Fair Work Act 2009

s.394 - Unfair dismissal

Application for an unfair dismissal remedy - whether applicant was an employee - whether application filed within 21 days - extension of time - no exceptional circumstances - application dismissed

[1] This decision concerns an application made by Mr Aaron Pottenger for an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (Act). The respondent, Department of Caffeine Pty Ltd (company), objects to the application on two jurisdictional grounds. First, it contends that Mr Pottenger was not an employee of the company. Secondly, it says that, even if he was an employee, his unfair dismissal application was filed outside the 21 day period prescribed by s.394(2).

[2] The company's jurisdictional objections were listed before me on 8 June 2018. I conducted the proceeding by way of determinative conference. The company was represented by Mr K. Vencatachellum and Mr H. Pham, each of whom is a director of the company. Mr Pottenger, who is also a director of the company, appeared for himself. All three gave evidence and made submissions.

[3] Section 396 of the Act provides that the Commission must decide four matters before considering the merits of an unfair dismissal application. One of these is the question of whether the applicant was a person protected from unfair dismissal. A person can only be protected from unfair dismissal if she or he is an employee who has completed a minimum period of employment (see s.382). An unfair dismissal application cannot proceed if the applicant was not an employee. Another of the four preliminary matters that the Commission must decide before considering the merits of an application is whether the application was made within 21 days after the dismissal took effect. The other two preliminary matters are not presently relevant.

[4] Department of Caffeine is a small private company that operates a café in Chelsea in Victoria. Until March 2018, Mr Pottenger performed the role of front of house manager at the café, and worked approximately 40 hours per week.

[5] In late 2017, Mr Vencatachellum and Mr Pham developed concerns about Mr Pottenger's performance in his role as front of house manager. They decided to offer Mr Pottenger a contract of employment. They thought this would make Mr Pottenger more responsible for performing the front of house manager role. Mr Pottenger did not sign the contract, but continued to work as front of house manager on a full-time basis.

[6] The concerns about Mr Pottenger's performance persisted. Mr Vencatachellum sent Mr Pottenger a warning letter dated 1 December 2017, advising that his performance was unsatisfactory. It referred to problems associated with managerial skills, timeliness, and the impact of this on the company's financial position and goodwill. The letter stated that if his performance did not improve, Mr Pottenger's employment may be terminated.

[7] Mr Vencatachellum sent Mr Pottenger a second warning letter dated 21 February 2018, raising further issues of concern about Mr Pottenger's performance, including that he had allegedly left the café unsupervised for two days, and that he was not able to manage staff turnover and rostering.

[8] On 2 March 2018, a board meeting was held, at which Mr Pottenger's role as front of house manager was discussed. The meeting was attended by Mr Pottenger, Mr Vencatachellum, Mr Pham and Ms Aurelie Ducasse, the company secretary and back of house manager. The company contends that, at this meeting, Mr Pottenger's role as front of house manager was terminated with immediate effect. Mr Pottenger denies this and says that his employment was not terminated until a subsequent board meeting on 10 March 2018. Mr Vencatachellum and Mr Pham said that during the meeting on 2 March 2018, they told Mr Pottenger that he would have an opportunity to address other employees at a staff meeting on 7 March 2018 and let them know that he would no longer be front of house manager. Mr Pottenger says that he was given until 7 March 2018 to decide whether he wished to resign, but that he did not do so. Mr Pottenger did not attend the staff meeting on 7 March 2018.

[9] On 8 March 2018, Mr Vencatachellum sent a text to Mr Pottenger, asking him to return the keys to the café. Mr Pottenger replied that he had not resigned and that he was expecting to be rostered for work the following week. Mr Vencatachellum replied 'what do you mean not resigned from your position?' to which Mr Pottenger responded: 'I was given the opportunity to resign but I have chosen not to.' The exchange of texts was submitted to the Commission as part of the applicant's materials.

[10] On 10 March 2018, a further board meeting was held. Mr Pottenger says that it was not until this meeting that he was told that he was dismissed from his position as front of house manager. He contended that the minutes of this meeting support his position.

[11] The company submitted that Mr Pottenger was not an employee of the company. It contended that Mr Pottenger is a director and part owner of the business, with a shareholding of 15%. It said that the directors and shareholders perform work for the company without entering into any employment relationships, and that they work together to try and make their business a success and share the profits. Such arrangements are certainly common in small private companies. However, the fact that someone is a part owner or a director of a business does not mean that they cannot also be an employee of that business.

