| [2022] FWC 2133 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Mr Eric Rossi
v
Low Latency Media Pty Ltd T/A Frameplay
(U2021/6369)
MELBOURNE, 12 AUGUST 2022 |
Application for an unfair dismissal remedy – serious misconduct alleged – employee’s actions did not constitute serious misconduct – no valid reason for dismissal – dismissal was unfair – reinstatement ordered.
[1] Mr Eric Rossi lodged an unfair dismissal application under s.394 of the Fair Work Act 2009 (the Act) on 20 July 2021. Low Latency Media Pty Ltd T/A Frameplay initially objected to the application stating that Mr Rossi was not protected by the unfair dismissal provisions of the Act. I dismissed the jurisdictional objection on the grounds of the high-income threshold in a decision 1 issued on 28 October 2021. Having found that Mr Rossi was protected by the unfair dismissal provisions, I subsequently dismissed Mr Rossi’s application for costs on 8 February 2022.2
[2] The Respondent has advised that it no longer relies on the defence of consistency with the Small Business Fair Dismissal Code given that the US associated entity engages 16 employees. Accordingly, this decision deals with the merits of the application.
[3] Directions were issued on 10 November 2021 and were further amended on request of the parties. Both parties were granted permission to be legally represented, but on 14 December 2021, Mr Rossi’s legal representative ceased to act. Mr Rossi was self-represented throughout these proceedings. However, his wife, a lawyer, was his support person for most of the proceedings.
[4] Mr Rossi gave evidence on his own behalf and Mr Peter Morris, Accountant for Low Latency Media gave evidence for Mr Rossi.
[5] The following witnesses gave evidence on behalf of the Respondent:
• Johnathon Troughton, CEO;
• Li Fang Wu, Chief Financial Officer;
• Cary Anna-Dawson Tilds, Chief Strategy and Operations Officer;
• Luke Austin, Product Manager;
• Kayla McCord, Head of Customer Success;
• Nicole Mancino, Director of Marketing;
• Clifford Gurney, Director of Product Strategy and Product Operations; and
• Michael William Blake, Director and Chairman of Frameplay Holdings Corporation.
[6] The matter on merit was heard over five days on 2 March to 4 March, 8 March and 26 April 2022. Substantive written submissions and evidence was filed in the course of the proceedings.
Background
[7] Mr Rossi and Mr Troughton met through an online video game in 2017 and jointly founded Low Latency Media Pty Ltd (LLM). Mr Rossi, a software engineer and accredited with Engineers Australia, brought to the business his software technical skills to embed advertisements into video games. Low Latency Media was a start-up company, both Mr Rossi and Mr Troughton were business partners and co-founders when the company was incorporated in January 2018.
[8] Until his dismissal, Mr Rossi was the sole Director and an employee of Low Latency Media Pty Ltd. Mr Troughton held the role of Adviser to LLM paid as a contractor by Mr Rossi’s other business, not LLM, while he resided in Australia. 3 In July 2019 on recommendation from Mr Troughton, the full LLM shareholding was transferred into Frameplay Holdings Corporation (the Holdings Corporation), a US company. Thereafter, Mr Troughton moved to the US and assumed the roles of CEO and director of the Holdings Corporation. This change to business structure resulted in LLM becoming the Australian subsidiary of the US corporation. Mr Rossi was also the largest shareholder of the Holdings Corporation and a board member.
[9] Mr Rossi was paid director fees from LLM’s inception until November 2019 but drew a salary from the business from either November or December 2018 in the position of Chief Technology Officer (CTO).
[10] The engineering team were employed by the Australian subsidiary based in Melbourne and were managed by Mr Rossi. Other employees were employed by Frameplay Holdings Corporation and based in the US.
[11] As a start-up company Mr Troughton focussed on securing investors into the business, however, at times it faced difficulty covering operating expenses. On 22 April 2020 Mr Rossi secured a loan of $100,000 with the Commonwealth Bank of Australia. He maintains that the loan was necessary to cover LLM’s operating expenses during the COVID-19 lockdown, particularly in relation to payment of employee wages. Mr Rossi was the guarantor for the loan and was personally liable in the event of default.
[12] Additionally, Mr Rossi loaned LLM $15,000 on 16 January 2020, $1,000 on 13 March 2020, $4,000 on 30 March 2020 and $4,000 on 31 March 2020.
[13] LLM submit that the reasons for the dismissal were sound, defensible and well-founded. The letter of dismissal tendered in evidence refers to concerns with Mr Rossi’s performance and conduct, lists examples and states that the reasons for the summary dismissal (without notice) is for unlawful harassment, sex discrimination, wilful disobedience, wilful breach of duty, wilful breach of company policy and wilful neglect of duties pursuant to clause E3 of the contract of employment. 4
[14] At the time of the hearing, it was confirmed that Mr Rossi was removed as the director of LLM on 7 July 2022.
[15] Mr Rossi denies the allegations of misconduct as provided in the letter of termination and denies allegations contained in the witness statements for the Respondent. He submits the dismissal was harsh, unjust and unreasonable.
[16] Mr Rossi describes his role of CTO as architecting and designing the software that LLM use to embed advertisements within video games, selecting the technology required to build the platform, defining roles and resources required to execute the technology, hiring and vetting qualified engineering staff, managing the development of the software and architecting and developing the global infrastructure to support the software. Mr Rossi is the author of the patent which covers Frameplay’s technology. 5 He defines Mr Troughton’s role as responsibility for the day-to-day operation of the company, securing funding and overall administration. Mr Rossi gave evidence that the agreement between the two co-founders was that they would be equals in the business with equal say on all business decisions.
[17] He gave evidence that he has invested heavily into LLM both financially and with his time, took a wage cut to help LLM with its finances and went without wages for prolonged periods of time while funding was sought. 6 Mr Rossi states that he was the sole director of LLM because Mr Troughton was declared bankrupt. As sole director, Mr Rossi understood that he was personally financially liable, should Mr Troughton not secure funding for LLM.
[18] On 2 July 2021 at around 9.30am, Mr Rossi returned a missed call to his business partner, Jonathon Troughton. Mr Rossi states that he was advised that he was dismissed for serious misconduct and to refer to the letter sent via text message. Mr Rossi says that he asked about the other Board members at which point Mr Troughton advised that Mr Michael Blake and Mr Li Wu were on the call with him. In response to the question regarding what the serious misconduct was, Mr Rossi says he was told “it’s all in the letter,” and the call ended after some two minutes. Mr Rossi states that he received the text message after the call. At around the time of the call, Mr Rossi’s access to email, Xero, payroll, personal company documents relating to his directorship including access to his shareholding certificate had been removed. 7
[19] While Mr Rossi was employed on a wage from around November or December 2018, no formal employment agreement was put in place until January 2021. 8 The employment agreement was backdated to 1 January 2019. I observe that while the employment agreement is electronically signed by both Mr Rossi and witnessed by Mr Troughton, neither dated their signature and there is no signature on behalf of LLM. I further observe that the covering letter is not signed on behalf of LLM and there is no individual person identified as an authorised signatory for LLM.
[20] Mr Rossi gave evidence that in December 2020, Mr Troughton gave him the employment agreement and stated it was required for investors. He states that he inquired why he was reporting to him in the agreement and was told it was just a formality and it would not alter the working relationship. Mr Rossi states that he was also given a Vesting Deed (the Deed) with the employment agreement and was told it was required for investors. On noticing that the Deed provided that he would forfeit 350,000 of his own shares in the event of involuntary termination, Mr Rossi sought legal advice. He subsequently requested amendments to the Deed, which Mr Troughton refused, resulting in a heated argument. Consequently, Mr Rossi refused to sign the Deed. Mr Rossi on reflection presumes that Mr Troughton had plans to dismiss him when he presented both documents to be signed. 9
[21] Mr Rossi submits that there was no valid reason for the dismissal relating to capacity or conduct and that he was not given clear reason for the dismissal. Prior to 2 July 2021, he submits that he was not aware of any reason that would have led to dismissal, there was no prior warnings, and the process was devoid of any fairness within the meaning of s.387 of the Act.
[22] He further submits that the decision to dismiss him was, “in all the circumstances manifestly disproportionate to the circumstances alleged to justify the dismissal”. Moreover, Mr Rossi denies the allegations put forward by LLM to justify his dismissal. 10
[23] In addition, Mr Rossi submits that his personal circumstances are further relevant to the dismissal being harsh, unjust or unreasonable. Those personal circumstances include:
• That he was a founder of the business;
• His length of employment with the business;
• That he agreed to a 30% pay reduction in February 2021 in good faith and in the best interests of the company; and
• That the Respondent was aware that his wife was on maternity leave with a newborn and he was the sole income earner for his family. 11
[24] In relation to the Respondent’s allegation that the Applicant engaged in serious misconduct, Mr Rossi says that the alleged conduct does not meet the definition of serious misconduct in s.12 of the Act and in effect Regulation 1.07 of the Fair Work Regulations 2009. He further states that certain incidences referred to in the letter of termination predate December 2020, when he was given the contract of employment, and in any event, if the alleged incidences were so serious to justify summary dismissal, no action was taken at the time.
[25] He submits that the Respondent at no point raised any concerns regarding his performance or conduct, nor did he have any knowledge that certain members of the Board were preparing for his dismissal. As the largest shareholder of the company, Mr Rossi states that he would not intentionally do anything that would harm the business.
[26] Mr Rossi seeks reinstatement to his position of CTO with payment of loss of pay and the correction to the unauthorised deduction by the Respondent of his annual leave accrual. Further, he seeks a correction to his ATO payment summary consistent with my earlier decision to accurately reflect earnings, instead of the incorrect figure regarding Mr Rossi’s income for the period 2019/20 financial year.
[27] LLM submit that on or around January 2018, Mr Rossi co-founded the business with Mr Troughton. Mr Rossi took on the role of CTO and an employment contract dated 1 January 2019 was finalised. LLM contend that Item 3 of the schedule of the contract provides that he reports to Mr Troughton, the CEO. It was also a contractual term that he may be summarily dismissed for serious misconduct, and the contract lists instances of conduct characterised as serious misconduct.
[28] LLM submit that there were at least four occasions where Mr Rossi was warned that he was acting in contravention of the conduct specified in his contract. LLM further submit that Mr Rossi cultivated a hostile work environment impacting the health and safety of other employees.
[29] By around June 2021, LLM determined that should Mr Rossi not be dismissed, there was an increased risk of resignation, loss of potential investors, inadequate technical innovation and a potential lawsuit.
[30] Mr Troughton submits that he lost trust and confidence in Mr Rossi as a leader and considered that Mr Rossi could not deal honestly with financial matters. For these reasons, together with the demonstrated serious misconduct justified a summary dismissal on 2 July 2021.
[31] In relation to the valid reasons for dismissal, LLM state that Mr Rossi’s conduct included: 12
• Disparaging senior, female employees and executive staff on 28 July 2020;
• Swearing and directing offensive language towards a junior member of staff on 10 August 2020;
• Undermining executive directions on 3 March 2021;
• Intimidating staff on 31 March 2021;
• Singling out a staff member to withhold their equity on 22 April 2021;
• Admitting to lacking dedication to the role on 20 May 2021; and
• General hostility.
[32] LLM submit that the conduct referred to above satisfies the common law meaning of serious misconduct, giving rise to Mr Rossi’s dismissal.
[33] In terms of Regulation 1.07 of the Fair Work Regulations 2009, serious misconduct includes others matters such as safety and dishonesty or gross breach of trust. LLM refer to alleged conduct of varied seriousness that caused grief to victims, created a hostile work environment causing stress, anxiety, humiliation and depressed moods in several employees. LLM further allege that Mr Rossi engaged in financial misconduct concerning wages and tax obligations as valid reason for the dismissal and refer to evidence filed during the jurisdictional hearing.
[34] LLM contends that Mr Rossi was constantly on notice with respect to his conduct and capacity and on 28 July 2020 Mr Troughton raised the misconduct directly indicating that his employment may be terminated if the conduct continued.
[35] LLM contend that due to a loss of trust and confidence it would not be feasible to re-establish the employment relationship, and should I consider remedy, it says that it strongly opposes reinstatement. It further submits that compensation is inappropriate.
[36] LLM also rely on earlier submissions and witness evidence in the jurisdictional hearing of 11 October 2021.
