Alan Broomfield Leddicoat v Schiavello Commercial Interiors (SA)

[1995] IRCA 569

CATCHWORDS

INDUSTRIAL LAW - UNLAWFUL TERMINATION - genuine redundancy
whether termination harsh, unjust or unreasonable - whether payment for severance adequate - factual dispute as to length of notional employment with the respondent - oral assurance of security of employment given 3 months before termination - whether failure to give advance warning of pending redundancy constituted procedural unfairness - compensation for inadequate payment in lieu of notice and for severance.

Industrial Relations Act 1988, ss 170EA, 170DB, 170DE

Matter No. SI 1153 of 1995

ALAN BROOMFIELD LEDDICOAT v SCHIAVELLO COMMERCIAL INTERIORS (SA)

VON DOUSSA J
ADELAIDE
18 OCTOBER 1995

IN THE INDUSTRIAL RELATIONS )
  )
COURT OF AUSTRALIA         )
  )      No. SI 1153 of 1995
SOUTH AUSTRALIA            )
  )
DISTRICT REGISTRY          )

BETWEEN:

ALAN BROOMFIELD LEDDICOAT

Applicant

AND:

SCHIAVELLO COMMERCIAL
   INTERIORS (SA)

Respondent

MINUTES OF ORDER

CORAM:    VON DOUSSA J

PLACE:    ADELAIDE

DATE :    18 OCTOBER 1995

THE COURT ORDERS THAT:

1. Declare that the termination of the applicant's employment by the respondent on 18 May 1995 was harsh, unjust or unreasonable, contrary to section 170DE(2) of the Industrial Relations Act 1988.

2. The respondent pay to the applicant compensation in the sum of $5,977.26.

Note:Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS )
  )
COURT OF AUSTRALIA         )
  )      No. SI 1153 of 1995
SOUTH AUSTRALIA            )
  )
DISTRICT REGISTRY          )

BETWEEN:

ALAN BROOMFIELD LEDDICOAT

Applicant

AND:

SCHIAVELLO COMMERCIAL
   INTERIORS (SA)

Respondent

Coram: von Doussa J
Place: Adelaide
Date : 18 October 1995

REASONS FOR JUDGMENT

This is a claim under s.170EA of the Industrial Relations Act 1988 ("the Act") for unlawful termination of employment contrary to the provisions of Part VIA, Division 3, of the Act. The applicant's employment as a commercial furniture consultant with the respondent was terminated on 18 May 1995.
     Initially the proceedings also included a claim in the associated matter jurisdiction conferred on the Court under s.430 for $15,000 damages for breach of the contract of employment.  In light of this additional claim it was directed that the matter be heard by a Judge of the Court.  However when affidavits were subsequently filed, it was disclosed that the applicant had obtained employment on no less favourable terms with another employer approximately one week after the termination of his employment with the respondent.  At the commencement of the hearing counsel for the applicant conceded that having regard to his client's new employment and to the termination payments which he received from the respondent, no damages at common law could be established and that claim was abandoned.

The respondent has asserted from the outset that the termination of the applicant's employment was in consequence of a genuine redundancy. Initially the applicant was disposed to dispute this, and also to dispute whether, even if there were a genuine redundancy, he had been appropriately selected as the employee whose employment was to be terminated. Part way through the trial, however, the applicant conceded that his termination was for a valid reason connected with the operational requirements of the respondent's undertaking, establishment or service, within the meaning os s.170DE(1).

In light of these concessions, the only issue remaining for determination is whether, under s.170DE(2) the termination was harsh, unjust or unreasonable.

It is common ground that even where there is a genuine redundancy, a termination of employment may nevertheless be harsh, unjust or unreasonable:  see Quality Bakers of Australia Limited v Goulding and Another, unreported decision of Beazley J, 23 June 1995 at p.16, and the cases there cited. The termination may contravene s.170DE(2) either because there has been "substantive unfairness" or because of "procedural unfairness": Kenefick and Another v Australian Submarine Corporation Pty Ltd (1995) 131 ALR 197 at 208, although this convenient classification of kinds of unfairness may be of limited assistance, depending on the circumstances of the case: Byrne & Another v Australian Airlines Ltd, as yet unreported decision of the High Court of Australia, 11 October 1995 per McHugh and Gummow JJ at p.59.

