Thompson v Taira (T&T) Pty Limited [1995] IRCA 432

CATCHWORDS INDUSTRIAL LAW - UNLAWFUL TERMINATION - NATURAL JUSTICE - PROCEDURAL FAIRNESS - WARNING to employees concerning their conduct or performance should be in writing where it is practical so to do - Meaning of the word "UNJUST" in section 170DE(2) Industrial Relations Act 1988 - The question of what regard is to be had to the ILO Termination of Employment Recommendation, 1982. INDUSTRIAL LAW - UNLAWFUL TERMINATION - Compensation for lost REMUNERATION - Social Security payments received by applicants are not to be deducted from sums ordered by way of compensation for lost remuneration. INDUSTRIAL LAW - UNLAWFUL TERMINATION - NATURAL JUSTICE - PROCEDURAL FAIRNESS - WARNING to be given before the decision to terminate employment is made, and must put the employee on notice that his or her job is in jeopardy. INTERNATIONAL LAW - The question of what regard is to be had to the ILO Termination of Employment Recommendation, 1982 - Meaning of the word "UNJUST" in section 170DE(2) Industrial Relations Act 1988 - Warnings to employees concerning their conduct or performance should be in writing where it is practical so to do. Industrial Relations Act 1988 ss 170CA, 170DC, 170DE, 170EA, 170EE Nicolson v Heaven and Earth Gallery Pty Limited (1994)126 ALR 233 Minister of State for Immigration and Ethnic Affairs v Ah Hin Teoh (1995) 128 ALR 353 Grahame Foxcroft v The Ink Group Pty Limited (1994) 57 IR 65 THOMPSON -v- TAIRA (T&T) PTY LIMITED No. NI 1582 1995 COURT: PATCH JR PLACE: CANBERRA DATE: 13 JULY 1995

INDUSTRIAL RELATIONS COURT OF AUSTRALIA NEW SOUTH WALES REGISTRY No. 1582 of 1995 BETWEEN: Thomas Glen THOMPSON Applicant AND: TAIRA (T&T) PTY LIMITED Respondent BEFORE: PATCH JR PLACE: CANBERRA DATE: 13 JULY 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 claims that his employment was unlawfully terminated and seeks re-instatement. Was there a "valid reason" to terminate the applicant's employment? The reason given by the respondent for the termination of the applicant's employment was a "breach of company procedure". Exhibit 2 is a document which sets out the procedural requirements for dealing with cash at the company's premises. The respondent company is a supermarket chain, which has a number of establishments throughout New South Wales. One of them is the store, Cannons Food Barn at Merimbula. The applicant was one of three assistant managers at that store. From time to time during the day, money would be taken from cash registers and taken to another part of the store. That money was called "pick up cash". When the money had been removed from the cash register and taken to another part of the store, (I presume an office), the required procedure, as set out in Exhibit "2" was as follows: "The seal will be broken and the cash counted and itemised on a posting envelope. The details on the posting envelope will then be confirmed with the details on the enclosed Change Slip/Pick Up Note. The Pick Up cash will then be re-counted, the value confirmed and made ready for posting into the two key safe. The Cash Pick Up Book will then be completed, in the following manner: (1) Insert the "Date", "Time" and relevant Operator Number. (2) Insert the Cash Register Operator's Name and the Supervisor's Name (or the name of the person making the Pick up). (3) Insert the Signatures of the two people who are going to make the actual posting into the two key safe (these people have both just counted the Pick up). (4) Insert the Envelope Number to be posted (this will be the next number from the Cash Posting Transaction Book). (5) Insert the value of the cash to be posted in the Amount column. NOTE. The Cash Pick Up Book is only completed when you have an actual cash pickup of excess note from a register, during operation. Now, we are ready to post the Pick Up into the two key safe. With the Cash Posting Transactions Book complete, the following: (1) Insert the "Date", "Time" and "Envelope Number" (these numbers go in numerical sequence starting at No. 1 each new day) (2) Insert the cash Posting Amount in the envelope to be posted. (3) Calculate and enter the Progressive Cash Total and insert. (4) Insert the signature of the two people who have counted the cash. Now, both people will post the envelope in the two key safe." The applicant agrees that he breached that procedure by not having another person present to separately count the money and to separately sign both the cash pick up book and the cash posting transactions book. The applicant also concedes that he was aware of that policy/procedure. Firstly because he had seen a copy of the document from which I have just quoted. And, secondly, because approximately two weeks before the termination of his employment there had been a meeting involving Mr Hardcastle, (the human resources manager for the company), the store manager and the three assistant managers (including the applicant), which had been specifically called to make clear to the local people the importance of following the correct procedure in relation to the counting and posting of cash. The reason that the applicant's employment was terminated, as I have said, was because of his breach of that procedure. In my opinion, when