Bodycoat v It Blows Air Con Pty Ltd Trading as Ibac Plumbing
[2020] FCCA 3033
•12 November 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BODYCOAT v IT BLOWS AIR CON PTY LTD TRADING AS IBAC PLUMBING | [2020] FCCA 3033 |
| Catchwords: INDUSTRIAL LAW – Small claims matter – whether the applicant is entitled to redundancy pay – whether the applicant is entitled to payment in lieu of notice – judgment for applicant. |
| Legislation: Fair Work Act 2009 (Cth), ss.44, 45, 117, 119, 123, 548 |
| Cases cited: Birrell v Australian National Airlines Commission (1984) 5 FCR 447 McInnes v Aegis Ac Pty Ltd [2020] FCCA 1142 Rhodes v Firepower Pump Systems Pty Ltd Trading As Territory Fire Service And Training [2020] FCCA 1649 WorkPac Pty Ltd v Rossato [2020] FCAFC 84 |
| Applicant: | SAMUEL BODYCOAT |
| Respondent: | IT BLOWS AIR CON PTY LTD TRADING AS IBAC PLUMBING ACN 44 102 258 391 |
| File Number: | PEG 465 of 2019 |
| Judgment of: | Judge Kendall |
| Hearing date: | 6 November 2020 |
| Date of Last Submission: | 6 November 2020 |
| Delivered at: | Perth |
| Delivered on: | 12 November 2020 |
REPRESENTATION
| Counsel for the Applicant: | Ms A Heffernan |
| Solicitors for the Applicant: | CEPU |
| Respondent: | Mr B Hay |
DECLARATIONS AND ORDERS
THE COURT DECLARES THAT:
The respondent contravened s.44 of the Fair Work Act 2009 (Cth) by failing to pay the applicant notice of termination in accordance with s.117 of the Fair Work Act 2009 (Cth) when the respondent terminated his employment on 12 August 2019 without notice or payment in lieu of notice.
The respondent contravened s.45 of the Fair Work Act 2009 (Cth) by failing to pay the applicant redundancy in accordance with cl.18 of the Plumbing and Fire Sprinklers Award 2010 when the respondent terminated the applicant’s employment on 12 August 2019 because it no longer had any work.
THE COURT ORDERS THAT:
Pursuant to ss.545(2)(b) and 548 of the Fair Work Act 2009 (Cth), the respondent pay the applicant the amount of $20,000 as payment in lieu of notice of termination and redundancy within 90 days of the date of these orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 465 of 2019
| SAMUEL BODYCOAT |
Applicant
And
| IT BLOWS AIR CON PTY LTD TRADING AS IBAC PLUMBING ACN 44 102 258 391 |
Respondent
REASONS FOR JUDGMENT
Introduction
On 28 November 2019, the applicant (Mr Bodycoat) filed an application in the Fair Work Small Claims Division of this Court pursuant to s.548 of the Fair Work Act 2009 (Cth) (the “Act”).
Mr Bodycoat is seeking payment from his employer, the respondent (It Blows Air Con Pty Ltd trading as IBAC Plumbing), for the amount of $20,000 comprising of notice of termination pay and redundancy pay he claims is owed to him under the Act. IBAC Plumbing denies that Mr Bodycoat is owed any money.
Small Claims Jurisdiction
Before detailing the substance of the claim before the Court, it is necessary to explain the small claims jurisdiction of this Court – in particular, the limits on the Court’s jurisdiction and the approach that is taken to resolving issues in dispute.
In most circumstance, neither party to a small claims matter may be represented: the Act, s.548(5). However, on 13 February 2020 the Court made orders allowing Mr Bodycoat to be represented by his Union (being the Communications, Electrical and Plumbing Union of Australia) until further order of the Court. No issue was taken with this decision.
Accordingly, Mr Bodycoat was represented in these proceedings by Ms Heffernan from the Union and IBAC Plumbing was represented by Mr Hay (IBAC Plumbing’s Director).
The Court’s small claims jurisdiction has a monetary limit of $20,000: the Act, s.548(2)(a). Mr Bodycoat claims that he is owed in excess of this amount. However, Mr Bodycoat has indicated that he only seeks $20,000. The Court proceeds on the basis that any right or entitlement to an amount over $20,000 has been abandoned.
Turning to procedure, s.548(3) of the Act provides:
(3) In small claims proceedings, the court is not bound by any rules of evidence and procedure and may act:
(a) in an informal manner; and
(b) without regard to legal forms and technicalities.
In effect, while the Court does not disregard the rules of evidence in their entirety in proceedings of this sort, evidentiary technicalities (such as those that apply to hearsay evidence) are not strictly adhered to. This approach implicitly assists in circumstances where most parties do not have legal representation.
Issues
The issues before the Court are whether Mr Bodycoat was entitled to be paid:
a)notice of termination pursuant to cl.17.1 of the Plumbing and Fire Sprinklers Award 2010 (the “Award”) and s.117 of the Act; and
b)redundancy pay pursuant to cl.18 of the Award.
Neither party disputes that the Award applied to Mr Bodycoat’s employment.
Applicant’s Claim
Mr Bodycoat commenced employment with IBAC Plumbing in December 2010 as an apprentice plumber. From October 2014 he was employed by IBAC Plumbing as a full time plumber.
