CATCHWORDS INDUSTRIAL LAW - Termination of employment - Unlawful termination - Restructure - Redundancy - Operational requirements - Notice (weekly payments in lieu) - Repudiation (of contract) - Harsh, unjust and unreasonable termination - Compensation. Industrial Relations Act 1988, S170DC, S170DE, S170EDA, S170EA, S170EE. LLOYD JOHN BORIS GOLJA v KELVIN ERNEST LORD (t/a KELVIN LORD AND COMPANY) No. WI-1193/95 Before:Ryan JR Place: Melbourne Date: 19 May 1995 Siagen v Sanel Pty Ltd [1994] 122 ALR 333; Association of Professional Engineers, Scientists and Managers Australia and Another v Skilled Engineering Pty Ltd [1994] 122 ALR 471; Grout v Gunnedah Shire Council [1994] 125 ALR 355; Heaven and Earth Gallery Pty Ltd [1994] 126 ALR 233; Wheeler v Philip Morris Ltd [1989] 97 ALR 282; Mason Gray Strange N.S.W. Limited v Eisdell and Others [1989] 31 AILR 271; O.U. Norman International Pty Ltd v Baker and Others [1990] 32 AILR 434. IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA PERTH DISTRICT REGISTRY Matter No WI-1193/95 B E T W E E N: LLOYD JOHN BORIS GOLJA Applicant AND: KELVIN ERNEST LORD (t/a KELVIN LORD AND COMPANY) Respondent RYAN JR MINUTES OF ORDER 19 MAY 1995 THE COURT ORDERS THAT: The respondent pay to the applicant compensation of $15,000. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules. IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA PERTH DISTRICT REGISTRY Matter No WI-1193/95 B E T W E E N: LLOYD JOHN BORIS GOLJA Applicant AND: KELVIN ERNEST LORD (t/a KELVIN LORD AND COMPANY) Respondent COURT: RYAN JR PLACE: MELBOURNE DATE: 19 MAY 1995 REASONS FOR JUDGMENT APPLICATION FOR REMEDY FOR UNLAWFUL TERMINATION OF EMPLOYMENT The applicant began as a Technical Assistant with the respondent on 10 February 1986. The contract of employment was primarily encompassed in a letter of employment dated 4 November 1995. The contract provided for terms and conditions governed by the Professional Engineers Award and for termination by either side on giving three months notice in writing. The letter of employment contained the following statement: "It is our intention that you will acquire sufficient knowledge and experience to become a Registered Patent Attorney in due course. As you know, this will entail passing the Patent Attorneys examinations'. Ultimately, at some stage after you have become a Registered Patent Attorney there could be the possibility of us entering into a partnership agreement if this was desired by both parties." The applicant worked for the respondent for nine years. His initial background was that of a high school teacher with a B.Sc. degree with a major in physics. He left teaching to join the Australian Patent Office in Canberra. He worked there as an examiner of patents and undertook some supervisory duties. He joined the respondent as a technical assistant in what is an entry position for a person seeking to qualify and practise as a patent attorney. During his employment with the respondent the applicant qualified and became registered as a Patent Attorney and was listed on the letterhead of Kelvin Lord and Company, Patent and Trade Mark Attorneys as "L.J.Boris Golja B.Sc., Dip.Ed., M.A.I.P., F.I.P.A.A." It is conceded that at no stage during the nine years employment was it ever suggested that the applicant was deficient in performance or conduct. It is also conceded that the applicant was never consulted in respect of any reorganisation or restructure of the respondent firm. On 10 February 1995 at about 10:30 am the respondent entered the applicant's office where the latter was dictating a specification for a provisional patent application. The respondent told the applicant he was terminating his employment and handed him a letter which read as follows: "Kelvin Lord and Company Patent and Trade Mark Attorneys February 10, 1995 To Mr Boris Golja. Dear Boris, In accordance with the terms of my letter to you dated November 4, 1985, I hereby give you three months notice of termination of your employment with this firm. The major reason for my decision to give you notice of termination is the business restructure that has occurred in the firm. I have been left with no alternative to terminate your services. I am prepared to offer you outplacement services to investigation (sic) for your alternative employment. Also, if required, I am prepared to offer you access to independent financial advice. Yours sincerely Kelvin Lord Principal" The respondent's reasons for restructure are dealt with in some detail in his affidavit of 19 April 1995 (paragraph 2 - 12). There is no need to go into this detail other than to say that the respondent had concluded that an economic recession and a downturn in new work and a desire to utilise technical assistants qualified in chemistry, bio-technology and electronics warranted