Smith v Aussie Waste Management Pty Ltd [2015] FWC 1044

[15] A dispute exists between the parties as to whether Mr Smith is owed leave loading under the Award in the amount of 17.5%.

[16] AWM employed Mr Smith with an employment contract 2 which, at clause 6.2, advised that if above Award rates were paid, there was no entitlement to leave loading. AWM stated that Mr Smith was paid at classification level 6 under the Award, but was only a level 5 employee.

The Applicant's case

[17] Mr Smith gave evidence in support of his case both by written statement 3 and oral evidence.

[18] Mr Smith's evidence was that at the beginning of the first phone call, Mr Coombes was angry. He said that Mr Coombes was abusive towards him and that they both swore at each other using the words "fuck" and "bullshit". Mr Smith confirmed he swore back at Mr Coombes, although under questioning by the Commission, he was evasive as to exactly what he had said. The phone call ended when he hung up.

[19] Mr Smith said he adhered to the direction given to him in the second phone call and took the truck back to the depot, collected his personal belongings and left. Subsequently he made the third phone call to Mr Coombes as described in [12] above when he got home.

[20] Mr Smith confirmed he had received the written warning from Mr Coombes on 14 July 2014. Mr Smith perused two other warnings dated 15 May 2013 and 30 October 2013 entered into evidence by AWM 4 but denied receiving them from AWM's former Operations Manager, Mr Peter Abblitt.

[21] Much of the cross-examination of Mr Smith went to his performance at work and the motor vehicle accidents he had been involved in. Mr Smith confirmed he signed the employment contract 5 provided to him by AWM when he commenced employment with them on 5 July 2012.

[22] Mr Smith said he had never received a warning about swearing in the workplace or for any form of conduct.

[23] Mr Michael Hilder, an employee of AWM gave evidence both by written statement 6 and oral evidence for the applicant. Mr Hilder's evidence went largely to operational and industrial practices and threatening and intimidating behaviour by AWM to its drivers. Mr Hilder was not present at the time of the phone call between Mr Smith and Mr Coombes and therefore could not provide any assistance in establishing the facts around the dismissal in question.

[24] Mr Doble of the TWU, as representative for Mr Smith, submitted that the manner in which Mr Smith was terminated rendered his dismissal unfair. Mr Doble stated that Mr Smith's conduct on 3 October 2014 was not misconduct and even if it was, he was not provided an opportunity to explain his actions to his employer.

[25] Mr Doble stated that the evidence as to the written warnings dated 15 May and 30 October 2013 was such that the documents should not be considered as having been received by Mr Smith and that they had no relevance to this application.

[26] Specifically addressing the criteria in s.387 of the Fair Work Act 2009 (the Act) relating to whether a termination is harsh, unjust or unreasonable, Mr Doble submitted that there was no valid reason for termination of Mr Smith's employment and that Mr Smith was not notified of the reason prior to the termination, nor was he given an opportunity to respond.

[27] Mr Doble said that Mr Smith was not afforded the opportunity to have a support person present at any meeting as the employer held no meeting with Mr Smith, instead choosing to summarily dismiss him.

[28] It was submitted by Mr Doble that even though Mr Smith had received a warning (or warnings) about unsatisfactory performance, he was not dismissed for performance issues and that this criteria was not relevant. It was conceded that AWM is not a large business and would not have detailed procedures or dedicated human resource management expertise.

[29] Mr Doble submitted that in the least, Mr Smith should have been afforded an opportunity to discuss his behaviour with his employer prior to any termination being affected.

The Respondent's case

[30] Mr Coombes confirmed his written statement 7 and gave oral evidence. He said that Mr Smith had received "numerous verbal and written warnings" 8 concerning his performance.

[31] Mr Coombes' evidence was that he did not swear at Mr Smith during the first phone call. He said he tried to speak to Mr Smith about there being nothing wrong with the first truck he drove that day, but that Mr Smith had said to him "you dribble shit, you always dribble fucking shit". 9

[32] On questioning by the Commission, Mr Coombes confirmed he terminated Mr Smith for speaking to him in an unacceptable manner and using bad language, as identified above and this had been confirmed in the third phone call, which he said occurred on Monday 6 October 2014. Mr Coombes stated he had not previously given Mr Smith a warning relating to swearing in the workplace.