Mr Bodycoat claims that he is owed $14,400 in redundancy pay and $7,200 for payment in lieu of notice of termination. He claims as follows:
1. The Applicant was employed by the Respondent from 10 October 2014 up to an including 7 August 2019.
2. On 12 August 2019, at approximately 7:00am, the Applicant’s manager advised him that his position was redundant and that he would be provided a “redundancy letter” upon the removal of his tools from the work vehicle.
3. Later on 12 August 2019, the Respondent alleged the Applicant gave the Respondent notice of resignation on 13 May 2019, effective 7 August 2019. The Applicant denies the allegation.
4. The Applicant was not paid any moneys in respect of his termination of employment or redundancy.
In written submissions filed on 14 October 2020, Mr Bodycoat seeks the following:
1. Declarations pursuant to s 16 of the Federal Circuit Court of Australia Act 2001 (Cth) and/or s 562 of the Fair Work Act 2009 (Cth) (FW Act) that:
(a) IBAC contravened s 44 of the FW Act by failing to pay the Applicant redundancy in accordance with s 119(1)(a) of the FW Act when the IBAC terminated his employment on 12 August 2019 because it no longer had any work;
(b) IBAC contravened s 44 of the FW Act by failing to pay the Applicant notice of termination in accordance with s 117 of the FW Act when the IBAC terminated his employment on 12 August 2019 without notice or payment in lieu of notice;
(c) IBAC contravened s 45 of the FW Act by failing to pay the Applicant redundancy in accordance with clause 18 of the Award when the IBAC terminated his employment on 12 August 2019 because it no longer had any work.
2. An Order pursuant to ss 545(2)(b) and 548 of the FW Act that IBAC pay the Applicant the amount of $20,000 as payment in lieu of notice of termination and redundancy.
Mr Bodycoat provided two affidavits in support of his application. The first was affirmed on 24 August 2020. The second was affirmed on 12 October 2020.
The affidavit evidence can be summarised as follows:
a)Mr Bodycoat ceased his employment with IBAC Plumbing on 12 August 2019. At that time he was receiving $93,000 per year as he was employed on a permanent full time basis;
b)on or around 13 May 2019, Mr Bodycoat advised Mr Hay that he might relocate to Perth in December 2019 but he would give him a date when he had a date. He did this out of courtesy. No decision had been made about relocating at that time;
c)on 7 and 8 August 2019, Mr Hay asked Mr Bodycoat to take time off as there was no work. Mr Bodycoat told Mr Hay that he could not afford to take time off;
d)on 12 August 2019, Mr Hay advised Mr Bodycoat that he was being made redundant. Mr Bodycoat told Mr Hay that he was still required to give Mr Bodycoat four weeks’ notice and requested a termination letter. Mr Hay respondent that it was a “redundancy letter”;
e)when Mr Bodycoat returned to the office on 12 May 2019 to collect the redundancy letter, he was provided a letter that read:
Firstly, I wanted to thank you for your service to IBAC Plumbing, for over the past five years, you have been an integral part of the IBAC team, and I would have no hesitation in recommending you for any future employment opportunities.
As stated on May 13th this year, by you, in the IBAC office at 27 Konkerberry Drive, Kununurra, you advised me of your moving away to Perth to follow your family. I did, on this day, May 13th , accept your notice.
The minimum four weeks’ notice has since been fulfilled and I can confirm your end date with IBAC Plumbing was Wednesday 7th of August.
f)on 13 August 2019, Mr Bodycoat emailed Mr Hay querying the terms of the letter and confirming entitlements to notice and redundancy pay. His final pay included payment for the hours worked and nothing more;
g)Mr Bodycoat made requests to alter his working hours so that he could attend to before and after school pick-ups for his children on certain days. At all times Mr Bodycoat worked an 8-hour day (even with these changes);
h)Mr Bodycoat requested a pay rise to $45 per hour (it was previously $35 an hour) on 6 November 2017. He did not request this pay rise to absorb his annual, sick and carers leave entitlements. On 28 December 2017, Mr Hay told Mr Bodycoat that he would no longer receive annual leave;
i)at no time did Mr Bodycoat agree to change from full time to casual work. He did not become agitated with Mr Hay between 7-11 August 2019 (as Mr Hay claims). Rather, he was following up on his employee rights;
j)Mr Bodycoat attempted to discuss the letter he received from Mr Hay but he was motioned to leave. At no time was he physically aggressive. Nor did he shout; and
k)Mr Bodycoat commenced employment with a new employer on 23 August 2019.
