C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - claim of UNLAWFUL TERMINATION - whether VALID REASON FOR TERMINATION - whether TERMINATION HARSH, UNJUST OR UNREASONABLE. INDUSTRIAL RELATIONS ACT 1988, Ss 170EA, 170DE, 170DC, 170EE Chris Karambelas v Compack Packaging Pty Ltd, IRCA Decision No. 178 of 1995 Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233 Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20 DOROTHY MAHER v CARBIDE INTERNATIONAL PTY LTD - WI 1101 of 1995 BEFORE: BOON JR PLACE: PERTH DATE: 16 JUNE 1995 IN THE INDUSTRIAL RELATIONS ) COURT OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) No. WI1101 of 1995 BETWEEN: DOROTHY MAHER - Applicant AND: CARBIDE INTERNATIONAL PTY LTD - Respondent MINUTE OF ORDERS BEFORE: BOON JR PLACE: PERTH DATE: 16 JUNE 1995 THE COURT ORDERS THAT: 1. The Respondent pay the Applicant the sum of $15,000 by way of compensation for the unlawful termination of her employment. 2. The amount of compensation be paid within 28 days of the date of this order. NB: Settlement and entry of Orders dealt with by Order 36 of the Industrial Relations Court Rules. IN THE INDUSTRIAL RELATIONS ) COURT OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) No. WI1101 of 1995 BETWEEN: DOROTHY MAHER - Applicant AND: CARBIDE INTERNATIONAL PTY LTD - Respondent BEFORE: BOON JR PLACE: PERTH DATE: 16 JUNE 1995 REASONS FOR JUDGMENT This is an application under Section 170EA of the Industrial Relations Act 1988 relating to the termination of the applicant's employment by the respondent. The applicant's position is that the respondent was motivated to terminate her employment by the fact that she gave evidence which did not support the respondent's case in an earlier hearing in this court. That earlier hearing arose out of the alleged unlawful termination of the employment of another former employee of the respondent. The respondent denies that this was the reason for the termination, and says that the applicant's employment was terminated for a valid reason on the basis that the value to the respondent of the work done by the applicant did not warrant her salary of $38,000 per annum. The respondent decided to abolish the applicant's position and replace it with a lower level clerical position with reduced duties. Alternatively, because of the economic difficulties faced by the company it was said by the respondent that the termination had an element of redundancy. In either event, the respondent contends that the termination was for a valid reason based on the operational requirements of the respondent's undertaking. The applicant says that there was no valid reason for termination and says that in any event the termination was harsh, unjust or unreasonable. BACKGROUND The respondent, Carbide International Pty Ltd, is a company which sells, amongst other things, tungsten carbide inserts for use in heavy machinery. The company was founded by its managing director, Alan Macdonald. In 1990 his wife, Rosalind Macdonald, became a director of the company and lent a total of $25,450 to the company in the form of a director's loan. Mrs Macdonald has qualifications in accountancy. Mr and Mrs Macdonald are the only two shareholders in the company. Up until mid 1993, the respondent's business was conducted from the Macdonald family home. In the latter part of 1990, Mrs Macdonald gave birth to twins. In September 1990, Mrs Macdonald was employed as Financial Director for the company and during her first year with the company this employment was part time. The workload gradually increased and the Macdonalds say that since February 1993 Mrs Macdonald has been employed on a full time basis with the company. Mrs Maher, the applicant, denies that Mrs Macdonald's work for the company could be classified as full time since July 1993 and that issue will be dealt with in more detail below. 0Between February 1993 and July 1993, Mrs Macdonald employed a full time nanny to look after the children. By mid 1993, the company had decided to expand its operations. Mr and Mrs Macdonald also decided that they wanted their children back at home and that Mrs Macdonald would spend more time with the twins. They decided to employ an office manager. Mrs Maher, the applicant, was employed by the respondent as its Office Manager and started work on 19 July 1993. Shortly after this, the respondent moved to rented accommodation away from the Macdonald family home. Until mid 1993, the company employed only one Sales Engineer, Gary Haar. He is still with the company. Around the time Mrs Maher started work with the respondent, the company employed two other Sales Engineers, David Wylie and Tony Butling. At the time the applicant started work with the respondent, the salaries of its employees