James Lewis Aitken v The Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia - Western Australian Branch [1995] IRCA 352

ng, Energy Union, an organisation registered under the Act ("the Federal Union"), agreed with the State Union that the Federal Union would apply to the Industrial Relations Commission ("the Commission") under the Act and seek the extension of federal awards to which the federal Union was a party to workers to whom awards registered under State Act applied including workers who were members of the State Union. The Commission granted the requested extension of coverage after a contested hearing. The State Union supported the Federal Union's application. The State Union and Federal Union agreed that the Federal Union would establish a branch of its forestry division in Western Australia to provide services for members of the Federal Union including members who were formerly members of the State Union. The branch was established on or about 1 July 1993. With the agreement of the State Union the forestry division branch used officers employed by the State Union to deliver the services of the Federal Union to workers employed in the timber industry. Aitken was one of the officers of the State Union directed to perform those duties for the Federal Union. In July 1994 the State Union and the Federal Union agreed that the Federal Union would employ its own staff. The Federal Union indicated to the State Union that it did not intend to employ Aitken. On or about 2 August 1994 the Secretary of the State Union called Aitken into his office and advised him that his services were to be terminated forthwith. A payment in lieu of notice would be made to him. Aitken was handed a letter of termination which read as follows: "2/08/94 Jim You are aware that for some time now the Forestry Division has been subject to a decrease in membership and therefore income. The Division has gone from a membership of 1400 in 1992 to a figure of some 800 to-day. The Division has been subsidised by the resources of the Construction Division for a number of years now and that position can no longer be sustained due to the downturn in the construction industry which has seen the Construction Division make a painful readjustment to it's (sic) altered circumstances which included, amongst other things, letting people go. Whilst the Forestry Division maintains it's (sic) current level of membership it is essentially a one person division with the necessary administrative support. The A.T.A.I.U. have decided that they will determine who that person will be and I understand that person to be Paul Martinello. Regretfully I've got to inform you that under these circumstances I am obliged to terminate your employment. You are to receive four weeks notice in lieu of notice. I would like to thank you for the work that you have done, under difficult circumstances, for the Union and only wish that it could have been otherwise. Regards (Signed) NEIL FLYNN STATE SECRETARY" "The A.T.A.I.U." referred to in the letter was the forestry division of the Federal Union. When the matter was heard by the Registrar the State Union, which had filed a conditional appearance, maintained that the Federal Union had been the employer of Aitken and that no case of unlawful dismissal could be sustained against it. Alternatively, it argued that if Aitken had been employed by the State Union at the relevant time, the termination of his services had been based on the operational requirements of the State Union, and, therefore, under s.170DE(1) of the Act, there had been a valid reason for termination. In the course of the hearing before the Registrar the State Union, in effect, abandoned its conditional appearance and the real argument became whether the State Union had a valid reason to terminate Aitken's services and whether the termination was harsh, unjust or unreasonable under s.170DE(2) of the Act. At the time of termination Aitken was informed by Flynn that the State Union would try and get a job for him on a building site but if the money paid on termination "ran out" Aitken would have to "get on the dole". Aitken gave unchallenged evidence that he found the sudden termination of his employment and the period thereafter very stressful and upsetting. Aitken was unemployed for three weeks until he was offered employment on a "temporary basis" as the organiser for the forestry division of the Federal Union. The employment was said to be "temporary" in that it was subject to review each month. It appears that the temporary status of Aitken's employment continued at the time of the hearing before the Registrar and at the time of the review. On the hearing of the review it was not in issue that the State Union had been Aitken's employer at all times. Counsel for the State Union contended that the Registrar had found that the Union had discharged the obligation imposed upon it by sub-s.170EDA(1) of the Act to prove that there had been a valid reason for termination of Aitken's employment, namely, a reason based on the operational requirements of the State Union. Counsel for Aitken did not agree that such a finding had been made by the Registrar and submitted that if such a finding had been made it had been made in error. The absence of agreement on the point meant that the issue has to be decided afresh by the Court according to the evidence presented to it in the review proceeding. (See: Cox v. South Australian Meat corporation (unreported) Industrial Relations Court Von Doussa J. 13 June 1955 at p.2). At the time of termination Aitken