The Small Business Fair Dismissal Code and serious misconduct

What follows is a part of a Fair Work Commission unfair dismissal decision which deals with the legal principles which apply to determining whether a dismissal for serious misconduct was consistent with the provisions of the Small Business Far Dismissal Code and thus whether the small business employer had  a jurisdictional defence to the claim.

“Consideration

[60] Section 385 of the Act stipulates that the Commission must be satisfied that four cumulative elements are met in order to establish an unfair dismissal. These elements can be identified in s. 385 which is in the following terms:

“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.”

[61] In this instance there was no dispute that the applicant had been dismissed, and that the dismissal was not a case of genuine redundancy. Consequently, only the provisions of subsections (b) and (c) of s. 385 of the Act have any relevance.

Small Business Fair Dismissal Code

[62] Section 396 of the Act requires that the Commission must decide certain matters before considering the merits of any application for relief from unfair dismissal. One of the initial matters to be considered before any consideration of the substantive merits of an unfair dismissal application is whether the dismissal was consistent with the SBFD Code. Relevantly, s. 396 of the Act is in the following terms:

“396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy.”

[63] It is clear from subsection 396 (c) of the Act that a determination of any application of the SBFD Code should precede any more general contemplation of whether the dismissal could have been considered to have been harsh, unjust, or unreasonable. Further, in the event that the dismissal of the applicant was found to have been consistent with the SBFD Code, any further consideration as to whether the dismissal was harsh, unjust, or unreasonable would become unnecessary.

[64] In this instance there was a level of contest as to whether the employer was a small business employer as comprehended by the meaning of small business employer stipulated by the terms of s. 23 of the Act. Section 23 of the Act is in the following terms:

“23 Meaning of small business employer

(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.

(2) For the purpose of calculating the number of employees employed by the employer at a particular time:

(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and

(b) a casual employee is not to be counted unless, at that time, the employee is a regular casual employee of the employer.

(3) For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.

(4) To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee’s employment, the employees that are to be counted include (subject to paragraph (2)(b)):

(a) the employee who is being dismissed or whose employment is being terminated; and

(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated.”

[65] Relevantly, subsection 23 (1) of the Act stipulates that if an employer employs fewer than 15 employees then they satisfy the meaning of being a small business employer. The applicant asserted that at the time of her dismissal the employer had 16 employees. The employer contended that three of the 16 persons identified as employees were casual employees who were not “regular casual” employees and therefore, by virtue of subsection 23 (2) (b) of the Act, should not be counted as employees for any determination as to whether the employer was a small business employer.

[66] The evidence that was provided about the engagement of the three individuals who were the subject of contest as to whether their status was that of a “regular casual” employee for the purposes of subsection 23 (2) (b) of the Act, focussed upon the payroll activity details provided in Exhibit 3. In summary, Exhibit 3 records the actual engagements undertaken by three named individuals who were employed by the employer during the 2020 calendar year. The first of these individuals was engaged in work for the employer on the following five occasions during 2020: 1 July, 29 July, 12 August, 9 September, and 18 November. The second person was engaged in work for the employer on the following five occasions during 2020: 7 October, 21 October, 4 November, 18 November, and 2 December. The third person was engaged in work for the employer on the following three occasions during 2020: 12 August, 18 November, and 2 December.

[67] The pattern of the engagements of the three individuals who were identified in Exhibit 3 could not be established to have any regularity. The respective engagements for work on each of five, and in respect to the third person, three occasions, during the entire 2020 calendar year, has confirmed a finding that these three individuals were not what must be logically meant by the terminology “regular casuals”. These three individuals could not be counted for the purposes of s. 23 of the Act and therefore at the time of the dismissal of the applicant, the employer had fewer than 15 employees.

[68] Therefore, the Commission has determined that the employer was a small business at the time of the dismissal of the applicant and the provisions of subsection 385 (c) of the Act require consideration. Specifically, by way of operation of s. 388 of the Act, it is necessary to determine whether the employer complied with the SBFD Code in relation to the dismissal of the applicant.

[69] The SBFD Code is in the following terms:

“Small Business Fair Dismissal Code

Summary Dismissal

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.

Other Dismissal

In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.

The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.

The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee’s response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.

Procedural Matters

In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.

A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.”

[70] In this case, the employer asserted that the summary dismissal of the applicant was consistent with the SBFD Code. Specifically, the employer relied upon the terminology contained in the Summary Dismissal part of the SBFD Code. The employer acknowledged that it would be unlikely for the Commission to find that the employer had complied with the Other Dismissal provisions of the SBFD Code because not all facets of those provisions had been complied with. In any event, it would be difficult to contemplate assessment of the dismissal of the applicant in circumstances where, in the absence of any notice or payment in lieu of notice, the dismissal could not be considered to be anything other than a summary dismissal. A dismissal must logically fall within the SBFD Code to be either a Summary Dismissal or an Other Dismissal and could not conceivably be both. In simple terms, the Other Dismissal provisions of the SBFD Code do not represent a fall-back position that might be used to buttress a summary dismissal.

