Employee awarded seven months’ salary despite breaching fiduciary duties

The Supreme Court of Victoria found an employee who was suspended for failing to honour his agreement to purchase the business was entitled to the equivalent of seven months’ salary, despite breaching his fiduciary duties, because his employer failed to formally terminate his employment.

A significant issue in the case was the status of Mr Fernando’s employment and whether he was unfairly dismissed from AMR Hewitts PrintPackaging Pty Ltd (AMR).

Mr Fernando and two colleagues entered into an agreement with the director of AMR (Mr Mimmo), agreeing they would purchase his company. However, they failed to make the agreed upfront payment of shares in AMR by the required date.

Prior to failing to honour the agreement, Mr Fernando changed the company’s ASIC records without the approval of Mr Mimmo and failed to properly account for receipts and payments, allegedly breaching his fiduciary duties.

On 11 July 2013, Mr Fernando was removed from the company premises at the behest of Mr Mimmo. He was instructed to return any property that belonged to AMR including keys, credit cards, mobile phones and laptops, and told to go on ‘home leave’.

Mr Fernando was given a letter from Mr Mimmo’s solicitor that stated Mr Mimmo was retaking control of the company because Mr Fernando and his colleagues failed to pay the agreed upon amount to buy the business. Mr Fernando was given no other documentation or reason for being placed on ‘home leave’ and was not told his employment was ‘terminated’.

Mr Fernando claimed he was not terminated until 10 February 2014 when AMR repudiated his contract. He stated he was ‘ready, willing and able to work’ from the period of 11 July 2013 to 10 February 2014 and claimed his salary for the period.

Decision

Although Mr Fernando was stripped of all the indicia which would suggest a continuing employment relationship on 11 July 2013, the Court found the employment contract was not terminated at this point. The relationship may have broken down, but there was no clear, unequivocal indication that Mr Fernando’s employment had been terminated.

While AMR may have had a valid reason to terminate Mr Fernando due to breach of his fiduciary duties leading up to his ‘suspension’, this reason was never communicated to Mr Fernando and it appeared the main reason for his suspension was his failure to purchase AMR.

Thus, although factors indicated his termination, such as non-payment of salary and confiscation of passes, being marched out of premises, being told to go on home leave and being suspended did not constitute a termination and it was instead found he was ‘unlawfully suspended’. While this did not entitle him to receive the benefit of wages, the Court believed it should consider the remuneration he would have received had his employment continued.

The Court ordered AMR to pay Mr Fernando the equivalent of seven months’ salary, calculated from an average salary of $121,089.80, as well as long service leave and annual leave.

Read the full decision here

* PCC Lawyers are a team of employment practitioners based in Sydney, with many years of combined knowledge and experience in workplace law, industrial relations, workplace investigations and training.  They provide a high standard of excellence and an exceptional level of personal service to a variety of clients in the Sydney metropolitan area, Central Coast, regional NSW and interstate. 

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