Williams v Quick Chips Pty Ltd
[1997] IRCA 221
•10 July 1997
DECISION NO:221/97
INDUSTRIAL RELATIONS COURT OF AUSTRALIA
INDUSTRIAL LAW - termination of employment - operational requirements - reduction in staff brought about by service agreement between two family companies - no consultation with applicant - termination unlawful
Workplace Relations Act 1996 ss.170DE(1), 170EA, 170EF
WILLIAMS -v- QUICK CHIPS PTY LTD
No. VI-2227 of 1996
Ryan JR
Melbourne
10 July 1997
WILLIAMS -v- QUICK CHIPS PTY LTD
No. VI-2227 of 1996
CASES:
Carydias v The Greek Orthodox Community (IRCA, unreported, North J, 20 February 1996)
Slifka v JW Sanders Pty Ltd (1995) 67 IR 316
Brown v Power trading as Royal Hotel Tumut (IRCA, unreported, Moore J, 19 April 1996).
Selvachandran and Peteron Plastics Pty Ltd (1995) 62 IR 371
Nettlefold and Kym Smoker Limited (1996) 69 IR 370
Kerr and Jaroma Pty Ltd (1996) 70 IR 469
Thomas v Lynch trading as Bellingen (IRCA, unreported, Wilcox CJ, 20 December 1996)
R v The Industrial Commission of South Australia; ex parte Adelaide Milk Supply Co-operative Limited (1977) 44 SAIR 1202
Jones v Department of Energy and Minerals (1995) 60 IR 304
Quality Bakers Australia Ltd v John Golding & Anor. (1995) 60 IR 327
Darling v The Employee Relations Commission of Victoria, Supreme Court of Victoria, Court of Appeal (unreported), 19 February 1997
Leddicoat v Schiavello Commercial Interiors (SA) (IRCA, unreported, von Doussa, 18 October 1995)
Carydias v The Greek Orthodox Community (IRCA, unreported, North J, 20 February 1996)
Pritchard v Standard Chartered Bank of Australia Limited (1996) 64 IR 315
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI-2227 of 1996
B E T W E E N :
WILLIAMS
Applicant
AND
QUICK CHIPS PTY LTD
Respondent
MINUTES OF ORDERS
Judicial Registrar Ryan 10 July 1997
THE COURT
declares the termination of the employment of the Applicant to be unlawful
orders the Respondent to pay the Applicant compensation equivalent to her gross earnings in her last 26 weeks employment with the Respondent
requires the Applicant to provide a statement, within fourteen days, of gross earnings in the last 26 weeks of employment
grants leave to the Respondent to make a submission within 21 days on such gross earnings
adjourns the application to a date to be fixed for a final order on compensation
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI-2227 of 1996
B E T W E E N :
WILLIAMS
Applicant
AND
QUICK CHIPS PTY LTD
Respondent
Ryan JR
Melbourne
10 July 1997
REASONS FOR JUDGMENT
THE CLAIM
The Applicant seeks compensation in a claim for relief in respect to termination of employment. She worked for the Respondent as a receptionist and book keeper from 29 December 1995 to 5 July 1996. Her application was signed on 12 July and contains the following statement
“On 5/7/96 at 5.00 pm I was informed by my employer that my services were no longer required - “due to financial difficulties”. I now have good reason to believe a new person has been employed in my position.”
THE BUSINESS
The Respondent is a food processing company which specialises in the production and preparation of vegetable products which can be heated and served quickly. The late Mr John Mosk began the business from a food van in 1958. He was successful and formed the Respondent company in 1960. It was and is a classic family business. At various stages, John, his wife, Greta, their daughters, Veronica and Virginia, and their sons, Leon and Dean, have been involved in the business.
Initially, Mr Mosk rented old dairy premises in Glen Iris. In 1974 the company purchased the present factory in Dandenong Road, East Malvern. The business flourished and attracted large institutional clients (e.g. prisons and hospitals), supermarkets and small businesses such as delicatessens and convenience food outlets.
FINANCIAL PRESSURES
Outsourcing of kitchens by institutional clients, the increasing demands of supermarkets and the arrival and expansion of rivals have, in recent years, exposed a growing family business to fierce, competitive pressures.
The operating accounts from 91/92 to 95/96 demonstrate a peak in turnover and profit in 91/92. The accountant, John Hughes, described this in his evidence as a “high point in the 92/93 year”. The accounts also show decline in turnover and profit with operating losses in 94/95 and 95/96. Repairs and maintenance were also very high in 92/93 and 94/95.
