Industrial Relations Commission of New South Wales CITATION : Cunningham v Midcoast Petroleum [2001] NSWIRComm 66 PARTIES : James George Cunningham Midcoast Petroleum Pty Ltd FILE NUMBER: IRC 4601 of 2000 CORAM: Harrison DP at 1 Unfair dismissal - fixed term contract of employment - termination mid-term CATCHWORDS : Held - Performance agreement not part of contract - sales target not basis for termination in absence of any other criticism Found - dismissal harsh, unreasonable and unjust, maximum compensation of 26 weeks awarded LEGISLATION CITED : Industrial Relations Act 1996 HEARING DATES: 12/01/2000; 02/14/2001 DATE OF JUDGMENT: 04/04/2001 Mr I Borrow Solicitor of Haywards Solicitors LEGAL REPRESENTATIVES: Mr P McGuire of Counsel Instructed by Ms S Price Cowley Hearn Lawyers JUDGMENT: - 20 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: HARRISON DP Wednesday, 4 April 2001 Matter No IRC 4601 of 2000 James Cunningham and Midcoast Petroleum Pty Ltd Application re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 DECISION 1 The application in this matter was filed on 14 September 2000 and first listed for proceedings for the purpose of directions and conciliation on 26 September 2000. These proceedings were deferred at the request of the parties to 8 October 2000. A further attempt at conciliation took place on 17 October 2000, on which occasion it was established that the matter could not be resolved by agreement. Directions were issued to bring the matter to arbitration on 1 December 2000. In the event, the matter proceeded on 1 December 2000 and concluded on 14 February 2001, by agreement of the parties, to accommodate availability of a witness 2 Mr I Borrow of Haywards Solicitors appeared on behalf of the applicant, Mr Cunningham. Mr P McGuire of Counsel, instructed by Ms S Price of Cowley Hearn Lawyers, appeared on behalf of Midcoast Petroleum Pty Ltd, the respondent employer. 3 On hearing Mr Borrow brought evidence from Mr Cunningham. Mr McGuire brought evidence from Mr John Ozard, an employee of the respondent since 3 August 1992 and at the relevant time employed in the role of Wholesale Marketing Manager; Mr Glenn Powell, an employee of Mobil Oil Australia Ltd who has since the end of February 2000 performed the role of General Manager for the respondent, a company jointly owned by Mobil Oil and another; Mr Terrence Kelly, employed as the Financial Controller by the respondent since 22 May 2000; and Mr Nigel Hobbs, an employee of Mobil Oil Australia who was General Manager of the respondent from October 1998 until January 2000. 4 The evidence established that Mr Cunningham was offered employment by the respondent as an Industrial Lubricants Executive on 13 January 1998, which he accepted on 27 January 1998. Mr Cunningham commenced employment on 2 February 1998 and on that day he signed an employment contract for a period of two years ('the contract"). This contract is attachment C to exhibit 2, the affidavit of evidence of Mr Cunningham. 5 The relevant terms of the contract are set out below: 2 Term 2.1 Subject to Clause 9, this Contract shall operate for a period of 2 years commencing on 2nd February 1998 (the "commencement date") and terminating on 1st February 2000 (the "termination date"). 3 Renewal of Appointment 3.1 At least 3 months before the termination date, the employee shall advise Midcoast in writing if the employee is seeking reappointment with Midcoast. 3.2 At least 2 months before the termination date, Midcoast shall advise the employee in writing whether it proposes to offer to the employee a new Contract of Employment and if so, on what terms. 3.3 At least 1 month before the termination date, the employee shall advise in writing if Midcoast's offer is accepted. 3.4 In the absence of reappointment or appointment to another position, the employee's employment terminates on the termination date. 4 Duties and Responsibilities 4.1 The employee shall: 4.1.1 satisfactorily carry out the responsibilities and perform duties to achieve results as defined in the Position Description. 4.1.2 perform other duties as required for the job or as requested by the Marketing Manager or other authorised officer of Midcoast. 4.1.3 promote the best interests of Midcoast 4.1.4 comply with all Midcoast policies and procedures. 4.1.5 comply with all relevant legislation and regulations. 4.1.6 not engage in other remunerated work without the written consent of the General Manager, such consent not to unreasonably withheld. 5 Performance Review 5.1 Performance of the employee shall be monitored in comparison with the Position Description, and reviewed annually 5.2 The review of the employee's performance will be conducted by the Marketing Manager. 5.3 The Marketing Manager shall give 1 week's notice that the performance review is to be conducted. 