Davis v Nokia Telecommunications Pty Ltd
[1996] IRCA 217
•30 April 1996
DECISION NO: 217/96
CATCHWORDS
INDUSTRIAL LAW - UNLAWFUL TERMINATION - VALID REASON - HARSH UNJUST or UNREASONABLE - PROCEDURAL FAIRNESS - No OPPORTUNITY TO RESPOND to allegations concerning CONDUCT or PERFORMANCE - REINSTATEMENT is the primary remedy under the Act - Factors to be taken into account when determining the question of whether it is IMPRACTICABLE to order REINSTATEMENT - LOST REMUNERATION
Industrial Relations Act 1988 ss. 170DC, 170DC, 170DE(1), 170DE(2),
170EE, 430
Nicolson v Heaven and Earth Gallery Pty Ltd (1994)1 IRCR 199
Cox v South Australian Meat Corporation, (SI 229 of 1994, Industrial Relations Court of Australia, 13 June 1995, unreported)
Johns v Gunns Limited (1995) 60 IR 258
Izdes v L. G. Bennett and Co. Pty Ltd t/as Alba Industries, (WI 307 of 1994, Industrial Relations Court of Australia, 15 September 1995, unreported)
Patterson v Newcrest Mining Limited , (WI 0595R of 1994, Industrial Relations Court of Australia, Marshall J, 21 December 1995, unreported)
Abbott-Etherington v Houghton Motors Pty Ltd (WI 0429R of 1994, Industrial Relations Court of Australia, Marshall J, 28 September 1995, unreported
Doyle v Western Suburbs District Rugby Leagues Club Ltd, (NI 527 of 1994, Industrial Relations Court of Australia, Patch JR 14 October 1994 unreported)
KEITH DAVIS -v- NOKIA TELECOMMUNICATIONS PTY LTD
No. NI 2447 of 1995
COURT: PATCH JR
PLACE: SYDNEY
DATE: 30 APRIL 1996
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NI 2447 of 1995
BETWEEN :
Keith DAVIS
Applicant
AND:
NOKIA TELECOMMUNICATIONS PTY LTD
Respondent
REASONS FOR JUDGMENT
30 APRIL 1996 PATCH JR
This is an application under section 170EA of the Industrial Relations Act 1988 (“the Act”). The applicant claims that his employment was unlawfully terminated and seeks reinstatement, an order for continuity of employment, and an order for lost remuneration. In the alternative, he seeks compensation.
CLAIMS IN THE ASSOCIATED JURISDICTION OF THE COURT
At the commencement of the hearing of the matter leave was given to the applicant to raise two claims in the associated jurisdiction of the Court, as set out in section 430 of the Act. The first matter was an alleged outstanding annual leave payment of $1,480.76, and the second matter was an alleged outstanding bonus payment of $1,960.00.
The claim for outstanding annual leave was settled by the parties, and it was agreed that it was, therefore, not necessary for me to decide that matter.
In my opinion, the applicant has not established that he is entitled to any payment for an outstanding bonus. The bonus was dependent upon certain performance targets being reached by the “team” of which the applicant was a member. There is simply no evidence as to those performance targets being reached, or not.
The claim in the associated jurisdiction of the Court for an outstanding bonus payment is therefore dismissed.
BACKGROUND FACTS
The applicant first commenced working for the respondent on 12 November 1992, as a casual “temp” through a personnel agency. On 1 January 1993 he commenced permanent full-time employment with the respondent as the “Warehouse Controller”.
The applicant started working for the respondent at the commencement of a period of rapid expansion in the respondent’s Australian business operations. This was because the respondent was a major supplier of equipment to Optus, which itself was rapidly expanding its operations.
From about August 1994, the applicant gradually spent more and more of his time on repairs and spares handling, and less and less of his time on the warehouse side of his job.
The applicant claimed that, in order to properly perform his duties, it was necessary for him to consistently work extra hours. This claim was not contested by the respondent, and I accept what he says.
In 1992 the respondent had purchased a computer software package, or system, which is described by the initials of the Swedish words making up its name - “SCALA”. Throughout the case, that system was simply called “SCALA”, and I will adopt the same terminology. An analysis had been done of the capabilities of the “SCALA” system at about the time of its purchase, and it had been then decided that the system could not be used for all of Nokia’s requirements in relation to repairs handling and processing.
Nokia is in the business, not only of supplying telecommunications equipment, but of repairing equipment as well. When equipment supplied by Nokia is out of warranty, Nokia charges its customers for the repair of that equipment. The handling of repairs - whether they were under warranty or not - was a significant part of the applicant’s job.
In late October, following discussions between the applicant and
Mr Anthony Frewen, (who, at the time, and at all times relevant to this case, was the respondent’s Customer Service Accountant for Australia), they agreed to suggest to management that the possibility of using “SCALA” for all of the repairs and handling documentation and record keeping be investigated.
This was done, and a short time later, Mr Paul Kvist, the manager of the respondent’s Australian operations, directed those investigations be carried out.
There followed a series of meetings between the “SCALA” representatives and representatives of the respondent, including the applicant.