The words "harsh, unjust or unreasonable" are ordinary, non-technical words which are intended to apply to an infinite variety of situations where employment is terminated.  In Bostik (Australia) Pty Ltd v Gorgevski (No.1) (1992) 36 FCR 20 at 28 Sheppard and Heerey JJ said of these words:

"We do not think any redefinition or paraphrase of the expression is desirable.  We agree with the learned trial judge's view that a court must decide whether the decision of the employer to dismiss was, viewed objectively, harsh, unjust or unreasonable."

In Gregory v Philip Morris Limited (1988) 80 ALR 455 at 471 Wilcox and Ryan JJ said in relation to an award provision that required that "termination of employment by an employer should not be harsh, unjust or unreasonable", that it was intended to deal with actual industrial situations, requiring that a termination of a particular individual shall not be harsh, unjust or unreasonable. In the present case therefore an objective assessment of the employer's conduct in relation to all the circumstances of the individual case of the applicant is required.

The applicant contends that the termination contravened s.170DE(2) in two respects only:

(a)procedural unfairness because he was dismissed without forewarning in the face of an oral assurance given some three months before that his employment was secure; and

(b)substantive unfairness as an inadequate severance payment was made.

In his affidavit evidence the applicant raises as a further possible ground of substantive unfairness that a payment made to him in respect of a profit bonus scheme was inadequate.  That point was not ultimately pressed and gained no support from the evidence which was to the effect that on termination he received a payment for the current year equal to that which he received under the scheme the preceding year.  In the course of the trial a possibility emerged that the component in the termination payment in respect of long service leave which had accrued under the Long Service Leave Act 1987 (SA) may have been incorrectly calculated having regard to s.3(3) of that Act. However this was not a ground advanced by the applicant in support of his case, and the parties are agreed that any error in calculation can be separately rectified.

It is convenient to deal first with the ground of substantive unfairness based on the adequacy of the severance payment.  This ground turns, in substance, upon a dispute between the parties as to the date when the applicant's employment is to be treated as having commenced for the purposes of computation of severance pay.  It is necessary to refer to the facts to identify the background to this dispute.

The applicant is aged 57.  He was employed from 9 February 1987 as a sales representative with BCI Pty Ltd ("BCI") which carried on business as Bissland Commercial Interiors.  With pay increases, he was still employed with that company when it, and others comprising the Bissland Group, went into provisional liquidation on 27 September 1993.  On the morning of that day the employees of BCI were called to a meeting by the provisional liquidator who informed them of the provisional liquidations, and gave to each employee a letter of termination.  The letter included advice that:

"At present insufficient funds are held by the company to enable payment to you of any outstanding employee entitlements.  These payments will be made from realisations of company assets."

At the conclusion of the meeting the employees were asked to wait about as discussions were taking place with the respondent (or an associated company) which was a major national supplier of office furniture and systems, and for which BCI had acted as South Australian agent.

In the afternoon a meeting of the former employees of BCI Pty Ltd was called.  Either at that meeting, or earlier in the day, the employees had been informed of their individual entitlements upon termination, those entitlements including payments in lieu of notice and for severance.  In the applicant's case the amount due to him was approximately $9,500.

Present at the afternoon meeting were the provisional liquidator, Mr Tony Schiavello, (the managing director of the respondent, or the group of which the respondent was a member) and the respondent's solicitor.  No point is taken that Mr Schiavello and the solicitor may have been representing another company in the group at the time.  The employees were informed that they could either take the termination payments which had been advised to them by the provisional liquidator, which would be paid as and when possible from the proceeds of BCI's liquidation, or they could be employed by the respondent which offered to re-employ all fourteen former staff of BCI. The respondent intended to take over the occupancy of the former BCI premises, and several large BCI contracts which involved the supply and installation of the respondent's products in Adelaide.

