Sean Kenneth Kneebone v Baysilk Holdings Pty Ltd
[1995] IRCA 158
•13 April 1995
IN THE INDUSTRIAL RELATIONS ) No. WI 625 of 1994
COURT OF AUSTRALIA )
WESTERN AUSTRALIA DISTRICT REGISTRY )
BETWEEN:Sean Kenneth Kneebone
Applicant
AND:Baysilk Holdings Pty Ltd
Respondent
BEFORE: Boon JR
PLACE: Perth
DATE: 13 April 1995
REASONS FOR JUDGMENT
The applicant has applied under Section 170EA of the Industrial Relations Act 1988 for an order declaring the termination of his employment to have contravened Division 3 of part VI A of the Act. He is seeking reinstatement and compensation.
The applicant was employed as the Sales Manager of the Bullcreek branch of the Body Club health club which is owned and operated by the respondent. The applicant started work on 31 October 1994 and his employment was terminated without notice on 25 November 1994.
The applicant alleged that the respondent breached the provisions of Section 170DC of the Act in that he was not given any opportunity to answer any allegations made against him. The applicant also states that he was given no warnings in any material respect that his employment was in danger. Further, the applicant alleges Section 170DE of the Act was breached in that there was no valid reason for the termination of the applicant's employment.
The respondent, on the other hand, says that the applicant's employment was terminated because he was a salesperson who couldn't sell gymnasium memberships. It was said that the applicant was employed on a high salary and was expected to achieve immediate results that is, a dramatic improvement in the sales figures for the Bullcreek branch of the Body Club. The applicant was to lead the way in personal sales figures and he did not do this. It is alleged by the respondent that the applicant was given some warnings about his performance. The main thrust of the respondent's case was that the applicant's personal sales record was abysmal.
The Respondent's Business
Baysilk Holdings Pty Ltd operates five health clubs known as "BC - The Body Club". The clubs are situated at Claremont, Bullcreek, Cannington, North Beach and Osborne Park. The Claremont club has been operating since November 1993 and the Bullcreek club has been operating since August 1994. The five clubs have differing levels of facilities. The prime club as far as the respondent is concerned is the Claremont club. It is located on a main road in one of Perth's wealthiest areas. It has excellent facilities and records membership sales well in excess of those of the other clubs. The Claremont club cost $650,000 to establish but the respondent does not own the building in which it is housed. The Bullcreek club cost $800,000 to set up but the respondent does own that building. The other three BC clubs cost between $30,000 and $100,000 each to set up. The Bullcreek and Claremont clubs contain superior equipment and facilities compared to the other clubs.
The Bullcreek club is not situated on a main road and the demographics of the surrounding area are not as favourable to the respondent's business as those of the Claremont club. The respondent purchased the premises of a previous health club which had been declared bankrupt. The respondent spent a considerable amount of money purchasing and upgrading the club. After the Bullcreek BC opened in August 1994 the respondent conducted an extensive advertising campaign during its first two months of operation. The campaign was directed specifically at the Bullcreek branch and was successful in that membership sales for August and September 1994 amounted to $117,650 and $105,581 respectively. During October 1994, however, membership sales declined to a total of $55,676 for the month.
The Contract of Employment
The applicant ,who was 27 years of age at the time of his employment with the respondent, has had several years experience in the area of sales and considers himself to be a good sales person. He also has some experience in the area of training professional athletes and in the sale of gymnasium equipment. Just before he started work with the respondent, the applicant was working long hours as a sales person for another business. He went to the Body Club in Bullcreek and handed in a rough curriculum vitae. He later spoke to Shaun McCabe, the Director of the respondent, about working for the Body Club. Mr McCabe showed him around the Bullcreek club. The applicant told Mr McCabe that he had worked in sales and had performed well. It was made clear to the applicant that selling ability was important. However, the job the applicant was eventually offered was as the Sales Manager of the Bullcreek club and this involved different duties. Mr McCabe told the applicant that the Bullcreek club should be achieving sales of around $80,000 per month but that this wasn't happening at the moment. Mr McCabe's evidence is that at his interviews with the applicant he repeatedly stressed that the respondent expected the applicant, if he were to be offered the position, to achieve a sustained high turnover in the sales of memberships for the club.
