Ambrose von Erkel v Solar Station Alpha Pty Ltd T/A Solar Backup [2018] FWC 4973

1 Fair Work Act 2009 s.394—Unfair dismissal Ambrose von Erkel v Solar Station Alpha Pty Ltd T/A Solar Backup (U2016/2082) DEPUTY PRESIDENT KOVACIC CANBERRA, 23 AUGUST 2018 Application for relief from unfair dismissal – dismissal previously found unjust – issue of remedy – reinstatement not appropriate – compensation of $8,615.36 less applicable tax plus superannuation ordered. [1] In a decision1 handed down on 3 May 2018 the Fair Work Commission (the Commission) found that Mr Ambrose von Erkel’s (the Applicant) dismissal by Solar Station Alpha Pty Ltd T/A Solar Backup (the Respondent) on 13 April 2016 was unjust. The background to the matter is briefly set out in that decision but is set out in greater detail in an earlier decision2 dealing with the Respondent’s first jurisdictional objection to Mr von Erkel’s application. It is not necessary to repeat that background for the purposes of this decision. [2] Subsequent to the 3 May 2018 decision the matter was listed for hearing on 23 July 2018 to determine the issue of remedy. At the hearing, Mr Peter Hull appeared with permission for Mr von Erkel, while Mr Paul Wilson, the Respondent’s General Manager at the time of Mr von Erkel’s dismissal, appeared for the Respondent. [3] For the reasons set out below, I find that reinstatement is not appropriate and determine that compensation of $8,615.36 less applicable tax plus superannuation is appropriate in all the circumstances of this case. The compensation is to be paid within 21 days of this decision. The Applicant’s case regarding remedy [4] Mr von Erkel seeks reinstatement and orders for continuity of service, recognition of prior service and payment for remuneration lost because of his dismissal. While Mr von Erkel acknowledged in his submissions that he did not initially seek reinstatement he submitted that he re-evaluated his position on reinstatement in the light of Mr Wilson’s evidence that the Respondent had no assets and no money so he was not sure where the money to pay any compensation would come from3. Mr von Erkel posited that Mr Wilson’s evidence made it clear that an order for reinstatement would only produce a remedy of substance if an order was made under s.391(1A) of the Act, i.e. an order that he be reinstated to a position with an associated entity of the Respondent on terms and conditions no less favourable than those on which he was employed immediately before his dismissal. Mr von Erkel further posited that [2018] FWC 4973 DECISION -- 1 of 19 -- [2018] FWC 4973 2 an order for compensation would be nugatory. By way of background, the Commission determined in the 3 May 2018 decision that the Respondent and Arvio Pty Ltd (Arvio) were associated entities for the purposes of the Act4, with Mrs Donna-Louise Wilson’s (a Director of the Respondent) evidence including that Arvio was the Respondent with a building licence5. [5] Other key aspects of Mr von Erkel’s submissions include that:  had he not been dismissed his employment would have been transferred to Arvio;  he worked across the various and varying aspects of the closely combined operations of the Respondent, Arvio and Phase Change Energy Solutions Pty Ltd (a related business);  it must be all but axiomatic that an order for reinstatement to a non-operating entity without resources would not and could not be appropriate;  an order for compensation in lieu of reinstatement is simply not available as a matter of practicality, adding that such an outcome would render the object of Part 3-2 of the Act unimportant and irrelevant with reinstatement the only remedy which would uphold that object;  he had been unable to secure employment since his dismissal;  unless an order was made that he be reinstated to a position with Arvio he would be denied any meaningful remedy;  the fact that the Respondent no longer had a sales position available, or indeed any position, is the very reason why he was entitled to invoke the operation of s.391(1A) of the Act;  there was no evidence that any of the Respondent’s employees had lost their jobs as a result of the transfer of the Respondent’s business and assets to Arvio;  the Respondent’s submission that it continues to operate unabated as it did before the dismissal contradicts Mr Wilson’s evidence; and  the Respondent’s submissions with respect to the Commission’s powers to make a reinstatement order to an associated entity were wrong. [6] At the hearing, Mr von Erkel largely reiterated key aspects of his written submissions and emphasised that he was entitled to the remedy of reinstatement. In response to the Respondent’s submissions, Mr von Erkel highlighted Mrs Wilson’s oral evidence6 that all of the Respondent’s employees had transferred to Arvio on 1 July 2016. Mr von Erkel also submitted that the allegations of fact in the Respondent’s submissions should be closely scrutinised by the Commission, adding that where those submissions were not supported by evidence they should be disregarded. [7] Mr von Erkel tendered two witness statements7 regarding the issue of remedy. In those statements he deposed among other things that: -- 2 of 19 -- [2018] FWC 4973 3  he would like his job back;  while it was true that he had some differences with Mr Hartog, a Director of Arvio, he thought they generally got on very well together;  it was also true that