Outboard World v Muir

Industrial Relations Commission (NSW)|2002-05-20|Before: Sams DP

CITATION : Thomas and Christie Direct Pty Ltd [2002] NSWIRComm 161 APPLICANT PARTIES : Justin Thomas RESPONDENT Christie Direct Pty Ltd FILE NUMBER: 6638 of 2001 CORAM: Sams DP Termination of employment - unfair dismissal - contract of employment - award conditions - employee's position made redundant - whether redundancy a sham - conflict of evidence - whether dismissal "harsh, unreasonable or unjust" - procedural fairness - principles considered. CATCHWORDS : Held, doubt as to bona fide redundancy - applicant not covered by award - applicant not warned his position was redundant - options for alternative employment not considered - no redundancy benefits - applicant selected on flawed basis - respondent's admissions - conflict in respondent's evidence - timing of dismissal insensitive - matters to be considered under s88 of the Act - applicant denied procedural fairness - dismissal "unjust" and "unreasonable" - reinstatement impractical - applicant's post dismissal earnings - s89(6) of the Act - applicant's age, length of service and marketability - compensation ordered - proceedings concluded save for any costs application. LEGISLATION CITED : Industrial Relations Act 1996 Workplace Relations Act 1996 (Cth) Huseyin Arslan and Others and Berkeley Challenge (Commercial) Pty Limited and Others [2001] NSWIRComm 45 Outboard World v Muir (1993) 51 IR 167 Quality Bakers of Australia v Goulding (1995) 60 IR 327 Shop, Distributive and Allied Employees' Association, New South Wales and WD & HO Wills Holdings Ltd [2000] NSWIRComm 98 Jones and Dunkel (1958) 101 CLR 298 Browne v Dunn (1894) 6 R 67 Macleay Valley Health Service and Jeffree, 58 IR 187 CASES CITED : Leeds and Northrop, 46 IR 11 Buckman v Burdekin, 85 IR 418 Byrne & Anor v Australian Airlines (1995) 185 CLR 410 Antonakopoulos v State Bank (1999) 91 IR 385 D & R Commercial Pty Ltd v Flood [2002] IRComm 88 Wilson v Department of Education and Training, 100 IR 1 Perkins v Grace Worldwide (Aust) Pty Ltd, 72 IR 186 Hollingsworth v Commissioner of Police (No 2) 88 IR 282 HEARING DATES: 05/20/2002; 06/03/2002 DATE OF JUDGMENT: 07/16/2002

APPLICANT Mr E Young, Solicitor Phillips Fox Lawyers LEGAL REPRESENTATIVES: RESPONDENT Mr A Britt of counsel SOLICITORS Sparke Helmore

JUDGMENT: - 20 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: SAMS DP

Matter No IRC01/6638 JUSTIN THOMAS AND CHRISTIE DIRECT PTY LTD Application by Justin Thomas re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 DECISION [2002] NSWIRComm 161

1 Justin Thomas ("the applicant") was employed as Art Director and Senior Graphic Artist for the advertising agency, Christie Direct Pty Ltd ("the respondent"). On 28 September 2001 the applicant was informed his position had been made redundant and that his final day of work would be 5 October 2001. The applicant received no redundancy entitlements. The respondent claimed to have less than fifteen employees and was therefore exempt from paying redundancy pay under cl 39 of the Clerical and Administrative Employees (State) Award 296 IG 619 ("the Award").

2 On 1 October 2001, the applicant wrote to the respondent and said he was unaware he was covered by the award. However, if he was, he claimed award entitlements to overtime, meal allowances and leave loading which had not been paid during the course of his employment. The next day the respondent rejected these claims and informed the applicant he was covered by an employment contract which did not provide for such benefits.

3 He was paid outstanding statutory entitlements and two weeks' pay in lieu of notice and further informed that he would not be required to attend the office from that date.

4 The applicant filed a claim of unfair dismissal, pursuant to s84 of the Industrial Relations Act 1996 ("the Act") on 9 October 2001. He challenged the grounds for his dismissal and asserted that he was denied procedural fairness.

5 Conciliation proceedings were listed on 22 November 2001. Ms P Tumpey appeared for the applicant and Mr D Davies appeared for the respondent. No settlement of the claim could be negotiated. Pursuant to s87 of the Act, the Commission made a finding of unsuccessful conciliation and listed the matter for arbitration. Directions were issued accordingly.

6 On the 8 March 2002 the Commission dismissed a notice of motion filed by the respondent. The notice of motion sought to limit the scope of a summons to produce the respondent's employment records. This matter is not materially relevant to the substantive proceedings, which commenced on 20 May 2002.

7 The applicant commenced his evidence by tracing his freelance employment with the respondent for a month before being employed full time as Senior Designer from 6 March 2000. His letter of offer proposed a salary of $57,000 plus superannuation and recognised that when extra hours were worked, time off in lieu would be available. The letter referred to an employment contract, which the applicant worked under - although it was never signed.

8 On 10 November, Ms Christine Prince, the respondent's then Managing Director confirmed that the applicant's salary was to be increased by $3,000 and that a review of his position to that of Art Director was contemplated. The increase was said to be "to reward your dedication and commitment."

