Manager unfairly dismissed, but no remedy awarded

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Manager unfairly dismissed, but no remedy awarded

The Fair Work Commission has exercised its discretion not to award compensation to a manager who was unfairly dismissed. It also pointed out the commission was not the right vehicle for pursuit of an unpaid bonus.

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Although a manager was dismissed unfairly when ownership of a business was about to change hands, the Fair Work Commission exercised its discretion not to award any remedy to the employee.

It also added that the FWC was not the right vehicle for pursuing non-payment of entitlements under the Fair Work Act or an employment contract, such as redundancy or bonus payments.

Facts of case


Anthony Gambling was employed as a general manager for about 13 years. Eventually the business was bought out by Digital Fox Pty Ltd after it lost a major client and became unprofitable. His employment contract provided for payment of a share of company profits which he could put towards buying the business himself, plus payment of a lump sum if the business was sold to anyone else. 

When Digital Fox took over, he received a letter stating that his employment and entitlements had been transferred to the new employer. The parties were in dispute over whether a bonus of $96,914 that had accrued while working for the previous employer should be paid by Digital Fox. Mr Gambling had converted the bonus amount to accrued annual leave (because he believed Digital Fox could not afford to pay him in cash at the time), but the directors were unaware of this at the time.

When the company began suffering financial problems, the two directors discussed one buying out the other’s share, as a strategy to repay a debt to the Australian Tax Office (ATO). At this point, they became aware of Mr Gambling’s accrued leave liability. 

With the $96,914 a sticking point in negotiations over the directors’ buyout, one director, Paul Power, met with Mr Gambling, who agreed to resign on the following conditions: he gained ownership of his company car, Digital Fox paid its remaining lease payments, he kept his company mobile phone number, and “all outstanding amounts” were paid to him. The parties’ evidence differed over the details of what was finally agreed, with Mr Power claiming that some of Gambling’s leave entitlement would be used to make the other payments. 

Mr Gambling claimed that Mr Power told him to either resign or he would be sued for fraud (in relation to the ATO debt). When he refused, Mr Power allegedly told him he was dismissed and that he would have to sue Digital Fox for payment of the leave accrual (this was said after Mr Gambling said that dismissal would not change his entitlement to that payment).

At a later meeting, Mr Gambling offered to have the value of the car deducted from termination payment entitlements, and a statement was issued announcing that Mr Power had sold his share of Digital Fox to the other director. The statement referred to “dismissal” of Mr Gambling (Mr Power claimed that Mr Gambling had inserted that reference). Further negotiations relating to a lease on his wife’s car followed, but when the termination payout was made, the bonus of $96,914 was excluded from it.

The arguments


Digital Fox claimed that Mr Gambling had resigned after making an oral agreement with Mr Power over the terms of his departure. Therefore, the FWC had no jurisdiction to hear Mr Gambling’s claim. It also claimed that Mr Gambling’s contract did not allow conversion of a cash bonus to annual leave, and in any case it was a liability of the previous employer that did not transfer to Digital Fox. 

Mr Power claimed that if the other director bought the business, he could not afford to employ Mr Gambling and in any case the director would take over Mr Gambling’s position himself. The other director denied this.

In response to the suggestion that converting his bonus to a leave accrual without notifying the directors could amount to a valid reason for dismissal, Mr Gambling said that as general manager he had authority to approve the transaction and in any case it benefited Digital Fox by avoiding an on-the-spot payment it could not afford.

In issue


The main issues in this case were: whether Mr Gambling was dismissed, if so whether he was unfairly dismissed, or whether he was constructively dismissed (forced to resign) – although Mr Gambling insisted that he did not resign. Digital Fox claimed that he voluntarily resigned to enable the sale of the business, after agreeing to settlement terms.

Decision


The FWC found that Mr Gambling would not have agreed to resign if the payment of $96,914 was not to be made to him. Further, he knew that the new owner of the business would take over his role of general manager, which would entitle him to redundancy payments. Had the $96,914 been paid he would have resigned, but in this case he was dismissed.

Although Mr Gambling’s conduct may have amounted to a valid reason for dismissal, Digital Fox did not pursue such a claim, only arguing that he was not dismissed. Nor did it inform Mr Gambling that it had concerns about his conduct sufficient to consider dismissing him, nor did it give him an opportunity to respond to any concerns it may have had. There was no prior consultation over possible redundancy, just the assumption that no job for Mr Gambling would exist after the sale. 

However, the FWC said that the case really amounted to a dispute over non-payment of the bonus/leave accrual conversion, as well as not treating the termination as redundancy. Therefore, it rejected Mr Gambling’s claim for a financial remedy of 21 weeks’ pay.

The evidence indicated that he would not have remained employed for any longer than the notice period he was paid for. The FWC could not order payment of the bonus or redundancy pay, meaning that Mr Gambling would need to pursue those payments in court instead.

The bottom line: The FWC’s power to order payment of compensation is discretionary, for example for lost work income if a dismissal was unfair. However, the Act’s unfair dismissal provisions cannot be used as a substitute way to recover payments owing to an employee, such as bonus or redundancy payments.

Read the judgment


Gambling v Digital Fox Pty Ltd t/a Mango 4 Office Technology [2018] FWC 6060, 28 September 2018 
 
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