IN THE INDUSTRIAL RELATIONS ) No. WI 364 of 1994 COURT OF AUSTRALIA ) WESTERN AUSTRALIAN DISTRICT REGISTRY ) BETWEEN: Luke David Pepper Applicant AND: Element Holdings Pty Ltd t/as Algar Burns Distribution Respondent BEFORE: Boon JR PLACE: Perth DATE: 23 January 1995 REASONS FOR JUDGMENT BOON JR: Luke David Pepper by an application dated 8 September 1994 seeks the following relief under S 170 EA of the Industrial Relations Act 1988: 1. (a) an order declaring the termination of the employer's employment of the employee to have contravened Division 3 of Part VIA of the Industrial Relations Act 1988 ("the Act"); (b) an order requiring the respondent to reinstate the employee in employment; and (c) an order that the respondent pay compensation to the employee. 2. Such other order or orders as will put the employee in the same position (as nearly as can be done) as if the employment of the employee by the respondent had not been terminated: see Section 170 EA of the Act. The applicant appeared in person and Mr Jensen of the Chamber of Commerce and Industry of W.A. appeared for the respondent. The following witnesses were called to give evidence: 1. by the Applicant: (a) the Applicant himself, and (b) Ante Dropulich, Computer Scientist 2. by the Respondent: (a) John Hamilton Algar, Sales Consultant with Algar Burns Distribution, and (b) Neil Arthur Stocker, shareholder in Algar Burns Distribution and employer of John Hamilton Algar. Mr Pepper alleges that Algar Burns Distribution unlawfully terminated his employment. He argues that there is no valid reason for the termination connected with his capacity or conduct or based on the employer's operation requirements. He also argues that, if the termination was related to his capacity or conduct, he was not given the opportunity to defend himself against the allegations made against him and was dismissed without notice. Algar Burns Distribution disputes the bases of liability alleged by the applicant. Mr Jensen for the Respondent argued (i) that Mr Pepper was excluded from the operation of Section 170 EA because, at the time of his dismissal, he was serving a period of probation; and (ii) in any event, the termination did not contravene the provisions of the Industrial Relations Act because it was reasonable in the circumstances. Algar Burns Distribution is the trading name of a company which distributes computer software. In an affidavit sworn 8 September 1994 Mr Pepper states that the nature of his employment with Algar Burns Distribution was in sales and customer support. He was covered by the Commercial Travellers and Sales Representatives Award 1978 which is an award of the Western Australian Industrial Relations Commission. Mr Pepper's affidavit states that he started work with Algar Burns Distribution on 29 August 1994. This employment was terminated on 5 September 1994. No written notice of termination was given. Mr Pepper's affidavit states that the reason given by the Respondent for termination was said (by Mr Algar) to be that "I don't think we will work out". In an affidavit sworn 5 October 1994 Mr Algar on behalf of the respondent company states that Mr Pepper was employed for a three month probationary period. He disputes the reason for termination set out in Mr Pepper's affidavit and states that at the time of termination the reasons given were: (a) poor work attitude; (b) misused company property and continued to do so after receiving a warning; (c) conducted private business during working hours; and (d) accessed confidential files without management consent. The Question of Probation Regulation 30B(1) of the Industrial Relations Regulations made under the Industrial Relations Act states: "30B(1) for the purposes of Section 170CC of the Act, the following employees are excluded from the operation of Subdivisions B, C, D and E of Division 3 of Part VIA of the Act: (a) subject to sub regulation (2), employees engaged under a contract of employment for a specified period of time; (b) employees engaged under a contract of employment for a specified task; (c) employees serving a period of probation or a qualifying period of employment, if the duration of the period or the maximum duration of the period, as the case requires: (i) is determined in advance; and (ii) is reasonable, having regard to the nature and circumstances of the employment; (d) casual employees engaged for a short period within the meaning of sub regulation (e)." Thus if this court finds that Mr Pepper was serving a period of probation or a qualifying period of employment at the time of termination, that the probationary period was determined in advance, and that the probationary period was reasonable having regard to the nature and circumstances of the employment, then Mr Pepper is excluded from the operation of the Act and that would be the end of the matter. Mr Pepper gave evidence that he started work with Algar Burns Distribution on the 29th August 1994. He said that prior to his interview with Mr Algar he was given a brief