7 Hours 7.1 The employee shall work such hours as may reasonably be considered necessary to carry out the responsibilities as stated in the Position Description, noting that these hours may be varied and flexible. 9 Termination 9.1 This Contract may be terminated before the termination date in respect of the following matters: 9.1.1 By Midcoast and the employee agreeing in writing. 9.1.2 By the employee giving 4 weeks notice in writing, such 4 weeks commencing on the date of receipt of the notice by the Marketing Manager or the General Manager. 9.1.3 By Midcoast giving 4 week's notice in writing or by the payment of 1 month's pay in lieu of notice by Midcoast, where the employee does not satisfactorily meet the required performance as specified in the Position Description. 9.1.4 By Midcoast without notice if the employee commits serious misconduct as per Midcoast's Policies or is convicted of a criminal offence precluding the employee performing duties required to fulfil this Contract. 9.2 This Contract will terminate if the employee dies or becomes incapacitated from performing the duties outlined in this Contract for the balance of the term of the Contract. The employee will be deemed to be incapacitated upon certification by at least 2 medical practitioners, one of whom must be nominated by Midcoast, that the employee is incapable, because of ill-health, to fulfil the requirements of the Contract. 9.3 Upon termination of this Contract, the employee shall immediately return to Midcoast all property of Midcoast. 14 Dispute Resolution 14.1 Any dispute between the employee and Midcoast concerning the rights, duties or obligations of either party or concerning the proper explanation of any terms of this Contract should ordinarily be referred to an industrial tribunal. 14.2 Alternatively, such disputes may be referred to a mediator upon whom the parties agree. The parties shall attempt to settle their differences under the mediator so appointed. In the absence of agreement, the parties shall accept the decision of the mediator as final and binding. Each party will meet their own costs associated with the mediation. 17 Interpretation 17.1 Headings are for convenience only and shall not affect or contribute to the interpretation of the Contract 17.2 If reading down a provision of the Contract would prevent the provision being invalid or voidable it shall be read down to the extent that it is necessary and capable of being read down. 17.3 If a provision of the Contract is nevertheless invalid or voidable and the provision would not be invalid or voidable if a word or words were omitted, then that word will be omitted and, in any case, the whole provision shall be deleted and the remainder of the contract has full force and effect. 6 The contract was extended for a period of 12 months, in accordance with clause 3, to expire on 2 February 2001. Mr Cunningham was advised of the extension of his contract of employment in correspondence from Mr Ozard of 30 November 1999 (attachment G to exhibit 2). 7 Relevant aspects of this correspondence state: RE: YOUR FORMAL NOTIFICATION TO RENEW EMPLOYMENT CONTRACT Dear Jim. I acknowledge your letter dated the 1st November 1999 in which you express your desire to seek reappointment. This letter provides Midcoast Petroleum's formal response to your request. I express my disappointment at your 1999 October Year to date lube sales results. With 10 months of this year gone your lube sales volume, for both Wholesale, Sales and Total Sales, is well below objective. Whilst this statement is designed to demonstrate just how marginal this exercise has been, it isn't the sole basis for my assessment of your reappointment request. In your letter you have highlighted a number of areas where you consider your accomplishments have contributed to the overall performance of Midcoast Petroleum. I would like you to expand on these aspects as well as have you provide, in greater detail, an overall Territory Performance Report. This Report needs to review:- · Your 1999 objectives as per your Performance Agreement. · You will need to report by specific successes including their purchases for the year. · Report by specific prospect - detailing who they are and their potential in terms of volume and margin, where you are at with your negotiations and if unsuccessful detail the reasons why? · List all areas of concern both internal and external, again be specific. · Documented Call Plan cycle - last 2 months This report needs to be an in depth analysis of both you and your territory's performance. Your report will need to be completed by 16 December 1999. The following day I will arrange a meeting with Nigel Hobbs, Tony Farinola, yourself and myself to review your report, your 1999 performance and your territory plans for 2000. You will be asked to present your report at this review. I am prepared to offer an extension of your current Contract of Employment by an additional 12 months. The Conditions applied to the extension of the Contract of Employment will be a duplication of your existing Contract of Employment. Your gross salary applied to your Contract of Employment extension will be calculated on the basis of your 1999 salary plus any earned bonuses once your 1999 appraisal has been completed. 