DECISION NO: 140/96 CATCHWORDS INDUSTRIAL LAW - review of decision of Judicial Registrar - unlawful termination - compensation - whether workers compensation payments paid to an employee after termination should be treated as remuneration. Industrial Relations Act 1988: ss 170CD, 170DE(1)(a), 170DF(1)(a), 170EA, 170EDA(2), 170EE(3), 170EE(3)(b), 170EE(4)(a) and 377 Workers Compensation Act 1987 (NSW): ss 9, 33, 36(1), 38A, 42, 42(6) and 50 Industrial Relations Act 1991 (NSW): ss 235 and 243 Industrial Relations and Other Legislation Amendment Act 1995: s170EE(2) Lane v Arrowcrest Group Pty Ltd (t/as Roh Alloy Wheels) (1990) 27 FCR 427 Byrne v Australian Airlines Ltd (1995) 69 ALJR 797 Metal Trades Industry Association of Australia & Ors v The Amalgamated Metal Workers' and Shipwrights' Union & Ors (1983) 152 CLR 632 Huysse v Snowy Mountains Hydro-Electric Authority (1975) 1 NSWLR 401 Mullany v Active Concrete, 3 May 1995, Wilcox CJ, unreported Graham & Baker (1961) 106 CLR 3-10 Scott v Sun Alliance Australia Ltd & Anor (1993) 178 CLR 1 Association of Professional Engineers, Scientists and Managers Australia v Deniliquin Council (1995) 134 ALR 267 Janicek v ICI Dulux Australia, 4 September 1995, Wilcox CJ, unreported Aitken v The Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia - Western Australian Branch, 7 August 1995, Lee J, unreported No. AI 1023R of 1995 ALAN LAWRENCE BROWN v COLIN WILLIAM POWER AND KAY POWER T/AS ROYAL HOTEL TUMUT MOORE J CANBERRA 19 April 1996 IN THE INDUSTRIAL RELATIONS ) ) COURT OF AUSTRALIA ) No. AI 1023R of 1995 ) NEW SOUTH WALES DISTRICT REGISTRY ) BETWEEN: ALAN LAWRENCE BROWN Applicant AND: COLIN WILLIAM POWER AND KAY POWER T/AS ROYAL HOTEL TUMUT Respondents JUDGE: Moore J PLACE: Canberra DATE: 19 April 1996 ORDER OF THE COURT THE COURT ORDERS THAT: 1. The order of the Judicial Registrar of 1 June 1995 requiring payment of compensation to the applicant in the sum of $13,000 is set aside. 2. The respondents pay the applicant the sum of $2,500 by way of compensation. 3. Liberty to apply. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules. IN THE INDUSTRIAL RELATIONS ) ) COURT OF AUSTRALIA ) No. AI 1023R of 1995 ) NEW SOUTH WALES DISTRICT REGISTRY ) BETWEEN: ALAN LAWRENCE BROWN Applicant AND: COLIN WILLIAM POWER AND KAY POWER T/AS ROYAL HOTEL TUMUT Respondents JUDGE: Moore J PLACE: Canberra DATE: 19 April 1996 REASONS FOR JUDGMENT This is a review of the determination by a Judicial Registrar of an application by Alan Brown made under s170EA of the Industrial Relations Act 1988 ("the Act"). The Judicial Registrar found that there had been a termination of Brown's employment by his employers, Colin and Kay Power trading as the Royal Hotel Tumut, and that it was in contravention of s170DF(1)(a) of the Act and ordered that the respondents pay Brown compensation of $13,000. In this review the Powers contended that there was no termination of employment, if there had been it was not in contravention of s170DE(1)(a), if it was, no compensation should be awarded or any amount awarded should be less than the $13,000 awarded by the Judicial Registrar. While there was an issue about what precisely occurred at the time of the alleged termination, the parties agreed that the review could proceed by reference to the evidence before the Judicial Registrar, her reasons for judgment and some supplementary affidavit evidence filed in the review. For reasons which I shortly explain the differences in the accounts of what occurred in late December 1994 are of limited significance and I am satisfied that, as a matter of fact, the employment of Brown was terminated on 23 December 1994 at the initiative of the Powers. The Powers had operated a hotel at Cooma at which Brown had worked and continued to work after the Powers took over the operation of the Royal Hotel Tumut. They invited Brown to work for them in Tumut, which he did. He started in late March or early April 1994. On 23 December 1994 Brown injured his back while moving a keg in the hotel's cellar. This was the Friday before Christmas. Moving the keg was part of the duties associated with his job. He informed Mrs Power of his injury and left the hotel in a taxi. Brown saw a doctor that day and his de facto wife, Ms Belinda Adamson, took a medical certificate to the hotel and gave it to Mrs Power. It was to the effect that Brown would be unfit for work for two days. When Power was made aware of Brown having left the hotel, he sent another employee to speak to him. While there was an issue about what Power instructed the employee to say and what was said, Power accepted that the message he wished to convey was "I don't care how you get here, either in a wheelbarrow or wheelchair, but get here." Power then had misgivings about the genuineness of the injury. The following day another employee was sent to collect hotel keys from Brown. Early the following week Brown was paid unpaid wages and holiday pay. I have, to this point, glossed over some of the events and the differing accounts of some of them emerging from the evidence. Much of it was directed to whether Power terminated Brown's employment on or after 23 December 1994. I have glossed over the evidence because a document tendered in the review, prepared by Power in December 1994, indicated quite directly what Power had intended by his actions. The