WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION PARTIES FITZGERALD LUKE CASS APPLICANT -v- SOUTH METROPOLITAN PERSONNEL INC. RESPONDENT CORAM COMMISSIONER S J KENNER DATE THURSDAY, 30 SEPTEMBER 2004 FILE NO/S APPLICATION 253 OF 2004 CITATION NO. 2004 WAIRC 12891 Catchwords Industrial law – Termination of employment – Harsh, oppressive and unfair dismissal – Applicant alleges that he was unfairly targeted for redundancy – Respondent suffering significant financial stress – Principles applied – Applicant’s redundancy bona fide – Applicant wrongfully dismissed due to employer’s failure to discuss certain matters in accordance with the Minimum Conditions of Employment Act 1993 (WA) – Applicant failed to establish loss resulting from manner of retrenchment – Applicant not harshly, oppressively and unfairly dismissed – Application dismissed – Industrial Relations Act 1979 (WA) s 29(1)(b)(i); Minimum Conditions of Employment Act 1993 (WA) s 5, s 41, s 40(1), s 40(2), meaning of “significant effect” Result Application dismissed Representation Applicant In person Respondent Mr E Rea as agent Reasons for Decision 1 At all material times the applicant was the operations manager for the respondent. He commenced employment on or about 8 October 1998 and his employment came to an end on or about 26 February 2004. The applicant's position was made redundant by the respondent and as a consequence, the applicant was retrenched. 2 The applicant now brings these proceedings under s 29(1)(b)(i) of the Industrial Relations Act 1979 (“the Act”) alleging that his dismissal was harsh, oppressive or unfair. In essence, the applicant alleges that he was unfairly targeted for redundancy 84 W.A.I.G. WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 3333 and that the respondent failed to comply with it statutory obligations under the Minimum Conditions of Employment Act 1993 (“the MCE Act”). The applicant has now found a new position similar to that held with the respondent at approximately the same remuneration. Factual Background 3 The facts in this matter are essentially not in dispute and can be summarised as follows. The respondent is a specialist employment agency for people with disabilities. As operations manager the applicant was responsible for managing a team of field co-ordinators and also assisted with the administration of a fleet of motor vehicles and telephonic equipment used by the respondent. The applicant also represented the respondent on a State body in this area. The respondent is jointly funded by the State and the federal governments. 4 The applicant testified that as a result of an internal dispute with the respondent's chief executive officer at the time Mr Smith, his employment was terminated on 14 October 2003. The next day on 15 October, following discussions between the applicant and Mr Smith, and an apology from Mr Smith, the applicant returned to work. Apparently on the evidence, the applicant took to the respondent's board some concerns about the management of the respondent by Mr Smith, which in turn led to some conflict between both of them. On or about 22 October 2003 to 5 November 2003, Mr Smith took stress leave from the respondent. On his return on 6 November, Mr Smith and the applicant had discussions about issues they had between them and agreed that the applicant would undertake some counselling so that both the applicant and Mr Smith could communicate more effectively. Between 21 November 2003 and 12 January 2004, the applicant went overseas on holiday. On his return, Mr Smith spoke to the applicant and reiterated the need for him to attend some counselling which was scheduled to commence on 28 January 2004. 5 On 19 January 2004, Mr Smith spoke to both the applicant and the respondent's marketing manager Mr Green about the financial position of the respondent which was suffering funding difficulties. Apparently on the evidence of all witnesses, these funding constraints had started to become apparent in late 2003 and the applicant was aware of it. Financial information tendered as exhibit R1, clearly indicated a significant funding shortfall that the respondent needed to address. 6 As a consequence of this position, Mr Smith prepared an options paper, setting out various responses to the respondent's financial difficulties. A copy of this paper, tendered as exhibit A3, was given to both the applicant and Mr Green for them to consider. Their input was sought on this document by Mr Smith. Various options are set out in this document, including all staff reducing hours, some selected staff reducing hours, and the implementation of redundancies. Mr Smith testified that by this time, the funding position of the respondent had become critical, and decisions had to be made about cost reductions. He testified that his first option, which he put to all staff, subsequently, was for all employees to have a reduction in their hours of work. 7 After considering the options document for a few days, both the applicant and Mr Green met again with Mr Smith on 21 January 2004. Both the applicant and Mr Green raised various issues with Mr Smith in terms of alternatives to deal with the situation. The applicant testified that one option put forward by him was for field officers funded specifically from case based funding, the main source of the financial pressure, being specifically identified with those programs. Mr Smith informed the applicant that this would be too difficult to achieve. On or about 23 January 2004, Mr Smith informed all staff of the financial difficulties and requested that they take a reduction in hours or consider leave without pay, to assist the respondent at that time. On or about 28 January, Mr Smith informed the applicant that the staff did not want to pursue this option. 