8 The report requested of Mr Cunningham (tendered attachment H to exhibit 2) details 1999-2000 objectives in the following terms: 1999-2000 Objectives The prime objective of the 1999 - 2000 business plan was to develop the industrial lubricant market to 98000 its. volume. This figure requires a substantial increase on the 1998 -1999 volume of sales, an approximate increase of some 97%. Whilst I have been unable to generate the full volume of lubricants as required by the plan, I have on a year to-date basic generated 80% of the planned volume. This represents a growth of over 45% for customers in the portfolio. It is my contention that in a year in which the area's leading employer has closed the steelmaking facility, with all the negative ramifications that such a traumatic event might impose, that in generating 80% of the plan, our position as a major supplier of Lubricants and associated product within the area WO 1 has been advanced. Niche Markets have been developed with a comprehensive range of cutting fluids now at our disposal at our full mark-up. 9 The full report tendered is of 19 pages, going to detail of sales and customer analysis; including a "new business summary, comparison of actual sales 1998/9, 1999/2000 to planned sales 1999/2000; customer sales history by trade class; customer sales by warehouse by product and analysis thereof, specific successes, specific prospects, internal/external concerns, debtor comments and call plan cycle." 10 On 10 January 2000 Mr Ozard again wrote to Mr Cunningham (attachment I to exhibit 2) advising him of a salary increase of $1,200 per annum effective from 1 January 2000 and thanking him for his efforts and contributions throughout 1999. 11 Mr Cunningham's employment was terminated from 31 August 2000 by notice given on 17 July 2000 in correspondence from Mr Powell (attachment K to exhibit 2). 12 The advice of termination states: Dear Jim, Following on from our meeting of 7th June 2000, we wish to advise you in writing, of the implications of our discussions on that day. The discussion involved a review of the agreement, in place since 2nd February 1998, where you provide services as a contractor to Midcoast Petroleum Pty Ltd. An underlying condition of this agreement between Midcoast Petroleum Pty Ltd and yourself was that specified sales targets were to be met on a consistent basis. We acknowledge the amount of effort you have delivered as a contractor to Midcoast Petroleum Pty Ltd. Unfortunately however, the targets specified in the original agreement have not been achieved. Hence, we advise you that your services as a contractor to Midcoast Petroleum Pty Ltd will no longer be required after 31st August 2000. Any amounts owing to you, as per our agreement, will be paid to you on 31st August 2000. All property of Midcoast Petroleum should be returned at that time, unless an alternative agreement has been made. We wish to thank you for your loyal association as a contractor to Midcoast Petroleum Pty Ltd during your association with us and wish you all the best for the future. 13 The evidence of Mr Powell is that the decision to terminate Mr Cunningham's employment was made on 7 June 2000 with implementation delayed to 31 August to coincide with a business restructure and redundancy of other staff. Mr Powell and Mr Ozard put that the decision to conclude Mr Cunningham's employment on 31 August 2000 extended greater than the four weeks notice required pursuant to the contract and, in further consideration to Mr Cunningham, he was allowed use of the company vehicle for a further one month after termination of employment. 14 In his affidavit of evidence (exhibit 4) Mr Powell described the relevant aspects of his conversation with Mr Cunningham on 7 June 2000 in the following terms: " Powell: I've got bad news for you, as you are aware your contract is performance based and in accordance with clause 9.1.3 of the contract we can terminate it by giving four weeks notice in writing where the employee does not satisfactorily meet the required performance as specified in the position description." I then showed the applicant the lubes business plan with his target figure on it for the year 2000 which showed that he had not made target for the first four months of the year. I then said: Powell: Do you agree that you haven't made your target this year? Cunningham: Yes. Powell: On the basis of this we are going to terminate your employment. You are entitled to a months notice, but because we will be restructuring later in the year, we will make your termination effective at the same time. That will give you about 3 months notice and time to find a new job. Cunningham: I agree I have not made target. I've loved working here but understand the situation and appreciate so much notice. 