Unfair dismissal and Covid 19

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This case involves a dismissal which the employer contended was the result of the economic consequences of the Covid 19 pandemic.

The Commissioner

  • summarized the causative link between the termination of employment and the economic impact of the pandemic;
  • noted that the employer had conceded during the hearing that it could not rely upon its pleaded defence of genuine redundancy because of the lack of consultation;
  • accepted that the dismissal was unfair primarily because of the lack of consultation which preceded it;
  • noted that there was no valid reason for the dismissal since that concept only arises for consideration under sec 387 of the Fair Work Act when there is an issue of the employee’s capacity or conduct which is material to the termination of employment; and
  • rejected the application of the Sprigg formula in this case for assessing compensation since it would have led to an “inappropriate or unjust outcome”

“Introduction

[1] We live in unprecedented times.

[2] On 31 December 2019, the People’s Republic of China informed the World Health Organization of a mysterious pneumonia cluster linked to a live exotic animal 1 and seafood market in the city of Wuhan, Hubei province. Eleven days later a 61-year-old Wuhan man become the first virus-linked fatality.

[3] Since 11 February 2020, we have known the virus to be severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) and the disease that it causes as coronavirus disease (COVID-19). In the three months since that first death, as at the time of publishing this decision, 7,199,611 the world over have been infected and tragically, 408,737 people have died. 2

[4] In addition to the tragic human impact COVID-19 has wreaked havoc on the world economy, in every country and on operations large and small. One entity affected by COVID-19 is the respondent in the present matter, Battery Energy Power Solutions Pty Ltd (Respondent/Employer/Battery Energy). Battery Energy is an industrial battery importer and manufacturer. Around late January 2020, Battery Energy were informed that the factory in China from where it sources its product was closing for an extended period. Battery Energy became concerned about its ability to fill orders. In February 2020, it became apparent that the Respondent’s sales revenue was not improving. It became necessary to reduce costs, including staffing costs.

[5] On 3 March 2020, the Respondent terminated the Applicant’s employment.

[6] On 4 March 2020, Mr Aimal made an application to the Fair Work Commission (Commission) pursuant to s.394 of the Fair Work Act 2009 (Cth) (FW Act) seeking a remedy for unfair dismissal. Mr Aimal seeks an order that the Respondent reinstate him as a QA Assistant.

[7] On 25 March 2020, the Respondent filed a response to the unfair dismissal application. It objected to the Commission exercising jurisdiction in relation to the matter on the basis that, it contended, the dismissal was a case of genuine redundancy.

[8] Conciliation was attempted, but the dispute remained unresolved. Consequently, the matter was listed for hearing on 22 May 2020.

[9] If the termination was a genuine redundancy, then Mr Aimal’s application for an unfair dismissal remedy must be dismissed. If the termination was not a genuine redundancy it becomes necessary to determine if termination of employment was unfair. However, it became unnecessary to determine the jurisdictional objection because, at the hearing on 22 May 2020, the Respondent abandoned its genuine redundancy jurisdictional objection. 3 This was because, following the evidence of its Managing Director, Gabriel Peimer, the Respondent necessarily had to concede that it did not comply with the consultation obligations in the Manufacturing and Associated Industries Occupations Award 2010…………………………..

Was the Applicant protected from unfair dismissal?

[16] An order for reinstatement or compensation may only be issued where the Commission is satisfied the Applicant was protected from unfair dismissal at the time of the dismissal. Section 382 of the FW Act sets out the circumstances that must exist for the Applicant to be protected from unfair dismissal and, in the present matter, the Respondent does not submit that the Applicant was not protected.

[17] There being no dispute, the Commission, as presently constituted, is satisfied the Applicant has completed the minimum employment period and earned less than the high-income threshold. Consequently, the Commission, as presently constituted, is satisfied the Applicant was protected from unfair dismissal.

[18] I will now consider if the dismissal of the Applicant by the Respondent was unfair within the meaning of the FW Act.

Was the dismissal unfair?

