s.394 - Unfair dismissal

Application for an unfair dismissal remedy - dismissal not a genuine redundancy - whether dismissal unfair - measure of compensation

[1] This decision concerns an application made by Mr Aron Solway for an unfair dismissal remedy under s 394 of the Fair Work Act 2009 (Act). Mr Solway was employed as the creative director of Vision Blonde Pty Ltd (Vision Blonde), a hairdressing salon, from 9 October 2018 until his position was made redundant and his employment ended on 26 March 2020. Mr Solway contends that his dismissal was unfair and seeks compensation.

[2] Vision Blonde objected to the application on two jurisdictional grounds. First, it contended that Mr Solway's employment was terminated in compliance with the Small Business Fair Dismissal Code (Code). Secondly, it submitted that his dismissal was a genuine redundancy for the purposes of s 389 of the Act. In the alternative, Vision Blonde contended that Mr Solway's dismissal was not unfair.

[3] The matter was listed for hearing before me on 17 July 2020. Mr Solway gave evidence. Vision Blonde was represented by a lawyer, and led evidence from its co-directors, Ms Lauren Robertson-Larkin, who is also the salon manager, and Mr Sam Robertson-Larkin.

[4] The jurisdictional questions of whether Mr Solway's dismissal complied with the Code or was a case of genuine redundancy are two of the four matters that s 396 of the Act requires the Commission to decide before considering the merits of an unfair dismissal application. I will record here my conclusions on the other two preliminary matters in s 396, neither of which was contentious. First, Mr Solway's application was made within the 21-day period required by s 394(2) of the Act. Secondly, Mr Solway was a person protected from unfair dismissal, as he earned less than the high-income threshold and had undertaken the minimum period of employment (s 382).

[5] At the hearing, the company advised that it did not press its first jurisdictional objection. I am nevertheless required by s 396 to determine whether the dismissal was consistent with the Code. In its application to dismissals that are not summary dismissals, the Code requires that there be a valid reason for dismissal based on an employee's 'conduct or capacity'. The dismissal of an employee for reason of redundancy is not one that is based on conduct or capacity, but rather on the employer's business or operational needs. It is well established that 'redundancy' is not a 'valid reason' related to a person's capacity or conduct for the purpose of s 387(a) of the Act. Of course, that does not mean that redundancy cannot be a good and legitimate reason for dismissal. In the setting of s 387, where the reason for a dismissal is redundancy, this will be considered under s 387(h) - 'any other matters the Commission considers relevant'. However, the Code has no equivalent of s 387(h). It requires that there be a valid reason related to conduct or capacity. In this respect the Code is more restrictive than s 387, instead of being more flexible, contrary to what appears to have been the legislative intention. As there was no reason for dismissal related to the employee's capacity or conduct, the dismissal was not consistent with the Code.

[6] As to the company's remaining jurisdictional objection, I have concluded that the dismissal was not a 'genuine redundancy,' because the company did not comply with its obligation under the Hair and Beauty Industry Award 2010 (Award) to consult with Mr Solway about his redundancy. I have also concluded that, because the company did not meet its consultation obligations, the dismissal was unfair. I have determined that the measure of compensation should reflect the period it would have taken the company to comply with these obligations, which I consider to be one week.

[7] Vision Blonde operates a salon in South Melbourne which provides speciality hair cutting, styling and colouring services. These services require personal contact between the customer and the stylist, and appointments often last for several hours. In March, government restrictions imposed in response to the COVID-19 pandemic included a ban on salon appointments which extend beyond 30 minutes. This affected the operation of the company's business, causing a substantial downturn. Ms Robertson-Larkin produced financial reports showing that in the week Mr Solway was dismissed, the salon's income was only one quarter of what it had been in the previous week.

[8] Mr Robertson-Larkin gave evidence that on 24 March 2020 he called Mr Solway and told him that the company's business had been impacted by the restrictions, and that it may need to cease trading. He said that it might be necessary for employees to take periods of annual leave. Mr Robertson-Larkin then told Mr Solway to stay home for two days on full pay until it became clearer what the restrictions would mean for the business. Mr Solway agreed that such a conversation took place but said that the discussion did not address a possible closure of the business or his position being made redundant. Shortly afterwards, Mr Solway sent a text to Ms Robertson-Larkin, referring to the restrictions enacted by the government and advising that he would not feel comfortable interacting with customers for periods in excess of 30 minutes, and that he did not wish to take annual leave at that time.

