid reason for termination of his employment. While there was a valid reason for the termination of Mr Johnson’s employment we note that there were a number of mitigating circumstances (we will return to those matters shortly).

[21] We now turn to the other matters we must take into account in determining whether the dismissal was harsh, unjust or unreasonable.

Whether the person was notified of that reason – s. 387(b)

[22] It is not in dispute that Mr Johnson was notified of the reason for his dismissal.

Whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person - s. 387(c)

[23] The reason for the dismissal related to Mr Johnson’s conduct. Mr Johnson’s evidence is that the allegation was put to him and that he provided an explanation for his conduct. We are satisfied he was given an opportunity to respond to the reason for his dismissal.

Any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal - s. 387(d)

[24] There is no evidence of any refusal by the Respondent, unreasonable or otherwise, to allow Mr Johnson to have a support person present in any discussions relating to his dismissal.

If the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal – s. 387(e)

[25] Mr Johnson was not terminated on the basis of unsatisfactory performance, hence this is not a relevant consideration.

Size of the employer’s enterprise and human resource expertise – s. 387(f) and (g)

[26] The matters in paragraphs 387(f) and (g) concern the degree to which the size of the employer’s enterprise and the absence of dedicated human resource management specialists or expertise in the enterprise, would be likely to impact on the procedures followed in effecting dismissal.

[27] Mr Blake submitted that there are approximately 230 employees of the Respondent and that there are no dedicated human resource staff. Mr Blake’s evidence was that neither the size of the business nor the absence of dedicated human resources staff impacted on the procedures leading to the dismissal of Mr Johnson. We accept that evidence and find that the size of the employer’s enterprise and the absence of dedicated human resource management specialists or expertise did not impact on the procedures followed in effecting the dismissal.

Any other matters that FWC considers relevant – s. 387(h)

[28] Mr Johnson submits that the following matters should be taken into consideration:

(i) The length of his service with the Respondent (2008 to 2017) and the fact that he does not have any prior disciplinary history;

(ii) His personal circumstances. Mr Johnson is currently 63 years old and lives in Castlemaine. He has 5 children, one of whom lives with him and suffers from a disability arising out of anxiety, depression and learning difficulties.

(iii) He is likely to have significant difficulties in gaining future employment given his age and the area in which he lives.

[29] It is submitted that when these factors are weighed against the conduct that led to his dismissal, the dismissal was harsh.

[30] The Respondent submits that Mr Johnson was aware of the policies and procedures in place and had signed agreements confirming his understanding of the terms of these documents. Further, the Respondent says that Mr Johnson was caught removing goods for which he had not paid and that the termination of his employment was a direct result of the breach of the policy.

[31] Mr Johnson’s conduct involved a breach of policy but, as we have indicated, there were mitigating circumstances. Two important contextual considerations mitigate Mr Johnson’s conduct.

[32] First, the taking of the items was authorised by Mr Johnson’s direct supervisor. Mr Johnson’s evidence in this regard was unchallenged by the Respondent. In particular, Mr Blake did not contest Mr Johnson’s claim that his supervisor had authorised him to take the items. Rather, he said that he had no knowledge of any authorisation having been given by the supervisor. The Deputy President accepted that Mr Johnson had been authorised to take the items. 6 We take the same view.

[33] Second, there was unchallenged evidence that eight other employees were also engaged in the same practice. 7 We note, that Mr Blake’s evidence was that he was unaware of any such practice, but he did not lead any evidence to suggest that there was no such practice. Further, Mr Johnson’s evidence as to the practice was unchallenged.

[34] In light of the mitigating circumstances and the matters referred to by the Appellant, we consider that Mr Johnson’s dismissal was harsh. It follows that Mr Johnson was unfairly dismissed (see s. 385). We now turn to the remedy to be ordered.

Remedy

[35] As we have mentioned, s. 390 deals with the circumstances in which the Commission may order a remedy, it states:

“390 When the FWC may order remedy for unfair dismissal

(1) Subject to subsection (3), the FWC may order a person’s reinstatement, or the payment of compensation to a person, if:

(a) the FWC is satisfied that the person was protected from unfair dismissal (see Division 2) at the time of being dismissed; and

(b) the person has been unfairly dismissed (see Division 3).

