CHALMERS v DEAKIN UNIVERSITY [1997] IRCA 146

DECISION NO:146/97 CATCHWORDS

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - UNLAWFUL TERMINATION - VALID REASON - OPERATIONAL REQUIREMENTS - CONDUCT AND PERFORMANCE - employee unable to discharge duties due to PHYSICAL DISABILITY - employee seeking to exhaust sick leave entitlements before transfer to SUPERANNUATION benefit - offer to pay out entitlements refused - employer terminating employment in belief that employee would have greater benefit entitlement - COSTS - whether proceeding instituted "without reasonable cause" - relevance of offers made prior to termination of employment.

Workplace Relations Act 1996 (Cwth) ss170DE, 347 State Superannuation Act 1988 (Vic.) Accident Compensation Act 1985 (Vic.) Universities and Post Compulsory Academic Conditions Award 1995

Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257.

CHALMERS v DEAKIN UNIVERSITY VI96/1908

Before: MURPHY JR Place: MELBOURNE Date: 16 APRIL 1997

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY

VI96/1908

BETWEEN: ALAN DOUGLAS CHALMERS Applicant

AND DEAKIN UNIVERSITY Respondent

BEFORE: MURPHY JR PLACE: MELBOURNE DATE: 16 APRIL 1997 MINUTES OF ORDERS

THE COURT ORDERS THAT:

[1] The application is dismissed; [2] The applicant by 15 July 1997, pay the respondent's costs fixed at $6,500.

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 VICTORIA DISTRICT REGISTRY

VI96/1908

BETWEEN: ALAN DOUGLAS CHALMERS Applicant

AND DEAKIN UNIVERSITY Respondent

BEFORE: MURPHY JR PLACE: MELBOURNE DATE: 16 APRIL 1997 REASONS FOR DECISION Delivered ex tempore

