Michael Smith v Alice Car Centre Pty Ltd T/A Peter Kittle Motor Company

[2013] FWC 9093

[2013] FWC 9093

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Michael Smith
v
Alice Car Centre Pty Ltd T/A Peter Kittle Motor Company
(U2013/10550)

VICE PRESIDENT LAWLER SYDNEY, 20 NOVEMBER 2013

Application for relief from unfair dismissal – whether “genuine redundancy” – s.389.

[1] This is an application for an unfair dismissal remedy by Mr Michael Smith.

[2] Mr Smith was employed by Alice Car Centre Pty Ltd (Company) on about 3 March 2012 in the position of “business manager” in the Company’s car dealership in Alice Springs. Mr Smith was paid a modest fixed income and made most of his remuneration from a share of commissions for finance and insurance deals done with customers who purchased vehicles from the Company’s Alice Springs business.

[3] Mr Smith was dismissed on 5 June 2013 on the ground of redundancy arising from a restructuring of the Company’s operations. He had been employed by the Company for a year and a quarter.

[4] There is no contest that Mr Smith was protected from unfair dismissal.

[5] The Commission has no jurisdiction to grant an unfair dismissal unless “the person has been unfairly dismissed” (s.390(1)(b)). Section 385 defines when a person has been unfairly dismissed:

“385 What is an unfair dismissal

A person has been unfairly dismissed if FWA is satisfied that:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

(d) the dismissal was not a case of genuine redundancy.”

Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.

[6] Mr Smith believes that his dismissal was orchestrated to make way for a girl friend of the Company’s dealer principal in Alice Springs, a woman who had been taken on as a trainee business manager several months prior to Mr Smith’s dismissal for redundancy. The woman in question ceased employment with the Company shortly after Mr Smith. When Mr Smith was first employed, the Company had two business managers. It is now operating with only one business manager. I accept the evidence of Mr Kelly and Ms Prevost on this issue. There is no acceptable evidence on which I could find that Mr Smith’s dismissal was orchestrated in the manner that he believes.

[7] The primary argument advanced by Mr Smith’s solicitor was that his dismissal was “not a case of genuine redundancy” within the meaning of the definition in s.389 with the result that the dismissal was harsh, unjust or unreasonable.

[8] The expression “genuine redundancy” is defined in s.389:

“389 Meaning of genuine redundancy

(1) A person’s dismissal was a case of genuine redundancy if:

(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer’s enterprise; or

(b) the enterprise of an associated entity of the employer.”

[9] It will be immediately noted that this definition confers a meaning that is different from, and broader than, the ordinary meaning and usage of the expression “genuine redundancy”, which is concerned only with the matter specified in s.389(1)(a). In other words, a dismissal may not be a genuine redundancy within the meaning of s.389 notwithstanding that the dismissal was a case of genuine redundancy within the ordinary meaning and usage of that expression.

[10] The requirement in s.389(1)(b) is a necessary pre-condition to a finding that a dismissal was “a case of genuine redundancy”.

[11] The condition in s.389(2) does arise for consideration in any given case unless and until the employee raises the issue of reasonable redeployment and there is at least some evidence from which it can be argued that it would have been reasonable in all the circumstances for the employee to be redeployed within the employer or an associated entity of the employer.

[12] There was no serious dispute that there were genuine operational requirements that led the Company to restructure its business with the result that the positions of Mr Smith and several other employees were made redundant. I accept the Company’s evidence to the effect that it had suffered a deterioration in its business conditions in its Alice Springs business. There was a significant drop in the sales performance of the Alice Springs business. The Company relinquished its Honda franchise for Alice Springs in February 2013. The Company relinquished its Hino franchise for Alice Springs in April 2013. The genuine need to restructure was well established.

[13] I am satisfied that the Company no longer required Mr Smith’s job to be performed by anyone because of changes in the operational requirements of the Company’s enterprise. I am satisfied that the condition in s.389(1)(a) is met.

[14] Mr Smith’s solicitor contended that his dismissal was harsh, unjust and unreasonable because of the Company’s failure to consult with Mr Smith on his redundancy as required by s.389(1)(b) and because of a failure to properly consider redeployment as required by s.389(2).

