Worrall v The Precision Engine Parts Group Pty Ltd [1995] IRCA 386

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2263 of 1995 B E T W E E N RODNEY WORRALL Applicant A N D THE PRECISION ENGINE PARTS GROUP PTY LTD Respondent Before: Judicial Registrar Murphy Place: Melbourne Date: 18 August 1995 REASONS FOR JUDGMENT At about midday on 23 March 1995 Mr William Nitschke (Nitschke), on behalf of the Respondent, terminated the Applicant's employment as a phone clerk/storeman. In his application under Part VIA of the Industrial Relations Act (the Act) the Applicant sought compensation for breaches of the Act. At the hearing it was common ground that reinstatement to his former position was impracticable. Like many matters before this Court the key to unlocking the truth of the events of 23 March was said by the parties to lie in underlying interpersonal tensions between the main players, Nitschke and the Applicant. Resolving the truth of the competing testimony in matters of this type is never easy, particularly in the absence of corroborating contemporaneous documents. Background evidence The Applicant is not yet 17 years old. He commenced work with the Respondent, which is an importer and distributor to the trade of motor vehicle parts, as a casual junior in October 1993. He was then 15. During 1994 he was made permanent and his duties were primarily accepting telephone orders and then assembling and despatching the parts from the warehouse for those orders. He would pick the parts from the warehouse and pack them ready for dispatch by courier. As new stock came into the warehouse he would be responsible for packing it into the warehouse bays. The Victorian branch of the Respondent is based at Mount Waverley. The operation is small, consisting, during 1994, of a branch manager Ms Tina Beahan (Beahan), two sales clerks and the Applicant. During 1994 while Beahan was the manager she introduced the Applicant to various junior office duties in addition to his duties within the warehouse function of the Respondent. In late 1994 the Victorian branch was not performing and Nitschke, the son of the principal shareholder of the Respondent, Mr Bill Nitschke (Nitschke senior) took over as branch manager. Prior to Nitschke assuming the position of branch manager Beahan had been combining the duties of branch manager with duties as personal assistant to Nitschke senior. Nitschke commenced duties around Christmas 1994. Prior to Nitschke commencing duties the Applicant had been well regarded by the Respondent. He got on well with Nitschke senior and Beahan. He was encouraged by them and it was suggested that he had the potential to manage a branch of the business. As I have indicated he was given office duties by Beahan even to the extent that he believed that he was in charge of the office for a short period during that year. I accept the Respondent's evidence however that he was never the acting manager. In late 1994 he was awarded a $50.00 per week pay rise. The Events of January-March 1995 The Applicant was absent on two weeks holiday commencing 28 December 1994. Before he left Nitschke had a discussion with him to advise him that when he returned there would be some changes in the warehouse. At about the same time other staff were advised by Nitschke that he would be making changes. On 12 January the Applicant returned from his holidays and was approached by Nitschke. He was advised that the warehouse was to become smoke-free. The Applicant, a smoker, took exception to this and protested that he had permission from Nitschke senior and Beahan to smoke. A heated exchange occurred during which the Applicant used some strong language. Nitschke gave evidence that he recorded that he warned the Applicant "very strictly" not to talk to him like that. The Applicant invited Nitschke to immediately call Nitschke senior to clarify the matter. Nitschke, who documented the events in a memorandum, chose not to do so. He compromised by allowing the Applicant to continue to smoke but said that he had to clean his ash tray. Nitschke gave evidence that a week later he raised with the Applicant the need to ensure that parts were properly located in the warehouse bays. This was to continue with the system that Nitschke had put in place during the Applicant's absence on holidays to ensure that the warehouse was properly conducted and orders could be promptly and accurately despatched. Nitschke gave evidence that he found that the Applicant's response "was casual in his acceptance of what had to be done". Nitschke had the feeling that the Applicant did not like to be told what to do. It was his evidence that unless he picked the Applicant up on these work problems, they would have continued. Another incident occurred on 16 February when again the Applicant was told by Nitschke that stock had to be properly put away. Nitschke said that the Applicant "would have been warned" that it had to be done properly. Nitschke made a note of these two incidents. Another matter which Nitschke says he raised with the Applicant was his penchant for wearing "heavy metal" T-shirts. The Applicant owned several company windcheaters which he wore to work. In the summer months in the warehouse however he wore T-shirts which Nitschke found offensive. One was particularly offensive. Nitschke said he raised the issue of the Applicant's dress with him casually in the conversation which occurred before the Applicant went on holidays. The Applicant denied this. The gist of Nitschke's comment to the Applicant was that if the Applicant was to progress to management he would need to reconsider his standards of dress. The Applicant admitted that the question of T-shirts