INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1502 of 1994 B E T W E E N : JOHN FREDERICK CULLEN Applicant AND DEPARTMENT OF ENERGY & MINERALS Respondent Before: Judicial Registrar Chancellor Place: Melbourne Date: 31 March 1995 REASONS FOR DECISION This is an application pursuant to Section 170EA of the Industrial Relations Act by John Cullen in respect of the termination of his employment by the Victorian Department of Energy and Minerals on 18 August 1994. The evidence of the Department was that at the time of termination Mr Cullen was not an Award employee and was employed on a salary of $59,580.00. From that sum he made an employee contribution to the State Superannuation Fund and made a contribution toward the provision of a motor vehicle. The Department provided Mr Cullen with a motor vehicle and made a statutory contribution into the State Superannuation Fund on his behalf estimated at $13,143.00 per annum. The Respondent argued that Mr Cullen's wages exceeded the $60,000.00 cap contained in section 170CD of the Act. In the case of Terry Shields ‑v‑ Chief Commissioner of Payroll Tax (1989) 98 ALR 559 Mr Justice Lee stated at pages 566 and 567: "The provision of a car for private use is certainly not within the concept of wages as understood in this country." In Ardino -v- Count Financial Group Pty Ltd (NI 517 of 1994) Chief Justice Wilcox stated at page 14: "I do not think it ("relevant wages") includes payments made by an employer on behalf of an employee pursuant to a binding antecedent obligation, whether statutory or contractual." Applying those tests it is my view that neither the provision of the motor vehicle or the compulsory employer contribution to the superannuation fund should be included as part of Mr Cullen's wages. This matter therefore falls within the jurisdiction of the Court. Mr Cullen is a qualified engineer who worked for BHP Minerals prior to commencing with the Victorian Public Service in October 1982. In early 1989 he was asked to assist the General Manager Minerals to provide market focus and client orientation and he eventually took up the position of Director Business Development. He was effectively the sole employee of that branch of the minerals division of the Department and held a SES 1 position. The secretary of the Department from 30 November 1992 was Mr David Downie. He gave evidence that he had thirty years of public sector experience, most recently in the area of change management. The Department was formed after the change of government in October 1992 and Mr Downie said that the government's general view at that time was that the mining industry in Victoria was moribund and that changes in legislation, regulation and bureaucratic framework within the Department were to take place in order to reinvigorate the industry. As early as late January 1993 Mr Downie formed the view that the structure of the Department was not right and that changes would have to be made. For that reason he did not offer any of the SES officers, including Mr Cullen, one of the new employment contracts. Mr Cullen was frustrated by the fact that he was not offered a contract although he had elected to take one, if offered, as early as February 1993. He was obviously somewhat uncertain and insecure about his future. Clause 9 of Schedule 6 of the Public Sector Management Act 1992 therefore applied to Mr Cullen. It states: "1. A person holding an office in the public service under the former Act immediately before the commencement of this clause must, on that commencement, be taken to hold the position corresponding to that office on the same terms and conditions and with the same classification and accrued or accruing entitlements, as applied to that person under the former Act immediately before that commencement." Mr Cullen submitted that pursuant to the Public Service Act 1974 that he was effectively guaranteed permanency and his employment being deemed to be "on the same terms and conditions" it meant that he held a permanent position and could not be lawfully terminated. However, a Second Tier Agreement made between the VPSA and the Minister in October 1988 pursuant to section 43B of the Public Service Act meant that termination might eventually be an option where surplus positions existed and redeployment was unsuccessful. I therefore reject the proposition that Mr Cullen was in any way deemed to have a permanent position. I note that the Second Tier Agreement ceased to have effect as of 20 August 1993. WAS THERE A VALID REASON FOR THE TERMINATION? Pursuant to section 170DE(1) the onus is on the Respondent to establish a valid reason for the termination. The Respondent argued that the termination was based on the operational requirements of the Department and this was a case of genuine redundancy. It was submitted that once it became apparent that Mr Cullen could not be redeployed he was lawfully terminated pursuant to the provisions of the Public Sector Management Act. Mr Downie gave evidence that a restructuring process began within the Department in September 1993. A restructure task force within the Department commenced taking submissions in October 1993. Mr Brian Wright an officer of the Department and a task force member, gave evidence that all managers were cognisant of the climate of change and the pending restructure. Mr Cullen made both a written and oral submission to the task force. The task force reported to Mr Dowd, the Deputy Secretary of the Department, on 21 January 1994. Mr Downie gave evidence that he consulted widely before deciding on the form of the restructure. He consulted senior managers, other departments, ministerial staff and industry representatives amongst others. Mr Downie consulted with Mr Dowd and was aware of the task force recommendations. By early February 1994 Mr Downie had formed a