Christie v Qantas Airways Ltd

[1996] IRCA 276

DECISION NO:   276/96

C A T C H W O R D S

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - UNLAWFUL TERMINATION - REDUNDANCY -VALID REASON -OPERATIONAL REQUIREMENTS - HARSH UNJUST or UNREASONABLE - failure to consult or apply proper selection criteria before termination - COMPENSATION - DAMAGES

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

CASES:Kenefick v Australian Submarine Corporation Pty Ltd (1995) 62 IR 107;

Bullock v Mayne Nickless Ltd, (Murphy JR, 19 March 1996 unreported)

Fryar v Systems Services Pty Ltd. (von Doussa J, 10 May 1996, unreported);

Quality Bakers of Australia Ltd v Goulding (1995) 60 IR 327

MARY BAKUS -v- ASPEN BY-PRODUCTS PTY LTD

No. VI 6150 of 1995

Before:  Judicial Registrar Murphy
Place:  Melbourne
Date:  20 June 1996

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 6150 of 1995

B E T W E E N :

MARY BAKUS
Applicant

AND

ASPEN BY-PRODUCTS PTY LTD
Respondent

MINUTES OF ORDERS

Judicial Registrar Murphy  20 June 1996

THE COURT ORDERS that within 21 days:

1. The respondent pay to the applicant, pursuant to s170EE(2) of the Act, the sum of $2,047.36;

1. The respondent pay to the applicant, pursuant to s177EE(5) of the Act, the sum of $200.00 in damages.

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 6150 of 1995

B E T W E E N :

MARY BAKUS
Applicant

AND

ASPEN BY-PRODUCTS PTY LTD
Respondent

Before:          Judicial Registrar Murphy
Place:            Melbourne
Date:              20 June 1996

EX-TEMPORE  REASONS FOR JUDGMENT

The applicant, formerly known as Mary Giannopoulos, seeks a remedy under s170EA of the Industrial Relations Act (“the Act”) following the termination of her employment by the respondent on 29 November 1995. The issues in the case centred around the validity of the termination and the reason for the termination. The respondent alleged that the reason for the termination was based on its operational requirements. The applicant contended that she had been singled out for a redundancy. It was further alleged by her that the termination of her employment was based on performance grounds to which she was not given any opportunity to respond.

Circumstances surrounding the termination. 
The respondent is involved in the manufacture and export of meat by-products.  The principal witness for the respondent was Mr Brian Atkinson.  He is a director of the respondent and was involved in the decision to terminate the applicant. The applicant commenced with the respondent in 1987 as a receptionist.  She remained in that position for some years, but additional duties were assigned to her, including typing.  In 1993, partly in response to complaints about her performance, the applicant was transferred to a position in the shipping department of the respondent with the title of Shipping Clerk.

The applicant's duties primarily involved typing and clerical work involved in the processing of export documentation.  In her position she reported successively to Mr Sze, Mr Schmidt, and Mr Cole.  In evidence were a number of memoranda (Exhibits R2-R9) relating to the applicant's performance over the period November 1994 to November 1995.  It is unnecessary to canvass the contents in detail.  The applicant, in her evidence, and at the time, denied the basis for the performance matters that were raised with her.  The respondent's witnesses, Mr Atkinson, Mr Schmidt, Mr Sze, and Ms Martin, all gave evidence generally supporting the material in the memoranda that the applicant had a difficult relationship with other staff members, and that, from time to time, her performance left something to be desired.

I accept the evidence of the respondent's witnesses in relation to the performance and conduct deficiencies of the applicant.  I reject her evidence that she was the subject of a campaign designed to freeze her out of the workplace.  I am also satisfied on the evidence, much of it is unchallenged, that while she was capable of and did perform her duties satisfactorily, at times she was rude, abrupt and unco-operative with other staff members and did not perform satisfactorily.  The important matter that emerges from all the evidence on this issue, however, is that the respondent, apart from a formal warning in November 1994 (Exhibit R4), took no disciplinary action against the applicant in relation to the performance matters.

The choice of the applicant for redundancy. 
Mr Atkinson gave evidence of a substantial downturn in the respondent’s industry.  The respondent was only shipping 50 per cent of its previous volumes.  The respondent at that time had reduced to approximately 25 per cent of its size 5 years ago, and was under a lot of financial pressure.  Staff had been falling in the factory area since July.  In the month of October 1995, the respondent achieved a bad result.  In response to this, Mr Atkinson sat down with the other two directors and reviewed all positions in the administration side of the respondent.  The review was of every employee's performance and what positions could go.  The respondent looked “at the skills and merits of each employee to determine which would be retained in order to function the business efficiently”.

The conclusion was reached that the applicant's duties as a shipping clerk could be most easily dispersed to other employees, and that, applying the criteria of the relative merit of the applicant against the other employees, she was “the one who least fulfilled that role as being able to function for the business efficiently and effectively”.

