against a decision [[2007] AIRC 292] and order [PR976799]

s.643 - application for relief in respect of termination of employment

Appeal - termination of employment - whether termination was for genuine operational reasons - duty to give adequate reasons - Workplace Relations Act 1996 ss.643 and 649.

[1] This is an appeal, for which leave is required, by Mr A Cruickshank (the appellant) against a decision and order made by Commissioner Eames on 17 April 2007. [1] In that decision the Commissioner dismissed an application by the appellant for a remedy in relation to the termination of his employment by Priceline Pty Ltd (the respondent).

[2] Section 643(1)(a) of the Workplace Relations Act 1996 (the Act) permits an employee whose employment has been terminated to make an application for a remedy on the basis that the termination was harsh, unjust or unreasonable. The right contained in s.643(1)(a) is subject to a number of exclusions. One exclusion is that an application must not be made if the employee's employment was terminated for genuine operational reasons or reasons that include genuine operational reasons. In this case the respondent requested the Commission to dismiss the appellant's application, submitting that the operational reasons exclusion applied. The Commissioner upheld that submission and dismissed the application.

[3] The operational reasons exclusion is contained in ss.643(8) and (9). Those sections read as follows:

"643 Application to Commission to deal with termination under this Subdivision

(8) An application under subsection (1) must not be made on the ground referred to in paragraph (1)(a), or on grounds that include that ground, if the employee's employment was terminated for genuine operational reasons or for reasons that include genuine operational reasons.

(9) For the purposes of subsection (8), operational reasons are reasons of an economic, technological, structural or similar nature relating to the employer's undertaking, establishment, service or business, or to a part of the employer's undertaking, establishment, service or business."

[4] These provisions have a number of important elements. The first is that an employee is prohibited from making an application for relief if the employment was terminated for the reasons specified in s.643(8) or for the reasons that included those reasons. As a matter of practicality, the true reasons for a termination of employment will usually not be within the knowledge of the employee concerned. Except in a limited number of cases it would be unrealistic to expect a dismissed employee to ascertain with certainty the reason or reasons motivating an employer in terminating the employment. For that reason the operation of the prohibition will usually be a matter of controversy. The Act provides for the resolution of the controversy at an early stage of the proceedings. We deal with that provision, s.649, below.

[5] Another element of ss.643(8) and (9) is that the operational reasons must be "genuine." The use of the adjective "genuine" serves to indicate that the reasons advanced must be genuinely held and must be capable of withstanding reasonable scrutiny. It would not be sufficient that an employer had a sincere belief that a termination was for operational reasons unless it could also be shown that the reasons were "genuine in the sense that [they were] real, true or authentic, not counterfeit" as explained in Village Cinemas Australia Pty Ltd v Carter [2] (Village Cinemas).

[6] The third element of the provisions which should be emphasised is that where the exclusion operates it is a complete bar to the application. It follows that it is impermissible, in the course of examining whether the reasons for the termination are genuine operational ones, to inquire whether the termination was harsh, unjust or unreasonable. The two inquiries must be kept separate.

[7] We turn now to the provisions which permit the Commission to dismiss an application on the basis that the termination in question was for genuine operational reasons, or for reasons that included genuine operational reasons. The provisions are contained in s.649, which should be set out in full:

"649 Dismissal of application relating to termination for operational reasons

(a) an application is made, or is purported to have been made, under subsection 643(1):

(i) on the ground referred to in paragraph 643(1)(a); or

(i) the respondent has moved for the dismissal of the application on the ground that the application is outside the jurisdiction of the Commission because the employee's employment was terminated for genuine operational reasons or for reasons that include genuine operational reasons; or

(ii) it appears to the Commission, on the face of all the materials before it, that the employee's employment may have been terminated for genuine operational reasons or for reasons that include genuine operational reasons;

the Commission must hold a hearing to deal with the operational reasons issue before taking any further action in relation to the application, other than dealing with a matter on the papers as provided by section 645, 646, 647 or 648.

(2) If, as a result of the hearing, the Commission is satisfied that the operational reasons relied on by the respondent were genuine, the Commission must:

(a) if subparagraph (1)(a)(i) applies - make an order dismissing the application; or

(b) if subparagraph (1)(a)(ii) applies - make an order dismissing the application to the extent that it is made on the ground referred to in paragraph 643(1)(a).

(3) Subject to any right of appeal to a Full Bench of the Commission, a finding by the Commission that it is not satisfied that the operational reasons relied on by the respondent were genuine is final and binding between the parties in any proceedings before the Commission.

