Shop Manager Accused of Misuse of Business Funds Loses Dismissal Claim
A Townsville supplements shop manager has lost his unfair dismissal claim in the Fair Work Commission (FWC) after the FWC found he used his employer’s money to benefit himself.
Background
The Applicant in the matter, Mr Smith, was employed as a full-time manager of the business, Mass Nutrition Currajong Pty Ltd (the Respondent), on $75,000 per year with a vehicle allowance of $85 per week. He is also a 25% shareholder of the business and a director. The business has three other directors. The Applicant was responsible for managing the store and handling all day-to-day operational requirement, including ordering of stock and processing payments of accounts and wages. That meant he had full access and control of the Respondent’s bank account.
Things went downhill after an external accountant reviewed the business accounts and in February 2019, met with the directors to tell them then business was at risk of insolvent trading if immediate steps were not taken to address the financial management of the business. The Applicant was unable to attend the meeting. The accountant disclosed that discrepancies suggested the company funds may not have been used appropriate when compared with the turnover of the business. A bookkeeper was tasked with taking over all financial transactions for the Respondent on 30 May 2019, at which time the other directors were able to full review the financial situation and noticed a significant number of suspicious and unauthorised transactions.
The Respondent wrote to the Applicant on 13 June 2019 asking him to show cause over alleged unauthorised transactions. The letter identified a number of transactions for the Applicant’s response:
- 20/02/2019–Virgin Australia -$225.01
- 08/10/2018–ATM Withdrawal Port Douglas -$250.00
- 05/03/2018–Mater Hospital -$450
- 05/03/2018–Queensland X-Ray -$215.10
- 07/03/2018–Private Emergency Pimlico -$190.00
- 17/08/2017–Hertz Australia -$370.82
The letter also referred to the fact the Applicant was paid a vehicle allowance of $85 per week to compensate for expenses relating to the use of his vehicle while at work. The letter went on to refer to alleged unauthorised transactions relating to the Applicant’s vehicle:
- 1/7/17 –30/06/2018 –Motor vehicle Fuel of $545.97
- 18/10/2017–Attention to Detail -$400.00
- 22/12/2017–Pickering’s Auto Group -$708.05
- 09/07/18–Queensland transport -$396.67
- 06/12/18–Pickering’s Auto Group -$910.59
The Applicant did not respond to the show cause letter and his employment was terminated on 15 July 2019 with the Respondent citing his failure to respond to the show cause letter and to misappropriation of funds as the reasons for dismissal.
What the FWC found
Before the FWC, the Respondent told Commissioner Hunt that after the Applicant’s dismissal, more suspect transactions were discovered. They included $688.52 allegedly spent on private legal fees, a $250 ATM withdrawal said to have been made by the Applicant’s girlfriend, and $4,299 alleged to have been spent on an Orpheus Island Holiday. Commissioner Hunt also heard evidence that the Respondent’s bookkeeper (RBS) had, on multiple occasions, raised the matter of there appearing to be cash missing from business accounts based on a reconciliation of cash sales and profit and loss statements, in summary:
- 16 June 2017 – RBS advised via email that there appeared to be $16,000 missing in the bank account;
- 24 June 2017 – RBS advised via email there appeared to be $8,127 in cash missing from business accounts based on a reconciliation of cash sales and profit and loss statements;
- 23 January 2018 – RBS advised via email $20,000 cash discrepancy remaining unaccounted for; and
- 10 June 2018 – RBS raised concern about $5,980 held in cash not appearing in bank accounts. Mr Smith replied that the cash was in his possession and would be banked in the coming week. Ms McCarthy gave evidence that only $3,630 of the $5,980 was repaid to the company
The Commissioner declined to make any findings about these allegations because there was insufficient evidence before her. The Commissioner did, however, have to consider whether, as a small business employer, the Respondent had complied with the Small Business Fair Dismissal Code. The Code requires, in matters involving allegations of serious misconduct, that the employer believed on reasonable grounds that an employee’s conduct is sufficiently serious to justify immediate dismissal. The Commissioner could only consider the allegations put to the Applicant in the show cause letter, not the allegations discovered after the dismissal. The Commissioner was satisfied that the Respondent did believe on reasonable grounds that the conduct was sufficiently serious to warrant summary dismissal.
Commissioner Hunt did not accept the Applicant’s argument that he was entitled to charge the Respondent’s debit card for matters authorised by him on account of being a director, as opposed to an employee. The Commissioner said that the Applicant appeared to “have a conflated understanding of his responsibilities as a Director, shareholder and employee”.
Commissioner Hunt went on to find that, even if she was incorrect to find the dismissal was consistent with the Code and therefore required to consider whether the dismissal was harsh, unjust or unreasonable, the dismissal would not be unfair. The Commissioner was satisfied that the Applicant “made numerous unauthorised transactions that were charged to the Respondent’s business account” which constituted a valid reason for dismissal. On the question of whether the Applicant held a greater discretion to use the Respondent’s funds than an employee is not a director, the Commissioner concluded:
I have taken into consideration Mr Smith’s assertions that he held a greater discretion to use the Respondent’s funds than an employee who is not a Director. I find against Mr Smith on this issue, as there is no evidence that Mr Smith made any disclosure of the decisions made by him to use the Respondent’s money to benefit himself in the way that it did. I am satisfied that he conducted himself in a deceitful and dishonest manner.
Smith v Mass Nutrition Currajong Pty Ltd T/A Fit Empire & Wellness [2020] FWC 1168