K Beames v BDRP Falconer Pty Ltd - PR916075 [2002] AIRC 350; (28 March 2002)

Workplace Relations Act 1996

s.170CE application for relief in respect of termination of employment

[1] On 16 October 2001 Kristian Beames was made redundant from his employment with BDRP Falconer P/L trading as Tercel, an electrical contracting company. On 31 October 2001 he lodged an application under s.170CE of the Workplace Relations Act 1996 alleging among other things that the termination was harsh, unjust or unreasonable. Mr.Beames was represented by Mr.J.Maddison of the CEPU, and Tercel was represented by Mr.Kennedy of NECA.

[2] In this matter, there is no great disagreement on the facts. Tercel, the respondent employer, is an electrical contracting company divided into two sections, those being Projects and Area Lightning Protection. Projects consisted of minor construction work and electrical services. Area Lightning Protection installed lightning protection on buildings.

[3] The applicant, Kristian Beames, commenced work with Tercel on 25 January 2000. He worked within the Projects Section performing electrical work. He was initially appointed as a casual employee, and was `permanently' appointed as an `A' Grade Electrician on 11 May 2000. He did however do a small amount of work in the Area Lightning Section, estimated in Tercel's written submission to be in the order of 4-5% of his work.

[4] On 14 August 2001 Mr.Beames injured himself at work. He was advised that he had a hernia and would need an operation. He had an operation on 11 September 2001, and returned to work on 16 October 2001. He had a WorkCover Certificate of Capacity for this period indicating that he had no capacity for work. While off work he also received a written warning from Tercel, signed by Leigh Mullen.

[5] When he returned to work he had a Capacity Certificate which indicated that he had a current capacity but that there were restrictions on his ability to lift more than 10 kilograms.

[6] On 12 October 2001 three employees of Tercel met, these being Brian Falconer, Victorian State Manager, Dennis Young the Victorian Project Manager, and Leigh Mullen, the Human Resource Manager. The meeting was in the words of Mr.Mullen `convened specifically to discuss the situation regarding the dramatic drop off in electrical work ... During the meeting it was agreed that, due to the immediate lack of electrical work and little, if any, on the horizon, Tercel would have to sell two of the work vehicles and make one employee's position in the electrical section redundant.' [Statement of Leigh Mullen, attachment to Exhibit K1].

[7] The applicant Beames was selected for the redundancy. He was selected for the redundancy for reasons which were stated by Mr.Mullen and Mr.Young to be `skill based'. His skills were, according to their evidence, assessed in comparison to two other employees, Grant Beech and Anthony Docherty. Mr.Beech could be employed full-time in the lightning area. He had worked in both sections of the business and had long experience. Mr.Docherty also had long experience in both sections, and was at that stage engaged in quoting for electrical work. There was still work in the lightning section, but little or no work in the electrical projects area. Mr.Beames had little experience in the lightning section and so was the logical choice for redundancy.

[8] On 16 October 2001 Mr.Beames returned from work and initially was put in a room and told to go over his phone bills and itemise those phone calls which were personal calls. He provided Tercel with this itemisation about 3.00 pm, and shortly afterwards was asked to attend a meeting by Mr.Mullen. Mr.Young and Mr.Mullen attended this meeting with Mr.Beames, and told him that he was being made redundant. Messrs. Young and Mullen stated in evidence that they told Mr.Beames why, and provided him with a cheque for his termination payment, a certificate of service, a redundancy notice, separation certificate, and a payslip. Messrs.Young and Mullen also gave evidence that they explained to Mr.Beames the reason for him being made redundant. I accept this evidence.

[9] Mr.Beames found new work on 13 February 2002, on the same wages as his previous employment.