In early December a meeting was held involving the Australian management of the company, and also the applicant, and a decision was made at, or shortly after, that meeting by Mr Kvist to use the “SCALA” system for all of the respondent’s requirements in relation to repairs and handling documentation and record keeping - including the tracking of repairs via the use of warranty numbers, and the production of quotes and invoices to customers.
It is the applicant’s alleged failure, either through "inflexibility", or deliberately, to implement this decision which was the reason for the termination of his employment
THE ISSUES
The issues in the case are as follows:
Was there a valid reason for the termination of the applicant’s employment?
If there was a valid reason for the termination of the applicant’s employment, is that termination to be deemed to be not for a “valid reason” because it was harsh or unjust or unreasonable within the meaning of section 170DE(2) of the Act?
Was the termination of the applicant’s employment unlawful by reason of a breach of Section 170DC of the Act?
If the termination of the applicant’s employment was unlawful, is it impracticable to order his reinstatement?
If reinstatement is impracticable, what amount of compensation should be ordered?
Was there a valid reason for the termination of the applicant’s employment?
The stated reasons for the termination of the applicant’s employment were that he was inflexible in implementing the “SCALA” system and, in addition to that, he did not implement that system in deliberate defiance of a specific directive of the management of the respondent that he do so.
The “inflexibility” was an inflexibility regarding the implementation of the “SCALA” system for hardware repairs.
The applicant’s case was that he was never “inflexible” in that way, and never refused to implement the system. Indeed, it was his case that he was happy to do so because it was partly his idea that it be done.
The respondent argues that on 14 February 1995, in a memorandum from
Mr Arno Schaaf (then, the applicant's direct manager) to the applicant (exhibit 7) the applicant was given an explicit directive to implement the “SCALA” system. It is this directive that the respondent argues the applicant refused to implement, thus leading to the termination of his employment.
That memorandum became exhibit, and reads as follows:
“After our discussion last Friday about the use of the “SCALA” system for repair management, I have investigated what systems are available to you at present and how they may be improved. I have found that from October last year, SCALA has been set up to handle repair quotations and invoicing, very much along the lines of what we discussed. You have received training on this system, but to date you have not used it.
This is not acceptable. We invest in systems to improve our efficiency and reduce your workload, and these objectives cannot be achieved if you simply carry on working as before. This attitude also results in higher workloads for other people, such as in the accounts department.
Please present me with a plan as to when you will phase out the current tools you are using for transmission repair and swap repair management, by Friday 17 February. My expectation is that you will be doing this before the end of this month.
If there are improvements to be made to the SCALA system, I will accept and support suggestions made by its users.”
There was a stark conflict of evidence between the applicant, on the one hand, and the witnesses for the respondent on the other hand, as to whether or not the “SCALA” system was capable of being used for all of the functions which management wanted. In particular, it was the applicant’s case that at the time of the termination of his employment (2 June 1995) the “SCALA” system simply could not be used to calculate final prices for quotations to customers because of problems associated with the calculation of a number of variables, including sales tax, import duty and handling fee.
Mr Anthony Frewen, Mr Paul Kvist, and Mr Arno Schaaf all gave evidence that the “SCALA” system could be used for all of the desired functions. On analysis, however, Mr Kvist and Mr Schaaf were repeating information given to them by Mr Frewen.
In cross-examination (as he had in his evidence-in-chief) Mr Frewen asserted that the SCALA system was, at all relevant times, capable of producing a final quote to customers, incorporating sales tax and import duty, without the need for the operator to do any calculations outside the system. This was because, he said, there were a number of price lists allowing for all the necessary variables to be added on to the base price.
However, he was then confronted with the written instruction provided by SCALA, and admitted that, if those instructions were followed, only one price list could be used - and that the instructions then stated:
"If sales tax is applicable, enter sales tax."
There was no mention, in the instructions, of using another price list.
Mr Frewen then agreed that there was no reference at all in the instructions to the incorporation, in the final price, of import duty or a handling fee (the latter of which was always charged), and that, therefore, if those instructions were followed, Nokia would "lose out".
At that point in his testimony, it had become apparent that his understanding of the SCALA system was flawed - and that his earlier assertion was wrong.
Also at that point, the nature of his criticism of the applicant's performance changed.
Up until then, he had been asserting (as above) that the SCALA system was capable of being used as Nokia wanted but that the applicant would no do it.
Forced to admit in effect, that the applicant could not do it, he changed tack, and the criticism became one of the applicant's failure to ensure that the SCALA providers changed the instructions and the system so that it functioned as Nokia management wished.
I have carefully read the transcript of the evidence of each of the witnesses, searching for a means by which I could decide to prefer one side’s account to the other, such as significant inconsistencies, evasive or glib answers, untruths, or the like. Apart from the above matter concerning Mr Frewen, no such factors were apparent.
Furthermore, none of the witnesses’ demeanour in the witness box led me to conclude that they were persons upon whose evidence I could not rely.
None of the witnesses impressed me as persons whose evidence could not be relied upon because of their poor memory or inadequate knowledge of the subject matter. To put it bluntly, apart from the one matter referred to above, all of the witnesses in the case gave the appearance of being truthful and reliable.
