Parsons and CFMEU v Wesfi Woodworks Pty Ltd
[1997] IRCA 25
•29 January 1997
DECISION NO:25/97
C A T C H W O R D S
INDUSTRIAL LAW - termination of employment, termination based on assumption that a proposal to establish a competing business to outsource distribution was inconsistent with the Applicant’s obligations as an employee - held the proposal as a proposal was not inconsistent with the employee’s obligations - no valid reason for termination
Workplace Relations Act 1996 ss.170DC, 170DE, 170EA, 170EE
CASES:
Selvachandran and Peteron Plastics Pty Ltd (1995) 62 IR 271
Kerr and Jaroma Pty Ltd (unreported, IRCA, Marshall J, 7 October 1996)
Nettlefold and Kym Smoker Pty Ltd (unreported, IRCA, Lee J, 4 October 1996)
Nicolson and Heaven and Earth Gallery Pty Ltd (1994) 1 IRCR 199 at 205 and 126 ALR 233
Dwyer and Bill McLean’s Hi-Fi, IRCA (unreported, IRCA, Tomlinson JR, 14 November 1995)
Turner and Carpet Call (Vic) Pty Ltd, IRCA, (unreported, IRCA, Parkinson JR, 22 December 1994)
Blyth Chemicals and Bushell (1933) 49 CLR 66 at 81
PARSONS & CFMEU -v- WESFI WOODWORKS PTY LTD
No. VI-2372 of 1996
Before: Ryan JR
Place: Melbourne
Date: 29 January 1997
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI-2372 of 1996
B E T W E E N :
RICHARD PARSONS & CFMEU
Applicant
AND
WESFI WOODWORKS PTY LTD
Respondent
MINUTES OF ORDERS
Judicial Registrar Ryan 7 February 1997
Taking account of gross taxable income of $33,236 for financial year ending 30 June 1996, I propose to order compensation equivalent to two months at that rate, i.e. $5,540. This takes account of the period after termination when the Applicant was unemployed.
I also propose to order additional compensation to take account of the fact that the Applicant receives $173 less per week gross at present in his current employment. In that respect I consider compensation for that loss for six months as adequate and appropriate additional compensation, i.e. $4,498.
I therefore propose to order compensation in the sum of $10,038.
THE COURT ORDERS:
The Respondent pay to the Applicant within 21 days compensation in the sum of $10,038.
Any payment to the Australian Taxation Office within that period of 21 days in respect of and relating to the payment of the $10,038 compensation is pro tanto satisfaction of the order in 1 above.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI-2372 of 1996
B E T W E E N :
RICHARD PARSONS & CFMEU
Applicant
AND
WESFI WOODWORKS PTY LTD
Respondent
MINUTES OF ORDERS
Judicial Registrar Ryan 29 January 1997
THE COURT ORDERS:
That the Respondent pay compensation to the Applicant, the sum of the compensation to be determined after consideration of satisfactory evidence of the Applicant’s post termination earnings.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI-2372 of 1996
B E T W E E N :
RICHARD PARSONS & CFMEU
Applicant
AND
WESFI WOODWORKS PTY LTD
Respondent
Before: Ryan JR
Place: Melbourne
Date: 29 January 1997
REASONS FOR JUDGMENT
(Delivered ex tempore)
This is an application for relief in a claim of unlawful termination of employment. References to the Applicant are to Richard Parsons, a former employee of the Respondent WESFI Woodworks Pty Ltd. If it is necessary to refer to the second Applicant, CFMEU, I shall refer to that Applicant as “the Union”.
It is not necessary to go into the detail of the evidence heard yesterday. Extensive documentation of that evidence would delay delivery of a decision In my view the benefits to all parties of an ex tempore decision now outweigh a lengthier decision delivered later.
This is in many ways an unfortunate situation in which an employer considered it necessary to terminate an employee who was acknowledged to be in all ways excellent at his work.
The Applicant claimed that
he was unlawfully terminated from his employment as a sales clerk
the Respondent, his employer, did not have a valid reason and failed to establish a valid reason for the termination of employment pursuant to S170DE(1) of the Workplace Relations Act 1996
the Respondent, as employer, did not give the Applicant, as employee, an opportunity to defend himself against certain allegations made against him
the allegations were that
(a)he, the Applicant, was establishing a business distributing panel products in the Bayswater area
(b)this (presumably the purported establishment of the business and/or the steps allegedly being taken to establish the business) created a conflict of interest
(c)Mr Bill Paterson, the Respondent Victorian Manager, presumably on behalf of the Respondent as employer, had no alternative but to terminate the employment effective Thursday 27 August 1996
The Respondent’s position appears to be as set out in 4 (a), (b) and (c) above. The Court assumes that this is the Respondent’s position on the basis of the letter of termination dated 27 August 1996 and on the basis of the evidence given by the two witnesses called by the Respondent, Mr Paterson and Mr John Stockton, the Respondent’s Bayswater Manager.
