Shane Mitchell-Calvert v Yahoo! Inc - [2001] NSWIRComm 136 - NSWIRComm 2001 case summary — Zoe

NSWNSWIRComm

Shane Mitchell-Calvert v Yahoo! Inc

[2001] NSWIRComm 136

Industrial Relations Commission (NSW)|2001-06-22|Before: Kavanagh J, Mr J, Ms P

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Source facts

Court

Industrial Relations Commission (NSW)

Decision date

2001-06-22

Before

Kavanagh J, Mr J, Ms P

Catchwords

03/13/2001
03/14/2001
03/15/2001
03/21/2001

Source

Original judgment source is linked above.

Catchwords

03/13/200103/14/200103/15/200103/21/200103/22/2001 DATE OF JUDGMENT: 06/22/2001

Judgment (72 paragraphs)

[1]

Industrial Relations Commission of New South Wales in Court Session

[2]

CITATION : Shane Mitchell-Calvert v Yahoo! Inc [2001] NSWIRComm 136 APPLICANT: PARTIES : Shane Mitchell-Calvert RESPONDENT: Yahoo! Inc FILE NUMBER: IRC4135 of 1999 CORAM: Kavanagh J CATCHWORDS : s106 application - jurisdiction challenged as to whether application exempt under s109A of Act - question as to whether circumstances reveal a s83 unfair dismissal - whether annual remuneration can include share option plan under the terms of s83 - unfairness in the term of contract as to notice - conduct of respondent on termination of applicant and setting of unachievable sales targets reflects unfairness in performance of contract - contract varied for unfairness - terms of contract as to notice declared void ab initio - terms of Share Option Plan varied to reflect grant of options during notice - orders allowing for the exercise of the grant of shares - monetary orders awarded LEGISLATION CITED : Industrial Relations Act 1996 Beahan v Bush Boake Allen Australia Ltd (1999) 47 NSWLR 648 Kagan and Primus Telecommunications (Aust) Pty Ltd (No 2) [2000] NSWIRComm185 Skailes v Blue Anchor Line Limited (1911) 1 KB 360 Port Macquarie Golf Club Limited v Stead & Anor (1995-1996) 64 IR 53 CASES CITED : Reich v Client Server (1999-2000) 99 IR 69 Westfield v Helprin (1998) 82 IR 411 Abboud v The State of NSW (Department of School Education) (1999) 92 IR 32 Gallagher & Anor v Modern Garages Australia Pty Ltd (In liquidation) & Ors [2000] NSWIRComm 184 Newton v Goodman Fielder Mills Ltd (1997) 81 IR 227 HEARING DATES: 03/12/2001; 03/13/2001; 03/14/2001; 03/15/2001; 03/21/2001; 03/22/2001 DATE OF JUDGMENT: 06/22/2001