he had some harsh things to say about Mr Hartog and Mr Wilson at the 9 March 2016 meeting, adding that he sincerely regretted saying those things and that they were said in the heat of the moment;  he did not believe that anything that transpired at the meeting of 9 March 2016 should prevent him from being successfully reinstated;  he always got on well with all of his colleagues;  since his dismissal he had not been able to find ongoing or secure work;  following his dismissal he registered for social security payments which he continued to receive until about December 2016, adding that during this period he was assigned to an employment agency called Matchworks;  over the period September 2016 to February 2017 he worked as a house painter, earning about $7,000 for this work from which he had to meet expenses;  in February 2017 he had to focus on preparing his home for sale, adding that after the sale settled in October 2017 he took time off to visit family and friends in New Zealand and the United States;  he returned to Australia in February 2018 when he commenced looking for work again, primarily through personal connections and networking;  he did not believe that criticism of his sales performance was valid, though he acknowledged he did not meet the initial sales targets that were set at the beginning of 2016; and  he realised that were he to be reinstated there would be a period where things might be a little uncomfortable for both himself and Mr and Mrs Wilson, adding that he would be fully committed to the success of their business and that he did not hold any grudges about the way that they responded to his unfair dismissal application. [8] At the hearing, the Respondent noted that Mr von Erkel had not provided any Job Search Record Sheets8 for the period prior to 12 July 2016. In response to a question from the Commission regarding this Mr von Erkel attested that most of his Job Search records had been submitted electronically to Matchworks using a USB stick which he was unable to locate, adding that he provided copies of all such records that he had to the Commission via his witness statement. -- 3 of 19 -- [2018] FWC 4973 4 The Respondent’s case regarding remedy [9] The Respondent noted that Mr von Erkel initially did not seek reinstatement but that he now did, adding that it no longer had a sales position available. The Respondent also highlighted that Mr von Erkel went on a verbal tirade against Mr Hartog and Mr Wilson during the termination meeting of 9 March 2016. [10] Other key aspects of the Respondent’s submissions were that:  Mrs Wilson, a Director of the Respondent, wound back the Respondent’s business in the latter part of 2016 to just include service call work, adding that the Respondent no longer employed any full-time staff;  as a result of the decision to wind down the Respondent’s business some employees but not all employees were offered employment with Arvio;  had Mr von Erkel not been dismissed his employment would never have been transferred to Arvio as there was no agreement that the Respondent’s staff would automatically transfer to Arvio;  it continues to operate as it did before Mr von Erkel’s dismissal, albeit at a reduced capacity, under different management and at a different location with different personnel;  the proposition that the Commission effectively uphold the object of Part 3-2 of the Act by reinstating Mr von Erkel to an associated entity of the Respondent under s.391(1A)(c) of the Act is preposterous and would surely fail any legal test;  it was very clear from the hearing that Mr von Erkel had significant hatred for senior management of the Respondent and had no remorse for his actions;  absent his dismissal for misconduct, Mr von Erkel would have been dismissed within a month for underperformance; and  Mr von Erkel should receive no compensation for several reasons, including that there was no evidence that he tried to mitigate his loss by finding new employment and that he gratuitously disparaged colleagues and senior management in the termination meeting of 9 March 2016 and in a text message he sent to Mr Robertson (Arvio’s Sales Manager and Mr von Erkel’s manager at the time of his dismissal) later that day. [11] At the hearing the Respondent was asked a number of questions by the Commission regarding paragraphs 12, 13 and 15 of its written submissions which in short submitted that the Respondent continued to be an operating entity. Mr Wilson’s responses to those questions can be summarised as follows:  the Respondent does not undertake any sales activities but does take inbound calls relating to service work and warranties, with those calls transferred to a service agent; -- 4 of 19 -- [2018] FWC 4973 5  the Respondent generates a small amount of turnover from those service calls;  the Respondent has no full-time employees and operates at an extremely reduced capacity; and  the reference to “different personnel” in paragraph 15 of the written submissions was a reference to the abovementioned service agent. The Statutory framework [12] Section 381 of the Act which sets out the Object of Part 3-2 – Unfair Dismissal of the Act provides as follows: “381 Object of this Part (1) The object of this Part is: (a) to establish a framework for dealing with unfair dismissal that balances: (i) the needs of business (including small business); and (ii) the needs of employees; and (b) to