Phillip Seitz v Ironbay Pty Ltd t/a City Beach IGA [2018] FWCFB 1341

Phillip Seitz v Ironbay Pty Ltd t/a City Beach IGA [2018] FWCFB 1341 - FWCFB 2018 case summary — Zoe

[6]

[1] Mr Phillip Seitz has applied for permission to appeal and appealed a decision of Deputy President Binet issued on 22 December 2017[1] (Decision) pursuant to s 604 of the Fair Work Act 2009 (FW Act). In the Decision, the Deputy President determined that Mr Seitz had been dismissed from his employment with Ironbay Pty Ltd trading as City Beach IGA (City Beach IGA), that the dismissal was unfair, that the remedy of reinstatement together with an order maintaining the continuity of Mr Seitz's employment should be granted, but that no order should be made restoring remuneration lost by Mr Seitz as a result of his dismissal. The Decision was accompanied by an order[2] (Order) giving effect to the Deputy President's determination of the remedy to be granted in respect of Mr Seitz's unfair dismissal. Mr Seitz's appeal challenges the Decision insofar as he was granted reinstatement rather than compensation as a remedy.

[2] Mr Seitz was employed as a full-time butcher by City Beach IGA, a franchised supermarket, on 1 December 2014. Mr Yuhai (Jack) Cao was the owner-manager of the business. On 24 January 2017 he was involved in a verbal altercation with a recently-dismissed employee of City Beach IGA. Mr Seitz was unhappy with the way in which Mr Cao dealt with this incident and consequently tendered a written resignation on 25 January 2017. Notwithstanding this, the employment continued, and the Deputy President found that the conduct of the parties was consistent with the resignation having been withdrawn or revoked.[3] On 17 April 2017 Mr Seitz went off work because of illness. On Friday 5 May 2017 Mr Seitz sent a text message to Mr Cao indicating that he would be fit to return to work on Monday 8 May 2017. Later that day and on the following Saturday and Sunday there were a number of text messages exchanged between Mr Seitz and Mr Cao. In Mr Seitz's part, he indicated several times that he would be happy for Mr Cao to terminate his employment and pay him what he was owed, but in subsequent messages denied that this constituted a resignation and stated his willingness to attend work. Mr Cao directed Mr Seitz to attend the workplace at 11.00am on 5 May 2017 for a meeting, but following a large number of further texts from Mr Cao (the Deputy President's findings concerning which are discussed below), Mr Seitz formed the view that he was not comfortable attending the meeting and asked Mr Cao to raise anything he wished to discuss in an email. Mr Cao then purported, by text, to accept Mr Seitz's resignation. In subsequent text exchanges, Mr Seitz denied that he had resigned and stated that he regarded himself as having been dismissed. The employment did not continue beyond that point.

[3] Mr Seitz filed his unfair dismissal application on 15 May 2017. He returned to the workplace to retrieve his belongings on 26 May 2017. The evidence he gave about this in his witness statement dated 14 September 2017, which was received into evidence by the Deputy President, was as follows:

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[5] Although Mr Seitz's appeal is concerned only with the issue of remedy, it is important for reasons which are explained later to note initially a number of relevant factual findings which the Deputy President made in connection with her earlier findings that Mr Seitz had been dismissed and the dismissal was unfair. These findings were as follows:

• Mr Seitz had obtained a new job as a butcher with P Princi Food services on 18 July 2017.[4]

• Mr Seitz was absent from work on sick leave, supported by medical certificates, from 18 April 2017 until 5 May 2017 inclusive. Mr Seitz attributed his illness to stress arising from unreasonable work demands imposed on him by Mr Cao.[5]

• Between 4.27pm on Friday 5 May 2017 and 11.33am on Sunday 7 May 2017 (including on Saturday evening and in the early hours of Sunday morning), Mr Cao sent Mr Seitz 33 text messages, which at best could be characterised as nuisance texts and at worst might be perceived as containing an implied threat. On multiple occasions Mr Seitz asked Mr Cao to stop texting him.[6]

• Mr Seitz interpreted Mr Cao's repeated message that "friends" were waiting for him upon his return to work as a veiled threat, and this together with Mr Cao's unreasonable refusal to allow him a support person and Mr Cao's "spam-like texting" made it not unreasonable for Mr Seitz to be reluctant to attend a meeting scheduled with Mr Cao on 8 May 2017.[7]

