Fair Work Act 2009

s.394 - Unfair dismissal

Application for an unfair dismissal remedy - dismissal - resignation - employee resigned because of the imposition of a Performance Improvement Plan - not a heat of the moment resignation - real alternatives to resignation were available - employee was not dismissed.

[1] Mr He worked for Smartech Systems Oceania Pty Ltd for 23 years, for most of that time as the IT Manager. In 2022 he was treated harshly: his role was changed, his work location within the office was changed, his direct report was re-assigned and he was required to report to the HR Manager even though there was no apparent operational reason for doing so. When told in November 2022 that he was to be placed on a Performance Improvement Plan, Mr He resigned.

[2] Mr He claimed that he was unfairly dismissed. Smartech argued that Mr He was not dismissed at all.

[3] For the reasons that follow I find that Mr He was not dismissed from his employment and therefore his application cannot proceed. In short, and even though Mr He was treated poorly, his resignation was considered, voluntary and was not the probable consequence of Smartech's conduct. Smartech's conduct did not leave Mr He with no real option but to resign.

[4] Mr He worked for Smartech for more than 23 years. Mr He says his responsibilities were to manage the computer systems and networks, telecommunication, directly supervise assigned staff, provide work standards and training and other duties. For the last 21 years he was the IT manager.

[5] Mr He said he was forced to resign on 7 November 2022 because of a course of conduct engaged in by Smartech.

[6] In June 2022 Smartech gave notice that Mr He was going to change Mr He's position from IT Manager to Business Transformation Manager. As a result of this proposed change Mr He's two direct reports were to be removed and were to instead report to the CFO, and Mr He was to report directly to the HR Director.

[7] Mr He wrote a letter asking management not to make the change and Smartech accepted Mr He's advice. As a result Mr He's two direct reports continued to report to him, although his title was changed to IT & Business Transformation Manager, but Mr He was on notice that he needed to do more on the transformation side of projects.

[8] Mr He said the events in June 2022 were relevant to understanding the significance of events in October and November 2022, arguing that the changes forced upon him as part of a Performance Improvement Plan (see below) were the same changes abandoned by Smartech in June 2022.

[9] The evidence from Smartech's witnesses about the process in June 2022, and the involvement of Smartech's CEO Mr Vincent Nair in the process, was inconsistent and at times contradictory. However the events in June 2022 are of limited relevance to the question to be determined. It is therefore not necessary to spell out my concerns regarding the authenticity of Smartech's evidence in any detail.

[10] In or about August 2022 Mr Nair became concerned about cyber security. In 2022 data breaches in large corporations attracted significant publicity and the Federal Government considered new laws that would have impacted on Smartech and other corporations.

[11] Mr Nair made enquiries of Mr He and others regarding Smartech's security measures. In October 2022 Mr Nair became more agitated and concerned about whether Smartech was properly protected from cyber-attacks. Mr Nair said he and his fellow directors actively sought assurances from Mr He, and from Mr He's functional manager Mr Chan, that proper measures were in place.

[12] On Saturday, 22 October 2022 Mr Nair sent an email to Mr He regarding data protection, asking for a meeting to discuss the need to "enforce more rigor and applied governance to protect customer and employee data at all costs."

[13] A meeting was held on 27 October 2022, at which Mr Nair set his agenda of matters requiring urgent attention.

[14] There was a follow-up meeting on Wednesday, 2 November 2022. This meeting did not go well. Mr Nair shut down the meeting after only ten minutes, expressing frustration at the lack of progress. Mr Nair formed the view that neither Mr He nor Mr Chan had read the minutes from the previous meeting and neither had done anything to address his concerns.

