Krupp-Geier v Open Family (Australia) Incorporated

[1996] IRCA 13

DECISION NO:  13/96

CATCHWORDS

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - review of decision of Judicial Registrar - whether employment was terminated for a valid reason based on operational requirements - "compensation".

Industrial Relations Act 1988 - ss 170DE(1), 170DE(2), 170EDA, 170EE(2), 170EE(3) and 377.

Association of Professional Engineers, Scientists and Managers Australia on behalf of Cross v Deniliquin Council (1995) 129 ALR 418
Gibson v Bosmac Pty Ltd (199) 130 ALR 245
Association of Professional Engineers, Scientists and Managers Australia on behalf of Cross v Deniliquin Council, 14 December 1995, unreported, Moore J

No. AI 1052R of 1995

KRUPP-GEIER v OPEN FAMILY (AUSTRALIA) INCORPORATED

MOORE J

SYDNEY (Heard in Canberra)

6 February 1996

IN THE INDUSTRIAL RELATIONS      )
  )
COURT OF AUSTRALIA               )     No. AI 1052R of 1995
  )
NEW SOUTH WALES DISTRICT REGISTRY )

BETWEEN:          HANS PETER KRUPP-GEIER

Applicant

AND:             OPEN FAMILY (AUSTRALIA)
  INCORPORATED

Respondent

JUDGE:    Moore J

PLACE:    Sydney (Heard in Canberra)

DATE:        6 February 1996

ORDER OF THE COURT

THE COURT ORDERS THAT:

1. The matter be adjourned to 26 February 1996 to enable the parties to bring in short minutes.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS      )
  )
COURT OF AUSTRALIA               )     No. AI 1052R of 1995
  )
NEW SOUTH WALES DISTRICT REGISTRY )

BETWEEN:          HANS PETER KRUPP-GEIER

Applicant

AND:             OPEN FAMILY (AUSTRALIA)

INCORPORATED

Respondent

JUDGE:    Moore J

PLACE:    Sydney (Heard in Canberra)

DATE:        6 February 1996

REASONS FOR JUDGMENT

Introduction

This is an application under s377 of the Industrial Relations Act 1988 ("the Act") by Open Family (Australia) Incorporated ("the Charity"). It seeks the review of the determination by a Judicial Registrar of an application under s170EA of the Act by Mr Hans Peter Krupp-Geier ("Krupp") who claimed the termination of his employment on 21 January 1995 had been in contravention of certain provisions of Division 3, Part VIA of the Act. The Judicial Registrar determined that it had been and ordered that the Charity pay Krupp compensation in the sum of $16,500.

The nature of the review

A review conducted under s377 is a hearing de novo: Association of Professional Engineers, Scientists and Managers Australia on behalf of Cross v Deniliquin Council (1995) 129 ALR 418 and Gibson v Bosmac Pty Ltd (1995) 130 ALR 245. However the parties agreed that it should be conducted by reference to the reasons for judgment of the Judicial Registrar and the affidavit evidence called in the proceedings before the Judicial Registrar. One further affidavit was relied upon which concerned the failure of Krupp to obtain employment since the termination.

The factual background

In about July 1992 Krupp commenced full-time employment with the Charity.  The evidence does not disclose in detail the entire range of the activities undertaken by the Charity though it is clear that its central role is the provision of welfare services to young people.  To that end it appears to have provided or managed accommodation for youths with drug or alcohol problems and has run a project providing support for young people on the streets of Canberra.

Krupp was first employed as a Street Work Co-ordinator, the advertisement for which described the work in the following way:

"... to work in the Open Family Street Work Project with at risk adolescents in Canberra.  A demonstrated empathy for this particular group of young people is fundamental as is the ability to liaise effectively with the right section of the community and other professionals in the field including volunteers."

In August 1993 Krupp assumed other duties in the organisation and became a co-ordinator of a project described as "the C.A.N.A. Project".  That appears to have been a project in which accommodation was provided to adolescents in need.  Mr Nathan Stirling was, at the relevant times, the executive director of the Charity.  In his affidavit he says of the change in duties of Krupp:

"Following some concerns that the applicant was not suitable for the position the ACT director of the respondent, Paul Isaacson, then resolved to issue a memorandum to staff dated 4 August 1993 that the applicant should change positions to be a Co-ordinator in regard to C.A.N.A. Project."

