Miller, David James v Central Gippsland Water Authority
[1997] FCA 1081
•2 OCTOBER 1997
FEDERAL COURT OF AUSTRALIA
INDUSTRIAL LAW - complaint of UNLAWFUL TERMINATION -
JURISDICTION - CONTRACT OF EMPLOYMENT - whether employee covered by AWARD - VALID REASON - whether OPERATIONAL REQUIREMENT - whether OPPORTUNITY to RESPOND - REMEDY - whether reinstatement impracticable - COMPENSATION -
Water Act 1989 (Vic) s322
Workplace Relations Act 1996 (Cth) ss 170CD, 170DC, 170DE, 170EA, 170EE,
170MA, 170UD
Workplace Relations Regulations reg 30DA
Gippsland Water Professional Officers’ Contracts Agreement 1996
Regional Water Authorities Officers’ Award 1990
Christie v Qantas Airways Ltd (1996) 60 IR 17
Comalco Aluminium Ltd v O’Connor (1995) 61 IR 455
Grout v Gunnedah Shire Council (1994) 125 ALR 355
Kerr v Jaroma (1996) 70 IR 469
Nettlefold v Kym Smoker Pty Ltd (1996) 69 IR 370
Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371
MILLER -V- CENTRAL GIPPSLAND WATER AUTHORITY
VI 1134 of 1997
PARKINSON JR
MELBOURNE
2 OCTOBER 1997
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) VI 1134 of 1997
)
GENERAL DIVISION )
B E T W E E N: David James MILLER
Applicant
AND: CENTRAL GIPPSLAND WATER AUTHORITY
Respondent
JUDICIAL REGISTRAR : PARKINSON
PLACE : MELBOURNE
DATED : 2 OCTOBER 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
Pursuant to Section 170EE(3) of the Workplace Relations Act, 1996, the respondent pay to the applicant compensation in the sum of $40,000.00.
Payment in accordance with Order 1 herein be within 21 days of the date of this order.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) VI 1134 of 1997
)
GENERAL DIVISION )
B E T W E E N: David James MILLER
Applicant
AND: CENTRAL GIPPSLAND WATER AUTHORITY
Respondent
JUDICIAL REGISTRAR : PARKINSON
PLACE : MELBOURNE
DATED : 2 OCTOBER 1997
REASONS FOR JUDGEMENT
This is an application made pursuant to Section 170EA of the Workplace Relations Act 1996.(‘the Act’) The applicant commenced employment by the respondent on 31 July, 1995, as the General Manager Human Resources. He was employed pursuant to a contract, which specified various terms and conditions of employment.(Exhibit R4)
The respondent is a public authority, providing water and sewerage services to the Gippsland Region in Victoria. It is an authority which was created as a result of a restructuring of the water industry in Victoria and the consequent amalgamation of a number of water authorities in the Gippsland region. The respondent is an authority comprising the former Latrobe Water Board, the Tarago Authority, the MacAlister Authority, Sale and Gippsland Central Authorities. Upon its establishment the respondent was controlled by an interim board for a period of 3 years. The authority was also subject to the operation of guidelines for the implementation of the restructure process in terms of staff and conditions of employment. These guidelines were given the force of regulations pursuant to s322 of the Water Act 1989 (Vic).
The applicant was employed in 1995 in circumstances where the respondent was facing a significant reduction in staff numbers and faced the task of altering significantly its manner of operating and provision of service. There is no doubt that, at the time of the employment of the applicant, the authority was undergoing significant change as a consequence of the amalgamation of the various disparate authorities and as a consequence of the staff reduction and reorganisation which was occurring and had already occurred. The applicant was employed by interview with the Chief Executive Officer, Mr. Sunderman. The applicant and the respondent anticipated that the employment would be for a period of at least 3 years and this is apparent from the term set by the contract. (Exhibit R4) The respondent contends that the applicant is unable to bring the proceeding as a consequence of his salary level exceeding the statutory limit provided for by reg 30DA and s170CD. It contends that the applicant, by reason of the amount of his income, is precluded from bringing the proceedings. It is apparent that the applicant’s income of $80,000.00, (Exhibit A4), exceeds the amount prescribed by reg 30DA.