8 According to Mr Smith, faced with the situation, and with no alternatives being readily available, he had to consider the issue of redundancies. He looked at the management positions and was concerned to ensure that any redundancy have as smaller impact as possible, on what he described as the “consumer group”, which the Commission understands to be the persons with disabilities whom the respondent assisted in finding employment. In particular, the field staff were those most closely associated with delivering the respondent services and Mr Smith did not want to impact on this aspect of the operation. He also testified that he considered the marketing manager position but regarded this position as critical to the respondent’s success, because that role was required to actively seek out alternative employment opportunities for the respondent's consumer group. Ultimately, after considering the issue, Mr Smith testified that he identified the applicant's position, as being one which would least impact on the service delivery of the respondent, if that position was abolished. It is to be emphasised, that exhibit A3, which was provided to the applicant and Mr Green, did identify as one of the options, the reduction of a management position. 9 After the discussions with Mr Smith, the applicant testified he heard nothing further until 30 January. On this day, he said he spoke with Mr Green and asked him if he had heard anything further about the possible redundancies, and Mr Green informed him that he had not been made aware of any developments. The applicant then approached Mr Smith later that morning. He testified that he asked Mr Smith if there was to be a decision that one of the managers be made redundant. Mr Smith informed the applicant that he had decided that it was the applicant's position that would be made redundant. Mr Smith had prepared a letter dated 29 January to the applicant which he gave him that morning. The letter, tendered as exhibit A2, referred to consideration of various options and that Mr Smith's decision was that the abolition of the operations manager position was the option least disruptive to the respondent's day to day operations. Mr Smith in the letter confirmed the importance of the marketing role within the respondent. The applicant was to be given four weeks’ notice of termination of employment and paid eight weeks’ severance pay in accordance with the relevant award. 10 Mr Smith gave the applicant the option of either working out the period of notice or taking salary in lieu and additionally, was offered the use of his motor vehicle and mobile telephone for this period. The applicant elected to leave the respondent by salary in lieu of notice, and kept the motor vehicle and mobile telephone for about one week thereafter. Mr Smith admitted that he did not specifically discuss the applicant's circumstances with him, prior to the day of the termination of his employment. 11 Subsequent to the applicant's departure, the respondent has implemented further redundancies and the present chief executive, Mr Green is working in that role at his previous salary rate as a manager. The respondent is also selling assets to fund its ongoing operations. 12 I find accordingly. Consideration 13 In this matter the onus is on the applicant to establish that his dismissal was as a consequence of an abuse by the respondent of its contractual right to terminate his employment contract: Miles v The Federated Miscellaneous Workers Union of Australia, Industrial Union of Workers, Western Australian Branch (1985) 65 WAIG 385. It is also trite to observe, that an employee dismissed on the grounds of redundancy, may be harshly, oppressively or unfairly dismissed, if the redundancy itself is not genuine. Furthermore, in cases where it is alleged that the selection of a particular position for redundancy was harsh or unfair, the burden rests with the redundant employee, in proceedings challenging his or her dismissal, to demonstrate that another 3334 WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 84 W.A.I.G. employee should have been selected for dismissal, other than him or her: Amalgamated Metal Workers and Shipwrights Union of WA v Australian Shipbuilding Industries (WA) Pty Ltd (1987) 67 WAIG 733; Gromark Packaging v Federated Miscellaneous Workers Union, WA Branch (1992) 46 IR 98. 14 In addition, although the concept of redundancy embraces the circumstance where a job is abolished, that is not the only circumstance arising that can be characterised as a redundancy, and it extends to a decision by an employer to reduce the total number of employees because of an excess of labour: Gromark. The notion of redundancy is also applicable where, as in the present case, the duties of a position abolished are not done away with but are subsequently performed by other employees in an organisation: Bunnett v Henderson's Federal Spring Works Pty Ltd (1989) 31 AILR 356. 15 In addition to these principles, in the case of a redundancy, which is otherwise genuine, s 41 of the MCE Act imposes certain obligations. That provision is as follows: “41. Employee to be informed (1) Where an employer has decided to — (a) take action that is likely to have a significant effect on an employee; or (b) make an employee redundant, the employee is entitled to be informed by the employer, as soon as reasonably practicable after the decision has been made, of the action or the redundancy, as the case may be, and discuss with the employer the matters mentioned in subsection (2). (2) The matters to be discussed are — (a) the likely effects of the action or the redundancy in respect of the employee; and (b) measures that may be taken by the employee or the employer to avoid or minimize a significant effect, as the case requires.” 16 Whilst by s 40(1) of the MCE Act “redundant” is defined to mean “being no longer required by an employer to continue doing a job because the employer has decided that the job will not be done by any person” in the present circumstances, a dismissal as a result of the reallocation of the duties of a position would in my opinion constitute a “significant effect” for the purposes of s 40(2) of the MCE Act and therefore s 41 still had application. 17 The requirements imposed by s 41 of the MCE Act on an employer were dealt with by the Industrial Appeal Court in Garbett v Midland Brick Company Pty Ltd (2003) 83 WAIG 893 in particular per EM Heenan J at 902 – 906 (Parker and Hasluck JJ agreeing). In particular, in cases where it is established that an employer has breached s 41 of the MCE Act, and hence has breached the contract of employment by reason of the implication of that section into all contracts of employment (s 5 MCE Act), consideration needs to be given to all of the circumstances arising. This includes whether, had there been compliance with s 41 of the MCE Act, the result would have been any different, in the sense that the employee has suffered a compensable loss as a consequence of the employer's failure to comply with its statutory obligations. In my view, it is only when, absent any other factors going to unfairness, it is established that such a loss or injury flows from the employer’s failure to comply with s 41 of the MCE Act, that the conclusion may be reached that in such circumstances, a dismissal is harsh, oppressive or unfair. It is the overall consequences of such a breach of statutory obligation and contract that must be considered and not simply the breach simpliciter. 