Logan v Otis Elevator Company Pty Limited [1995] IRCA 580

C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - complaint of UNLAWFUL TERMINATION - CONDUCT AND PERFORMANCE - VALID REASON. Industrial Relations Act 1988, S 170 DE Brookton Holdings Pty No V and Ors. v Kara Kar Holdings Pty Ltd and Another (1994) 57 IR 288 Jones v Associated Tunnelling Co. Ltd [1981] IRLR 477 Courtaulds Northern Spinning Ltd v Sibson [1988] ICR 451 Metrans Pty Ltd. v Courtney - Smith and Others (1983) AILR 158 LOGAN v OTIS ELEVATOR COMPANY PTY LIMITED - No. NI 1279 of 1995 Before: Judicial Registrar WALKER Place: Sydney Hearing Dates: 27-28 July, 18-19 September 1995 Judgment Date: 30 October 1995

INDUSTRIAL RELATIONS COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N0. NI 1279 of 1995 Between: PETER ANTON CHARLES LOGAN Applicant And: OTIS ELEVATOR COMPANY PTY LIMITED Respondent Before: Judicial Registrar WALKER Place: Sydney Hearing Dates: 27-28 July, 18-19 September 1995 Judgment Date: 30 October 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The respondent pay to the applicant compensation in the sum of $20,000.00. 2. Such payment to be made within 21 days of the date of this judgment. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules. INDUSTRIAL RELATIONS COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N0. NI 1279 of 1995 Between: PETER ANTON CHARLES LOGAN Applicant And: OTIS ELEVATOR COMPANY PTY LIMITED Respondent Before: Judicial Registrar WALKER Place: Sydney Hearing Dates: 27-28 July, 18-19 September 1995 Judgment Date: 30 October 1995 REASONS FOR DECISION The applicant, Peter Logan first commenced employment with the respondent company, Otis Elevators in 1968 and took up an apprenticeship with the company in 1969. He subsequently gained his certificate as a tradesman, passing with Honours and was nominated for apprentice of the year in New South Wales as an electrical mechanic. In 1975 he left Otis for a two year period to help his father in a trucking business and rejoined Otis in October 1978. He left again for a short time in 1979 in order to assist his ill father wind up the trucking business and took up employment with the respondent again in about February 1980, continuing that employment until his termination on 8 February 1995. The applicant was employed by Otis in Orange as their Local Representative. The duties of a Local Representative are varied, however the applicant relies on a glossy advertising pamphlet to lay the basis for the assertion that in 1992 when the document was printed, the primary role of Local Representative was as it is set out in that document. This document was marked as exhibit 1 and under a photograph of the applicant there is the following description: "Local Representative: Peter Logan, Orange. The Local Representative's primary role is to ensure the safe and reliable operation of your elevator and escalator equipment, while also coordinating any specific requirements you may need answered by other departments of OTIS. While travelling extensively within a region area they are in continual contact with their local manager and support teams to ensure optimum customer service." It is of interest to note that under the heading of Local Manager on the same document the following responsibilities are recorded: "The Local Manager is responsible for all activities relating to the sales, supply, installation and servicing of OTIS elevator and escalator equipment in the Newcastle and Northern NSW region, including Coffs Harbour, Port Macquarie, Gosford and Orange." It is the respondent's case that the applicant's work performance had fallen to a level that warranted him being transferred out of his position as Local Representative in Orange to another position in Sydney, Canberra or Newcastle which would be of a technical nature only and where he could be closely supervised. There was agreement by the respondent that the applicant's technical work was satisfactory and acceptable, but the charge against him was that he had now become disinterested and this was evidenced by the fact that he: had missed certain service calls; was late in getting his paper work into head office; had not put the kilometre readings on some of his petrol card receipts; had not met his "T" sales targets; and had not demonstrated a business plan at a annual meeting to the satisfaction of the Regional Manager. These matters were not the reason for the termination of Mr Logan's employment but rather reasons for the company to transfer him to another area. The reason for termination was the applicant's refusal to be transferred. Section 170 DE provides that: "(1) An employer 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." As the reason for termination was the refusal to accept a transfer from Orange, it is therefore necessary to consider whether that was a valid reason based on the operational requirements of the undertaking, establishment or service. The question of capacity or conduct does not arise in this case because if the applicant had accepted the transfer he would have remained in the employment of the respondent. The applicant argued that the unconditional transfer