Robert McIntosh v Recoil Pty Ltd
[1995] IRCA 81
•10 March 1995
CATCHWORDS
INDUSTRIAL LAW - Termination of employment - Employee not told his employment in jeopardy - Question of what regard is to be had to the procedures set out in Schedule 11 of Industrial Relations Act - Warnings given to an employee should, where practical, be given in writing - Lack of procedural fairness - Application for reinstatement and compensation.
Industrial Relations Act 1988, ss. 170CA(1), 170DC, 170DE, 170DE(2), 170EA, Schedule 11 (International Labour Organisation, Recommendation 166).
Nicolson v. Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233
Byrne & Frew v. Australian Airlines Ltd (1994) 52 IR 10
ROBERT McINTOSH v RECOIL PTY LTD
No. NI 837 of 1994
CORAM: PATCH JR
PLACE: SYDNEY
HEARING DATES: 16, 17, 28 FEBRUARY 1995
JUDGMENT DATE: 10 MARCH 1995
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY No. NI 837 OF 1994
BETWEEN: ROBERT McINTOSH
Applicant
AND: RECOIL PTY LTD
Respondent
CORAM: PATCH JR
PLACE: SYDNEY
HEARING DATES: 16, 17, 28 FEBRUARY 1995
JUDGMENT DATE: 10 MARCH 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
That the respondent pay the sum of $20,000 in compensation to the applicant, within 21 days of 10 March 1995.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Industrial Court Rules
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY No. NI 837 OF 1994
BETWEEN: ROBERT McINTOSH
Applicant
AND: RECOIL PTY LTD
Respondent
CORAM: PATCH JR
PLACE: SYDNEY
HEARING DATES: 16, 17, 28 FEBRUARY 1995
JUDGMENT DATE: 10 MARCH 1995
REASONS FOR JUDGMENT
This is an application under section 170EA of the Industrial Relations Act 1988 (“the Act”).
The applicant, Mr Robert McIntosh, seeks the following orders:
(a)An order declaring the respondent’s termination of his employment to have contravened Division 3 of Part VIA of the Act;
(b) An order requiring the respondent to reinstate him in employment;
(c) An order that the respondent pay him compensation;
(d)Such other order or orders as would put him in the same position (as nearly as can be done) as if his employment had not been terminated.
The applicant commenced work with the respondent on 21 March 1994. His employment was terminated on 8 September 1994. The application was filed on 22 September 1994.
The applicant had been employed by the respondent as the New South Wales/Queensland Sales Development Manager. Shortly before the commencement of his employment, he received a letter of engagement from the respondent, over the signature of Mr Paul Dowling, Commercial Director. That letter of engagement concentrated on what might be called the administrative aspects of the applicant’s employment. These included, for example, the title of his position, the location of his work, his salary, bonus, use of a motor vehicle, annual leave and so on.
However, when the applicant was first interviewed for the job, he was given a detailed job description. This was given to him by Mr Paul Green, from Archers Consulting, a firm which had been employed by the respondent to fill the position.
That document (Exhibit “H”) set out the specific duties of the position. It said:
“Specific duties include:
Dealing with major distributors and an existing client base (major distributors include Blackwoods and Repco).
Attending distributor exhibitions.
Attendance of trade shows
Involvement in the education of distributor staff in accepting product range.
Organising product demonstrations.
Attending to the preparation of quotations and preparation of proposals for specific client requirements.
Customer support, engaging in phone sales and product recommendations.
Attendance of sales meetings and seminars as required.
Assisting with training that the company is involved with through TAFE.”
The document went on to say:
“Reporting:
Reporting requirements will see you complete a monthly Board Report and weekly Activity Target Sheets and information regarding client calls achieved.”
Mr Paul Dowling, the Commercial Director of the respondent, and the person to whom the applicant was responsible to in the chain of management, gave evidence that, during the initial three day induction period in March 1994 when the applicant was in Melbourne, the applicant was told that the reporting requirements were an integral part of the job. I accept that the applicant was told that.
WAS THE WAY IN WHICH THE APPLICANT’S EMPLOYMENT TERMINATED A BREACH OF SECTION 170DC OF THE ACT?
In my opinion, the answer to the above question is “yes”.
Section 170DC of the Act is as follows:
“An employer must not terminate an employee’s employment for reasons related to the employee’s conduct or performance unless:
(a)the employee has been given the opportunity to defend himself or
herself against the allegations made; or
(b) the employer could not reasonably be expected to give the employee that opportunity.”
