Unfair dismissal and Covid 19

The approach of the Fair Work Commission to dismissals in workplaces affected by Covid 19 is evidenced by the following principles noted in an extract of a recent unfair dismissal case by the Fair Work Commission

“Was the dismissal unfair?

[62] The Applicant was not dismissed for any reason related to his capacity or conduct. Accordingly, the criteria in s. 387(a) is not relevant to the question of whether the Applicant was unfairly dismissed. Given that the reason for dismissal did not relate to capacity or conduct, the consideration in s. 387(b) and s. 387(c) is not relevant. There were no discussions about the Applicant’s dismissal and the Applicant did not request a support person so that s. 387(d) is also not relevant. Further, the dismissal did not relate to unsatisfactory performance and the question of whether the Applicant was warned is not relevant to the question of whether his dismissal was unfair and accordingly the consideration in s. 387(e) is not relevant.

[63] With respect to s. 387(f) and (g), while the employer is not a small business, neither is it a large business. The Respondent does not have dedicated human resource management specialists or expertise. Notwithstanding this, the Respondent had access to a legal practitioner for the purpose of preparing material for this case including mounting two jurisdictional objections which ultimately could not be sustained. Regrettably, it appears that the Respondent did not utilise the money it undoubtedly spent preparing material in relation to those objections, on obtaining advice prior to dismissing the Applicant.

[64] With respect to s. 387(h) there are a number of matters which in my view are relevant to the question of whether the Applicant’s dismissal was unfair. Generally, I found Mr Howard to be an unconvincing witness. In short, Mr Howard did not provide a credible explanation as to why the Applicant was the only manager in any of the gyms in which Mr Howard has a proprietary interest, who was made redundant during the COVID-19 Pandemic.

[65] The Applicant had a good employment record. He had previously moved from a gym operated by a franchisee to a gym operated by Mr Howard. While he had been on a performance improvement program, his evidence was that this was not disciplinary and that there was no disciplinary action arising from the program. There was a total inconsistency in Mr Howard’s evidence about advertising for gym managers on a bi-monthly basis so that vacancies can be filled, and his rationale for dismissing the Applicant. Mr Howard kept every other gym manager in employment during the period when gyms were required to be closed due to COVID-19, on the basis that he would need them when the effects of the pandemic abated. Mr Howard also advertised for additional managers in May 2020 for the same reason, approximately one month after he had dismissed the Applicant. There is no cogent reason why Mr Howard could not have maintained the Applicant in employment and paid him the JobKeeper subsidy given the regular and ongoing requirement for gym managers for the Respondent to operate its business.

[66] I do not accept Mr Howard’s explanation that he could not in good conscience claim the JobKeeper subsidy for the Applicant in circumstances where he believed there would not be a job for him when the pandemic abated. On Mr Howard’s own evidence, he does not know whether or not a number of his gyms will ever open again, and that did not prevent him claiming JobKeeper subsidies for the managers of those gyms and retaining those managers in employment. Mr Howard’s evidence about Mr Moratti and his involvement in the Respondent’s operations was also entirely unconvincing. There was no mention of Mr Moratti in any document filed by Mr Howard until his third witness statement dated 2 September 2020 was filed. It is passing strange that this is the same date upon which information about Mr Moratti appeared on websites for the gyms he was said to have been managing since April 2020 and on FaceBook, and the names of the managers who had previously been promoted on the website were removed. Mr Howard’s evidence about this being done by a marketing person and having no relation to the present proceedings was also unconvincing. In my view, this was no co-incidence and it is more probable than not that the promotion of Mr Moratti on the websites for the Cleveland, Buranda and Meadowbank gyms was to shore up the Respondent’s case that the role of manager for each of those gyms had been abolished or restructured. Patently this is not so and the managers of the Buranda and Meadowbank gyms continued to be employed after the Applicant was dismissed.

[67] Further, I am of the view that Mr Howard’s figures in relation to the impact of COVID-19 on numbers of employees were to say the least, rubbery. The failure to count 19 persons as employees in circumstances where they were stood down on JobKeeper, appeared to be directed to creating the appearance of a significant reduction in employee numbers to disguise Applicant’s dismissal as a redundancy and to minimise opportunity to question why the Applicant was not retained in employment and paid the JobKeeper subsidy in the same way as those employees. Mr Howard is an experienced business person who owns a large number of gyms and other enterprises, and I do not accept that this failure was entirely inadvertent or that he did not understand that persons who were stood down were still employed.