Krupp's capacity to perform satisfactorily the duties of a street worker assume some significance in these proceedings.  The question was considered by the Judicial Registrar who reached the following conclusion:

"There was some evidence as to whether or not he was suitable for the position.  The evidence is unsatisfactory and insufficient in my view to lead to a conclusion that he was unsuitable for the position and would not have been able to perform the duties.  They were the duties that he had carried out in past years without any complaint from his employer."

This is a reference to Krupp's capacity to perform the duties of a new street worker position filled shortly after his termination.  It is a matter I discuss shortly.  The observations of the Judicial Registrar concern Krupp's capacity to perform the duties of the new position and were made having regard to the evidence concerning the way in which Krupp had earlier discharged his duties in the position of street worker when first employed by the Charity.

In early January 1995 a review was undertaken of the organisation of the Canberra operations of the Charity.  A memorandum  of 3 January 1995 was prepared by Stirling setting out a reorganisation which he proposed.  It is plain from the memorandum that Stirling viewed the need to restructure as an urgent one and the memorandum sets out at some length and in some detail both the rationale for the restructuring and the detailed changes that would have to be made if it were to be implemented.  The rationale for the restructuring was to re-focus the operations of the Charity in Canberra to what were viewed as the essential functions of the organisation.

It is unnecessary to detail the reasons as it was common ground that the re-organisation was a bona fide attempt to restructure the Canberra operations and it was also common ground that the position then held by Krupp, namely co-ordinator of the C.A.N.A. project, was to be abolished.  However it is clear from the proposal that the reorganisation would involve the creation of an additional position in the street work project in which the Charity was involved.

Stirling sent a copy of the memorandum to Father Bob McGuire, the National Chairman of the Charity and to Justice Higgins, the Chairman in the Australian Capital Territory.  The proposal it advanced was the subject of further discussions and another memorandum dated 8 January 1995 was prepared by or at the direction of Stirling.  It contained a plan to implement the restructuring.  It noted that the "Peter Krupp to be retrenched.  (two weeks notice to be given)".  It also noted in relation to street work that as a step needed "one new full-time worker to be sourced for street work".  It is not clear from the affidavits whether the Charity, and Stirling in particular, had in mind employing any particular person within the organisation for the additional street worker position.  The Charity advertised for applicants for the position on 28 January 1995 which is seven days after the termination of Krupp's employment.

The findings of the Judicial Registrar on the manner in which the Charity went about implementing this re-organisation are found in the following passages of her reasons for judgment:

"On 20 January, Mr Burkey, who was another employee, spoke to the staff and informed them that he had been appointed as the Director of Services.  Mr Burkey asked the staff whether they were happy with his appointment and the applicant responded to the effect that he was not happy because no one had been consulted.  Mr Burkey indicated that in the next week there would be changes within the organisation and his words, as reported by the applicant, were, "Everything will be revealed about changes within the organisation."

Mr Burkey is reported by the applicant in his affidavit to have said words to the effect that, "This is an exciting time for Open Family because it has a new future."  Mr Burkey did not indicate to any of the staff on 20 January that any employee's position or employment was at risk, notwithstanding that he knew at that time that the applicant's position and employment were at risk and that there were proposals in relation to the retrenchment of two other employees.

The applicant gave oral evidence that he was informed by Mr Burkey on 20 January that he would be "pleasantly surprised" when Mr Burkey spoke to him the following week.  On 23 January, Mr Burkey called the applicant to a meeting and asked him for a report about the projects he was undertaking at that time and, at the conclusion of that meeting, he informed the applicant that he, Mr. Burkey, was taking over C.A.N.A. and that the applicant was to be retrenched.

The applicant was informed that there were to be two new positions created and the applicant immediately asked for a reason as to why he would not be able to do one of those jobs.  He was told that the Board had discussed that matter and that he was not suitable.  One position mentioned by Mr Burkey at that meeting became a reality and shortly thereafter the respondent advertised for prospective employees for that position in the public press.  The applicant applied and was not successful.  Further, in relation to that position, the applicant was given a note by the Executive Director on 24 January which mentions the new position and says, "... but to be fair, I'm sure he (Mr Burkey) would have told you that he didn't think you would have the inside running on it."

The evidence of Mr Stirling is to the effect that after Miss Corrigan resigned, he left it to Mr Burkey to allocate Miss Corrigan's duties, which were to involve some of the applicant's former duties as well.  Mr Burkey allocated a large part of those duties to himself, so that his own workload became quite heavy."

In the conversation of 23 January 1995 Burkey made known to Krupp that the Board had discussed the question of whether Krupp could be employed to do street work and had decided that he was not suitable.

