1
Fair Work Act 2009
s 394—Unfair dismissal
Eduard Sergeev
v
Butterfly Systems Pty Ltd
(U2020/3703)
DEPUTY PRESIDENT SAMS SYDNEY, 1 OCTOBER 2020
Application for an unfair dismissal remedy – Software Developer in a small business –
applicant dismissed for serious misconduct by text message - whether Small Business Fair
Dismissal Code (the ‘Code’) complied with - principles considered - non-compliance with
Code – applicant’s dismissal ‘harsh, unjust and unreasonable’ - reinstatement inappropriate
- compensation ordered.
[1] Mr Eduard Sergeev (hereafter ‘the applicant) was employed by Butterfly Systems Pty
Ltd on 20 September 2018, until he was dismissed by Ms Amy Luo, Chief Executive Officer
(‘CEO’)/Director on 24 March 2020. At the time of his dismissal, the applicant was a
Software Developer on a salary of $120,000, plus superannuation.
[2] There is no dispute that Butterfly Systems Pty Ltd (hereafter the ‘respondent’) is a
small business with eight employees, meaning that the applicant’s dismissal must be
considered under the Small Business Fair Dismissal Code (the ‘Code’); see: s 385(c) of the
Act.
[3] Ms Luo initially claimed that the applicant had not been dismissed, because he had
abandoned his employment when he was absent from work on 24 March 2020 without
explanation, and refused her direction to return to work immediately. After a phone
conversation with the applicant that day – the details of which are contested – Ms Luo sent the
applicant a text message which reads as follows:
‘We have tried to contact you without success, you (sic) craziness brings a huge
business risk in the business operation, I am going to terminate your employment
[2020] FWC 5217 [Note: So much of this decision and the associated order
has been quashed - refer to Full Bench decision dated 5 January 2021
[2021] FWCFB 18]
DECISION
E AUSTRALIA FairWork Commission
https://www.fwc.gov.au/documents/decisionssigned/html/2021fwcfb18.htm
https://www.fwc.gov.au/documents/awardsandorders/html/pr723257.htm
[2020] FWC 5217
2
contract immediately today and please return all company SOMETHING to the office
ASAP’.
[4] On 27 March 2020, the applicant filed an application for an unfair dismissal remedy,
pursuant to s 394 of the Fair Work Act 2009 (the ‘Act’). In accordance with my usual
practice, I convened a conciliation conference on 5 June 2020. However, the application was
not able to be resolved. Accordingly, I issued directions for a hearing of both the jurisdictional
objection and the merits on 15 July 2020. The applicant appeared unrepresented and the
respondent was represented by Mr M Gillis, Solicitor, with permission being granted for the
respondent to be legally represented, pursuant to s 596 of the Act. I note the applicant did not
object to Mr Gillis’ representation.
[5] I raised with Mr Gillis that the respondent had failed to comply with the Commission’s
directions in not filing any evidence until the day before the hearing (14 July 2020) when the
directions required the filing and service of evidence by 2 July 2020. Despite some reluctance
from the applicant, and given Mr Gillis’ very recent involvement in the case, I directed the
parties to confer privately to discuss settlement. On resumption, however, the matter had not
settled, and the hearing proceeded.
THE EVIDENCE
For the respondent
Ms Amy Luo
[6] As Mr Luo’s statement was brief, I set it out in full below:
‘The employer only employs 8 people including the applicant.
The employer does not employ any HR personnel
At the start of COVID 19, we were trialing (sic) people working from home.
On 24 March 2020, I had a telephone call with the applicant about another employee.
In the telephone conversation:
(i) The applicant stated to me that he would not be doing any work for the day.
[2020] FWC 5217
3
(ii) I told the applicant he was expected to work today.
(iii) The applicant said he would not be working and would refuse to undertake any
work.
The applicant then hung up on me.
I tried to call him back but he did not answer his telephone.
I sent him a text message:
“We have tried to contact you without success, you (sic) craziness brings a huge
business risk in the business operation. I am going to terminate our
employment contract immediately today and please return all company assets
to office ASAP”.
I do not consider I would be able to work with the applicant again as he has displayed
a willful (sic) and deliberate attitude towards me and the business where he will,
despite direction to the contrary, disobey a reasonable request to undertake work. The
risk to the business is too high with deadlines that have to be achieved.’
[7] The respondent also relied on the Code’s Checklist, in which Ms Luo relevantly ticked
the box that the applicant was dismissed for serious misconduct being abandonment of
employment, which she detailed as follows:
‘• Refusal to follow a lawful and reasonable direction
Refusal to attend work
Refusal to undertake work
Abandonment of employment’.
[8] Ms Luo was not required for cross examination.
For the applicant
[9] Similarly, the applicant’s statement of one page is reproduced below:
‘• On 24/03/2020 in the morning (around 9am) I was notified by my colleague
Dmitry Rotay (also Software Developer) that our CEO Amy Luo demanded
him to take his annual leave starting from today until his home office is
“properly set up” (we all were working from home at that time). My
understanding was that it was unlawful of Amy to force him to take his annual
[2020] FWC 5217
4
leave at that time since it was not Christmas shut down period and Dmitry had
very little annual leave accumulated.
