The Fair Work Commission has found that an employee who carried on his own competing business within the hours he was employed by, and against the interests of, his former employer was not entitled to any compensation for unfair dismissal, as his summary dismissal was consistent with the Small Business Fair Dismissal Code.

Implications for employers

When determining whether or not a summary dismissal of an employee of a small business is unfair, one of the relevant considerations for the Commission will be whether the employer held the belief that the employee’s conduct was sufficiently serious to justify immediate dismissal. That belief does not need to be correct – it just needs to be ‘reasonable’. In determining whether the employer holds that reasonable belief, the Commission must assess that belief whilst being mindful of the experience and resources of the small business concerned. The result is a less stringent requirement in respect to the reason for the dismissal and the procedure adopted.

Background

Mr Matthew Jones made an unfair dismissal claim under the Fair Work Act 2009 (FW Act) after being summarily dismissed by Solarbright Country Pty Ltd (the respondent) on 14 November 2014.

The employer - employee relationship between Mr Jones and the respondent was unusual and, in the words of Commissioner Bull, “doomed to fail”. Prior to his employment with the respondent, Mr Jones owned the business MCG Roofing Specialists Pty Ltd (MCG Roofing). The respondent was initially a customer of MCG Roofing, who installed all of the respondent’s skylights and ventilation systems. MCG Roofing then subsequently purchased products from the respondent. This led Mr Jones meeting with Mr Yako, the respondent’s managing director. Following this meeting and subsequent dealings, Mr Jones commenced employment as the office manager of the respondent’s Port Macquarie office.

It had been established from the outset that Mr Jones could continue to work for MCG Roofing while employed by the respondent. It was agreed that Mr Jones would work 9.00am to 5.00pm with the respondent and then after hours for his own company. While Mr Jones admitted that, on occasions, he would complete work for his own company in the respondent’s work hours, he believed the respondent was more than compensated by the additional work he did for it beyond eight hours a day he was employed to work.

From around August 2014 to November 2014, Mr Yako noticed Mr Jones engaging in conduct that concerned him. This included seeing Mr Jones’ work desk covered in MCG Roofing paperwork and marketing material, Mr Jones approving payments of certain purchases not related to the respondent and unusual banking transactions.

On 14 November 2014, the respondent summarily dismissed Mr Jones on a number of grounds, including serious misconduct and “competing with the company’s core business through private business”. The serious misconduct was based on a number of matters, including Mr Jones:

  • using the respondent’s time and resources to manage MCG Roofing;
  • removing the respondent’s property without authorisation and selling it on to MCG Roofing customers;
  • collecting data and information from the respondent to set up and advance MCG Roofing; and
  • taking days off on sick leave from the respondent while working for MCG Roofing.

Mr Jones denied all allegations made against him. While admitting he had a competing business, Mr Jones argued that he had at all times acted with propriety and had never acted against the respondent’s interests in placing his own business interests above those of his employer. He also denied any allegation of serious misconduct relating to the purchase of the respondent’s goods for his own business or otherwise.

Decision

Commissioner Bull noted that section 385 of the FW Act provides that four criteria must be met before the Commission can be satisfied that a person has been unfairly dismissed. In discussing whether those four criteria had been met, the Commissioner focused on section 385(c) and whether the dismissal was consistent with the Small Business Fair Dismissal Code (Code). The Commissioner was also required to consider this issue as a threshold consideration in accordance with section 396(c).

The Commissioner explored the provisions of the Code and the relevant case law. It was noted that the Code does not require a determination by the Commission of whether the summary dismissal by the employer was ‘warranted’. Instead, “the test is whether at the time of the dismissal, the employer held the belief that the employee’s conduct was sufficiently serious to justify immediate dismissal and whether that belief was based on reasonable grounds” (emphasis added).

Commissioner Bull found the evidence demonstrated that Mr Yako was of the belief that Mr Jones had:

  • misappropriated stock from the respondent;
  • made private purchases through the respondent’s accounts; and
  • conducted his own private business for MCG Roofing, not only in competition with the respondent, but during the hours he was employed to work for the respondent.

While the procedural aspects of Mr Jones’ termination were said to be “far from ideal”, the Commissioner found that Mr Yako had reasonable grounds for holding the view that Mr Jones’ conduct was sufficiently serious to justify his immediate dismissal.

The termination was consistent with the Code. The application for an unfair dismissal remedy was dismissed.

Jones v Solarbright Home Improvements Trading as Solarbright Country [2015] FWC 5854