[15] In Ulan Coal Mines Limited v Honeysett [2010] FWAB 7578 a Full Bench identified the proper approach to applying the definition of “genuine redundancy” in 389(2):

“[26] First, s.389(2) must be seen in its full context. It only applies when there has been a dismissal. An employee seeking a remedy for unfair dismissal cannot succeed if the dismissal was a genuine redundancy. In other words, if the dismissal is a case of genuine redundancy the employer has a complete defence to the application. Section 389(2) places a limitation on the employer’s capacity to mount such a defence. The defence is not available if it would have been reasonable to redeploy the employee. The exclusion poses a hypothetical question which must be answered by reference to all of the relevant circumstances.

[27] Secondly, it is implicit in the terms of s.389(2)(b) that it might be reasonable for an employee dismissed by one employer to be redeployed within the establishment of another employer which is an entity associated with the first employer. It follows that an employer cannot succeed in a submission that redeployment would not have been reasonable merely because it would have involved redeployment to an associated entity. Whether such redeployment would have been reasonable will depend on the circumstances. The degree of managerial integration between the different entities is likely to be a relevant consideration.

[28] Thirdly, the question posed by s.389(2), whether redeployment would have been reasonable, is to be applied at the time of the dismissal. If an employee dismissed for redundancy obtains employment within an associated entity of the employer some time after the termination, that fact may be relevant in deciding whether redeployment would have been reasonable. But it is not determinative. The question remains whether redeployment within the employer’s enterprise or the enterprise of an associated entity would have been reasonable at the time of dismissal. In answering that question a number of matters are capable of being relevant. They include the nature of any available position, the qualifications required to perform the job, the employee’s skills, qualifications and experience, the location of the job in relation to the employee’s residence and the remuneration which is offered.”

[16] On the issue of whether or not redeployment would be reasonable, the Full Bench said ([2010] FWAB 7578 at para [34]):

“...Of course the job must be suitable, in the sense that the employee should have the skills and competence required to perform it to the required standard either immediately or with a reasonable period of retraining. Other considerations may be relevant such as the location of the job and the remuneration attaching to it.”

Was the requirement in relation to consultation in s.389(1)(b) met?

[17] There was no contest that the Vehicle Manufacturing, Repair, Services and Retail Award 2010 (Vehicle Award) covered and applied to the Company at the time of the dismissal. Clause 8 of the Vehicle Award provides:

“8. Consultation regarding major workplace change

8.1 Employer to notify

(a) Where an employer has made a definite decision to introduce major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the employer must notify the employees who may be affected by the proposed changes and their representatives, if any.

(b) Significant effects include termination of employment; major changes in the composition, operation or size of the employer’s workforce or in the skills required; the elimination or diminution of job opportunities, promotion opportunities or job tenure; the alteration of hours of work; the need for retraining or transfer of employees to other work or locations; and the restructuring of jobs. Provided that where this award makes provision for alteration of any of these matters an alteration is deemed not to have significant effect.

8.2 Employer to discuss change

(a) The employer must discuss with the employees affected and their representatives, if any, the introduction of the changes referred to in clause 8.1, the effects the changes are likely to have on employees and measures to avert or mitigate the adverse effects of such changes on employees and must give prompt consideration to matters raised by the employees and/or their representatives in relation to the changes.

(b) The discussions must commence as early as practicable after a definite decision has been made by the employer to make the changes referred to in clause 8.1.

(c) For the purposes of such discussion, the employer must provide in writing to the employees concerned and their representatives, if any, all relevant information about the changes including the nature of the changes proposed, the expected effects of the changes on employees and any other matters likely to affect employees provided that no employer is required to disclose confidential information the disclosure of which would be contrary to the employer’s interests.”

[18] Clause 8 contains an obligation imposed by a modern award on the Company to consult about the “definite decision” to make Mr Smith redundancy.

[19] A failure to comply with a consultation obligation of the sort referred to in s.389(1)(b) may result in a dismissal that is unjust or unreasonable notwithstanding the existence of genuine operational requirements for the dismissal. Whether an order for compensation is appropriate in such circumstances, and the proper amount of any such compensation, is a matter that turns on the circumstances of each case.

[20] The Company did not consult with Mr Smith as required by Clause 8 and, accordingly, the requirement in s.389(1)(b) was not met with the result that Mr Smith’s dismissal was not a case of genuine redundancy within the extended meaning of that expression in s.389.

[21] I do not wish to be unduly critical of the Company. I am satisfied that Ms Prevost, the Company’s HR manager, acted conscientiously and in good faith. I accept her oral evidence. Despite many years experience as a human resources manager, Ms Prevost had never had occasion to consider s.389 and simply overlooked the extended definition in that section. Nevertheless, the Company’s failure to consult with Mr Smith as required by Clause 8 of the Vehicle Award compels a conclusion Mr Smith’s dismissal was not a case of genuine redundancy within the meaning of s.385(d).

