1 Fair Work Act 2009 s.394 - Application for unfair dismissal remedy Mr Jay Fenton v First Derivatives Pty Limited (U2024/5175) DEPUTY PRESIDENT COLMAN MELBOURNE, 1 AUGUST 2024 Unfair dismissal – applicant not forced to resign – application dismissed [1] Jay Fenton has made an application for an unfair dismissal remedy under s 394 of the Fair Work Act 2009 (Act). Mr Fenton contends that his former employer, First Derivatives Pty Limited (FD), forced him to resign from his employment because it failed to pay his wages for some five months, and that he was therefore dismissed within the meaning of s 386, in circumstances which were unfair. FD objects to the application on the basis that Mr Fenton resigned of his own accord after refusing to follow directions to transfer to its UK payroll. It further contends that any dismissal was not unfair. [2] Mr Fenton is a British national who became resident in Australia in 2014. From 2015, Mr Fenton had various commercial dealings with FD, principally through his company. In April 2021, he commenced employment with FD as a software designer. His contract of employment stated that he was to work at a location within Australia. On 19 August 2021, Mr Fenton was given a notice authorising him to work from outside Australia ‘until further notice’. Shortly afterwards, Mr Fenton and his two young children went to the UK, where they lived with Mr Fenton’s mother. Mr Fenton continued to work for FD from the UK. His work was largely for the benefit of KX Systems Inc (KX), a related entity of FD. He continued to be paid from FD’s Australian payroll, which meant that Australian taxes were deducted and remitted to the Australian Taxation Office (ATO). From August 2021 until late March 2024, Mr Fenton spent most of his time in the UK and Japan. He visited Australia on several occasions. [3] On 27 September 2022, Mr Fenton resigned from FD and proposed that he become a contractor. His manager suggested that they discuss the matter before Mr Fenton handed in his notice. Discussions about a possible contracting role for Fenton continued for some time, however none eventuated. Mr Fenton remained an employee of FD and continued to work in the UK. [4] Lauren Osbahr is the head of people for KX. Ms Osbahr’s evidence was that in June 2023, the financial controller told her that an Australian employee had been working in the UK for a significant period and needed to be moved to the UK payroll. On 7 July 2023, she had an online meeting with Mr Fenton and told him that if he intended to continue living in the UK, he would need to move onto the UK payroll. She was concerned that there were tax risks for [2024] FWC 2058 DECISION [2024] FWC 2058 2 the company if he remained on the Australian payroll. Mr Fenton told Ms Osbahr that he would probably return to Australia but that he was willing to move to the UK payroll. He asked her whether he could work as a contractor. On 28 July 2023, Ms Osbahr sent an email to Mr Fenton stating that the contractor option was not preferred as it came with various legal and tax challenges. She stated that he had been residing in the UK for some time and had no confirmed date for returning to Australia, and that to ensure compliance with UK laws and regulations, the company had to move him to the UK payroll. She said that the change would take effect on 1 September 2023, and that human resources would assist with documentation. [5] On 23 August 2023, Mr Fenton sent an email to Ms Osbahr stating that, according to his tax advisor, he had not been an Australian resident for tax purposes for the past two years. He asked that the company amend its payroll reporting ‘STP’ for this period and that the relevant withholdings be returned to him. Ms Osbahr then obtained advice from the group global mobility tax manager, who told her that the course proposed by Mr Fenton involved risk for the company, whereas there were steps that Mr Fenton could take himself to correct his Australian tax filings. On 25 August 2023, Ms Osbahr sent a message to Mr Fenton stating that it was his responsibility to ensure that his tax filings were correct. She noted that it had been his decision to work from the UK, and that the company would not bear responsibility for any tax consequences of this decision. [6] In early September 2023, the chief financial officer of FD sent Mr Fenton a ‘temporary work location’ letter, stating that until 31 August 2024 his work location would be the UK and that all of his duties would remain the same, except that his pay would be processed in the UK. The implication of this was that his salary would be subject to UK taxes. Mr Fenton was asked to sign and return a copy of the letter. On 12 September 2023 and again on 25 September 2023, Ms Osbahr followed up with Mr Fenton. On 27 September 2023, he replied, stating that he could not sign the document until the ‘Australia/STP’ matter