[19] A dismissal is unfair if the Commission is satisfied, on the evidence before it, that all of the circumstances set out at s.385 of the FW Act existed. Section 385 provides the following:

“385 What is an unfair dismissal

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

(a) the person has been dismissed; and

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

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

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

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

Was the Applicant dismissed?

[20] A person has been unfairly dismissed if the termination of their employment comes within the definition of “dismissed” for purposes of Part 3–2 of the FW Act. Section 386 of the FW Act sets out the meaning of “dismissed”. In the present matter it is common ground that the Respondent dismissed the Applicant.

[21] Consequently, the Commission, as presently constituted, finds that the Applicant was dismissed from him employment with the Respondent within the meaning of s.386 of the FW Act.

Was the dismissal consistent with the Small Business Fair Dismissal Code?

[22] A person has not been unfairly dismissed where the dismissal is consistent with the Small Business Fair Dismissal Code. In the present matter the Respondent was not, at the time of the dismissal, a small business. At the time of the dismissal the Respondent employed 20 people.

[23] Consequently, the Commission, as presently constituted, finds the Respondent was not a small business employer within the meaning of s.23 of the FW Act.

Was the dismissal a genuine redundancy?

[24] The Respondent abandoned its contention that the dismissal was a case of genuine redundancy.

[25] The Commission, as presently constituted, is satisfied that:

  1. a) the Applicant was protected from unfair dismissal,
  2. b) the dismissal was not a case of genuine redundancy within the meaning of s.389 of the FW Act because of the failure to consult.

Harsh, unjust or unreasonable

[26] Having determined that the termination of Mr Aimal’s employment was not a case of genuine redundancy, I must now consider whether I am satisfied the dismissal was harsh, unjust or unreasonable.

[27] The ambit of the conduct which may fall within the phrase ‘harsh, unjust or unreasonable’ was explained in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 465 by McHugh and Gummow JJ as follows:

“…. It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment may be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted.”

[28] The criteria the Commission must take into account when assessing whether the dismissal was harsh, unjust or unreasonable are set out at s.387 of the FW Act:

“387 Criteria for considering harshness etc.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant.”

[29] Ordinarily I would be under a duty to consider each of these criteria in reaching my conclusion. 26 However, because the dismissal was not a case of genuine redundancy the consideration of the matters specified in s.387(a), (b) and (c) are neutral, unless in the circumstances another valid reason is identified. No other valid reason was identified by the Respondent.

[30] Matters arising from the redundancy (e.g. if relevant, a failure to consult with an employee) fall within s.387(h). 27

[31] Therefore, in relation to the dismissal of the Applicant I am satisfied that:

Valid reason – s.387(a)

(a) The Respondent did not assert that the reason for the dismissal of the Applicant was related to his capacity or conduct. Consequently, there cannot have been, and there was not, a valid reason for the dismissal related to his capacity or conduct.

(b) In all the circumstances of this case, I regard this element of s.387 as a neutral consideration in respect of whether the dismissal of the Applicant was harsh, unjust or unreasonable.

Notification of the valid reason and opportunity to respond – s.387(b); (c)

(a) The matters in s.387(b) and (c) of the FW Act deal with whether there was procedural fairness in respect of a reason for dismissal related to capacity or conduct.

(b) The dismissal of the Applicant was not related to capacity or conduct.

(c) Consequently, in all the circumstances of this case, I regard this element of s.387 as a neutral consideration in respect of whether the dismissal of the Applicant was harsh, unjust or unreasonable.

Unreasonable refusal by the employer to allow a support person – s.387(d)

  1. a) Where an employee protected from unfair dismissal requests a support person be present to assist in discussions relating to the dismissal, the employer should not unreasonably refuse that person being present.
  2. b) In the present matter this is not a relevant consideration.
  3. c) In all the circumstances of this case I regard this element of s.387 as a neutral consideration in respect of whether the dismissal of the Applicant was harsh, unjust or unreasonable.

Warnings regarding unsatisfactory performance – s.387(e)

(a) The Respondent did not assert that the dismissal of the Applicant related to his unsatisfactory performance, so this matter is not relevant to my consideration as to whether the dismissal was harsh, unjust or unreasonable.