[10] Mr.Maddison submitted that there was no `valid reason' for the termination of Mr.Beames in this matter. He pointed out that s.122(1) and (2) of the Accident Compensation Act 1985 (Vic) provide:

(1) If within the period referred to in sub-section (3) after a worker commences to be entitled to receive weekly payments in respect of an injury arising out of or in the course of employment with an employer--

(a) the worker no longer has an incapacity for work, the employer must provide employment for the worker in a position which is the same as or equivalent to the position which he or she held before the injury; or

(b) the worker has a current work capacity, the employer must provide suitable employment for the worker.

(2) Sub-section (1) does not apply if the employer can demonstrate to the Authority's satisfaction that it is not possible for the employer to provide employment in accordance with sub-section (1)(a) or suitable employment in accordance with sub-section (1)(b).

(2A) This section does not apply to an employer of a worker in respect of a worker who is a pupil at a school within the meaning of Part IVA of the Education Act 1958 and employed pursuant to a work experience arrangement under that Part.

(3) For the purposes of this section, the period for the purposes of sub-section (1) after a worker commences to be entitled to receive weekly payments is the period of 12 months or the sum of the periods not exceeding, in the aggregate, 12 months first occurring after the injury during which the worker has an incapacity for work.

(4) The Authority must not commence proceedings against an employer under section 242(1) unless--

(a) the Authority has given the employer notice in writing that the Authority intends to file a charge against the employer for failing to comply with sub-section (1) unless within the period of 60 days after service of the notice the employer can demonstrate to the Authority's satisfaction that it was not possible for the employer to comply with sub-section (1) at the time of the alleged offence; and (b) the employer fails within that period to provide any information or sufficient information to demonstrate to the Authority's satisfaction that it was not possible for the employer to comply with sub-section (1).

(4A) Sub-section (2) does not apply if the Authority has given notice in writing under sub-section (4).

[11] He submitted that in this case Tercel had not provided employment as required by s.122(1), nor had Tercel sought the approval of WorkCover within s.122(2) that enables an employer to avoid the obligations of s.122(1). He submitted that the Commission has found that a breach of s.122 is relevant to the issue of whether a termination is harsh, unjust or unreasonable. Mr.Maddison submitted that in this matter the employer by terminating the employee breached the obligations in s.122(1), and that the employer Tercel had not avoided those obligations by following the procedure set out in s.122(2). As s.122 was breached, the termination was harsh, unjust or unreasonable.

[12] Mr.Maddison further submitted that in terminating Beames the evidence from Messrs.Young and Mullen was that Tercel had ignored the needs of Beames at a time of ongoing incapacity resulting from his hernia. Tercel had ignored therefore a consideration which it had to have regard to. As the Full Federal Court had stated in Bostik (Australia) Pty Ltd v. Gorgevski (No.1)[1] in relation to an Award clause which provided that termination of employment by an employer shall not be harsh unjust or unreasonable:

`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 redefinitions 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.'

[13] This phrase was recently applied to s.170CE proceedings by Watson SDP in Liu and Windsor Smith.[2]

[14] Mr.Maddison also submitted that s.170CG(3)(c) was breached in that Mr.Beames was not given an opportunity to respond to any reason related to the capacity of the employee. The termination in the present case was one based on an assessment of skill, and therefore this factor was relevant.

[15] He submitted that in accordance with a Full Bench of this Commission in Sprigg v. Paul's Licensed Festival Supermarket[3] the following amount of compensation should be awarded:

1. The employee would have received twelve months remuneration if he had not been terminated, given the requirement in s.122 of the Accident Compensation Act 1985 (Vic) to maintain employment for twelve months. This was an amount of $44,973.76, based on an hourly rate of $22.76, or $864.88 per week.

2. The amount of $14,702.96 should be deducted from this amount, being some 17 weeks pay that the employee had earned during the period since termination. The net amount of compensation sought was therefore $30,270.80. Mr.Maddison said that Mr.Beames had actively sought to mitigate his loss since the termination, and this was not seriously challenged by Tercel.

4. No submission was put on the issue of the impact of taxation.

5. The amount sought was less than the legislative cap on compensation, so no reduction should take place on account of the legislative cap.