(2) The FWC may make the order only if the person has made an application under section 394.

(3) The FWC must not order the payment of compensation to the person unless:

(a) the FWC is satisfied that reinstatement of the person is inappropriate; and

(b) the FWC considers an order for payment of compensation is appropriate in all the circumstances of the case.

Note: Division 5 deals with procedural matters such as applications for remedies.”

[36] The circumstances in ss. 390(1)(a) and (b), and (2) are satisfied in this case. Accordingly the first question is whether to make an order for a remedy. If persuaded to order a remedy then we may order reinstatement or the payment of compensation.

[37] We are satisfied that it is appropriate to make an order for a remedy. We now turn to the nature of the remedy. Section 390 provides that the Commission may order a person’s reinstatement or the payment of compensation to a person, but the choice between those remedies is not at large, as it were. The structure of s. 390(3) requires the Commission to first consider the question of reinstatement. It is only if the Commission is satisfied that reinstatement is inappropriate that it may consider an order for the payment of compensation. As the Full Bench observed in Nguyen v Vietnamese Community in Australia t/a Vietnamese Community Ethnic School South Australia Chapter, 8:

“Subsection 390(3) underscores the primacy of reinstatement as a remedy for an unfair dismissal as the discretion to order a remedy of compensation may only be exercised if the Commission is satisfied that reinstatement is ‘inappropriate’. Further, one of the objects of Part 3-2 of Chapter 3, in which the unfair dismissal provisions appear, is “to provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement”. 9 We would observe that to describe reinstatement as the ‘primary remedy’, is to simply recognise that reinstatement is the first, perhaps even the foremost, remedy under the Act.10 The relevant question in determining whether to grant the remedy of reinstatement of an employee in relation to a dismissal that is found to have been ‘unfair’ is whether reinstatement is appropriate in the particular case.” 11

[38] Reinstatement is not sought in this case and in those circumstances we are satisfied that it would be inappropriate to order reinstatement. We therefore turn to consider an order for the payment of compensation.

[39] Section 392 deals with the orders for the payment of compensation,:

‘Compensation

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

Criteria for deciding amounts

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

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

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

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

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

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

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

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

Misconduct reduces amount

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

Shock, distress etc. disregarded

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

Compensation cap

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

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

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

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

(a) the total amount of remuneration:

(i) received by the person; or

(ii) to which the person was entitled;

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

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

[40] In assessing compensation, it is necessary to take into account all the circumstances of the case, including the specific matters identified in s 392(2)(a) to (g), and to consider the other relevant requirements of s 392.

[41] The well-established approach to the assessment of compensation under s 392 is to apply the ‘Sprigg formula’, derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul Licensed Festival Supermarket. 12 This approach was articulated in the context of the current legislative framework in Bowden v Ottrey Homes Cobram and District Retirement Villages.13 Under that approach, the first step to be taken in assessing compensation is to consider s.392(2)(c), that is, to determine what the applicant would have received, or would have been likely to receive, if the person had not been dismissed. In Bowden this was described in the following way:

“[33] The first step in this process - the assessment of remuneration lost - is a necessary element in determining an amount to be ordered in lieu of reinstatement. Such an assessment is often difficult, but it must be done. As the Full Bench observed in Sprigg:

‘... we acknowledge that there is a speculative element involved in all such assessments. We believe it is a necessary step by virtue of the requirement of s.170CH(7)(c). We accept that assessment of relative likelihoods is integral to most assessments of compensation or damages in courts of law.’

[34] Lost remuneration is usually calculated by estimating how long the employee would have remained in the relevant employment but for the termination of their employment. We refer to this period as the ‘anticipated period of employment’...”

