Fair Work Act 2009

s.394 - Unfair dismissal

Application for unfair dismissal remedy - whether termination a genuine redundancy - obligation to consult - small business dismissal code did not apply - redundancy not related to capacity or conduct - failure to consult - whether termination harsh, unjust or unreasonable - dismissal not unfair - application not dismissed.

[1] Mr Rajnesh Sharma (the Applicant) lodged an application on the 8 June 2020 for an unfair dismissal remedy under s 394 of the Fair Work Act 2009 (the Act). He disputed his termination of employment from GTS Australia (the Respondent).

[2] The Respondent raised two jurisdictional matters: that it was a genuine redundancy, and in the alternative, the Respondent contended that it is a small business employer and if not a genuine redundancy then the dismissal was consistent with the Small Business Fair Dismissal Code (the Code).

[3] A conciliation conference was held on the 2 July 2020, however the matter did not resolve. I issued directions on 21 July 2020 for submissions. The Respondent's material was due on 28 July 2020 and the Applicant's material was due on 11 August 2020. No material was received from the Applicant and an extension of one day was provided. The Applicant submitted his material the following day.

[4] A hearing by telephone was held on the 18 September 2020 where the Applicant represented himself and the Respondent was also self-represented. Mr Adam Stokes, the Corporate Manager for GTS, represented the Respondent.

[5] The Applicant entered into an agreement to sell his business to GTS Australia and enter into an employment agreement with the Respondent on 21 October 2018. The position was Customs Manager and paid a salary of $120,000 per annum, with a car allowance of $15,000. The Respondent is a customs clearance and transport provider.

[6] The Applicant performed work in the role during this period, however early in 2020, management identified the business was having some financial difficulties and these issues were exacerbated as a result of the COVID-19 pandemic.

[7] The business undertook a review of its operations and identified several cost savings. These included: one employee's salary package was reduced by $30,000; a Storeman in the warehouse was made redundant; and two administrative employees had their hours reduced. The Applicant was also made redundant.

[8] The Applicant had time off in January without pay which he volunteered to assist the business in its financial situation. He took further time off, some of it paid, during the first four months of the year.

[9] Mr Joseph Peter, the company CEO, telephoned the Applicant on 5 May to advise him that the business had made a decision to terminate his employment contract and make him redundant due to the financial stress on the business.

[10] The Applicant contends that the decision to make him redundant was based upon the fact that he had withdrawn his licence and had removed the other company employees from a Corporate Licence that the Applicant held for Customs Clearance.

[11] The Respondent contends that the termination of the Applicant's employment was a genuine redundancy and he was not unfairly dismissed. The Respondent further argues that their business is to be regarded as a small business under the Act, and as such the dismissal would be covered by the Small Business Fair Dismissal Code. Pursuant to s 396 of the Act, I am required to determine this question before considering the merits of the application. If the termination was a genuine redundancy, then that is the end of the matter. If the termination was not a case of genuine redundancy the question becomes whether the dismissal fell within the Small Business Fair Dismissal Code, or if it did not, whether the termination was harsh, unjust or unreasonable pursuant to s 387.

[12] A dismissal which is a genuine redundancy is not an unfair dismissal as per s 385 of the Act. The meaning of the term "genuine redundancy" is provided in s 389 which states:

(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."

[13] I am satisfied that the first limb of s389(1)(a) has been satisfied. The business did not require two brokers and decided to reduce by one broker. Further, other changes in the organisation demonstrated that the Respondent was identifying cost savings and he was not the only person to be made redundant. As previously mentioned, the Respondent had just made another employee redundant and also reduced another employee's salary by a significant amount and reduced hours of two staff. It is clear that the Applicants termination of employment arose from the restructure.

[14] The decision in Solari v RLA Polymers Pty Ltd [2010] FWA 5676 considers a redundancy where the employer closed one of its two plants and only one employee (a long-term employee of some 16 years) was made redundant. Sams DP found the respondent had a difficult choice to make on the basis of its operational requirements and its knowledge of the applicant's skills and experience, and ultimately dismissed the applicant. Sams DP said (my emphasis added):

"[15] It is perfectly understandable that the applicant would feel hurt, upset and even betrayed by the respondent's decision to make him - and only him - redundant. It is also understandable that he believes he has the skills to perform the work of the other permanent employees. Most employees after 16 years service would feel they have the experience and knowledge to perform work across the broad spectrum of a company's operations. This is a natural human reaction. However, when compared to others, this might not always be the reality. Ultimately however, it is the prerogative of Management to manage its business as it sees fit; subject to treating its employees fairly and honestly.

