DECISION NO:225/97 INDUSTRIAL RELATIONS COURT OF AUSTRALIA INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - alleged UNLAWFUL TERMINATION - ONUS OF PROOF - VALID REASON - CONDUCT AND PERFORMANCE - WARNING - OPPORTUNITY TO RESPOND - whether ILLNESS or TEMPORARY ABSENCE a reasons for termination - REMEDY - whether REINSTATEMENT impracticable where small employer - COMPENSATION - assessment of likelihood that employment would have continued. Workplace Relations Act 1996 (Cth) ss170DC, 170DE, 170DF, 170EA, 170EDA, 170EE. Workplace Relations Regulations Reg 30D(2) Termination of Employment Convention, 1982 Art. 7 Termination of Employment Recommendation, 1982 Paras 7 and 8. . Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199 Perrin v Des Taylor Pty Ltd (1995) 58 IR 254 Drury v BHP Refractories Pty Ltd (1995) 62 IR Izdes v L G Bennett & Co Pty Ltd (t/a Alba Industries )(1995) 61 IR 439 Reader v Wyndham Lodge Nursing Home Inc (unreported, Industrial Relations Court of Australia, Moore J, 26 March 1997) Davis v Portseal Pty Ltd (1996) 70 IR 320; on appeal (unreported, Industrial Relations Court of Australia, Wilcox CJ, Lee and Marshall JJ, 10 March 1997). BROADLEY v PETER MARKOVIC PTY LTD VI/1176 of 1997 Before: MURPHY JR Place: MELBOURNE Date: 18 JULY 1997 IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI/1176 of 1997 BETWEEN: AMANDA JANE BROADLEY Applicant AND PETER MARKOVIC PTY LTD Respondent BEFORE: MURPHY JR PLACE: MELBOURNE DATE: 18 JULY 1997 MINUTES OF ORDERS [1] The Court declares that the respondent has breached ss170DC, 170DE(1) and 170DF(1)(a) of the Workplace Relations Act 1996 (Cth); [2] The Court orders that the respondent pay to the applicant the sum of $5,863; [3] The respondent may offset against the sum in paragraph 2 hereof any amounts remitted to the Australian Taxation Office on the applicant's account. 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 VI/1176 of 1997 BETWEEN: AMANDA JANE BROADLEY Applicant AND PETER MARKOVIC PTY LTD Respondent BEFORE: MURPHY JR PLACE: MELBOURNE DATE: 18 JULY 1997 REASONS FOR DECISION Introduction. This is an application for a remedy under s170EA of the Workplace Relations Act 1996 (formerly the Industrial Relations Act 1988) ("the Act"). The applicant alleges that her employment was terminated by the respondent on 16 December 1996 in circumstances that contravened ss170DC, 170DE(1) and 170DF(1)(a) of the Act. The respondent's defence was that the applicant was lawfully terminated for reasons related to her conduct and performance. Background. The respondent is a real estate agency operating in the inner northern suburbs. The applicant commenced employment in July 1996 as a receptionist. Her duties were to greet customers, answer the telephone and disperse calls, take messages, and do some typing. She was interviewed for the position by the principal of the respondent, Mr Peter Markovic. I am satisfied that Ms Aileen Paton also participated in that interview. She had a one day trial before being offered the position. At the interview she explained to Mr Markovic that her typing skills were limited and offered to do a course to improve. I accept her evidence that she was told then that there would be not much typing in the position, she could build up her skills, and eventually a computer would be made available and she would be trained on that. The applicant's performance deficiencies - the respondent's account. The evidence ranged widely over the applicant's alleged performance deficiencies that formed the reason for termination. Soon after the applicant commenced employment, Ms Aileen Paton, who was a portfolio manager at the respondent as well as acting as office manager, raised with the applicant a number of matters relating to her performance. She noted them (Exhibit R1) and passed the note to Mr Markovic who filed it. Mr Markovic gave evidence that on 20 September, as a result of complaints that he had been receiving in the office as to the typing of display notices, he called the applicant into his office for a talk which lasted about twenty minutes. He noted in his diary (Exhibit R2): "Typing. Amanda typing". He said that he raised the issue of the applicant passing typing over to other staff and not typing listings on time. He raised the question whether the applicant was improving. The applicant replied that she was doing the best she could. In cross-examination Mr Markovic was unable to recall the time of day that this conversation occurred. On 7 October in Mr Markovic's diary there is an entry: "see Amanda. Canvassing letters too slow." He said that this related to a request he made to the applicant to type out to owners of properties one hundred standard form canvassing letters per week. He said that the applicant's reply was that she hadn't time to type the letters. He said that the applicant had only typed thirty-eight letters over a period of eight weeks and he "got a bit sick of asking every week". Mr Markovic said that in this interview he also discussed the applicant's lateness. On 8 November Mr Markovic made a diary entry: "Amanda late all the time?". He said that he again saw the applicant in his office and raised with her "lateness of coming to work every day". He said that her lateness had become a compounding