[71] The dismissal of the applicant was clearly summary in nature in that the employer did not provide notice or payment in lieu of notice, and the dismissal was immediate in effect when it was confirmed in the letter of dismissal dated 12 November 2020. The employer asserted that the dismissal of the applicant accorded with the first sentence of the SBFD Code which is repeated: “It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal.” Consequently, the jurisdictional objection raised by the employer had as its foundation, the contention that Mr Gomez believed that the applicant’s conduct was sufficiently serious to justify immediate dismissal, and that the belief of Mr Gomez was established upon reasonable grounds.

[72] The approach to consideration of the application of the Summary Dismissal provisions of the SBFD Code has been undertaken having regard for the Full Bench Decision in the case of Ryman v Thrash Pty Ltd (Thrash). 2 In particular, the text contained in paragraph (2) of paragraph [41] of the Decision in Thrash is on point, and the full text of that paragraph is as follows:

“[41] In summary, drawing on the conclusions stated above and the ratio in Pinawin, we consider that the “Summary dismissal” section of the Code operates in the following way:

(1) If a small business employer has dismissed an employee without notice – that is, with immediate effect – on the ground that the employee has committed serious misconduct that falls within the definition in reg.1.07, then it is necessary for the Commission to consider whether the dismissal was consistent with the “Summary dismissal” section of the Code. All other types of dismissals by small business employers are to be considered under the “Other dismissal” section of the Code.

(2) In assessing whether the “Summary dismissal” section of the Code was complied with, it is necessary to determine first whether the employer genuinely held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal, and second whether the employer’s belief was, objectively speaking, based on reasonable grounds. Whether the employer has carried out a reasonable investigation into the matter will be relevant to the second element.”

[73] In closing submissions, Ms Ikonomou conceded that it was unlikely that the employer had complied with the SBFD Code in respect of the third, fourth, and fifth allegations that represented basis for the dismissal of the applicant. Consequently, the focus of consideration was specifically whether the employer had complied with the SBFD Code in respect of the first and second allegations, which were referred to as the abuse or assault allegations. Thus, the primary aspect of the determination as to compliance with the SBFD Code was whether Mr Gomez genuinely believed that the applicant had engaged in the conduct described in the abuse allegations such that it was sufficiently serious to justify immediate dismissal, and that the belief of Mr Gomez was established upon reasonable grounds.

[74] It has been instructive to examine the basis upon which the employer’s representatives essentially abandoned any reliance upon the third, fourth, and fifth allegations.

[75] In respect to the third allegation, the employer acknowledged that the evidence provided during the Hearing established that “Mr Gomez was unable to identify the alleged deleted documents in the forensic report that were listed in the dismissal letter.” 3 The corollary of this evidence has been that the finding that Mr Gomez substantiated in the dismissal letter regarding allegation 3, was not something that he had any actual knowledge of, and he either deliberately made a false decision, or he was recklessly careless in making a serious finding about something he knew little or nothing about.

[76] In respect of both allegations 4 and 5, the employer’s representatives stated that “There is no evidence before the Commission to find that Mr Gomez conducted an inquiry or investigation into this allegation.” 4 The absence of any inquiry or investigation into both allegations 4 and 5 then led to the employer’s representatives further stating, “Therefore, it is open for the Commission to find that the Respondent did not comply with the [SBFD] Code.”5 This conclusion would be a sound reflection of the Full Bench Decision in Thrash whereby the following statement can be extracted, “…and second whether the employer’s belief was, objectively speaking, based on reasonable grounds. Whether the employer has carried out a reasonable investigation into the matter will be relevant to the second element.”

[77] Consequently, the position that was recognised by the employer in respect of allegations 3, 4 and 5, has provided confirmation that, firstly, in respect to allegation 3, Mr Gomez was capable of making a false or recklessly careless decision, and secondly, he made decisions about allegations 4 and 5 without any inquiry, investigation, or otherwise testing the subject matter of his determinations. In this context, examination of the evidence regarding his beliefs about allegations 1 and 2, the very serious abuse allegations, has been undertaken.