The written submissions filed 14 October 2020 in support of the application provided:
a)Mr Bodycoat was informed verbally by IBAC Plumbing on 12 August 2019 that he was being made redundant, effective immediately. Consequently, Mr Bodycoat rightfully raised his entitlement to 4 weeks’ notice of termination. This caused IBAC Plumbing to try to re-characterise the termination as a resignation, in what appears to be an attempt to avoid paying Mr Bodycoat his minimum entitlements;
b)IBAC Plumbing failed to comply with s.117 of the Act in not paying Mr Bodycoat in lieu of the minimum notice period;
c)IBAC Plumbing alleges that Mr Bodycoat resigned and provided notice of resignation on 13 May 2019. If this assertion were accepted, then IBAC Plumbing has failed to explain why Mr Bodycoat was still employed, and being asked to take days off from work, as at 7 August 2019;
d)Mr Bodycoat’s continuation of work up until the 7 August 2019 is a firm indictor that no resignation was ever tendered by Mr Bodycoat and that Mr Bodycoat’s employment was terminated at the initiative of IBAC Plumbing;
e)IBAC Plumbing has not provided any documentary evidence in support of its assertion that Mr Bodycoat resigned on 13 May 2019;
f)IBAC Plumbing bears the onus of establishing that Mr Bodycoat’s cessation of employment falls within one of the exceptions to cl.18 of the Award;
g)in the event the Court accepts IBAC Plumbing’s version of events (i.e., that Mr Bodycoat resigned), Mr Bodycoat remains entitled to redundancy pay under the scheme of the Award; and
h)by operation of the industry-specific redundancy scheme, IBAC cannot discharge its obligation to pay redundancy pay, irrespective of whether Mr Bodycoat was terminated by reason of redundancy or he resigned.
Mr Bodycoat was also cross-examined by Mr Hay. Mr Bodycoat’s evidence in cross-examination was that on 13 May 2019, Mr Bodycoat told Mr Hay that there was a possibility that he would move to Perth at the end of the year. Mr Bodycoat had also told other people about this. Ultimately, however, Mr Bodycoat did not move to Perth until late January 2020.
In re-examination, Mr Bodycoat confirmed that he did not agree to forego annual leave, sick leave, redundancy or notice entitlements for a $45 flat rate of pay. He admitted that he worked two days per week for “Northwest Plumbing” and was paid for that work while he was still working for IBAC Plumbing and while using IBAC Plumbing’s work vehicle.
The Court found Mr Bodycoat to be an honest witness. He answered questions directly and without hesitation.
Respondent’s Response
In IBAC Plumbing’s response to the claim IBAC Plumbing argues:
1. Samuel Bodycoat negotiated an extremely high hourly rate in exchange for no annual leave, sick pay, redundancy pay, or public holiday pay.
2. Samuel Bodycoat gave notice that he was following his family to Perth at the end of 2019 on May 13th 2019. I agreed that Samuel Bodycoat would work to 7th August 2019.
3.Samuel Bodycoat was working for another plumbing company within two days of his final day with IBAC Plumbing.
Mr Hay’s affidavit affirmed 21 September 2020 can be summarised as providing:
a)Mr Bodycoat was paid above Award rates at all times during his employment;
b)Mr Bodycoat requested late starts and “early knock offs” different to what was stated in his contract;
c)on 1 November 2017, Mr Bodycoat spoke to Mr Hay about being paid at a higher rate in lieu of entitlements. A clause in Mr Bodycoat’s contract allowed him to do so;
d)the higher rate of pay was “much more lucrative” than what Mr Bodycoat would have been paid on the Award;
e)on 13 May 2019, Mr Bodycoat advised Mr Hay that he was relocating to Perth to be “closer to his girls”. Mr Hay wrote in his diary that “…4 weeks from that date Samuel Bodycoat would have satisfied his notice of 4 weeks on the 7th August 2019 and thanked him for letting me know”;
f)
Mr Hay tried to provide Mr Bodycoat with work after
7 August 2019 but there was limited work available. Mr Bodycoat advised that he was going to work for an opposition plumber. Mr Hay had no issue as Mr Bodycoat had satisfied his notice. Further, Mr Bodycoat was “working casually”;
g)on 11 August 2019, Mr Hay asked Mr Bodycoat to return his work ute and “officially” ended the casual agreement. Mr Hay advised Mr Bodycoat that he could not keep four tradespersons going;
h)Mr Bodycoat requested that he be provided 4 weeks’ notice. Mr Hay was shocked and advised Mr Bodycoat that he had previously given notice and that he would put that in a letter;
i)when Mr Bodycoat returned to the office he was very agitated. The office administrator had a worried look on her face and Mr Hay asked Mr Bodycoat to leave as he feared that Mr Bodycoat may become physically aggressive; and
j)in respect of the claim generally:
1. Verbal notice was provided on the 13th May 2019. Which was in keeping with all other form of communications over the years.
2. He was not made redundant. He had handed in his notice to IBAC Plumbing.
3. On the 1st November 2019 Samuel Bodycoat requested a higher pay rate in lieu of holiday, redundancy, overtime rates and sick pay, so there were no accrued entitlements.
4. His final payslip included the hours I was able to provide for him on a casual basis whilst he sought other employment.