(b) In all the circumstances of this case, I regard this element of s.387 as a neutral consideration in respect of whether the dismissal of the Applicant was harsh, unjust or unreasonable.

Impact of the size of the Respondent on procedures followed and Absence of dedicated human resources management specialist/expertise on procedures followed – s.387(f); (g)

(a) The size of a Respondent’s enterprise may impact on the procedures followed by it in effecting a dismissal. Further, the presence of dedicated human resource management or expertise in a Respondent’s enterprise should ensure a higher standard of management of human resources.

(b) In all the circumstances, I am satisfied that the size of the Respondent and the non-existence of an internal dedicated human resource function had an adverse effect on the dismissal of the Applicant. MrPeimer’s process left much to be desired.

(c) However, in all the circumstances of this case, I regard this element of s.387 as a neutral consideration in respect of whether the dismissal of the Applicant was harsh, unjust or unreasonable.

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

[32] Having considered each of s.387(a)-(g) of the FW Act, it remains necessary to now consider subsection 387(h) in respect of the Applicant. Section 387(h) provides the Commission with a broad scope to consider any other matters it considers relevant.

[33] Once I have considered s.387(h) in combination with each of ss.387(a)- (g) of the FW Act, I must then decide (in respect of the Applicant) if, in all the circumstances, the termination of the Applicant’s employment was harsh, unjust or unreasonable. Deciding whether the termination was ultimately unfair involves the exercise of discretion.

[34] Although s.387 includes matters that the Commission must take into account in deciding how to exercise its discretion, the discretion conferred is otherwise expressed in general, unqualified terms. Of course, the discretion conferred must be exercised judicially, that is to say, not arbitrarily, capriciously or so as to frustrate the legislative purpose. Further, the discretion is also confined by the subject matter, legislative context and purpose. 28

[35] In exercising the discretion, guidance can be drawn from s.381 of the FW Act. It provides that:

“381 Object of this Part

(1) The object of this Part is:

(a) To establish a framework for dealing with unfair dismissal that balances:

  1. The needs of business (including small business); and
  2. The needs of employees; and

(b) To establish procedures for dealing with unfair dismissal that:

  1. Are quick, flexible and informal; and
  2. Address the needs of employers and employees; and

(c) To provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement.

(2) The procedures and remedies referred to in paragraphs (1)(b) and (c), and the manner of deciding on and working out such remedies, are intended to ensure that a “fair go all round” is accorded to both the employer and employee concerned.

Note: the expression “fair go all round” was used by Heldon J in in re Loty and Holloway v Australian Workers’ Union [1971] AR (NSW) 95.”

[36] In respect of Mr Aimal, I consider the following matters to be relevant to the determination of whether him dismissal was harsh, unjust or unreasonable:

Matters in the Respondent’s favour

  1. a) The Applicant’s position was made redundant. The position of QA Assistant was no longer required to be done by anyone. The Applicant’s duties were dispersed to other members of the Compliance and QA Team.
  2. b) The Applicant was not the only person made redundant.
  3. c) The decision made by the Respondent was as a result of operational requirements relating to the prevailing business conditions being experienced by the Respondent.

Matters in the Applicant’s favour

  1. d) The Applicant is middle-aged with two dependent children. The loss of his job had a negative affect on his economic security and that of his family.
  2. e) English is not the Applicant’s first language. This will likely impact on his job prospects.
  3. f) The dismissal came “out of the blue”. The Respondent did nothing to put the Applicant on notice that his job was on the line before sacking him on 3 March 2020.
  4. g) There was no consultation with the Applicant.
  5. h) That is to say, the Respondent failed to comply with the requirements of the Manufacturing and Associated Industries Occupations Award 2010.

[37] The Respondent submitted that,

“… if … the Commission were to find some deficiency in the consultation process, it is clear that any further period of consultation would not have negated the operational reasons for Mr Aimal’s dismissal or lead to any other substantive change. That is, given that the operational needs of Battery Energy’s business resulted in the decision to terminate Mr Aimal’s employment, any further consultation by Battery Energy with Mr Aimal would not have changed Battery Energy’s decision. It follows that any failure to engage in further consultation did not render the dismissal unfair (Maswan v Escada Textilvertrieb t/as Escada [2011] FWA 4239 per Watson VP at [39]).