[15] The next day, 3 November 2022, there was a flurry of email activity:

(a) at 8:39am Mr He raised a complaint with Ms Anwar, Chief People and Culture Officer and Mr He's apparent line manager, about Mr Nair's alleged misconduct in "vehemently" swearing in the meeting the day before. Mr He's email included a demand for a formal apology and also asked for a day of sick leave;

(b) at 9:26am Ms Anwar sent an email to Mr He asking for "details" of his complaint against Mr Nair, indicating that "this complaint will remain confidential at this stage with me and you." Ms Anwar appears to have participated in the meeting on 2 November 2022 but she nonetheless asked Mr He to specify "Who was on the call? What was said exactly and by who? What was the context of what was said?" Ms Anwar also said "I will remind you that this is a serious complaint ... Based on your answers this matter will need to verified regarding the same questions I have asked you regarding context of the call".;

(c) at 12:13pm Ms Anwar sent a further email to Mr He alleging that Mr He had been speaking to other employees regarding "the meeting and the incident regarding directly against the Executive Chairman and CEO Vincent Nair, which can be very damaging to his reputation as the shareholder and Executive Chairman of SMARTECH". Ms Anwar's email demanded "an immediate response from [Mr He] as to who [he] spoke to? The names of the employees and what was discussed with each employee?";

(d) at 12:36pm Mr He sent a reply to Ms Anwar assuring her that he had not spoken to any employees about his complaint but, quite properly, had spoken to Mr Peter Chan, Director Operations and Customer Experience and apparently Mr He's Executive Leadership Team "sponsor", and to Mr Zac Warby, Chief Operating Officer & Public Officer, about the cyber security matters raised by Mr Nair in the meeting the day before;

(e) at 1:48pm Mr Nair sent an email to Mr Chan, to Mr Warby, Mr He and other managers outlining his concerns about cyber security, his concerns about the responses he had received about his concerns and demanding a written response by 9:00am the next morning. Mr Nair's email also included a threat that disciplinary action may follow:

"As per my request yesterday seeking answers by COB last night and not receiving any, I will now ask that minutes are read by all of you, remedies and follow up actions are published to me by 9am tomorrow morning. Failure to do so will result in decisions to be rectified by the Board to take up actions to protect the company which may include disciplinary measures."

(f) at 4:59pm Mr Chan sent an email to Mr Nair providing specific responses to his concerns;

(g) at 8:52pm Mr Nair sent an email to Mr Chan, Mr Warby and Mr He doubling down on his concerns about cyber-security matters. Mr Nair's email was blunt, highly critical of Mr Chan and Mr He, and reiterated his demand for a response by 9:00am the next day. Mr Nair's email included the following:

There appears to be a distinct push back on management and board direction from yourself and [Mr He]. Whether this is deliberate on the IT managers part or he is grossly out of his depth. You both have missed the point that .... You are again relying on 3rd Party providers to substitute for laziness within our ranks...

My greater concerns now remain with the competency of our IT department and it's [Executive Leadership Team] sponsors. Whether you and Ron understand the needs expressed by myself on behalf of my board of directors or should I seek your decision to provide me an official show cause as to why you both remain and operate against the direction and wishes of the company.

You both now get the gist. Nothing has been follow up. This is my last and final instructions to both you and Ron to review the minutes, for every action I would like a corrective action by 9am tmrw morning as per my earlier email today.

Failing that, I will move towards making decisions in the best interest of the company in accordance with regulations governing business standards and to provide best protection for customer and employee data.

We have wasted enough time and the company does not have any further tolerance to risk it's security with employees who do not understand risk management to meet Board expectations.

(h) at 10:12pm Mr Chan sent an email to Mr Nair, Mr He and other managers responding to Mr Nair's concerns; and

(i) at 11:17pm Mr He sent a further detailed response to Mr Nair.

[16] At 11:00am the next morning Mr He met with Ms Anwar and Mr Warby and was told that he was required to participate in a Performance Improvement Plan.

[17] Under the Performance Improvement Plan Mr He would not have any direct reports, was to relocate to an open office area close to the senior managers and was to only report to Ms Anwar. The Plan said:

"Details: The PIP came about after failure to provide adequate responsiveness related to cybersecurity measure across the business and action in a timely manner on several occasions, behavior and attitude needs to improve related to response to senior management on key top priority projects with clear timelines, remedies, actions. As a manager you will be required to attend and work out of the office 5 days per week and relocate to an open plan area close to the senior managers to ensure visibility and matters are always actioned in a rapid manner.