Section 170CD provides:
170CD(1) [Employee not employed under award conditions]
The following Subdivisions do not apply to a termination of employment of an
employee who is not employed under award conditions if:
(a)in respect of an employee who was continuously employed by the employer during the period of 12 months immediately before the termination day - on the termination day the
employee’s relevant wages exceeded the applicable amount; or
(b)in respect of an employee who was continuously employed by the employer for a period less than 12 months immediately before the termination day - on the termination day the employee’s relevant wages exceeded the amount worked out using the formula:
days employed
365X applicable amount
170CD(2) [Amount]
The applicable amount for the purposes of subsection (1) is:
(a) subject to paragraph (b), $60,000; or
(b)if the regulations made in accordance with Subdivision CA prescribe a formula for the annual indexation of the amount referred to in paragraph (a) - the amount worked out using that formula as it applies from time to time.
170CD(3) [Non-award employee]
For the purposes of this section, an employee is taken not to be employed under award conditions if wages and conditions of employment of the employee are not regulated by one or more relevant awards that bind the employer of the employee.
170CD(4) [Terms defined] ...
The respondent contends that the applicant’s employment was not governed as to wages or conditions by an award and consequently his income of $80,000 per annum was outside of the amount prescribed by reg 30DA. The respondent refers to the employment agreement or contract, entered between the parties after the commencement of the employment, as identifying the basis of the employment of the applicant. It contends that the employment was regulated as to terms and conditions exclusively by the contract and not by any industrial award.
The applicant contends that his employment is regulated by operation of an award of the Australian Industrial Relations Commission, (‘the Commission’), known as The Regional Water Authorities Officers’ Award 1990, (‘the Award’). It is contended that there is no inconsistency between the operation of the contract and the application of the Award to the employment, either as to wages or conditions. The applicant contends that his employment fell within the definition of Senior Officer as provided for by Clause 9 of the Award. It was contended that his duties and responsibilities were encompassed by the description of the duties set out in the definition of Senior Officer Grade 2. As to the salary level exceeding the amount provided for in the Award, the applicant contends that the application of the Award to the employment cannot be determined merely by the failure of a party to comply with its terms.
It is appropriate to consider the question of jurisdiction at the outset of this decision and I now do so. The Award regulates the terms and conditions of employment of various grades and levels of employees in named Regional Water Authorities. The classifications contained in Clause 9 extend from a base grade clerk to senior officers and professional officers in the water industry. The Award is an award of a type known as a Paid Rates Award. In a Paid Rates Award it is anticipated by the parties that the payments made to employees on account of salary and allowances will not exceed those provided for expressly by the award. This is in contrast to an award which is known to be a Minimum Rates Award and prescribes only the minimum payments required for a particular occupation or classification. A Paid Rates Award, as a result of providing for an all inclusive rate, is often an award which provides for salaries in excess of those provided for in a Minimum Rates Award, for the same classifications or occupations. In making a Paid Rates Award, the Commission requires that the parties to the award, generally the union and the individual employer, provide, by statutory declaration, a commitment to the rates provided for in the award and not to exceed those rates of pay in relation to any classification or occupation provided for in the award. As I understand the process, an award was only made as a Paid Rates Award where such a commitment has been made by the parties and formally provided to the Commission.
The respondent relies in this proceeding upon the fact that the applicant was paid by the respondent an amount in excess of the rate of pay provided for by the Award. The applicant contends that his employment falls within the definition provided for by the Award for Senior Officers and that he was appropriately classified pursuant to that classification. The applicant contends that the Award provides for the regulation of, not only wages but also conditions and that aspects of his conditions of employment were regulated by the Award. Further it is contended that the applicant’s employment was governed and intended to be governed by the Award, save for the increased salary and that this is recognised and expressly provided for by the contract entered between the parties.
I do not accept that that the failure of the respondent to comply with its commitments as to rates of pay, arising from the making of a Paid Rates Award, is a matter which may be relied upon to assert that the Award did not apply to the employment. Whilst it is a failure, which may have consequence industrially, it does not affect the application or effectiveness of the Award in relation to the employment of the applicant.