The applicant seeks a remedy under s170EA of the Workplace Relations Act 1996 (Cwth) ("the Act"). He alleges that when the respondent, by letter dated 8 December 1995, terminated his position effective 7 June 1996, it did not have a valid reason to do so. Background. The history of the letter of 8 December 1995 (Exhibit R14) goes back some years. The applicant was employed by a predecessor of the respondent. When in 1992 the respondent became the successor of his then employer, the applicant, due to what was accepted by WorkCover as a work related injury, was incapacitated for work. It was common ground between the applicant and the respondent that from 1992 until 1996 the applicant remained totally incapacitated for duties and was unable to assume his duties at the respondent. The applicant was paid workers compensation, including make-up pay for the first twelve months. Then ensued an exchange of correspondence between the applicant and the respondent as the respondent sought to bring the applicant's status with it to some finality. That finality was the six months notice issued in the letter dated 8 December 1995. Before that letter was issued there was a deal of correspondence between the parties in relation to the applicant's entitlements under the State Superannuation Act 1988 (Vic.) and under the Accident Compensation Act 1985 (Vic.). Various attempts to resolve matters between the parties also ensued, including offers made by the respondent to the applicant in relation to his outstanding entitlements. These offers included an offer at one stage to pay out all the applicant's sick leave entitlements in order to allow the applicant, under a rule then prevailing and administered by the Victorian Superannuation Board ("the Board"), to assume a disability benefit under the State Superannuation Act. A particular sticking point was that the Board required all sick leave entitlements to be extinguished before that disability benefit was payable. The discussions between the parties, at least from the respondent's point of view, were reiterated in a letter to the applicant dated 2 June 1995 (Exhibit R7) which confirmed that the applicant at that time was receiving sixty-five per cent of his salary under the WorkCare / WorkCover legislation. It noted that the respondent had investigated the applicant's eligibility for an ill-health pension from the Board, and that while the applicant was on WorkCover benefits he was not eligible for such a benefit. The letter further stated: "in order to resolve this issue the University offered you a lump sum payment of one year's salary which was rejected by you. This offer was made on the basis that your acceptance of the lump sum would have effectively cleared the way for an application by you for the ill-health pension benefit from the State Superannuation Board." The letter indicated that the respondent was not prepared to move from that position. On 14 July 1995 the respondent advised the applicant (Exhibit R9) that it had been advised by the Board that the applicant had been approved for retirement and a disability retirement benefit. The applicant replied to that letter (Exhibit R10) saying that it was a matter for him as to whether he accepted that benefit from the Board. On 22 August 1995 the respondent wrote to the applicant (Exhibit R11) confirming the advice it had received from the Board in relation to a grant of a disability benefit, further advising that the respondent had received advice that should the applicant accept the disability benefit he would be paid seventy per cent of his salary and that the WorkCover benefits would top up his salary by a further twenty-five per cent making a total benefit of ninety-five per cent. The letter noted that that proposal would appear to be the most advantageous to the applicant. The letter also noted that the respondent presumed that the applicant would not transfer to sick leave prior to accepting the disability benefit. The applicant did not accept the proposal at that stage and subsequently action was put in train to terminate the applicant's employment under Clause 16 of the Universities and Post Compulsory Academic Conditions Award 1995 ("the Award"). That clause provides that the Chief Executive Officer may terminate employment by giving, in circumstances where medical examination reveals that the staff member is unable to perform his or her duties, a period of six months' notice. That notice was dated 8 December 1995 (Exhibit R14). The letter was stamped at the Sorrento Post Office on 16 December 1995; it is not clear when the letter was actually delivered into the postal system. The letter also reiterates an earlier offer of an ex gratia payment equivalent to twelve months salary and further confirms the offer from the Board. The letter states that the respondent has advised the Board of its actions. The applicant wrote back to the respondent (Exhibit A2) after receiving that letter disputing the decision to terminate his employment and querying what had changed that had caused the respondent to take the action it did. On 11 January 1996 the respondent replied (Exhibit A3) that it relied on clause 16(e) of the Award which provided that it was entitled to give six months' notice. Subsequently the applicant was paid his outstanding entitlements for annual leave and long service leave. He was not paid his outstanding sick leave entitlements. Valid Reason. The respondent contends that it had a valid reason based on its operational requirements to terminate the applicant's employment. That reason was that the applicant was unable to discharge the duties of his position, the respondent believed it was in the applicant's interests that his employment be terminated, and further it would allow the respondent to fill the position that the applicant nominally held. The applicant's contention in his evidence was that as a result of the actions of the respondent he suffered substantial losses. This was because, contrary to the respondent's advice to him prior to the termination, the top up arrangement in relation to his Board pension and workers compensation did not occur. He further alleged that he lost the three hundred days accrued sick leave that he had at the time of the termination, and he had lost the right to future accrued annual, long service and sick leave. The authorities in the court indicate that the employer must show that the decision to terminate employment was a logical response to its operational requirements or was based on the employee's conduct or performance. Here the decision to terminate the applicant's employment could be said to be based on both the applicant's capacity, and on the respondent's operational requirements. The applicant's capacity was incapacity: he was unable to perform his duties. The respondent's operational requirements were that the applicant was not in a position, nor was it ever expected that he would be in a position, to be a productive member of its staff. Therefore there was no reason why he should remain a staff member and thus it was entitled under the terms of the Award to terminate his employment. On the other hand, the applicant asserts that the consequences of the respondent taking the action it did were his loss of accrued sick leave, and the failure to achieve, by the combination of the WorkCover and the Board disability benefit, ninety-five per cent of his previous salary, as envisaged in the letter of 22 August 1995 (Exhibit R11). The respondent's response to this was that the applicant's position under the WorkCover legislation and under the Board resulted from the operation and interaction of those two legislative schemes and not from its own actions: to the extent that the applicant has not achieved the advantageous benefits envisaged in the letter of 22 August, this did not deprive the respondent's decision of its validity under s170DE of the Act. It further submitted that the applicant's request to be able to access his sick leave to the full, and then revert to workers compensation, or to use the sick leave to top up the workers compensation payments, was unable to be achieved