[37] Mr Rossi gave evidence that the employment agreement was a template document signed by him and backdated and that the document is an agreement between himself and LLM. The employment agreement makes no reference to Mr Troughton or the Holdings Corporation. 13
[38] While being cross examined, Mr Rossi gave evidence that as Director of LLM, he is solely responsible for the employees of LLM. The uncontested evidence was that the employees in Melbourne were employed by LLM. Mr Rossi states that the employees of LLM do not directly report to Mr Troughton, the CEO, but to himself as the sole Director of LLM. 14
[39] In relation to the role of Mr Wu, he was the CFO of the Holdings Corporation, but Mr Rossi acknowledged that he took on the responsibilities of HR for both the US Corporation and the Australian Company. He maintained that according to the Holdings Corporation’s Constitution, Mr Wu reported to the Board of the Holdings Corporation as a C level executive and not to the CEO, particularly in relation to HR matters. 15 The Constitution at Article IV, section 1 regarding Board of Directors does invest the powers of business and affairs in the Board. Section 3 provides for the shareholders of common stock to elect Board Members at the annual meeting or at a special meeting called for that purpose. Other than the power of the Board to manage its affairs, it may by majority resolution designate a committee and appoint officers. There is no specific reference to the CEO, however, there is a reference to President, CTO, CFO or Treasurer, Chairman or Vice Chairman and other officers. The power still rests with the Board and the Officer simply has the delegated authority that the Board provides. Therefore, unless the Board delegated significant powers on the CEO, Mr Rossi is correct to state that Mr Wu as an officer, reports to the Board.16
[40] In relation to OHS responsibilities, it was put to Mr Rossi during cross examination that engineering team employees felt conflicted if they received instructions or messaging from the CEO or CFO and different messaging from Mr Rossi. In answer, Mr Rossi suggested that this may be the case, however, as Director he bore the responsibility for employees, and in all likelihood no US executive would be called to Court in place of himself should there be a question of OHS responsibility. 17 Mr Rossi may be quite correct on this point as the LLM Constitution is clear in terms of the line of responsibility.
[41] The Respondent asserts that on 3 March 2021, after the CEO addressed the engineering team, Mr Rossi undermined executive directions by making the comment “disregard everything the other executives say, I run the company.” 18 The letter of termination also states that such a statement is contrary to the Constitution. This is incorrect on assessment of the Constitution. During cross examination Mr Rossi identified the different descriptions of his alleged statement regarding his authority by Mr Gurney compared to Mr Austin. Mr Gurney stated that Mr Rossi’s witness statement was correct,19 but he raises an issue of tone. Mr Austin described the team discussion concerning conflict in orders coming from various areas of the business (from the US) and Mr Rossi, after the CEO addressed the team. He described Mr Rossi’s statements to the team, that work should be funnelled through him as he had the best overview of the work. After Mr Austin allegedly disagreed with him, it is alleged that Mr Rossi stated, “it doesn’t matter what Jon said, this is my company and you have to do as I say.”20 Mr Rossi submits the difference in recollection of an alleged statement are inconsistent with the allegation that his conduct constituted serious misconduct.21
[42] LLM raised in the course of proceedings the complaint that Mr Rossi did not turn on his camera during meetings. This was raised in Mr Troughton’s witness evidence and in the witness statement of Mr Austen. It is argued that Mr Rossi deliberately failed to turn on his camera and this was an act of insubordination and undermined the CEO and overall workplace culture. Mr Rossi states that reference to cameras is not in the letter of termination. He further explained that when Melbourne went into lockdown and they had to work from home, he worked from his gaming machine which had no camera. He further states that he was never instructed to purchase a camera for use while working from home. Asked by LLM’s legal representative why he could not purchase camera, he states that LLM had no funds for additional technology to be used in the home nor was he instructed to purchase one. Mr Rossi disputes Mr Austin’s witness statement at [35] where his failure to have a camera at home was described as undermining. 22
[43] In relation to the allegation in the letter of termination that Mr Rossi publicly disparaged Mr Li and Ms Tilds, Mr Troughton’s witness statement at [68] refers to a complaint by Ms Tilds that she was disrespected and called stupid in a meeting between her, Mr Wu and Mr Rossi on 28 July 2020. Mr Rossi denies both allegations. Mr Troughton states that while he does not have notes of the telephone call, that he did warn Mr Rossi immediately after receiving the complaint.
[44] Mr Rossi denied all of the alleged warnings contained in Mr Troughton’s witness statement. On cross examination of Mr Troughton there was an apparent absence of evidence of warnings to support the witness statement.
[45] Mr Peter Morris gave evidence for Mr Rossi and tendered two witness statements. 23 He was the financial controller, performing duties for LLM since its creation and subject to employment on a casual basis since 8 October 2019. Mr Morris is a certified practicing accountant since September 2017. Mr Morris described his responsibilities as assisting Mr Rossi with payroll, employee fortnightly wages, superannuation and leave entitlements, preparation of quarterly BAS statements, day-to-day bookkeeping, preparation of LLM financials, liaising with the CFO in the US with financials and forecasts of operational funds and expenses and liaising with LLM’s Australian taxation agent.
[46] During cross-examination, Mr Morris confirmed that he reported to Mr Wu, the CFO. The matter of back payments, R&D tax and Jobkeeper was subject to extensive questioning. From that evidence, Mr Morris confirmed that in order to ensure financial records were correct wage expenses and tax liabilities were accurately recorded when accrued, even if the payment of wages was delayed due to cashflow issues. Similarly, records for R&D tax and JobKeeper wage record accruals were accurately recorded. 24 In relation to JobKeeper, Mr Morris confirmed that even though Mr Rossi was entitled to wages, subsequently to be covered by JobKeeper payments, he forewent timely wage payments to ensure that staff were paid.25
[47] Mr Morris also in confirming his witness statement gave evidence that he spoke to Mr Wu fortnightly if not weekly on all financial matters including wages, JobKeeper, leave, rent, liaison with external bodies and Mr Rossi’s $100,000 business loan et cetera. Mr Morris also confirmed that those with direct and equal access to Xero (the accounting software) were Messrs Rossi, Troughton, Wu and Morris.
[48] Mr Morris gave evidence that cash flow issues affected some 10 fortnightly wage payments due to Mr Rossi and some four fortnightly wage payments to Melbourne staff. 26
[49] Mr Morris corroborated evidence from Mr Rossi that $100,000 was borrowed by Mr Rossi and personally guaranteed by him to address cash flow issues impacting the payment of wages to Melbourne staff. He states that he raised the option of the loan and was aware that it was discussed and agreed by the CEO, CFO and CTO. He states that he raised the loan option as an arrangement made available in Australia to assist business with financial constraints caused by the pandemic. 27 Mr Morris also confirmed other loans made by Mr Rossi’s personal and separate business RES Pty Ltd to LLM when there were cash flow issues.28
[50] The letter of termination refers to a performance assessment conducted by Mr Troughton that found Mr Rossi lacked leadership on product and technology development, missed product delivery deadlines, failed to undertake KPI reporting and on 20 May 2021 disclosed to a staff member that he only dedicates 20% of his time to the CTO role. While giving evidence Mr Troughton stated that the audit document on which he relied to dismiss Mr Rossi resulted from a meeting between Mr Rossi, a select number from the engineering team and Mr Wise, an adviser to Frameplay Holdings Corporation. Mr Rossi attached the meeting invitation and questions/ directions for the meeting. 29 Mr Troughton placed much emphasis on the alleged “independent” audit report as evidence of Mr Rossi’s poor performance, however, Mr Troughton revealed that it was he who drafted the report, rather than Mr Wise after an alleged conversation with Mr Wise. Mr Troughton confirmed that he was not in the one-hour meeting between Mr Wise and the engineering team. He also confirmed that the document that he drafted was not shared with anyone in the engineering team for feedback or to check its accuracy.30 Mr Rossi gave oral evidence and tendered supporting documentation that the purpose of the meeting was to have the people that perform the work to present and following the meeting, for investor purposes, that feedback will be provided to “use, consider, or ignore” when making the best impression with investors. Mr Troughton confirmed that Mr Rossi had never seen his report, nor did he put to Mr Rossi the alleged under performance allegations.
[51] Mr Troughton made further assertions regarding the weight of the report referred as a due diligence report, on which he based his decision that performance delays were attributable to Mr Rossi. Mr Troughton failed to provide any credible evidence to support his allegations and his responses while giving evidence were vague and non-committal. No evidence was tendered, and it was not contested that Mr Rossi was never informed of the allegations on which Mr Troughton relied to justify the dismissal.
[52] Mr Troughton gave evidence that Mr Morris was not an employee but a contractor because there was no written contract of employment. Further, he stated that he has since found that Mr Morris received superannuation to which he was not entitled to, so from his perspective there was likely to be further action on this point. In an exchange with the Commission that employees need not necessarily have a written contract of employment, Mr Troughton responded that Mr Rossi then went ahead on his own to employ him and it was falsely done. This evidence of alleged impropriety on the part of Mr Rossi raises the following question: why, if both Mr Troughton and Mr Wu (who also had a direct line of reporting) and access to Xero, would they maintain this position? The employment pay records including the single touch payroll reports to the ATO for each employee were visible to them; the records would have shown a wage paid to Mr Morris and the tax paid to the ATO. I do not consider that the witness evidence of Messrs Troughton and Wu holds weight in relation to Mr Rossi’s alleged misconduct. The responses by both Mr Troughton and Mr Wu raise questions of credibility in respect to their allegations that Mr Rossi employed Mr Morris for 2.5 years without their knowledge or that unauthorised superannuation or wages were paid.
[53] In relation to the $100,000 loan, Mr Troughton states it was not a personal loan taken by Mr Rossi, that instead it was a government incentive. It appears that Mr Troughton misconstrues the point made about the loan. The facts show that while the government may have encouraged banks to release three-month interest free loans, the actual loan taken by Mr Rossi on behalf of LLM through a bank was personally guaranteed by him. Mr Rossi submits that it was agreed between the Directors (Rossi and Troughton) that the loan was a temporary measure until the 2019/2020 tax return to pay wages because of cash flow issues, but the agreement was that it be repaid immediately to avert further costs. Mr Rossi tendered in evidence emails between Messrs Troughton, Rossi and Wu about the loan. 31 No evidence was tendered from LLM to dispute Mr Rossi’s account. Mr Troughton continued to assert in oral evidence that Mr Rossi had no right to insist on its repayment, despite the ramifications, that is that Mr Rossi as guarantor had secured the loan against his own assets and was personally liable in the event of default. On other matters concerning finance, Mr Troughton admitted to having access to the CBA account and probably misplaced or left behind in Australia the security token to access the Company accounts. In response to Annexure B (copies of CBA banking authority forms),32 Mr Troughton admitted that he had access, but he could not give Mr Wu direct authority.
[54] Mr Troughton further gave evidence that it was near impossible to record events and warnings for two reasons: firstly, he was too busy seeking out investors and secondly, by recording warnings he felt it would expose the business negatively should potential investors seek to access the employment contracts and HR records.
[55] Mr Rossi took Mr Troughton to his witness statement of 10 September 2021 where he states: “The Applicant became Frameplay’s employee during a meeting I had with him in Frameplay’s old office at level 19, 60 Albert Road…” 33 and “on or around 1 January 2019, I finalised the Applicant’s contract of employment. I did not review that document again following that date.”34 It is uncontested that Mr Rossi was given the contract in December 2020. Mr Troughton was asked how Mr Rossi could have been made an employee by Mr Troughton in that meeting when Mr Troughton was not an employee nor director and in relation to the second statement Mr Troughton avoided the question how he finalised the contract. When it was obvious that he had no legal capacity to finalise the contract Mr Troughton gave evidence that he witnessed it.35 He did not disclose where the document came from, on my observation, he avoided the question.
[56] During cross-examination, Mr Rossi took Mr Troughton to paragraph [19] of his February witness statement 36 and asked why, if in the middle of 2020 Mr Troughton was advised to get rid of Mr Rossi, did he provide Mr Rossi with a contract of employment in December 2020 together with the Vesting Deed requiring Mr Rossi to relinquish 350,000 of his shares? Mr Troughton responded that he tried to work with him and not dismiss him, and the contract and Vesting Deed were quite standard practice in the industry. Mr Troughton’s allegations regarding Mr Rossi’s conduct are quite serious, yet there was no evidence to support those allegations. Nor did Mr Troughton provide evidence to support his assertions regarding standard industry practice.