Seeing it as unjust situation I sent Amy Luo the following message over our
corporate chat system:
o What is going on with Dmitri? Should I take day off as well?
In response Amy Luo sent me the following message:
o We have a lot of work to do today, I will not like to approve your day
off
Shortly after that (at 9:56am) she called me and we had somewhat heated
discussion in which I repeated that in my view she could not force an
employee to take annual leave whenever she wants. In response she said that in
her view she could do exactly that. At the end of that talk I repeated that such
case I would take my day off today as well and hung up.
I then used our internal HR system to submit a request for one day of my
annual leave and disconnected from our corporate network.
At 9:59am Amy Luo tried to call me again but I did not respond to her call
since I considered myself being on my annual leave. She did not leave any
voice message.
At 11:34am someone tried to call me from the number I did not recognise but I
did not answer. Now I suspect that it was Daniel Wiggins (our General
Manager). He did not leave any voice message either.
At 11:37am I received the following mobile txt message with my termination
notice:
o “We have tried to contact you without any success, you craziness
brings a huge business risk in the business operation. I am going to
terminate our employment contract immediately today and please
return all the company assets to office ASAP! Best regards, Amy”
After that at 11:51am Amy Luo tried to call me again, but I did not respond.
I did however sent her mobile txt message at 11:53am with the following
content:
o “OK, I’ll bring in the laptop tomorrow. I am on my annual leave today,
stop calling me outside business hours. Good luck with your business
:)”
There were a few mobile text messages from Amy Luo on that day after that
which I think are irrelevant.
[2020] FWC 5217
5
The next day after noon I brought corporate laptop to the office as I said I
would.’
[10] In cross examination, the applicant agreed he started work normally on
24 March 2020 at approximately 9:00 am, and was intending to work from home that day due
to COVID-19. He sent Ms Luo a chat message between 9:00 am and 10:00 am in which he
asked her if he should take the day off as a colleague ‘Dimitri’ was told to do so. He denied
the comment, ‘[w]hat is going on with Dimitri? Should I take the day off as well?’, was him
seeking permission to do so. It was more a comment that he would take the day off, unless
Dimitri was allowed to work that day. He acknowledged he was already at work. He
understood Ms Luo wanted him to work that day and had directed him to do so. His
understanding was that Dimitri could do his work that day, as there were only two developers
and they were interchangeable.
[11] The applicant contended that he had no contract of employment with the respondent,
but acknowledged he had been working for Ms Luo for some time and had received a pay
increase during that period for ‘exceptional performance’.
[12] The applicant agreed he and Ms Luo had a phone conversation in which she restated
her position. He just told her that he was going to take his day off and hung up. He denied
being directed to work. They had just had a chat. He claimed he had notified Ms Luo
previously if he was taking a day off and it was never a problem, as they had a good
relationship. He said that he had previously taken time off for less than a day and, on this
occasion, he worked between 9:00 am to 10:00 am, without pay. He could not recall what he
worked on in this period.
[13] The applicant stated that he had been looking for alternative work since his dismissal,
but this was difficult given the COVID-19 pandemic. Whilst he had some hopeful prospects,
he had been unsuccessful and was on presently Centrelink payments. He was not seeking
reinstatement, but compensation for the unfair way he was dismissed.
[2020] FWC 5217
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SUBMISSIONS
For the respondent
[14] Mr Gillis submitted that what the applicant thought about the treatment of another
employee is irrelevant. The facts are that there was an incident on 24 March 2020 in which
the applicant had agreed he commenced work that day, and then believed he was entitled to
refuse Ms Luo’s direction, particularly in the context of a significant disruption to the
business caused by COVID-19.
[15] Mr Gillis put that the fundamental obligation is on the employee to follow lawful and
reasonable directions, which goes to the trust and confidence in the employment relationship.
This was grounds for dismissal. The employer could have no confidence in the applicant
would follow directions in the future; nor could it be expected that the business could
properly function if employees conducted themselves as the applicant did.
[16] Mr Gillis said that on any view, the applicant’s conduct was unacceptable, even if it
was not misconduct, or the Code had not been complied with. However, any compensation
should be at the low end of the range having regard to the applicant’s conduct.
For the applicant
[17] The applicant said it was his understanding that Dimitri could not be forced to take
annual leave. He agreed that he decided to take the day off as a sign of protest for Ms Luo’s
actions. As both he and Dimitri were peers as Senior Software Developers, either one of them
could work as Ms Luo seemingly only wanted one of them to work that day. There was no
harm to the business because Dimitri wanted to work that day. He had suggested that he
would even go into the office that day.
Ms Luo sent him the termination email 11:27 am, without any warning, either in writing or
verbally.
