
Transferring employees and recognition of prior service
Jul 30, 2025The Fair Work Commission’s recent decision in Hooper v Shahbod Pty Ltd [2025] FWC 1624 reinforces a vital truth in employment law: small business and probationary employment do not exempt employers from fair process. The case involved the summary dismissal of a barista during a probationary period—an action that ultimately led to a finding of unfair dismissal and a compensation order.
In this blog, we unpack the factual background, legal reasoning, and practical lessons arising from the decision, particularly as they apply to small businesses operating in New South Wales.
Background: Change of Hands, Continuous Service
Steven Hooper had worked as a barista at the Lords of Pour café at Ettalong Beach since April 2023. Over time, the café changed hands twice. The latest purchaser was Shahbod Pty Ltd, who took ownership on 10 July 2024. Although Mr Hooper initially continued as a casual employee under the new management, he was transitioned to permanent part-time employment on 10 October 2024.
On 26 January 2025—Australia Day—a critical incident occurred. Mr Hooper left work abruptly at 8:00am, informing the café manager, Mr Omid Ghabousi, that he “had to go home.” Later that day, he received a text and an emailed letter informing him that his employment was terminated.
Mr Hooper filed an unfair dismissal application with the Fair Work Commission on 14 February 2025. The key legal question? Whether he was protected from unfair dismissal under the Fair Work Act 2009 (Cth), particularly given that he had not served 12 months directly under Shahbod Pty Ltd.
Was Mr Hooper Protected from Unfair Dismissal?
Under section 382 of the Fair Work Act, an employee must serve a minimum employment period—12 months for small business employers—to qualify for unfair dismissal protection. As Shahbod had fewer than 15 employees, this 12-month threshold applied.
Although Mr Hooper had only been with Shahbod for around six months, the Commission determined that he was still eligible for protection due to the concept of a "transfer of business."
Key Findings:
- Mr Hooper’s prior employer, Outwit Outplay Outlast Pty Ltd, sold the business to Shahbod.
- Mr Hooper resumed employment within 3 months of that transfer.
- The work he performed remained substantially the same post-sale.
- Assets (including goodwill and equipment) were transferred as part of the sale.
This met the statutory definition of a transfer of business under section 311 of the Fair Work Act, and crucially, Shahbod had not given Mr Hooper written notice that prior service would not be recognised.
As such, Mr Hooper's prior service counted—making him eligible to bring a claim.
Procedural Failures: A Checklist Ignored
The case turned on whether Mr Hooper’s dismissal complied with the Small Business Fair Dismissal Code (SBFDC). The Code outlines specific processes that small business employers must follow, including requirements for notice, warnings, and opportunities to respond.
The employer claimed that Mr Hooper had committed serious misconduct by walking off the job without explanation. However, the termination letter—sent just hours later—framed the dismissal as arising from performance concerns during a “probationary period.”
Procedural Shortcomings:
- No prior warnings were given to Mr Hooper about his performance.
- No opportunity to respond to alleged concerns was provided.
- No investigation into why Mr Hooper left the café was conducted.
- Mr Hooper was not informed of any concerns before his dismissal.
The Commission rejected the employer’s reliance on the SBFDC, noting:
“There is no evidence that Mr Hooper was notified that he was at risk of being terminated before he was dismissed… He was not given any formal warnings… or any opportunity to rectify any alleged issues with his performance.”
The Mental Health Context
Significantly, Mr Hooper later explained—via messages and evidence—that his abrupt departure on 26 January 2025 stemmed from a mental health episode, triggered by anxiety and panic.
Medical records presented confirmed that Mr Hooper suffered from depression and anxiety. Although the employer was not aware of this at the time of dismissal, the Commission acknowledged the context and held that it diminished the seriousness of his conduct.
Commissioner Crawford found:
“It was inappropriate for Mr Hooper to abruptly leave… without explaining… [but] his conduct must be viewed in context, given it is now clear that his mental health issues contributed to his actions.”
This point was crucial: while an unexplained departure might otherwise support termination, the Commission declined to treat it as serious misconduct justifying summary dismissal.
Was the Dismissal Harsh, Unjust or Unreasonable?
Yes. The Commission concluded that:
- There was no valid reason for the dismissal.
- The process was procedurally flawed.
- Mr Hooper was unfairly dismissed within the meaning of section 385 of the Fair Work Act.
Even though the employer was a small business and lacked HR expertise—factors which can moderate the expectations around process—they were not enough to excuse the deficiencies in this case.
Compensation Instead of Reinstatement
Mr Hooper did not seek to be reinstated. Instead, he asked for compensation. The Commission applied the Sprigg formula, which considers:
- The expected period of continued employment.
- Actual income lost.
- Any income earned post-dismissal.
- Mitigation efforts.
The Commission found that:
- Mr Hooper likely would have remained employed for another three months.
- He suffered a net loss of $10,676.96 in wages and super.
- A 5% deduction applied for low-level misconduct in walking off without explanation.
- The final award was adjusted down to $8,000 plus $920 in super due to the café’s tight financial position and Mr Hooper’s short tenure.
Lessons for Employers: Probation is Not a Free Pass
This case underscores several practical lessons for small business owners:
- Fair Process Still Applies
Probation does not remove the obligation to notify, warn, and hear out an employee. A fair process must precede dismissal, regardless of tenure.
- Document Performance Concerns
Verbal complaints or private frustrations are not enough. Employers must record warnings, set clear expectations, and provide opportunities to improve.
- Mental Health Requires Consideration
Even if mental health issues are not disclosed, they may later emerge as mitigating factors. Employers should investigate unusual behaviour before acting.
- Dismissal Letters Must Reflect the Real Reason
Conflicting narratives (serious misconduct vs. performance issues) undermine credibility. Be clear, consistent, and accurate in any written notice.
- SBFDC is Not a Shield Without Substance
Compliance with the Small Business Fair Dismissal Code must be genuine. Token checklists are insufficient when not backed by fair procedures.
Lessons for Employees: Know Your Rights
Employees, even in small businesses or under probationary contracts, may still be protected from unfair dismissal if:
- They are covered by a modern award or earn below the high-income threshold;
- They have served the minimum employment period (including service carried over through a business transfer);
- Their dismissal was procedurally or substantively unfair.
If you’ve been dismissed in similar circumstances, legal advice should be sought promptly—as strict 21-day timeframes apply for unfair dismissal applications.
Final Thoughts
The decision in Hooper v Shahbod Pty Ltd serves as a pointed reminder that process matters—even in small businesses, and even where there is an assumption of informality. The failure to follow proper steps, particularly when dismissing an employee dealing with mental health challenges, will not be lightly overlooked.
Employers in New South Wales should review their dismissal procedures and ensure compliance with the Fair Work Act 2009, regardless of business size or employee status. Employees, meanwhile, should not assume that probation excludes them from legal protections.
Contact the Shire Legal team if you have any questions.
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