18 In the present case, the applicant alleges that the termination of his employment on the ground of redundancy was not genuine, because it was actuated by the difficulties the applicant and Mr Smith had in their relationship, some months prior to the redundancy. This was strongly denied by Mr Smith. I have considered this matter carefully and have considered the applicant's and Mr Smith's evidence about this issue. Undoubtedly, Mr Smith reacted somewhat abruptly and prematurely, when he became aware that the applicant had gone to the respondent's board complaining about the management of the respondent by Mr Smith. However, also understandably, one can envisage Mr Smith becoming upset at the applicant taking these issues to the respondent's board, without first raising them with him directly. There were also issues of communication between the applicant and Mr Smith that seem to be problematic on the evidence. However, I am satisfied that after these events “blew over”, both Mr Smith and the applicant resolved to move forward in their working relationship and I am not persuaded, on all of the evidence, that the applicant has established that he was targeted for redundancy for reasons that were not bona fide. 19 Furthermore, from the financial information tendered in evidence, the respondent was suffering significant financial stress towards the end of 2003 and budget projections made it quite clear that significant cost reductions were required. I am also satisfied that Mr Smith explored alternatives to redundancy, such as a reduction overall in hours of work by employees and the taking of leave without pay, as options to avoid the need to consider redundancies. I am therefore persuaded on balance, that the circumstances of the need to make a management employee of the respondent redundant were genuine. 20 As observed above, the applicant, challenging his selection for redundancy, bares the burden of establishing that another employee of the respondent should have been retrenched in preference to him. Whilst the applicant endeavoured to suggest that, in a general submission, consideration could have been given to one of the other managers, I am not persuaded that the applicant has discharged this burden on him, to clearly demonstrate, that the respondent's selection of him was flawed in this way. I accept Mr Smith's evidence, that he considered the operational impact as the most important factor, in terms of delivering services to people with disabilities. It seems to me quite open to conclude, that given the applicant's duties and responsibilities, in terms of a management role, his position would have the least impact on these essential services, given that his duties and responsibilities, could be and were, devolved to others within the organisation. 21 Having concluded that the applicant's redundancy was bona fide, for genuine financial reasons, I then turn to the issue of the procedure adopted to implement it. As I have already found, the first the applicant heard of his redundancy was when he went to see Mr Smith on 30 January 2004. It seems on the evidence, that he became aware of his redundancy on this day, somewhat by chance, in going to see Mr Smith. In all of the circumstances, whilst there was some general discussion with Mr Smith in the weeks prior about the possibility of redundancies, I am satisfied that there was no compliance with s 41 of the MCE Act in this case. On the evidence, there was certainly no discussion, with the applicant, about the likely effects of the action or redundancy and certainly there was no discussion of alternatives or measures that may be taken by the employee or the employer to avoid or minimise a significant effect. It is the case that the applicant was given the opportunity to not work out his period of notice and was offered the use of his motor vehicle and mobile telephone during his notice period. Whilst this might be said to involve some minimisation of the effect on the applicant, there was certainly no discussion between Mr Smith and the applicant about alternatives to the retrenchment of the applicant and other options that may have been available. 84 W.A.I.G. WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 3335 22 To this extent, I am therefore persuaded that the dismissal of the applicant was wrongful, in the sense that there was a breach of the implied term in his contract of employment, requiring compliance with s 41 of the MCE Act. 23 The next question is however, what is the consequence of this breach by the employer? In other words, has the applicant established on balance, any loss and/or injury flowing from the respondent's failure to comply with its statutory obligations. Having considered the evidence carefully, I am not persuaded that the applicant has demonstrated that there were realistic alternatives available to him either within the respondent or externally, such that, had there been compliance by the employer with s 41 of the MCE Act, any material difference would have resulted. The applicant did not demonstrate alternative positions that he could have occupied and which were available, in light of the circumstances facing the respondent. Additionally, there was no evidence from the applicant of positions external to the respondent, that he could have availed himself of at the time, had there been compliance with the statutory obligations. 24 I am not therefore persuaded that the applicant has established any loss and/or injury resulting from the manner of his retrenchment. It is to be noted additionally, that the applicant was paid a severance payment of eight weeks’ salary in accordance with the relevant award. 25 For the foregoing reasons, I am not persuaded on balance, that the applicant has demonstrated that in all of the circumstances, his dismissal on the grounds of redundancy was harsh, oppressive or unfair. The application is dismissed. 2004 WAIRC 12890