Virginia Mosk was the primary witness for the Respondent. She was responsible for adminstration and sales but like all members of the Mosk family, and indeed all staff, she was expected to turn her hand to any and every area of the business.
It is clear from her evidence and the evidence of Mr Hughes that the Respondent company needed to restructure and reduce costs.
THE RESTRUCTURE
The Respondent reduced vehicles and staff and took a number of measures designed to reduce expenditure, avoid loss and and maximise profit.
Of more importance was an arrangement which led to the termination of the employment of the Applicant on 5 July 1996. Viginia Mosk’s husband, Patrick Zee Yang Chiang (Zee) played a prominent part.
Mr Zee operates a smaller food processing company which specialises in Asian satays, noodles, rice and chicken based products. His evidence and the evidence of the Applicant and Virginia Mosk confirm that Mr Zee was taking some interest in the Respondent business from as early as January 1996. At that stage he displayed a particular interest in the potential of new and upgraded computer systems to be used by the Respondent and, it later emerged, in conjunction with his own business which traded as Zee Foods and operated under the umbrella of a company entitled Wan Shi Da Pty Ltd (WSD).
THE AGREEMENT - QUICK CHIPS AND ZEE FOODS
On 1 July 1996, four days before the termination of the Applicant’s employment, the Respondent, Quick Chips Pty Ltd (QF) entered an agreement with Zee Foods (ZF).
The agreement includes the following:
“QC is a food processing company, producing fresh and frozen food products and distributing its products throughout Australia and is desirous of contracting ZF to provide the labour and expertise to perform sales and all related functions. ZF is a food processing company, producing fresh and frozen food products and distributing its products throughout metro Melbourne and is desirous of expanding its distribution area in association with QC. Duties of both parties will be performed under the following terms and conditions:
ZF is to perform all sales for existing and future QC customers customer service, invoicing, sales leads, calls and samples, excepting corporate accounts. Corporate accounts meaning Supermarket head offices and Catering chains. QC is to perform negotiations and sales for corporate accounts for both ZF and QC products.
QC is to supply office space, equipment and office supplies excepting ZF telephone line and charges.
QC is to perform distribution, deliveries and all related functions including upkeep of vehicles, drivers wages and costs, etc.
Both parties are to be responsible for maintenance and upkeep of their own labour and staff to carry out the obligations in this contract. Both parties have full and total authority, responsibility and control of the hiring and termination of services of their respective staff.
Both parties are to pay all State and Federal duties, charges, etc. in relation to its employees, ie. taxation, superannuation and Workcare. ZF hereby indemnifies QC for any losses that occur in all these matters.
QC is to collect monies from all customers. QC is to calculate and reconcile sales figures at the end of each month and pay ZF monthly for its products sold.
Bad debts are to be shared equally. Credit limits to customers to be mutually agreed upon by both parties.
ZF is to follow instructions and cooperate with QC and to follow and maintain QC’s corporate image and objectives.”
This Agreement and an Agreement signed fourteen days after the Applicant’s termination (Exhibit R1) were part of a restructure in which QC and WSD and ZF contracted with each other so that the Respondent company and Zee Foods could take advantage of their respective strengths and bolster their respective weaknesses.
THE EVIDENCE OF VIRGINIA MOSK
Virginia Mosk described the QC/ZF contract of 1 July (Exhibit R3) as
“distribution through Quick Chips and sales and service through Zee Foods”
The Agreement was not as simple as that. The Respondent was to remain responsible for sales to corporate clients. However, in her evidence, Ms Mosk did concede that the termination of the Applicant on 5 July was
“to cut costs and service those companies”.
Her evidence included the following
“the arrangements could not have been put in place with (the Applicant) present. We had to take firm measures to reduce costs....it was Zee Foods decision. They chose not to employ Ms Williams. The benefit (to the Respondent) was...basically...to save one employee’s wages and picking up small customers...I did not advise her (the Applicant) that she had an opportunity to be employed by Zee Foods...I did not tell her of arrangements entered with my husband when the contract (Exhibit R3) was written...her job was to be done by Zee Foods by whoever they chose to employ....I drew up the two contracts (Exhibit R1 and Exhibit R3). I took advice from the accountant (Mr Hughes)....I spoke to my husband. I encouraged my husband to take on the Applicant. He had his own reasons for taking on Julie Vine. I encouraged my husband to take on the Applicant. I felt she had settled in and was familiar with customers and procedures...I told her of the arrangement we were thinking of putting in place. I never thought it was my position to tell her that my husband did not want her in the position. She had no knowledge that anyone was looking at her position.”
