Powers v Ani Engineering Pty Ltd
[1996] IRCA 391
•22 August 1996
DECISION NO: 391/96
CATCHWORDS
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - alleged UNLAWFUL TERMINATION - whether termination based on the OPERATIONAL REQUIREMENTS of respondent - whether employee's lack of capacity and conduct a REASON contributing to TERMINATION - whether VALID REASON - whether termination HARSH, UNJUST OR UNREASONABLE - lack of CONSULTATION - COMPENSATION
Industrial Relations Act 1988 (C'th) ss 170DB, 170DE, 170EDA, 170EE
Aitken v CMETSWUof Western Australia (1995) 63 IR 1.
Allia v Plumbing World Ltd, IRCA 453/95, Boon JR, 7 September 1995, unreported.
Bostik Australia Pty Ltd v Gorgevski (1992) 36 FCR 20.
Byrne & Frew v Australian Airlines Ltd (1995) 131 ALR 422.
Corkey v General Motors Holden Ltd (1986) 53 SAIR 531.
Gregory v Philip Morris Ltd (1988) 80 ALR 455.
Fitzgerald et al v Western Australian Specialty Alloys Pty Ltd, IRCA 358/96, 12 August 1996, Boon JR, unreported.
Food Preservers' Union of Australia v Watty Pict Ltd (1975) 172 CAR 227.
Fryar and Simpson v System Services Pty Ltd, IRCA 177/96, von Doussa J, 10 May 1996, unreported.
Hamilton v Australian Guarantee Corporation Ltd, IRCA 383/95, Chancellor JR, 18 August 1995, unreported.
Henderson v Australian Guarantee Corporation Ltd,IRCA 383/95, Chancellor JR, 18 August 1995, unreported.
Hockey v Multiskip Pty Ltd, IRCA 557/95, Marshall J, 29 September 1995, unreported.
Jones v Department of Energy and Minerals (1995) 60 IR 308.
Karambelis v Compack Packaging Pty Ltd, IRCA 179/95, Murphy JR, 4 May 1995, unreported.
Kenefick v Australian Submarine Corporation Pty Ltd (1995) 131 ALR 197.
Kenefick v Australian Submarine Corporation Pty Ltd, IRCA 103/96, Ryan, Beazley and North JJ, 26 March 1996, unreported.
Lead & AFMEPKIU v Riverhouse Packaging Pty Ltd, IRCA 572/95, Ryan JR, 24 October 1995, unreported.
Leddicoat v Schiavello Commercial Interiors (SA), IRCA 569/95, von Doussa J, 18 October 1995, unreported.
May v Lilyvale Hotel Pty Ltd, IRCA 628/95, Wilcox CJ, 1 December 1995, unreported.
Mitchell-Collins v Latrobe Council (1995) 60 IR 480.
New South Wales Cancer Council v Sarfati (1992) 28 NSWLR 68.
Phillips v Gaze, IRCA 268/96, Millane JR, 25 June 1996, unreported.
Pritchard v Standard Chartered Bank of Australia Ltd, IRCA 11/96, Patch JR, 2 February 1996, unreported.
Quality Bakers of Australia Ltd v Goulding & Anr (1995) 60 IR 327.
Quinn v Jack Chia (Australia) Ltd (1992) 1 VR 567.
Sinclair v Anthony Smith & Assocs Pty Ltd, IRCA 663/95, von Doussa J, 1 December 1995, unreported.
Termination, Change and Redundancy case (1984) 8 IR 34.
Walsh v Wayne Motors, IRCA 92/96, Ryan JR, 21 March 1996, unreported.
Wynns Wine Growers Pty Ltd v Foster (1986) 16 IR 381.
Woolhouse v John Selfe, IRCA 511/95, Parkinson J, 10 August 1995, unreported.
Yaxley v Trust Bank of Tasmania, IRCA 95/96, Ryan JR, 15 March 1996, unreported.
Crow R, "The Common Law Remedy for a Dismissed Employee - What Is Reasonable Notice and When Is It Required", Law Society Journal, November 1994, 48.
GARY WILLIAM POWERS V ANI CORPORATION LTD - WI 2100 OF 1995
Before: RITTER JR
Place: PERTH
Date: 22 August 1996
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WI 2100 of 1995
B E T W E E N:
GARY WILLIAM POWERS
Applicant
A N D:
ANI CORPORATION LIMITED
Respondent
MINUTE OF ORDERS
22 AUGUST 1996 RITTER JR
THE COURT ORDERS THAT:
It is declared that the respondent terminated the employment of the applicant in contravention of section 170DE of the Industrial Relations Act 1988 (C'th).
The respondent is to pay compensation to the applicant in the sum of $1,000, within 7 days.
The applicant's claim in the associated jurisdiction of the Court is dismissed.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WI 2100 of 1995
B E T W E E N:
GARY WILLIAM POWERS
Applicant
A N D:
ANI CORPORATION LTD
Respondent
REASONS FOR JUDGMENT
22 AUGUST 1996 RITTER JR
INTRODUCTION
This is an application under section 170EA of the Industrial Relations Act 1988 (C'th) ("the Act"). There was no dispute that the applicant was employed by the respondent and that his employment was terminated by the respondent. The termination of employment occurred on 14 September 1995. The applicant alleged that the termination of his employment was in contravention of either section 170DE(1) or 170DE(2) of the Act. Pursuant to section 170EDA(1), the respondent has the onus of proving that there was a valid reason for the termination of employment, pursuant to section 170DE(1).
The respondent's case was that there was a valid reason for the termination of employment, based on the operational requirements of the respondent's business. It was the respondent's case that the termination of the applicant's employment was a genuine redundancy. The applicant disputed this assertion.
In the alternative, the applicant submitted that he had discharged his onus under section 170EDA(2) of proving that the termination was not for a valid reason because the termination of employment was harsh, unjust or unreasonable under section 170DE(2).
If the applicant was entitled to a remedy in respect of the termination of employment, he asserted that the appropriate remedy was reinstatement under section 170EE of the Act. The respondent disputed this.
The final issue was a claim in the associated jurisdiction of the Court (section 430 of the Act) for damages arising out of an allegedly insufficient payment being made to the applicant in lieu of notice upon termination.
The applicant gave evidence in support of his application. The respondent called as witnesses Mr Steven Williams, the group financial controller of the respondent since February 1995, and Mr Michael Buckland, the general manager of ANI Hoskins Pty Ltd.
Both parties were represented by counsel, Mr A Mackay appearing for the applicant and Mr M Goldblatt appearing for the respondent. The hearing of the application and the preparation of these reasons has been much assisted by the clarity of the presentation of the evidence and the submissions made by counsel.
The relationship between the respondent and other companies should be mentioned. The applicant commenced employment on 30 July 1987 with a company called WA Mining Engineering Services Pty Ltd ("WAMES"). WAMES was an engineering business. WAMES was jointly owned by Comsteel Pty Ltd (a wholly owned subsidiary of the respondent) and others, including BHP Minerals Pty Ltd. Comsteel purchased the other 50 per cent share holding in WAMES by agreement dated 30 January 1995. There was a division of ANI Corporation Ltd called ANI Products Division. This division was to take on board the business of WAMES, together with another business called Vortex (a pump business) and exercised certain other responsibilities for other divisions, including Ware Products.
ANI Hoskins was previously a business unit within ANI Corporation Ltd's products division and, on a restructuring of ANI Corporation Ltd, crossed to the ANI Engineering division. Both ANI Hoskins and WAMES were located in Perth. WAMES and ANI Hoskins were considered by ANI Corporation Ltd to be similar business units and the management of these two entities was consolidated as one management group, operating from premises at Bassendean where ANI Hoskins had been located. Following this, the accounting functions of WAMES and ANI Hoskins were amalgamated.
Mr Williams explained in his evidence that the idea was that to replicate accounting and administrative routines and functions that existed elsewhere in the ANI group was something to be reduced.
At the time of the acquisition of WAMES, Mr Powers was the financial controller at WAMES. Mr Stephen Perry was the financial controller at ANI Hoskins. After the acquisition of WAMES, Mr Perry was transferred to another ANI Corporation Ltd group operation in Brisbane and it was decided that Mr Powers would assume responsibility for all of the accounting responsibilities in the two operations. This decision took place between about 15 and 20 February 1995. The decision to appoint Mr Powers to the position of financial controller for WAMES and ANI Hoskins was that of Mr Williams, taken in consultation with operational and divisional management. Mr Powers' employment in this position lasted until the date of his termination, 14 September 1995.
VALID REASON FOR TERMINATION - OPERATIONAL REQUIREMENTS
As stated earlier, it was the case of the respondent that the valid reason for the termination of employment of Mr Powers was the operational requirements of ANI Corporation Ltd.
At WAMES, Mr Powers had been responsible for all financial accounting, including annual reports, purchasing, stores and the running of the computer system, including making sure that programs were running correctly. WAMES was essentially a repair shop, with their main customer being Mt Newman Mining and the maintenance of the Mt Newman Mining haulpak fleet.
