STYLIANOU v STAMWARD Pty Ltd [1997] IRCA 48

DECISION NO:48/97 C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - whether termination at the initiative of the employer - COMPENSATION - whether compensation payable for the loss of the security full time permanent employment provides where an employee suffers a temporary incapacity for work by reason of an injury Workplace Relations Act 1996 ss 170EE(2), 170EE(3) Byrne v Australian Airlines Ltd (1995) 131 ALR 422 Mohazab v Dick Smith Electronics Pty Ltd (No 2), (1995) 62 IR 200 Rheinberger v Huxley Marketing Pty Ltd (1996) 67 IR 154 Jackson v Elmerside Pty Ltd (unreported, IRCA, R.D. Farrell JR, 3 February 1997) Slifka v J W Sanders Pty Limited (1995) 67 IR 316 Grout v Gunnedah Shire Council 1 IRCR 143 JOHN STYLIANOU - v - STAMWARD PTY LTD No. VI 2441 of 1996 Before: Judicial Registrar Millane Place: Melbourne Date: 26 February 1997 INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2441 of 1996 B E T W E E N : JOHN STYLIANOU Applicant A N D STAMWARD PTY LTD Respondent MINUTES OF ORDERS Judicial Registrar Millane 26 February 1997 THE COURT DECLARES THAT: 1. On 30 April 1996 the respondent terminated the applicant's employment in contravention of the Workplace Relations Act 1996. AND THE COURT ORDERS THAT within 21 days of the date of making these orders: 2. The respondent pay to the applicant compensation in the sum of $1242.71. 3. Unpaid commission payments in the sum of $1191.00. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules. INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2441 of 1996 B E T W E E N : JOHN STYLIANOU Applicant A N D STAMWARD PTY LTD Respondent Before: Judicial Registrar Millane Place: Melbourne Date: 26 February 1997 REASONS FOR JUDGMENT Between 12 August 1995 and 30 April 1996 the applicant worked with the respondent at its Chadstone Mitsubishi yard as a used car salesman. He left on 30 April 1996 and now alleges that his employment was terminated in contravention of the Workplace Relations Act 1996 (the Act). The argument between the parties pursuant to the provisions of the Act was confined to the preliminary question of whether there was termination at the initiative of the respondent. Additionally the applicant seeks outstanding commission payments he says are owing for the month of April 1996 totalling $1191.00. THE WITNESSES The applicant gave evidence on his own behalf. The respondent called the following witnesses: - Con Stambanis (Stambanis), a director of the respondent company; - Terence Victor Wolger (Wolger), the respondent's business manager; and - Ronald Paul O'Hallaran (O'Hallaran), the respondent's former used car manager and second in charge. THE CONTRACT OF EMPLOYMENT It was common ground that when the applicant commenced his employment on 12 August 1995 the terms of his engagement included the payment of a retainer of $430.00 gross per week together with commission payments in accordance with a used vehicle commission structure set out in a document dated 27 May 1992 (Exhibit R1). It was the applicant's evidence that that document was never given to him prior to commencing his employment, however, its contents were discussed with O'Hallaran during his interview. The structure provided for in Exhibit R1 sets out a basis for calculating commission payments to the two used car salesmen employed by the respondent including the applicant until April 1996. The respondent's used car sales yard contains used cars referred to both as stock and old-stockers; that is to say, stock held up to ninety days and stock held for ninety days or over respectively. Until April 1996 it was agreed that the used car salesmen could obtain commission at the rates provided for by the existing used vehicle commission structure on any vehicle sold whether it was stock or old-stockers regardless of whether the salesmen reached the monthly targets published by O'Hallaran each month. From April 1996 the respondent unilaterally and retrospectively altered the basis upon which the commission structure was payable (Exhibit A4); so that the salesmen were required to sell either three old-stockers or thirteen of any stock before what it referred to as "normal commission structure (was) payable retrespective to deal 1 ... (sic)". If the salesman failed to achieve one or the other target the rate of commission was confined to ten per cent of the gross. It was conceded by the respondent that at all relevant times the applicant's employment was governed by the terms of the Federal Vehicle Industry - Repair, Services and Retail - Award 1983. The High Court in its decision in Byrne v Australian Airlines Ltd (1995) 131 ALR 422, makes it clear that the terms of an award, without express agreement to do so or where the importation of such terms is necessary for the reasonable or effective operation of the contract, are not imported into the contract of employment. Nevertheless such award terms carry statutory force as minimum conditions applying to the employment governed by the award and any contractual arrangement between the parties cannot derogate from these minimum conditions. Clause 48 of the award contains the following provision in respect to the payment of a commission (Exhibit A1): "Payment of commission, if any, to a vehicle salesperson may be negotiated between the salesperson and his employer subject to the following provisions, viz: (i) The basis on which commission will be paid shall be committed to writing and a copy given to the salesperson within 21 days of commencing employment and such basis shall not be altered except by mutual consent or by a week's notice in writing from the employer to the salesperson. (ii) The employer of a salesperson employed at the date of the coming into operation of this award shall comply with subparagraph (i) hereof within 21 days of such date." It was the applicant's uncontested evidence that when he was engaged by the respondent the terms of his employment were