s 394 - Unfair dismissal

Application for an unfair dismissal remedy - company in administration - Commission not barred from determining matter under Corporations Act - Small Business Fair Dismissal Code not applicable - no valid reason - procedural fairness denied - dismissal unfair - reinstatement not appropriate - compensation awarded.

• [1] Cheema Enterprises Pty Ltd dismissed Mrs Dipa Bhudia from her role as HR Superintendent on Thursday 16 January 2025. Mrs Bhudia initially commenced employment with AFCH Enterprises Pty Ltd on Friday 1 September 2023. On Sunday 31 March 2024, her employment transferred to Cheema Enterprises. Mr Baljeet Cheema is a director for AFCH and Cheema Enterprises.

• [2] Mrs Bhudia says that her dismissal was unfair and has applied to the Fair Work Commission for a remedy under s 394 of the Fair Work Act 2009 (Cth).

• [3] I held a determinative conference on Tuesday 13 May 2025 to hear the matter. At the determinative conference Mrs Bhudia represented herself and gave evidence in support of her case. The witness statements of Mr Andrew Peters, Ms Beth Leane and Mr Mark Richards were received unchallenged.

• [4] A representative for Cheema Enterprises did not attend the determinative conference. It is helpful to set out some of the history of this matter.

• [5] Mr Cheema attended a Case Management Conference on Thursday 27 March 2025 for this matter. On Monday 5 May 2025, Mr Cheema sought an extension of time to file Cheema Enterprises' materials, which was granted. However, no material was filed. On Monday 12 May 2025, my Chambers wrote to the parties and informed Mr Cheema that if no representative for Cheema Enterprises attended the determinative conference, I would still proceed to hear the matter.

• [6] After the determinative conference on Tuesday 13 May 2025, Mr Stephen Dixon of Hamilton Murphy wrote to my Chambers to notify that he had been appointed Administrator for Cheema Enterprises pursuant to s 426A of the Corporations Act 2001. Mr Dixon also advised that pursuant to s 440D of the Corporations Act, any proceedings against Cheema Enterprises is stayed and cannot be commenced without leave of the Court.

• [7] That same day, my Chambers wrote back to the parties noting that as per multiple authorities of the Commission,[1] the Commission is not a court for the purposes of s 440D of the Corporations Act. Based on this, my preliminary view was that based on the information in Mr Dixon's letter, s 440D is not a bar to Mrs Bhudia's application being determined. Mr Dixon was informed that if he sought to be heard on the matter, he should contact Chambers as soon as possible.

• [8] On Monday 19 May 2025, my Chambers sent another email to the parties. Noting that the Administrator had not replied to the email from Chambers sent on Tuesday 13 May 2025, the parties were advised that if the Administrator sought to be heard on either my preliminary view regarding s 440D of the Corporations Act, or Mrs Bhudia's substantive application, they must contact Chambers by Wednesday 21 May 2025.

• [9] As of the date of this Decision being published, there has been no further contact from the Administrator nor any other representative of Cheema Enterprises.

• [10] I affirm my view that s 440D of the Corporations Act does not prevent me from determining Mrs Bhudia's unfair dismissal application and now turn to consider it.

• [11] The events that led to Mrs Bhudia's termination are short.

• [12] Mrs Bhudia's account is that in the lead up to her dismissal, Cheema Enterprises had failed to pay her wages. On Thursday 16 January 2025, she sent Mr Cheema a text message notifying him that she had contacted the Australian Taxation Office regarding unpaid super for the last 1.5 years and the Fair Work Ombudsman regarding her unpaid wages.

• [13] Mr Cheema acknowledged her text messages. Mrs Bhudia and Mr Cheema exchanged text messages where Mr Cheema asked her to terminate other employees' employment contracts, before sending the following messages to her:

I hope you're doing well and had a fantastic time during your holidays. Firstly, I want to express my gratitude for all the support and guidance you've provided us. Your expertise and dedication have been invaluable.

Unfortunately, we are currently facing a challenging financial situation. We've fallen significantly behind on our payments, and as a result, we are not in a position to cover your wages and other expenses at this time. It is with a heavy heart that we must terminate your contract immediately.

