Lloyd v R J Gilbertson (Qld) Pty Ltd
[1996] IRCA 252
•14 June 1996
This copy has been electronically compressed to single spacing and smaller font size to reduce transmission costs - page numbering will therefore differ from the original file copy.
DECISION NO: 252/96
CATCHWORDS
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - Claim of UNLAWFUL TERMINATION - whether termination of long-serving employee without WARNING was HARSH, UNJUST OR UNREASONABLE - REDUNDANCY - PERFORMANCE ISSUES - PROCEDURAL FAIRNESS
INDUSTRIAL LAW - alleged BREACH OF CONTRACT - IMPLIED TERM of duty not to destroy relationship of confidence and trust between employer and employee - whether DAMAGES for psychiatric injury could or should be awarded - reasons for declining to exercise alleged ASSOCIATED JURISDICTION
Industrial Relations Act 1988 (Cth) ss: 170DB, 170DC, 170EE
Aitken v The Construction, Mining, Energy, Timberyards, Sawmills and Wood Workers Union of Australia - W.A. Branch (Industrial Relations Court of Australia, Lee J, 7 August 1995, unreported)
Burazin v The Blacktown City Guardian (Industrial Relations Court of Australia, Madgwick J, 16 December 1995, unreported)
Hockey v Multiskip Pty Ltd (Industrial Relations Court of Australia, Marshall J, 29 September 1995, unreported)
Jones v Department of Energy and Minerals (Industrial Relations Court of Australia, Ryan J, 16 June 1995, unreported)
Quality Bakers of Australia Limited v Goulding & Anor (Industrial Relations Court of Australia, Beazley J, 23 June 1995, unreported)
ERROL LLOYD v. R J GILBERTSON (QLD) PTY LTD
NI 95/2135
CORAM: MADGWICK J
PLACE: BALLINA
DATE: 14 JUNE 1996
IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA
NEW SOUTH WALES
DISTRICT REGISTRY
No. NI95/2135
BETWEEN ERROL LLOYD
Applicant
AND R J GILBERTSON (QLD) PTY LTD
Respondent
CORAM: MADGWICK J
PLACE: BALLINA
DATE: 14 JUNE 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
1.Compensation in the amount of $26,650 be paid to the applicant;
2.The said sum be paid into Court within 28 days;
3.Interest of 10% per annum is to be paid on that amount as from 22 March 1995, and is also to be paid into Court;
4.The said sum and interest are to be paid out to the applicant.
IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA
NEW SOUTH WALES
DISTRICT REGISTRY
No. NI95/2135
BETWEEN ERROL LLOYD
Applicant
AND R J GILBERTSON (QLD) PTY LTD
Respondent
CORAM: MADGWICK J
PLACE: BALLINA
DATE:
REASONS FOR JUDGMENT
MADGWICK J:
Introduction
Mr Lloyd seeks reinstatement or compensation under the Industrial Relations Act 1988 (Cth) (the Act) and damages for alleged breach of contract in the accrued jurisdiction of the Court.
Employment History
Mr Lloyd started work with the respondent ("Gilbertsons") on or about 17 July 1974 as a slaughterman at its Grafton abattoir. He was then aged 25. He had left school at 14 and had engaged in manual, rural work. He had worked in the meat industry since he was 20. In 1987, when he was about 39, he was promoted to the position of Foreman. He supervised the killing and dressing of cattle, including accepting responsibility for hygiene and the loading of at least the major products of the abattoir. He was on call 24 hours per day, 7 days per week.
In 1993 a new abattoir manager, Mr Jobson, was appointed and at about the same time the more senior management at Gilbertsons changed. Greater work pressures were placed on Mr Lloyd and the employees under his supervision. This reflected a difficult and competitive market in which Gilbertsons was operating.
A 1994 Enterprise Bargaining Agreement with the slaughter-floor workers' union led to restrictions on Mr Lloyd's ability to engage casual labour to cope with fluctuations in available stock for slaughter. This added to the pressures upon him, which included having to contribute his own physical labour at times. Mr Jobson did not have Mr Lloyd's private respect; among other things, Mr Jobson paid little regard to Mr Lloyd's protestations about difficulties for himself, the slaughter-floor and other workers, and about the maintenance of proper hygiene standards. Mr Jobson was transferred to the Melbourne operations of the company in about October 1994 and was succeeded at Grafton by Mr Earl. Mr Lloyd continued to press his concerns with Mr Earl.
