Domenic Loui Allia v Plumbing World Limited [1995] IRCA 453

C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - claim for UNLAWFUL TERMINATION - whether there was a VALID REASON for termination - whether the termination was HARSH, UNJUST OR UNREASONABLE - REMEDY INDUSTRIAL RELATIONS ACT 1988, Ss 170EA, 170DE, 170EE Quality Bakers of Australia Limited v John Goulding WIR 142 of 1994, Beazley J, 23 June 1995, unreported Bostik (Australia) Pty Ltd v Gorgevski (No. 1) (1992) 36 FCR 20 Byrne v Australian Airlines Pty Limited (1994) 47 FCR 300 Chris Karambelis v Compack Packaging Pty Ltd (IRCA Decision No. 178/95, Murphy JR, unreported) John Ferry v Minister for Health, Western Australia WI064IR of 1994, Marshall J, 25 August 1995, unreported DOMENIC LOUI ALLIA v PLUMBING WORLD LIMITED - WI 95/1602 BEFORE: BOON JR PLACE: PERTH DATE: 7 SEPTEMBER 1995 IN THE INDUSTRIAL RELATIONS ) COURT OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) No. WI 95/1602 BETWEEN: DOMENIC LOUI ALLIA - Applicant AND: PLUMBING WORLD LIMITED - Respondent MINUTE OF ORDERS BEFORE: BOON JR PLACE: PERTH DATE: 7 SEPTEMBER 1995 THE COURT DECLARES THAT: 1. The termination of the employment of the applicant contravened Section 170DE of the Industrial Relations Act 1988. AND THE COURT ORDERS THAT: 2. The respondent shall pay compensation to the applicant in the sum of $2,000.00 within 14 days of the date of this order. NOTE: Settlement and entry of Orders is dealt with by Order 36 of the Industrial Relations Court Rules

IN THE INDUSTRIAL RELATIONS ) COURT OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) No. WI 95/1602 BETWEEN: DOMENIC LOUI ALLIA - Applicant AND: PLUMBING WORLD LIMITED - Respondent BEFORE: BOON JR PLACE: PERTH DATE: 7 SEPTEMBER 1995 REASONS FOR JUDGMENT This is an application under Section 170EA of the Industrial Relations Act 1988 for compensation arising out of the alleged unlawful termination of the applicant's employment by the respondent. Reinstatement is not sought. The applicant alleges that the respondent breached the provisions of Section 170DE(1) of the Industrial Relations Act and says that the termination of the applicant's employment did not occur for a valid reason. Further, the applicant states that the termination of his employment was in any event harsh, unjust or unreasonable within the meaning of Section 170DE(2) of the Act. The respondent states that there was a valid reason for the termination based on the operational requirements of the respondent's business. It was respondent's position that there was a need to restructure the respondent's undertaking to reduce costs and restore profitability in the face of continuing operational losses. The respondent states that it did all that it possibly could to keep the workers at its Glendalough branch informed of the position and to alert them to the possibility of redundancies. The applicant questions the need for the reduction in staff and says that in any event he was not afforded procedural fairness as he was never consulted about the possibility of redundancy. BACKGROUND The respondent, Plumbing World Limited, is a retailer and wholesaler of plumbing and hardware supplies and at present operates from ten outlets in Western Australia. Plumbing World Limited supplies plumbing equipment and associated products to the construction and building industry in Western Australia. The State Manager of the respondent, Dragan Velichkovich, gave evidence that he had been with the respondent for about 14 months. Before he became State Manager of the respondent, Plumbing World was a co-operative owned by plumbers and was not intended to make a profit. It was then floated on the stock exchange and it is now in business to make a profit. Plumbing World Limited has several associated companies but Plumbing World itself stands on its own. The applicant, Domenic Allia, was born on 23 September 1962 and is aged thirty-two. He completed and passed Year 10 at Mt Lawley High School in 1977 and in 1989 he obtained the Hardware Course Examination Certificate from the National Hardware Institute of Australia. Between 1978 and 1981 Mr Allia worked as a factory hand, initially with Multigraphic Pty Ltd and later with Berlei Pty Ltd. Mr Allia started working for Plumbing World on 18 January 1982. Initially he was given a job because he had just obtained his 'B' Class driving licence which enabled him to drive trucks. Since starting work in 1982, Mr Allia has worked for Plumbing World in a number of different positions including truck driver, storeman, counter salesperson, telephonist and general worker at the Glendalough branch of the respondent. At the time of his termination on 12 May 1995, Mr Allia was working primarily as a counter salesperson and only drove trucks if he was required to do so for urgent deliveries. Mr Allia's evidence was that he made up orders ready for delivery, answered telephones, placed orders and also served customers walking in from the street. He also did some general work such as checking on stock bins to see if anything needed to be ordered and stocking goods on shelves. It was clear from Mr Allia's evidence that he enjoyed working for Plumbing World and he appeared to take some pride in his work. He said that he worked hard at all times and it was not in issue that the applicant was a good worker. In fact, Mr Bob Johnston, who gave evidence for the respondent, said that Mr Allia was one of Plumbing World's most reliable and trustworthy employees. Mr Allia gave evidence that for thirteen years he worked a basic 38 hour