[16] Mr.Kennedy for Tercel submitted that properly interpreted, s.122(1)(a) of the Accident Compensation Act 1985 (Vic) does not preclude a termination under the Workplace Relations Act 1996 where there is no longer a job because of redundancy. He conceded that Tercel had not sought WorkCover approval under s.122(2). He had no other submission to put on the issue.

[17] He submitted that Tercel was in a difficult business situation, it was experiencing a significant downturn. There were real and good operational reasons for the redundancy.

[18] While it was true that Mr.Beames was chosen for redundancy, and that this created hardship, there would have been hardship if either of the other two employees had been chosen for redundancy just prior to Christmas.

[19] He rejected Mr.Maddison's submission that Mr.Beames was not given an opportunity to respond to any reason related to the capacity of the employee within s.170CG(3)(c). At the meeting on 16 October he was given that opportunity.

[20] He submitted in relation to remedy under s.170CH(7)(a), that the business was in real difficulties and that any compensation order would be a problem for the business. Mr.Maddison in reply said that Tercel had the opportunity to lead evidence on the adverse consequences of a compensation order and had not done so. A submission from the bar table to that effect was insufficient.

[21] Mr.Kennedy, after checking the basis of the calculations, did not take issue with Mr.Maddison's application of the Sprigg five steps to this present matter, and considered that it was appropriate [PN494-496].

(a) the Commission has issued a certificate under subsection 170CF(2) regarding conciliation of an application relating to a termination of employment; and

(b) the applicant has made an election under subsection 170CFA(1), (2), (3) or (5) to proceed to arbitration to determine whether the termination was harsh, unjust or unreasonable;

the Commission may so proceed to arbitrate the matter

(2) Neither the making of an election under subsection 170CFA(1), (2), (3) or (5) to proceed to arbitration nor the commencement of that arbitration prevents further conciliation of the matter being attempted, or the parties from settling the matter, at any time before an order is made under section 170CH.

(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.

[23] Firstly, Mr.Maddison submitted that Tercel breached their obligations under the Accident Compensation Act 1985 (Vic). He submitted that Tercel breached its obligations under s.122(1)(b) by not retaining Beames in a suitable job for twelve months, or alternatively, by not avoiding that obligation by making an application and gaining Authority approval under s.122(2). The applicant, Mr.Beames had provided Tercel with a certificate of current work capacity, and this was not disputed in evidence. Mr.Kennedy quite properly conceded that the s.122(2) approval had not been obtained, but sought to avoid a submission that s.122(1) obligations had been breached with the brief submission that the obligation to provide employment did not apply in situations of redundancy. The submission was not developed, and is one that I reject. The obligations in s.122(1) are broad in nature and there is no support on their face for the exception suggested by Mr.Kennedy, nor is there any support to be found in the case law that I have examined, and no decisions were referred to by Mr.Kennedy. On the evidence I find that s.122 was breached by Tercel in terminating Mr.Beames.

[24] The Commission has in the past taken account of breaches of s.122 in determining applications under s.170CE. In Hecker v Herald and Weekly Times Limited[4] the applicant argued that the dismissal in that matter offended ss.122(3) and (1) of the Accident Compensation Act 1985 (Vic) in that it occurred within the 12 month period during which time an employer is required to maintain suitable employment. Gay C said:

`It is said that an adverse s.170CG(3) finding would be unreasonable by virtue of it extending the obligations imposed by the ACA [Accident Compensation Act 1985 (Vic)]. I am unable to accept this argument. The public policy behind the ACA is not `extended' by an adverse s.170CG(3) finding in the present circumstances. The Act requires a consideration of all the relevant circumstances bearing on a termination to allow the Commission to determine whether it was harsh, unjust or unreasonable. The findings in this case do not stem from or extend the obligations reposed in an employer by the ACA, rather they are a consequence of the Commission's consideration of the aspects of the termination relevant to the s.170CG(3) determination.' [paragraph 81]

[25] Gay C found the termination in that matter to be harsh, unjust or unreasonable on the basis of the facts of the dispute.

