Mr Paul Walsh v Palace Nominees Pty Ltd T/A Joe Crisafio Kia

[2015] FWC 6434

[2015] FWC 6434

FAIR WORK COMMISSION

DECISION

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

Mr Paul Walsh
v
Palace Nominees Pty Ltd T/A Joe Crisafio KIA
(U2014/13938)

COMMISSIONER CLOGHAN PERTH, 17 SEPTEMBER 2015

Application for relief from unfair dismissal - jurisdiction - genuine redundancy.

[1] This is an application by Mr Paul Walsh (Mr Walsh or Applicant) seeking a remedy for alleged unfair dismissal from his former employer, Palace Nominees Pty Ltd T/A Joe Crisafio KIA (Employer).

[2] The application was made to the Fair Work Commission (Commission) pursuant to s.394 of the Fair Work Act 2009 (FW Act).

[3] In response to the application, the Employer asserts that the Applicant is not protected from the unfair dismissal provisions in the FW Act because Mr Walsh’s dismissal was a case of genuine redundancy.

[4] The Employer requested that its jurisdictional objection be dealt with in the first instance.

[5] At the hearing, Mr Walsh represented himself and gave evidence on his own behalf.

[6] The Employer was represented by Mr R Ballucci, Industrial Relations Manager, Motor Trade Association WA.

[7] The following gave evidence on behalf of the Employer:

• Mr G Crisafio, Dealership Principal;



• Mr R Amara, Financial Controller; and



• Mrs T Crisafio, Customer Relations Manager and wife of Mr Crisafio.

[8] This is my decision and reasons for decision on whether Mr Walsh’s dismissal was a case of genuine redundancy, and therefore, he is not protected by Part 3-2 Unfair dismissal provisions of the FW Act.

RELEVANT STATUTORY FRAMEWORK

[9] Section 385 of the FW Act sets out the meaning of unfair dismissal as follows:

“(a) the person has been dismissed; and
(b) ...and
(c) ...and
(d) the dismissal was not a case of genuine redundancy.”

[10] The meaning of genuine redundancy is contained in s.389 of the FW Act as follows:

“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.”

[11] Shortly put, where it is found that a dismissal is a genuine redundancy, it is not an unfair dismissal.

CONSIDERATION

s.389(1)(a) - The Employer no longer required the position occupied by Mr Walsh to be performed by anyone because of changes in operational requirements of the Employer’s enterprise.

[12] Mr Walsh commenced employment with the Employer as its Service Manager on 17 October 2013.

[13] Mr Walsh proceeded on annual leave on 14 October 2014. Mr Walsh returned from leave on 10 November 2014.

[14] On his return from annual leave, Mr Walsh met with Mr Crisafio and Mr Amara. Mr Walsh’s evidence is that Mr Crisafio said to him, “he regretted to tell me he is going to have to let me go, he was making my position redundant, they had done some sort of review of the company profitability and they can’t afford to have a Service Manager, handing me a letter and a cheque.” 1 A discussion ensued and Mr Walsh said, “I will see you in court and walked out”.2

[15] Mr Crisafio’s written evidence is not too dissimilar to that given by Mr Walsh in relation to the meeting on 10 November 2014. Mr Crisafio’s evidence is he advised Mr Walsh of the decision to make his position redundant as it was a “necessary step to ensure that the company remained viable. He was handed the redundancy letter by the Financial Controller, who explained the details of the termination payment. Paul [Mr Walsh] stormed out of the meeting and threatened that he would be suing us and that Ray Amara cooks the books”. 3

[16] Mr Crisafio is the Dealer Principal and founder of a vehicle dealership for KIA motor vehicles in Perth, Western Australia. Mr Crisafio has operated the business for 21 years.

[17] The context to the position of Service Manager being abolished is as follows.

