FEDERAL CIRCUIT COURT OF AUSTRALIA
| SCHULTZ v SCANLAN & THEODORE PTY LTD | [2013] FCCA 1096 |
| Catchwords: INDUSTRIAL LAW – Claim of adverse action – dismissal – workplace right – entitlement to maternity and sick leave – pregnancy and/or physical disability – allegations of breach of ss.342 and 351 of Fair Work Act 2009 – burden of proof – consideration of s.361 – application dismissed. |
| Legislation: Fair Work Act 2009 (Cth), ss.340, 340(1), 342, 351(1), 360, 361 |
| Applicant: | MONICA SCHULTZ |
| Respondent: | SCANLAN & THEODORE PTY LTD |
| File Number: | MLG 1155 of 2012 |
| Judgment of: | Judge O’Sullivan |
| Hearing dates: | 18, 19 & 20 September 2013 |
| Date of Last Submission: | 20 September 2013 |
| Delivered at: | Melbourne |
| Delivered on: | 18 October 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr J. McKenna |
| Solicitors for the Applicant: | Wisewould Mahony Lawyers |
| Counsel for the Respondent: | Mr M. Felman |
| Solicitors for the Respondent: | Minter Ellison Lawyers |
ORDERS
The application be dismissed.
Any application, affidavit and written submissions in relation to costs be filed and served within 14 days.
Any response, affidavit and written submissions in reply be filed and served 14 days thereafter.
AND THE COURT NOTES:
Any application for costs will be determined on the papers unless otherwise requested in submissions.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1155 of 2012
| MONICA SCHULTZ |
Applicant
And
| SCANLAN & THEODORE PTY LTD |
Respondent
REASONS FOR JUDGMENT
Monica Schultz (“the applicant”) was employed by Scanlan & Theodore Pty Ltd (“the respondent”) between November 2010 and July 2012. The respondent carries on a business as a women’s fashion designer and retailer. The respondent has a number of retail outlets and a head office in South Yarra, Melbourne.
Between November 2010 and September 2011 the applicant was employed by the respondent as a Merchandising Assistant based at the head office. Subsequently, the applicant was promoted to the position of Merchandising Manager with the respondent also located at the head office.
In March 2012, the applicant informed the respondent that she was pregnant. In April 2012 the applicant advised the respondent she would be taking maternity leave later that year. The applicant…
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Details
- Case
- [2013] FCCA 1096
- Decision Date
CaseChat Overview and Summary
In *Schultz v Scanlan and Theodore Pty Ltd*, the applicant, Ms Schultz, alleged that her employment was terminated by the respondent, Scanlan and Theodore Pty Ltd, due to her pregnancy and her intention to take maternity leave, constituting unlawful adverse action. The respondent contended that Ms Schultz's position as Merchandise Manager was made redundant due to the company's poor financial performance and that her pregnancy played no part in the decision. The matter came before Judge O’Sullivan.
The court was required to determine whether the termination of Ms Schultz's employment was a consequence of her pregnancy or her intention to exercise a workplace right, or if it was a genuine redundancy. Specifically, the court had to assess the reasons provided by the respondent for the redundancy and consider whether the applicant's pregnancy was a factor, either directly or indirectly, in the decision-making process.
The court found that the respondent had discharged its evidentiary burden under sections 360 and 361 of the *Fair Work Act 2009*. The evidence indicated that the decision to make the Merchandise Manager role redundant was primarily driven by the company's significant financial downturn in 2012, with sales falling substantially below budget. This financial pressure led to discussions about cost-saving measures, including redundancies. The court noted that the duties of the Merchandise Manager were largely absorbed by other employees, consistent with the definition of a genuine redundancy. Crucially, the court found no evidence that Ms Schultz's pregnancy was discussed or considered by the decision-makers at the time the redundancy was decided, and indeed, one of the key decision-makers was unaware of her pregnancy. Furthermore, the respondent demonstrated a history of supporting employees taking maternity leave, and the applicant herself had previously held the Merchandise Manager role on a maternity leave contract without issue.
The court concluded that the termination of Ms Schultz's employment was solely by reason of redundancy and not due to any unlawful adverse action. Accordingly, the court found that the employer had not contravened the adverse action provisions of the *Fair Work Act 2009*.
The court was required to determine whether the termination of Ms Schultz's employment was a consequence of her pregnancy or her intention to exercise a workplace right, or if it was a genuine redundancy. Specifically, the court had to assess the reasons provided by the respondent for the redundancy and consider whether the applicant's pregnancy was a factor, either directly or indirectly, in the decision-making process.