15 Mr Cunningham denied the latter statements attributed to him. 16 Mr Powell deposed that Mr Cunningham was not made redundant nor paid any severance or redundancy payment as the employer required the work to be done and intended to employ another person to replace Mr Cunningham. 17 During the recruitment process the tasks and functions carried out by Mr Cunningham were assigned to Mr Ozard on a holding basis pending the appointment of a replacement. 18 The evidence of Mr Hobbs, given on 14 February 2001, is that a replacement for Mr Cunningham had been selected and was about to commence employment. 19 The respondent relied upon clause 9.1.3 of the contract of employment to support the termination of Mr Cunningham's employment on the grounds of failure to meet the required performance as specified in the position description (attachment D to exhibit 1). 20 The position description states: Overall Purpose of Job : To manage the sale of lubricant products, services and associated products in Territory WO2 so as to maximise volumes, margins and ROCE in accordance with Midcoast's Lubes Business Plan. Additionally, identification and pursuit of new business that maximises volume is mandatory. KEY ACTIVITIES/TASKS/RESPONSIBILITY 1. Manage existing accounts to ensure Midcoast is retained as the preferred and major supplier by adding value to the customer operation. 2. Identify new business opportunities (both within existing and new accounts) that maximise volume and set plans to secure the business. 3. Negotiate Supply Contracts with major customers. 4. To maintain a high level of customer service at each major account through monthly representation, addressing customer needs promptly whilst providing technical expertise. 5. To manage Credit/TAR, volume, margin and expense to achieve objectives. 6. Comply with all Company Procedures and Policies including EH&S and Anti-discrimination Policies. 7. To assist the Marketing Manager in developing and implementing a 12 monthly Lubricants Marketing Plan - a Lubes Business Plan. 8. To schedule, arrange and conduct regular training sessions to develop staff product knowledge that will enhance both the quality of customer service and selling skills. 9. Provide the Marketing Manager on a monthly basis, last months selling activities (profitability, volume and new business) plus prospects and losses. Determine the following months activities, prospects, retaliation and market development priorities. 10. Communicate with Mobil personnel - Sales Engineers, Commercial and Industrial Representatives and Distributor Lubes Executives in positioning both Mobil and Midcoast as the provider of quality products and services. 11. Provide the Marketing Manager with on going competitive market intelligence. 12. Attend all nominated training programs, conferences and conventions as directed by the Marketing Manger and achieve competency levels as set. 13. Report on the status of issues delegated to the incumbent by the Marketing Manager from the Business Plan/Lubes Business Plan. 14. Operate Territory within approved authorities. 15. Assist in developing and implementing relevant Marketing and Advertising strategies for Midcoast. 16. Provide technical expertise to answer/respond to customers phone/counter inquiries regarding lubricants whenever you reside in the Sandgate Office or other Midcoast facilities. Special Requirements Maintain current and valid drivers licence. Others All tasks are to be completed as per demonstration, training and Procedures Manual as shown and understood. 21 The evidence of Mr Ozard is that the contract and associated position description (Attachments A and D to exhibit 1) were those which formed the basis of the arrangement between Midcoast Petroleum and Mr Cunningham; and had been provided to the recruitment consultant for discussion with applicants, which he assumed had taken place. 22 Mr Ozard deposed that the position description applied in the first year of the arrangement and did not require the satisfaction of pre-determined targets as it was the intention of Midcoast Petroleum to use the first year as development and to establish a base. 23 Mr Ozard deposed that the format of job descriptions for all sales and marketing employees of Midcoast Petroleum was altered in the years 1999 and 2000 to performance agreements, found as attachment E to exhibit 1. This document assigns percentage weightings for performance review by category of key outcomes in the following manner: Key Outcomes: Customer *To provide a high level of customer service whilst maintaining/growing customer base 40% People *Continuous improvement in effective teamwork practices 20% Profit *Achieve volume, margin, expense and New Business targets 30% EH&S *Carry out daily job duties in a safe and environmentally friendly manner, promote EH&S awareness amongst Midcoast customers and staff. *Report all relevant incidents at customer locations. 