was raised by Nitschke but denied it was at the first discussion before his holiday. He claimed that the only discussion was a request for him not to wear a particular T-shirt which he complied with. He said the only other comments were just joking references. A fellow employee, Mr Ronald Thomas (Thomas) gave evidence that he found the T-shirts offensive and suggested to the Applicant that he should not wear them. He further said that the Applicant had conveyed to him that Nitschke had also suggested that he not wear them. The Applicant, according to Thomas, continued to wear the T-shirts. Nitschke conceded in cross-examination that, while he had asked the Applicant not to wear the T-shirts, he had never said there would be any consequences if he continued. The Events of 21-23 March One of the changes that Nitschke implemented was that one employee, Thomas, was to be on the road promoting the company's services. This left the Applicant, another employee, Mr Harrison, and Nitschke at the warehouse. In February Harrison left and was not replaced. This left the Applicant the primary person responsible for warehouse duties. Nitschke gave evidence that he and Thomas assisted when it was busy and they were available. The Applicant's evidence, however, was that he was mainly working alone. There is some dispute as to how busy the Applicant was. The Applicant claimed that, while January was quiet, he was generally required to process 15-25 orders per day and sometimes up to 50. In addition he was required to process orders under pressure to meet regular pick-ups by couriers throughout the day. Nitschke claimed that the Applicant was not really busy in his duties. A matter which had been of concern to Nitschke was the despatching of incorrect orders. It caused inconvenience to customers and damaged the Respondent's business. It should not have happened. Nitschke raised the issue with the Applicant on what he said were numerous occasions. Thomas gave evidence that this had also been raised with him and it was agreed between all employees that it was not good that these errors occurred and an effort should be made to pick the right stock. On 23 March Nitschke said that he received three phone calls relating to incorrect orders which had been despatched by the Applicant. He said that he approached the Applicant with the three invoices saying "We have a problem" with wrong orders. The Applicant had responded that he didn't see a problem. It was just a matter of sending out the correct order. Nitschke had then said that this was not acceptable as the customer had been disadvantaged. The Applicant then said that "If you get off your fat arse and come out here (to the warehouse) and do some f....ing work for once" there would not be a problem. Nitschke told him to calm down and invited him to comment on each of the incorrect invoices. The Applicant's response, according to Nitschke, was that "He didn't think there was a problem". Nitschke advised him that if that was his attitude to the matter "You are no good to me, get your bag and go home". The Applicant was allowed to call his mother. There were then two heated phone conversations between each of the Applicant's parents and Nitschke. The Applicant was then asked to leave the premises. At this stage an angry exchange occurred. In evidence each accused the other of making threats. The Applicant was subsequently paid one week's pay in lieu of notice. He then brought these proceedings. There was a real conflict in evidence as to the extent to which the issue of wrong orders had been raised. Nitschke maintained that up to 10% of the orders despatched by the Applicant were incorrect. He also said that he had brought the mistakes to the Applicant's attention but they continued to happen. It was put to him that he had never said that if there was another mistake or if the Applicant did not take more care, then he would be sacked. He replied: "No, I probably wouldn't have said it that harshly." He further said this: "And you certainly did not tell him that there would be consequences if it (the mistakes) did not stop? - Not verbally, no." The Applicant's version was that he rarely made mistakes and that he made only "about five or six" over the period that Nitschke was the branch manager. He admitted the three mistakes which Nitschke said he raised with him on 23 March. The Applicant maintained however that only one of those matters was raised on 23 March, with the other two being raised previously. The three invoices produced in court are all dated 21 March. The Respondent maintained that on one invoice the Applicant had distributed a chain that was "66 inch" instead of the "56 inch" required by the customer. The Applicant said that that was what he understood had been ordered over the telephone by the customer when he took the order down. The Applicant said that he had discussed the matter with Nitschke on 21 March and Nitschke had accepted his explanation as to the events. Nitschke said he regarded the error as "just lack of communication." The Applicant admitted that he was responsible for the other two mistakes. It was the Applicant's evidence that while he admitted that he had made errors, he had not made them to anywhere near the extent claimed by Nitschke. It was his further evidence that it had never been put to him by Nitschke that in the event that he continued to make mistakes in the despatching of orders his job would be in jeopardy. Nitschke admitted that he had never given the Applicant any written warning or counselling. He also admitted that at the time he was unfamiliar with the provisions of the Act and the Schedules to the Act. The events of 23 March