The authorities identify that the consequences of the failure to comply with a Paid Rates Award are not that the Award becomes ineffective or inoperative in relation to the employment. See in this regard Comalco Aluminium Ltd v O’Connor (1995) 61 IR 455 where Wilcox CJ and Keely stated;
(at page 476)
In making an award specifying “actual entitlements”, rather than “minimum entitlements”, the Commission manifests an expectation as to the parties’ future conduct, this being reflected in the statement required by s170UE. However, s170UD confirms that the statutory concept of “paid rates award” does not necessarily involve a prohibition on overaward payments. Section 170UD contemplates situations where parties to a paid rates award act so inconsistently with it as to make inappropriate its continuance as a paid rates award. In speaking of a party acting in a way that is “inconsistent with the award”, Parliament apparently had in mind a situation where an employer provides, and employees receive, entitlements in excess of those prescribed by the award. By doing this, the parties act inconsistently with the award’s intended character, even if not inconsistently with its terms.
The circumstances that s170UD contemplates inconsistent behaviour, but speaks of it as behaviour “inconsistent with the award” rather than “in breach of the award”, and provides only the sanction of the Commission cancelling the status of the award as a paid rates award does not prohibit an employer providing additional entitlements. The position might be different if a prohibition was embodied in the award itself; although it is not clear how, or by whom, such a prohibition could be enforced.
(and at page 481)
The second element in the s4 definition is that the award specifies actual entitlements, rather than minimum entitlements, in relation to wages and conditions. As we have indicated, there is a question about the meaning of the expression “specifying actual entitlements”. For the reasons we have stated, we do not think that this expression requires that the award be one that, in terms, prohibits the provision of additional entitlements; so that, if additional entitlements were provided, one or both parties would be in breach of the award and exposed to penalty under s178 of the Act. We think the expression refers to an award that specifies the entitlements intended to be actually provided. If an employer bound by the award provided less than these entitlements, that would, no doubt, be a breach of the Act attracting orders under s178. If the employer provided more, the only sanction would be cancellation of the award, as a paid rates award, under s170UD and any additional industrial consequences that might ensue from that.
The definition of “paid rates award” draws a clear distinction between “specifying actual entitlements” and “(specifying) minimum entitlements”. When minimum entitlements are specified in an award, there is not necessarily an expectation on anybody’s part that these will accord with the entitlements actually provided to employees. It is commonplace, in many industries, employers to provide over-award benefits. Because there is no necessary expectation of a correlation between specified minimum entitlements and actual entitlements, it is clear that an award that specifies minimum entitlements is not a paid rates award. As we have pointed out, the Act uses the term “award” to refer to a complete instrument, not a part of it. It seems to us that, unless the whole award meets the test of specifying actual entitlements rather than minimum entitlements, it I not as paid rates award. It is not enough that it specifies some actual entitlements, if it specifies only minimum standards in relation to others.
It is appropriate to set out the relevant provisions of the Award and the contract. Clause 5 (b) provides that the Award is binding upon various water authorities including the respondent in respect of all their employees whose remuneration and conditions of employment are determined by this Award, whether members of the undermentioned unions or not. The clause then provides that the Award is binding in respect of various unions. It is common ground that the respondent is a party to the Award and bound by its provisions.
The initial question to determine the application of the Award to the employment is whether the applicant’s remuneration and conditions are determined by the Award, in the sense expressed in Clause 5(b). The issue for determination is whether the applicant’s duties and responsibilities fell within the classification contained in Clause 9 for a Senior Officer. It is apparent that the Award provides for, or determines the level of, salary to be paid. Thus I am satisfied that if the applicant’s duties fall within the classification structure, the Award “determines the remuneration and conditions” as required by Clause 5(b) and consequently applies to his employment in the sense contemplated by s170CD of the Act. It is necessary to consider the duties and responsibilities held and performed by the applicant, and the duties and responsibilities provided for by the classification in the Award for which the applicant contends. Clause 9, of the Salaries and Classification Definitions section, provides a definition of various classifications of work the subject of regulation by the Award. I am satisfied that the applicant’s duties and responsibilities are contemplated by the classification of Senior Officer contained at Clause 9. The definition for that classification is as follows:
Senior band 1
DefinitionUnder broad policy control and direction a senior band one employee is:
· a senior practitioner; or
· a senior manager; or
· a senior specialist
Classification of a position in this band requires a level of accountability, complexity, competency, judgement and responsibility clearly above and beyond that of a band 5 administrative/technical or a band two professional position.