[16] Given the applicant's 16 years of loyal and conscientious service (which I accept unreservedly), and the respondent's genuine expressions of regret over the applicant's redundancy (which I also accept), I have a great deal of sympathy for the applicant. However, sympathy alone does not overrule the legal position or the policy intent of the Act, which denies access to an unfair dismissal remedy where an employee's termination of employment is a genuine redundancy, as defined. Any forced redundancy is always most regrettable and likely to have a severe impact on an employee and his/her family, particularly someone of the applicant's age. This is, after all, why all employees are protected, in part, by redundancy payments under their relevant Award or Agreement and why minimum redundancy standards are now a legislated feature of the National Employment Standards (NES). I have no doubt that the respondent acted appropriately in that regard and, in fact, provided a greater period of notice than the Award provides."

[15] Operational requirements is a broad term and involves the past and present performance of the business, the state of the market in which the business operates, steps that may be taken to improve efficiency by installing new processes, equipment or skills, or by arranging labour to be used more productively, and the application of good management to the business.

[16] In this case, there is evidence of a downturn in business, exacerbated by the onset of the COVID-19 pandemic. The Respondent was entitled to take steps to improve efficiencies, which in this case resulted in a redistribution of duties across the organisation, reduction of salary and hours of staff, and another redundancy. The Respondent considered its business position and determined that the other broker could absorb all of the work the Applicant had previously done. Unfortunately, this left no duties for the Applicant in his job to perform, as all these duties were now performed by other staff.

[17] It follows therefore that the Respondent no longer required the Applicant's role to be performed and that one broker was capable of performing the reduced workload. I consider that while the Applicant's duties survived, the Applicant's job was no longer required to be performed by anyone because of changes in the operational requirements of the Respondent's business.

[18] The next consideration is whether the Respondent complied with its award obligations to consult about the redundancy. Clause 38 of the Clerks - Private Sector Award 2020 (the Award) states:

"38. Consultation about major workplace change

38.1 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):

(c) the introduction of the changes; and

(d) their likely effect on employees; and

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

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

38.2 For the purposes of the discussion under clause 38.1(b), the employer must give in writing to the affected employees and their representatives (if any) all relevant information about the changes including:

(a) their nature; and

(b) their expected effect on employees; and

(c) any other matters likely to affect employees.

38.3 Clause 38.2 does not require an employer to disclose any confidential information if its disclosure would be contrary to the employer's interests.

38.4 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 38.1(b).

38.5 In clause 38 significant effects, on employees, includes any of the following:

(a) termination of employment; or

(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

(d) loss of, or reduction in, job tenure; or

(e) alteration of hours of work; or

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

(g) job restructuring.

38.6 Where this award makes provision for alteration of any of the matters defined at clause 38.5, such alteration is taken not to have significant effect."

[19] The Respondent had put the Applicant on notice in January 2020 that the business was under significant cost pressure and in fact the Applicant offered to take two weeks without pay to assist the Respondent's business. The crisis deepened for the Respondent as the COVID-19 pandemic struck. The Respondent had undertaken several cost saving measures as previously catalogued. In a meeting early in May between Mr Adam Stokes and Ms Carol Phipps, they reviewed the brokers' performance and identified that Mr Sharma had processed 19% of the broker business, with the other broker processing the balance. This led them to the conclusion that with the downturn in business, they would be able to manage with only one broker. Unfortunately, this was presented to Mr Sharma as a fait acompli and in a phone call from the CEO, Mr Peter, he was told he was to be made redundant. There was no consultation as required under clause 38 of the Award.

[20] The evidence of the Applicant was that he was aware of the business's difficulties, however he was not consulted about the decision to terminate his employment by way of redundancy. The Respondent gave evidence that they did consider alternative roles in the organisation and they credibly provided testimony that unfortunately they could not identify any suitable option. The missing piece is they did not advise him of the potential decision and provide him an opportunity to respond.

[21] The Respondent flagged a jurisdictional objection on the basis that the redundancy was a genuine redundancy. The onus of establishing that this is factual is with the Respondent. They did satisfy me that the redundancy was a result of the business restructuring after facing significant cost pressures and they did attempt to identify an alternative role. However, they do not satisfy the criteria under s 389(1)(b) of the Act. They did not comply with the requirements to consult. In this case the redundancy cannot be considered genuine for the purposes of s 389 and I dismiss the objection.

[22] I now turn to the second jurisdictional objection that they are a small business and complied with the Code.

[23] The Small Business Fair Dismissal Code is set out under s 388 of the Act, which provides:

(1) The Minister may, by legislative instrument, declare a Small Business Fair Dismissal Code.

(2) A person's dismissal was consistent with the Small Business Fair Dismissal Code if:

• (a) immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happened first), the person's employer was a small business employer; and

• (b) the employer complied with the Small Business Fair Dismissal Code in relation to the dismissal."