IBAC Plumbing’s written submissions filed 29 October 2020 largely repeat what is stated in Mr Hay’s affidavit. The following points are, however, noteworthy:
a)IBAC Plumbing had only entered into the initial employment contract with Mr Bodycoat. No new contracts were drawn, changed, or requested. When Mr Bodycoat requested a higher rate of pay inclusive of overtime at $45 per hour, the parties negotiated holiday, sick pay, and redundancy to be inclusive also. While Mr Bodycoat refutes that he did not agree to this flat rate, he continued to be paid this rate for the remainder of his employment with no disputes;
b)the reason Mr Bodycoat continued to accumulate holiday and sick leave was due to office staff failing to “untick” those boxes in Mr Bodycoat’s pay. Once this mistake was identified, IBAC Plumbing stopped the holiday and sick leave accruing;
c)when Mr Bodycoat advised Mr Hay on 13 May 2019 that he was relocating to Perth, Mr Hay worked out the final date of employment to be 7 August 2019. IBAC Plumbing continued to employ Mr Bodycoat after this date as Mr Bodycoat had requested that he be allowed to continue on a casual basis;
d)Mr Bodycoat continued to work with another company on the days that IBAC Plumbing did not have work. Mr Bodycoat is implying that IBAC Plumbing should pay 8 hours of work to an employee who has also taken up employment with another company. This means he would be receiving double wages on any given day;
e)on 11 August 2019, Mr Hay asked Mr Bodycoat to return the company vehicle as Mr Hay felt it was not right that Mr Bodycoat attend the sites of another company using the company vehicle. Mr Hay also advised Mr Bodycoat that he could not offer him any more work. Mr Bodycoat “demanded” four weeks’ notice. Mr Hay was shocked by this request. When Mr Bodycoat attended IBAC Plumbing’s office it was an “uncomfortable and alarming situation”;
f)Mr Bodycoat is trying to paint an untrue picture of the events. He denies he resigned and denies many of the verbal agreements in place. However, all the payslips confirm the agreements were in place;
g)IBAC Plumbing prides itself on creating packages that are lucrative to its employees and considers all workers to be friends. This is the reason why verbal agreements and notices have been operational at IBAC Plumbing. It operates on mutual trust and respect; and
h)Mr Bodycoat appears to have successfully used the Award to suit his needs during his employment (even in relation to his resignation and claims for redundancy). Mr Bodycoat requested more generous provisions during his employment but upon resignation teamed up with the Union to claim Mr Bodycoat’s rights arising from the Award.
In cross-examination, Mr Hay was careful in his responses. At the commencement of cross-examination he agreed that the entirety of the conversation that he had had with Mr Bodycoat on 13 May 2019 was “what is recorded” in his affidavit. However, later in cross-examination, Mr Hay stated that he had discussed with Mr Bodycoat “additional matters”. For example, he said that he told Mr Bodycoat that he would endeavour to give Mr Bodycoat additional work (after the notice period) until he left for Perth. Mr Hay also made a number of references to employing Mr Bodycoat as a “casual”. When asked about the “diary note” that he made on 13 May 2019, Mr Hay’s responses were vague. When it was put to Mr Hay that there was no diary note and that he had “retrospectively engineered” Mr Bodycoat’s resignation, Mr Hay responded that he had not.
The Court does not consider Mr Hay to be a dishonest witness. However, there were inconsistencies in his evidence. As will be explained below, the Court does not accept Mr Hay’s evidence that 7 August 2019 was decided (on 13 May 2019) as being Mr Bodycoat’s final date of employment. Overall, the Court prefers Mr Bodycoat’s evidence to Mr Hay’s evidence.
Consideration
In light of the Award specific redundancy scheme, the Court will first consider the claim for redundancy pay. It will then consider any issues in relation to the notice of termination.
Redundancy
In written submissions, Mr Bodycoat states that he is entitled to redundancy pay pursuant to s.119 of the Act and cl.18 of the Award.
Section 119 of the Act has no application. Section 123(4)(b) of the Act specifically states that Subdivision B (which contains s.119 of the Act) does not apply to an employee to whom an industry-specific redundancy scheme in a modern award applies. Clause 18.1 of the Award states:
The following redundancy clause for the plumbing and fire sprinklers contracting industry is an industry specific redundancy scheme as defined in s.12 of the Act. In accordance with s.123(4)(b) of the Act the provisions of Subdivision B-Redundancy pay of Division 11 of the NES do not apply to employers and employees covered by this award.
Any reference to s.119 is therefore misplaced. The entitlements and obligations are purely derived from the Award.
The definition of “redundancy” is found in cl.18.2 of the Award. It provides:
For the purposes of this clause, redundancy means a situation where an employee ceases to be employed by an employer other than for reasons of misconduct or refusal of duty. Redundant has a corresponding meaning.
Notably, “redundancy” for the purposes of the Award is not required to be on the initiative of the employer (as is generally the case). Rather, it extends to the ceasing of employment on any party’s initiative for any reason (save for misconduct and refusal of duty). Accordingly, the obligation to make redundancy payments is largely unfettered.
In Rhodes v Firepower Pump Systems Pty Ltd Trading As Territory Fire Service And Training [2020] FCCA 1649, His Honour Judge Riethmuller considered the history of cl.18.2 and similar provisions in other awards. His Honour stated:
15. This clause has had a long history and it took some time to identify some authoritative statements about the operation of the Plumbing and Fire Award. In the 4 Yearly Review of Modern Awards - Construction Awards [2018] FWCFB 6019, the Commission said (at paragraph [82]):
[82]In respect of the claim to alter the definition of redundancy, it may be accepted that the definition adopted in the form of the 1990 variation did not apparently match the intention of Commissioner Palmer that the scheme only apply to employer-initiated terminations of employment. However that may be, the definition is a foundational element of the industry-scheme which itself, as the Award Modernisation Full Bench found in 2009, has become an established feature of the building and construction industry. Moreover it is part of the broader application of the scheme which the Full Bench found it necessary to take into account in order to reach the conclusion that the scheme was not less beneficial than the NES provisions. That is a matter relevant to the requirement for fairness in the modern awards objective. Changing the definition would, we consider, alter the industrial balance of the scheme and its historic industry-specific character. The same conclusion may be reached in respect of the proposed exemption of small employers, as proposed in different forms by the HIA and the MBA. Further, as already stated, it has not been demonstrated that the rationale for not excluding small employers does not remain as valid in today’s circumstances as it was found to be in 1990.