In Nicolson v Heaven and Earth Gallery Pty Limited (1994) 126 ALR 233 Wilcox CJ said, in respect of section 170DC of the Act:
“The paragraph does not require any particular formalities. But this does not mean that it is unimportant or capable of perfunctory satisfaction. Section 170DC carries into Australian labour law a fundamental component of the concept known to lawyers as “natural justice” or, more recently, “procedural fairness”. The relevant principle is that a person should not exercise legal power over another, to that person’s disadvantage and for a reason personal to him or her, without first affording the affected person an opportunity to present a case. The principle is well established in public administrative law. It was accepted in international labour law when Article 7 was inserted in the Termination of Employment Convention. Section 170DC is directly modelled on Article 7. The principle is, I believe, well understood in the community. It represents part of what Australians call “a fair go”. In the context of section 170DC it is not to be treated lightly. The employee is to be given an opportunity to defend himself or herself “against the allegations made”, that is, the particular allegations of misconduct or poor performance that are putting the employee’s job at risk.”
When an employer is contemplating dismissing an employee for specific reasons, it is insufficient that the employer merely put those reasons to the employee, unless the employer also makes it clear that the employee’s job is at risk. This is, in my opinion, implicit in the wording of section 170DC. The phrase “the allegations made” in section 170DC must be read to mean “the allegations made in respect of which the employee’s employment may be terminated.” This is because the obligation on the employer to put the allegations to the employee, and give him or her the opportunity to respond, is an obligation imposed on an employer only in the context of the possible termination of the employee’s employment.
This is what I understand the Chief Justice to have meant in Nicolson when he said:
“The employee is to be given an opportunity to defend himself or herself “against the allegations made”, that is, the particular allegations of misconduct or poor performance that are putting the employee’s job at risk.”
I am reinforced in this opinion by Section 170CA(1) of the Act, together with Schedule 11 to the Act, (which is Recommendation No. 166 of the International Labour Organisation), which is referred to in that section.
Section 170CA(1) of the Act is as follows:
“The object of this Division is to give effect, or give further effect, to:
(a) the Termination of Employment Convention; and
(b) the Termination of Employment Recommendation, 1982, which the General Conference of the International Labour Organisation adopted on 22 June 1982 and is also known as Recommendation No. 166, and a copy of the English text of which is set out in Schedule 11.”
The title of the Recommendation is “Recommendation Concerning Termination of Employment at the Initiative of the Employer.”
Under the heading “Standards of General Application”, there is a subheading “Procedure Prior to or at the Time of Termination”. Paragraph 8 under that subheading is as follows:
“8. The employment of a worker should not be terminated for unsatisfactory performance, unless the employer has given the worker appropriate instructions and written warning and the worker continues to perform his duties unsatisfactorily after a reasonable period of time for improvement has elapsed.”
As one of the objects of the Division 3 of Part VIA of the Act is to “give effect, or give further effect, to” the Recommendation, I must have regard to the wording of that Recommendation in determining the meaning of section 170DC, and the obligations imposed on employers as a result of that section.
The Act does not, in terms, impose an obligation on employers to give employees a “written warning” in terms of paragraph 8 of the Recommendation. I accept that, if it were the intention of the Parliament to impose generally such a requirement, then the Act would specifically say so.
Nonetheless, in view of the fact that one of the objects of the Act is to give effect to the Recommendation, and in view of the fact that the Recommendation is incorporated in the Act in the sense that it is a Schedule to the Act, the absence of a written warning (where that could appropriately and practically be given) is a factor to be taken into account on the question of whether or not an employer has breached the provisions of section 170DC of the Act (and section 170DE).
To put it another way, although I do not regard the Recommendation as necessarily binding, I do take it into account as providing significant guidance to the Court on the question of the proper procedures for an employer to follow.
Furthermore, there are sound policy reasons why a written warning stating that the employee’s job is at risk, and setting out the reasons why that is the case (where that could appropriately and practically be given) should be given. It is in the interests of both parties that the potential for misunderstanding be minimised - a written warning has that effect.
Related to that, in my opinion, is this: if an employee’s work performance is not up to the required standard, then an employer should inform the employee, as precisely as possible, exactly what the problems are. The best way to do this is in writing. If there are required standards to which the employee must perform, then those standards should be set out in writing.
Nonetheless, lest I be misunderstood, each case has to be examined in the light of its own facts. The absence of such a written warning is not necessarily determinative of the question, and there would certainly be many circumstances in which the absence of a written warning would not necessarily mean that a termination of employment was in breach of the Act. It is simply a factor to be taken into account, in the way set out above.