[24] There is no dispute that, in accordance with s 23 of the Act, the Respondent is a small business employer, employing less than 15 employees at the time of the Applicant's dismissal. The Respondent contends that they rely upon the provisions of the Code as an alternative basis for the contention that the Applicant was not unfairly dismissed. I now examine the Code and whether it applies to the Respondent and provides an alternative jurisdictional objection.

[25] The Code provides:

The Small Business Fair Dismissal Code comes into operation on 1 July 2009.

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.

In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee's conduct or capacity to do the job.

The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.

The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee's response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer's job expectations.

In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.

A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements."

[26] If the dismissal is consistent with the Small Business Fair Dismissal Code, it is not an unfair dismissal and the application is dismissed. If the dismissal is not consistent with the Code, then s 387 comes to bear and I must consider whether the termination was harsh, unjust, or unreasonable.

[27] The Code only offers two options for dismissal: either it is for conduct or capacity. Further, the reason provided for the termination by the employer must be nominated by the employer and provided to the employee. The reason must be a valid one and there is no option to for the employer to rely upon facts at the time but not identified as the reason for the dismissal unlike the provisions in s 387(a).

[28] The Code does not foreshadow redundancy as a reason for dismissal. In Iannello v Motor Solutions Australia Pty Ltd 7 [2010] FWA 3125, Watson VP held that the Small Business Fair Dismissal Code does not deal with termination on the ground of redundancy.

[29] The Respondent provided the form (Small Business Checklist), however did not provide any evidence that they used the Code to guide them through the dismissal process. No evidence was led that the Respondent was mindful of the Code or any evidence other than already provided for the merits of the Unfair Dismissal application.

[30] I find that the dismissal of the Applicant relates specifically to the position being made redundant and not to the Applicant's conduct or capacity. Therefore, the Small Business Fair Dismissal Code is not applicable to this dismissal.

[31] I now examine the application of s 387 to this matter.

Whether the dismissal was harsh, unjust or unreasonable

[32] In considering whether a dismissal is harsh, unjust or unreasonable, FWA must consider the factors set out in s 387 of the Act. That section provides as follows:

In considering whether it is satisfied that a dismissal was harsh,

unjust or unreasonable, FWA must take into account:

(a) whether there was a valid reason for the dismissal related to

the person's capacity or conduct (including its effect on the

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to

any reason related to the capacity or conduct of the person;

(d) any unreasonable refusal by the employer to allow the person

to have a support person present to assist at any discussions

(e) if the dismissal related to unsatisfactory performance by the

person - whether the person had been warned about that

unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer's enterprise

would be likely to impact on the procedures followed in

(g) the degree to which the absence of dedicated human resource

management specialists or expertise in the enterprise would

be likely to impact on the procedures followed in effecting

(h) any other matters that FWA considers relevant."

[33] The employer bears the onus of establishing that there was a valid reason for a dismissal.[1] A valid reason for dismissal is one that is "sound, defensible or well founded" and not "capricious, fanciful, spiteful or prejudiced."[2] The reason for dismissal must also be defensible or justifiable on an objective analysis of the relevant facts,[3] and validity is judged by reference to the Tribunal's assessment of the factual circumstances as to what the employee is capable of doing or has done.[4] The matters in s 387 go to both substantive and procedural and substantive fairness and it is necessary to weigh each of those matters in any given case, and decide whether on balance, a dismissal is harsh, unjust or unreasonable.

[34] A dismissal may be:

• Harsh - because of its consequences for the personal and economic situation of the employee, or because it is disproportionate to the gravity of the misconduct;

• Unjust - because the employee was not guilty of the misconduct on which the employer acted; and/or

• Unreasonable - because it was decided on inferences that could not reasonably have been drawn from the material before the employer.

[35] I have determined that the Respondent no longer required the Applicant in his role and as a result in the downturn of business they decided to make him redundant. I find that there was a valid reason for the termination of employment in accordance with subsection (a).

[36] There was an obligation under the Clerks Award - Private 2020 that there be a process of consultation. The Award does not specify how long this process should take or what form it should be in, but as Watson VP stated in Maswan v Escada [2011] FWA4239:

"[19] These provisions are of long standing, emanating from the Termination, Change and Redundancy test case in the early 1980s and from time to time have been reflected in legislation. The requirement to discuss proposed changes and consult about the changes has been held to require meaningful consultation and not merely an afterthought. Consultation after an irrevocable decision has been made has been held to not amount to meaningful consultation.

