Reid v World Travel Headquarters Pty Ltd
[1996] IRCA 486
•04 October 1996
DECISION NO: 486/96
C A T C H W O R D S
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - VALID REASON - whether REDUNDANCY based on OPERATIONAL REQUIREMENTS of the respondent - whether respondent discharged onus of showing excess of labour and the application of proper criteria for selection of particular employee
Industrial Relations Act 1988 ss.170DE(1), 170DE(2), 170EE(2), 170EE(3)
CASES: The State of Victoria & Ors v The Commonwealth of Australia
(unreported, High Court of Australia, No. FC 96/024, 4 September
1996)
Quality Bakers of Australia v Goulding (1995) 60 IR 327
Kenefick v Australian Submarine Corporation Pty Ltd (No2)
(1996) 65 IR 366
Selvachandran v Peteron Plastics Pty Ltd (1995-96) 62 IR 371
Burke v Reander Pty Ltd (unreported, Millane JR, No. VI 6336 of
1995, 17 September 1996)
GREGORY JOHN REID -v- WORLD TRAVEL HEADQUARTERS PTY LTD (A.C.N. 009 669 158)
No. VI 1050 of 1996
Before: Judicial Registrar Millane
Place: Melbourne
Date: 4 October 1996
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1050 of 1996
B E T W E E N :
GREGORY JOHN REID
Applicant
A N D
WORLD TRAVEL HEADQUARTERS PTY LTD
(A.C.N. 009 669 158)
Respondent
MINUTES OF ORDERS
Judicial Registrar Millane 4 October 1996
THE COURT DECLARES THAT:
The termination of the applicant’s employment by the respondent on 3 January 1996 contravened Division III Part VIA of the Industrial Relations Act 1988.
AND THE COURT ORDERS THAT within 21 days of the date of making these Orders:
The respondent pay to the applicant the sum of $8461.54 compensation less any amount payable to the Commissioner of Taxation pursuant to the Income Tax Assessment Act 1936 and actually paid.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1050 of 1996
B E T W E E N :
GREGORY JOHN REID
Applicant
A N D
WORLD TRAVEL HEADQUARTERS PTY LTD
(A.C.N. 009 669 158)
Respondent
Before: Judicial Registrar Millane
Place: Melbourne
Date: 4 October 1996
REASONS FOR JUDGMENT
By an application filed on 8 January 1996 the applicant, who was formerly the respondent’s Australian product manager between May 1991 and 3 January 1996, seeks compensation. He alleges that on 3 January 1996 the respondent terminated his employment in contravention of Division III Part VIA of the Industrial Relations Act 1988 (the Act).
As a preliminary matter the parties consented to an order that the title of the respondent be amended to read “World Travel Headquarters Pty Ltd (A.C.N. 009 669 158)”.
On its part the respondent defends the proceedings alleging that the termination of the applicant’s employment was brought about by a restructuring of the respondent’s business and, therefore, it was a termination based on the respondent’s operational requirements.
When the applicant first commenced his employment in 1991 he was in fact employed as a tour manager by the corporate entity referred to as Travel Marvel Australia Pty Ltd. By approximately June 1994 the business of Travel Marvel had been taken over by World Travel Headquarters Pty Ltd, which entity assumed all the liabilities of the former employer in respect to its employees. World Travel Headquarters is a subsidiary of a New Zealand public company referred to as the Helicopter Line and, at the time of the take over, the distribution of the business was such that up to 90% of its operations were conducted in New Zealand with the balance being conducted in Australia. The applicant’s role in Australia was to manage the Travel Marvel division of the respondent’s domestic tours division. The applicant’s territory covered Queensland, Tasmania and New South Wales; his duties being to organise itineraries for tours and locate and obtain bookings of hotels and other amenities.
Apart from the Travel Marvel division of its operations, World Travel Headquarters also operated tour divisions referred to as Swingaway World Holidays and Newmans Holidays. It was said by the respondent that by 1995 its travel operation in Australia had been constricted by competition causing a significant drop in profit and considerable losses in the three Australian divisions. From July 1995 the respondent alleges that it turned its attention to cost cutting and restructuring its Australian operation to make it more profitable. This led to the amalgamation of the three divisions under one management. Some of the steps taken to make the business more profitable included closing the accounting facilities operated in Sydney and terminating the services of fourteen employees in Sydney. The Melbourne accounting services were then utilised instead of the Sydney base. From approximately August 1995 the Swingaway booking system in Sydney was moved to Melbourne and the reservation office in Brisbane was closed terminating the employment of twenty-two staff.
Apart from the reduction in its operations and services, the respondent and the Helicopter Line also decided to sell the Swingaway division and this was done.