Was it reasonable in all the circumstances for Mr Smith to be redeployed within the Company (s.389(2)(a))?

[22] I am satisfied that Ms Prevost genuinely and conscientiously explored whether Mr Smith could be redeployed elsewhere within the Company’s enterprise, including at locations other than Alice Springs, business but no suitable position was available. On the evidence I find that it would not have been reasonable in all the circumstances for Mr Smith to be redeployed within the Company.

Was it reasonable in all the circumstances for the person to be redeployed within an associated entity of the Company (s.389(2)(b))?

[23] The expression “associated entity is defined in s.12 of the FW Act:

“associated entity has the meaning given by section 50AAA of the Corporations Act 2001.”

[24] Section 50AAA of the Corporations Act 2001 provides:

“50AAA Associated entities

(1) One entity (the associate) is an associated entity of another entity (the principal) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.

(2) This subsection is satisfied if the associate and the principal are related bodies corporate.

(3) This subsection is satisfied if the principal controls the associate.

(4) This subsection is satisfied if:

(a) the associate controls the principal; and

(b) the operations, resources or affairs of the principal are material to the associate.

(5) This subsection is satisfied if:

(a) the associate has a qualifying investment (see subsection (8)) in the principal; and

(b) the associate has significant influence over the principal; and

(c) the interest is material to the associate.

(6) This subsection is satisfied if:

(a) the principal has a qualifying investment (see subsection (8)) in the associate; and

(b) the principal has significant influence over the associate; and

(c) the interest is material to the principal.

(7) This subsection is satisfied if:

(a) an entity (the third entity) controls both the principal and the associate; and

(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.

(8) For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:

(a) has an asset that is an investment in the second entity; or

(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.”

[25] The solicitor for Mr Smith put the following matters to the Company’s General Manager, Mr Kelly:

• The Company, Alice Car Centre Pty Ltd, is owned by Yamba Pty Ltd and CAAMV Pty Ltd as 50% shareholder.



• Yamba Pty Ltd is owned by Louise Mary Kittle and Peter James Kittle.



• CAAMV Pty Ltd is owned by Centrecorp Aboriginal Investment Corporation.



• Centrecorp Aboriginal Investment Corporation is owned by the Central Land Council, Tangentyere Council and Central Australian Aboriginal Congress.

[26] The solicitor for Mr Smith placed reliance on s.50AAA(5) and (8). He submitted that each of Centrecorp Aboriginal Investment Corporation, Central Land Council, Tangentyere Council and Central Australian Aboriginal Congress were associates that had a qualifying investment in the Company. He then submitted that those three entities

“...are large organisations with obvious turnover and so therefore it’s our submission that generally there’s a reasonable chance that there might have been redeployment options there. We can’t say any more than that because there just isn’t the evidence before the court.” (PN818).

[27] In an understandable way, it never occurred to Ms Prevost that she should consider whether Mr Smith could be redeployed in CAAMV Pty Ltd, Centrecorp Aboriginal Investment Corporation, Central Land Council, Tangentyere Council or Central Australian Aboriginal Congress

[28] The position in relation to “qualifying investments” is as follows:

• Each of Yamba Pty Ltd and CAAMV Pty Ltd has “an asset that is an investment” in the Company. Each owns the shares in the Company. Each has a qualifying investment in the Company.



• Centrecorp Aboriginal Investment Corporation has “an asset that is an investment” in CAAMV Pty Ltd. It owns the shares in CAAMV Pty Ltd. Centrecorp Aboriginal Investment Corporation has a qualifying investment in CAAMV and is an “associated entity” of CAAMV.



• Each of Central Land Council, Tangentyere Council and Central Australian Aboriginal Congress has “an asset that is an investment” in Centrecorp Aboriginal Investment Corporation, namely a shareholding in Centrecorp Aboriginal Investment Corporation.



• While shares constitute an asset that is an investment in the company that has issued the shares, the shareholders of a company do not have a beneficial interest in the assets of the company.



• None of the Centrecorp Aboriginal Investment Corporation (via its shareholding in CAAMV) or the Central Land Council, Tangentyere Council and Central Australian Aboriginal Congress (via their shareholdings in Centrecorp Aboriginal Investment Corporation) have “an asset that is an investment in” the Company or “a beneficial interest in an investment in” the Company.

