Goodings v Megabus Pty Ltd
[1997] IRCA 260
•13 Sep 1997
DECISION NO:260/97
INDUSTRIAL RELATIONS COURT OF AUSTRALIA
INDUSTRIAL LAW - termination of employment - relevant wages - operational requirements - consultation after the decision to terminate employment - offer of alternative employment - adequate consultation albeit after decision to terminate employment - termination for valid reason
Workplace Relations Act 1996 ss.170CD, 170DC, 170DE, 170EA
CASES:
Ardino v Count Financial Group Pty Ltd (1994) 1 IRCR 221; 126 ALR 49
Brown v Listaglen (1994) 59 IR 26 and Nixon v Ord Minnett Limited (No 1) (1996) 64 IR 356
Potter v Pilot Freight Pty Ltd (unreported, IRCA, Ryan JR, 17 May 1996)
Wolfer v Computer Associates Pty Ltd, (unreported, IRCA, Boon JR, 12 April 1995
Carydias v The Greek Orthodox Community (IRCA, unreported, North J, 20 February 1996)
Victoria v Commonwealth (1996) 138 ALR 120
Nettlefold v Kym Smoker Limited (1996) 69 IR 37
Kerr v Jaroma Pty Ltd (1996) 70 IR 469
Thomas v Ralph Lynch trading as Bellingen Grocery (1997) 71 IR 307
Westen v Union des Assurance de Paris (IRCA, unreported, Madgwick J, 23 December 1996)
Selvachandran v Peteron Plastics (1995) 62 IR 371
Kenefick v Australian Submarine Corporation (No 2) (1996) 65 IR 366
GOODINGS -v- MEGABUS PTY LTD
No. VI-2417 of 1996
Ryan JR
Melbourne
3 September 1997
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI-2417 of 1996
B E T W E E N :
STEWART GOODINGS
Applicant
AND
MEGABUS PTY LTD
Respondent
MINUTES OF ORDERS
Judicial Registrar Ryan 3 September 1997
THE COURT ORDERS:
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-2417 of 1996
B E T W E E N :
STEWART GOODINGS
Applicant
AND
MEGABUS PTY LTD
Respondent
Ryan JR
Melbourne
3 September 1997
REASONS FOR JUDGMENT
THE CLAIM
The Applicant seeks compensation in a claim of unlawful termination of employment. The Respondent provides computer hardware, software and services.
THE EMPLOYMENT CONTRACT
On 14 February 1995 the Applicant signed and accepted a written offer of employment dated 9 February (Exhibit R1).
The offer was described as “initially as a Senior Account Manager in the Quoteplus Team, working your way up to Sales and Marketing Manager for all products”.
The terms of employment set out in Exhibit R1 included
“starting salary package of $6,000 per month, which is to include all expenses such as lease of a motor vehicle, running expenses, telephone expenses etc”
“commission at a rate to be negotiated, however, if a sales budget is met, we’ll guarantee...some $20,000 commission”
“company will contribute superannuation at the rate of 4% of...salary into the company’s superannuation fund”
“period of notice of two weeks...by either party, prior to termination”
RESPONDENT DENIES JURISDICTION AND ASSERTS TERMINATION FOR VALID REASON
The Respondent asserts that subdivisions A, B and C of Division 3 of Part VIA of the Workplace Relations Act 1996 do not apply to the termination of the Applicant’s employment because the Applicant was continuously employed by the Respondent during the period of twelve months immediately before the termination date and on the termination date his relevant wages exceeded the applicable amount prescribed under s170CD(1)(a) and (2) and Regulation 30DA.
Alternatively, assuming the Applicant’s wages are held not to have exceeded the applicable amount, the Respondent asserts a sound, defensible and well-founded reason for terminating the employment of the Applicant because of a genuine redundancy brought about by operational requirements.