The applicant (and also the other employees) accepted employment with the respondent.  To that end they completed, either then or over the next day or so, an "employment application form" which set out their personal particulars, and other forms relating to superannuation.  As would be expected, the taxation and wages records of the respondent show that the respondent's employment commenced in September 1993, and the superannuation records record that the applicant joined the respondent's plan on 1 October 1993.

The applicant's case is that he and the other employees were told at the afternoon meeting that if they waived payment of their entitlements then due in consequence of the termination of their employment by BCI, the respondent would take over their employment and continue it with notional effect from each of their commencement dates with BCI.  In other words, the employment offer, which they accepted, was on those terms. 

The respondent's case is that the respondent only agreed to take over accrued liabilities for long service leave, annual leave and car leasing entitlements (although the affidavits of Mr Lockwood and Mr Dohnt, the witnesses for the respondent, also say that the agreement was to take over accrued sick leave).  As to severance pay, in the event of later termination of the new employment by the respondent, it is asserted that the relevant period of service was to run only from 27 September 1993.  It is asserted that this was made clear to the employees orally at the time, and is confirmed by Deed Polls executed by the applicant during the next day or two.  Identical Deed Polls were signed by most of the other employees in the days immediately following their oral acceptance of the respondent's offer of employment.  The Deed Polls were in the following terms:

First:
  "DEED POLL

To BCI Pty Ltd (In Provisional Liquidation) ("the Company")

99 Frome Road

ADELAIDESA  5000

I Alan Leddicoat release forever hold harmless and hereby undertake to make no claim against the company for any employee entitlements I presently have against the company (including annual leave, sick leave or long service leave), accumulated or otherwise or any other entitlement I may have pursuant to the provisions of the Corporations Law.

Executed as a Deed this September 28, 1993..."

Secondly:
  " DEED POLL

To Schiavello Commercial Interiors (VIC) Pty Ltd ("the Company")

Tullamarine Park Road

TULLAMARINE  VIC  3043

I Alan Leddicoat hereby release and forever discharge and hold harmless and undertake to make no claim against the company in respect of any employee entitlements which I may have for redundancy payments covering my period of employment with BCI Pty Ltd (in Provisional Liquidation) pursuant to the provisions of the Corporations Law or any other law or practice.

Executed as a Deed this 29th day of September, 1993..."

The first Deed Poll by its terms gives a complete release to the Provisional Liquidator in respect of all of the entitlements then due to the applicant by BCI, which would include entitlements for pay in lieu of notice and for severance.

The second Deed Poll is less clear in its terms and counsel for each party contended for a construction favourable to his client's case.  On the one hand for the applicant it was contended that the Deed Polls should be read together, and against the background of the events which had occurred; that the second Deed Poll reflected no more than an abundance of caution by the Provisional Liquidator and the respondent to ensure that the respondent would not be required to pay the redundancy payments as assessed by the Provisional Liquidator, the entitlement to which had arisen upon termination of the applicant's employment with BCI; and that it did not address at all the separate question of how an entitlement for a redundancy payment by the respondent would be calculated in the event that the applicant's employment with the respondent was later terminated on the ground of redundancy.  On the other hand the respondent's case focuses primary attention on the second Deed Poll; it is contended by the respondent that as it could not have become liable for redundancy payments due by BCI merely upon employing its former employees, the only construction of the second Deed Poll which could give it any substantive effect is that in the event that the applicant is later made redundant by the respondent, his period of employment with BCI will not be brought into account for the purposes of calculation.

In my opinion the purpose and intent of the second Deed Poll cannot be ascertained by taking the document in isolation from the events which surrounded its execution. Either interpretation is possible if the second Deed Poll is read in isolation. 