problem. He was unable to recall her exact response and said that "it became obvious that (the applicant) was not interested in responding." On 26 November Mr Markovic made an entry in his diary: "see Amanda. Being rude and warning her." Mr Markovic said he saw the applicant on that day. He raised the question of rudeness and that improvement in her performance "just was not happening". The reference to rudeness arose out of an incident where the applicant, in front of other staff, had stormed off when Mr Markovic asked her to do something. Mr Markovic gave evidence that in late November a system had commenced in the office to record whether employees arrived late. The relevant records show that the applicant, along with some other employees, was late on a number of days during December. On 12 December Mr Markovic discussed with Ms Aileen Paton "what are we going to do about the performance of (the applicant)?" Ms Paton said that she knew that the applicant was "nearing the end". She mentioned complaints from staff members, her lack of ability to do the job, her relations with Mr Markovic, her typing and her lateness. Ms Paton said that she understood that the applicant had been dismissed "mainly for performance, late arriving". It was decided to terminate the applicant's employment. On 16 December Mr Markovic called the applicant into his office at about 6.00 pm. Mr Markovic's diary entry reads: "late second day / typing / slow / insubord(ination)". He was vague as to what he told the applicant when dismissing her. He said that her typing hadn't improved and she was constantly being late. He then escorted her to the desk and from the office. He replied affirmatively to this question from the Court: "You are saying you had called her in and basically told her, "you're insubordinate, you have been constantly late and your typing hasn't improved. You're sacked. Is that right...?" ----"That's right". "Was that the conversation? ----"That's correct". In re-examination Mr Markovic said that the applicant's performance had been below standard; this and "being late to work each day" were why she was terminated. On 19 December Mr Markovic's secretary, Ms Fiona Paton, signed an Employment Separation Certificate (Exhibit A3) that gave as the reason for her termination "too many days off and not punctual". Ms Fiona Paton said that she produced this document without reference to Mr Markovic. The applicant's account. The applicant's account of the events leading to the termination of her employment was in marked contrast to that of Mr Markovic. First she denied that she had been called in to his office on four occasions where allegedly he formally raised matters with her. She also denied ever being asked by Mr Markovic to mail out canvassing letters. She denied incidents of rudeness and gave an explanation of one exchange that did not amount to insubordination. She said that she had been told by Ms Aileen Paton that her typing was improving. She also said that at one stage Mr Markovic had assured her that her job was secure. This was when he placed an advertisement for a receptionist in the newspapers that was designed to attract applicants for another position in the office. It was in relation to the applicant's lateness that the evidence was most contentious. Mr Markovic and Ms Aileen Paton gave evidence that the applicant was up to ten to fifteen minutes late about three times a week. The applicant's counsel did not specifically put to those witnesses that this was not the position. The applicant in her evidence denied that she was regularly late of that order. Rather she claimed that when she was running late she would call the office to advise. In evidence Ms Paton was only able to point to a couple of notations in her diary that the applicant was late, and the diary contains a number of messages that the applicant was running late. The respondent relied on the fact that the applicant's handwriting was not recorded as the first entry in the day book to prove that the applicant was late. It was common ground that in early December Ms Aileen Paton, without advice to staff, instituted a system whereby the initials of those persons in the office at 9.00 am were recorded. Ms Paton's evidence was that the system was instituted because a number of staff were running late. In cross-examination she modified the evidence to suggest that the system was primarily instigated as a result of the applicant's lateness, and because other staff were imitating her. The respondent held regular staff meetings but the system was never raised with staff at those meetings. It was abandoned soon after the applicant's departure. The applicant denied that Mr Markovic had given her any formal warning regarding lateness. Ms Paton gave evidence of a conversation with the applicant regarding lateness wherein the applicant had said, in a joking way, she was on a second warning from Mr Markovic. The applicant denied this conversation. The applicant's account of the reasons proffered for her termination differed from that of Mr Markovic. The applicant's evidence was that Mr Markovic said: "You know you're too slow, your typing's not up to standard, you don't arrive at work on time, you've had too many days off. We need someone here who we know