Geoffrey Allan Middleton v Sidley Pty Limited

[1995] IRCA 271

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA  
VICTORIA DISTRICT REGISTRY

VI 1065 of 1995

B E T W E E N

Geoffrey Allan MIDDLETON
Applicant

A N D

SIDLEY PTY LIMITED
Respondent

REASONS FOR JUDGMENT

23 June 1995  PARKINSON JR

This application is made pursuant to S170EA of the Industrial Relations Act 1988. In addition, the applicant makes a claim in the accrued jurisdiction of the court in relation to alleged breach of contract. This breach is said to arise out of a failure by the respondent to pay overtime to the applicant. The latter claim was expressly made in the application filed in accordance with Order 75 of the Rules of Court, and the claim was particularised by the applicant’s counsel in his opening.

The jurisdiction of the court to entertain claims of a contractual nature in its accrued jurisdiction has been the subject of consideration in a number of decisions of this court.  I am satisfied that in relation to the subject matter of this claim, it is a matter arising out of the circumstances of the employment and the termination, and is a matter convenient to be dealt with in the course of these proceedings. In this regard I have considered the following decisions of the court: Grout v Gunnedah Shire Council (No. 2) (unreported, Moore J, IRCA 13/02/95), and Ardino v Count Financial Group Limited (1994) 126 ALR 49.

Further, the contractual claim does not exceed any jurisdictional limit which may be exist by virtue of the provisions of  S376(2) and Order 74 r.3. I have decided to exercise my discretion to determine the contractual claim.

Background to the termination of employment
The applicant was employed by the respondent on 28 March 1992 as a shop assistant, driver and furniture maker for the respondent’s retail furniture store in Bendigo. He was responsible for retail sales, deliveries, buying and the production or repair of items of furniture for retail sale.

The applicant’s evidence was that his employment was terminated on 30 December 1994 as a result of the respondent’s managing director and store manager, Mr Stanyer, alleging that the applicant had been trading in secondhand goods privately and in competition with him. The applicant’s evidence was that Mr Stanyer attended at the store on 17 December 1994 and, in an angry manner and using colourful language, accused the applicant of this conduct. In the course of this discussion he was told that his employment was terminated, effective end December, 1994. On 30 December 1994 that termination of employment was effected. The applicant says that any downturn in business was not the true reason for the termination of his employment.

The respondent’s evidence was that the conversation in the terms alleged by the applicant did not occur and that the reason for the termination of the applicant’s employment was the operational requirement of the business. Mr Stanyer’s evidence was that the applicant’s position was made redundant as a result of an alleged severe downturn in trade which, it was submitted on behalf of the respondent, had been occurring for a substantial period of time.

Both parties acknowledge that a conversation did take place on or around 17 December 1994, and that the subject matter of that conversation was the termination of the employment of the applicant. I am satisfied that it was likely that included in that conversation was a discussion of the applicant’s private activities in advertising secondhand goods for sale. However, I am also satisfied that some consideration of the ongoing decline in the receipts of the business was a factor in the termination of the applicant’s employment.

In relation to the ongoing decline, the respondent relies upon records of cash receipts extracted from the account books of the respondent, together with bank pay-in books and receipts (Exhibits C1 and C2).  There was also a table tendered by the respondent setting out what it relied upon as being an overall reduction in profit such as to identify a severe downturn in the business (Exhibit C3). The material relied upon by the respondent did not include profit and loss statements of the respondent. Profit and loss statements, or financial records of that type and reliability, are the type of documents I would expect to see in circumstances where there is dispute between the parties as to the bona fides of the operational requirement alleged. In this case the dispute extended to the very reason for the termination.

On balance, having regard to this material and in particular to the applicant’s evidence acknowledging that there had been a slow down in the business takings over some period of time, I am satisfied that the respondent had valid reason for the termination of the applicant’s employment. It should be noted that in the absence of such evidence from the applicant, on the material before me, and in particular having regard to the fluctuation in the records provided and their inadequacy to establish the true trading position of the respondent, I would not have been so satisfied.

Having regard to the above matters I am on balance satisfied that the respondent had a valid reason related to the operational requirements of the business for the termination of the applicant’s employment.

S170DE(2) - Harsh, Unjust or Unreasonable
I turn now to consider the question of whether the termination of employment was harsh, unjust or unreasonable. 

