DECISION NO:630/96 CATCHWORDS INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - VALID REASONS - No PROCEDURAL FAIRNESS - Reasons for the termination of the applicant's employment included the General Manager's conclusion that the applicant's conduct had resulted in the relationship between the applicant and his two immediate superiors becoming untenable - Insufficient to merely put the background facts upon which that conclusion was based - That conclusion was itself an "allegation" within the meaning of s170DC of the Act - REINSTATEMENT IMPRACTICABLE - COMPENSATION. Industrial Relations Act, 1988, ss: 170DC Selvachandran -v- Peteron 62 IR 371 at 373 MOFFITT -V- PINPOINT TARGET MARKETING SERVICES PTY LTD NI 1799 of 1996 Before: PATCH JR Place: SYDNEY Date/s of hearing: 18, 19 & 20 NOVEMBER 1996 Date of judgment: 20 NOVEMBER 1996 IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NI 1799 of 1996 BETWEEN: DOMINIC JAMES MOFFITT Applicant AND PINPOINT TARGET MARKETING SERVICES PTY LTD Respondent MINUTES OF ORDERS 20 November 1996 PATCH JR THE COURT ORDERS THAT: 1. The respondent to pay the applicant within 21 days of today, the sum of $3,900.00 (gross) as compensation for the unlawful termination of employment. 2. Any sum paid within 21 days of today by the respondent to the Commissioner for Taxation as tax in respect of the above sum is to be regarded as having been paid in pro-tanto satisfaction of the judgment debt. 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 NEW SOUTH WALES DISTRICT REGISTRY NI 1799 of 1996 BETWEEN: DOMINIC JAMES MOFFITT Applicant AND PINPOINT TARGET MARKETING SERVICES PTY LTD Respondent REASONS FOR DECISION Delivered ex tempore - revised from the transcript 20 November 1996 PATCH JR The applicant claims that the termination of his employment was unlawful and seeks reinstatement. If the Court were to determine that reinstatement is impracticable the applicant seeks compensation. Background Facts The respondent's business was and is that of a bulk mail distributor in competition, in effect, with Australia Post. The respondent obtains an address list and material from clients and distributes that material. At the relevant times at least the respondent's business was confined to the distribution of envelopes, not packages. The applicant started work as an accounts manager, (that is to say a sales representative), in November 1994. Mr David Macdonald started as the New South Wales State Manager in late September 1995, and remained in that position until the termination of the applicant's employment. Mr Peter Asimus started as the New South Wales Sales Manager of the respondent in mid March 1995, and remained in that position until the termination of the applicant's employment. The General Manager of the respondent, based in Melbourne, was Mr Andrew Williams. He had started as General Manager in March 1995 but had worked previously in the same group of companies. Mr Asimus had also had a long term association with the same group of companies. So the reporting hierarchy, starting from the bottom and working up, was that the applicant reported to Mr Asimus; Mr Asimus reported to Mr Macdonald, and Mr Macdonald reported to Mr Williams. During a period of some months when there was no State Manager, before the appointment of Mr Macdonald, the applicant reported directly to Mr Williams who had a more "hands on" role in the New South Wales operations of the company. The applicant's employment was terminated on 4 June 1996. Prior to that there was a history of counselling and warnings. In late March or early April 1996 (in any event before Easter 1996) Mr Macdonald and the applicant had an informal discussion in a cafe, during which Mr Macdonald told the applicant he had to be more organised. On the Tuesday after Easter, 10 April 1996, the applicant had a more formal discussion with Mr Macdonald. Mr Macdonald gave evidence, which was not disputed, that he explained to the applicant that it was a requirement that there be 10 face to face calls per week with clients; that he was concerned with his time-keeping; that he was concerned about the applicant's sales training and explained the necessity of training and upgrading, especially in the light of the applicant's current performance. Mr Macdonald also gave evidence, which was uncontested, that the applicant replied by saying something like "Don't baby me, I'm the best salesman you've got, I don't need training". Mr Macdonald went on to give evidence that he also stressed to the applicant at that meeting the importance of the applicant's reporting, both because that was important in terms of the content of Mr Macdonald's own reports to Mr Williams and for reasons of intelligence gathering for the business of the company. There was a warning letter dated 19 April (which was handwritten). A typed version of that was given to the applicant on 22 April. A second warning letter was given to the applicant on 6 May 1996 and a third