Industrial Relations Commission of New South Wales CITATION: Murray v A Murray & Sons Pty Ltd [2005] NSWIRComm 1173 APPLICANT Julie Diane Murray PARTIES: RESPONDENT A Murray & Sons Pty Ltd FILE NUMBER(S): 1123 of 2005 CORAM: Stanton C Termination of employment - Unfair dismissal - Redundancy - Obligations on employers - Procedural fairness - Consultation - Selection criteria - Reinstatement impracticable - CATCHWORDS: Compensation ordered Employment Protection Act 1982 LEGISLATION CITED: Industrial Relations Act 1996 Byrne & Anor v Australian Airlines (1995) 185 CLR 410 Huseyin Arslan and others v Berkeley Challenge (Commercial) Pty Limited and Others [2001] NSWIRComm 45 CASES CITED: Outboard World v Muir (1993) 51 IR 167 Shop, Distributive and Allied Employees' Association, New South Wales v WD & HO Wills Holdings Ltd [2000] NSWIRComm 98. Tony Neal v Shaw McDonald Pty Limited & anor [2003] NSWIRComm 294 HEARING DATES: 07/11/2005 DATE OF JUDGMENT: 10/25/2005 EXTEMPORE JUDGMENT DATE : 10/25/2005 APPLICANT Mr Ben Huston Turnbull Hill Lawyers LEGAL REPRESENTATIVES: RESPONDENT Mr Warren Marr Director and Newcastle Branch Manager DECISION: 11 1 INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: STANTON C 25 October 2005 Matter No IRC 1123 of 2005 Julie Diane Murray and A Murray & Sons Pty Limited Application by Julie Diane Murray re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996. DECISION [2005] NSWIRComm 1173 1 This is an application pursuant to section 84 of the Industrial Relations Act 1996 (the "Act") filed by Mrs Julie Diane Murray (the "applicant"), seeking relief from her alleged unfair dismissal through redundancy from A Murray & Sons Pty Limited (the "respondent") on 15 February 2005 for alleged reasons of a downturn in business. 2 The applicant aged 50 years, commenced employment with the respondent in September 2002 as an office assistant. Her application stated her occupation was Administration Manager. The applicant sought reinstatement and in the event the Commission rendered that primary remedy impracticable, monetary compensation. 3 The respondent's letter of termination dated the 14 February 2005, a day prior to her termination stated: "We have suffered a downturn in business and as such have to reduce costs. We will be terminating your position as at todays (sic) date. Attached is termination statement showing redundancy entitlements and 3 weeks notice. Could you please sign this letter as acknowledgement that you have received all wages that are owing?" 4 The application was filed on 4 March 2005. Ritchie C conducted a conciliation conference on 23 March 2005. The matter was subsequently re-allocated to McLeay C who convened a further conciliation conference on 18 April 2005. As the matter was not settled Directions for filing of evidence were issued and the matter was allocated to the Commission, as presently constituted, on 9 June 2005 to bring the matter to hearing. 5 The matter was subject to arbitration on 11 July 2005. Mr B Huston, solicitor, Turnbull Hill Lawyers, appeared for the applicant and Mr W Marr, Newcastle Branch Manager appeared for the respondent. Mr Huston relied upon an affidavit filed by the applicant on 13 May 2005 and an affidavit in reply filed on 22 June 2005. Mr Marr relied upon his own affidavit filed on 31 May 2005. 6 The respondent is a firm of plumbing contractors with branches in Albury, Bathurst, Newcastle and Tumut in New South Wales, employing between 30 and 40 employees. The Newcastle Branch employed some five employees in management and clerical positions. 7 At the time of termination, the applicant reported directly to the respondent's managers, namely Mr Warren Marr, Mr Lawrence Cole and Mr Michael Bowe. She received a salary of $696.00 per week and worked 40 hours per week. 8 The applicant was paid three weeks pay in lieu of notice and a redundancy payment of 8.75 week's pay in line with her entitlement under the Employment Protection Act 1982 standard. EVIDENCE For the Applicant 9 In the affidavit that formed the basis of her evidence in this matter, the applicant outlined the nature and history of her employment with the respondent, as she understood it. Her duties included invoicing, debt collection, development and maintenance of quality assurance, occupational health and safety, attending reception, answering telephones and filing. No criticism had been directed towards her work performance. 10 It was the applicant's evidence that despite a downturn in business, she did not believe that her position was under threat until her meeting with Mr Marr on 15 February 2005. She believed Ms Cuskelly, whom she recruited as her assistant in October 2004 and who was relatively inexperienced, would be dismissed instead of herself in the event of a review of office staff positions. Ms Kelly Cuskelly received a salary of $600 per week and her duties included invoice preparation, purchase orders, reception work and filing which would expand as the applicant assumed additional duties, particularly data entry and correspondence for Mr Cole. In early February 2005, the applicant advised Mr Marr that Ms Cuskelly had given her a positive indication that she would, if required, consider part-time employment. 11 According to the applicant, Mr Marr met with Mr Cole and herself early in February to discuss a reduction in the number of tradesmen employed. It was her clear recollection that the meeting did not canvass the prospect of cutting back office staff positions and at no time before or after the meeting did Mr Marr state her position with the Company was threatened. 