In this case, there was no reason why the respondent (in particular Mr Dowling) could not have given a written warning to the applicant that his job was in jeopardy.
But Mr Dowling did not even give an oral warning to the applicant that his job was in jeopardy. It is the respondent’s case that the meeting between the applicant and Mr Dowling on 10 August 1994, together with the history of meetings and correspondence, means that the applicant “must have known” that his job was in jeopardy. I do not accept that.
I do accept that, at the meeting on 10 August 1994, there was a lengthy and detailed discussion between the applicant and Mr Dowling. Mr Dowling had prepared notes, in advance, for that discussion. Those notes became Exhibit “S”. Markings were made on those notes by Mr Dowling as the meeting progressed, and those markings are objective evidence of the fact that the topics in the list were discussed. I accept that Mr Dowling made clear that the applicant was not performing his job satisfactorily in a number of respects.
However, it does not follow from the fact that an employer has criticised an employee’s performance that that employee therefore must know that his job is in jeopardy.
In my opinion, the evidence establishes that the applicant must have been aware (and in fact was aware) that Mr Dowling was unhappy with his performance in a number of respects, particularly to do with the sending to Melbourne of the weekly activity sheets, the applicant’s carrying out of the work set out in the “To Do” list sent to him by Mr Dowling, his performance in respect of “cold calling” (going out to see new customers) and the general level of sales.
As the applicant was not made aware by the respondent that his job was in jeopardy, I find that the termination of the applicant’s employment by the respondent was a breach of section 170DC of the Act.
The termination of the applicant’s employment was also a breach of section 170DC of the Act because of Mr Dowling’s failure to put to the applicant his belief that the applicant had, on 5 July 1994, lied to him about sending completed paperwork to him in Melbourne. That is discussed more fully below.
WAS THE DECISION TO TERMINATE THE APPLICANT’S EMPLOYMENT A BREACH OF SECTION 170DE OF THE ACT?
Section 170DE reads as follows:
“HARSH, UNJUST OR UNREASONABLE TERMINATION
170DE(1) [Termination must be for valid reasons] An employer must not terminate an employee’s employment unless there is a valid reason, or valid reasons, connected with the employee’s capacity or conduct or based on the operational requirements of the undertaking, establishment or service.
170DE(2) [Termination harsh, unjust or unreasonable if reasons not valid] 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.”
In my opinion, (putting aside for the moment the question of whether the termination of the applicant was “harsh”, “unjust” or “unreasonable” in terms of section 170 DE(2)) the respondent has established that there was “a valid reason” for the termination of the applicant’s employment.
The reasons for the termination of the applicant’s employment.
The evidence in relation to this varied somewhat, but, on analysis, it is clear that there were four principle reasons for the decision of Mr Dowling to terminate the employment of the applicant. These were:
The applicant had failed to file Activity Sheets (as he was required to) for all but one week of his period of employment, and had failed to file Board Reports as required;
The applicant had systematically failed to carry out the directions of Mr Dowling, as set out in “To Do” lists sent to him by Mr Dowling.
The sales figures were, in Mr Dowling’s opinion, unsatisfactory;
The applicant had lied to Mr Dowling on 5 July 1994 when he had told Mr Dowling that overdue paperwork had been completed, and would be sent that day, or had already been sent.
1. The alleged failure to send weekly Activity Sheets and monthly Board Reports to Melbourne.
It had been made clear to the applicant, right from the very start of his employment, that regular reporting was important. There were two principle types of reports the applicant was required to file with the head office in Melbourne. They were:
a.Weekly “Activity Sheets”, setting out (to speak generally) the work that the applicant had done in the week concerned, where he had gone, and the persons with whom he had had contact.
b.Monthly Board Reports, for the purpose of keeping the board of the respondent informed as to the situation in New South Wales, Queensland and the ACT.
a. The Activity Sheets
Not only was the applicant told quite clearly from the beginning of his employment that he was to regularly file the Activity Sheets, this was reinforced (both orally and in writing) from time to time, over the period of his employment.
Exhibit “E” is a large bundle of documents consisting principally of correspondence between the applicant and Mr Paul Dowling.
On 8 April 1994 Mr Dowling sent a fax to the applicant, ending with the words:
“Finally do not forget to send photocopies of your daily Activity Sheets to me each week.”