the actions of the applicant are examined objectively, they were not so serious as to warrant his dismissal at all, let alone his summary dismissal. There was no element of dishonesty involved, and there was no loss to the company. The error which was made (and highlighted the applicant's breach of procedure) was easily detectable and, in fact, easily detected. The error was "in office" only, that is to say, the correct figure was given to the bank and no time was wasted in dealing with the bank sorting out discrepancies. It was a very busy day that day, because there was a stocktake going on, and the applicant did what he did as a shortcut to avoid leaving money on the desk. I do not want to be misunderstood. What the applicant did was a breach of correct company procedure and it did warrant a warning being given to him, and being put on his personnel file. But his employment should not have been terminated for that particular breach of procedure. Section 170DE (1) of the Act is as follows: "[Termination must be for valid reasons] An employee 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." To put it simply, the senior management of the respondent company overreacted. There was not a "valid" reason for the termination of the applicant's employment. The termination of his employment was, for that reason alone, unlawful. Procedural Fairness - section 170DC Furthermore, in my opinion, the termination of the applicant's employment was a breach of section 170DC of the Act. That section is as follows: 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." It is perfectly clear that the applicant was given no opportunity to "defend himself against the allegation made". What happened when his employment was terminated is set out in his affidavit, exhibit A: "On the 1st March I started work at 1p.m. At 2.15p.m. I was called to the Manager's Office where Mr G Childs, Area Manager, Mr B Hockings, Store Manager, Mr J Petty, Assistant Manager and myself were present. Mr Childs spoke. He said, "Have you been told you made a mistake in the cash office on Sunday." I replied "Yes." Mr Childs said, "What you did was against Company Policy and the mistake has cost you your job'". That evidence of the applicant was uncontested. That is to say, no evidence was called to contradict it, and nor was it put to him in cross-examination that what he said was incorrect. Furthermore, it has the ring of truth about it. I accept what he says. It follows that he did not have an opportunity, before his employment was terminated, to respond to the allegation. There was no reason, furthermore, in reference to section 170DC(b), why the employer could not have given him the opportunity to defend himself. In Nicolson v Heaven and Earth Gallery Pty Ltd 126 ALR 233, Wilcox CJ, at page 243, when discussing section 170DC(a) said this: "The paragraph does not require any particular formality. But this does not mean that it is unimportant or capable of profunctory (sic) 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 affording the affected person an opportunity to present a case. The principle is well established in public administrative law. It was accepted into international labour law when Article 7 was inserted into 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 the 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." Here, the applicant was summarily dismissed. He could have been, and should have been, given the opportunity to explain his actions and to argue that a lesser penalty be imposed. That should have been done before the decision to terminate his employment was made. The termination of his employment was therefore a breach of section 170DC of the Act. Section 170DE(2) of the Act - "Unjust" Section 170DE(2) of the Act is as follows: "[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." For the same reasons that the lack of procedural fairness means that the termination of the applicant's employment was a breach of section 170DC of the Act, (the lack of justice involved in the summary nature of the applicant's dismissal and the failure to give him to opportunity to defend himself), the termination of his employment was "unjust" within the meaning of section 170DE(2) of the Act. Furthermore, the company had a written policy concerning the giving of warnings to employees before the termination of their employment. That written policy is contained in exhibit E under the heading "Official Warnings". I will not quote all of it, but the relevant parts are: "Your Store Manager and the management team attempt to operate on an understanding and fair basis. In order to maintain discipline and control throughout the supermarket, it is necessary to utilise the "Three Warnings/Termination" policy. This policy operates as it states. "Your third warning, will be your last warning. Any further indiscretion will result in your dismissal". And then the policy goes on to cite a number of specific examples saying: "Official warnings may be issued for a variety of reasons, a few specific examples follow: (a) Incorrect cash handling procedure." The document continues with other specific examples. It is clear that the applicant did engage in "incorrect cash handling procedure", which was a breach of company