Features
An employee in this band is expected to have extensive experience and comprehensive knowledge related to two or more functions.
Employees work under broad direction in terms of objectives, policies and priorities. Programs, projects, assignments or other work to be performed are generally decided by higher level management but employees have authority to decide on how to achieve end results within limits of available resources. Decisions by employees in this band have direct consequences on the achievement of results for the function or group of activities for which the employee is responsible.
Employees in this band exercise independence and discretion in determining overall strategies, priorities and work standards. The employee also contributes directly to the formulation of agency policies for the work area and requires an understanding of the wider policy and strategic context. Technical of [sic] professional advice generally has consequences beyond the immediate work area and is normally only reviewed for policy and general approach.
A senior practitioner in this band operates in the absence of general guidance and is expected to apply significant knowledge and judgement in more than one discipline or field in relation to more novel, complex and critical work.
A manager in this band leads, directs and co-ordinates work over a range of functions and disciplines.
A senior specialist in this band exercises a high degree of independent judgement in the resolution of more novel, complex and critical problems or issues. An employee is required to provide authoritative technical or policy advice which draws on in-depth knowledge in at least two disciplines or fields. Analysis, design and interpretation of results of research or investigations must result in authoritative and final conclusions. An original continuing contribution to the knowledge in the relevant discipline(s) or field(s) and the application of that advance in knowledge to the organisation’s work would be expected.
Senior band two
DefinitionUnder broad policy control and direction a senior band two employee is:
· a principle manager; or
· a principle specialist/practitioner.
Classification of a position in this band requires a level of accountability, complexity, competency, judgement and responsibility clearly above and beyond that of a senior band one position.
Features
An employee in this band exercises a high degree of independence within the area of responsibility, in the determination of overall strategies, priorities, work standards and the allocation of resources within the limits of the work program and the formulation of policy and associated principles, practices and procedures.
An employee in this band operates in accordance with broad objectives and is expected to apply highly significant knowledge and judgement to the performance of work which is often critical to the achievement of overall objectives of a department or region.
A principal manager in this band leads, directs and co-ordinates major functions or work areas in an agency involving a considerable variety of activities such as a region or a directorate. Relative to other senior officer positions, senior managers in this band have highly significant responsibility for the human, physical and financial resources under their control, and the work may also include extensive co-ordination of projects involving large numbers of employees engaged in a variety of disciplines.
Employees in this band may also be responsible for initiating, planning and conduction research projects of considerable breadth which contribute significantly to the development of agency policy or are highly complex in terms of problem definition and methodology.
A principle specialist in this band is expected to have a depth of knowledge in his/her discipline or field of significance to the department concerned. There is a requirement for a high degree or [sic] originality and analytical and conceptual skills in the resolution of particularly complex “technical” or policy issues. The work requires expert knowledge in a professional or technical range of fields and in most cases a comprehensive knowledge of relevant legislation and policies. The work requires constant adaptation of existing principles to new and unusual problems and involves frequent changes in policy, program or technological requirements.
The salary levels for senior officers are in Clause 9 of the Award.
9. - Salaries (a) contd
Senior Officers stream Total annual rate of pay
per annumBAND 1
48,777 49,611
50,123 50,957
51,647 52,481BAND 2
53,097 53,931
54,386 55,220
56,124 56,958
The applicant’s duties were to manage the entire human resources function of the respondent, including to plan and implement projects and policies. He functioned in those duties independently and autonomously. He was subject to direction from the Chief Executive Officer and through the latter, the Board. Whilst he had a limited responsibility for the direct supervision of staff, in that there were only 3 nominated divisional employees in the organisational chart, he had overall responsibility for human resource processes and planning in the organisation which employed approximately 250 employees. The applicant was responsible for the negotiation of workplace agreements, industrial awards and agreements and the development of processes and policies of a complex type in the context of proposed contract proposals. His duties required him to exercise a significant degree of initiative and to oversee the implementation of workplace change and the reorganisation of the workplace as a consequence of the redundancy program which had been implemented.
The performance appraisals of the applicant in the period of the employment identified the independence and responsibility of the position to be at a senior level. I am satisfied that the applicant’s duties and responsibilities fall within the definition provided for an employee required to be classified as a Senior Officer Grade 2.