The court found that the respondent had discharged its evidentiary burden under sections 360 and 361 of the *Fair Work Act 2009*. The evidence indicated that the decision to make the Merchandise Manager role redundant was primarily driven by the company's significant financial downturn in 2012, with sales falling substantially below budget. This financial pressure led to discussions about cost-saving measures, including redundancies. The court noted that the duties of the Merchandise Manager were largely absorbed by other employees, consistent with the definition of a genuine redundancy. Crucially, the court found no evidence that Ms Schultz's pregnancy was discussed or considered by the decision-makers at the time the redundancy was decided, and indeed, one of the key decision-makers was unaware of her pregnancy. Furthermore, the respondent demonstrated a history of supporting employees taking maternity leave, and the applicant herself had previously held the Merchandise Manager role on a maternity leave contract without issue.
The court concluded that the termination of Ms Schultz's employment was solely by reason of redundancy and not due to any unlawful adverse action. Accordingly, the court found that the employer had not contravened the adverse action provisions of the *Fair Work Act 2009*.
Orders
Orders of the court
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Background
Background to the litigation
Mr Gary Theodore is the Director and Head Designer for the respondent who filed an affidavit on 26 August 2013. In that affidavit he deposed inter alia:“Background and qualifications1.Between l98l and approximately 2001 there was another Director of the Respondent since 2001 I have been the sole Director of the Respondent.Current role at Scanlan & Theodore2.In my role as Director, I am responsible for ensuring that the financial position of the Respondent is sound and that any financial commitments made by the Respondent are met. I have the overall financial responsibility for the Respondent.3.In my current role as Head Designer, I am responsible for designing ranges of clothing that are saleable and delivered on time.Financial position of Scanlan & Theodore 2006-20114.In the period of 2006 to 2008, prior to the global financial crisis, the financial position of the Respondent was good. The business was growing and we were achieving good sales figures.5.The Respondent's business suffered substantially in 2009 during the global financial crisis and our sales dropped away. The Respondent had made financial commitments including in respect of orders for fabrics for coming seasons, and that put us in a difficult financial position.6.In the period 2010 to 2011 the Respondent's financial position stabilised. However the Respondent has not regained the peak financial position it achieved in 2008.7.During 2012 the Respondent's financial position tapered downwards and sales did not grow as expected. Towards the beginning of 2012, I had discussions with Mr Sener Besim (Besim), the Respondent's General Manager, about the need to undertake redundancies. This was on the basis that the Respondent was selling less clothes and therefore did not need as many employees in Head Office to run the business. To save costs, the Respondent made a number of employees redundant and also did not replace a number of employees who had resigned.Decision to make the role of Merchandise Manager redundant8. On 9 July 2012, whilst I was in Greece, I had a telephone conversation with Besim regarding the current financial position of the Respondent. Besim told me that the financial performance of the business was not good and that sales were down. Besim told me that, in his opinion, the Respondent needed to make another position redundant. Besim told me that he had identified the Applicant's position of Merchandise Manager as one that could be made redundant. Besim explained to me that the duties of the Merchandise Manager could largely be absorbed by the Planning Manager, Khatijah Hussain, to whom the Applicant reported.9.I told Besim that I supported his decision regarding the redundancy and agreed with the logic behind the decision. I then left the final decision, and its implementation, to Besim.10.I cannot recall whether this discussion occurred over one or two telephone conversations. At no point in any conversation I had with Besim about the redundancy of the Merchandise Manager role and the termination of the Applicant's employment was her pregnancy discussed. I am unable even to recall whether I was aware that the Applicant was pregnant at the time of the discussion.”
Evidence
Evidence Before The Court
The respondent’s closing submissions in relation to this allegation were set out at paragraphs [54] to [75] of exhibit R9 as follows:“54.The Respondent denies that it terminated the Applicant’s employment by reason of her pregnancy or any other workplace right that she had, exercised or proposed to exercise, or for the purposes of preventing the Applicant exercising a workplace right.55.The Respondent terminated the Applicant’s employment by reason of redundancy.56.It is well established what constitutes a termination by redundancy. In Virgin Blue, Judge Burnett said at [247]:“In Jones v Department of Energy and Minerals (1995) 60 IR 304, Ryan J provides further guidance on the meaning of redundancy as follows:‘... it is within the employer’s prerogative to rearrange the organisational structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly-created positions ... One illustration of it occurs when the duties of a single, full-time, employee are redistributed to several part-time employees. What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organisation, any duties left to discharge.’”57.The decision that the Applicant’s position was to be terminated by reason of redundancy was made predominantly by Besim. However, the Respondent accepts that Theodore was consulted by Besim in relation to this decision. On 9 July 2012, Besim called Theodore while Theodore was overseas in Greece. The purpose of the call from Besim’s perspective was to inform Theodore of the financial position of Scanlan & Theodore and to express his own view that, by reason of this financial position, there was a need to make another position redundant at Scanlan & Theodore. By 9 July 2012, Scanlan & Theodore was $2,674,489 behind budget (in sales). Prior to this telephone conversation, Besim considered which position ought be made redundant. He reached the conclusion that the position of Merchandise Manager ought be made redundant as those duties could largely be absorbed by Hussain in her role as Planning Manager and other employees assuming some of the duties.58.During the conversation, Theodore and Besim discussed the sales figures for the month and agreed that there was a need to make another position redundant. Besim presented Theodore with the proposition that the Applicant’s role as Merchandise Manager ought be made redundant and the basis upon which Besim formed that view. Theodore agreed with Besim.59.There was no discussion of the Applicant’s pregnancy during this conversation. The fact that the Applicant was pregnant or wanted to take maternity leave was not part of the reason for making the Applicant’s role as Merchandise Manager redundant. Theodore left the final decision and its implementation (in relation to terminating the Applicant’s position by reason of redundancy) to Besim (SB [45], SB Supp [2]-[5], GT [8]-[10]. See also [2T26:23-27:28(SB) and 2T66:34-46(GT)].60.There was substantial and overwhelming evidence in support of the fact that the reason for the decision to terminate the Applicant’s employment was solely redundancy, and not by reason of the Applicant’s pregnancy or intention to take maternity leave (or in any way related to maternity leave). This evidence is set out below.Direct evidence from the decision maker(s)61.There was direct evidence of Besim that the reason for the termination of the Applicant’s employment was redundancy and not by reason of the Applicant’s pregnancy or anything to do with maternity leave (Besim [45] and Besim's supplementary affidavit [3]). This evidence was not disturbed in cross-examination [2T44:10-38(SB) and 2T47:43-46(SB)]. Besim communicated this decision and the reason for it to Hussain immediately after making the decision (Hussain [34]);62.Further, there was direct evidence of Theodore that the reason for the Applicant’s termination was redundancy (Theodore [8] – [9]). Indeed, Theodore was not even aware that the Applicant intended to take maternity leave nor that she was pregnant [2T57:18-27(GT) and 2T69:19-21(GT)].“Diabolical” sales figures in 201263.The objective evidence that the performance of the Respondent’s business had, in 2012, experienced a significant downturn. Despite budgeting for growth in sales for the 2012 calendar year, by 30 June 2012, Scanlan & Theodore sales had decreased by approximately 10% from the winter season in the 2011 calendar year. (Besim [30] and Exhibit SB-5; Theodore [7] See also 2T14:24(SB) and 2T20:30-33(SB)). In evidence, Besim said:“It – it came on basically from – it basically started the year before to be completely honest. We were – didn’t get off to a good start with our sales at the end of 2011 and we had to massively reduce our prices to – just to get to some sort of reasonable sales figure and we had a lot of stock so – and then when – basically we – we know how we’re going to go when we start the season and we start the season in February and we had the worst – we had the worst start to a season ever. So diabolical that it didn’t even make a dint to the figures. Usually we have an increase from – from – from your last week of sale to the first week of the new season you usually have at least double the figures. We just didn’t have any traction. Nothing happened which was – for us that’s why I used the word diabolical to – to be selling summer product in February and then to deliver, repaint the stores, polish your – polish your terrazzo. All the girls get their hair cut and they get their make-up done, new music, let’s launch the season, nothing happened, nothing happened. There was no increase in figures. That to us after Gary being in business for 26 years, that had never happened to us before and to experience what we experienced in 2009 we were very concerned.” [2T28:4-18]64.This resulted in Besim and Theodore discussing redundancies and identifying middle management roles that could be made redundant (Besim [32]; Theodore [7]).Previous redundancies