contrast strongly with what seems, on the evidence, to have been an otherwise satisfactory working relationship between the Applicant and Nitschke. The two got on well despite the disagreement over smoking, which Nitschke described as "No big deal". Nitschke admitted that he regarded the Applicant as having quality and potential and being a good worker. An indication of the generally good relationship between the parties was the fact that on the day before the termination Nitschke acceded to a request by the Applicant to have the afternoon of 23 March off so that he could attend a concert. This was granted even though the Applicant was unable to make up the time the following day. One area of difference was the relations between the Applicant and Nitschke senior and the previous manager Beahan. The Applicant gave evidence that he was advised at the time he was awarded a $50.00 per week pay rise by Nitschke senior to keep an eye on his son. The Applicant claimed, but Nitschke denied, that Nitschke accused him of spying for his father. It was common ground that Nitschke told staff not to discuss the business of the Respondent with Beahan. Both Thomas and the Applicant said that they were told they would be sacked if they did so. Nitschke denied putting it in those terms but on this point I accept the evidence of the other two staff. The forceful nature of this warning is in contrast to the evidence discussed above in relation to the Applicant's conduct. The picture that emerges from the evidence about the Applicant's conduct is that while Nitschke brought various matters to the attention of the Applicant, he failed to fully bring home the seriousness with which he regarded those matters. I find on the basis of his own evidence that he failed to expressly indicate the consequences which would follow from a continuation of the Applicant's conduct and attitude. The proper way to characterise the actions of Nitschke is as "exhortation to improve." (Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199, 210). It follows from this finding that it is unnecessary to resolve the various conflicting accounts in the evidence. An example of a conflict is whether the Applicant ceased wearing the offensive T-shirt. The Applicant said he did, while Nitschke said there was no change. It was common ground, however, that Nitschke took no further action in relation to clothing apart from sarcastic jokes. On the whole I was more impressed with Nitschke's evidence than that of the Applicant and am content to rest my conclusion in this case on the Respondent's evidence. Did the Respondent Have a Valid Reason to Terminate the Applicant's Employment? Under s.170EDA(1) of the Act the Respondent carries the onus of proof that it had a valid reason pursuant to s.170DE(1) to terminate the Applicant's employment. In Selvachandran v Peteron Plastics Pty Ltd (Industrial Relations Court of Australia, Northrop J., 7 July 1995) the Court said: "In its context in sub-section 170DE(1), the adjective "valid" should be given the meaning of sound, defensible or well-founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of sub-section 170DE(1). At the same time the reason must be valid in the context of the employee's capacity or conduct or based upon the operational requirements of the employer's business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of a relationship between an employer and an employee where each has rights and privileges, and duties and obligations conferred and imposed on them. The provisions must "be applied in a practical, commonsense way to ensure that" the employer and employee are each treated equally ...". In that case the conduct of the employee relied upon by the employer was similar to that here. The employee had failed to adapt to change and had continued to perform clerical duties, including packing, incorrectly. The employer had issued a series of written and verbal warnings and subsequently terminated the employment. The employer was held to have a valid reason. In Drury v BHP Refractories Pty Ltd (Industrial Relations Court of Australia, Wilcox C.J., 16 June 1995) the conduct complained of was abusive language and insubordination. Wilcox C.J. did not characterise the conduct as serious misconduct and said this: "Having said all this, the fact remains that (the Applicant's) behaviour was unacceptable. I agree with Mr Raymond (the Respondent's general manager) that it did not constitute "serious misconduct", warranting instant dismissal. But it was behaviour that went beyond even the "give and take" atmosphere of a modern Australian workplace. It was disruptive behaviour that called into question the authority of the person who was in charge of the project. If continued after a clear warning, it was conduct that constituted a valid reason, connected with the operational requirements of the project, for (the Applicant's) termination; see s.170DE(1) of the Act. And, if the conduct continued after the written warning on the morning on 29 April, the termination would not have been harsh, unjust or unreasonable; see s.170DE(2)." Here the Respondent's valid reason was put as the "conduct of the Applicant," his "attitude and insubordination", and his "failure to respond to the need for change". It was submitted that the conduct and language used justified the termination. On one view of the evidence it could be said that the Respondent has discharged its onus of proof. Nitschke had raised the question of the T-shirts but received no response. He had brought the issue of proper stacking of shelves and incorrect packing of orders to the Applicant's attention but the mistakes continued. From the Applicant's point of