Outboard World v Muir

JUDGMENT: - 4 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: SAMS DP

Application by Sarah Jo Heape re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996

1 In a decision published on 16 November 2001, [2001] NSWIRComm 288, the Commission found that Mrs Sarah Jo Heape ("the applicant") had been constructively dismissed by General George Carpets ("the respondent") on 24 July 2001. In doing so, I rejected a challenge to the Commission's jurisdiction as to whether the applicant had been actually dismissed, or otherwise prevented from bringing a claim of unfair dismissal under two legs of Reg 5B of the Industrial Relations Act 1996 ("the Act"). In the result, the Commission held that the applicant was not prevented from bringing a claim for alleged unfair dismissal, pursuant to s84 of the Act.

2 Having so determined, the Commission listed the matter for further conciliation on 10 December 2001. The conciliation conferences proved unsuccessful in resolving the applicant's claim against the respondent.

3 The matter was listed for arbitration. Affidavits were directed to be filed and the matter was heard on 6 May 2002. Much of the evidence revisited the circumstances surrounding the applicant's dismissal which had been relevant to the jurisdictional proceedings. This decision however, relates to two issues: whether the applicant's dismissal was unfair in terms of Pt 6 ch 2 of the Act and if so what, if any, remedy should be ordered by the Commission.

4 The applicant traced her employment history from 22 January 2001 to her dismissal on 24 July 2001. This background was relevantly not contested.

5 The applicant's husband was also employed by the respondent, on a contract basis, as a carpet measurer. She travelled to work with her husband from their home on the Central Coast to Belrose. On 20 July, Mr Heape was involved in a physical altercation with the respondent's sales manager, Mr Ian Swords. Mr Heape was dismissed for misconduct.

6 In view of her husband's dismissal, the applicant canvassed her own future with the respondent's managing director, Mr Eric Hodges, in a telephone conversation on 23 July. No conclusions were drawn from this conversation and the applicant attended for work the next day. The applicant and Mr Hodges discussed the matter and the applicant's employment was terminated.

7 The Commission referred to this conversation in my earlier decision at para 31: It must be accepted that the respondent did not expressly dismiss the applicant, either in writing, or verbally. Fundamentally, the conversation between Mr Hodges and the applicant on 24 July 2001 is not materially in dispute. The applicant returned to work on Tuesday, 24 July 2001, following the incident involving her husband on the Friday before. She expected not to have a job. During the conversation the applicant and Mr Hodges accepted it would be uncomfortable for her to remain employed, given the unpleasant circumstances of her husband's dismissal. I concluded in respect to the termination of employment: In my view, the facts in this case disclose a classic example of a forced resignation of employment, readily embraced by the employer as a convenient means of resolving the dilemma of the applicant's continuing employment. In short, the applicant was forced to resign.

8 An affidavit of Mr Dennis Heape (the applicant's husband) was tendered on a conditional basis as Mr Heape was unavailable for cross examination. I do not consider the material contained in Mr Heape's affidavit to be relevant to the Commission's determination of this matter.

9 Mr T Vargo, an agent now appearing for the applicant, referred the Commission to a number of authorities which have considered the meaning of the terms "harsh, unreasonable or unjust". See Outboard World v Muir (1993) 51 IR 167; Byrne & Anor v Australian Airlines (1995) 185 CLR 410; Devey v Enacon Parking Pty Ltd (unreported, Connor C, Matter IRC1886 of 1995, 15 December 1995) and Hoskins and Trader Nick's and Laurie and Bill Shead t/as Trader Nick's [2000] NSWIRComm 144.

10 He referred to the provisions of s88 of the Act and submitted that the applicant's dismissal was substantively and procedurally unfair. Mr Vargo said there could be no doubt that s88 of the Act had not been complied with. The applicant had received no warnings for poor performance or misconduct was given no warning of her dismissal (see Herson and One.Tel Ltd (unreported IRC5181 of 1998, 18 February 2000) and Bankstown City Council v Paris, 93 IR 209).