10% 24 The percentage amounts are relevant weight of each outcome. Scorecard measures are set and customers/appraisers are identified, as are objectives. 25 The profit scorecard is: * Gasoline Wholesale - 360000 *Gasoline All Sales - 589000 *Distillate Wholesale - 626000 *Distillate All Sales - 914000 *Lubes all Sales - 98000 *Expenses - $22,400 *STM - $12000 *Credit - 8% 26 and 1999 objectives for the profit outcome are specified as: Implement all Lube and General Business Plan activities focus on Key segment:- Industrial. Implement Industrial Action Plans. *Win 30 new industrial accounts *Establish Lube Sales Centres in 3 of the Industrial Estates. * Sell MCP's total range. 27 A target of 120,000 litres of lubricant sales was initially proposed by the respondent, subsequently reduced to 106,000 litres following discussion with Mr Cunningham. 28 The parties are at issue on the extent of agreement to the target of 106,000 litres. 29 The evidence brought by the respondent contends that Mr Cunningham agreed to this figure and accordingly is held to it. Mr Cunningham's evidence is that he regarded the figure of 106,000 litres to be unreasonable, however a more reachable target than 120,000 litres. It is Mr Cunningham's evidence that the figure of 106,000 litres was a consensus figure as to target and a motivational tool, not a benchmark which, on failure to achieve, would abrogate the contract or give right to the employer to terminate. 30 Mr Cunningham deposed that he was of the view that renewal of his employment contract beyond February 2001 could depend on achievement over that period. He deposed that he was not told, nor given to understand, that his continued employment was dependant upon achieving a monthly sales target; or that his employment could or would be terminated prior to February 2001. 31 Mr Cunningham deposed that he was not given credit for non lubricant sales in assessment of his overall sales achievement and contribution to profits. The evidence of Mr Ozard and Mr Powell was that sales other than lubricants were incidental or contractual and not properly attributable to Mr Cunningham, but for administrative purposes some sales occurring in Mr Cunningham's territory were attributed to him by default. 32 Mr Ozard's evidence in respect of this issue is found at p75 of transcript in the following terms: Q: (Borrow): Now, can I take you to the way in which you've characterised his gross lube contribution. Now, for a start, this pays no regard, does it, to the other product, that is, product other than the lube sales? A: (Ozard): I understand what you are saying. The employment of Mr Cunningham was based on a lube specialist, he was a lube specialist. We did expect him to generate a further sales of gasoline and diesel by way of his position, but in essence, the job was to generate lubes growth, and you're right, I'm sorry, to answer your question, it doesn't take into account the margin that his additional volume brought in." 33 Mr Ozard deposed that the basis for the termination of Mr Cunningham's employment was failure to achieve volume targets. Mr Ozard's evidence is that Mr Cunningham did not meet monthly targets for the year 2000 until the month of May and that in his professional opinion it would not have been possible for Mr Cunningham to meet the annual target of 106,000 litres. Mr Ozard noted that the monthly targets were seasonally adjusted with January attracting the lowest allocation and December the highest on the basis of operation and maintenance patterns of the customer base. 34 It is Mr Ozard's evidence that the failure to achieve monthly targets was raised with Mr Cunningham at a meeting on 7 June 2000 and the prospect of termination of employment raised. Mr Ozard denied that Mr Cunningham put that he would expect to have his contract paid out if his employment were terminated, and further denied that Mr Powell had responded that he thought he could get Mr Cunningham on performance continually under the marketing target. 35 The evidence of Mr Kelly is that he did not attend the meeting with Mr Cunningham, though did meet with Mr Powell and Mr Ozard on 7 June 2000 prior to their meeting with Mr Cunningham. 36 Mr Kelly deposed that he was informed by Mr Powell that Mr Cunningham's contract would not be renewed beyond the integration date due to performance below target. Mr Kelly deposed that Mr Powell requested him to draft a letter to Mr Cunningham to that effect which he commenced on 11 July 2000, the draft subsequently becoming the termination letter dated 17 July 2000. 