[68] Finally, I do not accept Mr Howard’s evidence that the possible sale of the Cleveland gym had any impact on his decision to dismiss the Applicant. Mr Howard accepted that his evidence and submissions to the Commission in these proceedings were prepared by an experienced legal practitioner. It is unlikely that such a significant matter would be overlooked in that material, particularly given the lengths that Mr Howard went to in his evidence to attempt to establish the cluster scenario involving Mr Moratti. The possible sale of the Cleveland gym would have gone some way to explaining the decision to make the Applicant’s role redundant and it is improbable that such evidence would only emerge as a result of a question from me during the hearing. It is also the case that issues with the lease in the Gladstone gym did not stop Mr Howard appointing a manager, albeit temporarily.

[69] At the end of the day, given the lack of a cogent reason for the Applicant’s dismissal, and the fact that he was the only manager of a gym owned by Mr Howard who was made redundant, it is more probable than not that the Respondent took an opportunity to dismiss the Applicant under the cover of the COVID-19 Pandemic, in circumstances where there was no reason – operationally or on the basis of the Applicant’s conduct, capacity or work performance – for the Applicant to have been dismissed.

[70] The dismissal was harsh because of its impact on the Applicant’s personal and financial circumstances. The Applicant was the sole income earner for his family including two young children and he was required to withdraw funds from his superannuation account to pay living expenses, which will detrimentally affect his financial situation into the future. The economic circumstances at the time the Applicant was dismissed were extremely difficult which increases the harshness, in circumstances where there was no cogent reason for the Applicant to have been dismissed. The dismissal was unjust because the Applicant was dismissed with no discussion, much less consultation, in relation to mitigation of the effects of dismissal. The dismissal was also unreasonable because there was no cogent reason why the Applicant could not have been retained in employment in circumstances where the employer would have been entitled to claim the JobKeeper subsidy on his behalf. The Respondent claimed JobKeeper for all other gym managers and given the turnover as evidence by the fact that the Respondent advertises bi-monthly for gym managers, there was no reason not to retain the Applicant in employment, particularly when he had previously worked at another location.

[71] I accept that employers cannot be found to have unfairly dismissed an employee by simply by virtue of deciding that the employee’s position will not be required at the end of the COVID-19 Pandemic. An employer is not obliged to keep an employee in employment because of the availability of JobKeeper subsidies, in circumstances where the employee’s job is genuinely redundant either in the ordinary sense or consistent with the statutory definition of genuine redundancy. However, in the present case, I do not accept that the Applicant’s position was genuinely redundant either in the statutory sense or the ordinary sense. The evidence about the precise nature of Mr Moratti’s role was sketchy and I do not accept the manager role at that gym was filled by a school based trainee (the Mr Howard’s son) and Mr Moratti. I am also of the view that there would have been other options to deploy the Applicant to a different location, had he been retained in employment and the Applicant’s retention in employment would have been entirely consistent with the objectives of the JobKeeper subsidy. Accordingly, I find that the Applicant was unfairly dismissed.

Remedy

[72] Having found that the Applicant was protected from unfair dismissal, and that his dismissal was unfair, it is necessary to consider what, if any, remedy should be granted to him. The Applicant sought “redeployment” to a gym not owned by the Respondent. Redeployment to an entity owned by a third party is not available as a remedy for unfair dismissal. The submission of the Applicant’s representative that the Applicant sought reinstatement to the Cleveland gym where he was working at the time of his dismissal, was at odds with the Applicant’s evidence that he did not seek this outcome, and in all of the circumstances I accept that it would be inappropriate to reinstate the Applicant. I also accept that the Applicant has agitated his dismissal with other staff by seeking statements from them in support of his application and at least one staff member has approached Mr Howard to seek his assistance in having the Applicant cease contact. Further, the Applicant has successfully challenged Mr Howard’s credit and the relationship is most likely irreparable.

[73] Section 390(3)(b) of the Act provides the Commission may only issue an order for compensation if it is appropriate in all the circumstances. A compensation remedy is designed to compensate an unfairly dismissed employee in lieu of reinstatement for losses reasonably attributable to the unfair dismissal within the bounds of the statutory cap on compensation that is to be applied. 29

[74] Having regard to all the circumstances of the case, including the fact that the Applicant has suffered financial loss as a result of his unfair dismissal, I consider that an order for payment of compensation to him is appropriate.

