Fair Work Act 2009

s.394 - Application for unfair dismissal remedy

Application for an unfair dismissal remedy - jurisdictional objections - Small Business Fair Dismissal Code and genuine redundancy - failure to comply with consultation obligations - dismissal unfair - compensation ordered.

• [1] Mr Carson Q Zhang was employed by Orientile Pty Ltd (Orientile) from 5 July 2010 until his dismissal on 28 February 2025. Orientile contends that Mr Zhang's dismissal was a genuine redundancy within the meaning of s 389 of the Fair Work Act 2009 (Cth) (Act). Orientile also contends that it complied with the Small Business Fair Dismissal Code. Mr Zhang refutes those suggestions and contends that his dismissal was harsh, unjust and unreasonable. He seeks an unfair dismissal remedy of compensation in lieu of reinstatement.

• [2] Orientile is a small employer. It employed 9 employees at the time that Mr Zhang was dismissed. The business sells imported tiles. In 2010 when the business was in its infancy, Mr Zhang was employed as a sales representative. As the business grew a second sales representative was employed. In June 2024 the business expanded by purchasing a second warehouse. In August 2024 it hired a third sales representative. ​Orientile claims that by early 2025 the business was faltering due to slow sales and financial strain due to increased operational costs and associated with the purchase of a second warehouse. Mr Zhang claims that sales are also slow early in the financial year.

• [3] On 28 February 2025 Mr Zhang was called to a meeting with Mr Gao, the owner of the business. Mr Gao says that he decided that morning that he could no longer afford to employ three sales representatives. He asked Mr Zhang to a meeting with the intention of dismissing him. There was some contest in the descriptions given by Mr Zhang and Mr Gao about the length of the meeting. Mr Zhang said it went for no more than 10 minutes. Mr Gao said it went for 40 to 50 minutes. CCTV footage was provided showing Mr Zhang arriving at the warehouse and walking into the office and later footage showing him leaving the office around 90 minutes later. Documents were also provided of receipts issued by Uber which Mr Gao says shows when Mr Zhang left. Nothing turns on the length of the meeting and so I make no finding as to whose account is correct.

• [4] What is not contested is that the meeting commenced with Mr Gao telling Mr Zhang that he was to be dismissed because his position was redundant. Mr Zhang said he was shocked to hear this. Both Mr Gao and Mr Zhang state that the meeting continued with a discussion about Mr Zhang's termination pay. Mr Zao also offered to provide Mr Zhang with a separation certificate for the purpose of claiming social security benefits and a reference to assist him in finding other work. Mr Zhang declined the invitation. Mr Zhang was then required to clear his belongings from the company car and hand over the keys. Mr Gao arranged an uber to drive Mr Zhang home. Mr Gao did not give Mr Zhang written notice of termination.

• [5] Mr Gao considered the meeting on 28 February as consultation about his decision to reduce the number of sales representatives from three to two. He states that Mr Zhang did not challenge his decision and on that basis, he did not have to speak to the other sales representatives about the change or to ask if they were willing to be retrenched instead of Mr Zhang. Mr Zhang said he made no challenge as he was shocked at the news and did not consider it to be a matter he had any say over or that it was available to him to ask that he not be retrenched.

• [6] On 4 March 2025 Mr Zhang was paid his termination pay. There was an exchange of emails on that day about the termination pay and other outstanding payments owed to Mr Zhang. There was a further exchange of emails on 7 March 2025 Mr. Zhang sent an email to Mr Gao alleging he had been unfairly dismissed and that there had been other procedural breaches associated with the termination of his employment. Mr Gao responded denying the claims. Mr Gao also sent an email in the following terms:

I would like to write to you to confirm that your employment with Orientile Pty Ltd was terminated on 28 February 2025. The notice was originally given verbally to your face on 28 Feb 2025 and is confirmed in the email sent to you on 4 March 2025.

Pls do not hesitate to contact me if require other written documents regarding the termination of your employment.

• [7] Mr Zhang filed his application for an unfair dismissal remedy on 14 March 2025.

• [8] Section 385 provides that a person has been unfairly dismissed if; the person has been dismissed, the dismissal was harsh, unjust or unreasonable, the dismissal was not consistent with the Small Business Fair Dismissal Code, and the dismissal was not a case of genuine redundancy. There is no issue about the first matter. Mr Zhang was dismissed. The other three matters are contested.