[26] In Larcombe v. McCarthy Catering Pty Ltd[5] Simmonds C said:

`On the evidence before me I am not satisfied there was a valid reason for Mr Larcombe's termination. There is no evidence that the company has got out of catering; indeed the evidence on that matter is to the contrary. There is no evidence about the nature of the restructuring of the company's operations other than it has abolished Mr Larcombe's position. The reason for the abolition of that position is a mystery, and there is no evidence that it was connected with the operational requirements of the employer. The only evidence of Mr Larcombe's performance is that which indicates that he performed at least to the requirements of the employer, he was praised and trusted. There was no discussion with him about the proposed restructuring, and no effort was made to discuss with him any matter, which might mitigate the adverse effects on him of that restructuring. His capacity for employment, following his injury was reduced. He was cleared for alternative duties, but none were found. In any event the effect of s.122 of the Accident Compensation Act 1985 (Vic) is that the employer must keep open the employment for a period of twelve months.'

[27] In Gaweda v. Stone Container Limited[6] Whelan C also took into account the Accident Compensation Act 1985 (Vic).

[28] I therefore consider that the circumstances leading to and constituting a breach of s.122 are relevant factors in the function that I have in making the assessments required of the Commission in relation to s.170CE applications. It would be a strange result if a breach of a statutory scheme for return to work of employees following injury and workers compensation payments was not relevant to an assessment of whether their termination was harsh, unjust or unreasonable.

[29] Secondly, in this matter the employer submitted that Mr.Beames was dismissed for a `valid reason for the termination related to the ... operational requirements of the employer's undertaking ...' The evidence of Tercel was that a redundancy was required because of the difficult business conditions of Tercel, namely lack of orders. This evidence was not contested by Mr.Beames. I am satisfied that Tercel responded to operational requirements by terminating the employment of Mr.Beames.

[30] Thirdly, Tercel submitted that it chose Mr.Beames for the redundancy on the basis of an assessment of the skill and experience of Beames and two other employees [PN83;93;190]. On the evidence, very much on balance, I accept that the assessment that was made by Tercel was an appropriate assessment of `capacity or conduct' of the employee within s.170CG(3)(a). Mr.Beames was qualified as an `A' Grade electrician, and Mr.Beech had no presently recognised qualifications but had extensive experience in lighning protection work, considerably more experience than that of Mr.Beames. It was in my view of the evidence legitimate for the employer to take account of and give weight to that considerably greater experience, notwithstanding Mr.Beames' `A' grade electrician qualifications. Qualifications are of no value to an employer unless actually used, and the evidence in this case was simply that such a qualification would assist Mr.Beames in picking up the necessary skills quickly, not that they were such that Mr.Beames had more capacity to do the lightning protection work than Mr.Beech [PN26-28; PN106-115], nor that Tercel was in error in placing more weight on Mr.Beech's experience than Mr.Beames' experience and qualifications.

[31] Northrop J. commented in Selvachandran v Peteron Plastics Pty Ltd[7]:

`In its context in s.170DE(1), the adjective `valid' should be given the meaning of sound, defensible or well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of s.170DE(1). At the same time the reason must be valid in the context of the employee's capacity or conduct or based upon the operational requirements of the employer's business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. The provisions must `be applied in a practical commonsense way to ensure that' the employer and employee are each treated fairly, see what was said by Wilcox CJ in Gibson v. Bosmac Pty Ltd (1995) 60 IR 1, when considering the construction and application of s.170DC.'

[32] While these comments related to provisions which are similar but now repealed, these comments have been followed by a number of decisions of this Commission in determining matters under s.170CE of the Act.

