Helen Hartley v MGICA

Helen Hartley v MGICA - [2001] NSWIRComm 224 - NSWIRComm 2000 case summary — Zoe

[6]

2 The respondent had restructured its business and, as a consequence, the position of account manager became redundant. The applicant was offered employment in other roles but declined. Ms Hartley alleged that the abolition of the position of account manager amounted to termination of her employment. She was not given any redundancy pay. The applicant alleged that other employees were provided with redundancy pay. The applicant claimed that pursuant to s 106 of the Industrial Relations Act 1996 her contract of employment with the respondent "was and is unfair, unconscionable and contrary to the public interest". The applicant sought the following orders: 1. An order declaring void in whole or in part or varying in whole or in part either from its commencement or from some other time the contract of employment between the applicant and the respondent under which the applicant performed work in an industry. 2. Further, in addition, an order that the contract of employment between the applicant and the respondent under which the applicant performed work in an industry is unfair, harsh and unconscionable and contrary to the public interest. 3. Further, in addition, an order varying the contract of employment between the applicant and the respondent from its commencement so as to include the following terms: (a) upon termination of employment for any reason the respondent shall give to the applicant 3 months notice of termination or payment in lieu of such notice of termination. (b) upon termination of employment for reasons of redundancy the respondent shall pay to the applicant in addition to notice under (a) above a redundancy payment calculated in accordance with the redundancy policy applied to award covered employees (a) (sic) for the purpose of (a) and (b) above payment in lieu of notice shall be calculated by reference to the total value of all benefits that the applicant would have received during the notice period. 4. Further, in addition, an order that the respondent pay to the applicant such amount of money in connection with the contract so avoided or varied as may appear to be just in the circumstances. 5. An order that the respondent pay to the applicant interest upon such amount of money as is ordered to be paid to the applicant in connection with the contract as varied at such rates and from such time as this Honourable Commission considers appropriate. 6. An order that the respondent pay the applicant's costs of these proceedings. 7. Such further or other orders as this Honourable Commission considers appropriate. 3 The amount sought by Ms Hartley in respect of redundancy pay entitlements was $160, 797.

[24]

21 On the question of remuneration, the applicant had said to the respondent that it was her view that "my earnings will be considerably less" as a relationship manager. This view appears to have been based on a belief that her bonus earnings under the new arrangements were likely to reduce by 10 per cent. The respondent maintained that it had indicated to the contrary. In a letter expressing his disappointment that the applicant had declined the role of relationship manager, Ian Graham, the respondent's managing director, said on 29 April 1999: It is not correct that your earnings will be less than as an Account Manager. Your base pay and the remuneration range for the Relationship Manager role is higher than that offered in your current position. You have commented that the new bonus structure available will not be as lucrative. As you are aware, bonuses are based on performance and as such are not guaranteed. Notwithstanding any reservations you may have the base and fixed remuneration components together will provide higher levels of remuneration than current arrangements where objectives are met or exceeded. 22 The evidence in respect of remuneration was that the remuneration range for the account manager position was $56,379 to $68,908. The remuneration range for the relationship manager was $68,450 to $83,650. Ms Hartley's fixed remuneration as an account manager was $67,400. Her fixed remuneration as a relationship manager, if she had accepted the appointment, was to commence at $68,450. The "maximum variable reward" (bonus) that could be achieved by an account manager was 22.5 per cent of "fixed remuneration" (Base salary plus salary sacrifice superannuation). A relationship manager could receive up to 20 per cent of their fixed remuneration, although a target of 10 per cent bonus was payable on meeting agreed objectives. In her evidence Ms Beverley deposed that "The new bonus program is not as discretionary as the variable performance reward program, as the guidelines or objectives are set by the employee and the manager so the employee has control over what they will achieve during the year. MGICA sets a "target" of where it expects the average of our people to perform." I note that Ms Logan, who accepted the role of relationship manager with the respondent, received about "10 to 11 per cent" by way of bonus for the 1999 year. Between 1992 and 1998 Ms Hartley's bonus varied between 17.5 to 22.5 per cent.