interview or outline of what the job was to involve. He was told he would have to take orders over the telephone, get products out to customers, prepare spread sheets and data bases amongst other duties. The position involved software sales in computers. He had finished part of a diploma in Computer Science. Mr Pepper stated that John Algar was the person he had an interview with. Mr Algar mentioned that he was glad that Mr Pepper was of neat appearance. It was agreed at the interview that the salary would be a bit more than the award rate, and that he would earn about $17,000.00 per annum. Mr Pepper's evidence was that "at no stage was there any mention of me being on probation". He only met Mr Stocker (an owner of the company) once, and got on well with him. Mr Pepper stated that once he started work his duties involved manning telephones, typing price lists, updating data bases, getting packages of software ready to go out and taking queries over the telephone. On the Friday at the end of this first week, John Algar pulled him aside and said he was happy with Mr Pepper's work. He gave no indication that he'd done anything wrong. The following Monday however Mr Algar called Mr Pepper in and said he didn't think he'd work out. Mr Pepper stopped work on that day. Under cross-examination Mr Pepper stated that at his job interview with Mr Algar it was agreed that his salary was to be $17,000.00 at first. This was to be increased after the first three months. Mr Pepper stated that his first three months on the job were to be a "training period". Mr Pepper's only other witness Mr Dropulich did not give any evidence relevant to the issue of whether or not there was a probationary period. The respondent's first witness was Mr John Algar, the sales manager with Algar Burns Distribution. He gave evidence that he has the freedom to run the business, and has been doing so for 2 years. He has been running companies for 20 years. In his present position with Algar Burns Distribution he has the discretion of hiring and firing, but always refers back to Mr Stocker, the owner of the company. At present Algar Burns Distribution has only one other staff member apart from Mr Algar himself. This other position was briefly held by Mr Pepper and was a sales person's job. Algar Burns Distribution deals with some major corporations and businesses, such as the Main Roads Department, the Department of Agriculture, the Crown Law Department and about 180 schools. The staff of Algar Burns Distribution deal with representatives of companies who are at a senior management level or with senior teachers in schools. When Algar Burns Distribution needed a sales person an advertisement was placed in the newspaper. Mr Pepper answered the advertisement and he and Mr Algar arranged a first meeting. Only Mr Pepper and Mr Algar were present at this meeting. Mr Algar's evidence was that at this first meeting the requirements of the job were explained fully to Mr Pepper. No job offer was made for they were just "finding out about each other". Mr Algar said that after this first interview he had three major concerns about Mr Pepper: 1. that he had previously been a self-employed person and that he might find it difficult not to have the freedom to make his own decisions. Mr Pepper was only 19 years old and might either be "an absolute disaster or very good". 2. Mr Pepper had a night-time job as a disc jockey and he might find it difficult to serve two masters; and 3. Mr Pepper had his own promotions company, although he said this didn't have any work at the time. Mr Algar also said that he "hammered the point that if we offered him a position it would be on a trial basis". With a 19 year old person and a 53 year old person a relationship problem was seen to be possible. After this first meeting, Mr Algar rang Neil Stocker and discussed Mr Pepper with him. A second interview was arranged at which Mr Pepper, Mr Algar and Mr Stocker were present. Mr Algar said that he had checked around the computer industry and concluded that three months was the normal or standard probationary period. He said that he needed a reasonable length of time to let people unwind and see if people got along. Mr Pepper was offered the job during the second meeting which took place on a Thursday. Mr Algar's evidence was that he mentioned the probationary period four or five times in the course of this second interview. Mr Pepper accepted the position and started work on the following Monday, the 29th August 1994. The company had just secured another contract with 180 schools and these needed to be logged on the computers. Mr Pepper worked by himself, with Mr Algar working beside him. Mr Pepper's employment was terminated after just one week because, for various reasons, Mr Algar felt that the trust between employer and employee had broken down. Mr Neil Stocker also gave evidence as to what happened at the second interview with Luke Pepper. He said that the purpose of this meeting was as a gesture for him to meet Mr