oral and, in particular, the basis upon which the commission was payable was not committed to writing, nor was it given to him in writing within 21 days of his commencement. Notwithstanding this omission on the part of the respondent whose witnesses clearly had no knowledge of the award requirement at the relevant time, it was common ground that the parties treated the used vehicle commission structure dated 27 May 1992 as the basis for their arrangement to calculate commission payments to the applicant on sales. This was so until O'Hallaran, in an effort to increase the sales of the respondent's old-stockers, implemented a new commission structure. Whilst the applicant made much of the respondent's failure to comply with the award requirements when he was initially engaged as a used car salesman, the applicant ultimately relied on the 1992 document as evidencing the commission agreement entered into and the agreement which he says could not be altered except by mutual consent or by one week's notice in writing from the respondent to the applicant. It was further argued by the applicant that any written notice by the respondent purporting to alter the basis of the commission payable could not, without his consent, create a commission structure that in effect derogated from the minimum entitlements originally agreed to and protected by the award provisions. This lastmentioned argument is one I accept as being consistent with the purpose of the award provisions in securing minimum terms and conditions of employment. I interpret clause 48 to mean that the employer may give one week's notice in writing of a proposed alteration, however, if the employee does not consent to that alteration the employer cannot impose a unilateral change to the commission structure which has the effect of imposing an additional requirement before the employee is entitled to receive payment of commission at the higher rate previously agreed to. In this case by imposing the alternative targets the respondent created a situation where there was an immediate downward impact on the employee's remuneration if either target was not achieved. It was agreed that in this case the applicant had not been achieving the monthly targets set by O'Hallaran prior to April 1996. Nevertheless, he was paid commission on the vehicles sold at a rate in accordance with the 1992 structure. It was said by the respondent that it had to do something to shift its growing stock of old-stockers and used cars. It was the applicant's case that he did not consent to what was a material alteration of the basis upon which he was remunerated and had agreed to be employed. It was not the case that he disagreed with the targets set so much as it was the case that he did not agree to an alteration which precluded him from obtaining commission at the higher rate unless he achieved one or the other target set in the April document. Apart from breaching the term of his contract the applicant also pointed to the fact that the method by which the alteration was brought into being did not accord with the requirements of the award. THE EVIDENCE The applicant carried the initial burden of proof in this case and gave evidence first. He told the Court that in the first or second week of April 1996 O'Hallaran handed him Exhibit A4, which document introduced the changed commission structure. Up until then it was the practice of O'Hallaran to give the used car salesmen a document before the commencement of or during each month, detailing the bonus commission structure for each month and the sales target. The April document was, he said, handed to him by O'Hallaran in the yard without comment. When he read it he went to O'Hallaran's office and told him he was not happy with it. O'Hallaran contested this evidence by telling the Court that he recalled handing the document to both salesmen at a meeting in his office on Thursday, 4 April 1996, the day before the Easter break, during which meeting he set about explaining the change contained in that document. He could not recall the applicant's precise words at that meeting; although, because the applicant had a "sharp wit", he was "... sure he made a comment on money ..." or some other comment. When the applicant was cross-examined it was only put to him that the document was given to him by O'Hallaran on 4 April 1996 and that he took it without expressing any dissatisfaction at all. To a limited extent this evidence is consistent with what the applicant says because he did take the document without saying anything and did not express any dissatisfaction until he read it and attended on O'Hallaran in his office. The meeting with the other salesman and the explanation O'Hallaran says he gave at that meeting were not the subject of any cross-examination of the applicant. In these circumstances, I accept the applicant's evidence that there was no discussion until such time as he attended O'Hallaran's office; indicating then that he was not happy with the changes because in his view they were unfair. The applicant claims that in response to his complaint O'Hallaran "shrugged" his shoulders and proceeded with his paperwork. Whether or not O'Hallaran did take time to explain the basis of the changes made, it is apparent that the meeting with the applicant did nothing to alter the respondent's course in implementing a different and less favourable commission structure for the month of April 1996. Shortly after implementing that change O'Hallaran took leave and was not there when the termination of the applicant's employment occurred on 30 April 1996. Neither party could identify the precise date, however, it was agreed that in about mid April 1996 and following the Easter break from 5 April 1996 onwards, a dinner was held at a restaurant, Jimmy The Greeks in Carlton, and that dinner was attended by staff including the applicant and Stambanis. During the latter part of the evening at the restaurant it was further agreed