Stephens v Malmo Pty Ltd

[1996] IRCA 429

DECISION NO: 429/96

C A T C H W O R D S

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - alleged UNLAWFUL TERMINATION - whether termination at the initiative of the employer - VALID REASON - HARSH, UNJUST AND UNREASONABLE - claim for underpayment of wages pursuant to STATE AWARD.

Industrial Relations Act 1988 (C’th) Ss 170DE(1), 170DF(1)(e), 170EA, 170EDA(1)(b).
Metal Trades (General) Award No. 19 of 1965.

Brackenridge v Toyota Motor Corporation Australia IRCA No. 162 of 1996, Beazley J, 19 April 1995, unreported.
Hartigan v Forde Constructions IRCA No. 314 of 1996, Ritter JR, 16 July 1996, unreported.
Walker v Ken Vidler Surfsports IRCA No. 655 of 1995, R.D. Farrell JR, 30 November 1995, unreported.
Mohazab v Dick Smith Electronics Pty Ltd (No 2) 62 IR 200.
Aitken v CMETSWU (1995) 63 IR 1.
Kenney v PM Loveland IRCA No. 26 of 1995, Ritter JR, unreported.

Brian David STEPHENS -v- MALMO PTY LTD 
WI 2535 of 1995

BEFORE:        R. D. FARRELL JR
PLACE:           PERTH
DATE:             29 August 1996

IN THE INDUSTRIAL RELATIONS     )
COURT OF AUSTRALIA  )
WESTERN AUSTRALIA  )
DISTRICT REGISTRY  )         

No. WI 2535 of 1995

BETWEEN:  

Brian David STEPHENS
  Applicant

AND:  

MALMO PTY LTD
  Respondent

MINUTE OF ORDERS

BEFORE:                R. D. FARRELL JR

PLACE:                   PERTH

DATE:  29 August 1996

THE COURT ORDERS THAT:

1.The respondent pay to the applicant compensation pursuant to Section 170EE(2) of the Industrial Relations Act (1988) in the sum of $1732.80, within 14 days of the date of this order.

2.The respondent pay to the applicant wages in the sum of $2096.30 which should have been but were not paid pursuant to the Metal Trades (General) Award No 19 of 1965 (WA), within 14 days of the date of this order.

NOTE:           Settlement and entry of Orders is dealt with by Order 36 of the   Industrial Relations Court Rules

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY

WI 2535 of 1995

BETWEEN:

Brian David STEPHENS
Applicant

AND:

MALMO PTY LTD
Respondent

REASONS FOR DECISION

29 August 1996  R. D. FARRELL JR

1. This is an application under Section 170EA of the Industrial Relations Act 1988 for  compensation arising from the alleged unlawful termination of the employment of the applicant, Brian David Stephens (“Mr Stephens”), by the respondent Malmo Pty Ltd, (“the Company”).

1. The respondent contends that there was no termination at the initiative of the employer, so that Section 170EA of the Act has no application. The applicant contends there was a termination at the initiative of the employer.

1. The respondent contends that, for the purposes of Section 170DE(1), any termination at the initiative of the employer would have been for a valid reason based upon the operational requirements of the undertaking.

1. The applicant contends there was no valid reason for the termination, and further that the termination was for a prohibited reason contrary to Section 170DF(1)(e).

1. Finally, the applicant urged that the Court order the respondent to pay to the applicant certain amounts which it contends are due to the applicant under a Western Australian award, including pay in lieu of rostered time off, tool allowances, superannuation with interest and underpayment of wages.

Findings of Fact.

1. Malmo Pty Ltd is a trustee company for the RE Robertson Family Trust.  Mr Ron Robertson, the managing director of Malmo Pty Ltd, was the sole witness for the Company. 

