Cliffe v Hoescht Australia Ltd

[1996] IRCA 531

DECISION NO:531/96

C A T C H W O R D S

INDUSTRIAL LAW - termination of employment - valid reason connected with performance and capacity - adequate opportunity to respond to allegations

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

CASES:

Selvachandran v Peteron Plastics Proprietary Limited (1995) 62IR 371

Kennefick v Australian Submarine Corporation Proprietary Limited (1995) 62IR 107

LINDON HEARPS -v- JACOB TOYOTA

No. VI-1424 of 1996

Before:  Ryan JR
Place:  Wodonga
Date:  9 October 1996

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI-1424 of 1996

B E T W E E N :

LINDON HEARPS
Applicant

AND

JACOB TOYOTA
Respondent

MINUTES OF ORDERS

Judicial Registrar Ryan  9 October 1996

THE COURT ORDERS:

1. That the application be dismissed.

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-1424 of 1996

B E T W E E N :

LINDON HEARPS
Applicant

AND

JACOBS TOYOTA
Respondent

Before:      Ryan JR
Place:       Wodonga
Date:         9 October 1996

REASONS FOR JUDGMENT
(Delivered ex tempore)

Lindon Charles Hearps claims that H A Jacob and Sons trading as Jacob Toyota, terminated his employment unlawfully and without valid reason.

Mr Morgan appeared for the Applicant, Mr McKell for the Motor Traders Association appeared for the Respondent.

The claim of unlawful termination of employment lodged with the Australian Industrial Relations Commission requested reinstatement and compensation.  Messrs Morgan and McKell did not mention reinstatement at any stage in the hearing.  Mr Morgan did not refer to remedy in his final address but indicated in opening that the Applicant was unemployed for a month after his employment with the Respondent was brought to an end, and that he then obtained employment with a car dealer in Wangaratta.

No specific evidence was given of the Applicant's present earnings but it appears that he now receives similar income to that received while working for the Respondent.  The Applicant sold cars for the Respondent in Wodonga and Albury as follows:

• new cars Wodonga 17 April 1989 to 10 September 1993

• used cars Wodonga 13 September 1993 to 4 February 1994

• new and used cars Albury 7 February 1994 to 30 September 1994

• new cars Wodonga while acting as relieving manager 3 October 1994 to 11 November 1994

• new and used cars Albury 14 November 1994 to 7 July 1995, used cars Wodonga 10 July 1994 to 4 March 1996.  (See exhibit R1)

The Respondent also tendered:

• figures of vehicles sold by the Applicant from May 1989 to December 1995 (exhibit R2)

• vehicles sold in 1994 and 1995 and January and February 1996, (exhibit R3)

• calculation of the gross profit allegedly earned by the Respondent as a result of the Applicant's sales in 1994 and 1995 and January and February 1996 (exhibit R3)

• records of a Motor Traders Association disciplinary process described as counselling, warning and termination interviews 5 December and 21 December 1995, 19 January and 1 February and 15 February 1996, (exhibits R4 to R8 respectively)

• letter of termination dated 4 March 1996 (exhibit R9)

• an employment separation certificate of 13 March 1996 (exhibit R10).

The Applicant tendered

• graphs which purported to measure the 1995 sales performance of the Applicant and nine other sales consultants employed by the Respondent (exhibit A1)

• pay slips for the Applicant for the periods ending 31 January, 6 March and 13 March 1996 (exhibits A2 to A4 respectively)

• claim forms of the Applicant's sales for January to March 1995, May to October 1995, December 1995 and January and February 1996, (exhibit A5)

• vehicle sales commission reports in respect of the Applicant for January 1995, March '95, May '95, July to December '95 and February '96 (exhibit A6)

Exhibit A1 was prepared by the Respondent's accountant for the information of the Respondent's general manager.

The Respondent called four witnesses, Christopher Dziedzic, general sales manager, Stephen Bright, new business manager (but at the time of the Applicant's termination used car manager), Peter Wimhurst, business manager and Neville Jacob the proprietor of Jacob Toyota and a director of the Respondent company.

The Applicant gave evidence on his own behalf.

The Respondent asserts that:

1. the employment of the Applicant was terminated for valid reasons connected with capacity;

1. the Applicant failed to perform at the standards required of him by his employer

1. the Applicant failed to meet sales targets set for him and set at the same level for used car salespersons in the Wodonga yard

1. the Applicant was unable or unwilling to follow the recommended sales procedures

1. the Applicant was given a termination payment which included outstanding commission earned on sales, leave entitlements and a payment in lieu of notice which met the requirements of section 170DB

1. the Respondent complied with section 170 DC because

(a)Messrs Dziedzic and Bright formally counselled the Applicant on performance on 5 and 21 December 1995 and the Applicant was given an opportunity to respond, and did respond at both interviews and signed a record of both interviews as being an accurate record of counselling interviews;

(b)Mr Dziedzic counselled the Applicant on 19 January and 1 February 1996 and issued and signed a first formal warning on 19 January 1996, and issued and signed a second and final warning on 1 February 1996 and the Applicant was offered but declined the opportunity to have a witness present at the interview on 1 February;

(c)Messrs Dziedzic and Wimhurst interviewed the Applicant on 15 February and Mr Dziedzic completed a document called record of termination interview. That document was read and signed by Mr Dziedzic and Mr Wimhurst and the Applicant. At the interview on 15 February the Applicant was offered, and declined, to have a witness present and was given an opportunity to respond to the complaints of lack of sales. The Applicant failed to follow sales procedures, was informed that his employment would be terminated, was given targets for sales for the last two weeks of February 1996, read and signed the written record of termination interview and agreed that the record was an accurate record of the termination interview;

(d)the Applicant was advised in writing on Jacob Toyota letterhead by Mr Dziedzic on 4 March 1996 as follows:

“You are hereby advised that your employment with this company will terminate on Monday 4 March 1996 by payment in lieu of notice.  Signed Chris Dziedzic, General Sales Manager, Monday 4 March 1996.”