view as to the form of the restructure. He felt that the nine branches of the minerals division were too flat and unfocussed and determined to reduce that level of the division. In its place there were to be five branches of a new Resources Development Division of the Department. Mr Cullen's position was abolished and a new position of General Manager Industry Development was created. Mr Cullen submitted that there was not really a great deal of difference between his old position and the new position. After hearing evidence from several officers of the Department including Mr Downie and Mr Dowd I reject that submission. Whilst Mr Cullen had effectively worked in a one man branch the new position had responsibility for a number of regional managers and staff and was a much broader job involving a different skill set. This was reflected by the ultimate salary package which was almost 40% greater than that paid to Mr Cullen. Mr Cullen later applied for the new position but was unsuccessful. Indeed, all of the interviewees were unsuccessful and the position eventually had to be head hunted. The interview panel, of which Mr Dowd was a member, formed the view that Mr Cullen did not have the appropriate skill set, lacked knowledge of the position and its functions and even lacked some knowledge of some processes within the Department. This confirmed Mr Cullen's lack of suitability for the new position. I therefore find that Mr Cullen's position no longer existed after the restructure and that the Respondent has established a valid reason for his termination. Section 7(2) of the Public Sector Management Act gave Mr Downie the power to create or abolish any position in the Department. WAS THE TERMINATION HARSH, UNJUST OR UNREASONABLE? Although Mr Cullen had not received an employment contract and was aware that a restructure was to take place, he was obviously firmly of the view that he had a lot to offer the Department and that his employment was not in jeopardy. Unfortunately, the considered choice of structure and new aims of the Department really meant that there was very little left for him to do. Mr Downie gave evidence that the marketing and public relations role which Mr Cullen had performed was to be completely reworked, and that Mr Cullen's efforts in attempting to get overseas investment, particularly from Japan, were premature and that the main emphasis was to be on getting Australian companies to invest in Victoria. Although Mr Cullen might disagree with Mr Downie's decisions in relation to those matters, the decisions are ultimately ones for Mr Downie, and I accept that they were properly and fairly made in close consultation with Mr Dowd and others. Mr Downie gave evidence that once he had made the decision to abolish Mr Cullen's position that he considered alternate employment within the Department either in other positions or with a collection of work duties. Given that the overseas work was to be wound back and the marketing and public relations reworked by the new appointment, Mr Downie was unable to identify a meaningful job or a role for Mr Cullen to play at or near to his existing SES level. Mr Downie took the view that it would be inappropriate to put Mr Cullen on menial tasks which would have been frustrating, demeaning and boring. Mr Downie got advice on the legal position, reconsidered the decision and then decided to act in accordance with section 78 of the Public Sector Management Act which states: "1. If the appropriate Department Head at any time finds that a greater number of persons is employed in the Department than is considered by the Department Head to be necessary for the efficient working of the Department, those persons who are identified by the Department Head as redundant may be transferred by the Public Service Commissioner to any other Department that requires additional assistance. 2. If the Public Service Commissioner cannot successfully transfer any person so identified as redundant, the Public Service Commissioner must advise the Department Head who may then terminate that person's employment." On 7 February 1994 Mr Cullen was called into Mr Dowd's office and told that as a result of a restructure his job was being made redundant. Quite naturally Mr Cullen was shocked to receive this news although his evidence was that no‑one would have observed this. He then went to Mr Downie's office where it was confirmed that Mr Cullen's position was redundant and he was advised that he would immediately be referred to the redeployment pool. Mr Downie advised Mr Cullen that counselling and out-placement services would be made available. Mr Cullen was advised to pack up and go home and was told that he would remain in receipt of his full salary and that he would continue to have use of a car. Mr Cullen was advised that if a job could not be found that he would be retrenched. He was advised to focus on the future and to make every effort to find a job. Mr Cullen was angry and upset. He felt that he had skills which the Department could use and he did not want to go home. He felt that insufficient weight had been given to his specialised and uncommon knowledge. Because he was in a shocked state he was unable to raise these matters with Mr Downie. A fellow employee of Mr Cullen's was asked to assist Mr Cullen in packing up his office and leaving the building. Although in evidence in chief Mr Cullen attempted to create the picture that he had been unceremoniously marched out of the office, the picture was somewhat different at the end of cross‑examination. Mr Buckland and Mr Cullen spent two hours packing up the office during which time they talked and discussed matters. Mr Cullen agreed that Mr Buckland was not a superior and was not threatening in any way. They both carried boxes out, walking behind or beside one another as they