I move therefore, to an examination of the other material in the case, including contemporaneous documents created in the normal course of the respondent’s business, by employees of the respondent, including the applicant.
In a series of messages from the applicant to other persons working for the respondent, the applicant set out the problems that he was having in trying to fully implement the “SCALA” system, in compliance with the directives given to him on 14 February by Mr Schaaf.
Exhibit 21 is an “e-mail” (a communication sent from one computer to another), sent from the applicant to Mr William Trinkler, an employee of the respondent. It was sent on Friday, 10 March 1995, at 8.09 am, and reads as follows:
“William,
Can you please run a price calculation update. This is what Rod Harrison spoke to you about 7/3. I need this to produce Customs Docs for repairs.
Thanks and please let me know when this has been done.
Keith”
Exhibit 22 is a follow up e-mail from the applicant to Mr Trinkler. Copies were sent to Mr Arno Schaaf and Mr Alan Cainey (Mr Cainey took over from Mr Schaaf as the applicant's direct manager over late March and early April). As was the case with exhibit 22, the subject listed at the top of the e-mail (each was in the form of a memo) was “SCALA: Price Calculation updates”. Exhibit 22 was sent on Tuesday, 21 March 1995, at 1730 hours. It reads as follows:
“William,
Price calculation is still not operating. Not sure if have run the update as requested 10/3, if not can you please do it so that I can produce Customs invoices for Swap Repairs. If you did do it please let me know as it ain’t working!”
A copy of the e-mail sent by the applicant on 10 March 1995 was sent together with that e-mail.
In my opinion, exhibits 21 and 22 prove that, at least up to 21 March 1995, the applicant was conscientiously attempting to implement the directive of management, but was unable to do so because of problems with the “SCALA” system - problems which he alone could not solve. I accept what he said in Exhibit 22 as the (then) fact of the matter, namely "it ain't working".
My opinion in this respect is confirmed by exhibit 15, which is a handwritten note, in the applicant’s hand, made in respect of a meeting in which he participated on 30 March 1995. Part of that note reads as follows:
“I explained the delays we had with “SCALA” developing and writing up procedures, that we were still waiting for fix of pro forma problem, William to update prices.”
That leads me to conclude, that up to 30 March 1995, the applicant was attempting to use the “SCALA” system to produce prices, but was unable to do so because of problems in the system which he himself could not solve - including the fact that the applicant was still waiting for Mr Trinkler to “update prices”.
Exhibit 23 consists of a memo (sent via e-mail) from the applicant to both Mr Alan Cainey and Mr Anthony Frewen. The subject of the memo was “Pricing Structure - TRS repairs” and the date of the memo is Tuesday, 2 May 1995. Together with the printed material, there are some additions in the hand of the applicant.
Exhibit 23 came into evidence during the cross-examination of the applicant. The starting point for that particular part of the cross-examination of the applicant was this question:
Q: “You said that one of the problems as at 2 June was that a cost element could not be done?”
A: “Yes”
Q: “Do you have a contemporaneous record to that effect, to verify that statement?”
A: “Well, I’m not too sure, but - I’m not too sure to be honest without looking at my notes.”
The applicant then produced exhibit 23. Exhibit 24 came into evidence a short time later (see below).
The typed part of exhibit 23 is as follows, omitting the formal parts:
“Just confirming meeting arrangements Thursday, 4 May 1100/1200 Anthony’s Office, to discuss our present pricing structure for TRS Repairs to ensure compatibility to our business goals.
The points I would like to discuss are:
1. Conversion Rate Co-ordination.
2. Margin on Finnish Repair Centre Prices.
3. Margin on NZ Repair Centre Prices.
3A. Margin on Freight and Handling.
4. Sales Tax Adjustments.
Any other suggestions gratefully received.
Cheers
Keith”
Underneath that the applicant had written in his own hand the following:
“5. Improve business reporting procedures. i.e. at the moment does (sic) all repair transport charges go against individual products or all in one bucket.”
The applicant had made some notes next to each of points one to four in the typed part of exhibit 23.
Next to point 1., he wrote: “set at 3 and review monthly”. This meant that the exchange rate between the Finnish Mark and the Australian Dollar was to be 3 to 1, initially.
Next to point 2. the applicant had written: “+ 30% on ITP LIST”
Next to point 3. the applicant had written: “+30% on TLR LIST”.
Next to point 3A. the applicant had written: “maintain at $120 & review 3 months time”.
Next to point 4. the applicant had written: “Melinda’s area. Pay all Sales Tax up-front, then reclaim on ST Return”.
The applicant was asked what happened at the meeting on 4 May 1995. He answered as follows:
“We discussed the suggestions that had been made and after a lot of some rather heated and lively debate between Mr Frewen and Mr Cainey it was decided, I understand, to simplify matters and to work on a percentage figure of the new price for the transmission items.”
The applicant was present at that meeting.
The applicant was asked whether that decision solved that “particular problem”, (ie: using the SCALA system to produce quotes or prices) and answered “No, not on that day”.
The applicant was then asked what the outstanding problem was. He repeated that the decision had been made “to eliminate all the problems that we had had before in compiling the figures and that we would just work on a straight percentage.” That percentage was to be a percentage of the purchase price of items purchased “from the product line back in Finland”.