[57] It was also alarming and improper that in Mr Troughton’s evidence he sought external advice from C Level executives of leading companies in the industry whether he should dismiss Mr Rossi based on his own perceptions and his description of alleged conduct. The alleged advice that he should dismiss Mr Rossi was not independent or reliable, but instead appears to have disparaged Mr Rossi unfairly in an industry in which he operates. Further, Mr Rossi had no capacity to defend his reputation against the allegations of serious misconduct disseminated by Mr Troughton. 37
[58] Specifically, on the allegation of sex discrimination, Mr Troughton stated that he speculated that Mr Rossi was sexist because the female staff participated in a buddy system (without Mr Rossi’s awareness) and there were no females in the Melbourne engineering team. In oral evidence he says that he did not raise the allegations of sexism with Mr Rossi but said that Mr Rossi’s behaviour had to stop. Mr Troughton provided no clarity on what he allegedly said to Mr Rossi.
[59] In respect to allegations of bullying in August 2020, Mr Troughton says that he told Mr Rossi that he could be sued and dismissed but despite this he did not dismiss him nor issue a warning. In respect to allegations of insubordination, Mr Troughton states that Mr Rossi was not told he would be dismissed. There is an absence of evidence from Mr Troughton that he warned or disciplined Mr Rossi in respect to any of the issues, that he described as so serious to warrant summary dismissal.
[60] The letter of termination refers to a 3 March 2021 incident where it is alleged that Mr Rossi undermined executive directions in a meeting with his engineering team. Mr Rossi took Mr Troughton to various reports of the alleged incident from the Respondent’s witnesses. Mr Troughton was shown the different reports between Mr Austin and Mr Gurney and Mr Rossi’s explanation. Mr Troughton confirmed that despite the variance, he only took the report from Mr Austin, he made no further inquiries of any sort and stated, “I had no reason to believe or doubt the legitimacy of what was said.” 38
[61] In relation to the alleged incident of 31 March 2021, Mr Troughton struggled to explain the seriousness of the alleged incident since having read the recorded Slack discussion. He did state that it was reported to him by Ms Tilds that Mr Rossi interrogated her staff member, and it was on that information that he acted with his decision to dismiss. He admitted to not investigating the matter and he confirmed that he was unaware of the recorded discussion that does not resemble an interrogation. 39
[62] The letter of termination also refers to an assessment by Mr Troughton of Mr Rossi’s performance on 31 May 2021. Mr Troughton gave evidence that there was no specific event concerning this date other than his decision that “enough is enough” and that he would dismiss Mr Rossi. He confirmed no evidence or information was given to Mr Rossi to respond to, and the delay to dismiss was because he needed to obtain legal counsel to assist in the process of dismissal. Mr Blake’s oral evidence supported Mr Troughton’s evidence that Harmers were engaged to provide advice on the steps to be taken to dismiss, risk mitigate and keep information of an impending dismissal from Mr Rossi.
[63] On any objective analysis, Mr Troughton’s evidence shows a failure to provide Mr Rossi with any detail regarding the allegations made against him prior to dismissal. Further, the evidence demonstrates that Mr Rossi was not provided with an opportunity to respond and no efforts were made to investigate or to verify any reports relating to Mr Rossi’s alleged conduct. Mr Troughton spoke of needing to respect individuals, make them feel safe and valued, yet no such action was afforded to Mr Rossi.
[64] Mr Wu gave evidence regarding his role, he confirmed that he was the CFO, that he was an executive officer but not a member of the Board of the Holdings Corporation. He stated that he took Board minutes and recorded attendees, motions, action items and outcomes. He confirmed that he did not record discussions at the Board level concerning the alleged discussions regarding Mr Rossi’s behaviour.
[65] Evidence of great concern about Mr Rossi’s decision making on financial matters was raised by Mr Wu. It is alleged that the decisions were unauthorised and included: Mr Rossi’s decision to back pay his wages that were owing; payment of rent when the landlord threatened a breach notice because there was no entitlement to rent relief according to their legal advisers; the repayment or insistence on repayment of the $100,000 borrowed by Mr Rossi where he was personal guarantor and the appointment of and payment of superannuation to Mr Morris as an employee.
[66] It was obvious from Mr Wu’s evidence that he was unclear of obligations in Australia for payments to employees as opposed to contractors. Further he was unaware of the circumstances where superannuation payments are payable to contractors. The simplistic view that there was no contract for Mr Morris, therefore he was a contractor, and despite the evidence in Xero of 2.5 years of casual wages paid, provides little weight to the evidence relating to Mr Rossi’s alleged misconduct. If the decisions made were “unauthorised” as stated, then for such significant financial matters one would expect that Board minutes would be produced that confirmed the Board decisions, particularly on matters concerning loan terms and conditions, matters concerning serious allegations that place the Company at risk and the status of financial liabilities. A loan of $100,000 is significant and it would be a reasonable expectation that minutes could or should have been produced. Instead, copious hours of evidence on these matters from each witness simply produced more conflicting evidence. On this specifically, I prefer on balance the evidence of Messrs Morris and Rossi; their evidence was clear, direct, and unwavering, while the same cannot be said for the evidence of Messrs Wu and Troughton. LLM rely on the evidence of Mr Rossi during the jurisdiction hearing where he made statements concerning the payment of Jobkeeper, R&D tax and PAYG tax paid. During this hearing, Mr Rossi took time to explain his evidence and any misunderstanding at the jurisdiction hearing. Mr Morris corroborated the evidence.
[67] In addition, it is concerning that Mr Rossi’s back pay has caused such consternation. Mr Rossi was an employee of LLM, performed work and was entitled to his wages. He agreed to a delay in payment of wages, but to deny him payment when funds were available, even though financially challenging, seems not only callous, but inconsistent with LLM’s legal obligations. Both Messrs Wu and Troughton had access to Xero, controlled the funds deposited into LLM to cover all liabilities and yet gave evidence they were not aware of the payments made by Mr Rossi; it is difficult to accept on balance of the evidence having seen the limited emails produced from Mr Rossi.
[68] Mr Wu also gave evidence in respect to his role as “HR”. The series of incident reports attached to his witness statement produced significant concerns. Firstly, the reports were not contemporaneous, they were not validated, there was an inconsistent approach, selective material was inserted into the reports, and the person, the subject matter of the allegations, in this case Mr Rossi, was never given any information that they existed, or given an opportunity to reply. The reports further do not support the great pains Mr Troughton went to claim that he would not keep records in fear of investors accessing the information. The reports about Mr Rossi were made with Mr Troughton’s knowledge and authority, and a simple observation of them shows their purpose was to either support the letter of termination or were made as corroborating evidence. Mr Wu made it clear that the date of production of the reports in his view was irrelevant. I do not agree, and on any reasonable analysis, the date of manufacture of each report is a credibility issue which appears to have been lost on him. Mr Wu described three purposes for the reports: check in on employees, manage performance and HR processes and manage risk for the company. There was no evidence of these three objectives. Mr Rossi, also an employee, was not checked in on. His performance was not managed and in respect to risk, the evidence before the Commission suggests that they were produced for the purpose of these proceedings.
[69] I must add that in relation to the incident report attached to Mr Gurney’s witness statement which concerns the event on 28 October 2020, Mr Wu confirmed that he was the author of the Incident Report. This report was not tendered by and with Mr Wu’s other reports but attached to Mr Gurney’s witness statement. 40 The report does not resemble the other incident reports.
[70] Ms Tilds is based in the US reporting to Mr Troughton. She described Mr Rossi as rude, that he talked down at staff, his tone was demeaning, and she and others felt disrespected and disregarded. She described her concerns about Mr Rossi as bypassing her and approaching her staff directly, referring to her as the CMO when her title was Chief Strategy and Operations Officer and in relation to the important work contained in the roadmap, she states that she communicated with Mr Rossi but he referred to her emails as noise.
[71] Ms Tilds attached to her witness statement a sample of the emails she sent to Mr Rossi. In the period 1 May to 27 June 2020. There were 96 emails over a period of some 40 working days. The emails are detailed and request follow-up or a response from Mr Rossi.
[72] Ms Tilds stated that she reported to Mr Troughton and received instructions from him including his direction that she speak to the engineering team directly and engage on a one-on-one basis. However, she stated that it was inappropriate for Mr Rossi to go directly to her staff.
[73] In respect to the meeting scheduled on 31 March 2021 regarding branding, she gave evidence that she knew that Mr Rossi had a script as she was forewarned “because Cliff had given me a heads up that you were upset.” 41 She gave evidence that Mr Rossi went off script and his comment about green and blue should not be seen together was offensive.
[74] Mr Austin gave evidence that he worked with and reported to Mr Rossi for 2.5 years. Although he was trusted with the SDK team, he described incidences where Mr Rossi could be prickly, judgemental or negative.
[75] Mr Austin gave evidence in regard to the incident where the “junior” member of the team was reprimanded by Mr Rossi for failing to attend work on a series of Fridays. Mr Austin disputed that the employee missed work, merely missed meetings. The “junior" employee was part of Mr Austin’s team and when he did not deal with the matter of absence, Mr Rossi spoke to the employee directly. It is contentious in terms of what was said. Mr Austin could not recall if the word “cunt” was used, but he did say that the employee reported to him that he was told by Mr Rossi that his behaviour was not good enough. 42 I note that Mr Austin stated that both Mr Rossi and he communicated with the employee via Discord, yet no evidence of any discussion was tendered in evidence.
[76] Mr Austin states that the culture was negative while Mr Rossi was employed, however, while giving evidence he could not provide any detail regarding negative culture other than the two events: incident with the “junior” employee and the comment Mr Rossi made to ignore what the CEO says because it is his company. 43 However, Mr Austin did acknowledge that the difficulty he had was with employees, and his ability to communicate different opinions, suggested he lacked to skills to do so.44
[77] Further, evidence of the impact of Mr Rossi’s discussion with the “junior” employee was subject to witness evidence from Messrs Austin, Li, Troughton and Gurney, However the evidence was inconsistent and unreliable that the behaviour caused a significant mental health injury. 45 Mr Austin gave evidence that Mr Rossi would go outside to have a cigarette with the employee,46 this does not suggest evidence of a traumatised employee. As it turns out, no evidence of Company paid time was tendered and Mr Austin confirmed that the employee just took time off some time well after Mr Rossi was dismissed. While the Respondent suggests Mr Rossi’s behaviour constituted bullying and it took the matter seriously, there is no evidence of action taken, and witness evidence concerning the alleged leave taken by the employee was so vague it was unclear whether it was annual leave or time off in lieu. I do observe that Mr Austin states that he is a friend of the employee and admitted to being aware that the employee has personal issues outside of work that required him to take time off work.
[78] On the matter of cameras, Mr Austin stated during examination in chief that he knew that Mr Rossi did not have a camera, “It was my understanding he didn’t, but I was unaware why he couldn’t find a way.” 47
[79] Mr Gurney is described as a senior member of the team and now resides in the US, but while working with Mr Rossi in Melbourne he describes him as defensive, prone to passive-aggressive behaviour, lacking in leadership, assertive of his dominance and narcissistic. In his witness statement he refers to various incidents to illustrate his point, one being where he suggested the refrigerator should be stocked with Coca Cola and Mr Rossi responding whether this was justifiable or necessary. Mr Gurney also describes how because there were irregularities in LLM providing free pizza that Mr Troughton tried to develop the “culture” in the office by reimbursing staff for purchasing pizza each Friday. Mr Gurney describes Mr Rossi as stand-offish for failing to report to his team what he was working on.