went, and talked and chatted on the way to the car. I am unable to accept Mr Cullen's submission that the manner in which he left the office somehow created suspicion in the minds of those industry persons who may have been within the Department at that time, particularly when there was no evidence called to support that fact. However, I do agree with him that the suddenness of his departure is something that surely should have been avoided. It seems harsh and unfair that a person who is doing a job to the best of his ability and who is loyal to his employer and reasonably expects to complete a full working day should be suddenly told that his job no longer exists and to go home. I am not in the position to provide the best answer, but surely some preliminary counselling and the opportunity to leave the office at a time or nearby day of his choice and in dignified circumstances should be given to the employee. Other witnesses quite rightly expressed concern at the lack of warning and the suddenness of Mr Cullen's departure. Mr Andrew Lauva the personnel officer of the Department gave evidence that he immediately undertook steps in an attempt to obtain a secondment for Mr Cullen. He asked Mr Cullis who was the Acting Director of Corporate Services to assist. An updated CV was obtained from Mr Cullen and approaches were made to Business and Employment, Overseas Projects, Small Business Development and the Office of Major Projects. I find that every effort was made to obtain a suitable secondment and that the Department indicated that it would meet Mr Cullen's salary during the period of secondment. Unfortunately these attempts were unsuccessful. On 9 February Mr Cullen met with Lyn Southward a consultant with the work force management unit, a unit which was delegated powers by the Public Service Commissioner in relation to redeployment under section 78 of the Public Sector Management Act. Ms Southward has extensive private and public sector experience in executive recruitment. She gave evidence that it was not normal procedure for senior people to be sent home. Normally work would be identified by the Department either on aspects of their own job or a special project. Alternatively a secondment would be arranged. She agreed that if there was no real work or secondment available then it might work very much to the officer's advantage to be at home with full concentration being placed on future employment. The Applicant relied on the workforce management unit guidelines to attack the manner in which his redundancy and cessation of work were handled. The guidelines recommended discussion and consultation to minimise uncertainty, counselling to make persons fully aware of how and why decisions were made and the provision of meaningful work whilst re-deployment options were being considered. Although these are only guidelines and are not to be slavishly followed it is my opinion that they are full of industrial common sense. I find that there was insufficient consultation with Mr Cullen in relation to the possibility of his redundancy, the manner and time in which he was to cease work and the provision of meaningful work for him within the department or otherwise. This failure to consult left Mr Cullen in an unnecessary state of uncertainty and confusion which could and should have been avoided. This no doubt caused some unnecessary stress for both himself and his family. Rex Buckeridge a qualified Psychologist and colleague of Mr Cullen gave evidence of his observations of the obvious stress which Mr Cullen suffered at that time. However, in relation to the redundancy decision itself Mr Cullen had the opportunity to make written and oral submissions to the task force, Mr Dowd had spoken to him a couple of times per month in relation to his functions and role and I accept that Mr Downie's decision to abolish his position was an informed and responsible one. I also accept Mr Downie's view that there was little left for Mr Cullen to do within the department given its new aims and structure. However I am sure that Mr Cullen would have been able to accept that situation in a far better frame of mind if he had been consulted in relation to it. Essentially I am saying that even if consultation had taken place it is most unlikely that anything would have changed. Mr Cullen would still have been declared surplus and would still have been sent home to concentrate all his energies on obtaining new employment, but hopefully he would have done this in a far better state of mind. Mr Cullen may still have had some problems. He seems to have fallen into the trap of focusing too much on the past and its perceived injustices and this has probably restricted his ability to obtain alternative employment. In my opinion apart from the obvious lack of consultation, Mr Cullen was otherwise generally very well treated by the department between his date of cessation and date of termination. He was provided the following benefits and assistance:- (i) genuine attempts at secondment; (ii) early referral to the workforce management unit to gain assistance in re-deployment. He was assisted in approaching the department to ensure a satisfactory response to reference checks; (iii) specialist counselling on a wide range of matters; (iv) early referral to Morgan & Banks who provided a career transition management and out-placement program. This included attending a two day senior officer's career options workshop, assistance in preparing a CV and job applications, personal career and financial counselling and the provision of office facsimile and secretarial facilities. This service was fully funded by the department and at the maximum allowable level of $5,000.00; (v) advice in relation to voluntary departure packages and targeted separation packages and their effects on his superannuation