16. This paragraph seems to acknowledge that the initial intention of Commissioner Palmer, when this type of clause was initially used, was that it would not extend to resignations. However, it has come to have the extended meaning and been used as such for some time. This position was, again, noted and not departed from in the 4 Yearly Review of Modern Awards - Plain Language - Standard Clauses [2018] FWCFB 7449 (at paragraph [19]):
[19] We note that the industry-specific redundancy schemes in the Building and Construction General On-site Award 2010 (Building Award) and the Plumbing and Fire Sprinklers Award 2010 (Plumbing and Fire Award) were recently considered by the Construction Full Bench in the Award Stage of the Review and that no changes were made to these provisions. [FN: [2018] FWCFB 6019 at [83]-[84]]. In that matter, the Housing Industry Association (HIA) sought to remove the industry-specific redundancy scheme in the Building Award, or in the alternative, to amend the definition of redundancy. A similar claim was made by the Master Plumbers Group (MPG) in relation to the Plumbing and Fire Award. The Full Bench rejected these claims and concluded:
‘[83] As was found to be the case in the Transitional Review, we consider that the cases advanced by the HIA, the MBA and the CCF amount to little more than a re-agitation of the issues heard and determined by the Award Modernisation Full Bench. No cogent reasons have been advanced to depart from the conclusions reached by the Full Bench, and the evidence has not demonstrated any relevant change in circumstances. We do not consider that any variation to clause 17 is necessary in order for the Building Award to meet the modern awards objective, or that the variations proposed by the claimants would necessarily achieve the objective. The claims to vary clause 17 of the Building Award are therefore rejected.
[84] With respect to the Plumbing and Fire Award, we consider the same conclusions apply for the same reasons, and the MPG claims are rejected.’ [FN: Ibid at [83]-[84]].
17. There has been little judicial consideration of the operation of clauses in terms of cl.18.2 or similar, even though they do appear in quite a large number of Awards and have done so for many years now. In Anthony R. Van Der Heul v J.C. and S.J. Van Der Heul (Ecoson Contractors) [1993] SAIRC 56, an Industrial Magistrate found that an equivalent clause covered the resignation of an employee. Other cases concluded that it covered a situation that involved wrongful dismissal, rather than redundancy: see Inspector Jonathan Andrews v Tomlinson’s Concrete Pty Ltd [2000] NSWCIMC 24 and Construction, Forestry, Mining and Energy Union and McCormick Civil Constructions Pty Ltd; National Building and Construction Industry Award 1990 [1993] CthArbRp 801; (1993) 7 CAR 111.
18. When the Australian Workers’ Union Construction and Maintenance Award 1989 was ‘simplified’ in 2002, a redundancy clause in similar terms was altered to change the definition back to the more limited common meaning of ‘redundant’. However, this clause was, again, altered in 2005 on the basis that the agreement to the change by The Australian Workers’ Union was in error: see The Australian Workers’ Union - Re Redundancy - PR 964916 [2005] AIRC 974.
19. It also appears that issues around the operation of this type of clause was in the government’s mind back in the mid-2000’s, as they made mention of it in the explanatory memorandum to the Workplace Relations Amendment (Work Choices) Act 2005 (‘Workplace Relations Act’), where (at paragraph [1609]), the government said:
1609.Some current awards define redundancy as occurring when an employee ceases to be employed by an employer in any situation, other than for reasons of misconduct or refusal of duty. This broad definition of redundancy may lead to redundancy payments being paid in some circumstances where termination of employment was not at the initiative of the employer and on the grounds of operational requirements. This includes, for example, to the estate of an employee that has died while still employed. Award terms providing for redundancy payments in ordinary resignation situations are also not to be treated as a redundancy.
20. This led to legislation that required clauses of this type to be categorised either as a genuine redundancy or an allowable incentive-based payment under s.513 of the Workplace Relations Act in order for those clauses to be valid. This in turn led to litigation. A State Magistrate in South Australia found in favour of an employee who resigned on the basis of such a clause in an Award: see Summerton v Yirra Pty Ltd t/as Richmond Demolition and Salvage [2008] SAIRC 43.
21. This decision was appealed to the Federal Court of Australia: see Yirra Pty Ltd (t/as Richmond Demolition and Salvage) v Summerton [2009] FCAFC 50 (‘Yirra’s case’). In Yirra’s case, Spender ACJ, although in the minority on the outcome, noted that at common law ‘redundancy’ had its usual meaning, referring to a situation where an employer no longer wished to have anyone doing a particular job: see paragraph [30] where his Honour referred to Bray CJ’s comments in R v Industrial Commission of South Australia; ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6 at paragraph [8]. Spender ACJ, went on (at paragraph [39]) to state that the clause:
39. …contemplates payments in all cases where the employee resigns, and in all cases where the employer has terminated the employment other than on the grounds of operational requirements or where the employer is insolvent (regardless of the number of employees the employer has), excepting only where the employer has terminated the employment for misconduct or refusal of duty.
22. The majority judges, Graham and Tracey JJ, took the same view as to the interpretation of the clause itself, saying (at paragraph [110]):
110. It is clear that, but for the operation of certain statutory provisions, the employee would have an entitlement to redundancy pay under the award.