1. The Company runs two businesses in adjoining premises at Pinjarra, a country town some 70 kilometres south of Perth. The businesses run by the Company were called “Murray Auto Wreckers” and “Pinjarra Tyres”. The Company also conducted a towing service as part of the wrecking business. The businesses have separate bank accounts but there is some overlap in the activities of the employees of the respective businesses.  The wrecking business bought cars and disassembled them to salvage parts of any value, with the residue being sold for crushing.

1. The wrecking business employed Mr Stephen MacGregor who, while not a qualified mechanic, had acquired good mechanical knowledge as a result of his experience working with cars. It also employed Mr Ron Robertson’s son, who had similarly  acquired good mechanical knowledge through experience working with cars. With this practical mechanical expertise available to it, the wrecking business had some work servicing utility vehicles  (“utes”).

1. However, Mr Robertson’s son was moving on to spend more time with his own trucking business and Mr MacGregor indicated to Mr Robertson that, after 7 years with the Company, he was ready to look for a change of job. As a result, Mr Robertson contacted the Commonwealth Employment Service and the Job Link services in Pinjarra.

1. Mr Robertson asked these services for someone with very good mechanical knowledge or, alternatively, a mechanic who was unable to find employment, perhaps because he was in his fifties. I accept that Mr Robertson was hopeful that, if he hired a qualified mechanic, he would be able to expand the mechanical servicing  side of the wrecking business. However, he was adamant that whoever took the position must be prepared to accept alternative work in the wrecking yard, if no mechanical servicing work was available.

1. Mr Stephens was 48 years of age. He had obtained mechanical qualifications after an apprenticeship in the United Kingdom. In 1973 he had immigrated to New South Wales and obtained a certificate to work as a motor mechanic in Australia. He had worked as a mechanic in New South Wales and later in Western Australia. More recently he  bought the Old Mill Guesthouse in Yarloop, a small town south of Pinjarra. The business was primarily run by Mr Stephens’ wife. However, it became clear that Mr Stephens would need to find additional paid employment. He therefore applied for jobs and learnt from the Pinjarra Job Link that Murray Auto Wreckers were looking for a mechanic. 

1. On the morning of Friday 17 March 1995, Mr Stephens went to the wrecking yard, but Mr Robertson was not there. After speaking with Mr Robertson’s son, he left and returned that afternoon.

1. Mr Stephens says that, when he eventually spoke to Mr Robertson, Mr Robertson told him that he was looking for a mechanic, preferably someone older. Mr Robertson told him that they were getting quite a bit of repair work, but if there was insufficient repair work then Mr Stephens would have to be prepared to work elsewhere to help out in other parts of the wrecking business. Mr Robertson said that they were hoping to attract more mechanic work. 

1. Mr Robertson told Mr Stephens that the wage would be “a basic mechanic’s wage and if things improved then it would be reviewed”. No figure was mentioned, and Mr Stephens only learnt that he was to be paid $420.00 per week when he received his first pay packet. Mr Stephens said he understood the reference to the “basic mechanic’s wage” to be a reference to the relevant award rate. He did not know what the award rate was.

1. Mr Robertson rang Mr Stephens the next day and Mr Stephens accepted the position.  It was agreed he would start on Monday 20 March 1995.

1. In the ensuing months, Mr Stephens performed the mechanical work for the wrecking business. By far the largest client was Brandrill Ltd, a business located across the street from Murray Auto Wreckers. Mr Stephens serviced their utes and their four-wheeled drive vehicles. This work included overhauling brakes, repairing gear boxes, overhauling hubs and general vehicle maintenance and repairs. There was some other outside work, including work on various buses and some other private vehicles. When there was no servicing available, Mr Stephens helped strip vehicles from the wrecking yard. Part of this work included the overhauling of gear boxes from wrecked vehicles and replacing of rings and bearings of engines from wrecked vehicles. 