was dealt with. Ms Osbahr replied that day, stating that it was ‘imperative’ that he sign the letter. He did not do so. Ms Osbahr referred the matter to the group head of human resources, Catherine Harrison. [7] Ms Harrison is a qualified accountant. Her evidence was that she was concerned that if Mr Fenton continued to work in the UK without being on the UK payroll, the company would be exposed to compliance risks. From late September to mid-October 2023, Ms Harrison sent Mr Fenton numerous messages with meeting requests, to which he did not respond. On 20 October 2023, she conferred with the chief finance officer, who said that if Mr Fenton had not returned to Australia by the end of the month, he had to be on the UK payroll. The same day, Ms Harrison sent Mr Fenton an email to this effect. He did not reply. On 31 October 2023 she sent him another message. Again he did not respond. On 8 November 2023, Ms Harrison sent him a further message stating that he would be removed from FD’s Australian payroll on 30 November 2023, and that she was available to discuss the matter with him. This time Mr Fenton replied immediately, insisting that he was not a UK tax resident and that it did not make sense to put him on the UK payroll now. He said that he was going to remain an Australian tax resident. He asked Ms Harrison to confirm that he would stay on the Australian payroll. Ms Harrison replied, stating that his tax affairs were a personal matter for him and that if he was not going to be a UK tax resident, he had to confirm the date on which he would return to Australia. She told him that she needed confirmation before the payroll cutoff date on 20 November 2023. [2024] FWC 2058 3 [8] On 24 November 2023, Mr Fenton sent Ms Harrison an email stating that he did not regard his tax affairs as a purely personal matter and that he did not understand why the company did not simply resolve the issue through the STP. He said that he did not fulfil the criteria for tax residency in either Australia or the UK but chose to pay taxes in Australia and would return there in the near future. On 27 November 2023, Ms Harrison sent Mr Fenton a link to a meeting on 29 November 2023. She stated that she had been trying to speak with him for three months and asked him to attend the meeting. Several further messages were exchanged. In short, Mr Fenton did not attend the meeting, because he preferred to communicate in writing. [9] On 29 November 2023, Ms Harrison instructed the payroll team to remove Mr Fenton from the Australian payroll effective the next day. She also exchanged several messages with Mr Fenton, the last of which stated that in order to be paid he would need to be added to the UK payroll before the cut off for the December pay run. On 5 December 2023, she told Mr Fenton that the company required his UK bank details. Ms Harrison sent Mr Fenton another message on 8 January 2024 stating the company needed to have him added to the UK payroll that week to ensure that he was paid that month. She told him to upload his bank details onto the ‘Oracle’ system. He did not do so. On 12 January 2024, Mr Fenton replied, stating that he would not move to the UK payroll until the company resolved the ‘STP’ issue. On 19 January 2023, Ms Harrison responded, again stating that he needed to be paid out of the UK payroll, and that once he had returned to Australia he would revert to the Australian payroll. She attached the temporary work location letter sent to him previously, and asked him to sign and return it. Again she asked him for UK bank account details. None were provided. Ms Harrison sent Mr Fenton further messages on 30 January and 19 February 2024 which went unanswered. [10] Mr Fenton remained in the UK. He continued to work. Ms Harrison’s evidence was that by mid-March 2024, she had concluded that Mr Fenton was not prepared to engage with her. Although she wanted to make sure that he was paid his salary and backpay, she needed his UK bank account details. She was concerned that there might be information security risks associated with Mr Fenton continuing to have access to work systems when he was not receiving his pay, and was potentially disgruntled. Ms Harrison also considered that by restricting his access to the company’s systems it would prompt him to engage with her to resolve the payroll issue. On 15 March 2024, after conferring with Ms Osbahr and Paul Colgan, who was Mr Fenton’s manager, Ms Harrison sent a message to Mr Fenton stating that if the payroll issue was not resolved by 22 March 2024, his access to company systems would be temporarily revoked. Mr Fenton did not reply. Ms Harrison said that her understanding had been that Mr Fenton’s system access was revoked on 22 March 2024. In fact, this did not occur. [11] On 25 March 2024, Mr Fenton returned to Australia. On 4 April 2024, he sent Ms Harrison an email stating that under