Mr McCabe said when he met the applicant he was extremely impressed. He was convinced he was "in the presence of a sales performer" and that the applicant would be able to run the sales at the Bullcreek branch on his own. The applicant was offered "a very high salary" on the basis that he would perform extremely well and attain high sales levels. According to Mr McCabe, he told the applicant that he would be solely responsible for training and motivating existing staff and to initiate sales promotions. The applicant and Mr McCabe signed a contract of employment which stated that the position was as Sales Manager of the Bullcreek branch of the Body Club at a salary of $40,000 per annum which was a base retainer. There was a bonus system whereby the applicant, upon reaching sales of $70,000 per month would receive a $1,000 bonus; upon reaching $80,00 per month a further $2,000 bonus; upon reaching $90,000 a further $1000 bonus and upon reaching $100,000 a further $1,000 bonus. The list of duties included that the Sales Manager was to be answerable to oversee all areas of the operation of the Club and would be answerable for all facets of running of the club. The list of duties covered a number of different areas of performance and made only very limited reference to selling memberships.
The Period Of The Applicant's Employment
The applicant started work on 31 October 1994. For the first two weeks of his employment the previous Sales Manager, Gary Easthope, was still working at the Bullcreek branch. The applicant did not have his own office in which to work. The applicant said this was an awkward situation as Mr Easthope was still "calling the shots". This made it difficult for the applicant to carry out his job as a Sales Manager as well as he would have liked during the first two week period. The applicant said that in spite of this, he carried out his duties diligently at all times. During this initial period the applicant had a good look at the club and its operations and thought about ways to improve its sales. He had to oversee all of the clubs operations, including the gym, the swimming pool, receiving complaints and getting people to fix things. Some of the time he showed people around and sold memberships. He was involved in staff training and conducted role plays to evaluate the Sales Persons' selling techniques. The applicant considered that as he was the Sales Manager (as distinct from a Sales Person) he was doing his job if he devised ways of improving the sales performance of the other staff at the Bullcreek club, as this would improve the overall level of sales at Bullcreek. He did consider he had to do some selling, but this was only a small part of the overall job.
Mr McCabe, on the other hand, was of the view that the applicant should take a lead in selling memberships. He said that Sales Manager should personally sell $25,000 to $30,000 worth of memberships per month. It is undisputed that the applicant sold much less than this amount. Mr McCabe said that the question of the applicant's sales performance was put squarely to him when he was hired and continually during his employment. He expected the applicant to immediately achieve very high levels of sales, despite the fact that the applicant had received no training specific to the Body Club. Mr McCabe was asked if this expectation was perhaps a little unrealistic. He said that it was not unrealistic and that if he personally was put in any club in Western Australia he would "turn them around in 48 hours". It was conceded by Mr McCabe that he didn't tell the applicant that he was expected to achieve a personal sales target of $25,000 to $30,000 worth of memberships per month.
The sales figures for all Body Club clubs from October 1994 to January 1995 show the following levels of sales:
Bullcreek: October $56,000
November $49,000
December $39,000
January $82,000
Cannington: October $58,500
November $50,500
December $27,400
January $84,200
Claremont: October $90,700
November $118,000
December $52,000
January $112,500
Osborne Park: October $44,000
November $45,000
December $17,000
January $54,000
North Beach: October $45,000
November $46,000
December $34,000
January $59,000
The figures for the Bullcreek branch for the period 1 November 1994 to 25 November 1994 show sales of between $42,000 and $43,000. The applicant says that he was comparing the Bullcreek's figures for November with those of October, and that the figures for November were higher than at the corresponding time in October. Mr McCabe was not happy as he thought Bullcreek should sell $80,000 worth of memberships per month. The Club took $50,000 to $55,000 per month to run and he considered that the applicant was losing the Club money as he was not meeting his personal sales targets.
The Termination
The applicant stated that at no time before 25 November 1994 did he receive any oral or written complaints about his sales performance. On at least two occasions during his employment, including one occasion just before he was dismissed, Mr McCabe told him that his membership sales figures had been consistent. On one day the Bullcreek branch had achieved higher membership sales than the Claremont branch.
