Industrial Relations Commission of New South Wales CITATION: Brown v Nicole Obeid (nee Eshensky) trading as Hairlairious [2005] NSWIRComm 1135 APPLICANT Nadia Brown PARTIES: RESPONDENT Nicole Obeid (nee Eshensky) trading as Hairlairious FILE NUMBER(S): 781 of 2005 CORAM: McLeay C CATCHWORDS: Termination of employment - unfair dismissal - hairdresser - alleged theft of intellectual property - inappropriate conduct - work performance issues not substantiated - issues not raised with applicant - onus on respondent to justify summary dismissal not fulfilled - dismissal was unjust and unreasonable - applicant's conduct after termination taken into account - no compensation awarded LEGISLATION CITED: Industrial Relations Act 1996 Gorgevski v Bostik (Australia) Pty Ltd (1991) 39 IR 229 Standley v Electronics Boutique Aust Ltd (unreported, IRC 4516 of 1998, 18 March 1999) CASES CITED: Metrans Pty Ltd v Courtney-Smith and Ors [1981] 8 IR 379 Pastrycooks, Biscuit Makers and Flour and Sugar Goods Workers' Union (NSW) v Gartrell White (No.3) (1990) 35 IR 70 Franklins Limited v Webb (1997) 72 IR 257 HEARING DATES: 06/21/2005; 07/01/2005 DATE OF JUDGMENT: 08/23/2005 APPLICANT Ms L Tucker Solicitor LEGAL REPRESENTATIVES: Kingsford Legal Centre RESPONDENT Mr J Murphy of Counsel DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: MCLEAY C 23 August 2005 Matter No IRC 781 of 2005 Nadia Brown and Nicole Obeid (nee Eshensky) trading as Hairlairious Application by Nadia Brown re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 DECISION [2005] NSWIRComm 1135 1 This is an application by Nadia Brown for unfair dismissal against Nicole Obeid (nee Eshensky) trading as Hairlairious pursuant to section 84 of the Industrial Relations Act 1996. Ms Obeid had employed Ms Brown as a hairdresser since 5 September 1996 until she was summarily dismissed on 1 February 2005. 2 On the afternoon of 1 February Mr Moses Obeid, the manager of the salon and husband of the respondent, called Ms Brown out of the shop and summarily dismissed her for allegedly stealing from the business. At the time, Ms Brown had been attending a client, who left with wet hair in support of Ms Brown. 3 The reason for the dismissal appears to be, on the evidence of Mr Obeid, that Ms Brown wrote out the names and telephone numbers of a number of clients and denied having done so, breaching the trust and confidentiality required in an employment relationship. Ms Brown said she was told that she was dismissed for being a thief (of the respondent's clients' contact details). 4 Ms Brown admitted in evidence that she had taken the contact details of some clients to keep in her telephone book, a practice she had continued over a period of twenty years. She said that Ms Obeid had given permission to do so at times in the past, and she had never been told not to do so. Ms Obeid denied having given such permission. 5 Evidence was called from Ms Wendy Blair, Executive Administrator of the Professional Hairdressers Association, a registered industrial association of employers representing the hairdressing trade in New South Wales. Ms Blair's evidence was that client details including names, contact numbers, and information relevant to their hairdressing needs were the intellectual property of the salon owner, and that to use such information for any purpose other than that of the business was "highly unethical". 6 When questioned, Ms Blair said that any suspicion of an employee copying contact details should be investigated. In similar circumstances, she said, she would question the employee as to her reason for taking the information, and if not satisfied with the response, would dismiss the employee. 7 Mr Nicholas Dunn, the owner of the salon where Ms Brown currently rents a chair, gave similar evidence. Under cross-examination he agreed that if he saw someone writing down the names and contact details of his clients he would question that person about it. If another hairdresser was trying to entice his clients away to another salon, he said: "Well, I wouldn't like her chances. I wouldn't think there'd be much success rate, you know." 8 Ms Brown admitted to building up a list of client contact details over many years in case she might ever need them. Ms Larissa Baldwin, a work colleague of the applicant, said that she had reported to Mr and Ms Obeid on various occasions since 2001 that Ms Brown had been copying clients' contact details. Ms Rahlee Carroll, another employee of the respondent, said that she had been reporting Ms Brown's copying of contact details to Mr and Ms Obeid since 2003. Ms Brown had never been questioned about the practice, and there was no evidence that she had ever been told to stop doing it. 9 Ms Obeid said that, when she received a telephone call from the salon on 1 February 2005 telling her that Ms Brown was copying client details, she reacted by asking her husband, the manager of the business, to go to the salon as soon as possible. She said she may have received a similar complaint "once or twice" before, and had not dealt with the issue because she "had no proof". She confirmed that this may have been the third such complaint, and that because she was home with a newborn child and existing on two hours sleep a day, she was sick of the staff's complaints and wanted the situation sorted out. She said that she had been hoping that Ms Brown would be successful in her earlier application to teach at TAFE (the reason for providing the reference in September 2004) and that she hoped "it would all go away". 