Given that you were away overseas and are now back, we would greatly appreciate any guidance you can offer to help us navigate this difficult period in good faith. It is likely to take us around 2-3 months to get back on track, as our payment terms are 60 days. Once we regain our financial stability, we would be more than happy to re-engage your services, as you are exceptionally skilled and the best in your field.

Thank you once again for everything, and please let us know what steps we should take next.

60 days payment terms are hard initially to sustain but when circle goes on it will be easy and affordable for us

• [15] Unsurprisingly, Mrs Bhudia was not keen on meeting with Mr Cheema to provide free labour in the form of managing the business's financial affairs after he had dismissed her. Mrs Bhudia was not paid notice.

• [16] Cheema Enterprises' Form F3 states that Mrs Bhudia was dismissed as the company was struggling financially and couldn't afford to pay her. Further, that there were no issues with Mrs Bhudia's performance.

• [17] There is no contest, and I find that:

(a) Mrs Bhudia had completed the minimum employment period and earned less than the high income threshold. Mrs Bhudia was protected from unfair dismissal under s 382 of Act;

(b) Mrs Bhudia's application was made within the time prescribed in s 394(2) of the Act; and

(c) Mrs Bhudia's dismissal was not a case of genuine redundancy.

• [18] Cheema Enterprises' Form F3 identified that it had three employees at the time Mrs Bhudia was dismissed, which Mrs Bhudia confirmed. Cheema Enterprises was a small business within the meaning of s 23 of the Act. However, as per the Form F3, Cheema Enterprises does not rely on the Small Business Fair Dismissal Code. For completeness, I find that as Mrs Bhudia was not terminated for any misconduct or performance issues, neither limb of the Code applies.

• [19] Section 385 of the Act provides that:

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.

• [20] Section 387 of the Act requires me to consider certain criteria in assessing whether a dismissal is harsh, unjust or unreasonable. I set out my consideration below.

4.1 Section 387(a) - was there a valid reason for the dismissal related to Mrs Bhudia's capacity or conduct?

• [21] A valid reason is one that is 'sound, defensible or well-founded'[2] and should not be 'capricious, fanciful, spiteful or prejudiced'.[3]

• [22] Mrs Bhudia was terminated due to Cheema Enterprises' poor financial state. It seems clear from Mr Cheema's text messages that Mrs Bhudia was good at her job. There was no valid reason relating to Mrs Bhudia's capacity or conduct.

4.2 Section 387(b) and (c) - notification of valid reason and opportunity to respond

• [23] An employee protected from unfair dismissal should be notified of the reason to terminate their employment before the decision to dismiss is made.[4] Failure to do so impacts on their ability to respond to that reason before the decision to terminate is made.[5]

• [24] Mrs Bhudia was told of her summary dismissal via text message. There was no notification of a reason (valid or not) and she did not have the opportunity to respond.

4.3 Section 387(d) - any unreasonable refusal by Cheema Enterprises to allow a support person

• [25] Mrs Bhudia was terminated via text message without a meeting. This is a neutral consideration.

4.4 Section 387(e) - warnings concerning performance

• [26] Mrs Bhudia did not receive any warnings regarding her performance.

4.5 Section 387(f) and (g) - size of Cheema Enterprises enterprise and whether the absence of dedicated human resource management specialists or expertise would be likely to impact on the procedures followed

• [27] As noted above, Cheema Enterprises had three employees, including Mrs Bhudia. However, Mrs Bhudia was the HR Superintendent for Cheema Enterprises; there was no absence of dedicated human resource management specialists. Mrs Bhudia's evidence included her text message to Mr Cheema advising that he could not dismiss employees without notice and that he needed to pay out the employees' leave entitlements, which Mr Cheema ignored. In these circumstances, I find that this factor is a neutral consideration.

4.6 Section 387(h) - any other matters the Commission considers relevant

• [28] I note that Cheema Enterprises has entered administration. This suggests that Cheema Enterprises' reason for dismissing Mrs Bhudia is factual.

4.7 Conclusion - Mrs Bhudia's dismissal was unfair

• [29] I have made findings in relation to each matter in s 387 as relevant to this case. The considerations in s 387(a), (b) and (c) weigh in favour of a finding that the dismissal was unfair. The other considerations in s 387 are neutral. I find that there was no valid reason for Mrs Bhudia's dismissal. I further find that Mrs Bhudia was denied procedural fairness in her dismissal. I have considered that Cheema Enterprises is clearly in financial strife; however, Cheema Enterprises did not provide any evidence or submissions as to the extent of its financial issues and how that affected the lack of procedural fairness afforded to Mrs Bhudia.

