Karen Smahel and Kerry McGee
[1994] IRCA 74
•24 Oct 1994
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA NI No. 150 of 1994
SYDNEY DISTRICT REGISTRY
BETWEEN:
KAREN SMAHEL
Applicant
AND:
KERRY McGEE
Respondent
MINUTES OF ORDER
24th October 1994 LINKENBAGH JR
THE COURT ORDERS THAT
1.Pursuant to the provisions of Section 170EE of the Act the respondent is to pay the applicant compensation in the sum of $8000.
2.The Principal Registrar of this Court forward to the Attorney General, for reference to the Australian Taxation Office, a copy of these reasons and the transcript of the evidence of the applicant in these proceedings.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA NI No. 150 of 1994
SYDNEY DISTRICT REGISTRY
BETWEEN:
KAREN SMAHEL
Applicant
AND:
KERRY McGEE
Respondent
Reasons for Judgement
24th October 1994
LINKENBAGH JR
The applicant, Karen Smahel, makes an application under Section 170EA of the Industrial Relations Act 1988 and her right to make an application arises under that section. The applicant is quite clearly an employee and the respondent is her employer for the purposes of these proceedings. There seemed to be some indication in the evidence that the employer may well have been Kerry McGee Pty Limited but the respondent did not raise that as an issue and for the purpose of the proceedings Kerry McGee personally is treated as the employer. The application was made within the time allowed under Section 170EA.
An application can be brought by a person who alleges that they have rights under 170EA of the Act. That Section imposes a prohibition on the termination of employment unless there is a valid reason for that termination and subsection 2 of that section indicates that a reason is not valid if that reason is harsh, unjust or unreasonable. The applicant seeks a remedy under Section 170EE of the Act. The primary remedy available under Section 170EE is for reinstatement and the section goes on to say in subparagraph 2 that if reinstatement is impracticable then compensation may be awarded by the Court in such amount as the Court thinks appropriate.
It is common ground in these proceedings that reinstatement is impracticable and the issue of reinstatement has not been argued by either party. The evidence before the Court was the oral evidence of the applicant and an affidavit sworn by her in support of her application on 10 April 1994. The evidence for the respondent was sparse to say the least. The respondent herself has chosen not to engage in these proceedings either by swearing an affidavit on which she might have made herself available for cross-examination or by attending before the Court to give oral evidence.
The respondent’s evidence consists of an affidavit sworn on her behalf by Anthony John McGee on 25 May 1994 and on the oral evidence of Mr. Boorman who is an officer of Kelly McGee Pty Limited. It is of note that the respondent did not take issue with any of the evidence in the applicant’s primary affidavit except for clarification of the period of employment. The facts that are found by the court are as follows:
The applicant was in full-time employment with the respondent between January of 1993 and August of 1993 and between 20 December 1993 and 8 April 1994.
The applicant’s duties were described by her as being a nanny and house manager. She had the care of two children, a boy aged ten and a girl aged two and she did all the usual household management chores. She paid bills, ran people around in motor vehicles, bought flowers, did the shopping, shopped for children’s clothes and committed herself to an on-call and overnight arrangement with the respondent to provided those services. Her evidence was that at times she spent three or four nights at a time at the respondent’s home in relation to her duties.
The termination of employment is in respect of the second period of employment, that is ending on 8 April 1994.
The first period of employment is relevant as establishing the relationship between the appellant and the respondent and that relationship is seen as being mutually very close and trusting.
The first period of employment ended at the initiative of the applicant because of her reaction to the return to the respondent’s home of a man who had previously lived with the respondent. That man had in the past displayed sexually offensive conduct towards or in the presence of the applicant on two occasions and on at least one occasion in the presence of the younger child.
Although the first period of employment ceased in August of 1993 the parties remained in contact with one another and their relationship was close enough that the applicant gave evidence for the respondent in family law proceedings against the man referred to in (5), at the request of the respondent. On the day when the applicant attended the Family Court for the purpose of giving that evidence the respondent requested that she recommence full time employment with her and that full time employment recommenced on 20 December 1993.
The excellent relationship which existed between the applicant and the respondent is evidenced by the provision by the respondent at her own cost of a holiday in Queensland in December of 1993 for the applicant and her mother who was visiting from Scotland. The two children of the respondent and two children who were friends of one of those children went with them to the respondent’s beach house at Innisfail.
The relationship between the applicant and the respondent continued without any problems until early April 1994. At what must have been about the end of March 1994, the applicant again travelled to Queensland with the respondent’s younger child and stayed at the beach house for about a week. During that week the respondent telephoned the applicant each night.
On the return of the applicant to Sydney with the child on 8 April 1994 she called at the respondent’s factory premises with the child and was informed by the respondent:
“I can’t afford you any more, I’ll have to get another nanny.”