[2020] FWC 5217
7
CONSIDERATION
Statutory provisions and principles relevant to the jurisdictional objection
[18] Section 385 of the Act defines an unfair dismissal as follows:
What is an unfair dismissal
A person has been unfairly dismissed if the 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.
[19] All four criteria described above must be met for a person to be unfairly dismissed and
become entitled to bring an application to the Commission for an unfair dismissal remedy.
[20] Section 388 of the Act deals with the Code as follows:
The Small Business Fair Dismissal Code
(1) The Minister may, by legislative instrument, declare a Small Business Fair
Dismissal Code.
(2) A person's dismissal was consistent with the Small Business Fair Dismissal Code
if:
(a) immediately before the time of the dismissal or at the time the person was
given notice of the dismissal (whichever happened first), the person's employer
was a small business employer; and
(b) the employer complied with the Small Business Fair Dismissal Code in
relation to the dismissal.
[2020] FWC 5217
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[21] Section 23 of the Act defines a ‘small business employer’ relevantly as a ‘national
system employer is a small business at a particular time if the employer has fewer than 15
employees at the time’. The particular time is the time when the employee had been
dismissed. There is no dispute that at the time of the applicant’s dismissal, the employer was a
small business, to which the Code applied.
[22] The legislative instrument containing the Code declared by the Minister, pursuant to
s 388(1) above, is as follows:
Commencement
The Small Business Fair Dismissal Code comes into operation on 1 July 2009.
Summary dismissal
It is fair for an employer to dismiss an employee without notice or warning when the
employer believes on reasonable grounds that the employee's conduct is sufficiently
serious to justify immediate dismissal. Serious misconduct includes theft, fraud,
violence and serious breaches of occupational health and safety procedures. For a
dismissal to be deemed fair it is sufficient, though not essential, that an allegation of
theft, fraud or violence be reported to the police. Of course, the employer must have
reasonable grounds for making the report.
Other dismissal
In other cases, the small business employer must give the employee a reason why he
or she is at risk of being dismissed. The reason must be a valid reason based on the
employee's conduct or capacity to do the job.
The employee must be warned verbally or preferably in writing, that he or she risks
being dismissed if there is no improvement.
The small business employer must provide the employee with an opportunity to
respond to the warning and give the employee a reasonable chance to rectify the
problem, having regard to the employee's response. Rectifying the problem might
involve the employer providing additional training and ensuring the employee knows
the employer's job expectations.
Procedural matters
In discussions with an employee in circumstances where dismissal is possible, the
employee can have another person present to assist. However, the other person cannot
be a lawyer acting in a professional capacity.
A small business employer will be required to provide evidence of compliance with
the Code if the employee makes a claim for unfair dismissal to the Fair Work
[2020] FWC 5217
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Commission, including evidence that a warning has been given (except in cases of
summary dismissal). Evidence may include a completed checklist, copies of written
warning(s), a statement of termination or signed witness statements.
[23] Section 12 of the Act defines ‘serious misconduct’ as having ‘the meaning prescribed
by the regulations’. Regulation 1.07 of the Fair Work Regulations 2009 reads, inter alia:
Meaning of serious misconduct
(1) For the definition of serious misconduct in section 12 of the Act, serious
misconduct has its ordinary meaning.
(2) For subregulation (1), conduct that is serious misconduct includes both of the
following:
(a) wilful or deliberate behaviour by an employee that is inconsistent with the
continuation of the contract of employment;
(b) conduct that causes serious and imminent risk to:
(i) the health or safety of a person; or
(ii) the reputation, viability or profitability of the employer's business.
[24] It is common ground the applicant was dismissed (albeit with two weeks’ notice not
worked) for serious misconduct. Therefore, the summary dismissal section of the Code
applies in this case.
[25] The application of this section of the Code was described in Pinawin t/a
RoseVi.Hair.Face.Body v Domingo [2012] FWAFB 1359 (‘Pinawin’), where the Full Bench
said at [29]:
‘[29] We believe that the approach and observations in these two decisions are correct.
There are two steps in the process of determining whether this aspect of the Small
Business Fair Dismissal Code is satisfied. First, there needs to be a consideration
whether, at the time of dismissal, the employer held a belief that the employee’s
conduct was sufficiently serious to justify immediate dismissal. Secondly it is
necessary to consider whether that belief was based on reasonable grounds. The second
element incorporates the concept that the employer has carried out a reasonable
investigation into the matter. It is not necessary to determine whether the employer
was correct in the belief that it held.’
[2020] FWC 5217
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[26] In Ryman v Thrash Pty Ltd t/a Wisharts Automotive Services [2015] FWCFB 5264
(‘Ryman v Thrash’), the Full Bench elaborated further and said at [40]-[41]:
‘[40] Whether the employer had “reasonable grounds” for the relevant belief is of
course to be determined objectively.