[33] As to the copies of written warnings dated 15 May and 30 October 2013 and produced by AWM at the hearing, Mr Coombes advised they were not signed copies because they had not been on Mr Smith's employee file and they had had to print them off the computer used by their former Operations Manager, Mr Abblitt. Mr Coombes stated he was not aware of the existence of these warnings at the time he terminated Mr Smith's employment.

[34] Ms Cheryl Walker, Office Manager for AWM gave evidence in support of AWM's case both by written statement 10 and oral evidence. Ms Walker's evidence provided that Mr Smith had had four major motor vehicle accidents whilst working with AWM and gave examples of phone calls from concerned motorists about Mr Smith's driving.11 Much of Ms Walker's evidence went to operational and industrial relations processes for AWM. Ms Walker stated that Mr Smith signed an 'employment agreement' which "clearly states we do not pay leave loading due to above award hourly rates."12 Ms Walker stated that AWM had been advised by the office of the Fair Work Ombudsman that it is not necessary to pay leave loading as AWM pay their drivers above award wages.

[35] Ms Walker said that she had found the written warnings dated 15 May and 30 October 2013 on Mr Abblitt's computer as she was aware of some warnings but they were not on the file when she looked for them subsequent to Mr Smith's dismissal. Ms Walker said she did not know whether Mr Abblitt gave the warnings to Mr Smith but thought that he would have done so.

[36] Mr Matthew Hursey 13 and Mr Robert John Page,14 employees of AWM provided written statements as to Mr Smith's negative attitude towards AWM and Mr Coombes. The applicant did not seek to cross-examine either Mr Hursey or Mr Page on their evidence. None of their evidence went directly to the matters involving the termination and was not related to any previous warning which Mr Smith had received and apparently was not information that was before Mr Coombes at the time he effected Mr Smith's dismissal.

[37] Ms Walker for AWM made submissions in relation to s.387 of the Act stating that Mr Smith's dismissal was not harsh, unjust or unreasonable. Ms Walker submitted that anyone who spoke to their employer in the manner that Mr Smith did could expect to be dismissed from their employment. Ms Walker stated that a valid reason for termination existed in that Mr Smith had engaged in serious misconduct warranting summary dismissal.

[38] It was submitted by Ms Walker that Mr Smith was notified of the reason for his dismissal during the third phone call. Ms Walker conceded that whilst AWM had not given Mr Smith an opportunity to respond to the reasons for termination, they had not refused him a support person, as Mr Smith had not requested a meeting with AWM to discuss his termination.

[39] Ms Walker submitted that whilst the reason for termination was not based on performance, when the conduct of Mr Smith was added to his underperformance, the conduct became the "final straw". Ms Walker said the business is small in size and has no industrial relations specialist or expertise.

The Meaning of Dismissed

[40] The meaning of dismissed is found at s.386(1) of the Fair Work Act 2009 (the Act) and states:

(1) A person has been dismissed if:

(a) the person's employment with his or her employer has been terminated on the employer's initiative; or

(b) the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.

Consideration

[41] In order for there to be access to a remedy to unfair dismissal, the employee must have been dismissed in accordance with s.386 of the Act. It is clear on the evidence of both parties that a dismissal of Mr Smith's employment took effect on 3 October 2014, pursuant to s.386(1)(a).

[42] Section 396 of the Act provides for four matters which must be determined in applications of this type before the merits of the claim are considered. These matters are:

(a) whether the application was made within the period required in subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy.

[43] Mr Smith was dismissed on 3 October 2014 and his application in this matter was made on 14 October 2014. Accordingly, the application was made within the 21 days period prescribed in s.394(2). There was no argument from either side that the applicant is not a person protected from unfair dismissal. Subsections (c) and (d) of section 396 are not relevant to this application.

[44] To determine whether a dismissal is harsh, unjust or unreasonable, the Act, through s.387 sets out the criteria which must be taken into account by the Commission. The criteria are as follows:

(a) whether there was a valid reason for the dismissal related to the person's capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any reasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person - whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer's enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that FWC considers relevant.

