s.394 - Application for unfair dismissal remedy

Application for an unfair dismissal remedy -whether dismissal was genuine redundancy. Dismissal not genuine redundancy - Dismissal unfair - Application of Sprigg formula - whether the Applicant's employment would have extended beyond date of termination - estimation of remuneration that Applicant would have received - whether amount inadequate in the circumstances - Compensation awarded

• [1] The Applicant in this matter, Ms. Freya Powell, was formerly employed by Kognitiv Australia Pty Ltd (Respondent) in the position of senior application manager until 22 November 2024 when her employment was summarily terminated by the Respondent. The Applicant has sought a remedy for unfair dismissal against the Respondent under Part 3-2 of the Fair Work Act 2009 (Cth) (Act). The matter was heard on 17 March 2025. The Respondent failed to file any material in response to earlier directions and did not appear at the hearing.

• [2] The Applicant was terminated by correspondence dated 21 November 2024 (received by the Applicant on 22 November 2024) which advised that as a result of unforeseen delays in finalising the sale of the Respondent's Enterprise Loyalty Business, the financial position of the Respondent had become untenable and that an immediate reduction in the size of the Respondent's workforce was necessary. By the terms of the letter, the termination of the Applicant's employment took immediate effect. There was no consultation with, or notice provided to, the Applicant. Despite attempts made by the Applicant to contact the Respondent in relation to the circumstances of the termination, the Applicant has had no further contact from the Respondent since the letter of termination was provided to her.

When can the Commission order a remedy for unfair dismissal?

• [3] Section 390 of the Act provides that the Fair Work Commission (Commission) may order a person's reinstatement, or the payment of compensation to a person if satisfied that the person was protected from unfair dismissal and has been unfairly dismissed. On the basis of the evidence provided by the Applicant as to her earnings I am satisfied that the Applicant is a person who is protected from unfair dismissal[1] under the Act. I am also satisfied that the application was made within the requisite time period after the dismissal took effect on 22 November 2024.

• [4] In order to determine whether the dismissal was unfair I need to be satisfied that the Applicant was dismissed, that the dismissal was harsh, unjust or unreasonable, that the dismissal was not consistent with the Small Business Fair Dismissal Code and the dismissal was not a case of genuine redundancy.[2] The Applicant provided a copy of the letter of termination. The letter establishes that the employment of the Applicant was terminated on the employer's initiative.[3] I am also satisfied on the evidence from the Applicant that the Small Business Fair Dismissal Code has no application in this case given that there was no termination relating to the conduct or capacity of the Applicant,[4] but rather the termination related to the economic circumstances of the Respondent.

• [5] An issue arises as to whether the termination was a case of genuine redundancy. Section 396(d) requires me to decide whether the dismissal was a case of genuine redundancy before I consider the merits of the application.

• [6] Section 389 sets out the meaning of genuine redundancy for the purposes of Part 3-2 of the Act. It provides:

(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:

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

• [7] The employment of the Applicant and 3 other employees employed by the Respondent in Australia came to an end on 22 November 2024. According to the Applicant's unchallenged evidence, the Respondent has not employed anyone in Australia since that date but still services the needs of Australian clients through personnel based outside the country. I conclude that at the time of the termination the Respondent no longer required the Applicant's job to be performed by anyone because of changes in the operational requirements of the enterprise.

• [8] The Applicant did not contend that the dismissal was not a case of genuine redundancy because it would have been reasonable to redeploy the Applicant and that the exclusion in s.398(2) applies. The remaining question is whether there has been compliance with any award or agreement consultation provisions in accordance with s.389(1)(b) in order to establish that this is a case of genuine redundancy.

• [9] The Applicant was employed pursuant to a common law contract of employment. The Applicant described her work with the Respondent as managing the Respondent's accounts and providing support remotely to clients of the Respondent who had purchased software from the Respondent. In relation to the accounts work, the Applicant said that she undertook work associated with invoices sent by the Respondent but she did not generate the content of the invoices themselves. The Applicant said that this invoicing and accounts work constituted around one half of her duties.

• [10] The Clerks - Private Sector Award 2020 (Clerks Award) is an occupational award. Clause 4 of the Clerks Award provides that that award applies to private sector employers throughout Australia in relation to employees wholly or principally engaged in clerical work. "Clerical work" is in turn defined at clause 2, inclusively, as 'recording, typing, calculating, invoicing, billing, charging, checking, receiving and answering calls, cash handling, operating a telephone switchboard, attending a reception desk and administrative duties of a clerical nature.' The classification structure in Schedule A of that award sets out a 5-level skill structure defined by reference to indicative skills and duties. Having regard to the description of the Applicant's duties provided by the Applicant I am satisfied that the Clerks Award applied to her employment and that the Applicant would fall within level 3 of the classification structure. Accordingly, clause 38 of that Award, Consultation about major workplace change, also applied to the circumstances surrounding the termination of the Applicant's employment.

• [11] Clause 38 of the Clerks Award requires employers to consult employees about major workplace change, including changes in structure that are likely to have significant effects on employees. Significant effects include termination of employment. It was the Applicant's uncontested evidence that there was no prior consultation with her by the Respondent prior to the Applicant being advised on 22 November 2024 that her employment was being terminated by the employer with immediate effect. I do not consider that the Respondent has complied with the obligations imposed by clause 38 of the Clerks Award in relation to a decision likely to have significant effects on employees. Accordingly, this is not a case of genuine redundancy within the meaning of s.389 of the Act.

• [12] As I have concluded that the dismissal of the Applicant was not a case of genuine redundancy, I turn to consider whether the dismissal was harsh, unjust or unreasonable. In doing so I am required to consider each of the matters referred to in s.387 of the Act.