were as follows: Alan Macdonald - initial salary of $900 per week ($46,800 per annum). - later $52,000 per annum plus a fully maintained vehicle Rosalind Macdonald - salary of $900 per week ($46,800 per annum) plus a fully maintained vehicle Gary Haar, Sales Manager - salary of $1,300 per week ($67,600 per annum) - later $1400 per week or $72,800 per annum plus a vehicle David Wylie, Sales Engineer - salary of $750 per week plus a vehicle Tony Butling, Sales Engineer - salary of $650 per week plus a vehicle David Wylie and Tony Butling were dismissed in April 1994. Two new Sales Engineers were hired during 1994 but both of them resigned within a few weeks and they were never replaced. Mrs Maher, the applicant, is 56 years of age and has extensive experience in office management. She has some qualifications in accounting and has always had accounting functions in every job she has held, although she has never portrayed herself as an accountant. Mrs Maher's evidence was that at her interviews she was only given a general outline as to the nature of the work she would be doing for the respondent. Mr Macdonald asked her what was the absolute minimum she needed "to live on" and in the course of these negotiations she told him $28,000 but made it clear that this was not the value she put on the job. She agreed to start work for $26,000 per annum on the basis that her salary was to be reviewed after four weeks. It soon became apparent to Mrs Maher that the position was more onerous and responsible than had originally been indicated to her. According to Mrs Maher, the workload of the position required at least one and a half employees, and she worked at least 52 hours per week. Mrs Maher had no objection to working the long hours, but felt that there was an inequity in what was being paid for her work relative to others within the company and the role as originally explained. On 24 July 1993, Mr Macdonald increased Mrs Maher's salary to $28,500 per annum. On 14 February 1994, her salary was increased to $31,100 per annum, on 4 July 1994 it was increased to $36,920 per annum and in late July 1994 it was increased to $38,220 per annum. Mr and Mrs Macdonald deny that the position was more onerous and responsible than indicated to Mrs Maher and deny that Mrs Maher necessarily worked a 52 hour week. The fact that Mrs Maher was paid a $38,000 salary, however, is consistent with the position having a significant amount of responsibility. Further, for reasons which will be dealt with below, I prefer the evidence of Mrs Maher to that of Mr and Mrs Macdonald to the extent that there is any inconsistency. THE WYLIE HEARING In mid 1994, David Wylie and Tony Butling brought claims in this court alleging that the termination of their employment by the respondent breached the provisions of the Industrial Relations Act. According to Mrs Maher, Mr Macdonald asked her in June 1994 if she would be prepared to give evidence for him if he needed it. Mrs Maher replied that she would but that if she did so she would be telling the truth. Mrs Maher was served by David Wylie with a subpoena to give evidence in a hearing on 16 and 17 January 1995. She gave her evidence on 16 January 1995, the first day of the hearing, and was driven to and from the court by Mr Macdonald, together with Gary Haar. When she gave her evidence, Mr Wylie's solicitor examined Mrs Maher about the events on Mr Wylie's birthday, and whether Mrs Maher knew of any warnings given to Mr Wylie by Mr Macdonald. Mrs Maher gave evidence that she knew of no such warnings. The claim was settled on the following day. Mrs Maher states that after the hearing on the first day, while she and Mr Macdonald were alone together waiting for the lifts outside the court, Mr Macdonald accused her of not supporting his story in court. On the following afternoon, when Mr Macdonald handed Mrs Maher the settlement cheque he had made up for Mr Wylie, he made similar remarks to her. Mrs Maher replied that she was under oath to tell the truth and asked him "What did you want me to do - lie?" In his affidavit, Mr Macdonald states at paragraph 43 "I was not aware that anything that DM [Dorothy Maher] had said in this court was contrary to any evidence presented by AM [Alan Macdonald] or GH [Gary Haar] nor that her appearance and evidence was in anyway detrimental to our case. AM and GH regarded all DM evidence as confirmation of our own evidence. At the end of the first day's hearing GH, DM and I left the court together, walked back to the car together, and returned to the office together. The evidence given by all three in the court was not discussed at all. DM did not attend the second day's hearing. The matter was settled early afternoon of Tuesday 17 January. Part of the settlement agreement, ratified by the court, was that the settlement terms remain confidential." The transcript shows that at the hearing of this matter when Mr Macdonald was cross-examined on 1 June 1995 in relation to Mrs Maher's evidence at the Wylie hearing, the following was said "Do you recall what Mrs Maher was examined on - what evidence she gave; what questions she was asked; what the issues were?