the abolition of the Patent Attorney position held by the applicant. The trouble with that is that the respondent never told the applicant. Indeed, he openly expressed the view in his evidence that it would have been a waste of time to consult the applicant and that nothing would have been achieved by such consultation and nothing would have changed if consultation had taken place. At the conclusion of the hearing I pointed out that S170DE(1) provides that an employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employees capacity or conduct or based on the operational requirements of the undertaking, establishment or service and that 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. I also drew attention to subsection 170EDA(1) which reads: "If an application under Section 170EA alleges that a termination of employment of an employee contravenes subsection 170DE(1): (a) the termination is taken to have contravened subsection 170DE(1) unless the employer proves that, apart from subsection 170DE(2) there was a valid reason, or valid reasons, of a kind referred to in subsection 170DE(1); and (b) if the employer so proves, the termination is nevertheless taken to have contravened subsection 170DE(1) if the applicant proves that, because of subsection 170DE(2), the reason or reasons proved by the employer were not valid." I also indicated that on the basis of the evidence given by the respondent himself, the respondent faced formidable difficulties in establishing a valid reason under subsection 170DE(1). The respondent claims that the applicant was terminated as part of a restructure which rendered his position redundant. In other words, the respondent claims that it was a valid and fair termination based on the genuine operational requirements of the firm. However, the applicant was paid a bonus for exceeding targets in January to June 1994 and another bonus for exceeding targets in July to December 1994. Furthermore, Mr Lord conceded that January and February are a quiet period. In addition, for the first time, at the hearing on 27 April, the respondent revealed that "minor reasons" for the termination were the need to provide excessive supervision over the applicant to meet deadlines and what he described as "circumstantial evidence" that the applicant was not a good influence on other staff. Other than the respondent's bald assertion, no evidence has been produced of a genuine redundancy based on operational requirements. I agree with Counsel for the respondent that a sole proprietor may not commit certain things to paper but if this is not done and the sole proprietor does not consult the employee, the proprietor is left with no other evidence. In this case the applicant has conceded that there was a downturn in new work but the respondent has produced no evidence of that downturn or of any decrease in the profitability of the firm. Furthermore, at no stage was the applicant given an opportunity to respond pursuant to S170DC to the allegations of adverse influence on other staff or inability to meet deadlines. Indeed, the applicant was never even told about either alleged defect. The applicant was never consulted in relation to the restructure and the respondent openly in evidence expressed the view that consultation with him on the restructure or on the alleged defects said to be minor reasons for termination would have been of no effect and a waste of time. There is no satisfactory evidence of a termination for a valid reason and even if there had been satisfactory evidence of termination on the grounds of a genuine redundancy the termination would have still been harsh, unjust and unreasonable. I would have been prepared to make a determination to that effect at the conclusion of the hearing except for an alternative submission which was put by Counsel for the respondent. This submission was that the employment relationship and the contract of employment had in fact been brought to an end by the applicant. This position was formulated after a mediation conference on 31 March 1995 when the applicant informed the respondent that he had obtained full-time employment with Wray and Associates as a patent attorney. On 6 April solicitors for the respondent wrote to solicitors for the applicant pointing out that the written notice of termination dated 10 February 1995 included provision for 3 months notice to be given in order to terminate the contract. The respondent, through his solicitors, claimed that during the period from 10 February to 10 May the applicant was required to uphold his contractual obligation to be ready, willing and available to perform on the contract until its expiry. The respondent further claims that in breach of the terms of the contract the applicant took up a full-time permanent position with Wray and Associates on or