10 In September 2004 Ms Brown had sought a reference from Ms Obeid, to assist in an application to teach at TAFE. In the reference, Ms Obeid described Ms Brown as "a cornerstone of the salon" and added "I commend her for her friendship, loyalty and her unrelenting support of the salon's success". Ms Obeid said she and Ms Brown had developed a close relationship during the period of Ms Brown's employment. 11 Mr Obeid said that he made the decision to dismiss Ms Brown on 1 February 2005, taking into consideration a number of factors: (a) the reports of Ms Carroll and Ms Baldwin regarding the events of the day; (b) the docket on which Ms Brown had written clients' contact details; (c) the reports of staff about Ms Brown acting suspiciously and appearing to copy information over the previous three months; (d) the suspicion that Ms Brown had been servicing clients outside operating hours in the salon using salon products and not remitting any money charged to the salon; (e) the drop in takings and in the number of Ms Brown's repeat clients in the last 12 months; (f) the reports from other staff of meetings held between Ms Brown and Mr Carswell a former employee who worked at a competitors' nearby salon and the comments made by Ms Brown to staff following the meetings; (g) the large volume of bulk product taken by Ms Brown on credit over the last six months during which period she had not advised Mr or Ms Obeid that she had a second job; (h) Ms Brown's general attitude and reports of disparaging comments made to clients about the salon over the past 12 months; (i) the fact that Ms Brown had lied to Mr Obeid and refused to admit that she had copied names and phone numbers of clients when questioned a number of times; and (j) the possible catastrophic effect of removing clients' names and numbers with a view to taking clients from the salon. 12 The concern I have with a number of these issues was that on the evidence, both Ms Obeid and Mr Obeid had had a range of worries about Ms Brown's alleged conduct for a long period. In spite of Ms Obeid acknowledging her close relationship with Ms Brown, she said that she did not raise any of these issues with her because "it was not in her nature". 13 If either Ms Obeid as the employer or Mr Obeid as the salon manager had concerns about Ms Brown's conduct or performance, they had an obligation to raise these issues with her directly (see Gorgevski v Bostik (Australia) Pty Ltd (1991) 39 IR 229). Mr Obeid gave evidence that he raised issues in a general way at staff meetings because he did not like to confront any individual. None of the issues appear to have been raised directly with Ms Brown during the course of her employment. 14 Ms Brown has denied so much of the conduct which was taken into account to determine that she should be dismissed that it is clearly unfair that these problems were never raised with her individually, so that she could never give an account of herself. Rather the employers' suspicions were compounded by ongoing complaints by other members of staff of which Ms Brown was unaware. 15 Taking in turn the factors considered by the respondent in determining to dismiss Ms Brown, the evidence reveals the following. (a) Ms Carroll's and Ms Baldwin's reports were consistent with the reports they had each been making to Mr and Ms Obeid over a long period. (b) The docket providing "proof" that Ms Brown had taken client contact details did not prove any ill intent. Ms Brown said that she had taken customer contact numbers at various times over a number of years with Ms Obeid's knowledge and consent. (c) There was no evidence that Ms Brown had been "acting suspiciously", nor was the meaning of this term defined in any way. (d) Ms Brown said she had permission to do her sister's hair and this was not disputed. She also provided a statutory declaration from her sister in this regard. She admitted having cut one client's hair after hours and after being spoken to about it said that she never did it again. Mr Obeid's suspicions in this regard were not backed up by any evidence. (e) The claims that the salon's takings had dropped were not substantiated. No business records were provided to show a drop in takings. While Mr Obeid suggested that Ms Brown was providing discounts to her clients, the respondent's computer records provided in evidence showed no discounts being provided by Ms Brown at any time over the period that those records covered. (f) No specific claims were put on this ground at any stage of the proceedings. As to the discussions between Ms Brown and Mr Carswell, Ms Brown said that she maintained a friendship with Mr Carswell after he left the employ of the salon. (g) Ms Brown said she did not take a large volume of bulk product and that she did not have a second job. The claims were not substantiated by the respondent. (h) There is also no evidence in regard to Ms Brown's attitude or any alleged reports of disparaging comments. (i) As to Ms