Fair Work Act 2009_

s 394 - Application for unfair dismissal remedy

Termination of employment - application for relief from unfair dismissal - notice of dismissal for poor performance - serious misconduct - allegations of fraud and theft - Small Business Fair Dismissal Code - employer had reasonable grounds to believe the applicant's conduct was sufficiently serious to justify dismissal - applicant's explanations implausible - employer complied with Code - application dismissed.

[1] Mr Glenn McDermott (the 'applicant') was employed from 17 February 2013 until 21 July 2014 as the Manager of a hairdressing Salon, De Beaux Cheveux (the 'Salon' or the 'respondent') in Castle Hill, New South Wales. The Salon's owner, Mr John Giamo, lives in Cairns, North Queensland. The applicant was dismissed for serious misconduct on 21 July 2014 after Mr Giaimo became suspicious that the applicant was paying himself for excessive hours not worked, which did not seem to reflect the Salon's poor turnover or its opening hours.

[2] The applicant had previously been given two weeks notice of his dismissal on 9 July 2014 for his alleged refusal to comply with the reasonable requests of Mr Giaimo to provide him with monthly business reports of the Salon's revenue and expenditure. In addition, the respondent claimed he had received complaints from other employees about the applicant's behaviour and abusive attitude to fellow employees. There was also an incident which was said to be relevant to workplace health and safety which Mr Giaimo was concerned about.

[3] After a meeting with the applicant on 17 July 2014 to discuss the safety issue and the Salon's finances, Mr Giaimo sent the following letter to the applicant:

I am writing to you about the termination of your employment with De Beaux Cheveux.

I refer to our meeting on 17/7/2014 which was attended by you and Steven McGuire and Jennifer Ciappara. During the meeting we discussed funds missing from company accounts.

This meeting was attended by you and Steven and Jennifer and we spoke about you allowing trades people to enter the Salon to perform work during trading hours.

A further investigation shows very limited records of hours worked, submitted for wages payment for yourself for a number of months, no relationship to hours submitted for payment corresponding with trading hours. A email was sent to your personal email requesting an explanation, the response was unsatisfactory.

Upon investigation of the Salon computer, there were no files relating to the day to day operation of the business. Ie contracts, procedures, artwork for advertising etc.

Due to your absence from work, no further discussion regarding your conduct was able to be

● Was wilful or deliberate behaviour by you that is inconsistent with the continuation of your contract of employment.

● Caused a serious and imminent risk to the health or safety of a person.

● Caused a serious and imminent risk to the reputation, viability or profitability of the Employer's business in that removal of company property from the Salon computer.

● Was conduct in the course of your employment engaging in theft, and in the circumstances your continued employment during a notice period would be unreasonable.

● Was conduct in the course of your employment engaging in fraud, and in the circumstances your continued employment during a notice period would be unreasonable.

We consider that your actions constitute serious misconduct warranting summary dismissal.

You will be paid any accrued entitlements and outstanding remuneration, including superannuation, up to and including the date of this letter.

Employees and employers may seek information about minimum terms and conditions of employment from the Fair Work Ombudsman. If you wish to contact them you can call 13 13 94 or visit their website at www.fairwork.gov.au.

[4] On 11 August 2014, the applicant filed an application, pursuant to s 394 of the Fair Work Act 2009 (the 'Act') for an unfair dismissal remedy. The application was the subject of the Commission's standard conciliation conference on 23 September 2014. However, no settlement of the claim was able to be achieved and the application was referred to me for hearing. The applicant does not seek reinstatement. He claims all his outstanding wages and entitlements (which have been withheld by the respondent due to the allegations of fraud) and compensation for being unfairly dismissed.

[5] Section 385 of the Act defines when a dismissal is unfair. It reads as follows:

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.'

[6] Section 396 of the Act requires the Commission to determine a number of preliminary matters, before considering the merit of the applicant's claim. The section is expressed as follows:

'396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy.'

[7] At this point, I propose to deal with these and other preliminary matters:

(1) The applicant is a national system employee and the respondent is a national system employer (ss 380, 13, 14);

(2) The applicant was employed under the terms of the Hair and Beauty Services Award 2010 [MA000005] at an hourly rate of $21.83 (s 382(b)).

(3) The respondent's business is a small business as defined by s 23, in that the Salon employed 4 persons (ss 396(c), 388);

(4) The applicant had been employed for the minimum employment period for a small business of at least twelve months (ss 382(a), 383(b));

(5) The applicant's dismissal was not a case of genuine redundancy (s 385(d));

(6) The applicant was dismissed for 'gross' misconduct on 21 July 2014 (ss 385(a), 386); and

(7) The application for a remedy from unfair dismissal was lodged within the statutory time limit of 21 days (s 394(2)(a)).

[8] As will be evidenced from the above findings, the respondent maintained that he had complied with the Small Business Fair Dismissal Code (the 'Code') and consequently, the applicant's claim for an unfair dismissal remedy was beyond the Commission's jurisdiction. Consideration of this submission will necessarily require an examination of the facts and circumstances leading up to, and including the applicant's dismissal. If it is found that the respondent had not complied with the Code, then considerations going to whether the dismissal was 'harsh, unreasonable or unjust', within the terms of s 387 of the Act, will arise.

[9] The applicant was represented by Mr D Ralph and Solicitor Ms T Mokwena, Solicitor and the respondent was represented by Mr S Hartford-Davis of Counsel instructed by Ms A Teggins, Solicitor after the Commission granted permission for both parties to be legally represented, pursuant to the provisions of s 596 of the Act. The applicant provided written and oral evidence, as did Mr Giaimo. Another employee of the Salon, Ms Shannon Heard also provided a statement and oral testimony.