[42] The identification of this starting point amount ‘necessarily involves assessments as to future events that will often be problematic,’ 14 but, as the Full Bench observed in McCulloch v Calvary Health Care Adelaide,15 ‘while the task of determining an anticipated period of employment can be difficult, it must be done.’16

[43] Once this first step has been undertaken, various adjustments are made in accordance with s.392 and the formula for matters including monies earned since dismissal, contingencies, any reduction on account of the employee’s misconduct and the application of the cap of six months’ pay. This approach is however subject to the overarching requirement to ensure that the level of compensation is in an amount that is considered appropriate having regard to all the circumstances of the case. 17

[44] As to the ‘compensation cap’, this is set in s.392(5), which provides that the amount ordered to be paid by the Commission must not exceed the lesser of:

● The total amount of remuneration either received by the person, or to which the person is entitled, for any period of employment with the employer during the 26 weeks immediately before the dismissal, and
● Half the amount of the high income threshold immediately before the dismissal. 18

[45] From 1 July 2016, the high income threshold was $138, 9000 per annum and from 1 July 2017 it is $142,000. Therefore, the compensation cap is:

● $69,450 for a dismissal that occurred on or after 1 July 2016 and before 1 July 2017, and
● $71,000 for a dismissal that occurred on or after 1 July 2017.

[46] In the matter before us the Appellant submits that the amount of compensation ordered should be an award that is greater than simply the payment of the notice period. It is submitted that if compensation was confined to the notice period only, then the Full Bench would not be making the appropriate allowances for inter alia:

(i) the disproportionate reaction of the employer to Johnson’s conduct;

(ii) the fact that at no stage could Johnson be described as dishonest;
(iii) the fact there were no policy refreshers provided by the employer in any way since 2008;
(iv) the denial of procedural fairness and the conduct of the employer in carrying out the dismissal;
(v) the relatively low-paid nature of Johnson’s work; and
(vi) Johnson’s age, disciplinary history and personal circumstances.’

[47] The Respondent’s submissions in relation to remedy are limited to the submission that the appeal should not be allowed and that compensation should not be awarded.

[48] We are minded to make an order for compensation in this matter, however, we cannot adequately assess the quantum of such an order on the basis of the limited material currently before us. Neither party has satisfactorily addressed the matters we are obliged to take into account (under s. 392(2)(a) to (g)) in determining the amount of compensation to be ordered.

[49] Given the deficiencies in the material currently before us we have decided to remit the question of the amount of compensation to be ordered to Commissioner Cirkovic for determination.

PRESIDENT

 1   [2017] FWC 2866.

 2   [2017] FWCFB 3897.

 3   Walsh v Ambulance Victoria (2013) 233 IR 15 at 24-25 per Watson VP; Drake SDP and Johns C concurring on the issue of misconduct.

 4   See paragraph 10 of the Decision. The Appellant acknowledged at hearing that there was no contest as to the facts set out in this paragraph, save for a contest concerning certain details of the taken items.

 5   Exhibit B1.

 6   Paragraph 13.

 7   Witness Statement of Robert Johnson dated 10 April 2017 at [21].

 8   [2014] FWCFB 7198.

 9   Section 381(1)(c) Fair Work Act 2009 (Cth).

 10   Wark v Melbourne City Toyota, Print R4864, 20 May 1999 per Williams SDP, Acton SDP and Tolley C; Newtronics Pty Ltd v Salenga, Print R4305, 29 April 1999 per Polites SDP, Acton DP and Smith C; Rowley v EDI Rail Pty Ltd [2008] AIRCFB64; Colson v Barwon Health [2014] FWCFB 1949.

 11   Regional Express Holdings Limited trading as REX Airlines v Richards [2010] FWAFB 8753 at [23]-[24]; Colson v Barwon Health [2014] FWCFB 1949 at [30]-[31].

 12   Print R0235, (1998) 88 IR 21.

 13   [2013] FWCFB 431; 229 IR 6.

 14   Smith v Moore Paragon Australia Ltd PR942856, [2004] AIRC 57; (2004) 130 IR 446 at [32].

 15   [2015] FWCFB 873.

 16   Ibid, [27].

 17   Ibid.

 18   The high income threshold is referred to in the Fair Work Act a s.382(b)(iii), and is discussed in more detail in this Benchbook.

Printed by authority of the Commonwealth Government Printer
<Price code C, PR595641>