s.394 - Unfair dismissal

• [1] On 2 February 2025 Mr Robert Corney made an unfair dismissal application under s.394 of the Fair Work Act 2009 (the Act) to the Fair Work Commission (the Commission) in relation to his dismissal by AJL Industries Pty Ltd. In seeking an unfair dismissal remedy Mr Corney alleges that his dismissal on 15 January 2025 was unfair.

• [2] AJL Industries Pty Ltd (AJL) submit that it is a small business and as Mr Corney did not meet the minimum employment period, the Commission has no jurisdiction to hear the substantive application. AJL submit that Mr Corney's employment commenced on the day it purchased the business, that being either on 27 or 28 September 2024 and the dismissal took effect on 15 January 2025, which is a period of less than 12 months service and less than the minimum employment period required by the Act's unfair dismissal protections.

• [3] Further AJL object to the application submitting that the dismissal was a genuine redundancy and as a small business it took steps to ensure its process complied with the Small Business Fair Dismissal Code.

• [4] Both parties were self-represented. Mr Corney appeared for himself. Mr Adam Lacey, owner presented evidence and Ms Tanya Lacy who held the unpaid position of bookkeeper, administration presented witness evidence.

• [5] AJL submit that it purchased the business on 27 September 2024. The café is 80 square metres and seats 20 people. Mr Adam Lacy is the owner and a 22-year-old business investor. Mr Lacy submits that when he purchased the business from Tasty Trading Pty Ltd, the contract of sale did not make provision for the transfer of employment entitlements for Mr Corney who was the only full-time employee of Tasty Trading when he negotiated the sale of the business.[1] Mr Lacy further submits that he is aware that Tasty Trading paid out all entitlements to Mr Corney and there is no continuous service following the purchase of the business to include the period of employment with Tasty Trading from 2022. Mr Lacy submits that he employed Mr Corney, and while there is no written contract, the verbal employment contract confirmed a new contract and he asserts that Mr Corney was verbally informed that his prior service with the old employer would not be recognised.[2] Mr Corney was employed as café chef on a salary of $77,064 per year plus superannuation.

• [6] AJL submit that Mr Corney was initially employed as the café chef but his salary increased significantly to $84,968 ($43 per hour and a package of $94,739.32 per annum inclusive of superannuation) when he presented himself as a person capable of personal growth and to seize the business growth opportunity in the business. This resulted in the negotiated substantive position of café manager, although responsibility for the kitchen was also retained. Mr Lacy submits that he offered the role to Mr Corney because he presented himself as a capable and experienced manager and due to his own inexperience (he admits to not being a chef, cook or barista), he relied on Mr Corney to manage the business. AJL submits that Mr Corney knew that he was subject to a probation period once employed by AJL and on accepting the role of manager, the probation period was reset.

• [7] By late November 2024 the business was experiencing serious financial losses. Mr Corney's idea for burger nights each Thursday, Friday and Saturday together with 7-day trading where excessive staff numbers were rostered on the quietest days, all contributed to major financial losses. Mr Corney admitted having suspected a loss of $10,000 in 2024 but was corrected that the loss amounted to $40,000. Nevertheless, it was obvious to Mr Corney the business was "haemorrhaging" as he describes it. Mr and Ms Lacy were forced to negotiate payment terms with suppliers, and this was a direct result of Mr Corney's challenges with ordering (which he admitted to Mr Lacy).[3]

• [8] Over the Christmas period, Mr Lacy took drastic steps to evaluate the business financials line by line to pinpoint the causes for the losses as there was no action taken by Mr Corney to do so as manager. Instead of taking the matter seriously, in Mr Lacy's view, Mr Corney commented that losing money in a new business was expected.[4] AJL submits that numerous emails had been sent from Mr Lacy, that there were discussions between Mr Lacy and Mr Corney and there were text conversations regarding the need to restructure the business. This meant reverting to a 5-day trade from 7, pulling back hours of work by staff and reducing costs.