[10] The applicant provided a statement for this proceeding and also relied on a statement he made on 13 October 2014, at the request of an investigator, acting on behalf of the GIO, in respect to a workers' compensation claim. The applicant claimed that due to the way he had been dealt with by Mr Giaimo, he felt so unwell that his doctor put him on sick leave from 18 to 26 July 2014. He was dismissed during this time. The applicant claimed that he had never been given an informal or formal counselling session or a warning letter that his employment was in jeopardy.

[11] The applicant said he had not been approached by the Police in respect to Mr Giaimo's allegations against him of fraud and theft. Both he and his lawyer had unsuccessfully sought to obtain from Mr Giaimo, the Police event number of the Police report. The applicant said that in his nineteen years involvement with the hair and beauty industry, including in management roles, he had never been accused of theft or fraud.

[12] The applicant claimed he had worked hard for Mr Giaimo; working long hours, including on tasks involved in marketing the Salon. He believed his working relationship with Mr Giaimo was generally good and he reported to him in relation to key areas. He had worked above and beyond what was asked of him.

[13] In his workers' compensation statement, the applicant outlined his employment history and noted, in particular, that when he worked for the Salon under its previous name ('Blow Dry Bar'), he worked as a manager about 40 hours a week, with two days off. When the Salon changed its name, Mr Giaimo instructed him to plan marketing for the new company. However, he only saw Mr Giaimo three times, face to face, from 13 February to 17 July 2014.

[14] The applicant explained that the Salon's computer system known as 'Shortcuts', allowed him to do marketing and reports. It also allowed the staff to record their hours; although most staff did not do so. He did not insist that they do and consequently, the records were inaccurate. He claimed Mr Giaimo had never trained him in using the system. Mr Giaimo had pretty much given him autonomy to run the business as he saw fit, although he would contact Mr Giaimo daily, or three times a week, mostly by phone. He would send the pay records on spreadsheets to Mr Giaimo's accountant in Cairns. When this arrangement ceased in March 2014, he sent the spreadsheet directly to Mr Giaimo who then deposited the pays by electronic transfer.

[15] The applicant claimed that when the business changed names the staff were confused and would consistently ask him questions about their futures. This had caused him a lot of personal stress. The applicant believed that when he first started with the Salon under its old name, it was making around $10,000 a month. After his three months as manager, the monthly takings went up to around $20,000. In November 2013, when Mr Giaimo told the applicant to increase all the Salon's prices, he had noticed a drop off in customers. When Mr Giaimo queried what was going on, the applicant told him it was due to the price increases.

[16] In December 2013, the applicant took it upon himself to design the Salon's business card, as customers had been requesting it. He spent three hours on this work and Mr Giaimo just told him to get the cheapest quote. As Mr Giaimo appeared not to recognise his initiatives, he began to feel anxious.

[17] The applicant deposed that when Ms Heard went on maternity leave, he was working 6-7 days a week, as the only other employee, Mr Stephen McGuire, did not do 'cuts'. The applicant said that Mr Giaimo asked him in March 2014 to research a marketing plan guide and propose a plan for the Salon. He found this difficult, given he was not privy to Mr Giaimo's finances and resources. Nevertheless, he had worked on the plan at home. However, this caused him to feel sick and he was not sleeping properly. He was also working on and designing a Salon menu, postcard and letterhead.

[18] The applicant said he had also sought to incorporate a beautician service in the Salon to broaden its appeal, but rather than agreeing to this suggestion, Mr Giaimo threatened to sack Mr McGuire 'if things did not improve'. He was shocked by this and felt threatened himself. The applicant stated that in July 2014, Mr Giaimo rejected all his proposals to attract new customers, Mr Giaimo had responded by accusing him of removing the Salon's property.

[19] The applicant described the leaking roof episode, which involved him liaising with different tradesmen, who were all blaming each other for the problem. This 'backwards and forwards' went on for six weeks. He had told them that work had to be done when the Salon was closed and they had complied.

[20] When Mr Giaimo gave him two weeks notice, the applicant said he was despondent, felt like a failure and could not sleep. He had a number of anxiety attacks.

[21] On 16 July 2014, the applicant was informed by a tradesman that he had been sent by the landlord to repair the ceiling. He emailed Mr Giaimo, who told him to close the Salon, send everyone home and telephone the clients to cancel their scheduled appointments for the next two weeks. However, he received an email from Mr Giaimo to reopen the Salon next day. He also wanted a meeting with staff on Thursday 17 July 2014. The applicant said he was extremely confused and speculated Mr Giaimo may be closing the Salon for good. Mr Giaimo had told him in another email to contact all the clients and rebook their appointments.

[22] On 17 July 2014, when Mr Giaimo arrived at the Salon, he criticised the applicant for not closing the Salon the day before. But the applicant insisted he had done so. He felt intimidated and embarrassed because Mr Giaimo berated him in front of Mr McGuire and another new staff member. Mr Giaimo also raised an incident which had occurred a year earlier, when he had accidentally used the Salon's credit card to pay a $100 taxi fare. With Mr Giaimo's consent, the applicant closed the Salon early and went home; however, not before venting his frustration to Mr Giaimo as to how he had treated him.

[23] The applicant said that he received the termination letter (see para [3]) on 21 July, while he was on sick leave. He became more depressed and had further anxiety attacks. The applicant saw a psychologist and was put on antidepressant medication. However, his condition had now improved. The applicant attributed his anxiety and depression to how Mr Giaimo had treated him.

[24] The applicant agreed Mr Giaimo flew him to Cairns in November 2013 for a counselling session. It only lasted one day, and the business person who conducted the session, did give him some ideas on setting goals in relation to management. Mr Giaimo had also mentioned other training, but nothing had eventuated.

[25] The applicant reasserted that he had been working 50 hours at the Salon. Other hours were worked at home doing artwork and marketing, which Mr Giaimo had asked him to do.