The other positions against which the applicant was compared were the receptionist position, the two secretaries to the directors, an accounts payable clerk, and a stock controller.  The respondent took advice from an employer association as to the applicant's entitlements on redundancy.  At about 5.15 pm on 29 November, she was called in to the boardroom and advised of the reason for her termination.  Mr Atkinson said that the conversation went for some 30 minutes, while the applicant said it went for a much shorter time. 

I am inclined to accept the applicant's account of the length of the conversation.  At all events, she was handed a letter (Exhibit R12) signed by the three directors, advising her that due to the industry downturn and a review of all positions within the administration office, her position had been made redundant.  I am satisfied that there was a short discussion.  The applicant was shocked.  She was handed a cheque for her entitlements and left the office.

Was this a genuine redundancy? 
There was a volume of evidence directed to whether this was a genuine redundancy.  The respondent maintained that its business had sustained a serious downturn.  Since November, staff levels have fallen even further.  The receptionist has been retrenched, the stock controller has been required to work half time in the factory and the financial controller retrenched.  The applicant's contention was that the decision to retrench her was capricious.  It was, she alleged, a sham and the result of animosity directed towards her by Mr Cole and Mr Atkinson.  She maintained that she had been the subject of the cold shoulder treatment by these two employees, as well as two other female employees.  She led evidence from a former employee, Mrs Cooper, to support her evidence on this point.

She further maintained that there was no real basis for the matters relating to her performance raised in the various memoranda.  She said they were generated as part of a campaign to force her out.  The respondent's witnesses, Messrs Atkinson, Sze, and Schmidt and Ms Martin denied this aspect of the applicant's account.  They admitted that there had been some friction in the office, but denied any campaign. 

Having had an opportunity to observe all the witnesses, and after considering the contents of the written memoranda, I am not satisfied that there was any campaign against the applicant within the respondent.  I find that in general the applicant performed her duties satisfactorily, but other staff members, including Mr Schmidt and Mr Sze had difficulty with the applicant's manner.  These difficulties were, however, never raised to any formal status by the respondent except in the warning of 30 November 1994 (Exhibit R4).

It follows from this that I accept the evidence of the respondent on the issue of the downturn in the business necessitating a review of the administration office positions.  I find that as a result of the downturn which saw staff numbers fall from about 125 to 95 over the period August to November (Exhibit R11), including the retrenchment of 29 factory employees on 29 November, the respondent was forced by the downturn to review positions in the administration office.  I am satisfied that after that review of positions it was decided that the applicant's position had become redundant.  Her duties were to be distributed to other staff in response to the squeeze on the company.

I further accept Mr Atkinson's evidence as to the reasoning of the respondent which led to the termination of the applicant's employment.  The respondent, after reviewing the positions, then considered the remaining positions and personnel and made a decision based on its operational requirements of an effective and efficient operation.  It compared the relative merits of the applicant with the other persons holding the positions that remained, and determined that the applicant was less suited than the other individuals.  It then determined to terminate her services.  Mr Atkinson said that the applicant's "performance" was only marginal to the decision.  It is significant that the applicant was told on 29 November that her performance was not relevant to the issue.  Further, she was subsequently provided with two references by the respondent.

Did the respondent have a valid reason under s170DE(1) of the Act?
In Kenefick v Australian Submarine Corporation Pty Ltd (1995) 62 IR 107, 116, Wilcox CJ indicated that an employer will discharge its onus of proof under s170EDA(1) and s170DE(1) of the Act if the termination of employment was a "logical response" to the operational requirements of the employer. The same analysis has been adopted in the recent decision in Fryar v Systems Services Pty Ltd (von Doussa J, 10 May 1996, unreported).  The Full Court decision in Kenefick and Ors v Australian Submarine Corporation Pty Ltd  (Ryan, Beazley and North JJ, 26 March 1996, unreported) seems consistent with this approach.  Adopting that reasoning I am satisfied that the respondent has discharged its onus of proof that it had a valid reason based on its operational requirements to terminate the applicant's services.

Procedural and substantive fairness. 
The applicant carries the onus of proof that the termination infringed sections 170DE(2) and 170DC of the Act. Here the main criticism made by counsel for the applicant was that the respondent had failed to consult with the applicant, failed to consider proper alternatives to termination, and failed to adopt proper selection criteria. Counsel for the respondent accepted that there had been a failure to consult but maintained that this did not, on the authorities, mean that the termination was to be characterised as infringing s170DE(2). He maintained that in effect consultation would not have made any difference in the circumstances.

Counsel for the applicant pointed to the provisions of the Clerical and Administrative Employees' Award (Exhibit R17).  This Award was incorporated, he submitted, into the contract of employment by the application of section 24(3) of the Victorian Employee Relations Act.  Clause 38 of the Award provides that where a redundancy occurs, an employer is to consult with the relevant employees and the union. 