23. More recently, in Construction, Forestry, Mining and Energy Union v Concrete Constructions (WA) Pty Ltd [2017] FWCFB 3912, the Commission noted (at paragraph [13]) that:
13. This clause does not require a dismissal and so would apply when the employment of an employee engaged for a fixed term or a specified task comes to an end.
24. The effect of the clause is that a payment made under the clause may, in some cases be such as to fall within the common law understanding of a redundancy payment, but in other cases would be what the common law would categorise as a termination or severance payment. Under these clauses, the term ‘redundant’ has been given quite an extended meaning, taking it outside of its normal, everyday meaning and certainly well-beyond the common law meaning that would be ascribed to that term.
25. This difference between the Award definition and the ordinary definition of ‘redundancy’ can now be seen in other areas. For example, in an Australian Tax Office Class Ruling on whether a payment was within the definition of an ‘eligible termination payment’, when made under this clause through a trust fund, the Commissioner found that such a payment could only be assessed as a potential ‘bona fide redundancy’ payment on a case-by-case basis; and said ‘this can include resignation, age retirement, permanent disability and death as well as bona fide redundancy’: see CR 2007/32, Income Tax: tax treatment of payments to members of the South Australian Building Industry Redundancy Scheme Trust, 1 July 2000 at paragraph [60].
26. Considering the authorities that I have been able to locate on this difficult issue, I have come to the view that the proper interpretation of the clause is that it does cover a situation where an employee resigns. In this regard, it also seems to me that I am bound by the Full Court of the Federal Court’s decision in Yirra’s case and that the remaining other authorities and treatments of the clause are consistent with that interpretation.
Accepting IBAC Plumbing’s case for present purposes (i.e., that Mr Bodycoat resigned), IBAC Plumbing is still obliged to pay Mr Bodycoat redundancy pay. As Judge Riethmuller explained, an employee resignation falls within the extended meaning of redundancy as per cl.18.2 of the Award.
As such, IBAC Plumbing is liable to pay eight weeks pay to Mr Bodycoat. This amounts to $14,400. This would be so regardless of whether Mr Bodycoat had resigned or had been made redundant by IBAC Plumbing.
Notice of Termination
IBAC Plumbing alleges that Mr Bodycoat gave verbal notice of his resignation on 13 May 2019. Mr Bodycoat denies that this is the case.
While an employer is required to give written notice of termination, there is no reciprocal obligation on an employee (i.e., there is no obligation to provide written confirmation of resignation). Mr Bodycoat’s contract simply stated that if he wanted to terminate the contract, a “notice” period had to be given in accordance with cl.7.1 (which was 4 weeks).
In Birrell v Australian National Airlines Commission (1984) 5 FCR 447 at 457 it was stated:
The purpose of providing in a contract for a period of notice of termination is to enable the party receiving the notice to make other arrangements. An employee given notice by his or her employer has a period of time in which to seek another job; an employer who receives notice has time to arrange for a substitute employee. It would be harsh if arrangements so made during the running of the notice could be disrupted, and parties could be held to their contracts by unilateral withdrawal of the notice at the last minute. Such withdrawal, if possible, could lead to an employee being bound by contracts of employment with two employers, or an employer being bound by contracts of employment with two employees, each being required to give notice to one or the other in order to be extricated from this position, or possibly to suffer the requirement to forfeit or pay wages for a period of time.
The Court does not doubt that on 13 May 2019, Mr Bodycoat and Mr Hay had a conversation in which Mr Bodycoat indicated that he was looking to relocate to Perth.
The issue is whether this conversation can be taken to be “notice” of Mr Bodycoat’s resignation or, in fact, a resignation.
Mr Bodycoat states that he advised Mr Hay that he “may” relocate to Perth in December 2019 and that, once he had more details, he would provide a possible date. Mr Bodycoat did not state unequivocally that he was moving or provide any details (such as his final date of employment). Mr Bodycoat’s examination in cross-examination did not differ in this regard and struck the Court as entirely credible.
In the Court’s view, the ambiguity about the date on which Mr Bodycoat was going to cease his employment suggests that Mr Bodycoat had not, at that stage, resigned. He had also not indicated an intention to resign. Rather, he had indicated a possibility of resigning if and when he had more details.
Furthermore, Mr Bodycoat’s evidence indicates that, on at least
19 October 2019, there was nothing more than a possibility of relocation if certain conditions were met (i.e., suitable employment and agreement with his ex-partner).
Mr Hay’s evidence is that on 13 May 2019 he wrote in his diary that, on 7 August 2019, Mr Bodycoat’s four week notice period would have been satisfied.
It is noteworthy that Mr Bodycoat’s four week notice period would have, in fact, ended on 10 June 2019. The time between 13 May 2019 and 7 August 2019 was 12 weeks and 2 days.
It is also noteworthy that on 8 August 2019 (the day after the date Mr Hay says was Mr Bodycoat’s final day), Mr Hay sent a text to Mr Bodycoat which said “No work tomorrow mate, have a day off”.