What must be determined is the terms on which the applicant was employed.  The offer of employment was made orally at the afternoon meeting.  The Deed Polls later signed as part of the formalities of acceptance of that offer do not purport to record the full terms of the contract of employment.  The purpose and intent of the second Deed Poll must be determined in the light of the terms of the employment that were orally offered.

The applicant's evidence in chief was:

"What discussion took place at the meeting later on that day in the board room at which Mr Schiavello was present?---Yes, the liquidator commenced the proceedings by saying that he and Mr Schiavello had negotiated dealings whereby Mr Schiavello was going to take over Bissland Commercial Interiors and that he was proposing that the staff - he was prepared to take on the existing staff on their existing packages that they were on at Bissland from that moment on if we were in agreement to certain conditions.

What were those conditions?---The conditions were that the liquidator read out the redundancy payments that each member of the staff of the Interiors was entitled to at that particular morning and he made the statement that because Mr Schiavello had lost a substantial amount of money apparently in the takeover - we weren't aware of what the deal was - that if we were prepared to forego the redundancy payments that we were entitled to he was - prepared to employ us on our existing packages and that the service that we had would be continuous provided we were prepared to give up that redundancy figure that we were entitled to that morning."

The applicant summarised his understanding of what was said at the meeting:

"I understood that if I forewent that that day, in other words - it appeared that if Mr Schiavello took over the business the liquidator still had to pay us that money.  He had come to some arrangement with the liquidator, that if the staff were prepared to give up that payment that they were entitled to, then that would not be added to his amount that he had to pay to take the company over.  That was the way it was sort of put to us, that that would eliminate Mr Schiavello from having to accept that further liability...I believed that my total package was continuous.  My long service, etcetera, etcetera, was all continuous and virtually I theoretically had been dismissed at 10 o'clock in the morning and re-employed at four in the afternoon so therefore my service was literally uninterrupted and that is the way it was put to us by the liquidator, that technically you are entitled to the money because you have been dismissed, however, morally you have been re-employed later that day so we believe it would be unfair to ask Mr Schiavello to have this account (sic - amount) of money added to his bill, words to that effect."

In cross-examination the applicant said that "the document" (i.e. the second Deed Poll) was explained as being to record that the respondent "was not going to be responsible for any of the redundancy payments which had accrued and were due to employees during this period of service with Bissland"; and Mr Schiavello was saying "I am prepared to offer all of you people a job but I just want it to be clear that I am not picking up any liability for anything that the dead company Bissland may or may not owe you".

The picture given by the applicant's evidence, apart from one answer in cross-examination, is that what was being given up was the $9,500 figure then due by BCI, and that the new employment with the respondent would be treated as a continuation of the BCI employment.  On his evidence the purpose of the Deed Polls was as his counsel now contends.

The one answer in cross-examination which might be thought to be inconsistent with this picture occurred at the end of the following interchange between counsel and the applicant:

"Well, the individual detail that I am asking you to recollect if you can is that Mr Schiavello was putting it clearly: that employment with me commences today when you accept my offer of employment, it commences on 29 September, 1993.  Do you accept that?---Yes, I don't think it was clearly stated.  It was just accepted that we were starting work with him that day, yes.

It was:that the employment would start from today when you accept my offer of employment?---That's correct, yes.

But that as part of the negotiations and part of the deal done I will agree that any monetary amounts accrued and due owing by way of annual leave and/or long service leave, I, Schiavello, will accept a liability to pay them to the individuals who are owed them?---Yes.  No, as I said, I can't recall him saying that in the exact words but that was the gist of what we accepted. 

That was consistent, of course, with the discussions and the deed R1 about redundancy payments, was not it, in the sense that: employment with Schiavello starts now, September 1993, I am not going to accept that employment is deemed to date back to the time when you started with Bissland.  That was the structure of what he said, was not it?---Basically, yes."