duress he was now back in Melbourne, and that he had advised Mr Colgan of this on 25 March 2024. He asked the company immediately to pay his salary and superannuation since 30 November 2023 and to return him to the Australian payroll, and to confirm this had been done by 12 April 2024. He said that he and Mr Colgan were in daily positive discussions to resolve the situation and that the actions he had requested would ‘go quite some way to grease the wheels of resolution’. [12] Ms Harrison said in her evidence that FD relies on a third party to manage its global payroll function. FD’s Australian employees are paid on the fifteenth day of each month. For [2024] FWC 2058 4 payments in April, employees had to be confirmed in the payroll system by 22 March 2024. Ms Harrison had not known of Mr Fenton’s return to Australia until 4 April 2024, and even Mr Colgan had not known until 25 March 2024, by which time the cutoff date had passed. [13] On 10 April 2024, Ms Harrison sent Mr Fenton an email stating that, as he had now returned to Australia, he would receive his salary and all back-payments owed to him in the May pay period, paid from the Australian roll. She said that unfortunately, by the time he had advised her on 4 April 2024 of his return to Australia, the cut off for the April pay period had already passed. The same day, Mr Fenton replied, asking the company to endeavour to pay him in April. He stated that waiting until May was ‘not acceptable for a variety of reasons’. Ms Harrison was on leave that day. Her automatic out of office response advised Mr Fenton that she was out of the office on 10 April 2024 and that she would respond when she returned. Ms Harrison’s evidence was that by oversight, she omitted to do so. [14] On 26 April 2024, Mr Fenton sent a letter to FD stating that he was resigning under duress, due to the continued non-payment of his salary since 30 November 2023. He stated that he was now in severe financial distress and was saddened to be forced to resign. He said that he had been met with unreasonable behaviour by the company and ‘nonsensical’ demands, and that he now assumed that the delay in paying him was personally targeted. [15] Ms Harrison said that she was surprised by Mr Fenton’s resignation. She found it difficult to reconcile his claim that he was forced to resign with all of the efforts she had made to ensure that he would be paid by having him transfer to the UK payroll. She said that it did not make sense to her that he was claiming to have been forced to resign after returning to Australia and having been told that he would be back paid and on the Australian payroll, as he had wanted. She said that the only thing preventing Mr Fenton from being paid had been his refusal to transfer to the UK payroll and engage with her about this. Mr Fenton has since been paid all outstanding salary. [16] Mr Fenton’s evidence was that he was forced to resign because he had not been paid for five months. He said that his financial situation had been very difficult, as he had explained in his resignation letter. He said that he had told the company that he was willing to transfer onto the UK payroll if the company amended its payroll STP in light of the fact that he had not in fact been an Australian resident for tax purposes in the preceding years, as his tax adviser had told him and which he had relayed to the company. He said that despite it being a simple matter for the company to alter the STP, it refused to do so, and therefore he was not willing to transfer onto the UK payroll and could not be forced to do so. He said that he did not have a UK bank account, that there was no mechanism for him to open one easily, and that in any event he had intended to return to Australia, and in fact did so. Mr Fenton said that after returning to Australia against his will, he was then told that he would not be paid until May, which was unacceptable. [17] Mr Fenton also said that he had been subjected to a pattern of negative behaviour from the company which culminated in the withholding of his pay for five months, and a refusal to pay him even once he had returned to Australia. He disputed that he had been given any directions which were lawful and reasonable. He also said that the company had made his bonuses unattainable through structural changes, had provided him with no pay increases, and had reneged on an agreement to enable him to hire a team. Mr Fenton said that in all the circumstances he had been forced to resign from his employment with FD. [2024] FWC 2058 5 Consideration [18] An employee has been ‘dismissed’ within the meaning of the Act if the employment has been terminated ‘on the employer’s initiative’ (s 386(1)(a)), or if the employee has resigned but was ‘forced to do so because of the conduct, or a course of conduct,’ engaged in by the employer (s 386(1)(b)). Mr Fenton contends that he was forced