The termination
On Monday 20 March 1995, Mr Lloyd was in pain from a recurrence of a work-related back injury sustained in 1990, and went home sick. He rang in to work sick the next day, and the day after.
However, at about 2.00 pm on the Wednesday, Mr Earl, the abattoir manager, telephoned Mr Lloyd and asked him to come in that afternoon. Mr Earl said that the "Group Human Resources Manager", Mr Smith, "just wants a chat". Unwell, Mr Lloyd reported in at about 3.00 pm as he had said he would. After being kept waiting for about an hour he was invited in to meet Mr Earl and Mr Smith.
He was then told that his employment was to be terminated and that due to restructuring his position would be abolished. Mr Lloyd protested: "Nobody has ever discussed this with me; ... I've been here all my life and this is the way I'm treated". Mr Earl said "Nothing personal, Errol. Your job is just not here any more". Mr Lloyd was handed a letter of termination signed by Mr Smith, a cheque and a reference.
The letter said:
"...
It was explained to you [today] that due to internal Company reorganisation and restructuring of existing business operations, your position as Kill Supervisor responsible for the processing of live animals for the Company, has been made redundant.
...
... you were informed that your services would effectively be terminated today...
Please find enclosed a cheque for $30408.49 being all your outstanding entitlements consisting of:
1. Annual Leave plus 25% loading;
2. Long Service Leave;
3. Twenty weeks redundancy payment;
4. Five weeks wages in lieu of notice.
...
We take this opportunity to thank you for your continued support throughout your employment, and wish you success in future endeavours ..."
The accompanying reference certified the length of Mr Lloyd's service and stated that his current position "was made redundant", not as a "reflection of his work performance or personal abilities, but merely due to organisational circumstances". The brief reference concluded with the words "He goes with the Company's best wishes".
Terms and Conditions of the Employment
In April 1994, Mr Slinger, then Deputy Managing Director of the Company, had written to Mr Lloyd as "a result of a review by the Company of the employment arrangements with non-Award employees and, in order to avoid any uncertainty over the effect of recent industrial reforms, ... to confirm [Mr Lloyd's] terms and conditions of ... employment ...". Among the matters set out, and which Mr Lloyd accepted, were the following:
"DUTIES AND RESPONSIBILITIES
...
Depending on job requirements, the Company reserves the right to vary your duties and responsibilities from time to time, in which case your new duties and responsibilities will be discussed with you and mutually agreed.
...
... you are required to carry out such duties as are within the limits of your skill, competence, knowledge and training.
REMUNERATION. Your salary is currently calculated at the rate of $53,300.00 p.a. and is subject to annual review.
...
The payment of your salary ... may be either weekly or fortnightly by agreement with the Company.
HOURS OF WORK. Flexibility in respect to the hours of work is required and your salary includes a component for all time worked, considered to be in excess of normal business hours.
...
SICK LEAVE. As a respected member of the Company's management, you will, in the event of genuine illness, be entitled to all reasonable time off with full pay to three months in any one year. After three months, and subject to satisfying insurance requirements, you will be eligible for ongoing cover under the Company's salary continuance scheme which provides a benefit of 75% of your salary.
...
TERMINATION OF EMPLOYMENT.
A. BY YOURSELF. You may terminate your employment by providing the Company with one month's notice in writing, in which case you shall be entitled to receive all entitlements calculated in accordance with this Agreement, paid to the final day of your employment.
Subject to mutual agreement, it may be decided that having received notice of your termination, the notice period shall be reduced, in which case you shall be paid all entitlements calculated up to the agreed date of your final employment.
Furthermore, the Company reserves the right, having received notice of your resignation, to terminate your employment at any time prior to the date notified within this termination advice, in which case, you shall be paid in lieu of the notice period.
B. BY THE COMPANY. The Company may terminate your employment by providing you with one month's notice in writing, as a result of personal incapacity which renders you unable to perform your duties and responsibilities for a continuous period of six months.
The Company may summarily terminate your employment as a result of any misconduct, fraud or dishonesty on your part or you are precluded from taking part in the management of the Company by virtue of any provision of law.
Should the Company be dissatisfied at any stage with the standard of your work performance, the Company shall provide you with a formal notice or warning, in writing.
In the event that your work performance fails to improve, you shall be provided with a second notice. If after two formal notices, your work performance is still not up to standard, the Company may then terminate your employment by providing you with one month's notice, in writing.