The applicant went on to say that those prices were held on a data base in Melbourne, and after the information had been obtained from Melbourne, it was passed on to him to work on. The applicant ran some tests and he said, “It worked out that on that basis that we were actually charging less than what the Repair Centre were charging us so that we were running at a loss.”
I add here that repairs were not done at the site where the applicant worked - they were done in other places, including New Zealand and Finland, depending on the nature of the repair and the type of product.
The applicant said that he told Mr Frewen about the problem of running at a loss, and added, “I am not saying we did run at a loss because I was working on the existing system.”
The "existing system" was one whereby the repair price was individually calculated for each individual item, outside the SCALA system, adding, as appropriate, such factors as customs duty, sales tax, and handling fee.
The decision to simply charge a straight percentage was obviously a way to get around the problems caused by the necessity for a multiplicity of individual and variable items to be added to the “base” price of each item. Those problems were problems with the SCALA system.
It is apparent that the meeting of 4 May 1995 was a meeting which was arranged in order to find a solution to problems associated with the implementation of the SCALA system for the calculation of repair prices to customers. It follows that the system was not, at that stage, as a practical matter, capable of being used for that purpose.
It follows from the fact that Mr Cainey and Mr Frewen attended that meeting that they were aware of that fact.
In other words, I accept that the applicant was attempting to use the SCALA system to produce repair prices for customers but was genuinely unable to do so because of the inability of the SCALA system, at that time, to do so. I accept that the agreed solution was to apply set percentages of the purchase price.
My opinion in respect to the above matters is based not only on the fact that the meeting was called, and not on a mere acceptance of the applicant’s evidence, in isolation of the other evidence in the case. I note that the respondent's witnesses, and Mr Frewen in particular, gave evidence to the contrary - in particular, that he asserted that the SCALA system could be used at the relevant times to produce prices for quotes to customers.
My opinion is also based on an analysis of exhibit 24, which is examined in some detail in the following passages of these Reasons for Judgment. The e-mail exchanges which are contained in exhibit 24 would not have occurred if there had not been a meeting of the nature set out in exhibit 23, and of the nature as described by the applicant. Those e-mail exchanges would not have occurred if the problems described by the applicant as leading up to the meeting of 4 May had not been in existence. Those e-mail exchanges would not have occurred if the “solution” which was reached at the meeting on 4 May was not an impractical one.
The applicant went on to say that, following the meeting of 4 May, there were a number of discussions. The applicant said that, probably in the third week of May, it was agreed that Mr Frewen would take up the matter with the representatives of Nokia Finland at a meeting in Bangkok to which he was scheduled to go in the near future.
The problem was that using the straight percentage on the purchase price as obtained from Melbourne would sometimes result in a loss to the Australian company, because the price that the customer would be charged at that basis would be less than the price charged by the repair centre.
The applicant's assertion (which I accept) that this was the nature of the problem (and that, therefore, the “solution” reached at the meeting of 4 May 1995 was really no solution at all) is supported by exhibit 24.
Exhibit 24 consists of a number of e-mails, commencing with one dated 24 May 1995, sent to a Mr Katri Kontulainen, in Finland.
That memo was as follows, omitting the formal parts:
“Katri Hi
With reference to Invoice 5383039 for repair charges of a 24012 DM2, how do you calculate the repair price?
We are of the understanding that the repair price is to be 40% of the ITP.
According to ITP price list supplied by Finland the price for this piece of equipment is $425.00 AUD.
Therefore the repair price should be $170.00 AUD not $367.30 AUD.
Exchange rate is fixed as it is based on the ITP.PLEASE EXPLAIN
OUR PRICING TO THE CUSTOMER IS BASED ON 40% OF THE ITP, THEREFORE IF WE ARE CHARGED THIS AMOUNT (367.30) WE MAKE A LOSS.
Regards
Anthony”
Mr Frewen’s e-mail to Mr Kontulainen was referred to Mr Harri Montonen, who replied on 26 May 1995. That reply was, omitting the formal parts, as follows:
“Hi Anthony,
referring to inquiry, Katri handed it to me.
Our ITP repair prices typically correspond to 30.70% of the units ITP. In general, the cheaper unit the higher %. Every unit has own annually adjusted fixed price. Unfortunately due to our RC invoicing system we have to use FIM prices and thus your invoices in AUD vary a bit due to the exchange rate variation.
I guess that Keith has our list for 1995?
According to my knowledge of 24012 prices: ITP is 1663 FIM, recommended sales prices is 4030 FIM and our repair ITP is 1160 FIM. Based on this our prices are well in line with the other prices, excluding customer rep. Price.
Naturally Arn can decide sales price based on local factors, but this 170 AUD sound quite low to my mind. As you stated you sell this service on loss, which should not be the case.If you have more questions, I’ll be only glad to help you.
Rgds
Harri”
It is apparent from Mr Montonen’s e-mail to Mr Frewen (a copy of which was sent to Mr Davis) that Mr Frewen’s understanding that the repair price was to be 40% of the ITP (which I take to mean internal transfer price) was incorrect - and that a variable percentage was to be applied.