JURISDICTION SECTION 170CD(3)
At first blush, the details of earnings by the Applicant from 1 August 1995 to 30 July 1996 (Exhibit R3) suggest that the Applicant was an excluded employee with earnings in that period of $95,351.82. However, if “relevant wages” during the period of twelve months immediately before the termination day do not include the payments made in commission and for vehicle lease and vehicle expenses, the “relevant wages” in the relevant period seem to have been in the order of $62,980.10 ($59,292.48 and $3,687.62). If this be so, the relevant wages did not exceed the applicable amount and the Applicant’s claim is within jurisdiction.
The Respondent has conceded that commission payments and the non-contributory superannuation payments made on the Applicant’s behalf do not fall within the definition of “relevant wages” for the purposes of s170CD but argues that the payments for car expenses and car lease are within the purview of “relevant wages”.
Even if the Respondent had not made the concession in relation to commission, Judicial Registrars of this Court, following Ardino v Count Financial Group Pty Ltd (1994) 1 IRCR 221; 126 ALR 49, have often distinguished wages as a payment for services from commission as a form of remuneration. Examples include Brown v Listaglen (1994) 59 IR 26 and Nixon v Ord Minnett Limited (No 1) (1996) 64 IR 356.
The Applicant did not personally make any vehicle lease payments. The payments were made by the Respondent on behalf of the Applicant. Mrs Lyn Malley gave evidence to that effect and the payments are confirmed in Exhibit R2.
Non-pecuniary benefits are not included in “relevant wages”. (see Ardino at IRCR 221 and ALR 55).
I note again, as in Potter v Pilot Freight Pty Ltd (unreported, IRCA, Ryan JR, 17 May 1996) that taxation arrangements between employer and employee are relevant to what might constitute “relevant wages” and that the payments made for vehicle lease were not included in the Applicant’s taxable income.
Furthermore, given the arrangement reached with Mrs Malley, I am of the view that the lease payments were not wages which the Applicant was “entitled to receive” for the purposes of s170CD. In this respect, I rely on the Chief Justice in Ardino at IRCR 228 and ALR 54-55 as follows:
“the definition of ‘relevant wages’ is concerned only with payments that are wages, strictly so called. I do not think it includes payments made by an employer on behalf of an employee pursuant to a binding antecedent obligation, whether statutory or contractual....a payment made by the employer, that the employee was never contractually entitled to receive, cannot be regarded as “wages”. It is not sufficient that the payment arose out of the contract of employment....so far as money payments are concerned (superannuation, school fees etc) the critical question is whether the employee ever had an entitlement to receive the money himself or herself. This contractual arrangement between the employer and the employee was that the money would be paid to someone else as soon as the occasion arose to the exclusion of any right of the employee to obtain payment, the money was not something that the employee received or was entitled to receive.”
Again, I do not consider that a car allowance could be said to form part of “relevant wages” within the meaning of s170CD. A car allowance is intended to compensate an employee for the use of his or her vehicle used in the course of his or her employment. (see Wolfer v Computer Associates Pty Ltd, (unreported, IRCA, Boon JR, 12 April 1995)). The fact that cars in such circumstances are also commonly used for private purposes does not alter the purpose behind payment of the allowance.
I have concluded that payments made to the Applicant in commission and for motor vehicle expenses and for vehicle lease were not “relevant wages” and that the application is within jurisdiction.
THE RECRUITMENT OF THE APPLICANT TO THE REPAIR DIVISION
The Respondent operated three separate businesses namely
computer hardware, software and backup services to the motor vehicle body repair trade (repair division)
computer hardware, software and backup services to the motor vehicle retail tyre industry (tyre division)
sale of computer parts (office product division)
The Applicant had 18 years experience in the tyre industry. He was approached by Mr Jeffrey Malley, Managing Director, to work for the Respondent. At that time he was Sales and Marketing Manager for Precure Systems Australia. It is common ground that Mr Malley told the Applicant and others on a number of occasions that he intended to groom the Applicant for the position of Managing Director.
The Applicant began work in the repair division. He also claimed that a fair amount of his time was devoted to the tyre and office products divisions.