REDUNDANCY. If as a result of changing business circumstances, including the restructuring of existing business operations, the Company may terminate your employment, in which case you shall be entitled to, in addition to all other amounts which are payable under this Agreement, a redundancy payment calculated in accordance with the following schedule.
Schedule of Redundancy Payments
Years of Service Redundancy Payment
0 - 10 8 weeks
11 - 15 12 weeks
16 - 20 16 weeks
21 - 25 20 weeks
25 and over 24 weeks
..."
The following may be observed:
(a)The Termination of Employment clause is in a curious form. It apparently so much assumed continuing employment that it both: (i) obliged the company to give one month's notice of termination, even for unsatisfactory work after two written warnings; and (ii) completely omitted to make express provision for any notice of termination of employment on account of redundancy or indeed, on any ground other than long term "personal incapacity", misconduct, etc., or unsatisfactory performance.
(b)The redundancy payments clause does not deal with notice of termination at all and, in modern Australian practice, "redundancy payments" are not generally thought themselves to bear upon the appropriate period of notice of termination.
Termination required reasonable notice
Thus the period of notice will fall to be determined by the implication of a term that it be reasonable in all the circumstances. The circumstances of this case include these: Mr Lloyd had twenty years of exemplary service with the company; there has been a shrinkage in the number of abattoirs on the east coast of Australia; this was a country job; Mr Lloyd had recently been told that he was "a respected member of the Company's management"; as a comparatively low-level manager in a specialised field, he would have limited alternative employment prospects; his heath was imperfect, and he was 47 years of age with dependent children.
On the other hand, he was not, say, 57 years of age, his re-employment prospects were not remote (as events bore out), and he was well enough to perform the core responsibilities of an abattoir floor manager.
In my opinion, reasonable notice of termination would have been four months.
Why was the employment terminated and was it contrary to the Act?
The principal factual contest agitated in the case was whether Mr Lloyd was terminated because he was redundant or because of performance factors. I have therefore posed these questions in combination because, in my view, however one resolves the first question, the answer to the second is that the Act was contravened. That being so, having regard to the low cap on compensation fixed by s 170ee(3) and (4), the ultimate resolution of that factual contest is unnecessary.
The abattoir and the company were subject to the chill winds of change, the consequences of historic overcapacity in the Australian meat processing industry, and international competitive pressures of various kinds.
There is no reason to doubt the surrounding circumstances explained on behalf of the company by Mr Slinger, the Company's managing director. The Gilbertsons' Group had been under pressure to cut costs and had abolished over 1300 jobs in the last 5 years. The Grafton abattoir had severe profitability problems and its export licence was under threat on account of adverse reports by the Australian Quarantine Inspection Service (AQIS).
In early December 1994, Mr Lloyd and other Grafton managers were warned, in general terms, by Mr Slinger that the abattoir was not profitable, that Mr Slinger was not satisfied with its performance, and that he expected "an immediate improvement in all managers' performances ..."
Following further adverse reports on hygiene by a US Department of Agriculture representative and by AQIS, which indicated real problems about maintenance of the export licence, Mr Slinger again met the Grafton managers on 8 March 1995 (two weeks before Mr Lloyd's termination). Among other things, he again warned them all of the importance of performing "at the level required" on pain of possible termination of their services, and indicated that Mr Earl, the General Manager of the Grafton abattoir, would be commencing the restructure of the Grafton operation in accordance with a business plan which he, Mr Slinger, was then writing.
I think Mr Slinger had, so far as was relevant to Mr Lloyd, two vital considerations: (1) a degree of cost-cutting and measures to demonstrate that the company was very serious about the need for drastic improvements in productivity and cost-saving at Grafton; and (2) an urgent need that slaughter-floor conditions be improved so as to keep the export licence. The first consideration smacked of redundancy (by way of the reorganisation of work between fewer managerial employees): cf. Jones v Department of Energy & Minerals (Industrial Relations Court of Australia, Ryan J, 16 June 1995, unreported). The second concerned Mr Lloyd's performance.
Insofar as there was an element of redundancy in the termination, there was lacking that degree of reasonable and proper consultation, duly respectful of the status of employees as other than industrial serfs, which will ordinarily be required to save a termination on redundancy grounds from being harsh, unjust or unreasonable: see Quality Bakers of Australia Limited v Goulding & Wickham (Industrial Relations Court of Australia, Beazley J, 23 June 1995, unreported), and Hockey v Multiskip Pty Ltd (Industrial Relations Court of Australia, Marshall J, 29 September 1995, unreported).