• [9] Section 396 of the Act also sets out the matters which I am required to decide before I consider the merits of Mr Zhang's unfair dismissal application. Those include whether the Small Business Fair Dismissal Code was followed and whether the dismissal was not a case of genuine redundancy. I will deal with these matters first. As will become evident it is convenient to deal with the question of genuine redundancy first.

• [10] Section 389 of the Act defines genuine redundancy as follows:

(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."

• [11] A dismissal will be a case of genuine redundancy if all three requirements in the section have been met.The employer must no longer require the persons job to be done by anyone. The employer must have complied with an obligation to consult in an award or agreement. And, there must be no reasonable opportunity to redeploy the employee in the employer's business or an associated business. If any of these requirement are not met then the dismissal will be not be a genuine redundancy.

• [12] In this matter, to reach the conclusion that there was no genuine redundancy, I only have to consider whether Orientile complied with an obligation in a modern award to consult about the redundancy. Orientile contended that the relevant modern award was the Storage Services and Wholesale Award 2020. The relevant obligation is found in clause 30 of the Award. It reads:

30.1 If an employer makes a definite decision to make major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the employer must:

(a) give notice of the changes to all employees who may be affected by them and their representatives (if any); and

(b) discuss with affected employees and their representatives (if any):

(iii) measures to avoid or reduce the adverse effects of the changes on employees; and

(c) commence discussions as soon as practicable after a definite decision has been made.

30.2 For the purposes of the discussion under clause 30.1(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.

30.3 Clause 30.2 does not require an employer to disclose any confidential information if its disclosure would be contrary to the employer's interests.

30.4 The employer must promptly consider any matters raised by the employees or their representatives about the changes in the course of the discussion under clause 30.1(b) .

30.5 In clause 30 significant effects , on employees, includes any of the following:

(b) major changes in the composition, operation or size of the employer's workforce or in the skills required; or

(c) loss of, or reduction in, job or promotion opportunities; or

(f) the need for employees to be retrained or transferred to other work or locations; or

30.6 Where this award makes provision for alteration of any of the matters defined at clause 30.5 , such alteration is taken not to have significant effect.

• [13] It is clear on the accounts given by Mr Zhang and Mr Gao that Orientile did not consult with Mr Zhang before dismissing him. The first communication between Orientile and Mr Zhang in relation to his dismissal was on the day he was dismissed. It follows that Orientile did not comply with its obligations under clause 30 of the Storage Services and Wholesale Award 2020. In particular, the requirements in clauses 30.1, 30.2 and 30.4 were not met. Mr Gao said that he did not read clause 30 until after he dismissed Mr Zhang and so was unaware of the obligation to consult. This submission was contrary to the claim he otherwise made that he did consult. Be that as it may, I find that there was no compliance with the obligation.

• [14] As Orientile did not comply with its consultation obligation under the Award its dismissal of Mr Zhang was not a case of genuine redundancy within the meaning of s.389 of the Act and the requirement in s. 385(d) is met.

• [15] Mr Gao provided a copy of the Small Business Fair Dismissal Code Checklist which he completed on 20 March 2025. The document includes a question directed to whether the employer complied with any requirement to consult under an Award. Mr Gao ticked yes in response to this question. For the reasons above this response was wrong. In any event, the Small Business Fair Dismissal Code does not capture redundancy situations.[1]

• [16] Accordingly, Mr Zhang's dismissal was not consistent with the Small Business Fair Dismissal Code and the requirement in s. 385(c) is met.

• [17] Having determined that Mr Zhang's dismissal was not a genuine redundancy within the meaning of s.389 of the Act, and that it was not consistent with the Small Business Fair Dismissal Code the next issue is whether the dismissal was harsh, unjust or unreasonable. In determining whether the dismissal was harsh, unjust or unreasonable, I must take into account the matters set out in s.387 of the Act.

Section 387(a) - valid reason related to capacity or conduct

• [18] Mr Zhang was dismissed because Orientile no longer required three sales representatives. Mr Gao decided that due to a decline in sales and increased costs associated with the new warehouse the financial position of the company could only sustain two sales representatives. Mr Zhang's duties were reassigned to the other two sales representatives. This was a change to the operational requirements of the business. It follows that, in those circumstances, the reason for the dismissal did not relate to Mr Zhang's capacity or conduct, and s 387(a) should be regarded as a neutral matter with respect to the question of whether the dismissal was harsh, unjust or unreasonable.[2]

• [19] Section 387(b) relates to notification of "that reason", being the reason related to the person's capacity or conduct.

