Director 'deserves some sympathy' for his 'callous' termination, says FWC
The Fair Work Commission (FWC) recently dealt with an unfair dismissal case involving a long-serving employee in the towing industry who was abruptly terminated at the age of 76.
This case highlighted several key employment law issues, including the importance of having valid reasons for dismissal, following proper procedures, and considering an employee's circumstances when terminating their employment.
The decision also shed light on how changes in business operations and an employee's financial stake in a company can impact their ongoing employment prospects.
Background of the case
The worker had been involved in the towing business for over 30 years, initially as an owner-operator of a company called Active Towing Sydney Pty Ltd (ATS) from 1991.
In 2019, facing his business partner's health issues and desire to exit the business, the worker decided to continue the business under a new structure. He approached two long-time employees to form a new company, Active Towing & Transport Pty Ltd (ATT).
The new company was established with the worker holding a 50% share and the two other employees each holding 25%. The arrangement was that the worker would continue as an employee for 5-7 years before retiring and selling his shares to the other directors.
The worker's role in the new company involved arriving at work early, reviewing emails, receiving calls about towing jobs, driving tow trucks when required, and recording towing details upon returning to the office. He typically worked Monday to Saturday, with shorter hours on Wednesdays and Saturdays.
Changes in business structure and status
However, the situation changed dramatically over time. In February 2021, the worker resigned as a director of ATT, though he remained an employee and shareholder.
In August 2022, the company's principal place of business moved from its office to one of the director's home address, which significantly reduced the worker's duties.
The most significant change occurred in February 2023 when the worker declared bankruptcy. This resulted in his shares in ATT vesting in the trustee in bankruptcy, meaning he no longer had a direct financial interest in the company.
Shortly after the worker's bankruptcy, on 31 March 2023, he realised he had not been paid. After unsuccessful attempts to contact the directors, the worker engaged a consultant to write to the company requesting payment.
The company responded through its solicitor on 4 April 2023, denying that the worker was ever an employee and stating that payments to him had been stopped.
Key issues in the dismissal
The employer claimed the worker was dismissed due to redundancy and misconduct. They alleged the worker had transferred leave entitlements without authorisation, engaged in inappropriate behaviour towards another employee, and made unauthorised transactions on company accounts.
The worker denied these allegations and argued he was unfairly dismissed without notice or proper reason.
He emphasised his age, long service, and limited prospects for future employment.
FWC's findings on the dismissal
The FWC found that the dismissal was harsh, unjust and unreasonable. It determined there was no valid reason for the dismissal related to the worker's capacity or conduct. The Commission noted:
"I do not accept that it occurred because of redundancy or misconduct."
The FWC also criticised the manner of dismissal, stating:
"[The worker] deserves some sympathy for the callous way in which his employment was ended by ATT."
While the FWC found the dismissal unfair, it also considered that the worker's employment would likely have ended soon after due to changes in the business operations and his loss of financial stake in the company.
The Commission explained:
"In my view, it is likely that the combination of the business operating from [the director’s] home address from August 2022 together with [the worker] no longer having a financial interest in the business of ATT from February 2023 would have led ATT to form the view soon after the dismissal that it no longer required [the worker’s] job to be performed by anyone because of changes in the operational requirements of ATT's enterprise."
Ultimately, the FWC awarded the worker eight weeks' pay plus superannuation as compensation. In explaining this decision, the Commission stated:
"I am satisfied that the amount of compensation that I have determined above takes into account all the circumstances of the case as required by s.392(2) of the FW Act and that the amount does not include a component compensating for shock, distress or humiliation."
This case serves as a reminder to employers about the importance of following proper procedures when terminating employment, even in small businesses. It also highlights how changes in business operations and an employee's circumstances can impact employment relationships over time.