11 Mr Vargo emphasised that the applicant had not been guilty of any misconduct and there were no issues of poor performance. The only reason she was dismissed was because her husband had engaged in a physical altercation with Mr Swords and it would have been uncomfortable for her to continue working for the respondent. Such a dismissal was manifestly unfair (see Naganathan and Soluble Solutions Pty Ltd (unreported, McKenna C, Matter IRC5917 of 1996, 14 April 1997)).

12 Mr Vargo said the applicant found alternative employment at Parramatta twelve weeks after her dismissal. He sought compensatory relief of twenty weeks' pay.

13 The respondent's managing director, Mr Hodges, relied on his earlier affidavit in the jurisdictional proceedings and provided additional oral evidence. As the Commission canvassed this evidence in the jurisdictional decision, it is unnecessary to revisit these matters. The respondent tendered and affidavit sworn by Mr Ian Swords. I have not been assisted by Mr Swords' affidavit and it is not relied upon. In any event, Mr Swords was not available for cross examination.

14 In his submissions, Mr Legge, solicitor for the respondent, said that the applicant would not have been surprised by her termination of employment. Her husband had been involved in a serious altercation with Mr Swords and a continuation of her employment was unlikely.

15 Mr Legge relied on the applicant's part time work and flexible work arrangements to suggest that, if any award of compensation was to be made, it should be a modest one.

16 Having found the applicant was constructively dismissed on 24 July 2001, the Commission's next task is to determine whether the dismissal was "harsh, unreasonable or unjust" within the meaning of Pt 6 ch 2 of the Act.

17 It is apparent from both the ordinary meaning of each adjective, and their application in an industrial context, that each word has its own discrete and distinct meaning - albeit with common threads.

18 Connor C defined the terms as follows: HARSH: too severe, having regard to all the circumstances. UNREASONABLE: immoderate, excessive or extravagant. UNJUST: unfair, inequitable, undeserved or biased. (see Parker v Capitol Painters & Decorators Pty Ltd , 68 IR 100, at p104).

19 Having established that each element of the expression has its own independent meaning, it is axiomatic when the expression is applied to a particular case and set of circumstances, that not all the three descriptors might be evident. A particular dismissal might be found to be 'harsh', but not 'unreasonable' or 'unjust'. Other variations might be found. 20 This principle arises from the oft quoted authority in Byrne & Anor v Australian Airlines, 185 CLR 410, where the expression 'harsh, unjust or unreasonable' was considered in the context of an award provision. In their joint judgment, McHugh and Gummow JJ said at p465: It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment may be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted. 21 The principle was further discussed in Outboard World v Muir, 51 IR 167, at 182, where a Full Commission said: First we deal with the argument for the appellant that the Commission erred by applying the wrong test in connection with the dismissal: 'unfair' rather than 'harsh, unreasonable or unjust' dismissal. We agree with Mr Reitano's submission in this respect that the reference by the Commissioner to "unfairness" did not represent any misunderstanding of the correct test but was merely the use of a shortened form of expression intended to embrace the three relevant words. Whilst we recognise that there may be a natural tendency (recognised in the use even by the advocate for the Company before the Commissioner of the term 'unfair') to use the shortened form, we consider that it is preferable that a member of the Commission utilise the precise words provided by s246, rather than the catch-all heading, particularly when expressing the basis for a finding that a dismissal is within one or more of the heads provided by the section. We take this view because, even though there may be some circularity in the full phrase 'harsh, unreasonable or unjust', we detect scope for variation of meaning which may be critical to the determination of a particular matter and may be obscured by the use of the substitute term "unfair". Different but not wholly dissimilar words, "unfair", "harsh", and "unconscionable", are used in s275, power of the Industrial Court to Declare Certain Contracts Void, of the 1991 Act. In relation to those words, then appearing in s88F of the 1940 Act, the Commission in Court Session (Perrignon, Cahill and Dey JJ) in A & M Thompson Pty Ltd v Total Australia Ltd [1980] AR (NSW) 399 at 418 (Cahill J delivering a separate judgment) said: The duty of the Commission is to reach a conclusion on the issues of whether the subject transaction is 'unfair', or 'harsh' or 'unconscionable'. It has been said that those words are a 'tautological trinity' ( Davis v General Transport Development Pty Ltd ) [1967] AR 371) but we prefer to take the view that there is a perceptible difference between the meaning of the term 'unfair' and that of the terms 'harsh' and 'unconscionable'. What is unfair may not be so unfair as to be 'harsh'. But, whether this view be correct or not, once the transaction is found to be unfair the Commission may proceed to exercise its very wide power.