will be at work today and we're going to have to let you go." Mr Markovic denied that absences were an operative reason. He was supported by Ms Aileen Paton who said that while the applicant, as a result of a medical condition, had a number of days off early in her employment the position had substantially improved in the period up to November and December. Findings. In the face of conflicting accounts as to a multitude of events, and with few relevant contemporaneous documents, I have concluded that I am unable to accept the entirety of either of the accounts proffered. I am satisfied that the real reason for the termination only emerges from both accounts. The respondent relied heavily on Mr Markovic's diary entries to corroborate his evidence that he raised with the applicant in a formal manner on four separate occasions matters relating to her performance, and that these reasons formed the basis of a defensible decision to dismiss her. Mr Markovic's evidence as to the conversations was, however, decidedly vague and sits uneasily with other evidence in this case. Although I allow for the fact that this is a relatively small workplace where a degree of informality in personnel matters can be expected, I am unable to accept Mr Markovic's evidence that on the four occasions alleged he formally raised the matters he recorded in his diary with the applicant. I am satisfied that Mr Markovic has reconstructed these alleged conversations from matters that he has recorded in his diary at the time. The matters recorded on each occasion were what he intended to raise with the applicant but I am unable to accept that he did so in the manner that he alleged. I accept the applicant's evidence that the only two matters that he raised in a direct or formal manner with her were the question of how he was to be addressed in front of clients, and the fact that she was late on one occasion. I am unable to accept his account of the request to type the canvassing letters. I accept the applicant's account that she was not asked to type one hundred canvassing letters a week and her denial that she was asked by Mr Markovic for what she had done on a weekly basis. Mr Markovic gave evidence that he had discussed with the applicant her lateness on a number of occasions. I am unable to accept this. I do accept that the question of punctuality was raised with the applicant by Ms Aileen Paton. This was done in an informal manner. I am prepared to accept that Mr Markovic may have informally raised the issue with the applicant on an occasion other than the day when she was half an hour late. This may explain the applicant's joking comment to Ms Aileen Paton that she had been warned by Mr Markovic twice. I am satisfied that at no stage was the applicant put on any sort of final warning regarding that aspect of her performance. At their highest the conversations were exhortations to improve. This leads to a consideration of what precipitated the termination. It was common ground that on the Thursday prior to the termination there was an abrupt exchange between the applicant and Mr Markovic as to whether she should attend the staff meeting scheduled that evening. I accept Ms Fiona Paton's evidence that on that occasion the applicant was rude to Mr Markovic. It prompted her to make a sharp comment about the applicant. This exchange must be combined with the applicant's attendance record under the system instituted earlier that month. The applicant was not recorded as being in the office at 9.00 am on a number of days. These matters prompted Mr Markovic, after a discussion with Ms Aileen Paton, to reach the decision to dismiss the applicant. His decision was based on his review of all aspects of the applicant's conduct and performance over the duration of her employment. The conduct and performance inadequacies that formed the basis of Mr Markovic's decision included the applicant's typing, her rudeness and insubordination, her lateness and her attendance record. In his evidence he included the fact that the applicant had been passing on typing to other staff. Ms Aileen Paton gave evidence that this practice effectively ceased after it was raised with the applicant. I accept the submission of counsel for the applicant that the applicant's absences on account of illness were a reason for her dismissal. They were mentioned by Mr Markovic on 16 December and they were an operative reason, albeit minor in the whole complex of reasons. This is because her attendance record had substantially improved in the previous couple of months. I thus prefer the applicant's account of the meeting on 16 December over that of Mr Markovic. The applicant told a fellow employee, Ms Houston, that evening that her absences were mentioned by Mr Markovic. This reason was also recorded by Ms Fiona Paton on the Employment Separation Certificate. As she was Mr Markovic's secretary she was in a good position, even accepting her evidence that the document was prepared without reference to her employer, to know of the reasons that motivated him to act. It is now necessary to apply these findings to the relevant provisions of the Act. Application of the Act: onus of proof. The respondent carries the onus of proof to exclude from its reasons for termination any proscribed