By the latter part of 1995 it was clearly the case that the returns in the various divisions of World Travel Headquarters were well down. At a management meeting held on 14 December 1995 the discussion turned to a proposed restructuring of the Australian operations, leading to a decision to make the applicant redundant, with his duties to be performed by another employee, Colin McLean, who was then responsible for the management of the New Zealand tour product.
There was no complaint concerning the applicant’s performance at any time. Indeed, in June 1995 the respondent confirmed an increase in the applicant’s salary from 4 January 1996. It was also acknowledged by the respondent that the applicant was an extremely efficient employee who, by the date of termination, had organised tours well beyond the date of termination.
The applicant appeared in person and it was apparent from both his evidence and the comments made from the bar table that as a result of the sudden and unheralded termination of his employment on 3 January 1996, he had suffered a great deal of personal hardship. Because of this he had some difficulty in accepting the respondent’s claim that his performance was not an issue when it came to a decision by the respondent to restructure and reduce its Australian operations.
THE TERMINATION
The decision to make twelve Travel Marvel staff redundant was taken in December 1994. It is also apparent from the evidence given at hearing that from the latter part of 1995 the respondent had already commenced secret negotiations with Australian Pacific Tours, another travel entity, to sell to it the Travel Marvel business. This transaction was completed by June 1996 with Australian Pacific Tours retaining only two of Travel Marvel’s staff. The staff retained did not include Colin McLean. However, at the date of the redundancies, which occurred on 2 and 3 January 1996, the existence of the negotiations for sale was not generally known and certainly was not known to the applicant.
By 22 December 1995 the respondent’s management decided to put into effect its restructuring plan and, it was said, that the decision to postpone informing staff that they were to be made redundant was made to allow them to enjoy the Christmas break. However, notwithstanding the alleged sentiment behind this decision, it is apparent from Exhibit R2 that the respondent was also motivated to delay the notification of the impending redundancies by considerations of “... outstanding projects, particularly in the areas of brochure production, lack of trained staff able to step in immediately to maintain service levels and consideration of staff leave arrangements, resulted in the adoption of 2 January 1996. Issues such as staff reaction/morale to the originally proposed date were also considered.” (see Exhibit R2)
The result of the delay in notifying staff was that they, including the applicant, returned from their Christmas vacation and on 2 and 3 January 1996 were given notice of immediate redundancy as well as receiving their financial entitlements and severance pay. Because the applicant was ill on 2 January 1996, he was not informed until 3 January 1996 and left his employment on the same day with some eleven weeks’ pay consisting of three weeks’ notice and eight weeks’ severance pay.
There was some problem with the extent of the payments made to the applicant and subsequent to the termination further payments were made. At hearing the applicant sought additional sums which were consented to and orders were made during the course of the hearing for the payment of these sums amounting to $1658.95.
Throughout his employment and particularly in 1995, the evidence shows that the applicant was encouraged in the view that his employment was secure and opportunities to develop his areas of work with the respondent were available. If there was any area of particular dispute between the parties it really came down to the applicant’s refusal to accept that Colin McLean, whose job was terminated with the sale of the respondent’s business in June 1996, was selected to remain and perform the applicant’s duties as well as his own.
The applicant also, quite appropriately, complained about the lack of notice and consultation in the termination process and, as a result, the harsh effect of the termination on him. However, the decision of the High Court of Australia in The State of Victoria & Ors v The Commonwealth of Australia (unreported, High Court of Australia, No. FC 96/024, 4 September 1996) handed down after the hearing of this case but before the handing down of these reasons for judgment, has invalidated section 170DE(2) of the Act and, as a consequence, employees are no longer able to rely on this provision to prove that an otherwise lawful termination was unlawful by reason of this provision of the Industrial Relations Act 1988.
VALID REASON
The evidence of the respondent concerning its restructuring and its allegation that its operational requirements brought about the redundancies was not seriously challenged by the applicant. One of his principal concerns was that there could be no redundancy under the applicable award provisions of the Travel Agencies Award 1989 because his duties were still required to be performed; albeit by someone else already performing other tour management duties. I am satisfied on the evidence that in this case there was a genuine redundancy situation where the applicant’s duties and those performed by another employee were amalgamated for the purpose of cutting cost (see Quality Bakers of Australia v Goulding (1995) 60 IR 327).
The respondent carries the burden of establishing that there was at termination a valid reason for the termination. Where there is a bona fide redundancy the onus of proof is not fully discharged unless the respondent also discharges its onus of showing that there was a valid reason for the selection of the applicant for termination from its pool of employees. This much is evident from the decision of the Full Court of the Industrial Relations Court of Australia in Kenefick v Australian Submarine Corporation Pty Ltd (No2) (1996) 65 IR 366 where the Court made the following observations:
“Section 170DE(1) is concerned with the termination of the employment of an individual employee. As was said in relation to s.170DC, the terminations in this case were for two reasons. Both were based on the operational requirements of the respondent. One reason was the need to reduce the workforce, the other was to retain some rather than other employees of the existing workforce. Without both steps, no individual would have been terminated. The decision to reduce the overall numbers of welders in the hull shop did not of itself lead to the termination of individual appellants, and the process of selection was only commenced after the decision to reduce overall numbers had been taken. Consequently, the respondent carried the onus of showing that there was a valid reason for the selection of each appellant.