[33] I would probably, on balance, have found that the selection of Mr.Beames for redundancy and his subsequent termination was `sound, defensible or well founded' except for my finding that the termination was in breach of s.122(1) of the Accident Compensation Act 1985. I cannot however ignore that breach_._ I did give some consideration to whether I should in determining a `fair go all round' treat the breach of s.122(1) obligations as more of a simple procedural failure, a technical breach with no substance, because approval could have been quickly sought and gained, in view of the circumstances of the termination and my findings regarding the selection of Mr.Beames for redundancy, and therefore to find that the termination was not harsh. However, it is a matter of speculation what the Authority would have done in this instance if Tercel had applied for approval under s.122(2). I cannot and do not assume that such approval would have been automatic or routine, or even would have been given in this case. Compliance with a binding statutory scheme for return to work after a workplace accident is in my view a serious matter, and in present circumstances I must give it weight, particularly given that in my view the assessment of the employer decision to select Mr.Beames rather than Mr.Beech was only marginal and on balance a sound, defensible or well founded one, and my later finding that the harsh effects on Mr.Beames of the termination were not taken into account.

Section 170CG(3)(b) - Employee Notified of Reason for Termination

[34] I find on the evidence that Mr.Beames was notified of the reason for his termination at the meeting that took place on 16 October 2001. The provisions of this subclause are therefore met in my view.

[35] I find on the evidence that Mr.Beames was given an opportunity to respond to the reasons for the termination at the meeting that took place on 16 October 2001. The provisions of this subclause are therefore met in my view.

[36] Tercel submitted, and on the evidence I accept, that issues of unsatisfactory performance were not relevant in this present matter.

Section 170CG(da) - Size of Employers Undertaking

[37] Tercel did not seek to rely on this subclause [PN472]. It is not relevant in my view in the present matter on the submissions put to me.

Section 170CG(db) - Absence of Dedicated Human Resource Management Specialists

[38] Tercel had a Human Resources Manager, Mr.Leigh Mullen, who had some specialist qualifications in the human resources area, and took part in key decisions in relation to the termination. On the evidence I do not believe that this subclause is therefore relevant in the present matter.

[39] I have had regard to all the evidence and submissions in this matter.

[40] Finally, on the evidence I find that in selecting Mr.Beames and terminating him on his first day back at work, Tercel did not take into account his personal circumstances and difficulty in finding another job because of his restricted capacity for work. This was specifically admitted during the evidence of Messrs. Mullen and Young [PN234; PN154-155]. That lack of regard should be taken into account in determining whether the circumstances are harsh, unjust or unreasonable, having regard to the statement quoted earlier in Bostik that: `Relevant to this are the circumstances which led to the decision to dismiss and also the effect of that decision on the employee. Any harsh effect on the individual employee is clearly relevant but of course not conclusive.'

[41] Overall, I find that the applicant was not afforded a `fair go all round' [s.170CA(2)]. I find that the termination was harsh, unjust or unreasonable. I do so because of the failure to sufficiently take Mr.Beames' personal circumstances into account in selecting him for redundancy, and the circumstances leading to a breach of s.122 of the Accident Compensation Act.

(1) Subject to this section, the Commission may, on completion of the arbitration, make an order that provides for a remedy of a kind referred to in subsection (3), (4) or (6) if it has determined that the termination was harsh, unjust or unreasonable.

(2) The Commission must not make an order under subsection (1) unless the Commission is satisfied, having regard to all the circumstances of the case including:

(a) the effect of the order on the viability of the employer's undertaking, establishment or service; and

(b) the length of the employee's service with the employer; and

(c) the remuneration that the employee would have received, or would have been likely to receive, if the employee's employment had not been terminated; and

(d) the efforts of the employee (if any) to mitigate the loss suffered by the employee as a result of the termination; and

(e) any other matter that the Commission considers relevant;

(3) If the Commission considers it appropriate, the Commission may make an order requiring the employer to reinstate the employee by:

(a) reappointing the employee to the position in which the employee was employed immediately before the termination.

(b) appointing the employee to another position on terms and conditions no less favourable than those on which the employee was employed immediately before the termination.

