Lee Keith Woolhouse v John Selfe trading as Normark Business Supplies

[1995] IRCA 511

C A T C H W O R D S

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - claim of UNLAWFUL TERMINATION - whether termination based on OPERATIONAL REQUIREMENTS - whether the making of complaints by employee against employer as proscribed in S170DF(1)(e) was reason for termination - substantive and procedural unfairness - COMPENSATION.

INDUSTRIAL RELATIONS ACT 1988 - Ss 170EA, 170DE(1), 170DE(2), 170DF, 170DF(1)(e), 170EDA, 170DC

Nicolson v Heaven & Earth Galleries Pty Ltd (1994) 126 ALR 233 at 243

Byrne & Frew v Australian Airlines (1994) 120 ALR 274

Bostik (Aust) Pty Ltd v Gorgevski (1992) 36 FCR 20 at 20

Selvachandran v Peteron Plastics Pty Ltd, 7 July 1995, unreported

Johns v Gunns Ltd, Northrop J, 18 May 1995, unreported

LEE KEITH WOOLHOUSE -v- JOHN SELFE TRADING AS NORMARK BUSINESS SUPPLIES - WI 95/1707

BEFORE:     PARKINSON JR
PLACE:        PERTH
DATE:          10 AUGUST 1995

IN THE INDUSTRIAL RELATIONS    )
COURT OF AUSTRALIA  )
WESTERN AUSTRALIA  )
DISTRICT REGISTRY  )          No. WI 95/1707

BETWEEN:  LEE KEITH WOOLHOUSE
  -    Applicant

AND:  JOHN SELFE trading as
  NORMARK BUSINESS SUPPLIES
  -     Respondent

MINUTE OF ORDERS

BEFORE:                 PARKINSON JR

PLACE:  PERTH

DATE:  10 AUGUST 1995

THE COURT ORDERS THAT:

1. That the respondent pay to the applicant the sum of $7,059.62 in compensation.

1. That time for payment be 21 days from the date of this order.

NOTE:           Settlement and entry of Orders is dealt with by Order 36 of the   Industrial Relations Court Rules

IN THE INDUSTRIAL RELATIONS    )
COURT OF AUSTRALIA  )
WESTERN AUSTRALIA  )
DISTRICT REGISTRY  )          No. WI 95/1707

BETWEEN:  LEE KEITH WOOLHOUSE
  -    Applicant

AND:  JOHN SELFE trading as
  NORMARK BUSINESS SUPPLIES
  -     Respondent

BEFORE:                 PARKINSON JR

PLACE:  PERTH

DATE:  10 AUGUST 1995

REASONS FOR JUDGMENT

This is an application made pursuant to S170EA of the Industrial Relations Act 1988. The applicant was employed by the respondent as a salesperson in his business and office supplies business, trading as Normark Business Supplies. He was employed between 15 November, 1993 and 29 May, 1995.

The applicant was engaged to perform sales duties involving servicing existing customers and cold calling. As a measure of performance together and for remuneration purposes later in the employment the applicant was set what was described as budget targets on a monthly basis. These targets were set by the sales manager on his evidence of what would be a reasonable expectation in  terms of sales achievements.  Each month these targets were increased, however it is not clear on the evidence by what criteria the increase was determined.  Further the evidence was that the applicant’s sales budget targets were increased in a greater amount than those of the other employees in sales.

The stated reason for the termination of the applicant’s employment was  “redundancy” of his position as a result of the re-organising of the business   into a corporate structure. (Exhibit A12) The evidence of the respondent was that it was brought about as a consequence of concern as to trading profit levels having regard to the annual turn over of the business. It was put in submissions by counsel for the respondent that the reason also included a decision by the respondent to reorganise the manner in which the work was done to a part-time method, however this was not the evidence of the respondent or witnesses called on his behalf.

The applicant submits that the stated reason is a “sham” and that the reason for the termination was because of complaints made by the applicant in relation to his entitlements with various wages authorities, including the Department of Productivity and Labour Relations, a Department of State of Western Australia. These complaints it was said were constituted by various
correspondence between the applicant and the Department. (Exhibits A10 and A11). It was further submitted alternatively that it was because of allegations as to work performance which it was submitted were untrue. The applicant further relied upon S170DE(2) of the Act.