In January 1995, Mr Powers was being paid a salary of $53,000 by WAMES, and had received in the previous two years bonuses of $5,000 and $4,000 respectively. In addition, Mr Powers had a fully serviced company car, a Ford Falcon; a fully paid mobile telephone; his home telephone account fully paid for, and superannuation. As stated, after the purchase of shares in WAMES by ANI Corporation Ltd, Mr Powers became financial controller of ANI Hoskins and WAMES. Mr Powers continued the tasks he was doing at WAMES and took on the additional responsibilities of the accounting of ANI Hoskins and the management of staff under his control. This involved an increased workload for Mr Powers. Whereas previously he had worked from 8 am to 4 pm, he was now having to work until 5.30 pm, and taking work home on weekends, especially during budget time because the budgets were done in a different format from those he had been used to at WAMES.
Mr Williams gave evidence of a meeting on 15 February 1995 involving himself, Mr Perry and Mr Powers. He said that what was discussed at that meeting was merging common functions to eliminate duplicated effort and resources. This included Mr Powers effectively doing the job that had previously been done by two people. At that stage, there was no concern as to the viability or general business activity of either WAMES or ANI Hoskins, according to Mr Williams.
By letter dated 6 March 1995, from the respondent to the applicant, the respondent confirmed in writing Mr Powers' continuing employment within the ANI group, following the acquisition of the remaining 50 per cent of issued share capital in WAMES.
Mr Williams said that during the period February to July 1995, there was preparation for a divisionalisation of WAMES, which took effect on 1 July 1995. Mr Williams said that divisionalisation meant that the assets and business undertakings of WAMES were transferred directly or indirectly to ANI Corporation Ltd, with WAMES remaining as a shell: a non-operating company.
In the period to 30 June 1995, Mr Williams said that ANI Hoskins was continuing to report its results through the previous managing division, ANI Products division, and WAMES was to produce its results directly to ANI Corporation Ltd through the head office reporting system.
Mr Williams said that during 1995, he noted some limitations in Mr Powers' performance "but noted those limitations in the context of the restructuring process and the additional demands and workloads being generated". On 11 July 1995, there was a meeting in Perth attended by Mr Williams, his chief executive Mr Rod Lane, and Mr Buckland. The purpose of the meeting was a business and strategy review, following the year-end results in which a number of strategic and practical matters were discussed. During this meeting, Mr Williams noted some reservations about Mr Powers. Mr Williams said that Mr Buckland raised the issue of there being difficulties achieving certain outputs and deadlines, and that there were with errors. Mr Williams said it was the view that they needed a "better qualified resource". Mr Williams said he took these points on notice and made a note to review the issue again at the end of July 1995. The decisions taken at the meeting involved cost improvements being demanded of the local management to achieve, inter alia, budgets. There was no specific discussion about redundancies at that stage because the matter was left with Mr Buckland to come back to Mr Williams with recommendations.
In his evidence, Mr Buckland agreed that he said that Mr Powers was unable to cope with the situation, deadlines were not being achieved and that Mr Powers was complaining about the systems used by ANI, and ANI generally. Mr Buckland was also aware that there had been some accounts and budget errors. Mr Buckland said that it was agreed at the 11 July 1995 meeting that they would wait to the end of July 1995 to see how Mr Powers performed (transcript 216).
On the same date, Mr Williams had another meeting to discuss the early retirement and termination of employment of Mr Peter Butterworth, who had been the general manager of WAMES, both prior to the takeover in January 1995 and subsequently. At that meeting, it was agreed that Mr Butterworth would move towards leaving the company on 30 September 1995, at his request, on an early retirement basis. Mr Williams undertook to check out the method of termination which would give him the best overall net benefit. Mr Williams said that the retirement of Mr Butterworth was part of a cost-cutting exercise. The treatment of Mr Butterworth's termination of employment can be contrasted with that of the applicant.
On 4 August 1995, there was a meeting of the senior management of the division, including Mr Williams, Mr Lane and Mr Michael Price, the group operations controller. Mr Buckland was also involved in the meeting by telephone. At the meeting, Mr Buckland conveyed his decision that the systems coordinator role was to be declared redundant and that a reorganisation as necessary would be undertaken in order to absorb those responsibilities. Mr Williams was asked to provide professional input as to how this should come about. It was Mr Williams' judgment that if the position was to be eliminated, it should be absorbed within the financial controller's position. In that circumstance, Mr Williams thought that Mr Powers would be unable to cope with the additional responsibility. Mr Williams said that he reached that conclusion, "based upon my professional observation of his capabilities and performance over the past few months". Mr Williams said that "it was clear to me that a further restructure involving his taking on additional personal responsibility simply was not possible". However, Mr Williams said that no further action took place until the following week, when the matter was discussed again with Mr Buckland, and the conclusions and decisions reached on 4 August 1995 were reassessed between them and confirmed. Mr Williams said that he spoke to Mr Price about alternative positions available for Mr Powers within the group. However, none were available.
Mr Williams said that he gave consideration as to whether Mr Powers could be retrained for the amalgamated position. He said that his opinion was that further training would be impossible. He said that Mr Powers had not responded particularly well to previous training, and given the fact that two positions were having to be merged, it simply would not have been possible to provide extensive training in those circumstances to achieve the same economic result. This was because it would be necessary to employ or deploy somebody else whilst extensive training was being undertaken. In addition, Mr Williams had little confidence that training would have raised Mr Powers' skills to the required levels.
Mr Williams then began a search both internally within the group and externally amongst his own networks and recruitment consultants to find a person to fill the amalgamated position. Interviews took place on about 4 September 1995. An offer to the selected candidate was made a couple of days after that. The offer of employment was accepted, prior to the termination of Mr Power's employment. The new employee, Mr Greg McKeon, is still employed by ANI Corporation Ltd in the amalgamated position of financial controller and systems administrator of ANI Hoskins and WAMES. ANI Corporation Ltd is happy with his performance.
Mr Williams was asked to compare the difference in qualifications between Mr McKeon and Mr Powers. Mr Williams said that Mr Powers does not have formal accounting qualifications or an accounting degree. He said that what was required in the amalgamated position was a greater range of skills, including a full accounting qualification, being the qualification prerequisite for becoming a member of the Australian Society of Accountants, together with systems and computer skills, particularly in modern software applications. These requirements were met by Mr McKeon but not Mr Powers.
It was common cause that Mr Powers' employment was terminated on 14 September 1995 and that he received no warning of this.
Mr Powers described what took place on this date in his evidence. He said that at about 8.15 am, Mr Williams came down to his office and said that he wanted to see him in the boardroom. Mr Powers went to the boardroom. With Mr Williams was Mr Ken Little, the human relations and safety manager for ANI Hoskins. Mr Powers said that Mr Williams looked at him and said, "There's no easy way to do this. We are dispensing with your services." Mr Williams gave Mr Powers a letter of termination to read. He gave him some documents, stating what Mr Powers was being paid, and gave him a cheque and asked him to sign documents, which he did not sign. The documents included a letter from the respondent to the applicant dated 14 September 1995, a statement of termination pay for Mr Powers and an ANI Executive Superannuation Fund member exit advice to Mr Powers. The total amount received by Mr Powers, which will be referred to in greater detail later, was $43,694.85. After the documents and cheque were handed to Mr Powers, Mr Little escorted him to his desk to clean out his personal effects. Mr Powers was told that he should not make any phone calls, although he did make a couple to people he had worked with, and was then escorted to the company car. Mr Powers then removed his personal belongings and was escorted to a taxi which was waiting to drive him home. He said that the whole process, from the time he left the boardroom until he got into the taxi, took about 20 to 25 minutes. The meeting in the boardroom had taken about 10 minutes. Mr Powers said, and this was probably an understatement, that he was "taken by surprise" by what had happened that day.
He said that in a discussion with Mr Buckland in about May of 1995, Mr Buckland reported that he had spoken to Mr Price and Mr Lane and confirmed to Mr Powers that both of these people were happy with his performance.
This conversation took place because Mr Powers was concerned with an advertisement that was placed in the West Australian newspaper for a "divisional accountant, engineering/manufacturing". The advertisement was placed in the West Australian by a recruitment agency, Downing Teal Pty Ltd. The advertisement did not mention the respondent, WAMES or ANI Hoskins by name, although Mr Buckland confirmed that the advertisement was placed in the newspaper at his instruction. He said that the advertisement was not for Mr Powers' position; however, Mr Powers said in his evidence that he had reason to believe that it was.
Subsequent to this episode, Mr Powers saw Mr Buckland on 1 July 1995 about salary increases. Mr Buckland advised Mr Powers that he had a salary increase of $2,000 and, according to Mr Powers' evidence, Mr Buckland said that he would not be given this increase "if I was going to get rid of you". Mr Powers said that "once again, he seemed to be reassuring me that he was happy with my performance".
Between the period towards the end of June 1995 and 14 September 1995, Mr Powers said that his workload was very heavy because he was putting an assets register together and there was a new accounting system "so we were working until half past five, six and sometimes later and I was working at home on the weekends on the asset register".
Mr Powers said that apart from the discussions referred to, he did not have any discussions with anyone from the respondent about his performance. Mr Powers qualified this to some extent by saying that they were having problems meeting deadlines, and that he wrote a letter to Mr Williams about this and how it could be addressed. He said that he received a letter in reply but that this did not address the problems that he had brought up. Mr Powers did not retain a copy of this correspondence when he left the respondent's employment.
The first question to determine is whether the termination of Mr Powers' employment in the circumstances described above was a termination based on the operational requirements of the respondent.