In much the same way, we consider that, while strict definitions of 'harsh', 'unreasonable' and 'unjust' may produce a degree of circularity of meaning, turning on the notion of 'fairness', it may be in a given case that a dismissal may be viewed as coming within the ambit of one of the three adjectives but not the others. To avoid the possibility of misunderstanding or error, the tribunal, when making that primary finding, should state explicitly the basis on which it is made.

22 A contemporary authority reaffirming this principle is to be found in Bankstown City Council and Paris, 93 IR 209. The Full Bench said at p212: The Commissioner found that the dismissal by the Council of Mr Paris was 'harsh, unreasonable or unjust'. This phrase, contained within s84, is an important key to jurisdiction and does require some specifity of finding. As has been observed by the Commission on numerous occasions, a dismissal may be capable of being unreasonable but not harsh, or harsh but not unjust, other permutations may apply. In the present case, however, it seems to us that the dismissal of Mr Paris was capable of meeting not one or the other of those descriptions but each of them. Therefore, nothing turns upon the expression adopted by the Commissioner. We would observe that in a case where the conduct of the employer might satisfy one but not all of those heads, a positive and specific finding should be made.

23 A dismissal, of course, can be both procedurally and substantively unfair. For the relevant authorities on this proposition, I refer again to the High Court judgment in Byrne & Anor v Australian Airlines at p465 where McHugh and Gummow, JJ observed: The distinction between procedure and substance is elusive. This is so even in those fields of private international law, the statute law dealing with limitations of actions and the effect of repeal upon accrued rights, and the Statute of Frauds, where it has an entrenched operation (217). In our view, it is unhelpful and contrary to the tenor of the Award to introduce it into cl.11(a). That is not to say that the steps taken, or not taken, before termination may not in a given case be relevant to consideration of whether the state of affairs that was produced was harsh, unjust or unreasonable. Thus, it has been said that a decision which is the product of unfair procedures may be arbitrary, irrational or unreasonable (218).

But the question under cl.11(a) is whether, in all the circumstances, the termination of employment disobeyed the injunction that it not be harsh, unjust or unreasonable. That is not answered by imposing a disjunction between procedure and substance. It is important that matters not be decided simply by looking at the first issue before there is seen to be any need to enter upon the second Brennan CJ, Dawson and Toohey JJ concluded at p430: Save for the prescription of periods of notice, cl 11 does not require the adoption of any particular procedure for the dismissal of an employee. However, it is clear that the use of an unfair procedure may result in a dismissal being harsh, unjust or unreasonable. For example, the failure to afford an employee the opportunity to explain apparent misconduct where there is an innocent explanation available would result in the dismissal of the employee being in breach of cl 11(a)(95). On the other hand, if an employer were to observe the actual misconduct of an employee in circumstances which allowed no innocent explanation, a summary dismissal might not be in breach of cl 11(a).

24 The Full Bench decision in Antonakopoulos v State Bank (1999) 91 IR 385, considered the basis upon which procedural matters might be considered in the context of an alleged unfair dismissal. The Commission 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 . See also D & R Commercial Pty Ltd and Flood [2002] IRComm 88 and Wilson v Department of Education and Training , 100 IR 1.

25 As mentioned in the above passage, the Commission has a statutory basis for considering procedural issues. s88 of the Act is this basis: 88 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 or her 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 reinstatement or re-employment with the employer, and

f) such other matters as the Commission considers relevant.