reason: ss170EDA(2) and 170DF(1); it carries the onus of proof that it had a valid reason to dismiss the applicant: ss170EDA(1) and 170DE(1); the applicant carries the onus of proof that the respondent has failed to accord her an opportunity to respond to the allegations that were the reason for her dismissal: s170DC. Because the reasons for a dismissal are known to the employer it carries an evidentiary onus on this issue: Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 372. Valid reason and the opportunity to respond. The central issue in this proceeding was whether the applicant's (mis)conduct and (inadequate) performance justified her dismissal. I have concluded that the applicant's conduct and performance did not justify her termination. The principal reason for this conclusion is that the process by which the respondent reached its conclusion lacked the quality of defensibility that is imposed on employers under the Act. A starting point for a determination of the defensibility of a decision to dismiss is the explicit obligation on an employer to provide the employee with an opportunity to respond to the allegations that form the basis of the reason to terminate his or her services: s170DC of the Act. This obligation is derived from Article 7 of the Termination of Employment Convention, 1982 (Sch 10 of the Act). The provisions of Paragraphs 7 and 8 of the Termination of Employment Recommendation, 1982 (Sch 11 of the Act) are also relevant to the application of this obligation. They provide: "II Standards of General Application Procedure Prior to or at the Time of Termination 7 The employment of a worker should not be terminated for misconduct of a kind that under national law or practice would justify termination only if repeated on one or more occasions, unless the employer has given the worker appropriate written warning. 8 The employment of a worker should not be terminated for unsatisfactory performance, unless the employer has given the worker appropriate instructions and written warning and the worker continues to perform his duties unsatisfactorily after a reasonable period of time for improvement has elapsed." In Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199 at 209, Wilcox CJ, in a comment that has echoed through the cases, stated that the obligation to accord procedural fairness is substantive but does not require any particular formality. The obligation is encapsulated, according to Wilcox CJ, in an obligation to accord a "fair go" to the employee. In Perrin v Des Taylor Pty Ltd (1995) 58 IR 254 at 256 Moore J said: "Its purpose [s170DC] is at least twofold. It is to give the employee the opportunity to demonstrate that the allegations have no foundation in fact or they should not be viewed as reflecting on the employee's capacity.... A second purpose of s170DC is that an employee with whom an allegation has been raised may be able to persuade the employer that, while the allegation is of substance, there are factors that should persuade the employer not to terminate the employment. They may be extenuating personal circumstances or they may involve undertakings about future conduct. The rights of an employee to be consulted before dismissal now embodied within s170DC are not novel: [citations omitted]." The obligations on employers under the Act, as identified in the above material, are not onerous. The process and the conclusion reached are required to be characterised as defensible within the context of the employment relationship. Where performance deficiencies are the issue, the employee is entitled to have the performance standards expected by the employer laid out in unambiguous terms. This may require that matters be put in writing, it may not. Where the issue is something that can evoke different subjective responses, such as typing performance, insubordination or rudeness, the obligation to afford objective performance criteria or standards is even more important, particularly in the case of a junior employee just entering the workforce. On any of these criteria the respondent failed to achieve a level of management that gave proper weight to its obligations to the applicant in the employment relationship. On the two issues that precipitated the termination the respondent could easily have laid the groundwork for its decision to be defensible and thus valid under the Act. Ms Aileen Paton introduced a system of recording latecomers but failed to advise the staff, including the applicant, of the consequences for offenders. All staff could have been told that latecoming, under penalty of termination, would not be tolerated. The applicant, on the respondent's own account, was never told this. Similarly on the issue of insubordination. In any office environment sharp exchanges occur. Whether such incidents can form the basis of a lawful dismissal will often depend on whether the employer has drawn a line in the sand and advised the employee that such conduct will no longer be tolerated: see e.g. Drury v BHP Refractories Pty Ltd (1995) 62 IR 467 and Gibson v Bosmac Pty Ltd (1995) 60 IR 1. Here the respondent not only failed to lay down with sufficient specificity the standards of conduct and performance it expected, it also failed to give the applicant the opportunity