[18] In April and May 2014, the Employer’s dealership incurred losses. 4

[19] In June 2014, the Employer’s financial performance was deteriorating further and Mr Crisafio met with all his managers. Following this meeting, the New Car Manager resigned. 5

[20] In August 2014, one of two Service Advisors resigned. The two Service Advisors reported to Mr Walsh. 6

[21] On 11 August 2014, Mr Crisafio met with Mr Walsh and put to him the suggestion of combining the remaining Service Advisor role with his role as Service Manager. According to Mr Crisafio’s evidence, Mr Walsh made it clear that he only wanted to work in the Service Manager’s role and that such a proposition was a “step down”. 7

[22] Mr Walsh proceeded on annual leave. During this period, Mr Crisafio received the August 2014 financial performance results, which again demonstrated a deterioration across the dealership. 8

[23] While on annual leave, Mr Walsh’s responsibilities were allocated to other members of staff.

[24] In his absence on annual leave, Mr Crisafio reviewed the temporary arrangements entered into while Mr Walsh was on leave, and came to the view that they could continue on an ongoing basis. 9

[25] Mr Crisafio discussed his review with Mr Amara and Mrs Crisafio. Both agreed the temporary arrangements could be made permanent which meant the abolition of the position of Service Manager. 10

[26] In the month of September 2014, the dealership suffered a $55 000 loss. Consequently, Mr Crisafio acted immediately on Mr Walsh’s return from annual leave and advised him that the position of Service Manager had been made redundant. 11

[27] Mr Walsh appears to acknowledge that the Employer made his position of Service Manager redundant to reduce overall running costs. 12 However, he is unable to reconcile making his position redundant, and after that event, continuing to replace other staff who have left the Employer.13

[28] While this issue does not go to the statutory test in s.389(1)(a) of the FW Act, the practical answer of Mr Walsh’s difficulty is that the Employer needs to keep its business running. Because an employer makes a particular position redundant, this does not mean that the entity grinds to a halt by not replacing other staff that leave the organisation, for whatever reason. There is no contradiction between make a position redundant and replacing other staff within an entity.

[29] Mr Walsh cross examined Mr Crisafio on whether the current Service Advisor was also the acting Service Manager. 14 Mr Crisafio did not “shy” away from the fact that the Service Advisor deals with customers, deals with complaints and directs staff with their work. However, the Service Advisor is not the acting Service Manager.15

[30] At this point, it is useful to refer to the Fair Work Bill 2008 Explanatory Memorandum which states at paragraphs 1548 and 1549 as follows:

“1548. The following are possible examples of a change in the operational requirements of an enterprise:

• a machine is now available to do the job performed by the employee;



• the employer‘s business is experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five; or



• the employer is restructuring their business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore the person‘s job no longer exists.

1549. It is intended that a dismissal will be a case of genuine redundancy even if the changes in the employer‘s operational requirements relate only to a part of the employer‘s enterprise, as this will still constitute a change to the employer‘s enterprise.” (my emphasis)

[31] Parliament intended that a genuine redundancy exists even though the employer may distribute tasks of the redundant position among remaining employees. In my view, because those tasks and responsibilities have been reallocated to remaining employees, that action does not result in those employees being designated – in this case, the acting Service Manager.

[32] Mr Walsh deliberately drew the Commission’s attention to the Employer’s creation of the position of General Sales Manager/Car Sales Manager after his position had been made redundant. I am unsure of the benefit to the Applicant in doing so. The Employer readily conceded that, after the positions of new and used manager positions became vacant, Mr Crisafio combined the positions into one General Manager. 16

[33] Secondly, the advertisement of 17 November 2014, on SEEK, specifically states in its introductory paragraph, “Due to our recent corporate restructure…” 17 This expression summarises the activities being undertaken by the Employer at the time the Service Manager’s position was made redundant, on or about 10 November 2014.

[34] Mr Crisafio’s evidence in cross examination was:

“…My next question is why did you choose, after almost 13 months, to conduct a financial review and not involve, consult, liaise with one of your senior managers, and wait for him to go on holidays before you had this alleged meeting?---Why did I wait 13 months to make the position redundant?  Well, no one plans redundancies.  As an employer, I don’t sit there and get my calendar out and plan when I’m going to make someone redundant.  It’s financial constraints that cause employers to make redundancies.  That was a financial reason where we did what we had to do.  We haven’t replaced you and we have no intention of replacing a service manager for the foreseeable future.  It was nothing personal.  It was nothing untoward.  I felt you were doing a fantastic job but, Paul, let’s be honest, I just could not afford the luxury of a service manager when my service business was declining.” 18

[35] Finally, in defending the Employer’s jurisdictional objection, Mr Walsh sought to distinguish his department’s financial performance, from that of the dealership as a whole.