to resign because he had not been paid his wages for five months, and for the other reasons referred to above. I do not accept this. [19] Ordinarily, if an employee had not been paid wages for several months and had resigned under protest, it would be easy to conclude that he was forced to do so. But in this case, the reasons why Mr Fenton was not paid were ones of his own making. It is very clear that the company wanted to pay him. But because he had been working in the UK for a substantial period, the company considered that he could not remain on the Australian payroll. He needed to move to the UK payroll. There was a compliance risk for the company if this did not occur. Mr Fenton refused to transfer to the UK payroll unless the company agreed to his ‘STP’ request. But the company believed that this involved risk. In my view, there was no good reason why the company should assume this risk, especially given that Mr Fenton had moved to the UK of his own accord, not at the company’s request. It was for Mr Fenton to manage his own tax affairs. [20] The reason Mr Fenton was not paid for five months was because he refused to do what the company reasonably required of him, namely that he transfer to the UK payroll. To do this, he had to provide the company with the details of a UK bank account. I accept Mr Fenton’s evidence that he did not have such an account, but I do not accept his suggestion that it would have been difficult to open one. This was not explained and does not make sense. Had Mr Fenton opened a bank account, given the details to the company, and signed the temporary location letter, he would have been paid. He was given every opportunity to transfer to the UK payroll. But he refused to do so. Mindful of its compliance risk, the company eventually took him off the Australian payroll. Still Mr Fenton would not take the steps necessary to transfer to the UK payroll. The fact that he was not paid from 30 November 2023 until his return to Australia was the consequence of his own decisions. [21] Further, it is clear that the fact that Mr Fenton was not paid between late November 2023 and late March 2024 did not force him to resign, because he did not in fact resign, but instead continued to work and then returned to Australia. The question then is whether Mr Fenton was forced to resign when he was told on 10 April 2024 that he would not be paid until May. I find that this was not the case. Again, there were reasonable options open to Mr Fenton other than resigning. He chose not to take them. First and foremost, he could have told the company that his financial situation was so dire that if he was not paid in April he would resign. After receiving Ms Harrison’s out of office message stating that she was away on 10 April 2024, he could have sent her a follow up message. He could have sent a message to Ms Osbahr. He could have sent a message to Mr Colgan. He could have sent a message to another manager. He could have called any of these people. But Mr Fenton did not do any of these things. In the sixteen days between his last message to Ms Harrison on 10 April 2024 and his resignation letter of 26 April 2024, Mr Fenton did not do anything to convey to the company that he was in a difficult situation, or that he was contemplating resignation. Instead, on 26 April 2024, and only a few weeks before he would be fully paid, from the Australian payroll, he chose to resign. [2024] FWC 2058 6 [22] Another reasonable option that was available to Mr Fenton was to give the company some advance notice of his return to Australia. Instead, he simply arrived in Melbourne on 25 March 2024 and told his manager the same day. Ms Harrison heard nothing of the matter until 4 April 2024. Had he flagged his planned return to Australia, the company would have been able to remind or advise him of the payroll cutoff date. The fact that Mr Fenton missed the April pay run was again a consequence of his own decisions, in particular, his failure to communicate with the company. I further find that Mr Fenton should reasonably have been aware that monthly payroll was subject to a cut off, because the UK payroll cutoffs for previous months had been referred to by Ms Harrison in her correspondence. [23] I reject Mr Fenton’s contentions that other factors forced him to resign, whether individually or collectively. Many of these additional matters were first raised in the submission document that he filed the day before the hearing. It is simply not credible that bonus arrangements, the absence of pay rises and the other matters to which Mr Fenton referred compelled his resignation. I find that there were no circumstances of compulsion in this case at all. Mr Fenton was not forced to resign. For completeness, I further find that he was not dismissed on the employer’s initiative. Mr Fenton was not dismissed within the meaning of s 386 of the Act. The