This conclusion is consistent with the scheme of s.170DE and s.170EDA(1). The scheme of the sections provides for the employer to carry the onus on matters peculiarly within the knowledge of the employer, and for the employee to carry the onus on matters peculiarly within the knowledge of the employee. Thus, in the present case, the respondent made the decisions concerning the selection of each particular appellant, and determined the basis on which the selection was to be made. The respondent should justify those decisions. To cast on the employee the onus of showing that the basis of selection has been harsh, unjust or unreasonable would be inconsistent with the apparent intention that this legislation should accord an accessible and inexpensive means by which a dismissed employee can seek a remedy. That consideration derives particular force when it is remembered that often an individual employee will not know why he or she has been selected for retrenchment.”
Relying on the decision of the Full Court in Kenefick’s case, it is not enough for the respondent to come to Court and prove that there was a bona fide need to reduce its workforce when it has also engaged in a process of selecting employees for redundancy and retaining others to perform duties performed by those made redundant. In the present case it was agreed that prior to Colin McLean’s appointment to his position managing the respondent’s New Zealand tour product, the applicant had been considered qualified to perform McLean’s duties but the general manager had decided instead to appoint McLean directly to that position, even though McLean had apparently no experience in the running of the New Zealand product. It was asserted by the applicant that McLean was a close friend of the general manager and had previously worked with the general manager in earlier employment. The thrust of the applicant’s argument was that there was no apparent or reasonable basis for selecting McLean to continue in preference to the applicant who had the necessary qualifications. The general manager, who was not called to give evidence, was one of the people involved in the decision to make the applicant redundant and retain McLean’s services.
It is clear from the way in which the respondent ran its case that it did not fully appreciate the need for it to prove and justify the basis on which it made its selection. Indeed, there was no evidence given of what criteria was developed and applied to select the applicant; other than to assert that because McLean was then handling the larger part of its product in New Zealand, he was retained. Exhibit R1 only records that:
“Greg to be made redundant.
Colin to pick up until finished.”
Accordingly, I am not satisfied on the evidence that the respondent has discharged its burden of proof in regard to the reason for selecting the applicant for redundancy. As a result my finding is that the respondent contravened section 170DE(1) of the Act.
Another matter which caused me some concern in this proceeding was the failure of the respondent to call any evidence concerning the availability of alternative employment through any of its related corporate travel entities. The phrase “valid reason” is one understood in this Court to mean one that is sound, defensible or well founded (see Selvachandran v Peteron Plastics Pty Ltd (1995-96) 62 IR 371). Arguably a decision to terminate based on the operational requirements of the business may not be defensible or justified where there is a failure to consider or offer suitable and available alternative employment (see Burke v Reander Pty Ltd (unreported, Millane JR, No. VI 6336 of 1995, 17 September 1996)). In this case on the evidence given the respondent does not appear to have turned its mind to the responsibility it had for avoiding the consequences of its need to reduce staff numbers.
REMEDY
The circumstances of the sale of the Travel Marvel division of the business make reinstatement impracticable. The applicant only seeks compensation pursuant to ss 170EE(2) and (3) of the Act.
On the evidence the applicant lost an opportunity to remain employed with the respondent until mid 1996 running both the Australian tour product and the New Zealand product. He lost this opportunity because of the failure to create and apply appropriate selection criteria. He may also have lost the opportunity to be considered for employment with other corporate entities connected to the respondent if such opportunities existed. Taking into account the eleven weeks’ pay received for notice and severance pay, I have assessed the loss of these opportunities at a further two months’ pay; namely $8461.54.
MINUTES OF ORDERS
THE COURT DECLARES THAT:
The termination of the applicant’s employment by the respondent on 3 January 1996 contravened Division III Part VIA of the Industrial Relations Act 1988.
AND THE COURT ORDERS THAT within 21 days of the date of making these Orders:
The respondent pay to the applicant the sum of $8461.54 compensation less any amount payable to the Commissioner of Taxation pursuant to the Income Tax Assessment Act 1936 and actually paid.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
I certify that this and the preceding eight (8) pages are a true copy of the reasons for judgment of Judicial Registrar Millane.
Associate:
Dated: 4 October 1996
Applicant in person.
Solicitors for the Respondent: Mills Oakley
Counsel for the Respondent: Mr P. Riordan
Date of hearing: 16 & 17 July 1996
Date of judgment: 4 October 1996
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