[36] As I apprehend Mr Walsh’s argument, it is twofold. Firstly, that there was a misallocation of expenses to the Service Department budget to “prop up other departments”. 19 And secondly, the Service Department was not the reason for the deteriorating financial performance.

[37] While Mr Walsh may have a grievance in relation to how the Employer apportioned expenses, or overheads, to the Service Department, that is not a statutory test which I am required to consider. I am only required to be satisfied that the Employer no longer required the position occupied by Mr Walsh to be performed for operational requirements.

[38] Secondly, with respect to the profitability or otherwise of the Service Department, that is also not the statutory test of a genuine redundancy. Such a restriction, as set out by Mr Walsh, is not envisaged in the legislation. In the case of this application, the Employer has to deal with a declining demand for its vehicles or services across the entire dealership. As put by Mr Crisafio to his managers “the boom is over”. 20 Parliament has not curtailed employers on how they can deal with changes in operational requirements; it is not restricted to redundancies in alleged loss making aspects of the employer’s business.

[39] Mr Amara is the Employer’s Financial Controller. Mr Amara gave evidence that he has 30 years’ experience in the accounting profession, of which 15 years has been in the automotive retail industry. Mr Amara’s major expertise is working with organisations that have operational and financial issues and implementing operational plans and budgets. 21

[40] Mr Amara’s evidence was that shortly after he commenced with the Employer, he transferred the duties and made the position of Assistant Accountant redundant. 22 Having produced a proposed budget for the 2015 financial year, to achieve the expected outturn, it was necessary to review the management structure because he felt it was too “top heavy”.23

[41] Mr Amara details changes made to the Employer’s organisation both structurally and financially. 24

[42] The aim or objective of these changes was described by Mr Amara, in evidence, as “for the sake of the future viability of the business”. Mr Amara’s remit was to reduce “operation expenses… Sales were very low.  Sales were very difficult.  The margins were coming down, further down.” 25 For the months of July, August, September and October were either breaking even or making a small profit.26 The thrust of Mr Amara’s evidence is that all the structural changes, including not filling vacancies, merging positions and reducing expenses, were either not contested or disturbed in cross examination.

[43] Having considered the guidance provided in the Explanatory Memorandum and the evidence, I find that the conditions required in paragraph 389(1)(a) have been met. The Employer no longer required the job performed by Mr Walsh to be performed by a discrete person because of changes in the operational requirements of the business due to a deterioration in a demand for its vehicles and services.

s.389(1)(b) - Has the Employer complied with any obligation in a modern award or enterprise agreement to consult about the redundancy?

[44] In his submission, Mr Walsh states:

“I am a Service Manager of almost 20 years. I was employed as a Service Manager from 17th October 2013. My base salary was $80,000 P.A. 9.5% superannuation 10% of Net Profit. A fully maintained company vehicle, a mobile phone, $250 fuel a month. This was later amended/revised to 15% of Net Profit 14th May 2014 then minimum guarantee of a $1,500 monthly bonus was amended 3rd June 2014.

I had approximately 15 staff under my direct supervision this includes

2 Service Advisors
1 Receptionist/CRO
1 Warranty Clerk
1 Workshop Controller
3 Cleaners
5 or 6 Technicians
2 Apprentices

My roles was varies, included overseeing of day to day. Reviewing of the Service Department, sales, expenses, planning, marketing, supervision and mentoring of staff, customer service, ordering and controlling inventory, maintenance, OH&S of workshop and car parks, compliance manufacturer requirements, wages, banking etc.” 27

[45] Having given this evidence, Mr Walsh asserts that a modern award applies, in particular, the “Clerks Private Sector Award 2010” (Clerks Modern Award). 28

[46] Mr Walsh submits that he Clerks Modern Award applies because, “the majority of my duties were of a clerical nature” and cites four cases without setting out their relevance.