[41] In summary, drawing on the conclusions stated above and the ratio in Pinawin,
we consider that the “Summary dismissal” section of the Code operates in the
following way:
(1) If a small business employer has dismissed an employee without notice -
that is, with immediate effect - on the ground that the employee has committed
serious misconduct that falls within the definition in reg.1.07, then it is
necessary for the Commission to consider whether the dismissal was consistent
with the “Summary dismissal” section of the Code. All other types of
dismissals by small business employers are to be considered under the “Other
dismissal” section of the Code.
(2) In assessing whether the “Summary dismissal” section of the Code was
complied with, it is necessary to determine first whether the employer
genuinely held a belief that the employee’s conduct was sufficiently serious to
justify immediate dismissal, and second whether the employer’s belief was,
objectively speaking, based on reasonable grounds. Whether the employer has
carried out a reasonable investigation into the matter will be relevant to the
second element.’
[27] Further in Ryman v Thrash, the Commission made some further observations about the
intersection of the Code with Reg 1.07 Fair Work Regulations 2009 and the confusing
inelegance of the language used in the Code. At [30]-[32] the Full Bench said:
‘[30] The operative effect of the “summary dismissal” section of the Code is conveyed
by the first sentence, which identifies the circumstances in which “[i]t is fair for an
employer to dismiss an employee without notice or warning…”. The reference to
dismissal “without notice or warning” in the Code is confusing. A dismissal “without
notice”, understood literally, means a dismissal in relation to which no period of notice
is provided. A dismissal that is accompanied by a payment in lieu of notice, as well as
a summary dismissal, is usually regarded as a dismissal without notice. That points to a
lack of synonymity between a summary dismissal and a dismissal without notice. An
alternative view might be that a dismissal “without notice” was intended to mean a
dismissal in relation to which no payment in lieu of notice has been provided as well as
no actual notice provided. That would resolve the synonymity problem. However it is
not a reading which readily arises from the words actually used.
[31] It is unclear whether a dismissal “without warning” was intended to mean
something different from a dismissal “without notice”. Presumably the warning
referred to is a warning that dismissal is going to occur sometime in the future, in
[2020] FWC 5217
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which case a dismissal without notice and a dismissal without warning are probably
the same thing. However if the warning is of the possibility that dismissal might occur,
then things get more complicated. Although, absent an express contractual term to the
contrary, there is no obligation at law upon an employer to afford an employee a right
to be heard in relation to any allegation of misconduct, incompetence or negligence
which might lead to summary dismissal, most employers (including small business
employers) would in accordance with modern industrial relations practice probably do
so. Where a dismissal results, there might be a question in that circumstance as to
whether the employer has in some sense warned the employee of the dismissal.
Alternatively, the “warning” contemplated might be a warning that if certain conduct
is repeated or performance is not improved, dismissal will follow. There is no
necessary inconsistency between the issue of such a warning and a subsequent
summary dismissal, but arguably such a dismissal may not be characterised as one
“without warning”.
[32] An immediate dismissal is one which takes effect immediately. That would
include a summary dismissal in the sense earlier discussed, but it would also include a
dismissal with a payment in lieu of notice which is intended to have immediate effect.’
and at [37]-[39] the Full Bench said:
‘[37] Notwithstanding that the Code, and its accompanying checklist, were apparently
designed to be read as “stand alone” documents by small business employers, we
prefer the view that the reference to “serious misconduct” is to be read as bearing the
meaning in reg.1.07. The types of conduct expressly referred to in the Code as
constituting serious misconduct are all encompassed by the reg.1.07 definition, so no
direct inconsistency is apparent. The fact that the checklist invites inclusion of “some
other form of serious misconduct” suggests that the identified types of conduct were
not meant to be exhaustive, and it is otherwise difficult to conclude that they were
meant to be exhaustive given that they do not include other types of behaviour which
may well constitute misconduct justifying summary dismissal, such as sexual
harassment, bullying or significant non-compliance with a lawful and reasonable
direction. And, as earlier discussed, the lack of any recognised meaning at law of the
expression “serious misconduct” means that the definition in reg.1.07 is necessary to
give the expression a clear content.
[38] We therefore consider that the “Summary dismissal” section of the Code applies
to dismissals without notice on the ground of serious misconduct as defined in
reg.1.07.
[39] To be clear, nothing stated above is to be taken as suggesting that in relation to
such a dismissal it is necessary for the Commission to be satisfied that the serious
misconduct which is the basis for the dismissal actually occurred in order for the
dismissal not to be unfair…’
[28] In my opinion, a decision to terminate the applicant’s employment in the morning of
24 March 2020 all over a time span of about two hours, after an abrupt phone call and one
[2020] FWC 5217
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unanswered phone call, cannot, on an objective basis, sustain a claim that Ms Luo believed
that the applicant’s conduct was sufficiently serious to justify immediate dismissal, based on
reasonable grounds. On the evidence, there was no serious engagement between Ms Luo and
the applicant as to his reasons for not continuing work that day; let alone that Ms Luo had
warned the applicant of the dire consequences of his refusal to accept her insistence that he
work that day.