policy. The official warnings policy goes on to say: "If you receive an official warning, you will be required to sign the warning, to indicate your understanding of the severity and of the need to be given such a warning. Unsigned warnings are still considered to be warnings. An improved attitude and a positive change in performance can result in the cancellation of warnings. If you receive an official warning which you feel is either unnecessary, or unfair, you can bring your concern to the attention of your Store Manager, who may decide to investigate and arbitrate. Serious misconduct or insubordination will result in instant dismissal." The company breached its own procedure in a number of ways. Firstly, there were no warnings at all - discussions and statements that an employee must improve are not warnings. A warning must put the employee on notice that his or her job is in jeopardy. Secondly, there was nothing in writing, and the policy required that warnings be in writing, not simply oral. The termination of the applicant's employment, being in breach of the company's own procedural requirements, was "unjust" within the meaning of section 170DE(2) of the Act. The effect of the Internatiional Labour Organisation Termination of Employment Recommendation, 1982 The question arises in this case as to what regard must be had to the International Labour Organisation Termination of Employment Recommendation, 1982. Section 170CA(1) of the Act is as follows: "[Reason for Division defined] The object of this division is to give effect or further effect to: a) the Termination of Employment Convention; and b) the Termination of Employment Recommendation, 1982, which the general conference of the International Labour Organisation adopted on 22 June 1982, and is also known as Recommendation number 166, and a copy of the English text of which is set out in schedule 11." The title of the Recommendation is "Recommendation Concerning Termination of Employment at the Initiative of the Employer". Under the heading "Standards of General Application", there is a subheading "Procedure prior to or at the Time of Termination". Paragraph 8 under that subheading is as follows: "8. 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 a reasonable period of time for improvement has elapsed." A recent judgment of the High Court has set out the way in which international treaties are to be treated in Australian domestic law. In Minister For Immigration and Ethnic Affairs v Teoh (1995) 128 ALR 353, Mason CJ and Deane J, at page 361, said: "It is well established that the provisions of an international treaty to which Australia is a party do not form part of Australian law unless those provisions have been validly incorporated into our municipal law by statue. This principal has its foundation in the proposition that in our constitutional system the making and ratification of treaties fall within the province of the Executive and the exercise of its prerogative power whereas the making and the alteration of the law fall within the province of parliament not the Executive. So, a treaty which has not been incorporated into our municipal law cannot operate as a direct source of individual rights and obligations under that law." They then went on to say, referring to the United Nations Convention on the Rights of the Child: "But the fact that the Convention has not been incorporated into Australian law does not mean that its ratification holds no significance for Australian law. Where a statute of subordinate legislation is ambiguous, the courts should favour that construction which accords with Australia's obligations under a treaty or international convention to which Australia is a party, at least in those cases in which the legislation is enacted after, or in contemplation of, entry into, or ratification of, the relevant international instrument. That is because Parliament, prima facie, intends to give effect to Australia's obligations under international law. It is accepted that a statute is to be interpreted and applied, as far as its language permits, so that it is in conformity and not in conflict with the established rules of international law. The form in which this principle has been expressed might be thought to lend support to the view that the proposition enunciated in the preceding paragraph should be stated so as to require the courts to favour a construction, as far as the language of the legislation permits, that is in conformity and not in conflict with Australia's international obligations. That is indeed how we would regard the proposition as stated in the preceding paragraph. In this context, there are strong reasons for rejecting a narrow conception of ambiguity. If the language of the legislation is susceptible of a construction which is consistent with the terms of the international instrument and the obligations which it imposes on Australia, then that construction should prevail. So expressed, the principal is no more than a canon of construction and does not import the terms of the treaty or convention into our municipal law as a source of individual rights and obligations." One of the objects of Division 3 of Part VIA of the Act, as set out in section 170CA(1), is "to give