---No. There were a lot of issues. I can recall some of them, but certainly not a lot of them. All right. Do you recall her being cross-examined by the solicitor for Mr Wylie in some detail about the events on the day of David Wylie's birthday?---Yes, I can recall some of that, yes. Can you recall what her evidence was about that day, in particular her evidence about the extent of Mr Wylie's attendance at the office?---No, not specifically. It was his birthday and some refreshments had been arranged later in the afternoon when he returned. What was the significance of Mr Wylie's birthday to the case?---I don't know that there was any significance to the case Was it not the case that you were alleging that he was given a warning on his birthday?---He was given a warning on that day, yes. So that was then and is now your contention?---That's right, yes. Is it not the case that Mrs Maher said that he was only in the office for about 10 minutes on that day and that was in the company of everybody else in the office and therefore he could not have - - -?---No, that wasn't said at all, and it wasn't the case either. So you are saying that Mrs Maher's evidence was not that he was only in the office for a very short period on that day?---As I recall it, that's right. Well, if it comes to that, the transcript will reveal that?---Well, as I said, that's how I recall it. As far as I am concerned it had no significance. Was Mrs Maher cross-examined in more general terms about her - whether Mr Wylie was given warnings?---Yes, I think so - I can't remember it for sure. Do you recall - is it not the case that her evidence was that as far as she was aware he had never been given any warnings?---No, that's not my recollection of it at all. So you say your evidence was not that. What do you recall her evidence as being on the question of warnings?---As I recall it, she thought that we had given him some verbal warnings. On the following day, when the cross-examination continued, Mr Macdonald was shown some notes of evidence prepared for the Wylie trial which said in part that "On 21 January 1994 Alan Macdonald gave David Wylie his first official advice that he must improve sales immediately or face dismissal." Twenty-first January 1995 was David Wylie's birthday. The following was said on the second day of Mr Macdonald's evidence "Do you still hold the view that Mrs Maher's evidence was that verbal warnings were given to Mr Wylie? Is that still your evidence?---That I gave Mr Wylie verbal warnings? No. Yesterday you said that Mrs Maher's evidence at the hearing, that Mrs Maher gave evidence that you had given David Wylie verbal warnings?---I think she's claimed yesterday that she wasn't aware that I had given him verbal warnings. Certainly that is her position but it was not your position yesterday, I am asking you what your position is today?---The same as it was yesterday. Did Mrs Maher's evidence at the hearing make any reference to verbal warnings?---I can't recall for sure, she - she - - - Right. So today you cannot recall for sure?---She - at the - at the hearing - at the Wylie hearing to the best of my recollection she said she couldn't state for sure whether or not I'd spoken to David Wylie after the drinks and refreshments we had to celebrate his birthday late in the afternoon. And the question wasn't asked of me in fact yesterday whether I had or not given him a warning, but I in fact I had, I spoke - I spoke to him --- No, no. The question that was asked of you - well, I think from memory you volunteered that Mrs Maher's evidence had been very helpful and that in fact she had confirmed that you had given Mr Wylie verbal warnings?---No, I didn't say she'd confirmed, it wasn't asked and I didn't say that. All right?