The Applicant, through his counsel, and by way of his sworn evidence:

1. denies that the Respondent has demonstrated or had a valid reason for termination

1. asserts that the reason or reasons for termination were not sound, defensible and well founded in terms of the dicta of Northrop J in Selvachandran v Peteron Plastics Proprietary Limited (1995) 62IR 371 of 373

1. implies that the reason or reasons for termination were flawed and invalid by citing the following comment from Selvachandran at 373:

A reason which is capricious, fanciful, spiteful or prejudiced could     never be a valid reason for the purposes of section 170DE(1).

1. suggests that the real motivation of and reason for the termination described by Mr Morgan as “perhaps the underlying reason” was the Applicant's refusal to move from used car sales to new car sales

1. asserts that the specific target of 15 used car sales or units a month was not, and could not, be a requirement of the Applicant's contract of employment and that a failure to meet such a target, or a target of unspecified or specified gross profit to be earned by sales, could not be and was not a valid reason for termination connected with the Applicant's capacity

1. dismisses the evidence - the Respondent's evidence - of the Applicant's failure to follow sales procedures as “half hearted”.

The sale of used and new cars through modern franchise dealers is a tough, demanding, competitive, aggressive, promotional and selling activity as in many other areas of sales and promotion.  Targets are commonly set for sales teams and for individual sales persons in the motor industry.  It is also common practice to set corporate and individual targets on calculations of gross profit from sales and to set individual targets by averaging and notionally allocating a specific unit number of sales of product to each sales person.

The Court can envisage circumstances in which a termination of the employment of a sales consultant or representative which was based solely and rigidly on a failure to exactly and entirely meet specific numerically determined sales targets could be held to be so unreasonable and unfair and unachievable as to be incapable of constituting a sound, defensible, well founded valid reason for termination under section 170DE1. However, the Court does not believe that such circumstances exist in this case.

The Court accepts that the Respondent must demonstrate a valid reason. The onus of proof is on the Respondent. The Respondent must satisfy the Court that there was a valid reason for termination within the terms of 170DE1. However, section 170DE(1) is designed to inhibit capricious terminations, not to put the Court in the employer's managerial chair. Kennefick v Australian Submarine Corporation Proprietary Limited (1995) 62IR 107 at 116:

An employer may not treat every employee equally and may not act in exactly the same way in counselling and warning employees subjected to sales targets set on basis of averaging sales by allocation of units to be sold or by notional calculation of gross profit.  However, different treatment of different employees will not of itself vitiate a valid reason for termination.  A reason for termination is sound defensible and well founded or it is not.

Having observed the witnesses I have concluded that the Applicant was given ample opportunity to improve his sales performance. Mr Jacob and Mr Dziedzic are experienced dealers. The Applicant and at least two other employees were assessed as failing to meet required standards. In the case of the Applicant he was unwilling or unable to comply with the demanding but common practice whereby sales consultants are expected to speak to all potential customers and to elicit from each customer, if at all possible, an initial offer and to ensure that customers and potential purchasers are introduced to a second member of the sales team.

The Applicant's attitude to co-operation with the actual or potential lawful directions of his employer was revealing.  He indicated that he was not aware, at least until recently, that his employer could direct him to move from one position and location to another position and location.  He admits that he refused to move from the used car yard back to new car sales.  He admits that he asked on one occasion of his supervisors whether they proposed to physically carry him to the new car department.  This was, no doubt, a rhetorical question. Nevertheless, this was the way which the Applicant expressed it and he concedes that he said it in a meeting with his supervisors.

He admits that he considered the used car commission earnings more attractive.  The Respondent did not rely on or assert the termination was based in whole or in part on the Applicant's failure to obey a direction to move to the new car yard.  However, the Applicant's admitted attitude to that request, even if it stopped short of a legitimate direction by the employer, is relevant to the Respondent's assertion, which the Court accepts, that the Applicant was unwilling or unable to comply with certain recommended sales procedures.

I have concluded that there were valid reasons for the termination of employment connected with the Applicant's performance and capacity and that the Respondent did not breach section 170DB, section 170DC or section 170DE(1).

While the Respondent seems to have applied counselling, warning and termination procedures recommended by the Motor Traders Association without complete attention to every aspect of the procedure apparently contained in some manual or advice from the Association, I am satisfied that the procedures were followed in good faith and that the Applicant was not dismissed by way of a slavish and rigid application of sales target criteria, but rather because the Respondent was not satisfied with overall sales performance.

I will add that there is evidence that the Applicant is, or is capable of being, a competent sales representative but that from at least July 1995 to March 1996 he failed to meet the standards imposed by his employer.

The order of the Court is the application be dismissed.

MINUTES OF ORDERS

THE COURT ORDERS:

1. That the application be dismissed.

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 6 pages are a true copy of the reasons for judgment of Judicial Registrar Ryan.

Associate:          
Dated:  4 November 1996

Solicitors for the Applicant:           Nevin Lenne & Gross
Appearing for the Applicant:                  Mr C Morgan

Appearing for the Respondent:     Mr K McKell

Motor Traders’ Association  of NSW

Date of hearing:  8 October 1996
Date of judgment:  9 October 1996