warning letter was given to the applicant on 3 June 196. Sometime shortly after that Easter Tuesday between Mr Macdonald and the applicant, the applicant contacted Mr Williams and made some allegations about the history of Mr Macdonald prior to Mr Macdonald joining the company and the conduct and performance of Mr Macdonald since he became the State Manager. They were serious allegations, and included: · That Mr Macdonald was not doing his job properly. · That Mr Macdonald was misusing company credit cards, ie., that on one occasion at a restaurant Mr Macdonald took the money from everyone at the table and then booked the dinner up on the company credit card. · That Mr Macdonald had been dismissed from his previous employment for sexual harassment. · That Mr Macdonald was not working long hours. · That on one occasion the applicant, at Mr Macdonald's request, had dropped Mr Macdonald off at a gym. · That on one occasion the applicant drove Mr Macdonald to a Kings Cross coffee shop. There were not many matters of factual dispute in the case, but there were some. It is therefore necessary to resolve questions of credit between the applicant, on the one hand and the witnesses for the respondent, on the other. In this regard, I noted during the applicant's evidence that he tended at times to answer some questions in a way that avoided a direct answer. The applicant gave evidence that Mr Macdonald simply read through the warning of 3 June 1996 (exhibit 5). That at sometime shortly before that process had finished Mr Williams entered the room and summarily dismissed the applicant before the applicant had the opportunity to say anything in response to the allegations in that letter. Mr Macdonald, on the other hand, gave evidence that he went through that letter paragraph by paragraph and paragraph by paragraph gave the applicant the opportunity to respond to the allegations in the letter. Mr Macdonald's version is supported to some extent by Mr Asimus and by Mr Williams, both of whom entered the meeting when Mr Macdonald had already gone through the bulk of the letter. Importantly, however, Mr Macdonald gave evidence that he made notes on his copy of the warning letter during the meeting and that he sometimes made a verbatim notes of the applicant's response. The original of the first two pages of the notes made by Mr Macdonald is to be found as part of exhibit 5. A photocopy of the third page of those notes is part of exhibit 13. Exhibits 5 and 13 being copies of the warning letter and the first two pages of exhibit 13 being a photocopy of the first two pages of exhibit 5. I accept Mr Macdonald's version of that meeting and reject the applicant's assertion that he had no chance to respond to the letter of 3 June before his employment was terminated. Whenever there are differences between the evidence of the applicant and the evidence of Mr Asimus, Mr Williams, or Macdonald, I prefer their evidence in preference to that of the applicant. I therefore accept Mr Williams when he says (contrary to the evidence given by the applicant) that it was the applicant who raised with Mr Williams the allegation that Mr Macdonald had been dismissed for sexual harassment. That allegation was really the repetition of malicious and untrue gossip that had been circulating in the office. There was no proper reason for the applicant to raise that with Mr Williams. Mr Williams investigated the allegations made by the applicant and told both the applicant and Mr Macdonald, some time prior to the first warning letter on 19 April, 1996 (exhibit 8), that the allegations had been rejected as untrue. WAS THERE A VALID REASON FOR THE TERMINATION OF THE APPLICANT'S EMPLOYMENT? The applicant's case was that the termination of his employment was the culmination of a vendetta against him by Mr Macdonald, which vendetta had been sparked by Mr Macdonald's knowledge that the applicant had made the abovementioned allegations to Mr Williams. The applicant's case was that when Mr Asimus issued the warning letters of 19 (and 22) April 1996, 6 May 1996, and 3 June 1996, that Mr Asimus was acting as the agent of Mr Macdonald, and at Mr Macdonald's instigation, as part of the vendetta against him. I am satisfied that Mr Asimus acted independently of Mr Macdonald when he decided to issue those warning letters and that he made bona fide criticisms and raised bona fide concerns with the applicant in each of those three warning letters. I am satisfied further that Mr Macdonald did not enter into a vendetta against the applicant. In fact I am satisfied that, when Mr Macdonald realised that the allegations (which he admitted caused him upset) had resulted in a strained personal relationship between himself and the applicant, Mr Macdonald took steps to distance himself from the applicant in the day to day workings of the respondent. He did this by emphasising the reporting chain by which the applicant reported first to Mr Asimus and did not report