The first issue to be determined in this case is whether it was an operational requirement that the employment be terminated. In so far as this provision is concerned I am of the view that this aspect of S170DE(1) is not confined to circumstances of “redundancy” in the sense utilised by awards and agreements of industrial tribunals, but may also encompass circumstances where an employer in the interests of the business makes a bona-fide decision to re-organise or restructure. In such circumstances my approach to the issue is not one of going behind the decision made by the employer to re-organise or restructure to establish whether the decision was meritorious or appropriate to the interests of the business, but rather one of ensuring that the decision, rightly or wrongly, was made bona-fide and that any selection criteria was adopted and applied in good faith. This is the approach I have taken in this matter and what follows are my conclusions as to the bona-fides of the reason given for the termination.

In my view the following facts in evidence lead to the conclusion that the termination was not for reason of redundancy or even to express it more broadly as a result of the operational requirements of the business. 

-The evidence was that whilst immediately after the termination the respondent utilised existing employees in different capacities, to take up the applicant’s sales work,  nevertheless within an extremely short time frame, further permanent employees were engaged to perform full-time sales work and in particular the applicant's job and the number of employees devoted full-time to sales work increased after the termination of the applicant’s employment from 1 to 2 with another person working approximately half time on sales.  

-The evidence of the respondent that the turnover of the business had increased since the respondent had taken over the business, which time frame roughly coincided with the period of employment of the applicant, from $200,000 to approximately $1 million dollars.

-The evidence of the respondent that the business had moved into more expensive and expansive premises than originally occupied and done so shortly before the termination of the applicant’s employment.

-There was no evidence that profitability of the business had declined from previous levels at all,  nor such that it would necessitate the reduction of employee numbers and whilst profitability itself is not necessarily determinative of the issue of the operational requirements, it was profitability, including trading profits which was raised and relied upon by the respondent in its statement of facts and in the evidence. The evidence of the respondent in this regard was that he would have liked the profit to be higher.

-The evidence of the respondent was that the business had been in the past 12 months through a phase of significant growth and that whilst this growth was now static it was certainly not in decline.

-The evidence of the respondent was that the restructuring of the business to a corporate structure was brought about as a result of    taxation advice received by the respondent and contrary to the statement of facts,  had nothing to do with the profitability or survival of the business. Nor was           there any evidence in the proceedings that the business’ survival depended upon the redundancy of the applicant.

-The evidence was that there was a failure by the respondent to consider the applicant for re employment, notwithstanding the day after the applicant was made “redundant”, another full time sales employee of the respondent resigned.  No approach was made to the applicant in relation to this position and the position was filled ultimately by an employee from outside of the business.

Having regard to the above matters, I am not satisfied that the reason for the termination of the applicants employment was as a result of the operational requirements of the business. 

Nor am I satisfied on the evidence before me that the termination of the employment of the applicant was not for the reason of or for reasons including the matters proscribed by S170DF(1)(e) of the Act. In so far as S170DF(1)(e) is concerned the onus rests upon the respondent to satisfy the court to the contrary of that asserted. In this regard I have had regard to the decision of his honour Justice Northrop in Johns v Gunns Ltd 18 May 1995, unreported, wherein his honour gave detailed consideration to the operation of S170DF of the act and the onus of proof discussed the appropriate application of S170EDA, in such cases. In this regard I refer particularly to that consideration at pages 21- 27 of the decision.

In my view the respondent has on balance failed to establish to the contrary  and indeed in this regard I am satisfied that on balance of probabilities the applicant has on the evidence has established that it was such a reason. 

That Section provides in so far as is relevant:

“An employer must not terminate an employee’s employment for any one or more of the following reasons, or for reasons including any one or more of the following reasons:

the filing of a complaint, or the participation in proceedings, against an employer involving alleged violation of laws or regulations or recourse to competent administrative authorities;”

The applicant made complaints to the Department in respect of the failure by the respondent to pay him for an absence from work on a public holiday. There was dispute between them as to this matter and the applicant pursued the claim with relevant authorities. This included letter and enquires seeking information. All of these approaches and dealings he brought to the attention of the respondent personally.  The correspondence from the wages authority confirming obligations in this regard, exhibit A11, was dated 18 May, 1995.

