Birch v Golden Editions Pty Ltd

[1996] IRCA 467

DECISION NO: 467/96

C A T C H W O R D S

INDUSTRIAL LAW - termination of employment - probation - notice - no opportunity to respond - no valid reason

Industrial Relations Act 1988 ss.170CC, DB, DC, DE, EA and EE

Industrial Relations Regulations - Regulation 30B

CASES:

Selvachandran v Peteron Plastics Pty Limited (1995) 62 IR 371 at 373.

Nicholson v Heaven and Earth Gallery (1994) 1 IRCR 199

DAVID BIRCH -v- GOLDEN EDITIONS PTY LTD

No. VI-6373 of 1995

Before:  Ryan JR
Place:  Melbourne
Date:  23 September 1996

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI-6373 of 1995

B E T W E E N :

DAVID BIRCH
Applicant

AND

GOLDEN EDITIONS PTY LTD
Respondent

MINUTES OF ORDERS

Judicial Registrar Ryan          23 September 1996

THE COURT ORDERS:

1. I order that the Respondent pay to the Applicant within 21 days compensation in the sum of $3810. 

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

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI-6373 of 1995

B E T W E E N :

DAVID BIRCH
Applicant

AND

GOLDEN EDITIONS PTY LTD
Respondent

Before:      Ryan JR
Place:       Melbourne
Date:         23 September 1996

REASONS FOR JUDGMENT
Delivered Ex Tempore

The Applicant claims unlawful termination of employment and seeks compensation.  Mr McDonald of McDonald and Charman, Solicitors, appeared today on his behalf.

The Respondent has described itself as a wholesaler and supplier of audio and video products supplying major music and retail chains and less traditional retailers such as newsagents, gift shops, service stations, convenience stores and the automotive after market industry.  The National Sales Manager, Mr Watson, appeared for the Respondent today.

The Applicant and Mr Watson gave evidence. 

The Applicant asserts that the Respondent has failed to demonstrate, or establish a valid reason for the termination of the Applicant on 15 December 1995, 3 months and 5 days after the employment began on 11 September 1995.  The Applicant does not seek reinstatement.  I have no doubt it would be impracticable.  Mr McDonald was quite specific.  He seeks compensation for the Applicant equivalent to the payment of his salary for the period 16 December 1995 to his re-employment elsewhere on 19 December 1995.

Mr Watson seems to rely on a claim that the application lacks jurisdiction in that the Applicant was an employee excluded from the operation of sub divisions B, C, D and E, a Division 3 of Part VIA of the Act, being an employee serving a period of probation or a qualifying period of employment, the duration of such period having been determined in advance, and being reasonable, having regard to the nature and circumstances of the employment.  In other words, although imprecisely and generally expressed, Mr Watson relies on Regulation 30B(1)(c).

I reject that proposition.  The claim is within jurisdiction.  In my view a period of probation was determined in advance, and was reasonable. To that extent, I disagree with Mr McDonald, but, at the time of termination, the Applicant was no longer on probation.  The period had expired on 10 December 1995 and had not been extended.  The relevant parts of the offer and contract of employment appear in Exhibit A1 and read as follows (Exhibit A1 being a letter to the Applicant from Mr Hoghton Hughes, the managing director of the Respondent company) - I am simply going to quote those parts that are relevant:

“This letter confirms your appointment as our Victorian Country Sales Representative effective, from Monday 11 September.

As discussed, you will be responsible for both audio and video sales throughout the Victorian country area. Your itinerary is enclosed.

Your annual salary (payable monthly) will be $33,000, and you will also be eligible for our various bonus incentives, as outlined per the enclosures. As your salary, commissions and expenses will be deposited direct into your bank account, please advise your account number and details as soon as possible. Also, please remember your salary incorporates a $1,500 Telephone Allowance.

You will report direct to our Victorian Manager, Lynne Watson.

Important! Please complete the Employment Declaration form (enclosed) with your Tax Number and return it to Graham Broughton (in Sydney) immediately.

Copies of recent memos plus an outline of expense account procedures, vehicle accident formalities, etc. are enclosed.

Business cards have been ordered and will be sent down to you as soon as they are printed.

One final and important point: Due to our problem in getting into K-Mart, it is essential that you exploit all potential outlets for our product (e.g. truckstops, roadhouses, video stores, newsagents, etc.).

As agreed, this arrangement is for a 3 month trial (or settling in) period, with either party being free to terminate the relationship during, or at the end of, that period. Following this period, and pursuant to the terms of your salary arrangement, one month’s written notice will be required for any resignation. ”

No evidence has been given of a valid reason for termination being a sound defensible and well-founded reason as outlined by Northrop J in Selvachandran v Peteron Plastics Pty Limited (1995) 62 IR 371 at 373.

I need not go into the very little detail that exists of the termination meeting at the Rockmans Regency Hotel between 11 am and 11.20 am on 15 December 1995.  Suffice to say that the Applicant and Mr Watson gave reasonably consistent evidence of the meeting.  It is crystal clear that Mr Watson terminated the Applicant without warning, counselling or notice on that day and did so at the direction of the managing director of the Respondent company, Mr Hoghton Hughes.

I might add that while Mr Hughes had written to all sales representatives, including the Applicant, on 5 December (Exhibit A9), stating that “as expected,  all of you qualify for the 1% Incentive Bonus”, he had earlier on 21 November written to Mr Watson as follows, and I am referring here to Exhibit A10:

“ATTENTION Andrew Watson.