9 On 1 March 2001 the applicant was promoted to Art Director. It was said that he had "made a huge contribution to the running of the studio." The applicant claimed his duties were both artistic and administrative and included: the design of brochures, promotions and posters; the development of corporate identification brands; the development of concepts for television commercials and print advertising; art production including layout, corrections and quick-cutting; the organisation of, and attendance at, production and work-in-progress meetings; the co-ordination of freelance artists as required; the co-ordination of junior graphic designers and the monitoring of their workloads and various other duties as required to co-ordinate and ensure the smooth running of the respondent's business.

10 The applicant referred specifically to the administrative duties such as the hiring and co-ordination of the freelance artists. The applicant produced time sheets, which were signed off by him for the artists (Ex "5").

11 On 15 July the applicant received a further salary increase of $2,000 per annum taking his salary to $62,000.

12 On 20 July the applicant applied for and was granted approval for twenty-four days' annual leave commencing on 8 October to travel overseas.

13 On 28 September Mr Christie and Mr Haywood (Creative Director) informed the applicant that his position had been made redundant due to the economic crisis and consequent loss of clients. The decision was not based on performance. Mr Christie had said if the applicant hadn't been going on holidays he would have been retrenched at the end of October.

14 The applicant gave oral evidence (correcting his affidavit) that the respondent had correctly identified it employed only three employees - the applicant, Ms Alisi Nainoca, Studio Manager and Mr Cameron Todd, Graphic Web Designer.

15 In late October 2001 the respondent hired Ms Nicole Desaix as a freelance contractor through her own company, Quid'di.ty. The evidence revealed that Ms Desaix worked full time and had a business card, which disclosed that she was the respondent's "Studio Director". Her duties were similar to those performed by the applicant. In oral evidence, the applicant agreed he did not know upon what basis Ms Desaix had been employed or what work she was performing.

16 The applicant claimed his dismissal was unfair for the following reasons: 1) The grounds for dismissal were a sham 2) He was never informed an award governed his employment. 3) The unsigned employment contract provided for four weeks' notice of termination of employment. 4) He was never counselled or consulted about his proposed redundancy. 5) He was not given adequate reasons for his redundancy. 6) He was not given a reasonable opportunity to work in an alternative position or offered re-training. 7) He received no warnings or counselling concerning a failure to perform his duties.

17 The applicant provided evidence of his attempts to obtain alternative employment (Ex"3") and income he had received through working for his partner's company, Uber Creative (Ex"4").

18 Mr Britt questioned the applicant as to the work he did for his partner's company. He had commenced looking for work after returning from holidays on 8 November. He said he did some freelance work commencing on 6 December 2001, had two weeks' in January and had regular freelance work since 1 February. The applicant deposed that his work through Uber Creative was 10 to 15 percent of his earnings since dismissal. Ex "4" discloses that as at 5 May 2002, the applicant's gross earnings through Uber Creative were $11,552.00.

19 The applicant was asked upon what basis he believed his redundancy was a sham. He said firstly, Mr Christie had told him if he had not been going on holidays it wouldn't have happened; secondly, Ms Desaix had replaced him and, thirdly, that Mr Cameron was to have been made redundant. However, this did not happen.

20 The applicant did not know if the respondent had any vacant or alternative positions at the time. He was asked what training could he have received for a non-existent position.

21 Mr Richard Niess is the Financial Controller of Christie Agency Pty Ltd, a company related to the respondent. He had been the management consultant to the Christie group of companies since March 1990.

22 Mr Niess attended the board meeting on 13 September 2001, which discussed the continuing financial losses of the respondent. Also present in the meeting were Douglas Christie, Ian Stevenson and Steve Hogwood.

23 Mr Niess deposed that it was agreed one staff member would need to be retrenched. Mr Hogwood and Mr Christie would review the positions and decide which position would be made redundant. Mr Niess said he was not involved in the decision to dismiss the applicant.

24 Mr Niess believed that the State Award and the terms of the Federal Workplace Relations Act 1996 (Cth) covered the applicant's employment. He acknowledged that he had not sought legal advice in relation to the applicant's dismissal.

25 Mr Niess deposed that at 17 October 2001, the Christie Agency and Christie Direct Pty Ltd employed five consultants and seven employees. In cross-examination, Mr Niess was asked about the relationship between the various companies in the Christie group. He said he didn't know if Christie Corporation Pty Ltd was related to the respondent. Another company, Littles Entertainment Group Pty Ltd used the services of Christie Direct Pty Ltd.

26 Mr Niess was asked about the duties performed by Ms Desaix as Studio Director. He agreed her duties included: graphic design, design of brochures and pamphlets, development of corporate brands, art production and layout, organisation and attendance at production and progress meetings, co-ordination of freelance artists and authorisations of their hours of work and responsibility for the studio's expenses and costs. Mr Christie also confirmed these duties were performed by Ms Desaix.

27 Ms Desaix's invoice for November 2001 revealed that she worked every working day in November. However, Mr Niess deposed that she did not work every day of every week. She was employed by a company known as Quid'ti.ty.