Further, whilst the history of the Award provisions provided to the Court was incomplete, it is apparent from the various predecessor awards that the classification structure contemplated employees in the water authorities at a senior level, including the most senior officers, the Secretary of the Authority and the Assistant Secretary. There is nothing as to the classification of the applicant, his duties or his seniority as one of 5 General Managers, which is inconsistent with the scope or application of the various Awards historically governing local water authorities, including predecessor authorities to the respondent.
Finally, to the extent that the parties intentions and conduct after the Award has been made is relevant in any way to the determination of the application of the Award to the employment, (see Grout v Gunnedah Shire Council (1994) 125 ALR 355 Moore J at page 375), I am satisfied that the conduct of the parties revealed an acknowledgement and understanding that the Award applied to the applicant’s employment. In the contract recital provision at paragraph E, it is provided that the contract is to be read in conjunction with the Regional Water Authorities Officers Award 1990 and any certified agreement in existence from time to time, and to the extent of any inconsistency the contract shall apply. It is apparent from the evidence that it was the parties intention to, at some stage in the future, register an industrial agreement providing for the precedence of the contractual provisions over the Award. This in fact occurred after the termination of the employment when an agreement made pursuant to s170MA of the Act was certified by the Commission on 27 September 1996. That agreement is known as the Gippsland Water Professional Officer’s Contracts Agreement 1996, (‘the Agreement’), (Exhibit A10), and is stated to apply to persons falling within the Professional Officers and Senior Officers classifications of the Award.
In addition to the provisions as to classification in the Award, the Award provides for regulation of conditions of employment. It is sufficient for the purposes of reg 30DA and s170CD that an employment be governed as to conditions by the terms of an Award. See in this regard the decision of Wilcox CJ in Christie v Qantas Airways Ltd (1996) 60 IR 17 where his Honour said;
(at page 25)
The fact that the award was amended in such a way as to facilitate agreements for over-award payments to captains who undertook particular responsibilities does not mean that those captains were taken out of the general protection of the award. They remained ‘pilots’. They remained ‘captains’.
(and at page 26)
In framing the test set put in s170CD(3), Parliament employed a double negative: “an employee is taken not to be employed under award conditions if wages and conditions of employment of the employee are not regulated” by one or more awards. As counsel for the respondents pointed out, the words “wages and conditions” are conjunctive and not disjunctive. Wages and conditions means both wages and conditions: not either wages and conditions. But because Parliament used the negative “not regulated”, the effect of this is that the stipulated test is satisfied only if both wages an conditions are not regulated by an award or awards. If an employee’s conditions are regulated by an award, this is enough to prevent the satisfaction of the negative test.
Whilst I have earlier indicated that my finding that the applicant’s wages were regulated by the Award, I am also satisfied that the applicant’s conditions of employment were regulated by the Award. It is apparent from the terms of the contract of employment between the applicant and the respondent that it was anticipated that, to the extent that matters were not expressly provided for, the Award would continue to apply to the employment. In fact the terms of the Award were often expressly stated to apply. It was also intended that the Agreement would be registered and endorsed by an industrial tribunal. The parties clearly apprehended that the variance in the agreement from the reigning Award provisions required such a step to be taken in the proceedings. I am satisfied that the applicant was an employee to whom the provisions of the Award applied. Having regard to my conclusions as to the application of the classification provisions of the Award to the employment of the applicant and in the absence of a complete history of the Award provisions including the logs of claims alleged to found the Award in question, I am satisfied that there is no material before the Court which establishes a prima facie jurisdiction arguement arising from a contention that there was insufficient ambit in the logs of claims to found the awards made. Having regard to all of the above matters, I am satisfied that the Court has the jurisdiction to hear and decide the application.
I turn now to consider the substantive aspects of the application. The applicant commenced the employment on 31 July, 1995. The position for which he was employed was initially advertised in June, 1995. The position was described as a Human Resources Manager, and required extensive skills in change management and workplace reform. I am satisfied that these matters were part of the duties of the applicant in the position. The applicant was employed by the Chief Executive Officer and the contract entered on 22 September, 1995, contemplated that the employment would continue for a period of 3 years. There is no dispute that the parties in initial discussions had contemplated that the employment would be initially for such a period of time.
