1. I am not satisfied that the Applicant unilaterally changed his pay rate above that which had been agreed. I am satisfied that the agreement between the parties, consistent with their intention to be business partners, was that the Applicant and the Respondent would be paid the same amount. I am satisfied that the Applicant would not have resigned given his firm belief as to the agreement between him and the Respondent about becoming a partner in the business.

1. On 20 May the Respondent sought to have the Applicant confirm in writing that he resigned. The Applicant replied the following day in writing confirming that he had not resigned and had no intention of doing so. There is no evidence that the Respondent sought to clarify this position with the Applicant or reply asserting the Applicant had resigned on 14 May. This supports a finding that the Applicant did not resign.

1. Finally, I accept the Applicant had put significant work into building the business and entering into a partnership with the Respondent, and would not have simply walked away from this in circumstances where he felt he had already "paid his way" into the partnership.

• [39] I am satisfied that this was a termination at the initiative of the Respondent and as a result I find the Applicant was dismissed within the meaning of the Act. I am also satisfied that he is otherwise a person protected from unfair dismissal. Accordingly, I now need to determine whether his dismissal was unfair.

• [40] A dismissal is unfair if the Commission is satisfied on the evidence that the circumstances set out at s.385 of the Act existed. Section 385 provides the following:

A person has been unfairly dismissed if the FWC is satisfied that:

(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.

• [41] I have found that the Applicant was dismissed, and subsections (c) and (d) do not apply.

Was the dismissal harsh, unjust or unreasonable?

• [42] Section 387 of the Act provides that, in considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the Commission must take into account:

1. whether there was a valid reason for the dismissal related to the person's capacity or conduct (including its effect on the safety and welfare of other employees); and

1. whether the person was notified of that reason; and

1. whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

1. any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

1. if the dismissal related to unsatisfactory performance by the person - whether the person had been warned about that unsatisfactory performance before the dismissal; and

1. the degree to which the size of the employer's enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

1. the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

1. any other matters that the FWC considers relevant.

• [43] The ambit of the conduct which may fall within the phrase 'harsh, unjust or unreasonable' was explained in Byrne v Australian Airlines Ltd[3] as follows:

"... It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment may be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted."

• [44] The onus is on the Applicant to prove his dismissal was harsh, unjust and/or unreasonable.

• [45] I am required to consider each of these criteria, to the extent they are relevant to the factual circumstances before me.[4]

• [46] In order to be a valid reason, the reason for the dismissal should be "sound, defensible or well founded"[5] and should not be "capricious, fanciful, spiteful or prejudiced."[6] 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.[7]

• [47] There is no mandate for giving the 'valid reason' criterion any greater emphasis or weight than any of the other criteria in s 387. It is well settled that the statutory requirement to 'have regard to' or 'take into account' requires the Commission to give the matter(s) weight as a fundamental element in the decision-making process. Even if it is found that there was a valid reason for the dismissal, an overall assessment must be made as to whether the dismissal was harsh, unjust or unreasonable.

• [48] The Respondent asserts that the Applicant unilaterally and without permission increased his pay rate, and this constituted serious misconduct warranting dismissal.

• [49] I am not satisfied that this occurred. I find that the Applicant and the Respondent had agreed that the Applicant would be paid the same amount as the Respondent. It is clear in the evidence that the Respondent approved payments made to all employees within Xero, the business' accounting software, including payments made to the Applicant. She clearly approved the payments made to the Applicant that she now disputes. I do not accept the Applicant used his relationship with the former bookkeeper (his former partner) to, in essence, misappropriate funds or engage in fraud. The Applicant's actions in contacting both the new bookkeeper and the Respondent to dispute his pay are not the actions of someone who has misappropriated funds. He was asserting what he genuinely believed were his pay entitlements.

• [50] The Respondent asserts that there is a valid reason for dismissal which arises from the Applicant's post-employment conduct, that being inappropriate commentary regarding the Respondent and a breach of contractual obligations.

• [51] I accept the Applicant's comments about the Respondent were not flattering. The comments included that her staff did not like her or respect her, that she has lied, that clients were unhappy with her, and that she was using business funds to pay for her wedding. Clearly, he was upset about what had occurred. As he described, he felt betrayed by the Respondent and said that never in his wildest dreams did he imagine she would be so dishonest. I am not satisfied, though, that his post-employment comments were serious enough to ground a valid reason for his dismissal in these circumstances.

• [52] As a result, I find that there was no valid reason for the Applicant's dismissal.

Notification of the valid reason and opportunity to respond - s.387(b) and (c)

• [53] Notification of a valid reason for termination must be given to an employee protected from unfair dismissal before the decision is made,[8] in explicit terms[9] and in plain and clear terms.[10] In Crozier v Palazzo Corporation Pty Ltd[11] a Full Bench of the Australian Industrial Relations Commission dealing with similar provision of the Workplace Relations Act 1996 stated the following:

"[73] As a matter of logic procedural fairness would require that an employee be notified of a valid reason for their termination before any decision is taken to terminate their employment in order to provide them with an opportunity to respond to the reason identified. Section 170(3)(b) and (c) would have very little (if any) practical effect if it was sufficient to notify employees and give them an opportunity to respond after a decision had been taken to terminate their employment. Much like shutting the stable door after the horse has bolted."[12]

• [54] An employee protected from unfair dismissal must also be provided with an opportunity to respond to any reason for dismissal relating to the conduct or capacity of the person. Such requirement will be satisfied where the employee is aware of the precise nature of the employer's concern about his or her conduct or performance and has a full opportunity to respond to this concern.[13] This criterion is to be applied in a common sense way to ensure the employee is treated fairly and should not be burdened with formality.[14]

• [55] The requirement to notify of the reason, together with the requirement to provide an opportunity to respond to the reason, involves consideration of whether procedural fairness was afforded to the Applicant before his dismissal was effected.