---In fact I believe, and the transcript will show, I believe Mrs Maher said that she was not aware of me having given Mr Wylie any verbal warnings." Mr Macdonald's evidence was also that he had not said anything to Mrs Maher outside the court and was absolutely certain that he and Gary Haar had gone to the toilet together and had come out together after the Wylie trial. He said he had not been alone with Mrs Maher at any time outside the courts. The evidence given by Mr Macdonald on the second day of his verbal testimony after he was presented with a document prepared for the Wylie trial conflicted somewhat with his evidence on the first day and with his affidavit evidence. It also conflicted with Mrs Maher's recollection of the trial. For reasons which will be dealt with more fully below, on balance I prefer Mrs Maher's version. THE TERMINATION Mr and Mrs Macdonald's evidence was that on the weekend following the Wylie trial, they held long discussions about the financial position of the company. Mr Macdonald's evidence was that it had cost the company about $50,000 including legal costs to deal with the Wylie and Butling claims. They wanted to consider ways of cutting costs. It was on that weekend that they decided to terminate Mrs Maher's employment. They decided to employ a cheaper clerk/typist at the award rate of around $21,000 per year. Mr and Mrs Macdonald said that they discussed offering Mrs Maher the lower paid position but they decided that as she had said at her interview that she would not work for less than $28,000 per annum it was not considered to be an option. In his affidavit, Mr Macdonald said "Even so I was concerned about any legal obligation that the company may have to offer her the position", and he sought legal advice as to whether they were under a legal obligation to offer the new position to Mrs Maher. The advice they received was that there was no such obligation. Mr Macdonald said in his evidence that if they had known that Mrs Maher had been prepared to accept $415 a week, she would still be working for them. On Monday 23 January 1995, Mr Macdonald met with Gary Haar and Mrs Maher and announced cutbacks, which he said were due to the economic situation of the company. They included a salary cut for Mr and Mrs Macdonald to $600 per week each; the discontinuation of a cleaning service for the office and for the Macdonald home; cutbacks in stationery; and cutbacks in the use of electricity. On Monday 30 January 1995, Mrs Maher was called into a meeting with Mr and Mrs Macdonald and Gary Haar. According to Mrs Maher, Mr Macdonald said that he was sure she was aware of the poor economic state of the company. He said that through no fault of Mrs Maher's, but over the previous seven months, the company had experienced losses, and that he and Mrs Macdonald had decided to do away with the position of Office Manager and that they were going to employ a younger, cheaper clerk/typist. It was denied by the Macdonalds that the word "younger" was used and in the end that does not make any difference to the outcome of the case. Mr Macdonald said that they had discussed all options and had no alternative but to terminate Mrs Maher's services and make the position redundant. They gave her two weeks' notice and to "ease the pain" they would pay an additional two weeks pay. That additional two weeks' pay was not ultimately paid. It is common ground that Mrs Maher said that there must be other options available. Mrs Maher wanted to have a round table discussion to see what alternatives there were to termination but this was not accepted by Mr Macdonald because he and Mrs Macdonald had already made up their minds. According to Mrs Maher, Mrs Macdonald said the only other option was for her to get a job and with the cost of childcare that was not viable. It was denied by Mr and Mrs Macdonald that this was said at the termination meeting. Gary Haar, in his evidence, stated that he did recall Mrs Macdonald saying that. To the extent that there is any inconsistency, I prefer the evidence of Mrs Maher over that of Mr and Mrs Macdonald. THE FINANCIAL POSITION OF THE RESPONDENT Mr Macdonald states that as a result of the Wylie and Butling cases, the company faced a total cost of $50,000. This meant that the company had to drastically reduce overheads. The steps taken by the company included those already listed and the termination of Mrs Maher. Mr and Mrs Macdonald also took out a personal loan of $55,000 using a home unit owned by them as security. Mr Macdonald said that the company was refused additional funds by way of an increased overdraft facility to pay creditors because of the poor financial state of the company. Mrs Maher's position is that whilst she acknowledges that there had been some falling off in sales, she does not accept that there was a true financial crisis facing the business such that her retrenchment was required, if the company limited itself to business related expenses. Mrs Maher believes that the accounts of the respondent company were manipulated by Mr Macdonald through the inclusion of non business related expenses to minimise profit for tax purposes. She states that if these expenditures had been allocated correctly, it would have been possible to retain her services. In her affidavits, Mrs Maher has listed a number