• Mr Cao alleged in the proceedings that Mr Seitz had been stealing from the business, but did not produce the video evidence which he said supported this, and did not raise this allegation until he filed the initial employer response to Mr Seitz's unfair dismissal application. Mr Cao reported this allegation to the police, who advised Mr Seitz that he had no case to answer. It was not accepted that Mr Cao believed on reasonable grounds that Mr Seitz engaged in conduct sufficiently serious to justify summary dismissal, nor that there was a valid reason for Mr Seitz's dismissal.[8]

• City Beach IGA employed five full-time employees and five casual or part-time employees immediately before the dismissal, and was thus a small business employer within the meaning of s 23 of the FW Act.[9]

• City Beach IGA had no dedicated human resources management or specialist.[10]

[6] In the Deputy President's consideration of remedy, she began by considering the remedy of reinstatement, and cited two Full Bench authorities bearing on the principles to be applied. The Deputy President then said:

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[9] Mr Seitz also contended in his notice of appeal that it would be in the public interest to grant permission to appeal because Mr Cao had "broken the law and continues to do so", had similar cases with multiple workers, had failed to communicate, engaged in bullying behaviour, failed to provide regular or correct payslips and failed to provide a safe work environment.

[10] It was submitted in the appeal on Mr Seitz's behalf that:

the grant of permission to appeal would be in the public interest because the remedy ordered by the Deputy President was counter-intuitive in circumstances where there had been a clear loss of trust and confidence in the employment, and also because the appeal raised issues of broader importance and the legal principles applied in the Decision were disharmonious with other decisions dealing with similar matters;

the loss of trust and confidence was demonstrated by Mr Cao's condition that stolen property be returned before Mr Seitz came back to work and the harassing text messages he had sent to Mr Seitz, but these matters had not been considered in the Decision;

the Deputy President had also not considered that Mr Cao was an employee in a business with only five full-time employees in which a close working relationship was required and trust and confidence would be required;

the Deputy President also did not address the issue of underpayment of wages and the lack of appropriate payslips;

in respect of the refusal to make an order for lost remuneration, Mr Seitz was vindicated on any wrongdoing in the Decision and thus there was no basis to take into account that he invited Mr Cao to terminate his employment; and

the issue of the financial viability of City Beach IGA, upon which the Deputy President also relied in refusing to make an order for lost remuneration, was never raised by City Beach IGA in the proceedings.

[11] City Beach IGA submitted:

the question of whether to order a remedy in a case of unfair dismissal was a discretionary one, and the grant of a remedy was not automatic or a right;

reinstatement remained the primary remedy for unfair dismissal, and compensation should not be ordered simply because reinstatement might prove to be difficult, awkward or embarrassing;

the reluctance of an employer to shift from a view that an employee had committed misconduct, despite the Commission's assessment that the employee was wrongly dismissed, does not provide a sound basis to conclude that the relationship was no longer viable;

here, the evidence demonstrated that City Beach IGA was prepared to take back Mr Seitz as an employee;

the arguments advanced in support of the appeal were mainly an attempt to re-argue the case put before the Deputy President and seek a different outcome;

it was not open to the Full Bench in the absence of identified appealable error to substitute its view as to remedy for that determined by the Deputy President;

merely because Mr Seitz wanted compensation as a remedy did not make reinstatement inappropriate; and

the public interest test for the grant of permission to appeal was not satisfied.

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[14] Section 392 deals with the power to make an order for compensation in circumstances where the Commission is satisfied, pursuant to s 390(3)(a), that reinstatement is inappropriate.

[15] The principles applicable to the proper interpretation and application of ss 390 and 391 were summarised in the Full Bench decision in Nguyen v Vietnamese Community in Australia.[13] Relevantly, those principles may be summarised as follows:

• The question whether to order a remedy where a dismissal has been found to be unfair remains a discretionary one, and it may be open to exercise the discretion by not ordering any remedy at all.[14]

• Section 390(3) underscores the primacy of reinstatement as a remedy for an unfair dismissal as the discretion to order a remedy of compensation may only be exercised if the Commission is satisfied that reinstatement is "inappropriate".[15]

• To describe reinstatement as the "primary remedy" is to simply recognise that reinstatement is the first, perhaps even the foremost, remedy under the FW Act.[16]

• The relevant question in determining whether to grant the remedy of reinstatement of an employee in relation to a dismissal that is found to have been "unfair" is whether reinstatement is appropriate in the particular case.[17]

• Consideration as to whether reinstatement is appropriate involves the assessment of a broader range of factors than practicability.[18]