[26] In cross examination, the applicant was asked if he was aware that his workers' compensation claim had been rejected because the insurer had taken the view that the management's actions were reasonable. He had no comment to make.

[27] The applicant agreed that from around November 2013 until he was dismissed, the Salon's revenue varied week to week - sometimes $3,000-$4,000, other weeks, $1,500-$2,000. He agreed the Salon was pretty quiet during this time. The applicant outlined the Salon's opening hours six days a week totalling 42.5 hours and was asked how it was he was claiming 60 hours work a week? He explained that Mr Giaimo had asked him to create a marketing plan and design business cards. He had designed two sets of business cards - the first took two days and the second took about one month of full time work, because he was not a graphic designer. He was also hairdressing and training Mr McGuire at the same time. The applicant agreed Mr McGuire had been employed for over one year and that he was only managing two people and for a number of months, only one - Mr McGuire. The applicant said the marketing plan involved researching the local demographics.

[28] The applicant agreed that Mr Giaimo had not told him to work at home. Nevertheless, he claimed he was spending up to 20 hours working at home on marketing. The applicant said Mr Giaimo directed him to do the marketing in March 2014 and he was passionate about it. The applicant said he was offended that Mr Giaimo had reminded him to complete the marketing plan.

[29] The applicant was shown an email he had sent to Mr Giaimo as follows:

'I take offence to what you said. I have been doing so much research, John and have been speaking to marketing experts in regards to everything, plus I have been designing all artwork for business cards, gift vouchers, postcards, signage, letterhead, etc. That is NOT IN MY JOB DESCRIPTION**,** not [sic] am I getting paid to do that either and I don't even get a thank you from you or anything.'

He recalled the first part, but could not recall saying he was not being paid for the extra work, when he had been.

[30] The applicant acknowledged that he disagreed with Mr Giaimo's decision to direct him to reduce staff hours. He did not accept that this direction constituted a warning, even though Mr Giaimo had added, 'Either you do your job or resign and remember who is the boss here.'

[31] The applicant was asked about an 'angry' email he had sent to Mr Giaimo on 9 July 2014. He claimed that he was annoyed, rather than angry. He had just wanted to get his point across. He did not accept its content was below the standard expected of an employee. In a later email, he agreed he had told Mr Giaimo he was 'threatening us.' He claimed he had not understood what Mr Giaimo meant when he had told him: 'You have failed to follow on numerous occasions to comply with my requests and provided poor excuses.'

[32] The applicant acknowledged that he had taken artwork, for which he had been paid, off the Salon's computer. He believed the artwork belonged to him and he was really annoyed. The applicant expressly denied that he had claimed 60 hours a week for work he had not performed and said that his home computer records would prove he had worked at home.

[33] The applicant was asked about Mr McGuire's work. He said Mr McGuire was not confident in cutting hair and did not do any of this work, notwithstanding he had been a hairdresser for five years. He had not dismissed him, because hiring new staff was difficult. The applicant denied he 'fought' with Mr McGuire in the Salon; it was only ever outside the workplace. Nevertheless, the applicant described Mr McGuire as a friend of nine years who lived with him and his family. The applicant said that he had had cause to warn Mr McGuire on a few occasions, but had not dismissed him, despite Mr Giaimo having directed him to do so. The applicant agreed that Mr McGuire was also being trained by an external party. He believed Mr McGuire had potential. In further questioning, the applicant agreed he had failed to follow Mr Giaimo's directions to discipline Mr McGuire.

[34] The applicant was shown a chain of text messages sent to Mr Giaimo concerning an incident outside the workplace between himself and Mr McGuire. He agreed the emails were sent while at work and included the words, 'All this is pissing me off.' He believed this incident may have triggered Mr Giaimo's request for him to fly to Cairns for management training. The applicant agreed that there had been occasions where he and Mr McGuire had both resigned as a result of fights with each other. He could not recall the specifics, but he was certain the fights were always outside the Salon, because he always acted professionally as the manager at work.

[35] The applicant conceded that he had not regularly provided Mr Giaimo with the Salon's trading reports, despite being directed to do so. In any event, he believed Mr Giaimo could access them. He acknowledged that he had refused Mr Giaimo's direction.

[36] In later questioning on an email of 25 June 2014, the applicant accepted he had had issues with Mr McGuire during work hours, but this was the first occasion it had happened. It arose when the applicant had heard Mr McGuire say certain things to another employee Ms Jennifer Ciappara, over the video equipment in the Salon. In the email to Mr Giaimo, the applicant had said: 'I should not have went off at Stephen the way I did. I tore shreds out of him this morning. I should've controlled myself better.'

[37] The applicant was questioned about the disciplinary meeting he had with Mr Giaimo on 17 July 2014. He agreed he was offered a support person (Ms Ciappara). The applicant conceded that although he knew how to record his hours of work on the Shortcuts Software, he had not done so as, because it would create more paperwork. He explained this failure as 'just a habit'. His hours and those of the other staff, were handwritten on pieces of paper.

[38] In respect to the leaking ceiling, the applicant said that no one was in the Salon when the tradesmen were working. He had closed the Salon before they started work and before Mr Giaimo had instructed him to do so. The ceiling was fixed that day and the Salon reopened the next day. The applicant agreed Mr Giaimo had not told him to cancel client appointments for two weeks. He denied doing this as a malicious attempt to disrupt the business, because he had earlier been given two weeks' notice of termination.

[39] In re-examination, it was established that the applicant's contract of employment disclosed that he would be working 50 hours a week. The applicant was also shown complimentary emails from Mr Giaimo concerning the applicant's work.

[40] The applicant reaffirmed that all of the hours claimed by him had been approved by Mr Giaimo. The applicant claimed that he had personally paid for the software on the computers, both at home and at work, and had not been reimbursed for the costs.