[9] Ms Robertson-Larkin gave evidence that on 25 March 2020, the company ceased trading. She said that it was unclear at that time what the company's fate would be. She said that there had never been such a big drop in business in her four years running the business. There had been a 75% decline in revenue as against the previous week, which itself was down on the average takings for the previous months. She said that when the business closed its doors on 25 March 2020, she did not know when the business would reopen, or whether it would reopen.

[10] On 26 March 2020, Mr Robertson-Larkin called Mr Solway, and told him that the company had decided to terminate his employment because the business could not afford to maintain his position during such a significant downturn in business. Mr Solway's evidence was that he was very surprised, and that his earlier conversation with Mr Robertson-Larkin had not suggested to him that his employment might be made redundant. The same day, the company's solicitor sent a letter to Mr Solway by email, stating that COVID-19 had had a substantial impact on the company, including a significant downturn in customer attendances, and that it needed to reduce its number of employees, otherwise it was at serious risk of having to close permanently.

[11] On 31 March 2020, the business reopened for two days, but closed again on 2 April 2020, and did not start trading again until 4 May 2020. As of late March 2020, aside from Mr Solway, the company employed two full time employees, who were 'colourists', and three casual employees (two hairdressers and a salon coordinator). Ms Robertson-Larkin is also an employee of the company. During the period the business was closed, the two colourists took annual leave for two weeks and then were stood down under s 524 of the Act, the casuals were not engaged, and Ms Robertson-Larkin did not draw a salary. Since 4 May 2020, the casuals have been working reduced hours. Ms Robertson-Larkin said that, due to stage three restrictions being reintroduced in Victoria in July, the company was again considering stand downs.

[12] Ms Robertson-Larkin gave evidence that, since Mr Solway's position was made redundant, his former position of creative director has not been filled. She said that Mr Solway had been the most highly paid employee, aside from her.

[13] Mr Solway's evidence was that he believes the company had ulterior motives for ending his employment. He said that in his opinion Ms Robertson-Larkin's feelings towards him had changed after he had raised certain concerns and grievances with her, including his dissatisfaction with his current salary. He said that he had had an altercation with another employee, Hollie, and that this had displeased Ms Robertson-Larkin. Mr Solway contended that the company's decision to select him for redundancy was because he had upset Ms Robertson-Larkin, and because he had stood up for himself. He said that in his view, the company was using the pandemic as a cover to get rid of him.

[14] Vision Blonde contends that Mr Solway's dismissal was a case of genuine redundancy, and that the Commission has no jurisdiction to hear the merits of the application. Under s 385 of the Act, a dismissal cannot be unfair if it was a case of 'genuine redundancy', which is defined as follows by the Act at s 389:

"(1) A person's dismissal was a case of genuine redundancy if:

(a) 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; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person's dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer's enterprise; or

(b) the enterprise of an associated entity of the employer."

[15] I consider that Vision Blonde no longer required Mr Solway's job to be performed by anyone because of changes in the operational requirements of its enterprise. I accept the evidence of Ms Robertson-Larkin that the company had experienced a significant downturn. Mr Solway was the creative director, and the most highly paid employee aside from Ms Robertson-Larkin. I note Mr Solway's submission that 'creative director' was a job title, and that in substance he was a hairstylist like the other employees. But he was also the most senior hairstylist, and the most highly paid of those employees, aside from the co-owner of the business. I find that the decision to make this position redundant occurred because the company needed to reduce employment costs in the face of the downturn.

[16] Mr Solway's position has not been filled. It was abolished when he was dismissed and has not been reinstated. This too is consistent with a conclusion that the company did not want the job he was doing to be done by anyone.

[17] Further, it was because of changes in the operational requirements of its enterprise that the company no longer wanted Mr Solway's job done by anyone. Those changed operational requirements were its new assessment of those requirements,[1] and the business downturn that Vision Blonde was experiencing at the time as a result of restrictions enacted by government due to the COVID-19 pandemic.