of examples of the ways in which expenses were improperly allocated as business expenses. The relevance of these allegations will be dealt with below. It is not necessary to go into all of those allegations in detail here. Paragraph 108 of Mrs Maher's affidavit, sworn 3 May 1995, reads as follows: "By reference to the information set out above, the following amounts at least were treated as business expenses during the period of my employment which I believe could not properly be treated as business expenses in total, or at least could not properly be substantiated as business expenses: Expense Value Salary - Mrs Macdonald (paid $37,000p.a. $55,000 more than commercially realistic for 78 weeks) Salary - Mr Macdonald (arguably more than $ ? commercially realistic) Toyota Land Cruiser (deposit) $14,125 Travel Expenses $28,000 Wine $ 2,069 Home Telephone $ 1,000 Cleaning $ 3,500 Total $104,194 The difference in annual salary between myself and my replacement was $16,640 (ie $38,220 - $21,580)." The most significant example given was that of Mrs Macdonald's salary. Mr and Mrs Macdonald both claim that Mrs Macdonald is a full time employee of the company. Mrs Macdonald is paid a full time salary by the company. It was maintained by Mr and Mrs Macdonald that from the latter part of 1993 Mrs Macdonald worked in the office almost every Monday and Friday for a full day on each occasion. It was said that Mrs Macdonald worked at home for the rest of the week including evenings and weekends if that was necessary in order to fit in certain activities during the three week days the children were with her. During 1994 the children attended kindergarten on two days each week for 21/2 hours each time. The duties listed by Mrs Macdonald in her affidavit include the following: "1. Weekly tasks included writing up cash payments journal, bank reconciliation, directors' loan accounts, worksheets on all motor vehicle expenditures, overhead worksheets. 2. Setting up and keeping up with superannuation and fringe benefits tax laws, reading all company taxation and wages laws which was all done at home. 3. Annual duties included keeping the secretarial volume up to date, preparing group certificates, preparing wage figures for insurance, preparation of annual returns, fringe benefit tax return, company accounts. 4. Some one off duties included filling in for Mr Macdonald while he was away on business trips, filling in for the Office Manager if she was away on sickness or holidays, attending on overseas business trips including to Singapore and England. 5. Preparation of packed lunches for every local car trip by Mr Macdonald and passengers, purchasing and packing of supplies for crews going to field meetings, entertaining at home and at restaurants of overseas visitors, breakfast and morning teas for visiting farmers who come a long way to purchase products on weekends during the seeding season, and cleaning company cars. " It was significant that both Mr and Mrs Macdonald maintained that Mrs Macdonald worked in the office for full days twice a week with few exceptions. Gary Haar gave evidence that Mrs Macdonald was often there at the office. I discount his evidence as it was obvious both from Mr Haar's demeanour and responses that he was doing his best to protect his employers' interests. Mrs Maher's evidence is that after she herself started work with the company in July 1993 Mrs Macdonald was certainly not a full time employee of the company. When Mrs Maher started work, she was told by Mrs Macdonald that Mrs Macdonald would be concentrating on the activities of her twin children. Mrs Maher said that from mid 1993 Mrs Macdonald would come into the office on Fridays and would first do personal accounts and correspondence. When that was done, she would begin by writing up the company's cash book. She would normally be gone by 3.00 pm. In October 1993, Mrs Macdonald had told Mrs Maher that she felt she would only need to come in once a month to write up the cash book, and when necessary prepare the other financial documents. Mrs Maher's evidence was that with a few exceptions such as when Mrs Maher herself went to Sydney for six working days, Mrs Macdonald would have spent four hours at most per month is the office on business related activities. This evidence was supported by David Wylie. Mr Wylie said that although he was not in the office all the time, the impression anyone who worked in the office would get was that Mrs Macdonald was not a full time employee. She was rarely there, and was not there on Mondays and Fridays on a regular basis. He said that in his nine months with the company he saw Mrs Macdonald at the office perhaps half a dozen times. Although I accept that Mrs Macdonald did perform work for