(4) To avoid doubt, this section does not require the Commission to hold a hearing in relation to an application that has been dismissed under subsection 645(5) or 646(1).

operational reasons has the meaning given by subsection 643(9)."

[8] Section 649(4) is not relevant and can be disregarded in this case. If an employer respondent moves for dismissal of an application on the ground, or if it appears to the Commission, that the employee's employment was not terminated for genuine operational reasons, the Commission must conduct a hearing to determine the operational reasons issue before taking any further action, subject to some specified exceptions. In light of the cases advanced at the hearing the Commission must make an order dismissing the application, at least in so far as the application is made on the ground that the termination was harsh, unjust or unreasonable, if it is "satisfied that the operational reasons relied upon by the respondent were genuine."

[9] Where the procedure in s.649 applies, therefore, the question is whether the Commission is "satisfied" that any operational reasons advanced by the employer for the termination are genuine reasons. While there is no presumption to the contrary, [3] unless the employer produces evidence of the reasons for the termination and persuades the Commission they are or include genuine operational reasons, the jurisdictional objection will fail. Questions of onus may arise but they are unlikely to play a large part in the decision-making process. The question ultimately is whether the Commission is satisfied, on the evidence and material presented to it by the parties, that there were genuine operational reasons.

[10] Speaking generally the reasons for termination of employment are the reasons of the decision-maker. In many cases the decision-maker will be easily identifiable. In other cases the situation may not be straight forward. For example the decision may have been taken by a group such as a committee. In any event the evidence of the decision-maker, or decision-makers if there are more than one, will be pivotal.

[11] In General Motors-Holden's Pty Ltd v Bowling [4] (Bowling) the High Court was concerned with the application of a statutory provision which prohibited an employer from terminating the employment of an employee "by reason of the circumstance that" the employee was, among other things, a union delegate.[5] The relevant provision placed the onus upon the respondent employer of proving that the dismissal was not actuated by a prohibited reason if the employee was able to prove the other elements of the offence. In Bowling, the other elements having been proven, the question was whether the employer had discharged this onus.

[12] In considering whether the onus had been discharged the Court had regard to evidence given by a Mr Rosenboom, the respondent's plant superintendent, and a Mr Gould, the respondent's South Australian operations manager. It emerged during the evidence of these two witnesses that there had also been communications in connection with the decision to dismiss with two directors of the respondent based at the head office in Melbourne. Neither of the two directors gave evidence. Mason J's reasons for decision contain the following passages:

"The suggestion that the respondent's position as a shop steward was not associated with the reason for dismissal in the minds of Mr. Rosenboom and Mr. Gould is based partly on the assumption that one need not look beyond the consideration which they gave to the matter of dismissal. Yet it is clear enough from the evidence that the effective decision to dismiss the respondent was not made by them in South Australia but by the two directors in Melbourne after they had consultation with Mr. Gould, not Mr. Rosenboom.

In the light of this evidence it is impossible to treat the directors in Melbourne as having no more than a power to veto a decision arrived at in South Australia. The unexplained failure of the appellant to call the two Melbourne directors then became significant. It left uncontroverted the possibility that the respondent's position as a shop steward was an influential, perhaps even a decisive, consideration in their minds." [6]

[13] Gibbs J agreed with Mason J's reasons for judgment. He added a number of observations, one of which is pertinent in this case:

"If in the present case evidence had been given by the directors responsible that the employee was dismissed because he was guilty of misconduct or because his work was unsatisfactory, and that in dismissing him they were not influenced by the fact that he was a shop steward or indeed that he was dismissed in spite of that fact, and that evidence had been accepted, the onus would have been discharged." [7]

[14] Leaving aside the references to the so-called reverse onus for which the statute provided, these passages shed light on the nature of the Commission's task under s.649(1). To ascertain the reasons for an employer's decision to terminate an employee's employment, it is necessary to focus on the reasons, if any, advanced by the decision-maker. It is clear that the credibility of evidence given by the decision-maker may be put in issue in some cases. If this occurs the Commission will be required to evaluate the evidence given by the decision-maker against the other evidence and the circumstances overall in the usual way.

[15] The background circumstances are largely agreed. On 28 April 2003 the appellant commenced full time employment with the respondent at its Bayswater store. His position at the time was entitled 'Store Merchandising/Space Planner - Merchandise Services.' In that role he was responsible for coordinating the placement of merchandise within stores operated by the respondent or its franchisees. In October 2004 Australian Pharmaceutical Industries Limited (API group) acquired the respondent and the appellant was subsequently offered the position of 'Space Planner - Health Division.' In that role he focussed on one particular merchandise category, that category being health products.