[45] In accordance with s.387(a) it must first be determined whether there existed a valid reason for Mr Smith's dismissal. The term 'valid reason' has well been considered by Courts and industrial tribunals. The oft quoted passage from Northop J's decision in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 provides that a 'valid reason' is :

"… sound, defensible or well founded … the reason must be valid in the context of the employee's capacity or conduct or based upon the operational requirements of the employer's business".

[46] This concept embodies the element of fairness in the sense that a valid reason must be defensible and well founded.

[47] AWM relied upon serious misconduct to summarily dismiss Mr Smith. I am required to determine for myself whether the alleged conduct took place and if so, whether it amounted to a valid reason for dismissal. 15

[48] Whilst the evidence provided that Mr Smith had received at least one written warning for being involved in four motor vehicle accidents, it is less clear on the evidence whether Mr Smith received the written warnings on 15 May and 30 October 2013 from Mr Abblitt, the former Operations Manager. Both witnesses for AWM were unable to confirm that the warnings had been given to Mr Smith. Further, it was Mr Coombes' evidence that he was unaware of those warnings until after he had dismissed Mr Smith. In any event, it is not necessary for me to make a finding on whether the warnings were received by Mr Smith as all the warnings produced by AWM related to performance issues only and did not involve Mr Smith's conduct. As such, I am of the view that whilst these warnings provide context around the frustration the employer may have had with Mr Smith's work performance, they are not relevant to the reason for the termination which is the subject of this application.

[49] Mr Smith admitted to the use of swear words during the first phone call with Mr Coombes, although he was not specific with the words he used. Mr Coombes' evidence was that he terminated Mr Smith because he said "you dribble shit, you always dribble fucking shit". I accept Mr Coombes' evidence on this point. It is clear that the exchange on the phone was heated with Mr Smith deciding to end the call by hanging up. I have concluded that Mr Smith did use the words described by Mr Coombes. The use of bad language towards another person, especially a supervisor or manager, is of a different character to swearing at an inanimate object or its use as an adjective. However, any use of swearing must be considered in the context of the workplace.

[50] There was no suggestion from Mr Coombes that the phone conversation he had with Mr Smith was overheard by other employees. Accordingly there was no propensity for Mr Smith's conduct to undermine Mr Coombes' authority in the workplace. There was little evidence led by either party as to the robust nature of the workplace and the waste management industry in general, with Mr Smith stating it was common place to be subject to abuse in the workplace. This evidence was refuted by Mr Coombes. There is no doubt that workplaces are more robust in 2015, as they relate to the use of swearing, than they were in the 1940s. Further, I would not consider it uncommon for bad language to be used in the workplace in this or other similar industries.

[51] The principle of the use of bad language and conduct in the workplace and its relationship to summary dismissal was well espoused by the Privy Council in Jupiter General Insurance Co Ltd v Shroff [1937] 3 All ER 67 at 73 and 74 where their Lordships held:

"On the one hand, it can be in exceptional circumstances only that an employer is acting properly in summarily dismissing an employee on his committing a single act of negligence; on the other, their Lordships would be very loath to assent to the view that a single outbreak of bad temper, accompanied, it may be, with regrettable language, is a sufficient ground for dismissal. Sir John Beaumont, C.J., was stating a proposition or mere good sense when he observed that in such cases one must apply the standards of men, and not those of angels, and remember that men are apt to show temper when reprimanded."

[52] When considering whether a summary dismissal was a fair dismissal under the Act, I must also consider whether the conduct alleged was serious misconduct. Serious misconduct is attributed a meaning under regulation 1.07 of the Fair Work Regulations 2009 which provides:

Meaning of serious misconduct

(1) For the definition of serious misconduct in section 12 of the Act, serious misconduct has its ordinary meaning.

(2) For subregulation (1), conduct that is serious misconduct includes both of the following:

(a) wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;

(b) conduct that causes serious and imminent risk to:

(i) the health or safety of a person; or

(ii) the reputation, viability or profitability of the employer's business.

(3) For subregulation (1), conduct that is serious misconduct includes each of the following:

(a) the employee, in the course of the employee's employment, engaging in:

(i) theft; or

(ii) fraud; or

(iii) assault;

(b) the employee being intoxicated at work;

(c) the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee's contract of employment.

(4) Subregulation (3) does not apply if the employee is able to show that, in the circumstances, the conduct engaged in by the employee was not conduct that made employment in the period of notice unreasonable.