[75] It is necessary therefore for me to assess the amount of compensation that should be ordered to be paid to the Applicant. In assessing compensation, I am required by s 392(2) of the Act to take into account all the circumstances of the case including the specific matters identified in paragraphs (a) to (g) of this subsection.

[76] The established approach to assessing compensation in unfair dismissal cases was set out in Sprigg v Paul Licensed Festival Supermarket 30 and applied and elaborated upon in the context of the current Act by Full Benches of the Commission in a number of cases as follows:31

Step 1: Estimate the remuneration the employee would have received, or have been likely to have received, if the employer had not terminated the employment (remuneration lost).

Step 2: Deduct monies earned since termination.

Step 3: Discount the remaining amount for contingencies.

Step 4: Calculate the impact of taxation to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.

Step 5: Apply the legislative cap on compensation.

Remuneration the Applicant would have received, or would have been likely to receive, if she had not been dismissed (s 392(2)(c))

[77] Calculations of damages or compensation involve an element of speculation in determining an employee’s anticipated period of employment. This is because the task involves an assessment of what would have been likely to happen in the future had the employee not been dismissed. 32

[78] I am satisfied on the balance of probabilities that if the Applicant had not been dismissed on 9 April 2020, he would have remained employed by the Respondent until 31 October 2020. The Applicant had no reason to cease his employment with the Respondent and has family commitments that I accept would have provided him with an incentive to remain in employment particularly during the COVID-19 Pandemic and in the current economic circumstances. I have also had regard to the fact that the Applicant had an unblemished work record in the sense that there is no evidence that he had ever been warned in relation to his conduct, capacity or work performance.

[79] Further, the Respondent continues to advertise bi-monthly for gym managers and has a manager in the significant majority of its gyms. There is also evidence of staff movement which in my view increases the likelihood that the Applicant could have retained his employment for 12 months, particularly given his preparedness to work at other locations. Finally, for reasons given elsewhere in this Decision, I did not find Mr Howard a credible witness and I do not accept his evidence that the Applicant would only have remained in employment for a further two week period.

[80] I do not accept the 12 month period of anticipated employment as contended for by the Applicant. Notwithstanding the lack of reasons for the Applicant’s dismissal at the relevant time, the Respondent may have restructured its operations and made the Applicant’s position redundant and I also note that the Applicant stated in his Form F2 Application that he and Mr Howard “have not seen eye to eye for a long time” and the Applicant may have left the Respondent’s employment to pursue other opportunities once the effects of COVID-19 on the fitness industry had abated.

[81] The Applicant was employed on an annual base salary of $57,000.00 per annum with the possibility of earning incentive payments. However at or around the time the Applicant was dismissed, the Respondent was eligible for JobKeeper subsidies and accordingly the Applicant would have earned $750 per week for the period from his dismissal on 9 April 2020 to 28 September 2020. I am of the view that by 28 September 2020 the Respondent’s gyms had reopened and that thereafter, until 31 October 2020, the Applicant would have earned his usual weekly rate of $1,096.00.

[82] The Applicant provided no evidence in relation to any additional earnings he may have received by way of bonus or incentive payments provided for in his contract of employment. The Applicant was represented by an experienced lawyer and I have assumed that if there were such additional earnings evidence of them would have been tendered. Further, I consider it unlikely in the present economic circumstances that the Applicant would have earned any bonus or incentive in the period when JobKeeper payments concluded.

[83] Accordingly, I have calculated that the Applicant would have earned the amount of $18,000.00 for the 24 week period between his dismissal on 9 April 2020 and the period of JobKeeper payments at the rate of $750 per week ending on 28 September 2020. Thereafter, the Applicant would have earned an amount $5,480.00 based on 5 further weeks of employment at his weekly rate of $1,096.00.

[84] The Applicant was unable to work for a three week period and had exhausted his personal leave and other leave accruals. As a result the Applicant would not have been paid for that period. I have decided to deduct an amount of 3 weeks in respect of the Applicant’s knee surgery – a total of $2,250.00.

[85] I am satisfied that the remuneration that the Applicant would have received, or would have been likely to receive, if he had not been dismissed is $21,230.00.

Remuneration earned (s 392(2)(e)) and income reasonably likely to be earned (s 392(2)(f))

[86] At the point the matter was heard the Applicant had earned no income from other employment and I make no deduction on this basis.