about 13 March and the letter from his solicitors of 6 April implies that the contract of employment had come to an end on or about 13 March 1995 because of the actions of the applicant. The solicitors for the applicant replied immediately stating that their client had been summarily terminated on 10 February and that this termination was a breach of contract and upon termination the respondent was obliged to pay to the applicant three months salary in lieu of notice. The solicitors for the applicant also advised that their client had been accepting payment of the salary in lieu of notice in weekly instalments and should those weekly instalments stop the applicant would proceed to claim payment of the full amount then outstanding. Before adjourning the matter and reserving judgment I indicated that if I found that the applicant repudiated the contract the application for remedy for unlawful termination of employment would be dismissed but that it seemed to me that there was formidable authority to the contrary namely Siagen v Sanel Pty Ltd [1994] 122 ALR 333; Association of Professional Engineers, Scientists and Managers Australia and Another v Skilled Engineering Pty Ltd [1994] 122 ALR 471 and Grout v Gunnedah Shire Council [1994] 125 ALR 355. On the basis of those authorities I have no doubt that the respondent ended the employment relationship on 10 February 1995. The only aspect which caused me to pause for thought was the curious arrangement whereby the three month period of salary in lieu of notice was paid on a weekly basis from 10 February to 31 March and presumably would have continued to be paid on a weekly basis until 10 May were it not for the respondent discovering on 31 March that the applicant had obtained other employment. My observations of the applicant and the respondent while giving evidence and the nature of their evidence and an assessment of that evidence has led me to prefer the evidence of the applicant whenever there is a conflict. I do not doubt that the respondent wanted the applicant to leave immediately on 10 February and made that quite clear. I accept the applicant's evidence (at the trial and in paragraph 31 of his affidavit) that the respondent said: "If we need you, we know where to contact you although I don't think that likely." At no stage during the period 10 February to 31 March did the respondent call for the applicant to undertake any work on his behalf or on behalf of his firm. The respondent, in evidence, sought to justify what I have concluded was a reconstruction after the event. By this I mean that I have concluded that the respondent terminated the applicant without warning and without notice on 10 February. Because of the terms of the contract the respondent elected to pay three months salary in lieu of notice. He did not want the applicant to work out the period of notice. He specifically directed the applicant to go and go immediately. He began to pay the salary due in lieu of notice in weekly payments, which payments the applicant scrupulously acknowledged in writing as being received without prejudice to his claim for compensation for unlawful termination of employment. The position erected by the respondent, and which I describe as a reconstruction after the event, is set out by the respondent in paragraphs 17, 18 and 19 of his affidavit of 19 April 1995 as follows: "My original intention was to make an accrued annual leave payment to the Applicant after the three month notice period had come to an end. The situation was altered when I discovered at the Mediation Conference that the Applicant had been working for another firm on a full time basis. My view at the time, subject to obtaining further legal advice, was that the Applicant's contractual entitlements for accrued annual leave and the notice period would be reduced due to the Applicant commencing full time employment elsewhere during the notice period under the contract. Indeed, I was disappointed to find out that the Applicant had taken up full time employment and had not advised me of this development, particularly as I had earlier stated to him that he may be required to come in and work for me from time to time. I also believe it was most improper for the Applicant to have continued to receive weekly notice payments from me during the time he was working with Wray & Associates without advising me of his new circumstances. In fact, he wrote to me on a regular basis acknowledging the receipt of the weekly payments but failed to mention at all his new employment situation. I am aware that the Applicant has an entitlement to accrued annual leave. Having read the Applicant's Affidavit I will now be in a position to calculate the entitlement and pay the Applicant accordingly." I have concluded that the notice payments were not conditional on