• [9] On 29 December 2024, Mr Lacy sent to Mr Corney an email containing a document as a checklist for general operational improvements for 2025, a confidential spreadsheet providing roster guidelines to reduce cost and a work arrangement module to guide expectations and expected standards. He submits this material shows that Mr Corney was clear on the need to address operational costs and the resulting processes was to be followed with his input. This email was followed up with a telephone discussion on the same day where Mr Corney was advised that 5-day trading would commence on 8 January 2025. Despite these efforts, Mr Lacy submits that Mr Corney pushed back stating "it wouldn't work." Mr Lacy gave evidence of face to face discussions on 3 and 7 January 2025 including the texts and emails because of loss of profit due to mismanagement for which Mr Corney was responsible.[5] Mr Lacy further gave evidence of Mr Corney's threat that should he be returned to his previous role at $75,000 per year he would be walking out the door.[6] AJL submits that the reason for letting Mr Corney go was because it could not afford his position and his management methods thereby requiring a restructure of the business for financial reasons.

• [10] Despite these discussions, Mr Lacy contends that Mr Corney was often rude to him and refused to address cost blowouts resulting in significant financial strain on the business. The examples of costs and wastage not addressed by Mr Corney included ordering for a 7-day operation even though it reverted back to 5 days, over staffing, failure to manage inventory and abuse of overtime.

• [11] AJL submits that Mr Corney's position of café manager was not replaced, but after his departure the burger chef transferred from casual to fulltime work in the role of café chef. AJL also submit that Mr Lacy now does all of the front of house ordering, the cleaning, rostering and communicates directly with staff. Consequently, the absence of a manager shows there is no need for one.

• [12] Alternatives to redundancy were considered and AJL invited Mr Corney to offer solutions to rein in costs, reduce staffing and contain further costs, but he indicated that he couldn't see how it was possible, including the limited work hours proposed. AJL submit that Mr Corney was clear that if he was required to return to a salary of $75,000 per annum it would lead to him walking from the business. It submitted that Mr Corney further advised that reducing trading to 5 days was unpalatable in so far as the consequent reduction in salary to reflect 5 days' work. Consequently, AJL determined that the business could no longer financially support Mr Corney's role as manager on a package of $95,000.[7]

• [13] The Applicant submits that he commenced employment with Tasty Trading on 1 November 2022 and pursuant to s.311 of the Act there was a transfer of business from the old employer to the new employer and therefore his probation period should not have been reset. He submits that his employment transferred when he ceased employment with Tasty Trading and his work as head chef with the new employer was substantially the same as the work he performed for the old employer, except for its enhanced role as manager.[8]

• [14] Mr Corney gave evidence that the old employer sold the building and some months later sold the business. The business was sold to AJL Industries Pty Ltd. The trading name of the café - Greenwich Deli remained the same after the sale of the business. He describes the business as a café / sandwich bar. Mr Corney purports that the old employer did not terminate his employment and that his employment was seamlessly transferred with the sale of the business. He adds that it was in approximately November 2024 when he and Adam Lacy discussed whether his probation period would be reset, and he submits that he was not advised that his employment with Tasty Trading would not be recognised.

• [15] Mr Corney submits that he did not have a written contract of employment with either the old or new employer. However, following a conversation with Mr Lacy where he revealed his salary of $74,100 with Tasty Trading, AJL then offered him employment commencing on either 27 or 28 September 2024 on the same rate. However, the evidence regarding salary is contrary to Mr Corney's oral evidence.

• [16] Mr Corney submits that Mr Lacy was inexperienced in the hospitality industry and given his experience in hospitality and with Greenwich Deli, it was agreed that he manage the business[9] "with Adam Lacy providing support from the side" (not in the business). This promotion to head chef and manager occurred on 14 October 2024 at a salary of $84,968.00 per annum plus superannuation and the evidence shows that this rate continued until the termination of employment on 15 January 2025.