entitlements; (vi) after hours use of the department fax to send off some public and private sector job applications; (vii) although referral to the workforce management unit was generally for three months and sometimes as little as one month, by agreement with the department Mr Cullen's period within the unit was extended to 27 July, giving him an even greater chance of re-deployment; (viii) the department agreed to meet the costs of pursuing public sector positions in country Victoria; (ix) in June 1994 the department agreed to meet Mr Cullen's return airfare to Canberra to pursue a position in the private sector; (x) Mr Cullen was granted an interview for the newly created position of general manager industry development. He also applied for two other senior positions within the public service; (xi) throughout this period from 7 February 1994 to 18 August 1994 Mr Cullen was paid his full salary whilst being able to devote his full-time to obtaining employment. He was also provided with the use of a motor vehicle, which on the evidence of Mr Downie was not required as Mr Cullen was not actually attending at work. On 28 July the workforce management unit advised Mr Downie that Mr Cullen was not able to be transferred to another department in the current circumstances. This assessment had regard to the limited availability of senior positions following a number of redundancies across all departments, experience to date in endeavouring to place Mr Cullen and Mr Cullen's employment background and skills. On 2 August the department wrote to Mr Cullen confirming that the workforce management unit had been unable to re-deploy him and that he had been referred back to the department. He was advised that the secretary had to consider four options open to him:- (i) voluntary departure package; (ii) voluntary transfer to a position at a lower classification in the department; (iii) transfer to an equivalent or lower level position in the department; (iv) retrench and give a targeted separation package. The letter indicated that Mr Downie would meet with Mr Cullen to convey his decision. It invited him to call Mr Lauva if he had any queries. Mr Cullen gave evidence that he called Mr Lauva and indicated that he wanted to discuss the possibility of lower level employment within the department. Mr Lauva recalled having many and sometimes long discussions with Mr Cullen over possible options. Mr Downie gave evidence that there were no suitable equivalent or lower level positions available in the department. At best perhaps there were some very low level positions and Mr Downie formed the view that those positions were both menial and insulting given Mr Cullen's background, experience and seniority. However, it is again most unfortunate that Mr Downie reached this conclusion without consulting Mr Cullen. I am sure that if such a discussion had taken place that Mr Cullen would have agreed with Mr Downie's assessment, but it again created unnecessary uncertainty and suspicion in Mr Cullen's mind. Despite the fact that several officers of the department, including the personnel officer were called to give evidence, Mr Cullen was unable to adduce evidence from any one of them of any sort of lower level job that may have been suitable for him at any time between February and August of 1994. Further, the evidence of Lyn Southward was that Mr Cullen was only ever interested in jobs at or above existing levels. He did not apply for any lower level positions despite receiving a fortnightly workforce management unit bulletin outlining all available positions within the public service. Following the letter of 2 August and his discussion with Mr Lauva, and given that at no stage had the department been able to provide him with suitable work, Mr Cullen correctly took the view that he would shortly be terminated. Indeed, Mr Cullen had been advised by Mr Downie on 7 February that if a job could not be found then he would be retrenched. On 4 August Mr Cullen wrote to the Ombudsman questioning the legality of the forthcoming termination. Mr Cullen submitted that fairness required that he be given three months warning of termination after he had been referred back to the department by the workforce management unit ie, 27 July to 27 October. He argued that it was reasonable to give him three months warning to enable himself and his family to prepare for the termination and to get a job in the private sector. I reject that submission. Mr Cullen was told from the very beginning that his best chance of re-employment lay in the private sector. Mr Cullen knew from early to mid-February that if he was unable to find suitable employment within the public service that it was most likely that he would be terminated. At best he could normally have expected three months in re-deployment followed by three months notice. At worst he could have been given one month in re-deployment and then one months warning of termination. I note that the June 1993 Public Service Commissioner Guidelines indicated that the department head was responsible for the counselling of a redundant staff member and allowing a reasonable time to consider his exit option. A period of four weeks was suggested. The fact that Mr Cullen was kept in the re-deployment pool for an extended period of time was an extra bonus for Mr Cullen and cannot be used by him to justify an extended warning period. I note that in early May Mr Cullen had suggested to Lyn Southward that late June or August would be appropriate termination dates. At a meeting with Mr Downie on 18 August Mr Cullen was advised that his services were terminated. Mr Cullen was paid four weeks pay in lieu of notice together with a targeted separation package of a further 20 weeks pay. The termination was carried out pursuant to Section 78(2) of the Public Sector Management