The original of the letter of termination is Exhibit A6. An unsigned facsimile copy is Exhibit A5 and another unsigned copy was tendered by Counsel for the Respondent as Exhibit R2. Nothing turns on the admitted error in the first sentence of the letter of termination which refers to a discussion between the Applicant and Mr Paterson on Monday 27 August. It is conceded that the discussion referred to in the letter took place on Monday 26 August. Nothing turns on the fact that the original letter, Exhibit A6, was received by the Applicant on Wednesday 29 August in an envelope franked with the date 26 August. The Court accepts that the envelope was so franked and that the letter was prepared in Fairfield on 27 August and posted on that date. That is the uncontested evidence of Mr Paterson.
Of more importance is the facsimile copy of the letter of termination, that is Exhibit A5. This facsimile copy was transmitted to the Applicant at 17:03 hours, on 27 August and reads as follows:
“Dear Richard,
This letter is to confirm our discussion on Monday 27th of August in which you advised me that you are establishing a business distributing panel products in the Bayswater area.
Unfortunately this automatically creates a conflict of interest and therefore I have no alternative but to terminate your employment effective today Tuesday 27th August 1996.
I am disappointed you are leaving us, however I wish you every success in your new venture.
Regards
W. Paterson”
The Court finds that:
Mr Paterson informed the Applicant by facsimile at 17:03 hours on 27 August 1996 as outlined above
Mr Paterson had advised the Applicant, earlier that day, in conversations at about 8:00 am and 2:00 pm, that his employment was to be terminated
a letter of termination dated 27 August was received by the Applicant on Wednesday 28 August 1996
the Applicant received the facsimile transmission of such letter very soon after 5:00 pm on 27 August
by 5:15 or 5:20 pm on 27 August the Applicant had said goodbye to his workmates and had left the employment
The crucial issues are:
was there a valid reason for termination in terms of s170DE(1)?
was the Applicant given adequate opportunity to defend himself against the allegations outlined above?
A valid reason must be sound, defensible and well founded: Selvachandran and Peteron Plastics Pty Ltd (1995) 62 IR 271 at 373. A valid reason must be one that is defensible or justifiable on an objective analysis of the relevant facts: Kerr and Jaroma Pty Ltd (unreported, IRCA, Marshall J, 7 October 1996)
Perhaps, in accordance with Nettlefold and Kym Smoker Pty Ltd (unreported, IRCA, Lee J, 4 October 1996), s170DE(1) is open to the construction that a requirement is imposed that in all the circumstances a termination of employment at the initiative of an employer must not be “unjust or unfair”. It is not necessary for me to rely on such a construction of s170DE(1). I have concluded, for reasons which I will outline, that the Applicant was not given an adequate opportunity to respond to the allegations that
he was somehow disloyal in being involved in a proposal as outlined in Exhibit R1
the proposal, as made, constituted a conflict of interest and effectively put the Applicant into competition with the Respondent while still an employee.
There is no need to go into the detail of the proposal put by a Mr Barry Power on his own behalf and on behalf of the Applicant at a meeting with the management of the Respondent company on 26 August, a meeting from which the Applicant was excluded at the initiative of the Respondent. That proposal did not proceed. If the proposal had proceeded there would have been a conflict between the Applicant remaining an employee, but his evidence is that it was not his intention to remain an employee if the proposal proceeded. The proposal did not proceed.
The Respondent concedes that the Applicant was an excellent employee. This is not in dispute. Indeed, on matters of importance, there is really very little dispute or disagreement between the evidence of the Applicant and the two Respondent witnesses, Messrs Paterson and Stockton. All three witnesses were genuine witnesses who gave evidence to the best of their recollection. The Applicant has a more precise and accurate recall of his discussions with Mr Paterson and Mr Stockton and in particular the Court accepts that he has given the more accurate description of his two telephone discussions with Mr Paterson on 27 August 1996.