It is also apparent from the line “As you stated you sell this service on loss, which should not be the case.”, that any system which might have been used in Australia based on a set percentage price was contrary to the business objectives of Nokia Finland.
Slightly later on 26 May 1995, a further memo was sent to Mr Frewen with a copy to Mr Davis. This was from Mr Vesa Kilpi to whom Mr Frewen’s original e-mail of 24 May 1995 had been copied. That e-mail was as follows:
“Hello everybody
The fixed % through whole product range does not work. On the other end we’ll end up too high prices and respectively in other end the fee is insufficient. In average 40% is valid figure i.e. when unit price is 4000 - 7000 FIM. The unit prices anyhow vary from 1000 to 100,000FIM so some adjustment system must be used. The repair price for TRS units vary between 30 and 70% compared to units price.
If the unit price is low enough we come across with a feasibility problem. The sum of labor cost (average 1..2h/unit) plus transportation (200...400FIM one-way) is higher that the 40% of unit price!
So the level should be something
25%....150%* price of the unit.I have sent the price lists of unit repairs Arno.
Unit Repair 1AUD
24012 DM2 1160FIM 362AUDNext year price lists will be again bit different. Now we have equal price no matter where we sent the unit (to Sydney or to Helsinki). In the coming version there will be repair price and freight cost treated separately.
On the other hand - with one unit its possible to make loss if this helps to sell such a unit that the total margin is positive in the end of the day.
Regards
Vesa”
This reinforces the obvious - namely that “the fixed percentage through whole product range does not work.” The reasons are quite clearly set out in Mr Kilpi’s e-mail.
On 29 May 1995, at 1714 hours, the applicant sent an e-mail to Mr Frewen as follows:
“Anthony,
Just to confirm our discussions today following receipt of pricing info from Finland.
As an interim measure it has been agreed to use the prices quoted by the Finnish Repair Centre in their File TR_R_ITP.XLS. a margin of 30% is to be applied to those prices using a conversion rate of 3.1.
These prices will apply until further notice.
Please let me know if this is incorrect.
Regards Keith”
Mr Frewen replied six minutes later saying that the applicant’s assumption as to what the system was to be was “spot on”.
As the “solution” agreed at the meeting of 4 May 1995 was no solution at all (even, in some cases, resulting in a loss to the Australian operation) and as the interim solution was not confirmed until late on 29 May 1995 it cannot be said that any “failure” to use the SCALA system to produce prices for repairs for customers was the fault of the applicant - either through “inflexibility”, or through a deliberate refusal to implement the SCALA system.
29 May was a Monday. The applicant’s employment was terminated the following Friday, 2 June 1995. Such a short period of time would be clearly too short a period in which to establish that the applicant had been “inflexible”, or that he had deliberately refused to carry out a management directive given to him on 14 February 1995.
On analysis, the reason(s) for the termination of the applicant’s employment focused on his attitude to the implementation of the “SCALA” programme - it is alleged that he was “inflexible”, and that he deliberately refused to carry out a management directive.
As the objective material shows that he was genuinely attempting to carry out that directive, and that, through no fault of his own he could not do so, the reason(s) for the termination of his employment have been shown to be without basis.
There was, therefore, no valid reason for the termination of the applicant’s employment, which was unlawful.
A considerable amount of evidence was directed to the question of whether or not the SCALA system was, in fact, capable of being used in all of the ways that the management of the respondent wished it to be used. In particular, there was clear disagreement between the applicant and the witnesses for the respondent (in particular, Mr Frewen) on the question of whether or not the system could be used to produce prices for repairs for customers. For the sake of completeness, I should state that, in my opinion, the evidence to which I have referred above establishes that, certainly up to and including the clarification on 26 May 1995 in the faxes from Mr Montonen and Mr Kilpi of what percentages were to be used, the SCALA system could not, as a practical matter, with the pricing structure then in place, be used to calculate prices for repairs for customers.
Was the termination of the applicant’s employment “harsh” or “unjust” or “unreasonable” within the meaning of section 170DE(2) of ?
As a considerable amount of argument was directed to this point, in order to properly satisfy the genuine desire of the parties that all the matters in controversy between them be resolved, I will determine this question.
Exhibit 48 is a document which sets out the respondent’s “standard operating procedure” for termination of employment. It was effective at the time of the termination of the applicant’s employment. Paragraph 4.2 of that document reads as follows:
“NTPL may terminate employment with notice or with payment in lieu of notice for unsatisfactory performance providing the following procedure is followed:
(i) the employee’s supervising manager will discuss the performance problem with the employee, stating clearly the nature of the problem, and the standard that is expected by NTPL.
(ii) the manager must give the employee reasonable support to achieve the agreed objectives.
(iii) the content of this meeting must be documented, and agreed and signed off by both the manager and the employee.
(iv) a date for a further meeting shall be set for a review of the performance. If performance has been satisfactory in the interim, no further action will be made.
(v) if performance continues to be unsatisfactory, it will clearly be explained to the employee that if a satisfactory standard is not obtained by a given date, their employment will be terminated
(vi) prior approval shall be given in all cases by the area general manager to embark on this termination procedure, and the HR manager must be copied on all the performance processes.”
The procedure set out in the document was not followed.
In particular, even if one considers the meeting which preceded the memo of 14 February 1995 (exhibit 7) as a meeting satisfying sub-paragraphs (i) and (iii) of paragraph 4.2, there was no “further meeting..... for review of the performance” in accordance with sub-paragraph (iv).
Furthermore, it was never “clearly explained to the (applicant) that if a satisfactory standard is not obtained by a given date, his employment will be terminated” in accordance with sub-paragraph (v).
Employers, particularly large corporations such as the respondent, set themselves codes of conduct in order to ensure that their managers treat their employees justly. That was clearly the purpose for which the above standard procedures for termination of employment were promulgated.
The fact that the respondent has breached its own procedures is, in my opinion, a weighty factor, strongly suggesting that the termination of the applicant’s employment was tainted by procedural unfairness, and therefore “unjust” within the meaning of section 170DE(2) of the Act.
The decision to terminate the applicant’s employment was made by
Mr Paul Kvist in late March or early April. The applicant was not informed that his employment was to be terminated until 2 June 1995. In the meantime, the respondent had found a replacement for him. Prior to the decision to terminate the applicant’s employment, and prior to the actual termination of his employment, the applicant was never informed that his employment was in jeopardy.
Counsel for the respondent argued that the applicant in fact knew that his employment was in jeopardy because of the content of the memo of
14 February 1995 (exhibit 7) - in particular the words “this is not acceptable”.
I do not accept that submission. A criticism of an employee’s performance, even in such terms, does not amount to a warning that his or her employment is in jeopardy. Exhibit 7 was simply a directive to the applicant to do what management wanted him to do.
Counsel for the respondent also argued that I should conclude that the applicant realised that his employment was in jeopardy because of the fact that from early in 1995 the applicant was keeping notes of things to do with his employment.
I also do not accept that submission. In early 1995, the applicant had received a poor performance rating (once again this rating was given in breach of the company’s own procedures, because no consultation occurred with him before he was given the rating) and I accept his evidence that he kept those notes in order to (using his terminology), “cover his backside” - in other words, to protect himself against adverse criticism. That, in my opinion, falls short of establishing that the applicant knew that his job was in jeopardy.
The applicant’s assertion that he was thinking in this way is supported by exhibit 16, a contemporaneous note in the applicant’s own hand, which refers to a meeting with Mr Kvist on 4 April 1995. In part of that exhibit the applicant says this:
“I said I was apprehensive, particularly in respect to my performance rating, which I considered was based on hearsay.”
Not only was the applicant not told that his job was in jeopardy, the reasons for the termination of his employment were never discussed with him. If they had been discussed with him, then he would have had, in my opinion, strong grounds to argue, and a strong objective basis upon which to prove, that he had been genuinely attempting to carry out the directives of management as set out in exhibit 7, but had been unable to do so. That opportunity was never given to him.
In my opinion, any one of the above circumstances would be deficient to render the termination of the applicant’s employment “unjust” within the meaning of section 170DE(2) of the Act. Together, they compel for that conclusion.
It follows, therefore, that even if I were to conclude that there had been “prima facie” a “valid reason” within the meaning of section 170DE(1) of the Act for the termination of the applicant’s employment, that termination would be deemed not to be for a “valid reason”, and unlawful.
Was the termination of the applicant’s employment in breach of section 170DC of the Act?
Section 170DC of the Act 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 give 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.
In Nicolson v Heaven and Earth Gallery Pty Ltd (1994)1 IRCR 199, his Honour, Wilcox CJ, in discussing section 170DC(a) of the Act, said this at page 209:
“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 legal power over another, to that persons 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 the Termination of Employment Convention. Section 170DC is directly modelled on Article 7. The principle is, I believe, well understood in the community. It represents part of what Australians a “fair go”. In the context of section 170DC, it is not to be treated lightly. The employee is to be given the opportunity to defend himself or herself “against the allegations made”; that is, the particular allegations of misconduct or poor performance that are putting the employee’s job at risk. Section 170DC(a) is not satisfied by a mere exhortation to improve.”
In this case, the respondent did not put any particular allegations to the applicant against which he could defend himself.
As Wilcox CJ said in Nicolson, at page 210:
"For section 170DC(a) to be satisfied, it would have been necessary for the respondent to determine what aspects of (the applicant’s) conduct or performance were such as to justify possible dismissal and put those matters squarely to him, under circumstances where he had a fair opportunity to defend himself. That would have had to be done at a relevant time, close to the date of dismissal.”
Here, nothing of that nature occurred. Although some criticisms were made of the applicant’s performance, which criticisms were made after 14 February 1995, they never amounted to “allegations” against which he could defend himself.
Furthermore, in order for an employee to be given the opportunity to “defend himself or herself” against allegations, that must be in the context of the employee being informed that those particular allegations are allegations in respect of which his or her employment might be terminated. The applicant was never given such an opportunity.
In my opinion, therefore, the termination of the applicant’s employment was in breach of section 170DC of the Act, and unlawful for that reason as well.
REMEDY
Is the reinstatement of the applicant impracticable?