document reads: "Allan Brown 312 138 201 Commenced Employment 10.4.94 Ceased Employment 23.12.94 Total Earnings $16,689.62 8 months completed service therefore pro rata base for holiday pay 66.66% of 12 month period = 34.66 52 weeks = $1,283.80 Receives no loading less than 12 months service." It is, in my opinion, plain from this document that Power viewed Brown as having ceased employment on 23 December 1994. It follows, in my opinion, that the request of Power that Brown attend at the hotel on the 23 December 1994 and his failure to do so led Power to decide to terminate Brown's employment and this was reflected in his later request conveyed to Brown to return the keys. This was the understanding of Brown at the time. Accordingly I have concluded that Power terminated the employment of Brown on 23 December 1994. He did so when Brown was absent from work because of an injury which, at the time, was viewed by the doctor Brown saw as rendering Brown incapable of working for two days. That was made known to the Powers. It is contended that in these circumstances the termination was because of the absence of Brown from work because of a temporary illness: see s170DF(1)(a) of the Act. It is to be remembered that s170EDA(2) provides that if termination for that reason is alleged, the employer must show that the termination was not for that reason. In the present case not only has the employer not demonstrated that the alleged reason was not the reason, the evidence tends to support the view that it was. It may be accepted that Brown's disability persisted and that at least for the purposes of the payment of workers' compensation, Brown was permanently incapacitated for several months. However the relevant question is, in my opinion, what was the reason for the termination at the time it occurred. On 23 December 1994 Power knew only that Brown had a medical certificate indicating he would not work for two days. It was with this knowledge that he terminated Brown's employment. Section s170DF(1) prohibits an employer from terminating the employment of an employee for one of the proscribed reasons. At the time of the termination of Brown, his temporary absence because of illness was the probable actual reason and the reason imputed by s170EDA(2). It may be accepted that, at least arguably, facts which existed at the time of the termination which come to light subsequently may be relevant when considering the lawfulness of a termination: see Lane v Arrowcrest Group Pty Ltd (t/as Roh Alloy Wheels) (1990) 27 FCR 427 and Byrne v Australian Airlines Ltd (1995) 69 ALJR 797 at 806 per McHugh and Gummow JJ. However the relevant facts existing at the time of the termination were that Brown was temporarily absent from work and his doctor had certified he was unfit for work for two days. Accordingly I do not see how the Powers gain any support, as suggested in submissions by their solicitor, from Byrne (supra). I find that the termination of Brown's employment was in contravention of s170DF(1)(a) of the Act. It is unnecessary to consider whether the termination was in contravention of any other provision of the Act. This leads to a question of remedy. There was no real suggestion that reinstatement was practicable. Accordingly , and subject to one mater I discuss at the conclusion of this judgment, the question that then arises is what compensation should be awarded. For the six months after his termination, Brown was in receipt of workers' compensation payments under the Workers' Compensation Act 1987 (NSW) ("the Compensation Act") on the basis that he was totally incapacitated. He led evidence that he could nonetheless have done some work. I consider this matter shortly. The Powers argued that because Brown had been treated as totally incapacitated for the purposes of the Compensation Act he was unfit for remunerative work. These matters are said to be relevant because s170EE(3) requires consideration of remuneration lost. Section 170EE(3) provides: "In working out the amount of the compensation for the purposes of subsection (2), the Court is to have regard to the remuneration that the employee would have received, or would have been likely to have received, if the employer had not terminated the employment, but the amount of compensation: (a) must not exceed, in respect of any employee, the amount of the remuneration that would have been received by the employee in respect of the period of 6 months that immediately followed the day on which the termination took effect if the employer had not terminated the employment and the employee had continued to receive remuneration in respect of the employment at the rate at which he or she received remuneration immediately before the termination took effect; and (b) must not exceed, in respect of an employee who is not employed under award conditions, the applicable amount on the day on which the termination took effect." Two questions arise. The first is whether Brown would have received or would have been likely to have received remuneration during the period following the termination of his employment on 23 December 1994. The second is whether, if he would have received remuneration in that period but for the unlawful termination, should any allowance be made for the workers' compensation payments paid to him during that period. In a written