There was no other discussion about the reasons for termination of the employment or any other matter related to it.
The applicant immediately delivered the respondent’s two children to the respondent’s home, which had been her place of employment, and she spoke to a woman who had taken over her role as nanny. There was a conversation between the two women in which the applicant was told that the other woman had known for a long time that she “had the job” and she was waiting as “Kerry had given me long notice to find other work.” That quote is taken from the applicant’s affidavit of 10 April.
Another piece of evidence giving an indication of the reason for the termination is the employment separation certificate provided by Kelly McGee Pty Ltd to the Department of Social Security on 26 April 1994. That document provided:
“Work termination was agreed mutually as I now require live-in help and I do not have accommodation suitable as Mrs Smahel is married.”
The only other item of evidence as to the reason given for the termination is in the affidavit of Mr McGee sworn on 25 May 1994, in which he says,
“the reason for the respondent’s decision to terminate the employee’s employment is; restructure of operation of position to enable cost efficiency and flexibility of service”
- the meaning of this is obscure.
It was common ground between the parties that there was no issue as to the applicant’s ability to perform her work and her actual performance of that work.
The applicant’s wages were $500 per week plus tax of about $170 and an additional cash payment of $150 per week. That total amount of wages of $650 plus the tax on $500 applied to both the periods of employment and there was no dispute between the parties as to that at the hearing.
The wages of the new nanny since 8 April 1994 have been, on the evidence of Mr Boorman, $800 per week. Mr Boorman’s evidence in relation to that was, to say the least, unsatisfactory. He initially told the court that the nanny was now employed on a contract, on an hourly basis. When he was pressed for details of the hourly rate or what was meant by that he told the Court that the nanny was paid $800 per week for a full week of seven days and that if she did not work the full seven days there was no reduction in that amount, that the only reduction was that if she did not work at all during the week then she got paid nothing at all and there have been three or four weeks since April when the nanny was not required and therefore not paid.
The only conclusion from that evidence is that in fact the respondent is still outlaying $800 per week for the services of a nanny and there has been no interruption in her intention to continue to employ a nanny on that bias except that apparently there has been the occasional week when the nanny has not been employed at all.
The respondent raised in cross-examination of the applicant a payment of $9400 to her after her first period of employment ceased in August of 1993. The applicant explained that payment as the product of a savings plan which the respondent had undertaken on her behalf and on behalf of her husband. The applicant’s husband worked as the gardener and cleaner and he was paid $300 per week. That sum, along with $100 out of the $150 additional payment which was made to the appellant each week was saved for the applicant and her husband by the respondent so that effectively the respondent was putting away $400 a week for the applicant. The applicant’s evidence is that the payment of $9400 was the total saved.
The applicant’s evidence was that those moneys were cash moneys payable to her in respect of which no Income Tax was paid, and those amounts do not appear, on the applicant’s evidence, on any Group Certificate issued for taxation purposes. The respondent suggested that that payment of $9400 was an ex gratia payment made by the respondent at a time when she was under considerable stress and it was put by the respondent’s representative that because the respondent had in fact paid a gift in August of 1993 that may have caused the applicant to presuppose that on this termination of employment she might receive another gift. The difference of course is that these proceedings are brought pursuant to the legislation which commenced on 30 March 1994 and the appellant’s entitlement to compensation or otherwise is determined according to that legislation.
Mr Boorman’s evidence was that the company conducted by the respondent was going through a bad time financially in April of 1994. Whilst that may have been the case, the respondent did not take up the opportunity to put before the Court any other evidence to support that view nor did the respondent put before the Court any evidence as to any actual restructuring of the respondent’s business which, on the respondent’s case, justifies the termination of the applicant’s employment.
Now turning to the application of the law to these fact, the applicant relies on Section 170DE (2). She says that she was a loyal and conscientious employee; she gave service beyond the call of duty; she was given no opportunity to renegotiate the terms of her employment and she submits to the court that she was not given the benefit of any procedural fairness. The respondent relies on Section 170DE (1) and says the termination was the result of operational requirements and that it was not harsh, unjust or unreasonable within the meaning of the other subsection.
The respondent’s case on the question of operational requirements is unconvincing to say the least. The fact that the respondent chose not to discuss future options with the applicant prior to dismissing her and prior to employing a replacement; the fact that the respondent peremptorily replaced the applicant before giving the applicant notice of her termination and the fact that in effect the cost of gaining the services which were provided by the applicant to the respondent remained the same, both before and after 8 April 1994, are all matters which indicate a lack of conviction in the respondent’s argument.