In his closing submission, Mr Goldblatt said that "the view was taken that [Mr Powers] could not do the job. He was unqualified; that is shown by his curriculum vitae. They needed a better qualified person to do both jobs and a man who could cope within the parameters of the working hours available. He did not have to work Saturdays, Sundays and all hours which, as a result, must affect your ability to work. They got a man who could cope within the hours available." The position of systems administrator was made redundant and, according to the respondent, Mr Powers was made redundant and Mr McKeon was employed to do both jobs. He was employed at Mr Powers' then salary of $55,000 per annum (transcript 238).
The argument that the termination of Mr Powers' employment was based on the operational requirements of the respondent encompasses the following elements :
The respondent had a genuine desire to reduce costs;
The respondent made a business decision to make the position of systems administrator redundant and to absorb this position into the position occupied by Mr Powers;
It was felt that Mr Powers could not cope and was not qualified to take on the amalgamated position;
Mr McKeon was employed to take on the amalgamated position;
Mr Powers was therefore redundant in that his labour was excess to the requirements of the respondent;
This was confirmed by the fact that there was no other position within the respondent's group where Mr Powers could be employed.
Mr Mackay, in his closing submission, disputed Mr Goldblatt's characterisation of the termination and said that the employment was terminated because the respondent was dissatisfied with the performance of Mr Powers. He referred to the fact that Mr Buckland, in his evidence, stated that at various times he was both satisfied and dissatisfied with the applicant's performance. He had said that the area of greatest dissatisfaction was Mr Power's monthly reporting. However, Mr Buckland said that, until the end of June 1995 at least, none of these complaints were regarded as job threatening. If they had been, Mr Powers would have been issued with a warning (transcript 188).
Mr Mackay referred to the meeting on 11 July 1995 and the note that Mr Williams made on that date, which was tendered as Exhibit C, and which included the notation "need a better qualified person, check out". Mr Mackay also pointed to the advertisement issue, the responsibilities and qualifications which the respondent sought in candidates to take on the amalgamated position, the fact that Mr Williams had simply assumed that Mr Powers could not handle computing functions as required in the amalgamated position, and an internal telephone list published after Mr Powers' departure that showed Mr McKeon as financial controller (Mr Power's former position) and Ms Faye Davis as continuing as systems administrator. This meant, according to Mr Mackay's argument, that there was in fact no amalgamated position, an argument disputed by the respondent. Mr Mackay also referred to the written announcement to staff of Mr Powers' departure which stated that Mr Powers' position was taken over by Mr McKeon but mentioned no alteration to the position. Because of all this, Mr Mackay submitted, it was not a situation where there was a genuine redundancy or termination based on operational requirements, but a termination based on dissatisfaction with performance.
I place little weight on the telephone list and the memorandum to staff. There was evidence that the insertion of Ms Davis as systems administrator in the telephone list was a mistake. This included subsequent documents emanating from Ms Davis in which she did not refer to herself as systems administrator but as the assistant accountant.
With respect to the memorandum to staff, this could well have been designed not to reflect in its entirety the true state of affairs, but to endeavour to involve a smooth transition to Mr McKeon taking up the amalgamated position.
I am satisfied that the reason for the termination of Mr Power's employment included the elements referred to above, as extracted from the submissions of Mr Goldblatt. Equally, I am satisfied that one of the reasons for termination of employment was dissatisfaction with Mr Powers' performance or, at least, an assumption by Mr Williams that Mr Powers did not have the capacity to adequately perform in the newly created amalgamated position.
Mr Mackay, in closing, submitted that this was not in fact a newly created position at all. However, I accept Mr Williams' evidence that it was a position created from those held by Mr Powers and Ms Faye Davis, and that the newly created position required an employee with qualifications and computer skills that Mr Powers did not have.
The legal question that arises is whether the termination is simply based on the operational requirements of the respondent or if it is also connected with the employee's capacity or conduct. I think that the latter is correct. This was a situation where the termination of Mr Powers' employment was for a combination of reasons. One of these was the operational requirement of the saving of costs and the creation of the amalgamated position. The second was Mr Williams' opinion that Mr Powers did not have the capacity to properly fulfil the requirements of the amalgamated position. Due to this latter element, Mr Powers' capacity and conduct was also a reason for the termination.
This, of course, does not mean that there was not a valid reason for the termination. However, the "valid reason" in this case cannot simply be based on the operational requirements of the respondent but must also take into account the capacity and conduct of Mr Powers.
Having considered the evidence, I am satisfied that there was a valid reason for termination, in the sense described by Wilcox CJ in Kenefick v ASC (1995) 131 ALR 197 at 207, lines 45 - 50, based on the combination of the operational requirements of the respondent and Mr Powers' lack of capacity or conduct to fulfil the amalgamated position,
Therefore, there was no contravention of section 170DE(1).
SECTION 170DE(2) - TERMINATION HARSH, UNJUST OR UNREASONABLE
At the time relevant to this application, section 170DE(2) said that :
"A reason is not valid if, having regard to the employee's capacity and conduct, and those operational requirements, the termination is harsh, unjust or unreasonable. This subsection does not limit the cases where a reason may be taken not to be valid."
The relationship between section 170DE(1) and 170DE(2) was considered recently by von Doussa J in Fryar and Simpson v System Services Pty Ltd, unreported, IRCA 177/96, 10 May 1996, decided after the hearing of this application. His Honour concluded at page 15 that section 170DE(2) should be interpreted as a general prescription making unlawful terminations which are harsh, unjust or unreasonable. His Honour rejected a contention in that case that "although section 170DE(2) uses two concepts, a reason and the termination, they do not stand independently of one another. It is the quality of the termination which may invalidate the reason for termination. This suggests that there must exist some rational link between the harshness, injustice or unreasonableness of the termination and the validity of the reasons for termination" (see page 8 of his Honour's reasons). His Honour's rejection of this argument included a rejection of the argument that "if a rational link between the harshness, injustice and unreasonableness to which section 170DE(2) refers, and the validity of the reason or reasons for termination referred to in section 170DE(1) is not a requirement of section 170DE, section 170DE(2) would, in effect, create a fiction; that is, a reason will be deemed to be invalid if for any circumstance, whether related to the reason or not, the termination is found to be harsh, unjust or unreasonable. In short, section 170DE(2) should not be construed as though it was a general prescription making unlawful terminations which are harsh, unjust or reasonable". As stated, his Honour rejected this submission and held that section 170DE(2) did, indeed, provide the general prescription referred to.
At page 16, his Honour pointed to the fact that in section 170DE(1) the valid reason or reasons can be connected with the capacity or conduct or based on the operational requirements of the employer, whereas section 170DE(2) states that the reason is not valid if, having regard for the employee's capacity and conduct and those operational requirements, the termination is harsh, unjust or unreasonable. His Honour therefore said that "even where the valid reason is based on the employer's operational requirements, section 170DE(2) required regard to be had for the employee's capacity and conduct. There is no apparent reason why the notion of the employee's capacity and conduct should be narrowly construed". What this part of the Fryar and Simpson decision confirms, in my opinion, is that in looking at the question of whether the termination was harsh, unjust or unreasonable in a case such as the present, one must consider the capacity and conduct concerned, the operational requirements, and all other relevant circumstances.
In his closing submission, Mr Goldblatt submitted that it could not be shown that the termination of Mr Powers' employment in the circumstances of this case was harsh, unjust or unreasonable. He pointed to factors, including the valid reason for termination and the extent of the redundancy package that Mr Powers was paid. He acknowledged that there had been a lack of any prior warning of the termination of employment or consultation as to whether there was an alternative to termination. However, he said that this did not necessarily mean that the termination of employment was harsh, unjust or unreasonable. He categorised these aspects as procedural unfairness and said that as a matter of law "one cannot simply say that procedural unfairness equals harsh, unjust and unreasonable". Mr Mackay, on the other hand, submitted that if there is a failure to consult prior to an employee being made redundant, then there is necessarily a contravention of section 170DE(2) of the Act.
There is no doubt that if Mr Mackay's submission is correct, there has been a contravention of the section because of the acknowledged lack of consultation prior to termination. Therefore, I need to examine the law on this topic.
THE NECESSITY FOR CONSULTATION AND WARNING - THE LAW
There is no doubt that even where there is a genuine redundancy, the termination of employment of a particular employee may be harsh, unjust or unreasonable. In Walsh v Wayne Motors, unreported, IRCA 92/96, 21 March 1996, I examined a number of the authorities in this area.
These included Mitchell-Collins v Latrobe Council (1995) 60 IR 480 at 490 where Spender J stated that a failure to consult with an employee or union about the issue of redundancy may mean that a termination on that ground is harsh, unjust or unreasonable.
In Walsh v Wayne Motors, I also referred to the judgment of Beazley J in Quality Bakers of Australia Ltd v Goulding & Anr (1995) 60 IR 327 at 334, where her Honour said that:
"The need for consultation with employees and, if applicable, the employee's union, in the case of workplace change or restructuring, has consistently been recognised as an essential element of fairness in the relationship between employee and employer."
I then said in Walsh that :
"Her Honour cited two decisions of Judicial Registrars in support of this proposition. Earlier in this decision, her Honour quoted with approval a number of judgments which had emphasised the need for fairness in all aspects of the employer/employee relationship. Her Honour referred to the decision of Corkey v General Motors Holden Limited (1986) 53 SAIR 531 at 538, where Stanley J stated a number of 'basic principles' which should apply in the case of a redundancy. One of these was that the employer should give as much warning as possible of impending redundancies so as to enable the union and the employees who may be affected to take early steps to inform themselves of the facts, to consider possible alternative solutions and, if necessary, to find alternative employment either with the employer or elsewhere."