establish procedures for dealing with unfair dismissal that: (i) are quick, flexible and informal; and (ii) address the needs of employers and employees; and (c) to provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement. (2) The procedures and remedies referred to in paragraphs (1)(b) and (c), and the manner of deciding on and working out such remedies, are intended to ensure that a “fair go all round” is accorded to both the employer and employee concerned. Note: The expression “fair go all round” was used by Sheldon J in in re Loty and Holloway v Australian Workers’ Union [1971] AR (NSW) 95.” [13] Division 4 of Part 3-2 of the Act deals with remedies for unfair dismissal and is set out below. “390 When the FWC may order remedy for unfair dismissal (1) Subject to subsection (3), the FWC may order a person’s reinstatement, or the payment of compensation to a person, if: (a) the FWC is satisfied that the person was protected from unfair dismissal (see Division 2) at the time of being dismissed; and (b) the person has been unfairly dismissed (see Division 3). (2) The FWC may make the order only if the person has made an application under section 394. (3) The FWC must not order the payment of compensation to the person unless: (a) the FWC is satisfied that reinstatement of the person is inappropriate; and -- 5 of 19 -- [2018] FWC 4973 6 (b) the FWC considers an order for payment of compensation is appropriate in all the circumstances of the case. Note: Division 5 deals with procedural matters such as applications for remedies. 391 Remedy – reinstatement etc. Reinstatement (1) An order for a person’s reinstatement must be an order that the person’s employer at the time of the dismissal reinstate the person by: (a) reappointing the person to the position in which the person was employed immediately before the dismissal; or (b) appointing the person to another position on terms and conditions no less favourable than those on which the person was employed immediately before the dismissal. (1A) If: (a) the position in which the person was employed immediately before the dismissal is no longer a position with the person’s employer at the time of the dismissal; and (b) that position, or an equivalent position, is a position with an associated entity of the employer; the order under subsection (1) may be an order to the associated entity to: (c) appoint the person to the position in which the person was employed immediately before the dismissal; or (d) appoint the person to another position on terms and conditions no less favourable than those on which the person was employed immediately before the dismissal. Order to maintain continuity (1) If the FWC makes an order under subsection (1) and considers it appropriate to do so, the FWC may also make any order that the FWC considers appropriate to maintain the following: (a) the continuity of the person’s employment; (b) the period of the person’s continuous service with the employer, or (if subsection (1A) applies) the associated entity. Order to restore lost pay (2) If the FWC makes an order under subsection (1) and considers it appropriate to do so, the FWC may also make any order that the FWC considers appropriate to cause the employer to pay to the person an amount for the remuneration lost, or likely to have been lost, by the person because of the dismissal. (3) In determining an amount for the purposes of an order under subsection (3), the FWC must take into account: (a) the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for reinstatement; and -- 6 of 19 -- [2018] FWC 4973 7 (b) the amount of any remuneration reasonably likely to be so earned by the person during the period between the making of the order for reinstatement and the actual reinstatement. 392 Remedy – compensation Compensation (1) An order for the payment of compensation to a person must be an order that the person’s employer at the time of the dismissal pay compensation to the person in lieu of reinstatement. Criteria for deciding amounts (2) In determining an amount for the purposes of an order under subsection (1), the FWC must take into account all the circumstances of the case including: (a) the effect of the order on the viability of the employer’s enterprise; and (b) the length of the person’s service with the employer; and (c) the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and (d) the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and (e) the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and (f) the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and (g) any other matter that the FWC considers relevant. Misconduct reduces amount (3) If the FWC is satisfied that misconduct of a person contributed to the employer’s decision to dismiss the person, the FWC must reduce the amount it would otherwise order under subsection (1) by an appropriate amount on account of the misconduct. Shock, distress etc. disregarded (4) The amount ordered by the FWC to be paid to a person under subsection (1) must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person’s dismissal. Compensation cap (5) The amount ordered by the FWC to be paid to a person under subsection (1) must not exceed the lesser of: (a) the amount worked out under subsection (6); and (b) half the amount of the high income threshold immediately before the dismissal. -- 7 of 19 -- [2018] FWC 4973 8 (6) The amount is the total of the following amounts: (a) the total amount of remuneration: (i) received by the person; or (ii) to which the person was entitled; (whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal; and (b) if the employee was on leave without pay or without full pay while so employed during any part of that period—the amount of remuneration taken to have been received by the employee for the period of leave in accordance with the regulations. 