submission filed after the conclusion of the hearing of this matter, Brown's solicitor drew attention to s243 of the Industrial Relations Act 1991 (NSW). That section renders it unlawful for an employer to dismiss an employee because the employee is not fit for employment as a result of the injury. This restriction operates during a period of six months from the time the employee first became unfit. Section 235 contains a definition of "injured employee" and it is relevantly defined as meaning an employee who receives an injury within the meaning of the Compensation Act. Thus it may be assumed that Brown was an injured employee for the purposes of s243 and it would have been unlawful for the Powers to have dismissed him for a period of six months from 23 December 1994. Had the Powers not dismissed Brown on 23 December 1994, it is likely they would have acted lawfully in relation to his employment and would not have dismissed him for at least a period of six months because he was unfit, because of his injury, to perform the range of duties for which he was employed. A real issue may arise about the relationship between s243 of the Industrial Relations Act 1991 (NSW) and Part 3 of Division VIA of the Act and whether there is any inconsistency between them: see Metal Trades Industry Association of Australia & Ors v Amalgamated Metal Workers' and Shipwrights' Union (1983) 152 CLR 632. However it is not an issue that was raised in these proceedings and I proceed on the basis that s243 operates according to its terms. For the purposes of the review, Brown swore an affidavit dated 15 August 1995 in which he said: "I have worked only one day since I left the employ of the Respondent. I still suffer from a back injury. I am unable to carry out cellar work but could do bar work, work in a bottle shop or other work which does not involve heavy lifting or frequent bending." Brown was not cross-examined on this affidavit nor was evidence led to suggest this work could not have been done by Brown at the hotel had his employment not been unlawfully terminated. He gave evidence before the Judicial Registrar of some non-remunerative work he had done and his desire and attempts to obtain work. However the Powers advanced five propositions, in answer to the suggestion that Brown could have continued to work but for the unlawful termination. The first is that there is no medical evidence to support the suggestion, the second is that no certificate was proffered of the type referred to in s38A of the Compensation Act, the third is that he has received compensation on the basis of total incapacity, the fourth is that the position he had occupied required heavy lifting and there were no alternative positions, and the fifth is the inference that it is said can be drawn from Brown's statement that he has worked for one day between December 1994 and August 1995. As to the first, while accepting there is no medical evidence that Brown could have worked after the 23 December 1994, there is no medical evidence that he could not. As to the second, it is irrelevant. No occasion arose for a certificate under s38A, which concerns a partially incapacitated worker, as compensation was being paid on the basis that Brown was totally incapacitated. As to the third, the payment of compensation to Brown was made on the basis that liability was admitted. It was the acceptance by the Powers' insurance company of Brown's contention that he was totally incapacitated that led to the payment of compensation. It has not been submitted that any estoppel arises from the receipt of payments on the basis of total incapacity: see Huysse v Snowy Mountains Hydro-Electric Authority (1975) 1 NSWLR 401. The payment and receipt of workers compensation on the basis of Brown being totally incapacitated does not preclude this Court considering, on the evidence before it, whether Brown could have worked but for his unlawful termination. There is probative evidence that he could which was not challenged. As to the fourth, while it may be accepted that the position for which Brown had originally been employed required heavy lifting, there is no reason to believe that had Brown's employment not been unlawfully terminated, the Powers would not have sought to use him in work that would not require heavy lifting. It would have been in their interests to do so. As to the fifth, the inference that should be drawn from the fact that Brown has worked only one day since his termination is not that he was unable to work but rather that his attempts to gain work, of which there was evidence, were unsuccessful and that the need for him to obtain other work was not a pressing one having regard to the fact that he was receiving compensation payments at a level not materially less than the income he had earlier earned. I am satisfied that had Brown's employment not been terminated unlawfully on 23 December 1994 he would have remained in the Powers' employ and an attempt would have been made by both Brown and the Powers to accommodate his back injury so as to enable him to do other work. To this point, I have accepted the correctness of the submission made by the Powers' solicitor that the reference in s170EE(3) to remuneration that the employee would have received, is a reference to remuneration for work done. The submission is based on observations of