that the applicant expressed his view that the new structure was unfair and asked that they return to the old structure. I am satisfied that during the latter part of the evening at the restaurant there were a number of references to the issue of the new structure and, as indicated by the applicant, Stambanis listened and explained the reason the respondent had for wanting this new structure; pointing out also that he, Stambanis, could not be seen to be resiling from the position adopted, at least for the month of April, because the staff would take the view that he did not mean what he said. In other words, he was concerned that he would lose credibility if he changed his mind midstream. Nothing further happened until 30 April 1996 when the applicant attended on Stambanis in his office. It is important to bear in mind that the new structure was for the period 1 April 1996 to 27 April 1996 and, if O'Hallaran's evidence is correct, he introduced the change retrospectively. By the time the applicant had his last conversation with Stambanis before the termination occurred, the sales period for April had finalised and the applicant had not achieved either target for that month, even though he had sold some used cars but not any old-stockers. This meant that, for instance, for the seven vehicles sold by the applicant in April 1996 he could not seek commission payments up to twenty per cent of the gross profit (after lot charges) on the sale of the vehicles where the gross profit from the sale exceeded $1,801.00 and over. In respect of four of the sales the applicant claims a loss of commission as follows, being the difference between what he was paid and what he says he should have received under the old commission structure: Rus $ 115 Bould $ 283 Kilby $ 550 Marriage $ 243 _____ $1191 When the applicant attended on Stambanis there ensued a fairly lengthy discussion following which discussion the applicant left his employment. The applicant alleges that he sought to convince Stambanis to be, as he put it, fair and pay him the commission he says was owing as well as return to the old structure allegedly agreed upon. In effect, he was told by Stambanis that he wanted the applicant to stay, however, he was a grown up and he could do what he liked. Stambanis' position was as it had been at the restaurant and that is that he would not change the structure and pay the commission for April at the old rate because he would lose credibility. Stambanis' evidence of the matters canvassed at their last meeting is more detailed but of similar effect to that given by the applicant. What is apparent is that the applicant sought to return to the structure as it had existed since the inception of his employment and receive commission for April 1996 at the old rate. Stambanis told him that he did not want him to leave, explained why the new structure had to be introduced and reiterated his stance that he could not be seen to change what had been set in place. According to Stambanis the applicant told him that Stambanis was forcing him to resign, in response to which comment Stambanis reiterated that the structure was in place for that month, it was in "concrete" and would he would not go back on it. The conversation did not progress beyond these matters until Stambanis invited the applicant to make up his mind, which he did by saying that he would resign. He then offered to give one week's notice or leave immediately. After the applicant returned to his office Wolger, who Stambanis says was told by him that the applicant had resigned, approached the applicant with a pro forma document bearing the title "Termination Notice". It was common ground that the document was completed in front of the applicant by Wolger who inserted the following words in the section identified as "Reason for Leaving": "Unagreeable to amendment of commission structure." The applicant claims that he signed the document as completed in the formal parts and it was then signed by Wolger. It was agreed that the document was later signed by Stambanis. Wolger and Stambanis told the Court that when they signed the document it also bore the following statement written by Wolger at the bottom of the page under the signatures: "Employee offerred (sic) resignation and provided 1 weeks notice, offerred (sic) to leave immemidately (sic)" Wolger claims that he wrote the abovementioned statement on the document before the applicant signed the document. This is denied by the applicant. On the substantive question of whether or not there was termination at the initiative of the respondent the additional words make very little difference because by the time this document was signed it was clear that the applicant was leaving in circumstances where he did not agree with the respondent's unilateral alteration to his terms of remuneration. There is, however, a question of credibility arising out of the circumstances surrounding the signing of the document. I have some reservations about accepting that the statement was on the document when it was signed by the applicant. I can see no reason why the additional statement could not have been inserted in the section providing for a "Reason for Leaving". Stambanis' evidence was that the statement was on the document when he signed it, however, that evidence is not conclusive of the issue because he signed it after it was brought to him by Wolger. The document provides for the paying of one week's pay in lieu of notice; which sum the applicant was paid on termination and which payment is consistent with a termination by the respondent rather than resignation with the giving of one week's notice by the employee. Where there is a resignation and the giving of notice there is no obligation on the employer to pay compensation in lieu of notice. TERMINATION AT THE INITIATIVE OF THE RESPONDENT Having heard the evidence I am satisfied that this is a case where there was termination at the initiative of the