Klemm and Secretary, Department of Employment
[2017] AATA 507
•13 April 2017
Klemm and Secretary, Department of Employment [2017] AATA 507 (13 April 2017)
Division:GENERAL DIVISION
File Number: 2015/5816
Re:David Klemm
APPLICANT
AndSecretary, Department of Employment
RESPONDENT
DECISION
Tribunal:Member K Millar
Date:13 April 2017
Place:Adelaide
The decision under review is affirmed.
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Member K Millar
CATCHWORDS
EMPLOYMENT - Fair Entitlement Guarantee - claim for advance under Fair Entitlements Guarantee Act - insolvency event - whether entitled to a redundancy pay entitlement - termination of employment - applicants employment terminated because of his conduct - decision under review affirmed.
LEGISLATION
Fair Entitlements Guarantee Act 2012 (Cth)
Fair Work Act 2009 (Cth), s 119 and 123
Fair Work Regulations 2009 (Cth), reg 1.07
CASES
David Klemm v Penrice Soda Products Pty Ltd (In liquidation) [2016] FWC 6527
Veolia Transport Sydney Pty Ltd v Mifsud [2012] FCA 1472
SECONDARY MATERIALS
Penrice Mine Enterprise Agreement 2013
Penrice Soda Products Redundancy Agreement 1998
REASONS FOR DECISION
Member K Millar
13 April 2017
BACKGROUND
Mr Klemm was employed as a mine operator for Penrice Soda Products Pty Ltd (Penrice) from 14 February 2008 to 3 July 2014. At the time his employment ended, an insolvency practitioner had been appointed for Penrice, which went into liquidation on 31 July 2014. As a result Mr Klemm was eligible for an advance under the Fair Entitlements Guarantee Act 2012 (the Act).
The Act provides for the Commonwealth to pay an advance of unpaid employee entitlements to former employees of an insolvent or bankrupt employer where the end of the employment was connected with the insolvency or bankruptcy and the employee cannot obtain payment of the entitlements from other sources. The Commonwealth can then recover the advance through the winding up or bankruptcy of the employer and from any other payments the former employee receives towards their entitlements.
Mr Klemm received an advance of $19,606.81 for unpaid wages, annual leave and payment in lieu of notice.
Mr Klemm contends that in addition to these amounts he is entitled to a redundancy payment. The Secretary says his employment was not terminated due to redundancy, and therefore he is not entitled to a redundancy payment.
Mr Klemm seeks a review of the decision about the amount of the advance to which he is eligible. The issue to be determined is whether Mr Klemm is entitled to an advance of a redundancy pay entitlement.
JURISDICTION
Under s 40 of the Act, a person can apply to this Tribunal for a review of a decision of the Secretary about the amount of an advance if that decision has been affirmed or varied on internal review. An internal review of the decision affirmed the decision and the outcome was advised to Mr Klemm on 7 October 2015.
LEGISLATIVE PROVISONS
Under s 35 of the Act, for the purposes of deciding the amount of an advance the Secretary, and this Tribunal in the place of the Secretary, can presume that information relating to the person that is given by the insolvency practitioner for the employer is accurate.
In this case, in an email dated 5 June 2015, the insolvency practitioner advised that Mr Klemm’s employment ended due to unsatisfactory work performance.[1] This advice of the insolvency practitioner was confirmed in an email dated 7 December 2016, which stated his employment was terminated due to misconduct and not redundancy.[2]
[1] Exhibit R1, p125.
[2] Exhibit R2, p53.
The Secretary is entitled to presume this information is accurate in the absence of other evidence.
Sections 16 and 23 of the Act allow for a person’s redundancy pay entitlement to form part of the advance from the person’s employment.
Section 5 and subsection 6(5) of the Act define the person’s redundancy pay entitlement as the amount of redundancy pay the person is entitled to under the governing instrument from the employer for termination of the employment.
The term “governing instrument” is defined in s 5 of the Act as:
… any of the following that governs the employment:
(a)a written law of the Commonwealth, a State or a Territory;
(b)an award, determination or order that is made or recorded in writing;
(c)a written instrument;
(d)an agreement (whether a contract or not).