[41] In a question from me, the applicant said that he obtained alternative hairdressing work on 16 October 2014.

[42] In his statement, Mr Giaimo said that he had entrusted the applicant with the day to day running of the Salon and had provided him with a company credit card for incidental purchases and occasionally allowed him to take the staff out for drinks at his expense.

[43] Mr Giaimo deposed that in November 2013, he received a number of complaints about the applicant's behaviour. As this situation was outside his expertise, Mr Giaimo engaged a consultancy firm in Cairns and flew the applicant to Cairns to undertake counselling and training. Mr Giaimo said he was genuinely interested in the applicant's further training and development.

[44] Mr Giaimo claimed the applicant would often not follow his directions and in particular, he had ignored his reasonable requests for monthly manager's reports. Mr Giaimo had instructed the applicant to avail himself of local marketing resources, but these requests were also ignored. When Mr Giaimo constructed a new website and Facebook page to promote the Salon, the applicant took it upon himself to change the Facebook page, logo designs and signage, without Mr Giaimo's approval.

[45] Mr Giaimo said he first terminated the applicant's employment with two weeks notice on 9 July 2014 for repeatedly ignoring his lawful and reasonable directions. He did so by email as follows:

I am under no obligation to visit the Salon. I have spent sufficient funds on rebranding, refurbishing and restocking the Salon.

The fact is you are not listening to my orders. You have been indulged long enough.

I don't think you understand the situation, you have failed to follow on numerous occasions to comply with my requests and have provided poor excuses.

I will now give you 2 weeks notice as required by award and you can hand over all keys, passwords, access codes etc. Any attempts to damage or sabotage Salon or equipment will be met with legal action.

I will be down next week to dismiss you personally and deal with the Salon.

[46] Mr Giaimo explained that he did not dismiss the applicant and pay him in lieu of notice, because he had no replacement readily available and was unable to attend the Salon himself due to his own recuperation from knee surgery, Mr Giaimo also claimed the applicant had threatened him on 9 July 2014, following his receipt of the above email.

[47] On 17 July 2014, Mr Giaimo conducted a meeting with the applicant to investigate allegations that:

(c) he had cancelled customer appointments following a safety incident; and

[48] Three other persons attended the meeting. Mr Giaimo brought Mr Aaron Myers and the applicant had two support persons - Ms Ciappara and Mr McGuire. Mr Giaimo said that when asked about the allegations, his responses were brief and non-hostile. He reacted to the financial inaccuracies in the records by claiming he had not counted the till correctly. Following the meeting, Mr Giaimo's conducted further investigations into the Salon's computer system. He had uncovered evidence of the hours worked by the staff which accurately reflected their hours, but not those claimed by the applicant. The next day, the applicant notified Mr Giaimo he was sick and would not be attending work for the balance of the notice period.

[49] Mr Giaimo's further investigations caused him to conclude that the applicant was engaged in serious misconduct in that he:

(e) could not explain missing funds under his control; and

(f) had not followed directions in relation to the safety incident.

[50] Mr Giaimo sent a letter to the applicant on 21 July 2014, terminating his employment with immediate effect (see para [3]). Mr Giaimo claimed that further information from other employees came to light after the applicant's dismissal suggesting that the applicant had:

(b) attended the workplace regularly under the influence of alcohol;

(c) slept in the Salon when drunk, which was a violation of the respondent's lease and had fouled it with vomit; and

(d) closed the Salon during trading times, so that he could visit licensed premises.

[51] Mr Giaimo said that the new Salon manager does not work more than 41 hours per week and performs all of the tasks and duties which the applicant had been contracted to perform.

[52] In a direct response to the applicant's statement, Mr Giaimo gave the following evidence. Mr Giaimo said he was initially unaware of the applicant's lack of management skills, as he had taken him over in good faith from the previous Salon owner with assurances as to his credentials. Mr Giaimo had never required the applicant's employment contract with the previous owner.

[53] As a former Union delegate for the AWU and ETU, Mr Giaimo claimed experience in ensuring that employees were afforded procedural fairness in disciplinary matters. While residing in Cairns, Mr Giaimo communicated daily with the applicant by email, text and phone. He had reduced his hours of work and directed him to manage staff more effectively. It was after the applicant refused to comply with these directions that Mr Giaimo issued him with two weeks' notice of termination.

[54] Mr Giaimo claimed that Ms Heard had raised the issue of missing funds with the applicant. The applicant's response was to verbally abuse her.

[55] Mr Giaimo said that the applicant was only ever asked to meet realistic expectations of an Award covered employee, according to his job description. The Salon's performance steadily declined under the applicant's management, despite considerable amounts of money spent on marketing and promotion. An industry marketing plan was provided to the applicant as a tool for him to better understand how to promote the business. The applicant never told him the plan was too difficult. Mr Giaimo denied that the applicant had ever been involved in 'major marketing efforts'. His role was not to develop marketing strategies, but to implement the strategies designed by Mr Giaimo.

[56] Mr Giaimo claimed that one employee, Ms Heard, was generating 50% of the business turnover. When she went on parental leave the figures dropped and Mr Giaimo believed it was due to the applicant and Mr McGuire being engaged in regular fighting, arguing and erratic behaviour in the workplace.

[57] Mr Giaimo responded to the applicant's GIO statement by rejecting his claims of designing various promotional material and the time he claimed he spent doing so. The applicant offered no viable solutions for the Salon's poor trading performance. The Salon was not busy, yet the applicant was claiming excessive hours of work. He was never directed to perform any marketing work at home. He simply failed to focus on the core issues of courtesy, competency and customer service. Mr Giaimo agreed that he had told the applicant to cut his hours to 50 a week, but he had not directed him to work 50 hours.