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JUDGMENT 1 This application is brought under the provisions of s106 of the Industrial Relations Act 1996 (the Act). Mr Shane Mitchell-Calvert, the applicant, alleges the contract which he entered into with Yahoo! Inc, the respondent, in its terms and/or in the alternative, in its performance, was unfair, harsh and unreasonable. It is alleged: (a) The contracts made no, or no fair, provision for the respondent to give notice of the termination of the contracts or make payments in lieu of such notice; (b) The contracts made no, or no fair, provision for the respondent to compensate the applicant for the loss of his employment and the prospects that it offered to him; (c) The contracts allowed the respondent to impose unfair, harsh, unreasonable and arbitrary obligations on the applicant during the course of his employment; (d) The contracts make no, or no fair, provision, for the grounds in which the applicant's performance was to be assessed and evaluated; (e) The contracts make no, or no fair provision for the grounds upon which the applicant's employment could be terminated; and (f) Such other grounds as the Commission considers fit. 2 The applicant claims: (i) Twelve months salary at $3,333 per month; (ii) Bonus $20,000; (iii) Interest on both payments; (iv) Options from 15 December 1998 vesting up to 21 December 2000; and (v) Options vesting after 21 December 2000. 3 Mr J.N. West QC with Mr I.M. Neil of counsel appeared for the applicant and Mr B.W. Walker SC with Mr R.A. Dick of counsel appeared for the respondent. The applicant gave sworn evidence and relied upon a significant amount of documentation in support of the application. The respondent relied upon the affidavit evidence of eight witnesses of whom two were required for cross examination. A significant further amount of documentation was tendered. 4 As to the options claim, the applicant alleges his right to a monthly tranche of 1250 options from 18 December 1998 to 21 December 2000 should be vested to him and, in accordance with his practice of purchase and on-selling immediately, the employer pay to him their monetary value at the date of termination. He claims the monetary value of options due to him to 21 December 2000 and claims the options due to him after 21 December 2000 be vested to him for the four year period as agreed. The Employment 5 From 1987 to 1997 the applicant worked as a sales person in advertising through the medium of television and newspapers. He specialised in the "classified directory" advertising industry. In January 1997 the applicant was interviewed for a position as "Interactive Advertising Specialist" with Ziff-Davis UK Limited, a joint venture partner with Yahoo! UK. The applicant began work with Ziff-Davis. In June 1997 the applicant was approached by Heather Killen, then Vice-President of Yahoo! International, with the offer of a position as a sales executive working directly for Yahoo! UK. The applicant accepted this offer of employment. A term of his employment agreement with Yahoo! UK was he was to be given credit for his service with Ziff-Davis. The applicant worked very successfully for Yahoo! UK negotiating bookings for Internet advertising. 6 On 30 October 1997 the applicant informed Yahoo! UK of his intention to resign from his employment and immigrate to Australia. Yahoo!'s Sales Director for Europe, Mr Philippe Guillanton, who was very supportive of the applicant, endeavoured to keep the applicant working with Yahoo! UK. Arising out of a number of conversations, Ms Killen, Vice-President of Yahoo! International, the USA based company, then approached the applicant proposing that he stay with Yahoo! UK at least to the end of November 1997 to finalise an important sales deal and in return she would assist him in obtaining work for Yahoo! Inc in Australia when he migrated here. Yahoo! Inc had begun its operations in Australia and New Zealand in September 1997. 7 In accordance with her promise, Ms Killen arranged for the applicant to meet with Mr Tony Faure, the General Manager of Yahoo! Inc in Australia. This meeting took place in San Francisco. Arising out of these negotiations an agreement was reached that the applicant stay with the UK company until the end of November 1997 to finalise the particular sale. He would then take a "leave of absence" from the end of November until April or May 1998 to travel through Europe and then to immigrate. On arrival in Australia it was agreed he could negotiate an employment contract with the respondent in Sydney. This arrangement was put in writing in the following terms:

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8 The applicant began his leave of absence, in accordance with this agreement, in November 1997. Before he left the Yahoo! UK operation, he brought to finalisation a lucrative contract with Hewlett Packard in France, the sponsors of the World Cup Soccer Competition to advertise on the Yahoo! Internet site. It was the biggest Internet advertising contract yet achieved, worldwide. 9 On 4 May 1998 after enjoying his leave and re-settling in Australia, the applicant struck an employment agreement with Yahoo!'s Australian operation and began working with the respondent's operation in Sydney. Prior to beginning this work, in May 1998, the applicant had met Mr Craig Lambert, the Sales Director of Yahoo! Australia and New Zealand, under whom he would be working. The contract of employment in the Australian operation was entered into with the US parent company which was still guiding the fledgling Australian business, namely, Yahoo! Inc. The contract was not in writing. The contract allowed for a salary of $50,000 per annum, a $20,000 bonus and options under the Share Option Plan. 10 When the applicant began work in Australia there were few established customers of Yahoo! Inc. That being so, the applicant was required to "cold call" clients. The company policy was to book "short term" advertising space to enable it to build up a client base. The plan was to then pursue the bigger advertising contracts. The applicant needed to do his own market intelligence and information work. He was given a list of companies by Mr Lambert most of whom, by name, he did not recognise. In making "cold calls" he had to deal with clients who were neither familiar with the Internet nor the new advertising medium on the Internet. 11 Mr Faure, the General Manager of Yahoo! Inc in Australia, advised the applicant of the difficulties he would find, as a transposed English-born sales person in addressing the Australian business management personnel. This advice was based on Mr Faure's own experience when he came from England to work in Australia. He discovered personnel in Australian management were most welcoming to sales persons but, he warned, such a welcome did not necessarily reflect in sales. 12 The applicant began work in May 1998. By October 1998 the applicant's sales figures were disappointing and Mr Lambert, the Sales Manager, was expressing concern. The applicant himself was sufficiently concerned to ask for and he received a formal review of his performance. Within the Yahoo! Inc business there was a formal procedure for a review of performance. 13 There are two phrases used in the industry which become relevant when an examination of the documents relied upon by both parties, as to the applicant's sales performance, is made. There is first a document called an "Insertion Order" which is a document completed by the salesperson to record an order for advertising space. However, a booking does not represent "Revenue Recognition", namely, payment for advertisements run, that is, an order does not always proceed to a sale of advertising space. Sometimes there is a cancellation and sometimes there must be significant follow up calls to firmly secure the order. Sometimes the terms of the order change. In the Internet advertising industry forward bookings are not made months in advance, therefore revenue flows quickly for short space advertising. 14 An examination of the bookings made by the applicant through the months he worked with Yahoo! Inc, the respondent asserts, reveals many of his Insertion Orders did not reflect in Revenue Recognition. The respondent submits, although significant bookings through Insertion Orders were recorded by the applicant, the bookings did not eventuate or were not finalised in the terms and size reflected in the applicant's original Insertion Orders.

