Mr Angelo Librio v Engineering Plastics Pty Ltd

[2011] FWA 7854

[2011] FWA 7854

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.394—Application for unfair dismissal remedy

Mr Angelo Librio
v
Engineering Plastics Pty Ltd
(U2011/8398)

COMMISSIONER SMITH MELBOURNE, 28 NOVEMBER 2011

INTRODUCTION

[1] On 9 September 2011 a decision 1 was issued which found that the termination of employment of Mr A Librio by Engineering Plastics was harsh, unjust and unreasonable. The decision was based substantially on the operation of s389 of the Fair Work Act 2009, in that Engineering Plastics did not consult with Mr Librio before deciding to make him redundant. Given that Engineering Plastics had raised its financial capacity to meet any order in relation to remedy, the matter was adjourned to another day to permit evidence to be produced.

[2] When the matter returned for hearing, Engineering Plastics put in additional material including a letter from its accountants. However, the information contained in that letter was inconsistent with the material provided when the matter was first heard and Engineering Plastics submitted that given this difference, I could not rely completely upon the material provided by the accountant.

[3] In addition, and in the context of remedy, an opportunity was given to Engineering Plastics to address the merit selection process of selecting Mr Librio for redundancy 2, but it called no additional evidence rather it preferred to rely on previous evidence and submissions.

[4] Mr Librio also made an application for costs. I turn firstly to consider the matter of remedy.

REMEDY

[5] A review of the material demonstrates that a conclusion can be reached that Engineering Plastics lost most of the work from its most significant client. On the material before me, the loss would constitute in excess of 50% of total sales. I am also prepared to accept that at the time of reviewing the matter there had been an increase in the time debtors of the company were paying their bills. This delay impacts upon the cash-flow and liquidity of the business. I accept that there are significant financial issues facing the company.

[6] Section 390(3) of the Act provides:

(3) FWA must not order the payment of compensation to the person unless:

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

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

[7] Given the submission of the parties, I am satisfied that reinstatement is inappropriate. Firstly, Engineering Plastics wanted to reduce its cost base and there is evidence to support that conclusion. Secondly, this is a small employer and reinstatement would present added difficulties. Finally, while Mr Librio seeks reinstatement he recognises that compensation may be an alternative.

[8] Section 392 is therefore the section to which attention must be given. It provides:

392 Remedy—compensation

Compensation

(1) An order for the payment of compensation to a person must be an order that the person’s employer at the time of the dismissal pay compensation to the person in lieu of reinstatement.

Criteria for deciding amounts

(2) In determining an amount for the purposes of an order under subsection (1), FWA must take into account all the circumstances of the case including:

(a) the effect of the order on the viability of the employer’s enterprise; and

(b) the length of the person’s service with the employer; and

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

(d) the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and

(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

(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

(g) any other matter that FWA considers relevant.

Misconduct reduces amount

(3) If FWA is satisfied that misconduct of a person contributed to the employer’s decision to dismiss the person, FWA must reduce the amount it would otherwise order under subsection (1) by an appropriate amount on account of the misconduct.

Shock, distress etc. Disregarded

(4) The amount ordered by FWA to be paid to a person under subsection (1) must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person’s dismissal.

Compensation cap

(5) The amount ordered by FWA to be paid to a person under subsection (1) must not exceed the lesser of:

(a) the amount worked out under subsection (6); and

(b) half the amount of the high income threshold immediately before the dismissal.

Note: subsection 395(5) indexed to $59,050 from 1 July 2011

(6) The amount is the total of the following amounts:

(a) the total amount of remuneration:

(i) received by the person; or

(ii) to which the person was entitled;

(whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal; and

(b) if the employee was on leave without pay or without full pay while so employed during any part of that period—the amount of remuneration taken to have been received by the employee for the period of leave in accordance with the regulations.

[9] In relation to s.392(2)(a) the letter from the accountant states that any sudden requirement for a large payment could affect the viability of the business going forward. Whilst I was told by Engineering Plastics that I could not rely totally upon the letter from the accountant, I am prepared to do so in this regard. This has been a difficult matter to consider because of the lack of rigour in presenting material which would allow for completely safe conclusions to be drawn. However, given the size of the business I am prepared to make allowances, although the business was professionally represented.

[10] In relation to the s.392(2)(b) Mr Librio was employed for nearly 10 years which is not insignificant. Under the National Employment Standards Mr Librio was entitled to 5 weeks notice of termination of his employment but not entitled to what would have been 12 weeks redundancy pay because Engineering Plastics is a small employer. 3

[11] The operation of s.392(2)(c) is an important matter given that the basis for the original finding was that Engineering Plastics had not consulted and therefore it did not constitute a genuine redundancy in context of the Act. The submission of the employer was that the only function that could be absorbed into duties of other employees was that performed by Mr Librio. It was submitted that there were five shop floor employees and two owner/directors and the function performed by Mr Librio was spread amongst those remaining staff that could perform a sales role as well.

[12] Mr Librio, on the other hand, submitted that if there had been consultation and a proper selection process, then there were skills he held that may be been preferred over other employees and therefore he would have been retained in employment. It is put by Mr Librio that there was no consideration given to his possible redeployment. The only person to give clear evidence on this was Mr Librio.