Brown lying to Mr Obeid, it seems to be a matter of some conjecture. According to Mr Obeid's evidence Ms Brown denied stealing client information. In the circumstances where she said she had approval to take the information, it is appropriate that she denied stealing it. There is a difference between the various reports of the conversation so whether or not she actually lied to him or not is unclear. Certainly if her denial was in regard to stealing and she believed that she was not stealing, then she was not being dishonest in her conversation on 1 February as reported by Mr Obeid. (j) As to the allegation that Ms Brown had taken clients' names and numbers with a view to taking the clients away from the salon, this indeed is a serious concern. However the notion that this would have a catastrophic effect on the salon was in effect denied by the evidence of Ms Wendy Blair, the Executive Administrator of the Professional Hairdressers' Association, and by Mr Dunn, a hairdresser of some 37 years standing. Ms Blair gave evidence that she frequently took calls from members concerned about an employee taking numbers and told them that it was rare that clients would actually cause a significant effect on the business because, for a range of reasons, clients tended to stay with the salon rather than follow a hairdresser elsewhere. Ms Brown denied that her purpose was to take clients from the salon. 16 When Ms Brown asked Ms Obeid for a reference to apply for TAFE teaching in September 2004, Ms Obeid could easily have raised any questions she had about Ms Brown having a second job without being confrontational, but she did not. Doubtless, many such opportunities for conversation of a non-confrontational type were available between two people who had developed a close relationship over time. In not doing so, the respondent created a working environment for Ms Brown that was grounded in suspicion. 17 I am concerned about some aspects of the evidence during the two days of hearing in this case. In particular, many allegations were raised without corroboration. Some business records produced could not be relied upon. There were inconsistencies between the evidence of the various respondent's witnesses. On the other hand, at all times during these proceedings Ms Brown admitted that she had collected contact details from the salon over a number of years and she admitted that she had contacted a large number of clients to let them know she had left the salon and where she was going. There was nothing in the evidence to suggest that she was not truthful. 18 Ms Carroll gave evidence that she believed Ms Brown was seeing clients outside salon hours without money being received by the salon, and had reported this to Ms Obeid and Mr Obeid in 2004. The respondent's response was to raise the issue at a general staff meeting where Ms Brown denied that she was servicing clients out of hours. Similarly, on Ms Carroll's evidence, the issue of stock losses and discounts were dealt with at general staff meetings. None of Ms Carroll's concerns re stock losses or discounts were substantiated by the production of business records. Rather, the only records produced by the respondent showed that no discounts were given. 19 What should be a simple case of dismissal based on inappropriate conduct by an applicant has turned itself into a complex situation because the respondent chose for various purposes over a number of years not to deal with issues of concern. It has been long established that summary dismissal puts the onus on the employer to justify the action. In Pastrycooks, Biscuit Makers and Flour and Sugar Goods Workers' Union (NSW) v Gartrell White (No.3) (1990) 35 IR 70 at 83-84, Hungerford J, said: It is undoubted, in my view, and as Mr Walton conceded, that the onus for making out a case to warrant the intervention of the Commission in ordering reinstatement is on the claimant union: see Re Barrett and Women's Hospital Crown Street [1947] AR (NSW) 565; Re Municipal Employees, Greater Newcastle (Wages Division) Award (Re Wallace) [1949] AR (NSW) 868; Western Suburbs District Ambulance Committee v Tipping [1957] AR (NSW) 273 at 279 and Homebush Abattoir [1966] AR (NSW) at 386. However, it is also undoubted, in my view, that where an allegation of misconduct is raised as a defence or as justification for a particular course of action by an employer, such as in summarily dismissing an employee, then the legal burden, in an evidentiary sense to establish that fact, shifts from the union to the employer: see WD & HO Wills (Australia) Ltd v Jamieson [1957] AR (NSW) 547 at 552, 553; North v Television Corporation Ltd [1976] 11 ALR 599 at 602; Flynn v JC Hutton Pty Ltd (1982) 3 IR 413 at 414; Williams v Printers Trade Services (1984) 7 IR 82 at 84; and Wallace v Deering Auto Electrics (1985) 12 IR 34 at 35. 20 To justify summary dismissal, the respondent is required to show that she was satisfied after careful and proper examination that the applicant had committed such conduct to support her decision: Franklins Limited v Webb (1997) 72 IR 257. 