[29] While I unreservedly accept that misconduct can be as a result of a refusal to comply
with a lawful and reasonable direction of the employer; per Reg 1.07, in Ryman v Thrash, the
Full Bench qualified such non-compliance, when it said at [37] ‘bullying or significant non-
compliance with a lawful and reasonable direction’ (my emphasis).
[30] In my view, the applicant’s conduct was not only not ‘significant non-compliance’, but
Ms Luo did not even describe his conduct as a refusal to comply with a lawful and reasonable
direction in her terse text message at 11:29 am. Indeed, at this point, and even after the filing
of the applicant’s unfair dismissal application, Ms Luo seems to have believed that the
applicant had abandoned his employment. In an email to the Unfair Dismissals Team of the
Commission on 30 April 2020, Ms Luo said:
‘Dear Fair Work Commission,
Butterfly Systems ex-employee Mr. Eduard Sergeev is a case of abandonment of
employment, it should not be dealt via Fair Work Commission.
On the 24th of March, Eduard Sergeev is absent from Butterfly Systems without
reasonable excuse and employer's approval and he has also failed to communicate with
the employer to provide an excuse for being absent.
We do not think it is a matter of unfair dismissal under Fair Work Commission.
Please feel free to contact me if you have any further questions.
Best regards,
Amy’
[31] Given this confusing and conflicting scenario, I can have no confidence that Ms Luo
held a belief, on reasonable grounds, that the applicant’s conduct was sufficiently serious to
justify his immediate dismissal (as Mr Gillis conceded). That said, I would conclude that the
applicant’s conduct was unacceptable and for which a meeting the next day to clearly set out
[2020] FWC 5217
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Ms Luo’s expectations and for the applicant to explain his conduct might have resulted, at
worst, in a formal warning.
[32] As to the second of the Code element referred to in Pinawin (the concept that the
employer has carried out a reasonable investigation into the matter), obviously Ms Luo
conducted no investigation, nor could she have, in such a short time span. To my mind,
Ms Luo hurriedly and unreasonably rushed to judgment that the applicant’s conduct justified
his immediate dismissal, which was inconsistent with the relevant compliance with the Code.
[33] Accordingly, the respondent’s jurisdictional objection is dismissed. I turn now to
consider whether the applicant’s dismissal was ‘harsh, unjust or unreasonable’, in accordance
with s 387 of the Act.
[34] Section 396 of the Act requires the Commission is required to make findings on a
number of preliminary matters. These are:
(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; and
(d) whether the dismissal was a case of genuine redundancy.
[35] With this in mind, I determine that:
(a) The applicant was dismissed at the initiative of the employer (s 385);
(b) The applicant is a national system employee and the respondent is a national
system employer (ss 13, 14, 380);
(c) The applicant’s unfair dismissal application was lodged within the 21-day
statutory time limit prescribed by s 394(2)(a) of the Act (s 396(a));
(d) The applicant had completed the minimum employment period of 6 months,
having been employed for approximately 18 months (ss 382(a) and 383);
[2020] FWC 5217
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(e) In the absence of a signed contract of employment, the employment of the
applicant was governed by a Modern Award (s 382(b)(i)); and
(f) Neither of sub-ss (c) or (d) of s 396 the Act are relevant to this application.
[36] Section 385 of the Act defines an unfair dismissal based on four criteria which must be
satisfied if a person, seeking a remedy for unfair dismissal, is to succeed. This section reads:
What is an unfair dismissal
A person has been unfairly dismissed if the 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.
[37] It follows that there can be no contest that the applicant was a person protected from
unfair dismissal. Consequently, the only question which falls for determination by the
Commission is whether the applicant’s dismissal was ‘harsh, unjust or unreasonable’
(s 385(b)) within the meaning of s 387 of the Act and, if so, what remedy, if any, should be
awarded by the Commission, pursuant to ss 391 and 392 of the Act. I turn then to s 387 of the
Act, which requires the Commission to take into account the following:
(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
[2020] FWC 5217
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(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.
[38] I shall come back to these matters shortly. However, at this juncture, I would add that
the meaning of the expression ‘harsh, unjust or unreasonable’ in the context of an unfair
dismissal, was explained in the oft-quoted passage from Byrne and Frew v Australian Airlines
Ltd (1995) 185 CLR 410 where McHugh and Gummow JJ said at para 128:
‘128. Clause 11(b) is aimed at the situation where the termination of employment
brought about by the dismissal, rather than the steps leading up to the dismissal, or
lack of them, is harsh, unjust or unreasonable. A dismissal with notice may be harsh,
unjust or unreasonable because it is based on a ground defined as such by cl 11(b).
This refers to such matters as termination "on the ground of" race, colour, sex and
marital status. 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.’ (my emphasis)
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) – s 387(a)
[39] I turn now to consider whether the applicant’s conduct was a valid reason for his
dismissal – a significant matter under s 387 of the Act.
