Franklins Ltd v Pearson

[1997] IRCA 288

INDUSTRIAL RELATIONS COURT OF AUSTRALIA

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - review of decision of judicial registrar - whether extension of time should be granted - goods of no value belonging to employer taken by employee without permission - employee failed to allow employer to inspect goods - whether employer had a VALID REASON to terminate the employment - whether essential condition of contract of service repudiated

Workplace Relations Act 1996 (Cth), s 170DE, s 170EA

Nelson v Scholle Industries (1995) 64 IR 9, distinguished
North v Television Corporation Ltd (1976) 11 ALR 599, applied

FRANKLINS LTD v GEOFFREY ROBERT PEARSON
NI 2286 of 1995

MADGWICK J
SYDNEY
4 NOVEMBER 1997

IN THE INDUSTRIAL RELATIONS COURT

OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NI 2286 of 1995

BETWEEN:	FRANKLINS LTD APPLICANT
AND:	GEOFFREY ROBERT PEARSON RESPONDENT

JUDGE(S):	MADGWICK J
DATE:	4 NOVEMBER 1997
PLACE:	SYDNEY

SHORT MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The decision of the judicial registrar be set aside.

1. The original application be dismissed.

IN THE INDUSTRIAL RELATIONS COURT

OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

 NI 2286 of 1995

BETWEEN:	FRANKLINS LTD APPLICANT
AND:	GEOFFREY ROBERT PEARSON RESPONDENT

JUDGE(S):	MADGWICK J
DATE:	4 NOVEMBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

HIS HONOUR:  The respondent, Mr Pearson, had been employed by the applicant company as a forklift driver at its Chullora warehouse for 6½ years.  In the early morning of 12 January 1995 an incident which involved Mr Pearson taking some damaged work clothing from the warehouse without permission led to the company terminating Mr Pearson’s employment later that day.  Mr Pearson lodged an application, out of time, under the Industrial Relations Act 1988 (Cth) (as it was then called) on the ground that his employment had been unlawfully terminated. A judicial registrar found that, in the circumstances, the Court should exercise its discretion to allow the application to proceed out of time. The judicial registrar also found that the company did not have a valid reason to terminate Mr Pearson’s employment, and awarded reinstatement and compensation for lost wages. This is a review of that decision under s 377 of the Workplace Relations Act 1996 (Cth) (“the Act”).

Background to the Review

The relevant facts, which were not in dispute, are as follows. Approximately ten minutes before the end of Mr Pearson’s night shift, he was seen by a security officer via surveillance cameras to take two bags from the applicant’s warehouse and put them in his car.  At the end of his shift, Mr Pearson drove his vehicle to the bundy area of the warehouse to “clock off”, and when he returned to his vehicle Mr Eddy, the assistant afternoon shift manager, and Mr Renton, a shift supervisor, were waiting to speak to him about the content of the bags.  Mr Pearson was told that he had been observed putting something into the trunk of his car, to which he replied that the bags contained old freezer clothing that had been discarded as rubbish.  Mr Eddy asked whether Mr Pearson had obtained a “gate pass”, under an established system of authorising the taking of items from the warehouse by employees.  The respondent replied that he had not obtained a gate pass, that the bags only contained rubbish and that he had not obtained a gate pass because he could not find a supervisor to issue one.  Mr Eddy asked Mr Pearson whether he had spoken to Mr Bowran, one of the supervisors on duty, to which Mr Pearson replied that Mr Bowran didn’t give gate passes.  Mr Eddy asked Mr Pearson to remove the bags from the car, and indicated that a gate pass would be issued.  Mr Pearson agreed, but then got into his vehicle and drove off without showing the contents of the bags to Mr Eddy or to Mr Renton.

The next day Mr Pearson was asked to go to the office for a meeting with management about the incident.  Expecting some trouble, Mr Pearson had brought the bags back with him to work.  At the meeting were Mr Pearson; Messrs Nasr and Scardinale, Mr Pearson’s union representatives; Mr Freitas, the shift manager; Mr Kane, the site manager for Chullora; and Mr Eddy.  Mr Kane indicated that the issues being investigated were the fact that Mr Pearson had gone to his car before the end of his shift, and that he had ignored a reasonable request by his supervisor to inspect the bags.  Mr Pearson stated that he did not believe that he was under any obligation to comply with management requests concerning searches as there had not been a union delegate present at the time.  Mr Pearson’s employment was then terminated on the grounds that he had taken damaged stock without a gate pass.

Extension of time - was it necessary and should it be granted?

The limitation period provided in the relevant version of s 170EA(3) required that an application be made (a) within 14 days after the employee receives written notice of the termination; or (b) within such further period as the Court allows on an application made during or after those 14 days.

The respondent did not lodge an application for a remedy under the Act until 26 May 1995, some four months after his termination. Mr Pearson’s explanation for the delay was that three days after his employment had been terminated, a union representative had a meeting with management to discuss the prospects of Mr Pearson being reinstated. Following this meeting, the union representative advised him that he had little chance of being reinstated. It was not until some time in April that the union advised the respondent to seek legal advice about a possible unlawful termination claim, whereupon Mr Pearson contacted legal aid authorities.

Mr Pearson also pointed to the fact that he had not received written notice of his termination, nor did he personally receive a copy of his employment separation certificate which the applicant had provided to the Department of Social Security on 10 February; furthermore, the certificate did not provide any reasons for the termination of employment, the applicant only indicating that Mr Pearson did not cease work voluntarily. The applicant submits that the issuing of the separation certificate on 10 February constituted sufficient notice to comply with the requirements of the Act. In Nelson v Scholle Industries (1995) 64 IR 9, von Doussa J held that the issuing of an employment separation certificate was sufficient to constitute written notice for the purposes of s 170EA(3)(a). However, the facts in Nelson are significantly different from those in this case; in Nelson the separation certificate had been supplied by the employer to the employee within a few days following the termination, and the certificate set out the reasons for the termination.  Furthermore, the applicant in Nelson had also received and signed a document produced by the employer which clearly stated that the employment was being terminated and indicated the reason for it.  Nothing that could be said to be written notice of termination was provided to Mr Pearson and so, because of s 170EA(3), time did not begin to run against him.

Alternatively, having regard to cases such as Hunter Valley Developments v Cohen (1984) 3 FCR 344 at 348-349, this is an appropriate case to grant an extension of time for the lodgement of the application: Mr Pearson has a reasonable explanation, and I can see no particular prejudice to the employer if an extension of time is granted.

Valid reason for termination?

The main question to be determined in this review is whether the respondent’s conduct was, objectively speaking, sufficiently serious to warrant summary dismissal.  Despite any harshness of the effect of a termination of his or her services upon an employee, the question is whether the reason for termination was valid:  Victoria v Commonwealth (1996) 138 ALR 129. This involves an inquiry as to whether, in all the circumstances, the employer’s reason was sound and just. Contemporary community notions of fairness should be applied: see generally Selvachandran v Peteron Plastics Pty Ltd (1996) 62 IR 371, Kerr v Jaroma Pty Ltd (Industrial Relations Court of Australia, Marshall J, 7 October 1997, Westen v Union Des Assurances Des Paris (Industrial Relations Court of Australia, Madgwick J, 17 December 1996) and Cosco Holdings Pty Ltd v Van Do and Ors (Industrial Relations Court of Australia, Madgwick J, 30 June 1997).

Mr Pearson drew attention to the facts that (a) the company did not have a consistent policy in regard to the issuing of gate passes, and the policy was haphazardly enforced, and (b) it was not proven that he took anything of value.  In my opinion, these factors are of little importance.  Mr Pearson refused what can only be regarded as a reasonable request from a senior supervisor, in circumstances of his own making that suggested possible stealing, and in the face of an offer to assist him (by getting him a gate pass) if his story proved to be legitimate.  It was his evidence that he knew that the correct procedure for taking company property from the plant involved taking the items through the bundy area so that a supervisor could inspect them; he had done this on a previous occasion.  Security was an important and legitimate concern of the employer.  Mr Pearson’s response to Mr Eddy’s request was, if not indicative of dishonesty, contemptuous of the employer’s reasonable concerns and rudely disobedient to the instruction conveyed by the request.  It can hardly be said that the decision to dismiss the respondent for non-compliance with the employer’s request to inspect the goods was capricious, fanciful or done out of spite:  Selvachandran.  Nor was it unfair or unjust:  Cosco.  Mr Pearson’s misconduct was, in my opinion, sufficiently serious to warrant dismissal.

Mr Pearson submits, alternatively, that there is a context which robs this misconduct of some of its seriousness.  He says that the applicant company had accepted the custom that there should be a union delegate present during car searches, and that it was normal practice for management to organise the attendance of union delegates.  In that context, it is submitted that Mr Pearson’s conduct could not reasonably be said to be such an offence against company policy that it warranted the termination of his employment.