In Sinclair v Anthony Smith & Assocs Pty Ltd, unreported, IRCA 663/95, 1 December 1995, von Doussa J made comments on the issue of consultation in the context of an award which required discussions with employees, prior to termination for redundancy. However, his Honour's comments are useful in understanding the legality of a termination or redundancy under the Act:-
"The requirement for consultation is in the award not only to permit the possibility of arriving at some arrangement of the workplace which has lesser consequences than dismissal, but also to allow time for the employees to deal with the emotional, family and domestic stresses that are likely to descend upon them when their employment is brought to an end. The importance of these non-workplace personal factors cannot be underestimated, and finds expression in the reasons of various tribunals that have had to consider clauses of this type.
To put it into colloquial terms, it is desirable, as the award recognises, that employees whose security of employment is about to be shattered to be let down gently. If they are forewarned and counselled, they are more likely to be able to accommodate to their new situation, to adjust themselves to the search for other work, and the like. Moreover, it is generally recognised that if an employee is in work and is given time off to go and look for other work, the prospects of finding employment are somewhat better than if the person concerned is required to seek work as an unemployed person on social security.
The failure to consult is a significant matter in this case. In my view, it is also significant that no forewarning was given, and significant also that no counselling was provided. Those are matters that should have been attended to, to render the dismissal in the circumstances of this case reasonable and fair."
In Karambelis v Compack Packaging Pty Ltd, unreported, IRCA 178/95, Murphy JR cited a number of cases which the Judicial Registrar said:
". . . represent strong authority for the proposition that in the usual course, even in the case of a genuine redundancy based on the operational requirements of an employer, an employer must consult with the employee . . . in order to avoid the termination breaching section 170DE(2) of the Act" (page 7) (emphasis added).
Judicial Registrar Boon, in Allia v Plumbing World Ltd, unreported, IRCA 453/95, 7 September 1995, at page 7 quoted this observation with apparent approval.
Marshall J in Hockey v Multiskip Pty Ltd, unreported, IRCA 557/95, 29 September 1995 at page 10 has gone so far as to say:
"It is well established in this Court that a termination of an employee's employment on redundancy grounds will be harsh, unjust or unreasonable where there is no prior consultation with an employee before that employee's employment is terminated on redundancy grounds."
Mr Goldblatt submitted that statements of the type made by Marshall J in Hockey v Multiskip were an incorrect statement of the law about section 170DE(2). Mr Goldblatt submitted that such statements lend undue emphasis to procedural matters in assessing whether a termination of employment has been harsh, unjust or unreasonable. Mr Goldblatt submitted that all factors must be considered, not just those relating to procedural matters. In this regard, Mr Goldblatt drew support from the judgment of Wilcox CJ in Kenefick v ASC (1994) 131 ALR 197 at 208. Although the Chief Justice's decision has been overturned: Kenefick v Australian Submarine Corporation Pty Ltd, unreported, IRCA 103/96, 26 March 1996 (Ryan, Beazley and North JJ), the judgment of the Full Court does not contain any express criticism of the passage that Mr Goldblatt relied on.
Mr Goldblatt also relied on the judgment of von Doussa J in Leddicoat v Schiavello Commercial Interiors (SA), unreported, IRCA 569/95, 18 October 1995. This was a case where, despite a genuine redundancy, it was alleged that the termination of employment was, nevertheless, harsh, unjust or unreasonable.
His Honour said that a termination may contravene section 170DE(2), either because there has been substantive unfairness, or procedural unfairness, and cited the judgment of Wilcox CJ in Kenefick in support: see pages 2 and 3.
His Honour also drew attention to the issue that an attempt to classify "unfairness" into substantive on the one hand and procedural on the other hand may be of limited assistance. In this regard, his Honour cited the judgment of McHugh and Gummow JJ in Byrne & Frew v Australian Airlines Ltd (1995) 131 ALR 422. In this judgment, their Honours said at page 462 that "the distinction between procedure and substance is elusive". In that case, the High Court was considering clause 11(a) of the Transport Workers (Airlines) Award 1988 which provided that termination of employment shall not be harsh, unjust or unreasonable. At page 462, McHugh and Gummow JJ said, "That is not to say that the steps taken, or not taken, before termination may not in a given case be relevant to consideration of whether the state of affairs that was produced was harsh, unjust or unreasonable . . . But the question under clause 11(a) is whether in all the circumstances the termination of employment disobeyed the injunction that it not be harsh, unjust or unreasonable. That is not answered by imposing a distinction between procedure and substance. It is important that matters not be decided simply by looking to the first issue before there is seen to be any need to enter upon the second."
In the majority judgment of Brennan CJ, Dawson and Toohey JJ, at page 434, their Honours also said, "An unfair procedure may result in a dismissal being harsh, unjust or unreasonable" but that it was not "a permissible approach for the Full Court [Federal Court] to reach a conclusion adverse to the respondent, based on the procedure employed in dismissing the appellants without considering whether the trial judge was correct in reaching the conclusion that there was sufficient evidence to establish that the appellants were involved in the misconduct alleged against them".
Von Doussa J, in Leddicoat, at page 3, referred to the expression "harsh, unjust or unreasonable" and said that it is "intended to apply to an infinite variety of situations where employment is terminated". His Honour cited with support a passage of the judgment of Sheppard and Heery JJ in Bostik Australia Pty Ltd v Gorgevski, (1992) 36 FCR 20 at page 28, where their Honours indicated that no re-definition or paraphrase of the expression was desirable and that the question was whether viewed objectively the decision to dismiss was harsh, unjust or unreasonable. Von Doussa J also cited with approval part of the judgment of Wilcox CJ and Ryan J in Gregory v Philip Morris Ltd (1988) 80 ALR 455 at 471. Von Doussa J concluded that an "objective assessment of the employer's conduct in relation to all the circumstances of the individual case is required" (emphasis added).
In Leddicoat, there were two alleged bases for a contravention of section 170DE(2), being procedural unfairness because of dismissal without forewarning in the face of an oral assurance, given three months earlier, that employment was secure, and substantive unfairness in that an inadequate severance payment was made.
Relevant to the present case, von Doussa J, at pages 22/23, said that:
"In almost every case a termination of longstanding employment, especially for a person of the applicant's age, will be hard on the employee, and a matter of distress and anguish. The force of the blow will often be less if it is preceded by sympathetic forewarning and counselling, but it does not follow that a termination without forewarning on the ground of genuine redundancy is necessarily in contravention of s.170DE(2)."
On this issue, on the facts, his Honour found that an assurance was given to the applicant which was calculated to have the effect that he would feel secure and not seek other employment to better protect the remainder of his working life. His Honour said that to then terminate the employment without forewarning, in the circumstances, required some additional period either of notice or payment in lieu of notice above the statutory minimum under the Act.
The later judgment of von Doussa J in Fryiar & Simpson v Systems Services Pty Ltd, cited earlier, is consistent with a similar approach.
Mr Goldblatt also drew support from the decision of Ryan J in Jones v Department of Energy and Minerals (1995) 60 IR 308 at 311 where his Honour said:
"The authorities in this area support the view that the content of the duty of fairness in the sense of the procedures to be followed before deciding to dismiss an employee will vary according to the circumstances of each case. No generally applicable rule can be formulated as stipulating, for example, the required extent of consultation with the employee facing dismissal, or the lengths to which the employer must go in attempting to find other work for that employee."
Mr Goldblatt drew my attention to the quotation of this passage in the judgment of Ryan JR in Yaxley v Trust Bank of Tasmania, unreported, 95/96, 15 March 1996 at page 10. Immediately following that quotation, Ryan JR referred to the judgment of Gregory v Philip Morris (1988) 24 IR 397 - 415, where Ryan JR said that the Court described consultation as "often a necessity" but "not of universal rule", in cases where a provision like section 170DE(2) applies.
Mr Goldblatt also drew my attention to the decisions of Lead & AFMEPKIU v Riverhouse Packaging Pty Ltd, unreported, IRCA 572/95, 24 October 1995, Ryan JR; Woolhouse v John Selfe, unreported, IRCA 511/95, 10 August 1995, Parkinson JR; and Pritchard v Standard Chartered Bank of Australia Ltd, unreported, IRCA 11/96, Patch JR, 2 February 1996. In the latter case, Patch JR said that the case directly raised the question of whether a failure to give an employee a warning that employment was to be terminated for reason of redundancy must, in all cases, be held to be unjust within the meaning of section 170DE(2) of the Act. The Judicial Registrar held "that cannot be the case". He said that :
"Speaking hypothetically, there must be redundancy situations which come to the notice of an employer without warning, which require immediate and prompt action to safeguard the financial interest of the employer, and in which the immediate termination of an employee's employment is imperative. In such an extreme situation, the termination of that employee's employment would not be 'unjust'.
On the other hand, it is necessary, in the light of the recent amendments to the Act, to take into account all of the circumstances of the termination of the employee's employment in order to determine whether or not that termination of employment is 'unjust' within the meaning of s 170DE(2) of the Act. It may well be the case that that particular amendment to the Act merely put into 'black and white' statutory law what was in fact already the situation (see Byrne & Frew v Australian Airlines Ltd, 131 ALR 422, per McHugh and Gummow JJ at 463.31)."