On 14 April 1994, in preparation for a trip that the applicant and Mr Dowling were going to do to Brisbane together, Mr Dowling sent the applicant a fax. Amongst other things he said in that fax:
“Could you please bring with you the quarterly sales reports I recently sent you and all other current paper work (“To Do” list etc) so that we can spend some time to go through these in detail.”
In my opinion in the light of the other evidence in the case, the phrase “All other current paper work (“To Do” list etc)...” includes a reference to the weekly activity sheets.
On 29 April 1994 Mr Dowling sent the applicant a memo. This memo was after the trip that they had made to Brisbane together. A change of tone is evident. It is clear, that, after the Brisbane trip, Mr Dowling was alarmed as to the performance of the applicant. He said so in his oral evidence and I accept that that was the case.
In that memo, in respect of the Activity Sheets, he said this:
“Bob, can you please copy me with the Activity Sheets that you compiled for the three days that we spent in Brisbane. It is my further expectation that from here in you will also copy me on a weekly basis of your previous weeks daily Activity Sheets. This planning process is part of a planning culture and as previously discussed, an integral part in ensuring that you maintain regular and efficient calls to all your existing customers, that follow through on is carried out in a timely manner and that cold and prospect calling is incorporated and carried out in an efficient manner when you are next working on the respective geographical areas.”
After the receipt of a directive in those terms the applicant could not have been in doubt as to the importance of sending the weekly Activity Sheets on a weekly basis to Mr Dowling. I therefore do not accept his evidence that he did not understand how important they were.
On 17 May 1994 Mr Dowling sent the applicant another memo. Once again (as was normally the case) this memo dealt with a variety of things. In that memo Mr Dowling said this:
“Thanks for sending down the bag containing accounts dockets for Adam and theAactivity Reports sheets from Brisbane. I have not yet received any other daily Activity Report sheets from you as yet - is there a problem?”
On 16 July 1994 the applicant received a further fax from Mr McIntosh. In that fax Mr McIntosh said this:
“Despite your promises I have yet to receive a copy of one Activity Report from you (apart from the 3 days that we spent in Brisbane together in late April) - please advise the problem.”
Mr Dowling gave evidence, which I accept, that on a number of occasions he spoke to the applicant and made it clear that the Activity Sheets had to be sent regularly to Melbourne, and that this was an important part of the applicant’s duties.
Despite the multiplicity of requests and directives the applicant did not do what he was required to do. The only Activity Sheets that he ever sent to Melbourne were for the three days that he spent with Mr Dowling in Brisbane.
The regular receipt in Melbourne of these Activity Sheets was important for the operation of the respondent. The applicant was the only employee of the respondent in the entire ACT, New South Wales and Queensland region. There was no way apart from information provided by the applicant, that the respondent’s managers in Melbourne could be aware in a systematic way of what the applicant was doing. Thus, regular reporting was very important for the efficient operation of the respondent’s business. That had been made clear to the applicant.
I therefore find that the failure of the applicant to send weekly Activity Reports to the respondent’s managers was a “valid reason” for the termination of the applicant’s employment.
b. The Board Reports
The applicant was also to send monthly Board Reports to Melbourne. I accept that he was informed of this requirement right from the start of his employment.
Mr Dowling gave evidence that the only Board Report that he ever received from the applicant was the report for the month of June 1994. That report was in evidence, and became exhibit “L”.
The applicant said that, in addition to the June report, he also sent Mr Dowling an amalgamated report for the months of April and May, and reports for the months of July and August.
Mr Paul Green, from Archers, the firm of consultants, gave evidence that he had a meeting with the applicant in early June 1994. He said that he assisted the applicant to prepare the Board Reports for April and May. He also said that he asked the applicant why he had not done the reports up until that time and that the applicant replied “I just haven’t done them”. He was not cross examined about that and I therefore accept what he says. Thus, up until that time, the applicant had failed to carry out what he knew to be part of his duties.
I also accept that Mr Green did help the applicant to complete a combined April/May Board Report. I think that it is highly unlikely that, the report having been completed with the assistance of Mr Green, that the applicant would not have sent it to Melbourne. I therefore find that the report was sent to Melbourne.
The question of the July and August reports is more difficult.
On 10 May 1994, and again on 17 May 1994, Mr Dowling requested, in writing, the April Board Report from the applicant. That request was not answered until after the June meeting between the applicant and Mr Green.
There is no other evidence of any written request by Mr Dowling to the applicant in respect of the Board Reports - in contrast to continued requests, in writing, for the applicant to complete and send the Activity Sheets.