[47] If I take the first case cited by Mr Walsh, Lee v WorleyParsons Services Pty Limited 29, Commissioner Lee had to determine whether Ms Lee, as she asserted, was covered by the Clerks Modern Award.

[48] The employer (as does this Employer) submitted that the Clerks Modern Award did not apply to Ms Lee’s employment.

[49] Commissioner Lee concluded:

“…The proper inquiry is, was the primary purpose of the role of the Applicant the exercising of skills of a professional or quasi professional nature, or not. It is clear on the extensive evidence canvassed in this case that the primary purpose of the Applicants’ role was to exercise skills of a professional or quasi professional nature.

It is clear that the Applicant is a highly skilled professional or quasi professional who held a senior, management level position with the Respondent at the time of her dismissal. Any administrative functions performed by the Applicant were ancillary or incidental to her core duties which went significantly above and beyond the duties of an employee that could be covered by the Clerical award, even at Level 5. As the primary purpose of the role is the exercise of skills of a professional or quasi professional nature, “the role will not be regarded as clerical notwithstanding that the role involves various recording and ordinary administrative office functions.”

[50] Applying the “principal purpose” test referred to by Commissioner Lee at paragraph [7]:

“…To determine whether an employee is employed in a classification in a modern award, it is necessary to apply ‘the principal purpose test’. The principal purpose test can be addressed by determining what was the most important intention of the employer in requiring the functions of the position to be carried out by the employee.”

[51] Further,

“4.10 The principle purpose test has been endorsed and applied by the Full Bench of the Fair Work Commission.
...
4.12 In Layton v North Goonyella Coal Mines, the majority of the Full Bench of the AIR Commission quoted with approval the Federal Court in Joyce v Chistoffersen and said:

“... the task of interpretation is not a quantitative one based upon time spent performing certain types of duties. Rather, the task involves a qualitative assessment of the primary purpose of the position. Professional and managerial employees are clearly not clerks. Where the primary purpose of the role is the exercise of skills of a professional or quasi professional nature, the role will not be regarded as clerical - notwithstanding that the role involves various recording and ordinary administrative office functions.”

[Emphasis added]

4.13 This approach was upheld in the first instance decision of Gray v Hamilton James and Bruce Pty Ltd and subsequently approved on appeal by the Full Bench of theFWC.

4.14 In Gray, the Full Bench upheld the first instance decision of Kaufman SDP who held that the applicant was not covered by the Clerks Award. The applicant was employed in the position of General Manager of a recruitment firm but argued that her position was the equivalent of a Level 5 classification under the Clerks Award.

4.15 Kaufman SDP held:

“Whilst many of her duties were administrative in nature, of which some can be seen to correspond to those described in the Level 5 classification under the Award, I am satisfied that Ms Gray’s duties as the General Manager went significantly above and beyond the duties of an employee subject to a Level 5 classification “the primary purpose of Ms Gray’s job was that of a person employed in a managerial position with a great deal of authority as to how the company’s business is to operate”. [footnotes omitted]”

[52] On the evidence before me, I am satisfied that the Clerks Modern Award did not apply to Mr Walsh. Consequently, the Employer had no obligation to comply with any provision contained in the Award regarding consultation about a redundancy.

[53] Mr Walsh did not submit, nor is there any evidence, to indicate that an enterprise agreement applied to his employment.

[54] In conclusion, I find that conditions set out in paragraph 389(1)(b) of the FW Act are not applicable to Mr Walsh’s dismissal.

s.389(2) – Was it reasonable in all the circumstances for Mr Walsh to be redeployed within the employer’s enterprise or associated entities (if any)?

[55] The Employer’s submission is that Mr Crisafio considered the issue of redeployment of Mr Walsh in an endeavour to avoid dismissal after the position of Service Manager had been abolished. However, as already set out above, Mr Walsh declined to accept a suggestion that the amalgamated duties of Service Advisor and Service Manager on 11 August 2014 30.

[56] The Employer considered that this was the only potentially suitable redeployment option.

[57] Clearly, from the evidence, the Employer’s workplace restructure was evolving to improve its financial performance. This situation is part of the circumstances referred to in s.389(2) of the FW Act.