The governing instruments in this case are the Fair Work Act 2009 (the Fair Work Act), the Penrice Mine Enterprise Agreement 2013 (the Agreement) and the Penrice Soda Products Redundancy Agreement 1998 (the Redundancy Agreement). If Mr Klemm is entitled to redundancy pay under one of these instruments, the amount of his advance will include redundancy pay.
GOVERNING INSTRUMENTS
Section 119 of the Fair Work Act states:
(1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:
(a)at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b)because of the insolvency or bankruptcy of the employer.
Clause 31 of the Agreement addresses termination and states:
Either the Company or an Employee can terminate the employment relationship by providing two (2) weeks notice or as per the legislated minimum standards for notice of termination. In the case of termination at the initiative of the Company, the Company may elect to make a payment in lieu of all or part of the notice period.
…
This clause does not affect the Company’s right to dismiss an employee without notice on the ground of serious and wilful misconduct.
Clause 34 of the Agreement states in regard to redundancy “As per Penrice Redundancy Agreement, 1998, File No.402 of 1998”. Clause 15.2 of the Redundancy Agreement provides that:
Definitions
(a)‘Redundancy’ is defined as termination of employment where the whole or main reason for termination is that Penrice’s need for the employees to do work of a particular kind has diminished or ceased, but it will not include or apply to termination of employment in the following circumstances:
(i) Termination on account of malingering, inefficiency, neglect of duty or misconduct.
…
SEQUENCE OF EVENTS
Penrice issued a first warning to Mr Klemm regarding his operation of machinery on 10 August 2010.[3] The written warning states that on 4 August 2010 while driving a loader Mr Klemm made impact with a pile of stones damaging the rear steps of the loader. It is stated this resulted from Mr Klemm not paying adequate attention to or observing his workspace, and that he failed to move the stones, despite having previously identified them as being a risk to the loader. Mr Klemm stated that he reversed a loader out of a crusher and onto oversized rocks that had been dumped too close.
[3] Exhibit R1, T13 p164.
A final warning was issued on 21 October 2013[4] following an incident where a skid steer wheel rim was damaged due to Mr Klemm’s operation of the machinery. Mr Klemm described the incident as occurring late at night when he was finishing his shift. He stated he hit a corner post with a skid steer with a rake attached, and the rim of the skid steer was bent.
[4] Exhibit R1, T13 p165.
A letter dated 3 July 2014 from Mr James Rowe, Production Manager, Penrice,[5] details a meeting with Mr Klemm on 2 July 2014 regarding an incident where the operation of machinery resulted in damage to a concrete wall in a shed. This incident resulted in the termination of Mr Klemm’s employment.
[5] Exhibit R1, T13 p162.
Mr Klemm accepts he damaged a wall when he was using a forklift, but says this was the result of poor lighting in the shed, and two days after the incident the lights were fixed. The incident occurred at 7.30am and an incident report was completed at 10am after which he returned to work on the same equipment doing the same tasks in the same shed. Mr Klemm said at the time “I was hoping I would not get sacked.” There was a meeting at 3.30pm that day and then he was called in on the following day and dismissed.
In his oral evidence to the Tribunal, Mr Klemm highlighted that his role at work included teaching others to operate the truck, and that this role continued after he had been given a final warning. His representative pressed Mr Rowe on the circumstances and the investigation into the incident that led to the termination of his employment, and whether there were occupational health and safety risks regarding the lighting in the shed. He relied on minutes of the administrators that there was no human resource manager at the site and that occupational health and safety risks were identified due to the aging plant and machinery.[6]
[6] Exhibits A2 and A3.
Mr Rowe gave evidence that Georgina Tastersall, the Occupational Health and Safety Manager provided a report into the incident that led to Mr Klemm’s termination. He acknowledged there was no full time human resource manager at the site. He did not recall issues with lighting in the shed.
Mr Rowe also gave evidence that his concern was the potential danger to Mr Klemm and to others in Mr Klemm’s operation of machinery. He said he had issued a written warning to Mr Klemm seven or eight months prior to the incident that led to his termination. Mr Rowe said that there was a concerning trend of incidents on site and there had been two deaths on the site, and he did not want to see a repeat of these incidents. This led to a heightened awareness of safety on site.