In view of the fact that (as I have accepted) the applicant did send a combined April/May report, and in view of the contrast between the continuing written requests for the Activity Reports and the absence of any such requests for the Board Reports (in the situation where the Board Reports were regarded as being as equally important as the Activity Reports) I find that, on balance, the Board Reports for the months of July and August were sent to Melbourne.
2. The failure to carry out the requirements in the “To Do” list.
The “To Do” lists were lists of tasks that the applicant was required to complete. They were sent to him from time to time by Mr Dowling.
The applicant gave evidence that he did not regularly carry out the tasks in these lists within the time frames set by Mr Dowling. Mr Dowling gave evidence to similar effect.
The applicant gave evidence that the reason for him not doing that was because “he prioritised” those matters, and gave greater emphasis to what he perceived to be the highest priority of his job - that he improve the sales figures in his regions.
Once again, the question of the “To Do” lists was the subject of frequent correspondence between Mr Dowling and the applicant, and frequent reminders or complaints given by Mr Dowling to the applicant.
On 8 April 1994 Mr Dowling sent the applicant a current “To Do” list. He made detailed comments in respect of some of the matters on that list. On 14 April 1994 (in preparation for the Brisbane trip) Mr Dowling requested the applicant to bring with him “all current paper work, the “To Do” lists etc”.
On 19 May 1994 Mr Dowling sent a fax to the applicant. He said:
“Enclosed is the latest “To Do” list as I see it. A couple of comments regarding this list:
(1) Only a couple of items that I am aware of have been finalised and therefore removed from the list I issued dated the 8 April.
(2) Neil has followed up on the outstanding items that he was personally responsible for. However, in his last report Neil stated that they still require further follow up. As most of these issues pertain to existing/potential distributors on the north coast (Eastland Bearing Grafton, Blackwoods Coffs Harbour etc) I have left them on your list to follow up on your next Brisbane trip.”
On 6 July 1994 Mr Dowling sent a memo to the applicant. Under the heading “Current ‘To Do’ list” he said this:
“As you can see, there are many items on this list that are well overdue and therefore I believe your first task should be to re-schedule and prioritise these overdue items with a revised completion date that you believe is attainable. Items 14, 15, 16, and 19 were scheduled for action during your last Brisbane visit and obviously need to be re-scheduled once you have finalised item 3. I would suggest that you take a copy of this current list and make the necessary changes in hand writing and send it back to me so that I can update on my computer.”
On 16 July 1994 Mr Dowling sent the applicant a fax. In that fax, amongst other things, he said “Please advise the status of your “To Do” list and the alterations that you were to make and copy me on.”
On 1 August 1994 Mr Dowling sent the applicant another fax. He thanked the applicant for sending him a revised “To Do” list.
He went on to say:
“Enclosed is the revised “To Do” list as per your alterations. However I believe the items numbered 37 to 45 inclusive that you mark “Ongoing” should have a time frame completion date and I make the following comments:”
He went on to make a number of specific comments about particular items, and finished the fax by saying “Obviously this is an area that we need to discuss at our forthcoming review”.
An examination of the “To Do” list as of 30 June 1994 reveals that the vast majority of the list of specific matters that Mr Dowling had (by virtue of the sending of that list) instructed the applicant to complete had not been completed by the date stipulated by Mr Dowling. I accept Mr Dowling’s evidence that this was a continuing problem with the applicant. I accept Mr Dowling’s evidence that this was a serious matter, which adversely affected the proper functioning of the respondent company.
For the above reasons, in my opinion, the systematic failure to complete the tasks set out in the “To Do” lists, by the due dates, was “a valid reason” for the termination of the applicant’s employment.
3. Unsatisfactory sales figures.
The applicant commenced work with the respondent in late March 1994. His predecessor had been dismissed.
In the seven months prior to the commencement of the applicant’s employment with the respondent the sales figures for the applicant’s region were below budget. They were as follows:
September 1993 98.6 % of budget.
October 1993 94.8 % of budget.
November 1993 91.6 % of budget.
December 1993 87.1 % “
January 1994 87.6 % “
February 1994 87.0 % “
March 1994 85.7 % “
After the applicant commenced employment with the respondent the sales figures were as follows:
April 1994 83.3 % of budget
May 1994 80.4 % “
June 1994 80.9 % “
July 1994 101.9 % “
August 1994 104.7 % “
It is clear from the evidence of the applicant and the respondent’s witnesses that prior to the commencement of the applicant’s employment the region had not been properly serviced. It was therefore understandable that the sales figures would continue to decline, even given the best efforts of a new sales manager, for some period after that new person’s appointment.
Nonetheless, the figures do establish that, by July and August 1994, the applicant had, at least, stabilised the situation and the sales figures were improving.
The figure for August 1994 was inflated somewhat by a trade fair at Darling Harbour, when around $8,000.00 non-budget sales were achieved. Even taking that into account, it is still fair to say that the sales situation had been stabilised. It is reasonable to expect that this would have continued to be the case.
I therefore find that, to the extent that poor sales figures were a reason for the termination of the applicant’s employment, that reason was not “a valid reason”.
4. Alleged lies told to Mr Dowling by the applicant.
One of the reasons why the applicant’s employment was terminated by Mr Dowling was that Mr Dowling believed that on 5 July 1994 the applicant had lied to him. The lie in question was, according to Mr Dowling, that the applicant had told Mr Dowling that the overdue paperwork had been completed and would be sent that day or had already been sent.
Mr Dowling conceded, when giving his oral testimony, that this was a factor in his decision to terminate the applicant’s employment.
However, Mr Dowling also conceded that he never raised the matter with the applicant. He should have done so. The failure to raise the matter with the applicant was a clear breach of 170DC of the Act, and for that simple reason alone the termination of the applicant’s employment was unlawful.
It is also important to note that it was never put to the applicant in cross-examination that he had lied on 5 July 1994. I do not accept that the applicant deliberately lied to Mr Dowling - and certainly the respondent has come no way near proving that.
Was the termination of the applicant’s employment “harsh”, “unjust” or “unreasonable” in the terms of section 170DE(2) of the Act?
For the reasons set out above, I have found that the termination of the applicant’s employment was a breach of section 170DC of the Act. This was, in part, because the applicant was not made aware by the respondent that his job was in jeopardy, despite the respondent being critical of his performance.
For the same reason, the termination of the applicant’s employment was “unjust”, as he was denied procedural fairness.
In Byrne & Frew v Australian Airlines Limited, (1994) 52 IR 10, his Honour Gray J, in considering the use of the term “harsh, unjust or unreasonable” in an industrial award, said, at page 63:
“So far, the procedural aspects of a clause such as cl 11(a) have been seen as confined to the need for the employer to make a proper investigation of the facts and to consult with the employee about those facts and their possible consequences ... In my view, that analysis has been inadequate. The use of the word “unjust” in the clause is intended to import requirements of natural justice or procedural fairness into the process of terminating employment.”
His Honour went onto say, at page 64:
“... I am of the view that a clause such as cl 11(a) requires that an employer contemplating terminating the employment of an employee is obliged to afford procedural fairness to that employee. Not to do so would be ‘unjust’.”
Firstly, although the respondent did consult with the applicant about the applicant’s failure to perform as required, the respondent did not consult with the applicant about the “possible consequences” of his failure to perform - that is to say, the possibility that his employment would be terminated.
Secondly, in my view, natural justice requires an employer to tell the employee that his job is in jeopardy.
For these reasons, the applicant was denied natural justice, and the termination of the applicant’s employment was “unjust”.
Counsel for the applicant also submitted that the respondent employer deliberately gave the applicant a false sense of security, when the respondent had already decided to dismiss him. He submits that they decided not to tell him that his job was in jeopardy - or that the decision had already been made to dismiss him - for their own reasons - to do with the continuing smoothness of their business operation in the region for which the applicant was responsible.
Counsel for the applicant submits that, therefore, the termination of the applicant’s employment was “harsh”, and “unjust”.
I agree with his submissions. The applicant was, in effect, summarily dismissed on 8 September 1994. He had had some idea of what was happening, because a prospective replacement had unexpectedly telephoned him about three days before that date, when he was in the country, engaged in his job. The prospective replacement asked the applicant what the job was like, and the applicant therefore found out that the search was on for his replacement. That came as a considerable shock to him. The shock was entirely understandable, given the fact that the respondent had never told him that his job was in jeopardy.
If the respondent had told the applicant that his job was in jeopardy, or, alternatively, given him proper notice (I note here that he did receive pay in lieu of notice) it might have been possible for the applicant to commence the search for alternative employment at an earlier time. This possibility was denied to him because of the secretive and summary way in which the respondent proceeded.
Furthermore, the consequences to the applicant of the termination of his employment have been made worse by the way in which it was done. It must be more difficult for him to find suitable alternative employment because of the circumstances of his dismissal.
In fact, the respondent (in particular Mr Dowling) had engaged Archers Consultants to start looking for a replacement for the applicant as early as June.
In his evidence-in-chief, Mr Dowling had said that he only started looking for a replacement (or got Archers to start looking for a replacement) after the long meeting with the applicant at Sydney airport on 10 August 1994.
In cross examination, he was exposed as having told an untruth. It is clear in a file note in his own hand, (exhibit “T”) that he was actively considering replacing the applicant as early 23 June 1994, when he had a discussion with Mr Archer. At or about that time he even suggested to Mr Archer a possible person to, virtually then and there, take over the applicant’s job.
When Archers found the applicant for the respondent they gave a six month guarantee that the applicant would perform satisfactorily. In the event that he did not perform satisfactorily, Archers would either refund their fee or find a further person to fill the cost at no cost to the respondent. It is significant that the applicant’s employment was terminated shortly before the expiration of that six month period.
In all the circumstances, particularly taking into account the fact that Mr Dowling’s credit on this aspect of the evidence has been called severely into question, I find that the respondent had decided to terminate the employment of the applicant well before the meeting of 10 August 1994. The applicant was not told about this decision, and the termination of his employment was “harsh” and “unjust”.
SHOULD THE APPLICANT BE REINSTATED?
In my opinion, it would be impractical to order that the applicant be reinstated.
In view of my finding that the termination of the applicant’s employment would have been for a “valid reason” and lawful, but for its procedural unfairness, reinstatement would be “impractical”.
I also take into account the fact that the applicant was dismissed in September 1994, and that a new person is now performing the tasks of that position. That person is, according to Mr Dowling, doing a good job.
WHAT AMOUNT OF COMPENSATION, IF ANY, SHOULD BE AWARDED TO THE APPLICANT FOR THE UNLAWFUL TERMINATION OF HIS EMPLOYMENT?
The amount of compensation to be awarded is affected by the fact that, but for the procedural unfairness, the respondent would have been entitled to terminate the applicant’s employment.
In Nicolson v Heaven and Earth Gallery Pty Ltd (cited above) his Honour, Wilcox CJ, canvassed various authorities relevant to the question of the quantum of damages to be awarded for a breach of section 170DC of the Act (i.e. where there has been a breach of the requirements of procedural fairness laid down by the Act but there was an underlying valid reason for the termination of the applicant’s employment). He said, at page 246 of the report:
“They lead me to conclude that in assessing compensation for a breach of section 170DC, it is appropriate to consider what would have been likely to occur if that breach had not occurred. It should not be assumed that the employee would have been dismissed anyway. Such an assumption ignores the rationale of procedural fairness and everyday experience that decision-makers often change their minds when presented with another side of a case. It devalues section 170DC to the point of redundancy.
On the other had, it would be unrealistic for a Court automatically to assume that, if this employer had complied with section 170DC, the employee’s employment would have continued indefinitely.
The statement of Sheppard and Heerey JJ in Bostik, that ‘the respondent had substantial security in his employment’, was a comment about that case. It was not intended as a proposition of universal application .”
In Byrne and Frew v Australian Airlines Limited, (cited above) his Honour, Black CJ, in considering the meaning of the phrase “harsh, unjust and unreasonable” in an industrial award, said, at page 17:
“It is plain that [the clause] was intended to protect employees and to provide them with very much greater security of employment than they had previously had under Federal awards. That purpose is one of substantial social and industrial significance because the consequences of dismissal from employment may be devastating to the person dismissed and his or her family.”
I approach this case in the light of what his Honour Wilcox CJ said in Nicolson and what his Honour Black CJ said in Byrne and Frew.
In my opinion, it is likely that, that if the respondent had followed the proper procedures in terminating the applicant’s employment, the applicant’s employment would have been eventually terminated. It is simply not possible to be precise about when.
That factor operates to reduce the amount of compensation that he will receive, as it reduces the amount of remuneration that the applicant “would have been likely to have received if the employer had not terminated [his] employment”. (See section 170EE(3) of the Act).
At the time of the termination of his employment, the applicant was earning a salary of $35,000 per annum, plus the use of a car, plus bonuses.
In addition to that, it was part of his remuneration package that the respondent employer pay 5% of his salary by way of contributions to a superannuation fund.
The car provided to the applicant by the respondent was a new 2.6 Magna.
Exhibit “U” is a pamphlet issued by the NRMA entitled “What it costs to run your car”. The total cost per week of running a 2.6 Magna is $158.78.