393 Monetary orders may be in instalments To avoid doubt, an order by the FWC under subsection 391(3) or 392(1) may permit the employer concerned to pay the amount required in instalments specified in the order.” Consideration of the issues [14] The Full Bench in Phillip Seitz v Ironbay Pty Ltd t/a City Beach IGA9 (Seitz) set out the principles applicable to the proper interpretation and application of ss.390 and 391 of the Act as follows: “[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. 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.  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”.  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.  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.  Consideration as to whether reinstatement is appropriate involves the assessment of a broader range of factors than practicability. -- 8 of 19 -- [2018] FWC 4973 9  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).  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.  In relation to the impact a loss of trust and confidence may have on the question of whether reinstatement is appropriate, the following observations may be distilled from the decided cases: ➣ Whether there has been a loss of trust and confidence is a relevant consideration in determining whether reinstatement is appropriate but while it will often be an important consideration it is not the sole criterion or even a necessary one in determining whether or not to order reinstatement. ➣ Each case must be decided on its own facts, including the nature of the employment concerned. There may be a limited number of circumstances in which any ripple on the surface of the employment relationship will destroy its viability but in most cases the employment relationship is capable of withstanding some friction and doubts. ➣ An allegation that there has been a loss of trust and confidence must be soundly and rationally based and it is important to carefully scrutinise a claim that reinstatement is inappropriate because of a loss of confidence in the employee. The onus of establishing a loss of trust and confidence rests on the party making the assertion. ➣ The reluctance of an employer to shift from a view, despite a tribunal’s assessment that the employee was not guilty of serious wrongdoing or misconduct, does not provide a sound basis to conclude that the relationship of trust and confidence is irreparably damaged or destroyed. ➣ 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.”10 (Endnotes not included) [15] The Full Bench in Seitz also made the following observation regarding the issue of trust and confidence: -- 9 of 19 -- [2018] FWC 4973 10 “[16] … 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 …”11 (Underlining added) [16] I set out below some key aspects of the evidence referred to in the 3 May 2018 decision which found that Mr von Erkel’s dismissal was unjust:  Mr von Erkel’s evidence included that:  with regard to Mr Hartog’s evidence, he believed that Mr Hartog had definitely lied and that Mr Hartog’s recollection of the discussion was a concoction by him to get rid of him (Mr von Erkel)12,  with regard to the transcript of the termination meeting, he did want Mr Hartog out of the business but he did not express that in that situation13;  he did not want Mr Hartog out of the business but he did not want to see him as “our builder”14,  he felt that Mr Hartog was incompetent15, and  Mr Hartog and Mr Bain (an employee of Arvio) were “simpletons” as he considered them just “very simple guys”16;  Mrs Wilson attested that the Respondent’s assets were transferred or sold to Arvio, though she did not know what happened to the proceeds of that sale or have any idea as to the value of those assets17; and  Mr Robertson attested that:  he found Mr von Erkel’s performance to be substandard18, and  he generally got on pretty well with Mr von Erkel19. [17] In his oral evidence at the merits hearing Mr von Erkel attested that he remained good friends with Mr Rotgans (an employee of Arvio) and Mr Bain20. Further, when asked by the Respondent as to whether he had confidence in Mr Hartog as a builder Mr von Erkel responded that “As a builder, for what we were doing, we are way out of his league.”21 [18] Beyond that I note that Mr Robertson deposed in his witness statement of 24 February 201722 in respect of the written warning issued to Mr von Erkel on 2 March 2016 that had Mr von Erkel not been dismissed and continued to fail to meet the requirements set out in that warning letter within a month that he would have dismissed Mr von Erkel for underperformance. I note that this aspect of Mr Robertson’s evidence was not challenged under cross-examination at the merits hearing. By way of background, the warning letter stated inter alia: “On Monday 11th January 2016 the monthly and yearly targets were discussed and mutually agreed upon as fair and reasonable by yourself, General Manager Paul Wilson and myself … This target