The Issues

It was common ground that if the Court determined that the termination of Krupp's employment was in contravention of a provision of the Act, reinstatement was impracticable. Thus, it was accepted that if any remedy was to be granted, the appropriate remedy was an award of compensation under s170EE(2).

The case put on behalf of Krupp was, initially, that it was conceded that his employment was terminated for a valid reason based on the operational requirements of the Charity. It was thus being conceded that no contravention of s170DE(1) had occurred. What was put was that notwithstanding this concession, the termination was not for a valid reason because it was harsh unjust or unreasonable: see 170DE(2).

Probably as a result of observations I made in arguendo, the case finally put by Krupp was that there was not a valid reason for the termination based on the operational requirements of the Charity though it was still put that even if there was, the termination was not for a valid reason because it was harsh, unjust or unreasonable. This recasting of the case of Krupp is of significance given the operation of s170EDA to which I refer shortly. When the case of Krupp was recast no application was made by the Charity to adjourn the hearing nor did it resile from its agreement as to the manner in which the review should proceed and be determined.

The Operation of the Act

I have recently discussed the operation of s170DE in Association of Professional Engineers, Scientists and Managers Australia on behalf of Cross v Deniliquin Council, 14 December 1995 unreported.

That matter concerned the termination of the employment of a Council engineer in circumstances where, as a result of a bone fide reorganisation, the position he occupied was abolished.  However emerging from the reorganisation was to be, in due course, another position he might fill.  I repeat some of what I said in that matter:

"The question that s170DE(1) requires to be answered is whether the employee's termination was for a valid reason relating to (the) operational requirements (of the organisation). It is not whether a valid reason existed to abolish a position occupied by an employee...."

I further said:

"I was referred to several judgments of this Court where the provisions of Division 3 of Part VIA of the Act have been considered in the context of a position or positions in an organisation being abolished. The matter was considered by Ryan J in Jones v Department of Energy and Minerals unreported 16 June 1995:

"... it is within the employer's prerogative to rearrange the organisational structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly-created positions.  It is inappropriate now to attempt an exhaustive description of the methods by which a reorganisation of that kind may be achieved.  One illustration of it occurs when the duties of a single, full-time, employee are redistributed to several part-time employees.  What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organisation, any duties left to discharge.  If there is no longer any function or duty to be performed by that person, his or her position becomes redundant in the sense in which the word was used in the Adelaide Mill Co-operative Case."

This passage has been cited with approval in Mitchell-Collins v The Latrobe Council an unreported judgment of Spender J of 25 August 1995 and Aitkin v The Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia v Western Australia Branch an unreported judgment of Lee J of 7 August 1995: see also Leddicoat v Schiavello Commercial Interiors (SA) von Doussa J 18 October 1995 unreported and Quality Bakers of Australia Ltd v John Goulding & Anor Beazley J 23 June 1995 unreported.

...In construing s170DE(1) and applying its provisions to a particular set of facts, it is necessary to bear in mind the object of Division 3 of Part VIA. As earlier mentioned s170CA states that the object of Division 3 is to give effect to the Convention and Recommendation which are Schedules 10 and 11 to the Act respectively. The Recommendation contains provisions concerning termination for economic, technological, structural or similar reasons.

Article 19 provides:

"(1)All parties concerned should seek to avert or minimise as far as possible termination of employment for reasons of an economic, technological, structural or similar nature, without prejudice to the efficient operation of the undertaking, establishment or service, and to mitigate the adverse effects of any termination of employment for these reasons on the worker or workers concerned.

(2)Where appropriate, the competent authority should assist the parties in seeking solutions to the problems raised by the terminations contemplated."

and article 21 provides:

"The measures which should be considered with a view to averting or minimising terminations of employment for reasons of an economic, technological, structural or similar nature might include, inter alia, restriction of hiring, spreading the workforce reduction of a certain period of time to permit natural reduction of the workforce, internal transfers, training and retraining, voluntary early retirement with appropriate income protection, restriction of overtime and reduction of normal hours of work.

Thus a feature of the Recommendation is that an employer should avoid terminating an employee's employment as a result of a restructuring if it is possible to place the employee in another position within the employer's organisation. It cannot be assumed that s170DE(1) operates to treat a termination as having been for a valid reason if the employee occupying a position which is abolished as the result of a restructuring might be placed in another position created by that restructuring."

To that extent the Act might be viewed as qualifying the right an employer has to fill a position with the person best qualified to perform the duties required of it.