[80] He refers to a junior employee only a few years younger than him, where he alleges knowledge of an incident involving Mr Rossi, but he has no firsthand knowledge, only what he was told by Messrs Wu and Troughton. 48
[81] He describes discriminatory conduct, but provides no evidence, in fact he orally states in evidence that “but I do not intend it to be of a sexist nature.” 49
[82] On the matter of cameras, Mr Gurney confirmed that hardware was purchased after Mr Rossi’s departure to ensure that the engineering team can use cameras. 50
[83] Evidence was led by both Messrs Rossi and Gurney that there were disagreements regarding the work performed by Mr Gurney and his relationship with other team members in the Melbourne office. The oral evidence was conflicted, but a reasonable observation is that Mr Gurney while reporting to Mr Rossi went directly to Mr Troughton, Ms Tilds and Mr Wu instead of observing the directions from his line manager. This behaviour including sending “side notes” sidelined and undermined his direct manager. It is reasonable to conclude that Mr Gurney’s transfer out of Mr Rossi’s team was mutually agreeable.
[84] In relation to the Incident Report attached to Mr Gurney’s witness statement, it is incomplete. The report selectively reports what appears to be agreeable to Mr Gurney, rather than incorporating, referring to or including any detail regarding the serious event or Mr Rossi’s investigations and his follow-up action with each employee.
[85] Mr Gurney describes in his witness statement, the event as “underhanded conduct” by Mr Rossi because he investigated the event by speaking to each employee, that attended the work premises without authority after hours to consume alcohol and drugs during Melbourne’s lockdown. The description does not mention the seriousness of the event. Mr Gurney states that they (the four employees) “messed up”, but Mr Rossi handled the matter in a manner beyond acceptable. Mr Rossi produced a report of his investigation of the incident to Messrs Wu and Troughton. It has not been explained why the process adopted by Mr Rossi was underhanded or inappropriate other than it caused anxiety to the four employees. The conduct was serious on a number of levels and there is no evidence that Mr Rossi’s investigation process was disproportionate to the conduct nor was the investigation conducted in secret. All employees received a copy of the report to sign and verify.
[86] Concerningly, Mr Gurney gave oral evidence that he, despite a reasonable and lawful directions not to speak to the other employees, had organised a team meeting to discuss the investigation and took steps to discuss with Mr Troughton what he described “as crazy and unreasonable behaviour”. He stated that he did not think it reasonable that as a Director he should take steps to protect himself and LLM. 51
[87] Mr Gurney also gives evidence that he would report various observations to Ms Tilds, including the incident which he describes as “underhanded” (investigation of unauthorised entry onto site with alcohol, substances and non-staff in breach of pandemic lockdown orders).
[88] A number of statements made by Mr Gurney in his witness statement are irrelevant, lacking in evidence and accusatory without any substance. I do find a number of incidences that he refers to justify his interpretation of Mr Rossi’s behaviour, in fact his evidence shows a lack of respect for Mr Rossi’s position and active undermining of his authority. Examples include inviting individuals to Mr Rossi’s meetings without authority, undermining a disciplinary action, sending notes to other executives, alleging cameras were tied to Mr Rossi’s private email, when in fact it was his email at Frameplay, attaching only partial information, and arranging a meeting of the team to subvert a reasonable and lawful investigation.
[89] Ms McCord is Head of Customer Success and is the comparable age of the other employee referred to as a junior by the Respondent’s witnesses. However, there is no evidence that Ms McCord was treated as a junior by Mr Rossi or anyone else. She gave oral evidence of her perception of Mr Rossi. She made it clear that her evidence was based on her “perception, how she was feeling, and it was “her personal truth.” Ms McCord explained that she worked closely on a daily basis with Messrs Troughton, Li, Austin, Gurney and Ms Tilds.
[90] Ms McCord could not provide any example where Mr Rossi was aggressive towards her and again no example of sex discrimination could be identified, other that she was the first woman employed by the Holdings Corporation. She did, I observe acknowledge that Mr Rossi was involved in her appointment and the decision to grant her shares in the Company.
[91] Ms McCord was taken to an Incident Report created by Mr Wu dated 31 March 2021. She confirmed that she had not seen the Report before. In relation to the allegation that she made a statement to Mr Rossi, she states she could recall saying “you can’t speak to me like that,” but could not recall what incident led to the comment. 52
[92] In relation to allegations of bullying, Ms McCord was again non-committal and did not provide any evidence or refer to any incident, other than to state that she felt she was asked questions, or was “micromanaged,” or was just uncomfortable on the phone with Mr Rossi. She states that on review of her Slack conversations there was no “written proof that would necessarily pertain to evidence that you were disrespectful or a bully or whatever you want to call it.” 53
[93] With Ms McCord’s evidence it was also revealed that weeks before Mr Rossi’s dismissal, she was questioned about her experience with him and she too knew of the dismissal, before Mr Rossi was made aware. 54
[94] I am not satisfied that the evidence of Ms McCord added weight to the Respondent’s allegations against Mr Rossi.
[95] Ms Mancino joined the Holdings Corporation on 15 March 2021 as Director of Marketing. It is interesting that in her statement she states that she did not interact with Mr Rossi much and could only refer to one incident pertaining to the Marketing presentation where it is alleged Mr Rossi was aggressive and unprofessional. In her oral evidence she described Mr Rossi’s body language as being negative because he laced his fingers together and held his hands to his mouth area and looked down. In relation to tone, she recalled his statement that “green and blue should never be together.”
[96] I observe that Ms Mancino did state, “Typically, communications or directions would filter through Ms Tilds. That was by design, so that we were protected from Mr Rossi’s confronting style.” 55 This statement is unusual given that she admits to having limited interaction other than the one incident. The one incident she refers to occurred two weeks after she commenced. Mr Rossi was dismissed some three months after Ms Mancino commenced employment. Ms Mancino provides no evidence of any other incidences where she had to be shielded from Mr Rossi or any behaviour that caused her any concern. From this, given the structure of the witness statement, it suggests that Ms Mancino was aware of the arrangement to filter communications on her commencement of employment, therefore she felt she had to be protected upon commencement. This correlates to the rest of the witness statement.
[97] In my view, Ms Mancino’s statement provides limited credible evidence because as she states, her communication was in relation to the one incident in the three months of employment, yet she describes Mr Rossi’s witness statement as an “interesting” interpretation of events,” she has formed a view of the relationship between the co-founders but has no direct knowledge. Further in examination-in-chief she states that the Incident Report is accurate and while she did not have a direct conversation with Mr Wu, she then referred to “point €, open rejection of company culture and values, including a pattern of disrespect and inappropriate behaviour. And summary point (f) staff hesitancy and reluctance to be themselves due to your hostility and the fear of retribution. In the termination letter of 2 July 2021. These opinions are reiterated in my witness statement dated 6 February 2022.” 56 How Ms Mancino was aware of the detail in the letter of termination is baffling, and in her oral statement, she says the observations are reiterated in her witness statement – they are not.
[98] Ms Mancino refers to the company culture, yet no one has provided evidence of what is the company culture other than stating that Mr Rossi undermined it. Ms Mancino admitted to having the Incident Report before completing her witness statement during cross examination, which is concerning. The Respondent’s representative made some effort to address this admission in re-examination, but I prefer her original response which was not prompted.
[99] Mr Blake is the independent Director and provides the following oral evidence:
• As Mr Troughton was titled CEO, he relied on his statements alone and at no point verified or witnessed any of the allegations against Mr Rossi.
• Mr Troughton’s role was not technical, but was to secure funding, nevertheless, Mr Blake determined that because Mr Troughton communicated with him to obtain his investment that he was the natural leader and the person in charge.
• The only other individuals Mr Blake spoke to about Mr Rossi’s alleged conduct was with Mr Wu and on one occasion with Ms Tilds.
• Despite the evidence of Mr Wu, there were no discussions about or with Mr Rossi in relation to any alleged conduct of concern at any Board meeting.
• Before the completion of Series A funding, it was expected and understood that the directors would have their back pay.
• In January 2021 when the Board discussed reducing Director pay, on his recollection, funding was secured so reduction of salaries was restored immediately or almost immediately. During the jurisdiction hearing it was alleged that no decision was made to reduce salaries and Mr Rossi acted on his own without authority. If it were not for the evidence produced by Mr Morris, the Commission would have been misinformed by the Respondent’s evidence.
• While Mr Blake states there are minutes, at no point have any minutes been produced. However, in oral evidence Mr Bake also stated that decisions regarding back pay for the Directors, including Mr Wu occurred at executive level. 57
• At no time did he personally counsel or warn Mr Rossi, nor did he observe any counselling or warnings by Mr Troughton.
• In relation to allegations of financial misconduct, Mr Blake relies on statements from Messrs Wu and Troughton, he did not verify any of the allegations.
• Mr Blake mentions his understanding of JobKeeper but he provides no clarity, again he relies on statements from others and he also reasserts that he has no internal management function.
• As Chair of the Board of the Holdings Corporation, there was no evidence of regular meetings or a common accepted practice regarding minutes on important decisions.
• Given the contrasting evidence, it is reasonable to conclude that decisions were made on the go with no formality, nor formal recording of minutes and there is an absence of due diligence undertaken.
• Mr Blake also gave evidence that he delegated responsibility for correct payment of Mr Rossi’s entitlements including his back pay on termination to Mr Wu.
• In terms of the decision to dismiss Mr Rossi, Mr Blake says he did not make the decision. However, as Director he did, when he accepted Mr Troughton’s version of events and gave Mr Rossi no opportunity to defend himself. He determined that the decision was not for the Board but was with one co-founder because he held the title of CEO.
• Statements made by him to Mr Rossi that there were quite a few affidavits or statements regarding certain incidents were in fact not true as the only comments Mr Blake was aware of were from Messrs Wu and Troughton. 58
• Mr Blake made statements of alleged misconduct on the part of Mr Rossi and when he was directed to other material such as Xero statements of when actual payments were made or evidence that disputed his oral evidence, he wavered.
[100] Section 385 of the Act provides that a person has been unfairly dismissed if the Commission is satisfied that:
(a) the person has been dismissed; and
(b) the dismissal was harsh, unjust or unreasonable; and
(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and
(d) the dismissal was not a case of genuine redundancy.
[101] The threshold issue of whether the Applicant was dismissed at the initiative of the employer is not contested. I am satisfied that Mr Rossi was dismissed and that the dismissal was not a case of genuine redundancy. As the Respondent withdrew the jurisdictional matter of compliance with the Small Business Fair Dismissal Code, there are no other jurisdictional matters to be determined. The remaining matter pursuant to s.385 of the Act to be determined is whether Mr Rossi’s dismissal was harsh, unjust or unreasonable.
[102] Section 387 of the Act provides that, in considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, I 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 Commission considers relevant.
[103] I am required to consider each of these criteria, to the extent they are relevant to the factual circumstances before me.59
[104] In order to be a valid reason, the reason for the dismissal should be “sound, defensible or well founded”60 and should not be “capricious, fanciful, spiteful or prejudiced.”61 However, the Commission will not stand in the shoes of the employer and determine what the Commission would do if it was in the position of the employer.62
[105] Where a dismissal relates to an employee’s conduct, the Commission must be satisfied that the conduct occurred and justified termination.63 “The question of whether the alleged conduct took place and what it involved is to be determined by the Commission on the basis of the evidence in the proceedings before it. The test is not whether the employer believed, on reasonable grounds after sufficient enquiry, that the employee was guilty of the conduct which resulted in termination.”64
[106] The letter of termination is a detailed document that provides a number of statements regarding Mr Rossi’s alleged conduct. The relevant extract from the letter of termination 65 is as follows:
“TERMINATION OF YOUR EMPLOYMENT
As previously discussed with you 4 March 2021, your conduct and performance has failed to meet the Company’s values and expectations.
By way of summary, it is confirmed that the Company’s concerns with you include:
(a) serious substantiated contraventions of your Contract and Australian statutes including in relation to bullying and sexism, insubordination and dereliction of duties;
(b) consistent lack of leadership around product and technology;
(c) consistent lack of collaboration with executives and key business staff;
(d) consistent missed product delivery deadlines and lack of KPI monitoring
and poor, clarifying communication;
(e) openly rejection of company culture and values, including a pattern of disrespect and inappropriate behaviour;
(f) absent leadership;
(g) staff hesitancy and reluctance to be themselves due to your hostility and their fear of retribution.