I have difficulty understanding the last question to which the applicant gave his answer.  The subject matter of the preceding question was the respondent's acceptance of liability for annual leave and long service leave.  That subject seems unrelated to the terms of the second Deed Poll (exhibit R1) and a question asking for the opinion of the witness whether discussion on that subject was consistent with, inter alia, the Deed Poll was likely, at the least, to be very confusing.  I am uncertain what the witness thought he was saying was "basically" the structure of the oral offer of employment.

The applicant was an impressive witness.  Apart from this passage in his cross-examination the account of the meeting he gave conveyed clearly the picture I have earlier described.  I do not treat the above answer as a concession by the witness that he was modifying in any way what he had earlier said, and I do not treat the answer as having that effect.

The evidence of Mr Lockwood and Mr Dohnt who were called on the respondent's behalf does not cause me to reject the applicant's evidence although they now interpret the events surrounding their employment by the respondent as having the consequence on severance pay for which the respondent contends.  Mr Lockwood says that it was made "painstakingly clear" at the afternoon meeting that "our commencement of employment was that day and we actually had to sign papers to that effect and that was one of the major issues they were trying to really define very clearly that today is the beginning.  You work for Schiavello from today."

Although this was made clear he says the employees were told "we would be hired on the same wages and conditions, i.e. cars and whatever...All that would prevail", but Mr Schiavello and his solicitor "were very clear in what they trying to isolate".  Mr Lockwood went on to describe how accrued entitlements for annual leave and long service leave were to be dealt with.  These were described by him as the two contentious issues.  In cross-examination he said:

"Well, apart from those things which I have just mentioned, including the sick leave, you say all other entitlements as they related to continuity of service would be waived.  What other entitlements were to be waived?---The redundancy aspect of that.  The employment started at that day and an employees ability to call on the employment as starting from the commencement of work with Bissland was no longer relevant.

...

What I am putting to you is that as you say having made it painstakingly clear that that was an important issue, there is no documentation about the commencement date of employment with Schiavello?---No, it doesn't appear there is, no.

...

Was not the discussion about redundancy in the context of each individual person who had been made redundant by letter dated 27th and handed out on 29th, was not the concern later that same day to the effect that each of those persons had a specified entitlement by way of redundancy and that the company, in taking over their employment, was not to be liable to pay out that figure in respect of each individual?---Yes, I would say so. 

It was in that context, was it not, that the deed poll was required to be signed?---Yes, I would say so."

The impression given both by the applicant's and Mr Lockwood's evidence is that the discussion focused in some detail on annual leave and long service leave where in each case the respondent accepted a continuing liability for accrued entitlements, and the redundancy payment that had become due that morning when the BCI terminations had occurred; that the entitlements that accrued due for payments in lieu of notice and severance, the monetary amounts calculated and advised to each former employee by the provisional liquidator, were to be waived; but that the issue that now arises - whether in the event of a future redundancy notional service with the respondent was to include the BCI period of employment - was not specifically identified or discussed.

That impression is reinforced by Mr Dohnt's evidence.  In evidence in chief he said:

"Mr Schiavallo offered us a position with the Schiavello group of companies and at that time it was made clear that Schiavello would take over the entitlements of long service leave, annual leave, but no entitlement for any of the redundancy payments that may be due of which we were advised in dollar value what that was to be.  So we had then to make a choice whether we would accept the redundancy payment or whether we would accept employment with Mr Schiavello."

And in cross-examination:

"When you said in paragraph 3 of your affidavit that all previous sick leave, long service, annual leave entitlements and car leasing arrangements were saved and all other entitlements which would have been payable to the ex-employees were waived you were referring there, were you not, to the waiver of the redundancy or retrenchment payments which you had been told of earlier on the same day?---Yes.

HIS HONOUR: That is all you were referring to, is it not?---Correct."