[18] Mr Solway said that on 30 March 2020 he received a message from a customer saying that he was disappointed that his appointment for that day was not with Mr Solway. But this was during the two-day period that the business briefly reopened at the end of March. The fact that the business reopened for these two days does not affect the above analysis. I accept the evidence of Ms Robertson-Larkin that, when she closed the doors of the business on 25 March 2020, she did not know when or whether the business would reopen. Several days later, she reopened the business, but had to close it again after two days, and it remained closed for over a month. Nor does the fact that the company commenced trading again in early May contradict the conclusion that Mr Solway's position was redundant, because the position of creative director was not reinstated.

[19] Mr Solway also said that in May he saw an advertisement for a senior hairstylist with the company. He said that this showed that his position was not really redundant. But Ms Robertson-Larkin explained that one of the two full-time employees referred to above had left the company shortly beforehand, and the advertisement was to replace this person, not to replace Mr Solway. Further, she said that the hours of work of the casual employees in May had reduced from what they had been in March. All of this is consistent with the conclusion that the company did not want Mr Solway's job performed by anyone.

[20] Mr Solway contended that the company had ulterior motives for ending his employment. He said that in his opinion Ms Robertson-Larkin's feelings towards him had changed after he had raised certain concerns and grievances with her, including his dissatisfaction with his current salary. Mr Solway contended that these were effectively complaints, for the purpose of s 341 of the Act, which he was entitled to make in relation to his employment, falling within the definition of 'workplace right', and that he was dismissed because of or for reasons that included the fact that he had exercised a workplace right. Mr Solway contended that the company's decision to select him for redundancy was because he had upset Ms Robertson-Larkin, and because he had stood up for himself. He said that in his view, the company was using the pandemic as a cover to get rid of him.

[21] I accept that Mr Solway held suspicions that the company had ulterior motives for wanting to end his employment, but I do not accept that the company did in fact have any such motives, or that it dismissed Mr Solway wholly or partly for such reasons. I accept Ms Robertson-Larkin's evidence about the reasons for ending Mr Solway's employment. These are sensible and credible reasons.

[22] Next, it is necessary to consider whether the company complied with any obligation in a modern award or enterprise agreement that applied to Mr Solway's employment to consult about the redundancy.

[23] The company acknowledged that Mr Solway's employment was covered by the Award. Clause 8 of the Award requires an employer to consult with employees about major workplace change. Clause 8.1 states that where an employer has made a 'definite decision' to make major changes in organisation, structure, or various other matters, that are likely to have significant effects on employees (which includes termination), the employer must give notice of the changes to all employees who may be affected by them, and discuss the changes, their likely effect on employees, and measures to avoid or reduce the adverse effects of changes on employees. Clause 8.2 provides:

'For the purposes of the discussion under clause 8.1(b), the employer must give in writing to the affected employees and their representatives (if any) all relevant information about the changes including:

(c) any other matters likely to affect employees.'

[24] The company contended that its COVID policy 'Dealing with coronavirus in the workplace', which it provided to employees, constituted one element of its consultation with Mr Solway about his redundancy, and that another element was Mr Robertson-Larkin's telephone conversation with Mr Solway on 24 March 2020, in which he adverted to the precarious state of the business. I reject these contentions. Clause 8.1 requires consultation to occur when the company has made a definite decision; no such decision was made until 26 March 2020. Consultation for the purpose of clause 8 of the Award required the company to advise Mr Solway that his position was to be made redundant and discuss any 'measures to avoid or reduce the adverse effects of changes on employees'. Perhaps there were no such measures, but at the least, the clause would have required the company to advise Mr Solway that it had considered redeployment and did not consider this to be possible. It is also clear that Mr Solway was not provided with the relevant information in writing, as required by clause 8.2.

[25] As the company did not comply with its award obligation to consult with Mr Solway about his redundancy, the requirement of s 389(1)(b) has not been satisfied in this case. I therefore conclude that the dismissal was not a case of 'genuine redundancy'.

[26] It is not necessary to consider the remaining element of 'genuine redundancy', namely whether it would have been reasonable in all the circumstances to redeploy Mr Solway, however I will return to this question further below in the context of considering whether his dismissal was unfair.

[27] A finding that a dismissal was not a case of genuine redundancy does not necessarily lead to a conclusion that the dismissal was unfair. Rather, if the Commission rejects a contention that a dismissal was a case of genuine redundancy, as well as any other jurisdictional objections, the Commission proceeds to consider the unfair dismissal application on its merits.

[28] Section 387 states that in considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the Commission must take into account the matters in subsections 387(a) to (h).