37 Mr Kelly deposed that throughout this time he was involved with the integration of Newcastle and Coffs Harbour operations. This took place with effect from 31 August 2000, the integration date. 38 Mr Kelly deposed that he attended a meeting with Mr Ozard, Mr Powell and Mr Cunningham on 30 August 2000 in which the reasons for termination of Mr Cunningham's employment was restated. Mr Kelly's evidence is that Mr Cunningham was accepting of this, enquiring about severance pay and payments for September 2000. Mr Kelly's evidence is that Mr Cunningham was reminded of the notice of 17 July 2000 and informed he had been paid to 31 August 2000 and told he would not receive a redundancy payment as his employment was terminated for poor performance. 39 Attachment E to Mr Kelly's affidavit of evidence (exhibit 5) details termination payment to Mr Cunningham in the following terms: Long Service Leave $1,852.09 Annual Leave (31.25 hours) $ 689.10 Leave Loading 17.50% $ 120.59 Total Gross $2,661.78 Tax deducted -$ 756.00 Final Net payment $1,905.78 40 The evidence of Mr Hobbs is that the annual sales target was set by the sales team and approved by himself. He refutes that he at any time said to Mr Cunningham that the sales plant was just a motivational tool Mr Hobbs deposed that when Mr Cunningham had queried the sales targets he put that he believed the plans were achievable, and if the plans were not achieved then there would be a need to rethink the sales job due to its viability. 41 Mr Hobbs deposed that he recalled the year 2000 sales target of 120,000 litres being discussed and request for a reduction in this figure being made by Mr Cunningham. The evidence of Mr Hobbs is that Mr Ozard proposed the figure of 106,000 to which he and Mr Cunningham agreed. 42 The evidence of Mr Hobbs at item 5 of his affidavit (exhibit 6) is: … … I advised the applicant that the contract was a performance based one, and that he would need to achieve his sales targets. It followed then that if the targets were not reached the contract would not be renewed. No-one exerted any pressure on the applicant to sign the contract or forced him to sign the contract." 43 Mr Hobbs conceded that there is no specific reference to meeting targets in the employment contract, the position description or the performance agreement at p120 of transcript in the following terms: Q: Are you able to identify there any specific reference to targets, lube targets? A: (Hobbs): I would not use the word, there is no word "target" there but I think in the key results which is specific to what our organisation is looking for, or looking for in that role, in particular, incremental volume improvement and retention, profitability, market shares and new business." SUBMISSIONS 44 Mr Borrow submitted that the contract of employment between the applicant and the respondent was specific and did not require the achievement of targets. Mr Borrow put that the performance agreement introduced in 1999 was never accepted by the applicant and cannot be relied upon by the respondent to terminate employment pursuant to the provision of item 9.1.3 of the contract. 45 Mr Borrow put an alternative submission that if it were found that the applicant had acquiesced to the introduction of targets into his contract of employment by subsequent contract he neither freely accepted nor acquiesced to the particular target of 106,000 litres of lubricant. 46 In his written submissions Mr Borrow put: 13. The Respondent's reliance on the Applicant's failure to reach the prescribed targets was motivated by the restructure of the Respondent's business and its desire to avoid meeting the Applicant contractual entitlements. The Applicant's performance was, on any objective measure, otherwise satisfactory within the proper meaning of clause 9.1.3. 14. The Respondent did not pay proper regard to the Applicant's significant contribution to the Respondent's business in the following respects: · His sustained endeavour to expand the Respondent's business into new markets and the success achieved in doing so; · The long hours the Applicant devoted to the promotion of the Respondent's business; · The enhancement of the Respondent's reputation in the local petroleum retail market by the quality of the Applicant's involvement; · The discovery and retention of new clients, and the ongoing benefit the Respondent will derive from this; · The expansion of the Respondent's retail involvement into so called "niche" markets; · Self-evident financial benefits described in the Applicant's Territory Report annexed to the Applicant's Affidavit, which amounted to over $2.27 million in total revenue up to and including November 1999 (the Report did not detail revenue earned in the nine months up to the Applicant's termination). 