Insofar as an element of Mr Lloyd's performance was involved, s 170dc of the Act was not complied with; neither was the contract of employment, as drawn by the employer: no "written warning" was given. In relation to s 170dc, no amount of mere general exhortation of an employee as to a necessity, in changing times, for improved performance, along with others, even when rather pointed, will suffice. There needs to be (I) an identification to the employee of the aspects of performance with which the employer is unhappy - it is these that the section calls "allegations"; and (ii) an opportunity afforded to the employee for him or her to respond to the criticism - to "defend himself or herself against the allegations", as the section has it.
Counsel for the employer did not argue, nor could he reasonably argue, that the employer "could not reasonably [have been] expected to give the employee that opportunity", within the meaning of s 170dc(b).
I should add that the "performance element" was not of the usual kind. One has the picture here of a man who had tried as hard as one of his background and training could. He may simply not have had sufficient managerial expertise for the newer and more pressing work environment. I refrain from making any finding that that was the fact; but that, in substance, is what Mr Slinger, from whatever information, had come to believe. Nevertheless, that was enough for the termination to be "for reasons related to the employee's ... performance" within s 170DC.
The practical and statutory requirements for consultation are neither matters of mere procedural nit-picking nor a counsel of perfection. Mr Lloyd had been a great workhorse for the company. A quiet, reasonable, one-to-one talk with him might very well have produced constructive results for all concerned. In any case, common decency required that he be given every chance to do what was required, including perhaps to seek advice from those, like the AQIS representative, who were implicitly critical of his managerial methods. It required also that he be reasonably supported in relation to possible and actual redundancy by the company he had for many years served so well. With such support, and without the hurt and insult of being "sacked on the spot", albeit with a degree of compensation therefor, at least he might well have been able to find other suitable work and to relocate his family to it, in a civilised fashion.
Not much depends on credit in this case. In the event that anything might, I must say that, despite Mr Slinger's having impressed me as, in general, a sincere and hard-pressed executive, he was less than frank with the Court about who made the final decision to appoint the men who took over most of Mr Lloyd's former duties. This, in the entire factual web, was not insignificant.
Reinstatement impracticable
Mr Lloyd's psychological condition was, according to the evidence which I accept, such that reinstating him, despite his wishes in the matter, would be grossly irresponsible. To say that reinstatement is impracticable is an understatement.
Compensation
He ought to have had reasonable notice (ie., four months - or about 17 weeks) or pay in lieu, and decent redundancy pay or compensation for loss of his job. He received 25 weeks' pay after 21 years' service and was able to obtain a job, but he could and did reasonably hold this only for about 6 weeks.
In my view, giving credit for what has been paid, the applicant ought to receive 28 weeks' pay by way of compensation, having regard only to the aforementioned factors. This sum is made up as follows:
(Weeks)
Pay in lieu of reasonable notice 17
Fair redundancy pay * 42
59
less: Pay received in lieu of notice 5
Redundancy pay received 20
Weeks worked since termination 6
28 weeks
* See below
This would need to be reduced to 26 weeks because of the limit prescribed by s 170ee(3). That produces a sum of $26,650.
I would award this sum as compensation, which is the maximum payable under the Act.
Such a course makes it unnecessary for me to consider here whether one can or ought under the Act to award compensation for psychiatric injury or mental distress falling short of that: cf. Burazin v The Blacktown City Guardian, (Industrial Relations Court of Australia, Madgwick J, 15 December 1995, unreported); Brackenridge v Toyota Motor Corporation Australia Limited (Industrial Relations court of Australia, Beazley J, 14 September 1995, unreported); and Aitken v The Construction, Mining, Energy, Timberyards, Sawmills and Wood Workers Union of Australia - W.A. Branch (Industrial Relations Court of Australia, Lee J, 7 August 1995, unreported).
Accrued jurisdiction
The only elements of loss that are possibly compensible on a breach of contract claim, over and above what is compensible under the Act, would be:
(a) the shortfall as to purely economic loss of two weeks' pay just referred to; and
(b) the considerable psychiatric injury sustained by Mr Lloyd.