was paid a net sum of $7,952, after tax, being the balance of: i) a payment in lieu of long service leave, ($4,593); ii) a payment in lieu of annual leave, ($2,317); iii) a redundancy payment, ($800); iv) a payment in lieu of four weeks notice, ($2,956). It was conceded by counsel for the State Union that the amount paid in lieu of notice did not comply with the requirements of s.170DB(2) of the Act which required that Aitken be given at least five weeks notice, or compensation instead of notice, to terminate his services. Whether the payment in lieu of notice was calculated in accordance with the requirements of sub-ss.170DB(4) and 170DB(5) is unknown. Pursuant to sub-s.170EE(5) of the Act contravention of s.170DB permits the Court to make an order requiring the employer to pay the employee an amount of damages equal to the amount of the compensation which should have been paid under s.170DB at the time the employment was terminated. At the time of termination Aitken had the use of a motor vehicle supplied by the State Union and had been permitted to retain the vehicle for an unspecified period after termination. Almost immediately after his termination the Federal Union exercised a claim it had in respect of the vehicle and took possession of it from Aitken. It used the vehicle for a period of approximately four months before returning it to Aitken. Aitken has had the use of the vehicle thereafter. At the hearing before the Registrar the State Union sought an order for the return of the vehicle but that claim was not pursued in the review proceeding. It remains an issue to be settled between the State Union and the Federal Union. Aitken contends that the State Union contravened s.170DE of the Act and seeks an order that the State Union pay compensation pursuant to sub-s.170EE(2) of the Act. It was not in issue between the parties that reinstatement of Aitken is impracticable. As stated above, the State Union contends that there was a valid reason to terminate Aitken's employment based on the operational requirements of the State Union. Aitken claims that the evidence adduced by the State Union did not demonstrate that there was a genuine redundancy entitling the State Union to terminate his services. A genuine redundancy occurs when an employee is no longer required to perform the job for which the employee was engaged because of changes that have been made or suffered by the employer's undertaking. (See: R. v. The Industrial Commission of South Australia; Ex parte Adelaide Milk Co-operative Ltd. (1977) 44 S.A.I.R. 1,202 per Bray C.J. at 1,205; Gromark Packaging v. Federated Miscellaneous Workers Union of Australia, W.A. Branch (1992) 46 IR 98 at p.105 per Franklyn J.). As Ryan J. stated in Jones v. Department of Energy and Minerals, (Unreported) Industrial Relations Court, 16 June 1995) at 10-11: "However, it is within the employer's prerogative to rearrange the organisational structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly-created positions. It is inappropriate now to attempt an exhaustive description of the methods by which a reorganisation of that kind may be achieved. One illustration of it occurs when the duties of a single, full-time, employee are redistributed to several part-time employees. What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organisation, any duties left to discharge. If there is no longer any function or duty to be performed by that person, his or her position becomes redundant in the sense in which the word was used in the Adelaide Milk Co-operative case." The structural re-organisation that took place in the present case was the reduction in membership of the State Union by transfer of members to the Federal Union and cessation of the representative role of the State Union. At the time of amalgamation the Federal Union did not have employees present in the State able to provide services for the Federal Union and it relied upon the State Union to make employees available to render those services on behalf of the Federal Union. The evidence was sparse as to what arrangements existed between the State Union and the Federal Union for reimbursement of the State Union for the cost of the use of the services of its officers. However, it appears that all of the duties performed by Aitken were for the benefit of the Federal Union. In about July 1994 the impact of the reduced income from members' subscriptions and the development of differences between the State Union and the Federal Union led to the decision by the State Union to reduce its staff by terminating the services of Aitken. The State Union continued to employ other staff including perhaps several who did work for the Federal Union of the type that Aitken was capable of carrying out, but once the Federal Union ceased to rely on the assistance of the State Union in the timber industry the specific duties carried out by Aitken were no longer required. Although the evidence presented lacked clarity and was somewhat less than detailed there was sufficient evidence to show that upon the Federal Union taking steps to employ its own staff to deliver the services previously performed for the Federal Union by Aitken, by arrangement with the State Union, Aitken's role as an employee of the State Union became surplus to the State Union's requirements, and that his position was rendered "genuinely redundant" because of that dramatic reduction of operations of the State Union. It follows that the State Union satisfied the onus of proof cast upon it by sub-s.170EDA(1) of the Act. It is now necessary