(4) If the Commission makes an order under subsection (3) and considers it appropriate to do so, the Commission may also make:

(a) any order that the Commission thinks appropriate to maintain the continuity of the employee's employment; and

(b) subject to subsection (5)-any order that the Commission thinks appropriate to cause the employer to pay to the employee an amount in respect of the remuneration lost, or likely to have been lost, by the employee because of the termination.

(5) If, as a result of an application under section 170CP, a court has awarded an amount of damages for a failure to give notice of a termination as required by section 170CM, any amount ordered to be paid by the Commission under paragraph (4)(b) in respect of the termination is to be reduced accordingly.

(6) If the Commission thinks that the reinstatement of the employee is inappropriate, the Commission may, if the Commission considers it appropriate in all the circumstances of the case, make an order requiring the employer to pay the employee an amount ordered by the Commission in lieu of reinstatement.

(7) Subject to subsection (8), in determining an amount for the purposes of an order under subsection (6), the Commission must have regard to all the circumstances of the case including:

(a) the effect of the order on the viability of the employer's undertaking, establishment or service; and

(b) the length of the employee's service with the employer; and

(c) the remuneration that the employee would have received, or would have been likely to receive, if the employee's employment had not been terminated; and

(d) the efforts of the employee (if any) to mitigate the loss suffered by the employee as a result of the termination; and

(e) any other matter that the Commission considers relevant.

(8) In fixing an amount under subsection (6) for an employee who was employed under award conditions immediately before the termination, the Commission must not fix an amount that exceeds the total of the following amounts:

(whichever is higher) for any period of employment with the employer during the period of 6 months immediately before the termination (other than any period of leave without full pay); and

(b) if the employee was on leave without pay or without full pay while so employed during any part of that period-the amount of remuneration taken to have been received by the employee for the period of leave in accordance with the regulations.

(9) In fixing an amount under subsection (6) for an employee who was not employed under award conditions immediately before the termination, the Commission must not fix an amount that exceeds:

(a) the total of the amounts determined under subsection (8) if the employee were an employee covered by the subsection; or

(b) the amount of $32,000, as indexed from time to time in accordance with a formula prescribed by the regulations;

(10) For the avoidance of doubt, an order by the Commission under paragraph (4)(b) or under subsection (6) may permit the employer concerned to pay the amount required in instalments specified in the order.

[42] Reinstatement is the primary remedy. However, in this case the applicant is not seeking reinstatement, and is currently employed on wages not less than those enjoyed during employment with Tercel. I will therefore consistent with s.170CH(6) consider an order for payment of an amount in lieu of reinstatement.

[43] I have determined that the termination was harsh, unjust or unreasonable. Under s.170CH(1) I am now required to be satisfied that the remedy ordered is appropriate, having regard to certain matters.

[44] Under s.170CH(7), in determing an amount for the purposes of s.170CH(6) I must have regard to certain factors.

Sections 170CH(2) and (7)(a) - Effect on Employer Viability

[45] In relation to ss.170CH(2) and (7)(a), I find that Tercel is experiencing difficult business conditions because of lack of orders. This was not in contest in the matter. Mr.Kennedy for Tercel submitted:

`With respect to (a) [s.170CH(2)or (7)(a)] as I have just alluded to, the business is in a rocky situation at the moment and there are no prospects for recovery in the future. They have, since this event, had to retrench other people and may well have to do so in the future. So increasingly, as time goes by, the business is under pressure and any expense, any additional expense will certainly be a problem for the business.' [PN478]

`We say that the fact that there has been a down turn or even a significant downturn does not in and of itself, without supporting evidence, should not dissuade you from giving an order consistent with the calculations that have been made here today.