Viability (s 392(2)(a))

[87] No submission was made on behalf of the Respondent that any particular amount of compensation would affect the viability of the Respondent’s business. My view is that no adjustment will be made on this account.

Length of service (s 392(2)(b))

[88] The Applicant’s length of service with the Respondent (less than 12 months) does not justify any adjustment to the amount of compensation.

Mitigation efforts (s 392(2)(d))

[89] The evidence establishes that the Applicant made reasonable efforts to obtain alternative employment following his dismissal. The Applicant states that he applied for numerous positions but, unsurprisingly in the current environment, he has not been able to obtain alternative employment.

[90] In all the circumstances, my view is that the Applicant acted reasonably to mitigate the loss suffered by him because of the dismissal and I do not consider it appropriate to reduce the compensation on this account.

Any other relevant matter (s 392(2)(g))

[91] It is necessary to consider whether to discount the amount ($5,480.00) for “contingencies”. This step is a means of taking into account the possibility that the occurrence of contingencies to which the Applicant was subject might have brought about some change in earning capacity or earnings. 33 Positive considerations which might have resulted in advancement and increased earnings are also taken into account.

[92] The discount for contingencies should only be applied in respect to an “anticipated period of employment” that is not actually known, that is a period that is prospective to the date of the decision. 34

[93] Because I am considering an anticipated period of employment which does not extend beyond the date the application was heard, there is no uncertainty about the Applicant’s earnings, capacity or any other matters during that period of time. Accordingly, I make no deduction for contingencies. I do not intend make any deduction for wages paid to the Applicant in lieu of notice, on the basis that those wages would have been required to be paid in any event if the Applicant’s employment had continued for the period I have estimated that he would have remained in employment. Further, had he remained employed for the anticipated period and was then made redundant, the Applicant would have been entitled to severance payments in addition to notice.

[94] After considering the fact that the Applicant was paid JobSeeker amounts for the period over which I have assessed compensation, I have decided not to make any deduction on this basis. JobSeeker payments are essentially unemployment benefits or social security payments – albeit at an increased rate during the COVID-19 Pandemic. The manner in which such payments are treated in awards of compensation is well established and I see no basis to depart from that approach. That approach, set out in a Decision of a Full Bench of the Commission in McCullough v Calvary Health Care Adelaide35 is that deductions for social security payments are not made on the basis that such payments do not constitute remuneration earned from employment or other work for the purposes of s.392(2)(e). If any amount is required to be repaid by the Applicant that is a matter between the Applicant and Centrelink.

[95] I have considered the impact of taxation, but my view is that I prefer to determine compensation as a gross amount and leave taxation for determination.

Misconduct (s 392(3))

[96] The Applicant did not engage in any misconduct, so my view is that this has no relevance to the assessment of compensation.

Shock, distress or humiliation, or other analogous hurt (s 392(4))

[97] I note that in accordance with s 392(4) of the Act, the amount of compensation calculated does not include a component for shock, humiliation or distress.

Compensation cap (s 392(5)-(6))

[98] The amount of $21,230.00 is less than half the amount of the high income threshold immediately before the dismissal and is less than the total amount of remuneration to which the Applicant was entitled in his employment with the Respondent during the 26 weeks immediately before his dismissal calculated on the basis of his weekly base rate of $1,096.00 – $28,496. There is no requirement that I reduce the amount of compensation I have calculated by reason of s 392(5) of the Act.

Instalments (s 393)

[99] No application has been made to date by the Respondent for any amount of compensation awarded to be paid in the form of instalments. I have determined that the amount of compensation should be paid within 21 days of the date of this Decision.

Conclusion on compensation

[100] In my view, the application of the Sprigg formula does not, in this case, yield an amount that is clearly excessive or clearly inadequate. Accordingly, my view is that there is no basis for me to reassess the assumptions made in reaching the amount of $21,230. 36

[1] For the reasons I have given, I have decided that a remedy of compensation in the sum of $21,230.00 (less taxation as required by law) to be paid to the Applicant and superannuation contributions of $2,016.85 to be paid into the Applicant’s nominated superannuation fund, in three instalments over a three month period, is appropriate in the circumstances of this case. An Order to that effect has been issued.”

Cooper v The Trustee for Cleveland 24/7 Unit Trust – The Trustee for Cleveland 247 Unit Trust  [2020] FWC 6715 delivered 16 December 2020  Asbury DP