[32]

The payment is equal to A + B + C or A + D whichever is the greater Long service leave for 10 years or more Accrued annual leave entitlements Outplacement: Outplacement assistance, paid for by MGICA, will be offered to an employee through a recognised provider chosen by MGICA to assist the employee in finding alternative employment. The outcome of this assistance will remain confidential between the employee and the program provider. 25 In a letter from the applicant to Mr Graham dated 22 April the applicant said: As you are aware, it is my view and the view of my solicitor that a consequence of the restructure of MGICA is the redundancy of my position of Account Manager and accordingly results in the termination of my employment. Put another way, the termination of my employment is a consequence of the restructure. You have offered me a position in the new structure as Relationship Manager which is a quite different role and which has a bonus structure which would not on any realistic view allow me to achieve the significant bonus earnings I have achieved over the past 5 years. Accordingly, on any view, the job is quite different and my earnings will be significantly less. Even if you were entitled to unilaterally direct me to take up a new and different role (which I doubt), you are not entitled to do so while at the same time reducing my income. The redundancy policy entitles me to a significant redundancy payment and I require you to make that payment. I appreciate you have a different view of the matter, however, to ensure that I can preserve my rights and MGICA can proceed with its restructure, I propose that I cease employment on 30th April 1999 which is the last business day before the restructure. 26 Mr Graham responded to the applicant's letter on 29 April. I have already referred to Mr Graham's response in the context of the issue of remuneration, where Mr Graham denied that the applicant's remuneration would be lower in the new role. Mr Graham went on to say in his letter: You have also stated that the redundancy policy entitles you to a '"significant redundancy payment". This is not the case. The Policy in fact states quite clearly that "retrenchments may arise when work circumstances have changed to such an extent that the company is no longer able to provide a role which productively utilises the skills and capabilities of an employee". Certainly, the restructure means "work circumstances have changed". However clearly this has not been to the extent that MGICA is unable to provide you with a role that productively utilises your skills and capabilities. In fact the policy makes it clear that retrenchment will always be an "action of last resort and will only occur after any opportunities for redeployment have been fully explored". Further it states "Retrenchment provisions do not apply where: …the employee is offered but declines to take a reasonable alternate role." Our policy is aimed at providing ongoing employment for our people and therefore having been provided with a Relationship Manager role, there is no entitlement to any redundancy payment in your circumstance. You have understood that our view of your circumstances and entitlements on you choosing to cease your employment with MGICA on 30 April 1999 is quite different to that communicated in your letter to us (sic) 22 April. As you have advised your last date of employment is Friday 30 April I have arranged for you to be provided with termination payment on that day. If you have any questions in regard to these calculations please discuss them with Kelly Beverley.

[33]

27 The evidence revealed that the respondent made redundancy payments to three employees. The first was Ms Diana Logan. Ms Logan had been designated as a relationship manager under the old structure. Ms Logan accepted an offer to take up the position of relationship manager under the new structure and although her title remained the same, her role changed. In a letter from Ms Beverley dated 1 April 1999, Ms Logan was offered the position of relationship manager under the new structure at a "total employment cost" of $68,450 per annum plus bonus. The achievable range for the bonus was 10-20 per cent with a target of 10 per cent payable on the employee meeting agreed objectives. The letter indicated that the commencement date for employment in the new position was 3 May 1999. Ms Logan was also provided with a redundancy payment of $153,073.78 in accordance with the respondent's retrenchment policy. The payment included 8 weeks' pay in lieu of notice, notwithstanding that Ms Logan was to commence in her new role in 4 weeks' time. The reason given by the respondent for paying Ms Logan a redundancy payment was that the relationship manager role under the new structure was not considered a "reasonable alternate role" in terms of remuneration, capability and status. Ms Logan's "total remuneration" (i.e., base salary plus salary sacrifice for superannuation) in her old position was $75,593 and in the new position it was $63,674. Ms Hartley's "total remuneration" as an account manager was $60,465 and as a relationship manager, $63,674. The two other employees who received redundancy pay without any break in the continuity of their employment were Keith McKenzie, an account manager who was appointed to the position of underwriting officer, and Mark Anderson, who was the State Manager and accepted the role of regional portfolio manager. In respect of both of these employees it was considered that, like Ms Logan, the positions offered to them under the new structure were not reasonable alternate roles and, therefore, it was said that redundancy pay was payable under the respondent's retrenchment policy.

[38]

32 Principles that might be said to be associated with an entitlement to redundancy pay were summarised by Sams DP in Shop, Distributive and Allied Employees' Association, New South Wales v W D & H O Wills Holdings Ltd [2000] NSWIRComm 98 (9 June 2000) at pars 66 and 67: 66 A body of well settled contemporary industrial principles has developed from these, and many other, authorities. They may be summarised as follows: In redundancy situations an employer is obliged to: 1) Give reasonable notice to employees and/or their Unions; 2) Adequately consult with employees and/or their Unions on the impact of the proposed changes; 3) Explore genuine alternative options for redundancy, such as redeployment or relocation; 4) Ensure such options are fairly offered to affected employees; 5) Provide reasonable standards of redundancy benefits; 6) Provide appropriate ancillary services, such as time off to seek alternative work, retraining opportunities, outplacement services or financial planning; 7) Ensure employees nominated for redundancy are fairly selected on an objective and unbiased basis. 67 Notwithstanding the employer's obligations, there are certain reciprocal obligations on employees when confronted with genuine efforts by the employer to minimise the impact of potential redundancy. These obligations include: a) A willingness to participate in consultation with the employer; b) Genuinely participating in exploring alternatives to redundancy; c) Not unreasonably refusing to accept retraining, alternative employment, redeployment or relocation. 33 Sams DP also referred to the decision of Merriman C of the Australian Industrial Relations Commission in Clothing & Allied Trades Union of Australia v Algray Pty Ltd (1988) 31 IR 365: In considering all of the aspects of these two claims, the company seeks relief on the basis that neither former employee was actively seeking a commitment to employment or cooperating with the company as to future employment. The company's contention in this matter is supported by a decision of the Industrial Commission of SA in the matter of the Milk Processing and Cheese Manufacturing Etc (Appeal) case. In its decision the Full Commission said:

[49]

44 There are some parallels between the circumstances of this case and those in Gala v State Bank of New South Wales Ltd t/as Colonial State Bank (No 2) (1998) 84 IR 216. In Gala the appellant had been employed by the respondent as Treasury Audit Manager, a position that demanded high standards of honesty, integrity, independence and diligence. As a consequence of an amalgamation it was proposed to transfer the appellant to the position of Funds Transfer Pricing System Administrator. The appellant indicated that she was not prepared to accept the position. She regarded herself as a career auditor and was not interested in a position outside that field. Moreover, she considered that she did not have the skills to fill the new position. At first instance, Marks J, while sympathising with the appellant's length of service, her senior position, the abruptness of the notification that her long-held position had been made redundant, decided that it was not unreasonable for the employer to require the appellant to undertake the new position. In arriving at this view his Honour put great store in the fact that the appellant would not give the new position a trial because she was not interested in any job not within the auditing field. The appeal against his Honour's decision was upheld. The Full Bench (Cahill VP, Maidment and Hungerford JJ) said at 224-225: We have reached the firm conclusion, with due respect to his Honour's findings, that the respondent's conduct was not justified in terms of cl.7 of the Service Agreement. The respondent's direction that the appellant should immediately take up the new position specified and perform the duties entailed in that position was not a reasonable requirement under that clause. In the particular circumstances of the case we consider that that conduct on the part of the respondent was unfair and that it rendered the contract between the parties unfair. To our mind, features of the unfairness include the following: * There was an absence of notice or warning that the appellant's long-held, senior position was to be abolished and that, as a consequence, the appellant would no longer be able to work in that position. * Together with the giving of advice that that was indeed the case was the requirement that the appellant should transfer, virtually immediately, to another position in an area other than auditing, the appellant's only area of employment and in which she specialised, the duties of which were not able to be spelt out to the appellant in detail. * There was no attempt by the respondent to obtain the appellant's views on the proposed deployment before the decision to that effect was made. It was a "take it or leave it" situation. * There was unfairness in the options put to the appellant of, on the one hand, take up the new job, or, on the other, resign, be deemed by the respondent as having abandoned employment, or take the job, try it, and, if dissatisfied, then resign. * There was unfairness in the respondent's failure to give proper appreciation and consideration to the appellant's disinclination to take up the new position and the appellant's reasons therefor. Those reasons were expressed verbally to officers of the respondent and spelt out in the appellant's letter to Mr Neville on 2 September 1996. In our opinion, those reasons are both substantial and understandable, and should have been given considerably greater weight by the respondent than was actually the case. 45 As to the reliance by Marks J on the fact that the appellant would not give the new position a trial because she was not interested in any job not within the auditing field, the Full Bench said: We differ from his Honour in the weight to be given to that factor. As we have stated, we think that the respondent's (sic - appellant's) attitude was well-founded, understandable, reasonable and justified, and should be regarded in that light in weighing up the various factors of relevance in the matter. 46 Whilst there are, indeed, parallels between the present case and Gala, there are also important differences. Firstly, it could not be said that in relation to the applicant there was an absence of notice or warning that her position would be abolished. Secondly, it could not be said that there was a requirement on the applicant to transfer to the new position virtually immediately. Thirdly, it could not be said that there was no attempt on the part of the respondent to obtain the applicant's views on the proposed deployment before the decision to that effect was made. What can be said, however, is that there was a single-mindedness on the respondent's part about the new structure and an unwillingness to countenance any departure from it which, I believe, led to a failure by the respondent to give proper appreciation and consideration to the applicant's disinclination to take up the new position and her reasons for taking that position. For example, there was no attempt by the respondent to consider alternative roles that might have been acceptable to the applicant and, unlike the situation in Gala, no proposal was put to the applicant to at least trial the new position. The only option she was given was to resign. In that sense, the applicant faced a stark "take it or leave it" proposal.

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