Kenneth McKay v Astam Books [1995] IRCA 154

INDUSTRIAL RELATIONS COURT OF AUSTRALIA SYDNEY DISTRICT REGISTRY No. NI 1301 OF 1994 BETWEEN Kenneth McKay Applicant AND Astam Books Respondent COURT: Judicial Registrar Patch PLACE: Sydney DATE: 23 March 1995 REASONS FOR JUDGMENT (Delivered ex tempore - revised from transcript) This is an application under section 170EA of the Industrial Relations Act 1988 ("the Act"). The applicant, Mr Kenneth David McKay, seeks an order that the respondent pay him compensation. No other orders are sought. The applicant commenced work with the respondent on 12 September 1994, and his employment was terminated on 9 December 1994. He was employed by the respondent as a customer service officer and the intended duties of his position were set out in a job description given to him at about the time that his employment commenced. His duties were as follows: (i) To take first answer to telephone calls; (ii) Answer or fax and phone price and availability calls, fax to be cleared (iii) Customer problems, (a) back orders go to Nora; (b) accounts to Melissa; (iv) Returns authorisations; (v) Production of Credit Notes from returned items; (vi) Send copy invoices, credit notes, statements, etcetera; (vii) Produce back order reports; (viii) Frank and put down to Amanda the office mail at 3.30 each day; (ix) Sort Chris' mail and give to Amanda to send; (x) Send out brochures for customer inquiries; (xi) Month end routines. The first question which arises is whether or not the termination of the applicant's employment was a breach of Section 170DE of the Act. Section 170DE reads as follows: 170DE(1) (Termination must be for valid reasons) An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service. 170DE(2) (Termination harsh, unjust or unreasonable if reasons not valid) A reason is not valid, if having regard to the employee's capacity and conduct and those operational requirements, the termination is harsh, unjust or unreasonable. This subsection does not limit the cases where a reason may be taken not to be valid. In my opinion, putting aside for the moment the question of whether the termination of the applicant's employment was "harsh", "unjust" or "unreasonable" in terms of section 170DE(2), the respondent has established that there was a valid reason for the termination of the applicant's employment. That valid reason was a combination of the failure of the applicant to promptly process what are called return authorisations to customers with his failure to alert anybody in authority in the company to the problems he was having with processing those returns. It was important for the business of the respondent company that those documents be sent back to customers as soon as possible. One of the ways that the company did business was by sending books to its customers, which were principally book retailers. The retailers then had the right, within a period of 11 months, to return unsold books to the company and get a refund of the money that they had paid. Obviously, when a retailer decides to return unsold stock, it is desirable from the point of view of the retailer that they get a refund as soon as possible. It is desirable from the point of view of the respondent company that that refund go out as soon as possible, in order to maintain amicable relations with customers. Therefore, organising this was an important part of the applicant's employment. I am satisfied that he was aware that it was important and it follows, therefore, that his failure to perform that task, combined with his failure to inform his employers about his failure to do so, constituted a valid reason for the termination of his employment. There were other reasons put forward by the respondent for the termination of the applicant's employment. These were: (i) That the applicant had acted dishonestly in concealing his failure or inability to perform the tasks that I have just set out above to do with the return authorisations; (ii) That he had been "white-anting" or destabilising the company, both internally and externally, by broadcasting negative comments about the way the company worked; (iii) He was unable to perform a number of the other tasks associated with his job. In respect of the dishonesty question, I do not accept that the applicant acted dishonestly at all. In my opinion what he did was to continually put off to another day a task that he knew he should do, but for various reasons was unable to complete. That is not dishonesty, that is just a simple failure to face up to reality. In relation to the "white-anting" question, I do not accept that the applicant went around "white-anting" his employer. It is perhaps common ground that there were discussions between the employees about problems in the respondent company. But that is a normal thing and I do not believe that that amounts to "white-anting". There is simply no evidence at all before the court that the applicant ever made improperly critical comments in respect of his employer to customers and I do not accept that he did that. In relation to the final reason, namely, the applicant not being able to perform most of the tasks in his job description, I do not find that that reason has been proven by the respondent. It is important to understand that the valid reason that I found was a combination of firstly, the applicant's failure to complete the task with the return authorisations, secondly the importance of that for the business of the respondent company and thirdly, the applicant's failure to communicate that to his employer. Those three factors together constituted a valid reason. I do not believe that in the short time that the applicant had been employed at the respondent company, in view of the fact that this was a new position, that the alleged failure of the applicant to perform all of the tasks, if that were proven, (and I do not find it necessary to find that), would have constituted a valid reason for the termination of his employment. I then move to the consideration of this question: Was the way in which the applicant's employment terminated a breach of Section 170DC of the Act? In my opinion the answer to the above question is "yes". Section 170DC of the Act is as follows: 170DC An employer must not terminate an employee's employment for reasons related to the employee's conduct or performance unless: (a) the employee has been given the opportunity to defend himself or herself against the allegations made; or (b) the employer could not reasonably be expected to give the employee that opportunity. In Nicolson v Heaven & Earth Gallery Pty Limited (1994) 126 ALR 233 Wilcox CJ, in respect of Section 170DC of the Act said, at page 243: "The paragraph does not require any particular formality. But this does not mean that it is unimportant or capable of perfunctory satisfaction. Section 170DC carries into Australian labour law a fundamental component of the concept known to lawyers as "natural justice" or, more recently, "procedural fairness". The relevant principle is that a person should not exercise legal power over another, to that person's disadvantage and for a reason personal to him or her, without first affording the affected person an opportunity to present a case. The principle is well-established in public administrative law. It