As to (a), nothing is payable, since what I regard as "fair" redundancy pay for the purposes of the Act exceeds what was contractually agreed. It is proper, for the purposes of the Act, that I have regard to what was agreed, but I am not bound by it. The evident inequality of the bargaining positions of the parties may be taken into account, as may the more generous provisions generally made across industry for managerial employees: about two weeks' pay per year of service is something like a mid-range marketplace standard for a man in Mr Lloyd's situation, having regard to experience in the Court.
As to (b), Mr Lloyd's psychiatric injury, I do not doubt the genuineness and severity of this, having seen and heard him. Moreover, there is no doubt in my mind that it relates in substantial degree to the manner of his termination. I prefer the evidence of Dr Andreassen to that of the medical practitioners, particularly Dr Roberts. Dr Andreassen's approach much more closely fits what I know of the whole situation.
Nevertheless, for Mr Lloyd to succeed in the accrued jurisdiction, his unfortunate psychological condition must be causally related to a breach of contract. It may well not be so related to a breach of the implied promise to give reasonable notice of termination. Had the employer's agent, Mr Smith, said to Mr Lloyd: "We are giving you 6 months' notice of termination [ie. more than reasonable notice, in my view]. We don't require you to attend for work any further and would rather you didn't", the effect on Mr Lloyd would, in my view, likely have been no different.
What then was the term that was breached? I would be prepared to accept that there was an implied term that the employer would not, without reasonable cause, conduct itself in a manner likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee (see Burazin). But here, the relationship of employer-employee was, ex hypothesi, to be forthwith discontinued, in any event. One of the bases, in my opinion, for the implication of such a term is the obligation on the parties so to conduct themselves that fulfilment of the contract will not be rendered impossible, practically speaking. That justification no longer exists when the performance of the contract is, for other reasons, forthwith coming to an end. Thus, it is not clear to me that an implied term so formulated was breached.
Neither is it clear that the employer acted "without reasonable cause" within the formulation of such an implied term: the employer after all paid for the minimum notice period required by the Act (s 170db) and paid the contractually agreed redundancy pay which, although (as I have held) insufficient to be just, was nevertheless not insignificant. For an employer to have mistaken its legal position does not necessarily involve its having acted without reasonable cause, for the purposes of such an implied term of an employment contract.
There is in my view no other implied term which would avail Mr Lloyd.
In any case, I am not persuaded that there is not a suitable remedy elsewhere. I am unable to see why Mr Lloyd's psychological condition would not be compensible under the Workers Compensation Act 1987 (NSW). The quantum, over time, of that compensation might, for a person in Mr Lloyd's actual circumstances, exceed any damages that might be awarded here. If the employer has breached an implied contractual term as formulated above, it is difficult to see why the same facts would not amount to a tortious breach of the duty to take reasonable care for an employee's safety; but no tortious claim has been sought to be brought, fought or argued before this Court. Any difficulty in relation to foreseeability of the injury, given that Mr Lloyd was merely dealt with insensitively, rather than being subjected to gross indignity (as regrettably happens: Burazin represented but a moderate example of the species), would seem to apply equally to a contractual, as well as a tortious, claim for damages.
There is another matter relevant to my discretion whether or not to exercise any accrued jurisdiction. If the company has been obeying the workers' compensation laws, and I have little doubt it has, then it has for many years been compulsorily insuring its liability for injury, negligently or non-negligently sustained by Mr Lloyd. If I deal with this claim here, then either Gilbertsons would appear to be denied the benefit of that insurance or the insurer would be denied the benefit of its own means of investigation and possible defence against the claim. The latter is a right normally, and for good practical reason, valued by insurers.
On balance, I decline in my discretion, to entertain the claims made in the accrued jurisdiction.
In the result, I order that:
1.That compensation in the amount of $26,650 be paid to the applicant;
2.The said sum be paid into Court within 28 days;
3.Interest of 10% per annum is to be paid on that amount as from 22 March 1995, and is also to be paid into Court;
4.The said sum and interest are to be paid out to the applicant.
I certify that this and the preceding 13 pages are a true copy of the Reasons for Judgment of His Honour Justice Madgwick.
Associate:
Dated: 14 June 1996
APPEARANCES
Counsel for the Applicant: A Moses
Solicitor for the Applicant: Peter Marr
Counsel for the Respondent: J Phillips
Solicitor for the Respondent: Michie, Shehadie & Co
Date of hearing: 13 November 1995
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