28 Mr Niess provided the following financial information on behalf of the respondent. 1) Tax return for the year ending 30 June 2000. This disclosed total income as $787,783, expenses of $785,234 and an operating profit of $2,549. 2) Tax return for the year ending 30 June 2001. This disclosed total income of $462,170, expenses of $488,891 with a loss of $26,721. 3) Monthly balance sheet and profit and loss for the twelve months to 30 June 2001. This disclosed monthly results as: July - $15,079, August - $6,436, September - $2,820, October - (-$9,710), November - $30, December - (-$11,113), January - $10,639 February - (-$17,883), March - $18,719, April - (-$9,085), May - (-$8,411), June - (-$2,964), 4) Monthly balance sheet and profit and loss for the 6 months to 31 December 2001: July - (-$2,862), August - $10, September - $1,847, October - (-$15,105), November - (-$10,310), December - (-$12,367). N.B: Bracketed figures are losses.

29 Mr Douglas Christie is a director of Christie Direct Pty Ltd. He deposed that the applicant refused to sign a contract of employment when he commenced working full time for the respondent.

30 Mr Christie said that in May 2001 the applicant was offered the position of Studio Manager/Art Director. Mr Christie said he refused the offer, as he didn't want to perform administrative duties. As a consequence, Ms Alisi Nainoca was appointed.

31 Mr Christie deposed that in September 2001, it became apparent that the company was not making a profit and was unlikely to in the near future. He gave as the reasons, the downturn in business after the Sydney Olympics (40 per cent reduction in volume) and the terrorist attacks on America (11 September 2001). Mr Christie said it was necessary to reduce the staff by one or two and reduce the use of temporary labour. He said the company only had three employees, Alisi Nainoca, Cameron Todd and the applicant.

32 In cross-examination, Mr Christie explained that, although the applicant's dismissal was only two days after September 11, the terrorist attacks had a personal impact on him which he knew would impact on the business.

33 Mr Christie referred to the meeting on 13 September where it was decided to review positions and determine which position would be made redundant. This would be determined by assessing the cost of the position and its contribution to the company's future. In re-examination, Mr Christie said that after the 13 September meeting, he and Mr Hogwood spent the next two weeks looking at how to improve the business.

34 Mr Christie deposed that when he informed the applicant of his termination he told him it was not related to his performance. Had the applicant not been going on holidays, Mr Christie said he would have reduced temporary staff and then retrenched the applicant in October. Mr Christie agreed that when he approved the applicant's annual leave in July 2001, he expected the applicant to be working until at least 8 November 2001.

35 In cross-examination, Mr Christie said that he wasn't aware if the applicant co-ordinated and approved the payments for freelance artists or that he organised and monitored junior graphic designers. Mr Christie was not aware that the applicant "mentored" Ms Nainoca. Mr Christie had not asked the applicant about his duties.

36 Mr Christie deposed that he liaised with Mr Niess in respect to the applicant's dismissal, but didn't ask Mr Niess about the applicant's duties. The applicant was chosen on 13 September, as his salary was the highest and his role was the least required, as it was purely artistic and did not involve any managerial or administrative duties. Mr Christie said that there were no alternative positions for the applicant and retraining him was not an affordable option.

37 Mr Christie said he did not know the applicant's skills and work capacities before he was dismissed, but took advice from Mr Niess. He said the decision to dismiss the applicant was made jointly with Mr Hogwood, Mr Niess and Mr Stevens (another Director). Mr Christie expressed surprise that Mr Niess had denied being involved. The applicant's name had been discussed at the board meeting.

38 In late October 2001, Mr Christie said he was contacted by Nicola Desaix who offered to perform work for the company on a freelance contractor basis. She commenced work shortly thereafter and her duties were artistic, administrative and managerial. In December, after Ms Nainoca resigned, Ms Desaix assumed her duties.

39 Attached to Mr Christie's affidavit was a letter dated 29 October 2001 to Ms Desaix in these terms: Dear Nicole This letter confirms our offer of a contract for services to be provided by you to Christie Direct as follows: Freelance Design Contract Services On a daily basis at a rate of $315.00 per day plus GST as applicable. Notice of termination is one month from either side.

40 Mr Christie gave evidence that Ms Desaix had worked for the company previously for over eighteen months in a full time capacity. Mr Christie said that after she recommenced working for the company, she worked five days a week, but not a full day every day. Mr Christie confirmed the range of duties performed by Ms Desaix as attested to by Mr Niess (see Para 26). He added that Ms Desaix had replaced three or four temporary staff.

41 Mr Christie accepted that Ms Desaix was hired a month after the applicant's dismissal and that the annualised daily rate for Ms Desaix was higher than the applicant's salary.

42 Mr Christie denied the applicant's redundancy was a sham. The applicant was not replaced and the role of art director is now performed by himself.

43 Mr Young, for the applicant, submitted that the dismissal of the applicant for reasons of redundancy was a sham. This had been demonstrated by the evidence that the applicant received pay increases at a time the company was said to be experiencing financial difficulties. Less than a month after the applicant's dismissal, another person was employed performing the same artistic and administrative duties.