includes prospecting, outbound phone calls, -- 10 of 19 -- [2018] FWC 4973 11 appointments and sales. None of the benchmarks were reached in January or February 2016. Month Target new Prospects per month Target phone calls per month Target New Appoints per month New Appoint- ments % of Target Target Sales per month Sales % of Target Target $ Sales per month Gross $ value of sale % of Target Jan 100 60 20 0 0% 6 1 16% $62,500 $16,019 25% Feb 200 120 40 12 30% 12 3 25% $135,000 $11,019 8% Total 300 180 60 12 20% 18 4 22% $197,500 $27,038 14% On Monday February 1st 2016 you met with myself to discuss how your performance could be improved. At this meeting you advised that your performance had been unsatisfactory, and that immediate improvement is required. In particular you were advised that your number of prospects, phone calls and appointments needed to increase along with sales. None of the agreed benchmarks were reached in February, 2016. To week eight of 2016 (the last week in February) you have averaged 1.3 appointments per week. Of those 11 new appointments, none have yet resulted in sales. Since July 1st 2015 you booked 39 new appointments in 35 weeks. In 13 of those weeks there were zero appointments booked throughout the week and in some weeks there were no follow-up meetings booked either. This is well below targets which you have mutually agreed upon as fair and reasonable at present there are three appointments scheduled for this week and none for the following week. This too is below that which is required. … After considering the situation it is expected that your performance improves in the following areas – There is to be a minimum of 7 sales appointments per week There is to be a minimum of two sales per week There is to be no interference in another person’s sale You are to be in the office at 8:15 am or earlier All medical appointments are to be accompanied by a signed medical certificate This is your first warning letter and should there be no improvement in your sale’s [sic] performance or be any further company transgressions, it will result in either a second warning letter or dismissal. I propose that we meet again on Monday 8th March, 2016 at 8:30 am to review your progress during a scheduled sales meeting …”23 [19] As previously mentioned, the Respondent submitted that Mr von Erkel should receive no compensation for several reasons, including that he gratuitously disparaged colleagues and senior management in the termination meeting of 9 March 2016 and in a text message later that day. Relevant extracts from the transcript of the termination meeting are set out below: “22. Ambrose: Gerard [Mr Hartog] is loose cannon, we have always known that. He’s a weak note that Paul [Mr Wilson] controls and that’s why he is in that position here. -- 11 of 19 -- [2018] FWC 4973 12 23. David: He’s a what? 24. Ambrose: A weak note. Everyone thinks it. No one has confidence in him as a director that’s why he wasn’t included on the board; no one has confidence in him as a builder that’s why he isn’t in any of the meetings which is highly inappropriate for a building company, we have a builder that doesn’t participate in the process of design and preparing for a build. So you’re coming to me with someone who’s, with serious allegations about someone who no one in the business really has confidence in, he is in here because he is a convenience. I find this entirely inappropriate. … 45. David: … now accordingly [sic] to the statements not only were you pushing to have Gerard out of the directorship Ambrose, you are also pushing to have Paul Wilson not as General Manager, you have grave doubts about his ability to lead this business 46. Ambrose: Well I think there is a question there. I think everyone holds. You know I make no apologies there … 48. Ambrose: I think we are just frustrated with the lack of direction that’s all. … 64. Ambrose: Look there hasn’t been a great deal of confidence in Gerard I couldn’t see us succeeding with the level of goals we had set for ourselves with this weak note here … 77. David: Ok because on this particular case you have already been given a first warning letter about the lack of sales, you have signed that warning letter and in that warning letter it states that should there be no improvement in your sales performance or any further company transgressions it will result in either a second warning or dismissal … 88. Ambrose: Well, these are the two guys [Messrs Hartog and Bain] that I have been working with either don’t know what’s going on, they don’t wanna work with me … 96. Ambrose: Of course I have said what are we doing with Gerard as director he needs to or not as a director but as a builder I said you don’t bring him into the meetings you really don’t have the confidence in him as a builder, he is not a person who can work with people I said he builds any builds by himself there is very few people he will bring into the building process he will do it all himself. Gerard is great, I have no problem with Gerard as a person he’s happy go luck [sic], go find some bubble wrap that he can jump up and down on pop pop pop pop pop what is going on? Gerard is throwing stuff in the bin again. -- 12 of 19 -- [2018] FWC 4973 13 He’s a simpleton. We are not we an advanced company, were [sic] going places and honestly I wasn’t thrilled about the position I was going into considering I was working