to consider the provisions of sub-s.170DE(2) of the Act which provide, in effect, that a reason that is otherwise valid under sub-s.170DE(1) is not valid if, "having regard to the employee's capacity and conduct" and the "operational requirements" of the employer, the termination is harsh, unjust or unreasonable. The words "harsh, unjust or unreasonable" reflect a concept that is common to unfair dismissal cases under the terms of industrial awards and under the common law. A Full Court of the Federal Court considered the meaning of the words in Bostik (Australia) Pty. Ltd. v. Gorgevski (1992) 36 F.C.R. 20 where Sheppard and Heerey JJ. at 28 said as follows: "These are ordinary non-technical words which are intended to apply to an infinite variety of situations where employment is terminated. We do not think any redefinition or paraphrase of the expression is desirable. We agree with the learned trial judge's view that a court must decide whether the decision of the employer to dismiss was, viewed objectively, harsh, unjust or unreasonable. Relevant to this are the circumstances which led to the decision to dismiss and also the effect of that decision on the employer. Any harsh effect on the individual employee is clearly relevant but of course not conclusive. Other matters have to be considered such as the gravity of the employee's misconduct." A genuine redundancy which obliges an employer to select the employee whose services are to be terminated by reason of that redundancy may nonetheless result in the termination being harsh, unjust or unreasonable if the selection is not fairly made according to established criteria. (See: Corkrery v. The General-Motors Holden's Limited (1986) 53 SAIR 31 at 538; Wynn's Winegrowers Pty Ltd v. Foster (1986) 16 IR 381 at 384; Quality Bakers of Australia Ltd v. Goulding (Unreported) Industrial Relations Court Beazley J. 23 June 1995). The words 'harsh, unjust or unreasonable' used in s.170DE of the Act in Division 3 - (Termination of employment) are part of interrelated provisions designed to implement agreed international standards for the proper termination of an employee's services. (See: Employment Security (1994) (The Federation Press) M. Pittard "The Age of Reason" p.39; R.C. McCallum "International Standards in Industrial Relations and their Application in Australia (1995) 2 TJR 163 at 182). The object of these provisions of the Act is to institute a level of practice in the management of labour which will tend to preserve the worth of the asset that labour represents. Underlying the provision is the awareness of Parliament legislative intervention for the protection of employees is in the public interest in an economy that is subject to international influences which tend to promote less security in employment and to demand more flexibility in the use and skills of labour. In s.170CA of the Act it is stated that the object of Division 3 of the Act is to give effect, or further effect, to the Termination of Employment Convention ("the Convention") and the Termination of Employment Recommendation 1982 ("the Recommendation") each adopted by the General Conference of the International Labour Organisation on 22 June 1982. Australia ratified the Convention on 26 February 1993 and it is set out as Schedule 10 to the Act. The Recommendation is Schedule 11 to the Act, Clause 19(1) of the Recommendation reads as follows: "19(1) All parties concerned should seek to avert or minimise as far as possible termination of employment for reasons of an economic, technological, structural or similar nature, without prejudice to the efficient operation of the undertaking, establishment or service, and to mitigate the adverse effects of any termination of employment for these reasons on the worker or workers concerned." It is well known that the circumstances and manner of termination of an employee's services can have a substantial effect upon an employee's self-esteem and confidence and impact adversely upon the employee's ability to secure further employment. It is, therefore, considered to be in the public interest to ensure that employees whose services are terminated are treated in a fair and reasonable manner enabling them to retain confidence in their self-worth and reducing the prospect that they will have cause to rely on relief payments from public revenue. It is in that context that a determination is to be made whether the termination of the services of an employee, having regard to the employee's capacity and conduct, and the operational requirements of the employer, is harsh, unjust or unreasonable. The decision to dismiss Aitken had a severe impact upon that employee. As Flynn said: "... it was very unpleasant scenario. Mr Aitken was obviously disappointed and perhaps a bit reticent and perhaps a bit stunned at the time". Aitken lost contact with, and felt inferior to, co-workers and at the age of 52 was left in profound doubt as his ability to secure further employment. As matters transpired within three weeks Aitken was able to take up duties as an organiser with the Federal Union, although the terms of employment were said to be "temporary" and the remuneration paid was less than he had received in his previous employment. In some cases consequences of emotional stress and financial embarrassment are an unavoidable result of the termination of services and if the termination is effected not only for a valid reason but in compliance with requirements of the Act such consequences by themselves will not make an otherwise proper termination harsh, unjust