1. Mr MacGregor left in late April 1995 and was replaced by Mr Gerry Willems. Mr Willems had experience working in wrecking yards and also had good mechanical knowledge, but was not a qualified mechanic. Mr Willems managed the wrecking yard, and Mr Stephens answered to him with Mr Robertson as the overall boss. Mr Willems was paid $293.00 after tax.  Mr Stephens was paid $343.60 after tax. There was another young employee with less experience.

1. Mr Robertson required the employees to be on the premises by 8.00am and to stay until 5.00pm to ensure there were sufficient employees to keep the doors of the business open between those times. He did not believe it was practicable to stagger the starting and finishing times of employees because it was sometimes necessary for an employee to leave the premises in the course of business. There needed to be other employees available to keep the doors open when that happened. Mr Stephens received no rostered days off.

1. Later in the year, Mr Stephens received a government information pamphlet about employee superannuation in his post box. He says he had always assumed he was receiving the superannuation to which he was entitled, but he doesn’t believe it had ever been discussed. He was not aware, however, of the identity of the superannuation fund it was being paid into. At a morning tea break, which he believes was in November 1995, but which Mr Robertson places as early as  September, Mr Stephens asked Mr Robertson which fund his superannuation was paid into. Mr Robertson’s response was that he wouldn’t mind paying the superannuation if Mr Stephens got any money at the end of the day, but in his experience the costs taken out by the superannuation funds “took it all”. Following this conversation, Mr Stephens realised that the Company was not making any superannuation payments to his benefit.

1. Mr Stephens then began making inquiries about his entitlements. After consulting the telephone book, he rang up a Federal industrial relations body and was then referred to a Western Australian industrial relations body. It was unclear from the evidence whether he spoke to the relevant government departments or the State and Federal Industrial Relations Commissions.

1. His initial inquiry was whether it was compulsory for his employer to pay him superannuation.  He was advised that his employer should pay 4 percent of his salary in superannuation up to 1 July 1995 and 5 percent from then on.  Mr Stephens then asked what his award rate of pay was as a mechanic.  He was advised it was $433.20 per week and that the award rate had increased to that figure on 4 April 1995.  He was also advised he should be working a 37.5 hour week and that he was entitled to a tool allowance of  $9.20 per week.

1. Meanwhile on Friday 24 November 1995, Mr Robertson learnt that there were insufficient funds in the bank account for Murray Auto Wreckers to pay the employees’ wages. Mr Robertson got around this problem by transferring money from the Pinjarra Tyres account to enable the wages to be paid. While there were funds in the Pinjarra Tyres account, he was aware that there were overdue bills to tyre suppliers for amounts exceeding those funds.

1. While Mrs Robertson was making up the pays that day, Mr Stephens approached her, asking her whether she knew that he was not receiving the basic award pay to which he was entitled. She told him he should speak to Mr Robertson about that it, and later told Mr Robertson that Mr Stephens wanted to see him about the pay.

1. Later that day, after lunch, Mr Robertson approached Mr Stephens in the lunch room.  No one else was present. Mr Robertson said he understood Mr Stephens was unhappy in the work place. Mr Stephens responded that that was not the issue. He expressed his disappointment that he was not being paid the superannuation to which he was entitled. He said he was now entitled under the award to receive $433.20 gross per week rather than $420.00. Mr Robertson responded that $420 was the award he knew of and that was the figure he had been given by his son-in-law prior to his employing Mr Stephens. Mr Stephens also raised the entitlement he believed he had to the tool allowance and to overtime payments.

1. Mr Robertson said he couldn’t afford to pay Mr Stephens any more than he was paying him, and if Mr Stephens didn’t like that then Mr Robertson would have to terminate him. Mr Stephens replied that he was not prepared to work for less than the award rate and was not prepared to work without his “super”, Mr Stephens said he had an appointment to see a person with knowledge about industrial relations to see what his options where. Mr Robertson responded that there was no point in doing anything because he would just close the doors. By then it was after 3.00pm, and Mr Robertson said he was not prepared to pay any back pay or superannuation.