In the decision of Bullock v Mayne Nickless Ltd, (Murphy JR, 19 March 1996, unreported) I considered the authorities on the issue of consultation in a redundancy.  I am satisfied that in the circumstances here, and following that decision, there was an obligation on the respondent to consult the applicant after it determined that her position was redundant.  That obligation arose as a matter of fairness, as has been accepted in numerous decisions of industrial tribunals (see Quality Bakers of Australia Ltd v Goulding (1995) 60 IR 327, 334-7) and by reason of the provisions of clause 38 of the Award. Having reached this conclusion, it is strictly unnecessary to consider whether the Full Court decision in Kenefick (above) also obliged the respondent to consult the applicant, or put to her any performance matters on which it was relying, when it selected her for retrenchment, as against the other employees.

Counsel for the respondent argued that it was not the applicant's past performance or conduct that was a consideration but her likely future performance. Whatever way the decision making process of the respondent is characterised, it is clear that the applicant never had an opportunity to provide some input as to why she should remain employed rather than one of the other individuals. It follows that, without considering whether s170DC is applicable, such an opportunity, on the authority of Kenefick (above) should have been afforded her in order to avoid the decision being characterised as harsh, unjust or unreasonable. On these two bases then I am satisfied that the applicant has discharged her onus of proof that the termination breached s170DE(2) of the Act.

Remedy. 
The parties were agreed that reinstatement was impracticable in this case.  Counsel for the respondent submitted that “in all the circumstances”, under s170EE(2) of the Act, no remedy should be accorded the applicant. He maintained that this was a genuine redundancy, the business was in a downturn, and it was inevitable that the applicant would have been terminated had a proper process occurred. He further maintained that the performance issues that were canvassed throughout the hearing was such that the applicant would not have survived such a process.

Counsel for the applicant maintained that the applicant had been denied a proper opportunity to explore alternatives to termination with the respondent, and that there was no certainty that she would have been retrenched.  The Court must consider what would have happened had the unlawful termination not occurred.  Here the evidence was strong that the applicant was a relatively inflexible employee who had had her share of difficulties with a number of other staff.  It is a matter of speculation as to how long she would have continued, if at all, had the respondent dealt with the downturn in its business in a proper manner.

Doing the best I can with the competing contingencies, and they are similar to those considered in Bullock (above), I am of the view that it is unlikely that the applicant would have continued beyond Christmas. It follows that appropriate compensation for the breach of the Act is four weeks' pay at the rate of $511.84 per week, the sum of $2,047.36. I will order that the respondent pay that amount to the applicant.

Accrued jurisdiction claim. 
The applicant sought additional amounts in the court's accrued jurisdiction. Her termination pay had been calculated on a basis which excluded the $50 per week she received based on an additional half hour per day that she worked. The respondent admitted that the calculations were incorrect and did not comply with s170DB(4) and s170EE(5) of the Act. I will order that the sum of $200 be paid to the applicant.

The applicant also claimed an $8 per week "safety net" increase in wages ordered by the Employee Relations Commission of Victoria on 14 July 1995, operative from October 1995.  A satisfactory jurisprudential basis for the incorporation of this amount in the applicant's contract of employment was not advanced by counsel for the applicant and I decline to uphold that part of her claim. 

The applicant also claimed that her accrued annual and leave loading, as paid upon her termination, should have been calculated on the basis of a wage level that reflected the extra $50 per week that she earned.  It was submitted by the respondent that annual leave is not paid on overtime amounts but on ordinary rates of pay.  It was submitted that the purpose of the annual leave loading was to accommodate the reduction in earnings due to loss of overtime amounts during periods of annual leave and that the respondent had therefore calculated the accrued annual leave and annual leave loading payments on a proper basis.  I accept the arguments of the respondent on this matter and decline to make any order on that part of the claim. 

The applicant also claimed that she was entitled to be paid her severance pay on the basis which included the $50 per week overtime amount that she had been earning.  In the decision in Fryar (above) von Doussa J noted that severance pay is designed to compensate in the event of termination for non transferable benefits, such as long service leave and sick leave.  This means, in my view, that ordinary earnings, not earnings including overtime amounts, are the proper basis for the calculation of any severance pay.  The Award provides for the payment of a severance pay on the basis of ordinary earnings and I am satisfied that the amount paid by the respondent was in accordance with the Award.  I decline to uphold this part of the claim. 

The applicant also sought payment of the compulsory superannuation levy during her period of notice.  The respondent undertook, by its counsel, to remit the appropriate amount.  That undertaking is noted.  It is unnecessary to make an order as the amount is not payable to the applicant directly in any event.  I will grant liberty to apply in the event of any argument on this point.

MINUTES OF ORDERS

THE COURT ORDERS that within 21 days:

1. The respondent pay to the applicant, pursuant to s170EE(2) of the Act, the sum of $2,047.36;

1. The respondent pay to the applicant, pursuant to s177EE(5) of the Act, the sum of $200.00 in damages.

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 ten(10) pages are a true copy of the reasons for judgment of Judicial Registrar Murphy.

Associate:                 
Dated:  20 June 1996

Solicitors for the Applicant:          Holding Redlich
Counsel for the Applicant:            Mr Mark Champion

Solicitors for the Respondent:      Gary Katz & Associates
Counsel for the Respondent:         Mr Gary Katz

Date of hearing:  20 June 1996
Date of judgment:  20 June 1996