effect or give further effect to," the Recommendation. I must therefore, have regard to the wording of that Recommendation in determining the meaning of the various sections of Part VIA, Division 3 of the Act, including the obligations imposed on employers as a result of that part of the Act. The Act does not, in terms, impose an obligation on "employers" to give "employees" a written warning in the terms of paragraph 8 of the Recommendation. I accept that, if it were the intention of the parliament to impose in all cases such a requirement, then the Act would specifically say so. Nonetheless, in view of the fact that one of the objects of the Act is to give effect to the Recommendation, and in view of the fact that the Recommendation is incorporated in the Act, in the sense that it is a Schedule to the Act, the absence of a written warning, where that could be appropriately and practically be given, is a significant factor to be taken into account on the question of whether or not an employer has breached the provisions of sections 170DC and section 170DE(2) of the Act. To put it another way, although I do not regard the Recommendation as necessarily binding, I do take it into account in providing significant guidance to the Court on the question of the proper procedures for an employer to follow if the termination of an employee's employment is not to be a breach of section 170DC of the Act, or "unjust" within the meaning of section 170DE(2). Furthermore, there are sound policy reasons why a written warning, stating that the employee's job is at risk and setting out the reasons why that is the case, should be given, where that written warning could appropriately and practically be given. It is in the interests of both parties that the potential for misunderstanding be minimised, and a written warning has that affect. Indeed, in this case, the policy of the respondent cited just that policy reason as a reason for giving written warnings. I should add, lest I be misunderstood, that each case has to be examined in the light of its own facts. The absence of a written warning is not necessarily determinative of the question. And there would be many circumstances in which the absence of a written warning would not necessarily mean that the termination of an employee's employment was in breach of the Act. Nonetheless, where it is practical so to do, warnings to employees concerning their conduct or performance should be in writing. In this case, company policy required warnings to be in writing, and for that reason alone, in my opinion, the termination of the applicant's employment was "unjust" and "unreasonable" within the meaning of section 170DE(2) of the Act. The effect of the Recommendation reinforces my opinion in this regard. Remedies The question arises as to whether or not it is impracticable to order the reinstatement of the applicant. Section 170EE(1) and section 170EE(2) of the Act, are as follows: "(1) [Orders] In respect of a contravention of a provision of this division, (other than section 170DB or 170DD) constituted by the termination of employment of an employee, the Court may make the following orders: (a) an order requiring the employer to reinstate the employee by: (i) reappointing the employee to the position in which the employee was employed immediately before the termination; or (ii) appointing the employee to another position on terms and conditions no less favourable than those on which the employee was employed immediately before the termination; and (b) if the Court makes an order under paragraph (a): (i) any order that it thinks necessary to maintain the continuity of the employee's employment; and (ii) an order requiring the employer to pay to the employee the remuneration lost by the employee because of the termination. (2) [Reinstatement impractical] If the Court thinks, in respect of a contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, that the reinstatement of the employee is impracticable, the Court may make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate: The applicant seeks reinstatement. Section 170EE requires the Court to first consider whether reinstatement is impracticable before considering the question of compensation or lost remuneration. There is a distinction between compensation in lieu of reinstatement, which may be awarded under subsection (2) of section 170EE of the Act, and an order requiring the employer to pay to the employee remuneration lost by the employee because of the termination, which may be awarded under subsection (1) of section 170EE. Compensation under subsection (2) may only be ordered if the Court finds that the reinstatement of the employee is impracticable. In the case of Nicolson v Heaven and Earth, cited above, Wilcox CJ, said, at page 244: "It is important to note that Parliament stopped short of requiring that, for general compensation to be available, reinstatement be impossible. The word "impracticable" requires and permits the Court to take into account all the circumstances of the case, relating to both the employer and the employee, and to evaluate the practicability of a reinstatement order in a commonsense way. If a reinstatement order is likely to impose unacceptable problems or embarrassments, or