• Reinstatement might be inappropriate in a whole range of circumstances, including that it would be futile such as where it would almost certainly lead to a further dismissal because a post-termination discovery of serious misconduct on the part of the employee, or where the employer no longer conducts a business into which the employee may be re-appointed, or if the employee is incapacitated because of illness or injury (although the weight to be accorded to ongoing incapacity will depend upon all of the circumstances of the case).[19]

• The fact that the employer has filled the position previously occupied by the dismissed employee would rarely, of itself, justify a conclusion that reinstatement was not appropriate.[20]

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➢ The fact that it may be difficult or embarrassing for an employer to be required to re-employ an employee whom the employer believed to have been guilty of serious wrongdoing or misconduct are not necessarily indicative of a loss of trust and confidence so as to make restoring the employment relationship inappropriate.[21]

[16] When the issue of an asserted loss of trust and confidence is considered in the context of the appropriateness of reinstatement, it is important to note that this does not concern the broadly-formulated implied mutual duty of trust and confidence that was rejected by the High Court in Commonwealth Bank of Australia v Barker[22], nor the narrower and long-established employee's duty of trust and confidence[23], but rather to "that which is essential to make an employment relationship workable."[24] Kiefel J (as her Honour then was) characterised the employee's duty of trust and confidence as reflecting "... an essential aspect of the relationship between employer and employee. Whilst trust and confidence is maintained, the relationship endures".[25] It is this essential element of a viable working relationship which arises for consideration in the context of s 390. As a practical matter relevant to whether reinstatement is the appropriate remedy we consider that, while a loss of trust and confidence is usually asserted by the employer, it could equally be relied upon by an unfairly dismissed employee as a reason why reinstatement would not be appropriate and an award of compensation in lieu should be determined. Particularly in a small workplace where viable personal relationships between employees and the employer (or the employer's personal emanation) are critical, it seems to us that a rationally-based and well-founded loss of trust and confidence in the employer on the part of an unfairly dismissed employee may well constitute a significant practical impediment to the re-establishment of a viable employment relationship.

[17] The consideration for the purpose of s 390(3)(a) as to whether reinstatement is appropriate, and the general decision-making process as to whether an order of reinstatement (and any ancillary orders under s 391) should be made, involves the exercise of a discretion. In an appeal from such a decision, it is necessary for the appellant to demonstrate appealable error, and the type of error that might be demonstrated are those identified in House v The King[26] - namely that the decision-maker has acted on a wrong principle, has been guided or affected by extraneous or irrelevant factors, has mistaken the facts, or has failed to take into account some material consideration.[27]

[18] In this matter, whether Mr Seitz had sufficient trust and confidence in Mr Cao such as to permit the restoration of a viable working relationship was clearly the critical consideration in the assessment of whether reinstatement was appropriate. We consider that in making that assessment the Deputy President erred by failing to take into account a number of relevant considerations. We have earlier in our decision (at paragraph [5]) set out a number of findings made by the Deputy President in the Decision in relation to the questions of whether there had been a dismissal and whether the dismissal was unfair. They included that City Beach IGA was a small business with only about 10 employees and had no internal human resources expertise, that Mr Seitz had been off work for some weeks prior to his dismissal because of an illness which he attributed to stress caused by Mr Cao's behaviour, that immediately before the dismissal Mr Cao had harassed Mr Seitz with a series of text messages which were at best a nuisance and at worst might be perceived as containing an implied threat, and that it was not unreasonable for Mr Seitz to refuse to attend a face-to-face meeting with Mr Cao. In the circumstances of a working relationship in which Mr Seitz would, upon reinstatement, have to work directly under the management and supervision of Mr Cao, these were all matters which were highly relevant to whether there could be sufficient trust and confidence for such a working relationship to be viable. They all suggested that there had been a complete breakdown in the personal relationship between Mr Seitz and Mr Cao, but none of these matters was taken into account by the Deputy President in determining whether reinstatement was appropriate.

[19] An additional finding referred to in paragraph [5] above was that, for the purpose of the Small Business Fair Dismissal Code, it was not accepted that Mr Cao held a reasonable belief that Mr Seitz had engaged in conduct sufficiently serious to justify summary dismissal. The alleged conduct in question was that Mr Seitz had committed multiple acts of theft from City Beach IGA. The Deputy President's reasoning in reaching that conclusion makes it clear that not only did she not accept that the holding of a belief that Mr Seitz had engaged in such conduct was reasonable, but she also did not accept that Mr Cao actually held such a belief at the time of the dismissal at all (despite him having said that he discovered the thefts prior to the dismissal). In this respect the Deputy President said:

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[20] The implication of this finding is clear: that Mr Cao did not actually believe the allegation of theft he advanced against Mr Seitz in the proceedings. That was a matter of clear relevance to whether Mr Seitz could have sufficient trust and confidence in Mr Cao such as to permit the restoration of a viable working relationship, but was not taken into account by the Deputy President in her assessment of the appropriateness of reinstatement.