Mr Hay has not produced the “diary” in which he says he recorded that Mr Bodycoat would stop work on 7 August 2019. The Court does not accept that there was, in fact, a diary or that Mr Hay recorded
7 August 2019 as Mr Bodycoat’s final day of employment. Even if there was a diary note, Mr Hay has provided no credible evidence of why
7 August 2019 was written in his diary as being the last day of Mr Bodycoat’s employment.
Here, the Court is of the view that Mr Hay simply “chose”
7 August 2019 when it became apparent that Mr Bodycoat was no longer needed because of a downturn in business.
The Court does not accept that Mr Bodycoat gave notice of termination on 13 May 2019.
Accordingly, Mr Bodycoat’s employment was terminated by the respondent. The letter provided to Mr Bodycoat stated that Mr Bodycoat’s last day of employment was 7 August 2019 (i.e., his termination was effective immediately).
Pursuant to s.117 of the Act, Mr Bodycoat was, therefore, entitled to payment in lieu of notice in the amount of $7,200.
The Court notes, for finality, that the reason for Mr Bodycoat’s employment coming to an end was based on a downturn in business. The evidence demonstrates that IBAC Plumbing did not have enough work and that Mr Bodycoat’s position was thus no longer necessary. For example, the text messages sent by Mr Hay to Mr Bodycoat demonstrate that Mr Hay advised Mr Bodycoat that he had no work. Mr Hay’s affidavit evidence confirmed that IBAC Plumbing was going through a “quiet period”. Mr Hay also acknowledged that he allowed Mr Bodycoat to work for another plumber because of a “quiet period”. There is also no evidence that Mr Hay has hired any person to replace Mr Bodycoat.
The Court finds, on the evidence in this case, that Mr Bodycoat’s employment came to an end for reasons of redundancy.
“Set-Off”
While not entirely clear, Mr Hay seems to suggest in his affidavit, written submissions and in cross-examination that, as Mr Bodycoat was paid above Award rates, the amount he is claiming in these proceedings should be “set-off”.
Mr Hay’s affidavit contains a table which appears to suggest:
a)for the three years that Mr Bodycoat was being paid $35 per hour he was receiving $9,366.54 more than he would under the Award. Accordingly, over three years this amounted to $28,099.62; and
b)when Mr Bodycoat’s pay increased to $45 per hour, he received $28,566.64 more per year then he would receive if paid at the Award rate.
In WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (“Workpac”), Justice White summarised the principles of “set-off” as follows:
865…the following propositions concerning the entitlement of an employer to set off in analogous circumstances:
(a) the issue may require the application of the parties’ contract: Poletti v Ecob at 332. If they agree that a sum of money is paid and received for a specific purpose which is over and above or extraneous to an award entitlement, the contract precludes the employer from later seeking to rely on the payment as satisfying an award obligation which is outside the agreed purpose of the payment: ibid. If the payment was made for the purpose of satisfying the kind of award obligation sought to be satisfied, it may be brought into account as satisfaction or part satisfaction of that obligation. If it was paid for some other purpose, then the employer cannot bring the payment into account: Discount Lounge Centre at [23]. Stated more generally, an employer cannot later reallocate an amount agreed to be paid to an employee in respect of subject A (for example, ordinary hours of work) to meet a claim in respect of subject B (for example, overtime): Ray v Radano at 478-9 (Sheldon J); Pacific Publications at 419; Discount Lounge Centre at [57]. The focus is on the purpose of the payment. If it arises out of the same purpose as the award obligation, it can be set off: ANZ v FSU at [48]-[52]. I will refer to this as the “Contractual Principle”;
(b) the issue may involve application of the common law principles concerning payment by a debtor to a creditor: Poletti v Ecob at 332-3. When there are outstanding award or enterprise agreement entitlements, a payment designated by the employer as being for a purpose other than satisfaction of the award entitlement cannot be regarded as having satisfied the award or enterprise agreement: ibid. I will refer to this as the “Designation Principle”;
(c)close regard must be had to the character of the payment on which the employer relies for the claimed set off and the purpose (usually, the agreed purpose) for which it was made; and
(d)the purpose for which a payment was made will be a question of fact in each case. It may be express or may be implied from the parties’ agreement or from the employer’s conduct: James Turner at [21(3)]. The “designation and appropriation” are matters to be determined by reference to the whole of the evidence: ANZ v FSU at [56].
It appears that IBAC Plumbing purports to “set-off” the above Award rate payments Mr Bodycoat received during his employment against the redundancy payment owed under the Award and the payment in lieu of notice.
The contract of employment provides:
4. Remuneration
4.1 You will be paid weekly at the flat rate of $35 per hour regard less of overtime and hours worked in a day.
Mr Hay’s evidence is as follows:
4. The contract provided by Samuel Bodycoat marked SB1 started as of the 10/10/2014. He was on a flat rate of $35 regardless of overtime and hours worked in a day. At the time Samuel Bodycoat requested to be on a higher rate than the award with holiday and sick pay as detailed in the contract attached.
On Mr Hay’s evidence and on the plain reading of the contract, above Award pay of $35 per hour was agreed between the parties to satisfy the payment for hours worked, regardless of the day, time or number of hours worked per day. That is, the above Award rate was paid purely to satisfy any overtime work. Mr Bodycoat kept all leave entitlements (save for leave loading).
IBAC Plumbing cannot “set-off” any amount Mr Bodycoat was paid from the commencement of his employment until 8 November 2017. This is so because setting off the above Award payments (of $35 per hour) against the redundancy and notice entitlements would be outside the agreed purpose of the above Award payment (which was to satisfy any entitlements arising from overtime and the days of work).