In the recent decision of Boon JR, Fitzgerald et al v Western Australian Specialty Alloys Pty Ltd, unreported, IRCA 358/96, 12 August 1996, the Judicial Registrar referred to a number of cases and said that, "I agree that the failure to consult with employees prior to making them redundant does not necessarily mean that the termination will be harsh, unjust or unreasonable", although in the same paragraph, Boon JR factually distinguished the Jones case from the one before her.
I think it should be borne in mind that in Byrne & Frew v Australian Airlines Ltd, the High Court, in both the majority judgment and that of McHugh and Gummow JJ, differed significantly from the reasoning and conclusion of the Full Court of the Federal Court, in the Full Court's finding that because there had been procedural unfairness, this meant that the termination of employment was harsh, unjust and unreasonable. As the High Court held in the passages referred to earlier, this is not necessarily so. It must depend upon all the circumstances of the case.
It should be acknowledged, in my opinion, that decisions of this Court and the Federal Court, prior to the High Court decision in Byrne & Frew on 11 October 1995, could be infected by the erroneous approach noted by the High Court in that decision. For example, I note the decision of Marshall J in Hockey was before the High Court decision in Byrne & Frew.
A recent decision which explores the circumstances in which the termination of employment based on redundancy will be harsh, unjust or unreasonable is that of Millane JR in Phillips v Gaze, unreported, IRCA 268/96, 25 June 1996. I have found this decision to be of considerable assistance in preparing this judgment.
With respect to consultation prior to a termination of employment on the basis of redundancy, the Judicial Registrar cited the cases of Quality Bakers of Australia v Goulding, Mitchell-Collins v Latrobe Council, Sinclair v Anthony Smith & Assocs Pty Ltd (single judge and as upheld on appeal), and stated that "there is considerable authority in this Court supporting the view that a failure to properly consult with an employee about an impending redundancy, as well as the failure to consider alternative employment options and a failure to provide the employee with any counselling or assistance in relation to the redundancy, or in relation to obtaining other employment, may render the otherwise lawful termination harsh, unjust or unreasonable" (page 14) (emphasis added).
With respect, I agree with this statement of the law. Such a statement of the law is, I accept with regret, contrary to the judgment of Marshall J in Hockey v Multiskip, and other judgments, which suggest that a failure to warn or consult will mean that there has been a breach of section 170DE(2) of the Act. However, given the alternative statements of the law stated by von Doussa J in Leddicoat and Ryan J in Jones, I do not think that I am necessarily bound by the judgment of Marshall J in Hockey v Multiskip. I disagree with the statement of law by Marshall J with great reluctance and with the greatest respect to his Honour. However, in my view, the law has been accurately summarised by Millane JR in the passage I have quoted above. The passage is also consistent, in my opinion, with the approach of the High Court in Byrne & Frew v Australian Airlines.
As stated by von Doussa J in Fryar, section 170DE(2) should be interpreted as a general prescription, making unlawful terminations which are harsh, unjust or unreasonable. To the extent that it is sensible to consider the procedural and substantive issues relating to a termination of employment separately, procedural defects may, but not must, lead to a finding that the termination of employment is harsh, unjust or unreasonable, as held by the High Court in Byrne & Frew v Australian Airlines. As stated by von Doussa J in Leddicoat, an objective assessment of the employer's conduct in relation to all the circumstances of the individual case of the applicant is required. Further, as stated by Sheppard and Heery JJ in Bostik Australia Pty Ltd v Gorgevski, no redefinition or paraphrase of the expression "harsh, unjust or unreasonable" is desirable. The words are, as their Honours said in that judgment, "ordinary, non-technical words which are intended to apply to an infinite variety of situations where employment is terminated . . . the Court must decide whether the decision of the employer to dismiss was, viewed objectively, harsh, unjust or unreasonable. Relevant to this are the circumstances which led to the decision to dismiss and also the effect of that decision on the employer. Any harsh effect on the individual employee is clearly relevant but, of course, not conclusive."
It would, in my view, be an erroneous approach in a redundancy case to say that, to ensure that a termination is not characterised as harsh, unjust or unreasonable, there is a predetermined checklist of factors which the employer must satisfy. Rather, it is a question of looking at all of the circumstances of the case to see whether the termination has been harsh, unjust or unreasonable. That is not to say that the consideration of the factors referred to by Millane JR in Philips v Gaze will not be of assistance; it merely means that the objective review of the decision to terminate employment is not constrained by a checklist not present in the legislation.
In my respectful opinion, Lee J in Aitken v CMETSWUof Australia (1995) 63 IR 1 at page 6 gave carefully chosen words when he said that "a genuine redundancy which obliges an employer to select the employee whose services are to be terminated by reason of that redundancy may, nonetheless, result in the termination being harsh, unjust or unreasonable if the selection is not fairly made according to established criteria" (emphasis added). His Honour cited, in this context, Corkey v General Motors Holden Ltd (1986) 53 SAIR 531 at 538; Wynns Wine Growers Pty Ltd v Foster (1986) 16 IR 381 at 384; and Quality Bakers of Australia Ltd v Goulding (1995) 60 IR 327.
Further on page 6 his Honour said that "it is well known that the circumstances and manner of termination of an employee's services can affect an employee's self-esteem and confidence, and impact adversely on the employee's ability to secure further employment. It is, therefore, considered to be in the public interest to ensure that employees whose services are terminated are treated in a fair and reasonable manner, enabling them to retain confidence in their self-worth and reducing the prospect that they will have cause to rely on relief payments from public revenue".
His Honour also pointed out at page 7 that in some cases the consequences of emotional stress and financial embarrassment are an unavoidable result of the termination of employment and, if the termination is effected in compliance with the requirements of the Act, such consequences by themselves will not make an otherwise proper termination harsh, unjust or unreasonable.
His Honour concluded that the question in that case (one of redundancy) is "whether the employer gave due regard to all reasonable and fair considerations the employee was entitled to expect as part of the employer/employee relationship that existed between them prior to termination of the employee's services. That is to say, acting fairly and having due regard for the interests of the employee, did the employer do that which could be reasonably expected of it in the circumstances to avoid the termination operating harshly, unjustly or unreasonably?".
With respect to the question of unreasonableness, his Honour quoted Jenkinson J in Gregory v Philip Morris (1988) 24 IR 397 at 398, where his Honour said that "the question of whether termination was unreasonable was one of fact". "This question requires a determination, by reference to moral values and prudential considerations current in the community of what the tribunal of fact thinks a reasonable employer in the circumstances would have decided to do at the time when the respondent terminated the appellant's employment."
THE REDUNDANCY PAYMENT ISSUE
Mr Goldblatt submitted that one of the factors to take into account in assessing whether there had been a contravention of section 170DE(2) of the Act was the amount of the redundancy payment that the respondent paid to Mr Powers upon termination. Exhibit 6 was Mr Powers' statement of termination pay which was given to him on 14 September 1995. This set out the date of commencement of employment with WAMES as 13 July 1987 and the date of termination as 15 September 1995. It stated Mr Powers' date of birth of 10 January 1944 and his gross salary of $55,000 per annum. The termination pay was comprised of a post-days calculation (316 hours post), unused annual leave, annual leave loading, long service leave and redundancy. With respect to the redundancy, Mr Powers was paid one month in lieu of notice, an additional 13 weeks' pay, and 16 weeks' redundancy, two weeks for each year of service. This comprised a total payment of $43,694.85. In addition, Mr Powers was entitled to the benefit of a total amount immediately payable of $49,789.72 from the ANI Executive Superannuation Fund and a total amount to be preserved in accordance with government legislation and/or governing rules of $7,586.67. This was a total vested superannuation benefit entitlement of $57,376.39.
Of the total amount of the termination pay set out above, the respondent stated that the redundancy payment comprised 29 weeks' pay, there was one month's pay in lieu of notice which together totalled $32,964.74; there was $11,328.98 gross for annual leave, $1,982.57 for annual leave loading and $11,017.80 for accrued pro rata long service leave.
The respondent asserted that the one month's notice was provided according to the contract of employment of the applicant. The applicant stated that there was no such term in the contract of employment. This factual issue will be considered later.
Essentially, therefore, the respondent submitted that the total redundancy payment as set out above was a factor which ought to be taken into account in assessing whether there was a breach of section 170DE(2) of the Act.
In making this submission, the respondent was faced with some observations contrary to the argument of Beazley J in her Honour's judgment in Quality Bakers. At page 339, her Honour referred to a submission by counsel for Quality Bakers that even if the termination of Mr Goulding's employment might otherwise be considered to have been harsh, unjust or unreasonable, the 26 week redundancy payment in that case overcame any unfair effect of the dismissal. Her Honour stated that the contention "was that the amount of the payout was such that there was no contravention of the section. I do not agree. If the submission was correct, it would mean that an employer could escape the consequences of unlawful conduct constituted by a contravention of section 170EA by the payment of money. This would have the effect of undermining, if not rendering nugatory, the intention of the Act that reinstatement is to be the primary remedy for unlawful conduct".
Mr Goldblatt submitted that her Honour's observations were incorrect in so far as the amount of the redundancy payment ought to be taken into account in assessing whether there was a contravention of section 170DE(2) of the Act, rather than as being an attempt to buy one's way out of what was already a contravention.
