Carol Ann Hines v Eco Electrical Building Services Pty Ltd

[1995] IRCA 341

CATCHWORDS

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT VALID REASON - OPERATIONAL REQUIREMENTS of the establishment - section 170DC does not apply unless an employee is dismissed for reasons to do with the employees conduct or performance

Industrial Relations Act 1988 ss. 170DB, 170DC, 170DE.

CAROL ANN HINES -v- ECO ELECTRICAL BUILDING SERVICES PTY LTD

No. NI 1056 of 1995

COURT:  PATCH JR
PLACE:  SYDNEY
HEARING DATES:           19 MAY 1995
JUDGMENT DATE:         28 JULY 1995
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES REGISTRY

No. 1056 of 1994

BETWEEN:

Carol Ann HINES
Applicant

AND:

ECO Electrical Building
 Services Pty limited
Respondent

BEFORE:  PATCH JR
PLACE:  SYDNEY
HEARING DATE:             19 MAY 1995
JUDGMENT DATE:         28 JULY 1995

REASONS FOR JUDGMENT

This is an application under section 170EA of the Industrial Relations Act 1988 ("the Act"). The applicant, Ms Carol Ann Hines, claims that the termination of her employment was unlawful, and seeks compensation.

It is conceded by the applicant (a position with which the respondent agrees) that the financial difficulties of the respondent make it impractical for me to order reinstatement, and I so find. 

The applicant also conceded that those same financial circumstances, as they existed at the date of the termination of the applicant's employment, (early November 1994) meant that there was, in terms of section 170DE (1) of the Act, a "valid reason" for the termination of the applicant's employment, which was "based on the operational requirements of the undertaking".

It is sometimes overlooked that a "valid reason" for the termination of employment need not necessarily have to do with the employee's capacity or conduct - it can just as readily be based on the "operational requirements" of the employer's business.  This is such a case.  The applicant's employment was terminated because the respondent could no longer afford to employ her, due to a radical reduction in the income being earned by the respondent.

Was the termination of the applicant's employment "harsh" or "unjust" or "unreasonable" in the terms of section 170 DE(2) of the Act?

Section 170DE (2) of the Act reads as follows:

"A reason is not valid if, having regard to the employee's capacity and conduct and those operational requirements, the termination is harsh, unjust or unreasonable.  This subsection does not limit the cases where a reason may be taken no to be valid."

The amount of business being conducted by the respondent had been drastically reduced in the period following April 1994.  In that month, a company called Gresham Silver Pty Ltd, which was a major source of work for the respondent (in fact, the largest source of work for the respondent) had been taken over.  The new owners of that company had decided to effect the maintenance of the units that they managed in a different way to that of the previous owners.  Previously, their maintenance work had been done largely by the respondent. 

As a result of the significant downturn in the volume of work coming from Gresham Silver Pty Ltd, the number of tradespersons employed by the respondent was, in the months following April 1994, significantly reduced.

The applicant's job was in the office, and was principally to do with liaising with employees and tradespersons, and tenants of the various buildings which the respondent company did maintenance for and organising access to the buildings for the respondent's employees so that they could do maintenance work.  The applicant also, at times, babysat the children of Mr & Mrs Reynolds, the principals of the respondent company.

The respondent's accountant, Mr David Burnett, became concerned at the financial position of the respondent.  As a result, over a period of some months up to the termination of the applicant's employment, a series of faxes were sent by the accountant to the respondent.  These faxes pointed out, in very direct language indeed, the difficult financial position of the respondent.  In them, the accountant repeatedly advised the respondent's principals to terminate the employment of both the applicant, and a person who had been employed as a nanny, Lisa Fryett.  He pointed out that these two persons were not income producing, and that the financial position of the company made it necessary to terminate their employment.

Mrs Reynolds resisted the accountant's advice.  She was reluctant to dismiss people that she regarded as trusted and loyal employees. 

However, by the end of October, the company's financial position was such that, in her and her husband's opinion, there was no choice.  Accordingly, on 31 October 1994, the employment of the applicant was terminated.

As the applicant has conceded (quite rightly, in my view) that there was a "valid reason", relating to the operational requirements of the respondent's business, for the termination of the applicant's employment, the only real questions in this case are whether section 170DC of the Act was breached by the respondent, or whether the termination of the applicant's employment was "harsh" or "unjust" or "unreasonable" within the meaning of section 170 DE(2) of the Act.

Mrs Reynolds gave evidence, which is corroborated by Lisa Fryett, that when the faxes from the accountant arrived, she would inform the applicant and Lisa Fryett that the accountant had, once again, recommended that they be dismissed.  She gave evidence that, in addition to saying that, she told them that she was reluctant to do so, and that should would "continue to keep them on as long as I possibly could."