Whilst there was no express evidence that the termination reason included  the complaints to the wages authority, it  is a reason which the court is entitled to infer having regard to the circumstances of this termination of employment and the proximity in time between the various complaints and the termination of the employment and the absence of any other likely or credible explanation for the termination of the employment.  In so far as this latter aspect is concerned, I indicate that I prefer the evidence of the applicant to that of the respondent in relation to the absence of warnings as to work performance. This is because of an overall consistency in his evidence with the events and circumstances and a lack of consistency in the evidence of the respondent and the witness called by the respondent as to matters such as rehire of employees and the timing of discussions as to termination of employment and decisions on redundancy, together with the inability of the respondent to recall the contents of various of the alleged conversations with the applicant in any specific terms or detail.

Further, the absence of any written or any express complaints to the applicant as to his work performance prior to the wages complaints; the unsubstantiated reliance upon alleged “operational requirements of the business” as the reason for the termination of the employment, together with my finding earlier herein that the termination was not for valid reason, ie. as a result of the operational requirements of the business, are also matters to which I have had regard in determining that the reason for the termination included the reason proscribed by S170DF(1)(e) of the Act.

S170DC and S170DE(2) - Harsh, Unjust or Unreasonable.

Having regard to my findings in relation to S170DE(1) and S170DF(1)(e) it is not strictly necessary for me to consider or determine the other aspects of the application arising pursuant to S170DE(2) and S170DC of the Act.
However evidence as to those matters was taken in  the course of the proceedings and it is my view appropriate to indicate my conclusions on the evidence in this regard and I turn briefly to those matters. These aspects of the proceeding involve a consideration of the selection of the applicant for redundancy, having regard to the selection criteria adopted and consideration of the manner in which the termination of employment was effected by the respondent.

I do not accept the evidence of the respondent that the applicant was selected for redundancy as a result of his sales figures being consistently below budget. This is because the evidence is that whilst there was a general and usual approach of encouraging the applicant together with other employees to increase the level of their sales performance, the budget targets were in “targets”, not minimum sales requirements. The evidence as to the respondent and the sales managers dealings with the applicant and other employees in relation to budget targets was evidence as to general discussions, without any suggestion of there was no evidence of ever any instance of the respondent informing the applicant that his sales figures were not acceptable or that by failing to meet the targets set he was not performing satisfactorily.  The evidence was that the applicant’s sales performance was equal to or better than other employees in terms of the budget target requirements.  I am satisfied on the evidence that the applicant was performing his sales task adequately and that his sales figures were either at budget or close to budget targets during the course of his employment with the respondent. Further the applicant's employment was terminated notwithstanding that he had been employed for a longer period of time than at least 2 other employees.

I am satisfied that the respondent in terminating the employment of the applicant, failed to accord to the applicant fundamental considerations applicable to procedural fairness. In this matter I accept the evidence of the applicant that nothing was said to him at the time of the termination, and that he was left to discern the reasons for the termination by reading the contents of the letter handed to him by the respondent.

Further it is clear that no alternative to termination of employment were considered or discussed with the applicant, notwithstanding that the letter of termination dated 29 May, 1995, (Exhibit A12) advises that the position being made redundant was not to be abolished until 30 June, 1995.  However the termination was effected on and from the day of the letter with merely one weeks notice. 

It is clear upon the evidence not only of the letter of termination but also the vive-voce evidence of the respondent Mr Selfe that the only considerations were the interests of the respondent and his business and no consideration was accorded to the interests of the applicant when decisions were made as to when and how the termination was to be effective. In this regard Mr Selfe gave evidence that it was not in the interests of the business to give advanced warning of the proposed redundancy because it would affect the morale and work performance of employees.  Such considerations were also the only evidenced considerations as to the decision to terminate the applicants employment immediately.

I am satisfied that no opportunity was accorded the applicant to be heard in relation to any matters arising out of or associated with the termination, and this is so whether the termination had been for alleged redundancy or any of the reasons considered by the court.  In this regard the termination of the employment was harsh, unjust and unreasonable. 

The respondents counsel submitted that in determining the question of the harshness or otherwise of the termination and in particular procedural fairness, the standards which might apply to large business with multiple employees, ought not be applied to a small business operator such as the respondent. In particular it was submitted that there ought be no requirement on the employer to consult as to the redundancy or termination, because all of the information relevant was immediately and readily available and in the knowledge of the respondent and further because consultation would not have affected the outcome. I do not accept that this is a proper approach to the operation of S170DE or S170DC of the Act.