Mr Goldblatt submitted that I could decline to follow the judgment of Beazley J because there was authority from other judges of the Court which indicated that the extent of a redundancy package could properly be taken into account in assessing whether there has been a breach of section 170DE(2). Certainly, von Doussa J both in the Leddicoat and Fryar decisions, cited above, has held that an inadequate redundancy payment can, of itself, constitute a reason for finding a contravention of section 170DE(2). The corollary of this suggests that a
generous redundancy payment is something which can be taken into account, in a positive sense on behalf of an employer, in determining whether a contravention has occurred. Millane JR in Phillips v Gaze, seemed to take a similar approach.
In Fryar, von Doussa J explained the purpose of severance payment and money paid in lieu of notice in the following way. At page 20, his Honour stated that the distinction between the nature and purpose of a period of notice or payment in lieu, and a severance payment is reflected in Articles 11 and 12 of the Termination of Employment Convention, which is Schedule 10 to the Act. His Honour stated that a period of notice is to give an employee the opportunity to adjust to the change in circumstances which is to occur, and to seek other employment (page 20). His Honour said that "a severance payment, however, is intended to provide a payment as compensation for the loss of non-transferable credits and entitlements that have been built up through length of service such as sick leave and long service leave, and for inconvenience and hardship caused by the termination of employment through no fault of the employee: Termination, Change and Redundancy case (1984) 8 IR 34 at 62, 73. The inconvenience and hardship includes the disruption to an employee's routine and social contacts, and the competitive disability to long-term employees arising from opportunities foregone in the continuous service of the employer: Food Preservers' Union of Australia v Watty Pict Ltd (1975) 172 CAR 227". (pages 20 - 21).
In Phillips v Gaze, Millane JR quoted from a portion of this passage of the judgment in Fryar, and stated that "from his Honour's description of the matters
for which severance pay is intended to provide, it can be seen that some, if not all of these matters, would be relevant to circumstances for consideration when determining both the harsh effects, if any, of a redundancy, and the extent to which the employer had acted to minimise or avert these effects" (page 5). Millane JR at page 4 of her judgment said that "the failure to take steps to minimise or avert the harsh effects of the termination of the employee, whether those steps are by way of payment of a redundancy sum, an offer to re-train the employee, an offer of alternative employment, or counselling may be characterised as a harsh termination. Section 170DE(2) of the Act extends the protection already available to some employees by reason of the Termination, Change and Redundancy test cases to all employees covered by the provisions of the Act. It does so on the basis that it makes invalid an otherwise valid reason if for any circumstance the termination is harsh, unjust or unreasonable".
In my opinion, the authorities of Leddicoat, Fryar and Phillips indicate that one can take into account the extent of a redundancy payment in determining whether there has been a contravention of section 170DE(2). It may be, of course, that in some cases the other factors relating to a termination of employment may be such that, despite a generous termination payment, there will be contravention of the Act.
In this case, the severance payment component of the termination payment was 29 weeks' pay. This was calculated at the rate of 2 weeks' pay for every year's service, plus an additional 13 weeks. In my opinion, such a severance payment was reasonable, having regard for the factors set out in Fryar, Leddicoat and Phillips.
THE FAILURE TO GIVE NOTICE AND/OR CONSULT
As stated earlier, there was no warning whatsoever to Mr Powers that his employment was in jeopardy. This was his state of knowledge up to 14 September 1995. As has been set out above, in some period earlier, Mr Williams made a decision to make redundant Mr Powers' position, amalgamate it with the position of Ms Davis, and employ somebody else to take on the amalgamated position. Mr Powers was made redundant because Mr Williams did not think that he could fulfil the joint functions of the amalgamated position and there was no other alternative position available for Mr Powers within the respondent's organisation.
As has been characterised earlier, the termination of Mr Powers' employment was for the joint reasons of redundancy and Mr Powers' perceived lack of capacity and qualifications to take on the amalgamated position. The latter reason for termination was never put to or discussed with Mr Powers. Mr Williams made an assessment that Mr Powers was not up to the amalgamated position and, on this basis, made the decision to terminate his employment.
A major reason for consultation generally being required is that the employee may be able to suggest something to the employer which will save their employment. To some extent, this was not possible in this case. This was because Mr Williams required the person in the amalgamated position to have a qualification which Mr Powers did not have.
A second reason given for the lack of warning or consultation with Mr Powers was that Mr Williams said that the respondent feared that Mr Powers could do damage to the computer and accounts systems of the respondent if he was minded to do so, once warned of his impending or possible termination. Mr Williams made such an assessment on some suggested character flaws of Mr Powers. It was suggested that he had exhibited some excitable and emotional behaviour in the past when faced with stressful circumstances. However, in general terms, Mr Powers must be taken to have been a loyal and hardworking employee. He had worked with the respondent or associated companies for a period of eight years, and had received promotions and bonuses in the past.
During the course of his closing submissions, I asked Mr Goldblatt whether if, during the process of making the decision to terminate Mr Powers' employment, Mr Williams' thought process had been put to Mr Powers, would he have "gone off and wrecked the system". Mr Goldblatt said that whilst this was difficult, "I would say the probabilities are against it . . . that he would go off in those circumstances" (transcript 264). On the evidence, I think this concession by Mr Goldblatt was fairly and properly made. I think it unlikely that Mr Powers would have done anything to harm the respondent, if he had been warned and consulted whilst the decision-making process was taking place. Once a decision was made to terminate, then one can more readily understand the reason for a payment in lieu of notice, rather than working out a period of notice, from the respondent's point of view. However, if one has been given some warning and consultation prior to a decision being made to terminate employment, this can assist in the understanding of the reasons for termination, the preservation of the self-worth of the employee and the likelihood that the employee will be able to be re-employed sooner, rather than later: see Smith (per von Doussa J), in the paragraphs quoted earlier and Aitken at page 6.
In my opinion, there was no valid reason for the failure to warn or consult Mr Powers about the restructuring of his position and the possibility that he may become redundant. Further, in so far as it was suggested that Mr Powers lacked the capacity to work in the amalgamated position, in my opinion, it was only fair that this be put to Mr Powers and that he be given the opportunity to have input into Mr Williams' decision-making process.
Mr Goldblatt described such factors as being "emotional" in his closing submissions, although he conceded such factors had a role to play in assessing whether the termination of employment was harsh, unjust or unreasonable. This concession was rightly made, given, for example, the observations by Lee J in Aitken and von Doussa J in Smith, cited above.
SECTION 170DE(2) - THE FACTORS AND CONCLUSION
As stated earlier, as a matter of law, I think that a lack of warning and consultation about an impending redundancy is a factor and an important factor to be taken into account in assessing whether the termination of employment based, in whole or in part, on redundancy has been harsh, unjust or unreasonable.
From my consideration of the cases referred to earlier in this judgment, there are a number of other relevant factors including the extent of any termination package paid, attempts to find alternative employment within the organisation, where appropriate, assistance to find other work post-termination, including the provision of references and employment opportunities (eg, contacts) and the provision of counselling or other psychological assistance.
What one must do, in my opinion, is to assess the entirety of the facts in any individual case and determine whether, objectively, the termination has been harsh, unjust or unreasonable. To some extent, this will involve a value judgment by the judicial officer hearing the case, as acknowledged by Jenkinson J in Gregory.
In my opinion, the factors militating against the termination of employment in this case being harsh, unjust or unreasonable were the otherwise valid reason for the termination, the extent of the redundancy payment and the attempt by Mr Williams to see if an alternative position within the corporate structure of the respondent was available; as, against this, there was no warning or consultation, no references provided, no counselling or other emotional assistance, and no attempt by the respondent to provide Mr Powers with links to future employment opportunities. Also, Mr Powers' treatment was "worse" than other employees who were made redundant like Mr Butterworth, and also Marthia Viddicombe, who worked in Mr Powers' section and who received notice. Further, whilst I accept that the way in which Mr Williams affected the decision to terminate, in the manner of his meeting with Mr Powers on 14 September 1995, was matter of fact and to the point and that, as Mr Goldblatt submitted, there is no pleasant way of telling a person that their employment has ended, I do regard the way in which Mr Powers was asked to vacate the respondent's premises and return the company car as discourteous. In my opinion, there was no need for this, given Mr Powers' previous years of employment and seniority. I should mention, however, that this does not, in this case, mean the termination was contrary to the Act.
On balance, in my opinion, due to the factors mentioned, the termination of employment of Mr Powers was harsh, unjust and/or unreasonable.
REMEDY
Although Mr Powers conceded in his evidence that it would be difficult for him to return to the employment of the respondent, the claim for reinstatement was not abandoned on his behalf. Mr Goldblatt submitted that reinstatement was impracticable in all the circumstances of the case. I accept this submission. In my opinion, reinstatement would be impracticable, given that I have found that the amalgamation of positions was genuine, Mr Powers could not fill the amalgamated position and there was no realistic alternative employment for Mr Powers with the respondent, at least on the same terms and conditions on which he occupied his former position.
Section 170EE(2) of the Act provides that if the Court thinks, in respect of a contravention of a provision of Division III of Part VIA, constituted by the termination of an employee, that the reinstatement of the employee is impracticable, the Court may, if the Court considers it appropriate in all the circumstances of the case, make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate. Section 170EE(3) provides that in working out the amount of compensation, for the purposes of subsection (2) the Court is to have regard for the remuneration that the employee would have received, or would have been likely to have received, if the employer had not terminated the employment, but provides that the amount of compensation must not exceed the amount of remuneration that would have been received by the employee in respect of the period of six months that immediately followed the day on which the termination took effect, if the employer had not terminated the employment and the employee had continued to receive remuneration in respect of the employment at the rate at which they received remuneration immediately before the termination took effect.
