Business pays price for skipping proper termination process
The Fair Work Commission (FWC) recently dealt with an unfair dismissal claim by a head chef who was summarily terminated via text message after approximately two years of employment with a small business.
The worker argued that he was dismissed without any prior warnings, that the allegations of misconduct and poor performance were never discussed with him before termination, and that he was not given any opportunity to respond to the concerns raised in his termination letter. He claimed the employer had "concocted" allegations to justify his dismissal.
The case highlights critical issues around procedural fairness in small businesses, particularly the requirement for employers to properly investigate alleged misconduct and provide employees with an opportunity to respond before making termination decisions.
The worker started employment with a small ramen restaurant business (Sou) as head chef in August 2022. After approximately two years of employment, he was summarily dismissed via text message on 1 September 2024.
The text message stated: "Knowing you have already packed all your own items away on Friday, I know you are done working at Sou. I will send you an official release letter to conclude your employment with Sou, you should receive it sometime tonight at the latest."
The worker replied to this message explaining that he had only taken his personal knife home to use over the weekend. He asked: "Does that mean you are going to fire me?" The employer then sent a termination letter listing six different allegations of misconduct and performance issues.
The business was a small ramen restaurant with locations in North Sydney and Chatswood. The North Sydney restaurant, where the worker had been employed, closed in November 2024 due to financial difficulties. The employer was the sole owner and director of the company, which had fewer than 15 employees at the time of dismissal.
The dismissal occurred against a backdrop of deteriorating relations between the worker and the employer. According to evidence presented, the worker had been given a 5% share in the business in mid-2023, but this was removed in January 2024.
The worker claimed that his suggestions for the business were ignored and that his motivation decreased as a result, though he maintained he continued to perform his duties adequately.
The worker's annual salary was $75,000 plus superannuation. After his dismissal, he eventually secured a position with a Japanese business in January 2025, though there was some dispute about his connection to this company before his dismissal.
The FWC examined whether the dismissal complied with the Small Business Fair Dismissal Code (SBFDC), which requires employers to have reasonable grounds for summary dismissal and to conduct a reasonable investigation.
The FWC looked at a recording of a meeting between the worker and employer from 7 August 2024, about three weeks before the dismissal. This recording revealed a general discussion about the worker's motivation and the employer's business struggles, but none of the specific misconduct allegations later used to justify the dismissal were mentioned.
At this meeting, the employer asked the worker to reflect on whether he wanted to remain with the company and advise of his decision. The worker continued working normally after this meeting until his sudden dismissal on 1 September 2024, which appeared to be triggered when he took his personal kitchen knife home for the weekend.
The FWC noted that the employer "accepted that the misconduct alleged in [the worker's] termination letter had not been discussed with him at all prior to the termination letter being issued. The issues were not properly investigated by [the employer] and [the worker] was not provided with any opportunity to give his version of events."
The FWC found that the worker "has been able to provide compelling answers to the allegations during the unfair dismissal proceedings. These answers could have been provided to [the employer] if a proper investigation had occurred."
The termination letter outlined six reasons for dismissal: failure to respond to instructions, non-performance of duties, involvement in business decisions, allegations of conflict of interest, violation of company policies, and another conflict of interest allegation related to supplier interactions.
The FWC systematically analysed each allegation and found none of them substantiated by evidence. Regarding the first allegation about failing to respond to instructions, the FWC found: "The main issue identified by [the employer] is that [the worker] did not tell him whether he wanted to remain employed after their meeting on 7 August 2024. However, [the worker] gave uncontested evidence that a further meeting was scheduled during the next week to discuss the matter further, but the meeting could not be held because [the employer] was not at the restaurant outside of operating hours."
Addressing the allegation that the worker was not performing his duties, the FWC found: "The evidence does not establish that [the worker] was not performing his head chef duties. The evidence indicates the restaurant was operating normally, albeit potentially not profitably, during [the worker's] employment."
The FWC also dismissed allegations about business decisions, noting: "This allegation appears to be an attempt to blame [the worker] for the lack of success with the new Chatswood restaurant. It is clear [the employer] made the decision to invest in the Chatswood restaurant. Even if [the worker] gave bad advice about that decision to [the employer] (which has not been established), that would not constitute misconduct by [the worker] in his role as head chef."
The FWC was puzzled by the timing of the dismissal, stating: "I am confused as to why [the employer] suddenly decided to dismiss [the worker] on 1 September 2024. My best guess is that [the employer's] understandable stress and concern about the financial state of his business led him to treat [the worker] as a scapegoat for his problems given his lack of enthusiasm for the head chef role."
The termination process was found to have significant procedural fairness issues. The worker had not been notified of the reasons for his dismissal before the decision was made, nor had he been given any opportunity to respond to the allegations.
The FWC determined that while there had been a general meeting on 7 August 2024, this did not constitute notification of dismissal reasons. The employer admitted during cross-examination that the allegations in the termination letter had not been raised with the worker previously, except for the request for him to confirm if he wished to remain employed.
The worker had received no verbal or written warnings about performance issues during his two years of employment. The FWC specifically criticised the method of dismissal, stating: "Sending a text message to an employee over the weekend to communicate their immediate dismissal is not appropriate."
While acknowledging these serious procedural deficiencies, the FWC also recognised the practical challenges faced by small businesses without human resources expertise: "I accept [the employer] means well overall and that the size of his business and the lack of support contributed heavily to the lack of procedural fairness afforded to [the worker]."
The FWC applied the test from section 387 of the Fair Work Act 2009, which requires consideration of whether there was a valid reason for dismissal, whether the person was notified of that reason, whether they had an opportunity to respond, and several other factors including the size of the business and absence of HR expertise.
The worker did not seek reinstatement, and the FWC agreed it would be inappropriate given that the employment relationship had broken down and the restaurant where he worked had closed in November 2024.
In calculating compensation, the FWC had to determine how long the employment would likely have continued if the dismissal had not occurred. The worker had sent a message to the employer on 2 September 2024 (after being dismissed) indicating he had planned to give one month's notice. The FWC also considered that the restaurant closed in November 2024.
Based on these factors, the FWC estimated the worker would likely have remained employed for only six weeks had he not been unfairly dismissed. This resulted in an initial compensation calculation of $8,653.85 plus superannuation.
The FWC stated: "Having considered each of the matters specified in s.387 of the Fair Work Act, I am satisfied that the dismissal of [the worker] was unjust and unreasonable. There was not a valid reason for [the worker's] dismissal relating to his conduct or performance. [The employer] has failed to substantiate the allegations raised in [the worker's] termination letter."
However, the FWC reduced the final compensation amount after considering additional factors: "I am concerned that a compensation order of this size will impact the viability of [the employer]. [The worker] was not a long-term employee, and it appears he has now landed a positive opportunity with [a new employer]. I also have some sympathy for the position of [the employer] given the financial issues with [the business] and his health issues."
The final compensation ordered was $7,000 plus superannuation of $805, to be paid within 28 days of the decision.
