Unfair dismissal and failure to consult

In this interesting case an employee has lost an unfair dismissal case because although the small business employer failed to conform with the consultation provisions of an applicable modern award, the events surrounding the termination of employment occurred so swiftly that it would have apparently been unreasonable to require the employer to comply with them.

“[1] On 15 December 2022, Mr Matthew Dally-Watkins (the Applicant) made an application

to the Fair Work Commission (the Commission) under s.394 of the Fair Work Act 2009 (Cth)

(the Act) for an unfair dismissal remedy against Genesis Insurance Group: Gfsa Pty Ltd And

Genesis Insurance Broking Australia.

[2] The Respondent raises the issue that the Applicant had incorrectly referred to the

Respondent as Peter Johnson Managing Director, Genesis Insurance Group and identifying the

legal entity as Genesis Insurance Group: GFSA Pty Ltd & Genesis Insurance Broking Australia.

The Respondent asserted that the employer was Genesis Financial Services Australia Pty Ltd.

The Applicants payslips identify the employer as Genesis Financial Services Australia Pty Ltd,

and the Applicant subsequently accepted that he had been employed by Genesis Financial

Services Australia Pty Ltd. I was content to exercise power to amend the application such that

the Respondent is Genesis Financial Services Australia Pty Ltd.

[3] On 11 January 2023, the Respondent filed a Form F3 Employer’s response objecting to

the application on the jurisdictional grounds that the employer is a small business employer and

the employer complied with the Small Business Fair Dismissal Code.

[4] As the matter could not be resolved by conciliation, directions were issued for the filing

of material and the matter was listed for hearing on 22 March 2023 to determine the jurisdiction

and merits of the application. At the commencement of the proceedings given no formal

witness statements were filed, both the Applicant and Respondent were self-represented, and

neither party intended to call other witnesses it was agreed the matter proceed as a determinative

conference.

[2023] FWC 703

DECISION

[2023] FWC 703

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Background

[5] On Monday 30 August 2021, the Applicant commenced employment with the

Respondent, who is engaged in the business of brokerage of insurance and financial services,

as a para planner servicing officer based in the Gold Coast, Queensland. The Applicant was

engaged on a salary package of $85,000 per year plus superannuation.

[6] On 2 December 2022, the Applicant’s employment was terminated on the basis that the

Respondent had sold its entire life insurance book to another business that was not a related or

associated entity of the Respondent. According to the termination letter provided to the

Applicant, on enquiry, there is no avenue for the Applicant to be employed by the business that

took over the life insurance book of the Respondent. The termination letter further noted that

the Respondent had explored the possibility of employment with its associated company,

Genesis Insurance Brokers Australia, however there is no compatible position.

Applicant’s Submissions

[7] The Applicant alleges in his Form F2 that the Respondent sold part of the client revenue

client base to the group licensee, AFSL, which was the cause of his dismissal. The Applicant

believed that this was not a fair reason for his dismissal, noting that the Respondent is able to

continue to provide financial services to the remaining client base. The Applicant states that

during his employment, he did not receive adequate support and did not have any performance

reviews, and that he was not paid incentives or commission as provided in his employment

contract. The Applicant further notes that based on his experience, he is able to work in sales

and service of all insurance and superannuation products, including general, business and

personal insurance.

[8] In the Applicant’s outline of argument, he states that the termination was harsh and

unreasonable as the Respondent will continue to provide their clients service and continue to

sell insurance products to their client base. Further, the Applicant alleges that the portion of

clients sold is a small portion of the business; a portion of 100-120 Life clients. The business

will continue to provide service, reviews and sell insurance solutions and products for travel,

commercial, general insurance and life insurance. The Applicant also notes that the Respondent

has an estimated 750 plus business and consumer clients, including the Applicant’s fiancé. The

Applicant opines that the Respondent will continue to provide tier 1 and tier 2 products

including general insurance – commercial, travel, life and income protection products to their

client base. Referring to the contract with the AFSL related business, the Respondent will

continue to introduce/refer clients where appropriate for further advice on superannuation, life

and income protection products as referred to in the contract for sale and the Respondent’s

website as well as job listings on Seek.