12 Changes to procurement leading to her reduced workload and selection for dismissal were rejected by the applicant as she maintained procurement was not a regular and substantial task that she exercised as Mr Cole had only assigned this task to her three weeks prior to Mr Marr's appointment in February 2005. 13 The applicant deposed she was called into Mr Marr's office at approximately 8.05 am on 15 February 2005 where he said to her, words to the effect: "We have to start cutting back. We need to look at our options." Her immediate response to that statement was that another employee, possibly Ms Cuskelly, might be terminated. Accordingly, she enquired: "Who are you going to put off?" Mr Marr replied, words to the effect: "I am letting you go." The applicant subsequently returned to her desk to collect her personal effects when Mr Lawrence Cole and Ms Cuskelly said to her, words to the effect: "Are you leaving today?" She replied with words to the effect: "No. I am out of here for good. I've been terminated". 14 According to the applicant she and her husband, Mr Thomas Murray, a plumber with the company and brother of the company managing director, had suffered financial hardship as a result of her dismissal. Her termination was harsh, unreasonable and or unjust principally on the grounds that the respondent did not give her adequate notice, consult her about the impact of the redundancy or provide ancillary services and explore the potential alternatives to termination. 15 She found difficulty obtaining interviews for alternative employment because of her age and a personal injury disclosed to prospective employers. 16 Approximately 8 weeks after her dismissal, the applicant and her husband obtained employment with a Canberra plumbing firm. Rent was substantially higher in Canberra. A payslip marked with the letter "C" stating the applicant received $588.75 per week for 32 hours work with her new employer, Custom Plumbing Services was attached to her affidavit filed on 13 May 2005. For the Respondent 17 Mr Marr, a Director and shareholder of the respondent, commenced employment on 31 January 2005 as Newcastle Branch Manager. 18 A reduction in turnover of some 50% with no commensurate reduction in administrative positions had recently occurred against the backdrop of a similar 50% reduction in tradesmen through a combination of redundancy or voluntary resignation. Business losses had been running between $20000 and $70000 per month. 19 Shortly after joining the company, Mr Marr maintained he personally informed all employees through "one on one" meetings that a number of operational improvements were necessary to improve the viability of the business and that employment levels may be affected. 20 According to Mr Marr, the applicant exercised the duties of a senior office assistant whose tasks included reception, answering incoming phone calls, filing, invoice reconciliation, data entry and procurement for the company project team. Ms Cuskelly supported her in these roles. The Tumut Branch undertook payroll and invoices payable functions for a management fee. 21 In cross examination, Mr Marr stated that he had thirty years experience in the industry and considerable managerial experience. He had implemented a project management structure to give the relevant project supervisors greater control over site matters, including procurement to ensure materials were correctly specified following site variations. He viewed procurement a substantial component of the applicant's work and rendered tasks such as reconciliation of invoices to orders and data input to spreadsheets mundane and not the work of a senior office assistant. It was Mr Marr's evidence that Ms Cuskelly was also undertaking "a lot" of these "mundane" tasks at the time. 22 As manager, he had personally assumed additional responsibilities in respect to payment approvals and invoice reconciliation. He undertook his own word processing and spreadsheet data input requiring minimal clerical assistance, other than receiving phone calls, messages, invoice matching, mail and general reception duties. 23 Mr Marr deposed that when he had met with the applicant, Ms Cuskelly and Mr Cole individually early February to address roles, responsibilities and potential operational efficiencies, he made a statement to each employee to the effect that in addressing inefficiencies, some staff cut backs may eventuate. He recalled the applicant's concurrence with this view and she told him that she had already spoken to Ms Cuskelly about reducing her hours. 24 It was also Mr Marr's evidence that following his review of the Newcastle operations, the following key changes to staff functions, roles and responsibilities were subsequently approved by the Directors: (a) Lawrence Cole's role was altered from "fill in" Manager to full time estimator. (b) Glen Charlton's role was altered from Construction / Project Manager to Supervisor. (c) Rod Milldam's role upgraded from Foreman to Supervisor. (d) Max Manley's role upgraded from Foreman to Foreman / Supervisor. (e) Kellie Cuskelly's role remained the same. (f) Procurement of materials responsibility transferred to Supervisors on their respective projects. (g) Establishment of proformas to allow the estimator and the Manager to carry out word processing and spreadsheet tasks without clerical assistance. (h) Julie Murray's role became redundant given all of the above. 25 The Directors of the respondent subsequently agreed to offer the applicant payment in lieu of notice and a redundancy payment to help her to establish herself back into the workforce. 