Pepper and to rubber stamp the decision to offer him employment. He said that at this meeting the job was discussed in general terms. Mr Stocker said that they discussed the conditions of employment. He didn't recall that the word "probation" was actually used, but that he did recall the word "trial", and to his mind it was the same thing. Mr Stocker's evidence was that on no less than three occasions was the matter of a trial period mentioned. Mr Stocker felt that Mr Algar overstated the trial period factor. He said that he was a little concerned that Mr Algar mentioned it so often as they only had one applicant for the job and it was necessary for them to employ someone. Mr Stocker felt it was a bit off-putting that Mr Algar kept saying that the employment would be just on a trial basis, and felt a bit annoyed that Mr Algar said it repeatedly. Mr Stocker's evidence was that he could see no way in which the fact that the position was being offered only on a trial period wouldn't have been clear. I have carefully considered the verbal testimony of the three witnesses Mr Pepper, Mr Algar and Mr Stocker as to whether or not it was determined in advance that Mr Pepper was to serve a probationary period of three months. I have come to the conclusion that on the balance of probabilities, the evidence of Mr Algar and Mr Stocker is to be accepted as the correct version of what happened at the second interview. There are several reasons why I prefer their evidence over that of Mr Pepper. In the first place, Mr Pepper in his evidence did not go into very much detail as to what was said in his two job interviews. Although he remained adamant that at no time was the question of a probationary period mentioned, he was somewhat vague about what was actually discussed at the interviews. Mr Algar and Mr Stocker, on the other hand, were far more specific about what was said at the interviews. On Mr Algar's evidence he raised the question of probation four or five times, and on Mr Stocker's evidence it was raised on no less than three occasions. Secondly, I found Mr Stocker to be a particularly compelling witness. His evidence that he found it annoying that Mr Algar kept raising the fact the job was only on a trial basis accords with my own impressions, based on Mr Algar's own evidence, of Mr Algar's style of dealing with people. Thirdly, Mr Algar had a number of concerns about the suitability of Mr Pepper for the position. Because of this he considered a probationary period appropriate and he took some pains to find out what was the common probationary period in the industry. Finally, Mr Pepper did concede in cross-examination that it was agreed that his salary was to increase after the initial three months. He saw the first three months as a training period. However, I consider it more likely than not that the first three months were stipulated to be a trial or probationary period, particularly in view of Mr Algar's misgivings about Mr Pepper. Mr Pepper in his closing address raised the fact that the contract of employment was not in writing and submitted that it would have been normal business practice to state in writing that there was to be a three month probationary period. As Wilcox C.J. said at page 18 of his decision in Ian Samuel McGregor Nicolson v Heaven and Earth Gallery Pty Ltd No. NI 127 of 1994 (unreported) "It would have been easy for Mr Holt to send Mr Nicolson a short letter confirming the terms of his appointment, including the fact that it was subject to a two month probationary period. Where such an easy step is omitted, it is tempting for a judge to say that, if employers do not bother to put the terms of the agreement in writing, they ought not to expect a court to accept that there was an oral agreement for a probationary period. However, lawyers have been lamenting that commercial people often fail to put agreements in writing since time immemorial; to little effect. Notwithstanding the failure of parties to take this obvious step, courts have to take the evidence as they find it and endeavour to divine the truth." In the case before me I am satisfied that it was more probable than not that a three month probationary period was stipulated. The question remains whether the three month period of probation is reasonable within the meaning of regulation 30B (1) (c). The question of reasonableness was canvassed by Wilcox C.J. also in Nicolson's case where he stated at page 20 - 21 "In some cases evidence might be available concerning the practice in the particular industry. If so the evidence would be relevant on the issue of reasonableness. It might be helpful, even decisive. But it is not necessary, or desirable, for expert evidence to be called in relation to the reasonableness of a particular stipulation. Whether or not the stipulated period is reasonable, is a matter that has to be determined by the person hearing the case, as an exercise of judgement. The judgement should be based on the proved objective facts, not on someone else's