1. It is Mr Stephens’ recollection that Mr Robertson said he was to come in on Monday morning, and that if there was work to be done he could stay until Friday but otherwise he would be finished up.

1. Mr Robertson said that he had been thinking of terminating Mr Stephens employment anyway because there hadn’t been much work.

1. Mr Stephens worked out in consultation with an industrial relations consultant, what he believed he was owed and presented this amount to Mr Robertson on his last day at work - Friday 1 December 1995. It totalled about $3,000.00. Mr Robertson responded that he would not be getting any more. Mr Stephens was paid his 2 weeks’ accrued annual leave and his final pay. He had worked out his week’s notice. Mr Robertson says that Mr Stephens’ final pay again came from the bank account of Pinjarra Tyres, because there was no money in the Murray Auto Wreckers account.

1. Mr Stephens was given a Department of Social Security Employment Separation Certificate on 1 December 1995. The Certificate declares that the employment was terminated due to “shortage of work”, and that the employee ceased work voluntarily.  However, no reason was given for the voluntary termination of employment. 

1. Mr Stephens says he only “resigned” because Mr Robertson refused to pay him the amounts to which he was entitled.

Whether Termination at the Initiative of the Employer

1. It is well settled that “termination” for the purposes of the relevant provisions of the Act means “termination at the initiative of the employer”.

1. In Mohazab v Dick Smith Electronics Pty Ltd (No 2) 62 IR 200 at 205, a Full Court of this Court said:

   “In these proceedings it is unnecessary and undesirable to endeavour to formulate an exhaustive description of what is a termination at the initiative of the employer but plainly an important feature is that the act of the employer results directly or consequentially in the termination of the employment and the employment relationship is not voluntarily left by the employee. That is, had the employer not taken the action it did, the employee would have remained in the employer relationship.”

1. In this case, Mr Stephens claimed what he believed to be his entitlements under the award. Mr Robertson told Mr Stephens that he refused to pay those entitlements. 

1. In my view, the communication of that refusal was the act on the part of the respondent which resulted in the termination of the employment. Had his employer not refused to meet its obligations, Mr Stephens would have remained in his employment.

1. I therefore find that there was a termination at the initiative of the employer.

Whether There was a Valid Reason for Termination

1. Section 170EDA(1)(a) confers the onus on the employer to prove that there was a valid reason for the termination of the employee’s employment based on the operational requirements of the undertaking, establishment or service.

1. I accept the evidence given by Mr Robertson as to the state of the Company’s bank accounts. I also accept his testimony that he genuinely believed at the time of the relevant discussion with Mr Stephens that the Company’s wages bill was unsustainable.

1. The financial accounts provided to the Court lend support to the proposition that the operational requirements of the wrecking business would have justified a reduction of its workface and thus its wages bill.

1. The proposition is given further support by the applicant’s concession that business was getting slow toward the end of 1995.

1. Given that the number of employees had to be reduced, and given the relatively high wage paid to Mr Stephens and the reduced demand for his skills, the decision to terminate his employment rather than that of one of the other employees is defensible.

1. I am satisfied that, while the exact timing of the decision may have been influenced by the fact that Mr Stephens made the award claim, there was a valid reason for the termination of Mr Stephens’ employment based on the operational requirements of the wrecking business.

Whether the Termination was Harsh, Unjust or Unreasonable

1. The next matter for determination is whether the termination was harsh, unjust or unreasonable, so as to be in breach of Section 170DE(2)..

1. Section 170EDA(1)(b) confers the onus on the employee to prove that, because the termination is harsh, unjust or unreasonable, there was not a valid reason for the termination.

1. It is now well established that, even in the case of a genuine redundancy, the termination of employment of a particular employee may be harsh, unjust or unreasonable.