the company at home, on balance I am unable to accept that she carried anywhere near a full time workload as Financial Controller for the company. Mrs Maher's duties involved a lot of general accounting and recording work and this reduced Mrs Macdonald's workload significantly. Further, throughout the hearing there were several references to Mrs Macdonald having the children with her when she was in the office. When Mrs Maher was employed, Mrs Macdonald had made a decision to spend more time with her children and that is what she did. This is further supported by Mrs Macdonald's statement upon termination to Mrs Maher that the only other option was for Mrs Macdonald to get a job, but that cost of childcare was too great to make this option viable. It is unrealistic to say that her workload justified a $37,000 a year salary. Mrs Maher further criticises Mr Macdonald's decision to purchase a new expensive Toyota Land Cruiser at a time when the company was said to be experiencing a downturn in sales. MRS MAHER'S REPLACEMENT On 1 February 1995, the company placed an advertisement in the newspaper seeking the following: "Clerk/Typist: general office procedures, phone answering, typing, wordprocessing and PC computer skills required". Joyce Cornwill was appointed. Mrs Maher has visited the office on a number of occasions and has seen Ms Cornwill performing a number of the functions previously performed by herself. I am satisfied from the evidence of Ms Cornwill that she only performs part of Mrs Maher's previous functions. Ms Cornwill told the court that she is not fully occupied most of the time and that she has been told that she may read or do crosswords if she has nothing to do. Mr and Mrs Macdonald both gave evidence that they would employ a part-time clerk/typist if they could but that they needed someone there full time to occupy the office and answer the telephone if other staff are on the road. Mrs Maher's evidence is that prior to her termination she was as fully occupied on company business as she had always been, with the exception of only one day when things were fairly quiet. The nature of Mrs Maher's duties, however, had changed with the changing structure of the company. She did a lot of work to help Gary Haar and Mr Macdonald, and also performed some accounting functions to assist Mrs Macdonald. She also performed some of the basic sales functions of the company as part of her duties. Given that Gary Haar's evidence was that the respondent was still very busy and had a heavy workload, and given that the company was supposed to be experiencing financial difficulties, I find it surprising that Mr Macdonald encouraged one of his employees to read books and do crosswords during quiet times, thereby being completely unproductive. From Mrs Maher's evidence I am satisfied that there were many routine or mundane tasks which could easily have been undertaken by Ms Cornwill. This raises the suspicion that Mr and Mrs Macdonald were trying to restrict Ms Cornwill's duties to make Mrs Maher's termination look more like a redundancy. Because Mr Macdonald and Mr Haar are extremely busy I am unable to accept that there was not enough work for Mrs Maher (or Ms Cornwill) to do. The question of the value to be placed on that work is, of course, a separate matter. THE CREDIBILITY OF THE WITNESSES I found Mrs Maher to be an extremely strong and credible witness. She remained firm in her evidence and was unshaken during cross-examination. There was nothing about her demeanour which would cause me to doubt her evidence. She was confident in what she was saying and was able to provide many examples to support her assertions. Having said that, it does not necessarily follow that this court accepts all of the examples put forward by Mrs Maher of allegedly unwise financial decisions made by Mr Macdonald as proven. It is not necessary for me to decide many of those matters here. I had several reasons to doubt the credibility of Mr and Mrs Macdonald. In the first place, Mr Macdonald said that Mrs Maher's evidence in the Wylie case played no part in his decision to terminate her employment. There were inconsistencies in Mr Macdonald's evidence in relation to the Wylie case which have already been referred to above. I do not accept Mr Macdonald's initial stance that Mrs Maher's evidence was of no significance. Secondly, Mr Macdonald stated that Mrs Maher was a loyal, hardworking and respected employee and that he was not keen to get rid of her. This is inconsistent with him seeking legal advice on whether he had an obligation to offer Mrs Maher the lower paid position. Thirdly, the fact that Mr Macdonald was absolutely certain that he had spent no time alone outside the lifts with Mrs Maher after the