opinion. Probably the most important consideration, in determining what is a reasonable period, will be the nature of the job. In the case of a person employed to carry out repetitive duties under close supervision, a reasonable period may not extend beyond a week or two. In the case of a person employed in a marketing or managerial position, working with little or no direct supervision and whose quality of performance cannot be immediately apparent, it may be reasonable for an employer to specify a probationary period measured in months. Circumstances will vary from case to case; the size, location and mode of operation of the employer being relevant factors, along with the personal characteristics and circumstances of the employee. The legislature has not prescribed the maximum extent of a reasonable period. It is not for me to do so. But I suspect that an employer will rarely be able to justify a period exceeding two or three months, ...." In the present case, there is some evidence concerning the practice in the particular industry. Mr Algar is a manager with over 20 years experience in the industry, and in his experience a three month period was an industry norm. In addition, Mr Jensen for the respondent pointed to the Commercial Travellers and Sales Representatives Award, which is the award covering Mr Pepper's employment. Clause 6 (2) defines a "Probationary Traveller/Sales Representative" as " a worker engaged in the occupation of a commercial traveller/sales representative, but who has had less than nine month's experience as a commercial traveller/sales representative". Clause 7 (1) (C) of that Award states that the minimum weekly rates of wages payable to workers covered by this award "during the first three months in the industry in which the employer is engaged ... shall be ... 85% of the appropriate rate of pay rounded to the nearest ten cents". Mr Jensen submitted that three months is reasonable as it is the industry norm, for this period is a common thread running through the award and the evidence in this case. The fact that it is the industry norm is relevant but not conclusive. The nature of the job is also important. Although Mr Pepper's job was as a fairly junior sales person with the company, it was a job with many facets to it. Some of these duties, such as logging data on the computer, were fairly repetitive in nature but did require computer skills. Other facets of his duties, such as dealing with clients, was such that the quality of performance would take some time to become apparent. Mr Pepper was working with little direct supervision. The quality of Mr Pepper's performance would have had a direct effect on the company. His relative youth would have made him more risky to employ than a more experienced person, despite his obviously high level of intelligence. Because of all of these factors, I consider that a three month period of probation was reasonable in the circumstances. Mr Pepper was accordingly an employee to whom regulation 30 B (1) (c) applied and was excluded from the operation of subdivisions B and C of Part VIA. The application must be dismissed. It is therefore not necessary for me to make a finding about whether the termination was reasonable. However, whether or not Mr Pepper was guilty of any of the matters alleged against him by Mr Algar, he was given no opportunity to defend himself. He was simply dismissed without notice after Mr Algar concluded that Mr Pepper must have tampered with one of the company's computers. If I had not reached the conclusion that Mr Pepper was excluded from subdivision B of Part VIA by regulation 30 B, I would have found that his termination infringed the requirements of the Industrial Relations Act. The order of the court will be that the application be dismissed. I certify that this and the preceding 10 pages are a true copy of of the Reasons for Judgment of Judicial Registrar Boon. Associate: Date: Appearances for the Applicant: the applicant appeared in person. Appearances for the Respondent: Mr M Jensen, of the Chamber of Commerce and Industry. Date of Hearing: 17 January 1995. Date of Judgment: 23 January 1995 IN THE INDUSTRIAL RELATIONS ) No. WI 364 of 1994 COURT OF AUSTRALIA ) WESTERN AUSTRALIAN DISTRICT REGISTRY ) BETWEEN: Luke David Pepper Applicant AND: Element Holdings Pty Ltd t/as Algar Burns Distribution Respondent BEFORE: Boon JR PLACE: Perth DATE: 23 February 1995 MINUTE OF ORDER The court orders that: 1) The application be dismissed. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules CATCHWORDS INDUSTRIAL LAW - termination of employment - complaint of unlawful termination - whether employee on probation - reasonableness of probationary period - application dismissed. INDUSTRIAL RELATIONS ACT 1988, s 170EA INDUSTRIAL RELATIONS REGULATIONS Reg 30 B (1) Nicolson -v- Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233 LUKE DAVID PEPPER -v- ELEMENT HOLDINGS PTY LTD t/as ALGAR BURNS DISTRUBTION - WI 364/94 Before: Boon JR Place: Perth Date: 23 February 1995