26 On 15 February 2005, Mr Marr requested the applicant to meet with him to discuss the need to cut back administrative positions commensurate with the reduction in both company turnover and tradesmen employed. Mr Marr stated the applicant said words to the effect: " So who is going?" Mr Marr subsequently advised the applicant that her position had been made redundant and handed her a letter of termination setting out her applicable benefits. 27 In cross examination, Mr Marr stated the that respondent did not have a specific human resources division and whilst he was personally aware of the general legal obligations on employers in a redundancy situation, he was reliant upon the advice of the company accountant for the intimate detail of such obligations. He maintained the applicant was consulted and knew that job losses were imminent. The payment in lieu of notice in addition to redundancy was reasonable and provided the applicant with an opportunity to "get out into the market place and reposition herself " in alternative employment. SUBMISSIONS For the Applicant 28 Mr Huston submitted intervention was warranted, as the dismissal was harsh, unjust and unreasonable. In relation to compensation, consideration should be given to the applicant's circumstances after dismissal and the Commission should not be constrained by the redundancy pay already paid on termination. The applicant had been unemployed for 8 weeks and obtained work in Canberra. Six months' compensation was appropriate in this case, having regard to five factors - the applicant's age and personal injury, length of service, her efforts to find alternative employment and prospects of obtaining alternative work. Mr Huston did not elaborate on the nature of the applicant's injury, other than it was sustained in 2001. 29 Mr Huston referred to the principles whereby a genuine redundancy may be found to be unfair set out by Sams DP in Tony Neal v Shaw McDonald Pty Limited & anor [2003] NSWIRComm 294 and Shop, Distributive and Allied Employees' Association, New South Wales v WD & HO Wills Holdings Ltd [2000] NSWIRComm 98. 30 Mr Huston submitted the applicant was not afforded procedural fairness and the payment of redundancy pay cannot offset a failure to observe the general obligations upon an employer in redundancy situations. 31 Mr Huston also submitted that at the time of the applicant's dismissal, Ms Cuskelly remained inexperienced and required significant levels of supervision. Accordingly, it was his submission that Ms Cuskelly should have been made redundant ahead of the applicant. 32 Mr Huston maintained the applicant was not consulted, did not receive notice and no efforts were made to explore any alternative positions with the respondent. Simply put, the redundancy pay received by the applicant was inadequate. For the Respondent 33 Mr Marr submitted the respondent employed 42 tradesmen as at 7 July 2004 with three administrative staff. By 31 January 2005 tradesmen numbers had reduced to 24 and administrative staff, including himself as manager, had increased. Further, between February and March 2005 a further 8 tradesmen, including the applicant's husband Thomas, had resigned due to the uncertainty surrounding the business. 34 Mr Marr stated that in response to the considerable downturn he spent the first four months of his employment endeavouring to restore company stability and competitiveness and, it was therefore important to have a structure in place at the site level to complement those objectives. 35 Mr Marr submitted that the applicant was dismissed on the grounds of redundancy. Her performance was not in question. Given the work outlook, there was a degree of uncertainty whether Ms Cuskelly would continue working five days per week. 36 Mr Marr believed that it would have been unfair to offer the applicant Ms Cuskelly's duties, considering the additional clerical duties he himself had assumed - and then in the event the business could not be turned around, revert the applicant to a three or four day week. Accordingly, the decision was taken to terminate the applicant and allow her to seek re-employment at the level she was accustomed to. 37 Mr Marr submitted that there was nothing harsh or reprehensible about the manner of the dismissal and nothing manifestly unfair about the level of redundancy pay provided. The delay in dismissing the applicant on 15 February 2005, rather than the previous day, 14 February, the date of the termination letter, was due to the respondent ensuring that the correct payments would be made. 38 In conclusion, Mr Marr submitted that the market remained volatile and he was concerned about the respondent's ability to maintain work for the 24 remaining trades employees so as to sustain the current, albeit reduced, administrative staff. CONSIDERATION 39 There was no evidentiary challenge put before the Commission concerning the respondent's need to restructure its business. I am satisfied on the evidence that the restructuring was a necessary response to the economic and financial circumstances facing the respondent. Market conditions had lead to a substantial reduction in the number of tradespersons employed and the level of administrative overhead was disproportionate to the then level of business activity. A reduction in administrative staff numbers was seen as a genuine need for reasons of operational efficiency. 40 On the evidence before the Commission I am satisfied that the dismissal of the applicant was by way of genuine redundancy resulting in the changed operational structure of the respondent's business. 