She gave evidence that these conversations occurred on a regular basis from about the end of June.

Although the applicant initially gave evidence that nothing had been said to her before the termination of her employment about her employment security, and although she rejected the proposition, when put to her in cross-examination, that, on a large number of occasions in July, August, September and October 1994, Mrs Reynolds had explained to her that the company was experiencing extreme financial difficulties and that the accountant had advised that her services should be terminated, she did agree that there had been at least one conversation, some months before the termination of her employment, in which the accountant's attitude had been stated to her by Mrs Reynolds.

The applicant also said that, over a few months prior to the termination of her employment, she and Ms Fryett had discussed the possibility that their services would be terminated.

She said that she did not take it seriously when Mrs Reynolds had told her that the accountant had recommended that her employment be terminated.

Mrs Reynolds also gave evidence about the respondent's attitude to this information.  She said:

"Generally, she sort of had an attitude that I don't think she believed it would happen, that she knew there was a possibility.  She didn't really make comments."

Ms Fryett gave evidence that there were at least four conversations from June to October 1994, involving herself, Mrs Reynolds and the applicant, during which the financial position of the company and the lack of security of Ms Fryett's and the applicant's positions was discussed.  She said that these conversations were after the faxes were received from the accountant, and were about those faxes. 

She said that, after those discussions, she did not believe that her own employment was secure.

Ms Fryett said that she and the applicant had discussed between themselves the lack of security of their employment.

"After the first fax when we realised that there was a possibility we could lose our jobs.  I used to drive Carol to and from work.  We discussed work regularly.  Then she moved to French's Forest and it was less occasional, maybe two or three times a week if we could get together and have a chat."

She said that these sorts of conversations about their job security occurred "ten, fifteen, maybe more times".  She said:

"We discussed getting another job.  I encouraged her to look.  I said that she should look and look through the paper, get everything ready in case she was fired."

She said that this particular conversation occurred at least a month, maybe two, before the applicant's employment was terminated.  She said that the applicant said:

"Something along the lines of 'I know I should'.  But she never followed it up."

Ms Fryett went on to say:

"We had discussions about our jobs not looking too secure a couple of times a week over the two or three month period before Carol's dismissal."

I note here that there was some cross-examination of Ms Fryett by the applicant's representative, but the assertions of fact that she made in respect of these conversations were not challenged.

In my view, the applicant was put on notice, some months before the termination of her employment, that her employment was in jeopardy because of the financial position of the respondent company.  She was aware of this, and her awareness continued right up until the termination of her employment.

Section 170DC of the Act if 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    employee that opportunity."

As, in this case, the applicant's employment was terminated for a reason to do with the operational requirements of the respondent's business, and not for anything to do with her conduct or performance, section 170DC of the Act is not applicable.

Even if it were, the applicant was given more than ample notice of the situation, and was made fully aware that her employment was in jeopardy.  She had plenty of time to make her views known to her employer and to respond to the situation. 

As the applicant was made aware that her employment was in jeopardy months before the termination of her employment, and as the reason for her employment being in jeopardy was communicated to her, it cannot be said that she was denied procedural fairness. The termination of her employment was therefore not "unjust" within the meaning of section 170DE(2) of the Act.

There is no reason why the termination of the applicant's employment could be said to be "harsh" or "unreasonable". 

The termination of the applicant's employment was therefore not a breach of section 170DE(2) of the Act.

The applicant had commenced employment on 20 July 1993.  She had therefore served more than one year but not more than three year's employment.  She was only paid one week's pay in lieu of notice.

Accordingly, she is entitled to one further week's wages, as damages under subsection 170DB of the Act.

When her employment was terminated, the applicant was earning a gross salary of $630.00 per week. I therefore order that the respondent pay the applicant damages for a breach of section 170DB of the Act, in the sum of $630.00. That sum is to be paid to the applicant by the respondent within 21 days of today.

I certify that the preceding eight (8) pages are a true copy of the reasons for judgment of Judicial Registrar Patch.

Caroline Sternberg
Associate

Date:     28 July 1995

Appearances:

Counsel for Applicant:       Mr John Murphy
Solicitor for Respondent:   Mr Robert McClelland

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES REGISTRY

No. 1056 of 1994

BETWEEN:

Carol Ann HINES
Applicant

AND:

ECO Electrical Building
 Services Pty limited
Respondent

BEFORE:  PATCH JR
PLACE:  SYDNEY
HEARING DATE:             19 MAY 1995
DATE OF JUDGMENT:   28 JULY 1995

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The respondent pay damages to the applicant for a breach of section 170DB of the Act in the sum of $630.00, within 21 days of today.