Wylie trial did not ring true. Mr Haar had no such certainty as the event of course had no significance to him. Mrs Maher's recollection was clear because the event did hold significance for her. Mrs Macdonald's assertion that she did not know anything about what happened at the Wylie hearing was inconsistent with her stance that she was a full time, fully involved director of the company. Mr and Mrs Macdonald's evidence that Mrs Macdonald was a full time employee, worked 371/2hours a week for the company and that Mrs Macdonald worked two full days a week at the office was not supported by the evidence. It was also apparent that Mr Macdonald had at times claimed 100% of the rent and metered telephone calls from his home telephone as a business expense. Similarly, Mr Macdonald claimed that 100% of the use of his vehicle was for company business. Mrs Macdonald claimed that over 70% of her own vehicle use was for company business. This is unlikely to be accurate given the fact that the Macdonalds have no other vehicle for private use. Further, at the beginning of the hearing an order was made for the exclusion of witnesses. I specifically mentioned that witnesses were not to discuss the evidence with each other. At the end of the second day, Mr Macdonald in the course of cross-examination admitted that he had raised certain aspects of Mrs Maher's evidence with Mrs Macdonald. Mrs Macdonald had remained out of court and had not heard Mrs Maher's evidence. On the following day, Mrs Macdonald denied that Mr Macdonald had discussed Mrs Maher's evidence with her. Further, the position with Joyce Cornwill being advised that she was free to read books and do crosswords if she was not busy has raised some doubts in my mind as to the credibility of Mr Macdonald. For all of these reasons, I prefer Mrs Maher's evidence to that of Mr and Mrs Macdonald to the extent of there being any inconsistencies. THE REASONS FOR TERMINATION It is sometimes difficult to judge what has motivated a person to make a decision. There are several reasons however why I accept on balance that in terminating Mrs Maher's employment, Mr and Mrs Macdonald were at least in part motivated by their disapproval of the evidence Mrs Maher gave at the Wylie hearing. Firstly, I have already said that I accept Mrs Maher's evidence that Mr Macdonald expressed to her on two occasions his disapproval of the evidence she gave at the Wylie hearing. Secondly, the decision to terminate was made within days of the Wylie hearing. Mr Macdonald's evidence in relation to the Wylie trial caused me to question his motives. He moved from a position in which he stated that Mrs Maher's evidence had supported his evidence, to saying that it was of no significance, to saying that Mrs Maher had said that she was not aware of him having given Mr Wylie any verbal warnings. Mrs Maher's evidence could not be seen as supporting his case. More importantly, although he said that he was not keen to "get rid of" Mrs Maher, on his own evidence he sought legal advice as to whether he had an obligation to offer the new position to Mrs Maher. This suggests he was, in fact, determined to terminate her employment even if she had been prepared to accept the lower paid position. This could not, in my view, amount to a valid reason for terminating Mrs Maher's employment within the meaning of Section 170DE of the Act. The respondent's argument is that Mrs Maher's employment was terminated for a valid reason based on the operational requirements of the undertaking within the meaning of Section 170DE. It is said that management was entitled to make a decision that Mrs Maher's workload did not justify her higher salary. I accept that in general terms the management of a company has the right to make such decisions as it considers appropriate in relation to the affairs of the company. This general right, however, is tempered by the requirements of various types of legislation. In this case, in deciding to terminate Mrs Maher's employment, Mr and Mrs Macdonald had to comply with the requirements of the Industrial Relations Act. Although I have already found that Mr and Mrs Macdonald were in part motivated by their disapproval of Mrs Maher in relation to the evidence she gave at the Wylie trial, I also accept that in part they were motivated by the poor financial situation of the company. Sales had fallen off, the company had had to make a large payment to Mr Wylie and Mr Butling and to solicitors, and the company needed to cut costs. In this way, the decision to terminate was in part based on the operational requirements of the respondent's undertaking. Even in such cases, however, the employer must consult with the employee and, in appropriate cases, with a relevant union