• [20] Because the reason for the termination of Mr Zhang's employment was the operational changes to the business which is not related to his capacity or conduct, s 387(b) is also neutral factor in relation to the question of whether Mr Zhang's dismissal was harsh, unjust or unreasonable.

• [21] Section 387(c) is also predicated on there being a reason for dismissal related to the capacity or conduct of the employee. It follows that s.387(c) is a neutral factor in relation to the question of whether Mr Zhang's dismissal was harsh, unjust or unreasonable.

• [22] Orientile did not unreasonably refuse to allow Mr Zhang to have a support person present to assist at any discussions relating to his dismissal. It did not afford Mr Zhang with the opportunity to have a support person either. Accordingly, s.387(d) is a neutral factor in relation to the question of whether Mr Zhang's dismissal was harsh, unjust or unreasonable.

Section 387(e) - warning about unsatisfactory performance

• [23] Mr Zhang's dismissal did not relate to unsatisfactory performance. It follows that s 387(e) is also a neutral factor in relation to the question of whether Mr Zhang's dismissal was harsh, unjust or unreasonable.

Section 387(f)&(g) - size of enterprise and dedicated human resource management specialists

• [24] Orientile is a small employer. It did not have any dedicated human resource management specialists or expertise in its enterprise at the time it decided to terminate Mr Zhang's employment. I am satisfied that this had an impact on the procedures followed in effecting Mr Zhang's dismissal. So much is apparent from the lack of knowledge on the part of Orientile that Mr Zhang of the award obligation to consult Mr Zhang. I consider that these factors (ss.387(f) & (g)) weigh in favour of a finding that the dismissal was harsh, unjust or unreasonable.

• [25] I consider the following matters are relevant to the question of whether the dismissal was harsh unjust or unreasonable:

a) The speed with which Mr Gao moved on the morning of 28 February 2025 from his decision that the business needed to make cost savings by retrenching one of its sales representatives to informing Mr Zhang that he was to be dismissed. These circumstances indicate a lack of consideration for Mr Zhang's circumstances and the consequences of the dismissal.

b) The fact that there were no conduct, capacity, or performance issues justifying Mr Zhang's selection for retrenchment.

c) Mr Zhang's long service. He commenced employment almost 15 years ago when the business was starting up. He worked alongside Mr Gao and played an important role in the growth of the business.

d) Mr Zhang was one of three sales representatives employed at the time of the dismissal. As there was no consultation Ms Gao did not canvass with the other sales representatives their willingness to leave the business which would have allowed Mr Zhang to remain employed.

e) The failure of Mr Gao to engage in a consultation process in which he involved the other sales representatives also meant that there was no opportunity to explore other options, such as job sharing, voluntary redundancy, additional termination pay, or the development of agreed criteria for selection for retrenchment.

f) Mr Gao paid Mr Zhang only his legal entitlements on termination. He was unwilling to entertain any additional payment in recognition of Mr Zhang's long and loyal service. Making some additional payment would have reduced the adverse impact of the redundancy.

g) The adverse impact of the dismissal on Mr Zhang and his personal financial circumstances.

h) Mr Gao's had formed the view that the business could not afford to keep employing three sales representatives and so someone had to lose their job.

• [26] All of these factors, save for the last, weigh in favour of the dismissal being harsh unjust or unreasonable.

Conclusion - harsh, unjust and/or unreasonable dismissal

• [27] After considering each of the matters specified in s.387 of the Act, I find that the dismissal of Mr Zhang was harsh and unreasonable. Although, Orientile had a valid reason to make Mr Zhang's position redundant, Orientile's unreasonable and extensive failure to comply with its consultation obligations under the Award meant that Mr Zhang had no real opportunity to consider his possible retrenchment and present views and suggestions to Orientile to avoid or mitigate the adverse impact of the retrenchment. Many possibilities were available from job sharing with one or other, or both, sales representatives, to delaying the retrenchments to allow Mr Zhang to find other work, to seeking other savings in the business to avoid retrenchments. The alacrity with which the dismissal was carried out, the long loyal service of Mr Zhang, and his contribution to growing the business are also factors in finding the dismissal unfair.

• [28] Having found that Mr Zhang was protected from unfair dismissal and that his dismissal was harsh and unreasonable, it is necessary to consider what, if any, remedy should be granted. Mr Zhang did not seek reinstatement. In any event, I am satisfied that reinstatement would be inappropriate in all the circumstances because Orientile has suffered a downturn in its business and does not have a position available for Mr Zhang.