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The Termination 29 It was within this working environment, the applicant joined the other sales personnel and company people, with their partners, for a Christmas weekend at a resort called Peppers in the Hunter Valley from Friday 18 December 1998. The organisers had requested, from each employee, a statement giving a description of their partners. Such a description was to canvass the partner's stated job, their personality, their favourite activity, food, drink, "whatever"! The document was to be in 25 words or less. The request was couched in the following terms by way of an email to each employee: Could you provide me with a twenty-five word description of your mate/chick. A further e-mail stated: Why? None of your business. No information was provided to employees that the description of their "mate/chick" was to be published. 30 The applicant provided a short description of his partner as requested. They attended the weekend conference. Games were compulsory. No one had been told so. The purpose of the games was to enjoin the group in a spirit of team work. The partner, however, on her arrival, had read the description of herself in a document that had been distributed. It caused her some distress. As would be normal, she expressed this distress to her partner, the applicant, who seemed shocked at seeing his short descriptive analysis of her in print. Her distress caused him to miss the first series of games organised as a team bonding session. 31 During the games, Mr Lambert spied the applicant upon a hill with his distressed partner and was "furious". He demanded the applicant reveal why he had not participated in the team games. When the applicant explained his partner's distress Mr Lambert became even more "enraged". Mr Lambert explained his reaction saying the applicant was expressing concern at the publication of a document the applicant himself had brought into existence. Mr Lambert later expressed the view that having met the partner he found she, on three separate occasions, had committed "some sort of unacceptable social incidence in public". Mr Lambert said he was concerned for the company. From the evidence there could be an inference cast he felt and expressed the view the partner was "neurotic".

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40 The second document was headed "Stock Option Agreement". Relevantly, Clause 6 of the Stock Option Agreement is headed "Termination of Relationship" and it states: In the event of termination of Optionee's Continuous Status as an Employee or Consultant, Optionee may, to the extent otherwise so entitled at the date of such termination (the "Termination Date"), exercise this option during the Termination Period set out in the Notice of Grant. To the extent that Optionee was not entitled to exercise this option at the date of such termination, or if Optionee does not exercise this Option within the time specified in the Notice of Grant, the Option shall terminate. Further, to the extent allowed by applicable law, if Optionee is indebted to the Company on the date of termination, Optionee's right to exercise this Option shall be suspended until such time as Optionees satisfies in full any such indebtedness. And Clause 11, headed "No Additional Employment Rights" reads: Optionee understands and agrees the vesting of Shares pursuant to the Exercise Schedule is earned only by continuing as an Employee or Consultant at the will of the Company (not through the act of being hired, being granted this Option or acquiring Shares under this Agreement.) Optionee further acknowledges and agrees nothing in this Agreement nor in the Plan which is incorporated in this Agreement by reference, shall confer upon Optionee any right with respect to continuation as an Employee or Consultant with the Company, nor shall it interfere in any way with his or her right or the Company's right to terminate his or her employment or consulting relationship at any time, with or without cause. 41 In its terms therefore, the first grant of shares to the applicant was not vested or exercisable until the first anniversary of the applicant's employment and the allocation of shares was made monthly thereafter to full vesting at the end of four years. The purposes of the plan was stated as follows: . . to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants of the Company and its Subsidiaries and to promote the success of the Company's business. . . . 42 The applicant, at the beginning of November 1998, in accordance with his contract of employment in Australia, became entitled to 25% of his share allocation. He immediately exercised his right to purchase the options and on-sell the shares. There was a procedure put in place by the company to allow this practice. He did the same with a tranche of 1240 options which, under the contract, were vested to him in early December 1997. In the arrangement with Yahoo! Inc, no money changed hands and the agreed strike price was deducted from the sale price. The applicant received approximately $1.3 million in this exercise in accordance with the terms of his employment contract.