Mr.Kennedy had an opportunity to present evidence in relation to what may or may not be the effect, but in the absence of that evidence, we say that orders should be given consistent with the four or five step process, if we are successful in persuading you that the termination was harsh, unjust or unreasonable.' [PN505-506]

[47] In D.A.Moore v. Highpace Pty Ltd_[8]_ a Full Bench commented:

`We have examined the material and submissions before the Commissioner including the submissions made by counsel for the Company regarding the nature and circumstances of the Company's business and the likely practical outcome of an order being made against the Company. We accept the submissions made by the applicant's counsel on appeal to the effect that where an employer seeks to rely on the circumstances referred to in s.170CH(7)(a), the employer must present evidence and/or argument as to the financial situation of the undertaking and the likely effect that an order for compensation would have on the viability of the undertaking. We also accept that there was limited material presented to the Commissioner on this matter apart from evidence regarding the downturn in the Company's business over the last 2 or 3 years and submissions that the likely outcome of an order would be to cause the shut down of the business.'

[48] In this present matter the employer is experiencing difficult business conditions, and further redundancies have been made. This is not in contention. However, no witness evidence was led that an order of the amount sought would have an effect on the viability of the employer, or what the effect would be of such an order, or what extent that effect would relate to the viability of the business. The submission was however made by Tercel that `any additional expense will certainly be a problem for the business' [PN478].

[49] The question is whether I should be prepared to infer an effect on viability from the material before me about difficult trading conditions, and ongoing redundancies. Such an inference must not be simply `conjecture or speculation', and there must be facts which in my view make an effect on viability of the enterprise sufficiently probable[9]. The existence of trading difficulties and a general submission that `any additional expense will certainly be a problem for the business' is not a submission that the viability of the business will be affected or even that it will probably be affected. On those submissions, even if accepted, the problem may or may not affect viability, and the factor I must have regard to is of course effect on viability: `(a) the effect of the order on the viability of the employer's undertaking, establishment or service;'. At most it is a submission that problems will occur that might or might not, with no real likelihood either way, extend to affecting the viability of the business. Nor has the applicant been given an opportunity to respond to any submission or evidence that the problem will or probably will affect viability. Nor am I able to predict what the result of such a contest, if it had taken place, would have been. A mere submission that difficulties for the business will occur is, with respect, not enough. If some specific evidence had been led on the point perhaps the result would be different, or perhaps not.

Sections 170CH(2) and (7)(b) - Employee Length of Service

[50] The employee has been with the employer since January 2000. Tercel submitted that this was a short period of service, and I agree and take this into account.

Sections 170CH(2) and (7)(c) - Remuneration the Employee Would Have Received, Sections 170CH(2) and (7)(d) - Employee Efforts to Mitigate Loss

[51] A Full Bench of this Commission in Sprigg v. Paul's Licensed Festival Supermarket[10] set out a certain methodology for assessing the amount that the employee would have received, or would be likely to receive, but for the termination.

[52] The first step is to estimate the remuneration the employee would have received or would have been likely to have received, if the termination of employment did not take place. Mr. Maddison calculates Mr. Beames annual salary to be in the order of $44,973.76, based on an hourly rate of $22.76, or $864.88 per week, and a 38 hour week. These figures were not contested by Tercel [PN494-495]. On the evidence I find that Mr.Beames would have remained in employment with Tercel for at least another year, again a matter not contested by Tercel [PN383].

[53] The second step is to deduct moneys earned or to be earned up to the date of the anticipated period of employment, and to have regard to the applicant's attempt to mitigate his loss. Mr Beames did seek and find employment following his termination. It was conceded by Tercel that Mr.Beames made efforts to mitigate his losses [PN484]. He was unemployed because of the harsh termination for 17 weeks. Following his employment on 13 February 2002 he has worked continually at the same rate of pay as his employment with Tercel. On the evidence before me the assessment I make is that he will earn that amount until the anticipated period of employment. In order to put the applicant in the financial position he would have been in but for the termination of his employment[11], I find that the amount of 17 weeks pay would have to be paid to the employee. This is an amount of $14,702.96. Given that Mr.Beames is now in employment and has been since 13 February, I will not as sought by Mr.Maddison award compensation for moneys not earnt at Tercel at times when Mr.Beames is earning the same money from his new employer. This would not be consistent with the principle of Re:Knevitt Appeal.

