Tamblyn v Home Tune (Victoria) Pty Ltd

[1996] IRCA 158

DECISION NO:  158/96

CATCHWORDS

INDUSTRIAL LAW - complaint of UNLAWFUL TERMINATION - whether termination for VALID REASON  of OPERATIONAL REQUIREMENTS - whether HARSH UNJUST OR UNREASONABLE - COMPENSATION

Industrial Relations Act 1988, ss 170EA, 170DE(1), 170DE(2), 170EE(3)

PETER TAMBLYN v HOME TUNE (VICTORIA) PTY LTD
VI 4776 of 1995

Before:  PARKINSON JR
Place:  MELBOURNE
Date:  1 MAY 1996

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 5143 of 1995

B E T W E E N:

Peter TAMBLYN
Applicant

A N D

HOME TUNE (VICTORIA) PTY LTD
Respondent

REASONS FOR DECISION

1 May 1996  PARKINSON JR
This is a decision made pursuant to s170EA of the Industrial Relations Act 1988. The applicant was employed in September 1994 by the respondent as General Manager. His employment was terminated on 31 August 1995.

The respondent relied upon there being a valid reason based upon the operational requirements of the business for the termination of the applicant’s employment. The evidence was that the applicant was employed with a view to expanding the business of the respondent.  It was submitted that rather than there being an expansion in the business, there was a downturn making it no longer viable for the applicant to be employed. The downturn was attributed to difficulties with various franchisees, together with the loss of a monthly contract.

The respondent relied upon the cash flow position of the business to identify the operational requirement. Various exhibits created by the respondent from its records were tendered in the proceedings. These exhibits tended to identify a lack of cash flow to the business and significant expenditure throughout the entire trading period identified in the accounts. Those trading periods were for the financial years 1993, 1994 and to 31 January 1995.  It did not appear that there had been significant alteration in the respondent’s financial position at or around the time leading to the termination of employment, although on the profit and loss statement for the period ending 31 January 1995, the gross profits had reduced by $2,000.00 in comparison with year to date figures for 1994.  The evidence also identified that the respondent had ongoing difficulties with various franchise operators who were dissatisfied with the arrangements between themselves and the respondent.

The applicant’s evidence was that the respondent’s cash flow position was no different at the time his employment was terminated to the position when he was employed. The accounting documents tendered confirm this to be the case.  His evidence was that in hindsight he was of the view that the respondent was never able to afford to employ him and should never have taken him on. Evidence was given by the former accountant for the business, Ms Dang, as to the financial situation of the respondent. Although she was critical of the expenditure by the Managing Director, Mr McCraken, in substance her evidence supported the position that the financial situation of the respondent had been and continued to be unhealthy.

In determining whether a valid reason existed for the termination of employment, I am conscious of the fact that the financial circumstances of the respondent were known to it at the time of the engagement of the applicant.  However, it is clear that the further factors of franchisee dissatisfaction and contract loss intervened to compromise further the financial position of the respondent after the employment had commenced. It is the existence of these additional factors which enable me to be satisfied on balance, when taking into account the financial position,  that the respondent had valid reason for the termination of the applicant’s employment based upon the operational requirements of the business.

I turn now to consider the operation of s170DE(2).

The applicant was hired by the respondent in circumstances where its financial position was little better than that which applied at the date of the termination of the employment.  Notwithstanding that this was the case, the respondent nevertheless decided to hire him. The evidence of the respondent was that it took no steps to replace the applicant after the termination of the employment.  However, the evidence of a franchisee, Mr  Pleming, was that he was advised by the respondent’s managing director, that a new general manager, a Mr Rinaldi, had been or was to be appointed by the respondent. Further, the evidence is that the respondent subsequently entered into a management arrangement to enable potential purchasers of the business to determine whether the business would be a viable option for purchase.  Little detail of the management arrangements was provided to the court and no proper explanation was provided as to the function of Mr Rinaldi or other persons operating the respondent’s business.  

The evidence of the respondent was that a decision was taken to enter alternative arrangements in August 1995 and that, having regard to the figures and projections, it was decided to implement the termination of employment immediately, although the management agreement did not commence to operate until November 1995.  The applicant was informed of the decision to terminate his employment on 31 August, effective that day. The applicant was paid an amount equivalent to two weeks pay in lieu of notice.

I am satisfied that the manner in which the respondent approached the implementation of these arrangements, and in particular the time frames applied, resulted in the applicant’s employment being terminated harshly, unjustly and unreasonably. This is particularly so in circumstances where the applicant had been encouraged by the respondent to take the employment with it and to leave a secure position with a former employer to join the respondent’s business. I accept the applicant’s evidence that he had no prior knowledge or warning of the possibility of such a decision being taken or being considered by the respondent.  This is credible in view of there having been no significant alteration in the financial position of the respondent over the period of the hiring.  The respondent continued to trade after the termination of the employment and operated by way of management arrangements with a new manager after November 1995, albeit with a view to arranging sale.

I am satisfied that the implementation of the decision to terminate the employment with haste and without any serious identification to the applicant of alternatives and options to termination of his employment, constituted the termination as harsh. 

Having regard to the circumstances of the termination of employment I am satisfied that an order for reinstatement would be impracticable. In the circumstances of the employment, I am satisfied that additional time ought to have been accorded the applicant and that the applicant was reasonably entitled to anticipate a lengthier period of notice and consequently time to get his own affairs in order. 

I am satisfied that a reasonable period for this to occur, having regard to the length of the employment, together with the implementation of the management arrangements and the personal circumstances of the applicant, would be to November 1995, a period of two months.

The applicant was paid two weeks pay in lieu of notice as at 31 August 1995. The order of the court will be that an additional amount of $4200.00, representing an additional six weeks pay, be paid to the applicant by the respondent as compensation pursuant to s170EE(3). The amount includes an amount in recognition of 4 per cent superannuation contributions payable on behalf of the applicant.

The order of the court will be:

1. That the respondent pay to the applicant compensation in the sum of          $4200.00.

I certify that this and the preceding four (4) pages
are a true copy of the reasons for decision of
Judicial Registrar Parkinson.

Associate:
Dated:  1 May 1996

APPEARANCES

Applicant in person
Respondent in person

Date of hearing:  5 March 1996

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 5143 of 1995

B E T W E E N:

Peter TAMBLYN
Applicant

A N D

HOME TUNE (VICTORIA) PTY LTD
Respondent

MINUTES OF ORDER

1 May 1996  PARKINSON JR

THE COURT ORDERS THAT:

1. The respondent pay to the applicant compensation in the sum of      $4200.00

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