[12] The company paid Mr Pottenger $1,250.00 gross per week. The company deducted PAYG tax and made superannuation contributions to his preferred fund. It provided him with fortnightly payslips recording his employment details, and noted his 'employment basis' as 'full-time employment'. These factors point clearly to Mr Pottenger being an employee of the company.

[13] Furthermore, the two warning letters issued to Mr Pottenger about his performance both clearly describe him as an employee of the company. The company also produced to the Commission a letter it wrote to Mr Pottenger on 2 March 2018, in which it states that his employment with the company was terminated. Mr Pottenger says he did not receive this letter, and I return to this below.

[14] At the hearing, Mr Vencatachellum and Mr Pham explained that Mr Pottenger had simply performed the role of front of house manager as a co-owner of the business. They believed that, by offering Mr Pottenger a formal contract to do this work, they would make him more responsible for the effective performance of his duties. It seems that the company believed that, because Mr Pottenger did not sign the contract of employment, he had not become an employee. As I explained at the hearing however, many employees have no written contract of employment, and the question of whether a person is at law an employee is to be assessed by reference to all of the relevant circumstances.

[15] In the present case, it is quite clear that Mr Pottenger was an employee of the company. He was paid and described as such. I note Mr Pottenger was also paid out his accrued leave entitlements on termination. As Mr Pottenger was an employee of the company, he is able to bring an unfair dismissal claim against his former employer, subject to the other jurisdictional requirements being met.

[16] The company's second jurisdictional objection to the application is that it was not lodged within the 21 day period prescribed by s.394(2). It contends that Mr Pottenger's dismissal took effect on 2 March 2018. This would put his application for an unfair dismissal remedy, which was lodged on 31 March 2018, out of time. Mr Pottenger says that his dismissal took effect on 10 March 2018, such that his application was filed within the 21 day period.

[17] There is a conflict on the evidence as to what occurred at the board meeting of 2 March 2018. Mr Pham gave evidence to the Commission that he told Mr Pottenger that his role as front of house manager was terminated, effective immediately. Mr Vencatachellum gave evidence that he heard Mr Pham say this to Mr Pottenger. Mr Pham said that he told Mr Pottenger that he would have the chance to tell the staff of the café about the termination of his role, and that if he wished, he could say that he had resigned. Mr Pham said that he also offered Mr Pottenger a role as a waiter at the café.

[18] Mr Pottenger's evidence of the meeting on 2 March 2018 was Mr Pham and Mr Vencatachellum gave him until 7 March 2018 to decide whether to resign, but that he did not resign. Mr Pottenger said that he could not recall Mr Pham telling him that his position as front of house manager had terminated on that day.

[19] I accept Mr Pham's evidence that he told Mr Pottenger at the meeting on 2 March 2018 that his role as front of house manager was terminated with immediate effect. Mr Pham's evidence was clear and convincing. It was corroborated by Mr Vencatachellum. By contrast, Mr Pottenger said only that he could not recall Mr Pham saying these words. He did not deny it.

[20] What of the events of the second board meeting on 10 March 2018? The meeting minutes were produced to the Commission. The document contains printed text together with hand-written annotations. The minutes record the first agenda item as being to discuss and resolve managing emergencies at the company, and in particular 'to discuss Aaron Pottenger's position as FOH managing director'. In the hand-written annotations, the minutes record that, by two votes to one, Mr Pottenger 'is removed as FOH manager effective immediately 10.03.2018.' This conflicts with the evidence of Mr Pham and Mr Vencatachellum as to the effective date of termination.

[21] However, Mr Pham said that the minutes were hand-written by the company secretary, Ms Ducasse. He gave evidence that the reference to 'FOH manager' was a mistake made by Ms Ducasse, and that she should have written 'FOH managing director'. That is, at the second meeting, Mr Pottenger was removed as the director who was responsible for the front of house. His role as front of house manager was not terminated on this date. And he was not removed as a director. I note that ASIC documents filed by the company in support of their jurisdictional objections show that as of 24 April 2018, Mr Pottenger remained a director the company. Mr Pham contrasted the handwritten note of Ms Ducasse referred to above with the printed text of the meeting minute, which refers under the first agenda item to a discussion of Mr Pottenger's 'position as FOH managing director' (emphasis added). This, he says, is evidence of the fact that the board meeting was concerned with Mr Pottenger's ongoing duties as a director, not his role as front of house manager, as that had been resolved at the meeting on 2 March 2018. I accept this explanation.

