Fair work cases; dismissal or resignation?

In this extract from a decision in an unfair dismissal case, the legal principles which distinguish between a true resignation and one which is “forced” and is thus a dismissal are identified.

“Was Mr Costigan dismissed or did he resign?

[97] KOR says that in order for Mr Costigan to succeed in his application for an unfair dismissal remedy he must satisfy the Commission that he did not resign voluntarily and establish that KOR forced his resignation, by identifying action on KOR’s part which brought the relationship to an end or action that had that probable result. 17

[98] Section 386(1) of the Act allows for dismissal under two distinct limbs, the first being employment being terminated on the employer’s initiative and the second being a resignation forced by the conduct of the employer where the employee had no choice but to resign.

[99] Mr Costigan submits that he was dismissed as per s. 386(1)(b) of the Act.

[100] The meaning of “dismissal’ in the context of s. 386(1)(b) was extensively examined by the Full Bench in Bupa Aged Care Australia Pty Ltd t/a Bupa Aged Care Mosman v Tavassoli [2017] FWCFB 3941 (Bupa). I adopt the reasoning of the Full Bench, which held that:

“[34] It is apparent, as was observed in the decision of the Federal Circuit Court (Whelan J) in Wilkie v National Storage Operations Pty Ltd , that “The wording of s.386(1)(b) of the Act appears to reflect in statutory form the test developed by the Full Court of the then Industrial Relations Court of Australia in Mohazab v Dick Smith Electronics Pty Ltd (No. 1) and summarised by the Full Bench of the Australian Industrial Relations Commission in O’Meara v Stanley Works Pty Ltd” (footnotes omitted). The body of pre-FW Act decisions concerning “forced” resignations, including the decisions to which we have earlier referred, has been applied to s.386(1)(b): Bruce v Fingal Glen Pty Ltd (in liq); Ryan v ISS Integrated Facility Services Pty Ltd; Parsons v Pope Nitschke Pty Ltd ATF Pope Nitschke Unit Trust.”

….

[47] Having regard to the above authorities and the bifurcation in the definition of “dismissal” established in s.386(1) of the FW Act, we consider that the position under the FW Act may be summarised as follows:

….

(2) A resignation that is “forced” by conduct or a course of conduct on the part of the employer will be a dismissal within the second limb of the definition in s.386(1)(b). The test to be applied here is whether the employer engaged in the conduct with the intention of bringing the employment to an end or whether termination of the employment was the probable result of the employer’s conduct such that the employee had no effective or real choice but to resign. Unlike the situation in (1), the requisite employer conduct is the essential element.”

[101] In maintaining its position that there was no dismissal and that Mr Costigan resigned, KOR relies on Philip Knight v Wattyl Australia Pty Ltd. 18 The facts in this matter are distinguishable. Unlike the circumstances in Knight v Wattyl, Mr Costigan did not have access to a representative who advised him and negotiated on his behalf and the idea of resignation came from the employer.

[102] There is no dispute that KOR had made the decision to dismiss Mr Costigan. Although unlike Grundy v Brister and Co 19 a termination letter had not been arranged and signed, a decision had been made to terminate Mr Costigan’s employment. Under cross-examination Mr Roberts said:

“… when it was decided that your employment would cease at KOR, we intended to go about it in the most human and dignified way, including allowing you to resign, offer a letter of reference and not requiring you to work your four week notice period and also providing you with an additional payment to allow you to transition to the next chapter of your life. So the resignation offer was primarily for your own benefit.” 20

[103] There is some dispute regarding the sequence of events; that is, whether Mr Costigan was given an opportunity to leave the meeting room to think about matters before or after he resigned.

[104] The resignation meeting started at 3:30pm and by 4:07pm Mr Costigan had tendered his resignation.

[105] Mr Roberts had told Mr Costigan that 31 August 2021 would be his last day working for KOR. In that context, the pressure KOR put on Mr Costigan to make a decision in less than two hours, being the end of business for the day, the exact timing of the offer to leave the room to “think about it” is immaterial because it would have been insufficient time in any case for Mr Costigan to make a considered decision.

[106] Mr Costigan knew what he was doing, and in that moment believed that it was in his best interests to resign. That is not the matter in contention. The issue is whether Mr Costigan was exercising individual judgement independent of the employer’s actions. Between 3:30pm to the end of the working day, he had been told he would no longer be working at KOR by day’s end, had resigned, sent a farewell email to his colleagues, cleared his desk, volunteered his keys and entry fob and lost access to his work emails.