[38] I reject that submission. An employee covered by a consultation provision in a modern award should be given a bona fide opportunity to influence 29 or persuade the decision maker.30

[39] Having considered each of the matters specified in s.387, the Commission, as presently constituted, is satisfied that, overall, and having regard to the obligation to afford a “fair go all round” the dismissal of the Applicant was harsh.

[40] Accordingly, the Commission, as presently constituted, finds Mr Aimal’s dismissal was unfair within the meaning of the FW Act.

Remedy

[41] Section 390 of the FW Act sets out the circumstances in which I may make an order for reinstatement or compensation:

“390 When the FWC may order remedy for unfair dismissal

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

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

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

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

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

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

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

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

[42] I have already dealt with the issues at s.390(1)(a)–(b) above. The Commission, as presently constituted, is satisfied the Applicant was protected from unfair dismissal pursuant to s.382 of the FW Act and the Applicant was dismissed unfairly. An Order dismissing the jurisdictional objection will be issued with this decision.

[43] As a consequence of the above, the Commission is now required to determine whether to order:

  1. a) the reinstatement of the Applicant or, in circumstances where reinstatement is inappropriate,
  2. b) compensation if it is satisfied such an order is appropriate in all the circumstances.

Reinstatement

[44] The Applicant seeks compensation as the primary remedy. Regardless of the remedy sought by the Applicant, s.390 of the FW Act requires I first determine whether reinstatement is appropriate before I may consider an order for compensation.

[45] In the present matter, it is clear that, when the Respondent terminated the employment of the Applicant, it also made another position redundant. This was in response to prevailing business conditions being face by the Respondent. The Applicant’s position has not been replaced. There is no evidence that there are any other positions that the Applicant could be redeployed into. Consequently, in these circumstances the Commission, as presently constituted, is satisfied that an order for reinstatement is inappropriate.

Compensation

[46] Section 390(3)(b) provides the Commission may only issue an order for compensation to the Applicant if it is appropriate in all the circumstances.

[47] Noting that I have found that the Respondent treated the Applicant harshly, the Commission, as presently constituted, is satisfied that an order for compensation may be appropriate in all the circumstances of this case. Accordingly, I should apply section 392 to determine what amount (if any) is appropriate.

[48] Section 392 of the FW Act sets out the circumstances that must be taken into consideration when determining an amount of compensation, the effect of any findings of misconduct on that compensation amount and the upper limit of compensation that may be ordered:

“392 Remedy—compensation

Compensation

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

Criteria for deciding amounts

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

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

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

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

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

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

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

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

Misconduct reduces amount

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

Shock, distress etc. disregarded

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

Compensation cap

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

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

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

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

(a) the total amount of remuneration:

(i) received by the person; or

(ii) to which the person was entitled;

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

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

[49] The method for calculating compensation under s.392 of the FW Act was dealt with by a Full Bench of the Commission in Bowden, G v Ottrey Homes Cobram and District Retirement Villages Inc. T/A Ottrey Lodge 31 (Bowden). In that decision, the Full Bench set out the order in which the criteria and other factors should be applied, taking into account authority under the Workplace Relations FW Act 1996 in Sprigg v Paul’s Licensed Festival Supermarket32 and Ellawala v Australian Postal Corporation.33

[50] Recently, in Rachael Goldberg v The Advice Spot t/a The Advice Spot 34 his Honour Deputy President Sams observed that,

[118] In a more recent Full Bench decision, Hanson Construction Materials Pty Ltd v Pericich [2018] FWCFB 5960, it has been made clear that the Sprigg Formula is not to be applied in a rigid manner. At [39], the Full Bench said:

‘[39] The strict application of the approach set out in Sprigg v Paul’s Licensed Festival Supermarket (Sprigg), and endorsed in subsequent decisions, would yield an order that Mr Pericich be paid compensation of 1 weeks’ pay. Sprigg is a useful servant, but is not to be applied in a rigid determinative manner. In deciding the amount of a compensation order the Act directs that the Commission ‘must take into account all of the circumstances of the case’ including the particular matters set out at s.392(2)(a) to (g).’ (my emphasis)

[51] In Goldberg, his Honour then held,

[124] In applying the principle in Hanson, and in consideration of all of the circumstances of the case, I consider that the application of the Sprigg formula, produces an inappropriate and unjust outcome.