with Gerard. It was something that I wanted to bring up with Paul because I do not believe, I don’t know hats [sic] going to happen but it isn’t going to be easy going forward from that position. See you guys do what you want, you can get rid of someone who can actually be something to those clients or you can stay with a weak team member. He’s a puppet … 100. Ambrose: Look, in light of the fact that I was still managing Phase Change, I was getting used to your system, I was changing the product focus I was going though [sic] cancer and chemotherapy. In the light of the fact that all of this was going on, starting the new year, working under a new manager, sure I didn’t have the hits on the board but my connections are out there, sales are coming, there will and I will catch up. Frankly I don’t really want to go into a building part if Gerard is actually in the equation I don’t believe in it, it’s going to turn into a muddy mess. I’ve been building, I’ve built over 100 homes I’ve been in all aspects of building I’m one of the few talents in this area in this company, I know what it takes to run a building company, we don’t have it yet, we don’t have the team to be a building company to do the level that we want to, no way. I want to do what we are envisioning, I don’t want the madness, this company struggles to deal with its admin right now and you want add building into the mix, oh wow, you’re just turbocharging the demand that’s going to be put on the people. I would like to take change of a lot of things here. Because they need to be done we will not succeed and I have not had the ability to influence things and honestly I would rather do sales than go into an absolute nightmare because that’s where we are heading, that’s what I believe that I also believe that there is enough talent within this organisation to build something that will actually succeed that will actually achieve its goals”24 (Underlining added) [20] As to the text message referred to in the Respondent’s submissions, it was sent by Mr von Erkel to Mr Robertson at 11.46am on 9 March 2016 (i.e. after the termination meeting) and included the following: “… I felt then as I do now Gerard is incompetent for the direction and goals of the business. He is only in the business as a puppet for Paul to control. Personally I was grateful when he decided to leave. I believed this would remove a serious problem and open the door to a better solution for Arvio to make its claim as a leader in building construction. … This dismissal is a lame assassination hinged on the misunderstanding of two simpletons. I have only wanted what was best for Arvio and all of its people. I have only ever wanted the company to align its capacity to match that of its claims, direction and vision. So far I have been disappointed …”25 [21] As previously noted, Mr von Erkel sought an order for reinstatement, the restoration of lost pay and an order to maintain continuity of service. He submitted that anything short of reinstatement would be an inadequate remedy given that no compensation can be awarded in circumstances where the Respondent is a shell company. -- 13 of 19 -- [2018] FWC 4973 14 [22] The Respondent on the other hand submitted that reinstatement was not appropriate in the circumstances, particularly in view of Mr von Erkel’s poor performance and his disrespect towards Mr Wilson and Mr Hartog in the termination meeting of 9 March 2016. [23] As noted by the Full Bench is Seitz:  s.390(3) of the Act 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”;  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;  consideration as to whether reinstatement is appropriate involves the assessment of a broader range of factors than practicability; and  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. [24] In this case the Respondent did not explicitly contend that reinstatement was inappropriate on the grounds of a loss of trust and confidence, though it is arguable that it implicitly contended this when it highlighted that Mr von Erkel went on a verbal tirade against Mr Hartog and Mr Wilson during the termination meeting. Nevertheless, what is clear from the above extracts from the transcript of the termination meeting of 9 March 2016 and the text message Mr von Erkel sent Mr Robertson later that day is that Mr von Erkel did not have much professional regard for Mr Hartog’s abilities as a builder and that he also had reservations about Mr Wilson’s leadership capabilities. Mr von Erkel repeated some of those comments in his oral evidence at the merits hearing, describing Mr Hartog as incompetent and a simpleton. Also in his oral evidence Mr von Erkel reiterated his description of Mr Bain as a simpleton. Mr von Erkel’s oral evidence at the merits hearing in my view undermines his characterisation of his comments about Mr Hartog and Mr Wilson at the 9 March 2016 termination meeting in his witness statement of 12 June 201826 as having been said “in the heat of the moment”27. As noted in the decision of 3 May 2018, Mr von Erkel’s comments “… regarding Arvio and Mr Hartog and Mr Wilson raise doubts as to his ability to work effectively with either Mr Hartog or Mr Wilson they do not in my view of themselves warrant dismissal given the context in which they were made.”28 [25] I also note the observation by the Full Bench in Seitz regarding the criticality of viable personal relationships in a small