[58] Mr Giaimo referred to the leaking roof and the subsequent investigations into its cause and liability. All of these inquiries were handled in a professional manner and involved visual inspections and an independent building inspector's report. Mr Giaimo said that despite his express instruction to close the Salon when the roof was being repaired, the applicant told the tradesperson to perform the work with the Salon open.

[59] Mr Giaimo said that Ms Heard is currently engaged as a casual employee to suit her family responsibilities. As to Mr McGuire, Mr Giaimo said he regularly demonstrated poor performance and did not have the competencies to perform the work of a hairdresser. Mr Giaimo had directed the applicant to issue a warning to Mr McGuire and dismiss him on a number of occasions. The applicant had refused to comply with these directions. Mr McGuire subsequently resigned several weeks after the applicant's dismissal.

[60] Mr Giaimo claimed he had never required the applicant to have the skills of a graphic designer. Mr Giaimo did not instruct him to change any of the Salon's designs. Mr Giaimo denied it would have taken 60 hours per week for the applicant to perform his duties. The loss of revenue was not due to increased pricing, as the Salon's prices were conservative in comparison to others in the area.

[61] Mr Giaimo claimed that there were discrepancies in the Salon's accounts over several months which were never explained by the applicant. He believed that on 17 July 2014, when the applicant asked to go home early, he had removed his equipment and the Salon's data and files from the respondent's computer.

[62] Mr Giaimo said the Salon currently operates six days a week and the new manager's hours have rarely exceeded 40 hours a week. There is one other part time employee and one casual. The wages bill is now 30% less than when the applicant was the manager.

[63] In oral evidence, Mr Giaimo said the Salon had been operating under its present name for just over twelve months. The performance of the business had been consistently 'very poor' and it had never returned a profit. Mr Giaimo had never drawn a wage himself. Mr Giaimo said there had been a steady decline in performance since February/March 2014.

[64] Mr Giaimo was referred to the financial records of the Salon. This report (trading summary) was only generated after the applicant's dismissal, as the applicant would only ever send him the summary of wages required to be paid. Revenue is booked into the system and a ticket is issued for each task. For the month of May, net sales were $10,082. In the same month, the applicant performed 45% of the total number of tickets and billed for 65 hours work in the week ending 11 May 2014, whereas Mr McGuire's hours were 37.5. The report disclosed that the applicant's time at work in the Salon for the month was 137 hours, 30 minutes; or an average of 34 hours a week. Mr Giaimo said the applicant was responsible for managing the rosters, staff hours and submitting the time sheets.

[65] In the following three weeks in May 2014, the applicant claimed 65, 66.5 and 68 hours respectively. Mr Giaimo deposed that he had never directed the applicant to perform work at home, save for him knowing the applicant was producing a marketing report at home. He elaborated on the three examples he gave for claiming the applicant had refused to comply with his directions:

1. To reduce the hours of work of the applicant and Mr McGuire;

2. To provide him with monthly trading summaries; and

3. The applicant's refusal to discipline underperforming employees.

[66] After the notice period, Mr Giaimo said he uncovered further information about incidents at the Salon, including the excessive hours claimed by the applicant, the lack of business documents on the computer, such as employee contracts, agreements, procedures and an alarming absence of the applicant's hours recorded on the system. He was now very suspicious. As a result, he had filed a police report, three weeks after the applicant's dismissal. The delay was because he was collecting the evidence.

[67] In cross examination, Mr Ralph sought to discredit Mr Giaimo's evidence as to when he had filed his Employer response to the applicant's claim and the filing of the police report alleging the applicant's fraud. Mr Ralph also queried why Mr Giaimo did not bring his original notebook in which he had recorded his notes of the meeting with the applicant on 17 July 2014? Mr Giaimo agreed that the photocopied notes did not disclose the date on which the meeting was said to have been held.

[68] Mr Giaimo was asked, what he understood by providing procedural fairness to an employee. He said it was 'to follow a procedure with a fair and honourable outcome.' Mr Giaimo deposed that prior to giving the applicant two weeks' notice, he had been given informal warnings on a number of occasions. These were usually over the phone. However, he had not recorded these conversations. He had also sent him a text message.

[69] Mr Giaimo agreed that it was the applicant who first advised him of the leaking ceiling and when the repairs were being conducted. Mr Giaimo reaffirmed that he had instructed the applicant to close the Salon.

[70] Mr Giaimo conceded that the location of the Salon was not an ideal one, but other factors accounted for the poor trading figures. Mr Giaimo agreed that, at first, he had been happy with the applicant and had told him that he might send him for further training in Vanuatu and that he should obtain a passport. But this was conditional on there being a positive outcome of the counselling and training session in November 2013.

[71] Mr Giaimo was asked, why he had not dismissed Mr McGuire as the owner of the business, rather than directing the applicant to do so. He said that he relied on the applicant to carry out his instructions and, in any event, he was in Cairns and would have had to physically attend the Salon to dismiss him.

[72] In answer to a question from me, Mr Giaimo explained that he had not paid out the applicant's notice on 9 July 2014, as he had recently undergone a medical procedure in Cairns and was unable to attend the Salon until some time later.

[73] Ms Shannon Heard's evidence was critical of the performances of the applicant and Mr McGuire and raised specific allegations of:

(a) intense arguments between the applicant and Mr McGuire which created tension in the Salon;

(b) client complaints with the applicant as being unfriendly, arrogant and unapproachable;

(c) having smelt alcohol on the applicant's breath during work time;

(d) having found a pool of vomit and towels on the Salon's floor;

(e) the applicant staying overnight in the Salon and getting drunk;

(iii) wasting time on designing business livery that he had no business doing.

(g) the applicant having claimed for days and hours worked when he was not at the Salon.

Ms Heard believed the applicant put himself under pressure by doing unproductive and unnecessary things and due to issues in his personal life.

[74] In oral evidence, Ms Heard agreed she was not at work in the few months before the applicant's dismissal. She conceded she had only once smelt alcohol on the applicant's breath when he was at work.