Specific examples of relevant conduct and performance issues include (without limitation):
(a) On 28 July 2020, you attended a videoconference during which you publicly disparaged Ms Cary Tilds and Mr Li Wu regarding management of marketing and finance functions, which are outside of your remit;
(b) On 10 August 2020, you said to a junior staff member words to the effect of:
“You are a useless cunt and a waste of the company’s money”. The staff complained of an ongoing pattern of hostility from you, and the Company has taken preventative steps to protect the staff from your intimidation, including by directing his manager to act as a conduit of communication between you and the staff;
(c) On 3 March 2021, you convened a team meeting during which you said words to the effect of: “disregard everything the other executives say. I run the company.” That direction is contrary to the Company’s constitution, and has caused discomfort within the team;
(d) On 31 March 2021, you made direct contact with marketing staff to interrogate their about whether a previous staff resigned as a result of your conduct. Additionally, Ms Tilds and another female staff have requested a support person to attend all meetings with you due to your aggressive and sexist behaviour;
(e) On 22 April 2021, you singled out a staff and withheld stock options that were otherwise due to him and his colleagues;
(f) On 21 May 2021, a due diligence technology audit identified that you were responsible for:
(i) a six-month delay for the user management initiative going live;
(ii) a five-month delay to resolve the programmatic advertising buy issue; and
(iii) strategic roadblocking.
(g) On 31 May 2021, your performance was assessed by Mr Jonathon Troughton, who found that you:
(i) lacked executive leadership regarding product and technology; and
(ii) missed product delivery deadlines and failed to undertake KPI reporting; and
(h) On around 20 May 2021, you disclosed to staff members words to the effect of: “I only dedicate 20% of my time to the CTO role”.
The Company has determined that the serious concerns about your conduct and performance are substantiated.
Intimidation and sexism are extremely serious acts of misconduct in contravention of antidiscrimination laws. In addition, wilful disregard to duties and insubordination are contrary to Frameplay AU Handbook and HR Policies and constitute breaches of your contract of employment, dated 1 January 2019 (“Contract”).
This conduct has brought the Company into disrepute and exposes the Company to significant reputational and financial harm.
In the circumstances, the Company has no choice but to summarily dismiss you, without notice, for unlawful harassment, sex discrimination, wilful disobedience, wilful breach of duty, wilful breach of workplace policy, and wilful neglect of duties pursuant to clause E3 of your Contract
Your employment is terminated, effective immediately.”
[107] In LLM’s outline of submissions it submits that the following misconduct was serious enough and constituted valid reasons for summary dismissal:
• Disparaging senior, female employees and executive staff on 28 July 2020;
• Swearing and directing offensive language towards a junior member of staff on 10 August 2020;
• Undermining executive directions on 3 March 2021;
• Intimidating staff on 31 March 2021;
• Singled out a staff member to withhold their equity on 22 April 2021;
• Admitted to lacking dedication to the role on 20 May 2021; and
• General hostility. 66
[108] On the matter of serious conduct justifying dismissal, I observe that the list of reasons offered in the outline of submissions is expressed differently to the reasons given in the letter of termination of employment. The expressed conduct in [43] above is inconsistent in a number of respects such as:
a) In relation to the event of 28 July 2020 which is described as disparagement of senior, female employees and executive staff in the outline of submissions is unclear in the letter of termination whether disparagement is the main point in general or whether the disparagement concerned functions outside of Mr Rossi’s remit. This difference in language fails to provide clarity in respect to what the allegation is.
b) The event of 10 August 2020 is characterised as swearing and offensive language, yet the detail in the letter of termination raises additional matters.
c) In relation to the event of 3 March 2021, LLM express a concern with the alleged statement by Mr Rossi in the outline of submissions as undermining executive directions, but the letter of termination refers to the statement being contrary to the Company’s Constitution and caused discomfort.
d) Regarding the event of 31 March 2021 in the outline of submissions it is described as intimidating staff, yet the letter of termination makes no reference to intimidation, but states contact with marketing staff was an interrogation.
e) Paragraph (f) and (g) appear to relate to performance concerns, yet LLM state that the summary dismissal was due to serious misconduct, rather than performance concerns which would have expected a performance management process. 67
f) In relation to (h) in the letter of termination which is an alleged statement by Mr Rossi that he only dedicates 20% of his time to the CTO role, it is described in the outline of submissions as an admission of lacking in dedication.
g) The focus on the examples in LLM’s outline of submissions, while also taking into account the summary concerns which include reference to lack of leadership, contravention of his contract and laws, persistent missed deadlines and KPIs, open rejection of the company values and culture and his hostility where employees are in fear of retribution, together with the statement that “intimidation and sexism are extremely serious acts of misconduct… in addition to wilful disregard to duties and insubordination are contrary” to the Handbook, HR policies and constitute a breach of his contract, fail to clarify to Mr Rossi clear reasons for his dismissal.
[109] It is in dispute whether Mr Rossi was given the reasons for his dismissal on the call of 2 July 2021, including whether the contents of the letter were read at the time of the call. Mr Rossi states there were no reasons given and that he was directed to the letter texted to him, while Mr Troughton states that he said, “Due to performance issues identified in the recent report which were raised with you in your appraisal, and your ongoing misconduct which has been addressed to you specifically without improvement, we are unfortunately going to be letting you go.” Mr Michael Blake was also on the call and provided his recollections of the call which is more consistent with Mr Rossi’s recollection. 68 Mr Wu also on the call confirms that the “call wasn’t overly long- we tried to communicate the message and Mr Rossi was in denial.”69
[110] Based on the witness evidence, I prefer the evidence of Mr Rossi, which is supported by Mr Blake and Mr Wu that the call was short and discussions regarding the detailed reasons in the letter were not had. On this basis, the consideration of s.387(a) which requires the Commission to consider whether there was a valid reason, need not rely on whether reasons were given to Mr Rossi at the time of the dismissal. Whether Mr Rossi was informed of the reasons at the time of his dismissal are relevant for other considerations in s.387 of the Act, such as whether Mr Rossi was given an opportunity to respond to the reasons.
[111] LLM contend that its reasons for Mr Rossi’s dismissal justify a summary termination for serious misconduct, however, due to the language used in Mr Troughton’s witness statement and the Respondent’s outline of submissions, I will address each of the declared reasons including matters pertaining to capacity as I “must consider the entire factual matrix in determining whether an employee’s termination was for a valid reason.”70
Disparaging senior, female employees and executive staff on 28 July 2020
[112] LLM submit that use of offensive language and abuse is a valid reason for dismissal and relies on Bohonko v Sterjov. 71 In citing this decision, LLM refer to the allegation that on 10 August 2020 Mr Rossi directed offensive language to a junior member of staff. In Bohonko v Sterjoy the Court considered a single instance of swearing was not enough to warrant summary dismissal.72 However, the decision relevantly considers the effect of the conduct on a contract and the relevance of the workplace setting:
“The question is whether the applicant’s conduct was such as to show that she disregarded an essential condition of her contract of service, or was a repudiation of that contract.”73
[113] In considering context of the workplace and conduct of the individual using the inappropriate language, the Court found as follows:
“The applicant was not employed in a traditional industrial, or blue collar, setting, where robust terms of address may not be unusual. Even in such a setting, the direct abuse of a subordinate in racially offensive terms could, in my view, never be acceptable. However, the applicant was employed in a workplace in which invectives of that kind should be regarded not merely as unacceptable, but as intolerable. I consider that the way the applicant spoke to Ms Matthew irretrievably compromised her (the applicant’s) capacity to supervise Ms Matthew again. The words were calculated to destroy every vestige of respect that Ms Matthew had for the applicant. Together with the offensive nature, and wilfulness, of the applicant’s words, these circumstances lead readily to the conclusion that the applicant’s conduct was repudiatory.”74
[114] I am not satisfied that the evidence shows that Mr Rossi disparaged female employees and executive staff consistent with the reasoning in Bohonko and Sterjoy. LLM also states that the Commission must be satisfied that the conduct occurred because firsthand accounts were reported to Mr Troughton. The evidence concerning firsthand accounts reported is in Mr Troughton’s statement where he says:
“I was furious to hear one of the Australian employees, Mr Luke Austin, explain to me over the phone that Mr Rossi was gloating about his lack of dedication. Mr Austin also reported to me that Mr Rossi reiterate his desire to replace me as CEO, which is not the first time I received reports of such dissent.” 75
“I was pinged (messaged) by several people following that meeting who told me what had happened. The reports I heard were along the lines of: ‘Mr Rossi blew up and started having a fit about the execs when you got off that call.’ I also recall hearing about Mr Rossi saying he wanted to run the company” 76
[115] The meeting referred to in Mr Troughton’s second statement above occurred on 3 March 2021 where it is alleged that Mr Rossi directed staff to disregard other executives. 77 Mr Troughton in his witness statement goes on to say that he raised the incident of 3 March 2021 on multiple platforms and warned him on Slack that he should not “dissent’ him or the executive team in front of the team. He states that Mr Rossi screamed at him words to the effect of “I’ll speak to you however the fuck I want,” with Mr Troughton responding that he can’t speak to him like that neither at work nor as a friend.”78 Neither of these two statements given in Mr Troughton’s witness statement describe disparagement, use of offensive language or abuse in respect to the alleged incident on 3 March 2021. However, words to the effect of “I’ll speak to you however the fuck I want” appears from the witness statement to be a heated conversation between Mr Troughton and Mr Rossi which demonstrates a robust disagreement, with what may be inappropriate language, but falls short of evidence of disparagement.
[116] In relation to the alleged incident of 3 March 2021, Messrs Austin, Gurney and Rossi gave evidence. Mr Rossi was concerned with the contrary directions to his staff from US executives and following a call where Mr Troughton addressed the team. The evidence of the three witnesses present was inconsistent. Nevertheless, there is a lack of evidence of disparagement, consistent with the allegation as contained in the letter of termination and as described by Mr Troughton.
[117] Returning to the letter of termination it refers to an incident on 28 July 2020. Evidence concerning a meeting between Messrs Rossi, Wu and Ms Tilds is unclear. Ms Tilds in her evidence states that she discovered that on 28 July Mr Rossi reached out to an agency to set up a meeting to redesign their website without her knowledge. She attached in evidence that Mr Troughton informed her on the same day. The other piece of evidence in relation to the allegation of misconduct is a meeting invite by Ms Tilds for Messrs Rossi and Wu to discuss social video and funding. 79 This evidence is inconsistent with an allegation of disparagement; at best it is a disagreement over who should schedule meetings or be involved. I observe that Ms Tilds commenced employment in April 2020, and all marketing was previously performed by Mr Rossi. Evidence of a difference of opinion, or the absence of agreed processes is hardly an indication of serious misconduct.80 Although there is a further allegation by Ms Tilds that she was called stupid in the meeting, which Mr Rossi denies. No evidence was tendered other than Mr Wu’s Incident report. Mr Troughton gave evidence that Mr Rossi was warned in relation to this incident. While giving evidence I find there to be no credibility to the statement that a warning was given.
Undermining executive directions on 3 March 2021
[118] LLM submit that refusal by an employee to comply with a lawful and reasonable direction will almost aways provide a valid reason for dismissal. It submits that Mr Rossi refused after repeated oral warnings by Mr Troughton to turn on his camera during video conferences and that even after repeated directions concerning access to the financial accounts, Mr Rossi insisted on sole control without involvement by the CFO of the parent company. 81
[119] The letter of termination does not make reference to Mr Rossi allegedly not turning on his camera, yet this point was subject to evidence from witnesses and submissions from the Respondent. I accept the evidence of Mr Rossi that he did not have a camera on his gaming machine that he worked on during Melbourne’s lockdown. This evidence was supported by Mr Austin. There was no evidence that Mr Rossi did not follow a direction to turn on his camera while in the office, nor was there any evidence that Mr Troughton warned him on this matter.
[120] The evidence concerning the alleged undermining of management was from Messrs Austin and Gurney. However, rather than an example of undermining by Mr Rossi, in my view it shows an undermining by subordinates to their manager. Both employees reported to Mr Rossi, they ignored his authority and without his awareness regularly reported incidents that were to their dislike to Messrs Wu and Troughton and to Ms Tilds. However, it does appear that Messrs Troughton and Wu fuelled this insubordination by seeking information and engaging in activity to gain their trust, and in turn, their distrust of their manager, for instance paying for pizza without Mr Rossi’s knowledge, encouraging side notes and the like. 82
Intimidating staff on 31 March 2021
[121] Mr Wu tendered in evidence an Incident Report dated 31 March 2021 which includes a direct extract from Ms Tild’s email of the same date. 83
[122] Mr Troughton could not point to any evidence of intimidation on 31 March 2021. In fact, when he read the transcript of the conversation, he agreed what was described as interrogation could not be seen as such. He admitted to not conducting any investigation into the allegations against Mr Rossi.