Thus, in the present case, it is necessary to consider whether the abolition of the position occupied by Krupp provided, in the circumstances, a valid reason for the termination of his employment.

It is, at this point necessary to refer to s170EDA(1). Again I repeat what I said in Cross (supra):

"... s170EDA(1)(a) deems an employer to have contravened s170DE(1) unless the employer establishes affirmatively that the termination was for a valid reason because of, relevantly, operational requirements...

The deeming effect of s170EDA(1) must be negatived before s170DE(2) has any application. Thus the question of harshness, unjustness or unreasonableness only arises if the employer has demonstrated there is a valid reason for the termination because of operational requirements. This must mean, in my view, that the termination can be justified because of operational requirements...."

The application of the Act in this matter

In the circumstances of the present case it is necessary for the Charity to demonstrate that not only the abolition of Krupp's position was because of operational requirements, which is conceded by Krupp, but that the consequential termination of his employment was because of operational requirements or was otherwise in accord with the provisions of s170DE(1). This, in my view, requires the Charity to demonstrate, in the circumstances, that Krupp's termination was necessary because no other positions were available, or were to become available, which could be filled by him on the basis that he was qualified and able to perform satisfactorily the duties of those positions.

It is clear from the evidence that another position relating to the street work project of the Charity was created at the time of the reorganisation which resulted in the abolition of Krupp's position.  The critical question is whether the evidence sustains a finding that Krupp was not qualified and able to perform satisfactorily the duties of the position.

I have already set out the duties of the street work position occupied by Krupp when first employed by the Charity.  The duties of the street work position advertised on 28 January 1995 were described in the following way in a job specification provided to Krupp by the Charity on 22 February 1995:

"OPEN FAMILY AUSTRALIA INCORPORATED

JOB SPECIFICATIONS
  STREET OUTREACH WORKER

SELECTION CRITERIA

ESSENTIAL

experience that demonstrates a flair for relating to extremely marginalised young people

some background/training in relevant skills

availability for, and willingness to work, flexible hours

current drivers licence and use of (or willingness to obtain) a motor vehicle

first aid certificate/willingness to obtain same

self starting; ability to use creativity and initiative within a system that requires accountability and teamwork

attitudes and values compatible with the objectives, policies and methods of Open Family

DESIRABLE

professional, trade or tertiary qualifications in some field are highly regarded

awareness of OH&S issues

an understanding of the cultural environment of kids in Canberra

knowledge of networks and resources in the ACT

APPOINTMENT

Appointment is on a 3-month probationary basis.  Thereafter, the successful candidate will be offered a full-time, permanent contract.

ACCOUNTABILITY

The Street Outreach Worker is accountable to the Director of Streetwork Services.  Regular client and activity reports are required.

TASKS

1to assist in planning and implementing the streetwork project/s

2to provide casework services to Open Family clients and their families

3to support volunteer workers

4to maintain records as required by the Director of Streetwork Services

5to network with other services that deal with Open Family clients

All of these activities are carried on under the umbrella of Open Family's Mission Statement.  Workers are required to adhere to agency policy on service delivery objectives and methods."

As a matter of fact, Krupp applied unsuccessfully for the position and in his application he set out his opinion concerning his suitability for it.  He said he was and explained why.  Also to be considered on the issue of the Krupp's suitability is an affidavit of Ms Lisa Corrigan who had been employed by the Charity between November 1991 and January 1995 when she resigned.  She had been Acting Director of Services of the Charity for five months prior to her resignation.  As such she had been Krupp's immediate supervisor though not while he worked in a street worker position.  Of Krupp's performance of his work she said:

"11.I was surprised to learn that the Applicant had been made redundant.  During my term as Acting Director of Services, I was never consulted about the Applicants proposed redundancy.  I had never had any occasion to counsel or review the conduct or performance of the Applicant during his employment with the Respondent nor did I know of any circumstances that would warrant such action.

1. During the time I supervised the Applicant, I found him to be flexible and willing and able to undertake a variety of roles within the Respondent.  He always related well to clients, acting at all times in a professional and sensitive manner.  In my opinion as his supervisor, he would have been well suited to co-ordinate Streetwork Services."

When he was dismissed Krupp received a note from Stirling which read:

"Peter

I would have rang you yesterday to try and say some consoling sort of thing, but from what I heard of Friday's events, I figures that you wouldn't have wanted that.