[75] In cross examination, Ms Heard claimed she had spoken to Mr Giaimo on a few occasions about the personal issues and conflicts between the applicant and Mr McGuire at work.

[76] As the allegations of Ms Heard were not said to be the reasons for the applicant's dismissal, I do not intend to give any weight to her allegations and assumptions she made in support of them. The respondent's case was not materially enhanced by this evidence, particularly as Ms Heard's opinions appeared to be exaggerated and overblown in order to 'paint' the applicant in the worst possible light.

[77] In written submissions, Mr Ralph noted that the respondent was a constitutional corporation and that the applicant had been dismissed at the employer's initiative; See: Mohazab v Dick Smith Electronics Pty Ltd (No.2) (1995) 62 IR 200; Barkla v G4S Custodial Services Pty Ltd (2011) 212 IR 248 and Pawel v Advanced Precast Pty Ltd Print S5904. The applicant had been employed in the respondent's business since March 2013 and the respondent had taken over the business in November 2013. The applicant had continuity of service. The respondent was a small business employer, as defined, and the applicant was a person protected from unfair dismissal.

[78] Mr Ralph argued that the respondent had not been entitled to issue the email setting out two weeks' notice of termination on 9 July 2014 or the email of 21 July 2014 which set out the summary dismissal of the applicant. No warnings had been issued or disciplinary meetings engaged in, prior to the email of 9 July 2014. The allegations of theft and fraud, made in the email of 21 July 2014, were not substantiated.

[79] Mr Ralph claimed that some of the marketing tasks carried out by the applicant, had never been part of his job description. The respondent had been unreasonable in asking him to carry out these tasks and the applicant had attempted to comply with these requirements out of good faith. Mr Ralph claimed that the applicant had not been paid in accordance with the Award.

[80] Mr Ralph referred to the Small Business Fair Dismissal Code and the definitions of 'serious misconduct' in the Code and r 1.07 of the Fair Work Regulations 2009 (the 'Regulations'). He conceded that in determining whether the respondent had a 'reasonable belief' that the misconduct of the employee was serious enough to justify dismissal, the Commission was not required to determine whether the respondent's belief was in fact correct; See: Steri-Flow Filtration Systems (Aust) Pty Ltd v Erskine [2013] FWCFB 1943 and Pinawin v Domingo [2012] FWAFB 1359; (2012) 219 IR 128 ('Pinawin v Domingo').

[81] However, Mr Ralph asserted that the respondent was incorrect in its belief and it had not provided specific allegations to the applicant in the letter of 21 July 2014. Mr Giaimo had merely taken steps to 'mirror' the terms of the Code. Mr Ralph described this as 'curious' and said that the letter's content appeared to amount to a pre-prepared script, with a pre-determined outcome. The respondent did not have reasonable grounds for finding that the applicant had engaged in conduct serious enough to justify dismissal.

[82] Mr Ralph submitted that the allegations against the applicant concerning workplace safety presumably related to the repair of the ceiling, but the applicant had told the respondent that the tradespersons involved had been carrying out their work outside the Salon's normal business hours. The respondent had not itemised its claims as to excessive hours claimed by the applicant and improper dealings with the respondent's property. There was no evidence of inquiries or investigations, engaged in by the respondent, which were sufficient to establish, or justify, a reasonable belief; See: Harley v Rosecrest Asset Pty Ltd t/as Can Do International [2011] FWA 3922; Pinawin v Domingo and McKenna v Home Theatre Group Pty Ltd T/A Home Theatre Group [2012] FWA 9309.

[83] Mr Ralph said that the dismissal of the applicant had been 'harsh, unjust and unreasonable' within the meaning of s 387 of the Act. The facts which were said to justify dismissal should be considered by the Commission; See: Australia Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1. If the respondent chose to rely on a different reason for dismissal than that given at the time of the dismissal, there may be adverse consequences for it; See: APS Group Pty Ltd v O'Loughlin (2011) 209 IR 351.

[84] Mr Ralph put that a reason given for the dismissal of the applicant which is 'capricious, fanciful, spiteful or prejudiced' cannot be a valid reason for dismissal; See: Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371. It was not sufficient for the respondent to assert that it acted in the belief that the termination was for a valid reason; See: Rode v Burwood Mitsubishi Print R4471. The reason for termination must exist for the exercise of the right of the employer to terminate an employee; See: Miller v the University of New South Wales [2003] FCAFC 180; (2003) 132 FCR 147.

[85] Mr Ralph acknowledged that the failure of an employee to follow a lawful direction of an employer could constitute a valid reason for dismissal; See: Lambeth and others v University of Western Sydney [2009] AIRC 47. However, the directions relied on by the respondent in this respect were neither lawful or reasonable in that they required the applicant to perform work above and beyond what he would have been expected to perform. The standard of proof in relation to serious misconduct was on the balance of probabilities, as set out in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336. The allegations of theft, fraud, assault and intoxication at work were not made out. Summary dismissal was a disproportionate response in the circumstances; See: Potter v WorkCover Corporation (2004) 133 IR 458.

[86] Mr Ralph submitted that notification, in explicit, plain and clear terms, should have been given to the applicant, in order for him to respond before the decision to terminate him was made; See: Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137 and Previsic v Australian Quarantine Inspection Services Print Q3730. The emails of 9 July 2014 and 21 July 2014 were not sufficient in this respect, as the applicant was not fully aware of the precise nature of the employer's concerns; See: Wadey v Y.M.C.A. Canberra [1996] IRCA 568; and Dover-Ray v Real Insurance Pty Ltd (2010) 204 IR 399.