workplace29. While the Respondent no longer directly employs any employees, Arvio at the time of Mr von Erkel’s dismissal employees some 15 employees. There is no material before the Commission indicating any significant change in the number of persons employed by Arvio. While Arvio is not a small business employer for the purposes of the Act it is nonetheless a small business. Were Mr von Erkel to be reinstated to a position in Arvio it is highly likely that he would have to work closely with Mr Hartog. Given the nature of Mr von Erkel’s comments about Mr Hartog I consider it extremely unlikely that even after a period of adjustment the two could work together harmoniously or -- 14 of 19 -- [2018] FWC 4973 15 effectively. [26] Further, based on my observations throughout the various hearings related to Mr von Erkel’s application, it is clear to me that whilst Mr Wilson and Mr von Erkel were civil to one another during the proceedings there is “no love lost” between them at least as far as Mr Wilson is concerned. That view is reinforced by the Respondent’s submissions which contend that Mrs Wilson’s health issues were in part due to Mr von Erkel’s behaviour at the termination meeting and shortly thereafter. While I note Mr von Erkel’s evidence that he did not hold any grudges towards Mr and Mrs Wilson in terms of how they responded to his unfair dismissal application, my observations suggest that that goodwill is unlikely to be reciprocated on Mr Wilson’s part in particular. Having regard to Mr Wilson’s pivotal role in Arvio, in my view the relationship between Mr Wilson and Mr von Erkel is fractured to such an extent that it is beyond repair. This, together with the above finding that it is extremely unlikely that Mr von Erkel and Mr Hartog could work together harmoniously or effectively, in my view makes reinstatement is inappropriate in this case. [27] Accordingly the Commission now needs to consider the issue of compensation. While I note Mr von Erkel’s contention that such an order would be nugatory, I do not accept that to be the case given the Respondent’s submissions that it generates a small amount of turnover. Compensation [28] The method for calculating compensation under s.392 of the Act was considered by a Full Bench of the Commission in Bowden, G v Ottrey Homes Cobram and District Retirement Villages Inc. T/A Ottrey Lodge30 (Bowden). In that decision the Full Bench set out the order in which the criteria and other factors should be applied, taking into account authority under the Workplace Relations Act 1996 in Sprigg v Paul’s Licensed Festival Supermarket31 and Ellawala v Australian Postal Corporation32. I have adopted the methodology utilised in Bowden in determining the amount of compensation. Viability – s.392(2)(a) [29] In the absence of any submissions from the Respondent regarding this factor, I consider the issue of viability to be a neutral consideration. Length of service – s.392(2)(b) [30] Mr von Erkel was employed by the Respondent for a period of just over sixteen months (i.e. 3 December 2014 to 13 April 2016). I do not consider that any adjustment to the amount of compensation proposed is warranted on the basis of Mr von Erkel’s relatively short period of service. Remuneration that would have been received – s.392(2)(c) [31] As Mr von Erkel proposed reinstatement as the only meaningful remedy available to the Commission he made no submissions regarding this consideration. [32] The Respondent conversely submitted, consistent with Mr Robertson’s evidence, that but for his dismissal Mr von Erkel would have been dismissed within a month for underperformance. -- 15 of 19 -- [2018] FWC 4973 16 [33] Having regard to the warning letter given to Mr von Erkel by Mr Robertson on 2 March 2016 (see paragraph [18] above) I consider the period suggested by the Respondent is too short. As can be seen from the performance improvement requirements set out in the warning letter, some are readily achievable, e.g. being in the office at 8.15 am or earlier and providing a medical certificate in respect of all medical appointments. However, other improvements are likely to have been more difficult to achieve, e.g. a minimum of 7 sales appointments and two sales per week. I consider that Mr von Erkel may have been able to meet the required number of sales appointments in the short term but that translating that into sales would most likely involve a longer lead time. In other words, I consider that Mr von Erkel was likely to achieve progress in respect of some of the areas where improved performance was required and that as such the Respondent was likely to provide a reasonable opportunity for that to translate into sales. Given the references to Mr von Erkel’s performance in the warning letter I consider it unlikely that he would have been able to achieve the sales targets and that as such it was more likely that he would have only continued to be employed by the Respondent for a further 8 weeks. [34] Mr von Erkel’s contract of employment33 provides for an annual salary of $55,000 (i.e. $1,057.69 per week) plus superannuation and a Car Allowance of $15,000 per annum (i.e. $288.46 per week). On the basis that Mr von Erkel would have been employed for another 8 weeks, I estimate he would have earned $10,769.20 [i.e. ($1057.69 + $288.46) x 8], less any applicable tax, plus superannuation over this period. Mitigation efforts – s.392(2)(d) [35] Mr von Erkel provided evidence in the form of Job Search Record Sheets for the periods 12 July-12 August 2016, 29 August-12 September 2016 and 13 October-12 November 2016. As previously noted, Mr von Erkel also attested that he was unable to locate any further such records and that he provided copies of all such records that he had to the Commission via his witness statement. [36] While the Respondent submitted that there was no evidence that Mr von Erkel had tried to mitigate his loss by finding new work, I note that its written submissions in that regard predated Mr von Erkel’s witness statement of 17 July 201834 to which the abovementioned Job Search Record Sheets were attached. [37] Having regard to those Job Search Record Sheets and Mr von Erkel’s oral evidence, I am satisfied that Mr von Erkel sought to mitigate his loss by seeking alternative employment. Accordingly, no deduction on this ground is warranted. Remuneration earned – s.392(2)(e) [38] Mr von Erkel submitted that the only remuneration he had earned following his dismissal was $7,000 over the period September 2016 to February 2017 when he worked as a house painter. Prior to that Mr von Erkel was in receipt of social security payments. Given that Mr von Erkel earned no income during the 8 week period I consider that he would have continued to have been employed by the Respondent following his dismissal, I consider that no deduction to the amount of compensation proposed is warranted on this ground. -- 16 of 19 -- [2018] FWC 4973 17 Income reasonably likely to be earned – s.392(2)(f) [39] Mr von Erkel’s evidence was that since his dismissal he had not been able to find ongoing or secure work. In those circumstances, Mr von Erkel is unlikely to earn any income during the period between the making of an order for compensation and the actual compensation. As such, I consider that no deduction on this ground is warranted. Other matters – s.392(2)(g) [40] There are no other matters that I consider relevant to take into account in the determination of an amount of compensation. Misconduct – s.392(3) [41] In the decision of 3 May 2018 the Commission found that:  the evidence supported a finding that Mr von Erkel did prompt Mr Hartog to resign his directorship with Arvio35; and  while Mr von Erkel’s conduct had potentially significant implications for Arvio, it did not constitute serious misconduct as it could not cause serious and imminent risk to the reputation, viability or profitability of the Respondent’s business36. [42] With particular regard to the first of those findings, I consider it was inappropriate for Mr von Erkel to express the views that he did to Mr Hartog as opposed to suggesting to him that he discuss his concerns with Mr Wilson. His failure to alert Mr Wilson to his conversation with Mr Hartog in my view reflects poorly not only on Mr von Erkel but also on Messrs Rotgans and Bain who also were part of the discussion. In my view Mr von Erkel’s behaviour, given the potentially significant implications for Arvio, amounts to misconduct which warrants the proposed compensation being reduced by 20 per cent (i.e. $2,153.84). This reduces the amount of compensation to $8,615.36 (i.e. $10,769.20 – $2,153.84) less any applicable tax plus superannuation. No component for shock, distress, humiliation or other analogous hurt – s.392(4) [43] The compensation amount contains no component for any shock, distress, humiliation or other analogous hurt suffered by Mr von Erkel. Compensation cap – s.392(5) [44] The compensation cap in this case is $35,000 comprised of $27,500 in salary (i.e. half of Mr von Erkel’s annual salary of $55,000) and $7,500 in car allowance (again half of Mr von Erkel’s annual allowance of $15,000). This amount is lower than half the amount of the high income threshold immediately before Mr von Erkel’s dismissal (i.e. $69,450). -- 17 of 19 -- [2018] FWC 4973 18 Conclusion [45] Having regard to the various statutory requirements set out in ss.390-392 of the Act, I find that reinstatement is not appropriate in this case and determine that compensation of $8,615.36 less applicable tax plus superannuation is appropriate in all the circumstances of this case. This accords a “fair go all round” as per s.381(2) of the Act to Mr von Erkel and the Respondent. The compensation should be paid within 21 days of this decision. An Order to that effect will be issued in conjunction with this decision. Appearances: P. Hull for the Applicant P. Wilson for the Respondent Hearing details: 2018. Canberra and Melbourne. July 23. Printed by authority of the Commonwealth Government Printer <PR620180> 1 [2018] FWC 2473 2 [2016] FWC 7112 at [6]-[12] 3 Transcript at PN329 4 [2018] FWC 2473 at [48] 5 Ibid at [44] 6 Ibid at PN1957 7 Exhibits 35 and 36 8 See Attachment AvE 9 to Exhibit 36 9 [2018] FWCFB 1341 10 Ibid at [15] 11 Ibid at [16] 12 [2018] FWC 2473 at [12] 13 Ibid at [14] 14 Ibid 15 Ibid 16 Ibid -- 18 of 19 -- [2018] FWC 4973 19 17 Ibid at [31] 18 Ibid at [33] 19 Ibid 20 Transcript at PN3159 and PN3213 21 Ibid at PN3462 22 Exhibit 30 23 Exhibit 12 24 Exhibit 13 25 Exhibit 14 26 Exhibit 35 27 Ibid at paragraph 7 28 [2018] FWC 2473 at [85] 29 [2018] FWCFB 1341 at [16] 30 [2013] FWCFB 431 31 (1998) 88 IR 21 32 Print S5109 33 Attachment to Form F2 – Unfair Dismissal Application 34 Exhibit 36 35 [2018] FWC 2473 at [76] 36 Ibid at [85] -- 19 of 19 --