[107] Events were moving quickly. Mr Costigan says that during the meeting he was in shock and not thinking straight, that he was feeling vulnerable and did not think he could get another job without a reference from KOR. 21

[108] Not every resignation following notification of an impending termination will constitute a dismissal and each matter turns on its own facts. In these circumstances, there was time pressure imposed on Mr Costigan and the actions of Mr Roberts were instrumental in Mr Costigan’s resignation. The resignation was Mr Roberts’ idea and he presented it as an alternative to termination, together with a positive reference and an additional bonus. KOR’s intention was that Mr Costigan, whether through termination or resignation, would cease to be employed by them within less than two hours. There was no genuine attempt to give Mr Costigan time to contemplate the choice of resignation.

[109] In applying the principles in Bupa, 22 it is difficult to come to a conclusion that Mr Costigan was exercising his individual judgement when he accepted the offer to resign. He had no effective choice regarding the tenure of his employment at KOR. The only choice he had was the manner in which he would depart.

[110] In finding that Mr Costigan was forced to resign as per s. 386(1)(b) of the Act, I do not direct any criticism at KOR. KOR’s offer to Mr Costigan that he resign, the bonus and the offer of a work reference were their attempt at a dignified exit and to make it easier for Mr Costigan find another job.

Was the dismissal harsh, unjust or unreasonable?

[111] Having found that Mr Costigan was dismissed, I am now required to consider whether his dismissal was unfair; that is, whether his dismissal was harsh, unjust or unreasonable.

Was there a valid reason for the dismissal related to Mr Costigan’s capacity or conduct?

[112] In order to be a valid reason, the reason for the dismissal should be “sound, defensible or well founded” and should not be “capricious, fanciful, spiteful or prejudiced.” 23 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.24

[113] In Crozier v AIRC 25 it was found that:

“A reason will be “related to the capacity” of the employee where the reason is associated or connected with the ability of the employee to do his or her job.”

[114] KOR submits that there was a valid reason for the dismissal of Mr Costigan related to his capacity to perform the requirements of his substantive role. It is KOR’s evidence that Mr Costigan had been on notice of his unsatisfactory performance for almost twelve months  26 and that he had been coached to assist him in improving his performance. Further, that even after the employer reduced his duties in June so that he could focus on core tasks, Mr Costigan continued to make unacceptable errors.

[115] That against the background of poor performance, particularly over June and July, by August 31 2021, the following matters illustrated that Mr Costigan could not perform his job and this constituted a valid reason for dismissal. Mr Roberts notes that the following errors he identified were not exhaustive: 27

  1. Ongoing late approval of creditor invoices which Mr Costigan had not managed, and the urgency of the task was not understood by Mr Costigan.
  2. In August 2021, Mr Costigan failed to import the monthly budget for BU for Capellotto and run a budget. KOR say that this is another example of Mr Costigan not taking instructions and incorrectly prioritising tasks.
  3. After a discussion on 23 August 2021 that reconciling the Primus balance sheets was high priority, four days later this task had not been completed.
  4. Mr Costigan was responsible for checking trade references as part of the application by customers for a 30-day account. ControlTech applied on 3 August 2021 and on 19 August 2021, more than two weeks later, references had still not been checked. KOR submits that this lack of urgency and prioritisation reflected very poorly on the company and likely caused a loss of business.
  5. In August another Xero creditor error was discovered that had been made by Mr Costigan on 13 June 2021. Mr Costigan had delivered the invoice net of GST. This resulted in the customer short-paying KOR and querying the invoice. 28

[116] With regards to the reasons given for dismissal at the resignation meeting, Mr Roberts gave evidence that:

  • The “ongoing late approval of creditor invoices” was the same as the problem that had been identified and communicated to Mr Costigan in October 2020. 29
  • In relation to the monthly budget for BU, Mr Costigan’s failure to follow instructions to complete only a very small part of the task of quite a large task related to KOR taking on a second major supplier. That the consequence of this was that much of Mr Costigan’s work needed to be redone. He says that much of it could have been avoided if Mr Costigan had broken the task into smaller tasks, completed one, imported it, reviewed it and checked it before moving on to the next task. 30This process had been part of the coaching advice that Mr Costigan had been given by Mr Roberts.31
  • In response to COVID-19, KOR created an online process for potential customers to open 30-day accounts with the company. This was the first direct interaction potential customers would have with the company and that for over two weeks Mr Costigan had not checked customer references. KOR submits that Mr Costigan not prioritizing this task led to the likely loss of business because of the risk that customers, not having heard whether they had been successful in opening a 30-day account, had gone to competitors resulting in loss of business. 32

[117] At the Determinative Conference, in response to the question from Mr Costigan, Mr Roberts said: 33

“Are they demonstrators of a lack of improvement? At the point of that meeting on 31 August as I believe I previously stated, I had lost all trust in your ability to complete tasks on time, in full and without error and I believe I mention in my notes somewhere that on a particular case where you’d sent an email to Craig Bratton and not Craig Bolton, it might be the other way round, but an easy mistake to make, I mentioned that if it wasn’t for the quantity of ongoing errors that this particular error is not material, however, the quantity of errors over an extended period of time, errors, lack of comprehension and carriage, have forced me to arrive at a position where I could no longer trust you to complete your role and I was having to complete a significant review of all tasks that you were doing to save the reputation and the profitability of the company.”