[40] The meaning of ‘valid reason’ in s 387(a) is drawn from the judgement of North J
in Selvachandran. This meaning has been considered and applied by members of the
Commission and its predecessors for many years. For example, in Rode v Burwood
[2020] FWC 5217
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Mitsubishi Print R4471, a Full Bench of the then Australian Industrial Relations Commission
(‘AIRC’) discussed the meaning of valid reason in the context of the relevant provisions of
the Workplace Relations Act 1996, and by citing Selvachandran. The following is an extract
from the Full Bench’s decision at [17]-[19]:
‘[17] In relation to the meaning of “valid reason” the following remarks of Northrop J
in Selvachandran v Peteron Plastics Pty Ltd are relevant:
“Section 170DE(1) refers to a ‘valid reason, or valid reasons’, but the Act does
not give a meaning to those phrases or the adjective ‘valid’. A reference to
dictionaries shows that the word ‘valid’ has a number of different meanings
depending on the context in which it is used. In The Shorter Oxford Dictionary,
the relevant meaning given is: ‘2. Of an argument, assertion, objection, etc;
well founded and applicable, sound, defensible: Effective, having some force,
pertinency, or value.’ In The Macquarie Dictionary the relevant meaning is
‘sound, just or wellfounded; a valid reason’.
In its context in s 170DE(1), the adjective ‘valid’ should be given the meaning
of sound, defensible or wellfounded. A reason which is capricious, fanciful,
spiteful or prejudiced could never be a valid reason for the purposes of s
170DE(1). At the same time the reason must be valid in the context of the
employee’s capacity or conduct or based upon the operational requirements of
the employer’s business. Further, in considering whether a reason is valid, it
must be remembered that the requirement applies in the practical sphere of the
relationship between an employer and an employee where each has rights and
privileges and duties and obligations conferred and imposed on them. The
provisions must `be applied in a practical, commonsense way to ensure that’
the employer and employee are each treated fairly, see what was said
by Wilcox CJ in Gibson v Bosmac Pty Ltd, when considering the construction
and application of a s 170DC.”
[18] While Selvachandran was decided under the former statutory scheme the above
observations remain relevant in the context of s.170CG(3)(a). A valid reason is one
which is sound, defensible or well founded. A reason for termination which is
capricious, fanciful, spiteful or prejudiced is not a valid reason for the purpose of
s.170CG(3)(a).
[19] We agree with the appellant’s submission that in order to constitute a valid reason
within the meaning of s.170CG(3)(a) the reason for termination must be defensible or
justifiable on an objective analysis of the relevant facts. It is not sufficient for an
employer to simply show that he or she acted in the belief that the termination was for
a valid reason.’
See also: Nettleford v Kym Smoker Pty Ltd (1996) 69 IR 370.
[41] Given my earlier comments, I do not accept that the respondent had a valid reason for
the applicant’s dismissal in the Selvachandran sense that it was not sound, not defensible and
[2020] FWC 5217
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not well founded. As I earlier mentioned, Ms Luo’s reason for dismissal seems to have
changes well after the text message of 24 March 2020.
[42] The lack of a valid reason falls in favour of a finding of unfairness.
Further matters to be considered under s 387 of the Act
[43] Subsections (b)-(e) of s 387 are generally grouped under the rubric of ‘procedural
fairness’ or ‘natural justice’ issues. To highlight the importance of procedural fairness issues,
I cite three authorities on the subject in unfair dismissal cases. In Crozier v Palazzo
Corporation Pty Limited t/as Noble Park Storage and Transport (2000) 98 IR 137 a Full
Bench of the AIRC said at [73]:
‘As a matter of logic procedural fairness would require that an employee be notified of a
valid reason for their 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 170CG(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.’
[44] In Wadey v YMCA Canberra [1996] IRCA 568, Moore J made clear that an employer
cannot merely pay ‘lip service’ to giving an employee an opportunity to respond to allegations
concerning an employee’s conduct. His Honour said:
‘In my opinion the obligation imposed on an employer by that section has, for present
purposes, two relevant aspects. The first is that the employee must be made aware of
allegations concerning the employee's conduct so as to be able to respond to them. The
second is that the employee must be given an opportunity to defend himself or herself.
The second aspect, the opportunity to defend, implies an opportunity that might result
in the employer deciding not to terminate the employment if the defence is of
substance. An employer may simply go through the motions of giving the employee an
opportunity to deal with allegations concerning conduct when, in substance, a firm
decision to terminate had already been made which would be adhered to irrespective of
anything the employee might say in his or her defence. That, in my opinion, does not
constitute an opportunity to defend.’