Wilcox CJ in Mullany v Active Concrete, unreported, 3 May 1995: "The Court is required under s.170EE(3), in working out the amount of compensation, "to have regard to the remuneration that the employee would have received or would have been likely to have received if the employer had not terminated the employment"; but the amount must not exceed the amount of remuneration that would have been received by the employee in respect of the period of six months that immediately followed the date of termination. I think that the subsection directs attention to remuneration received in respect of work done, not money received from other sources and unrelated to work done; for example, social security receipts or gifts received from organisations or persons who take a charitable interest in the employee's plight. Accordingly, I do not propose to reduce the amount of compensation to which I think the applicant is otherwise entitled because of the social services payments." (emphasis added). However, were it necessary for me to address the matter, I would not accept uncritically that the remuneration referred to in s170EE(3) is only a reference to remuneration for work done. An employee who is temporarily absent because of ill health may well be entitled to be paid sick pay by the employer, under an award or at common law, for the period they are absent. If, contrary to s170DF(1)(a), the employee is dismissed while on sick leave, then I would not assume that sick pay forgone should not be treated as lost remuneration even if it was not for work done: see Graham v Baker (1961) 106 CLR 340 at 346. That is, I would not assume that the employee was not entitled to be compensated for payments that otherwise would have been made by way of sick pay as well as for remuneration for work that might have actually been done. The next issue is the relevance of the payment to Brown of compensation under the Compensation Act. The primary liability to pay compensation is on the employer: see s9 of the Compensation Act. By operation of s33 of the Compensation Act, the compensation payable by an employer is to include a weekly payment during the period of incapacity. The incapacity is the incapacity to work and earn income in the open labour market: see Scott v Sun Alliance Australia Ltd & Anor (1993) 178 CLR 1 at 12. During the first 26 weeks of incapacity, which is the relevant period in the present case, the compensation "shall be the amount of the worker's current weekly wage rate": see s36(1) of the Compensation Act. Section 42 provides that current "weekly wage rate" is, relevantly, the award rate and is not to include overtime and over award payments: see s42(6) of the Compensation Act. Moreover s50 of the Compensation Act enables the employer to offset against compensation which is payable, sick pay already paid and to offset against sick pay which is payable, compensation already paid. Section 170EE(3) confers on the Court a discretion as to the amount of compensation that should be awarded. The sub-section requires the Court to have regard to remuneration that would have been received or would have been likely to have been received and that it is a matter to be considered as a fundamental element when exercising the discretion: see Association of Professional Engineers, Scientists and Managers Australia v Deniliquin Council (1995) 134 ALR 267 at 281. The purpose of the sub-section is to empower the Court to place the employee in the same position he or she would have been in had there been no unlawful termination. The exercise of this power is subject to a statutory limit on the amount of compensation that might be awarded. In my opinion, it is appropriate to take into account payments made to an employee under the Compensation Act. The payments are paid notionally by the employer though it may be accepted, and is the fact in this case, that they are almost always paid by an insurance company acting on behalf of the employer. The scheme of the Compensation Act dictates that result. However it is, as I earlier noted, in satisfaction of an obligation of the employer. In this respect payments under the workers compensation legislation are in a quite different position to payments under the Social Security Act 1991 (Cth). Such payments are not to be treated as remuneration for the purposes of s170EE(3) and are thus not to be taken into account in any calculation of compensation under s170EE(3): see Janicek v ICI Dulux Australia, 4 September 1995, unreported, per Wilcox CJ. In my opinion the compensation payments made to Brown in the six months following the termination should be treated as remuneration paid to him for the period. The workers compensation payments for that period totalled $9,838.40. During the six month period from 23 December 1994 he would have earned $13,000.00 by way of wages. Thus the remuneration lost by Brown for that six month period was $3,161.60. In the written submissions to which I earlier referred, Brown's solicitor submitted that the Court is not limited to considering the remuneration lost during the six month period and may look at remuneration lost for some greater period. Indeed, it was submitted, other matters could indicate compensation might exceed the cap imposed by the section but if so, the Court is obliged to limit the amount awarded to that cap. I do not