or unreasonable. The question in this case is whether the employer gave due regard to all reasonable and fair considerations the employee was entitled to expect as part of the employer/ employee relationship that existed between them prior to termination of the employee's services. That is to say, acting fairly and having due regard to the interests of the employee did the employer do all that could be reasonably expected of it in the circumstances to avoid the termination operating harshly, unjustly or unreasonably. As Jenkinson J. said in Gregory v. Philip Morris Ltd. (1988) 80 A.L.R. 455 at 457: "The question whether the termination was unreasonable is, I think, one of fact. This question requires a determination, by reference to moral values and prudential considerations current in the community, of what the tribunal of fact thinks a reasonable employer in the circumstances would have decided to do at the time when the respondent terminated the appellant's employment. The process is similar to that by which the questions whether a personal injury or damage to a chattel has been caused by a person's negligence are resolved: what does the tribunal of fact think that a reasonable person placed in the circumstances in which that person was placed would have done?" It was part of the case for the State Union that at the time of termination it had informed Aitken that it would try to obtain employment for Aitken on a building site. There was no evidence that it took any steps in that regard before Aitken's services were terminated. It was admitted there was no consultation with Aitken about the prospect of his services being terminated nor discussion with him as to what steps may be taken to obtain alternative employment for him either on a building site or with the Federal Union. The absence of consultation denied Aitken an opportunity to put to the employer, and receive from the employer a reasoned response upon, Aitken's opinion that the State Union was obliged to apply to him the policy of "last on, first off" pursued by the State Union with employers of its members and to allocate to Aitken the duties of another position to be vacated under the application of that policy. In the present case the actual sum received by Aitken upon termination was approximately $5,500 after several accounts were paid by the State Union on Aitken's behalf pursuant to his authority. Of the sum received only $800.00 represented a payment for redundancy. It may be noted that one of the accounts paid on Aitken's behalf out of the termination payment was a substantial sum, $865, being medical fees incurred by Aitken as a result of injuries received whilst promoting the objects of the State Union. It does not appear to have been an injury for which compensation was paid by the State Union. The minor amount of "redundancy pay" become available to Aitken was a matter the State Union would have been required to discuss with Aitken if it had undertaken proper consultation with him before implementing its decision to terminate his services and it is probable that arising out of that discussion the State Union would have recognised a responsibility to offer a better severance payment than the $800 said to be the remainder of Aitken's entitlement. I am satisfied that the actions of the State Union fell well short of the conduct that may have been expected of a reasonable employer in the particular circumstances of this employer/employee relationship. The State Union was well placed to attempt to obtain a position for Aitken on a construction site before it took any step to terminate his services and prior to so acting the State Union should have held discussions with Aitken to assist him to face that unexpected termination and to pursue other opportunities for future employment, Aitken being a person who had rendered good service to the State Union as part of a small group of employees. Those were necessary and obvious steps for the proper management of labour by the State Union as employer. I am satisfied that in all the circumstances the manner of termination was harsh, unjust or unreasonable. Therefore, having regard to the steps that the State Union as a reasonable employer should have taken, and failed to take, before implementing its decision to terminate Aitken's services, the State Union did not have a valid reason to terminate Aitken's services on 2 August 1994. It is now necessary to determine whether any order should be made under sub-s.170EE(2) requiring the State Union to pay Aitken compensation additional to, or inclusive of, the amount already found to be payable under sub-s.170EE(5) of the Act. At the hearing before the Registrar there was evidence that the sum paid by way of redundancy payment upon termination would have been in the order of $5,500 but for the attrition of that sum allowed to occur in the course of Aitken's employment. According to the evidence of Flynn, organisers "accrued redundancy or severance pay" at the rate of $20 per week until 4 April 1994 after which the accrual occurred at the rate of $40 per week. It is not clear how this redundancy or severance pay was funded and, in particular, whether it was a deduction from weekly salary. As a matter of policy, however, the State Union allowed organisers to have access to the accrued entitlement and paid sums to, or on behalf of, such an employee as directed. At the time of termination of Aitken's services only $800 remained of the $5,500 that was said to have been his accrued entitlement. It was quite inappropriate for the