44 Mr Young said that this evidence casts serious doubt as to the respondent's parlous financial state.

45 Mr Young referred to the two reasons for the Company's financial difficulties cited by Mr Christie - the downturn after the Sydney Olympics and the terrorist attacks on September 11. However, Mr Christie changed his evidence by accepting he was "predicting" a downturn as a result of the terrorist attacks.

46 Mr Young submitted that the applicant gave evidence in an honest and forthright manner and was prepared to make concessions. The evidence concerning his duties was accepted by the respondent, including Ms Prince's email, which referred to the "huge contribution" made by the applicant in "the running of the studio".

47 Mr Young said Mr Christie's evidence clearly demonstrated he didn't know what duties the applicant performed and dismissed him without knowing or finding out. Mr Niess had contradicted Mr Christie's evidence on this matter.

48 Neither of the respondent's witnesses could be believed, particularly as they contradicted each other on whether Mr Niess was involved in the decision to dismiss the applicant and whether the applicant's name was mentioned at the meeting of 13 September 2001.

49 Mr Young said Mr Christie was evasive and had been forced to change dates in his affidavit in the face of the facts. Mr Christie changed his oral evidence, which was then consistent with the applicant's version of certain conversations.

50 Mr Young put that it was significant that Ms Desaix did not give evidence. Her role was both administrative and artistic - running the studio full time.

51 Mr Young submitted that the financial records of the company were not a reliable guide to its true financial position or grounds for the applicant's dismissal. There were two related companies. What was more reliable was what was happening in the workplace: the continued engagement of contractors, the hiring of Ms Desaix and the applicant's pay rises.

52 Mr Young said Mr Niess had no understanding of the employment arrangements with the applicant. The applicant was not engaged under the award and wasn't ever provided with the minimum notice under the employment contract - let alone any severance pay.

53 Mr Young relied on a number of authorities to support the proposition that, even if this case concerned redundancy, it was unfair; see Huseyin Arslan and others and Berkeley Challenge (Commercial) Pty Limited and Others [2001] NSWIRComm 45; Outboard World v Muir (1993) 51 IR 167; Quality Bakers of Australia v Goulding (1995) 60 IR 327; Shop, Distributive and Allied Employees' Association, New South Wales and WD & HO Wills Holdings Ltd [2000] NSWIRComm 98.

54 Mr Young referred to the seven issues considered in WD & HO Wills as relevant to the fairness of termination of employment due to redundancy: 1. Whether the employee received reasonable notice.

Whether there was adequate consultation on workplace changes.

Whether offers of alternative employment were explored and considered.

The provision of reasonable redundancy benefits.

The provision of appropriate ancillary services or re-training. 7. Whether there was a fair and objective selection process. 55 The respondent failed in its obligations relating to redundancy. It was Mr Christies' evidence that he didn't know what the applicant's duties and skills were. Selecting him was hardly fair, objective or unbiased.

56 Mr Young said that, if the Commission finds that the redundancy was not a sham, it was still unfair. The applicant would have remained employed at least until 8 November 2001.

57 Mr Young said it would be appropriate to apply severance pay at one month for each year of service. In addition, having regard for the conduct of the employer, compensation at the higher end of the scale was appropriate.

58 Mr Britt of counsel, for the respondent, submitted that the onus rests with the applicant to prove his dismissal was unfair and that the reason of redundancy was not a valid reason. Mr Britt said that the applicant's pay increases proved nothing. Neither does the engagement of Ms Desaix. Mr Christie, without being challenged, gave evidence that Ms Desaix was a freelance contractor. The evidence was that there was a significant drop in freelance work from September 2001.

59 Mr Britt submitted that the respondent's financial records make clear that the Company was in a difficult financial position. It had not been put to Mr Niess that these records were wrong. The Commission should therefore accept this evidence. The respondent cannot be criticised for supplying what the applicant had requested.

60 Mr Britt attacked Mr Young's criticism of Mr Christie for his predictions of the effects of 11 September 2001. Mr Christie's fears were realised by the $38,000 loss over the next six months. This evidence should be accepted, as it was never put to Mr Christie that the figures were untrue.

61 Mr Britt submitted that although Ms Prince had said that the applicant had made "a huge contribution to the running of the studio" it means no more than he made a contribution like everyone else. It does not mean he was managing the studio or was the Managing Director. Signing off on time sheets does not make him the manager. Nevertheless, the applicant was a good employee and the respondent acknowledged this.

62 As to Ms Desaix not giving evidence, Mr Britt said it was open to the applicant to have subpoenaed her to give evidence. Mr Britt submitted that if any Jones and Dunkel ((1958) 101 CLR 298) inference could be drawn, it was the applicant's failure to call evidence from his friend, Mr Maxwell and Ms Nainoca.

63 Mr Britt explained the contradictory evidence of Mr Niess and Mr Christie. He said that one, or both, might have been mistaken. This was understandable having regard for the significant time since the dismissal. It doesn't mean they are liars.

64 In respect to the evidence of Mr Niess and Mr Christie, Mr Britt submitted that the evidence, which they were not cross-examined on, should be accepted, Browne v Dunn (1894) 6 R 67.

65 Mr Young's criticism of Mr Christie for correcting his affidavit applies just as well to the applicant who accepted that his affidavit was wrong in respect to the number of employees employed by the respondent. The applicant conceded he had no knowledge of the role performed by Ms Desaix. His original claim of post dismissal earnings was also incorrect ($11,552 not $4,000).