[123] Ms Tilds gave witness evidence that she found it offensive that Mr Rossi went direct to her direct reports and she described this behaviour as intimidating to them. Her employees that gave evidence did not substantiate her allegations and the email attached to her witness statement from Gustavo further adds no weight to the allegation. 84 Interestingly, neither Ms Tilds or Messrs Troughton or Wu found it inappropriate to completely bypass Mr Rossi to approach his direct reports.
[124] There was no credible evidence of intimidation, there were differences of opinion, and perhaps the communication may have been coarse, or may have been misconstrued or there may have been an absence of agreed processes, but again this behaviour cannot be characterised as serious misconduct on any level.
Singled out a staff member to withhold their equity on 22 April 2021
[125] This allegation was that Mr Rossi singled out the “junior” employee by refusing to grant him stock options. The evidence did not support an allegation of serious misconduct. Firstly, there was no evidence that the employee was entitled to stock options, the evidence was that the Board had the full discretion to grant stock options. The Board at the time was the two co-founders and while Mr Rossi may have had a different view as to whether the awarding of stock options was earned, it was not his sole decision. Mr Austin gives evidence that Mr Rossi withheld the stock, but his evidence carries no weight as he was not privy to the discussions at Board level between directors. Mr Troughton could not reliably demonstrate this allegation against Mr Rossi.
Admitted to lacking dedication to the role on 20 May 2021
[126] This allegation is contained in an Incident Report prepared by Mr Wu and relates to a casual conversation between Mr Rossi and Mr Austin. Mr Austin’s witness statement has the heading “The Applicant’s lack of dedication to his role.” Mr Austin confirmed that he mentioned his casual conversation to Mr Troughton and did not report it to Mr Wu. It follows that the account came from Mr Troughton to Mr Wu and was captured by the report. Mr Troughton suggested that Mr Rossi gloated that he only committed 20% of his time to the CTO role, however, Mr Austin admitted that the comment was not Mr Rossi gloating, but rather an expression about the overload of various additional responsibilities that fell on him. 85 This allegation also lacks evidence of serious misconduct
General hostility
[127] LLM submit that poor attitude and behaviour constitute valid reasons for dismissal, including a history of various conduct issues. It submits that Mr Rossi had a track record of poor attitude and a history of misconduct to justify summary dismissal and extends back to his previous employment. 86
[128] It submits that Mr Rossi was a co-founder, Chief Technology Officer and a Director where it was expected that he assumed greater responsibility and accountability to set an example. It considers that Mr Rossi showed a dereliction of his responsibility, and it was no longer reasonable for LLM to tolerate his conduct.
[129] There is no explanation in terms of what was meant by the statement, that the track record of behaviour extends back to his previous employment. Prior to Mr Rossi receiving wages, he was paid dividends as a director and there is no evidence of prior employment with the Respondent.
Other general misconduct
[130] LLM submit the Commission should be satisfied that misconduct occurred because there were firsthand accounts of Mr Rossi’s remarks and disparaging comments, incidents were reported to Mr Troughton firsthand and that Mr Rossi was constantly reminded by Mr Troughton and measures put in place to mitigate and the incidents were reported formally in the Applicant’s HR records. 87
[131] LLM has not substantiated that misconduct occurred, and there were unreliable “firsthand” accounts. It is fair to note that some alleged “firsthand” accounts were not firsthand at all. The HR records (incident reports) were flimsy and cannot be considered reliable; the detail was essentially Mr Wu's recollections of discussions, there was no attempt to check their accuracy with either the reporter of the incident or with Mr Rossi, the material was selective and the documents were not contemporaneous.
Other reasons
[132] In addition to the six reasons referred to in the Respondent’s outline of submissions, on reading the letter of termination, there are additional reasons all expressed in different terms. These reasons include:
1. Contravention of contract and Australian statutes
2. Lack of leadership re product and technology
3. Absent leadership
4. Lack of collaboration with executive and key staff
5. Missed product delivery deadlines and lack of KPI monitoring and poor, clarifying communication
6. Openly rejecting company culture and values, including pattern of disrespect and inappropriate behaviour
7. Staff hesitancy and reluctance to be themselves due to Mr Rossi’s hostility and their fear of retribution
8. Intimidation and sexism - serious misconduct and contravention of anti-discrimination laws
9. Wilful disregard to duties and insubordination contrary to the company handbook, HR policies and breach of contract.
[133] Some of these reasons concern allegations of serious misconduct and others relate to allegations of poor performance. I have addressed these reasons where applicable while discussing the witness evidence and where applicable under the headings from paragraph [111] above. However, it should be added that there was no evidence of a company handbook or policies in existence while Mr Rossi was employed. The Respondent asserts that these reason justify termination of employment, but it did not tender reliable evidence. Further, the witness evidence provided failed to demonstrate that the conduct occurred as described and that the conduct justified dismissal. For these reasons I cannot find that the reasons for the dismissal were sound, defensible or well founded.
[134] In all the circumstances I find that there were no valid reasons for dismissal related to Mr Rossi’s capacity or conduct.
(b) Was Mr Rossi notified of the valid reason?
[135] Notification of a valid reason for termination must be given to an employee protected from unfair dismissal before the decision is made to terminate their employment,88 and in explicit89 and plain and clear terms.90
[136] LLM submit that warnings only apply where an employee is dismissed for unsatisfactory performance but acknowledges that the employer must notify the employee of a valid reason in explicit, plain, and clear terms before a decision to terminate is made. It is submitted that Mr Rossi was subject to constant notice in respect to his conduct and capacity in several of the internal communication platforms. Mr Troughton states that he constantly raised issues with Mr Rossi as “all of his other employees were uncomfortable doing so themselves” because it was like a time bomb going off. 91 Further, Mr Troughton states that over the 2020-2021 financial year he reminded Mr Rossi “over 50 times that he can’t treat people like worthless pawns, and that something is going to have to be done to discipline him.”92
[137] Mr Rossi disputes he was informed of any reasons likely to give rise to dismissal. The evidence from Mr Troughton was that there were numerous warnings, but the detail of the discussion, if it occurred between Messrs. Rossi and Troughton revealed a lack of clear and unambiguous or plain and clear terms of a warning were expressed to Mr Rossi before the dismissal. If there actually were discussions, they did not satisfy the requirements of s.387(a). In all the circumstances I find that Mr Rossi was not notified of the reasons for the dismissal before the decision was made; not in respect to capacity or conduct.
[138] 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. An opportunity to respond is to be provided before a decision is taken to terminate the employee’s employment. 93
[139] The opportunity to respond does not require formality and this factor is to be applied in a common-sense way to ensure the employee is treated fairly. 94 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.95
[140] The witness evidence shows there were no counselling, warnings and the dismissal meeting was brief. The reasons for dismissal were not discussed and the letter of termination of employment was received after the telephone call via text message.
[141] Having regard to the matters above I find that Mr Rossi was not given an opportunity to respond to any of the reasons for the dismissal.
[142] LLM did not unreasonably refuse, but no opportunity was given for Mr Rossi to ask for a support person as he had no way of knowing that the phone call was to summarily dismiss him. This consideration is neutral.
[143] A mere exhortation for an employee to improve their performance would not be a sufficient warning. A warning must:
• identify the relevant aspect of the employee’s performance which is of concern to the employer; and
• make it clear that the employee’s employment is at risk unless the performance issue identified is addressed.96
[144] Both Mr Troughton and Mr Wu allege there were warnings but could not produce any evidence and none of the other witness statements or witness evidence corroborated their evidence that there were warnings. Mr Rossi denied there were ever any warnings. Mr Blake himself also suggested there were general discussions however, a warning requires clear messages. This consideration concerns warnings in terms of performance. LLM contend that Mr Rossi was dismissed for serious misconduct therefore this consideration would be irrelevant, however, the letter of termination also refers to performance as a leader, meeting KPIs and evidence regarding performance during the one-hour audit. Nevertheless, despite the performance allegations, no warning or disciplinary procedure was implemented.
[145] Based on the evidence, the Commission cannot be satisfied that there were any warnings where the performance or conduct is made clear, and that the employee was at risk of dismissal should the performance or conduct not addressed.
[146] LLM together with the US Corporation is not defined as a small business. Some effort, to create HR systems was allegedly made, but these efforts fell well short to satisfy the requirements of a fair process. Further LLM submit that they obtained legal advice, which appears to have neglected procedural fairness, but perhaps was focused more on risk management in severing the relationship with Mr Rossi due to his position as sole Director of the Australian subsidiary and a Board member and shareholder of the US Corporation. The size of the business consideration does not weigh in favour of LLM.
[147] Section 387(h) requires the Commission to take into account any other matters considered relevant.
[148] During the hearing procedural and governance matters arose concerning the capacity of Mr Troughton to dismiss Mr Rossi. Copies of the LLM and Frameplay Holdings Corporation Constitutions were tendered in evidence. 97 The Respondent is of the view that the authority to dismiss sat with Mr Troughton, however, the Constitution for LLM did not give the authority to Mr Troughton. Mr Rossi was the sole director. It was also argued by the Respondent that the ultimate authority rests with the CEO in the Holdings Corporation, but my reading of the Constitution is that members can dismiss Board members at the annual general meeting or a special meeting for the purpose of dismissing a director. I note that Mr Blake gave evidence that the members voted to terminate Mr Rossi as director of the Holdings Corporation, but it seems that Mr Rossi as major shareholder may not have been given notice of the meeting.
[149] Mr Rossi’s employment agreement is signed by him, he gave evidence it was signed in December 2020, but backdated to January 2019. There is no signature on behalf of LLM, Mr Troughton simply signed the document as a witness. The schedule provides that in the position of CTO, Mr Rossi reports to the CEO. There is nothing in the agreement to identify who the CEO is. Further, the LLM Constitution at clause two vests the powers to manage the Company in the Board. Mr Rossi was the only Board member when he was dismissed. There is no evidence of any officer or person appointed with the capacity to effect Mr Rossi’s position of Director. Clause 9 of the LLM Constitution provides for the removal of Directors and it is clear that the Company (LLM) or the directors may pass a resolution for the removal of a director. No resolution was tendered in evidence.
[150] Uncontested evidence was given that the shareholding of LLM was in Frameplay Holdings Corporation. Mr Rossi was a major shareholder of the Holdings Corporation and therefore according to the Constitution he should have been advised of a shareholder meeting. No evidence was tended in respect to any rights attached to shareholders or their class of shares.
[151] Further I observe that the LLM Constitution tendered in evidence shows that schedule 2 provides for two persons that have agreed to be members of the Company Messrs. Rossi and David Troughton. David Troughton is not Jonathon Troughton. There was uncontested evidence was that in mid-2019 the shareholding was “flipped” into the Holdings Company and that new member arrangements were put in place. No evidence was tendered to clarify whether this impacted the rights and obligations under the LLM Constitution in relation to termination of a director.
[152] Mr Rossi submits that other matters are relevant to be considered in his case. Those additional matters relate to his personal circumstances and include:
• That he was a founder of the business;
• His length of employment with the business;
• That he agreed to a 30% pay reduction in February 2021 in good faith and in the best interests of the company; and
• That the Respondent was aware that his wife was on maternity leave with a newborn and he was the sole income earner for his family. 98
[153] I do consider the additional matters raised by Mr Rossi are relevant. While the Respondent argues that Mr Rossi did not act in the best interests of the Company when he was dismissed by threatening to put it into administration, he submits that his legal advice was that as it was not at that point in time solvent, and he had legal liabilities in a company that he had no control over. Mr Blake was also critical of Mr Rossi’s notice to the Board of his legal advice. On receipt of the advice from Mr Rossi, the Holdings Corporation took action to deposit money into LLM to ensure it was not insolvent. Mr Blake gave evidence that the Holdings Corporation acted within days. Nevertheless, as sole Director Mr Rossi had legal obligations that he had to address, and the legal advice appeared sound. On this basis I do not agree that Mr Rossi’s actions were contrary to the interests of the Company but were consistent with his legal obligations as sole Director.