seriously affect productivity or harmony within the employer's business, it may be "impracticable" to order reinstatement, not withstanding that the job remains available." I approach the facts of this case bearing in mind what his Honour said in Nicolson v Heaven and Earth. In another case, Grahame Foxcroft v The Ink Group Pty Ltd (1994) 57 IR 65, Wilcox CJ said, at page 67: "Especially since the June 1994 amendments to part VIA of the Act, which substituted a new section 170EE, the legislative emphasis has been on reinstatement of unlawfully terminated employees." It follows that the primary remedy for an unlawful termination of employment is reinstatement - but that the Court should not order reinstatement if it is "impracticable". In my opinion, the reinstatement of the applicant is not impracticable. There would undoubtedly be some difficulties reintegrating him into the workforce after he has been dismissed, but that must often be the case when the Court orders reinstatement. The mere fact that there will be some difficulties does not mean that the reinstatement of the applicant would be impracticable. The store manager would have some difficulties, I am quite sure, (and he gave evidence to this effect, which I accept) working with the applicant in the short term. But I am confident that, given goodwill on behalf of both parties, and the exercise of simple common sense, the applicant will be able to re-establish a reasonably normal working relationship once more. I am sure that this experience has taught him the importance of abiding by company procedure, and he must know well that if he, in any serious way, breaches company procedure in the future, his employment would be in jeopardy. He would be foolish to put his job on the line with a similar breach of company procedure. I am not to be understood to be giving carte blanche to the employer to dismiss the applicant for a similar breach - that would have to be decided on the facts and circumstances of what happens in the future, by whatever Court were to determine that, if it were ever to come to Court. I am just saying that the applicant must know now the seriousness of his conduct if he were to commit a similar breach. The applicant's employment was terminated on 1 March 1995. He has been unemployed, therefore, for 134 days. He was in receipt, at the time of the termination of his employment, of an annual salary of $26,000.00 $26,000.00, divided by 365 (to give the daily rate), multiplied by 134, (which is the number of days of unemployment), comes to a sum of $9,545.20. I deduct from that one week's pay in lieu of notice which was given to the applicant. Going through the same process, but multiplying only by 7 this time, one week's pay comes to $498.63. The remuneration lost by the applicant as a result of the unlawful termination of his employment is therefore $9,046.57. I have considered the question as to whether or not I should reduce the amount to be paid to the applicant for lost remuneration by deducting the amount of unemployment benefit received by him since the termination of his employment. He received no unemployment benefit for the first 6 weeks. That is to say, the first day that the applicant received unemployment benefit would have been 13 April 1995. Thereafter, he received, according to his evidence, the gross sum of between $295.00 and $300.00 per week. Acting on the basis that that was $300.00 (gross) per week from and including 13 April until today, the applicant would have received about $3,942.85 (gross) in unemployment benefits. In my opinion, it would be bad policy to deduct that sum from the amount to be ordered for lost remuneration.. True it is that if the applicant does not repay that sum to the Department of Social Security he would receive a windfall. But, if I were to deduct social security benefits from the amount of remuneration which I am going to order the respondent to pay, that would mean that the burden for the unlawful termination of the applicant's employment would fall on the Commonwealth, and not where it should fall, on the employer. Furthermore, the Act empowers the Court to make "an order requiring the employer to pay to the employee the remuneration lost by the employee because of the termination". (My emphasis) The order I make is an order in exactly those terms. I make the following orders: (1) That the applicant be reinstated by the respondent by being reappointed forthwith to the position in which he was employed immediately before the termination of his employment; (2) That the respondent, within 21 days of today, pay to the applicant the sum of $9,046.57, being the remuneration lost by the applicant because of the unlawful termination of his employment; (3) That the period from 1 March 1995 until today, inclusive, be treated, for all purposes, as a period of continuous employment of the applicant by the respondent in the position occupied by the applicant immediately before the termination of his employment. I certify that the preceding eighteen (18) pages are a true copy of the Reasons for Judgment of Judicial Registrar Patch. Associate: Caroline Sternberg Date: 31 August 1995 Appearances: Applicant: In Person Respondent: Mr Mathew Reardon (Company accountant)