[87] Mr Ralph put that the respondent had not issued warnings to the applicant which identified the relevant aspects of the applicant's performance which required improvement or that his employment was at risk; See: Fastidia Pty Ltd v Goodwin Print S9280. The emails of 9 and 21 July 2014 did not amount to appropriate warnings.

[88] Mr Ralph said that the applicant was seeking three days of lost pay ($523.92) and the equivalent of five months compensation for the period between his dismissal and when he had been able to find alternative employment in the hairdressing industry ($17,464.00). Accounting for tax, the net amount payable would be $11,788.20. The applicant had sought to mitigate his loss, but had suffered post-traumatic stress disorder after being dismissed and had been prescribed medication. Mr Ralph made further submissions as to underpayment of annual leave and/or annual leave loading.

[89] In oral submissions, Mr Ralph said that the applicant had given his evidence in a forthright and honest manner and it should be accepted. Not all of Mr Giaimo's evidence in relation to the applicant had been negative and this should be seen as supportive of the applicant. Ms Heard's evidence should be given very little weight.

[90] While Mr Ralph acknowledged that the Code did remove some of the burden of procedural fairness, Mr Giaimo's evidence was that he had some professional knowledge in relation to dismissals, arising from his previous work as a Union delegate. Mr Ralph put that the applicant was a good employee, though perhaps not a model employee. The evidence suggested that the relationship between Mr Giaimo and the applicant was generally amicable, but somewhat strained. It should be accepted that the location of the Salon had more to do with its poor turnover, than the conduct of the applicant.

[91] In relation to remedy, Mr Ralph clarified that the applicant sought payment for three days for which he had not been paid. Additionally, there had only been three months between the applicant being dismissed and him finding other work. However, this new work was only part time.

[92] In written submissions, HWL Ebsworth argued that the application be dismissed on the basis that the respondent had a valid reason to dismiss the applicant and that his dismissal had been in accordance with the requirements of procedural fairness and the Code.

[93] The respondent's lawyers described the chronology of the applicant's dismissal as follows. The applicant was terminated by way of the email of 9 July 2014, which gave him two weeks' notice and notified him of the reason for his dismissal, being a failure to follow lawful and reasonable directions. After this period, but prior to 21 July 2014, the respondent became aware of a number of issues involving the applicant claiming excessive hours worked, a CCTV security incident, the deliberate behaviour of the applicant in cancelling appointments following a work health and safety incident and missing funds from the Salon. The respondent had formed the view that the applicant had engaged in the serious misconduct which was put to him on 17 July 2014 and he was summarily terminated. The respondent had subsequently discovered further misconduct of the applicant.

[94] The respondent's lawyers submitted that the applicant had been afforded a number of opportunities to offer his version of events. The concerns of the respondent had been put to him in the meeting of 17 July 2014. However, he had not taken the opportunity to respond to the allegations.

[95] The respondent's lawyers referred to the criteria under s 387 of the Act which are to be taken into account when determining whether a dismissal has been 'harsh, unjust or unreasonable'. The applicant's continued failure to follow the reasonable directions of the respondent, and his serious misconduct were valid reasons for his dismissal (s 387(a)). The reasons for the termination letter of 9 July 2014 and the subsequent summary dismissal were communicated to the applicant (s 387(b)). The applicant had responded to the reasons given in the 9 July 2014 email and had been given the opportunity to respond in the 17 July 2014 meeting (s 387(c)). It was put that the applicant had been given the opportunity to have a support person present at the meeting of 17 July 2014 (s 387(d)).

[96] The respondent's lawyers further submitted that the applicant had been warned of his unsatisfactory performance prior to his dismissal and that the respondent had taken reasonable steps to provide assistance to the applicant in order to improve his performance (s 387(e)).

[97] The respondent's lawyers noted that the respondent was a small business employer, with no dedicated human resource management specialists. The Code applied to the termination of the applicant and it had been complied with.

[98] In oral submissions, Mr Hartford-Davis referred to the Code and put that it was permissible for an employer to summarily dismiss an employee where the employer believes, on reasonable grounds, that the employee had engaged in serious misconduct. The Commission was not required to find that the employee had actually engaged in the serious misconduct; merely that the employer had reasonable grounds to believe this was the case. The allegations of fraud had been reported to the police, which would be sufficient, if made on reasonable grounds. There was a further allegation of a breach of workplace health and safety by the applicant.

[99] Mr Hartford-Davis submitted that in the event that the Commission was satisfied that there was compliance with the Code, s 385(c) of the Act meant that the Commission could not find that the dismissal had been unfair.

[100] Mr Hartford-Davis acknowledged that it was unclear as to whether the applicant brought his application in relation to the initial termination, the subsequent summary dismissal or both, although it would seem that the summary dismissal would 'overtake' the other purported termination of the applicant's employment. In the event that the respondent was required to rely on performance grounds as a basis to dismiss the applicant, the Code only required the employer give the employee a valid reason why he/she may be at risk of losing their job. The direction to the applicant to reduce his hours, if he wanted to continue working at the Salon, fulfilled this requirement. While this was not ideally procedurally fair, the Commission should have regard to the size of the respondent's enterprise (s 387(f)) and the impact of this on the procedures which the respondent followed. The application should be dismissed.

[101] The facts of this case are somewhat unusual. It was said that there were two dismissals - one concerning the alleged poor performance of the applicant and the second concerning the allegations of serious misconduct involving theft and fraud, amongst other things.

[102] In my view, the alleged first dismissal of the applicant is irrelevant for present purposes, notwithstanding it might be said it should have been handled more appropriately by Mr Giaimo. Mr Hartford-Davis conceded as much. I accept that the first dismissal was overtaken by the summary dismissal of the applicant on 17 July 2014. This was so because the notice period had not expired, nor had Mr Giaimo acted on it. The focus had shifted to allegations, not of mere performance, but of serious misconduct going to fraud and theft. If this reason for the applicant's dismissal is satisfied according to the Code, then any other less serious allegations fall away and need not be considered.