[45] Nevertheless, procedural fairness steps should be applied in a common-sense and
practical way. In Gibson v Bosmac Pty Ltd (1995) 60 IR 1, Wilcox CJ said at [7]:
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‘Ordinarily, before being dismissed for reasons related to conduct or performance, an
employee must be made aware of the particular matters that are putting his or her job
at risk and given an adequate opportunity of defence. However, I also pointed out that
the section does not require any particular formality. It is intended to be applied in a
practical, commonsense way so as to ensure that the affected employee is treated
fairly. Where the employee is aware of the precise nature of the employer's concern
about his or her conduct or performance and has a full opportunity to respond to this
concern, this is enough to satisfy the requirements of the section.’
Whether the person was notified of that reason – s 387(b)
[46] The applicant was notified of his dismissal by text message on 24 March 2020, with
immediate effect. For not the first time, have I had cause to criticise an employer for
dismissing an employee by text message or email rather than face to face. I would not accept
that the COVID-19 pandemic absolves the employer from the lack of basic decency.
[47] I agree with Commissioner Cambridge when he said in Knutson v Chesson Pty Ltd t/a
Pay Per Click [2018] FWC 2080 at [47]:
‘[47] The employer provided notification of dismissal by email communication sent
at 8.53pm on 6 November 2017. Notification of dismissal should not be made by email
communication. Unless there is some genuine apprehension of physical violence or
geographical impediment, the message of dismissal should be conveyed face to face.
To do otherwise is unnecessary callous. Even in circumstances where email or
electronic communications are ordinarily used, the advice of termination of
employment is a matter of such significance that basic human dignity requires that
dismissal be conveyed personally with arrangements for the presence of a support
person and documentary confirmation.’
[48] This factor tells in favour of a finding of unfairness.
Whether the person was given an opportunity to respond to any reason related to the
capacity or conduct of the person – s 387(c)
[49] As the applicant had no opportunity to respond to a decision to dismiss him, this factor
strongly favours a finding of procedural unfairness.
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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)
[50] As there was no meeting between the applicant and Ms Luo, there was no
unreasonable refusal to allow the applicant to have a support person present at any discussions
relating to his dismissal. This is a neutral factor in this case.
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)
[51] There was no evidence that the applicant had a poor performance record; rather, the
contrary is true. In 18 months of employment, the applicant said he received a salary increase
for exceptional performance. There was no challenge to this evidence. That said, this criterion
is not relevant.
The degree to which the size of the employer’s enterprise would be likely to impact on
the procedures followed in effecting the dismissal – s 387(f); and 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 – s 387(g)
[52] The respondent is a small business and has no dedicated human resource management
expertise or advice. However, while I have taken this into account, Ms Luo’s dismissive
approach to responding to the unfair dismissal application and her handling of the situation on
24 March 2020, does not reflect well on her. It ill behoves any employer, with any sense of
the ordinary standards expected of sound and sensible employment relations; let alone the
CEO/Director of a software company, to have dealt with the applicant in such an unfair
manner.
[53] These matters tell against a finding of excusing the respondent from unfair procedures,
simply because it is a small business.
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Any other matters that the FWC considers relevant – s 387(h)
[54] I have taken into account that the applicant has had a relatively short service (18
months) and the fact that he was paid a reasonable salary of $120,000, plus superannuation.
Although the applicant was paid some notice in lieu, for an employee on this salary, the usual
expectation would be at least four weeks’ notice of dismissal. I have taken this into account.
[55] I was not advised of any other matter going to ‘harshness’ considerations, although the
applicant said he was on Centrelink benefits and has had difficulty finding alternative
employment. This later difficulty is obviously exacerbated by the COVID-19 pandemic.
[56] For the aforementioned reasons and in weighing all the matters the Commission is
required to take into account under s 387 of the Act, I am satisfied that the applicant’s
dismissal was ‘harsh, unjust and unreasonable’ on both substantive and procedural grounds. I
turn now to remedy.
Appropriate remedy
[57] The remedies for an unfair dismissal are set out at s 391 of the Act as follows:
391 Remedy—reinstatement etc.
Reinstatement
(1) An order for a person’s reinstatement must be an order that the person’s employer
at the time of the dismissal reinstate the person by:
(a) reappointing the person to the position in which the person was employed
immediately before the dismissal; or
(b) appointing the person to another position on terms and conditions no less
favourable than those on which the person was employed immediately before
the dismissal.
(1A) If:
(a) the position in which the person was employed immediately before the
dismissal is no longer a position with the person’s employer at the time of the
dismissal; and
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(b) that position, or an equivalent position, is a position with an associated
entity of the employer;
the order under subsection (1) may be an order to the associated entity to:
(c) appoint the person to the position in which the person was employed
immediately before the dismissal; or
(d) appoint the person to another position on terms and conditions no less
favourable than those on which the person was employed immediately before
the dismissal.
Order to maintain continuity
(2) If the FWC makes an order under subsection (1) and considers it appropriate to do
so, the FWC may also make any order that the FWC considers appropriate to maintain
the following:
(a) the continuity of the person’s employment;
(b) the period of the person’s continuous service with the employer, or (if
subsection (1A) applies) the associated entity.