directly to Mr Macdonald. The maker of the decision to terminate the applicant's employment was Mr Williams. Therefore it is his reasons for the termination of employment that are crucial on the question of whether or not there was a valid reason for the termination of the applicant's employment. Mr Williams gave evidence that his reasons for the decision to terminate the applicant's employment (which decision he made during the meeting of 4 June 1996) were as follows. (1) An inability to follow direction. (2). An inability to accept instructions. (3). A non desire to accept training. (4) A non-conformance to administrative procedures. (5) His general attitude. (6) His disruptive attitude. (7) That the relationship between himself and Mr Asimus and Mr Macdonald had become untenable. (8)(Possibly part of reason 7), that the applicant had no respect for Mr Asimus and Mr Macdonald. Mr Williams elaborated on those reasons in his testimony and said that at the meeting on 4 June 1996 it became obvious to him that the relationship between the applicant and Mr Macdonald was beyond repair and that they could not have a successful working relationship in the future. His evidence was as follows: Q. How did what you knew of his response to the warning letters affect your decision to dismiss him? A. That was the reason why I did really, there was no chance in an improvement in Dominic's attitude nor was there any chance of improvement to follow directions of management of the company. Mr Williams went on to say that, although the applicant's sales performance was well below budget, his sales performance was not specifically dealt with in the warning letters (and therefore by implication was not part of the reasons for the termination of the applicant's employment) because he, Mr Williams, thought that there was still some hope for the applicant (by implication prior to the meeting of 4 June 1996). The approach that Mr Williams took, therefore, was to work through the underlying reasons for the applicant's poor sales performance. Hence the detail of the warning letters. I am satisfied on the evidence of Mr Macdonald and Mr Asimus that the criticisms of the applicant's performance set out in the warning letters and, in particular, the final letter of 3 June 1996, were bona fide. I am satisfied that there was a sufficient basis for each of the reasons relied upon by Mr Williams to terminate the applicant's employment. I find that those reasons were sound, defensible, and well founded. See Selvachandran -v- Peteron 62 IR371 at 373. It is clear that the fundamental reason for the termination of the applicant's employment, that is to say the reason which took precedence over all others in the mind of Mr Williams, was that the relationship between the applicant and Mr Macdonald had become "untenable". I am satisfied that that was the case. It follows that there was a valid reason (in fact more than one valid reason) for the termination of the applicant's employment. WAS THE TERMINATION OF THE APPLICANT'S EMPLOYMENT IN BREACH OF SECTION 170DC OF THE ACT? I am satisfied that the first six reasons given by Mr Williams were traversed in exhibit 5 (the warning letter of 3 June, 1996). The questions of the applicant's inability to follow direction and his inability to accept instruction (probably a repeat of the same reason) were raised in exhibit 5 in the second last paragraph with the reference to "your willingness to follow managerial direction". Furthermore, the criticism of the applicant's failure to properly complete the weekly sales reports constitutes an assertion, in that limited respect at least, of an inability to accept instructions. This is because he had been told repeatedly to complete the weekly sales reports in the full and proper way. The non-desire to accept training is asserted in the last paragraph on page two of exhibit five, the paragraph beginning with the phrase, "I further refer to your behaviour demonstrated in the sales meeting on Friday 24 May 1996". The non-conformance to administrative procedures is a reference I am satisfied to the applicant's failure to complete weekly sales reports in the way in which he was instructed. I am satisfied that, despite some limited improvement in one or two of the sales reports, the applicant generally speaking was still not completing the weekly sales reports in the way that he was supposed to. The reference to general attitude and disruptive attitude is to be found in the last paragraph of exhibit 5 and in the second last and last paragraphs on page two of exhibit 5. Before moving on to the seventh reason, namely the question of the untenable nature of the relationship between the applicant and his managers, I am satisfied that the applicant was told that his job was in jeopardy because of the criticisms in exhibit 5. This is because of the specific reference in exhibit 5 (in the opening sentence) to exhibit 3 (the warning letter of 6 May 1996). On page 3 