The Applicant’s evidence of the telephone conversation with Mr Paterson at about 8:00 am on 27 August follows. It is taken from notes of the Applicant’s evidence. The Applicant did not claim that he was providing a verbatim account of the telephone conversation. Nevertheless, with one or two variations, the evidence of Mr Paterson is consistent with the evidence of the Applicant.
Applicant:At about 8:00 am Mr Paterson rang, I was at my desk, Mr Stockton was within ear shot.
Mr Paterson: So you are leaving us
Applicant:That is a possibility
Mr Paterson: You realise we might have to finish you up earlier
Applicant:That is a possibility
Mr Paterson: As early as today
Applicant:If this is the way you have to do it so be it
The Applicant stated that that was the end of the conversation and that the above, or words to that effect, were only words in the conversation. He said the conversation took less than two minutes. He also said that he thought that, as a result of the conversation, his employment was to be terminated that day and that the implication was that he was going to be terminated.
The Applicant’s evidence of the second conversation at about 2:00 pm is as follows. Again, I include a summary of the Applicant’s evidence. Again, he does not claim the words are a verbatim record but that words to this effect were used.
Mr Paterson: Will you write a letter of resignation?
Applicant: No
Mr Paterson: I don’t understand why not
Applicant:I do not want to resign
In evidence the Applicant also said
“The proposal the night before (Exhibit R1) had not bought anything, had not sold anything and owed no money. It was purely an idea.”
The Applicant states that he cannot recall what Mr Paterson said in reply to this, but that the gist of it was that this did not have any effect on the decision made, that is on the decision to terminate the employment.
Mr Paterson’s evidence of the two telephone conversations on 27 August 1996 was less impressive and he was not as certain as to what occurred in the 8:00 am conversation and what transpired in the 2:00 pm conversation. In cross-examination he expressed the belief that he asked for the Applicant’s resignation in the first conversation at 8:00 am. The Court has concluded that this is inherently unlikely. In his evidence in chief Mr Paterson did not give clear evidence of two conversations but stated that on 27 August he told the Applicant that the Respondent saw a conflict of interest between the Applicant remaining as an employee and the proposal (Exhibit R1).
Mr Paterson expressed the view that the Respondent had no choice but to terminate the employment. He also stated that the Applicant “needed to resign and seemed surprised and did not see himself as competing with the Respondent”.
It was only in cross-examination that Mr Paterson clearly conceded the two conversations at about 8:00 am and 2:00 pm. It was only in cross-examination that Mr Paterson expressed the belief that resignation was requested in the 8:00 am conversation. He did not explain to the satisfaction of the Court why, if that was the case, the second conversation was initiated by him at about 2:00 pm. When pressed he stated that he initiated the second telephone conversation to verify that the Applicant was leaving. If in fact the Applicant had been asked to resign in the first conversation and had refused to do so or had been non-committal, and if, as Mr Paterson stated, the Respondent had no choice but to terminate the Applicant’s employment, there would have been no need for the second conversation and no need (to use Mr Paterson’s words) to “verify that (the Applicant) was leaving”. The Applicant’s version is inherently more likely. The Court has accepted this version. I would simply add that even if the Court had accepted the version as given by Mr Paterson (to the extent it could be said that Mr Paterson ever gave one consistent version), it would not alter the result.
Mr Bourke for the Respondent understandably cross-examined the Applicant as to why, if his version was correct, the Applicant failed to protest and explain in the 8:00 am conversation that the proposal was no more than a concept or idea. In his evidence in chief the Applicant had stated that he believed that the 8:00 am conversation, although short, meant that his employment was to be terminated that day. He also stated in his evidence in chief that the implication was that he was going to be terminated.
In cross-examination the Applicant stated that the tone of the first conversation was such as indicated that protest would have been ineffectual. Whether protest by the Applicant during the first conversation would or would not have been ineffectual is neither here nor there. The Court has concluded that in that first conversation the Applicant was not given an adequate opportunity to protest irrespective of whether or not in the circumstances the Applicant would have protested if more time had been given.
The Applicant was also asked why he did not at that stage ask Mr Paterson to reconsider. Quite apart from the fact that the Applicant has given evidence that he thought the die was cast, the Applicant in cross-examination stated:
“If the company wanted to give me more time as a valued employee they could have offered it. In the second conversation I explained that we never did anything. If the company does not want to give me more time or another option they will do what they want to do.”