1. As I observed after a review of the authorities in Walker v Ken Vidler Surfsports, (IRCA No. 655 of 1995, R.D. Farrell JR, 30 November 1995, unreported) the indicia to which this court has regard in connection with this issue can be summarised as follows:

   ·The employer should give as much warning as possible to enable the employee affected to take early steps to inform themselves of the facts, to consider possible alternative solutions and, if necessary, to find alternative employment either with the employer or elsewhere.

   ·The employer should seek to see whether instead of dismissal the employee can be offered alternative employment.

   ·The employer should consult with the employee affected, and consider any such possible alternative solutions or possible alternative employment options raised by the employee.

   ·The employer should, with appropriate consultation, establish objective criteria to be applied in selecting the employees to be made redundant, which do not depend solely on the opinion of the person making the selection.

   ·The employer should see that the selection is made fairly in accordance with the established criteria and consider any representations that may be made in respect of the selection.

1. Even allowing for the proposition that these indicia should not be applied in an unconsidered manner to small businesses, it is clear that the Company fell well short of the requirements in the manner in which Mr Stephens was terminated.

1. Accordingly, I find that the termination was harsh, unjust or unreasonable for the purposes of Section 170DE(2).

Whether Termination for Prohibited Reason

1. The Applicant contends that Mr Stephens’ employment was terminated for reasons including the filing of a complaint against the Company involving alleged violation of laws or regulations or recourse to competent administrative authorities. This would be in breach of Section 170DF(1)(e).

1. I have no doubt that the fact that Mr Stephens complained to Mr and Mrs Robertson about their underpayment of his wages and entitlements in breach of the award affected the timing of the termination of his employment, and was one of the reasons for the termination.

1. However, it is not apparent to me that Mr Stephens actions amounted to “the filing of a complaint”. While there was evidence that Mr Stephens made enquires with Federal and State bodies, it was not said that he laid any complaint with those bodies before his termination.

1. For that reason, I do not find a breach of Section 170DF.

Remedy

1. Having found that the Company is in breach of Sections 170DE(2) of the Act, I must consider the appropriate remedy in all the circumstances.

1. Reinstatement was not sought and I am satisfied it would not be practicable.

1. Accepting that this is the case, the Court is empowered under Section 170EE(2) of the Act to order the payment of such compensation as it considers “appropriate in all the circumstances of the case”.

1. In assessing the compensation that was appropriate, the Court would have regard to what is reasonable in all the circumstances and will look at what would have been likely to occur had the Act not been contravened: Aitken -v- CMETSWU 1995 63 IR 1 per Lee J at 9.

1. Given that Mr Stephens has not been replaced, and given the additional evidence relating to the Company’s continuing poor financial performance following the termination of his employment, I consider it likely that, had Section 170DE(2) of the Act not been contravened, then Mr Stephens would still have been dismissed. He is likely, however, to have been given greater notice, and there is a remote possibility that consultation would have led to some other proposition such as job-sharing, part-time employment or the acceptance by Mr Stephens of a different job description and role, with lesser pay.

1. Accordingly, I will order compensation under Section 170EE of an amount equal to 4 weeks’ wages.

Whether Jurisdiction to Enforce Entitlements Under Western Australian Award

1. The Applicant seeks orders of this Court enforcing the Metal Trades (General) Award No. 19 of 1965, which is an award made by the Industrial Relations Commission of Western Australia under the Industrial Relations Act 1979 (WA).

1. Section 430(1) of the Industrial Relations Act 1988 (C’th) provides that:

   “So far as the Constitution permits, jurisdiction is conferred on the Court in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Court is invoked.”

1. Section 418 of the Act provides that:

   “In every matter before it, the Court is to grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided.”

1. As Beazley J held in Brackenridge v Toyota Motor Corporation Australia (IRCA No. 162 of 1996, Beazley J, 19 April 1995, unreported, at page 66) after a review of the authorities, the “necessary association” generally applied in invoking the associated jurisdiction of the Court is a common substratum of facts.