No direct reports effective immediately with all current reports to report directly to Chief Financial Officer, Zac Warby.

Timeline for Improvement, Consequences & Expectations:

Effective immediately, you are placed on a 60-day PIP. During this time you will be expected to make regular progress on the plan outlined above. Failure to meet or exceed these expectations, or any display of gross misconduct will result in further disciplinary action, up to and including termination. In addition, if there is no significant improvement to indicate that the expectations and goals will be met within the timeline indicated in this PIP, your employment may be terminated prior to 60 days. Furthermore, failure to maintain performance expectations after the completion of the PIP may result in additional disciplinary action up to and including termination. The PIP does not alter the employment-at-will relationship. Additionally, the contents of this PIP are to remain confidential.

Should you have questions or concerns regarding the content, you will be expected to follow up directly with me. We will meet again on as noted above to discuss your Performance Improvement

[18] By its terms the Performance Improvement Plan constituted a warning that Mr He's employment might be terminated - either within the 60 days of the Plan or via further disciplinary action after the completion of the plan.

[19] Mr He said he protested the fairness of the Performance Improvement Plan but that "[Ms Anwar] just said, as she kept saying, that this was for my benefit to improve my performance, and that I should not feel negative on just improvement."

[20] Mr He said that the removal of his direct report "voided" his original position as IT Manager. The wording of the Performance Improvement Plan was not precisely clear about whether Mr He's direct reports were permanently removed or only for the duration of the plan. I am prepared to assume for present purposes that the removal of the direct reports was only temporary.

[21] At some time in the afternoon on Friday 4 November 2022 Mr He typed a resignation letter. He then sought advice from Mr Warby and Mr Chan - who are both members of the Executive Leadership Group. Upon being handed the resignation letter Mr Warby skimmed its contents and immediately shredded it. Mr Warby and Mr Chan then tried to dissuade Mr He from resigning. After speaking to Mr Warby and Mr Chan, Mr He did not try to tender his resignation to Ms Anwar or Mr Nair on that day.

[22] Later in the evening on the Friday and on Saturday 5 November 2022 Mr Warby and Mr He exchanged further SMS messages in which Mr He revealed his fears about the Performance Improvement Plan. Mr Warby urged Mr He to "stay tough" and assured him "you will not get terminated at all, please don't resign."

[23] On Sunday 6 November 2022 Mr He sent an email to Ms Anwar indicating that he was not prepared to sign the Performance Improvement Plan. Mr He's email was lengthy, comprehensive and respectful.

[24] Ms Anwar, Chief People and Culture Officer, replied the same day. In her reply there was no suggestion of a meeting at the workplace the next day, or of talking with him about the matters raised, or any preparedness to consider the matters raised by Mr He. Ms Anwar's comments included the following:

In response to Mr He's indication that he would not sign the Performance Improvement Plan:

"You have been given an opportunity to improve your performance. Your participation in the Performance Improvement Plan has been highlighted for yours and the company's benefit. You are aware that if you do not agree to do this, your employment will be terminated."

In response to Mr He's assertion that his responsiveness to IT concerns has been consistently prompt for over 23 years:

"You have failed in your ability to provide early response to critical issues. This Performance Improvement Plan enables you to improve and understand how we can bring out the best in your performance. If you reject this opportunity to improve your response to critical events, you do understand that your employment will be terminated."

In response to Mr He's explanation for not completing a particular task:

"You were unprepared at the meeting with the Chairman of the Board of SMARTECH. You had not read the minutes distributed to you 2 weeks earlier; you did not attend to actions assigned to you and there were witnesses to your unpreparedness."

[25] Blunt as it was, Ms Anwar's reply did not put Mr He in a position where he had no real or effective choice but to resign. Ms Anwar's comments, and the Performance Improvement Plan itself, left open the option for Mr He to continue in employment.

[26] On Monday morning Mr He sent a further email to Ms Anwar, asking Ms Anwar to "let me take some time to reconsider this" and querying some further aspects of the Plan. Ms Anwar does not appear to have responded.

[27] Late Monday morning Mr He submitted his written resignation by email to Ms Anwar.