[29] Section 50AAA(5) operated to make each of Yamba Pty Ltd and CAAMV Pty Ltd an associated entity of the Company because:

(a) each has a qualifying investment in the Company; and

(b) each has significant influence over the Company. Each owns 50% of the shares in the Company and provides two of the four directors of the Company; and

(c) the investment in the Company is material to each.

[30] However, there was no evidence on which I could find there was any vacancy within CAAMV Pty Ltd or Yamba Pty Ltd into which Mr Smith might have been redeployed.

[31] In relation to Centrecorp Aboriginal Investment Corporation, the Central Land Council, Tangentyere Council or the Central Australian Aboriginal Congress (the Indigenous Entities), I am not satisfied that any of those entities had a “qualifying investment” in the Company or was an “associated entity” of the Company.

[32] Moreover, even if, contrary to that finding, s.50AAA did operate to render one or more of the Indigenous Entities associated entities of the Company, I am not persuaded that it would materially change the outcome of this case. The evidence on the topic of redeployment opportunities was confined to propositions put to Mr Kelly, the CEO of the Company, by the solicitor for Mr Smith in cross-examination. No company searches were tendered and there was no direct evidence of vacant positions that may have been suitable for the redeployment of Mr Smith into one of the Indigenous Entities. The Company witnesses had no knowledge of the affairs and circumstances of the Indigenous Entities, including whether any of the Indigenous Entities had a vacancy in which it was more likely than not that Mr Smith could have been redeployed had the Company turned its mind to s.389(2) prior to dismissing Mr Smith. Mr Smith was unaware of any such vacancies (PN482). In the absence of acceptable evidence that there were in fact suitable vacancies, I am not prepared to infer that it was more likely than not that there were suitable vacancies within one or more of the Indigenous Entities into which Mr Smith could have been redeployed. Indeed, taken at face value (because that is all that the evidence allows), it seems improbable that the relationship between the Indigenous Entities and the Company was such that any of those entities would have been amenable to taking over the employment of Mr Smith, let alone at a level commensurate with the level of remuneration he was receiving at the Company.

Criteria in s.387

[33] I turn to consider whether the dismissal was harsh, unjust or unreasonable by reference to the matters specified in s.387.

S.387(a) - whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

[34] The genuine operational requirements that motivated the decision to dismiss Mr Smith on the grounds of redundancy constituted a valid reason for the dismissal notwithstanding the Company’s failure to consult with Mr Smith in accordance with clause 8 of the Vehicle Award. The business manager presently retained by the Company, in preference to Mr Smith, is a long term employee of the Company.

S.387(b) - whether the person was notified of that reason; and

[35] Mr Smith was notified of the reason for his dismissal at the time of his dismissal but not before.

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

[36] The dismissal related to genuine operational requirements and did not relate to the capacity or the conduct of Mr Smith.

S.387(d) - any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

[37] There was no refusal by the employer to allow Mr Smith to have a support person present because there were no discussions relating to the dismissal before the dismissal was effected.

S.387(e) - if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal

[38] The dismissal did not relate to unsatisfactory performance.

S.387(f) and (g) - the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal - the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal

[39] The Company has a medium sized business operating out of four locations in South Australia and the Northern Territory. It had dedicated human resource management expertise in the form of Ms Prevost. I have already referred to Ms Prevost’s conduct of the redundancy process.

S.387(h)- any other matters that FWC considers relevant.

[40] Mr Smith is 61 years old. His length of service was relatively short – about 1 and a half years. Mr Smith has found alternative employment as a car salesman at another dealership in Alice Springs. While he is earning significantly less in gross income than he earned as an employee of the Company, the fact that he has found alternative employment means that the level of hardship caused by the dismissal has been significantly ameliorated albeit that his new employment carries a substantially lesser remuneration.

Harsh, unjust or unreasonable

[41] In the circumstances of this case, on the approach set out by the Full Bench in Ulan Coal Mines Limited v Honeysett ([2010] FWAB 7578), I am obliged to find that Mr Smith’s dismissal was harsh, unjust or unreasonable because of the Company’s failure to comply with the consultation obligation imposed by clause 8 of the Vehicle Award before dismissing Mr Smith such that the dismissal was not a case of genuine redundancy within the extended meaning in the FW Act.

Remedy

[42] Section 390(3) provides:

“(3) The FWC must not order the payment of compensation to the person unless:

(a) the FWC is satisfied that reinstatement of the person is inappropriate; and

(b) the FWC considers an order for payment of compensation is appropriate in all the circumstances of the case.”

[43] Given the genuine operational reasons that existed for the restructuring that led to Mr Smith redundancy and the absence of any evidence of vacancies within the Company, I find that reinstatement is not appropriate.

[44] I determining whether an order for compensation is appropriate, the Commission is obliged to consider the criteria specified in s.392(2).

S.392(2)(a) - the effect of the order on the viability of the employer’s enterprise; and

[45] There is no suggestion in the evidence that a modest award of compensation would have any effect on the viability of the employer’s business.

S.392(2)(b) - the length of the person’s service with the employer; and

[46] Mr Smith had been employed for only a relatively short period – about 1 year and a quarter.

S.392(2)(c) - the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and

[47] If Mr Smith had not been dismissed, he would have continued to receive remuneration in the form of his base salary and commissions on finance and insurance deals at approximately the same level that he had been receiving the months leading up to his dismissal. Mr Smith’s remuneration as an employee of the company varied according to commissions earned. His annual earnings were about $120,889 (derived by adding commission for a 12 month period ($78,889) to the annual wage rate implicit in pay slips ($42,000) - see Exhibit MS7), suggesting a weekly average of about $2,325. If Mr Smith had not been dismissed he would have been likely to continue receiving remuneration at about that level for no more than a further week.

S.392(2)(d) - the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and

[48] Mr Smith has made efforts to mitigate the loss suffered because of his dismissal. He has made a number of job applications and was successful in obtaining a job as a car salesmen at Centrepoint Cars in Alice Springs. He commenced that job on 19 August 2013.

S.392(2)(e) - the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and

[49] Mr Smith has earned remuneration as a car salesman at Centrepoint Cars from 19 August 2013 but at a rate that is significantly less what he earned as an employee of the Company.

S.392(2)(f) - the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and

[50] Mr Smith will earn his income as a car salesman at Centrepoint Cars during that period.

S.392(2)(g) - any other matter that the FWC considers relevant.

[51] Mr Smith received the following from the Company on his dismissal:

• 2 weeks full pay (base pay plus commissions) in lieu of notice.



• 4 weeks base pay as a redundancy payment.



• Outstanding annual leave entitlements.



• Commissions for the period leading up to his dismissal.

[52] The amounts paid in lieu of notice and as a redundancy payment were amounts required by the National Employment Standards.

[53] On the evidence of Mr Kelly and Ms Prevost, I am satisfied that even if there had been consultation as required by Clause 8 of the Vehicle Award, Mr Smith’s dismissal on the ground of redundancy would still have been inevitable. I find on the balance of probabilities, that if consultation in accordance with Clause 8 of the Vehicle Award had occurred, it would have made no difference to the ultimate outcome - Mr Smith would still have been terminated for redundancy on the basis of genuine operational requirements. I find that, in the circumstances that obtained for the Company in this particular case, consultation in accordance with Clause 8 of the Vehicle Award would have resulted in a delay in the decision to proceed with the dismissal of Mr Smith for a period of no more than one week.

[54] On the evidence before the Commission, on the balance of probabilities, I am not satisfied that it is more likely than not that Mr Smith would have been successfully redeployed within any of the entities that Mr Smith identified as “associated entities’ of the Company if Ms Prevost had made genuine attempts to seek his redeployment into one of those entities.

[55] The provision of a remedy for an unfair dismissal involves according ‘a fair go all round’. Fairness must be accorded to the employer and not just the employee. Notwithstanding the finding in paragraph [41] above, in my view it would not be affording a fair go to the employer in the circumstances of this case to hold it liable to pay compensation in a sum greater than the amount that Mr Smith would have earned if his employment had continued while the Company complied with its consultation obligation under Clause 8 of the Vehicle Award. On all the evidence, I assess that amount as the equivalent of one week’s remuneration, an amount of $2,325 and determine that an order for compensation in that amount is appropriate in all the circumstances of the case. An order giving effect to that determination has issued in conjunction with these reasons.

VICE PRESIDENT

Appearances:

Mr. P. Cozens for the Applicant

Ms. K. Prevost (via telephone) for the Respondent

Hearing details:

2013.

Alice Springs

9 and 10 October

Final written submissions:

For the applicant: 27 September 2013

For the respondent: 20 September 2013

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