In the emotionally charged situation in which the former BCI employees found themselves that day, it is understandable that they may now give different interpretations to what was said, and remember the meetings differently.  Those who would probably be in the best position to inform the Court what was said at the afternoon meeting, namely the Provisional Liquidator, Mr Schiavello and the respondent's solicitor were not called to give evidence.  The latter two, it may be inferred, would have been readily available to the respondent to give evidence as to what was said.  As the respondent did not call them, I am encouraged to give effect to my opinion formed from observing and hearing the applicant and the witnesses give evidence that I should prefer the evidence of the applicant, and find that the employees were told that their service with BCI and the respondent would be treated as continuous if they gave up the redundancy payment to which they had become entitled that morning from BCI. 

Instead of calling Mr Schiavello and the solicitor, the respondent tendered a number of documents as business records of the respondent said to throw light on the terms of the engagement of the applicant and the other former BCI employees by the respondent.  One of those documents is a letter from the Provisional Liquidator to Mr Schiavello dated 30 September 1993 (exhibit R9) which purports to set out the terms of the agreement reached between them covering the purchase of assets of BCI, the employment of the former BCI employees, and the assignment of certain works contracts.  I do not set out the terms of that letter insofar as they relate to the offer of employment.  It is sufficient to say that those terms are, as the letter says, directed, "... to insure that for the employees mentioned there are no priority employee claims in the liquidation".  As I construe the letter, it does not assist on the question whether for the purposes of assessing a redundancy payment to the applicant in the events which happened, the period of employment with BCI is to be taken into account.

Another document tendered as a business record was the applicant's "employment application form" completed on 29 September 1993.  Section 2 of that form asked for details of previous employment with a request that the applicant list his last employer first.  The applicant stated his last employer to be Anthony Fox Pty Ltd, whose employment he left to join Bissland.  In completing this form the applicant obviously treated his employment with the respondent as being a continuation of his BCI employment.  Whilst the applicant's belief at the time is not decisive of the terms of his employment with the respondent, the fact that the application form was accepted without the need for amendment by the respondent lends some weight to the applicant's case in that it tends to show that those in the respondent's organisation responsible for maintaining employee records interpreted their instructions at the time to mean that the applicant's employment with BCI was to be treated as employment with the respondent.

When the applicant's employment was terminated on 18 May 1995 he was handed a written calculation of his entitlements to explain four cheques that were handed to him.  The calculation was prepared in the head office in Melbourne.  The explanations for the calculation of pay in lieu of notice and severance pay were not disclosed to the Court.  There are aspects of that document and the calculations which also tend to show that the administration of the respondent treated the applicant's employment as having commenced on 9 February 1987, and which are inconsistent with the case advanced on the respondent's behalf.

The document is headed with a notation that the applicant was "Hired: 9.2.87 (ex Bissland)". The amount calculated for pay in lieu of notice was four weeks plus one week for the applicant being over 45. That calculation, if made under s.170DB of the Act - a reasonable assumption to make in the absence of any other explanation - is appropriate to an employee of 5 or more years. It does not suggest any likely calculation for an employee of 20 months standing. The calculation of severance pay was "8 weeks". The applicant had been employed collectively with BCI and the respondent for just over 8 years. Although Mr Lockwood, who said he was involved in fixing the amount of the severance pay, could not tell the Court how the calculation was made, it has the appearance of a payment of one week for each year of service. Whether or not that is the right explanation, it is not a calculation that suggests a period of 20 months service.

I find therefore that the employment offered to the applicant by the respondent in September 1993 had as one of its terms that the employment would be treated as having commenced when he commenced with BCI, viz 9 February 1987.  I find that the purpose and intent of the second Deed Poll was to confirm that the accepting employee not only waived all claims against BCI (the first Deed Poll) but also waived against the respondent any possible claim for the entitlement which arose that morning for pay in lieu of notice and severance.  The second Deed Poll refers only to "redundancy payments" as accrued annual leave, long service leave, and on balance I find sick leave, were not being waived: rather they were being taken over by the respondent.  I hold that the second Deed Poll was not intended to have any operation in the events which have happened - events which were not adverted to at the time otherwise than in the general offer made to the applicant that if he gave up his entitlement then due for redundancy his service would be treated as continuous.