the applicant being ready, willing and available to perform work during the notice period and that at no stage did the respondent intend that or state it to the applicant. On the contrary, the respondent wanted the applicant to leave on 10 February and terminated his employment on that date. Mason Gray Strange N.S.W. Limited v Eisdell and Others [1989] 31 AILR 271 and O.U. Norman International Pty Ltd v Baker and Others [1990] 32 AILR 434 are of no assistance or relevance. This is not a case of employees giving notice and of the employer waiving a continuing obligation to attend at work (Mason Gray). This is not a case of a former employee using, for the benefit of a competitor, information contained in a mailing list (Normal International). This is a case of a Patent Attorney terminated by an employer who did not want the employee to work at all or attend at the workplace during the period of notice. It was perfectly understandable and reasonable that the applicant would seek work as a patent attorney elsewhere as soon as possible. By doing so he has mitigated his loss although at the date of hearing there was no clear affirmative indication that his six months term of employment with Wray and Associates would be extended. However, the applicant's employment there from 13 March to 27 April (the date of hearing) was not the subject of any adverse comment by his new employer and I believe it likely that his employment there will continue and if not that the applicant is likely to quickly obtain further employment as a patent attorney. Nevertheless, the termination was harsh, unjust and unreasonable. The respondent may have been able to justify a termination after consultation on the basis that the operational requirements warranted technical assistants with different qualifications to the applicant. I have my doubts but it might have been possible to justify that position. The respondent may have been able to demonstrate that operational requirements justified taking steps (as he had) to employ these additional technical assistants even before he terminated the applicant. I have even more doubts about that proposition and a legitimate justification of it but, even assuming such justification, the applicant is entitled to reasonable compensation for an unfair, unjust and unreasonable termination. I do not accept the submission of counsel for the applicant that the applicant should be granted the maximum available compensation which would be $24,000 for six months employment. On the other hand, I do accept the submission of counsel for the applicant that reinstatement is impracticable. I have considered and rejected the possibility that the Applicant's employment might have continued indefinitely if the Respondent had consulted the Applicant, both in respect of the restructure and the performance issues said to be minor reasons for termination. I have taken account of and adopt the approach outlined by Wilcox CJ in Heaven and Earth Gallery Pty Ltd [1994] 126 ALR 233 at 244-247. I consider that there is a real possibility that if the Applicant had been accorded procedural fairness and had been adequately consulted nevertheless the Respondent would have, in due course and within a reasonably short time frame, terminated the employment because of his wish to use technical assistants with different qualifications. On the other hand, as in Wheeler v Philip Morris Ltd [1989] 97 ALR 282 at 311 in assessing compensation, I have taken account of the benefits which the Applicant enjoyed in the job from which he has been dismissed, including his statutory entitlement not to be dismissed otherwise than upon compliance with certain conditions. I have noted that the Applicant was a professional Patent Attorney who has only been paid 7 of the 12 weeks salary in lieu of notice. I have noted that the Applicant received no additional salary benefits by way of a severance benefit and no payments in lieu of long service leave which would have been due after one more year of employment. In all the circumstances substantial but not maximum compensation is warranted. In my view appropriate compensation in this case is $15,000 over and above the payments made from 10 February to 31 March and in addition to annual leave entitlements which should also be paid to the applicant if that has not already occurred. ORDER The respondent pay to the applicant compensation of $15,000. I certify that this and the preceding pages are a true copy of the Reasons for Judgment of Judicial Registrar Ryan. Associate : Date : 19 May 1995 Appearances: Counsel for the Applicant : T.H.F. Caspersz Solicitors for the Applicant : Parker and Parker Counsel for the Respondent : Mark Cuoma Solicitor for the Respondent : J A Long and Co Date of Hearing : 27 April 1995 (Perth) Judgment : 19 May 1995 (Melbourne)