[78] During cross-examination Mr Gomez provided evidence which firstly established that in respect to the first abuse allegation, he read the written statements that had been provided by Ms Diana Mejia Ortez and Ms Silvia Leon Castellanos, and he read the applicant’s response which denied the event. The applicant subsequently reiterated her denials during the Zoom disciplinary meeting held on 11 November 2020. When questioned about the conclusions that he made in respect of allegation 1, Mr Gomez provided the following evidence:

“Yes. Mr Gomez, if we go back to paragraph 50 of your statement, where you say Diana’s and Silvia’s statements were very similar, which meant the physical abuse likely occurred, that’s just not right, is it?—It is right that something had happened and there was a suspicion that something had happened.” 6 [emphasis added]

[79] The evidence of Mr Gomez was that he had a suspicion that something had happened, and because there were three statements which alleged that two incidents of very serious child abuse had occurred, he decided not to believe the applicant. Importantly, the suspicion that Mr Gomez had, was transformed into a substantiated finding in the letter of dismissal without any questioning or other inquiry of the two individuals that had made the allegations. The following evidence of Mr Gomez summarised his level of activity regarding any inquiry or investigation of those individuals who made the first abuse allegation:

“Okay. Do I understand from your answers earlier that after you received these statements from Diana and Silvia, you didn’t actually question them about any of the details of the statements, or did you?— No, I did not.” 7

[80] There was also another person who apparently witnessed the event that was alleged in the first abuse allegation. The statement of Ms Silvia Leon Castellanos that was provided to Mr Gomez included the following:

“7. I spoke to the Assistant Director at the time; Claudia Arbelaez, she untied the child and express her inconformity with Jenny.” 8

[81] Ms Arbelaez was no longer an employee of the employer, and she had apparently left Australia and was living in New Zealand. Mr Gomez gave very unconvincing evidence that he unsuccessfully attempted to find the contact details for Claudia Arbelaez. However, the New South Wales police managed to make contact with Claudia Arbelaez, and the following extract of the transcript of the Local Court proceedings demonstrates the benefit that may have been provided to Mr Gomez if he had undertaken some investigation of the first abuse allegation:

“Q. You just indicated that you had a phone call with Claudia about these allegations. Now, when you asked Claudia about the allegations, she told you that she didn’t remember anything like that occurring, didn’t she?

  1. That’s correct.
  2. Something like that, an alleged eyewitness saying to the officer-in-charge, that they do not remember the event occurring, is significant, isn’t it?
  3. That’s correct.” 9

[82] Mr Gomez dealt with the second abuse allegation in a manner that was consistent with his approach to the first abuse allegation. The following evidence of Mr Gomez during cross-examination summarised his acceptance of the second abuse allegation:

“So there were only two people that gave you information in relation to that one allegation?— Yes.

Macarena and Ms Wood?— Yes.

You did not make any enquiries, you just accepted what was written in that statement, didn’t you?— Yes.

The other statements, as we have just gone through, are not consistent, are they, so it’s not reasonable to just accept them on their face without making further enquiries, is it?— It was reasonable for me at the time. It’s not common that somebody makes that kind of allegation.” 10

[83] A careful examination of all of the evidence has established that Mr Gomez made decisions which substantiated allegations 1 and 2 without any proper inquiry, investigation, or other testing of the individuals who had made the allegations. For example, he did not ask any of the accusers why they did not make any report or other record of the events at around the time that they said that the events had occurred. Mr Gomez did not ask why these very serious allegations had not surfaced in any way for about three years.

[84] Mr Gomez failed to undertake any fundamental investigation of allegations 1 and 2 in the same way that he failed to test allegations 4 and 5. Mr Gomez did not test allegations 1 and 2 because he wanted the allegations to be sustained after he had failed to negotiate the applicant’s resignation via the “without prejudice meeting” process. Mr Gomez recklessly transformed nothing more than a suspicion that “something had happened” into substantiated findings of very serious child abuse.

[85] The submission 11 that it was reasonable for Mr Gomez to accept allegations 1 and 2 on their face without making enquiries because it was not common for someone to make that kind of an allegation, must be soundly rejected. The absence of any proper investigation and the reckless adoption of substantiated findings of very serious child abuse, has meant that any belief that Mr Gomez may have had that the applicant engaged in the conduct that was alleged in allegations 1 and 2, could not have been a belief that was established on reasonable grounds. The belief that Mr Gomez had was not a belief that the applicant’s conduct was sufficiently serious to justify immediate dismissal, but instead, he held no more than a suspicion that something had happened.

[86] The summary dismissal of the applicant was not consistent with the Summary Dismissal provisions of the SBFD Code because there were no reasonable grounds for any belief on the part of the employer that the applicant had committed the conduct that the employer had substantiated in respect of allegations 1, 2, and 3, as was particularised in the dismissal letter of 12 November 2020. The other matters contained in the dismissal letter which were identified in allegations 4 and 5, would not, even if properly proven, provide basis for the summary dismissal of the applicant. The dismissal of the applicant was not consistent with the SBFD Code.”

Wood v Amigoss Preschool and Long Day Care Co-Operative Ltd (2022) FWC 2925 delivered 3 November 2022 per Cambridge C