The applicant performed the duties of the position to the satisfaction of the respondent during the course of 1995 and 1996. The performance appraisals undertaken for the purpose of salary reviews in the period up to November, 1996 identified that his work performance was of a high standard and he received significant pay increases in the period. In about late September, 1996 the respondent engaged a firm of consultants, Change Alliance Pty Ltd, for the purposes of conducting a review of operations. The consultant’s correspondence confirming the brief, identifies that they were engaged for a period of 2 to 3 weeks. The role and duties of the consultants expanded and they continued beyond the initial contract period.
The consultants prepared a document entitled ‘First Interim Presentation to the Gippsland Water Board of Directors’, (Exhibit R1), which was provided to the board in a meeting on 18 November 1996. As a result of that report and subsequent recommendations, a Change Manager, later referred to as Project Change Manager was employed. That person was employed to ‘facilitate’ and continue the change management process, which was now being undertaken by the consultants. The report also recommended the downgrading of the position of General Manager Human Resources to a manager’s position outside of the corporate management team. The consultants spoke to the report at the board meeting on 18 November, 1996, expanding upon the conclusions which had been reached and the reasoning behind the recommendations.
On 19 November 1996 the Board decided to adopt the structure recommended, in the First Interim Presentation. The minutes of the meeting record the resolution of the board. They were as follows: (at page 2)
Resolved that:
(i)the Board adopt a revised structure, as presented, that creates a senior management group of four positions comprising a General Manager Corporate Services, General Manager Finance, General manager Major Customers, General Manager Projects and the introduction of a Process Manager.
(ii)the Board endorse the revised reporting accountability arrangements to the Chief Executive Officer; and
(iii)as a consequence of the revised organisational structure, the former positions of General Manager Operations and General Manager Human Resources be declared redundant.
On the afternoon of 19 November 1996 the Chairman of the Board, Mr. Wood, indicated that the positions, referred to in the Board’s resolution that day, were not required and directed Mr. Sunderman to act accordingly. Mr. Sunderman determined that it was necessary to terminate the applicant’s employment immediately and did so verbally on the applicant’s attendance for work the next day.
The respondent contends that due to the retaining of the consultants, it became apparent to it that it no longer needed a manager at the level of that which the applicant was employed. The applicant’s employment was terminated without warning, in circumstances where the respondent determined to act in its own interests by removing a ‘redundant’ employee from the workplace. No proper consideration was given to alternatives to the termination of the employment and it is apparent from the evidence in these proceedings that the respondent’s decision making process was based upon the limited information provided to it by the consultants and their information was based upon limited incomplete and flawed information and appreciation of the applicant’s role and employment brief.
It was clear from the evidence of Mr. Shrives and Mr. Warner that the consultants had no information as to the duty statements or job description of the applicant and formed some very negative impressions of the applicant based upon second hand observation and without any detailed knowledge of the history or circumstances of the applicant’s employment nor the role for which he was retained. It is clear from the evidence of Mr. Shrives, Mr. Warner and Mr. Sunderman, together with that of the applicant, that very little communication was had with the applicant by the consultants, despite the fact that he was the General Manager Human Resources and the consultants were looking at issues touching upon organisational change, which inevitably would require input from the human resources area.
It is also apparent that the consultants retained by the respondent, who made the recommendations which resulted in the termination of the employment of the applicant, continued to provide services in the human resources functions of the respondent for a period of time well beyond that which had originally been anticipated by the respondent when the consultants were retained. I am satisfied that this is partly due to the fact that, after the applicant’s employment was terminated, the consultants in part took up some of the functions the applicant had been performing at the more senior level.
This is a case where the applicant was employed in circumstances where there had already been a reorganisation occur and a large number of redundancies determined. It is contended on behalf of the applicant that it was capricious of the respondent to simply propose to alter its structure after it had only recently employed the applicant in the position of General Manager Human Resources and capricious to initiate the termination of employment prior to finally adopting the proposed new structure.
Mere substitution of the services of consultants for direct employees will not, in isolation of establishing an operational requirement, satisfy the Court that there was valid reason for the termination of the employment at the time the employment terminated. I earlier indicated that I was satisfied there were significant aspects of the applicant’s duties performed by the consultants, both during the course of his employment and subsequent to the termination of his employment. No evidence was brought to establish that the respondent had any benefit or advantage, either practically or economically, as a consequence of the utilisation of the consultant in combination with the other employees, than it would have had, had it retained the applicant in the employment. In this regard the following extract from the decision of Marshall J in Kerr v Jaroma (1996) 70 IR 469 is pertinent:
(at page 473)
It cannot be assumed that a mere desire by the employer to change the way it conducts its business which, in turn, leads to the termination of the employment of some of its employees, will necessarily found a valid reason for the terminations based upon the operational requirements of the undertaking.