jurisdictional objection is upheld and Mr Fenton’s application must therefore be dismissed. [24] Had I reached a different conclusion, I would nevertheless have considered that, taking into account the considerations in s 387 of the Act, any dismissal was not unfair. First, there was a valid reason for the dismissal related to capacity or conduct (s 387(a)). This was Mr Fenton’s failure to follow a lawful and reasonable direction to transfer to the UK payroll. I find that this and associated directions were given on several occasions: by Ms Osbahr on 28 July 2023, when she told Mr Fenton that the company had to move him onto the UK payroll and that the human resources team would assist him with the paperwork (which connoted that he was required to attend to this paperwork); by the chief financial officer in his letter of 1 September 2023, which told Mr Fenton to sign the temporary work location document and to return it; by Ms Osbahr on 27 September 2023, when she told Mr Fenton that it was ‘imperative’ that he sign the letter; and by Ms Harrison in January 2023 when she told Mr Fenton to provide UK bank details to the company via the Oracle system. Further, Mr Fenton ignored what were in substance directions given by Ms Harrison on numerous occasions that he was to contact her or join meetings. Mr Fenton’s preference was to communicate by email, but this was not his decision to make. He was required to follow the directions of his employer. [25] The company’s requirement that Mr Fenton cooperate with a transition to the UK payroll was plainly lawful because it was within the scope of his contract. He had been authorised to work overseas ‘until further notice’. In effect, Mr Fenton had been given notice that this arrangement was now subject to a condition: he could continue to work for FD in the UK but only if he transferred to the UK payroll. Otherwise, he was to return to Australia. It is a term implied by law into a contract of employment that an employee will follow the lawful and reasonable directions of the employer. Mr Fenton’s contract of 8 April 2021 also contained an express term that required him to carry out reasonable work instructions (see the disciplinary guidelines in Appendix 2). Mr Fenton’s refusal to follow lawful and reasonable directions was a valid reason for dismissal. It is well established that a valid reason within the meaning of s 387 is a reason that the Commission considers to be valid, in the sense that it is a good and [2024] FWC 2058 7 substantiated reason. It does not need to be a reason invoked by the employer at the time of dismissal. [26] As to the other considerations in s 387, Mr Fenton was not notified of any reason for dismissal or given an opportunity to respond to reasons for dismissal because the company did not believe it had dismissed him (see ss 387(b) and (c)). I would attribute this little weight in the circumstances. The considerations in ss 387(d) and (e) are not relevant, because there were no discussions about dismissal and Mr Fenton was not dismissed for poor performance. Nor are the factors in ss 387(f) and (g) of relevance because FD is a not a small employer. As to s 387(h), I find Mr Fenton’s conduct in the lead up to the end of his employment to have been unreasonable. I also note that FD paid Mr Fenton for the period of his notice. Mr Fenton said that the company, and in particular human resources, could have explored other options to accommodate his personal circumstances, such as acceding to his request to change the STP or agreeing to a contractor arrangement. But I do not consider that there is any reason why they should have done so. In all the circumstances, if it had been the case that Mr Fenton was forced to resign, I would have concluded that the dismissal was not harsh, unjust or unreasonable, and therefore not unfair. [27] Further and in any event, I would not have awarded a remedy in this case. The Act contemplates two forms of remedy. Neither reinstatement nor compensation would have been appropriate. Mr Fenton did not seek compensation. He also acknowledged that he had not applied for any jobs other than ‘tapping his personal network of friends’. I do not consider this to represent a reasonable effort to mitigate loss. As to reinstatement, Mr Fenton asked the Commission to order the company to engage him as a contractor based in Japan. The Commission has no power to make such an order. An order for reinstatement under s 391 is one requiring the respondent to employ the applicant. [28] In conclusion, Mr Fenton was not forced to resign. He was not dismissed. The jurisdictional object is upheld. Mr Fenton’s unfair dismissal application is dismissed. DEPUTY PRESIDENT Appearances: J. Fenton for himself D. Costaras of counsel for First Derivatives Pty Ltd Hearing details: 2024 Melbourne 30 July Printed by authority of the Commonwealth Government Printer <PR777790>