respondent. The Full Court in its decision in Mohazab v Dick Smith Electronics Pty Ltd (No 2), (1995) 62 IR 200 makes the following pertinent observation on the meaning of this phrase: "... plainly an important feature is that the act of the employer results directly or consequentially in the termination of the employment and the employment relationship is not voluntarily left by the employee. That is, had the employer not taken the action it did, the employee would have remained in the employment relationship." Subsequent to the handing down of the Full Court decision, His Honour Justice Moore had occasion to consider the phrase in his decision in Rheinberger v Huxley Marketing Pty Ltd (1996) 67 IR 154 where he says at page 160 that: "... it is not sufficient to demonstrate that the employee did not voluntarily leave his or her employment to establish that there had been a termination of the employment at the initiative of the employer. Such a termination must result from some action on the part of the employer intended to bring the employment to an end and perhaps action which would, on any reasonable view, probably have that effect. I leave open the question of whether a termination of employment at the initiative of the employer requires the employer to intend by its action that the employment will conclude. I am prepared to assume, for present purposes, that there can be a termination at the initiative of the employer if the cessation of the employment relationship is the probable result of the employer's conduct." In the present case there was no evidence to suggest that the respondent intended that the applicant resign; although it was apparent that he had not been meeting targets for sales before April 1996 and by shifting the "goal posts" and refusing to relent when challenged on the fairness of its conduct, the respondent may not have cared whether or not the applicant resigned. In his recent decision in Jackson v Elmerside Pty Ltd (unreported, IRCA, Judicial Registrar R.D. Farrell, 3 February 1997) Judicial Registrar R.D. Farrell had occasion to consider the question of termination at the initiative of the employer where there was a issue relating to the demotion of an employee. I concur with the Judicial Registrar's observation in that case to the effect that if there is repudiatory breach of a contract of employment by the employer the employee's conduct in accepting that breach and leaving her or his employment cannot be used as a basis for saying that there was termination at the initiative of the employee. This would create an anomaly by permitting employers to avoid the jurisdiction of the Act through non-consensual reductions in the terms and conditions of employment. At various times during the hearing it was said that this was a case where there had been a constructive dismissal. In his decision in Slifka v J W Sanders Pty Limited (1995) 67 IR 316, His Honour Justice North considered some of the common law authorities on this issue noting that whatever differences arose between the common law and any other statutory provisions as to what amounts to a constructive dismissal, the phrase adopted by the legislators in referring to termination at the initiative of the employer, was quite different from the form of expression, context and history referred to in these common law cases and other statutory provisions. His Honour concluded that there may be termination at the initiative of the employer as a result of the conduct of the employer even if that conduct falls short of evincing of an intention not to be bound by the contract of employment. His Honour's reasoning and conclusions in that case are consistent with the reasoning and conclusions of His Honour Justice Moore in both Rheinberger's case referred to above and an earlier decision of Justice Moore's in Grout v Gunnedah Shire Council 1 IRCR 143. Stambanis left it up to the applicant to decide to go, however, he made it perfectly plain that he was not prepared to alter the respondent's position then or in the future. The effect of this conduct was that the applicant was faced with no real choice. My finding is that the material and unilateral alteration of the contract of employment in April 1996 amounted to a repudiatory breach of the contract entered into and it was open to the applicant to accept that repudiation and leave. There was some delay in doing so, however, as can be seen from the complaints made and the discussions entered into, there was an attempt by the applicant over a period of time to persuade the respondent to change its decision and by 30 April 1996 it was abundantly clear that the respondent did not intend to alter its position, nor did it have any express plans to do so in future months. It was argued by the respondent that the written alteration to the commission structure handed to the applicant on 4 April 1996 should be treated as written notice in accordance with the terms of the award and taking effect within seven days; that is to say, by 12 April 1996. I have already dealt with the merits of that argument earlier in this judgment. However, the effect of that argument was that the respondent accepted liability for any shortfall in commission sales to 12 April 1996. Only one sale fell within that period and that involved a shortfall of $115.00. In view of my findings I am satisfied that the applicant has demonstrated an entitlement to commission payments for the entire month at the rate contracted for and I propose to make an order for the payment of $1191.00 in damages for unpaid commissions. With regard to the applicant's claim for compensation under the Act, the following matters are relevant. Approximately three weeks after termination the applicant was successful in gaining employment with another car yard. That employment commenced on 18 May 1996. The new employment was said by the applicant to be probationary employment for a period of six weeks. Unfortunately, during the probationary