DEGREE OF INVOLVEMENT IN TYRE AND OFFICE PRODUCTS DIVISIONS
The evidence here diverges. Mr Malley has described the Applicant’s involvement in the tyre division as “minimal” and “minor” and “minuscule”. The Applicant has submitted, through Counsel, that this represents an attempt by Mr Malley to minimise the role the Applicant played in all areas of the business. However, the Court has reached the opposite conclusion, namely, that the Applicant has exaggerated his involvement in the tyre and office products division. While there is evidence that the Applicant performed certain tasks in relation to Bridgestone invoices in the tyre division and data bases in all divisions, the Court does not accept his claims that he was indirectly responsible for sales in the tyre division and directly responsible for the supervision of George Tzilantonis in the tyre division. The Court notes and accepts the evidence of Mr Malley that Mr Tzilantonis was a top salesman and that his work was not supervised by the Applicant.
In reaching the conclusion that the Applicant did not contribute to the tyre division or the office products division or in general in sales and marketing to the extent he has claimed, the Court has taken account of certain documentation tabled as Exhibits R5, R6, R7 and R8.
As early as 25 October 1995 Mr Malley had signed a very favourable employee evaluation in which the Applicant was described as “sales and marketing manager” in the “sales department”. (Exhibit R5). The Evaluation Report suggested that Mr Malley had implemented the plan outlined in the employment offer of 9 February (Exhibit R1) which had been stated to be “initially (employment) as a senior account manager in the “Quoteplus team, working your way up to sales and marketing manager for all products”.
The general tenor of the evidence at the trial suggested that while the Applicant was described as sales and marketing manager in the sales department in the evaluation of 25 October 1995, his major work continued to be in the repair division. There is support for such a conclusion in the evaluation of 25 October. Although Mr Malley had completed the section of the report entitled “comments by evaluating supervisor/manager” by printing and initialling the words “very very happy” he also wrote under the Performance category of “Attitude” the following
Attitude is excellent. Needs now + ramp up management of team, which will require a little less hands on selling and more management and control of team. Now needs to understand “tyre” side of business....
Under the heading of “skills, capabilities or experience..not being used that can benefit..work or future with Megabus”, Mr Malley wrote “more of a management of the total sales team role”.
Under the heading “what can Megabus do to help you to perform your current job better?” Mr Malley wrote “Marlin training, Microscopy training”.
In an intra office memo to the Applicant on 8 May 1996 (Exhibit R6) headed Performance Review Mr Malley wrote
“You must be aware that I have not been happy with your performance over the past few months.
Irrespective of the RACV situation, there simply has not been evident, sufficient pro-active, yet basic creative sales management and initiatives. In addition, there seems to be an unacceptable long delay from the time an event is discussed, to the delivery and or finalisation of that event.”
Mr Malley gave examples of what he considered areas of “delay” and he listed fifteen “suggested areas of improvement”. The sixth of the “areas of improvement” was described as follows
“Tyre Industry - make yourself aware of the Marlin Product - sit in on some of George’s demo’s (Tzilantonis) - accompany George on some sales calls - meet with some of George’s customers etc”
The Applicant replied in detail and immediately (Exhibit R7). The reply makes some concessions but the Applicant pointed out in his first sentence
“I have not been aware of you being unhappy with my performance over the last few months. I have however noticed you being unhappy with revenue and management issues generally.”
The Applicant was also critical of the Respondent’s overall management and operations. The following are examples of comments made by him in his reply of 8 May
“Quality Control - Our QC is poor, our product is incomplete. When customers finally get a system they have enormous problems (check the support log for the 10 new QP4W sites)(NB - not all calls are being logged). Our name is not good out there. We still don’t have our operating system locked in.
If Megabus is a sales driven organisation it must have been hijacked by Admin and Development when no one was looking.
I’ve been expected to drive the sales team (with no incentive), make sales (with no product) help keep support running smoothly (no management) and you’re unhappy with my performance.”
On 13 May 1996 Mr Malley discussed the reply with the Applicant and wrote the following comment on the Applicant’s response
“Reviewed this response with SWG (Applicant) 13/5/96 9:30am in his office. Told him it was not accepted as “too defensive” and too ready to blame others! Jeff.”