On 25 November the applicant was visited at work by Gary Easthope. Mr Easthope said that he himself had been dismissed by Mr McCabe. He warned the applicant to expect a visit from Mr McCabe shortly and that it was likely that the applicant would be dismissed.
Shortly afterwards on 25 November Mr McCabe arrived at the Club. He gave the applicant a letter advising him that his employment was being terminated. The applicant was told that the leading Sales Person from the Claremont Branch would be replacing him. Apparently this Sales Person stayed at the Bullcreek branch just one week before insisting she return to Claremont. The figures for the Bullcreek branch immediately after the applicant was dismissed do not record any significant improvement in sales during the time that Sales Person was at the club.
Mr McCabe states in his affidavit sworn 22 February 1995 that at the end of the first fortnight he told the applicant he was not happy with the level of sales and would monitor his sales performance on a daily basis. He states that he had several conversations with the applicant in this regard over the next few days. He states that one week prior to his dismissal he had a meeting with the applicant and appraised him of his dissatisfaction with the applicant's performance and said that unless there was an immediate increase in the level of sales the respondent would have to terminate his services.
Mr McCabe said in his verbal evidence that he had worked for health clubs in WA for years and could provide a good estimate of how much any club can expect to bring in by way of membership sales. He said that the applicant's personal sales level was one of the worst he had ever seen, and that the applicant showed him from his lack of understanding that he was totally wasting his time with him. He conceded that his assessment of the applicant was based on his poor personal sales figures and his (McCabe's) own feeling that the applicant did not have the necessary qualities to succeed at the Body Club.
Mr McCabe admitted that he gave the applicant some positive feedback only a few days before his employment was terminated. Mr McCabe said that he had decided a week before the termination that the applicant was no good. He looked at the applicant's performance over 26 days and decided he couldn't afford to carry him for months.
Findings On The Evidence
This court is faced with a direct conflict of evidence on the question of whether the procedural requirements of Section 170DC have been complied with. The applicant, on the one hand, states that he was never given any warning that his job was in danger. Mr McCabe, on the other hand, says that the applicant was given several warnings.
I accept that Mr McCabe stressed, perhaps several times, to the applicant that the Bullcreek branch was expected to achieve high sales figures. However, such a general exhortation is not sufficient to satisfy the requirements of Section 170DC (see Wilcox, CJ in Nicolson v Heaven and Earth Gallery Pty Ltd [1994] 126 ALR 233). To the extent that evidence of the applicant and Mr McCabe differs both on specific threats to the applicant's employment and the duties that the applicant was required, under his contract of employment to carry out , I prefer the evidence of the applicant.
In the first place, the written contract of employment lists a large number of duties required to be carried out by the Sales Manager, and only the very last portion of the contract mentions, as one half of a sentence "make himself available to sell memberships at all times". This conflicts with Mr McCabe's assertion that the applicant was there almost exclusively to take the lead in sales.
Secondly, the letter of termination makes no mention of any previous warnings that the applicant's employment would be terminated. One part of that letter reads "In your own words, you stated to me that you would assess the situation at the end of the month. I am assessing that situation now. I direct no blame or responsibility to you, however, I must act now".
Thirdly, I found that much of what Mr McCabe said in his evidence either didn't ring true or else was unrealistic. One example is his rather grandiose claim that he could be put into any health club in WA and turn it around in 48 hours.
Council for the respondent submitted that the applicant didn't need warnings because there were constant self-evident criteria as the applicant kept a book of sales figures himself. I am unable to accept that argument as the provisions of Section 170DC quite clearly state that an employee must be given an opportunity to defend himself against the allegations made against him before his employment is terminated.
I find that the applicant was not given the opportunity to defend himself against the allegations made against him. It follows that there has been a breach of the procedural requirements of Section 170DC of the Act and the application must succeed.