view, however, Nitschke's actions were consistent with business as usual. Despite the blow-up, including abusive language, over smoking, the Applicant continued to smoke. Despite the comments about the T-shirts, he still wore them. Despite the errors no ultimatum was ever delivered. On this basis the Applicant was justified in telling his mother that he did not know why he had been terminated. Given the generally cordial working relationship between the parties prior to 23 March the Applicant had, in a sense, "got away with" his behaviour until that date. It is significant that the Respondent was unable to produce any documentary evidence to support Nitschke's evidence about warnings. As Nitschke said in relation to the Applicant's language "I sort of just let that ride for the moment until the day of his termination when it just went overboard." The conduct of the applicant over 21-23 March, and in particular his response and comments on 23 March, must be considered in the context of his past relationship with Nitschke. When this is done, it is difficult to characterise it as sufficiently serious to justify termination having regard to the approach of the Court in the two cases referred to above. I am not satisfied that the conduct was "serious misconduct" or conduct which constituted a "valid reason" pursuant to s.170DE(1) of the Act. Did the Respondent breach s.170DC of the Act? In Johns v Gunns Limited (Industrial Relations Court Australia, Northrop J., 18 May 1995) the learned judge indicated that s.170DC of the Act, and indeed s.170DE(2), only has application "if the employer establishes a valid reason or valid reasons for termination under s.170DE(1)". The matter has been fully argued however and I should indicate that I am not satisfied that the Respondent had discharged its obligation under s.170DC. It is clear from cases such as Nicolson (above) and Gibson v Bosmac Pty Ltd (Industrial Relations Court of Australia, Wilcox C.J., 5 May 1995) that the requirements of s.170DC are flexible but substantive. These may be summed up as requiring the employee to be given a "fair go". In Johns (above) Northrop J. said: "On general principles, in order for an employer to give an employee the opportunity to defend allegations made where the employee is in danger of having his or her employment terminated, the employer should state that the employee is in danger of having the employment terminated. This was not done in this case." In this case that certainly did not happen. It is clear that no real opportunity was given to the Applicant here to put any matters to the Respondent in relation to the reasons that the Respondent said justified his termination. Again there is a clear contrast between what happened in this case and what happened in Selvachandran (above) where the Applicant was the subject of a number of written warnings and counselling sessions. Similarly in Drury (above) a final warning had been issued. It is also appropriate to refer to the provisions of Article 9 of the Recommendation Concerning Termination of Employment (Schedule 11 to the Act) which provides: "The employment of a worker should not be terminated for unsatisfactory performance unless the employer has given the worker appropriate instructions and written warning and the worker continues to perform his duties unsatisfactorily after the reasonable period of time." While the matter must depend ultimately on the whole of the material before the Court and "the practical sphere of a relationship between an employer and employee" (Northrop J. in Selvachandran) (above)) I am satisfied here that the employer has not complied with its obligations under s.170DC of the Act. Remedy It was common ground in final submissions that reinstatement was impracticable in this case. The Applicant sought compensation on the basis that he had been unemployed since the date of his termination and had, to date, sustained a loss of $6,176.90. It was submitted that the Court should accept that it was unlikely that he would obtain employment in the short term given his unsuccessful efforts to date. On this basis it was submitted that the Applicant should be awarded a sum of $8,450.00 compensation being the maximum of 6 months' wages. In Nicolson (above) Wilcox C.J. indicated that in assessing compensation for a breach of the Act, it is appropriate to have regard to what would have occurred had the termination not occurred. Here, given the Applicant's attitude to his work as accepted by the Respondent, and the generally cordial relationship between the parties, I am satisfied that it was probable that his employment would have continued but for the events of 23 March 1995. I am not satisfied that within the next 6 months from 23 March it was likely that the Respondent would have lawfully terminated his employment or that the employment would have ceased in any event. On this basis, having regard to the losses which the Applicant has sustained and is likely to sustain, I am satisfied that an appropriate award of compensation is a sum of $8,450.00 being six months' wages at his weekly rate of $325.10 per week. MINUTES OF ORDERS THE COURT ORDERS: 1. That the Respondent pay to the Applicant the sum of $8,450.00 within 21 days of this date. 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 fifteen (15) pages are a true copy of the reasons for judgment of Judicial Registrar Murphy. Associate: Dated: 18 August 1995 Solicitors for the Applicant: Gill Kane & Brophy Counsel for the Applicant: Ms Melanie Young Solicitors for the Respondent: Maddock Lonie & Chisholm Counsel for the Respondent: Mr Ross Jackson Date of hearing: 31 July 1995 Date of judgment: 18 August 1995