(5) For paragraph (3)(b), an employee is taken to be intoxicated if the employee's faculties are, by reason of the employee being under the influence of intoxicating liquor or a drug (except a drug administered by, or taken in accordance with the directions of, a person lawfully authorised to administer the drug), so impaired that the employee is unfit to be entrusted with the employee's duties or with any duty that the employee may be called upon to perform.

[53] There is no suggestion in the evidence that Mr Smith's conduct involved occupational violence, breaches of health and safety policies or regulations, fraud, stealing or intoxication in the workplace. I do not consider that his behaviour was inconsistent with the continuation of his contract of employment. I conclude that the conduct of Mr Smith is not be considered serious misconduct.

[54] Whilst Mr Smith's conduct should not be tolerated in the workplace, in the context of a one-on-one heated discussion with his Manager without anyone else present, I have concluded that the conduct is not sufficiently insubordinate to establish a valid reason for dismissal. The conduct did, however, warrant a form of disciplinary action, other than dismissal.

[55] I note that AWM made submissions that Mr Smith did not approach them for a meeting to discuss his conduct and therefore they did not deny him an opportunity to have a support person with him. The matters contained within s.387 of the Act are critical considerations for any employer when effecting a termination of employment. Procedural fairness is important and should not be lightly cast aside. Its proper application ensures a robust and just process for those involved. I have had regard for AWM's lack of industrial relations expertise; however their failure to fulfil even the simplest of procedural fairness obligations placed upon it by s.387 the Act, has weighed against them.

[56] As I have found that there was not a valid reason for termination of Mr Smith's employment, and also that he was dismissed summarily, without the opportunity to provide mitigating reasons for his conduct, I conclude that Mr Smith was unfairly dismissed.

Remedy

[57] Having concluded that Mr Smith's dismissal was unfair, I am now required to determine the appropriate compensation (if any) payable to Mr Smith due to him being unfairly dismissed. Sections 390 to 392 of the Act provide for the remedies available.

[58] Mr Smith, on filing his unfair dismissal application, was seeking reinstatement to his former position. Following the making of the application, Mr Smith was successful in obtaining alternative employment. As at the date of this hearing, Mr Smith was seeking compensation for wages lost prior to obtaining his new employment, and payment of 17.5% leave loading under the Award on his accrued annual leave paid out on termination.

[59] Neither party provided sufficient evidence at hearing for me to determine compensation as a remedy as there was no evidence led as to the exact date Mr Smith obtained full time employment or whether he received any paid work during that time.

Leave Loading

[60] As the dispute over leave loading arises from the amount payable by AWM on termination, I now turn to the facts of this issue. Clause 33 of the Award provides:

33. Annual leave

33.1 Annual leave is provided for in the NES. This clause contains additional provisions.

33.2 During a period of annual leave an employee will receive a loading calculated on the rate of wage prescribed in clause 19 - Minimum wages of this award. Annual leave loading payment is payable on leave accrued and taken but it is not payable on leave paid out on termination. (my emphasis)

The loading is as follows:

(a) Day work

Employees who would have worked on day work only had they not been on leave - 17.5% or the relevant weekend penalty rates, whichever is the greater but not both.

(b) Shiftwork

Employees who would have worked on shiftwork had they not been on leave - a loading of 17.5% or the shift loading (including relevant weekend penalty rates) whichever is the greater but not both.

[61] For the sake of clarity on this issue, the legal principles applicable to set-off against payments made by an employer to an employee in respect of award entitlements have been considered in a number of cases. In Ray v Radano [1967] AR (NSW) 471, a decision considering whether an employer was entitled to off-set ordinary time wages which were paid in excess of award entitlement, Sheldon J said in his dissenting decision at 478-479:

"… if by contract, express or implied, the whole or part of the payment made to the complainant has been in respect of matters which are outside the award entitlement, the payment to that extent cannot be set-off. This may include amounts allocated, say, for fares or as a uniform allowance where there is no award entitlement in respect of such matters. This, of course, is recognized in the majority judgment.