[28] After 23 years of service neither Ms Anwar nor Mr Nair tried to discuss the resignation with Mr He. One hour after receiving an email version of the resignation, Ms Anwar replied by email to Mr He:

Thankyou for your time and we accept your resignation.

Please work with Cecila to ensure a smooth handover regarding access etc.

[29] Mr He was required to give 4 weeks' notice and he in fact worked at Smartech for the notice period without incident.

[30] The first question to be resolved in Mr He's unfair dismissal claim is whether in fact he was dismissed. This question was dealt with as a discrete issue and there has not been any hearing about the merits of Mr He's unfair dismissal claim.

[31] There is no disagreement that Mr He in fact sent an email to his employer advising that he was resigning. In some circumstances a resignation is treated as a dismissal. Section 386 deals with the meaning of "dismissed" for the purposes of the unfair dismissal regime and the relevant parts of s.386 are:

(a) the person's employment with his or her employer has been terminated on the employer's initiative; or

(b) the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer."

[32] In Bupa Aged Care Australia Pty Ltd T/A Bupa Aged Care Mosman v Tavassoli (2017) 271 IR 245, [2017] FWCFB 3941 ("BUPA") the Full Bench reviewed the legislative history and the earlier authorities in relation to dismissal and resignation (at [27]-[46]) and provided the following summary at [47]:

"Having regard to the above authorities and the bifurcation in the definition of "dismissal" established in s.386(1) of the FW Act, we consider that the position under the FW Act may be summarised as follows:

(1) There may be a dismissal within the first limb of the definition in s.386(1)(a) where, although the employee has given an ostensible communication of a resignation, the resignation is not legally effective because it was expressed in the "heat of the moment" or when the employee was in a state of emotional stress or mental confusion such that the employee could not reasonably be understood to be conveying a real intention to resign. Although "jostling" by the employer may contribute to the resignation being legally ineffective, employer conduct is not a necessary element. In this situation if the employer simply treats the ostensible resignation as terminating the employment rather than clarifying or confirming with the employee after a reasonable time that the employee genuinely intended to resign, this may be characterised as a termination of the employment at the initiative of the employer.

(2) A resignation that is "forced" by conduct or a course of conduct on the part of the employer will be a dismissal within the second limb of the definition in s.386(1)(b). The test to be applied here is whether the employer engaged in the conduct with the intention of bringing the employment to an end or whether termination of the employment was the probably result of the employer's conduct such that the employee had no effective or real choice but to resign. Unlike the situation in (1), the requisite employer conduct is the essential element."

[33] On the evidence I am satisfied that Mr He's resignation was considered and was not given in the heat of the moment, nor was it given in a state of emotional stress or mental confusion such that there was no real intention to voluntarily resign:

(a) Mr He was under considerable stress and distress following the hostile emails from Mr Nair followed by the Performance Improvement Plan introduced by Ms Anwar;

(b) however, after being told of the Performance Improvement Plan Mr He spoke for some time with Mr Warby and Mr Chan, both of whom actively discouraged him from resigning his employment. Importantly, after speaking to Mr Warby and Mr Chan, Mr He decided not to immediately tender his resignation;

(c) the subsequent SMS exchange with Mr Warby over the next two days was to the same effect: Mr He professed the fear that he was about to be terminated, the fact that he was considering resigning, but decided against resigning; and

(d) Mr He served out his 4-week notice period and did not attempt to withdraw his resignation.

[34] The second test in BUPA is less straightforward to resolve. Mr He had worked for Smartech for a long a long time was treated with disdain. I am satisfied that Smartech's conduct caused Mr He to decide to resign his employment. However, more must be established before Mr He's voluntary resignation could be in fact regarded as a dismissal.

[35] I am required to objectively assess Smartech's conduct and determine whether the conduct was intended to bring the employment to an end, or alternatively whether Mr He's resignation was the probable result of the conduct.

[36] On the evidence before me I cannot find that Smartech set upon a course of conduct designed to induce or compel Mr He to resign.

