Unfair Dismissal: Valid Performance Concerns, but Procedural Unfairness Leads to Compensation

Case: Galanopoulos v Australian Handrails Pty Ltd t/a NJM Group [2018] FWC 3569
Commission Member: Commissioner McKinnon
Decision date: 19 June 2018
Outcome: Dismissal found unfair; compensation of $2,060.16 plus superannuation awarded.

Case Overview

The Fair Work Commission found that a small business employee’s dismissal for poor performance was unfair, despite there being a valid reason related to her capacity to perform the role.

The employer had concerns about the employee’s accuracy, product knowledge and competency. However, the Commission found that the dismissal was procedurally unfair because the employee was not told the reason for her dismissal and was not clearly warned that her employment was at risk.

The decision demonstrates that even where an employer has legitimate performance concerns, compliance with the Small Business Fair Dismissal Code and procedural fairness remains important.

Background

The employee worked as a clerical worker for Australian Handrails Pty Ltd, trading as NJM Group, from 31 May 2016 until 21 December 2017.

Her duties included internal sales, answering enquiries, bookings and occasional deliveries and pickups. The employer was a small business with nine employees.

The employer alleged that despite ongoing instruction, training and warnings, the employee did not meet the required standards. Concerns included:

Inadequate product knowledge;
Errors in data entry, quotes and invoices;
Incorrect information provided to customers and installation staff;
Poor follow-up of customer quotes; and
The need for ongoing supervision and assistance from colleagues.

The employee acknowledged making mistakes but disputed that she had received formal warnings or that her performance had failed to improve.

Small Business Fair Dismissal Code

The Commission considered whether the dismissal complied with the Small Business Fair Dismissal Code.

The employer relied on a series of alleged verbal and written warnings. However, Commissioner McKinnon was not satisfied that written warnings had been given.

The Commission accepted that three verbal warnings had been issued, relating to:

Incorrect information provided for customer site visits;
The quality of sales conversations; and
The need to improve product knowledge.

However, the warnings were not sufficiently connected to the dismissal. The Commission was also not satisfied that the employee had been clearly told that her employment was at risk if her performance did not improve.

The dismissal was therefore found not to be consistent with the Code.

Was There a Valid Reason?

The Commission accepted that the employee was prone to errors and frequently required close supervision.

In a small business, the employee’s ongoing performance difficulties placed pressure on other employees and increased the time and cost associated with work bookings.

The Commission found that the employer had a valid reason for dismissal relating to the employee’s capacity to perform her role.

This factor weighed against a finding of unfair dismissal.

Procedural Fairness

Despite the valid reason, the Commission found significant procedural deficiencies.

The employee was not given a reason for her dismissal when it was communicated to her on 21 December 2017. The termination letter did not identify any reason and stated that the employer might contact her if her services were required in the new year.

The Commission also found that the employee had not been clearly warned that her employment was at risk. While performance concerns had been raised and she had opportunities to respond to some of them, these discussions did not amount to adequate warnings connected to the dismissal.

The Commission also considered the timing of the dismissal. The employee had recently undergone surgery and required further medical treatment. The employer had been advised that she would be absent for the final two working days before the Christmas closure.

The Commission considered that the employer’s attempt to backdate the effective date of dismissal to 20 December was intended to avoid an allegation that the dismissal occurred during a temporary absence for medical reasons. The dismissal took effect when it was communicated on 21 December.

The Commission described the circumstances as procedurally unfair.

Decision

Having considered the relevant factors under s.387 of the Fair Work Act 2009 (Cth), Commissioner McKinnon found that the dismissal was unreasonable because no reason was given to the employee and the process was procedurally unfair.

Reinstatement was considered inappropriate, given the valid reason for dismissal and the likelihood that reinstatement would not provide a sustainable outcome for either party.

Compensation was therefore ordered.

Compensation

The Commission assessed that the employee would likely have remained employed for a further six weeks.

The compensation calculation was:

Item	Amount
Anticipated earnings over six weeks	$4,464.00
Less payment in lieu of notice	−$1,488.00
Less adjustment for declined part-time employment	−$915.84
Compensation awarded	$2,060.16 gross

Superannuation was payable in addition.

The Commission accepted that the employee had made reasonable efforts to find alternative work, but reduced compensation to reflect her decision to decline an available part-time receptionist position.

Representatives

Applicant: G Dircks, Just Relations
Respondent: N Smith, Australian Handrails Pty Ltd