[22] The board meeting of 10 March 2018 arose following the exchange of text messages between Mr Pottenger and Mr Vencatachellum, during which Mr Pottenger disputed that his role as front of house manager had come to an end. Mr Vencatachellum's surprise is evident from his text message ('what do you mean you have not resigned?'). It was necessary for the directors to meet to discuss this issue. Although Mr Pham had told Mr Pottenger on 2 March 2018 that his position as front of house manager was terminated, Mr Pottenger remained a director and might seek to continue to perform work running the front of house, in his capacity as a co-owner of the business. This is what the board of meeting of 10 March 2018 resolved; Mr Pottenger was removed from his assignment as the director responsible for the front of house. But his employment as front of house manager had ended on 2 March 2018.

[23] I have considered how the company's position that Mr Pottenger was not an employee might relate to the question of whether he was dismissed on 2 March 2018. How could the company terminate employment which it considered did not exist? However, the company clearly did treat Mr Pottenger as an employee. Its contention before the Commission that he was not an employee is simply a legal argument in defence of the claim brought against it.

[24] After the meeting on 2 March 2018, which occurred on a Friday, Mr Pottenger did not attend for work. He was scheduled to work over the weekend and on the following Monday. He did not perform any further work, and did not attend the meeting with staff on 7 March 2018. This conduct is compatible with my finding that Mr Pham told Mr Pottenger on 2 March 2018 that his position as front of house manager was terminated with immediate effect. I also note that the company filed two brief unsworn statements from employees who work at the café, Mr Robbie Quessy and Mr Olivier Descumbes, who said that Mr Pottenger told them on 3 March 2018 that he was not coming back to the business. Their statements are consistent with the company's position.

[25] Finally, I accept Mr Pottenger's evidence that he never received the termination letter dated 2 March 2018. The company says that it posted the letter to Mr Pottenger, but cannot establish that he received it. I noted in the hearing that the letter contains an anomaly in that it refers to a meeting on 3 March 2018; Mr Pham and Mr Vencatachellum said that this was an error, and that the meeting in question was clearly the board meeting of 2 March 2018. As I have found that Mr Pham dismissed Mr Pottenger in the meeting of 2 March 2018, the fact that he did not receive the termination letter is of no significance.

[26] I must now consider whether to extend the 21 day period within which Mr Pottenger's unfair dismissal application was to be brought.

[27] Before I deal with the specific matters that the Act requires me to take into account, I will make some brief observations about the principles that are to be applied in considering whether I should exercise my discretion to extend time. The Act allows the Commission to extend the period within which an unfair dismissal application must be made, but only if it is satisfied that there are 'exceptional circumstances'.

[28] The test of 'exceptional circumstances' establishes a high hurdle for an applicant.[1] The meaning of 'exceptional circumstances' was considered by a Full Bench of what was then Fair Work Australia in Nulty v Blue Star Group Pty Ltd (Nulty),[2] where it was noted that, in order to be exceptional, the circumstances must be out of the ordinary course, or unusual, or special, or uncommon, although they need not be unique or unprecedented. The Full Bench also noted that exceptional circumstances can include a single exceptional matter, a combination of exceptional factors, or a combination of ordinary factors which, although individually of no particular significance, when taken together can be considered exceptional.[3] Although Nulty concerned the expression 'exceptional circumstances' in the context of s.365 of the Act, its reasoning is applicable also to s.394(3).

[29] In order for Mr Pottenger's unfair dismissal application to proceed, it is necessary for him to obtain an extension of time to make the application, under s.394(3). This section provides that the Commission may allow a further period for the application to be made if it is satisfied that there are exceptional circumstances, taking into account the following:

• (a) the reason for the delay; and

• (b) whether the person first became aware of the dismissal after it had taken effect; and

• (c) any action taken by the person to dispute the dismissal; and

• (d) prejudice to the employer (including prejudice caused by the delay); and

• (e) the merits of the application; and

(f) fairness as between the person and other persons in a similar position.

[30] Mindful that the parties were unrepresented, I read out these considerations during the hearing, and invited the parties to make any further submissions in relation to the question of whether there were exceptional circumstances.

[31] The Act does not specify what reason for delay might tell in favour of granting an extension however decisions of the Commission have referred to a credible,[4] acceptable[5] or a reasonable explanation.[6]

[32] Mr Pottenger's primary case was that he filed his unfair dismissal application within time and that there was no delay. However, I have found this not to be the case. Mr Pottenger acknowledged at the hearing that he did not have any particular reason to explain some or all of the delay, other than that he maintained that the dismissal took effect on 10 March 2018.