working week from Monday to Friday. He was automatically paid two hours overtime for each week and once every five weeks some extra overtime would be worked. Some time before the termination, overtime payments were cut at the Glendalough branch of Plumbing World. THE TERMINATION Mr Velichkovich gave evidence that when he started with Plumbing World it had four branches including the Glendalough branch. As at the date of the hearing of this matter, Plumbing World has ten branches. Mr Velichkovich said that as State Manager, his main area of responsibility is to ensure a profit for Plumbing World's shareholders. Mr Velichkovich said that the Glendalough branch had lost money from October 1994 onwards. This was partly due to a downturn in the building industry but also because Plumbing World had lost some contracts with customers representing twenty percent of its business. It was decided that Plumbing World had to restructure and try to obtain a competitive advantage by concentrating on small to medium builders instead of large builders as it had in the past. Measures taken by Plumbing World to reduce its costs prior to the termination of Mr Allia included cutting costs relating to freight, telephones, stationery and electricity. In addition, overtime payments were cut. The Glendalough showroom was closed down and this involved two staff losing their jobs at that time. Any staff who resigned were not replaced. The Operations Manager was made redundant. These measures were insufficient and Mr Velichkovich decided to look at the Glendalough warehouse, where Mr Allia worked. His evidence was that from November 1994 onwards it was always clear that retrenchments would eventually have to come. He said, however, that he did not make any final decision until he saw the trading figures for Glendalough for April 1995. The April figures were made available in the first week of May and they showed, according to Mr Velichkovich, that the Glendalough branch had made a loss for the month in the region of $32,662. On about 8 May 1995, Mr Velichkovich called in the Glendalough manager, Bob Johnston, and told him that Glendalough had to make some cutbacks and to consider retrenchments. He looked at the overall operation at Glendalough and wrote all the staff positions on a whiteboard. He looked at excess capacity in any area and considered to what extent the duties involved with each position could be merged with other positions. For example, with regard to the counter job, because of the loss of sales, it was decided that that job could easily be done by the warehouse manager and his assistant. It was therefore decided to merge the counter job functions with the functions of other positions. Mr Velichkovich emphasised that when considering retrenchments, it was his philosophy not to look at the personalities or people involved in any particular position but to simply look at the position itself. In this way, he avoided any emotion or possible favouritism on the basis of who occupied those positions. Mr Velichkovich said that Mr Johnston had raised the question of Domenic Allia and his many years of service and Mr Velichkovich had jumped in and said "(w)e can't do that, we have to be fair". Mr Velichkovich decided that there was no position available for Mr Allia. He did not consider moving Mr Allia to another position because he considered that would have appeared to be favouritism. He did not consider offering part-time work to anyone because "(t)hese guys are specialists - they have to know the product" and it was not realistic for them to work part-time under those circumstances. It was decided at that meeting to terminate the employment of eight people, including Mr Allia. On 12 May 1995, Mr Allia and seven others from the Glendalough warehouse were called in to a meeting and were each handed a letter of termination. According to Mr Allia, that was the first he knew of any likelihood that his employment would be terminated. Mr Allia's evidence was that he was shocked and devastated. Upon termination, Mr Allia was paid the following: (a) Long service leave $4,991.51 (b) Holiday pay $832.17 (c) Unused leave loading $132.38 (d) Four weeks pay in lieu of notice $1,730.76 (e) Two days ordinary pay $173.00 TOTAL $7,859.82 WAS THERE A VALID REASON FOR THE TERMINATION? It was the respondent's submission that a valid reason existed for the termination of the applicant's employment within the meaning of Section 170DE(1) of the Act in that the decision to terminate was made on the basis of the respondent's operational requirements. It was submitted by the respondent that "(t)he selection of workers to be terminated was made according to a structural analysis of the respondent's existing operations and a similar analysis of its anticipated future requirements such that positions to be made redundant were selected according to the demand for their function and/or the ability for that function to be merged or performed by another position". It was further submitted that these "criteria gave due weight to both the interests of the respondent's business undertaking and the interests of the Glendalough workforce as a whole in that questions of personal favouritism were avoided". Counsel for the applicant submitted that the respondent made no attempts to produce independent evidence from industry or any government department to establish that there was an economic downturn in the industry. He further submitted that the respondent did not adduce evidence to support the performance figures relating to the Glendalough branch of the respondent except a single sheet of paper compiled by Mr Velichkovich on the basis of performance data which were not in evidence at the hearing. Further, it was said on behalf of the applicant that no evidence other than that of Mr Velichkovich had been given to establish that large contracts were lost. Counsel for the applicant submitted that the respondent failed to produce any books to substantiate the figures showing the downturn and the loss of contracts. I have some misgivings about the evidence relating to the operational requirements of the respondent. As pointed out by Counsel for the applicant, no books of account were produced to substantiate the verbal evidence of Mr Velichkovich. Further, the evidence of Mr Velichkovich was that despite the alleged losses suffered by the Glendalough branch of the respondent, Plumbing World expanded its operations in Western Australia by opening six additional outlets between the time Mr Velichkovich started as State Manager and the date of the hearing of this matter. Despite these misgivings, however, I am prepared to give the respondent the benefit of the doubt and accept that Mr Velichkovich as State Manager of the respondent considered that it was necessary for the operational requirements of Plumbing World to select some workers for redundancy. As Beazley J stated in Quality Bakers v John Goulding WIR 142 of 1994, Beazley J, 23 June 1995, unreported, "(a) redundancy will arise where an employer has labour in excess of the requirements of the business; where the employer no longer wishes to have a particular job performed; or where the employer wishes to amalgamate jobs". I accept the evidence of Mr Velichkovich, the State Manager of the respondent, in this regard. WAS THE TERMINATION HARSH, UNJUST OR UNREASONABLE? There is authority arising from a number of Federal Court judgments to the effect that a termination may be harsh, unjust or unreasonable if procedural fairness has not been afforded to the applicant: (see Bostik (Australia) Pty Ltd v Gorgevski (No. 1) (1992) 36 FCR 20; Byrne v Australian Airlines Pty Limited (1994) 47 FCR 300). Further, the question has been discussed in this Court in a number of recent cases. In Chris Karambelis v Compack Packaging Pty Ltd (IRCA Decision No. 178/95 unreported) Murphy JR at page 7 lists a number of cases in which the issue has been discussed. Murphy JR goes on to state that "(t)hese cases represent strong authority for the proposition that in the usual course, even in the case of a genuine redundancy based on the operational requirements of an employer, an employer must consult with the employee, and in appropriate cases, with the relevant union, in order to avoid the termination breaching Section 170DE(2) of the Act". That approach was adopted by Beazley J in the Quality Bakers case at page 17 where her Honour stated that "(t)he need for consultation with employees and, if applicable, the employee's union, in the case of workplace change or restructuring, has consistently been recognised as an essential element of fairness in the relationship between employee and employer." Her Honour also referred at page 21 of that judgment to a number of recent cases in this court where the requirement of consultation in the case of redundancy has been emphasised. In the present case, it was the respondent's submission that there was adequate consultation with Mr Allia to satisfy the requirements of Sub-section 170DE(2). Mr Velichkovich referred to statements he had made at a number of meetings with employees prior to the termination. The evidence was that on each Friday afternoon after work employees and management would get together in an informal and relaxed way over a few beers supplied by the employer to discuss matters of concern relating to the operation of the Glendalough branch. It was not compulsory for employees to attend those meetings but most employees regularly attended. Mr Velichkovich said that from October 1993 onwards he spoke to the employees at the Glendalough warehouse approximately four times. He specifically recalled Mr Allia being there on some of those occasions. Mr Velichkovich said that at those meetings he told his employees that "(w)e were not travelling too well and that we would have to be prudent". He said that the last thing he wanted to do was retrench but if they had to do it they would, although he would do everything possible to avoid it. Mr Velichkovich said that he made it clear at those meetings that Plumbing World was experiencing some financial difficulties. Mr Velichkovich also relied upon statements he made at an end of year presentation function at the Parmelia Hotel where he advised staff that Plumbing World would have to make some changes. The evidence was, however, that Mr Allia did not attend that function. In any event, the statements made at that dinner appear to have been no more than some broad generalisations. Although Mr Velichkovich maintained that he discussed the redundancies with his workers, he also stated in his evidence that the reason that he did not come right out and say that workers would be made redundant some months before the redundancies took place was that there was a risk that the employees would lose morale, they would panic if they knew they were to lose their jobs and their performance would be down as a result. Mr Velichkovich's evidence was that "I told the chappies that there was a possibility of redundancy but it was the last thing I'd ever want to do". Further, although there may have been some discussion at management level about alternatives to making Mr Allia redundant, there was no evidence that Mr Allia was given any opportunity to be heard in relation to the matter. Once Mr Velichkovich had decided to abolish Mr Allia's position, he was not prepared to consider any other options. He would not take Mr Allia's personal attributes into account. It is the respondent's position that "(i)n the context of the particular operational difficulties experienced by the respondent, consultation with the applicant could not have avoided the applicant's termination". Although this had no bearing on my decision, I was surprised by Mr Velichkovich's evidence that he would not take into account any of the qualities of the people filling the positions that were to be made redundant. In view of his evidence that he would not consider part-time workers as the employees had to be specialists and know the product, I would have thought that Mr Allia's long years of service would be taken into account, especially considering the evidence that the employees in the warehouse carried out a range of tasks and were to some extent multi-skilled. Mr Allia's evidence was that until he received the written notice of termination on 12 May 1995 he had not been consulted at all in relation to the redundancy. He was aware of general comments made by management in relation to the economic difficulties being experienced by the respondent. He did not, however, pay any particular regard to the comments because in his thirteen years experience with Plumbing World there had always been cyclical variations in the building industry. He was particularly shocked that he had been made redundant when he had always been prepared to work hard, he had worked for thirteen years and he had always been prepared to perform a variety of duties in the course of his work. He considered it unfair that he was made redundant when another employee who had been with Plumbing World for only a period of about six months and who worked in the same section as Mr Allia was not made redundant. This other employee did some counter work but did more truck driving than Mr Allia was doing at the time of his termination. In all the circumstances, Mr Allia felt that he had been treated extremely unfairly. I find on the evidence that the respondent's management did not consult with Mr Allia in relation to the redundancy. On the basis of the authorities I have mentioned, and having particular regard to Mr Allia's long and faithful service to the respondent, I find that the circumstances of his termination were harsh, unjust and unreasonable and contravened the provisions of Section 170DE. THE APPROPRIATE REMEDY The primary remedy available under Section170EE of the Industrial Relations Act is reinstatement. In this case, however, Mr Allia is not seeking reinstatement. Under the provisions of Section 170EE, it is only appropriate to award compensation instead of reinstatement in cases in which reinstatement is impracticable. In this case, having regard to the operational requirements of the respondent and the fact that Mr Allia is now settled in alternative employment, I find that to order reinstatement would be impracticable. Mr Allia's evidence was that following his termination he applied for a lot of positions. He obtained some casual work at the Re Store for which he received $576 gross. Further, he did a one day work trial at Imported Ceramics but decided not to take that position as the work was too heavy and he feared that he would injure his back. The respondent submitted that Mr Allia had a duty to mitigate his loss and he had failed to do so in that he declined the opportunity of alternative and more remunerative employment with Imported Ceramics. In this regard, I refer to the decision of John Ferry v Minister for Health, Western Australia WI064IR of 1994, Marshall J, 25 August 1995, unreported, in which Marshall J states at page 14 "..... there is no obligation on an employee dismissed for no valid reason to mitigate his or her losses". In any event, I consider that Mr Allia acted reasonably in refusing employment which was too heavy for him. From 14 July 1995, Mr Allia has been working at Bunnings at a gross weekly wage of $401 (not including overtime). There is some possibility of overtime work associated with the Bunnings' position. At Plumbing World Mr Allia was earning $432 gross per week based on a 40 hour week. His Bunnings gross weekly wage is based on a 38 hour week. A period of nine weeks elapsed from the date of termination until the date Mr Allia was able to obtain alternative employment with Bunnings. Four of those weeks were covered by the payment in lieu of notice Mr Allia received at the time of his termination. Five weeks at Mr Allia's pre-termination gross wage of $432 amounts to $2,160. When the $576 he earned at the Re Store is taken into account, the amount is reduced to $1,584. However, Mr Allia is earning approximately $31 per week less at Bunnings than he earned at Plumbing World, although there is some opportunity for earning overtime. Taking this into account, I consider that an appropriate award of compensation in this matter is $2,000. I certify that this and the preceding ten pages are a true copy of the reasons for judgment of Judicial Registrar Boon. Associate: Appearances: Counsel for the applicant: Mr J Singh Solicitors for the applicant: J S Brar & Co Counsel for the respondent: Mr T M Retallack Solicitors for the respondent: Wilson & Atkinson Date of Hearing: 4 August 1995 Date of Judgment: 7 September 1995