• [17] Mr Corney describes his role as the only full-time employee working 38 hours with the support of 5 casual staff. He submits that there was no assistant manager or sous chef to assist him, therefore the whole business front of house, kitchen and management of the business became his responsibility. Mr Corney likened his role to that of the previous owner, noting that he lacked a full-time chef or an assistant manager.

• [18] Mr Corney acknowledged that on 29 December 2024 that he received an email containing a spreadsheet of business costings from Mr Lacy but says that this was the first time he received written material regarding costings. He points out that the rosters clearly identify his role as head chef and manager, thus his role was not limited to manager duties. He further confirms that meetings occurred and on 3 January where he says they had a discussion about reducing trading days, and on 7 January where he raised with Mr Lacy the need for further support with additional resources. When this was refused, following a robust discussion and refusal to return to the earlier position at the same rate, they allegedly agreed to a salary of $80,000 per annum. He submits that his role was still an expanded and "significant" role rather than the previous head chef role.

• [19] Mr Corney refutes that his role was made redundant because AJL have engaged the chef that he employed and trained to perform his former role of head chef on allegedly $39 per hour.[10] Mr Corney submits that he was unaware that his job was made redundant until the correspondence received from AJL with the offer to resolve the dispute.

• [20] The Commission can order a remedy for unfair dismissal if it is satisfied that an applicant was protected from unfair dismissal and is unfairly dismissed.[11] Sections 382 and 383 of the Act provides that a person is protected from unfair dismissal if they have completed a minimum employment period of 12 months if a small business employer, or six months if not a small business employer. A small business employer is defined as a business with 15 or fewer employees. AJL submit they are a small business employer, therefore the minimum employment period in this matter is twelve months.

• [21] The relevant sections of the Act are:

"382 When a person is protected from unfair dismissal

A person is protected from unfair dismissal at a time if, at that time:

(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and

(b) one or more of the following apply:

1. a modern award covers the person;
2. an enterprise agreement applies to the person in relation to the employment;
3. the sum of the person's annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold."

• [22] The minimum employment period required to have been served to comply with s.382(a) is found in s.383 of the Act, which provides:

(a) if the employer is not a small business employer - 6 months ending at the earlier of the following times:

(i) the time when the person is given notice of the dismissal;

(b) if the employer is a small business employer - one year ending at that time."

• [24] There is no contest that AJL is a small business employer, and the minimum employment period is 12 months. I am satisfied that AJL is a small business employer, and a minimum 12 month employment period must be met. Mr Corney only served 3.5 months with AJL. However, the issue is that Mr Corney submits his employment transferred from Tasty Trading to AJL and therefore his entire period of employment with the old and new employer exceeds the 12 month minimum period.

• [25] Section 22 of the Act concerns service and continuous service. Relevantly, s.22(5) of the Act provides:

"22 Meanings of service and continuous service

When service with one employer counts as service with another employer

(5) If there is a transfer of employment (see subsection (7)) in relation to a national system employee:

(a) any period of service of the employee with the first employer counts as service of the employee with the second employer; and

(b) the period between the termination of the employment with the first employer and the start of the employment with the second employer does not break the employee's continuous service with the second employer (taking account of the effect of paragraph (a)), but does not count towards the length of the employee's continuous service with the second employer.

Note: This subsection does not apply to a transfer of employment between non - associated entities, for the purpose of Division 6 of Part 2 - 2 (which deals with annual leave) or Subdivision B of Division 11 of Part 2 - 2 (which deals with redundancy pay), if the second employer decides not to recognise the employee's service with the first employer for the purpose of that Division or Subdivision (see subsections 91(1) and 122(1)).

(6) If the national system employee has already had the benefit of an entitlement the amount of which was calculated by reference to a period of service with the first employer, subsection (5) does not result in that period of service with the first employer being counted again when calculating the employee's entitlements of that kind as an employee of the second employer.