to avoid breaching Section 170DE(2) of the Act. This is clear from a number of decisions in this court. These cases are listed by Judicial Registrar Murphy in Chris Karambelas v Compack Packaging Pty Ltd IRCA Decision No. 178 of 1995. In Mrs Maher's case, even if this was purely a case of redundancy, it is acknowledged by the respondent that there was no attempt at consultation or discussion with Mrs Maher. In fact, when Mrs Maher suggested a round table discussion to consider options, it was flatly refused by Mr and Mrs Macdonald. The respondent argues that the only breach of Section 170DE which occurred was procedural in that there was no consultation. It was said that in considering the appropriate remedy, therefore, this court must on the authority of Wilcox CJ in Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233 look at whether Mrs Maher's employment would have lasted much longer in any event. Counsel for the applicant, on the other hand, argued that the breach of Section 170DE was not just procedural but also substantive. This court, in considering what would have been the likely position if there had been consultation, must pay regard not to what Mr and Mrs Macdonald were in fact likely to have done, but what they ought to have done if they had been performing their functions as directors objectively. It was said, and I accept on the evidence, that Mr and Mrs Macdonald were motivated by self interest in making their decisions as directors, including the decision to terminate Mrs Maher. Their self interest was evidenced in a number of ways, including the decision to nominate Mrs Macdonald as a full time employee and pay her a salary higher than that which would have been reasonable remuneration for her contribution to the company. In this way it is sometimes appropriate to go behind management decisions. As Wilcox CJ said in the Nicolson v Heaven & Earth case, to assume that the employee would have been dismissed anyway devalues Section 170DC to the point of redundancy. In that case, Wilcox CJ referred to dicta in Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20, in which the court proceeded on the basis that a reasonable employer would not have employed a "no smoking" policy inflexibly (my emphasis). The standard seems to be that of a reasonable employer and implies an objective test. I find that the termination of Mrs Maher's employment was unjust and unreasonable within the meaning of Section 170DE(2) of the Act. REMEDY I have little doubt that Mrs Maher was an extremely hardworking employee, whose efforts were a considerable asset to the company. I am unable to accept that if Mr and Mrs Macdonald had been acting reasonably they would have terminated her employment in any event. There was no friction between the parties prior to the Wylie hearing. I am also unable to accept that if her employment had continued, that Mrs Maher would have been paid only $415 per week. A reasonable employer would have assessed the entire situation and would have concluded that Mrs Maher's contribution to the company would have been worth considerably more than $21,000 per year. A number of options would have been possible. One was to cut Mrs Macdonald's salary to a more realistic level. Another would have been to reduce the amount of overseas and interstate travel undertaken by Mr and Mrs Macdonald. Another possibility would have been to reduce Mrs Maher's salary to an amount of say $30,000 per annum as well as reduce her workload and duties. Although the primary remedy under the Act is reinstatement, I am satisfied that it would be impracticable to reinstate Mrs Maher, primarily because of ill feeling between the parties. Mrs Maher is 56 years of age and has been unable to find alternative employment despite her valuable work experience. Under Section 170EE, in working out the amount of compensation, the court is to have regard to the amount of remuneration the employee would have received, or would have been likely to have received if the employer had not terminated the employment. In view of Mrs Maher's age and the fact that she has already been unemployed for almost five months, I consider that it is unlikely that she will be successful in obtaining employment in the near future. Accordingly I consider that an award of $15,000 is appropriate compensation in this case. I certify that this and the preceding 19 pages are a true copy of reasons for judgment of Judicial Registrar Boon. Associate: Date: Counsel for the Applicant: Mr Richard Farrell Solicitor for the Applicant: Richard Farrell Representative for the Respondent: Mr D M Jones of the Chamber of Commerce and Industry of Western Australia (Inc) Date of Hearing: 31 May 1995 & 1 and 2 June 1995 Date of Judgment: 16 June 1995