But at this stage I must part company from that judgment because I can see no difference in principle between an amount promised in excess of the award requirement whether the promise is for, say, a uniform allowance or for a payment confined to ordinary time only. In each case, the employee works on the basis that he will receive an extra-award payment and, in my opinion, it is not to the point that in one its subject matter is clothing and in the other additional remuneration for a nominated period of work. If one cannot be set-off, neither can the other because their essential character is identical, i.e., both are payments in fulfillment of a promise extraneous to the award obligation. The award obligation re clothing may be nil, in regard to ordinary time in may be $X. The extraneous promise is to pay $Y and, whether it is in respect of clothing or ordinary time, it is $Y beyond what the award requires. To put it in more concrete terms, if the award rate for 40 hours work is $40 with overtime payable in addition but the employer agrees to pay a uniform allowance of $5 per week, it is common ground that it is no answer to a claim under s. 92 for $40 ordinary time and $5 overtime worked to show that in fact $45 went into the employee's pocket. If this is so, I regard it as equally no answer if he got $45 only because the employer agreed to pay him that amount for no more than 40 hours work. In each case, as I see it, the employer cannot allocate to one subject matter what he has already paid in pursuance of a promise related to another subject matter."

[62] Sheldon J's approach in Ray v Radano has been preferred in a number of decisions including Pacific Publications Pty Ltd v Cantlon (1983) 4 IR 415 and Poletti v Ecob (No 2) (1989) 91 ALR 381. These principles were reconfirmed by the Full Court of the Industrial Relations Court in Logan v Otis Elevator Co Pty Ltd [1999] IRCA 4; (1999) 94 IR 218. More recently the Full Court of the Federal Court of Australia in Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd [2002] FCA 1406 (TCFUA v Givoni) considered these cases and held at paragraphs [60] and [61]:

"[60] These authorities make it clear that where a payment is made to an employee in discharge of an award obligation, which payment is in fact in excess of the amount of the obligation, the amount of the excess cannot be set-off against a claim in respect of a different award obligation unless at the time of the payment of the excess the employer designates that the excess is payable in respect of a purpose or an obligation different from the purpose for which the initial payment is made.

[61] Put shortly, where there is a payment made for, or in respect of, ordinary hours of work which is in excess of the award obligation, the excess cannot be set-off against a claim for underpayment or overtime unless at the time of the payment of the excess, the employer designates that that excess over the amount of the award obligation is paid for the purpose of satisfying any entitlement to overtime payments."

[63] The circumstances of this matter are that Mr Smith entered into a contract of employment with AWM which provided at clause 6.2:

"6.2 For each period of the Employee's Annual Holidays, the Employer will pay the Employee the wage for the period at the rate in which the Annual Holidays are Taken ('Holiday pay'). There will be no leave loading when pay rate is above the Award rate."

[64] In other words, AWM agreed to pay Mr Smith a higher hourly wage rate under the Award in compensation for his the entitlement to leave loading under that Award. Should Mr Smith have received a higher hourly rate of pay under the Award than he was entitled to, he would already have been compensated for his Leave Loading entitlement through the operation of clause 6.2 of the contract of employment. 16

[65] I consider the approach of the Full Court in the TCFUA v Givoni case provides the relevant authority and principle to apply to the facts in determining this matter. However, whilst AWM submitted they paid over Award wages, I am unable to conclude on the evidence available, whether this was the case.

[66] The Award clause is definitive as to when an entitlement to leave loading exists. Whilst the clause (reproduced at paragraph [60] above), provides for a payment of 17.5% on accrued leave when taken, it is "not payable on leave paid out on termination". Accordingly, Mr Smith is not entitled to payment of leave loading on his accrued annual leave entitlement paid on termination.

Conclusion

[67] I am satisfied that Mr Smith's dismissal was unfair.

[68] To enable assessment of whether any compensation is payable in this matter, the applicant is required to provide a statutory declaration evidencing all efforts he made to obtain employment following his termination by AWM on 3 October 2014, together with evidence of any and all income earned by him up to the present day (excluding any welfare payments). AWM will be afforded an opportunity to make submissions on these matters. Directions for the provision of this documentation are issued separately.

[69] An order giving effect to this decision will be issued, following receipt of the documentation contained in the Directions.

DEPUTY PRESIDENT

Appearances:

Mr L Doble, TWU for the Applicant

Mr H Coombes, for the Respondent

Ms C Walker, for the Respondent

Hearing details:

Hobart

2015

3 February

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