Mr Rowe said he discussed the termination of Mr Klemm’s employment with Mr Peter White, the General Manager at the time, and with Mr Klemm’s supervisor.
The same day Mr Klemm’s employment was terminated, the liquidator called for voluntary redundancies at the site.[7] Mr Rowe gave evidence that at the time Mr Klemm’s employment was terminated, he was not aware that voluntary redundancies would be offered. Mr Klemm’s position was not recommended to be filled on his termination, and Mr Rowe said this was because they were getting closer to finalising the sale of Penrice. The position was no longer required after Mr Klemm left, and Mr Rowe said this was due to a downturn in the market and a resulting decrease in the workload.
[7] Exhibit R1, T12 p133.
Penrice issued an Employment Change Notice dated 3 July 2014[8] which states that “David was terminated due to a number of safety acts that dangered [sic] employees and damaged machinery.” Mr Klemm’s Employment Separation Certificate dated 29 July 2014[9] states the reason for his termination is “unsatisfactory work performance.” The response on this notice to the question of whether the position is still required is “no”.
[8] Exhibit R2, AD5 p21.
[9] Exhibit R1, T4 p111.
In his claim for an advance under the Act, Mr Klemm states the reason for the termination of his employment was “unsatisfactory work performance.”[10]
[10] Exhibit R1, T4 p108.
After his employment ended, Mr Klemm lodged a claim with the Fair Work Commission alleging he was unfairly dismissed. The liquidators of Penrice agreed to settle the claim on terms that included that he was made redundant. Mr Klemm did not sign a deed to settle the claim or discontinue his action in the Fair Work Commission. Penrice sought dismissal of the application for want of prosecution. In the decision of Commissioner Hampton in David Klemm v Penrice Soda Products Pty Ltd (In liquidation), [2016] FWC 6527, Commissioner Hampton found that the continuation of the action was an abuse of process and that the failure to prosecute the claim was unfair to Penrice and dismissed the matter. Commissioner Hampton noted at [67] that:
The irony of Mr Klemm’s decision not to sign the deed, was that the absence of a basis upon which the FEG scheme could be satisfied that he had an actual entitlement – which he could not provide given the absence of the agreed outcome reflected in that deed, has led to the present situation where Mr Klemm now seeks to revive the unfair dismissal application.
In his application for review, Mr Klemm states the reason for his termination had been changed from a termination of employment to a redundancy. This was not the case, as a proposed deed to resolve Mr Klemm’s unfair dismissal claim was not signed by him and the proceedings were dismissed for want of prosecution.
An Employee Entitlements Worksheet issued 31 July 2014[11] lists the components of Mr Klemm’s final payment from Penrice as unpaid wages, unpaid superannuation, pre‑appointment annual leave, leave loading, pre-appointment RDO and payment in lieu of notice. The final line reads “Total Redundancy Entitlements”.
[11] Exhibit R1, T5 p113.
Clarification of this worksheet was sought by the Fair Entitlement Guarantee Branch.[12] The liquidator stated there was no redundancy entitlement line in the worksheet, and the row Total Redundancy Entitlements is a typographical error that resulted from using the same template as that for employees who were made redundant.[13]
[12] Exhibit R2, AD8 p53.
[13] Exhibit R2, AD8 p52.
Mr Klemm was provided with six weeks payment in lieu of notice. Clause 31 of the Agreement only requires that an employee terminated other than for serious and wilful misconduct is provided with two weeks in lieu of notice. Clarification of this payment was also sought by the Fair Entitlement Guarantee Branch. In response, the liquidator states that the nature of the incident was not serious enough to constitute serious and wilful misconduct, but resulted in the business losing faith in Mr Klemm’s ability to do his job safely. As a result, it was considered his termination should occur with notice and not as a summary dismissal. It is stated that at the time of the termination, the administrators understood that a previous Redundancy Agreement applied to Mr Klemm for both redundancy and payment in lieu of notice which would entitle Mr Klemm to five weeks but in any event the liquidators decided that as nothing turns on it not to revisit their original decision.[14]
[14] Exhibit R2, AD8 p.52.
WAS THE TERMINATION A REDUNDANCY?
