The recent Fair Work Commission decision of Andrew Goddard v Richtek Melbourne Pty Ltd [2024] FWC 979 is a useful reminder to employers to carefully consider the risks and benefits of post-employment restraints when dismissing an employee.
Background
Andrew Goddard was employed by Richtek Melbourne Pty Ltd (Richtek) as a salesperson from March 2022.
On 20 December 2023, Mr Goddard received an email from his sales manager attaching a letter which stated that Richtek had decided to terminate his employment for allegedly not following Richtek’s quoting policy and procedure, and for being rude to a customer. The letter stated the dismissal took effect that day.
Mr Goddard received his final pay slip several days later and did not receive any payment in lieu of notice.
Mr Goddard subsequently made an application for an unfair dismissal remedy under section 394 of the Fair Work Act 2009 (Cth) (the Act). Richtek filed a Form F3 Employer Response, however, failed to file submissions and witness statements, and failed to attend the hearing.
Was the employee unfairly dismissed?
In Richtek’s employer response, it relied on three principal reasons for dismissal, namely:
1. Richtek was informed by a client that Mr Goddard had allegedly failed to follow correct quoting procedures by not attending the customer’s site to inspect a shower, and instead attempting to quote over the phone;
2. A customer made a ‘formal complaint’ about being spoken to in an allegedly rude manner by Mr Goddard; and
3. Mr Goddard allegedly failed to follow Richtek’s quoting procedure by making a ‘one off item’ instead of a ‘prebuild’.
As to the first and third allegations, the Commission found that Richtek’s reasons for dismissal were unfounded, and that it had adduced insufficient evidence to prove that Mr Goddard had not followed company procedures.
As to the second allegation, Mr Goddard conceded that he had dealt with a customer with whom he did not ‘hit it off’, and he may have spoken to her in a sarcastic tone. The Commission found that on the balance of probabilities, Mr Goddard was likely rude to the customer, which is conduct that could bring the company into disrepute. The Commission found that this constituted a valid reason for dismissal.
The Commission also considered whether Mr Goddard was notified of any valid reason for dismissal, and whether he was given an opportunity to respond. In circumstances where Mr Goddard was notified of the reason for dismissal only after he was dismissed, and no genuine warnings were given to him, the Commission was satisfied that Mr Goddard was not given an opportunity to respond to the allegations against him.
Taking into account all of the relevant factors, the Commission found that Richtek’s decision to dismiss Mr Godard was harsh and therefore unfair.
Remedy
As Mr Goddard did not seek reinstatement to his employment with Richtek, the Commission determined that an order for compensation was appropriate.
In determining the amount of compensation, the Commission considered the efforts made by Mr Goddard to mitigate the loss suffered as a result of the dismissal. Mr Goddard informed the Commission that he had applied for hundreds of jobs since his dismissal, however he did not apply for jobs in the same sector as his previous work with Richtek because of a post-employment restraint clause in his employment contract.
The restraint clause provided that for a period of 12 months after the termination of his employment contract, he was not to work as an employee, contractor, advisor, or in any other capacity which was ‘engaged in activities substantially similar or identical to [Richtek] and provides services substantially similar or services offered by [Richtek].’
The Commission noted that ordinarily, a dismissed employee would be expected to apply for jobs in the sector of their expertise as a reasonable step in mitigating loss. However, the Commission was satisfied that the restraint clause explained and excused Mr Goddard’s decision not to do so.
Importantly, the Commission noted that whilst the clause was most likely unenforceable on the basis that its scope was unreasonable, an ordinary worker could not be expected to know that, and it is understandable Mr Goddard would not take the risk of ‘embroiling himself in legal controversy’ by acting contrary to an express provision in his contract. There was therefore no deduction made in respect of Mr Goddard’s decision to not apply for jobs in his area of expertise.
The total amount of compensation ultimately awarded to Mr Goddard was $39,205.34.
Key takeaways
This decision demonstrates the importance of being aware of the post-employment restraints included in an employee’s contract of employment. In this instance, the Commission elected not to apply any discount for a failure to mitigate loss in circumstances where the employee was prevented from attempting to obtain employment in his field of expertise due to a non-compete clause in his contract of employment.
Whenever terminating an employee, it is prudent to consider whether the post-employment restraints included in the contract of employment are necessary and enforceable. If they are unlikely to be enforceable, or if they are no longer considered necessary by the employer, it may be in the employer’s best interests to specifically state in the dismissal letter that the restraint clauses in the employment contract have been waived.
This article may provide CPD/CLE/CIP points through your relevant industry organisation.
The material contained in this publication is in the nature of general comment only, and neither purports nor is intended to be advice on any particular matter. No reader should act on the basis of any matter contained in this publication without considering, and if necessary, taking appropriate professional advice upon their own particular circumstances.