1. I am satisfied that the applicant’s claims under the Metal Trades (General) Award No. 19 of 1965 (“the Award”) form part of the common substratum of facts in this case. Though they arise in relation to his entire employment with the respondent, it was the applicant’s raising of the claims under the Award which precipitated his termination.

1. For the purposes of Section 418, the Award forms part of the law of Western Australia. The applicant is entitled to a remedy in respect of the applicant’s legal claim under the Award.

1. I note that Ritter JR of this Court has made orders for payment of entitlements due under a Western Australian award: Hartigan v Forde Constructions (IRCA No. 314 of 1996, Ritter JR, 16 July 1996, unreported). Ritter JR appears to have approached it as a claim for a contractual entitlement, with the right to the payment of the benefits set out in the award imported by statute into the relevant contract.

1. In the present case I have treated the applicant’s claim as a claim under the award. Just as a contractual claim is a legal claim capable of being dealt with within the associated jurisdiction, so also is an award claim.

The Claims under the Metal Trades (General) Award No. 19 of 1965

1. I am satisfied that one of the “industries” in which the wrecking business was involved was the “motor garage and service station” industry, so that the Company falls within Clause 3 - the “Area and Scope” clause - of the Award. I am satisfied, having considered his qualifications, the circumstances in which he was employed and the work done since he was employed, that Mr Stephens was a motor mechanic for the purposes of the Award.

1. Given that the Award applies to Mr Stephens as a motor mechanic, when the award rate increased from $420, Mr Stephens was entitled to be paid the new award rate. Under the terms of the Industrial Relations Act 1979 (WA), any agreement between the Company and Mr Stephens that he receive less than the award rate would have been unenforceable, unless it met the special requirements of a Workplace Agreement under the Workplace Agreements Act 1994 (WA). Mr Stephens never received the increased award rate. The applicant has demonstrated that he was therefore underpaid a total of $839.00 in the period from 4 April to 1 December 1995, and I will order that the respondent pay that deficit.

1. Mr Stephens worked at least a 40 hour week without rostered days off, when he was entitled under the Award to a 38 hour week. The applicant calculates he worked on nine days when he should have been given rostered days off. However, the employer would have been entitled instead, under clause 13 of the Award, to roster its employees to work 7.6 hours each day. There would be less than an hour’s overtime worked each day had that roster been adopted, and the penalty rate for each day’s overtime would never have exceeded time and a half. Where the hourly rate is $11.64, the time and a half rate is therefore $17.46. The respondent should therefore pay $1,257.30 for Mr Stephen’s 72 hours of overtime.

1. I find that the applicant’s claim to have been entitled to a tool allowance was not made out, because the Company provided the tools ordinarily required by Mr Stephens. Mr Stephens chose to use his own tools because he preferred them and could more conveniently locate them.

Superannuation

1. The applicant claimed the superannuation payments which should have been made by the respondent “as per relevant Commonwealth legislation”.

1. Ritter JR considered the obligations under the Commonwealth Superannuation Guarantee legislation in Kenney v PM Loveland (IRCA No. 26 of 1995, unreported, at page 41). He noted that the legislation does not give the employee any entitlement to receive the amount of the contribution which an employer ought to have, but did not, pay to a superannuation scheme, and did not make the order sought. For the reasons set out by Ritter JR in that decision, I will also decline to make the order sought in this application.

Conclusion

1. Accordingly, I will make an order for compensation, and an order for payment of wages, being for the total of the underpayment of wages and the failure to pay overtime.

I certify that this and the preceding (16) pages
are a true copy of the reasons for decision of
Judicial Registrar R.D. Farrell.

Associate:
Dated:  29 August 1996

APPEARANCES

Counsel appearing for the applicant:          Mr J Reyburn

Solicitors for the applicant:  Nicholson Clement

Counsel appearing for the respondent:      Mr G Chitty
Solicitors for the respondent:  Grant Chitty

Dates of Hearing:  17 April 1996           

Date of Judgment:  29 August 1996