15. The Respondent did not pay proper regard to the Applicant's: · Excellent employment record, including the absence of any allegation of misconduct or poor work performance during the entire period of his engagement by the Respondent; · Age; or · The limited employment opportunities in the petroleum retail industry in the Greater Hunter Region; · Difficulty in securing new employment and the concomitant lengthy period of unemployment the Applicant could have expected to face (and continues to experience at the time of writing), and · The consequence termination of employment for reasons of non-performance was likely to have for the Applicant's professional standing and future employment prospects. 47 Mr Borrow further submitted that: "… the target of 106,000 litres … would have yielded $46,428 less than the Applicant's annual salary in January 2000. In other words, if this figure were a true measure of profitability, there was never any real prospect of realising a profit so far as lubricant sales were concerned. It is difficult to accept that Ozard was not aware of this when he agreed to extend the Applicant's contract for a further 12 months on 30 November 1999, that being until 2 February 2001. By entirely basing the Applicant's performance on this one product line, the Respondent was dooming him to failure, notwithstanding the success achieved overall and the unquestioned commitment and dedication to the Respondent's interests. … … The Applicant understood that at the conclusion of the current contract, if he were not able to reach the target set by Hobbs late in December 1999, he could not expect to have the contract extended for any further period. However, that is a very different proposition to the Respondent seizing upon which it relies for the purpose of denying an employee the full benefit of his contract. … … The Commission will note, at this point, that no criticism was ever raised about the Applicant's commitment or dedication to his work, and there is no suggestion that he was not "putting in the hard yards". The Applicant took the Commission to a document entitled "Call Plan Cycle", included in his Territory Report (Annexure H of Applicant Affidavit). It illustrates the intensity of the Applicant's employment, which he stated in his evidence had been between 40 to 50 hours per week." 48 Mr McGuire submitted that the termination of the applicant's employment was not harsh, unjust or unreasonable, and accordingly not entitled to relief pursuant to the Act. 49 Mr McGuire put that the applicant was not made redundant, submitting that employment was terminated for unsatisfactory performance in consistently failing to meet required sales volumes. 50 Mr McGuire submitted that the major role required of Mr Cunningham was to increase the sales volume of industrial lubricants and that he was told that his continued employment was subject to satisfactory achievement of sales targets; in particular, on 13 January 1998 at the time of offer of employment, 2 February 1998 on signing the employment contract, specifically clauses 4.11, 5.1 and 9.13 thereof; in December 1998 in the form of the position description and performance agreement for 1999; in the letter from Mr Ozard on 30 November 1999 (attachment to exhibit 2); and by Mr Hollis at the territory performance review meeting of 22 December 1999. 51 Mr McGuire submitted that Mr Cunningham was informed of the reason for the termination of his employment in the meeting of 7 June 2000 and subsequent correspondence of 17 July 2000 and at the meeting of 30 August 2000. 52 Mr McGuire submitted that failure to perform to targeted sales figures is a valid reason for termination. He detailed the sales achieved against target on a monthly basis from February 1999 to May 2000, noting that targets were achieved in two of the 16 months, being April 1999 and May 2000. 53 Mr McGuire submitted that the terms of s88(c) of the Act were satisfied in that Mr Cunningham was given an opportunity to respond to criticism of his performance by the invitation contained in the correspondence from Mr Ozard of 30 November 1999 (attach. G to ex 2); at the territory performance meeting on 22 December 1999 and at the meeting on 7 June 2000 and conceded that sales targets had not been met. 54 Mr McGuire contended that Mr Cunningham was put on notice by the warnings and had an opportunity to identify and address the problem by improving his performance. Mr McGuire further contended that Mr Hobbs had clearly informed Mr Cunningham on 22 December 2000 that if he continued to fail to achieve sales figures he would lose his job, which Mr McGuire submitted was consistent with and authorised by Clause 9.1.3 of the employment contract. 