With respect to non-award employees, there is a prescribed amount set by sections 170EE(3)(b) and 170EE(4), which acts as a cap on the amount of compensation that can be ordered.
The question of whether and how much compensation to award is clearly discretionary.
Lee J, in considering the question of compensation in Aitken, said that "one must consider the detriment occasioned to the employee by the employer's contravention of the Act, and the extent to which it is reasonable to compensate the employee for such consequences" (page 9).
Mr Goldblatt submitted that it would not be appropriate to award any compensation in the circumstances of this case. This was because, in his submission, if a contravention of section 170DE(2) was found, it would have been due to what he described as procedural issues; and if there had been full procedural fairness, this would not have made any difference to whether Mr Powers' employment was terminated, Mr Powers was paid a reasonable amount by way of redundancy package, and Mr Powers has subsequently become employed in positions of similar financial reward.
In my opinion, one can take into account the amount of a redundancy payment in assessing the issue of compensation; see, for example, Beazley J in Quality Bakers at page 339, and Chancellor JR in Hamilton v Australian Guarantee Corporation Ltd, unreported, IRCA 383/95, 18 August 1995, page 20 and May v Lilyvale Hotel Pty Ltd, unreported, IRCA 628/95, Wilcox CJ, page 14. I also agree that one must take into account the economic effects of any subsequent employment obtained by Mr Powers.
Fortunately, given the way in which his employment was terminated, Mr Powers quickly set about trying to find alternative employment. A large bundle of job advertisements and applications were tendered as Exhibit 8. Between 14 September 1995 and 27 December 1995, Mr Powers was employed by Sunland Ltd as a bookkeeper. Mr Powers was employed with Sunland for a period of 10 weeks, and received a gross payment of $8,169. The employment with Sunland Ltd ceased because Mr Powers obtained a better paid position with Peak Hill Mine as an administration supervisor. This is a fly-in, fly-out position. Peak Hill Mine is about 600 km from Perth, in a northerly direction. Mr Powers explained that Peak Hill Mine is a resource that North Limited bought into in 1988. Mr Powers anticipated that the mine would continue until about October 1997.
Mr Powers explained that he has a very diverse range of duties at the Peak Hill Mine. There are only two people on at the office at any particular time. Therefore, the people at the office do everything from answering the phones, looking after purchasing, coding invoices, unloading trucks, unpacking stores, cleaning out the store and, at the end of the month, doing statistical monthly reports. Mr Powers is also in charge of the workers' camp which has about 125 residents. Mr Powers is responsible for making sure that the camp is running well, that caterers are performing, and the like. Mr Powers explained that he works for two weeks (14 days) from 6 o'clock in the morning until 6 o'clock at night, and other hours if required. There is then a 7 day break but much of the first and last days of the 7 day break are spent travelling. Mr Powers has to get taxi fares to and from the airport in Perth which cost about $30 one way. Mr Powers said that his current remuneration package with Peak Hill Mine does not provide for a company car, in contradistinction with his employment with the respondent, where he was provided with a car and all running expenses of the car. Since leaving the employment of the respondent, Mr Powers purchased a motor vehicle, a 1990 Holden Apollo, for $15,000.
The employment with Peak Hill provides for a salary of $46,500 per annum, plus a site allowance of $19,568. This amount totals $66,068. Mr Powers is also entitled to an 11 per cent superannuation contribution from his current employer. There is also a clothing allowance, free accommodation on site, and free food on site.
After a June 1995 salary review with the respondent, Mr Powers' salary with the respondent was $55,000 per annum. In addition to that, he had the use of a company car. Mr Powers explained that WAMES allowed the amount of $6,000 in budgeting, for running costs and repairs for each company vehicle. In addition to this, of course, there was the cost of the insurance of such a motor vehicle which was attributed to a separate account by WAMES.
When employed by the respondent, Mr Powers contributed 5 per cent to a superannuation fund and the employer contributed between 10.5 and 11 per cent of his salary.
Mr Powers' telephone accounts were also paid by the respondent, which were valued at about $60 to $120 per account. There was also a mobile telephone which was of benefit to Mr Powers to the extent of about $35 every month. Therefore there was about $1,200 per year in telephone expenses. Mr Powers said in evidence he no longer has a mobile telephone.
Mr Powers explained that there was a change to his lifestyle of some significance from his previous employment with the respondent to that of Peak Hill Mine. He explained that he spends probably a third of his work time outside in hot, dusty conditions and he believed that in winter time it would get very cold at the mine. He explained that there was a strong wind there. He explained that he was now doing a lot of manual work. He was away from home, working an average of 84 hours a week when on site and away from family, friends, etc. The nearest town is Meekatharra which is 130 km away. Therefore, he was virtually stuck on site. There is a wet mess, gym, swimming pool and television on site. The camp rules are that there is to be no noise after 10 o'clock at night, and all employees are breathalysed quite regularly.
In addition to the other benefits set out above, Mr Powers has the benefit of an employee share scheme and medical benefits from his current employment.
Mr Goldblatt submitted that it was a "toss-up" as to whether Mr Powers was receiving better remuneration with his previous employment with the respondent, or his current employment but, given the fact that he was paid by way of notice and severance payment a total of 33 weeks' salary by the respondent, Mr Powers has actually had a financial windfall by finding such remunerative employment relatively close to the date of his termination.
In his closing submissions, Mr Mackay drew my attention to some evidence given by Mr Buckland during the course of cross-examination that the budgeted figure for Mr Powers' package with the respondent was $80,000 to $85,000. However, I do not regard that evidence as a considered view by Mr Buckland on the worth of Mr Powers' salary package and place little weight on it.
However, Mr Mackay's submission was that if the package was worth $80,000 to $85,000, Mr Powers was currently suffering an annual loss of $14,000 to $19,000 between that amount and his current employment. Mr Mackay suggested that, given that, and "in view of the applicant's age and in view of all the circumstances of the case, then the Court might properly look in this case for awarding compensation towards the maximum level".
However, Mr Goldblatt submitted that the comparison between the $66,000 figure and $80,000 to $85,000 was not a proper comparison. This was because the $80,000 to $85,000 figure included the total package - superannuation, long service leave, etc. The $66,000 figure from the current employment is simply the cash component. Mr Goldblatt submitted, and in my opinion, correctly, that one would need to look at the other benefits from the current employment, including medical benefits, employee share scheme, superannuation, etc, and compare the remuneration packages.
In the end, I am not satisfied that it has been proved that Mr Powers has suffered any economic loss as a result of the termination of his employment.
The question then arises whether I should order any compensation at all.
If, due to the amount of the redundancy package that Mr Powers has been paid, together with the fortunate fact that Mr Powers found alternative remunerative employment, no compensation were to be awarded, this could be regarded as the Court condoning, or at least not condemning, the actions of the respondent in terminating Mr Powers' employment in contravention of the Act. There would be the danger of a perception of a wealthy respondent in effect buying its way out of a contravention of the Act.
Further, Lee J, in Aitken, said at page 9 that "it is also appropriate to keep in mind that the purpose of the Act in providing for compensation to be paid to an employee for an employer's failure to abide by the terms of the Act is not only to redress a wrong done to the employee, but, in the public interest, to instil greater awareness and adherence to, the provisions of the Act. A measure of compensation which addresses the consequences caused by conduct that has breached the Act assists to meet that purpose".
Given this, and the fact that although the applicant has found alternative remunerative employment, it involves lengthy periods away from his family, work in difficult conditions, and a lessening of status, I think it appropriate to award Mr Powers the sum of $1,000 in compensation. I will order that this amount be paid to Mr Powers within 7 days of the date of the order made.
SECTION 170DC
The applicant did not rely on section 170DC of the Act. This provides, relevantly, that an employer must terminate an employee's employment for reasons related to the employee's conduct or performance unless the employee has been given the opportunity to defend himself against the allegations made. As found earlier, one of the reasons that Mr Williams decided to terminate Mr Powers' employment was that, based on his hitherto performance, Mr Williams was of the view that he would not be able to perform the functions of the amalgamated position. Therefore, Mr Powers' employment was terminated for a reason related to his conduct or performance. Mr Powers was not given an opportunity to defend himself against the allegation made. Therefore, although not relied on by the applicant and therefore not responded to by the respondent, it appears that there was a breach of section 170DC of the Act. However, in light of the considerations just mentioned, and the fact that I have found a contravention of section 170DE(2), I need not consider any further this issue or the consequences that would have flowed from a contravention of section 170DC.
THE NOTICE ISSUE
Section 170DB sets out a statutory minimum period of notice for employees covered by the Act. A table set out in section 170DB(2) states that for an employee with more than five years' continuous service with an employer, a period of notice of at least four weeks is appropriate. The table also states that the period of notice is increased by one week if the employee is over 45 years old and has completed at least two years' continuous service with the employer. However, Mr Powers' employment with the respondent, as opposed to other corporate entities the shares in which were subsequently purchased by the respondent, was from only February 1995 to September 1995. A period of continuous employment of not more than one year, according to the table, requires a period of statutory notice of at least one week, which will be increased to two weeks, given Mr Powers' age.
