PR918783 PR918783 Download Word Document AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION Workplace Relations Act 1996 s.170CE application for relief in respect of termination of employment John Powell and Polite Enterprises Pty Ltd (U2001/5491) COMMISSIONER ROBERTS SYDNEY, 11 JUNE 2002 Termination of employment - arbitration. DECISION [1] This decision concerns an application by Mr John Powell (the Applicant) for relief pursuant to s.170 CE of the Workplace Relations Act 1996 (the Act) in respect of the termination of his employment by Polite Enterprises Pty Ltd (the Respondent or the Company). [2] The application is based on the following grounds: · that the termination was harsh, unjust or unreasonable pursuant to sub section 170CE (1)(a) of the Act; · that the termination was in contravention of s.170CM of the Act. [3] The application was filed in the Commission on 6 August 2001 and proceeded to conciliation on 20 September 2001. This was unsuccessful, and on 1 October 2001 a certificate under subsection 170CF(2) was issued. On the same day, a notice of election to proceed to arbitration was lodged. The matter was heard in Melbourne on 11 December 2001. The Applicant was represented by Mr G Dircks of Just Relations Consultants and the Respondent by Mr R McNab of Rennick & Gaynor Solicitors. [4] The Applicant gave sworn evidence and his witness statement was marked Exhibit A1. The Respondent called two witnesses, those being Mr G White and Mr G Pepper, whose witness statements were marked Exhibits R1 and R2 respectively. Background [5] The Applicant was employed by the Respondent from 17 August 2000 until 27 July 2001. At the time of the termination of his employment, the Applicant was employed as a Section or Team Leader in the Assembly section of the Bromax Division of the Respondent's business. Prior to being appointed to the position of Section Leader, the Applicant had been employed variously as an Assembler and as a Welder. The reason given to the Applicant for his termination was redundancy arising from the operational requirements of the Respondent's business. Evidence [6] It was the Applicant's witness statement (Exhibit A1) and sworn evidence that: · As a Section Leader, he had been responsible for six other staff members at the time of his termination. · The position he occupied was 60% supervision and 40% hands-on work. · At the time of termination, he had been earning an average of $610.60 per week gross, including overtime. · In about June 2001, Mr Les Roberts, who was later identified as the Respondent's Quality Assurance Manager and the previous owner of the Bromax Division (Transcript PNs246 and 308), had told him in confidence that he understood the Company was going to terminate the Section Leaders and the Welder. · Also around June 2001, the Respondent had hired four previously casual employees as permanent employees. · On Friday 27 July 2001, he was informed by Mr Gary Gardener, the Factory Foreman, that he and four other employees were required to go into the lunch room. When in the lunch room, Mr Gary White (the Respondent's Managing Director) spoke to those assembled about the need for redundancies, gave them termination pay slips and advised that they may be re-employed at a later date if the Company's economic situation improved. · Some employees asked why they were selected for redundancy, but no clear reasons were provided by Mr White. · Mr White had stated to him that his selection for redundancy was due to his poor performance but he was not advised of the particulars of that alleged poor performance. · No severance pay was paid. · In the subsequent weeks after his termination, at least one of the other employees who had been made redundant was re-hired by the Respondent and workers at the Company were still working substantial overtime. · He had been out of work for some three months after his termination but had been re-employed in November 2001 by the new owner of the Bromax Division and he was now performing substantially the same duties as he had been doing before he was terminated by the Respondent. [7] Under cross-examination by Mr McNab, the Applicant was asked if he recalled " ... being told at the meeting that if you wished to discuss any issues regarding the redundancy you could make an appointment to see ...? ". The Applicant replied " In the letter it wasn't being said. ". (Transcript PN102). Mr McNab went on to ask " You understood that to be the case though? ". The Applicant answered " Well, I just figured that being redundant well, what is the point. " (Transcript PN103). In subsequent exchanges with Mr McNab, the Applicant agreed that between the date of his termination in July 2001 and his re-employment by the new owner in November 2001, he did not approach the Respondent to discuss his redundancy. [8] Under further cross-examination by Mr McNab, the Applicant was asked " And when you were working at the company, no-one has ever said that you were a poor worker? " The Applicant replied " No. ". (Transcript PN190) The Applicant also later varied his response to an earlier question when he was asked by Mr McNab " So you accept that you were invited to go back to the company to discuss your termination when you were made redundant. You accept that that was offered to you? " The Applicant replied " Right, yes .". (Transcript PN195). [9] Under re-examination by Mr Dircks, the Applicant said that although he had not returned to the Company in person to discuss his redundancy, he had made several phone calls. He did not elaborate on the substance of those alleged calls. [10] Mr Gary White, the Managing