• [31] I now turn to the issue the remedy, if any, that should be ordered in the circumstances. I am satisfied pursuant to ss 390(1) and (2) that Mrs Bhudia has made an application for unfair dismissal, is a person protected from unfair dismissal and was unfairly dismissed.

• [32] Mrs Bhudia does not seek reinstatement. Given that Mrs Bhudia now has a new job and Cheema Enterprises is in administration, I agree that reinstatement is not appropriate. Mrs Bhudia effectively seeks that Cheema Enterprises pay her outstanding wages, entitlements and notice. As I explained to Mrs Bhudia during the determinative conference, those matters are not within the Commission's unfair dismissal jurisdiction.

• [33] I turn now to consider s 390(3)(b). As stated by the Full Bench in Nguyen v Vietnamese Community in Australia,[6] the question of whether to order a remedy in a case where a dismissal has been found to be unfair remains a discretionary one.[7] Section 390(3)(b) requires that all circumstances of the case to be taken into consideration. As to what this consideration requires, I respectfully adopt the reasoning of the Full Bench in Bowden v Ottrey Homes Cobram and District Retirement Villages Inc[8] at [40]:

As to whether an order for the payment of compensation by Ottrey to Ms Bowden is appropriate in all the circumstances of the case, we note that the phrase "all the circumstances of the case" in s.390(3)(b) of the FW Act is also contained in s.392(2). However, in s.392(2) the phrase is followed by a reference to the matters in ss.392(2)(a) to (g) and s.392(2)(g) concerns "any other matter that the FWC considers relevant." In this case, we think the matters in ss.392(2)(a) to (g) embrace all the circumstances of the case relevant to our consideration of whether a compensation order is appropriate. In Henderson v Department of Defence it was recognised that the same matters may serve different purposes in s.170CH of the WR Act, as it was prior to the Work Choices amendments...

• [34] In this regard, it is necessary to take into account all the circumstances of the case, including the specific matters identified in ss 392(2)(a)-(g) and to consider the order relevant requirements of s 392.

• [35] The well-established approach to the assessment of compensation under s 392 is to apply the 'Sprigg Formula', derived from the decision of the Full Bench of the Australian Industrial Relations Commission in Sprigg v Paul's Licensed Festival Supermarket.[9] This approach was articulated in the context of the current legislative framework in Bowden. I adopt the Bowden methodology but observe that Bowden and the formulation in Sprigg serve as a guide, rather than a decision rule.

• [36] The approach in Sprigg can be summarised as follows:

Step 1: Estimate the remuneration the employee would have received, or would have been likely to receive, if the employer had not terminated the employment.

Step 2: Deduct monies earned since termination. Workers' compensation payments are deducted but not social security payments. The failure to mitigate loss may lead to a reduction in the amount of compensation ordered.

Step 3: Discount the remaining amount for contingencies.

Step 4: Calculate the impact of taxation to ensure the employee receives the actual amount he or she would have received if they had continued in their employment.

5.1 Remuneration that Mrs Bhudia would have received, or would have been likely to receive, if she had not been dismissed: s 392(2)(c)

• [37] As stated by a majority of the Full Court of the Federal Court:[10]

[i]n determining the remuneration that the employee would have received, or would have been likely to receive... [the Commission must] address itself to the question whether, if the actual termination had not occurred, the employment would have been likely to continue, or would have been terminated at some time by another means. It is necessary for the Commission to make a finding of fact as to the likelihood of a further termination, in order to be able to assess the amount of remuneration the employee would have received, or would have been likely to receive, if there had not been the actual termination.

• [38] Mrs Bhudia earned $110,000.00 per annum, or $2,115.38 per week. I find that she would not have worked for Cheema Enterprises long given their issues with not paying her. I find that she would have only continued to work for Cheema Enterprises for three weeks. This is the 'anticipated period of employment'.[11]

• [39] I calculate that Mrs Bhudia would have earned $6,346.14 gross, plus superannuation, during the anticipated period of employment.