intended severance payment to have been subjected to such regular reduction and the purpose of the entitlement frustrated. (of: the Convention, Art.12) In effect, as the Registrar held, the treatment of that sum was akin to the payment of deferred salary. On the other hand if it is accepted that the termination of Aitken's services became unavoidable after the activities of the State Union were restructured by ceding industrial coverage of workers to the Federal Union and Aitken's duties were taken oover by the Federal Union, such a termination would have occurred only several weeks later than it did if adequate consultation and steps to find alternative employment had been undertaken by the State Union. Furthermore, although the employment now held by Aitken is subject to monthly review his history of satisfactory performance in a similar position with the State Union suggests that he should be able to retain employment as an organiser with the Federal Union. The compensation to be ordered to be paid under s.170EE(2) is such amount as the Court thinks appropriate. It is a statutory remedy for which no criteria of assessment are prescribed, other than a requirement in s.170EE(3) that the Court have regard to the remuneration that the employee would have received, or would have been likely to have received, if the employer had not terminated the employment and subject to the limit set in that sub-section. In assessing what compensation is appropriate, therefore, the Court will have regard to what is reasonable in the circumstances and will look at what would have been likely to occur had the Act not been contravened (See: Nicolson v. Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233 at 246 per Wilcox CJ.). The Court will consider the detriment occasioned to the employee by employer's the contravention of the Act, and the extent to which it is reasonable to compensate the employee for such events by reason of the employer's failure to adhere to the provisions of the Act. Division 3 of the Act provides the context in which s.170EE is to be constructed and the contract indicates that the Act is concerned, inter alia, with the protection of the dignity of employees and a breach of the Act in respect of which s.170EA provides a right to seek redress and s.170EE provides an entitlement to receive compensation may be said to have some of the characteristics of a statutory tort. Therefore, principles relevant to the assessment of damages in tort may provide assistance to assessing the compensation to be paid under s.170EE(2) in particular cases. that is to say it may be appropriate to include in the measure of reasonable compensation to be paid pursuant to s.170EE a sum sufficient to compensate an employee for mental distress or injured feelings caused by a harsh, unjust or unreasonable termination of employment (See: Whelan v. Waitaki Meats Ltd. [1991] 2 M2LR 74, 90. If the contractual measure is considered to be relevant it may be seen that in contract damages may be awarded for breach of the implied term of a contract of employment that the employer will not breach the contract so as to cause vexation, mental distress, disappointment or frustration to the employee anticipating enjoyment from the performance of the employment contract where such an adverse consequence for the employee may be said to have been within the reasonable contemplation of the employer and the employee if the employer were to breach the employment contract in such a fundamental respect (See: Cox v. Philips Industries Limited [1976] 1 WLR 638; Whelan v. Waitaki Meats Ltd; See also: Heywood v. Wellers [1976] QB 446; Watts v. Morrow [1991] 1 WLR 1421 per Bingham LJ at 1445; Baltic Shipping Company v. Dillon (1993) 176 CLR 344 per Mason CJ. P. 36-4). The purpose of awarding compensation to an employee for an employer's failure to abide by the terms of the Act is not only to redress a wrong done to an employee to secure, in the public interest, greater awareness of, and adherence to the provisions of the Act and a measure which provides compensation for consequences caused by conduct the Act seeks to prevent meets that purpose. Having regard to the relevant circumstances of the present case which include underpayment of the sum to be paid in lieu of notice, failure to pay an appropriate redundancy payment and the anguish and injured feelings occasioned to Aitken by the circumstances and consequences of his termination the sum of $7,000 awarded by the Registrar cannot be said to be a sum that so exceeding the limits of a reasonable assessment calculated according to relevant principles that it constitutes an erroneous exercise of judgment by the Registrar. By agreeing that the review proceeding be conducted without recalling witnesses, the parties have accepted that at least in respect of the Registrar's assessment of compensation the review proceedings be conducted as an appeal by way of re-hearing. Any advantage the Registrar enjoyed in observing Aitken as he gave his evidence and determining what weight was to be given to Aitken's evidence of disappointment and loss of self-esteem occasioned by the circumstances of the termination of his employment was an advantage that remained with the Registrar to be given due weight on the review (See. Cox v. Australian Meat Corporation p.2-4). Accordingly the order that the State Union pay the sum of $7,000 to Aitken should be confirmed. I certify that this and the preceding twentytwo (22) pages are a true copy of the Reasons for Judgment of his Honour Justice Lee. Associate: Date: