CATCHWORDS INDUSTRIAL LAW - UNLAWFUL TERMINATION - HARSH - CONDUCT and PERFORMANCE Industrial Relations Act 1988 ss 170DB, 170DE, 170EA Gibson v Bosmac Pty Limited number NI 380/94, (unreported, Wilcox CJ, 5 May 1995) Beltran -v- Farnell Electronic Components Pty Limited No. NI 1637 of 1995 COURT: PATCH JR PLACE: SYDNEY DATE: 19 JULY 1995 INDUSTRIAL RELATIONS COURT OF AUSTRALIA NEW SOUTH WALES REGISTRY No. NI 1637 of 1995 BETWEEN: Beltran Applicant AND: Farnell Electronic Respondent BEFORE: PATCH JR PLACE: SYDNEY DATE: 19 JULY 1995 REASONS FOR JUDGMENT (Delivered ex tempore, revised from transcript) This is an application under section 170EA of the Industrial Relations Act ("the Act"). The applicant seeks compensation and damages for failure to be given pay in lieu of notice. He does not seek reinstatement. Reinstatement I am informed and accept, as it seems to be common ground, that the personal relationships in the workplace have deteriorated now to such an extent that it would be impractical to order his reinstatement, if I were to find that the termination of his employment was unlawful. Was there a valid reason for the termination of the Applicant's employment? The Act imposes the onus upon an employer to prove that there was a valid reason, or reasons, for the termination of the applicant's employment. Section 170DE (1) of the Act is as follows: "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." The reason put forward by the employer to justify the termination of the applicant's employment is a refusal to carry out a reasonable and lawful request. There was some dispute as to the exact events of 6 March 1995 and the exact circumstances which led to the termination of the applicant's employment on that day. However, it seems clear, even on the applicant's own evidence, that he was requested by his employer to check the bar codes on goods that he had picked out of the warehouse to make sure that his bar code was on them. The respondent employer is a company which provides electronic components and other related things to business and governments all over Australia. It has a large warehouse at Chester Hill in Sydney. The warehouse is a large one - 20,000 square feet in size. Orders are received in the office of the company, which are then sent down to the warehouse via a computer. The computer prints out order forms and storemen in the warehouse then are randomly, according to availability, assigned the order forms. They then go and get the goods from where they are stored in the warehouse. Goods stored in the warehouse are stored in accordance with a system involving numbers and letters by which the place in which they are stored, and the particular goods, can be identified. The storemen are trained to identify the correct goods in the correct place. Indeed, it is very important that they do so, because the respondent company prides itself upon quality of service, which must substantially mean getting the correct goods in the correct quantity to the correct customer. Obviously, it is important for the business of the respondent that that occurs routinely and that the frequency of mistakes is minimised. It is also important for the business of the respondent that, when mistakes do occur, (as they inevitably must occur by virtue of the large number of detailed transactions that the storemen have to perform on a daily basis), that those mistakes can be sheeted home to the workers responsible, in order to be able to identify those workers, counsel those whose mistake rate is too high, and eventually terminate the employment of those workers whose mistake rate remains too high. The system by which workers are identified is this: When an order form is used by one of the storemen, he has to put on it a stick-on label (from a roll of such labels) which has his own personalised bar code. This bar code can be scanned and the name of the worker can be readily ascertained. There is no doubt that the storemen knew that this was important and knew of the instructions that they had to do this. The evidence establishes to my satisfaction that the applicant knew about the system and that he had, in the period of more than four years during which he had worked for the respondent, routinely followed it. His mistake rate was certainly no worse than an average storeman, and possibly a bit better. On 6 March the warehouse supervisor, Mr Barry Sterry, noticed that the bar code on one of the order forms on or near - the evidence varies somewhat, but it does not really matter - on or near the applicant's trolley, had a bar code belonging to another storeman, not the applicant. When he questioned the applicant about this the applicant gave an answer to the effect that he had no idea how that had happened. The applicant also said, and I accept that it was the fact of the matter, that he had "picked" that order - that is to say, he had been the storeman who got those particular goods from the particular spots in the warehouse where they were stored. This is important, because Mr Sterry then investigated that assertion of the applicant. He went to the worker whose bar code it was that was on the order form, and questioned him. The worker said that he, the worker, had no idea how that bar code had got onto that order form. The storeman that Mr Sterry spoke to did not say that he had been the person who had picked the goods from the warehouse. In other words, there can be no allegation here that the applicant had himself taken goods from the other storeman's trolley or workplace and put them on to his own trolley in a dishonest attempt to claim credit for work performed by someone else. After that, however, Mr Sterry was on guard. It had happened once before and he thought it might happen again. So he kept an eye on the applicant during the course of the day. In particular, he kept an eye on the bar codes on the applicant's order forms, to make sure that everything was in order. He twice spoke to the applicant during the course of the day. On the applicant's own evidence (in his affidavit which is Exhibit 1), Mr Sterry said to him, "Are you keeping an eye on the bar codes?" The applicant replied, "I told you I'm doing my job. Look, I'm putting my bar codes". Then the applicant said, according to his evidence, "Now as far as I'm concerned I'm doing my job properly. If someone wants to change the bar codes I'm not going to waste my time worrying about it". Mr Sterry said, "Are you refusing to check them?" The applicant said, "It's not my responsibility". That was a refusal by the applicant to check the bar codes to ensure that his bar code was on the order form in respect of the work that he was doing. Just before 3 o'clock in the afternoon, through the public address system, Mr John Deering asked the applicant to go up to his office. Mr John Deering was the financial controller of the respondent company, and the person in charge of the day-to-day running of the company when Mr Oxborough, the managing director, was away. Mr Oxborough was away that day. So for practical purposes, Mr Deering was in charge on 6 March. Mr Sterry had earlier that day gone and spoken to Mr Deering and informed him that the applicant was refusing to check the bar codes on the order forms in respect of the work that he had done. So, Mr Deering got the applicant up to his office to sort out the problem. It is not necessary for me to decide between the competing versions of the conversation that occurred in Mr Deering's office after the applicant went up there because, even on the applicant's evidence, it is clear that the applicant continued to refuse to carry out the request of, initially Mr Sterry, and then Mr Deering. I will quote from the applicant's affidavit, exhibit "1": Present were John Deering, Barry Sterry (my supervisor) and myself. John asked Barry to tell his side of the story, after he finished he turned to me and said words to the following effect: "Do you agree with that?" I replied: "You don't want to hear my side of the story - you always take his side anyway." John said: "Is it so hard for you to check and make sure that the orders have your barcodes on after you pick them?" I said, "The point is, that you expect us to worry about picking enough lines, don't make any mistakes, put fragile parts in foam, make sure we are picking the right parts and put barcodes on our order. So really I haven't got time to be no detective, that's Barry's job." He said: "Are you refusing to do what we are asking?" I said: "I believe it's not my responsibility - and if you sack me you wouldn't give a shit - you could replace me in five minutes and that's what Barry wants." John said: "Well, your service with the company is now terminated. Barry will escort you to get your things and get off the premises." Now, firstly, the applicant was asked, "Do you agree with that?" In other words, he was given the opportunity to tell Mr Deering his version of the events and he refused, declined that opportunity, saying, "You don't want to hear my side of the story, you always take his side anyway". Mr Deering obviously did want to hear the applicant's side of the story and the applicant's assertion that Mr Deering did not want that is incorrect. Secondly, it is clear that the applicant, at least by the time of that interview with Mr Deering, knew that the request that was being focused on was the request for him to - and I quote again from his affidavit: "to check and make sure that the orders have your bar codes on after you pick them". As I said, the bar code system was important for the commercial operations of the respondent corporation. This, therefore, was a reasonable request by Mr Sterry and Mr Deering. It was not a pedantic insistence upon some relatively trivial procedure, but was based on an important commercial consideration with important ramifications. Furthermore, the applicant's refusal to carry out an apparently reasonable request would, if tolerated, have undermined the authority of management in that particular work place. For these reasons, in my opinion, the respondent has discharged the onus of proving that the termination of the applicant's employment was for a valid reason. Has the applicant proven that the termination of his employment was "harsh" or "unjust" or "unreasonable" within the meaning of section 170DE(2) of the Act? I therefore turn to consideration of whether or not the applicant has discharged his onus to prove that the termination was harsh, unjust or unreasonable and therefore is to be deemed to be not for a valid reason by reason of the operation of section 170DE(2). That subsection reads as follows: 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." I have must have regard to the employee's capacity and conduct and I have must have regard to the operational requirements of the undertaking establishment or service. The necessity for me to have regard to the operational requirements of the undertaking establishment or service is something to which I should not give mere lip service. In a business such as the respondent's, where a request such as that made to the applicant is based on sound commercial considerations and is reasonable, a refusal to carry it out can be a serious matter, depending on the circumstances. It is important, however, not to confuse the concept of a "valid reason" for the termination of employment in section 170DE(1) with the concept of "serious misconduct, that is, misconduct of a kind such that it would be unreasonable to require the employer to continue the employment during the notice period" referred to in section 170DB(1)(b). In my opinion, the termination of the applicant's employment was, despite the fact that it was for an otherwise valid reason, in the particular circumstances of this case, "harsh". Firstly, there was no element of dishonesty involved. Secondly, the applicant had been employed by the respondent for a period of over four years. He had been a good employee. There had been only occasional minor difficulties of "temperament" with him. Thirdly, there had been, in the period of at least two years prior to the termination of the applicant's employment, some degree of tension, at a personal level, between himself and the supervisor, Mr Barry Sterry. Mr Sterry was alleged to have victimised the applicant during that period. I find, on balance, that that was not the case, that it did not go that far. That tension, in my opinion caused this situation to escalate beyond what it should have. In particular, it was a contributing factor in the applicant behaving inappropriately on that day and refusing a lawful and reasonable request. Fourthly, there was an element, during the day, before the interview in Mr Deering's office, of the applicant and Mr Sterry, to some extent, being at cross- purposes. That is, the applicant thought that Mr Sterry was requiring him to check out the possibility of other employees tampering with the bar codes - to use his words, to "act as a detective". That in fact, was not what Mr Sterry wanted. Mr Sterry wanted the applicant to make sure that everything was right with the bar codes, not to act as a detective. But, up until the interview in the office, the applicant thought that that was the case. As I said, that misconception was cleared up in Mr Derring's office. Mr Deering made it quite clear to the applicant what the problem was, and the applicant still refused to obey what was then senior management's request. However, that element, earlier in the day, of being at cross-purposes did contribute to the applicant's cantankerous and unreasonable attitude in the final interview. Nonetheless, given all of those things, the decision to terminate the applicant was still for a valid reason. However, it was harsh. It would not have undermined management's authority to give a long standing and otherwise satisfactory employee the chance to consider his position. It was not necessary, in order to maintain management's authority, to dismiss him on the spot. To put it bluntly, Mr Deering acted too quickly. If, speaking hypothetically, Mr Deering had told the applicant to "Go home, you are suspended, come back tomorrow, if you still refuse to carry out this request tomorrow your employment will be terminated", then I would not have hesitated to uphold the termination of the applicant's employment, if he had continued to refuse to do what Mr Deering was requesting. Employees are not to be given, by reason of this decision, any idea that they can refuse to carry out the reasonable and lawful requests of management. However, there are circumstances in which management, even when faced with a refusal of the nature of the applicant's refusal, have to take a step back, act not in the heat of the moment, but in a considered way, and give an employee of long standing a chance to reconsider. That is what should have happened in this case. This case rested on a very fine line. I had to carefully consider my judgment before I gave it, but all in all, I believe Mr Deering acted too quickly and that, particularly in view of the applicant's long period of good service to the company, his dismissal was "harsh" within the meaning of section 170DE(2). The termination of the applicant's employment is therefore deemed not to be for a valid reason and unlawful. Remedies I then turn to the question of compensation. The applicant's employment was terminated on 6 March 1995. Exhibit 6 establishes that his gross rate of pay, as of the termination of his employment, was $498.00 per week. He has earned some small amount in casual work since then and anticipates earning at the rate of $12 to $13 an hour for the next 1˝ weeks, and I take those matters into account as matters reducing the amount of compensation to which he would otherwise be entitled. But, on the question of compensation, the fundamental thing is that the applicant is unemployed as a direct result of the unlawful termination of his employment. I accept that he is looking for employment. However, he is young. He is fit. He is an experienced storeman with an otherwise good record, and these are factors tending to indicate that he could get a job in the not too distant future. Nonetheless, unemployment in this country is still a serious problem. The applicant will have difficulties getting a job in the near future. Any order for compensation has to take that into account. The fact of the matter is that, apart from some casual employment, he has been unemployed until now. That is a bit more than four months. I propose to, and I will give reasons in a moment, order that he be paid three weeks pay in lieu of notice. That will take him up to about the end of March. So he is entitled, roughly speaking, to compensation from the end of March until at least now. That comes in round figures to about $7,500.00 from which, if that is all it was, I would deduct the amount of money that he has earned in casual employment. In all the circumstances, taking into account the matters which I have set out above, particularly taking into account the known fact that the applicant's entitlement to now would be at least $7,500.00 (minus pay in lieu and minus the casual work), in the circumstances of this case I consider that the sum of $10,000.00 is an appropriate amount to order by way of compensation for the unlawful termination of the applicant's employment. In addition to that, the applicant is entitled, in my opinion, to three weeks pay in lieu of notice. Section 170DB of the Act sets out the law in respect of pay in lieu of notice. Section 170DB(1) is this: "An employer must not terminate an employer's employment unless (a) the employee has been given either the period of notice required by subsection (2), or compensation instead of notice; or (b) the employee is guilty of serious misconduct , that is, misconduct of a kind such that it would unreasonable to require the employer to continue the employment during the notice period. Subsection (2) specifies that in respect of an employee who has been employed for more than 3 years but not more than 5 years he or she is entitled to at least three weeks pay in lieu of notice. In my opinion, the conduct of the applicant, which, although apart from the question of harshness, would have amounted to a valid reason for the termination of his employment, was not "serious misconduct" within the meaning of section 170DB of the Act. There is no reason why, even if I were not to have found that his termination of employment was harsh, that pay in lieu of notice could not have been given. To do that would not have undermined the authority of management. For example, in Gibson v Bosmac Pty Limited, number NI 380/94, an unreported decision of Wilcox CJ, on 5 May 1995, his Honour said at page 21: "In this case the manager could have made his point and upheld his authority by giving (Mr Beltran) the required period of notice." I order the respondent to pay the applicant the sum of $1,494.00 (gross) as damages under section 170DB of the Act within 21 days of today and I also order the respondent to pay to the applicant the sum of $10,000.00 (gross) by way of compensation for the unlawful termination of his employment within 21 days of today. I certify that the preceding fourteen (14) pages are a true copy of the Reasons for Judgment by Judicial Registrar Patch. Associate: Caroline Sternberg Date: 8 September 1995 Appearances: For applicant: Mr G West (Solicitor) For respondent: Mr T Oxborough (Managing Director) INDUSTRIAL RELATIONS COURT OF AUSTRALIA NEW SOUTH WALES REGISTRY No. NI 1637 of 1995 BETWEEN: Beltran Applicant AND: Farnell Electronic Respondent BEFORE: PATCH JR PLACE: SYDNEY DATE: 19 JULY 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The respondent pay the applicant the sum of $1,494.00 (gross) as damages under section 170DB of the Act, within 21 days of today. 2. The respondent to pay the applicant the sum of $10,000.00 (gross) by way of compensation for the unlawful termination of his employment, within 21 days of today.