Director of the Company, gave evidence for the Respondent. It was his witness statement (Exhibit R1) and sworn evidence that: · The Bromax Division of the Respondent's business had had significant ongoing financial problems. · Those financial problems had caused the Company to consider closing the Division, but that a decision had been reached by the Directors in about mid July 2001 to reduce the factory production workforce of the Division by eight employees. · Once the decision to reduce the workforce had been made, Mr White had approached Mr Gary Pepper, the Production Manager, and asked him to select those staff members to be retrenched, based on his knowledge of production requirements. · About a week after his meeting with Mr Pepper in relation to the forthcoming redundancies, Mr Pepper had handed him a list of employees whom he considered should be made redundant. Mr White had acted on Mr Pepper's advice. · On Friday 27 July 2001, he had met with the staff who were to be retrenched. The meeting had been attended by six of the eight staff members concerned. He had explained to those employees present that they were being retrenched due to the Company's financial difficulties and the consequent need to reduce the size of the workforce. · He had found the meeting to be extremely difficult emotionally but viewed it as the most sensitive and compassionate way to deal with the retrenchment issue and to inform the relevant employees of the decision to retrench them. · He had been concerned prior to the 27 July 2001 meeting with how some of the staff members present might react. He was concerned about the safety of equipment and work in progress and the safety of goods in the factory. This arose from previous incidents of theft of equipment and goods. He was concerned that if he had provided the entire workforce with prior notice that there were going to be retrenchments, those who were not being retrenched would have suffered undue stress and hardship, wondering if they were going to be among those to be retrenched. · One member of the staff, on learning of his retrenchment, had reacted by causing damage of nearly $4000.00 to company equipment. · Shortly after 27 July 2001, the Directors of the Company decided to sell the Bromax Division. The business had been purchased for a total cost of $300,000.00 including plant, equipment and stock. It was sold on 26 September 2001 for $150,000.00, less employee entitlements, reducing the sale price to approximately $120,000.00. [11] Under cross-examination by Mr Dircks, Mr White was asked about the position held by Les Roberts. He said that Mr Roberts was not a senior manager and the Company did not confide in him concerning company decisions nor did it seek advice from him. Mr White was also asked as to the alleged conversation between Mr Roberts and the Applicant in approximately June 2001. Mr White said that he had no reason to believe that Mr Roberts would have any knowledge about the future directions of the business. [12] Mr White was unable to offer any information concerning the alleged employment of casual employees as permanent employees shortly before the redundancies took effect. He conceded that he had received advice from the Australian Industry Group to consult with employees prior to redundancies taking place. In relation to the employees present on 27 July 2001, Mr White was asked " Did you explain why these employees had been selected for redundancies? " He replied " On more than a few occasions while I was speaking I was asked by individuals as to why me type of questions. ... And I specifically said, and I repeat, on numerous occasions, that I didn't want to get into one on one conversations in an open forum, and that anybody that wanted more information pertaining personally to themselves, were more than - to please contact me on Monday, and make an appointment and come in and sit down and discuss one on one, and I made that quite clear during the meeting, that I didn't think that it was appropriate to sit and have one on one conversations in a ---. " (Transcript PNs346 and 347). When asked by Mr Dircks as to why such "one on one conversations" had not occurred prior to the 27 July 2001 meeting, Mr White repeated his earlier view that he was concerned with the safety of plant, goods and equipment. (Transcript PN352). [13] Mr White denied that his treatment of the employees who were being retrenched was "barbaric". (Transcript PN370). He was not aware as to exactly how the 27 July 2001 meeting had been convened or how employees had been summoned to the meeting. He had left the details to Mr Pepper. (Transcript PNs373-375). [14] Mr White denied that the Applicant had been selected for termination based on alleged poor performance. (Transcript PN383). Mr White was asked " Were you given any advice to look at alternatives to making a few people redundant? " He replied " If I could have had - if there were any alternatives we would have exhausted those alternatives. I mean making people redundant is not something we have ever done before in 15 years of business, nor quite frankly anything I ever want to do again. " (Transcript PN403). [15] Mr Gary Pepper, the Production Manager of the Company, gave evidence for the Respondent. It was his witness statement (Exhibit R2) and sworn evidence that: · As Production Manager, he had been responsible for all staff on the factory floor, including responsibility for hiring and firing of staff and for overall performance and production. · In mid July 2001, Mr White had told him that the Bromax Division had to reduce the number of staff by a total of eight persons