There has been a history of industrial disputes over security and searches of employees’ property at the company’s Chullora plant.  In proceedings before the Industrial Relations Commission of New South Wales on 20 August 1993, it was noted by Commissioner Tabbaa that the parties had agreed to the following terms:

“-         delegates may be present at all searches;

-the presence of the union delegates is not one of active participation but more to act as a witness in the interests of the parties;

-it is up to the union delegates to ensure that they are present at the conclusion of each shift so as to witness the searches both at the warehouses and at the carpark areas. Otherwise the searches will proceed without hindrance in their absence; and

-the presence of the union delegates will not be considered as time worked for payment purposes.”

However, Mr Nasr’s evidence before the Judicial Registrar was that, if the company wished to perform a search, it was the usual practice that management would telephone a union delegate, advise that a search was to take place, and wait until the delegate was present before the search was carried out.  Mr Nasr recalled an incident where management had refused to call a delegate despite the employee’s request, and the employee did not allow his car to be searched. Although the formal warning to that employee was later withdrawn after Mr Nasr drew attention to the terms of the agreement (as set out above), he felt it was necessary to make an announcement over the public address system at the warehouse that members should not comply with searches if a union delegate was not present.  During this dispute, the common practice was for employees to drive off if a delegate was not present for the search.  In order to settle the dispute, it was agreed between the union and management that two delegates would be notified if a search was to take place, but that the onus was upon the delegates to be present at the search.

Mr Nasr’s evidence was partly supported by the evidence given by Mr Eddy and Mr Kane, who both conceded that it would have been prudent to ask for a union delegate to be present while Mr Pearson’s car was being searched. 

However, the applicant submits that the arrangement made with the union was only in relation to random searches, and that no such arrangement had been made with the union in relation to searches on the basis of suspected theft.  Mr Nasr admitted that the directive he gave to union members over the public address system was only in relation to random car searches, and Mr Pearson confirmed under cross-examination that this was his understanding of the directive.  The inference that this was Mr Pearson’s understanding, and that he did not base his refusal to comply with Mr Eddy’s request on his belief that a union delegate should have been present, can also be drawn from his own evidence that he only formed that opinion the following day after he had spoken to union delegates.  It would thus be reasonable to infer from both the context of the 1993 policy document, and the oral evidence, that there was an agreed practice for management to inform a union delegate before a car search was carried out, but that this agreement only related to random searches and not searches for cause, and that the respondent understood this distinction.  In any case, a reasonable employee in Mr Pearson’s position should so have understood the position.

It remains to consider whether a single serious act of misconduct ought to be held to warrant the termination of an employee’s employment.  In North v Television Corporation Ltd (1976) 11 ALR 599 at 609, the matter was put thus by Smithers and Evatt JJ:

“For the purposes of the application of the common law principles to the facts of this case, the remarks of the Master of the Rolls in Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 2 All ER 285 at 287 & 89 are in point.  He said - ‘To my mind the proper conclusion to be drawn from the passages which I have cited and the cases to which we were referred is that since a contract of service is but an example of contracts in general, so that the general law of contract will be applicable, it follows that, if summary dismissal is claimed to be justifiable, the question must be whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service.’
. . .
‘I do, however, think (following the passages which I have already cited) that one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one of its essential conditions; and for that reason, therefore, I think that one finds in the passages which I have read that the disobedience must at least have the quality that it is ‘wilful’; it does (in other words) connote a deliberate flouting of the essential contractual conditions.’”

Pilfering is an obvious risk in the warehouse of a large retail grocer where a large staff is employed.  Systems requiring employees’ cooperation must be put in place to seek to minimise pilfering.  No sensible employer would fail to do so, and any reasonable employee would concede this.  A system had been established here.  Thus it was a condition, and a necessary one, that employees should cooperate with the employer’s reasonable security requirements, unless there be some good reason for doing otherwise.  In this instance, the established security procedures were reasonable and Mr Pearson’s deliberate refusal to submit to them constituted, in my view, a repudiation of an essential condition of the contract of employment.

Accordingly, I find that the applicant company had a valid reason to terminate Mr Pearson’s employment.  The judicial registrar’s decision should be set aside, and the original application by Mr Pearson dismissed.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment of the Honourable Justice Madgwick.

Associate:        
Date:               4 November 1997

Appearances

Counsel for the Applicant:            J Wallace
Solicitor for the Applicant:            Taylor & Scott
Counsel for the Respondent:        A Rogers
Date of hearing:  11 November 1996