accept this submission. Section 170EE(3) is structured in a way that plainly suggests, in relation to employees whose employment is covered by an award, that the lost remuneration to be taken into account is the remuneration for the period of six months following the unlawful termination. It appears from an affidavit sworn on behalf of the Powers' workers compensation insurance company that Brown was an award employee. Section 170EE(3)(a) appears to identify expressly a monetary limit and impliedly a temporal limit in relation to award employees. However the submission of Brown's solicitor finds some support in s170EE(3)(b) which provides, in relation to non-award employees, a limit identified in monetary terms only. However s170EE(3)(b) has to be read in conjunction with s170CD which renders the provisions of Division 3 of Part VIA applicable to non-award employees earning less than $60,000 per annum though the operation of s170CD is subject to qualifications which are not presently relevant. Thus the identification of the amount of $30,000 in s170EE(4)(a), for the purpose of s170EE(3)(b), involves the identification of a maximum amount which is half the maximum amount that might be earned by a non-award employee to whom Division 3 applies. It may be accepted there is not complete symmetry between paragraphs (a) and (b) of s170EE(3) in that a non-award employee whose actual salary is less than $60,000 per annum might, at least nominally, be awarded compensation of a sum amounting to more than six months remuneration. However I would have thought it likely that the Court, in exercising its discretion, would ordinarily limit any compensation to a maximum of six months remuneration having regard to the general scheme of the Act. In my opinion, when considering what compensation should be awarded to Brown, it is appropriate to pay regard only to the remuneration lost in relation to the six month period following the termination. Other matters might also be relevant: see Aitken v The Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia - Western Australian Branch, 7 August 1995, Lee J, unreported. Amendments were made to s170EE by the Industrial Relations and Other Legislation Amendment Act 1995 ("the Amending Act"). They apply if, at 15 January 1996, the Court had not pronounced final judgment in an application under s170EA. Whether an order of the Judicial Registrar is a final judgment, at least when a review is sought under s377, is a potentially complex issue. The operation of the Amending Act was not adverted to by the parties in their oral or written submissions. Relevantly, the Amending Act now invests the Court with a discretion to make an order of compensation if it "considers it appropriate in all the circumstances of the case": see s170EE(2) in its amended form. Were it necessary to exercise that discretionary power, I would do so in the applicant's favour. That is, I would make the same order for compensation as I would were I not required to consider whether it was appropriate in all the circumstances. The remuneration lost by Brown was $3,161.60. The submissions made on Brown's behalf, both in the statement of facts and contentions, orally and in supplementary written submissions were to the effect that the compensation should be awarded for the continuing financial disadvantage arising from the termination of his employment. This is said to be loss of wages. Having regard to the effect of s170EE(3), as I earlier discussed, the only compensation that might be awarded in that respect is $3,161.60 though some allowance must be made for the possible reduction in his over award pay because of his inability to do heavy lifting and thus his inability to do all the work for which he was employed and in respect of which the rate of pay was originally struck. As no other basis is advanced upon which compensation should be awarded, I propose to set aside the order of the Judicial Registrar and order that compensation in the sum of $2,500 be paid. I am aware that a sum of $7,000 may already have been paid having regard to a qualification I earlier placed on an order staying the operation of the Judicial Registrar's order. If it has been paid and any consequential order is required to be made, I give the parties liberty to have the matter relisted for the purpose of considering what further orders, if any, should be made. I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Moore. Associate: ...................... Dated: 19 April 1996 APPEARANCES Counsel for the Applicant: Mr J Bundock Solicitor for the Applicant: Hanstein, Stacey & Nyman Counsel for the Respondent: Mr J Wilson Solicitor for the Respondent: Crossin Barker Gosling Date of Hearing: 8 December 1995 Written Submissions Complete: 17 January 1996 Date of Judgment: 19 April 1996 IN THE INDUSTRIAL RELATIONS COURT ) ) OF AUSTRALIA NEW SOUTH WALES ) ) DISTRICT REGISTRY ) ) No. AI 1023R of 1995 BETWEEN: ALAN LAWRENCE BROWN Applicant AND: COLIN WILLIAM POWER AND KAY POWER T/AS ROYAL HOTEL TUMUT Respondent JUDGE: Moore J PLACE: Sydney DATE: 19 April 1996 CORRIGENDUM The following amendments are made to his Honour's judgment of 19 April 1996: 1. At page 16 after "Solicitor for the Respondent" delete "Crossin Barker Gosling" and insert "Peter Gain & Associates". Associate: ............................. Date: 23 May 1996