[37] Smartech's evidence regarding the lines of authority and reporting within the business, and particularly the role of the CEO Mr Nair, was amorphous. In cross-examination Mr Nair was at pains to emphasise that as a shareholder and director his involvement in the management of the business was minimal. Mr Nair said management decisions were primarily made by an Executive Leadership Team (ELT) and inferred that his involvement in the ELT was limited. On the specific issue of cybersecurity the evidence was clear that Mr Nair was actively and forcefully managing the issue, including issuing threats to dismiss employees.

[38] By 2 November 2022 Mr Nair was obviously frustrated with Mr He's response to his concerns about cybersecurity. Mr Nair communicated directly with Mr He about his concerns, even though Mr He had supposedly been reporting to Ms Anwar since June 2022. Ms Anwar was not called to account by Mr Nair in relation to any of Mr Nair's concerns about cyber security. For a period Mr Chan was also a target of Mr Nair's inquiries, but it seems that only Mr He was placed on a Performance Improvement Plan because of the allegedly inadequate responsiveness to Mr Nair's concerns.

[39] Smartech placed Mr He on a Performance Improvement Plan 28 hours after Mr He made a complaint about Mr Nair's conduct. Mr He's complaint was about the way Mr Nair had allegedly conducted himself in meetings with managers in relation to cybersecurity. The opening words of the Performance Improvement Plan refer to cybersecurity concerns: "The PIP came about after failure to provide adequate responsiveness related to cybersecurity measure across the business and action in a timely manner on several occasions."

[40] Smartech said there was no connection between the complaint against the CEO and the Performance Improvement Plan. Mr He represented himself at the hearing, and Smartech's evidence was not rigorously scrutinised in cross-examination. Nonetheless there is no evidentiary basis upon which I could find that Smartech wanted to end Mr He's employment shortly after Mr He had made a formal complaint about the CEO.

[41] The use of a Performance Improvement Plan may have been an overreaction. The Performance Improvement Plan was used in conjunction with meetings and communications about cyber security to emphasise to Mr He that cyber security was of fundamental importance to the employer and was so important that if Mr He did not deliver on what was required of him then his long-standing employment was in jeopardy.

[42] If I accept Smartech's evidence on face value that the decision to implement the Performance Improvement Plan was made by or in consultation with the Executive Leadership Team, then Mr Warby's and Mr Chan's assurances to Mr He, when they tried to persuade him not to resign, should have carried significant weight in assuring Mr He that his ongoing employment was viable.

[43] Obviously it would have been very uncomfortable for Mr He to continue in employment under the Performance Improvement Plan and Mr He understandably was concerned that Smartech was not satisfied with his performance.

[44] There was no suggestion by Mr He that the objectives in the Performance Improvement Plan were unobtainable, or that it was inevitable that his employment would be terminated during or after the 60-day period of the Performance Improvement Plan. In these circumstances the only available finding is that Mr He had a real option available to him to continue in his employment.

[45] I accept that Mr He's resignation was a possible consequence of Smartech's conduct in firing hostile email missives and then placing Mr He on a Performance Improvement Plan, and certainly Mr He's resignation was a possible consequence of Ms Anwar's blunt email sent on the Sunday evening. However I cannot find Mr He's resignation was the probable consequence of this conduct.

[46] Mr Nair's emails about cybersecurity were consistently directed to requiring Mr He and others to take positive steps to ensure that Smartech's data was protected. In this sense it was in Smartech's interests for Mr He to remain in employment and address its concerns. The terms of the Performance Improvement Plan directly assumed that Mr He continue in employment and address its concerns.

[47] Both Mr Nair and Ms Anwar chose to forcefully say to Mr He that his performance was not satisfactory and that he needed to do better. However I cannot objectively find that Mr He's resignation was the probable consequence of this conduct.

[48] Despite Mr He holding significant concerns about the fairness and legitimacy of the Performance Improvement Plan, I do not find that Smartech engaged in conduct that forced Mr He to resign, as opposed to conduct that caused Mr He to voluntarily resign.

[49] More precisely, I do not find that Mr He was dismissed from his employment and therefore I will make an order accordingly (PR761233).

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