[29] In circumstances of dismissal for reason of redundancy, no relevant finding can be made in relation to the consideration in s 387(a), namely whether there was a 'valid reason for the dismissal related to the person's capacity or conduct'.[2] Vision Blonde does not contend that there was any valid reason for dismissal related to Mr Solway's capacity or conduct. Rather, its reliance on redundancy as the reason for dismissal is to be considered in connection with s 387(h), 'any other matters the Commission considers relevant', to which I shall return.

[30] Similarly, the considerations in ss 387(b) and (c) are not material in the present case. They concern whether the employee was 'notified of that reason' (i.e. the valid reason in 387(a)), and whether the person was given an opportunity to respond to any reason related to capacity or conduct.[3]

[31] The consideration in s 387(d) is whether there was 'any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal.' In this case, the only discussion was the telephone conversation between Mr Robertson-Larkin and Mr Solway on 26 March 2020. I note that s 387(d) does not require an employer to offer an employee the opportunity to have a support person present. In this case, there was no refusal by the company for the purpose of s 387(d).

[32] If a dismissal relates to unsatisfactory performance, s 387(e) requires the Commission to consider whether the person has been warned about that performance prior to the dismissal. However, the present matter does not concern performance. Mr Solway was dismissed for reason of redundancy.

[33] The Commission is required to consider the degree to which the size of the employer's enterprise, and the degree to which the absence of dedicated human resources specialists or expertise in the enterprise, would be likely to impact on the procedures followed in effecting the dismissal (ss 387(f) and (g)). Neither party made any submissions in this regard. I note that Vision Blonde is a small business employer, and that this likely affected its approach to the dismissal of Mr Solway however in my view the considerations in ss 387(f) and (g) do not carry any significant weight in the analysis of whether Mr Solway's dismissal was unfair.

[34] I then come to s 387(h), 'any other matters the Commission considers relevant'. My conclusions in relation to the 'genuine redundancy' jurisdictional objection are relevant to the question of whether the dismissal was unfair. The company did not need Mr Solway's role to be undertaken by anyone. The company's decision to make Mr Solway's position redundant was a legitimate reason to end his employment in the circumstances. As noted above, this is not a case where the employer had an ulterior motive for the dismissal. Even though the dismissal was not a 'genuine redundancy' for the purposes of the jurisdictional objection, this does not mean that the dismissal was not a real and bona fide redundancy. Although it could not be a valid reason related to capacity or conduct for the purposes of s 387(a), Mr Solway's dismissal for redundancy in the present circumstances occurred for a good reason. I take this into account in my consideration of s 387(h). It is a consideration that tells against a finding that the dismissal was unfair.

[35] Mr Solway contended that it was unfair of the company to single him out for redundancy because he earned the most. He said that this was discriminatory. This is not the case. It is not unfair to take into account an employee's cost to the business in considering possible redundancies. On the contrary, this is a consideration one would expect to be taken into account. Mr Solway also said that the company should have laid off employees who had been employed for a shorter period than he had, but I do not consider this a point of unfairness. I do not see any logical connection between the length of a person's service and whether their position is needed.

[36] Mr Solway said that the company should have offered to renegotiate his salary. But the company simply did not require his job to be done by anyone. He said that his relationship with Ms Robertson-Larkin had soured, and that this was the real reason for his redundancy. But I do not accept that the company had an ulterior motive to dismiss him.

[37] It is also relevant to consider Mr Solway's contention that he could have been redeployed instead of being made redundant. Mr Solway said that his skills could have been deployed elsewhere within the business, as he was a qualified and experienced hairdresser, and although he was the senior stylist (creative director), and the highest paid employee, he was able to do the work that the other employees performed. As Mr Solway said, the reason he was hired was to 'do hair', and this function was still required, as other employees continued to service clients.

[38] However, the fact that Mr Solway had the ability to do other employees' jobs, or other work generally, does not mean that it would have been reasonable to redeploy him. The skills and ability of an employer are only one part of the analysis of whether redeployment would be reasonable. It is necessary to consider what other work was reasonably available. I am not persuaded that there was any other available work to which Mr Solway could have been redeployed. The company had removed his position. The remaining work within the business was being undertaken by other employees. Some of these were casual employees. However, there is no general rule or consideration of fairness that would require an employer to cease using casuals before making a permanent employee redundant. Casual employment is flexible and likely to be of assistance to a business in surviving difficult economic times.