(at page 476)
As is clear from Kenefick, a reason which is based on the operational requirements of an undertaking does not thereby become “valid” because of it being so characterised from the subjective view of the employer. The question remains as to whether the employer has satisfied its onus of proof in showing that a reason alleges to be based on its operational requirements was nonetheless effected for a valid reason, i.e, one which is defensible or justifiable on an objective analysis of the relevant facts.
For the purposes of a consideration of whether there was a valid reason based upon the respondent’s operational requirement, I can see little difference between a situation where an employer dismisses one employee and hires another in their place and where an employer dismisses one employee and hires an independent contractor or consultant in their place, to perform part or all of the duties previously performed by that direct employee. This is particularly so where, as in this case, there is little objective material available to identify the financial or other objectives to be achieved by the alteration.
Some support for this approach is to be found in the decision of Lee J in Nettlefold v Kym Smoker Pty Ltd (1996) 69 IR 370 where his Honour stated;
(at page 373)
As set out above under sub-s170DE(1) of the Act "[an] employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, ... based on the operational requirements of the undertaking..." [emphasis added]. An employer must prove that at the time of dismissal of an employee the operational requirements of the undertaking provided proper grounds for termination of the employee's employment. Proof that the employer acted in the belief that termination of an employee's services was based on the operational requirements of the employer's business would not satisfy the onus that the employer prove that there is a valid reason for the termination.
The Act does not define the term "operational requirements". Obviously it is a broad term that permits consideration of many matters including past and present performance of the undertaking, the state of the market in which it operates, steps that may be taken to improve the efficiency of the undertaking by installing new processes, equipment or skills, or by arranging for labour to be used more productively, and the application of good management to the undertaking. In general terms it may be said that a termination of employment will be shown to be based on the operational requirements of an undertaking if the action of the employer is necessary to advance the undertaking and is consistent with management of the undertaking that meets the employer's obligations to employees.
At the time the applicant’s employment terminated, the final structure of the respondent had not yet been determined and various options were still potentially available for the applicant to either accept or reject in terms of employment, which the respondent concedes would have been duties well within his competence or capability.
The Chief Executive Officer felt competent to make a decision as to what was in the best interests of the applicant in terms of the early termination of the employment, without consultation with the applicant. This decision being that the best thing for the applicant was to terminate his employment with payment in lieu of notice, rather than continuing the employment in the notice period or offering him an alternative position, albeit one which may have been at lesser status or salary. It is apparent that this is not what the applicant would have preferred and was in his view inimical to his chances of obtaining alternative employment.
I am satisfied that the respondent’s Board acted upon and reacted to a negative impression of the applicant’s work performance given to them by the consultants at the board presentation. Whilst the consultants evidence was that they did not recommend that the employment be terminated, the evidence of Mr Wood, the Chairman of the Board, was that this was the impression the board obtained from the presentation. Certainly if not expressly recommended, I am satisfied that the negative impression given of the applicant’s work performance was a matter which influenced heavily the boards decision. All the discussion as to the future structure of the respondent and the applicant’s present work performance and capacity occurred in the course of in-camera meetings between the Board and the consultants, and the applicant had no opportunity for input or to respond to the issues of capacity or competence being raised against him by the consultants, who, as I have earlier stated, suffered from the apparent disability of not being fully informed of the applicant’s responsibilities or riding orders from the Chief Executive Officer. In my view the respondent acted in an arbitrary and capricious manner in terminating the applicant’s employment at the time that it did and in so doing failed to have regard to the role the applicant was employed to perform and the circumstances in which the applicant had initially been employed.