[21] The Deputy President did consider Mr Cao's statement in the proceedings that reinstatement was appropriate if Mr Seitz did not bully other employees, did his job properly and did not steal.[28] The Deputy President did not regard that statement as an impediment to reinstatement on the basis that Mr Cao "must have accepted" that Mr Seitz had been "vindicated" in relation to the allegations of theft against him because he was prepared to "welcome Mr Seitz back to work".[29] It was not reasonably open to the Deputy President to reach that conclusion for two reasons. First, Mr Cao did not know the outcome of the proceedings when he made that statement, so he could not have known Mr Seitz would be vindicated. Second, Mr Cao also said in the proceedings that "I understand the business really need some good employees, so if he want to come back I want him first return the stolen property that's...".[30] That is, Mr Cao was purporting to condition Mr Seitz's return to work on him returning stolen property - in circumstances where he had not stolen anything and the Deputy President had found that Mr Cao did not reasonably believe that he had. This evidence, which tends to demonstrate a lack of genuineness or credibility on the part of Mr Cao, was not taken into account by the Deputy President.

[22] The Deputy President also did not take into account or make findings in relation to the evidence of Mr Seitz which we have set out in paragraph [3] above concerning when he returned to the workplace after his dismissal to collect his belongings. That evidence, if accepted, would demonstrate that Mr Cao engaged in behaviour intended to degrade and humiliate Mr Seitz at a time after Mr Seitz had lodged his unfair dismissal application, and would further tend to suggest that there was no basis upon which Mr Seitz could have any trust and confidence in Mr Cao as the personal emanation of City Beach IGA if reinstated.

[23] In assessing the appropriateness of reinstatement, the Deputy President proceeded on the assumption of "a positive approach on both sides".[31] However the various matters identified above which the Deputy President failed to take into account demonstrate that there was no basis to make that assumption, and tend to demonstrate that Mr Cao's behaviour towards Mr Seitz meant that there was no reasonable possibility that they could work productively together in the future. The assumption upon which the Deputy President proceeded was apparently derived from the Full Bench decision in Regional Express Holdings Ltd t/as Rex Airlines v Richards.[32] The Full Bench made that assumption[33], but in the context of a large corporate employer with, presumably, internal human resources expertise. It would not necessarily be safe to make such an assumption in the context of a small business requiring a direct working relationship between the owner-manager and the dismissed employee, and impossible to make the assumption on the facts of this case.

[24] Finally, the Deputy President did not take into account that, well before the time of the hearing, Mr Seitz had found alternative employment. In assessing whether reinstatement is an appropriate remedy, it is obviously relevant as to whether the dismissed employee has obtained alternative employment. Where that new employment is satisfactory to the employee, it will be no remedy at all to reinstate the employee to the pre-dismissal employment to which the employee, for well-founded reasons, has no desire to return. It may be accepted that the fact that an applicant employee does not seek the remedy of reinstatement does not, by itself, necessarily make the grant of reinstatement as a remedy inappropriate. The primacy of the remedy of reinstatement in the sense discussed in Nguyen requires consideration of the appropriateness of reinstatement whether the applicant seeks it or not. However the matters identified above which the Deputy President failed to take into account all strongly tend to demonstrate that reinstatement in this case was inappropriate.

[25] We conclude therefore that the Deputy President's assessment of whether reinstatement was appropriate was attended by appealable error which caused the exercise of the discretion to miscarry. In those circumstances, it is not necessary to consider to any substantial degree the Deputy President's reasoning and conclusion in respect of her refusal to make an order for lost remuneration, since as earlier explained the power to make such an order is dependent upon the making of an order for reinstatement. It is sufficient to observe that in refusing to make that order, the Deputy President took into account "the impact of an order for back pay on the viability of a small business".[34] There was no evidence or even a submission advanced by City Beach IGA that an order for lost remuneration would adversely affect its viability. The Deputy President therefore erred in taking this matter into account.

[26] This appeal is one to which s.400(1) of the FW Act applies. It provides:

At a glance

Court

Decision date

Source

Judgment (69 paragraphs)

Phillip Seitz v Ironbay Pty Ltd t/a City Beach IGA [2018] FWCFB 1341 (12 March 2018)

Parties

Legislation Cited (1)

Cases Cited (5)