SALE OF THE REPAIR DIVISION
Early in 1996 the RACV Insurance Company established in-house repair workshops and cut back on sub-contracting motor vehicle body repairs. This change resulted in decline in demand for the Respondent’s goods and services. RACV approved repairers had represented the major customers of the Respondent’s repair division. The division began to lose money immediately. Negotiations between Mr Malley and senior members of the division led to the sale of the division in early June with handover occurring on 1 August. On 4 June Mr Malley advised the Applicant that
the division had been sold to two employees, Dylan De Silva and Stephen O’Brien
Messrs De Silva and O’Brien proposed to employ all members of the repair division except the Applicant in their new business
the Respondent “had nothing to offer (the Applicant) in the tyre division”
the Applicant would be made redundant with “a departure date” of 15 August
Mr Malley confirmed these matters in a letter to the Applicant on 10 June (Exhibit R4).
NO CONSULTATION BEFORE DECISION TO TERMINATE EMPLOYMENT
There was no consultation with the Applicant prior to the decision on 4 June that he was to be made redundant. There was no consultation with the Applicant between 4 and 10 June when Mr Malley confirmed in writing
the offer of “a Management Buy Out...of the repair division...from (Messrs) O’Brien and De Silva”
acceptance by the Respondent of the Buy Out “subject to satisfactory terms”
the position of Messrs O’Brien and De Silva described as “the MBO have made it known that they will not require your services”
the position of the Respondent described as “as I have explained to you, Megabus has nothing to offer you in the Tyre Division”
a departure date described as “as discussed with you, we confirm your redundancy, with the departure date being 15 August 1996”
If the implementation of the decision to make the Applicant redundant from 15 August 1996 had proceeded without any discussion of alternatives and without any offer of alternative employment the Court may well have found that the termination was not for a valid reason. However, while discussion of alternative employment took place after the decision to terminate the employment, such discussion did occur in the later part of July and in early August. Mr Malley, in cross-examination, conceded that he did not give the Applicant any “other options (i.e. to redundancy) before 10 June”. However, he stated that he “began to discuss options in the latter part of July” and that the Applicant “attended my home” and “we were going through the viability of an offer to him”.
OFFER OF ALTERNATIVE EMPLOYMENT
An offer described as “a change in responsibilities” was made in writing on 5 August. The offer referred to “recent discussions” and was an offer to the Applicant of a position of sales and marketing manager on a base salary of $48,000 per annum with $2,000 per month to be paid as an advance on future commission. Personal and “team” gross profit revenue targets were set and commission was offered to the Applicant at 10% of gross profit on sales achieved by him and 2.5% of gross profit on sales achieved by three sales persons in the team. All other terms and conditions of the Applicant’s original employment in February 1995 were to apply including terms and conditions relating to working hours, leave, superannuation, probation, discipline, counselling, termination of employment, notice and restrictions on disclosure of confidential information.
The offer resulted from an agreement to increase the supply of hardware, software and services to the Bob Jane Tyre franchise network. The Respondent claims that “the remuneration package (offered to the Applicant), while having a lower threshold salary, involved a makeup component of guaranteed advances against commissions so as to provide a guaranteed $72,000 minimum earning package with a realistic earnings potential in the vicinity of $100,000 per annum”.
Both the Applicant and Mr Malley agree that there were “several discussions” in relation to the offer of employment.
The Applicant gave evidence that he viewed the offer of employment as an offer which represented less pay than he had previously received. Though the rate of commission offered had increased, the base salary had been reduced from $60,000 to $48,000. The Applicant also gave evidence that he did not accept that the sales targets listed in the document were guaranteed and thus took the view that he was being offered employment on less lucrative terms than he had previously enjoyed.
The Applicant also gave evidence to the effect that on 5 August he told Mr Malley that he did not want to accept what he considered an actual or likely reduced level of remuneration and that he wanted his remuneration to remain “as it was”. He conceded that the Respondent’s written offer of 5 August (Exhibit R10) may have been Mr Malley’s response to his position.
