Peter Houston v Wellcon Motors t/as Costanzo Ford

[1995] IRCA 295

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA  VI 1952 of 1995
VICTORIA DISTRICT REGISTRY

B E T W E E N:

PETER HOUSTON
Applicant

A N D

WELLCON MOTORS t/as COSTANZO FORD
Respondent

REASONS FOR JUDGMENT

3 July 1995  PARKINSON JR

The applicant was employed by the respondent at its new and used car dealership at Bundoora.  The dealership is a relatively large Ford dealership and employs approximately 50 people.  The dealership’s departments included administration, new and used sales areas, vehicle service and spare parts and car detailing.  The applicant was employed as a car detailer. He commenced employment on 26 September 1994 and the evidence is that he fitted into the work environment easily and was a good employee. He was provided with a reference by the respondent confirming this view of his work.

The applicant’s evidence was that he was called into the General Manager’s office on 28 February 1995 and was informed that due to a downturn in business the respondent was terminating his employment.  The applicant was paid his existing leave entitlements together with one weeks notice and he left the workplace that day.

The respondent’s general manager, Mr Abela, gave evidence in the proceedings as to the circumstances of the hiring and termination of the applicant’s employment. His evidence was that the applicant was hired in September 1994 as a result of a decision by the respondent to expand its operations and to attempt to increase its level of turnover.  Mr Abela had projected an increase in business of between 20-30% as a result of these plans and the applicant was employed as a direct result of this expectation.

This projected increase did not occur at least to the level expected. The turnover increased by some 5-10% in the relevant employment period. Difficulties were encountered in obtaining the requisite level of supply of product to meet possible increased demands from customers and this had a substantial impact upon the turnover increase. 

After reviewing the level of turnover achieved, together with a consideration of the difficulties with the supplier, Mr Abela decided that the increase in turnover actually achieved could not support the additional person employed in the detailing area.  It is apparent that this decision was made some weeks prior to the termination of the applicant’s employment, although the selection of the applicant was not finally determined according to Mr Abela’s evidence until the day before his employment was terminated.  

S170DE(1) - Valid Reason based upon operational requirement.
The applicant does not contest the evidence of the respondent in relation to the turnover of the business, but submits that they do not constitute a valid reason for the termination of the employment as they were based upon extreme and unrealistic predictions in the first place and what the court is required to have regard to is the actual circumstances at the time of the termination of the employment.  I agree with the latter part of the submission. However in the circumstances of this employment, it is clear on the evidence that it was the developmental ambitions of the respondent which caused it to hire the applicant in the first place.  The evidence in no way suggests that there was any other basis for the hiring. It was a new position, not a replacement position and the circumstances of this hiring give some assistance in determining whether the termination of the employment was as bona fide, a result of the operational requirements of the respondent. 

I am satisfied that in these circumstances the reason for the termination of the employment was as a result of the failure of the respondent to achieve the level of turnover predicted or anticipated.  I am satisfied that the continuance of the hiring and this anticipated increase in demand were inexorably connected in the planning of the respondent.  The fact that the projections may or may not have been imprudent is not determinative of the question of whether the operational requirements of the business resulted in the termination of the employment.

Counsel for the applicant referred to my decision in  Fenton & Gallagher v Casey College of TAFE (1994, unreported, 8 December 1994) where in considering the validity of a decision based upon operational requirements I said:  

“ ...it is not clear to what extent if at all this court is entitled to go
         behind a decision made by a respondent that a termination of
         employment is necessary for reasons based upon operational
         requirements. I am of the view that when the decision is made on the
         basis of program delivery requirements, funding arrangements and
         budget limitations which have been established to be bona-fide, and
         not merely a sham to enable the respondent to avoid scrutiny of the
         termination, the Court is able to conclude that the respondent did        have a valid reason for the termination for the employment, that       reason being a reason related to the operational requirements of the
         business.”

In this case I am satisfied that the respondent has made a decision about its staffing requirements based upon the levels of turnover of the business. This decision was that the business did not require the level of staff that it had employed in the detailing area of its operation.  I have concluded that the termination was for valid reason based upon the operational requirements of the establishment.  That operational requirement being that the level of work had not increased to the level expected when the applicant was hired and the respondent was consequently overstaffed.

The failure of the respondent to foreshadow this expectation and relationship between the employment and the increase in turnover, does not in my view change the character of the reason from valid to invalid, nor does the fact that the hiring was based upon an apparently highly optimistic expectation of increased turnover. These latter matters are however relevant for consideration in the context of S170DE(2).

S170DE(2) - Harsh, Unjust or Unreasonable.
The applicant’s evidence was that when he was called in to the general managers office there was no discussion of possible alternatives to the termination of his employment.  Options such as redeployment to another area of the business, retraining, nor even reduction in the number of hours worked were not discussed.  Further the applicant’s evidence was that he was working overtime in the week of the termination of his employment. Options such as reducing or eliminating overtime in the workplace were not considered. 

Mr Abela was frank in his evidence that there was no consideration by the respondent of any alternatives to the termination of the applicant’s employment.   Having regard to the failure of the respondent at the hiring to warn the applicant that turnover increase would be necessary for the position to continue, together with the failure to give the applicant any forewarning of the possibility of termination, I am satisfied that the termination of the employment was harsh, unjust and unreasonable and consequently the respondent has contravened S170DE(2).

The applicant has made out the claim in the application made pursuant to S170EA of the Act and I turn now to consider the question of the appropriate remedy.

S170EE - Remedy.
The applicant seeks compensation and does not seek reinstatement. The applicant has obtained alternative employment in a full time capacity, on increased wages to those received from the respondent, and has been employed since 18 May 1995.  The applicant seeks an amount of money in compensation which is representative of the wages lost during the period between the date of the termination and the date he obtained alternative employment.   I am satisfied in the circumstances of this matter, having regard to the alternative employment and it being in the industry with which the applicant seems to have had a long association, that an order for reinstatement would be impracticable.

I have taken into account the reason for the termination of the employment, the length of the employment of the applicant and the possible length of the employment had the respondent terminated the employment lawfully and the income which the applicant would have earned had the employment not been terminated. I have also had regard to the week’s notice already provided.  I have decided that an appropriate amount of compensation is the amount of  $ 2,821.00. This amount represents income, including superannuation contributions over a period of 8 weeks, together with a deduction of $384.00 for the weeks notice already given.  I am of the view that the maximum period the employment was likely to continue in the circumstances was 8 weeks beyond the date of the termination of the employment.

The orders of the court shall be:

1. That the respondent pay to the applicant the sum of $2,821.00 in
            compensation.

2. That payment be made within 14 days of the date of this order.    

1. No order as to interest and no order as to costs.

I certify that this and the preceding six (6) pages
are a true copy of the reasons for judgment of
Judicial Registrar Parkinson.

Associate:
Dated:  3 July 1995

Counsel appearing for the applicant:  Mr R M Niall
Representative of the respondent:  Mr J Abela

Date of hearing:  3 July 1995
Date of judgment:  3 July 1995