Order to restore lost pay
(3) If the FWC makes an order under subsection (1) and considers it appropriate to do
so, the FWC may also make any order that the FWC considers appropriate to cause the
employer to pay to the person an amount for the remuneration lost, or likely to have
been lost, by the person because of the dismissal.
(4) In determining an amount for the purposes of an order under subsection (3), the
FWC must take into account:
(a) 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 reinstatement; and
(b) the amount of any remuneration reasonably likely to be so earned by the
person during the period between the making of the order for reinstatement and
the actual reinstatement.”
[58] I am not satisfied that reinstatement of the applicant is appropriate, and he does not
seek it. I turn to whether any compensation should be ordered. The methodology for
determining the amount of compensation is set out at s 392 as follows:
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392 Remedy—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
[2020] FWC 5217
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(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.”
[59] The above methodology was discussed in Sprigg v Paul’s Licensed Festival
Supermarket (1998) 88 IR 21 (‘Sprigg’) and has since been described in shorthand, as
the Sprigg Formula. I will make findings as to the components of s 392 as follows.
The effect of the order on the viability of the employer’s enterprise – s 392(a)
[60] No evidence was put by the respondent as to its financial circumstances, with
Mr Gillis putting that contrary to his primary submissions, and if the Commission was minded
to order any compensation, it should be at the low end of the scale. Nor was there any
evidence as to any impact on the business as a result of COVID-19.
[61] I do not consider that there would be any deleterious effect on the viability of the
respondent’s enterprise by the order I intend to make.
The length of the person’s service with the employer – s 392(b)
[62] The applicant’s period of service was relatively short and seemingly without blemish,
until the incident on 24 March 2020.
[2020] FWC 5217
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The remuneration that the person would have received, or would have been likely to
receive, if the person had not been dismissed – s 392(c)
[63] Obviously, this consideration is highly speculative, but one which must necessarily be
made by the Commission. I determine that the unpleasantness and experience of the incident
on 24 March 2020, and its consequences for both parties, would likely have not resulted in the
applicant continuing in employment for any significant period of time. I estimate this period
of time to be 16 weeks.
The efforts of the person (if any) to mitigate the loss suffered by the person because of
the dismissal – s 392(d)
[64] The applicant has been seeking alternative employment and is quietly confident of his
future prospects. Given the industry in which he has worked and has experience, I consider
the applicant’s prospects for alternative employment are reasonably good. This is a neutral
consideration.
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 –
s 392(e); and 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 – s 392(f)
[65] The applicant has only received Centrelink payments since his dismissal. There was
no challenge to this evidence. In any event, social security payments are not to be taken into
account; see: Sprigg at p 29. Subsection (f) is not relevant.
Any other matter that the FWC considers relevant – s 392(g)
[66] As I have taken into account that the applicant was dismissed without warning, there
are no other matters under s 392 which I consider relevant.
[2020] FWC 5217
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Section 392(3)
[67] Although this was not a case of misconduct, I am prepared to accept that the
applicant’s conduct on 24 March 2020 was inappropriate and unacceptable. I intend to reduce
the amount I would otherwise order by two weeks.
Section 392(4)
[68] There is no consideration in the amount I intend to order, by way of shock, distress,
humiliation or other analogous hurt.
[69] The compensation cap is plainly not exceeded in this case. Subsections 5 and 6 of
s 392 are therefore satisfied.
CONCLUSION
[70] In calculating the amount of compensation in this case, I have had regard to what was
said by the Full Bench said in Hanson Construction Materials Pty Ltd v Pericich [2018]
FWCFB 5960 that the Sprigg Formula is ‘not to be applied in a rigid determinative manner’.
[71] The amount of compensation is calculated as follows
16 weeks X $2,500 = $40,000
Less 2 weeks X $2,500 = $40,000 - $5,000
TOTAL = $35,000
[72] For the aforementioned reasons, I am satisfied the applicant’s dismissal was ‘harsh,
unjust and unreasonable, and an order for the payment of compensation of $35,000 should be
made in this case.
[73] Finally, s 381(2) of the Act is a significant overarching object of Part 3-2 – Unfair
Dismissal of the Act. It reads:
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(2) The procedures and remedies referred to in paragraphs (1)(b) and (c), and the
manner of deciding on and working out such remedies, are intended to ensure that a
"fair go all round" is accorded to both the employer and employee concerned.
[74] The outcome I have determined in this case is consistent with the object of Part 3-2 of
the Act of providing a ‘fair go all round’ to both the applicant and the employer.
[75] This matter is now concluded. An order of compensation in the sum of $35,000, less
appropriate taxation according to law, will be published contemporaneously with this
decision.
DEPUTY PRESIDENT
Appearances:
The applicant appeared for himself.
Mr M Gillis, Partner, Gillis Delaney Lawyers, appeared for the respondent.
Hearing details:
2020.
Sydney (via Microsoft Teams):
15 July 2020.
Printed by authority of the Commonwealth Government Printer
PR723176
THE FAIR TORK COMMISSION THE SEAL OF