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65 I find further the statutory bar of s109A(b) does not apply to exclude this application under s106 of the Act. From the evidence I find the applicant has mounted a genuine, not superficial, attack on the contract. Generally as to the contract, the applicant submits the conduct of the respondent in the performance of the contract at the date of termination in the circumstances amounted to a constructive dismissal. The applicant submits such circumstances must found a basis for a finding of unfairness in the performance of the contract. It was further unfair conduct by the respondent, the applicant submits, to arbitrarily impose targets on him which were unachievable. Further, the respondent's assessment of the applicant's sales achievements was unfair in the circumstances where the applicant was assessed with reliance placed on unreliable records indicating, it is alleged, not his true achievements. The applicant also attacks the term of the contract as to notice. I find the court has jurisdiction to hear this application under s106 of the Act and this application could not be held to be an unfair dismissal claim in disguise. I find there has been mounted a genuine, not superficial or coloured attack on the contract in both its terms and performance. Consideration as to Unfairness 66 In determining under s106 whether the contract is unfair in its terms or performance, having found jurisdiction, the court is guided by the principles enunciated in Port Macquarie Golf Club Limited v Stead & Anor (1995-1996) 64 IR 53). The Full Bench in examining the effect of a similar provision, namely, s275 of the Industrial Relations Act 1991 to s106 of the Industrial Relations Act 1996 held the court must make an examination of the particular facts of the case (at 59): 6. Unfairness may arise either from the terms of the contract or arrangement itself, the surrounding circumstances and/or from the manner of performance or operation of the contract or arrangement: Barry v Incitec Limited (1991) 45 IR 143 at 146; Incitec Limited v Industrial Court of New South Wales (1992) 45 IR 155 at 157-158; and Baker v National Distribution Services Ltd (1993) 50 IR 254 at 270-271. 67 In applying the test for unfairness the Full Bench guides the court to take (at 59-60): 7. . . . the commonsense approach characteristic of the ordinary juryman by applying standards providing a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement, bearing in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement: Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 at 374: A & M Thompson Pty Ltd v Total Australia Ltd [1980] 2 NSWLR 1 at 13; and Baker at 271-272.

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71 Generally as to the dismissal, the respondent conceded there was a lack of dignity attached to the pre-Christmas events both related to the length of time given to the applicant as to notice and what was the motivation for the decision to terminate. The respondent conceded the circumstances of the termination reveal what could be perceived as a constructive dismissal. The words of Mr Lambert "resign or be sacked" it was conceded provide a text book example of a constructive dismissal. However, such lack of dignity in the circumstances related to the resignation, while it may demonstrate unfair conduct, does not demonstrate any unfairness in the contract under review, submits the respondent. 72 As to the unfairness related to Notice, the applicant relies on the decision in Westfield Limited & Anor v Helprin (1997) 82 IR 411 (at 434) where the court examined a notice provision and held: . . . a contract of employment which contains a term requiring the giving of reasonable notice of termination, whether that is an express or implied term of the contract, is not, for that reason, necessarily immune from consideration under s275. In an appropriate case, orders varying or declaring such a contract void may properly be made under the section, together with orders as to the payment of money in connection with the contract so varied or declared void as is just in the circumstances of the case in an amount which might at least be partly referable to the circumstances of termination. Their Honours in Helprin also had to consider an option scheme and held (at 435): . . . the option scheme may be regarded as an "arrangement" collateral to the contract of employment or as part of an "arrangement" of which the contract of employment also forms part. On either view, it comes within the purview of s 275 (see Legal & General Assurance Society Ltd v Stock (1993) 49 IR 465 at 480-481.) With due respect to his Honour, however, we differ from his view that the option scheme was not itself unfair, harsh and unconscionable within the meaning of the section.

Shane Mitchell-Calvert v Yahoo! Inc

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Judgment (72 paragraphs)

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Cases Cited (16)

Cited By (3)