THE EVIDENCE OF THE APPLICANT
The Applicant gave the following evidence
“On 5 July about 5:00 pm Virginia asked me if I had finished and I indicated that I had to balance. She asked me to leave the balance because she wanted to have a serious talk. I said:
‘Oh, Oh, what have I done?’
She said absolutely nothing is wrong Peggy. Patrick and I have had no wages for months now, the company is in financial difficulty. We have not been paid...so...unfortunately we have to let you go.
I said that I thought that the least they could do was cut my hours or wages and she said that they couldn’t even do that and that she was sorry.”
THE EVIDENCE OF PATRICK ZEE
Patrick Zee gave evidence that his company did not have easy access to supermarkets and that the Respondent company was in a position to provide the introduction of his prepared food to the supermarkets.
He said in evidence
“Because I did the sales they did deliveries for me. I did not pay in terms of money. I did the sales orders for the Respondent. I employed Julie Vine to do that. ....I weighed up the Applicant and Julie. I was familiar with Julie. She had been with me for ten years. Wherever I went she would follow me. She was computer literate. She managed my office before and I trusted her. I was confident in her capabilities. I saw the Applicant operate with the Respondent. She was not as computer literate as Julie. The Respondent’s computer program was not so good. I decided to put in a new program. I tried to speak to the Applicant. I wanted to change the program. She was not happy. I explained the benefits to her. She was not receptive. I could see that she was getting more and more stressed and was more easily upset and was smoking more.”
OPERATIONAL REQUIREMENTS AND THE REQUIREMENT TO CONSULT
A great more detail was given in the evidence of the Applicant and Ms Mosk and Mr Zee in respect of the events leading up to the termination of the employment.
I am satisfied that Mr Zee took the view that Julie Vine was the most appropriate person to conduct bookkeeping, computer and receptionist duties for the Respondent and Zee Foods.
I am satisfied that the arrangements which led to the termination of the Applicant were based on the operational requirements of the Respondent and that the Respondent hoped to save money and make efficiencies through the contract entered with Zee Foods (Exhibit R3).
However, at no stage was there any consultation with the Applicant. She was given no warning of the termination. She was given no opportunity to suggest any other option. She was given no opportunity to plead her case in lieu of replacement by Ms Julie Vine.
I have no doubt that the Applicant was replaced by Ms Julie Vine and that Ms Vine performed similar duties to those undertaken by the Applicant although she performed them for Zee Foods as well as Quick Chips.
There are cases in which a termination on the basis of operational requirements will be lawful even though there has been no consultation. In Carydias v The Greek Orthodox Community (IRCA, unreported, 20 February 1996) North J said:
“The need to consult is not a rigid requirement. The extent to which it is required, how it is to be satisfied, and even whether it is required at all, depend on the circumstances of the case.”
However, this is a case in which consultation was necessary. Termination without consultation in this case was clearly termination without valid reason within the meaning of those words as defined in Selvachandran and Peteron Plastics Pty Ltd (1995) 62 IR 371, Nettlefold and Kym Smoker Limited (1996) 69 IR 370 and Kerr and Jaroma Pty Ltd (1996) 70 IR 469.
Counsel for the Respondent, Mr Carmichael, has correctly identified the termination as for a “reason based on the operational requirements of the undertaking, establishment or service”. However, a reason so based does not automatically become a “valid reason” for termination within the terms of s170DE(1).
I agree with Mr Carmichael that the termination was based on the operational requirements of the business. I do not agree that the restructure or “reform” he describes in his written submission was as thorough or sophisticated as depicted. Nevertheless, allowing for a little hyperbole, I am prepared to accept the following statement from paragraph 1.6 of Counsel’s final submission.
“The reforms, including asset sales, staff reductions, a reformed distribution system, a change from daytime to night time production, and streamlining of production runs from five to two and a half working days per week, together with the introduction of current month financial reporting procedures, impacted upon the system of work and tasks Mrs Williams had been employed to perform.”