[20] As Sachs LJ observed in Sinfield v London Transport Executive [1970] [at 558]:

'Consultations can be of very real value in enabling points of view to be put forward which can be met by modifications of a scheme and sometimes even by its withdrawal. I start accordingly from the viewpoint that any right to be consulted is something that is indeed valuable and should be implemented by giving those who have the right an opportunity to be heard at the formative stage of proposals - before the mind of the executive becomes unduly fixed.'"

[37] Later in his decision, Watson VP found that a redundancy will only fall foul of s 394 if the rationale for the decision is seriously undermined or if there is a serious procedural error in effecting the dismissal. Watson VP specifically considered redundancy, finding that a failure to consult may not necessarily mean a dismissal is unfair:

"[39] In my view a decision to dismiss on account of redundancy will only be harsh, unjust or unreasonable if the rationale for the decision is seriously undermined or if there is a serious error in procedure such that renders the termination unfair in the circumstances. Here the decision appears open to the employer to make. The failure to consult is not a trivial matter. But as it is clear that consultation was highly unlikely to have negated the operational reasons for the dismissal or lead to any other substantive change, I do not believe that the failure to consult prior to the date of termination rendered the dismissal unfair. Given the evidence in relation to the operational need to restructure, I am of the view that it is likely that Mr Maswan would have been dismissed in any event, even if timely consultation had occurred."[5]

[38] There was a definite decision made by management on 5 May 2020 to make the Applicant redundant. Further, that decision was conveyed to the Applicant via a telephone call from the CEO, and then later through an emailed letter outlining the decision and his entitlements. There was no consultation on the matter. The Applicant was not aware that his position may be made redundant and no opportunity was afforded to him to respond with alternatives. I do acknowledge that the Respondent did look to alternative roles within the organisation, but not surprisingly in such a small organisation, they were not able to find an alternative role for redeployment.

[39] Notwithstanding the Respondent's genuine efforts to identify an alternative role the Applicant was not consulted. I am not satisfied that the Applicant was given an opportunity to respond to the reason for his dismissal. Therefore subsections (b) and (c) were not complied with.

[40] I find that s387 (d) and (e) are not relevant**.** The small size of the organisation does inform the light process and lack of expertise that might be brought to bear on the matter, subsection (f) and (g) and I provide some latitude in the decision for this fact.

[41] I have regard to subsection (h) and find that although the Respondent could have consulted over the proposal to make the Applicant redundant that the outcome would not have changed. The business was under cost pressure and through a series of cost cutting measures were attempting to run a lean operation that would survive the downturn in business. Even if there had been a period for consultation the opportunity to identify another alternative seems extremely limited. The decision to make the Applicant redundant was a rational one.

[42] Whilst the decision to make the Applicant redundant was a rational one the lack of consultation was a significant flaw in the process having regard that it was an Award provision. The outcome may not have varied a great deal from the ultimate outcome but that should not be a reason to avoid the process of consultation.

[43] However, that being said, any consultation had little chance of changing the outcome. The organisation did not have many alternative roles that they may have been able to deploy the Applicant into. The redundancy was fairly based upon a restructure and although the lack of consultation is not an insignificant matter, ultimately it would have not negated the outcome. I consider that the lack of consultation does not in this case render the termination of the Applicant's employment unfair. It is clear to me that on the evidence provided by the Respondent that they would have dismissed the Applicant in any event, even if there was a consultation process.

[44] I have considered the Applicant's contention regarding the issues surrounding his corporate licence. The scope of the Commission to consider those matters is limited to how it is applicable to the Act and in this case, whether the dismissal was unfair. While there may be some ancillary claim existing in contract, or otherwise, it does not change the fact that there was a valid reason to dismiss the Applicant.

[45] Taking all the evidence into consideration, I am not satisfied that the termination of Mr Sharma's employment was harsh, unjust or unreasonable.

[46] For the reasons above I find that Mr Sharma's dismissal is not harsh, unjust or unreasonable as the decision was grounded in a business decision to restructure as part of a cost savings initiative that affected a number of employees. The lack of consultation would not have led to another outcome had there been a process of consultation. I find that the failure to consult does not render the dismissal as unfair.

[47] I dismiss the application.

Mr Rajnesh Sharma, on his own behalf as the Applicant

[1] Allied Express Transport Pty Ltd v Anderson (1998) 81 IR 410 at 5; Yew v ACI Glass Packaging Pty Ltd (1996) 71 IR 201 at 204.

[2] Selverchandron v Peteron Plastics Pty Ltd [1995] IRCA 333; (1995) 62 IR 371 at 373.

[3] Rode v Burwood Mitsubishi Print R4471 at [90] per Ross VP, Polites SDP, Foggo C.

[4] Miller v University of NSW [2003] FCAFC 180 at pn 13, 14 August 2003, per Gray J.

[5] Maswan v Escada Textilvertrieb t/a ESCADA [2011] FWA 4239 at 39.

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