Mr Klemm submits his termination was not “for cause” or bone fide as there was an inadequate investigation into the incident. He also argues that he was not afforded procedural fairness as he was not shown the results of any investigations. He said the processes used were not sufficient to terminate the contract of employment, and as a result the contract remained. He argues that the Secretary did not call the other decision maker, Mr Peter White, and an adverse inference should be drawn from failing to call Mr White, who was a party to the decision to terminate his employment.
The Employment Change Certificate states that Mr Klemm’s position is not still required, and Mr Rowe states this is because of the downturn in the business. The Employee Entitlements Worksheet provides a total under the phrase “Total Redundancy Entitlements”, however both this and the amount of the payment in lieu of notice have been explained in the responses from the liquidator.
Mr Klemm argues that his conduct was not serious and wilful misconduct that would result in his termination, and that as the Secretary did not rely on the termination being for serious and wilful misconduct has conceded that it was not. It is argued that the Secretary had not considered whether the termination was a bone fide termination.
What this overlooks, as pointed out by the Secretary, is that to be entitled to a redundancy payment, Mr Klemm’s employment must have been terminated due to redundancy and not for some other reason.
As it applies to Mr Klemm, the Fair Work Act requires that to be a redundancy, the termination occurs because the work is no longer required to be done by anyone, or because of the insolvency or bankruptcy of the employer. The causal factor for the termination must be that the work is no longer required to be done by anyone. The cause of the termination cannot be for another reason, such as the misconduct of the employee.
In Veolia Transport Sydney Pty Ltd v Mifsud[15] the Federal Court considered a situation where Mr Mifsud’s employment was terminated on medical grounds in a period when voluntary redundancies were under active consideration. Justice Flick accepted the submission of Veolia that in the absence of any suggestion that termination for a cause is a cloak to avoid the entitlements to redundancy payment, the redundancy payment clause no longer applied.[16]
[15] [2012] FCA 1472.
[16] At [21].
Justice Flick also found that where consideration is being given to making an employee’s job redundant, a redundancy clause does not continue to apply where circumstances intervene and lead to the termination of services for cause.[17]
[17] at [28].
Mr Rowe gave his evidence is a straightforward manner. He is no longer employed by Penrice or its successor. I have no reason to doubt that his concern about the safety of staff on the site was genuine, and that this was a prime consideration in deciding to terminate Mr Klemm’s employment. There were prior written warnings given to Mr Klemm. The reason given for his termination on both the employee change notice and the Employment Separation Certificate was unsatisfactory work performance. Mr Klemm acknowledged this was the cause of the termination of his employment in his claim for an advance under the Act.
While there may be circumstances in which a purported termination is a cloak for a redundancy, this is not the case for Mr Klemm. In his case, written warnings had been issued about his operation of the machinery, which is the same basis used to terminate his employment. Mr Klemm’s employment was terminated and cogent reasons have been provided for the termination of his employment. Mr Klemm’s employment was terminated because of his conduct.
As a result, I am not satisfied that his termination was because Penrice no longer required the job done by the employee to be done by anyone, or because of the insolvency or bankruptcy of the employer. The termination does not meet the requirements in the Fair Work Act for redundancy, and Mr Klemm is not entitled to a redundancy payment under this Act.
Clause 31 of the Agreement allows for termination with notice where the reason for termination is not serious or wilful misconduct. Mr Klemm’s termination falls within this clause, which precludes his termination being a redundancy.
While this is sufficient to address this matter, the Redundancy Agreement specifies that redundancy is not available where the person’s employment is terminated for misconduct. This excludes Mr Klemm from redundancy as specified in the Redundancy Agreement.
As Mr Klemm does not have a redundancy pay entitlement under a governing instrument for termination of the employment as defined in ss 6(5) of the Act, the amount of his advance for the purpose of s 16 and s 23 of the Act has been correctly calculated and the decision under review is affirmed.
DECISION
The decision under review is affirmed.
I certify that the preceding 46 (forty -six) paragraphs are a true copy of the reasons for the decision herein of Member K Millar
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Administrative Assistant
Dated: 13 April 2017
Date(s) of hearing: 14 February 2017 Advocate for the Applicant: Mr A Wright Solicitors for the Applicant: WK Lawyers Advocate for the Respondent: Mr J Carroll Solicitors for the Respondent: Clayton Utz
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