by the respondent of the applicant's place of work and the variation proposed to the contract of employment amounted to a termination of employment. In support of that proposition he relied upon the authority of Brookton Holdings Pty No V and Ors. v Kara Kar Holdings Pty Ltd and Another (1994) 57 IR 288, a decision by Young J. in the Equity Division of the Supreme Court. The applicant also referred to the various cases set out in the "Law of Employment" by Macken, McCarry and Sappideen, 3rd edition at pages 185 and 186. At page 126 of the "Law of Employment" there is consideration of the question: Is there a duty to change place of work? Reference is made to a statement by Browne - Wilkinson J. in Jones v Associated Tunnelling Co. Ltd [1981] IRLR 477 where His Honour says: "The starting point must be that a contract of employment cannot simply be silent on the place of work: if there is no express term, there must be either some rule of law that in all contracts of employment the employer is (or alternatively is not) entitled to transfer the employee from his original place of work or some term regulating the matter must be implied into each contract. We know of no rule of law laying down the position in relation to all contracts of employment, nor do we think it either desirable or possible to lay down a single rule. It is impossible to conceive of any fixed rule which would be equally appropriate to the case of, say, an employee of a touring repertory theatre and the librarian of the British Museum. Therefore, the position must be regulated by the express or implied agreement of the parties in each case. In order to give the contract business efficacy, it is necessary to imply some term into each contract of employment." In the present case before this Court there was no express term of the contract as to the place of work, except for the fact that the applicant was the, "Local Representative," which in itself implies the position is connected with the Orange area. At page 127 of the, "Law of Employment," the following is set out: "It will there be seen, for example, that it has been held that the correct implication might be that the worker will work anywhere in the company's area. If the employer changes the place of business to a distant place, there is old authority that the employer thereby commits a breach of contract and the employee is not obliged to work for the employer at the new location. If the distance is short, the employee may be obliged to go. Sometimes the provisions of the award may be decisive, as in Re Metal Trades Award 1952. The approach in Associated Tunnelling was approved by the Court of Appeal in Courtaulds Northern Spinning Ltd v Sibson [1988] ICR. 451 at 460, where it was said that: in cases... where it is essential to imply some terms into the contract of employment as to the place of work, the court does not have to be satisfied that the parties, if asked, would in fact have agreed to the term before entering into the contract. The court merely has to be satisfied that the implied term is one which the parties would probably have agreed if they were being reasonable." I am satisfied that on both criteria, the applicant's contract of employment would have been breached, that is the distance to either Sydney, Gosford or Canberra would be regarded as a long distance, despite the fact that the means of transportation and communications has developed since this authority was decided and I am also satisfied that at the time of entering into the contract of employment, there was an implied term that the place of employment was to be Orange. I base that decision on the fact of the length of employment by the applicant in Orange and the fact that, but for the applicant's alleged poor performance he would probably have remained in Orange until his retirement. I am also satisfied that with the appointment of Mr Gardiner as Regional Manager there was a change of management philosophy and it was then decided that the Local Representatives' positions were to be used as a training ground for employees and that such employees would be required to move from area to area. Mr Gardiner gave evidence to this effect. He was asked the question, "... you expressed the view that you consider the local reps areas are a good training field?" and Mr Gardiner replied: "That's the way we want to run them." Mr Gardiner was then asked, "So, you see them as some training required for those that can be promoted into more senior positions elsewhere?" and he answered: "That's correct." To a further question, "When you say, that's how we view them, that is, how Otis view them, is it?" he answered: "Now at the present time, yes." This evidence suggests that there has been a fundamental change in the policy of the respondent in relation to the contracts of employment of their Local Representatives, as being permanently stationed in their areas, to now being subject to transfer in order to allow the positions to be used for the purpose of training. The respondent's counsel argued that these matters refer only to the change of circumstances in the contractual terms and are therefore not relevant to a matter