[118] Mr Costigan responds to the issues raised with him at the resignation meeting as detailed by Mr Roberts. Mr Costigan does not dispute the evidence of Mr Cusworth. Significantly, however, he disagrees with the manner in which the issues raised by Mr Roberts are characterised and offers his alternate characterisation.

[119] He says:

  • a. In relation to the ongoing late approval of creditor invoices, he submits that this task could not be completed on time due to a lack of communication from Mr Roberts who failed to respond in a timely manner to emails and messages regarding the task. 34He further stated that:

“I had been instructed by Sean (CFO) that I receive specific instruction for each creditor as to the approval criteria. I was to meet with Sean regarding each new creditor as they arose, and establish the reasonable limits for approval. I consistently requested time to meet with Sean to go over these – to then allow approvals to be done, and this was consistently delayed and pushed back. I then began emailing Sean each time I had a new creditor invoice, but these also were not always replied to in a timely manner”. 35

  • b. In relation to his failure to import a monthly budget for BU, Mr Costigan says that he had been instructed by Mr Roberts to find a better way to complete this task but that he had received no formal training on how to achieve this, which he says would involve generating a report within the Business Central software. He says that he spent some time discussing how to achieve this with KOR’s software expert and had spent time experimenting with the software and doing his own research. He says that the system was not user friendly and that not all reports within Business Central are known or understood. 36
  • c. In relation to failing to reconcile balance sheets in a timely manner, Mr Costigan says that when he had started the task, prior to being informed that it was urgent on 23 August, this task took longer than normal because the software is keyboard based and is not simple to work with. He says that when initially preparing the reconciliations he was using his workpapers from the previous year as he had not been given access to the financials. He says that after a few weeks of starting the task KOR gave him access to the financials and with these new figures he realised there was a discrepancy with the GST which he was struggling to reconcile. He admits that this task remained incomplete prior to his dismissal. 37
  • d. In relation to failing to check trade references as part of the application by customers for 30-day accounts, Mr Costigan accepts that he did not complete this task. However, he submits that this was a new process for him and that he was struggling to complete this along with his other responsibilities. He says that he had requested support a number of times and asked for this task to be completed by another staff member but that these requests were denied. 38
  • e. In relation to the Xero creditor error, Mr Costigan accepts that he made this error, but he submits that this error occurred before the July meeting and that he never made this error again. 39He says that this should carry no weight towards grounds for dismissal based on when it occurred.40

[120] Mr Costigan contends that the claims against his work were low in impact to his employer, and generally petty in nature. He says that some errors were not errors at all, but, rather, were misunderstandings and other errors were out of his control. Mr Costigan submits that this should also be compared with the quality work he produced, his consistent work ethic, and the meaningful contribution he made on a consistent basis. Mr Costigan says that, even at his dismissal, the Managing Director thanked him for his commitment and work ethic, and in the notes from KOR in May there is an outline of the outstanding work overall that he was able to contribute. Mr Costigan says that he has noted in his timeline of events, and response to the performance notes, that many of the issues presented were impacted by the large work load he was given.

[121] KOR submits that Mr Costigan performed poorly as a Business Analyst and was not able to perform tasks in an efficient and/or professional manner. Further, that even after notice of the matters that needed an improvement in performance, and in spite of multiple opportunities to improve, Mr Costigan did not improve, could not be trusted to deliver accurate work and could not perform work to the required standard.

[122] When asked whether one of the reasons for dismissal was because Mr Costigan continued to make errors, Mr Roberts said: 41

“Yes, that was one of the reasons for deciding to cease your employment, errors and lack of attention to detail, comprehension of tasks.  There was a number of factors, however ongoing and consistent errors were definitely a material factor.”

[123] The fact that errors made in July were not discovered until August does not mean that they cannot be matters included in the consideration of s. 397(a). Mr Costigan says that three instances related to tasks being late and one was a misunderstanding. I do not find these characterisations and Mr Costigan’s explanations regarding his failure to import a monthly budget for BU and his failure to reconcile balance sheets in a timely manner convincing. I do not accept Mr Costigan’s contentions that the claims did not significantly impact his employer.

[124] Considering all the evidence, and the matters referred to above, I find that there was a valid reason for Mr Costigan’s dismissal that related to his capacity, being his inability to perform his job to the reasonable satisfaction of his employer.”

Costigan v KOR Equipment Solutions Pty Ltd (2022) FWC 176 delivered 9 March 2022 per Mirabella C