[154] It is accepted that Mr Rossi was co-founder, and his technical intellectual capacity created the product. In addition, Mr Rossi invested heavily in the business financially and with his time. It cannot be ignored that when the Company lacked funds he went without income, took a salary reduction, and placed himself at serious financial risk to ensure employees were paid their wages.
[155] I note that some of the Respondent’s witnesses were challenged by Mr Rossi and were aggrieved. Mr Rossi challenged the CFO over spending on expensive lunches, to which he was entitled to do, particularly as funds were low and Melbourne staff wages were directly affected including himself. Messrs. Gurney and Austin disliked his management of them and described Mr Rossi in colourful terms, yet there is no evidence to demonstrate that he engaged in any misconduct. However, these two employees did, when they breached Melbourne’s lockdown to enter the premises with two other employees and another person unrelated to the business to engage drink and take illegal substances and subsequently sideline their direct manager.
[156] Due to an absence of corroborating evidence and the unreliable witness evidence of Mr Troughton the allegations concerning capacity ad conduct appear contrived. He gave evidence that as CEO he had to act in the interests of the Company, but in my view based on the evidence his behaviour as co-founder is indefensible and lacking in any due process to his business partner.
[157] Mr Rossi experienced significant hardship as a result of his dismissal, he effectively lost control over a business that he personally built and financially invested into. When he carried the full weight of the financial risk his co-founder and the executive paid no regard to him. He was also dismissed at a time when his wife had taken a period of parental leave and he was sole breadwinner for his family. There was total disregard for Mr Rossi’s commitment and contribution to the Company or his personal circumstances.
[158] LLM dismissed Mr Rossi summarily on the basis of serious misconduct. Serious misconduct takes its meaning from Regulation 1.07, which includes wilful or deliberate behaviour that is inconsistent with the continuation of the employment contract. A number of decisions have considered the notion that serious misconduct strikes at the heart of the employment relationship. 99 LLM suggest that the conduct reflected in the examples in the letter of termination of employment illustrate “the ongoing nature of the Applicant’s misconduct and performance issues that formed the valid basis for the dismissal.”100 Further it submits that “when the reasons are weighed in their totality"101 the Commission should find that the dismissal was not harsh, unjust or unreasonable despite the deficiencies taken by the Respondent to make Mr Rossi aware of the conduct prior to the termination.
[159] Mr Rossi submits that the termination was harsh, unjust and reasonable because in addition to the lack of evidence of a valid reason and absence of procedural fairness, he co-founded the business, and that the termination occurred while his wife was on maternity leave. He further cites his length of employment with LLM and his agreement to a 30% pay reduction in February 2021. He further submits that he was not granted procedural fairness in relation to the allegation levelled against him.
[160] LLM submit that the deficiencies surrounding the absence of procedural fairness provided to Mr Rossi owes to the small size of the business and the lack of human resources expertise. LLM submit that in view of Mr Rossi’s conduct, application of procedural fairness would not have changed the outcome of summary dismissal. They submit that the dismissal was just because Mr Rossi appeared guilty of the alleged misconduct, that the evidence before LLM supported the dismissal, a summary dismissal was proportionate to the gravity of Mr Rossi’s conduct.
[161] LLM further point out that Mr Rossi did not produce any “positive evidence supporting his assertions that the reasons for his termination were false or misconceived.” 102 It is LLM that rely on their reasons that there are valid reasons justifying a summary dismissal. The reasons for the dismissal are a matter for the Respondent to show that they are sound, defensible or well founded and it is for the Commission to be satisfied that the conduct occurred. Therefore, viewed objectively, it is in the interests of the Respondent that the evidence supports the decision of the employer. Had the conduct occurred that is alleged, were the employer’s reasons sound and defensible, and if the conduct occurred was the gravity of the conduct such to warrant a dismissal, or indeed a summary dismissal, is relevant to each consideration in s.387 of the Act. In addition, I do not agree with LLM that had they applied procedural fairness the outcome would not have changed. The evidence on balance, does favour the conclusion that Mr Rossi was direct, perhaps uncompromising, argumentative or abrasive at times. However, the pressures of a start-up were likely to have not aided positive communications. I am confident that the co-founders are committed to the success of the business and will lead by example and take proactive steps to avoid further unnecessary outcomes.
[162] I have considered each matter specified in section 387 and the evidence in relation to each matter. In reaching my determination I have considered whether the dismissal was harsh, unjust or unreasonable. I have weighed up all of the circumstances of the case and I am satisfied that all of the circumstances do weigh in favour of finding that the dismissal was harsh, unjust or unreasonable.
Conclusion
[163] I am therefore satisfied that Mr Rossi was unfairly dismissed within the meaning of s.385 of the Act.
Remedy
[164] Being satisfied that Mr Rossi:
• Has made an application for an order granting a remedy under section 394;
• was a person protected from unfair dismissal; and
• was unfairly dismissed within the meaning of section 385 of the Act,
I may, subject to the Act, order the Applicant’s reinstatement, or the payment of compensation to the Applicant.
[165] Under section 390(3) of the Act, I must not order the payment of compensation to the Applicant unless:
a) I am satisfied that reinstatement of the Applicant is inappropriate; and
b) I consider an order for payment of compensation is appropriate in all the circumstances of the case.
[166] Mr Rossi submits that reinstatement is an appropriate remedy together with restoration of lost pay. He submits that as co-founder and formerly sole Director of the Respondent Company his position as CTO was more than just a position. The Company has taken years to be financially viable and in support of the Company he took a significant drop in salary to ensure its success. He submits that should he be reinstated he would continue to act in the best interests of the Company.
[167] He further submits that embarrassment to the co-founder Mr Troughton should not be a deterrent to reinstatement. He also refers to the requirement to consider the combination of circumstances in his case and his good working relationship with his staff in the engineering team in Melbourne. In addition, Mr Rossi seeks that I order that the Respondent correct the ATO payment summary as it incorrectly reflected his wages for the 2019/2020 financial year.
[168] The Respondent on the other hand submits that reinstatement is not appropriate as this would likely lead to resignations and a continuation of the breakdown in working relations, trust and confidence between Mr Rossi and employees of the Respondent including the executive. It submits that there is no alternative position for Mr Rossi and it strongly opposes reinstatement.
[169] A Full Bench of the Commission has helpfully identified the following propositions relevant to the impact of a loss of trust and confidence on the appropriateness of an order for reinstatement:
“• Whether there has been a loss of trust and confidence is a relevant consideration in determining whether reinstatement is appropriate but while it will often be an important consideration it is not the sole criterion or even a necessary one in determining whether or not to order reinstatement.
• Each case must be decided on its own facts, including the nature of the employment concerned. There may be a limited number of circumstances in which any ripple on the surface of the employment relationship will destroy its viability but in most cases the employment relationship is capable of withstanding some friction and doubts.
• An allegation that there has been a loss of trust and confidence must be soundly and rationally based and it is important to carefully scrutinise a claim that reinstatement is inappropriate because of a loss of confidence in the employee. The onus of establishing a loss of trust and confidence rests on the party making the assertion.
• The reluctance of an employer to shift from a view, despite a tribunal’s assessment that the employee was not guilty of serious wrongdoing or misconduct, does not provide a sound basis to conclude that the relationship of trust and confidence is irreparably damaged or destroyed.
• The fact that it may be difficult or embarrassing for an employer to be required to re-employ an employee whom the employer believed to have been guilty of serious wrongdoing or misconduct are not necessarily indicative of a loss of trust and confidence so as to make restoring the employment relationship inappropriate.” 103
[170] The Full Bench concluded that, “[u]ltimately, the question is whether there can be a sufficient level of trust and confidence restored to make the relationship viable and productive. In making this assessment, it is appropriate to consider the rationality of any attitude taken by a party.”104
[171] In this matter while there would have been some loss of trust largely because of the dismissal, I am mindful that the co-founders have worked together in the past and have had a productive business relationship therefore in my opinion, despite their differences, they could continue to do so. They reside and work in different countries and with proper policies and procedures regarding lines of authority, acceptable conduct, compliance with legal obligations and matters concerning Board decisions it is in both their interests to maintain a working relationship for the benefit of the Company.
[172] Having considered the evidence and my findings that there was no valid reason for the dismissal and that the dismissal was harsh, unjust or unfair, I must consider whether reinstatement is appropriate in the first instance. Firstly, I am not satisfied that Mr Rossi has acted against the interests of the business. Although having observed the behaviour of Mr Rossi with the witnesses over many days during the proceedings, it can be reasonably found that the combination of an absence of policies and procedures together with pressures of a start-up may have contributed to inadequate communication. Despite these pressures, there was no evidence of misconduct or evidence of potential misconduct. However, I also conclude that the relations were further aggravated by the behaviour of Messrs Troughton and Wu by undermining Mr Rossi through Melbourne based team leaders.
[173] Of further relevance is that the allegations made against Mr Rossi while serious, there was no credible evidence in support. Further, a number of these allegations occurred in 2020 and early 2021 and the Respondent provided no reasons why it continued to employ Mr Rossi if it genuinely held concerns of serious misconduct.
[174] On the evidence it is apparent that the Company including the Holdings Corporation is more financially secure and has developed considerably from the time that Mr Rossi was dismissed. The pressures of a start-up have alleviated somewhat and provided proper policies and procedures, including governance processes are established, there is no evidence of any reason that reinstatement to the position of CTO in Melbourne managing the Australian subsidiary would not be contrary to the interests of the Company.
[175] Section 390 of the Act provides that the Commission may make an order for reinstatement if it is satisfied that the person was protected from unfair dismissal, the person was dismissed unfairly and the person seeks such an order. I so find.
[176] Section 391(1) of the Act provides that an order for the Applicant’s reinstatement must be an order that the Applicant’s employer at the time of the dismissal reinstate the Applicant by:
a) reappointing the Applicant to the position in which the Applicant was employed immediately before the dismissal; or
b) appointing the Applicant to another position on terms and conditions no less favourable than those on which the Applicant was employed immediately before the dismissal.
[177] Section 391(2) of the Act provides that, if:
a) the position in which the Applicant was employed immediately before the dismissal is no longer a position with the Applicant’s employer (as at the time of dismissal); and
b) that position, or an equivalent position, is a position with an associated entity of the employer,
the order for reinstatement may be an order to the associated entity to:
c) appoint the Applicant to the position in which the Applicant was employed immediately before the dismissal; or
d) appoint the Applicant to another position on terms and conditions no less favourable than those on which the Applicant was employed immediately before the dismissal.
[178] The Respondent gave evidence that there is no CTO appointed by the Respondent, further that the Australian subsidiary remains with the engineering team based in Melbourne.
[179] I am satisfied that it is open to me to award reinstatement to the position held by Mr Rossi immediately before his dismissal, that being the position of CTO based in the Australian subsidiary, LLM. I also order that the Respondent appoint Mr Rossi to the position within seven days of the order to the position on no less favourable terms than his written contract of employment immediately before the dismissal.
[180] Section 391(2) of the Act provides that, if the Commission makes an order for reinstatement and considers it appropriate to do so, the Commission may also make any order that the Commission considers appropriate to maintain the following:
a) the continuity of the Applicant’s employment;
b) the period of the Applicant’s continuous service with the employer or, if applicable, the associated entity.
[181] In all the circumstances, I do consider it appropriate to make an order to maintain Mr Rossi’s continuity of employment and period of continuous service with the employer. While there has been significant delay in finalising this matter, the proceedings have been complicated and prolonged. There is no evidence of any potential financial viability concerns for the business arising from an order for reinstatement and there is no reason that Mr Rossi should be disadvantaged by the delay of remedy.
[182] On the matter of lost pay, the Commission may make an order for remuneration lost, or likely to have been lost. In making any order for remuneration, the Commission must take into account:
a) the amount of any remuneration earned by the Applicant from employment or other work during the period between the dismissal and the making of the order for reinstatement; and
b) the amount of any remuneration reasonably likely to be so earned by the Applicant during the period between the making of the order for reinstatement and the actual reinstatement. 105
[183] An order to restore lost pay does not necessarily follow an order for reinstatement. The Commission may only make an order if it considers it appropriate to do so and only make an order that the Commission considers appropriate.106
[184] During proceedings there were two related matters raised where Mr Rossi submits that he has suffered financial loss from the dismissal. Firstly, prior to the payment of Mr Rossi’s leave entitlements, the Respondent deducted days purely based on an out-of-office message in his calendar. Some of these days were outside normal business hours, some were public holidays and personal leave. There was no valid process to confirm that the time in the calendar was in fact leave taken by Mr Rossi. This failure to consider the reasons for an out-of-office message is no justification for the loss of entitlements. Therefore, I order that these entitlements be reinstated at the full rate of pay prior to the reduction in Mr Rossi’s salary in January 2021.