(a) the accrued paid annual leave to which the employee is entitled as an employee of the second employer does not include any period of paid annual leave that the employee has already taken as an employee of the first employer; and

(b) if an employee receives notice of termination or payment in lieu of notice in relation to a period of service with the first employer, that period of service is not counted again in calculating the amount of notice of termination, or payment in lieu, to which the employee is entitled as an employee of the second employer.

(7) There is a transfer of employment of a national system employee from one national system employer (the first employer ) to another national system employer (the second employer ) if:

(i) the employee becomes employed by the second employer not more than 3 months after the termination of the employee's employment with the first employer;

(ii) the first employer and the second employer are associated entities when the employee becomes employed by the second employer; or

(i) the employee is a transferring employee in relation to a transfer of business from the first employer to the second employer;

(ii) the first employer and the second employer are not associated entities when the employee becomes employed by the second employer.

Note: Paragraph (a) applies whether or not there is a transfer of business from the first employer to the second employer.

(a) is a transfer of employment between associated entities if paragraph (7)(a) applies; and

(b) is a transfer of employment between non - associated entities if paragraph (7)(b) applies."

• [26] Relevantly s.311(1)-(3) of the Act deals with transferring business and provides:

Meanings of transfer of business, old employer, new employer and transferring work

(1) There is a transfer of business from an employer (the old employer ) to another employer (the new employer ) if the following requirements are satisfied:

(a) the employment of an employee of the old employer has terminated;

(b) within 3 months after the termination, the employee becomes employed by the new employer;

(c) the work (the transferring work ) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;

(d) there is a connection between the old employer and the new employer as described in any of subsections (3) to (6).

(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business.

Transfer of assets from old employer to new employer

(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and

(b) the new employer or an associated entity of the new employer;

the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):

(c) that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and

(d) that relate to, or are used in connection with, the transferring work."

• [27] Section 385 of the Act is relevant to AJL's second jurisdictional objection. Section 385 of the Act defines an unfair dismissal where the Commission is satisfied that the person has been dismissed,[12] and the dismissal was harsh, unjust or unreasonable,[13] and the dismissal was not consistent with the Small Business Fair Dismissal Code,[14] and the dismissal was not a case of genuine redundancy.[15] AJL Industries submit the dismissal cannot be unfair if the dismissal was consistent with the Small Business Fair Dismissal Code and was a case of genuine redundancy.

• [28] A genuine redundancy is defined in s.389 of the Act 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."

• [29] There was no evidence of Mr Corney being employed under a modern award or enterprise agreement. Mr Corney was employed in the substantial role of manager and this was the position made redundant. As there is no modern award covering Mr Corney's position as manager in a café, s.389(1)(b) of the Act does not apply in this matter.

• [30] It is not contested that the business employs less than 15 employees. Mr Corney was the only full-time employee at the time of his dismissal and 6 casuals in positions of barista, chef, server and kitchen hand were engaged as required. I find and I am satisfied on the evidence that AJL is a small business with fewer than 15 employees at the time of Mr Corney's dismissal.

• [31] In order to be protected from unfair dismissal Mr Corney must have served the minimum employment period of 12 months.[16] Mr Corney served a period of approximately 3.5 months with AJL, but he served a period of approximately 22 months with Tasty Trading, the old employer. It is not asserted that AJL and Tasty Trading were associated entities or that AJL informed Mr Corney in writing that his service would not be recognised.