of exhibit 3, Mr Asimus had said this to the applicant, after going through a large number of criticisms and asking for some things to be explained: The quality of your performance and attitude will not be allowed to continue and will result in the termination of your employment. An improvement in your performance and attitude is again expected and your future actions will continue to be monitored. By the reference to that letter contained in the opening words of exhibit 5, the applicant well knew that there was a possibility that his employment would be terminated if he was unable to satisfactorily respond to the criticisms in exhibit 5. However, nowhere in exhibit 5 (nor for that matter in either of the earlier warning letters) was it put to the applicant that the relationship between himself and Mr Asimus, or between himself and Mr Macdonald, had become "untenable". Nor was that mentioned orally to him. Nor was it ever said to him that any alleged problems in his relationship with those persons could result in the termination of his employment. Counsel for the respondent submits that that was not necessary and that all that is necessary in order for section 170DC of the Act not to be breached is that the primary or background facts upon which that conclusion (namely the conclusion that the relationship had become untenable) was reached were put to the applicant. I do not accept that. It is the allegations about conduct or performance which have to be put to an employee in order for the employee to be given the opportunity to respond to them. In this case section 170DC of the Act required the respondent to put to the applicant that his conduct or performance had led to the relationships becoming untenable, and that that situation was placing his employment in jeopardy. That was not done. The termination of the applicant's employment was therefore unlawful. REMEDY. Reinstatement. In my opinion it would be impracticable to order the reinstatement of the applicant. This is for two principal reasons: Firstly, although I have found that section 170DC of the Act was breached, there were several underlying and valid reasons for the termination of the applicant's employment. Secondly, Mr Williams gave evidence that he has no confidence in the applicant. This was no doubt because of the underlying valid reasons for the termination of the applicant's employment but it goes to show that there would be a significant danger of serious disharmony or disruption in the workplace if the applicant were to be reinstated. Compensation. The applicant is still unemployed. I am satisfied that he has made diligent attempts to obtain further employment since the termination of his employment by the respondent on 4 June. I am satisfied that he has suffered a considerable economic loss as a result of the unlawful termination of his employment and I am satisfied that, on the balance of probabilities, that economic loss will continue into the reasonably near future. On the other hand, in my view it is likely that his employment would have been terminated no later than three months after 4 June if the applicant had been given the opportunity to respond to the allegation that the relationship between himself and Mr Asimus and Mr Macdonald had become untenable. He was not responding well to criticism, and the relationship between himself and Mr Asimus, and himself and Mr Macdonald, would have taken a lot of work to repair. The applicant received two months pay in lieu of notice by virtue of the fact that his employment ceased on 4 June and he was paid up to 4 August. In my opinion therefore the applicant is entitled to one month's remuneration as compensation for the unlawful termination of his employment. I calculate that as follows: The applicant was earning a salary of $39,000 at the time of the termination of his employment. In addition to that he was receiving $7,800 car allowance. The total of his remuneration package was therefore $46,800 per annum. Dividing that figure by 12, I reach the sum of $3,900. The orders that the Court makes therefore are as follows: (1) The respondent is to pay the applicant within 21 days of today the sum of $3,900 (gross) as compensation for the unlawful termination of his employment; (2) Any sum paid within 21 days of today by the respondent to the Commissioner for Taxation as tax in respect of the above sum is to be regarded as having been paid in pro tanto satisfaction of the judgment debt. I certify that this and the preceding 11 pages are a true copy of the reasons for decision of Judicial Registrar Patch as recorded in the transcript and revised by the Judicial Registrar. Associate: Renee Cauchi Dated: 24 December 1996 APPEARANCES Counsel for the applicant: Mr J Higgins Solicitor for the applicant: Mr T Sullivan North Shore Legal Counsel for the respondent: Mr R Beech-Jones Solicitor for the respondent: Ms Y Vignando TG Hartman & Associates Dates of hearing: 18, 19 & 20 November 1996