[58] In a workplace structure where Mr Walsh is managing 15 to 16 employees in a total workforce of approximately 27 employees, it is difficult to envisage the Employer having too many options to redeploy the Applicant into another position. It would appear that the only suitable option was an amalgamation of the Service Advisor/Service Manager positions.

[59] When it was put to Mr Walsh, in cross examination, if he was asked to take the amalgamated position in August 2014, he responded, “that’s incorrect” and “never offered to me”. 31

[60] It is possible that Mr Walsh misunderstood the question in cross examination because he states that it was never “offered” to him. Although the amalgamated position may not have been “offered” to Mr Walsh, I am satisfied on the written evidence of Mr Crisafio, and oral evidence of Mr Amara, 32 that such a suggestion was put to him – a suggestion he declined to accept. I prefer their evidence to Mr Walsh’s lack of recollection and strong understanding that the meeting never took place.33

[61] In conclusion, from the evidence, I am satisfied that the Employer was responding to changing market conditions. The Employer’s response, which is not uncommon, was to abolish positions. For those employees who are employed in management positions, the options for redeployment into other positions are usually limited. For financial or “status” reasons, the aim or objective in s.389(2) of the FW Act is often difficult to achieve. Having considered the evidence and the circumstances which the Employer faced, I find that it was not reasonable for Mr Walsh to be redeployed within the enterprise or associated entities.

[62] Recently, I have had to deal with two applications relating to whether a dismissal has been a “genuine redundancy”. In the first application, the employee was advised of their position being made redundant on the last day of work before proceeding on leave. In this application, I am dealing with an applicant who was informed on the first day of returning from annual leave, that their position had been abolished.

[63] The Commission is not suggesting when employers should timetable redundancies – that is a matter which they must determine consistent with their own particular circumstances. However, I am increasingly inclined to the view that redundancies, which coincide with annual leave, end up in the Commission not being a hearing into the substantive jurisdictional argument but misdirected into a hearing, from the applicant’s perspective, about the “fairness” of the redundancy of which timing is a factor.

[64] To avoid this deviation into the fairness of the redundancy, it may be beneficial for employers to spend more time considering the timing of when positions are made redundant. Greater consideration relating to the timing of the abolition of positions, may enhance any consequential consultations, irrespective of whether there is an obligation in a modern award or enterprise agreement. Time spent on both these aspects of redundancies, may prevent unnecessary time and effort in the Commission prolonging what seems regular management response to changing market conditions.

CONCLUSION

[65] For the above reasons, I am satisfied that Mr Walsh’s dismissal was a genuine redundancy, and consequently, he is not protected by Part 3-2 Unfair dismissal provisions of the FW Act. Accordingly, the application must be dismissed. An Order to this effect is issued jointly with this Decision.

COMMISSIONER

Appearances:

P Walsh, the Applicant, on his own behalf.

R Ballucci, Industrial Relations Manager, MTA on behalf of the Employer.

Hearing details:

2015:

Perth,

26 May.

<Price code C, PR572007>

 1   Exhibit A2 Affidavit of P Walsh

 2   ibid

 3   Exhibit R2 Affidavit of G Crisafio paragraph (16)

 4   Exhibit R2 (4)

 5   Exhibit R2 (6)

 6   Exhibit R2 (7)

 7   Exhibit R2 (7)

 8   Exhibit R2 (9)

 9   Exhibit R2 (10)

 10   Exhibit R2 (11)

 11   Exhibit R2 (12)

 12   Transcript PN205

 13   Transcript PN205

 14   Transcript PN196

 15   Transcript PN196

 16   Transcript PN222

 17   Exhibit A2

 18   Transcript PN237

 19   Exhibit A2

 20   Exhibit R2 (6)

 21   Exhibit R3 Affidavit of R Amara paragraph (1)

 22   Exhibit R3 (2)

 23   Exhibit R3 (3)

 24   Exhibit R3 (4)

 25   Transcript PN332

 26   Transcript PN333

 27   Exhibit A2

 28   Exhibit A2

 29   [2014] FWC 3696

 30   Exhibit R1 Respondent’s submission paragraph (6)

 31   Transcript PN438 and PN439

 32   Transcript PN300

 33   Transcript PN302

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