66 Mr Britt put that the decision to dismiss the applicant was not made hastily. Mr Christie reviewed the three positions over two weeks' and chose the position that could be best absorbed. With three employees performing different roles, it was not possible to offer alternative employment. The applicant himself acknowledged his redundancy and merely sought award entitlements.

67 Mr Britt referred to the two-stage process of determining a s84 application. Firstly, to establish whether the dismissal was harsh, unreasonable or unjust. (See Macleay Valley Health Service and Jeffree, 58 IR 187). Secondly, to determine an appropriate remedy if the dismissal is found to be unfair. (See Leeds and Northrop, 46 IR 11) Matters to be taken into account are found at s88 of the Act (See Buckman v Burdekin, 85 IR 418).

68 Mr Britt said the applicant's dismissal was not a sham; it had a basis in fact. This was not a case concerning poor performance or warnings.

69 As to the reliance on WD & HO Wills, Mr Britt put that firstly, that case was determined under s130 of the Act. Secondly, the principles there developed were in the context of employers with more than fifteen employees. In this case, the employer had three employees. Consultation, opportunities for re-employment and retraining, are very limited for small employers compared to large corporations.

70 Mr Britt submitted that in s84 applications, it was not open for the Commission to determine what is reasonable notice or redundancy payments and most certainly not make orders as a deterrent to other employers. The applicant had relatively short service. If there was any unfairness it was the respondent's failure to consult with the applicant. Even so, a few more weeks of consultation wouldn't have altered the outcome. Mr Britt said it was wrong to suggest the applicant would have continued in employment until 8 November. He was on holidays and had received payment for those holidays.

71 As to post dismissal earnings, the applicant produced evidence of income of $11,552 and said it was 15 per cent of his earnings. There was no evidence concerning the remaining 85 per cent.

72 Mr Britt likened the applicant's position to that of one of the applicants in Berkeley Challenge. He said if any compensation was appropriate it should be no more than five weeks as was awarded to Mr F Sheehan in Berkeley Challenge. Mr Britt said the employer would also seriously consider any recommendation concerning the balance of four weeks notice (1.5 weeks). Mr Britt reserved the respondent's position on costs.

73 In reply Mr Young, said it was for the Commission to decide from the evidence what duties Ms Desaix and the applicant performed. He submitted that Ms Prince's email confirmed the evidence of other witnesses about the administrative duties performed by the applicant.

74 Mr Young said he had never suggested the company's financial records were a sham - rather they didn't tell the whole story.

75 As to Jones and Dunkel inferences, Mr Young put that it wasn't open to criticise the failure to call Ms Nainoca or Mr Maxwell. They cannot give evidence about the reasons for dismissal. However, Ms Desaix certainly could have.

76 Mr Young submitted the Brown and Dunn rule is one of fairness. It does not mean that a witness need be questioned on every paragraph in an affidavit.

77 As to criticism of the applicant for his incorrect claim as to the number of employees employed by the respondent, the applicant had only relied on the respondent's information. He could not have known who was employed and on what basis.

78 Mr Young said that, as the applicants in Berkeley had received three months notice, the applicant would be happy to accept three months' pay in lieu of five weeks proposed by Mr Britt.

80 The applicant was not employed under the terms of the Clerical and Administrative Employees' (State) Award. There was no overtime or weekend work paid or annual leave loading. The respondent had prepared a detailed and comprehensive employment contract, without reference to an award. Notwithstanding that the contract was unsigned, the evidence is that the applicant accepted it and worked according to its terms. The respondent accepted that both parties were honouring it.

81 Mr Britt accepted that the applicant was award free. However, this is not the point. The employer had seemingly not invoked selective terms of the Award, until it was able to secure a strategic advantage over the applicant.

82 It is not open for an employer to selectively apply what it finds convenient in an award and ignore the award's other terms.

83 The employer did not even comply with the terms of the contract, which it insisted applied to the applicant. The contract provided one month notice of termination.

84 In my opinion the applicant presented as an honest and sincere witness. On the other hand, the respondent's witnesses were less than convincing.

85 Mr Britt appropriately sought to distinguish differences in the versions of conversations recorded in the applicant's originating application and his later affidavit evidence. I do not read much into this criticism. The originating application, although in the form of a sworn statement, is expected to be brief. The material complained about is by way of omission, rather than contradiction. In my own opinion it would only be in cases where the evidence is blatantly contradictory, that the Commission might well query its reliability.

86 Nevertheless, the applicant readily acknowledged a mistake in the number of employees he believed were employed by the respondent. I accept that his original estimate was based on the employer's information. It would be unlikely, with so many freelance employees around and with three related companies, that the applicant could be sure of who was an employee and who was not.

87 In any event, it is unnecessary to make findings as to the number of employees employed by the respondent, or its related entities, for the purposes of establishing whether the employer is exempt from the provisions of the redundancy clause in the award. The reality is the applicant was not employed under the award. I hasten to add that the size of the employer may well be relevant to an investigation of whether options for alternative employment are available.