The Applicant also asserts that at a meeting on 9 August, in the presence of the Respondent’s Accountant, Ronald Collett, he discussed further with Mr Malley the offer outlined in the letter of 5 August and during the conversation Mr Malley said
“I can sense a lack of commitment from you. I want to withdraw the offer.”
The Applicant states that he replied
“I can understand that.”
And that Mr Malley then went on to say
“Do you understand what I mean?”
And that the Applicant replied
“Yes”
Mr Malley was cross-examined with some vigour on the conversation on 9 August. First of all he stated that in earlier discussions leading up to the offer of 5 August the Applicant had indicated that he needed time to think and on 9 August the Applicant repeated that he required time to think about the offer particularly as his wife was ill. Mr Malley conceded that he had some recall of referring to the Applicant’s “lack of commitment”. At one state in cross-examination, Mr Malley quite firmly denied that he used the words “I withdraw the offer”. Soon thereafter he said “I cannot remember whether I made those comments. On 9 August Mr Collett was there. I do not remember saying it. I do not deny saying it.” At this stage in cross-examination it was not clear whether Mr Malley was responding to questions by stating that he did not recall but did not deny the possibility that he withdrew the offer or whether he was simply responding that he did not (at that stage) recall or deny a reference to “lack of commitment”.
Later again Mr Malley said, “In my opinion the offer was still open. I do not recall withdrawing the offer”.
Mr Collett’s evidence included the following
“The Applicant was a bit ambivalent about the role. He was not fully happy. He did not reject the offer because I recall he said he would be considering the offer and said he would get back about the offer. I do not recall Mr Malley saying he wanted to withdraw the offer - not at all. The Applicant said ‘I will get back to you’. That is absolutely my recollection. The Applicant said he would get back. I do not recall a statement from Mr Malley that he sensed a lack of commitment”.
Counsel for the Applicant submits that Mr Malley was evasive under cross-examination on the issue of alleged withdrawal of the offer. Counsel’s submission is as follows
“When the ‘withdrawal’ conversation was put to him he stated variously that he could not recall and could not deny having said it. The Applicant submits that these answers were wholly unconvincing. The withdrawal of the offer of alternative employment is not something that it is likely Mr Malley would forget. By the same token, it is not something it is likely that the Applicant would forget, and the Applicant has given credible evidence in this and all other regards. Further, it is unlikely that the Applicant, who was unemployed between August and December 1996, would have simply failed to reply to an offer of employment, even one at less pay than he had previously enjoyed. The Applicant submits the Court should find on the balance of probabilities that the offer was withdrawn by Mr Malley. This being the case, the evidence in relation to the offer and subsequent withdrawal of the position in the Tyre Division is only evidence that the Applicant has not failed to mitigate his losses.”
I do not accept that Mr Malley was evasive under cross-examination. He was uncertain but in my view he was not evasive. Furthermore, I do not accept that it follows as unlikely that the Applicant, unemployed between August and December 1996, “would have simply failed to reply to an offer of employment”. The Applicant has given clear evidence that he did not believe that the commission offered would be easy to earn. His unwillingness to accept the position on the terms and conditions offered could well constitute a potent motivation and reason for a failure to reply to the offer of employment.
There is also the correspondence about performance between the Applicant and Mr Malley on 8 May (Exhibits R6 and R7) in which Mr Malley criticised the Applicant’s perceived defects in sales management, especially in the tyre division, while the Applicant responded with criticism of management and quality control and complained that he was “expected to drive the sales team with no incentive”. Certainly the offer of increased commission might have constituted increased incentive but the Applicant made it abundantly clear in his evidence that he considered a decrease in base salary and increased sales targets unpalatable and difficult to achieve.
After observing Mr Malley under cross-examination, and after hearing the evidence of Mr Collett and the evidence of the Applicant as to the discussion on 9 August, I do not accept that Mr Malley ever withdrew the offer of 5 August. In my view, on 9 August, Mr Malley expressed some exasperation with the Applicant who clearly was not expressing enthusiasm for the position in the form set out in the letter of 5 August. Mr Malley does concede that he did say to the Applicant that he sensed a lack of commitment on the part of the Applicant. I am sure he did say that and that this was a correct assessment of the Applicant’s position although Mr Collett does not recall such a statement.