21 Ms Tucker for the applicant submitted that, to be reasonably satisfied that the dismissal was justified, the Commission must have regard to the traumatic nature of summary dismissal, particularly in the circumstances of a long term employee who had enjoyed a close relationship with her employer, being dismissed on a busy footpath outside her work place, leaving a long term customer waiting inside to have her hair cut and the applicant's elderly aunt also waiting for the applicant's care. 22 Ms Tucker submitted that, given the impact, the extent of the respondent's investigation into the allegations which lead to the dismissal is a crucial factor in the consideration of the dismissal. She cited Standley v Electronics Boutique Aust Ltd (unreported, IRC 4516 of 1998, 18 March 1999) as follows: ...... it hardly needs to be said that summary dismissal is the most serious form of sanction an employer can take against an employee ......[it] may unhappily burden and grievously harm an employee for years to come. 23 Ms Tucker submitted that the uncontested evidence of the applicant is that she had never discussed alternate employment with the owner of the salon where she now works. The owner at that salon also gave evidence supporting this statement. The respondent's concern that the applicant was about to run off with his clients was unfounded. Rather, submitted Ms Tucker any clients leaving the salon did so of their own accord and as a result of the respondent's action in dismissing Ms Brown. 24 When she commenced employment at Hairlairious, Ms Brown had brought with her a number of clients from her previous employer and had taken over other clients when Ms Obeid was absent from the salon for a period of time due to illness and later was absent during her pregnancy. Ms Brown gave evidence that she understood Ms Obeid was not going to return to the salon in the capacity of hairdresser and so she considered these clients had become hers. In spite of Mr Obeid's protestations, there was no evidence to suggest that this was not a reasonable understanding. In my view, if the clients were indeed clients of the salon and not clients of Ms Brown it would be absurd to expect that they would leave the salon en masse and follow Ms Brown elsewhere. This, as Ms Blair testified, is not the usual situation. The claim that Ms Brown's departure would possibly have a 'catastrophic' effect on the business was not substantiated. 25 There is no doubt that the respondent acted without procedural fairness. Both Mr Obeid and Ms Obeid said they were provided information from what they called the Department of Industrial Relations (clearly the Office of Industrial Relations) that they should thoroughly investigate the situation. Ms Obeid delegated this task to her husband. Mr Obeid did not thoroughly investigate. He did a token investigation asking Ms Baldwin and Ms Carroll what had happened on that day. He then took Ms Brown outside the shop onto the footpath leaving her client without her services and after two brief conversations dismissed her. 26 Even on his own version of the events on the day of dismissal, Mr Obeid did not put to Ms Brown that she had worked in the salon after hours without permission, that she had taken products, that she had made disparaging comments, that she had provided discounts to customers or that he had, in fact, been receiving a number of complaints about her over at least the last three months, if not over a much longer period. Mr Obeid freely admitted that he took all of these matters into account and yet he did not ever raise them with Ms Brown as a matter of concern with her, apart from in a general way at staff meetings, so that he had never given her an opportunity to respond to them. He accused her of planning to go to another job based on the fact that she had taken contact details, yet he and his wife had known that she had been taking contact details since 2001 and had not left Ms Obeid's employ. Rather, throughout the whole of that time, on Ms Obeid's evidence, Ms Brown had been a "cornerstone of the salon" providing "unrelenting support". 27 It is of concern to me that it was only when nine and a half years employment is up and Ms Brown was headed towards a period when long service leave would become due that the matter seems suddenly to be of such dire consequence to provoke summary dismissal. The fact that both Ms Carroll and Ms Baldwin had provided numerous occasions of concern about Ms Brown taking contact details to both Ms Obeid and Mr Obeid over a long period is in direct conflict with Mr Obeid's testimony that it was necessary to instantly dismiss Ms Brown for continuing the same behaviour on 1 February 2005. In spite of the fact that the behaviour itself appears prima facie to be unethical and in conflict with Ms Brown's duty to her employer, the fact that it was known to (or at least suspected by) her employer and not discouraged, explains why Ms Brown did not understand the possible serious consequences of her actions. 28 Taking into account all of the evidence before me and the submissions made on behalf of the parties, I am satisfied that Ms Brown had been collecting client contact details for a long period with the knowledge of her employer. She had not misused this information over a number of years, so the inference was contrary to that suggested by Mr Obeid. She had no intention of leaving her employ with the respondent. In the absence of any information from the respondent that she was to cease the practice, there was no reason to infer that she would misuse the information. In these circumstances, Ms Brown cannot be held to have breached her duty of fidelity to her employer during the course of her employment. 