5.2 Remuneration earned and remuneration likely to be earned: ss 392(2)(e)-(f)

• [40] Mrs Bhudia secured new employment on Wednesday 5 February 2025. This is after the anticipated period of employment.

5.3 Length of Mrs Bhudia's service: s 392(2)(b)

• [41] I consider that Mrs Bhudia's length of service does not support reducing or increasing the amount of compensation ordered.

• [42] As was said in the Full Bench decision in McCulloch v Calvary Health Care Adelaide,[12] it is important to appreciate that a deduction for contingencies is applied to prospective losses, that is loss occasioned after the date of the hearing. Referring to Ellawala v Australian Postal Corporation,[13] the Full Bench in McCulloch stated that a discount for contingencies is a means of taking account of the various probabilities that might otherwise affect earning capacity. Of course, at the time of hearing, any such impact on an applicant's earning capacity between the date of termination and the hearing will be known. It will not be a matter of assessing prospective probabilities but of making a finding on the basis of whether an applicant's earning capacity has in fact been affected during the relevant period.

• [43] In this case, I know Mrs Bhudia's earnings during the anticipated period of employment. I therefore do not need to make a deduction for contingencies.

5.5 Effect of the order on the viability of Cheema Enterprise's enterprise: s 392(2)(a)

• [44] Cheema Enterprises did not make any submission on this point. There is nothing for me to consider in this regard.

5.6 Efforts of Mrs Bhudia to mitigate the loss because of the dismissal: s 392(2)(d)

• [45] Mrs Bhudia sought and obtained new employment after her dismissal. I find that no deduction should be made.

• [46] There was no misconduct. There is therefore no deduction to be made in respect of s 392(3).

5.8 No component for shock, distress, humiliation or other analogous hurt: s 392(4)

• [47] I confirm that the compensation amount assessed contains no component for any shock, distress, humiliation or analogous hurt Mr Haas suffered as a result of his dismissal.

• [48] The amount of compensation the Commission may order is capped. If the quantum of compensation initially assessed exceeds that cap, then the Commission must reduce the compensation amount to the cap. The Act stipulates that the compensation cap is the lesser of:

(a) The amount of remuneration received by the person, or that he or she was entitled to receive (whichever is higher) in the 26 weeks before the dismissal (in this case, $55,000.00); and

(b) Half the amount of the high-income threshold immediately before dismissal ($87,500.00).

• [49] In this matter I am satisfied that the amount for s 392(5) of the Act is $55,000.00 and a reduction is not required.

• [50] Cheema Enterprises did not make any submissions regarding the payment of compensation in instalments.

• [51] Having regard to all the circumstances of this matter applied to the considerations in s 392 of the Act, I consider it is appropriate to make an award of compensation to Mrs Bhudia of three weeks' wages, being $6,346.14.

• [52] Given my findings above, I am satisfied in the circumstances that reinstatement is inappropriate, but a remedy is appropriate. In my view, the application of the Sprigg formula does not lead to an amount that is excessive or clearly inadequate, and I am satisfied that the level of compensation is an amount that is appropriate having regard to all the circumstances of the case.[14] Accordingly, I order that Cheema Enterprises pay to Mrs Bhudia compensation in the amount of **$**6,346.14 to be taxed by law, plus make an 11.5% contribution to Mrs Bhudia's nominated superannuation account.

• [53] The compensation payment is to be made within 14 days of this Decision. An Order to this effect will issue separately.[15]

[1] See, eg Krebs v Pika Wiya Health Service Aboriginal Corporation (Administrators Appointed and under Special Administration) [2015] FWC 1232; Wallis v Corridors College Limited [2018] FWC 6718.

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

[4] Crozier v Palazzo Corporation Pty Limited Print S5897 [70]-[73], [(2000) 98 IR 137].

[6] [2014] FWC 3574.

[8] [2013] FWCFB 431.

[9] (1998) 99 IR 21.

[10] He v Lewin [2004] FCAFC 161 [58].

[11] Ellawala v Australian Postal Corporation Print S5109 (AIRCFB, Ross VP, Williams SDP, Gay C, 17 April 2000) [34].

[12] [2015] FWCFB 2267.

[13] [2000] AIRC 1151.

[14] Double N Equipment Hire Pty Ltd v Humphries [2016] FWCFB 7206 [17].

[15] PR787777.

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