As stated earlier, the respondent did not give the applicant any notice but paid him, in effect, four weeks' salary in lieu of notice. Therefore, there was no contravention of section 170DB of the Act, because of the payment to Mr Powers of an amount of compensation instead of notice, consistent with section 170DB(4) of the Act.
However, the applicant contended that his contract of employment contained an implied term that he be provided with reasonable notice of termination, having regard to his age, position with the respondent, professional qualifications, and length of time worked for the respondent.
The applicant's Summary of Facts and Particulars of Claim in the Accrued Jurisdiction contained an allegation that reasonable notice in all the circumstances was 18 months. This document was prepared by the applicant's solicitors and was not settled by Mr Mackay or other counsel.
Mr Goldblatt, in his closing submission, pointed to the fact that there had been no evidence at the trial of standard industry practice in terms of length of notice. In his closing submission, Mr Mackay conceded that and said that neither he nor his instructing solicitors were "able to find anything which supports the proposition of 18 months". In light of this, I asked Mr Mackay why 18 months was suggested in the summary of facts. Mr Mackay was unable to answer this question, but confirmed that neither he nor other counsel had prepared the summary of facts. I made the observation to Mr Mackay that it was surprising that the solicitors should include a specific period of time and were not able to give Mr Mackay any instructions on where they got that from. Mr Mackay was frank enough to say that "Well, sir, my answer to that observation is 'yes'."
It may well be a matter of concern on a professional conduct level that solicitors prepare a summary of facts which suggest a reasonable period of notice in the circumstances of the case was 18 months, when the solicitors are unable to provide to counsel with any instructions on where the 18 months' time period suggested comes from.
Be that as it may, Mr Mackay left the issue on the basis that there was an implied term that reasonable notice would be given, with the Court to determine what reasonable notice was in the circumstances of this case.
The respondent's position, as put by Mr Goldblatt in closing, was that there was no need to imply a term of notice into the contract because the contract of employment contained an express term of one month's notice. Mr Goldblatt's argument ran as follows. Initially, Mr Powers' employment with WAMES was governed by a document dated 21 July 1987, which stated that "a one month's termination notice will be required by either party". When Mr Powers became employed by the respondent, there was a letter to Mr Powers dated 6 March 1995 from the respondent which, by its terms, served to "confirm your continuing employment within the ANI group, following the acquisition of the remaining 50 per cent issued share capital in WA Mining Engineering Services Pty Ltd, and its subsequent integration with ANI". This document, signed by Mr Williams, did not mention notice on termination. The letter covered such matters as Mr Powers' position, reporting relationship, salary, company vehicle, leave entitlement, superannuation and secrecy agreement.
By memorandum from Mr Powers to Mr Buckland dated 12 April 1995, Mr Powers mentioned some aspects of concern in the letter he had received from Mr Williams. This was because he understood that in the new employment arrangement, his terms and conditions would be no less favourable than those that he had had prior to his employment with the respondent. In the memorandum, Mr Powers made reference to his telephone accounts, the transfer of long service leave, modification of the secrecy agreement, and salary level, given previous bonuses paid and the suggestion in his memorandum that it was "felt that the senior staff were not being paid market value". These issues were subsequently resolved. Therefore, Mr Powers did not address the issue of notice on termination in the matters raised by him subsequent to the change in his employment. This is probably not surprising, given that Mr Powers was apparently addressing his attention to the terms and conditions of his ongoing employment, rather than what would occur if his employment was terminated.
Mr Williams' evidence on this issue was that the letter dated 6 March 1995 only referred to changes in the employment contract. He said that he had the original contract in front of him when he drafted the letter dated 6 March 1995. In cross-examination, Mr Williams agreed that the letter dated 6 March 1995 was supplementary to the original contract of employment with WAMES.
Mr Goldblatt submitted that the one month notice period, which was a term of the contract of employment between WAMES and Mr Powers, as evidenced by the document dated 21 July 1987, continued to apply to the contract of employment between the respondent and Mr Powers. This is because both the applicant and the respondent knew of the previous terms of employment between the applicant and WAMES, and either expressly or impliedly agreed to be bound by the terms of that employment, in so far as they were not altered by the new contractual arrangement between the applicant and respondent. Mr Goldblatt agreed with the suggestion that I put to him during his closing that his argument was that there was almost an incorporation by reference of the pre-existing terms of the contract of employment between WAMES and the applicant. Mr Goldblatt submitted that wherever you have a case where a company takes over another company by purchasing the business or the assets, and employees "come across", inevitably one will find that the employment will continue, by agreement, on the same or perhaps adjusted terms.
I think this is an accurate representation of what occurred in this case. It is clear that Mr Powers regarded himself as essentially being employed by the same employer because of his evidence about having given eight years of service to the respondent. The respondent also regarded Mr Powers this way, because the redundancy payment was worked out on the basis, in part, of 16 weeks' pay comprising two weeks pay for each of eight years of service.
If one took the view that the employment between the applicant and the respondent started afresh and only on the terms specifically agreed after February 1995, then one is dealing with an employee of some eight months' standing by the time of his termination, rather than eight years. In my opinion, this would be an unrealistic assessment of the situation.
Mr Mackay submitted that if there was an express term dealing with the period of notice required, then that would mean that his implied term argument could not succeed. In his closing submission, Mr Mackay said that, having regard to the one month termination period in exhibit one, the applicant's case had to stand or fall on a further implied term which was that the express notice period alters with, or according to, the length of time the applicant is employed by the respondent. By way of analogy, Mr Mackay referred to the $32,000 per annum salary as set out in the letter dated 21 July 1987, which was obviously varied on an ongoing basis during the period of Mr Powers' employment with WAMES or the respondent. Mr Mackay submitted that it was an implied term that the salary would change, and that it was also an implied term, to give business efficacy to the contract of employment, that the period of notice would also change. Mr Mackay said that he had been unable to find any authority to support such a submission.
In my opinion, whilst this is a clever argument, it does not succeed. The variation of salary was expressly agreed between the parties on 21 July 1987, and varied by agreement from time to time. The notice period was not. It was set as a one month period of notice, expressly, by the contract dated 21 July 1987 and was, in my opinion, incorporated into the contract of employment between the applicant and respondent. I note that in his closing submission, Mr Mackay said that, "so far as the applicant is concerned, it is really a case of the present respondent having assumed the rights and liabilities. It is almost an assignment of the contract of employment from WAMES to the respondent". If this is the case, in my opinion, the express period of one month's notice is part of the contract of employment between the applicant and the respondent, and there is no room to imply a reasonable notice term into the contract.
Some of the issues relating to "Reasonable Notice - The Common Law Remedy for a Dismissed Employee - What Is Reasonable Notice and When Is It Required" are discussed in an article of this title by Roderic Crow, in the Law Society Journal, November 1994, page 48. At page 48, Mr Crow states that express terms for periods of notice made at the commencement of employment may not be in force when the employment terminates. He points to the example of an employee continuously employed by one employer who may be promoted or transferred to a job which is so fundamentally different as to bring about a variation of the original contract or its termination or replacement by a new contract. He states that whilst the original contract might have contained an express provision for the notice period of termination, the new or varied contract may not. He cites, as an example, the case of Quinn v Jack Chia (Australia) Ltd (1992) 1 VR 567. As Mr Crow states, were it otherwise, a junior clerk who rose to be managing director might only be entitled to the week's notice required under the first contract of employment. As Mr Crow states, where there is no express provision for the period of notice of termination, as a general rule the common law implies a term requiring the giving of reasonable notice. Mr Crow also states that "evidence is admissible to establish that an express term of a contract dealing with termination was intended by the parties to be comprehensive and exhaustive, and that no term requiring the giving of reasonable notice should be implied". He cites as an example New South Wales Cancer Council v Sarfati (1992) 28 NSWLR 68.
In this case, in my opinion, the evidence has established that the issue of a change in the agreed period of one month's notice between WAMES and the applicant was not of concern to either the applicant or the respondent. There were other aspects of the applicant's contracts of employment that both he and the respondent were concerned about. Notice upon termination was not one of them.
In all of the circumstances, I do not think that the situation here is other than that there was an express term of the contract of employment dealing with the question of termination which was still applicable to the situation of Mr Powers' employment with the respondent when terminated on 14 September 1995.
Therefore, I need not consider what a reasonable period of notice would have been if there had been no express agreement to this effect. Mr Crow contains a summary of some of the relevant factors in his article.
Therefore, the claim of the applicant in the accrued jurisdiction of the Court will be dismissed.
ORDERS
It is declared that the respondent terminated the employment of the applicant in contravention of section 170DE of the Industrial Relations Act 1988 (C'th).
The respondent do pay compensation to the applicant in the sum of $1,000 within 7 days.
The applicant's claim in the associated jurisdiction of the Court is dismissed.
I certify that this and the preceding 47 pages are a true copy of the reasons for decision of Judicial Registrar Ritter as recorded in the transcript and revised by the Judicial Registrar.
Associate :
Dated : 22 August 1996
APPEARANCES
Counsel for the Applicant: Mr A Mackay
Solicitors for the Applicant: Bruce Duncan Russell and Associates
Counsel for the Respondent: Mr M Goldblatt
Solicitors for the Respondent: Parker and Parker
Dates of Hearing : 18 and 19 March, 19 April 1996
Date of Judgment : 22 August 1996
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