[16] In December 2005 the appellant approached the Chief Executive Officer of the respondent, Mr Sher, and proposed a new grading system for space planners. The system involved an increase in responsibilities for space planners. Apparently it was decided, in response to this proposal, that space planners should undertake financial analysis duties in addition to the duties which they had carried out prior to that time. The decision was never implemented, however, as Mr Stapleton, the Merchandise General Manager, did not agree with it and directed the space planners not to carry out the extra duties. At the time the appellant was part of Mr Stapleton's business unit. Although he later transferred to the retail business unit, he contended that there was ongoing tension between him and Mr Stapleton as a result of these events.

[17] On 1 July 2006 the appellant received a pay increase. His gross income increased to $75,000 per annum. At that time his total remuneration, including salary, a motor vehicle, mobile phone and superannuation entitlements, was $101,150.

[18] In mid 2006 it became apparent that the respondent was suffering significant losses. On 12 July 2006 its shares were suspended by the Australian Stock Exchange. On 14 August 2006 it appointed a new Chief Executive Officer, Mr Roche. At about the same time it announced that it had experienced a financial shortfall of approximately $17.2 million that was taken as a loss of profit.

[19] On 22 August 2006 trading in the respondent's shares recommenced. In October 2006, however, following two hostile takeover bids, there was a review of the respondent's structure and operations which resulted in a decision to reduce costs by around $10 million per year. Half of this reduction was to be achieved through reductions in the number of employees. Louise Fordham, a Human Resources Manager, and other members of senior management were asked to examine ways to implement these changes within individual business units. It was decided that there would be a reduction of 32 positions. At the end of the restructure 29 employees had been made redundant, including the appellant.

[20] In order to meet the restructure target Mr Stapleton decided to make six positions redundant within his business unit. Among a number of significant organisational changes the space planning function, which had previously been part of the retail division, was brought into the merchandise division, Mr Stapleton's business unit. There were at that time four space planner positions although only three were filled. The salaries of the three space planners who were employed differed significantly. Mr Stapleton decided that the two highest paid space planners, one of whom was the appellant, should be made redundant. The appellant's employment was terminated on 3 November 2006.

[21] The Commissioner was required to decide whether the termination was for genuine operational reasons. The appellant submitted that the termination was not for genuine operational reasons and relied on a number of indications to that effect. The first was an allegation that there had been disharmony between himself and Mr Stapleton in the past in relation to the planned expansion of the duties of space planners, which Mr Stapleton had vetoed, and that Mr Stapleton was motivated by a desire to get rid of him. The second allegation was that his position was in fact not redundant. Both allegations were denied by Mr Stapleton and, so far as relevant by Ms Fordham. The Commissioner found that the termination was for genuine operational reasons or for reasons that included genuine operational reasons. The kernel of his decision is in the following passage:

"[22] In this matter I am satisfied that the Applicant's termination resulted from the Respondents financial difficulties and the subsequent decision to reorganise its structure, and on that basis at least part of its decision to terminate the Applicant was for a genuine operational reason. I am not satisfied there is any evidence to substantiate a "sham", or that the Applicant was targeted inappropriately." [8]

[22] The grounds of appeal were in substance only two. The first was that the Commissioner's conclusion was wrong. The second was that the reasons for decision were inadequate in that they did not indicate how various issues arising from the evidence were resolved.

[23] The evidence as to the financial predicament of the respondent gives general support to the respondent's submissions about the need for staff reductions. It is accepted that Mr Stapleton was the officer of the respondent who made the decision to terminate the appellant's employment. In the circumstances of this case his reasons for doing so are the respondent's reasons. Mr Stapleton's evidence was that he had decided to restructure the position of space planner so that the duties were reduced in scope and the position would attract a lower salary.

[24] Mr Borenstein SC, who appeared with Mr Felman for the appellant, drew our attention to a number of indications which, he submitted, led to the conclusion that genuine operational reasons played no part in the termination decision. Those indications, as refined during the course of the argument, may be summarised as follows:

(a) despite the termination of the appellant's employment the position he had occupied, space planner in the health and lifestyle division, remained after the restructure;

(b) the position was advertised internally shortly after the termination;

(c) the job description in the advertisement, it was alleged by the appellant, matched the description of the job he had been performing;

(d) when the appellant made an inquiry about the restructured position he was eventually told by a member of the human resources department, Mr Meiliunas, that his skill set was too low;

(e) subsequently the same position was advertised on the internet by a recruitment consultant on or around 27 November 2006, indicating that it would be a senior position with an excellent salary; and

(f) the position was advertised again by the consultant on or about 10 January 2007 and an annual salary up to $75,000 was specified.