As Darrell would have told you, there was no connection between Friday's events and the decision announced today to make your position redundant.  He would have also told you that another position of outreach worker will be appointed - of which you are welcome to apply - but to be fair, I'm sure he would have told you that he didn't think you would have the inside running on it.

Anyway, be assured that I am very happy to act as a referee for jobs you might apply for - and/or - I am happy to write you a reference pursuant to the selection criteria of particular job applications you might make.

I sincerely wish you all the best and thank you for your efforts.

Nathan

24/1/95"

While the note made plain that Krupp was not a preferred candidate for the new position, the intimation that he was welcome to apply is inconsistent with Stirling holding the view that Krupp was entirely unsuited for the position.

Against these matters must be balanced the fact that in mid 1993 he was moved from a position that was broadly similar to the new position because there were "some concerns that he was not suitable for the position" and that in January 1995 the Board formed the view that he was not suitable for the new position and that he was not interviewed when he applied for it.

The evidence falls short, in my opinion, of establishing, objectively, that he was not likely to perform satisfactorily the duties of the new position. The Charity must, in my view, do so to discharge the onus created by s170EDA(1). This it has failed to do and is thus to be treated as not having terminated the employment of Krupp for a valid reason based on its operational requirements. It follows that the termination of Krupp's employment was in contravention of s170DE(1).

Remedy - compensation

This leads to a consideration of what compensation should be awarded.

Senior Counsel for the Charity submitted that the Judicial Registrar approached the task of determining the amount of compensation as it was a penalty.  I do not consider she did so.  It is not an appropriate approach:  see Perrin v Des Taylor Pty Ltd, 10 March 1995, unreported Moore J.  In any event, as this is a review it is necessary for me to address the matter afresh.

In the present case the Charity does not put in issue that Krupp has made several attempts to secure further employment and has not been successful. Rather it was submitted that in the circumstances the maximum should not be awarded. However s170EE(3) speaks of "having regard to the remuneration the employee would have received, or would have been likely to have received if the employer had not terminated the employment." As I noted in Cross (supra), though in relation to s170ED(1),:

"...Moreover the expression "having regard to" has a generally accepted meaning in a context such as the present.  A variant of it was discussed by Mason J in R v Hunt; Ex Parte Sean Investments Pty Ltd (1979) 25 ALR 497 at 504:

"When sub-s(7) directs the Permanent Head to "have regard to" the costs, it requires him to take those costs into account and to give weight to them as a fundamental element in making his determination."

and later:

"However, the sub-section does not direct the Permanent Head to fix the scale of fees exclusively by reference to costs necessarily incurred and profit.  The sub-section is so generally expressed that it is not possible to say that he is confined to these two considerations.  The Permanent Head is entitled to have regard to other considerations which show, or tend to show, that a scale of fees arrived at by reference to costs necessarily incurred, with or without a profit factor, is excessive or unreasonable."

and see also:  Municipal Officers' Association of Australia v Lancaster & Anor (1981) 37 ALR 559 at 578-9 and 590, Croft v Minister for Health (1983) 45 AKR 449 and 457 and Queensland Medical Laboratory & Ors v Blewett & Ors (1988) 84 ALR 615 at 623."

Thus s170EE(3) requires lost remuneration to be considered as a fundamental element in assessing compensation though it is not the only matter that might be considered. The terms of s170EE(3) tends to focus attention on the circumstance of the employee. Indeed the use of the expression "compensation" is consistent with the Court's task being to review the effect of the termination on the employee. In a case such as the present where an employee has lost employment in a specialised field and has made genuine and substantial attempts to find other employment, the effect of the termination is plainly significant. Notwithstanding the submission of the Charity to the contrary, I see no basis for not awarding Krupp an amount of compensation equal to the income lost since the termination subject, of course, to the statutory maximum found in s170EE(3)(b). It follows that I would award the same amount as awarded by the Judicial Registrar. Whether a fresh order should be made or not is a matter I was not addressed on and it may have some bearing on questions of interest. Accordingly, I will give the parties an opportunity to bring in short minutes to give effect to these reasons for judgment and I adjourn the proceedings to 26 February 1996 for that purpose. Any orders that are agreed to can be made before then in chambers.

I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Moore.

Associate:  ........ ........ ......

Dated:    ..../..../....

APPEARANCES

Solicitor for the Applicant:              Mr Refshauge of Sly & Weigall

Counsel for the Respondent:               Mr Salmon QC

Solicitor for the Respondent:             Mr W G Coombes of Higgins Solicitors

Dates of Hearing:  8 December 1995

Date of Judgment:  6 February 1996