Section 170EE(2) of the Act is as follows:
“If the Court thinks, in respect of a contravention of a provision of this Division (other than section 170DB or 170DD), constituted by the termination of employment of an employee, that the reinstatement of the employee is impracticable, the Court may, if the Court considers it appropriate in all the circumstances of the case, make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate.”
In Nicolson v Heaven and Earth Gallery Pty Ltd (1994) 1 IRCR 199 Wilcox CJ said, at page 210:
“One of the amendments to part VI(A) made in June 1994 was the substitution of a new section 170EE. Under the substituted section, the first task of the Court, in considering relief, is to consider whether reinstatement is practicable. Compensation for loss of the job (as distinct from loss of remuneration) may be awarded only if reinstatement is “impracticable”. It is important to note that Parliament stopped short of requiring that, for general compensation to be available, reinstatement be impossible. The word “impracticable” requires and permits the Court to take into account all the circumstances of the case, relating to both the employer and employee, and to evaluate practicability of a reinstatement order in a common sense way. If a reinstatement order is likely to impose unacceptable problems or embarrassments or seriously affect productivity or harmony within the employer’s business it may be “impracticable” to order reinstatement, notwithstanding that the job remains available.”
His Honour’s approach to the question of the impracticability or otherwise of reinstatement has been adopted by a number of judges of the Court. See the decision of Von Doussa J in Cox v South Australian Meat Corporation, (SI 229 of 1994, Industrial Relations Court of Australia, 13 June 1995, unreported). See Johns v Gunns Limited (1995) 60 IR 258. At page 271 of that decision, his Honour Northrop J said:
“the main grounds advanced on behalf of the employer is the length of time since Mr Johns was terminated, the fact that his position has been given to another person and one of the reasons for the termination, namely being late for work because of watching television.”
The first two grounds are also advanced by the respondent employer in this case.
In Izdes v L. G. Bennett and Co. Pty Ltd t/as Alba Industries, (WI 307 of 1994, Industrial Relations Court of Australia, Beazley J, 15 September 1995, unreported), her Honour also agreed with the approach of Wilcox CJ in Nicolson. At page 34 of that case, her Honour said:
“I do not consider reinstatement to be reasonably practicable in the present case. The respondent is a small company. The managing director, is, in effect, the owner of the business. The relationship had broken down between the parties at the time of the dismissal. There were severe personality problems between the applicant and other employees at all levels, as well as between the applicant and Mr Bennett. Although the applicant considered that he could play a useful and effective role in the company, and Mr Bennett had not, at the time of the hearing, replaced him, I consider that the animosity which exists between the applicant and others in the company is such that reinstatement is not reasonably practicable. Accordingly, I do not propose to order the applicant’s reinstatement.”
Although it is clear there is some animosity between the applicant and his former superiors in the Nokia Organisation, none of them will be working with him on a day-to-day basis.
In Patterson v Newcrest Mining Limited , (WI 0595R of 1994, Industrial Relations Court of Australia, Marshall J, 21 December 1995, unreported), his Honour expressed his agreement with Nicolson, interpreting the phrase “unacceptable problems or embarrassments” to be read distributively, so that the adjective “unacceptable” referred to both “problems” and “embarrassments”.
The principles which I extract from the cases are as follows:
Reinstatement is the primary remedy under the Act. The initial focus of the Court in respect of any decision as to remedy has to be on the question of whether or not it is impracticable to reinstate an employee whose employment has been unlawfully terminated;
Reinstatement is to be ordered unless the Court finds it impracticable to do so.
Impracticable means something less than impossible, but reinstatement will not be impracticable where it is inconvenient or difficult, without causing an unacceptable problem or unacceptable embarrassment, or seriously affecting productivity, or seriously affecting harmony within the employer’s business.
The question of whether or not it is impracticable to order the reinstatement of the respondent was the most difficult issue to resolve in the case. The reason for that is because during the course of the hearing of the matter, the applicant sent two faxes to Mr Matti Alahuhta, President of Nokia Communications in Finland. The respondent is the Australian subsidiary of the Finnish Company.
The first of these faxes (exhibit 37) consisted of fifteen pages, and the covering letter was dated 11 October 1995.
The second fax (exhibit 38) is a two page document, dated 17 October 1995.
In exhibit 37, the applicant made a number of very serious allegations concerning what he called “Numerous Nokia management staff”.
Part of that fax read as follows:
“....from what has transpired so far during the court case it could well be that incidents of sales tax and customs duty evasion could emerge as well as breaches of the immigration act. I don’t intend bringing these issues up but they may well emerge if the Nokia witnesses continue to make unfounded allegations against me.”
These are, in short, allegations of criminal conduct by Nokia management.
In exhibit 38, the facsimile dated 17 October 1995, the applicant accused Mr Frewen of having made “allegations under oath that just aren’t true”.
Once again this is an allegation of criminal conduct.
Also in that second facsimile, the applicant predicted that “Nokia are just going to get embroiled in a web of deceit. The company has already suffered the embarrassment of having one accountant telling untruths.....”.
The applicant went on to say in that fax, “Now the company is on the verge of having more untruths is on the verge of having more untruths exposed with Mr Schaaf and Mr Kvist.”