• [13] The Applicant was dismissed for reasons related to the economic situation of the Respondent. The dismissal was unrelated to the Applicant's performance or conduct. Consequently, ss.387(a), (b), (c) and (e) are not relevant to the present circumstances. There was no unreasonable refusal by the Respondent to allow the Applicant to have a support person present at discussions relating to dismissal as there was no request and no discussions took place.

• [14] Subsections 387(f) and (g) relate to the size of the Respondent's enterprise, the absence of dedicated human resource management specialists and the potential impact of those matters on the procedures followed in effecting the dismissal. There was limited evidence available as to the nature and scale of the Respondent's operations. The Applicant said that the Respondent employed only 4 people in Australia but was a part of a larger global corporate group based in Canada that employed approximately 120 people. On that basis I think it unlikely that the Respondent would have had its own dedicated human resource specialists in Australia. There is insufficient material for me to come to a view as to whether the Respondent had access to some resources through related entities to enable it to adopt proper procedures and deal with the termination of the Applicant's employment in a way that may have reduced the impact on the Applicant. However, by any measure the procedures adopted in this case were poor and are not excused by the lack of specialist expertise. I find this to be a factor that weighs in favour of a conclusion that the dismissal was harsh, unjust or unreasonable.

• [15] Section 387(h) requires that I consider other relevant matters. I consider that the Applicant's length of service is a relevant factor. The Applicant had worked for the Respondent for almost 8 years. The Applicant said that there were no performance issues during her tenure. Despite this, the Applicant was sent an email terminating her employment with immediate effect. No-one put the Applicant on notice that this was occurring. No-one spoke to the Applicant about the termination even after the Applicant attempted to make contact with the Respondent to discuss the termination and the payment of accrued entitlements. These are factors which support a finding that the termination was harsh, unjust or unreasonable.

• [16] Having regard to the circumstances as a whole I am satisfied that the dismissal was harsh and that the Applicant was unfairly dismissed within the meaning of s.385 of the Act.

• [17] The Applicant did not seek reinstatement. Given the Respondent no longer appears to have any Australian-based operations and the Applicant has now found alternative employment, I do not consider that reinstatement is appropriate.

• [18] Section 392(2) of the Act requires that all of the circumstances of the case be taken into account when determining any amount of compensation to be paid in lieu of reinstatement, including the matters listed in that section. In relation to paragraph (a) there was no evidence as to the effect of any order for compensation on the viability of the business although, as noted above, it appears that the company is now no longer trading. As to paragraph (b) I note that the Applicant has had an extended period of employment of almost 8 years. Subsection (c) is an important consideration in this case because the closure of the Respondent's business, or at least the business insofar as it was conducted through the entity that employed the Applicant, and the termination of all of its staff makes it highly unlikely that the Applicant's employment would have continued beyond the time that it did. In this respect I note that the Applicant did not suggest that the terminations, including her own, were occasioned by some cause other than the economic necessity referred to in the letter of termination.

• [19] As to mitigation and post-dismissal earnings, the Applicant made efforts to obtain alternative employment and, since 10 February 2025, has been employed in a position which pays a slightly higher rate than she was receiving when employed by the Respondent. However, these earnings occurred well after any prospective period of employment and are not presently relevant.

• [20] As to other relevant matters I note the Applicant's evidence that the accrued leave entitlements referred to in the letter of termination were not paid to the Applicant on termination and remain outstanding. Whilst the recovery of any outstanding entitlements is properly a matter for the courts, I expect that the non-payment of accrued entitlements would have compounded the adverse economic consequences that resulted from the termination. Finally, I think it is relevant that this termination of a long-standing employee occurred without any notice or discussion with the Applicant before, at, or even after the termination. This reflects very poorly on the company.

• [21] The well-established approach to the assessment of any amount of compensation under s.392 of the Act is to apply the "Sprigg formula". That formula is derived from the Full Bench decision in Sprigg v. Paul's Licensed Festival Supermarket.[5] The starting point in the application of that formula is the estimation of the remuneration that the employee would have received or have been likely to have received if the employer had not terminated the employment. Given the circumstances I am unable to conclude that the employee would have remained employed, and therefore would have received any further remuneration, beyond the date on which the employment ultimately came to an end. In that case I do not think that the application of the Sprigg formula yields any amount of compensation that should be awarded to the Applicant.

• [22] It has been said before that 'Sprigg is a useful servant but is not to be applied in a rigid and determinative manner.'[6] I am mindful that the orders that can be made under s.392 are compensatory in nature. I am also aware that s.392(4) prohibits the inclusion of any component for shock, stress, humiliation or analogous hurt in any order for an amount of compensation under s.392(1). However, in the overall assessment of the circumstances, the summary dismissal of the Applicant would, in my view, have occasioned some economic dislocation and loss and I think it would be manifestly inadequate and inconsistent with the objective of Part 3-2 to provide parties with a "fair go all round"[7] that there be no order for compensation made. I therefore propose to order that the Respondent pay the Applicant an amount of 3 weeks wages, being $7,701.92 within 14 days of the date of this decision.

• [23] An order to the above effect is published separately with this decision.

By Video using Microsoft Teams at 10:00am AEDT on Monday, 17 March 2025.

[4] Iannello v. Motor Solutions Australia Pty Ltd [2010] FWA 3125.

[5] [1998] AIRC 989; (1998) 88 IR 21.

[6] Hanson Construction Materials Pty Ltd v Pericich, Darren - [2018] FWCFB 5960 at [39] and The Castaway Paper Products Co Pty Ltd v Saso Miloskovski [2024] FWCFB 195 at [64].

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