Having said that, it is strictly unnecessary for me to consider the question of whether there was a valid reason for termination of the applicants employment. Mr McCabe admitted that he never told the applicant that he was personally expected to sell $25,000 - $30,000 worth of memberships per month. The reason given for the termination was that the applicant was not a good sales person. However, this assessment was made on the basis of only a few weeks of employment when, during the first two weeks, the previous Sales Manager was still there. Further, it was clear from the contract of employment that the applicant was employed as a Sales Manager, not a Sales Person. Everything was directed at monthly targets, and the applicant was not given the opportunity of working for even one month.
Mr McCabe's target sales figure was based on his own assessment of what the Club should produce and was not based on any hard data. It was unfair and unrealistic to expect an immediate increase in sales. The standards required by Mr McCabe were, in my view, unrealistic, especially given the short time the applicant was employed. Given the fact that the employer bears the onus to prove that the employee was terminated for a valid reason, this Court could not have been satisfied that a valid reason existed.
The Appropriate Remedy
The applicant seeks reinstatement and compensation. The respondent vehemently opposes reinstatement and says that it would be condoning a system where someone is not generating any profit. It was stressed that the respondent is engaged in private enterprise and has very high capital costs. It was said that it was not fair to anyone in private enterprise to reinstate a person if they are not making a contribution. I cannot agree with this submission. It is clear from both the wording of Section 170EE and the decision of Liddell v Lembke (1994) 127 ACR 342 that reinstatement is intended to be the primary remedy for the breach of Section 170DC. Although the question of an employee's productivity is relevant, I am unable to find on the evidene that the applicant was "unproductive" within the terms of his contract of employment.
The respondent bears the onus of showing that reinstatement is impracticable, and has not discharged that onus in this case. Mr McCabe has stated that he bears the applicant no animosity. The applicant is keen to prove himself.
The applicant has received one weeks pay in lieu of notice.
In this case, it follows that the following orders are appropriate:
The respondent reinstate the applicant to the position in which the applicant was employed immediately prior to his termination at the salary he was receiving, and on the same terms under which he was employed prior to his termination;
The respondent pay to applicant an amount equal to the sum of $769.23 per week from 2 December 1994 until the date of this order. Such sum represents the gross remuneration lost by the applicant because of the termination and is to be paid within 21 days of the date of this order;
The period from the date of termination until the date of reinstatement is to be treated as one of continuous employment for all purposes.
I certify that this, and the preceding ten (10) pages are a true copy of the reasons for judgement of judicial registrar Boon.
Associate:
Date:
Counsel for the Applicant: Mr G Gishubl
Solicitors for the Applicant: Jackson McDonald
Council for the Respondent: Mr I Wilson
Solicitors for the Respondent: Ian Wilson
Date of Hearing: 1995
Date of Judgement: 13 April 1995
IN THE INDUSTRIAL RELATIONS ) No. WI 625 of 1994
COURT OF AUSTRALIA )
WESTERN AUSTRALIA DISTRICT REGISTRY )
BETWEEN:Sean Kenneth Kneebone
Applicant
AND:Baysilk Holdings Pty Ltd
Respondent
BEFORE: Boon JR
PLACE: Perth
DATE: 13 April 1995
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The respondent reinstate the applicant to the position in which the applicant was employed immediately prior to his termination at the salary he was receiving and on the same terms under which he was employed prior to his termination within 14 days of the date of this order;
The respondent pay to applicant an amount equal to the sum of $769.23 per week from 2 December 1994 until the date of reinstatement. Such sum represents the gross remuneration lost by the applicant because of the termination and is to be paid within 21 days of the date of this order;
The period from the date of termination until the date of reinstatement is to be treated as one of continuous employment for all purposes.
Note:Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.
CATCHWORDS
INDUSTRIAL LAW - Termination of employment - whether employee had opportunity to respond to allegations - whether warnings given - requirements for compliance with Section 170DC - remedy - whether reinstatement impracticable.
INDUSTRIAL RELATIONS ACT 1988, Ss 170DC, 170DE, 170EE
Nicolson v Heaven and Earth Gallery Pty Ltd (1994) 126 ALR 233
Liddell v Lembke (1994) 127 ALR 342
Sean Kenneth Kneebone v Baysilk Holdings Pty Ltd WI 625 of 1994
BEFORE: Boon JR
PLACE: Perth
DATE: 13 April 1995
0
3
0