88 Mr Niess' evidence was not particularly helpful. He was intent on answering questions with one-word answers and prevaricated when he thought an answer might compromise the respondent's case. When questioned about the application of the award, Mr Niess was shown the award. He could not find simple references to the award classifications, and seemed quite confused and unsure of what the award provided.

89 Mr Niess' evidence that the applicant was covered by the award sits rather oddly with the letter he signed to the applicant on 2 October in which it is said the applicant was bound to the employment contract.

90 Further, Mr Niess said he was not involved in the decision to terminate the applicant. However, Mr Christie was insistent that he was.

91 There is another area of significant conflict in the respondent's evidence. Mr Niess said the 13 September board meeting agreed one staff member would need to be retrenched and Mr Christie and Mr Hogwood would subsequently review who would be made redundant. Mr Christie deposed that the board meeting discussed the name of the person.

92 These conflicts of evidence cannot be explained away as simply as Mr Britt put, that someone was simply mistaken. These matters went to the heart of what was discussed and decided at the board meeting on 13 September 2001.

93 This is not the first occasion. I have been troubled with finding an answer to whether an employee's redundancy was a sham. If it wasn't for redundancy then what was the real reason? Here, there is an employee about whom there is no issue of performance. Indeed, he was highly regarded and received two pay increases during his employment; one just a few months before dismissal.

94 Why would the employer dismiss such a valuable employee in these circumstances? I am puzzled by this question.

95 While the evidence is inconclusive, I nevertheless have serious doubts that the applicant's redundancy was bona fide. This is so for the following reasons.

96 It is very curious, that the company was well placed, less than a month after the applicant's dismissal, to re-employ Ms Desaix. It is irrelevant whether Ms Desaix was a contractor or a permanent employee. The issue was whether the Company was in a financial position to employ her at $315.00 a day plus GST so soon after the applicant's dismissal and basically on a full time basis. Such a cost was equivalent to at least $1,575.00 per week; whereas the applicant's salary was $1,192.30.

97 However, I observe that her duties were not dissimilar to those performed by the applicant and her business card makes it plain she was the respondent's "studio director" (although this may have been after Ms Nainoca had left).

98 It is not relevant that Ms Desaix took up Ms Nainaco's duties when she resigned in December. Mr Christie did not know until November that Ms Nainoca would be resigning a month later. By that time, Ms Desaix was well and truly established in employment.

99 The Commission's doubts are also aroused about the financial evidence, which disclosed that the respondent had a small profit in the year ending 30 June 2000 ($2,549). This was only three months after the applicant's employment.

100 More significant, however, are the results for the financial year ending 30 June 2001. Here a loss of $26,721 is recorded. During this period the applicant was awarded a $3,000 increase (November 2000) and two weeks after the end of the financial year, a further $2,000 increase. This was a rather odd way to address the ongoing financial losses of the respondent, particularly as Mr Christie said he kept a "close eye" on the financial position.

101 Another strange claim by the respondent was that one of the two reasons for the downturn in business was the terrorist attack on America on 11 September 2001. The applicant was dismissed two days later. Whether Mr Christie's prediction was ultimately vindicated is not the point. It would be nonsense to suggest that anyone would have been able to predict the fallout from 11 September, two days later. In my view, this excuse was carelessly and foolishly cobbled together well after the decision to dismiss the applicant. I am fortified in this conclusion by the fact that this reason was never mentioned in the memos from the respondent of 28 September and 2 October 2001.

102 Notwithstanding my doubts as to the reasons for the dismissal, this matter is able to be conclusively decided without a finding on the real reason for the applicant's dismissal.

103 This is so because of the irresistible conclusions that can be drawn relating to the respondent's poor handling of the dismissal. The Commission is in no doubt that the applicant was denied fair and due process and his dismissal was based on flawed and inadequate information.

104 It is to these procedural issues to which I now turn.

105 The concept of procedural fairness, while not expressly referred to in the statute, is nevertheless, a factor the Commission may take into account when assessing whether a particular dismissal can be characterised as "harsh, unreasonable or unjust." In Byrne & Anor v Australian Airlines (1995) 185 CLR 410, the High Court, concluded that "it is clear that the use of an unfair procedure may result in a dismissal being 'harsh, unreasonable or unjust.'"

106 To this authority may be added the weight of a number of Full Bench decisions of the Commission. In Antonakopoulos v State Bank (1999) 91 IR 385, the Full Bench said at p389: We agree with the conclusion of Hill J that procedural issues, that is failure to deal with the matter in a procedurally fair way, may, in certain cases, of themselves, constitute the basis for a determination that a dismissal is harsh, unjust or unreasonable. A failure to adopt a procedure which constitutes a breach of 'an essential prerequisite to, or inviolable limitation on, the exercise of the employer's right to dismiss' or a failure to afford procedural fairness which causes a 'substantial and irrevocable prejudice to the employee' will often vitiate the decision of an employer and warrant, in itself, a determination that the dismissal was harsh, unreasonable or unjust (and hence, establish the basis for a remedy under the Act). Further, a decision to dismiss made upon the basis of procedures which are unfair and where an innocent explanation or other appropriate explanation is reasonably available will normally constitute a firm basis for a determination that a dismissal, so effected, is harsh, unreasonable or unjust.