It follows that on 18 May 1995 the adequacy of the severance payment made to the applicant is to be judged on the footing that his service commenced just over 8 years earlier in February 1987.

Mr Bourne, counsel for the applicant, pressed the Court to find that there is now a general practice or industry standard that requires a severance payment on genuine redundancy of at least 2 weeks pay for each completed year of service.  This argument was based on amounts paid, or conceded to be appropriate, in particular cases that have come before the courts, for example: Kenefick v Australian Submarine Corporation Pty Ltd at 201; Papadopoulos v CML Assurance Society Ltd (Ryan JR, 16 August 1994, Judgment No. 16/94); Jones v Department of Energy and Minerals (Tomlinson JR, 20 September 1994, Judgment No. 50/94); Mallen v Beasam Pty Ltd (Parkinson JR, 26 October 1994, Judgment No. 85/94); Butera v VDO Industries Pty Ltd (Ryan JR, 1 September 1995, Judgment No. 469/95); Morris v Southern Farmers Group Ltd (1991) 58 SAIR 86 especially at 91; Thomas v John Shearer Ltd (1991) 58 SAIR 711 at 717; Wynn's Winegrowers Pty Ltd v Foster (1986) 53 SAIR 347; and Jackson v Atco Industries Ltd (1986) 53 SAIR 95.

No evidence was led that attempted to establish any industry standard or general practice.  To mount such a case could be an enormous undertaking - and is one that more appropriately should be done in the Australian Industrial Relations Commission by way of review of the principles considered in the Termination, Change and Redundancy Case (1984) 294 CAR 175: cf. Morris v Southern Farmers Group Ltd at 88.  Apart also from the impossibility and undesirability of this Court acceding to Mr Bourne's submission, the standard which he postulated did not consider at all whether there should continue to be a ceiling to the number of weeks' pay.

The cases to which Mr Bourne referred, and the evidence led in cases which come before this Court do show that frequently severance payments that considerably exceed the common award prescriptions that followed the Termination, Change and Redundancy Case, are agreed to in enterprise bargaining, or are paid on redundancy terminations.  It was not disputed in the present case that in the circumstances of the applicant the payment of 8 weeks for severance as part of the overall package was not adequate if the applicant were to be treated as an employee of 8 years standing.  It was the respondent's case that it was adequate for someone of 20 months standing - and then a generous package.

The evidence discloses that the respondent has a policy regarding severance pay, but the Court was not informed what it is, although I gathered from the respondent's submissions that the applicant's contention that he should have received at least 2 weeks for each of his 8 completed years was not seriously contested if, contrary to its case, that was the relevant period for the calculation.

Without laying down anything that could have wider application as a standard of some sort, I am satisfied that in this case, as the applicant is to be treated as having 8 completed years of service, the payment made to him in the termination package for severance was substantially inadequate.  In expressing this view I do not overlook that the total package needs to be considered (see Jackson v Atco Industries Ltd at 113) but as the other items, apart from the payment in lieu of notice, are amounts for customary items that had accrued due and for the bonus that was likely to have been paid anyway if there had been no redundancy, the severance payment was inadequate. As the inadequacy was substantial, I find that the termination was harsh, unjust and unreasonable contrary to s.170DE(2).

It was suggested by the respondent's case that when his employment was terminated the applicant expressed satisfaction with the amount of the payments made to him.  I find that the applicant did not do so.  Rather he terminated the meeting with Mr Lockwood promptly without causing a scene and left without having given consideration to whether the calculations and the four cheques which he was given were appropriate or not.