due to financial pressures. He was asked by Mr White to provide him with a list of eight names of people whom he (Mr Pepper) believed should be made redundant. · He then considered the needs of the Division based on a reduced workforce. He selected four employees who had been working for the Company for ten weeks or less and were still on probation. The remaining four employees who were selected for redundancy included a Delivery Driver/Assembler who was selected on the basis that there was no longer any need for an internal delivery driver. The remaining three employees to be retrenched included the Applicant and the other Team Leader in the Division, Mr Adrian Smith. · "Both John Powell and Adrian Smith were retrenched on 27 July 2001. The reason they were both retrenched was because I decided that that tier or level of supervisory positions was not required in our reduced workforce post redundancies. In his position as a team leader, John Powell had been responsible for the supervision of approximately 8 to 15 assembly workers. The numbers fluctuated depending on the workloads. Adrian Smith in his capacity as the other Team Leader was responsible for approximately 7 welders. In the post retrenchment structure of the Bromax division the number of assemblers and welders was reduced in total to 14. I formed the view that it was simply not necessary or economic for those 14 operators to have two Team Leaders supervising them, with a further 2 more senior employees supervising those two supervisors. Accordingly 1 level or layer of supervisors was cut from our factory workforce." (Exhibit R2 at par 8) · His list of the eight employees to be made redundant was not varied by the Directors of the Company and he was confident that the Company would be able to function and operate efficiently under the new staff structure that he was proposing. · After the retrenchments on 27 July 2001, one of those retrenched was re-employed in late August 2001 due to an increase in orders. That person had been re-employed after he approached the Company to enquire as to the availability of work. · He was present at the meeting on 27 July 2001 and heard Mr White speak for about 15 to 20 minutes to the six staff members present about the Division and the reasons why the decision to retrench those six persons had been taken. · At the meeting on 27 July 2001, he had spoken to the six employees as a group and told them that they could telephone him on the next Monday and make an appointment with him if they had any issues they wished to discuss or if they wanted assistance in relation to references and finding another job. Submissions on behalf of the Applicant [16] A written outline of submissions was exchanged and filed prior to the hearing. Mr Dircks supplemented this outline with oral submissions. [17] Mr Dircks submitted that a bona fide redundancy may still be harsh, unjust and unreasonable if the employer had not developed and applied objective criteria to assess which employees should be made redundant, consulted with the employees concerned about the proposed redundancies and given the employees an opportunity to put submissions as to possible alternatives to redundancy. Mr Dircks said that in the case of the Applicant, the actions of the Respondent failed those tests. [18] Mr Dircks further submitted that the Applicant was not advised of the decision to terminate his employment and the reason for that termination prior to the decision to terminate being made, and was also not provided with a genuine opportunity to respond. [19] Mr Dircks referred to the decision of the Full Bench in Windsor Smith and Liu & others (1998) [Print Q3462] (Windsor Smith) as supporting his contentions. I will return later in this decision to a consideration of the principles in Windsor Smith. [20] In terms of proposed remedy, Mr Dircks submitted that reinstatement was not a practical remedy given that the Respondent had sold that Division of the business which previously employed the Applicant and that the Applicant was now employed by the new owner of that Division. It was submitted that the Applicant should be awarded a total of sixteen weeks pay, that period being the period of unemployment suffered by the Applicant after his termination. Submissions on behalf of the Respondent [21] A written outline of submissions was exchanged and filed prior to the hearing. Mr McNab supplemented this outline with oral submissions. [22] Mr McNab submitted that the termination of the Applicant's employment was based solely on the operational requirements of the Respondent and that these formed a valid reason for the termination. The Respondent did not rely on any judgement as to the capacity of the Applicant. The Respondent's method of selecting employees who were to be made redundant was objective, fair and reasonable and based on a managerial decision by the Respondent brought on by financial circumstances. [23] Mr McNab further submitted that the Respondent's decision to notify employees of their termination on the day of that termination without prior consultation, was based on a reasonably held fear that earlier notification would be likely to lead to damage to the Respondent's plant and equipment. [24] Mr McNab also said that the Commission should take into account that the Respondent had paid to the Applicant all entitlements, that it was no longer trading in the enterprise that employed the Applicant, that the termination was brought on by financial losses suffered by the Respondent in the enterprise then employing the Applicant, and that the Applicant had failed to reasonably mitigate any financial loss