Whilst it is clear that significant changes of a permanent nature has now taken place in relation to the respondent’s structure, these changes had not been implemented at the time of the termination of the employment and were apparently not implemented for a significant period of time after that date. The consultants final report was not presented until 29 January, 1997. The final structure of the respondent was not adopted and endorsed until that time. One matter of relevance in a consideration of operational requirement is the timing of the termination of the employment. In this case it appears that the applicant’s functions continued to be performed by the consultants for a significant period of time after the termination of the employment. In addition functions which could have been performed by the applicant were allocated to newly engaged employees, such as the Process Manager on the recommendation of the consultants, at a time when it must have been apparent, at least to the consultants, that there were likely to be recommendations affecting the applicant’s ongoing employment at the level of General Manager Human Resources.
For all of the above reasons I am not satisfied that the reason for the termination of the applicant’s employment was sound, defensible or well founded in the sense discussed by Northrop J in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373. I am not satisfied that the respondent had valid reason for the termination of the applicant’s employment. Consequently the respondent contravened s170DE(1) of the Act.
Section 170DC
The respondent failed to accord the applicant the opportunity to be heard in relation to allegations as to his work performance and in particular his capacity to perform the role of a human resources practitioner in a change management environment. It is apparent as earlier discussed in this decision that the respondent was presented with a negative view and assessment of the applicant’s capacity to perform the work, by the consultants. In part the applicant’s employment was terminated because of a negative view as to his capacity to perform the duties associated with change management and implementation. The applicant was entitled to be heard as to those allegations as to his work performance or capacity prior to the employment being terminated. This did not occur. The respondent has contravened s170DC of the Act. I turn now to consider the question of remedy.
Remedy
The respondent contends that an order for reinstatement would be impracticable. It contends that it has altered its organisation structure in such a manner as to abolish the position held by the applicant. The evidence of the respondent was that the structure was finalised only in January 1997. Whilst I accept that the respondent ought not be entitled to rely upon the very matters constituting the contravention of the Act, to found a contention that reinstatement would be impracticable, in this case I am satisfied that the reorganisation of the work has in the end eventually resulted in the applicant’s position being redistributed and performed to its conclusion by the consultants. Without significant alteration to the current structure and organisation of the respondent, in relation to which there is little evidence of feasibility, I am not confident that there is a position similar to that of the applicant’s former job. The evidence is that the work of the consultant in relation to the human resources aspect of the operation had completed shortly before the trial of this matter. Any ongoing work that the applicant would have had is now performed by other persons. I am satisfied that in the circumstances an order for reinstatement would be impracticable.
The applicant is entitled to compensation as a consequence of the loss suffered by him on account of the unlawful termination of his employment. The applicant’s salary at the time of the termination of employment was $80,000.00 per annum. I am satisfied that the applicant has suffered significant income loss as a consequence of the termination of the employment and that in view of the location of the employment in the Latrobe Valley and the limited employment opportunities generally, and specifically in the human resources field in that location, that the loss is likely to continue. I am satisfied that the applicant has made extensive effort to obtain alternative employment and could not be said to have been sitting on his hands in that regard. Further as to the continuing operation of the family small business, it is apparent that the applicant’s wife was, during the period of the applicant’s employment with the respondent, the person responsible for operation and management of the business and the evidence is that this continued to be the position after the employment ceased. I see no reason to require the applicant to account for the business in such circumstances. The applicant was unemployed from November, 1996 to the date of trial. This is a period in excess of eight months and continuing. Whilst I have had regard to the notice provisions under the contract, I am satisfied that the compensable loss exceeds the amount already provided for by notice, and is likely continue for a significant period of time having regard to the location of the employment and the employment circumstances of the region. I am satisfied having regard to the matters discussed earlier, that the applicant is entitled to the maximum amount of compensation available to be ordered. Pursuant to sl70EE(3) (a) the Order of the Court will be that the respondent pay to the applicant compensation in the sum of $40,000.00 which is the amount of remuneration the applicant would have received in respect of the period of six months immediately following the date of the termination of the employment.
I certify that the preceding eighteen (18) pages
are a true copy of the Reasons for Judgement of
Judicial Registrar Parkinson.
Associate :
Dated : 2 October 1997
APPEARANCES
Counsel for the Applicant : Mr. B. Lawrence
Solicitors for the Applicant : A.J. Macken & Co.
Counsel for the Respondent : Mr. B. Lacy
Solicitors for the Respondent : Clayton Utz
Dates of hearing : 9, 10, 11, 30, 31 July &
1 August 1997
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