The procedural unfairness alleged is said to arise in this way. When the respondent employed the BCI employees it became clear that the respondent's operation in South Australia was overstaffed. Moreover as the months went by the nature of the business activities changed so that a different mix of staff was required - less salespeople and more contract administrators. The types of product being sold also changed. Restructuring, and the learning of new skills by staff who were not retrenched was necessary. New styles of quality assurance and multiskilling were introduced. As disclosed by paragraphs 8 to 12 and 17 of Mr Lockwood's affidavit several former BCI employees were put off in 1994 and in February 1995. It is common ground that after an employee was retrenched in February 1995 the applicant spoke with Mr Lockwood concerning his future employment with the respondent, and was reassured that it was not under threat. The applicant was assured that he was "part of the team", that he was a valuable employee, that the respondent needed his expertise, and the company was not contemplating further retrenchments. It is also common ground that at no time before the applicant was informed on 18 May 1995 that his employment was being terminated was he told that the position had changed. It is contended that it was contrary to s.170DE(2) to terminate the applicant's employment in these circumstances without forewarning.

In almost every case a termination of longstanding employment, especially for a person of the applicant's age, will be hard on the employee, and a matter of distress and anguish. The force of the blow will often be less if it is preceded by sympathetic forewarning and counselling, but it does not follow that a termination without forewarning on the ground of genuine redundancy is necessarily in contravention of s.170DE(2).

In the present case it is said that the applicant should have been forewarned - but plainly even if he had been given a week or two of warning his termination would still have followed with all the consequential disruptions to his working and domestic arrangements. It is also said that the respondent should have discussed with the applicant the possibility of allowing him to work out his notice period so that he could look for another job whilst still employed. The Act in s.170DB recognises that often the circumstances of the employer's business and workplace will render it unreasonable to require the employer to continue employment through the notice period. A host of considerations in a particular workplace may lead to this situation. In the present case the applicant had a close working relationship with customers of the business, and it could have been unsettling to those customers and harmful to the business to have a senior employee on notice administering ongoing contracts. As it was, it seems that the respondent lost a significant customer over the applicant's termination. I am not satisfied that it was unreasonable for the respondent not to discuss alternatives to immediate termination and payment once the applicant was advised his position had become redundant. However where forewarning is not given (and it will frequently be required by Award conditions, but none applied here) it may be necessary, depending on the circumstances of the case, to consider whether a termination package that includes on account of a payment in lieu of notice only the amount required by s.170DB is adequate. In the present case, the assurance of security made in late February 1995 was calculated to have the effect that the applicant would feel secure and not seek other employment to better protect the remainder of his working life. To then terminate his employment without forewarning required, in my view in the circumstances of this case, some additional period either of notice or payment in lieu of notice, above the statutory minimum. Again, on this ground I consider there was a breach of s.170DE(2); but if that were the only matter of complaint, the compensation appropriate in this case to remedy it would not have exceeded an amount equal to pay for another week or thereabouts.

I am satisfied that the applicant's employment was terminated in contravention of s.170DE(2). It is impracticable to order reinstatement as the termination was due to a genuine redundancy. Compensation is the appropriate remedy. In assessing the compensation appropriate to remedy the insufficient payments in lieu of notice and for redundancy I think it is irrelevant that the applicant obtained employment elsewhere on no less favourable terms within a week or two. The applicant was entitled to payments under these heads appropriate to his situation on the day his employment was terminated. It is not to the point whether he then decided to retire from the workforce, go on an extended holiday, or accept employment with another employer located entirely by his own efforts and good luck. Moreover it should not be overlooked that even though the applicant's present wage and weekly conditions of employment may be similar, he has lost the benefit of having qualified for long service leave and being an employee of 8 years standing: see Termination, Change and Redundancy Case at 200.

In my opinion compensation should be assessed at $5,977.26 being a further 8 weeks pay for severance and one week more for pay in lieu of notice.  From this sum the respondent will have to deduct income tax before paying the balance to the applicant.

I certify that this and the
  preceding pages are a true
  copy of the Reasons for
  Judgment of Justice von Doussa

Associate:

Dated:

Counsel for the applicant  : Mr T Bourne
Solicitors for the applicant    : Stanley & Partners
Counsel for the respondent : Mr Martin Hoile
Dates of hearing               : 5 and 6 October 1995