William John Begg v Clay & Mineral Sales Pty Ltd
[1997] FCA 658
•21 JULY 1997
FEDERAL COURT OF AUSTRALIA
INDUSTRIAL LAW - complaint of unlawful termination - review of decision of judicial registrar - whether valid reason for termination because of redundancy - failure to consult - payments made by employer to ameliorate effects of redundancy - whether appropriate in all the circumstances to order compensation
Workplace Relations Act 1996 ss 170DE(1), 170EA
The Federated Clerks’ Union of Australia and Another v The Victorian Employers’ Federation and Others (1984) 154 CLR 472, considered
WILLIAM JOHN BEGG v CLAY & MINERAL SALES PTY LTD
SA 1051 of 1996
MARSHALL J
ADELAIDE
21 JULY 1997
GENERAL DISTRIBUTION
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY ) No. SA 1051 of 1996
)
GENERAL DIVISION )
BETWEEN: WILLIAM JOHN BEGG
Applicant (“Employee”)
AND: CLAY & MINERAL SALES PTY LTD
Respondent (“Employer”)
JUDGE: MARSHALL J
PLACE: ADELAIDE
DATED: 21 JULY 1997
MINUTES OF ORDERS
THE COURT ORDERS THAT:
It is declared that in terminating the employment of the employee on 4 March 1996 the employer acted in breach of s 170DE(1) Workplace Relations Act 1996.
No amount of compensation is payable by the employer to the employee.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
GENERAL DISTRIBUTION
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY ) No. SA 1051 of 1996
)
GENERAL DIVISION )
BETWEEN: WILLIAM JOHN BEGG
ApplicantAND: CLAY & MINERALS SALES PTY LTD
Respondent
JUDGE: MARSHALL J
PLACE: ADELAIDE
DATED: 21 JULY 1997
EX TEMPORE REASONS FOR JUDGMENT
This is a review of an exercise of power by a Judicial Registrar who determined an application under s 170EA Workplace Relations Act 1996 (“the Act”) in favour of Mr Begg and awarded him $12,500 compensation in respect of the unlawful termination of his employment by his former employer, Clay and Mineral Sales Pty Ltd (“Clay”).
FACTUAL BACKGROUND
Mr Begg was employed by Clay as a sales manager from 22 September 1980 until 4 March 1996. His employment was terminated on 4 March 1996 when he was called into the office of Mr L Fricker, a director of Clay, and advised that his employment was being terminated as a result of the downturn in the economy and its effect upon Clay. Mr Begg was paid $43,325 upon his termination by Clay. Included in that sum were the following amounts which were conceded by counsel for Mr Begg as being payments made by Clay to ameliorate the position of Mr Begg as a result of him being made redundant:-
$10,000 by way of “severance payment”
$3,125 by way of “extra superannuation contribution”
$4,308 by way of “extra bonus”
The total amount of such compensatory payments was $17,433. Subtracted from that amount, to determine the true amount of such compensatory payment, should be the amount of $2,350 conceded by both counsel to be an underpayment made to Mr Begg in respect of an accrued entitlement. The true value of the compensatory payment is therefore $15,083.
The possibility that Mr Begg’s employment might need to be terminated arose in the mind of Mr L Fricker in May 1995. He formed the view at that time that if Clay continued to sustain the losses it was then incurring to Christmas, Mr Begg’s employment might have to be terminated. He failed to communicate the formation of that view to Mr Begg. He engaged in no consultation with Mr Begg aimed at averting his termination or ameliorating its consequences prior to effecting the termination.
As at early March 1996 the group of which Clay is a part was incurring on-going losses valued at $3,000 per week. That situation had applied for the previous ten months. Mr L Fricker, his son Mr R Fricker, and Mr Begg were the only people involved in the sales section of Clay. Mr L Fricker gave evidence that:-
“...there were three of us involved in quoting for sales and with a business downturn halving it was obvious that we couldn’t continue to carry three people quoting for sales.”
He went on to add that his intention in terminating Mr Begg’s employment was to rationalise the business and make it profitable.
VALID REASON
At the conclusion of the submissions of counsel for Clay, I informed counsel for Mr Begg that I did not need to hear from him on the question of valid reason. My reason for so doing was that in my view Clay’s failure to consult with Mr Begg concerning his redundancy prior to terminating his employment resulted in the termination not being for a valid reason. Mr Begg was not given the opportunity to suggest any alternative to his termination nor to engage in discussions designed to ameliorate the effect of his termination prior to it occurring. As Ryan J said in Jones v Department of Energy and Minerals (1995) 60 IR 304, 312, consultation is an important element of procedural fairness in dismissals effected for reasons of redundancy. See also Quality Bakers v Goulding (1995) 60 IR 327, 334 (per Beazley J) and Hockey v Multiskip, (Marshall J, IRCA, 29 September 1995, unreported). In Leddicoat v Schiavello Commercial Interiors, (IRCA, 19 October 1995, unreported) von Doussa J held that in all the circumstances of the facts of the case before him it was not unreasonable for the employer to give no forewarning of a redundancy. Those circumstances will very much be the exception rather than the rule having regard to Jones, Quality Bakers and Hockey. There are no distinguishing or special features of the facts of this matter to exculpate Clay for giving no forewarning to Mr Begg of his impending redundancy by consulting him about it. As Wilson J said in The Federated Clerks’ Union of Australia and Another v The Victorian Employers’ Federation and Others (1984) 154 CLR 472, 502:
“... Such consultation is a natural expression of the industrial relationship of employer and employee in the face of technological change. .... Consultation between employers and employees, preceded by the distribution of adequate information is not only sensible but essential if commerce and industry are to meet the challenge of progress in a spirit of harmony and with some regard for human dignity.”
I am not satisfied that Clay had a valid reason for terminating Mr Begg’s employment on the ground of redundancy because it failed to engage in prior consultation with him regarding his impending redundancy. It can rarely be objectively justifiable for an employer to simply tell an employee about his redundancy after the event. This is especially so when one has regard to the observations of Wilson J in FCU referred to above. See also Murphy J at 494.
COMPENSATION
Counsel for both parties submitted that the financial circumstances of Clay made reinstatement impracticable. I accept that submission. That being so, I am obliged to consider the question of compensation. If the employment of Mr Begg had not been terminated at 4 March 1996 and instead Mr L Fricker had consulted Mr Begg on that day about the situation of Clay, the possibility of Mr Begg’s termination and had asked for any suggestions Mr Begg had to avert the termination or ameliorate the effects of it, the question arises as to how long Mr Begg’s employment would have continued beyond 4 March 1996 even with such consultation. Looking at the matter most generously to Mr Begg, I am satisfied, on the evidence, that his employment would not have continued for longer than a further three months having regard to the continuing losses which were being sustained by Clay.
Mr Begg’s yearly remuneration was valued at $43,640. An amount representing three month’s compensation would therefore be $10,910. Given that an amount of $15,083 has already been paid by Clay with the express purpose of softening the blow of Mr Begg’s redundancy it is inappropriate in all the circumstances to make any award of compensation.
ORDER
For the purposes of the Court’s order I will refer to Mr Begg as “the employee” and Clay as “the employer”.
The order of the Court is:
It is declared that in terminating the employment of the employee on 4 March 1996 the employer acted in breach of s 170DE(1) Workplace Relations Act 1996.
No amount of compensation is payable by the employer to the employee.
I certify that this and the preceding 5 (five) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall delivered ex tempore.
Associate:
Dated:
Counsel for the Applicant: G Coppola
Solicitor for the Applicant: Kelly and Co
Counsel for the Respondent: M. Hoile
Solicitor for the Respondent: Thomson Playford
Date of hearing: 21 July 1997
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