The requirement that procedural fairness be accorded exists whether or not the respondent is a large or a small business.  The issue is whether in the implementation of the termination on balance the employer has acted with fairness and reasonably.  See in this regard the decision of  Wilcox CJ in Nicolson v Heaven & Earth Galleries Pty. Ltd (1994) 126 ALR 233 at 243. This question will be determined having regard to the circumstances of each case and cannot be the subject of a predetermined set of rules as to what meets fairness requirements and what does not, however some guidance as to factors to be taken into account is contained in Byrne & Frew v Australian Airlines (1994) 120 ALR 274 and by the approach adopted by the majority in that Bostik (Aust) Pty Ltd v Gorgevski (1992) 36 FCR 20 at 20 . That this is the appropriate approach to the application of S170DE(2) is discussed at page 7 of a recent decision of Northrop J in Selvachandran v Peteron Plastics Pty Ltd.  7 July 1995, unreported.

It is clear from the authorities that a likelihood that the outcome would not be affected by the consultation does not excuse or obviate the requirement for procedural fairness to be accorded. In this case I am satisfied that it was not and that the termination of the employment was harsh, unjust and unreasonable for substantive and procedural reasons.

Remedy:

The applicant seeks an order for reinstatement and lost remuneration, and alternatively an order for compensation. The respondent submits that the reinstatement of the applicant would be impracticable having regard to the circumstances of the respondent and the nature of the relations between the parties. The applicant remains unemployed and has been unable to find alternative employment, notwithstanding his attempts to do so.

It is apparent that there is ill-feeling to the point of hostility between the parties to this proceeding. Whilst this may not always be determinative, in this case this is a business operation where the applicant would be required to interact on a daily basis with the respondent and the sales manager, both of whom having given evidence against his competence and his credit. I have also formed the view that the hostility is mutual and that the applicant’s attitude to the respondent would make reinstating any work relationship impracticable. I have decided that reinstatement would be impracticable.

During the course of submissions an issue was raised as to the practicability of an order for reinstatement in circumstances where the respondent is no longer trading in the business name, but rather the business now operates as a corporate entity.  It was submitted by Ms Stanton for the applicant that the court in the circumstances, upon being satisfied of the corporate identity under which the business now trades, ought grant leave to join the newly established proprietary limited company. As no material had been placed before me to enable a proper or full consideration of that issue, I indicated to the parties, that they would be heard in relation to this aspect in circumstances where, save for this factor, I had decided that an order for reinstatement was not impracticable.  In view of my decision that, for other reasons, such an order is impracticable, there is no necessity to further deal with this aspect of the submissions.

I turn now to consider the amount of compensation appropriate. In my view, having regard to the fact that the reinstatement is  impracticable it is appropriate to have regard to the amount which it would have been open to the court to order if the applicant had been reinstated, which to date is remuneration lost. The applicant’s counsel has calculated this as being in the sum of $7,059.62 cents and informed the court that this amount is calculated by reference to the weekly earnings of the applicant since the applicant commenced earning commission.

Further it is appropriate to have regard to the applicants unemployment since the termination. The applicant earned on average a gross amount of $685.40 per week in total remuneration whilst employed by the respondent. (Exhibits A1- A5)  I note that this amount take into account a payment characterised as a car allowance. The likely length of future employment is also a relevant matter to take into account and in the circumstances of this matter, I am satisfied that there was a likelihood of ongoing employment.  

In the circumstances of this case I have decided that an order for compensation in the sum of  $7,059.62 is appropriate. It should be noted that this amount whilst referrable to lost remuneration is the amount I have decided is appropriate even having regard to the other factors discussed above.   The orders of the court shall be:

1. That the respondent pay to the applicant the sum of $7,059.62 in compensation.

1. That time for payment be 21 days from the date of this order.

I certify that this and the preceding ten pages are a true copy of the Reasons for Judgment of Judicial Registrar Parkinson.

Associate

Date:

Counsel for the applicant:                  Ms F A Stanton
Solicitors for the applicant:                Mazza McCallum & Robinson

Counsel for the respondent:               Mr P J Hannan
Solicitors for the respondent:             Mony De Kerloy

Hearing date:         10 August 1995
Judgment date:      11 August 1995