When is a warning not a warning?

The FWC in the case of John Ernest Harley v Salena Estate Pty Ltd [2019] FWC 7842 gave a valuable lesson about what constitutes a warning for the purpose of satisfying the requirements of the Fair Work Act 2009 (Cth) (‘FW Act’).

On 6 October 2015, Mr Harley commenced employment with Salena Estate as a Sales Manager. Salena Estate sold a range of wines including clean skin and premium wines. Mr Harley was responsible for selling this wine to general retail, restaurants, hotels, function centres and any other buyer.

He was dismissed on 17 June 2019 and given 5 weeks pay in lieu of notice.

Salena Estate argued there was a valid reason for dismissal as Mr Harley failed to follow its business plan and strategy, as well as having substandard work performance. Salena Estate also argued it had engaged in numerous discussions with Mr Harley about his work performance.

The FWC applied the unfair dismissal criteria under the FW Act and found Salena Estate’s dismissal process was deficient in many respects.

Given the dismissal was not for serious misconduct, consideration was given to whether there was a valid reason for dismissal, and whether Mr Harley had been warned about his unsatisfactory performance prior to dismissal.

In relation to a valid reason, the FWC found the only agreed performance measure was the level of gross sales for 2018 and 2019, which Mr Harley had achieved. The FWC found the profitability concerns expressed by Salena Estate were not matters within Mr Harley’s control.

In relation to prior warnings, Salena Estate gave evidence of various performance discussions with Mr Harley, with witnesses being Mr Franchitto – Owner and Managing Director, Mr Castronini – Performance Improvement Manager and Mr Davidson – Global Sales Manager.

Mr Franchitto gave evidence that he met with Mr Harley on 7 June 2019 about sales performance.  However, he conceded he had never issued a formal warning or advised that if Mr Harley did not improve his performance, his employment would be in jeopardy.

Mr Castronini gave evidence that in April 2019, Mr Harley expressed concerns for his position. Mr Castronini suggested to Mr Harley he improve sales and try to improve his working relationship with Mr Franchitto. Mr Castronini also gave evidence that on 10 May 2019, he conducted a performance review with Mr Harley at a café.

Mr Davidson gave evidence of the following discussions and meetings:

• A discussion with Mr Harley on 5 February 2019 about the requirement for a strategy to improve the sale of premium wines;
• A meeting on 29 March 2019 with Mr Harley and Mr Franchitto, where Mr Harley’s role and dissatisfaction with sales volume and profitability was discussed;
• A meeting on 1 April 2019 with Mr Harley about profitability (as well as aged based retirement);
• And a meeting on 13 June 2019 with Mr Harley and Mr Franchitto, where Mr Harley’s performance was questioned.

Mr Harley gave a different account. His evidence was there was a meeting on or about 29 March 2019 with Mr Franchitto about sales levels, business plans and strategies; a meeting on 1 April 2019 with Mr Davidson about increasing the case price; and a meeting on 10 May 2019 with Mr Castronini about increased sales. He disagreed that it was a performance review meeting or that targets were discussed.

Mr Harley also gave evidence of a meeting on 7 June 2019 with Mr Franchitto, but disagreed that sales performance and increases of sales was discussed. He also confirmed a meeting took place on 13 June 2019, but that Mr Franchitto advised he was conducting a management review.

The FWC stated (adopting from the decision of Fastidia Pty Ltd v Goodwin (Print S9280 AIRCFB, Ross VP, Williams SDP, Blair C, 21 August 2000 at paragraphs 43-44)), that:

“A mere exhortation for an employee to improve their performance would not be a sufficient warning. A warning must:

• identify the relevant aspect of the employee’s performance which is of concern to the employer; and

• make it clear that the employee’s employment is at risk unless the performance issue identified is addressed.”

The FWC applied these criteria and decided that Mr Harley had not been appropriately warned about his unsatisfactory performance or that his employment was as at risk. On this basis the FWC decided Mr Harley had not received warnings about his performance.

This decision highlights a number of considerations when seeking to rely on warnings for the purpose of justifying dismissal.

Firstly, mere discussion about performance does not constitute a warning. It is important that the relevant aspect of the employee’s performance be identified rather than broad discussion about topics such as sales and business strategies.

Secondly, it must be made clear that the employee’s employment is at risk unless there is improvement with the employee’s performance. It is difficult to substantiate a warning given in a café environment.

Thirdly, there should be sufficient evidence supporting that these first two criteria have been addressed. A particular concern in this case was the contested evidence between Mr Harley and Salena Estate. Documentation such as counselling forms or written warnings would have been of assistance to support the claim that warnings were given for substandard performance.

If you would like to know more about the implications of this decision, please contact a Mapien consultant at hello@mapien.com.au