where unsatisfactory performance is alleged. He maintains that if the applicant is relying on wrongful dismissal on the basis of breach of contract, that the remedy should be at common law. I would disagree with that argument as it is the respondent who has determined the reason for termination and that is, failure to accept a transfer. That reason, I have found is in breach of the contract of employment and is therefore unlawful. If the termination of the applicant's employment is unlawful, it must not have been for a valid reason. Having decided that the termination was not a valid one it is not necessary for me to go any further, however, I am also of the opinion that had the applicant been terminated, as the respondent's counsel suggests, for unsatisfactory performance, then taking into account the allegations made against the applicant I would also be satisfied that the substance of these allegations was such as to be caught by the operation of S 170 DE (2). The only real allegation made out against the applicant was that his "T" sales figures had not been up to expectation, however, there was evidence that he had taken steps to remedy this situation and was in the process of this at the time of termination. REMEDY The applicant is seeking re-instatement in this matter and this remedy is to be granted unless it is impractical to do so. There are special circumstances in this case that arise after the termination had taken place, that become relevant to the consideration of re-instatement. The applicant it is alleged, has used confidential information gained as a result of his employment, in winning contracts of former clients of the respondent. It was alleged that knowledge of the contract tender price has placed the applicant in a position that enabled him to underquote the respondent. Mr De Meyrick, asked the applicant: "So when you prepared your own contract on your own behalf, you were aware of the contract price that you had prepared for Otis for that job?" The applicant replied: "Yes." The duty of fidelity and good faith may extend to an employee after termination (see page 129, The Law of Employment) however, does the respondent enjoy some degree of protection against the use of confidential information such as the quoted contractual offers of the respondent to its customers? This situation was considered by Kearney J. in the Equity Division of the Supreme Court of New South Wales in Metrans Pty Ltd. v Courtney - Smith and Others (1983) AILR 158. His Honour dismissed an application for an interlocutory injunction restraining the defendant, the former employee from: "(a) Using, copying or showing to any person the customer list or other confidential information of the plaintiff; and (b) Communicating with or soliciting orders from customers of the plaintiff with whom, to the knowledge of any defendant, the first defendant dealt with whilst employed by the plaintiff." His Honour went on to say a distinction is to be drawn between: "(1) Information which can fairly be regarded as a separate part of the employee's stock of knowledge, which a man of ordinary honesty and intelligence would recognise to be the property of the employer and not of the employee to deal with as he likes; examples are a chemical formula or a list of customers committed to memory or a design feature revealed to the employee in obvious confidence; there is a somewhat similar formulation in the Coco case at p.48: 'if the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence then this should suffice to impose upon him the equitable obligation of confidence;' and (2) general information inevitably acquired by an employee in the ordinary course of his employment as part of the sum total of his experience with that employer, not distinguished by any particular badge of confidence, which the employee will inevitably carry away in his head as part of his general stock of knowledge. In the latter case it can not properly be said that the conscience of the employee has been affected so as to place him under a restriction that he has not contractually accepted. Put shortly, an ex-employee is not entitled to make use of information which he obtained from his former employer in confidence, but subject thereto he is entitled to make use of the knowledge and skill which he acquired while in that service." His Honour concluded that: "The application of the principle in any given case had to be reconciled with the rule of public policy that a man was not to be restrained either by contract or without it, from using after his employment his personal skill, knowledge and experience." The applicant in this case has admitted to using confidential information of his employer to his own benefit. He has used the information, which although was generated by an act of his own doing, was nevertheless highly confidential in nature. The result of this is that there is now an irretrievable breakdown of the employer - employee relationship and for this reason I must find that the remedy of re-instatement is impractical. As to the amount of compensation, I am satisfied that the appropriate amount should be the sum of $20,000.00 and I do so order.