26 It is also appropriate to apply the following passage in Buckman v Burdekin, 85 IR 418, to the facts of this case: 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.

CONCLUSIONS 27 I doubt it will come as any surprise to the respondent that the Commission is well satisfied that the applicant's dismissal was "harsh, unjust and unreasonable" within the meaning of Pt 6 ch 2 of the Act. As I said in my earlier decision I have no doubt that the applicant was forced to resign as a consequence of the summary dismissal of her husband.

28 There was no question of any misconduct of the applicant. There were no allegations of poor work performance. On any objective view of it, the applicant's dismissal was substantively unfair.

29 Moreover, the applicant received no warning of her termination of employment. Nor was she given any opportunity to argue or defend her right to continue in employment. It was, in my judgement, a gross denial of procedural fairness.

30 I accept that the applicant may have felt uncomfortable in continuing to work for the respondent. However, she was given no opportunity to see if "things worked out". It was not open in my view for the respondent to conveniently use the applicant's discomfort as a means of relieving its own.

31 It may have become inconvenient, or even impossible, for the applicant to travel to work by public transport after her husband's dismissal. However, she was given no opportunity to test any alternative transport arrangements.

32 In short, the Commission has no doubt that the respondent's precipitous action in forcing the applicant's resignation ensured that the termination of employment was manifestly unfair.

33 Mr Vargo referred me to a decision of McKenna C in Naganathan and Soluble Solutions Pty Ltd. The decision is particularly apposite to this case. There the Commission was considering a claim of unfair dismissal based upon two reasons for dismissal; one of which concerned the applicant's spouse being under investigation for alleged fraud. McKenna C found against the respondent employer as to the reasons for dismissal and said: This leaves the second limb of the reasons, namely, that the applicant was dismissed because her husband allegedly was "under investigation by outside authorities". In an annexure to the initiating process, the applicant claimed that the circumstances of the "disagreement with my husband" were unrelated to her employment, and that she had been discriminated against in her employment because of marital status; and that the dismissal was, thereby, harsh, unreasonable and unjust. Section 169 of the Industrial Relations Act provides that the Commission is required to take into the principles contained within the Anti-Discrimination Act 1977 (NSW). Part 4 of the Anti-Discrimination Act renders unlawful discrimination on the basis of marital status: Boehringer Ingleheim Pty Ltd v Reddrop [1984] 2 NSWLR 13; Waterhouse v Bell [1991] 25 NSWLR 99. I do not consider it necessary to consider whether the principles contained in the Anti-Discrimination Act have applicability to this application because I am satisfied, without recourse to principles of anti-discrimination laws, that the dismissal was harsh, unreasonable or unjust within the meaning of the Ch 2 Pt 6 of the Industrial Relations Act . To dismiss a person because his or her spouse is allegedly, or in fact, under investigation can plainly be seen to amount to a harsh, unreasonable or unjust dismissal.

34 To my mind, the dismissal of an employee based wholly on the conduct or behaviour of a spouse or other relative employed by the same employer must, on any view of it, be a dismissal which is unfair. Put another way, "the sins of one cannot possibly be visited upon another".

35 Accordingly, I find the dismissal of the applicant to be "harsh, unreasonable and unjust" within the meaning of Pt 6 ch 2 of the Act.

36 The applicant makes no claim for reinstatement or reemployment. She has obtained alternative employment. While the primary relief available for an applicant who has been unfairly dismissed is reinstatement, I recognise the impracticality of doing so in the circumstances of this case; s89(5).

37 In determining an appropriate amount of compensation, I have taken into account the applicant's relatively short service and her alternative employment; s89(6).

38 I propose to order an amount equivalent to ten (10) weeks' pay at $270 per week.

39 Pursuant to s89(5) of the Industrial Relations Act 1996 the Commission orders that: 1) The respondent, General George Carpets Pty Ltd, shall pay to the applicant, Sarah Jo Heape, an amount of $2,700.

2. The amount in Order 1 shall be paid within twenty-eight (28) days of today.

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