[33] The lack of a credible, acceptable or reasonable explanation for the delay in Mr Pottenger lodging his unfair dismissal application weighs against the granting of an extension of time.

Whether the person first became aware of the dismissal after it had taken effect

[34] As I have explained above, there was disagreement as to when the dismissal took effect. On Mr Pottenger's argument, it might be contended that he became aware of the dismissal after it had taken effect. However, I have found that Mr Pham told Mr Pottenger that he was dismissed immediately on 2 March 2018. Even if Mr Pottenger does not now recall this, I am satisfied that he was told that he was dismissed on 2 March 2018. Accordingly, this is not one of those rare cases where a dismissal took effect unbeknown to the applicant, who therefore did not have the full benefit of the 21 day period for lodging an unfair dismissal claim. This consideration therefore does not weigh in favour of an extension of time.

[35] Mr Pottenger evidently contested his dismissal, in the sense that he told Mr Vencatachellum that he had not resigned and expected to be rostered for work the following week. He took at least some action to dispute his dismissal. This is a factor that weighs in favour of an extension of time.

[36] I cannot identify any particular prejudice that would accrue to the company if an extension of time were to be granted. However, the mere absence of prejudice is not itself a factor that would warrant the grant of extension of time. I consider this to be a neutral factor in the present case.

[37] An application to extend time is essentially an interlocutory matter that does not allow for the merits to be fully tested. There is insufficient material before me to make any detailed assessment of the merits. However, in my view, the application is not without difficulties.

[38] The company objects to the application on jurisdictional grounds, contending that the dismissal was consistent with the Small Business Fair Dismissal Code. Pursuant to s.385, a person can only be unfairly dismissed if the Commission is satisfied that, among other things, the dismissal was not consistent with the Code.

[39] The company appears to be a small business to which the Code applies. As required by the Code, the company gave Mr Pottenger a reason why he was at risk of being dismissed, which appears to have been a valid reason or reasons, based on his conduct or performance. He was warned in writing about the company's concerns and had an opportunity to respond to the warnings. Of course, these matters have not been tested, and Mr Pottenger has a different perspective on various matters, contests certain facts asserted by the company, and considers that his dismissal was unfair in all the circumstances.

[40] The factual contentions and the merits of the application more generally would need to be scrutinised, including under cross-examination, if an extension of time were granted and the matter proceeded. However, there appears to me to be a reasonable prima facie case that Mr Pottenger's dismissal was consistent with the Small Business Fair Dismissal Code.

[41] Accordingly, while Mr Pottenger has an arguable case, the merits of his application are in my view not strong. However, given the interlocutory nature of an application to extend time, and mindful that the material has not been fully explored, I do not consider the merits of the case to tell against an extension of time.

[42] In the circumstances I consider the merits of the case to be a neutral consideration.

Fairness as between the applicant and other persons in a similar position

[43] Applications to extend time generally turn on their own facts. The parties did not draw my attention to any relevant persons or cases that would be relevant in relation to the question of fairness as between Mr Pottenger and other persons in a similar position. I consider this to be a neutral consideration in the present matter.

[44] The time limit that applies to the exercise of a person's right to bring an unfair dismissal application reflects the Parliament's intention that this right be exercised promptly. The Act recognises that there are some cases where a late application should be accepted, namely where there are exceptional circumstances.

[45] Having regard to all of the matters that I am required to take into account under s.394(3), I am not satisfied that the requisite exceptional circumstances exist. There is no credible, acceptable or reasonable explanation for the delay in filing the application. The merits of the case are arguable but weak. Apart from some action taken by Mr Pottenger to dispute the dismissal, the other factors do not weigh in favour of granting an extension. In my view, the circumstances of this case are not exceptional, either individually or when considered together.

[46] I decline to grant an extension of time under s.394(3). Accordingly, Mr Pottenger's application for an unfair dismissal remedy is dismissed.

Mr K Vencatachellum and Mr H Pham for Department of Caffeine

[1] Stogiannidis v Victorian Frozen Foods Distributors Pty Ltd [2018] FWCFB 901 at [14]

[2] [2011] FWAFB 975

[4] Stogiannidis, op. cit., for example at [39]

[5] Blake v Menzies Aviation (Ground Services) Pty Ltd [2016] FWC 1974, per Gostencnik DP at [9]

[6] Roberts v Greystanes Disability Services; Community Living [2018] FWC 64, per Hatcher VP, at [16]

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