[25] It can be seen that a number of issues arose for consideration and there was evidence upon which it could be concluded that there was no genuine operational reason for the termination, in the sense that there was no "real, true or authentic reason." [9] Mr Stapleton's evidence was that by comparison with the previous position the space planner position in the health and lifestyle division after the restructure was a different one and that it was at a lower level. That evidence required to be weighed against the evidence given by the appellant that the description in the advertisements for the restructured position was apt for the job he had been performing at the time of the termination.

[26] Other aspects of the evidence about the advertisements were potentially important. Ms Fordham testified at one point that the new position was to attract a salary of $65,000 to $70,000 and, later in her evidence, $75,000. The annual salary specified in the internet advertisement was up to $75,000. It will be recalled that the appellant's overall package was $101,150, comprised of $75,000 in salary plus other benefits including a vehicle. While Ms Fordham testified that the remuneration for the new position did not include a car, one can understand that the appellant might be mystified to see what was alleged to be a new position advertised at the same salary.

[27] Ms Fordham also said that the internet advertisement which specified a salary up to $75,000 had not been specifically authorised by the respondent, although she indicated that the recruitment consultant had been given instructions about the position. Mr Stapleton and Ms Fordham both said that the appellant was too well qualified for the new position, yet the appellant stated that he had been told by Mr Meiliunas that he was not sufficiently qualified. Mr Meiliunas was not called, nor was anyone called from the recruitment consultant.

[28] The first ground of appeal can only succeed if the Commissioner's conclusion was not open on the evidence. All of the relevant factual allegations relied upon by the appellant were put to Mr Stapleton and Ms Fordham in the course of their evidence. The allegations were denied. It was not suggested that it was not open to the Commissioner to accept those denials. Accordingly the first ground must fail. The second ground requires closer analysis.

[29] We turn to the second ground of appeal. The authorities indicate that a decision-maker required to act judicially should give adequate reasons for decision. [10] Not in every case will reasons be required, but a decision under s.649 should ordinarily be accompanied by adequate reasons.[11] The Commissioner gave some reasons, but the question is whether those reasons were adequate.

[30] It is clear that there were conflicts in the evidence which required to be resolved by the exercise of judgment and by the apportionment of relative weight to the evidence and material before the Commission. While the Commissioner made some findings he made no intermediate findings. He moved directly to the overall conclusion that the termination of employment was not a sham and that the appellant was not targeted inappropriately. Assuming that the Commissioner decided to accept Mr Stapleton's evidence, despite the contrary indications to which we have referred, the appellant was entitled to know why. Furthermore, in the absence of intermediate findings we are unable to be confident that the Commissioner approached the application of the test in ss.643(8) and (9) in the correct way. It is accepted that the decision of the Full Bench in Village Cinemas [12] properly sets out the nature of that test, but it is not clear that the Commissioner in fact applied it. Whether or not a termination of employment is for genuine operational reasons, or for reasons which include such reasons, is to be ascertained by an examination of the reasons for the termination of employment in question, rather than by identifying a generalised operational need to reduce employment. In that context the question of witness credibility may loom large, as the passages we set out earlier from Bowling demonstrate. Because the Commissioner did not indicate how important evidentiary conflicts were resolved or how he applied the statutory test, we have concluded that the reasons for decision fell short of what is required.

[31] We grant leave to appeal. The appeal must be upheld and the decision quashed. The respondent's application pursuant to s.649 should be reheard. It is preferable that the application not be reheard by Commissioner Eames. The proceedings will be referred to Senior Deputy President Acton, Head of the Termination of Employment Panel, for reallocation.

H Borenstein SC of counsel with M Felman, solicitor, for A Cruickshank.

[1] [2007] AIRC 292 and PR976793.

[2] [2007] AIRCFB 35 at 26.

[3] Contrast the terms of the legislation considered by the court in General Motors-Holden's Pty Ltd v Bowling referred to below.

[4] (1976) 51 ALJR 235.

[5] Conciliation and Arbitration Act 1904, s.5(1).

[6] (1976) 51 ALJR 235 at 241 and 242.

[8] [2007] AIRC 292.

[9] See Village Cinemas Australia Pty Ltd v Carter referred to in para [5] above

[10] Confectionery Workers Union of Australia v Australian Chamber of Manufactures (1991) 38 IR 49 at 52 and the cases referred to therein; Edwards v Giudice [1999] FCA 1836; (1999) 94 FCR 561 at 566-7, 574.

[11] Some examples of decisions for which reasons may not be required are provided by Mahony JA in Housing Commission of New South Wales v Tatmar Pastoral Co (1983) 3 NSWLR 378 at 386C.

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