[54] The third step is to discount the amount of compensation for contingencies. The applicant sought that no discount be made.

[55] I note that in Slijka v. J.W.Sanders Pty Ltd[12] North J. deducted 25% for future contingencies such as:

. `the applicant may not have served the whole of the remaining 2 1/2 years as an employee of the respondent, for reasons such as ill health, lawful termination by the respondent, voluntary resignation, or closure of the respondent's business. None of these contingencies should attract a high allowance.'

. `the fact that some part of the compensation will be received up to 2 1/2 years earlier than if the applicant had completed his employment with the respondent.'

[56] In Sprigg[13] the Full Bench acted in accordance with what it said was the `principle and allowance' in Slijka, and deducted 25% for:

`(i) the uncertainty referred to in our consideration of Step 1; and

(ii) the fact that the moneys are to be received as a lump sum.'

[57] In Ellawalla v. Australian Postal Corporation[14] another Full Bench undertook a more extensive examination of the issue, did not express a concluded view as issues of general principle were not argued before them, and further said that these issues will need to be determined by a future Full Bench. The Bench quoted the observations of North J in Slijka and commented:

'41. It is apparent from the above extract that his Honour was not seeking to lay down a discount for contingencies which would be generally appropriate. Rather he adopted a 25 per cent discount factor on the basis of the circumstances of the particular case before him.

42. It would be open to the Commission to proceed on the basis that a certain percentage disount for contingencies was generally appropriate, subject to adjustment up or down to take account of an applicant's particular circumstances. But we are not necessarily convinced that a 25 per cent discount would be generally appropriate. We note that in Wynn v. NSW Insurance Ministerial Council the High Court observed that the practice in New South Wales was to generally adopt a 15 per cent discount for contingencies.'

[58] In present circumstances, on the facts before me, I consider that an amount of 25% should be deducted for the contingencies of a lump sum received, possible ill health, possible closure of business, possible redundancy and other uncertainties. The amount of $3,675.74 will therefore be deducted from the $14,702.96 determined above, leaving an amount of $11,027.22.

[59] The fourth step is to take into account the impact of taxation. Mr. Maddison did not put submissions on the issue of taxation. I leave this for determination by the parties.

[60] The fifth step pertains to the legislative cap on compensation. Section 170CH(8), limits the compensation to an amount not in excess of the amount of remuneration that the employee would have received in the six months immediately preceding the termination had the termination not occurred. The cap is not relevant in this case.

Section 170CH(2) - Commission Not to Make Order Unless Satisfied Remedy is Appropriate

[61] As outlined above, I have had regard to the factors set out in this subsection.

[62] Accordingly, I now order the respondent to pay the applicant the sum of $11,027.22.

Mr. J. Maddison of the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia for the applicant K.Beames.

Mr. F. Kennedy of The National Electrical Contractors Association for the respondent BDRP Falconer P/L trading as Tercel.

Printed by authority of the Commonwealth Government Printer

1 [1992] FCA 209; (1992) 36 FCR 20 at 28, per Sheppard and Heercy JJ with whom Gray J agreed.

3 Munro J, Duncan DP, Jones C, Print R0235 at paragraph 6.

7 (1995) 62 IR 371 at 373

8 Boulton J, Watson SDP, Whelan C, Print Q0871, 18 May 1998 at p.3

9 Print PR915674, per Ross VP, Lacy SDP, Simmonds C, at paragraph 39.

10 Munro J, Duncan DP, Jones C, Print R0235 at paragraph 6.

11 Re: Knevitt Appeal, C No.39050 of 1999, decision in transcript, per Polites SDP, Acton SDP and Hingley C.

12 (1995) 67 IR 316 at 328

14 Ross VP, Williams SDP, Gay C, Print S5109, 17 April 2000, at paragraphs 36-44.