The applicant submits that that figure represents the value to him of the car, and that, in assessing compensation, that full figure should be the basis of any calculation.
Counsel for the respondent, on the other hand, submits that the value to the applicant has to be discounted because it was used substantially for company business.
I accept that the value of the car should be discounted to some extent, but I also accept that the applicant did not purchase a car himself because one was provided to him by the respondent employer. I will take into account 75% of the figure set out in exhibit “U” as a basis for calculations.
The applicant has been trying to get work in his chosen field, and has been unsuccessful. I find that he has been making a genuine attempt to find another suitable position, and has not been able to.
Furthermore, from 14 September until (at least) the last day of the trial of this matter the applicant was earning about $500 per fortnight because of a casual cleaning job that he had obtained. I take that into account as a factor tending to reduce the amount of compensation which otherwise would be awarded to him.
As the applicant has tried to find another suitable position, and has taken a cleaning job to earn what money he can, he has taken reasonable steps to mitigate his loss.
When the applicant’s employment was terminated, he received a figure of almost $2,000 representing one months pay in lieu of notice, less tax. The pre-tax figure was $2,916.67. I take that payment into account as a factor tending to reduce the amount of compensation which otherwise would have been awarded to the applicant.
It is apparent that the applicant is having considerable difficulty finding employment in his chosen field. He was born on 2 November 1950 and is therefore aged 44 years. I take notice of the fact that, in the current economic climate, managerial and executive level staff of the applicant’s age tend to have difficulty finding re-employment after dismissal. This difficulty for the applicant was made worse by the summary and secretive manner of the termination of his employment.
I think that it is likely that the applicant will not find employment in his chosen field for a considerable time. I take that into account as a significant factor tending to increase the amount of compensation that would otherwise have been awarded to him.
The maximum amount of compensation I can award is limited by section 170EE(3) of the Act to:
“The amount of the 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 he or she received remuneration immediately before the termination took effect.”
I calculate the total amount of remuneration that the applicant would have received in the period of six months immediately following 8 September 1994 as follows:
Salary for 6 months: $17,500.00
Value of Magna motor vehicle for 6 months
(@ 75% of $158.78 per week): $ 3,104.72
Likely bonuses (as calculated below): $ 5,250.00
5% of salary superannuation contributions: $ 875.00
TOTAL $26,729.72
I calculate the bonus component of the above figure on the following basis:
The applicant had stabilised the sales situation in his region. It is likely that the sales figures would, to some moderate extent, have improved. According to his letter of engagement (exhibit “D”), if the applicant achieved sales of 100% of his budget his bonus would be 30% of the salary. If he achieved sales of 97.5% of the budget he would receive a bonus of 17.5% of the salary and if he achieved sales of 95% of his budget he would receive a bonus of 10% of his annual salary. For sales in excess of the budget, he would receive 8% of the value of those excess sales by way of bonus.
In my opinion, it is reasonable to assume, given the July and August figures, that the applicant would have achieved sales of at least 100% of his total budget, on average, in the period of six months following his dismissal. 30% of six months of his salary is $5,250.00.
I am very conscious, in assessing the amount of compensation, of my finding that it is unlikely that the applicant will find employment in his chosen field in the near future. Given that, the maximum amount of compensation, or a figure close to it, would seem to be appropriate.
In my opinion, the maximum of six months remuneration set by the Parliament is not intended to be the top of the scale. Nor is it intended to be the starting point from which other figures (such as the amount of money earnt by the applicant in alternative employment or the amount of money paid in lieu of notice) is to be deducted. It is simply the upper limit of the amount of compensation that can be awarded. If the Court were to consider that a figure greater than six months remuneration is “appropriate”, the power of the Court to award that greater figure is constrained by the six month limit set by the Parliament.
In all the circumstances, I consider that a round figure sum of $20,000.00 is the appropriate amount to order by way of compensation. That sum is to be paid by the respondent to the applicant within 21 days of the date of this judgement.
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I certify that this and the preceding seventeen (17) pages are a true copy of the Reasons for Judgment of Judicial Registrar Patch.
Associate : Phillipa Peach
Date : 10 March 1995
REPRESENTATION
Counsel for the Applicant : P. Coleman
Solicitors for the Applicant : Champion & Partners
Counsel for the Respondent : M. Scott
Representative for the Respondent : A. Salmon
Metal Trades Industry Association
Date of Hearing : 16, 17, 28 February 1995
Date of Judgment : 10 March 1995
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