• [32] Relevantly to this matter, s.22 of the Act provides that service with the first employer will count as service with the second employer but does not count as length of employment with the new employer.[17] AJL gave evidence, with the provision of the full extract of clause 15.3 of the sale contract which clearly did not recognise transferring employees and Mr Corney gave evidence that he was paid out his annual leave entitlements. Mr Corney avoided the direct question whether he was given notice of his termination of employment but ultimately admitted that his employment was terminated by the old employer, noting that he was informed there were "complications." Mr Corney was unclear about what took place in regard to his termination of employment from Tasty Trading, but Mr Corney admitted to knowing that the building was sold and some months later the café business was sold to AJL. He admitted to his annual leave being paid out, and on balance I am inclined to form the view that Mr Corney understood that his employment was terminated and his entitlements settled by Tasty Trading. On this basis I am satisfied that the old employer dealt with Mr Corney's employment entitlements consistent with the sale contract. And importantly, Mr Corney is not entitled to the benefits as he had already had the benefit of his entitlements with the old employer.[18]

• [33] However, for the purposes of minimum employment period, Mr Corney may be a transferring employee because even though the first and second employer are not associated entities, the employee transfers from one employer to the other if the business is a transferred business.[19] Relevantly s.311 of the Act defines when a transfer of business occurs.

• [34] Section 311 (2) of the Act provides that an employee is a transferring employee when the employment of the employee is terminated by the old employer,[20] the employee is employed by the new employer within 3 months of the termination of employment,[21] and the transferring work for the new employer is the same or substantially the same as the work performed for the old employer.[22] Mr Corney's work as chef transferred from the old to the new employer consistent with the provisions of s.311 of the Act, when he was dismissed by the old employer and accepted employment with the new employer within 3 months of his termination of employment. However, s.311 of the Act also requires consideration of s.311(3)-(6).

• [35] Sections 311(4) and (5) concerning outsourcing of work is irrelevant to this matter and s.311(6) concerns associated entities and is not relevant.

• [36] Section 311(3) provides that there is a connection between the old employer and new employer in accordance with an arrangement where the new employer owns or has the beneficial use of some or all of the assets (whether tangible or intangible) that the old employer owned or had the beneficial use of the assets that relates to or was used in connection with the transferring work.[23]

• [37] AJL gave evidence that on 14 July 2024 Mr Lacy made an offer to the owner of Tasty Trading Pty Ltd to purchase the café business. This offer was accepted and over July to September 2024, Mr Lacy spent time setting up for the new business. This involved council permits, food permits, WorkCover, new lease arrangements, new arrangements with suppliers among other obligations. The sales contract was finalised in September 2024 which required the old employer to satisfy all employment arrangements with their employees as a condition of the sale.[24] From this evidence it appears the assets transferred as part of the lease, and most likely not directly through Tasty Trading Pty Ltd, as the building was sold months before, noting a new owner of the building. There was no reliable additional evidence of any café assets that transferred through the sale of the business in connection to Mr Corney's work as a chef. The trading name remained the same and there is no evidence of any other substantial change in the business. The evidence was that the transfer of ownership was swift with a closure of the business for barely a few days.[25] Further AJL did not lead any evidence concerning whether there was any arrangement between the old and the new employer in respect of the assets to credibly find there was no connection in terms of the transfer of business. On this limited evidence I am not satisfied that Mr Corney was not a transferring employee in a transferring business. Therefore, I find that Mr Corney was most likely a transferring employee in a transferred business.

• [38] However, further jurisdictional objections have been raised by AJL. AJL submit that Mr Corney is not protected from unfair dismissal because the dismissal was consistent with the Small Business Fair Dismissal Code (the Code) and the dismissal was a genuine redundancy. The Code applies to small business employers with less than 15 employees and if the employer followed the Code, then the dismissal will be deemed fair. A redundancy needs to be genuine, and the relevant provisions are found in s.389 of the Act. However, the Code provides some guidance by clarifying in the paragraphs under Application that refilling the position with a new employee will not be a genuine redundancy and the checklist itself while it deals with summary dismissal or other dismissal based on conduct or capacity, questions 3 and 4 do concern redundancy. The checklist is simply a tool to help an employer to assess and record their reasons, but completion of the Code checklist does not mean that the employer has complied with the Code.

• [39] Relevantly question 3 of the Code helps an employer to identify if the dismissal was because the employer did not want the employee's job to be done by anyone else because of changes to operational requirements. And question 4 draws the employer's attention to consultation obligations about the redundancy in the relevant industrial instrument and whether the employee could be redeployed.