55 In addressing s88(d) the nature of the applicant's employment Mr McGuire submitted that the major role of the applicant was to increase sales volumes for lubricants and that the only real method to assess performance in that role was by reference to targeted sales figures, which Mr Ozard deposed that on the basis of his 27 years experience were reasonable and achievable 56 Mr McGuire submitted that there had been no denial of natural justice, no redundancy and that Mr Cunningham had been given a fair go. 57 Mr McGuire put an alternative submission that in the event the Commission found in favour of the applicant, compensation should be minimal having regard to the length of notice (7 weeks), the period of employment (26 months), the extended use of the company car and telephone and the payment of a long service leave entitlement to the applicant. CONSIDERATION 58 I find that the analysis by the respondent of Mr Cunningham's performance went no further than an examination of sales against target. There was no analysis or criticism of Mr Cunningham's knowledge, skill or endeavour. 59 The setting of the Lubes sales target for the year 2000 at 106,000 litres can only be described, on the evidence in this matter, as arbitrary. There is no supporting analysis offered by the respondent of an objective nature, the target of 106,000 litres being put on the basis of industry experiences. 60 The absence of any criticism of the way in which he went about his tasks leaves open the conclusion that the sales target of 106,000 litres of lubricant was an unreasonable and unfair criteria for the purpose of summary termination of employment short of the contract period. 61 There is at no point in the evidence presented in this matter any criticism of Mr Cunningham's effort, application to his duties, product knowledge nor willingness to co-operate with other employees. 62 The position description relied upon as part of the contract of employment is much broader in its requirements than an obligation to meet sales targets for lubricants. The subsequent so-called performance agreement relied upon by the respondent is of questionable substance. There is nothing in the performance agreement to identify it as a replacement or substitution for the position description referred to in Clause 9.1.3 of the contract of employment. 63 Notwithstanding this difficulty, the performance agreement is wider than sales of lubricant; in fact according a weighting of 40% to Customer Service and Sales and 30% to Profit, which includes Volume, Margin, Expense and New Business Targets. Whilst the Profit Scorecard includes Gasoline Wholesale, Gasoline All Sales, Distillate Wholesale and All Sales, Lubes All Sales, Exports STM and Credit. 64 There is no reference to clause 9.1.3 of the contract of employment in the setting of the Year 2000 target or the performance agreement. 65 There is no evidence of a warning to Mr Cunningham that he was failing to meet target and that his employment could or would be terminated in accordance with clause 9.1.3 of the contract of employment. 66 I note the respondent did not press the argument that Mr Cunningham was a contractor and not an employee of the respondent as contended in the letter of termination of 17 July 2000 (attach. K to ex 2). FINDINGS 67 I make the following findings on the evidence presented: Mr Cunningham was an employee of Midcoast Petroleum. i. Mr Cunningham's employment was terminated by Midcoast Petroleum due to its view that lube sales targets for the year 2000 would not be achieved. ii. Mr Cunningham was not retrenched and is not entitled to consideration on that basis. iii. It was not open to the respondent to rely upon the performance agreement as no valid link is made between the performance agreement and the contract of employment. iv. The performance agreement was introduced unilaterally by the respondent with little or no evidence of agreement, only acknowledgment by the applicant. v. It was open to the respondent not to continue employment beyond February 2001. vi. The termination of employment prior to that date on the grounds advanced was harsh, unreasonable and unjust. DETERMINATION 68 I determine that the termination of Mr Cunningham's employment was harsh, unreasonable and unjust. I find that neither re-employment nor re-instatement are practical and accordingly determine compensation. 69 In all the circumstances of this matter I determine compensation at the maximum of the jurisdictional limit, being 26 weeks pay at the rate of $826.92 per week, being the average weekly rate of pay advanced by the applicant and not challenged in these proceedings. ORDERS Pursuant to section 89 of the Industrial Relations Act 1996 Midcoast Petroleum Pty Ltd is ordered to pay Mr James George Cunningham the sum of $21,499.92 (twenty one thousand four hundred and ninety nine dollars and ninety two cents) within 21 days of the date of this decision. I so order. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.