he may have suffered. [25] Mr McNab submitted that the termination process had, in the circumstances, been fair and that the Respondent had taken all available steps to assist employees. He said that the decision to terminate the Applicant's employment was based on sound reasons and could not be found to be harsh, unjust or unreasonable. Mr McNab also drew my attention to Windsor Smith. Legislative Framework [26] Subsection 170CG(3) of the Act provides that: (3) In determining, for the purposes of the arbitration, whether a termination was harsh, unjust or unreasonable, the Commission must have regard to: "(a) whether there was a valid reason for the termination related to the capacity or conduct of the employee or to the operational requirements of the employer's undertaking, establishment or service; and (b) whether the employee was notified of that reason; and (c) whether the employee was given an opportunity to respond to any reason related to the capacity or conduct of the employee; and (d) if the termination related to unsatisfactory performance by the employee-whether the employee had been warned about that unsatisfactory performance before the termination; and (da) the degree to which the size of the employer's undertaking, establishment or service would be likely to impact on the procedures followed in effecting the termination; and (db) the degree to which the absence of dedicated human resource management specialists or expertise in the undertaking, establishment or service would be likely to impact on the procedures followed in effecting the termination; and (e) any other matters that the Commission considers relevant." [27] It is also necessary to have regard to the provisions of subsection 170CA(2) of the Act which provides that the procedures and remedies concerning the conciliation and arbitration of claims such as this one, as well as decisions on remedies, " ... are intended to ensure that, in the consideration of an application in respect of a termination of employment, a `fair go all around' is accorded to both the employer and employee concerned ". The dicta concerning a `fair go all round' are set out in the decision of Sheldon J. in Lotty and Holloway v Australian Workers Union (1971) AR(NSW) 95. Conclusion and Findings Introduction [28] The Applicant apparently did not dispute that there was a valid reason for the termination of his employment. Mr Dircks said in his opening statement, "The key issues in this case are not whether there was a valid reason for termination but more to do with the manner of the termination, the lack of consultation and the reasons why the Applicant was selected." (Transcript PN8). In his closing statement, Mr Dircks said "To say that it is kinder to employees to be put off with no notice, no time to adjust, no time to look at alternatives, no time to try and convince the employer that maybe it should not be them is kinder than consulting is just - well, it is rubbish; it cannot be accepted." (Transcript PN789). [29] The Respondent submitted that the termination was purely for operational reasons, followed a careful consideration of various options and was not communicated in advance to the employees affected due to a justifiable fear that prior notice would provoke a response which would include damage to the employer's property. Harsh, unjust or unreasonable [30] The issue which must be determined is whether the termination of the Applicant's employment was harsh, unjust or unreasonable having regard to the matters set out in subsection 170CG(3) of the Act. Subsection 170CG(3)(a) [31] Subsection 170CG(3)(a) of the Act requires that the Commission must have regard to whether there was a valid reason for termination. It is generally established that a valid reason is one which must be sound, defensible or well-founded on an objective analysis of the relevant facts. This principle was adopted in Shorten and others and Australian Meat Holdings Pty Ltd (1996) 70 IR 360. In the Applicant's case, termination occurred on the initiative of the Respondent after it had decided that he should be made redundant due to the operational needs of the Respondent's business. [32] As noted above, from the outset Mr Dircks did not apparently dispute that there was a valid reason for termination. On a close examination of the facts and evidence in this case, I find that there was a valid reason for termination based solely on the operational needs of the Respondent. Subsection 170CG(3)(b) [33] Subsection 170CG(3)(b) of the Act requires the Commission to have regard to whether an employee was notified of the reasons for his or her termination of employment. On the basis of the material before me, I find that the Applicant was so notified but also note that such notification was not provided to the Applicant until the actual occasion of his termination of employment. I further find that prior notification would not have altered the outcome, see the reasoning of Watson SDP in McCarthy and F J Trousers (2000) [Print T1853]. Subsection 170CG(3)(c) [34] Subsection 170CG(3)(c) of the Act requires the Commission to have regard to whether an employee was given an opportunity to respond to any reason relating to the capacity or conduct of that employee. On the basis of the material before me, I find that the Applicant's employment was terminated for reasons relating to the operational requirements of the Respondent's business and not on any grounds relating to his capacity or conduct. In this regard the evidence of Messrs White and Pepper is to be preferred over that of the Applicant. Subsection 170CG(3)(d) [35] This provision is not