was accepted in international labour law when Article 7 was inserted in the Termination of Employment Convention. Section 170DC is directly modelled on Article 7. The principle is, I believe, well understood in the community. It represents part of what Australians call, "a fair go". In the context of section 170DC, it is not to be treated lightly. The employee is to be given an opportunity to defend himself or herself "against the allegations made"; that is, the particular allegations of misconduct or poor performance that are putting the employee's job at risk. Section 170DC(a) is not satisfied by a mere exhortation to improve." When an employer is contemplating dismissing an employee for specific reasons it is insufficient that the employer merely put those reasons to an employee unless the employer also makes it clear that the employee's job is at risk. This is in my opinion implicit in the wording of Section 170DC. The phrase "the allegations made" in Section 170DC must be read to mean "the allegations made in respect of which the employee's employment may be terminated". This is because the obligation on the employer to put the allegations to the employee and give him or her the opportunity to respond is an obligation imposed on an employer only in the context of the possible termination of the employee's employment. That is what I understood the Chief Justice to have meant in Nicolson when he said, "the employee is to be given an opportunity to defend himself or herself "against the allegations made"; that is the particular allegations of misconduct or poor performance that are putting the employee's job at risk". Here, until the final termination interview, the applicant was not put on notice that his employment was in jeopardy. It was put to the applicant in cross-examination that prior to the termination of his employment, there were two "performance review meetings" between him and Mr Simon Player, who is the operations manager of the respondent company. But when Mr Simon Player gave evidence, those "performance review meetings" turned out to be discussions between the applicant and Mr Player following Mr Player "collaring" the applicant at the close of work and speaking to him informally. Whatever was said at those meetings, Mr Simon Player conceded that he never told the applicant that his employment was in jeopardy unless he improved his performance. It does not follow from the fact that an employer has criticised an employer's performance that the employee therefore must know that his job in his jeopardy. As the applicant was not made aware by the respondent that his job was in jeopardy, I find that the termination of the applicant's employment by the respondent was a breach of section 170DC of the Act. The evidence of Mr Christopher Player, the general manager of the respondent company, also established that the alleged fact that there had been customer complaints about the performance of the applicant was a factor, although a relatively minor one, in the decision of the respondent to terminate the employment of the applicant. That factor was not put to the applicant even at the final termination interview on 9 December. The applicant therefore had no opportunity to respond to that particular allegation which was, as Mr Christopher Player conceded, a factor in the decision. Therefore, for that reason as well, the termination of the applicant's employment was a breach of 170DC of the Act. The next question to be determined is this: Was the termination of the applicant's employment "harsh", "unjust" or "unreasonable" in the terms of section 170DE(2) of the Act? In Byrne and Frew -v- Australian Airlines Limited (1994) 52 IR 10, his Honour, Gray J, in considering the use of the term "harsh, unjust or unreasonable" in a Federal industrial award, said, at page 63: "So far the procedural aspects of a clause such as clause 11(a) have been seen as confined to the need for the employer to make a proper investigation of the facts and to consult with the employee about those facts and their possible consequences. In my view that analysis has been inadequate. The use of the word "unjust" in the clause is intended to import requirements of natural justice or procedural fairness into the process of terminating unemployment." His Honour went on to say at page 64: "I am of the view that a clause such as clause 11(a) requires that an employer contemplating terminating the employment of an employee is obliged to afford procedural fairness to that employee. Not to do so would be "unjust"." Firstly, although the respondent probably did consult with the applicant about his failure to perform, in the informal way that Mr Simon Player said, the respondent did not consult with the applicant about the "possible consequences" of his failure to perform - the possibility that his employment would be terminated. This possibility was not mentioned until the final meeting on 9 December, when it became a reality. Procedural fairness requires, in my view, that an employer tell the employee that his job is in jeopardy. The applicant was therefore denied natural justice and the termination of his employment was "unjust" in terms of section 170DE(2) of the Act. It follows that, although there was an underlying valid reason for the termination of the applicant's employment, due to the combination of circumstances that I have set out above, the termination of the applicant's employment is to be deemed to be not for a valid reason, as the applicant has proven that the termination of his employment was a breach of section 170DE(2) of the Act. The question then becomes what amount of compensation, if any, should be awarded to the applicant for the unlawful termination of his employment? The evidence of Mr Christopher Player was that the applicant's salary at the time of the termination of his employment was $471.15 per week gross, that is to say before tax. The applicant was dismissed on 9 December. He obtained employment in another position with another organisation on 23 January 1995. He was therefore unemployed for a period of 44 days. He therefore lost the sum of $2,961.51 in wages. I reach that figure as follows: $471.15 divided by 7 gives one day's pay. Multiplying that by 44 (the number of days of unemployment) gives $2,961.51. In addition to that, the applicant lost his entitlement to accrued holiday pay during that 44 day period. He lost, in other words, 44 divided by 365, (the number of days in the year), times $471.15, times 4 (because the entitlement is four weeks a year). The resulting figure is $227.18. In addition to that, he lost the 17.5 per cent loading on top of that figure. 17.5 per cent of $227.18 is $39.76. So his total holiday pay lost during that 44 day period is $266.94. The total amount of wages and lost holiday pay entitlements comes to $3,228.45. It seems to me to be appropriate to award that entire sum to the applicant and I so order. The respondent is to pay the applicant the sum of $3,228.45 by way of compensation for the unlawful termination of his employment within 21 days of today. I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment of Judicial Registrar Patch. Associate: Caroline Sternberg Date: 20 April 1995 Appearances For the Applicant: Mr G Maniatis A.S.U. For the Respondent: Mr C Player