The evidence was that the respondent employed additional staff, both a replacement employee and an additional staff member, during the period when trade was at its most significant downturn, and at a time when Mr Stanyer had, on his own evidence, already become concerned as to the earnings of the business. Whilst the evidence is that no person was engaged to fill the applicant’s position,  I find it difficult in the context of the considerations which arise in S170DE(2) to accept the evidence of the respondent that on the one hand it had been concerned by a major downturn in business for approximately 12 months, yet on the other it set about replacing persons who left its employ, and in addition engaged an additional employee in the relevant period.

The respondent says that the duties of the replacement employees required different skills to those held by the applicant, and that he would not have been suitable for such positions. However, there is no evidence of the respondent discussing any of these positions with the applicant at any time during the lead up to the termination despite the ongoing concern of the respondent as to trade and profitability, and the ultimate decision being made to terminate the applicant’s employment due to alleged redundancy.

The applicant had performed sales duties. That is how he described his occupation both in his evidence and in the application filed in the court. One of the positions in which a new employee was engaged was a sales based position. No consideration of this position was made despite the respondent’s evidence that at that time the downturn had already occurred. The most recent hiring of a person occurred in June 1994 in a position for which the applicant, on the evidence before me, appeared qualified.  

One other aspect about which the respondent has not satisfied me is the selection of the applicant as the employee to be made redundant. The respondent’s evidence was that the applicant was the most appropriate to go because, notwithstanding that he was the longest serving employee, the employee engaged in June 1994 had a heavy truck licence and the applicant did not.

I am not satisfied that the applicant was ever informed that in the absence of him obtaining a heavy truck licence his employment was in jeopardy as a result of the downturn in income of the business. Whilst the evidence was that there had been some discussion of the applicant obtaining such a licence, he was never requested or instructed to qualify for such a licence, and he was never told by the respondent of the criteria which the respondent applied to determine that he would be the person selected for redundancy.

The applicant, despite being the longest serving employee of the respondent, was selected for redundancy on the basis of criteria, apparently and singularly the heavy truck licence, which was never discussed with him. No regard was had to the length of his service with the respondent or the manner in which he performed his duties or any other criteria which may have been relevant and which the applicant may have, if given an opportunity, brought to the respondent’s attention. Further, I am not satisfied that there was any or any reasonable consideration by the respondent of the skills and ability of the applicant as against those of other employees.

I find pursuant to S170DE(2) of the Act that the termination of the applicant’s employment by the respondent was harsh and unreasonable, for substantive and procedural reasons.

Remedy
The applicant was able to obtain alternative employment on 7 February 1995.  The position he obtained was a full time position in furniture sales.
The applicant says that in view of this and his desire to remain with his present employer, reinstatement would be impracticable. In view of the possibility that there would be further uncertainty for the applicant if he were reinstated, and his express desire to remain in his current employment, I am satisfied that an order for reinstatement would be impracticable.

I turn therefore to consider the nature of any remedy in compensation which ought be given.  The respondent’s counsel submitted that in view of the applicant receiving his accrued annual leave entitlement upon termination, and the likelihood that the applicant would have taken this annual leave in January 1994, the court ought deduct that period from any amount of compensation awarded.  I do not accept that the evidence established any likelihood that the applicant would have taken annual leave at that time. Further, annual leave is an entitlement already accrued to an employee pursuant to clear statutory entitlement and, in my opinion, is not appropriate to be set off against compensation where a clear contravention of the provisions of this Act has occurred and an applicant is, by reason of S170EE, entitled to a remedy.   

In this matter I have decided to order that the applicant be paid compensation in the sum of $ 2,240.00, being the amount he would have earned between the date of the termination of the employment and the date of his obtaining alternative employment on a full time basis. This sum also contemplates lost accrued service entitlements. There are no circumstances in this matter which would suggest that an order for an amount representing   compensation for any continuing loss is appropriate.

The Contractual Claim for Overtime
The applicant claims 120 hours of unpaid overtime for 1993, and 50 hours of unpaid overtime in 1994. The applicant’s prescribed hours of work were 9.00am to 5.30pm, five days per week, but the evidence in the proceedings was that he worked significantly longer hours during the course of his employment with the respondent. The evidence was that he worked each Saturday morning together with some evenings.

This case is an example of the difficulties which arise for employers when they fail to keep or maintain adequate records in relation to their employees and their employment, including their actual hours of work on any relevant day. This of course is not any longer a matter of mere observation as to what is desirable, but is rather an observation that there is a requirement under S353A and Regulation 131 of the Industrial Relations Act 1988 that records be kept in relation to the hours of work of employees. Apparently no such records were kept by this respondent, as they were not produced in these proceedings.