I also accept that the termination of employment, resulting from the Agreement with Zee Foods, contains some elements of an amalgamation of functions, and could be described as a redundancy in terms of R v The Industrial Commission of South Australia; ex parte Adelaide Milk Supply Co-operative Limited (1977) 44 SAIR 1202, Jones v Department of Energy and Minerals (1995) 60 IR 304, and Quality Bakers Australia Ltd v John Golding & Anor. (1995) 60 IR 327. I certainly accept that “an employer might decide to make certain positions redundant with the sole intention of increasing the profitability of an already profitable business (Quality Bakers)” and “a desire to reduce costs may constitute a valid reason for the termination of an employer’s employment” (Thomas v Lynch trading as Bellingen Grocery).
However, I do not accept that Darling v The Employee Relations Commission of Victoria, Supreme Court of Victoria, Court of Appeal (unreported), 19 February 1997 or Leddicoat v Schiavello Commercial Interiors (SA) (IRCA, unreported, von Doussa, 18 October 1995) or Carydias v The Greek Orthodox Community (IRCA, unreported, North J, 20 February 1996) or Pritchard v Standard Chartered Bank of Australia Limited (1996) 64 IR 315 are authorities for the proposition that a termination without consultation is a termination for valid reason if the circumstances are such that consultation would make no difference.
Mr Carmichael submitted that these cases are all authorities for his proposition that “consultation making no difference to the decision making process is futile”.
It may often be the case that consultation would be futile in terms of preventing the termination of employment but it does not follow that the failure to consult in such circumstances cannot render such a termination unlawful.
Kerr, Nettlefold, Thomas v Lynch and Westen v Union Des Assurance De Paris (IRCA, unreported, Madgwick J, 20 February 1997) are all relevant authorities of this Court. The Chief Justice followed Kerr and Nettlefold in Thomas v Lynch and said
“One of the purposes of Division 3 of Part VIA of the Act was to improve the way employers treat their employees. It is conducive to that purpose to interpret s170DE(1), in a situation like this, as requiring that, before a Notice of Termination of employment is given, the employer attempt a real discussion with the employee about the best way of handling the problem confronting them both.
Consultation between Mr and Mrs Lynch and Mr and Mrs Thomas might have failed to yield an outcome compatible with the company’s business needs. If so, it would possibly have been defensible for the company to terminate the employment of one or both of the Applicants; in that event it would have been able to demonstrate the existence of a valid reason for the termination related to the operational requirement of its business. The company deprived itself of this possibility because of the arrogant way it dealt with its problems.”
While, in this case, I would not describe the attitude of Ms Mosk as in any way “arrogant”, the Respondent has deprived itself of the possibility of establishing a valid reason for the termination of Ms Williams because Ms Mosk and Mr Zee failed to consult Ms Williams prior to the termination.
REMEDY
The Applicant does not seek reinstatement. In any event reinstatement is impracticable. The Applicant moved quickly to mitigate her loss. She obtained other employment within a few weeks of termination but her earnings are close to $250 a week less than her earnings with the Respondent and her loss is ongoing. In the circumstances I consider the Applicant should be awarded compensation up to the cap providing in s170EE(3). In determining compensation I have followed Slifka v JW Sanders Pty Ltd (1995) 67 IR 316 and Moore J in Brown v Power trading as Royal Hotel Tumut (IRCA, unreported, 19 April 1996). I propose to order compensation equivalent to the Applicant’s gross earnings for the last 26 weeks of her employment with the Respondent. A final order on compensation will be made after receipt of evidence of gross earnings and will provide for pro tanto satisfaction by way of any relevant payment to the Australian Taxation Office.
ORDERS - MINUTES OF ORDERS
The Court
declares the termination of the employment of the Applicant to be unlawful
orders the Respondent to pay the Applicant compensation equivalent to her gross earnings in her last 26 weeks employment with the Respondent
requires the Applicant to provide a statement, within fourteen days, of gross earnings in the last 26 weeks of employment
grants leave to the Respondent to make a submission within 21 days on such gross earnings
adjourns the application to a date to be fixed for a final order on compensation
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
I certify that this and the preceding 7 pages are a true copy of the reasons for judgment of Judicial Registrar Ryan.
Associate:
Dated: 10 July 1997
Solicitor for the Applicant: Julie Andritsos
Counsel for the Applicant: Mr S Stuckey
Solicitor for the Respondent: Lalith P Thalakada
Counsel for the Respondent: Mr H Carmichael
Date of hearing: 12, 13 and 17 March 1997
Date of judgment: 10 July 1997
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