Dear Andrew,

RE: VICTORIAN DISTRIBUTION

Unfortunately, David Birch is a total disaster.  Please fire him at Christmas and either replace him with Annette or readvertise.  N.B.  I know Lynne would love to have Annette back!

Two more options:

-Lynne to cover Victoria on her own, transferring Albury\Wodonga to Andrew and more of West Victoria to Geoff

-Retain two Victorian reps and include Tassie in the coverage.

Let's know what you decide.

Yours sincerely

MUSIC WORLD

HOGHTON HUGHES
MANAGING DIRECTOR”

Mr Watson basically claims that this letter does not mean what it says and that comments like that from his managing director, who he describes as an eccentric man, are common and presumably not to be taken on face value.  I have no doubt whatsoever that Mr Watson terminated the Applicant's employment on 15 December because the managing director told him to do so and that his job, that is, Mr Watson's job, was on the line, and he gave evidence that he said words to that effect to the Applicant.  I accept that the managing director had a haranguing, high-pressure style aimed at achieving sales in a competitive industry and in a climate in which, according to Mr Watson, the Respondent was not trading profitably and had not traded profitably for three years.

I add that the haranguing and pressure seems to have been delivered behind the shelter of letters to sales representatives and in the expectation that Mr Watson, and perhaps others, would apply the pressure directly.  Mr Watson says he did that in regular discussions with the Applicant.  He stated:

“I constantly reminded the Applicant about budget expectations and the attitude of the proprietor.”

Mr Watson said, or he implied that if budgets were not met, there is trouble, but revealingly he also said that he, and indeed the managing director, used “nuance”.  Mr Watson referred to “nuance” several times.  He said:

“I do not use a big stick.  There is a subtle objective that territories be serviced in a profitable manner.”

In this case, despite some decidedly unsubtle written comments by the managing director, the direct approaches to the Applicant were too subtle.  There was too much nuance and, despite Mr Watson's assertions to the contrary, there was not enough direct, straightforward counselling and assistance in respect of targets which appear to have expanded as Christmas approached.

S170DC of the Industrial Relations Act 1988 reads as follows:

“An employer must not terminate an employee's employment for reasons related to the employee's conduct or performance unless:

(a)the employee has been given the opportunity to defend himself or herself against the allegations made; or,

(b)the employer could not reasonably be expected to give the employer that opportunity.”

In Nicholson v Heaven and Earth Gallery (1994) 1 IRCR 199 at 209 the Chief Justice of this Court referred to paragraph 170DC(a) of the Act as follows:

“The paragraph does not require any particular formality, but this does not mean that it is unimportant or capable of perfunctory satisfaction.  Section 170DC carries into Australian labour law a fundamental component of the concept known to lawyers as natural justice or more recently procedural fairness.  The relevant principle is that a person should not exercise political power over another to that person's disadvantage and for a reason personal to him or her without first affording the affected person an opportunity to present a case.  The principle is well-established in public administrative law.  It was accepted into international labour law when Article 7 was inserted in Termination of Employment Convention.

S170DC is directly modelled on Article 7.  The principle is I believe well understood in the community.  It represents part of what Australians call a fair go.  In the context of S170DC it is not to be treated lightly.  The employee is to be given the opportunity to defend himself against the allegations made, that is, the particular allegations of misconduct or poor performance that are putting the employees' job at risk. S170DC(a) is not satisfied by mere exhortation to improve.”

The Respondent failed to put the allegations to the Applicant in any manner in which he had an opportunity to improve, and I find that the Respondent has not established a valid reason for the termination.  That is not to say that the Respondent could not have established a valid reason for termination.  Again, in Nicholson at 214, the Chief Justice concluded his judgment referring to Mr Nicholson as follows:

“If he did not have this capacity (that is the capacity to perform, to do the work) the company, acting regularly, would have been entitled to dispense with his services.  I think it would have soon done so.”

So too, I believe, that the Respondent here could have and would have soon terminated the Applicant for a valid reason connected with capacity.  I disagree with Mr McDonald's suggestion that Mr Watson created a mirage competition.  I accept that the industry was and is very competitive indeed.  I believe it is possible that the termination of the Applicant could have been founded legitimately on capacity and/or on the operational requirements of the Respondent's business, but that has not been done.  The Respondent breached S170DB in respect of the provision of notice of termination, S170DC in failing to give the Respondent an opportunity to respond, and S170DE(1) in terms of the provision of a valid reason.

However, I consider that adequate compensation is the likely length of employment had notice been paid under the contract, and if the Respondent had taken adequate steps to establish valid reason.  I assess that period as six weeks, and I calculate six weeks at $33,000 per annum as $634.61 a week, and six weeks at $3807.66, and I order that the Respondent pay to the Applicant within 21 days compensation in the sum of $3810. 

MINUTES OF ORDERS

THE COURT ORDERS:

1. I order that the Respondent pay to the Applicant within 21 days compensation in the sum of $3810. 

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

I certify that this and the preceding 5 pages are a true copy of the reasons for judgment of Judicial Registrar Ryan.

Associate:          
Dated:  2 October 1996

Mr A McDonald of McDonald and Charman appeared on behalf of the Applicant.

Mr Watson, National Sales Manager appeared for the Respondent.

Date of hearing:  23 September 1996
Date of judgment:  23 September 1996