Respondent’s Submissions

[9] In the Respondent’s Form F3, it submitted that the Respondent had sold its portfolio in

its entirety on or about 1 December 2022. This sale meant that all ongoing trail commission

income transferred to the purchasing entity, effective on the same date as the sale of the portfolio

of the business. It is further noted that the Applicant was the only employee of the Respondent

at the time.

[2023] FWC 703

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[10] In the Respondent’s outline of argument, the Respondent reiterated that they had sold

its client base and all trail income in its entirety. Therefore, effectively not trading from 1

December 2022. The Respondent further notes that they raised the issue of employment for the

Applicant with the purchasing entity. However, the Respondent states that the Applicant did

not wish to pursue this option.

[11] The Respondent additionally states in their addendum that that were was no unfair

dismissal on the basis that the business was sold in its entirety and conformed to the Fair Work

procedures for staff dismissal.

[12] The Respondent goes on further to states that s.387(a) to (h) of the Act are not relevant

with respect to the facts of the matter, and that the Respondent has complied with all advice

from Fair Work and the Ombudsman.

Evidence

[13] Both the Applicant and Mr Johnson for the Respondent provided sworn evidence at the

determinative conference. It was apparent at the earlier directions hearing that, whilst not

pleaded by either party, that at the heart of the application is a claim that despite the sale of the

Respondents life insurance book, the Applicant could have continued to be employed by either

the Respondent or a related or associated entity of the Respondent. In substance, this is a dispute

about whether the Applicant’s termination was a genuine redundancy as defined by s.389, and

if it was not, whether the termination of employment was unfair in the circumstances. I directed

the parties to turn their minds to this issue in the course of the directions hearing.

[14] Mr Johnson gave evidence at the determinative conference that the Respondent only had

one employee, being the Applicant and the decision to sell the life insurance book was taken

quickly, and there are clear requirements and obligations governing the separation of a life

insurance and general insurance business. Further, neither the Applicant or Mr Johnson himself

for that matter, had the necessary qualifications to perform the work performed by the

Respondent’s associated company, Genesis Insurance Brokers Australia (GIBA), and in any

event there were no suitable positions available at GIBA.

[15] Both parties accepted that the Banking, Finance and Insurance Award 2020 (the Award)

covered and applied to the work of the Applicant. Mr Johnson said he sought advice about

following the correct procedure in the circumstances where the decision to make the sale

happened quickly, and this guided him in taking the steps he did in drafting the correspondence

he did and providing it to the Applicant to explain the reasons for his termination.

[16] It was apparent from his evidence that the Applicant was of the belief that Mr Johnson

could have taken different steps to the steps he chose that would have allowed the Applicant to

continue in employment. However, in the course of questions from myself, the Applicant

accepted that there was not a particular role that existed as at 2 December 2022 within the

Respondent or its associated entity that he could immediately be redeployed into, and his

evidence was more to the effect that it would have been open to Mr Johnson to have created

such a position had he been minded to.

[2023] FWC 703

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[17] The test in s.389(1)(a) is whether the person’s employer no longer required the person’s

job to be performed by anyone because of changes in the operational requirements of the

employer’s enterprise. It is apparent that s.389(1)(a) is satisfied in this case as following the

sale of the life insurance book, the Respondent had no employees and continues to have no

employees. Whether the Applicants maintains that the Respondent could have made a different

business decision is not to the point.

[18] In relation to s.389(2) the evidence was to the effect that the only other position that

could have potentially been available as at the time of the Applicant’s termination was a junior

position in the Respondent’s associated entity designed for a school leaver with a wage of

approximately $25,000 per year. The Applicant accepted at the determinative conference that

he did not regard this as a suitable position for him. The evidence of Mr Johnson is that there

were no other positions that the Applicant could have been redeployed into in the associated

business.

[19] I am satisfied that the Respondent has meet the requirements of both s.389(1)(a) and

s.389(2) to establish that the termination of the Applicant was a genuine redundancy.