and unfilled resignations in 201265.Prior to the Applicant’s redundancy, there had been five other employees of the Respondent who had either been made redundant, or had resigned and not been replaced (Besim [31]-[38] and Exhibit SB-6). These included:a.on 22 January 2012, one of Scanlan & Theodore’s five Pattern Makers, Roslyn Jack (Jack), resigned. Scanlan & Theodore did not replace Jack as a Pattern Maker. Therefore, one of the five Sample Machinists, who worked in tandem with a Pattern Maker, was also selected for redundancy [See also 2T21(SB)];b.in March 2012, the position of Workroom Manager at Scanlan & Theodore was made redundant and the functions performed in this position were absorbed by the Product Manager at Scanlan & Theodore [See also 2T22(SB)];c.in April 2012, the position of Quality Care Manager at Scanlan & Theodore was made redundant. The duties of this position were absorbed by the Production Manager [See also 2T23-24(SB)]; andd.in late June or early July 2012, the Fabric Warehouse Manager (Dean Gunning) resigned. This position was not replaced [See also 2T80(KH)].Meeting on 6 July 2012 warns of further redundancies66.On 6 July 2012 (prior to the termination of the Applicant’s employment), Besim conducted a meeting where he discussed the possibility of redundancies at the Respondent. At this meeting, Besim advises staff that Dean Gunning, Fabric Warehouse Manager, had resigned and that his position would not be placed and that the team would need to work together to take on the duties of this position.67.Besim discussed the fact that Scanlan & Theodore was not trading as well as it had budgeted and noted that there had already been a number of redundancies earlier in the year and says that there could be more (Besim [39]-[44]; Hussain [31]-[33]; Sawan [18]-[20]) See also 2T87:43(KH) and 2T20:9(SB)).Termination meeting on 10 July 2012 confirmed redundancy as reason68.At the meeting between Besim and the Applicant on 10 July 2012, Besim told the Applicant that her employment was being terminated by reason of redundancy. At the start of the meeting, Besim told the Applicant that the purpose of the meeting is to inform her that her position is to be made redundant, effective immediately. Besim told the Applicant that the decision to make her position redundant was purely financial and because of the financial performance of the business and tougher economic climate, particularly in the retail industry.69.The Applicant tried to give Besim an application for parental leave. Besim told the Applicant that he did not need the application because it is not relevant to the discussion. The Applicant asked whether she was being made redundant because she was pregnant. Besim replied with words to the effect, “Absolutely not.” and reiterated that the decision was a financial one. Besim said that he was offended that she had suggested it was because she was pregnant. Besim told the Applicant that there had been a number of employees who had taken maternity leave and the decision had nothing to do with that. (Besim [46]-[61] and Exhibit SB-8; Sawan [11]-[23] and Exhibit RA-4).70.At no stage during the meeting did Besim ask for the Applicant’s maternity leave paperwork. Besim was not even aware that the organisation had formal paperwork [T97:15(SB) and 2T34:7-10(SB)].The Applicant’s former duties redistributed71.Following the termination of the Applicant’s employment by reason of redundancy, her duties were split up and performed by Ratcliffe, Sawan and Hussain (Hussain [37]; Ratcliffe [29]; Sawan [21]-[23]). This evidence was confirmed in cross-examination [2T88:31-89:24(KH)]. The fact that Hussain subsequently reallocated many of these duties to her subordinates does not detract from the proposition that the former duties of the Applicant were performed by other employees and she was genuinely redundant. Hussain had autonomy to run her department as she saw fit [T83:33(SB)]. In this respect it is noted that both Ratcliffe and Hussain had previously performed the role of Merchandise Manager at Scanlan & Theodore [2T73:20-23(KH)].Scanlon & Theodore have a history of supporting maternity leave employees72.The Respondent has a history of female employees taking maternity leave and subsequently returning to work (Besim [65]-[66]), and supporting female employees during pregnancy and maternity leave (Hussain [39]-[41]; Ratcliffe [21]-[22]).73.The Applicant attempted to allege through cross-examination that female employees going on maternity leave created an inflexibility to Scanlan & Theodore. This was consistently denied by the Respondent’s witnesses [2T19:27-20:2(SB) and 2T60:31-44(GT)]. Indeed, the Applicant herself obtained the role as Merchandise Manager on a maternity leave contract to replace Ratcliffe while she went on maternity leave (See exhibit KH-2 to Hussain’s affidavit). There was no evidence that this created any inflexibility for Scanlan & Theodore.74.Ratcliffe gave evidence that when she told Besim that she was pregnant, he was very supportive and very excited for her. She told Besim at the time that she planned on taking around six months off as maternity leave, and Besim replied that it would be fine but it could be discussed further down the track. Ratcliffe found that the experience of going on maternity leave while employed at Scanlan & Theodore was a very easy process. Besim and Hussain were very supportive and accommodating. (JR [18]-[21]) This was not disturbed in cross-examination [2T98(JR)].Conclusion75.The evidence establishes that the Applicant’s termination was by reason of redundancy only and for no other reason. Scanlan & Theodore has discharged its evidentiary burden pursuant to sections 360 and 361 of the Fair Work Act 2009. In these circumstances the Court ought find that an employer has not contravened the adverse action provisions.”
Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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