[103] Of course, the Small Business Fair Dismissal Code (the 'Code') deals with dismissals separately in respect to serious misconduct and poor performance. As earlier mentioned, it is not in contention that the respondent was a small business (as defined) in that the Salon employed four employees. Notwithstanding Mr Giaimo's complaints with the applicant's performance (including his refusal to comply with the reasonable directions of the employer), it seems to me that these were displaced by the allegations of theft and fraud. In these circumstances, the following paragraph from the Code is applicable:

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.'

[104] This provision may be read in conjunction with the definition of serious misconduct in the Fair Work Regulations 2009. R 1.07 is as follows:

(1) For the definition of serious misconduct in section 12 of the Act, serious misconduct has its ordinary meaning.

(2) For subregulation (1), conduct that is serious misconduct includes both of the following:

(a) wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;

(b) conduct that causes serious and imminent risk to:

(ii) the reputation, viability or profitability of the employer's business.

(3) For subregulation (1), conduct that is serious misconduct includes each of the following:

(a) the employee, in the course of the employee's employment, engaging in:

(c) the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee's contract of employment.

(4) Subregulation (3) does not apply if the employee is able to show that, in the circumstances, the conduct engaged in by the employee was not conduct that made employment in the period of notice unreasonable.

(5) For paragraph (3)(b), an employee is taken to be intoxicated if the employee's faculties are, by reason of the employee being under the influence of intoxicating liquor or a drug (except a drug administered by, or taken in accordance with the directions of, a person lawfully authorised to administer the drug), so impaired that the employee is unfit to be entrusted with the employee's duties or with any duty that the employee may be called upon to perform.'

[105] What is particularly relevant to this case is the Code's distinction between a dismissal for serious misconduct and a dismissal based on an employee's conduct or capacity to do the job. Whereas the later dismissal must be based on a valid reason, a dismissal for serious misconduct need only require the employer to 'believe on reasonable grounds' that the employee's conduct is sufficiently serious to justify dismissal, without notice or warning.

[106] It is apparent that Mr Giaimo was well aware of his obligations in this regard as he had notified the Police of the allegations of fraud (although it is not a prerequisite) and added - for good measure - an allegation of a breach of health and safety involving the applicant permitting a tradesman to fix the roof while the Salon was open. In my view, this later allegation was insufficient on its own, to justify the applicants' dismissal. However, I turn to the more serious matter as to whether Mr Giaimo had 'reasonable grounds' to believe the applicant's conduct was sufficiently serious to justify his dismissal.

[107] This leads me to discuss the meaning of 'reasonable' as it is generally understood. The Macquarie Dictionary defines 'reasonable' as:

'1. endowed with reason. 2. Agreeable to reason or sound judgement: a reasonable choice. 3. not exceeding the limit prescribed by reason; not excessive: reasonable terms.'

[108] The Shorter Oxford Dictionary defines 'reasonable' as:

'1. Endowed with reason. ... 2. Having sound judgement; sensible, sane. Also not asking too much ... b. Requiring the use of reason. ... 3. Agreeable to reason; not irrational, absurd or ridiculous ... 4. Not going beyond the limit assigned by reason; not extravagant or excessive; moderate ... b. Moderate in price; inexpensive ... 5. Of such an amount, size number, etc., as is judged to be appropriate or suitable in the circumstances or purpose ... b. Of a fair, average or considerable amount, size, etc.'

[109] In my opinion, the meaning of 'reasonable grounds' in the Code is that the grounds are 'reasonable' when viewed from the standpoint of what a reasonable person would conclude as grounds which are credible, sensible, logical or plausible; See also: Construction, Forestry, Mining and Energy Union v HWE Mining Pty Limited [2011] FWA 8288 ('HWE Mining').

[110] Turning to this case then, what caused Mr Giaimo to conclude that he had reasonable grounds for believing the applicant's conduct was such as to justify instant dismissal?

1. Mr Giaimo became suspicious when the revenue from the Salon seemed disproportionate to the salaries paid to staff;

2. Mr Giaimo's concerns were raised when he discovered the applicant was consistently claiming 60 hours a week in circumstances where the Salon's opening hours were considerably less than 60 hours and the duties of the Salon's manager could not require the claimed 60 hours a week;

3. The applicant refused to provide Mr Giaimo with monthly business reports, despite his frequent requests for them;

4. Mr Giaimo found it improbable that the applicant's explanation for 60 hours work was that he often worked at home in marketing, design and livery projects for the Salon (up to 20 hours a week). Apart from the fact Mr Giaimo had never directed the applicant to redesign the Salon's livery, it was implausible that the design of a simple business card took many hours of the applicant's time;

5. Despite being directed to reduce his hours to 50 hours per week and better manage the staff, he had failed to do so;

[111] From these circumstances, I am comfortably satisfied that Mr Giaimo had reasonable grounds to believe that the applicant's conduct was sufficiently serious to justify his dismissal, without notice or warning. It must be stressed that such a finding does not mean that the Commission has concluded that the conduct had been proven. The Commission is simply not required to travel into that territory. Given the above finding, it follows that Mr Giaimo had complied with the Small Business Fair Dismissal Code in respect to the summary dismissal of the applicant.

[112] Accordingly, the applicant was not unfairly dismissed for the purposes of s 385 of the Act and the Commission has no jurisdiction to deal with this application. It is unnecessary to make findings as to whether the applicant's dismissal was 'harsh, unreasonable or unjust' for the purposes of s 387 of the Act. The application must be dismissed. Orders to that effect will issue simultaneously with this decision.

Mr D Ralph, Solicitor and Ms T Mokwena, Solicitor for the applicant.

Mr Hartford-Davis, Counsel, instructed by Ms A Teggins, Solicitor for the respondent.

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