[20] I am not satisfied that the Respondent complied with its obligations to consult with the

Applicant. Clause 28 of the Award provides as follows:

“28. Consultation about major workplace change

28.1 If an employer makes a definite decision to make major changes in production,

program, organisation, structure or technology that are likely to have significant effects

on employees, the employer must:

(a) give notice of the changes to all employees who may be affected by them

and their representatives (if any); and

(b) discuss with affected employees and their representatives (if any):

(i) the introduction of the changes; and

(ii) their likely effect on employees; and

(iii) measures to avoid or reduce the adverse effects of the changes on

employees; and

(c) commence discussions as soon as practicable after a definite decision has

been made.

28.2 For the purposes of the discussion under clause 0, the employer must give in writing

to the affected employees and their representatives (if any) all relevant

information about the changes including:

(a) their nature; and

(b) their expected effect on employees; and

(c) any other matters likely to affect employees.

[2023] FWC 703

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28.3 Clause 0 does not require an employer to disclose any confidential information if

its disclosure would be contrary to the employer’s interests.

28.4 The employer must promptly consider any matters raised by the employees or their

representatives about the changes in the course of the discussion under clause

0.

28.5 In clause [20] significant effects, on employees, includes any of the following:

(a) termination of employment; or

(b) major changes in the composition, operation or size of the employer’s

workforce or in the skills required; or

(c) loss of, or reduction in, job or promotion opportunities; or

(d) loss of, or reduction in, job tenure; or

(e) alteration of hours of work; or

(f) the need for employees to be retrained or transferred to other work or

locations; or

(g) job restructuring.

28.6 Where this award makes provision for alteration of any of the matters defined at

clause 0, such alteration is taken not to have significant effect.”

[21] It is apparent from the evidence that given the speed at which the decision was taken to

proceed with the sale, and to then advise the Applicant of his termination, without engaging in

the consultation steps set out above in clause 28 of the Award, that the Respondent does not

satisfy the requirements of s.389(1)(b).

[22] As it is necessary to meet all of the requirements of s.389 in order for the termination to

be a genuine redundancy within the meaning of s.389, and because s.389(1)(b) is not satisfied,

the Applicants termination was not a genuine redundancy.

[23] Having drawn that conclusion it is necessary to determine what flows from it. The

Respondent submitted that it had satisfied the Small Business Fair Dismissal Code (the Code).

Whilst it is clear the Respondent was a small business, the Code has no work to do in this case

as Mr Johnson was clear in his evidence, and I accept that the termination was not related to the

Applicant’s performance or conduct, but because his job was no longer required.

[24] Turning to the criteria for determining whether the termination was harsh, unjust or

unreasonable under s.387, it is apparent from the evidence that each of s.387(a), (b), (c), (d),

(e) are neutral considerations as the termination was not related to the Applicant’s conduct or

performance. In relation to the considerations in (f), and (h) the Respondent itself only had one

employee at the time of the dismissal and did not engage a dedicated human resources specialist

which tends to favour the Respondent.

[2023] FWC 703

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[25] The Applicants tenure of employment was reasonably short at approximately 15

months. The Respondent being a small business entered into the sale agreement which had

effect from the day before the termination. The Respondent ceased to have an income stream

of trailing commissions from its life insurance book. The Respondents sought advice, including

from the Fair Work Ombudsman about what appropriate steps to take and subsequently

prepared the termination letter explaining what had occurred and the Applicant was paid two

weeks pay in lieu of notice.

Conclusion on whether the dismissal was unfair

[26] Having weighed each of the considerations in s.387, in the particular factual

circumstances of this case, the Respondent’s failure to meet the consultation obligations in the

Award does not cause the dismissal to be unfair when weighed against all of the other

circumstances including that the sale transaction arose at very short notice, the income stream

from the life insurance book ceased almost immediately, the Respondent sought immediate

advice as to the appropriate steps to take in regard to the Applicant’s employment in the

circumstances, and consultation with the Applicant could not have had any impact on the

ultimate outcome. Whilst this conclusion should not be taken as an indication that a failure to

comply with consultation obligations in an Award is an insignificant issue, it is not, in the

overall circumstances of this particular case that failure does not point to the termination in all

of the circumstances being unfair.

[27] For the reasons set out above the application is dismissed.”

 

Dally-Watkins v Genesis Insurance Group: Gfsa Pty Ltd And Genesis Insurance Broking Australia [2023] FWC 703 delivered 23 March 2023 per Simpson C