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Norman Waterhouse

Waging war on employment negotiations

In the recent decision of MarkO'Connell v Floor Grinding Services Pty Ltd [2019] FWC 7791, the Fair Work Commission (the FWC) considered whether an employee had been unfairly dismissed after he sought a “massive pay rise” from his employer. The FWC ultimately found that the employee’s dismissal could not be justified and as such, the termination of the employee’s employment was unreasonable in the circumstances.

Facts

Mr Mark O’Connell (O’Connell) was employed by Floor Grinding Services Pty Ltd (the Employer). In late 2017, O’Connell decided to pursue his own business, OCON Floor Prep Pty Ltd (OCON). In the months leading up to 23 March 2018, O’Connell and the Employer were negotiating remuneration terms between OCON and the employer, for OCON to provide services to the Employer under an independent contractor arrangement. The parties continued negotiating a pay structure, however, could not come to a mutual agreement.

During that time, there was no legally binding contract between OCON and the Employer. O’Connell continued to be engaged as an employee of the Employer until 23 March 2018. On 23 March 2018, the director of the Employer phoned O’Connell and advised him that it would be his last day as an employee of the Employer.

O’Connell subsequently brought an unfair dismissal application in 2018 against the Employer, maintaining that he was unfairly dismissed from his employment on the grounds that he attempted to negotiate a pay rise.

The Employer initially raised two jurisdictional objections to O’Connell’s application. Firstly, that O’Connell was not dismissed, rather, he resigned from his employment on 31 January 2018 to pursue his own business, OCON. The Employer argued in the alternative that even if termination occurred at the initiative of the Employer, O’Connell’s application was made out of time. Both of these jurisdictional objections were rejected by the FWC.

Decision

O’Connell submitted that the termination of his employment had no connection with his capacity to undertake his job nor did it relate to his overall conduct. In addition, O’Connell argued the dismissal was based entirely on the wish for a pay rise regarding the services which OCON would be providing, to which both parties had failed to come to a consensus. The Employer conceded at trial that this was the reason for the termination of O’Connell’s employment.

The FWC rejected the Employer’s submission that due to a downturn in business, the Employer had no other option but to terminate O’Connell’s employment. In this case, there were alternative options. For example, both parties could have simply continued the existing employment relationship and if O’Connell was not satisfied with his current conditions, he was at liberty to resign.

Accordingly, the FWC held that O’Connell’s dismissal was unreasonable. This was primarily due to the fact that, on the Employer’s concession, O’Connell’s dismissal had “nothing at all” to do with the employee’s conduct or performance. Rather, the decision to terminate his contract was based entirely on the “massive pay rise” O’Connell was seeking when negotiating a deal between OCON and the Employer.

The FWC also noted that the Employer, given its dire financial situation, would have had grounds to make O’Connell’s position redundant. Had this argument been advanced by the Employer, it would have likely amounted to a genuine redundancy at law. However, this did not occur and the FWC found that there was no valid reason to terminate O’Connell’s employment.

Ultimately, the FWC determined that compensation of $15,000, as opposed to reinstatement of O’Connell’s employment, was appropriate in the circumstances.

Take Home Messages

This decision is a reminder to employers that caution should be exercised in situations where an employee and employer are negotiating a further employment or other contractual agreement. An employee’s request for an increase in remuneration does not constitute a valid reason for dismissal on its own.

Although remuneration is a key component of an employment relationship, parties must come to an agreement on this matter, having regard to the terms of an individual employment contract, performance reviews and attainment of key performance indicators. We recommend that employment contracts provide for a term that any increases in remuneration will be made at the sole discretion of the employer.

For more specific information on any of the material contained in this article please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.auor Virginia Liu on +61 8 8210 1279 or vliu@normans.com.au.

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