• [29] Section 390(3)(b) of the Act provides the Commission may issue an order for compensation if it is appropriate in all the circumstances. A compensation remedy is designed to compensate an unfairly dismissed employee in lieu of reinstatement for losses reasonably attributable to the unfair dismissal within the bounds of the statutory cap on compensation that is to be applied.[3]

• [30] Having regard to all the circumstances of the case, including the fact that Mr Zhang has suffered financial loss as a result of his unfair dismissal, I consider that an order for payment of compensation is appropriate.

• [31] It is necessary therefore for me to assess the amount of compensation that should be ordered. In assessing compensation, I am required by s.392(2) of the Act to take into account all the circumstances of the case including the specific matters identified in paragraphs (a) to (g) of this subsection. In doing so I am mindful of the established methodology for assessing compensation in unfair dismissal cases which was set out in Sprigg v Paul Licensed Festival Supermarket[4] and applied and elaborated upon in the context of the current Act by Full Benches of the Commission in a number of cases.[5]

• [32] I raised with Mr Gao that the maximum compensation I could award was 6 months' pay or $50,000 and invited him to make a submission on the impact such a payment would have on the viability of the business. He stated that such a payment would involve a substantial cost on the business but would not affect its viability.

• [33] My view is that no adjustment is required on this account.

• [34] My view is that Mr Zhang's 15 years' service with Orientile is relevant to the amount of compensation he should receive in lieu of compensation. The question is how much should be attributed to this factor. This matter along with another matter that I consider relevant for the purposes of s 392 (g), that Mr Zhang lost his job through redundancy and no fault of his own, and suddenly needed to make adjustments arising from his loss of livelihood after being so long in one job, lead me to conclude that he should be paid an additional 12 weeks' pay or $23,076.92. This amount is arrived at by reference to s.119 of the Act noting that s.119 does not apply to small businesses but otherwise provides a guide to what compensation might be made to employees with long service. The amount of 12 weeks seems appropriate in this case to take into account his long and loyal service and his substantial contribution to the growth of the business as well as to take into account the loss of livelihood occasioned by his dismissal, the need to find an alternative income and the time it will take to do so.

Remuneration Mr Zhang would have received, or would have been likely to receive, if she had not been dismissed (s 392(2)(c))

• [35] Like all calculations of damages or compensation, there is an element of speculation in determining Mr Zhang's anticipated period of employment. The task involves an assessment of what would have been likely to happen in the future had Mr Zhang not been dismissed.[6]

• [36] I consider that if Mr Zhang had not been retrenched on 28 February 2025, his employment may well have been retrenched at the end of a proper consultation process. Although this is by no means certain given the options available to Orientile to mitigate the adverse effects of its decision to cut costs that have already been mentioned. I estimate a proper consultation process would have taken a period of four weeks. That is, Mr Zhang may have been made redundant on 28 March 2025. My reason for finding four weeks an adequate period is that to meets its obligations under the Award Orientile needed to provide all relevant information about the changes it proposed to introduce measures to save costs to Mr Zhang and the other sales representatives. This information needed to include information about the nature of the changes it proposed, which was the reduction in the number of sales representatives from three to two with the remaining representatives taking on extra work. The likely effect that this would have on the sales representatives. And what measures had been considered to avoid or reduce the adverse impact of the changes. Although there does not appear to have been any such measures considered. Once that information was provided, the sales representatives needed time to consider the changes and make suggestions. Those suggestions needed to be considered. As outlined above those discussions may have involved proposals that the three representatives job share, that if one was to be made redundant then a volunteer be called for. Proposals could also be formulated for the payment of a severance payment to reduce the adverse effects of the redundancy. Discussions needed to occur about the proposed redundancy, the impact it would have on the employees both on the representative who was to lose their job and on the work of the two representatives who remained.

• [37] Mr Zhang was paid an annual salary of $100,000 plus superannuation. Hence, I am satisfied that if Mr Zhang had remained employed from 28 February 2025 until 28 March 2025 he would have received $7,692.31 plus $884.62 in statutory superannuation.

• [38] The evidence establishes that Mr Zhang has made reasonable efforts to obtain alternative employment following the dismissal. He has taken steps to start his own business and intends to be employed in that business.

• [39] In all the circumstances, my view is that Mr Zhang has acted reasonably to mitigate the loss suffered because of the dismissal and I do not consider it appropriate to reduce the compensation on this account.

Remuneration earned (s 392(2)(e)) and income reasonably likely to be earned (s 392(2)(f))

• [40] Mr Zhang has not received or earned any remuneration since his dismissal. No reduction to the total is made on this account.