There is no reason apparent on the facts for this termination. The reasons that have been stated by the respondent are not supported by the facts and certainly the respondent’s conduct is not in any way in the spirit of modern employer-employee practices and the Court finds that the termination was harsh, unjust and unreasonable. The meaning of those words has been considered by Courts on many occasions and in the decision in Gregory v. Philip Morris (1988) 24IR397, a decision of the Full Court of the Federal Court of Australia, Jenkinson J indicates that the application of those words is not simply applied to the effects on the employee but rather the termination has to be seen to be one which is harsh of the employer to impose as well as being harsh in its effect on the employee. His Honour said:
“I think that those words can apply equally to the words unjust or unreasonable and in this case I do not think that there is very much difference between, or these facts could certainly be said to smack of all three of the concepts of harsh, unjust and unreasonable both as to their effect on the employee and as to the perception of the decision as taken by the employer.”
Turning to the issue of compensation, Section 170EE (iii) indicates that the Court in assessing compensation must have regard to the remuneration that the employee would have received if the employer had not terminated the employment. The evidence before the court from the applicant is that she was unemployed for three months and that she now works in a similar position earning $450 a week net. She is therefore, as far as wages in the hand are concerned, $200 a week worse off than she would have been had she continued in the employ of the respondent. In her pleadings she has claimed ten weeks wages. In one document she has claimed ten weeks wages at $650 a week. That $650 a week is an in-the-hand figure and does not take any account of the Income Tax that she had previously been paying on $500 per week of that.
If we take her period of unemployment at ten weeks her loss of net income is $6500. The maximum compensation that she is permitted to receive pursuant to Section 170EE is 26 weeks. For the remaining 16 weeks of the 26 weeks she has been $200 per week worse off than she would have been if she continued in this employment and that figure is $3200, so that her net in-the-hand loss for the 26 week period is $9700. Of course, loss or reimbursement or consideration of lost wages is not the only factor to be taken into account by the Court and the Court has an overall discretion to allow a part or all of the actual loss.
The figure of $9700 does not take any Income Tax into account, and does not take into account the fact that any order for compensation will be received by the applicant in a lump sum, nor does it make any allowance for the effect of the loss of this employment on the applicant. There is no evidence before the Court that the applicant suffered any kind of reaction which would require medical treatment but she told the court that she was in “total shock” when her employment was terminated and certainly she impressed the Court as a person who was not understating the situation when she used those words or in fact in any of her evidence.
Overall, the court finds that the sum of $8000 would be a fair and reasonable amount to compensate this applicant for the loss of her employment and I propose to make an order that the respondent pay the applicant compensation in that sum.
The final matter which needs to be addressed is the question raised by the evidence before the court as to the non-payment of Income Tax in relation to part of moneys payable to the applicant by way of wages. In Petera Pty Limited v. EAJ Pty Limited & Ors, a decision of Wilcox J in the Federal Court, reported in Australian Trade Practices Reports of 1985 at Case Number 40465, at page 46982 the Court said this:
“The position of a court in a case where such a situation, that is, a non-payment of income tax comes to notice in the course of a hearing between parties other than the revenue authority has been discussed in a number of reported decisions. The decisions are collected in a judgement of Mr Justice Lindenmayer of the Family Court of Australia in the marriage of P and P reported at 1985 Family Law Cases at 91-605. Mr Justice Lindenmayer said
‘As far as English law is concerned the courts invested with a judicial power of a sovereign have considered themselves bound by certain duties including the duty to protect the revenue of their sovereign and that this duty has flowed on to the Supreme Courts of the Australian States’ ”.
For reasons he gave he concluded that there existed a similar duty by a Federal Court in relation to the revenue of the Commonwealth and he said that the duty extends to requiring this court to take such steps as it is able to take to ensure that the revenue laws of the Commonwealth are not defrauded or evaded by litigants or others who come before it.
In view of that I propose to make an order that the Principal Registrar of this Court forward to the Attorney General, for reference to the Australian Taxation Office, a copy of these reasons and the transcript of the evidence of the applicant in these proceedings and, that pursuant to the provisions of Section 170EE of the Act the respondent is to pay the applicant compensation in the sum of $8000.
MINUTES OF ORDER
THE COURT ORDERS THAT
1.Pursuant to the provisions of Section 170EE of the Act the respondent is to pay the applicant compensation in the sum of $8000.
2.The Principal Registrar of this Court forward to the Attorney General, for reference to the Australian Taxation Office, a copy of these reasons and the transcript of the evidence of the applicant in these proceedings.
I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgement of Judicial Registrar Linkenbagh.
Associate :
Dated : 24 October 1994
Counsel for the Applicant : Mr G Maniatis
Counsel for the Respondent : In person.
Date of Hearing : 5 September 1994
Date of Judgement : 20 October 1994
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