• [56] The Respondent submits that the Applicant was aware of her concerns regarding his pay and was given an opportunity to respond to these concerns.

• [57] Because I am not satisfied that there was a valid reason related to dismissal, this factor is not relevant in the present circumstances, as the inquiry to be made here is whether the Applicant was notified of the 'valid reason', and given an opportunity to respond to that reason, before a decision was made to dismiss him.

Unreasonable refusal by the employer to allow a support person - s.387(d)

• [58] Where an employee protected from unfair dismissal has requested a support person be present to assist in discussions relating to the dismissal, the employer should not unreasonably refuse that person being present.

• [59] This is not a relevant consideration in this matter.

Warnings regarding unsatisfactory performance - s.387(e)

• [60] A warning for the purposes of s.387(e) must clearly identify:

1. the areas of deficiency in the employee's performance;
2. the assistance or training that might be provided;
3. the standards required; and

• d. a reasonable timeframe within which the employee is required to meet such standards.[15]

• [61] The warning must also "make it clear that the employee's employment is at risk unless the performance issue identified is addressed."[16]

• [62] This was not a dismissal related to unsatisfactory performance and so this consideration is not relevant in this matter.

Impact of the size of the Respondent on procedures followed (s.387(f)), and the absence of dedicated human resources management specialist/expertise on procedures followed (s.387(g))

• [63] The Respondent submitted that the small business is 'not sophisticated' and does not maintain access to a dedicated human resource professional.

• [64] I accept that the absence of dedicated human resource expertise impacted on the procedures followed by it in effecting the dismissal.

Other relevant matters - s.387(h)

• [65] Section 387(h) of the Act provides the Commission with a broad scope to consider any other matters it considers relevant.

• [66] The Respondent submitted that the business was significantly impacted by matters involving the Applicant which affected its revenue and operational capacity.

• [67] I do not consider there are any other matters that are relevant in this case.

• [68] Having carefully considered each of the required matters, I am satisfied that the Applicant has discharged his onus of proving that his dismissal was harsh, unjust and unreasonable, and therefore unfair.

• [69] Having found that the Applicant's dismissal was unfair, it is necessary to consider what, if any, remedy should be granted to him. The Applicant seeks the remedy of compensation.

• [70] Under section 390(3) of the Act, I must not order the payment of compensation unless:

1. I am satisfied that reinstatement is inappropriate; and
2. I consider an order for payment of compensation is appropriate in all the circumstances of the case.

• [71] In this case, I am satisfied that reinstatement is inappropriate, and an order for payment of compensation is appropriate.

• [72] In considering what is appropriate compensation, I must consider the factors which are set out in s.392(2) of the Act and which include:

1. the effect of the order on the viability of the Respondent's enterprise;
2. the length of the Applicant's service;
3. the remuneration that the Applicant would have received, or would have been likely to receive, if the Applicant had not been dismissed;
4. the efforts of the Applicant (if any) to mitigate the loss suffered by the Applicant because of the dismissal;
5. the amount of any remuneration earned by the Applicant from employment or other work during the period between the dismissal and the making of the order for compensation;
6. the amount of any income reasonably likely to be so earned by the Applicant during the period between the making of the order for compensation and the actual compensation; and
7. any other matter that the Commission considers relevant.

• [73] The evidence and submissions filed by the parties did not address these factors. Accordingly, directions will be separately issued for evidence to be filed so proper consideration can be given to the appropriate compensation.

C Niven of Tailored Legal for Stephanie Muir Ridge.

[1] [2017] FWCFB 3941.

[2] [2012] FWA 2473.

[3] (1995) 185 CLR 410 at 465 per McHugh and Gummow JJ.

[4] Sayer v Melsteel Pty Ltd [2011] FWAFB 7498, [14]; Smith v Moore Paragon Australia Ltd PR915674 (AIRCFB, Ross VP, Lacy SDP, Simmonds C, 21 March 2002), [69].

[5] Selvachandran v Peteron Plastics Pty Ltd [1995] IRCA 333; (1995) 62 IR 371, 373.

[7] Walton v Mermaid Dry Cleaners Pty Ltd [1996] IRCA 267; (1996) 142 ALR 681, 685.

[8] Chubb Security Australia Pty Ltd v Thomas Print S2679 at [41].

[9] Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137, 151.

[10] Previsic v Australian Quarantine Inspection Services Print Q3730.

[11] (2000) 98 IR 137.

[13] Gibson v Bosmac Pty Ltd [1995] IRCA 222; (1995) 60 IR 1, 7.

[14] RMIT v Asher [2010] FWAFB 1200; (2010) 194 IR 1, 14-15.

[15] McCarron v Commercial Facilities Management Pty Ltd t/a CFM Air Conditioning Pty Ltd [2013] FWC 3034, [32].

[16] Fastidia Pty Ltd v Goodwin Print S9280 (AIRCFB, Ross VP, Williams SDP, Blair C, 21 August 2000), [43]-[44].

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