While the findings of the Commission in Buckman focus on the issue of warnings, the observations apply also to broader tenets of procedural fairness contemplated in s88 and to matters such as those raised in these proceedings. We agree that there is no obligation in the Act to follow any particular procedure when effecting a dismissal. However, a failure by an employer to adopt appropriate procedures when effecting a dismissal, or a failure to follow procedures prescribed in an industrial instrument, or in procedures laid down administratively by an employer, may be properly taken into account by the Commission as part of the consideration of an application brought under s84. Further, as we have noted, where procedures are specified in an industrial instrument or by administrative action, a failure by an employer to apply, or to properly apply, those procedures may in appropriate cases, of itself, support a finding that the dismissal was harsh, unreasonable or unjust .

107 The above reference to Buckman is Buckman v Burdekin 85 IR 418. In that case, the Full Bench said: Section 88 of the Act contains a number of matters which may, if appropriate, be taken into account in considering whether a dismissal was harsh, unreasonable or unjust. There is, of course, no obligation imposed by the Act upon employers to give an employee a warning prior to effecting a dismissal. However, a failure to give prior or timely warnings is a matter which properly may be taken into account as part of the consideration of general issues of substantive and procedural fairness.

108 See also the recent Full Bench decision D&R Commercial Pty Ltd v Flood [2002] IRComm 88 and also Wilson v Department of Education and Training, 100 IR 1.

109 Relevantly, s88 of the Act deals with matters, which might broadly be described as going to issues of procedural fairness. The section is expressed as follows: In determining the applicant's claim, the Commission may, if appropriate, take into account: (a) Whether a reason for the dismissal was given to the applicant and, if the applicant sought but was refused reinstatement or re-employment with the employer; whether a reason was given for the refusal to reinstate or re-employ, and (b) If any such reason was given - its nature, whether it had a basis in fact, and whether the applicant was given an opportunity to make out a defence or give an explanation for his behaviour or to justify his or her reinstatement or re-employment, and (c) Whether a warning of unsatisfactory performance was given before the dismissal, and (d) The nature of the duties of the applicant immediately before the dismissal and, if the applicant sought but was refused reinstatement or re-employment, the likely nature of those duties if the applicant were to be reinstated or re-employed, and (e) Whether or not the applicant requested or re-employed with the employer, and (f) Such other matters as the Commission considers relevant.

110 One will readily see that s88(f) does not limit the Commission to the matters referred to in the aforementioned sub clauses. The Commission is able to take into account such other matters, which it considers relevant arising from the facts and circumstances of a particular case.

111 Considerations of unfairness may still arise in circumstances of genuine redundancy. The oft quoted authority for this proposition is Outboard World v Muir. I cite the relevant passage: While in the ordinary case it may be that a redundancy genuinely occurring would not come within the parameters of Part 8, Unfair Dismissals, it takes little imagination to apprehend a situation which is both a redundancy and a harsh, unreasonable or unjust dismissal. For example, it may be that in selecting employees for redundancy an employer unilaterally decides to terminate an employee of long and exemplary service over another employee. The facts of the case may demonstrate both redundancy of one position but unfairness as against the employee selected. Once that position is accepted then it follows that an employee is not necessarily incapable of suffering an "unfair" dismissal in the context of a position becoming redundant. Other examples come readily to mind.

112 There are many other authorities emphasising the same point. Some were referred to by me in Arslan and Others and Berkeley Challenge (Commercial) Pty Limited and Others. It is unnecessary to cite them all, but I have had regard for them in deciding this case.

113 Both Mr Young and Mr Britt referred to my later decision in Shop, Distributive and Allied Employees' Association, New South Wales and WD & HO Wills Holdings Ltd, wherein I summarised the obligations of employers in redundancy situations. At para 66: 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 the 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.

114 Counsel for the respondent submitted that this case can be distinguished from the principles discussed in WD & HO Wills, because it involved a large employer in dispute proceedings under s130 of the Act. I respectfully disagree.

115 The size of the employer's workforce is really not the issue. Plainly it was a small employer. Nor is it relevant that proceedings were dealt with under s130 of the Act. It is clear that s137(1) comprehends similar considerations of unfairness as contemplated under Pt 6 ch 2 of the Act.

116 The principles in WD & HO Wills were distilled from a number of seminal authorities of various industrial tribunals. The principles are, in my opinion, applicable to any dismissal in which it is claimed that a genuine redundancy involved elements of unfairness. They are, to my mind, a useful guide as to whether an employee has been afforded procedural fairness in genuine redundancy situations. That is not to say that every case will disclose each of the matters I discussed in WD & HO Wills. Obviously, not all the matters apply to the facts and circumstances of this case.

117 The decision to dismiss the applicant was made at a board meeting on 13 September 2001. I do not accept Mr Niess' evidence that no name was mentioned or decided at this meeting. The respondent only had three employees. It wouldn't be too difficult to imagine who would be dismissed when the criterion was the employee who cost the most. Having decided the applicant was to go, the respondent didn't tell him for two weeks. I do not accept that the respondent was exploring other options during this time. It's decision had already been made.

118 Then, when the applicant queried his entitlements, the respondent altered its earlier notice to him and required him to leave forthwith.

119 There is no evidence that the applicant was warned his position was in jeopardy. Indeed, having regard for the pay rises he received and the favourable comments made by management, he may well have believed his position was perfectly safe.

120 It is axiomatic that a failure to provide an employee with any warnings of dismissal, where there is no issue of poor performance or misconduct, must be unfair. On this point I welcome and appreciate the candid and entirely appropriate concession made by Mr Britt in his submissions (T.p 30): We say that if the respondent has acted unfairly and the Commission has determined that, that the major issue of unfairness would be the failure to consult with the employee and inform the employee that it was likely that his position would be made redundant. If the employer had acted in accordance with the principles of the Commission in relation to consultation, he may have stayed in employment for a further one or two weeks whilst that consultation process took place.

121 However, the severity of the unfairness was exacerbated by the respondent's failure to explore other options with the applicant including a change of his role. It is not open for the respondent to rely on an earlier comment by the applicant (which I do not accept as the factual position) that he had not expressed an interest in administrative duties, so therefore the respondent didn't consider this as an option.

122 It seems entirely logical, that in circumstances where it was a choice of a job with administrative duties or no job at all, the applicant would have opted for the former. Nor would it seem was there any consideration of further freelancework, even though the applicant had previously done so.

123 To my mind, Mr Christie's decision was based on an incorrect assumption of what work was performed by the applicant. Mr Christie's belief was that the applicant's role was "purely artistic." This is patently not so. Mr Christie was forced to concede that he didn't even know what the applicant's duties were (T.p 67). YOUNG. Would you agree you would have been in a far better position to make the best decision for the company if you had discussed with him the proposed termination of his employment in order to understand what skills, abilities and knowledge he might be able to bring to the company? CHRISTIE. I would like to concede that point, yes YOUNG. Do you in fact concede this point? CHRISTIE. Yes I would like to.

124 So the question arises, how could a redundancy be fair if it is based on an employer's misconception of what work the employee actually performs? In my view, the answer is self evident.

125 There are two matters arising from the contract of employment relevant to the Commission's determination of this matter. Firstly, the uncontested evidence was that the applicant didn't receive the one months notice of termination as expressed in Cl 3.1 of the contract. As I said earlier, both parties acknowledge that the unsigned contract was the employment contract and the applicant was working under, and according to its terms and conditions.

126 Secondly, I do not accept that the respondent should be relieved of its obligations to pay redundancy benefits to the applicant. The award did not cover him. The respondent was therefore not caught by the award's exemption clause for an employer with less than fifteen employees. While I make no specific determination of what redundancy pay is appropriate, the fact that nothing was paid is a matter I have taken into account as being relevant to the determination of this case (s88(f)).

127 Further, I do not believe it was any coincidence that the applicant was dismissed immediately before taking annual leave. The timing was appallingly insensitive. The applicant gave three months notice of his leave in order to go overseas. An employee leaving for an overseas holiday would hardly feel good about being dismissed a few days beforehand, with no job to return to. To my mind, the decision was heartless and uncaring. I have also taken this matter into account in determining this case.

128 For the aforementioned reasons I find the applicant's dismissal was procedurally unfair being "unjust, and unreasonable" in terms of Pt 6 ch 2 of the Act.

129 It needs to be stressed that the statutory emphasis and policy intent of the Act is directed towards the reinstatement of an unfairly dismissed employee. It is only when the Commission makes a finding of the impracticality of reinstatement, that consideration may be given to awarding compensation pursuant to s89(5) of the Act.

130 The Commission, of course, takes into account the views of the parties, most particularly where an employee does not seek to be reinstated. Such a view is often perfectly understandable, particularly if the employee has found alternative employment.

131 Mere discomfort for the employer is not sufficient to establish the impracticability of reinstatement. See Perkins v Grace Worldwide (Aust) Pty Ltd (72 IR 186) and Hollingsworth v Commissioner of Police (No.2) (88 IR 282).

132 Having weighed up the factors evident in this case, including the small workforce of the respondent, I am satisfied that this is a case where compensation is more appropriate than reinstatement or re-employment. I accept that Mr Young successfully established that the applicant's post dismissal earnings to May 2002 were $11,552.00. Pursuant to s89(6), I have taken this figure into account in assessing the amount of compensation to be ordered.

133 Having regard, for my earlier findings and such other matters as the applicant's age, relatively short service and marketability in his chosen profession, I determine that an amount of sixteen weeks' compensation is appropriate in this case.

134 Pursuant to s89(5) and (6) of the Industrial Relations Act 1996, the Commission orders that: 1) The respondent Christie Direct Pty Ltd shall pay to the applicant an amount of $19,076.92 based on sixteen weeks pay at a salary of $62,000 per annum. 2) The amount ordered in (1) shall be paid within twenty-eight days of today. 3) Any application for costs must be made by notice of motion within fourteen days of today. 4) Save for any costs application, these proceedings are formally concluded.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Workplace Relations Act 1996(Cth)

Federal Workplace Relations Act 1996(Cth)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (142 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (7)

Cited By (1)