applicable given my finding under subsection 170CG(3)(c) above. Subsection 170CG(3)(da) [36] The Respondent's business was not a large one. The total number of employees appears to have been approximately 40 persons, with some 20 of those persons employed in the Division where the Applicant was employed. From the evidence of the three witnesses, it is clear to me that the small size of the Respondent's undertaking and the Respondent's unfamiliarity with the processes of redundancy had a substantial impact on the procedures followed in effecting the termination. For all of that, the selection process was a fair one. Subsection 170CG(3)(db) [37] I believe that it is relevant that the Respondent did not have dedicated human resource management specialists in their business and that this impacted on the procedures followed in effecting the termination. The Respondent did apparently receive some advice from the Australian Industry Group but this was received late in the process leading up to the termination of employment. Subsection 170CG(3)(e) [38] I do not consider any other matters to be relevant to this decision. [39] Both parties in part relied on the decision in Windsor Smith. In that decision, the Full Bench said: "Under the Workplace Relations Act 1996 the principal question is whether the termination was harsh, unjust or unreasonable. In considering that question the Commission is to ensure that a "fair go all round" is accorded to both the employer and the employee concerned. We take the true position to be that where employment is terminated on redundancy grounds it is a question of fact whether the employees selected for redundancy were selected for a reason related to the operational requirements of the employer's business, for a reason related to the employee's capacity or conduct, or for reasons of both kinds. Where the reason for selection is related solely to the operational requirements of the employer's business, it is not necessarily significant if no opportunity was given to employees to comment on the basis for their selection. Where the reason for selection is related to the capacity or conduct of the employees or includes such a reason and no opportunity is given to the employees to respond to that reason, that is a factor which the Commission must take into account." (Print Q3462 at p8) [40] The Full Bench went on to say, " Section 170CG(3)(a) distinguishes between valid reasons related to operational requirements and valid reasons related to the capacity or the conduct of the employee. In the case of the employees who were selected on the basis of operational requirements, and not because of their capacity or conduct, it is not apparent why an objective assessment of skills would be necessary. Such an assessment would only be required if selection was based on the capacity or conduct of the employees ." (Print Q3462 at pp9-10) [41] The Full Bench went on to make further comments which I also consider highly relevant to this case. The Bench said "...the existence of a valid reason or not does not answer the question of whether the termination is harsh, unjust or unreasonable. It is only one of a number of factors although it will often be a very important factor. " The Full Bench also said " The appellant submitted that its failure to give any notice of termination is explained by its fear of sabotage and/or violence. " (Print Q3462 at p10). In Windsor Smith, the Full Bench rejected the contention regarding sabotage saying "... the evidence of sabotage in the past was extremely thin ." (Print Q3462 at p11). [42] In this case, I find that the Respondent's fears of damage to their plant and equipment was a sincerely held belief based on prior experience of loss or theft. It was not disputed between the parties that substantial damage was done to the Respondent's premises by an employee after the meeting on 21 July 2001. To my mind, that occurrence proves that the Respondent's fears were not groundless. [43] The Full Bench in Windsor Smith also said " ... in ordinary circumstances it is reasonable for an employer who is contemplating redundancies to discuss the matter with the employees, and their representatives should the employees so desire, to enable alternatives to be canvassed and to allow employees who are in peril of losing their employment to adjust their affairs accordingly ." (Print Q3462 at pp11-12). I have taken this into account, but find that on this occasion the Respondent's well-founded fears of damage to plant and property and the Respondent's unfamiliarity with redundancies add up to a reasonable explanation as to why such procedures were not undertaken. [44] The Respondent did make arrangements for redundant employees to contact the Company on a one-by-one basis and kept open the possibility of future re-employment should economic conditions improve. The subsequent re-employment of one of those who was made redundant, in my view, shows that the Company was acting in good faith in that regard. All in all, I find that: 1. There was a valid reason for the termination of employment based solely on the operational requirements of the Respondent's business. 2. The termination of the Applicant's employment was not harsh, unjust or unreasonable in the circumstances. [45] Accordingly, I dismiss the application. [46] An order reflecting this decision is issued in Print PR918788 . BY THE COMMISSION: COMMISSIONER Appearances: G Dircks , agent, for John Powell. R McNab, solicitor, for Polite Enterprises Pty Ltd. Hearing details: 2001. Melbourne: December 11. Printed by authority of the Commonwealth Government Printer <Price code E>