Counsel for the Applicant also asserts that
the offer of 5 August cannot be relied on as evidence that the Respondent fulfilled its duty to consult with the Applicant and/or considered offering him alternative employment before making him redundant
the offer of the position in the tyre division was made “two months” after the Applicant was informed he was to be made redundant
the offer was made at a time when the Applicant was working out his notice
the terms were not discussed before the decision to terminate the employment was communicated to the Applicant in June 1996
Except for a slight exaggeration as to the time elapsing between advice of redundancy and the offer of the alternative position, the second, third and fourth assertions are indisputably correct but I do not accept the first assertion. In Carydias v The Greek Orthodox Community (IRCA, unreported, 20 February 1996) North J commented at 40:
“The need to consult is not a rigid requirement. The extent to which it is required, how it is to be satisfied, and even whether it is required at all, depend on the circumstances of the case.”
CONSULTATION AFTER DECISION BUT BEFORE TERMINATION OF EMPLOYMENT
This is a case where the circumstances required consultation. However, in my view, consultation during the long notice period, albeit after the decision to terminate had been taken, amounted to adequate consultation. I do not accept that the “post validity” decisions of the Industrial Relations Court of Australia since Victoria v Commonwealth (1996) 138 ALR 120; namely the decisions of Nettlefold v Kym Smoker Limited (1996) 69 IR 370; Kerr v Jaroma Pty Ltd (1996) 70 IR 469; Thomas v Ralph Lynch trading as Bellingen Grocery (1997) 71 IR 307; Westen v Union des Assurance de Paris (IRCA, unreported, Madgwick J, 23 December 1996); and Carydias; apply in the sense of a decision taken for a reason which lacks “validity” because of some “subjective” assessment by the Respondent of operational requirements. I do not accept that the decision was not valid in terms of Selvachandran v Peteron Plastics (1995) 62 IR 371. I consider the decision was “sound, defensible and well-founded”, given the consultation in late July and early August and the offer of alternative employment.
On 12 June, when the Respondent confirmed the decision to terminate the Applicant’s employment, the decision was based on the operational requirements of the undertaking. It was a decision necessary to advance the undertaking and a decision consistent with the management of the undertaking. In my view, the Respondent at that time, had not met obligations to the Applicant but did so during the period of notice.
In terms of Westen, this is a case in which a “reasonably practical alternative to the termination....was offered”, albeit well after the decision to terminate had been made. There was ample time for the Applicant to accept the alternative during the notice period. He declined to do so. The Applicant also had ample opportunity to suggest other alternatives. There may have been none but he had that opportunity and there is no evidence he suggested any other alternative.
VALID REASON FOR TERMINATION
I have concluded that there was a valid reason for the termination of the Applicant and that the application should be dismissed.
I would add that if I am wrong and if the consultation in late July and early August, and the offer of alternative employment on 5 and 9 August, are insufficient to “validate” a termination determined earlier and based on operational requirements, the circumstances are such that I would have declined to order compensation because of the failure of the Applicant to mitigate his loss by accepting the alternative employment.
PROCEDURAL FAIRNESS/SECTION 170DC
I do not accept that Mr Malley’s decision to select the Applicant for redundancy was a decision reached after any comparison with other employees in terms of conduct or performance (see Kenefick v Australian Submarine Corporation (No 2) (1996) 65 IR 366 at 372).
In the circumstances s170DC was not applicable and there was not and could not be any breach of that section.
MINUTES OF ORDERS
THE COURT ORDERS:
That the application be dismissed.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Court Rules
I certify that this and the preceding 9 pages are a true copy of the reasons for judgment of Judicial Registrar Ryan.
Associate:
Dated: 3 September 1997
Solicitors for the Applicant: G C F Mier & Associates
Counsel for the Applicant: Rachel Doyle
Solicitors for the Respondent: H T Davies
Counsel for the Respondent: Anton Lindeman
Date of hearing: 7 and 19 March 1997
Date of judgment: 3 September 1997
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