• [40] Mr Corney commenced with AJL on 27 September 2024 as head chef and on 21 October of the same year was promoted to manager to manage the entire café. In this role Mr Corney was paid a package of $94,739.32, the role was autonomous, he ordered supplies, rostered staff and hired a new chef. These duties and responsibilities are not covered by a modern award; Mr Corney's role was award free. Consequently, there is no industrial instrument (modern award or enterprise agreement) that prescribes a consultation process.

• [41] Even though there is no prescribed consultation process, AJL gave evidence and Mr Corney conceded that discussions occurred between them about the growing financial debt of the business due to excessive ordering of supplies and wastage, the rostering of staff during quiet periods and the need to immediately address operating costs otherwise there were consequences for Mr Corney. AJL gave evidence that the correspondence of 29 December 2024 focussed Mr Corney's attention on the requirement for drastic action to curtail costs and it submits that the discussions on 3 and 7 January 2025 in their view were evident to Mr Corney that serious consequences for his role as manager were likely, particularly because he himself pushed back against all suggestions made and he stated strongly that he would walk if he was required to revert to a salary of $75,000 per annum. Both parties gave evidence that Mr Corney made clear that he would not return to his role as chef at the same package as when he was first engaged by AJL.

• [42] Section 389 of the Act defines genuine redundancy where the employer no longer requires the person's job to be performed by anyone because of operational requirements. In this matter, AJL gave evidence that had it continued without making operational changes, the risk of business failure was real. Further it determined that Mr Corney would not be replaced as manager by another employee. There was no prescriptive consultation clause applicable to the process and consideration of redeployment had occurred. But as Mr Corney made clear his intention to not return to the role with the same conditions prior to his promotion to manager, and he did not embrace the suggestions nor make any suggestions himself to address operational costs, AJL submit the redundancy was genuine.

• [43] I find that Mr Corney's dismissal was a genuine redundancy. His position was not replaced and alternatives to redundancy were considered. AJL determined rightfully that decisions had to be made to restructure the business, AJL could no longer sustain the operational costs committed to largely through Mr Corney's mismanagement and his high salary was unsustainable. There was no additional obligation to conduct any consultation more than had already occurred by AJL in the circumstances. Therefore, I find that as a genuine redundancy Mr Corney was not unfairly dismissed in accordance with s.385 of the Act and is not entitled to press his application as an unfair dismissal.

• [44] For the above reasons, I am satisfied that Mr Corney's application does not meet the requirements of s.385 of the Act because the dismissal was a genuine redundancy as defined under s.389 of the Act. Even though I found that Mr Corney met the minimum employment period due to a transfer of business, the requirement of s.385 was not met. On this basis the application is dismissed pursuant to ss.587(1)(a) and (c) of the Act.

[1] Clause 15.3 of the contract for sale provides for the condition of sale that Tasty Trading Pty Ltd pay out all employee entitlements and AJL Industries Pty Ltd is indemnified from paying out any obligations generated by Tasty Trading Pty Ltd; see Digital Hearing Book ('DHB'), p.62 and Ms Tanya Lacy's statement of evidence, DHB p.99.

[2] DHB p.63; Respondent's oral submissions.

[5] DHB p.10, 41-42, 44-45. Supported by Ms Tanya Lacy's statement of evidence, DHB p.97-99 and Respondent's oral evidence.

[6] DHB p.42, 45; and Respondent's oral evidence.

[7] Respondent's outline of argument: objections at [4g], DHB p.76.

[9] Applicant's outline of submissions, DHB p.13.

[18] S.22(6) applies to annual leave and notice benefits. See also s.91.

[23] See John Lucas Hotel Management v Hillie [2013] FWCFB 1198 and Peter Zobrdac v Transclean Facilities Pty Ltd [2011] FWA 4492.

[24] Respondent's submissions, DHB p.117.

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