If either of Mr Frewen, Mr Schaaf or Mr Kvist would have to be in daily working contact with the applicant, I would find that his actions in sending such intemperate communications to the company headquarters in Finland would render it impracticable to order his reinstatement, because, to quote Wilcox CJ in Nicolson, it would be “likely to ....seriously effect....harmony within the employer’s business....”
But none of the persons named by the applicant will be working closely with him. The likelihood of an order for reinstatement having such a disruptive affect, of producing an unacceptable level of disharmony or seriously affecting productivity is, therefore, as a practical matter, low. There will probably be some disruption to harmony within the workplace, but, as his Honour, Marshall J, said in Abbott-Etherington v Houghton Motors Pty Ltd (WI 0429R of 1994, Industrial Relations Court of Australia, Marshall J, 28 September 1995, unreported), at page 7:
“....in almost every conceivable case where the Court has found that an employer has terminated the employment of an employee in contravention of Division 3 of Part VIA of the Act it is likely that an employer will form the view that harmony at the workplace will be affected by the return to work of the employee it has terminated. Such a happening, I believe, is unexceptionable.”
As I said in Doyle v Western Suburbs District Rugby Leagues Club Ltd, (NI 527 of 1994, Industrial Relations Court of Australia, 14 October 1994 unreported), if harmony or disruption at such a level were to play an undue role in the decisions of the Court in respect of reinstatement, then that would be to subvert the remedy of reinstatement as the primary remedy which Parliament intends under the Act.
The evidence also establishes that a person was employed to take over the applicant’s job immediately after the termination of his employment. The evidence establishes that the decision to terminate the applicant’s employment was made in late March or early April, and arrangements were thereupon put in train to find the applicant’s replacement. That factor is not, in the circumstances of this case, sufficient to warrant a finding that to order the reinstatement of the applicant would be impracticable.
Furthermore, reasons of policy make me reluctant to give such a factor any great weight - the reasons being that, if employers were able to argue that the fact that someone else has been employed to take the dismissed employee’s position renders the reinstatement of the dismissed employee impracticable, that would undermine the remedy of reinstatement as the primary remedy under the Act. To permit such an argument to carry any great force would be to permit employers to, unilaterally, prevent the reinstatement of dismissed employees, simply by promptly employing someone else.
In all the circumstances, therefore, in my opinion it would not be impracticable to order the reinstatement of the applicant, and I intend to do so.
Calculation of remuneration lost
At the time of the termination of his employment, the applicant was earning $35,000.00 per annum.
At the time of the termination of his employment, the applicant was given three months pay in lieu of notice. It follows that his remuneration lost will start to run from 3 September 1995.
The period from 3 September 1995 until today (30 April 1996) consists of 242 days.
$35,000.00 divided by 365 (to give the daily rate) multiplied by 242 (for the number of days in the relevant period) results in a total sum of $23,205.48 as the gross amount of remuneration lost by the applicant.
It will be necessary for the respondent to deduct tax at the appropriate PAYE rate, before paying the balance to the applicant.
In order for orders for a sum certain to be made, it will be necessary for the parties to attempt to reach agreement on the appropriate figures.
ORDERS
In all the circumstances, the Court makes the following orders:
The respondent shall forthwith reinstate the applicant by appointing him to the position in which he was employed immediately before the termination of his employment.
The employment of the applicant is, for all purposes, deemed to have been continuous in the position in which he was employed before the termination of his employment.
The parties will attempt to reach agreement on the appropriate figures for PAYE tax and the balance to be paid to the applicant, in accordance with the principles set out in the Reasons for Judgment. If agreement is reached a consent order may be filed pursuant Order 35 Rule 10. In the absence of agreement, written submissions on the calculation of PAYE tax shall be filed on or before 3 pm Tuesday, 14 May 1996.
Liberty to apply on not less than 48 hours notice to the other party.
The matter is adjourned sine die.
I certify that this and the preceding thirty-four (34) pages are a true copy of the reasons for judgment of Judicial Registrar Patch.
Associate:
Date: 30 April 1996
Appearances
Mr Keith Davis in person
Counsel for respondent: Mr Michael Sweeney QC
Solicitor for respondent: Gilbert & Tobin
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NI 2447 of 1995
BET WEEN :
Keith DAVIS
Applicant
AND
NOKIA TELECOMMUNICATIONS PTY LTD
Respondent
BEFORE: PATCH JR
PLACE: SYDNEY
DATE: 30 APRIL 1996
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The respondent shall forthwith reinstate the applicant by appointing him to the position in which he was employed immediately before the termination of his employment.
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The employment of the applicant is, for all purposes, deemed to have been continuous in the position in which he was employed before the termination of his employment.
The parties will attempt to reach agreement on the appropriate figures for PAYE tax and the balance to be paid to the applicant, in accordance with the principles set out in the Reasons for Judgment. If agreement is reached a consent order may be filed pursuant Order 35 Rule 10. In the absence of agreement, written submissions on the calculation of PAYE tax shall be filed on or before 3 pm Tuesday, 14 May 1996.
Liberty to apply on not less than 48 hours notice to the other party.
The matter is adjourned sine die.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
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