The respondent did not submit that there was no entitlement to payment for overtime worked arising out of the contract of employment between the parties. The applicant asserted that the overtime entitlement he was claiming was an entitlement to be paid hour-for-hour at the ordinary rate of payment. No clear submission was made by either party as to the legal basis upon which the entitlement to any overtime payment arose. There was in the way in which the proceedings were conducted an assumption by the parties of an entitlement at law to the overtime payments.

Whilst it is likely that the terms and conditions of an award of the former Industrial Relations Commission of Victoria (now the Employee Relations Commission of Victoria), in particular the General Shops Award, applies by operation of the Employee Relations Act 1991 (Vic), nothing was put to me by either party as to the specific terms of that or any award in relation to overtime payment entitlements.  I am therefore left to determine, by reference to limited material, whether such an entitlement existed.

The applicant asserts that it was a term of the contract, and of this there is no evidenced denial by the respondent.  Further, the evidence of the respondent was that there was agreement between the parties that the applicant would take time off in compensation for the hours of overtime which he worked. This was to be taken on an hour-for-hour basis. In the respondent’s evidence there is an acknowledgment of the obligation of the respondent to compensate the applicant for overtime worked by him.

Having regard to these matters, whatever way the contractual entitlement may have arisen, whether by operation of statute or by agreement express or to be implied between the parties, I am satisfied that such a term of the contract did exist and that the term was that the applicant was entitled to be paid for overtime worked.

It is necessary to determine at what rate the applicant was entitled to be paid. Whilst there is no express term in that regard, it is necessary for such a term to be implied by the court in order to give business efficacy to the contract. In the absence of any evidence of a loaded rate of payment, I can only conclude that the applicant’s entitlement was to be paid for the hours worked at the ordinary rate of payment he received per hour. I do this by reference to the evidence of the applicant as to the amount of the hourly rate of pay agreed between the parties, and the evidence of the respondent as to set-off discussed above.

I turn now to consider the number of hours alleged by the applicant to have been worked as overtime hours.  The evidence of the applicant was that he had commenced to keep records of his hours of overtime in January           1993.  This occurred, he said, as a result of advice he received from an inspector with the Department of Business and Employment.  These records are exhibited in the proceedings as Exhibit M1. The evidence establishes that the records tendered were not the actual recordings of the hours made by the applicant during the course of that period of time, but rather a re-writing of those records for the purpose of their presentation in this court. It was put to the applicant that the notes were not contemporaneous, but it was not suggested that his records were false. Rather the respondent’s evidence was that any hours of overtime worked had in fact been compensated for by way of equivalent time off. Whilst no records exist of any time granted to the applicant in this regard, the applicant has given evidence of having taken approximately half of one day for his own purposes during the period of his employment.

I have carefully examined the material in Exhibit M1 for the purposes of determining whether the applicant has established the hours claimed. I am satisfied on the evidence before me that the applicant’s claim in respect of the hours worked on Saturdays in the period January to December 1994 have been adequately established on the material tendered. The applicant gave evidence as to the circumstances of that work, and in particular there was identified various sales made and actual customers attended to on each date. In relation to the claim for overtime in 1993, in the absence of the actual diary notes or records as opposed to the transposed information, I have difficulty being satisfied that the hours alleged were accurate. In relation to 1993, no evidence was given by the applicant as to the factors which enabled him to identify the hours worked or as to any other factor, such as dockets issued or customers served.

I find that the respondent failed to pay to the applicant the amount of overtime to which he was entitled pursuant to the terms of the contract of employment in relation to overtime hours worked on Saturdays in 1994.  The applicant’s hourly rate of pay was $ 11.05.  The applicant is entitled to damages for breach of contract for unpaid overtime in the sum of $552.50 and I will so order.

The orders of the court shall be:

1. That the respondent pay to the applicant the sum of $2,240.00 in compensation pursuant to S170EE(2) of the Industrial Relations Act.

2. That the respondent pay to the applicant the sum of $552.50 by way      of damages for breach of contract for unpaid overtime.

3. That the time for payment is twenty-one days from the date of this         order.

I certify that this and the preceding twelve (12) pages
are a true copy of the reasons for judgment of
Judicial Registrar Parkinson.

Associate:
Dated:   23 June 1995

Solicitors for the applicant:                       Petersen Westbrook Cameron
Solicitor appearing for the applicant:                 Mr B Cameron

Solicitor for the respondent:  Beck Sheahan Quinn Kirkham
Counsel appearing for the respondent:               Mr M Campbell

Date of hearing:  15 June 1995
Date of judgment:  23 June 1995