29 Any discussion of the respondent's concerns with the applicant is very likely to have resulted in a different outcome, in my view. In this respect, the respondent's reluctance to raise issues with Ms Brown goes beyond the concept of procedural unfairness. Ms Brown appeared throughout these proceedings to have remained loyal in her opinion of Ms Obeid, and to be unaware of the potential serious consequences of using the respondent's intellectual property. I am satisfied that Ms Brown would have refrained from the practice had she been told not to do so. Ms Brown had shown her willingness to respond to her employer's directions when she agreed not to do clients' hair after hours. Further, I am satisfied that the employment relationship could have continued successfully if other issues of concern had been discussed with her. 30 The respondent has not fulfilled the onus to show that summary dismissal was justified. I find that the dismissal was unjust and unreasonable. 31 Mr Murphy for the respondent cited the decision of Kearney J in Metrans Pty Ltd v Courtney-Smith and Ors [1981] 8 IR 379 where a differentiation was made between knowledge acquired during the course of employment and the deliberate retention of information from the employer's records, the latter being intrinsically confidential in its nature which "fell into that category of special knowledge which she is not at liberty to treat as her own after termination of her employment". Mr Murphy said that the applicant, Ms Brown, failed in her common law duty of fidelity to her employer. He said she made wrongful use of the objective information obtained from her employer, in contravention of her common law duty not to regard objective knowledge as being available for her personal use. 32 Immediately after her employment had been terminated Ms Brown arranged to rent a chair in the hairdressing salon opposite Hairlairious where she could earn income for herself. Under cross-examination Ms Brown continued to deny that she used the information obtained from her employer to entice clients away from the business. She did use client contact information, some of which was gained from other sources or prior to her employment at Hairlairious, but some of which was gained during her employment at Hairlairious from the employer's records. She used this information, she said, to inform them as a courtesy where she would be working. 33 Despite her protestations, it is quite clear that Ms Brown's reason for contacting the majority of employees was to entice them to continue to use her services. It was very clear from telephone records and it was not denied by Ms Brown that she did contact a large number of the clients and it was only one of these that she said she knew would not come with her but contacted her simply to say goodbye. In making these calls, Ms Brown breached her duty of fidelity and her common law obligations to the respondent. 34 Evidence was presented by the respondent in an effort to show that the clients Ms Brown contacted were not her clients but were principally attended by other hairdressers or were salon clients, attended by whoever was available at the time. Both card records and computerised records presented for this purpose were not useful for a number of reasons. Firstly, the name of the hairdresser appeared to be written on the card records more recently than the dismissal, and since the time that these cards were replaced by the computerised record keeping system. Secondly, the evidence was that the name written on the card may show only that a particular hairdresser serviced the client on one occasion only. Thirdly, the computerised records were not accurate or complete. It follows that Ms Brown's claim that she only contacted her own clients may or may not be true. 35 By contacting clients after her dismissal, Ms Brown removed any possibility of reinstatement to her former employment. Re-employment is equally impracticable. In determining the question of compensation I turn to those actions of the applicant immediately following her dismissal to which I have already referred. Whether or not Ms Brown had Ms Obeid's permission to copy client contact details in case she needed them for other purposes, she was not at liberty to treat that information as her own after the termination of her employment. By telephoning clients using the intellectual property of the respondent to inform them where she would be working, Ms Brown was responsible for attempting to entice clients to continue to use her services, resulting in a direct and immediate loss to the respondent's business. Whether or not she was successful in doing so is immaterial. Her actions were unethical. Because of her actions following the termination of her employment, I decline to order any compensation. 36 The matter is concluded. _________________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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