Act. Mr Cullen submitted that his termination was harsh, unjust or unreasonable because of the failure to consult prior to the redundancy, failure to warn him that his particular position was at risk, forcing him to immediately cease work, failing to consult with him at any stage prior to termination in relation to lower positions within the department, and failing to consult him over the termination date. The Respondent submitted that matters which occurred prior to the Act coming into force on 30 March 1994 should not be taken into account. In my opinion if the termination takes place on or after 30 March then all matters directly related to and directly relevant to the termination can be taken into account, whatever the date of their occurrence. As I have already indicated I believe that Mr Cullen had adequate input into the re-structure process and adequate consultation in relation to his termination date. It is clear that the department failed to warn him that his particular position was at risk and this led to his leaving work in most unfortunate circumstances. The department failed to consult him in relation to employment opportunities at a lower level within the department. In relation to these matters he was denied procedural fairness. However, the evidence indicates that although it may have assisted the Applicant's peace of mind, such warning or consultation would have had no practical effect. There is no evidence to suggest that if Mr Cullen had remained at work doing whatever tasks the department could find or create for him that his ultimate termination would have been in any way altered. The test of whether the decision to dismiss is harsh, unjust or unreasonable is an objective one see Bostik (Australia) Pty Ltd v Gorgevski No. 1 (1992) 36 FCR 20 at page 28. In relation to a redundancy obligations to consult, to provide adequate notice and to apply objective selection criteria are facts in determining whether a dismissal is harsh, unjust or unreasonable. See Budget Couriers Equity Management v Beshara (1993) 5 VIR 173. An absence of procedural fairness, although not inevitably leading to such a finding, may lead to a finding that a dismissal was harsh, unjust or unreasonable. See Shearer v Action Mercantile (1993) AILR 281. In my opinion objective selection criteria were clearly applied in deciding Mr Cullen's redundancy. His old position was abolished and he did not have the skills, knowledge or experience to carry out the new position. In my opinion he was given more than adequate notice of his termination as he knew from mid-February that if a public sector job was not found that he would almost certainly be retrenched by mid-1994 and he should have prepared himself accordingly. Although there have been some aspects of procedural unfairness in my opinion they do not justify a finding that the termination as a whole was harsh, unjust or unreasonable. Applying an objective test the six months on full salary with the use of a car, together with a further 24 weeks payment on termination, together with the extensive assistance provided to Mr Cullen in an attempt to obtain re-deployment or re-employment far outweigh any problems of procedural fairness that may exist. At the end of the day Mr Cullen was provided with a more than reasonable opportunity to obtain re-deployment or re-employment and to get his affairs into order. I therefore propose to dismiss the application. Even if it were the case that a finding of one or more aspects of procedural unfairness should automatically have led to a finding that the termination was harsh, unjust or unreasonable, I would have declined to award compensation in this case because of the large sums already paid to and on behalf of Mr Cullen since the first notification of his redundancy. I will conclude by dealing briefly with three other matters Mr Cullen raised in his application. He said that he was on sick leave at the date of termination, but although he obtained a medical certificate on 18 August he could not properly be said to have been on sick leave at that time. He said that the department had agreed not to change his employment status whilst the matter was being reviewed by the Ombudsman, but there was no evidence called to that effect. He said that Mr Dowd had notified two industry associations that he had been terminated on 7 February and that this directly led to defamatory comments being published within the mining industry. Mr Cullen sought an apology from Mr Dowd. Mr Dowd and the industry association representatives, Mr Reynolds and Mr Winter, all gave evidence in relation to this matter. The evidence clearly indicated that at no stage did Mr Dowd inform either of the men that Mr Cullen had been terminated as at 7 February. If any defamatory remarks were published they were solely the responsibility of Mr Reynolds and Mr Winter and had nothing to do with Mr Dowd or the department. MINUTES OF ORDERS THE COURT ORDERS AS FOLLOWS: 1. The Application be dismissed. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules. I certify that this and the preceding eighteen (18) pages are a true copy of the reasons for judgment of Judicial Registrar Chancellor. Associate: Dated: 31 March 1995 Mr Cullen in person Solicitors for the Respondent: Mr P McDermott Counsel for the Respondent: Department of Business & Employment Date of hearing: 28 February, 16 March, 17 March, 20 March, 21 March & 24 March, 1995. Date of judgment: 31 March 1995 INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1502 of 1994 B E T W E E N : JOHN FREDERICK CULLEN Applicant AND DEPARTMENT OF ENERGY & MINERALS Respondent Before: Judicial Registrar Chancellor Place: Melbourne Date: 31 March 1995 MINUTES OF ORDER THE COURT ORDERS: 1. The Application be dismissed. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.