to defend herself against the allegations that were the basis of its decision. In a comment that had a ring of truth about it, the applicant said that she would not have issued the proceeding had Mr Markovic given her the four warnings he claimed to have recorded in his diary. The process of allowing the applicant to respond to the performance concerns failed because the standards were not laid out. The final decision lacks defensibility because the applicant was not given a hearing of any sort at all before the axe fell. The respondent has breached ss170DC and 170DE(1) of the Act and I so declare. Proscribed reason - s170DF(1)(a). Similar considerations apply to that aspect of the respondent's reasons that relate to the applicant's days off due to her medical condition. The applicant provided some medical certification (Exhibit A4) to the respondent and the latter was able to accommodate the applicant by authorising her absences as they arose: Workplace Relations Regulations - Reg 30D(2). I am satisfied, however, that without reverting to the applicant about the matter, these earlier absences became a part, albeit minor, in the catalogue of performance deficiencies that prompted Mr Markovic to dismiss the applicant on 16 December. In taking these matters into account the respondent infringed an important public right of the applicant. This right is enshrined in s170DF(1)(a) and proscribes termination of employment for a reason that includes a matter outside the applicant's control, namely "temporary absence from work because of illness or injury". The respondent must exclude a proscribed reason from its reasons for termination. It has failed to do so and I declare that it has breached s170DF(1)(a) of the Act. Remedy. The applicant sought reinstatement to her position. I have reached the conclusion that reinstatement is impracticable. This is a small office with only a handful of office staff. Mr Markovic is the principal of the respondent and has a close involvement with matters within his office. Relations between the applicant and Mr Markovic have clearly broken down. Relations between the applicant and the Paton sisters were also strained. To order reinstatement would cause unacceptable problems, embarrassments and disharmony: Nicolson (above) at 210; see also Izdes v L G Bennett & Co Pty Ltd (t/a Alba Industries )(1995) 61 IR 439 at 453-4. In the alternative the applicant seeks under s170EE(2) of the Act compensation for her losses. To the date of trial, despite efforts to obtain employment, she has been unemployed. The applicant's losses to date, however, are not necessarily a true indication of her losses as a result of the unlawful termination of her employment. The Court must also consider what may have occurred had the unlawful termination of employment not occurred: Nicolson (above) at 212; Reader v Wyndham Lodge Nursing Home Inc (unreported, Industrial Relations Court of Australia, Moore J, 26 March 1997); Davis v Portseal Pty Ltd (1996) 70 IR 320, on appeal (unreported, Industrial Relations Court of Australia, Wilcox CJ, Lee and Marshall JJ, 10 March 1997); and Perrin (above). Although these authorities deal with the assessment of compensation for a breach of s170DC, in my view similar principles apply where conduct and performance deficiencies are the basis of a decision to terminate that the court characterises as lacking validity. It is a matter of speculation whether, had the applicant been given a proper opportunity to turn around her performance, she would have succeeded in retaining her employment. Her relations with both Mr Markovic and Ms Aileen Paton suggest that this would not have been a certainty. She would have had to significantly improve her punctuality and level of typing skills. On the other hand, the applicant gave evidence of a desire to obtain a foothold in the workforce and thus may not have thrown away her employment when subjected to a proper disciplinary process. Having regard to these competing considerations, it is most likely that the applicant's employment would have continued for another three months. The applicant's likely earnings over that period are, in this case, the proper measure of compensation for the respondent's unlawful termination of the applicant's employment. The applicant's average weekly wage was $451 (taking into account the $82 she was paid for working every second Saturday). Three months wages total $5,863 and I will order that the respondent pay this amount to the applicant. ORDERS : 1. The Court declares that the respondent has breached ss 170DC, 170DE and 170DF(1)(a) of the Workplace Relations Act 1996 (Cth). 2. The Court orders that the respondent pay to the applicant the sum of $5,863. 3. The respondent may offset against the sum in paragraph 2 hereof any amounts remitted to the Australian Taxation Office on the applicant's account. I certify that this and the preceding nine (9) pages are a true copy of the reasons for decision of Murphy JR. Associate: KAREN HALSE Dated: 18 JULY 1997 APPEARANCES Counsel for the applicant: MS R DOYLE Solicitors for the applicant: SLATER & GORDON Counsel for the respondent: MR K MUELLER Solicitors for the respondent: A. AGROTIS & ASSOCIATES Dates of Hearing: 7 & 8 MAY 1997 Date of Judgment: 18 JULY 1997.