41 An employee's dismissal due to redundancy can attract considerations of unfairness such as to warrant a finding of the dismissal being "harsh unreasonable or unjust." In Outboard World v Muir (1993) 51 IR 167, the Full Bench of the Commission described unfairness in the context of redundancy: While in the ordinary case it may be that a redundancy genuinely occurring would not come within the parameters of Part 8, Unfair Dismissals, it takes little imagination to apprehend a situation which is both a redundancy and a harsh, unreasonable or unjust dismissal. For example, it may be that in selecting employees for redundancy an employer unilaterally decides to terminate an employee of long and exemplary service over another employee. The facts of the case may demonstrate both redundancy of one position but unfairness as against the employee selected. Once that position is accepted then it follows that an employee is not necessarily incapable of suffering an "unfair" dismissal in the context of a position becoming redundant… 42 In Byrne & Anor v Australian Airlines (1995) 185 CLR 410, the High Court concluded: …it is clear that the use of an unfair procedure may result in a dismissal being 'harsh, unreasonable or unjust .' 43 The dismissal was an inevitable outcome of the decision taken to restructure the business to meet the prevailing economic and market circumstances. The applicant believed Ms Cuskelly, whom she had recruited in October 2004, should have been chosen rather than her. However, in the absence of formal selection criteria this view is merely speculative. 44 Mr Huston referred to the principles and obligations on the employer laid down by Sams DP that may determine a genuine redundancy unfair, set out in Shop, Distributive and Allied Employees' Association, New South Wales v W D & H O Wills Holdings Ltd: The employer should: § give reasonable notice to employees and / or their Unions § adequately consult with employees and / or their Unions on the impact of the proposed changes. § explore genuine alternative options for redundancy, such as redeployment or relocation; § ensure such options are fairly offered to the affected employees; § provide reasonable standards of redundancy benefits; § provide appropriate ancillary services, such as time off to seek alternative work, retraining opportunities, outplacement services or financial planning; § ensure employees nominated for redundancy are fairly selected on an objective and unbiased basis. 45 Sams DP reaffirmed these obligations in Huseyin Arslan and others v Berkeley Challenge (Commercial) Pty Limited and Others [2001] NSWIRComm 45 and further stated: Of course, a failure to properly, or exhaustively comply with each, and every one, of these obligations might not necessarily warrant an adverse finding against an employer. Each case will be determined on its own particular set of facts and circumstances. 46 These principles do not represent a compliance template or an enforceable set of obligations for each and every redundancy situation faced by employers, both large and small. Whilst they are a useful guidepost, each case needs be determined on its own particular set of facts and circumstances. 47 In the present case the respondent failed to meet some of the obligations raised under the principles. Mr Marr submitted that the payment in lieu of notice was reasonable and afforded the applicant an opportunity to seek re-employment elsewhere immediately. There was no discussion, for example, whether the applicant might have preferred to work out her notice and seek alternative employment whilst still in paid employment. Prior consultation can often change the dynamics of a situation and remove a range of irritants that may in turn lead to perceptions of injustice and unreasonableness in a dismissal situation. 48 There were limited opportunities for alternative employment and consultation concerning the prospect of redundancy was inadequate. It is clear both on the evidence presented by the applicant and on Mr Marr's own admission, that the applicant did not believe her own position was ever in jeopardy. Simply forewarning of a possible future dismissal is not the same as consultation. There were no selection criteria to support the applicant's dismissal. No outplacement services were provided and on the material before the Commission, the applicant did not request such benefits at the time of dismissal or shortly thereafter. CONCLUSION 49 When the overall factual matrix surrounding the dismissal is considered, the breaches of procedural fairness - the manner of the applicant's dismissal in this case and in particular the respondent's failure to consult with her, the absence of a selection criteria and lack of adequate notice are sufficient in themselves to require a finding the dismissal was harsh and procedurally unfair. 50 In arbitration the applicant did not seek reinstatement. I find neither reinstatement nor re-employment to be practical on the grounds that there has been an irretrievable breakdown in the employment relationship as a result of the applicant's dismissal and, the applicant has relocated to Canberra. 51 In assessing any compensation payable, I have considered the applicant's efforts in obtaining alternative employment and the remuneration received in that alternative employment as required by section 89(6) of the Act. 52 For the reasons outlined, I find the dismissal of the applicant was harsh, satisfying the criteria of harsh, unreasonable or unjust set out in section 84(1) of the Act. 53 Accordingly, I make the following orders. ORDERS 1) The respondent A Murray and Sons Pty Limited shall pay to the applicant an amount of $6960.00 based on ten weeks pay at a salary of $696.00 per week. 2) The respondent shall pay the amount specified in order 1) within twenty-one days of today. 3) This order shall take effect on and from today, 25 October 2005.. J D STANTON Commissioner 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.