period the applicant alleges that he suffered a significant knee injury whilst putting petrol in his vehicle at a service station. He now has a claim against the alleged tortfeasor and such claim involves a claim for loss of income. By reason of his injury the applicant alleges that he was not able to resume his new employment during the probationary period and, in about July 1996 when he sought to return, he was informed that the new employer had no work available for him. He did not find employment as a used car salesman again until 22 October 1996 when he commenced employment with Nepean Auto Sales as a used car salesman. He left that employment by 9 November 1996 due to continuing incapacity associated with his knee injury (see Exhibit A7). On or about 2 December 1996 the applicant commenced employment with his current employer, Knox Ford. He does not seek reinstatement and in the circumstances disclosed to the Court and, particularly, because of his current full time employment, my finding is that reinstatement is impracticable. He does, however, seek twenty-six weeks' compensation at the rate of $430.00 per week, which reflects his base retainer agreed to when he commenced his employment with the respondent in August 1995. Sections 170EE(2) and (3) of the Act make the following provisions for the payment of compensation: "170EE(2) If the Court thinks, in respect of a contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, that the reinstatement of the employee is impracticable, the Court may, if the Court considers it appropriate in all the circumstances of the case, make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate. (3) 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." The ceiling applicable to compensation payable to the applicant pursuant to the Act is $11,180 if the retainer figure is used as the basis for a calculation. In accordance with section 170DB of the Act at termination he has received one week's pay in lieu of notice. This together with the compensation payable gives rise to a potential payment for compensation and damages totalling $11,610.00. At termination the applicant received one week's pay in lieu of notice. He was employed with the new employer from 18 May 1996 at a rate of pay comparable to his employment with the respondent from 18 May 1996. The applicant gave evidence that when he was employed by the respondent he worked six days per week and had a half day off during the week. This means that from the date of termination there were fifteen working days until he was re-employed. He was paid for five and a half days work by way of notice and that leaves nine and a half working days to be accounted for in lost remuneration up to the time he was engaged by the new employer. At an average daily rate of $78.18, I calculate his entitlement for that period in lost remuneration at $742.71. In addition to the abovementioned sum the applicant claims that he is entitled to further compensation because had he suffered the injury he suffered to his knee whilst employed in permanent full time employment with the respondent, his employment could not have been lawfully terminated by reason of temporary incapacity brought about by the knee injury. He claims that he was prejudiced in this matter by reason of his probationary employment which enabled the new employer to lawfully end his employment whilst he was convalescing with the knee injury. Obviously the knee injury is an intervening factor for which the respondent cannot be held responsible. Nonetheless the question here is not whether the respondent should pay compensation for loss of remuneration which might otherwise be claimed from another alleged tortfeasor such as the proprietor of the service station, but whether the loss of the security of permanent full time employment as a result of the unlawful termination of his employment is a compensable loss. In my view it is. There was no evidence of what, if any, paid sick leave the applicant would have been entitled to had he remained in permanent employment with the respondent during the relevant period. In the normal course of events an employee is entitled to some paid sick leave during the period of permanent full time employment as well as the opportunity to retain their employment during any period of temporary incapacity, whether or not that arises out of an injury in the workplace. The applicant lost both the opportunity to use any paid sick leave he may otherwise have been able to call upon during full time permanent employment, as well as the opportunity of retaining the position with an employer during a period of temporary absence due to an injury related incapacity. Accordingly, I propose to make an order for a sum of compensation to reflect that loss. The order for compensation I propose to make comprises an order for $742.71 representing the nine and a half days lost remuneration to the date of the new employment together with a $500.00 sum representing the loss of the opportunity to call on any sick leave entitlements and to return to a full time position following a period of convalescence. MINUTES OF ORDERS THE COURT DECLARES THAT: 1. On 30 April 1996 the respondent terminated the applicant's employment in contravention of the Workplace Relations Act 1996. AND THE COURT ORDERS THAT within 21 days of the date of making these orders: 2. The respondent pay to the applicant compensation in the sum of $1242.71. 3. Unpaid commission payments in the sum of $1191.00. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules. I certify that this and the preceding fifteen (15) pages are a true copy of the reasons for judgment of Judicial Registrar Millane. Associate: Dated: 26 February 1997 Solicitors for the Applicant: T I A Forbes & Henry Counsel for the Applicant: Mr P. Ginnane Solicitors for the Respondent: Coadys Counsel for the Respondent: Mr R. Cameron Date of hearing: 20 & 21 February 1997 Date of judgment: 26 February 1997