The Court is quite satisfied that the Applicant was not given an adequate opportunity to respond pursuant to s170DC(a) and relies on the oft quoted statement of the Chief Justice of this Court in Nicolson and Heaven and Earth Gallery Pty Ltd (1994) 1 IRCR 199 at 205 and 126 ALR 233 at 243 that while s170DC(a) requires no particular formality it is not amenable to perfunctory satisfaction.
The key to the Respondent’s position seems to be encapsulated in the following statement in Mr Bourke’s final submission. The Respondent believed the proposal (that is Exhibit R1) was an untenable commercial threat while the Applicant was an employee. The proposal was no more than a concept stated as such in the first line of the first paragraph of Exhibit R1. In the fourth paragraph of Exhibit R1 a reference is made to the Respondent’s decision to outsource distribution operations and to the resultant atmosphere of uncertainty amongst many of the Respondent’s existing customers. The Respondent’s witnesses concede that the outsourcing had created customer dissatisfaction. No evidence was led by the Respondent that the Applicant was given an opportunity to respond to the allegations in Exhibit A6 or for that matter the earlier facsimile version (Exhibit A5). No evidence was led by the Respondent of any other option invited or offered other than resignation or termination. The more obvious alternative would have been for the Respondent to indicate to the Applicant that any further involvement in the proposal (Exhibit R1) was incompatible with continued employment. In other words the Respondent could have, and consistent with s170DC(a) should have, given the Applicant an opportunity to abandon the proposal and remain as an employee. If that had been put and if the Applicant had declined then the Respondent could have terminated the Applicant’s employment for a valid reason. I would also add that even if the Applicant had indicated that he was prepared to abandon the proposal but if the Respondent had produced evidence that the Applicant had acted in bad faith and in a manner inconsistent with his contract of employment, then on those grounds the Respondent could have for valid reason have terminated the employment of the Applicant. No such evidence was produced and no alternative options were put to the Applicant. The Applicant was never given an adequate opportunity to respond in any meaningful sense.
For these reasons and because of markedly different fact situations this matter is readily distinguishable from Dwyer and Bill McLean’s Hi-Fi, IRCA (unreported) 14 November 1995, Tomlinson JR, NI-2380 of 1995 and Turner and Carpet Call (Vic) Pty Ltd, IRCA, (unreported), Parkinson JR, 22 December 1994, VI-181 of 1994. In Turner, Blyth Chemicals and Bushell (1933) 49 CLR 66 is cited where Dixon and McTiernan JJ stated (at 81):
“Conduct which in respect of important matters is incompatible with the fulfilment of an employee’s duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between the employer and employee, is a ground of dismissal....But the conduct of the employee must itself involve the incompatibility, conflict or impediment, or be destructive of confidence. An actual repugnance between his acts and his relationship must be found. It is not sufficient that ground for uneasiness as to its future conduct arises.”
I find no repugnance between the acts of the Applicant in his involvement in the proposal (Exhibit R1) and his relationship as an employee. Indeed it seems to me that the Respondent, through Mr Paterson and Mr Stockton and possibly through the absent but more senior regional manager, Mr Kiely, was uneasy as to the potential future conduct by the Applicant. Such future conduct could not come to pass. The Applicant’s employment was terminated unlawfully, unjustly and prematurely. Having found as I do that the Respondent has breached s170DCA and s170DE(1) I turn to remedy.
Reinstatement is impracticable not because the Applicant was disloyal, there is no evidence of disloyalty. Reinstatement is impracticable not because the Respondent through Mr Paterson and Mr Stockton and probably through Mr Kiely consider the Applicant was disloyal, although it is likely that this is the view they held and still hold. Reinstatement is impracticable because of restructure and redundancies flowing from the outsourcing of distribution.
In terms of compensation the Applicant was unemployed for two months and now earns less than he earned with the Respondent. An order for compensation will be made when I have considered satisfactory evidence of the Applicant’s post termination earnings.
MINUTES OF ORDERS
THE COURT ORDERS:
That the Respondent pay compensation to the Applicant, the sum of the compensation to be determined after consideration of satisfactory evidence of the Applicant’s post termination earnings.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
I certify that this and the preceding 7 pages are a true copy of the reasons for judgment of Judicial Registrar Ryan.
Associate:
Dated: 7 February 1997
Solicitors for the Applicant: Slater & Gordon
Counsel for the Applicant: Mr T Wraight
Mr T Bourke, Australian Chamber of Manufactures, appeared for the Respondent
Date of hearing: 28 and 29 January 1997
Date of judgment: 29 January 1997
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