[13] On this basis it is difficult to estimate how long Mr Librio would have been employed but for the termination of employment. Given his role, I am not completely satisfied that he would have succeeded on a relative merit selection process. Mr Librio had been working as a sales representative for a very long period of time. 4 I am also not unmindful of the fact that before his redundancy, discussions were being had with Mr Libro on ways and means of improving his sales performance, although it must be observed that performance was said not to be an issue in his selection for redundancy.

[14] A meeting, of which a verbatim transcript was kept, revealed the mutual desire to increase sales for the business and give attention to delivery times.

[15] Given the relative difference between work performed by Mr Librio and other staff of Engineering Plastics, the employer’s assessment was that a proper investigation may have taken four weeks 5. In relation to s.392(2)(d) and (e), Mr Librio has been actively seeking employment and has earned no income since his termination of employment. I have considered s.392(2)(f) and (g) and find that there are no other factors which would cause me to discount further the four weeks.

[16] I will award four weeks compensation as I consider it appropriate in all the circumstances of this case after having regard to s.392 of the Act.

COSTS

[17] Section 611 establishes jurisdiction for the Tribunal to award costs: It provides:

611 Costs

(1) A person must bear the person’s own costs in relation to a matter before FWA.

(2) However, FWA may order a person (the first person) to bear some or all of the costs of another person in relation to an application to FWA if:

(a) FWA is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or

(b) FWA is satisfied that it should have been reasonably apparent to the first person that the first person’s application, or the first person’s response to the application, had no reasonable prospect of success.

Note: FWA can also order costs under sections 376, 401 and 780.

(3) A person to whom an order for costs applies must not contravene a term of the order.

Note: This subsection is a civil remedy provision (see Part 4-1).

[18] To begin, I am satisfied that there has been compliance with s.402 of the Act.

The argument of Mr Librio was that it should have been reasonably apparent to Engineering Plastics that its jurisdictional argument had no reasonably prospect of success. I was referred to the decision of a full bench in Baker v Salva Resources Pty Ltd ([2011] FWAFB 4014), where it was stated:

[10] The concepts within s.611(2)(b) “should have been reasonably apparent” and “had no reasonable prospect of success” have been well traversed:

• “should have been reasonably apparent” must be objectively determined. It imports an objective test, directed to a belief formed on an objective basis, rather than a subjective test;  and



• a conclusion that an application “had no reasonable prospect of success” should only be reached with extreme caution in circumstances where the application is manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable.

(Footnote references removed)

[19] Engineering Plastics submitted that during the two telephone conferences conducted by FWA Officers there was no advice that the jurisdictional point had no reasonable prospect of success. The second line of argument was that it genuinely believed that it needed to take action quickly on the redundancies and that it had consulted.

[20] As can be seen from the first decision, the jurisdictional argument lacked substance. Indeed it should have been plain on the face of the respondents own submission that the argument could not succeed. The submission was bad beyond argument. As to the second line of argument, I take no issue with the contention that Engineering Plastics needed to act but that is not relevant to the jurisdictional argument. The jurisdictional argument was advanced to avoid scrutiny being given to the merit in circumstances where it was plain that the Manufacturing and Associated Industries and Occupations Award 2010 (the award) [MA000010] obliged the employer to take certain steps.

[21] As to the merit of the matter, it can be seen that Engineering Plastics submissions have been largely accepted. The decision to advance the jurisdictional argument added to the costs incurred by Mr Librio. The other aspect of the application for costs is of course the adequacy of the material presented on the first occasion to justify the serious financial circumstances facing the company. I have weighted those matters, and have decided that costs will only be awarded for representation and work carried out up to an including the first hearing. In accordance with Schedule 3.1 of the Fair Work Regulations 2009 Mr Librio has submitted a schedule of costs. The appropriate adjustments should be made and submitted to Engineering Plastics. In the event there is a disagreement about the schedule, I will determine the amount and all relevant material should be forwarded. An order on costs will be issued at that time.

DISPOSITION OF THE MATTER

[22] Engineering Plastics argues that should any compensation be awarded then it should be given time to pay equivalent to one week’s pay per calendar month. Given the decision and the material before me I cannot reach the conclusion that the payment of 4 weeks pay would impact upon the viability of the enterprise. This should be paid with 14 days of today. An order to this effect is attached.

[23] The matter of costs may well be different. The letter from the accountant does give an indication of cash-flow issues but regrettably there is a lack of precision. Out of caution I will stagger the payments with the first payment of half the amount being 30 days after the order is subsequently made and the second payment of the remaining half being 30 days after the first. On this basis some time consideration should be given to Mr Librio in relation to his liability to his representatives.

COMMISSIONER

Appearances:

M McKenney of Counsel on behalf of Applicant.

P Watson, paid agent, on behalf of Respondent

Hearing details:

2011
Melbourne
October, 11.

 1   Print [2011] FWA 6193

 2   Ibid @ paragraph 26

 3 See s.121 of the Fair Work Act 2009.

 4   See exhibit applicant 2

 5   See transcript PN137

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