• [41] As indicated above I consider that the fact that Mr Zhang was made redundant is a relevant factor in determining the amount of compensation he should receive in lieu of reinstatement. I have already considered the amount that should be paid to Mr Zhang by reference to his length of service, being 15 years, and considered that an additional 12 weeks' pay should be paid to him for this. This amount was arrived at by reference to the amount payable in redundancy situations in s. 119 of the Act. I use s. 119 as a guide only, noting that as a small business Orientile was not required to make this payment under the Act. I also consider that such a payment is justified as a matter of fairness as the failure of Orientile to consult and its failure to make efforts to mitigate the adverse impact of its decision resulted in Mr Zhang being dismissed unfairly in circumstances where reinstatement is not an appropriate remedy.

• [42] The total amount I consider reasonable to award Mr Zhang relates to his lost remuneration along with an amount recognising his long and loyal service and on account of the nature of his termination for redundancy. Those amounts are $7,692.31 plus $884.62 in statutory superannuation and $23,076.92 respectively. The total being $31,652.93.

• [43] I have considered whether to discount the total amount for contingencies. This step is a means of taking into account the possibility that the occurrence of contingencies to which Mr Zhang was subject might have brought about some change in earning capacity or earnings. Positive considerations which might have resulted in advancement and increased earnings are also taken into account.

• [44] The discount for contingencies should only be applied in respect to an "anticipated period of employment" that is not actually known, that is a period that is prospective to the date of the decision.[7]

• [45] Because I am looking in this matter at an anticipated period of employment which has already passed 28 March 2025 there is no uncertainty about Mr Zhang's earnings, capacity or any other matters during that period of time. In all the circumstances, my view is that it is not appropriate to discount or increase the figure of $31,652.93 for contingencies.

• [46] Save for the matters referred to in this decision, my view is that there are no other matters which I consider relevant to the task of determining an amount for the purposes of an order under s.392(1) of the Act.

• [47] I have considered the impact of taxation, I prefer to determine compensation as a gross amount and leave taxation to be paid in accordance with usual requirements.

• [48] Mr Zhang did not commit any misconduct, so this has no relevance to the assessment of compensation.

• [49] I note that in accordance with s.392(4) of the Act, the amount of compensation calculated does not include a component for shock, humiliation or distress.

• [50] The amount of $31,652.93 is less than half the amount of the high income threshold immediately before the dismissal. It is also less than the total amount of remuneration to which Mr Zhang was entitled in his employment with Orientile during the 26 weeks immediately before his dismissal. In those circumstances, my view is that there is no basis to reduce the amount of $31,652.93 by reason of s.392(5) of the Act.

• [51] Appling the Sprigg approach, my estimate of the remuneration Mr Zhang should have received, or have been likely to have received, which is comprised of lost income and a payment for his long service, loyalty and contribution to the business, is $31,652.93. I make no deduction from that amount for monies earned nor for contingencies. The taxation will be in accordance with legal requirements. The amount is less than the statutory cap. I will make an order for the payment of this amount. I will order that the payment be made within 21 days.

• [52] No application has been made to date by Orientile under s.393 for any amount of compensation awarded to be paid in the form of instalments. Should Orientile wish to make such an application it must do so within 14 days of this decision

[1] Groszek v Toyvision International Pty Ltd [2015] FWC 697 at [37]; Harrison v Queensland University of Technology [2010] FWA 8789 at [6]; Nalevansky v Thought Equity Motion Inc. [2010] FWA 3707; Iannello v Motor Solutions Australia Pty Ltd [2010] FWA 3125

[2] UES (Int'l) Pty Ltd v Harvey [2012] FWAFB 5241 (UES) at [42]; Ventyx Pty Ltd v Murray [2014] FWCFB 2143 (Ventyx) at [142]

[3] Kable v Bozelle, Michael Keith T/A Matilda Greenbank [2015] FWCFB 3512 at [17]

[4] [1998] AIRC 989; (1998) 88 IR 21

[5] Tabro Meat Pty Ltd v Heffernan [2011] FWAFB 1080; Read v Golden Square Child Care Centre [2013] FWCFB 762; Bowden v Ottrey Homes Cobram [2013] FWCFB 431

[6] Double N Equipment Hire Pty Ltd v Humphries [2016] FWCFB 7206 at [16]- [17]

[7] Enhance Systems Pty Ltd v Cox [2001] AIRC 1138 (Williams SDP, Acton SDP, Gay C, 31 October 2001) at [39]

Printed by authority of the Commonwealth Government Printer