[185] The second matter concerned the evidence of Mr Blake that Directors and Mr Wu should not have suffered loss of pay as funding was obtained. The Respondent relied on earlier witness statements in the jurisdiction hearing, and I note Mr Troughton gave evidence that in January 2021 he raised capital which negated the requirement for salaries to be dropped. Relevantly, he states:
“In fact, in around January 2021, I raised capital through some US investors, allowing Frameplay’s US holding company to distribute sufficient funds to keep Frameplay buoyant without the need for anybody to temporarily vary their salary.” 107
[186] For reasons unknown, this information was not conveyed to Mr Rossi and he suffered a drop in salary and this continued until his dismissal, while others did not experience any drop in salary. Interestingly, the CEO nor the CFO took any steps to correct Mr Rossi’s salary. Of course, during the jurisdictional hearing it was asserted that Mr Rossi reduced his own salary without authority unbeknown to the Holdings Corporation. On this basis, I order that Mr Rossi’s salary be reinstated to the rate of $86.0324 per hour and that he be reimbursed for the loss that he should not have suffered in the last six months of his employment. I have calculated the following payments to be made to Mr Rossi:
• For the period of drop in salary, the records show that 836 hours of ordinary time were paid. Payment of the difference to original rate is $21.329 per hour. This is a total due of $17,831.05.
• Back pay for wages deferred of $32,692.30 which was not paid. 108
• Makeup of pay to correct rate on annual leave on termination of 197.3097 hours is $4,208.42, and annual leave deducted without cause of 68.4 hours amounts to $5,884.62.
• Superannuation is to be paid at 9.5% on back pay on ordinary hours made up to correct rate, and 10% to be paid on the annual leave payable as the SGC employer contribution adjusted on 1 July 2021.
[187] This represents a gross of $60,616.39 to be taxed at the relevant tax rate, plus superannuation of $4,799.72 (representing 9.5% on ordinary hours) and $1,009.31 (representing 10% on annual leave on termination) to paid into Mr Rossi’s superannuation fund.
[188] Mr Rossi tendered his bank statement and evidence of earnings since his dismissal and on that material, which remains confidential to the Commission, I do not order loss of pay other than the two months of payment as he had no earnings until September 2021. I do find that Mr Rossi mitigated his loss in wages from September 2021. I note that while LLM did not pay any notice to Mr Rossi and although the contract refers to the notice period in the NES, I observe that it is unusual to see that the NES notice period applied to a working director. In the circumstances I therefore find that two months of wages is reasonable in the circumstances. This eight weeks of pay of $26,153.85 gross is less than the unfair dismissal cap on compensation and I consider this a reasonable outcome having considered s.392(5) of the Act. Mr Rossi’s eight weeks of wages will attract a 10% superannuation contribution.
[189] While I cannot order the correction of the ATO Payment Summary for the 2019/20 financial year, it is advisable that the Respondent correct any tax records to properly reflect actual payments made to Mr Rossi.
COMMISSIONER
Appearances:
Mr E. Rossi on his own behalf.
Mr M. Harmer for the Respondent.
Hearing details:
2022
Melbourne (By Video using Microsoft Teams)
2-4 March, 8 March and 26 April
Printed by authority of the Commonwealth Government Printer
<PR744692>
3 Exhibit A4, witness statement of Mr Eric Rossi at [11] and Transcript of 2 March 2022 at PN 883-885.
4 Applicant’s outline of submissions of 17 December 2021, annexure A and Exhibit A3, witness statement of Eric Rossi, Annexure C.
5 Exhibit A3, witness statement of Eric Rossi at [5].
6 Ibid at [7].
7 Applicant’s outline of submissions, 17 December 2021 at [6] – [10].
8 Exhibit A3, witness statement of Eric Rossi, Annexure A.
9 Ibid at [11] – [15].
10 Applicant’s outline of submissions of 17 December 2021 at [12].
11 Ibid at [14].
12 Respondent’s outline of submissions of 7 February 2022 at [3.7] – [3.20].
13 Transcript of 2 March 2022 PN 411-412.
14 Transcript of 2 March 2022 at PN504-506.
15 Transcript of 2 March 2022 at PN 511.
16 Article VI, Officers of the Frameplay Holding Corporation.
17 Transcript of 2 March 2022 at PN 513.
18 Exhibit A3, witness statement of Eric Rossi, Annexure C - Letter of termination dated 2 July 2021.
19 Exhibit A3, witness statement of Eric Rossi of 16 December 2021 at [45].
20 Exhibit R6, witness statement of Luke Austin at [29] – [30].
21 Transcript of 2 March 2022 at PN 514- 539.
22 Transcript of 2 March 2022 at PN 543- 557.
23 Exhibit A1, witness statement of Peter Morris dated 16 December 2021 and exhibit A2 dated 27 February 2022.
24 Transcript of 2 March 2022 PN 206 – PN 219.
25 Transcript of 2 March 2022 PN 224 – PN 227, PN 237-248, PN 253 and PN 255.
26 Transcript of 2 March 2022 at PN 283-292.
27 Transcript of 2 March 2022 at PN 320 -341.
28 Transcript of 2 March 2022 at PN 316 – 319. PN322.
29 Exhibit A3, witness statement of Eric Rossi dated 16 December 2021, Annexures C and D.
30 Transcript of 3 March 2022 at PN1104, PN1107 and PN1108.
31 Exhibit A4 witness statement of Eric Rossi dated 27 February 2022, Annexure L- emails of 20 and 21 August 2020.
32 Exhibit A3, witness statement of Eric Rossi dated 16 December 2021 at annexure B.
33 Exhibit R1, witness statement of Jonathon Troughton dated 10 September 2021 at [20] relating to the jurisdictional proceedings on 11 October 2021.
34 Exhibit R1, witness statement of Jonathon Troughton dated 10 September 2021 at [23] relating to the jurisdictional proceedings on 11 October 2021.
35 Transcript of 3 March 2022 at PN 1228-1241, then PN 1254- 1268.
36 Exhibit R2.
37 Transcript of 3 March 2022 at PN 1524 – 1540.
38 Transcript of 3 March 2022 at PN 1761, but the full discussion concerns PN 1748-1761.
39 Transcript of 3 March 2022 at PN 1764 – 1792.
40 Exhibit R7, witness statement of Clifford Gurney annexure L.
41 Transcript of 4 March 2022 at PN 2610.
42 Exhibit R6, witness statement of Luke Austin at [18 – [22] and Transcript of 4 March 2022 at PN 2742, 2744 and 2748.
43 Transcript of 4 March 2022 at PN 2837.
44 Transcript of 4 March 2022 at PN 2832 – 2833.
45 Transcript of 4 March 2022 at PN 2767 – 2768.
46 Transcript of 4 March 2022 at PN 2798.
47 Transcript of 4 March 2022 at PN 2715.
48 Exhibit R7, witness statement of Clifford Gurney at [33] – [35].
49 Transcript of 8 March 2022 at PN 3005.
50 Transcript of 8 March 2022 at PN 2991.
51 Transcript of 8 March 2022 at PN3069 - 3082.
52 Transcript of 8 March 2022 at PN3354 – 3358.
53 Transcript of 8 March 2022 at PN3395.
54 Transcript of 8 March 2022 at PN 3421 – 3429.
55 Exhibit R9, witness statement of Nicole Mancino at [12].
56 Transcript of 8 March 2022 at PN 3456.
57 Transcript of 8 March 2022 at PN 3646.
58 Transcript of 8 March 2022 at PN 3723 - 3728
59 Sayer v Melsteel Pty Ltd (2011) FWAFB 7498, [14]; Smith v Moore Paragon Australia Ltd PR915674 (AIRCFB, Ross VP, Lacy SDP, Simmonds C, 21 March 2002), [69].
60 Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371, 373.
61 Ibid.
62 Walton v Mermaid Dry Cleaners Pty Ltd (1996) 142 ALR 681, 685.
63 Edwards v Justice Giudice [1999] FCA 1836, [7].
64 King v Freshmore (Vic) Pty Ltd Print S4213 (AIRCFB, Ross VP, Williams SDP, Hingley C, 17 March 2000), [23]-[24].
65 Applicant’s outline of submissions of 17 December 2021, Annexure A.
66 Respondent’s outline of submissions at [3.7].
67 Respondent’s outline of submissions at [3.2] – [3.5].
68 Exhibit R10, witness statement of Michael William Blake at [66].
69 Exhibit R4 witness statement of Li Feng Wu at [103].
70 Commonwealth of Australia (Australian Taxation Office) t/a Australian Taxation Office v Shamir [2016] FWCFB 4185, [46] citing Allied Express Transport Pty Ltd v Anderson (1998) 81 IR 410, 413.
71 Bahonko v Sterjov [2007] FCA 1244.
72 Ibid at [120].
73 Ibid at [119].
74 Ibid at [121].
75 Respondent’s outline of submissions at [3.9] and Exhibit R2, witness statement of Mr Jonathan Troughton at [61] and [84].
76 Ibid at [84].
77 Ibid at [83].
78 Ibid at [85] – [86].
79 See Exhibit R1 calendar invite.
80 See Exhibit R5 witness statement of Cary Tilds at [16] and attachment E.
81 Respondent’s outline of submissions of 7 February 2022 at [3.11] – [3.16].
82 Other incidents include Exhibit R6 at [31]-[32].
83 Exhibit R5 witness statement of Cary Tilds attachment H.
84 Exhibit R5 witness statement of Cary Tilds attachment G.
85 Transcript of 4 March 2022 at PN 2814 – 2818.
86 Respondent’s outline of submissions of 7 February 2022 at [3.17].
87 Respondent’s out line of submissions at [3.22]- [3.23] and Exhibit R4, witness statement of Li Feng Wu attachment C copy of HR reports.
88 Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137, 151.
89 Previsic v Australian Quarantine Inspection Services Print Q3730 (AIRC, Holmes C, 6 October 1998).
90 Ibid.
91 Exhibit R2 witness statement of Jonathon Troughton at [52].
92 Ibid at [89].
93 Crozier v Palazzo Corporation Pty Ltd t/a Noble Park Storage and Transport Print S5897 (AIRCFB, Ross VP, Acton SDP, Cribb C, 11 May 2000), [75].
94 RMIT v Asher (2010) 194 IR 1, 14-15.
95 Gibson v Bosmac Pty Ltd (1995) 60 IR 1, 7.
96 Fastidia Pty Ltd v Goodwin Print S9280 (AIRCFB, Ross VP, Williams SDP, Blair C, 21 August 2000), [43]-[44].
97 Exhibit R 11.
98 Ibid at [14].
99 See Emma Horan v Tren Trading Pty Ltd t/a Dubbo Early Learning Centre [2019] FWC 3249, Sharp v BCS Infrastructure Support Pty Limited [2015] FWCFB 1033.
100 Respondent’s closing submissions at [8.86].
101 Respondent’s closing submissions at [10.3].
102 Respondent’s closing submissions at [5.9].
103 Nguyen v Vietnamese Community in Australia t/a Vietnamese Community Ethnic School South Australia Chapter [2014] FWCFB 7198, [27].
104 Nguyen v Vietnamese Community in Australia t/a Vietnamese Community Ethnic School South Australia Chapter [2014] FWCFB 7198, [28].
105 Section 391 (4) of the Fair Work Act 2009.
106 Aurora Energy Pty Ltd v Davison PR902108 (AIRCFB, Watson SDP, Williams SDP, Holmes C, 8 March 2001), [25].
107 Witness statement of Jonathon Troughton 10 September 2021.
108 See Applicant’s outline of submissions of 29 September 2021 at [22], Witness statement of Eric Rossi of 29 September 2021 at [25] and Annexure D and witness statement of Jonathon Troughton of 6 October 2021 attachment A.