[52] The Sprigg amount would have resulted in Ms Goldberg receiving $1,300. His Honour awarded her $6,500.

[53] I will now consider each of the criteria in s.392 of the FW Act and then also the application of Hanson and Goldberg.

Remuneration that would have been received: s.392(2)(c)

[54] The Applicant’s remuneration with the Respondent was $41,891.20 per annum.

[55] I should now determine the period of time the Applicant would have remained employed by the Respondent, or would have likely remained employed with the Respondent, had they not been dismissed.

[56] Noting the financial performance of the Respondent and decline in the staffing numbers that occurred at the same time as the termination of the Applicant’s employment and also taking into account the failure to consult with the Applicant, it seems to me that, more likely than not, the employment would have ended by reason of redundancy some short time after 3 March 2020. If the Respondent had properly consulted with the Applicant, his employment would not have continued for more than 1 additional week (i.e. he would have received an additional weeks’ pay of $805.60).

[57] I find that the Applicant would have continued to be employed by the Respondent for no more than 1 week had he not been dismissed. The amount the Applicant would have received is therefore $805.60.

Remuneration earned: s.392(2)(e)

[58] On termination the Applicant was paid 2 weeks’ pay in lieu of notice. I must take this amount into consideration. The Respondent could have given notice and consulted during the notice period. If it had done so the Applicant would not have received any additional payment. The payment of an amount in lieu of notice, reduces the compensation payment to zero.

Other matters: s.392(2)(g)

[59] I find it is not appropriate in the circumstances that a contingency should be applied.

[60] Further, under s.392(2)(g) 35 I should considered whether, in the all the circumstances of the case, the remedy I propose (being 1 month payment less the 1 weeks’ notice paid to the Applicant) satisfies the “fair go all round” test36.

[61] Noting that the Applicant:

  1. a) was not a high income earner,
  2. b) was employed for only just over a year as a permanent employee,
  3. c) would likely have lost his job in any case by reason of redundancy even if consultation had occurred,

I am not satisfied that, in the exercise of my discretion, an award of zero dollars strikes the right balance. Having applied the the Sprigg formula, it has produced an inappropriate or unjust outcome. For these reasons I revert to the amount of 1 additional weeks’ payment ($805.60).

Viability: s.392(2)(a)

[62] I find an order for compensation in the amount proposed will not affect the viability of the Respondent’s enterprise.

Length of service: section (s.392(2)(b))

[63] I find that the Applicant’s period of service with the Respondent should not affect the amount of compensation to be ordered.

Mitigating efforts: s.392(2)(b)

[64] In considering whether the Applicant has taken steps to mitigate the loss suffered as a result of the dismissal, I should take into account whether the Applicant acted reasonably in the circumstances. 37 Since the dismissal in March 2020, the Australian economy has worsened. The Applicant’s inability to obtain alternative employment is not his fault.

Misconduct: s.392(3)

[65] I have not found any misconduct by the Applicant that contributed to the dismissal.

Shock, Distress: s.392(4)

[66] I note that the amount of compensation calculated does not include a component for shock, humiliation or distress.

Compensation cap: s.392(5)

[67] I must reduce the amount of compensation to be ordered if it exceeds the lesser of the total amount of remuneration received by the Applicant, or to which the Applicant was entitled, for any period of employment with the employer during the 26 weeks immediately before the dismissal, or the high income threshold immediately prior to the dismissal.

[68] The amount of compensation I will order does not exceed the compensation cap.

Conclusion

[69] The Commission, as presently constituted, is satisfied that the Applicant was protected from unfair dismissal, that the dismissal was unfair and that a remedy of $805.60 (payable within 21 days) is appropriate.”

Aimal v Battery Energy Power Solutions Pty Ltd (2020) FWC 3034 delivered 10 June 2020 per Johns C

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