[39] Finally, it is relevant to consider the manner in which Mr Solway's employment was terminated. In particular, he was entitled, pursuant to the Award, to be consulted in a particular way, as discussed earlier. This did not occur. I consider that the process leading to Mr Solway's dismissal was deficient, because the company did not comply with the requirements of clause 8 of the Award. I note that Mr Solway was paid two weeks in lieu of notice. But he received very little actual notice, in circumstances where his employment was ending in difficult economic times which could present challenges to finding a new job. Had the Award consultation provisions been followed, Mr Solway would likely have had further notice of the termination of his employment and a better understanding of the reasons for it. In my view, Mr Solway's dismissal was not unreasonable or unjust. However, I consider that, in the particular circumstances of this case, the company's failure to comply with the consultation provision in the Award renders Mr Solway's dismissal unfair.

[40] Mr Solway seeks compensation rather than reinstatement. Section 390(3) of the Act provides that the Commission must not order the payment of compensation unless it is satisfied both that reinstatement of the person is inappropriate, and that it considers an order for the payment of compensation is appropriate in all the circumstances. Reinstatement is inappropriate in this case. Mr Solway's position has ceased to exist.

[41] I consider that an award of compensation is appropriate. Section 392(2) provides that in determining an amount of compensation, the Commission is to take into account all the circumstances of the case, including the matters identified in subsections 392(a) to (g). The principles that apply to the question of how compensation should be calculated are well-established. The method for calculating compensation under s 392 of the Act is informed by the decision of the Full Bench in Bowden v Ottrey Homes Cobram and District Retirement Villages Inc[4].

[42] In relation to the question of what effect any compensation order would have on the viability of the employer's enterprise (s 392(2)(a)), I note that the company has been experiencing a sharp decline in business, was not trading for over a month, and that Victoria is now under stage 4 restrictions due to the pandemic. A significant compensation order might affect its viability. As to Mr Solway's length of service (s 392(2)(b)), I note that he had worked for the company for less than two years.

[43] Section 392(2)(c) of the Act directs the Commission to take into account the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed. This requires the Commission to consider what would have occurred if the person was not dismissed, and in particular, how long the person would have remained employed. This is obviously a hypothetical situation which cannot be described with any certainty. However, given the company's financial situation and the fact that it had decided Mr Solway's role was not required, I consider it likely that, had Mr Solway not been dismissed on 26 March 2020, he would have been dismissed a very short time later.

[44] I assess this hypothetical situation from the standpoint that any subsequent dismissal of Mr Solway would have occurred according to law. If the company had made Mr Solway redundant in full compliance with the consultation provision in the Award, it would have, among other things, provided him with information in writing about his redundancy and the reasons for it, as contemplated by clause 8. I consider that this would have taken not more than one week.

[45] For the purposes of calculating one week's pay, I note Mr Solway's evidence, which was not contradicted by the company, that he was paid $32.90 an hour. Mr Solway's regular hours of work under his contract of employment were 38 hours a week. This results in an amount of $1,250.20. To this I will add 9.5% in respect of superannuation, which is $118.77, resulting in a sum of $1,368.97.

[46] The company disputed the genuineness of Mr Solway's efforts to mitigate his loss. However, Mr Solway explained that following his dismissal he attempted to find other employment and applied for unemployment benefits. I am satisfied that, at least in relation to the one week period in respect of which I will order compensation, Mr Solway did make efforts to mitigate the loss he suffered from his dismissal.

[47] I am satisfied that a remedy should be ordered in this matter. Reinstatement is inappropriate, but compensation is appropriate in the circumstances. I will order compensation to be paid to Mr Solway in the amount of $1,368.97 with deduction of any taxation required by law. This amount is to be paid by the company to Mr Solway within 28 days of the date of this decision.

[48] An order giving effect to this decision is separately issued in PR721760.

[1] See Shachar v Electrical Home Aids Pty Ltd t/a Godfreys [2018] FWC 4892 at [27] - [30]

[2] Appeal by Ventyx Pty Ltd [2014] FWCFB 2143 at [142]

[4] [2013] FWCFB 431. See also Sprigg v Paul's Licensed Festival Supermarket (1998) 88 IR 21 and Ellawala v Australian Postal Corporation AIRCFB, Print S5109, 17 April 2000), [33]

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