However, Mr Bodycoat’s rate of pay increased to $45 on 9 November 2017. Mr Hay’s evidence in relation to this increase provides:
6. On the 15 November 2017 Samuel Bodycoat spoke with me and asked to be put on a higher rate in lieu of any holidays or overtime etc. He pointed out a clause in his contract and asked to take advantage of it because he needed to save more money as his life circumstances had changed after his relationship breakdown. See attached clause as evidence. BH1.
7. On the 1st November2017 Samuel’s pay rate changed to $45 per hr no holidays, sick pay, overtime, or redundancy. Samuel Bodycoat often worked more than his “ordinary hours” upon request.
In Mr Bodycoat’s evidence, he states:
5. Paragraphs 6 and 7 of Mr Hay’s affidavit state that on 1 November 2017, I spoke to Mr Hay’s and requested to be put on a higher rate of pay in lieu of any holidays or overtime. I respond to this allegation as follows:
(a) I did not speak to Mr Hay on the 1 November 2017. On 6 November 2017, I went into the IBAC office before work to talk to Mr Hay about a pay rise.
(b) I requested Mr Hay increase my pay from $35 per hour to $45 per hour, with no overtime payments. This was not inclusive of annual leave.
(c) On Mr Hay’s calculations, overtime is apparently worth $5 per hour. I used Mr Hay’s overtime approach to calculate my pay rise to $45 per hour, which included the following:
i. a $5 pay rise; and
ii. an additional $5 to absorb any overtime.
(d) My requested pay rise was never intended to absorb my annual leave, sick leave and carers leave entitlements.
(e) From 9 November 2017 not the 1 November 2017, my rate of pay changed. I was paid a flat rate of $45 per hour with no annual leave, sick leave, overtime or redundancy. However, my payslips dated:
i. 09/11/2017to 15/11/2017;
ii. 14/9/2017 to 20 09/2017; and
iii. 14/12/2017 to 20/12/2017.
Stipulate that I was still accruing annual leave. Annexed hereto and marked SB7 are copies of my payslips from 9/11/2017 to 20/12/2017.
As noted in Workpac above, close regard must be had to the character of the payment and what is usually the agreed purpose for which it was made. Here, the evidence is conflicting. Mr Bodycoat and Mr Hay dispute the purpose of the additional $10 per hour. Mr Bodycoat states it was a pay rise. Mr Hay says it was compensation for the fact that Mr Bodycoat lost annual leave, sick leave and carer’s leave and redundancy entitlements.
The Court notes that the contract states:
10.2 The terms and conditions referred to in this letter may only be varied by a written agreement signed by both you and the employer.
The Court accepts Mr Hay’s evidence that things were agreed to “verbally” throughout Mr Bodycoat’s employment (such as hours which enabled Mr Bodycoat to pick his children up from school). However, Mr Bodycoat’s evidence under oath in which he denies that he agreed to the pay rise in lieu of annual leave, sick leave and carer’s leave and redundancy entitlements was clear, direct and entirely credible.
The Court is not satisfied that it was agreed that the $45 was paid and received for the specific purpose of satisfying the redundancy or notice payment obligations arising under the Award. In the absence of an agreement, IBAC Plumbing cannot set-off the above Award payments against the redundancy or notice obligations.
Accordingly, IBAC Plumbing is liable to pay the full sum owing to Mr Bodycoat. It cannot now reallocate payments to satisfy the amount Mr Bodycoat claims.
Conclusion
The Court does not doubt that IBAC Plumbing runs its business on the basis of mutual trust and respect. It does not doubt that IBAC Plumbing offers “lucrative” packages which IBAC Plumbing assumes covers all the entitlements under the Award.
However, as has been noted, the care that must be taken when “contracting out” of the Award is high. Simplistic contracts will rarely suffice: McInnes v Aegis Ac Pty Ltd [2020] FCCA 1142. Unfortunately, this is where IBAC Plumbing has erred in relation to this matter.
Mr Bodycoat seeks declarations that IBAC Plumbing has contravened ss.44 and 45 of the Act. There is nothing before the Court to suggest that the Small Claims jurisdiction limits the Court’s ability to make declarations. It is noted that other cases in the Small Claims jurisdiction have made declarations for contravention.
However, Mr Bodycoat seeks a declaration that IBAC Plumbing has breached s.119(1)(a) of the Act. As noted above, s.119 of the Act has no application in this case. Accordingly, declarations for breach of s.44 of the Act in failing to pay notice and s.45 of the Act for contravening cl.18 of the Award will be made.
The maximum sum that Mr Bodycoat can claim in this Court is $20,000. The amount he is owed for unpaid redundancy and notice entitlements exceeds this amount. Mr Bodycoat claims the maximum this Court can award. Accordingly, there will be an order that IBAC Plumbing pay Mr Bodycoat $20,000 in satisfaction of his redundancy and notice entitlements.
While there is no evidence as to the financial capacity of IBAC Plumbing, the Court notes that these are difficult times. On that basis, the Court will direct that payment of $20,000 be paid within 90 days from the date of this judgment (as opposed to one month).
I certify that the preceding seventy-two (72) paragraphs are a true copy of the reasons for judgment of Judge Kendall
Associate:
Date: 12 November 2020
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