because the policy of the respondent was to either have staff on WorkCover or on sick leave. The respondent offered the applicant the option of reverting to sick leave in order to be paid, or to utilise his outstanding sick leave entitlements, but he refused. Mr Wotherspoon gave unchallenged evidence that that offer was made to the applicant and was rejected by him. The applicant gave evidence that he was never made that offer. On this conflict I accept Mr Wotherspoon's evidence. It is clear that the respondent was in somewhat of a difficult situation in that the applicant was seeking to have it both ways by remaining on its books as an employee and seeking to access the outstanding sick leave, yet maintaining his workers compensation rights. From the applicant's point of view that is a not unreasonable stance to take. The question is whether or not the decision of the respondent, following the letter of 22 August 1995, to proceed to terminate the applicant's employment under the Award was deprived of validity by the disadvantageous impact on the applicant of him no longer being employed by the respondent. I should mention that the applicant also alleges that his terms of employment were not strictly governed by the Award, but also included his original terms of employment, which were the terms and conditions of employment of academic staff employed in affiliated colleges of the Victoria Institute of Colleges (Exhibit A4). Those terms provide for three months' notice of termination of employment, but also provide for a staff member to make a submission to the college council in the event that his or her employment has been terminated. The respondent's response to the suggestion that the applicant's employment was governed by the provisions of the document was that as a result of transitional provisions associated with the amalgamation of the applicant's employer into the respondent, the applicant's employment was governed by the Award. The evidence in relation to the way that Exhibit A4 remained incorporated into the applicant's contract of employment was unsatisfactory. It is difficult to find, in any event, that the applicant has sought to invoke the appeal rights under clause 6.2. Further, the provisions of the Award providing for six months' notice of termination are in a sense more advantageous to the applicant that three months' notice of termination provided in those terms and conditions. On this issue I prefer the evidence of Mr Wotherspoon that the transitional provisions of the Award do provide that the applicant's terms and conditions of employment were governed by that Award and not by some earlier contract of employment with a predecessor organisation. In any event, if I am wrong about this, it does not alter my ultimate conclusion as to whether or not the respondent had a valid reason to terminate the applicant's employment. Conclusion. I am satisfied that the respondent has made out its onus of proof that it had a valid reason to terminate the applicant's employment. The volume of correspondence between the parties illustrates that at all times the respondent was attempting to allow the applicant to utilise various accrued entitlements, and other entitlements under the WorkCare legislation and the superannuation legislation. Further, the respondent had, given the applicant's physical condition and inability to return to his position, a legitimate interest in seeking to finalise his employment status. The respondent did not rush to judgment on that matter. The applicant had been in that predicament from 1992 to December 1995 when his employment was terminated by notice . I am not satisfied that any financial disadvantage that was suffered by the applicant as a result of the termination of his employment deprives the respondent's decision of the defensible quality that is required under the Act. Clause 16(h) of the Award specifically provides that the provisions relating to termination of employment on the grounds of ill health are not to displace or override any existing workers compensation schemes. That is a clear indication in the Award that employers are entitled to terminate employment on the grounds of ill health under clause 16, but that the provisions of the Award do not effect any statutory entitlements under a workers compensation scheme. The applicant has not satisfied me that any financial disadvantage to him has arisen as a result of the employer's action, as distinct from the operation of either the WorkCover legislation or the State Superannuation legislation. In characterising the respondent's reason for termination here, I also note the open offers that were made to the applicant in the course of the events leading up to the letter of 8 December 1995. These include the offer of one year's salary made in the letter and the earlier offer made in the letter of 2 June 1995. The applicant may have rejected those offers, but the fact that they were made is relevant to determining whether or not the respondent has satisfied the Court that it had a valid reason, based on its operational requirements, to terminate the applicant's employment. I am satisfied that the respondent did have such a valid reason and that the application must be dismissed. Costs. This Court rarely makes orders for costs against unsuccessful parties. The test under s347 of the Act is that a proceeding be instituted "without reasonable cause". In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257, Wilcox J, as he then was, said at 264-5: "It seems to me that one way of testing whether a proceeding is instituted "without reasonable cause" is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success depends on the resolution in the applicant's favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being "without reasonable cause". But where, on the applicant's own version of the facts, it is clear that the proceeding must fail, it may properly be said that proceeding lacks a reasonable cause. That is a situation in the present case. The qualification of s347 applies. The Court has power to order costs against the applicant. I see no discretionary reason to withhold such an order. It is not a matter of the applicant's motives but, rather, that he has put the respondent to the expense of resisting a claim that always doomed to failure. There is no question of punishing the applicant for his unreasonable course of action. The rationale for making a costs order is that a measure of indemnity should be conferred upon the respondent for the costs it has been obliged to incur in responding to the unreasonably instituted proceeding." Here, on the applicant's own version of the facts, he was doomed to fail because it was accepted, at all times from 1992 onwards, that he was unable, for medical reasons, to discharge the duties of his office at the respondent. That was common ground between the parties. There was then extensive negotiation between the parties to attempt to bring the matter to finality. That included offers, confirmed in writing, on 2 June and 8 December 1995 of an ex gratia payment equivalent to twelve months salary. The applicant chose not to accept those offers and a further offer, in Mr Wotherspoon's evidence, of payment out of his outstanding sick leave entitlement to allow him to access the disability pension of the Board. The background of those offers, and the background of the applicant's total incapacity for work are relevant to whether or not, on the applicant's own version of the facts, he had any arguable case to impugn the validity of the reason of the respondent to terminate his employment. I am satisfied that on the facts known to the applicant when on 5 June 1996 he instituted the proceedings, his proceedings must be characterised as being without reasonable cause. Therefore the prohibition against an order of costs under s347 does not apply. I accede to the respondent's request for an order for costs against the applicant. I certify that this and the preceding eight (8) pages are a true copy of the reasons for decision of Murphy JR as recorded on transcript and revised by the Judicial Registrar.