Industrial Relations Commission of New South Wales CITATION: Cherkashina v Habaro Pty Ltd [2006] NSWIRComm 1099 APPLICANT Liubov Cherkashina PARTIES: RESPONDENT Habaro Pty Ltd FILE NUMBER(S): 1578 of 2005 CORAM: Macdonald C CATCHWORDS: Unfair dismissal - applicant belatedly advised of her dismissal - procedural unfairness - genuine redundancy as reason for dismissal not found - compensation ordered LEGISLATION CITED: Industrial Relations Act 1996 CASES CITED: D and R Commercial Pty Ltd v Flood (2002) 113 IR 344 Outboard World Pty Ltd v Muir (1993) 51 IR 167 HEARING DATES: 06/02/06 DATE OF JUDGMENT: 07/10/2006 APPLICANT Ms L Tucker, solicitor Kingsford Legal Centre LEGAL REPRESENTATIVES: RESPONDENT Mr C Swanson, solicitor Ledlin Partners Solicitors DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: MACDONALD C 10 July 2006 Matter No IRC 1578 of 2005 Liubov Cherkashina and Habaro Pty Ltd Application by Liubov Cherkashina re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 DECISION [2006] NSWIRComm 1099 1 This is an application by Liubov Cherkashina ("the Applicant") for unfair dismissal against Habaro Pty Ltd ("the Respondent") pursuant to section 84 of the Industrial Relations Act 1996 ("the Act") 2 The matter was set down for Conciliation and Directions on 15 April 2005 before Cambridge C. A Report Back was held on 6 June 2005. A Conciliation Conference was held on 19 August 2005. The matter remaining unresolved, a program for the filing of witness statements was put in place. The matter was put on for Mention on 4 November 2005, but still remained unresolved. 3 The matter was set down for a Hearing on 6 February 2006. The Applicant was represented by Ms L Tucker, solicitor, who called the following witness: · Liubov Cherkashina - the Applicant The Respondent was represented by Mr C Swanson, solicitor, who called the following witnesses: · Fay Skalrud - Director · Jane Dwyer - Sales and Development Manager · Enza Phillips - Freelance Pattern Maker · Karen Dickson - Warehouse Manager (The witnesses: Dwyer, Phillips and Dickson were not required for cross-examination.) BACKGROUND 4 The Applicant was employed as a sample machinist with the Respondent, which is a clothing company. She began her employment around October 1996 and was terminated in March 2006. 5 The Applicant was engaged as a full time employee. 6 She was asked by the Respondent to go to China in mid 2003, to liaise with garment makers there. The Applicant deposed that there were travel arrangement difficulties associated with this trip and following the trip, she said that Mr Skalrud was consistently rude to her. 7 The Applicant deposed that Farina Skalrud and other supervisors had a change of attitude towards her when on 10 December 2004, the Applicant was asked but was unable to help Farina Skalrud with some general tasks on a Saturday. The Applicant said she was spoken to abruptly in her exchange with Farina Skalrud. 8 The Applicant referred to another conversation with Farina Skalrud on 24 December 2004, about the duties to be performed by the Applicant. 9 On 11 March 2005, the Applicant received her payslip, as usual, on a Friday. She did not open it as her pay is transferred electronically into her account. On Monday, 14 March, she came to work as usual. She said she was met by Farina Skalrud who queried the Applicant's attendance at work as a letter, advising of the Applicant's retrenchment, had been placed in her payslip envelope. The Applicant deposed that there had been no mention of the letter beforehand to her. FINAL SUBMISSIONS For the Applicant 10 Ms Tucker, solicitor, for the Applicant put the following in final submissions: a) The central ground in this matter had been a lack of procedural fairness in the manner in which the employer carried out the retrenchment of the Applicant. The Applicant had been retrenched by way of a letter inserted in her pay slip advice envelope. There had been no prior notice of the impending retrenchment by the employer. b) The Applicant's retrenchment was not genuine. A job vacancy advertisement for a position substantially similar to that of the Applicant, was placed by the Respondent. The only clear difference in the positions, was the requirement for a Mandarin speaker - and such a person was not hired by the Respondent. c) The Respondent carries the onus to prove a genuine redundancy. The purported redundancy occurred at least two years after an apparent restructure of the company and the move towards a greater reliance on operations in China. There was no clear suggestion of any operational requirements being the cause of the redundancy. The Applicant's evidence was that she was busy up to the time of her termination. d) The Applicant had sought a wage rise in December 2004 for carrying out pattern-making and this issue had not been resolved by the time of her termination. e) Performance issues about the Applicant had not been raised in her eight and a half years employment. Any evidence to the contrary being put by the Respondent was to be rejected. Further, if there were performance issues, then how is that so when the Respondent sent her on business to China. For the Respondent 11 Ms Swanson, solicitor for the Respondent, put the following in final submissions: a) It was conceded, with hindsight, that the Respondent should have given notice to and consulted with the Applicant - prior to termination. The Respondent's conduct was explained by ignorance and that it was a very small business and it interacted in an informal way with employees. b) The reason for the termination was a lack of work - in particular for the Applicant's type of work: sample machining. The Applicant was also a victim to her greed, in that in December 2004, she said she would not perform any more pattern-making work unless she was paid more money. c) The lack of work was demonstrated by the Applicant's workbook which showed that she carried out detailed work in November 2004; had some work on 20 January 2005; and that there were no work entries after 20 January prior to her termination. The above workbook evidence was supported by the workbook of Jane Dwyer, which shows no work being allocated to the Applicant after January 2005. d) The evidence also showed that the sample-machining work performed by the Applicant had virtually disappeared. Further to that, the Applicant became less willing to carry out any duties which she considered not part of her job specifications. As the Applicant was not prepared to do whatever work was available, then she was terminated for that reason. e) At the time of the Applicant's termination, the Respondent employed 14 employees and now employed 12. Applicant in Reply 12 Ms Tucker, in reply, said: a) The evidence against the Respondent's claim of a work downturn to justify the termination, was refuted by the Respondent's conduct in advertising the Applicant's position. b) It was rejected that the Applicant was a victim of her own greed. The Applicant asked to be paid at the rate reflecting pattern-making. c) It was rejected that the Applicant was not busy at the time of her termination. d) The Applicant had been terminated after raising concerns about the rate for pattern-making and seeking to clarify other duties to be performed by her. These concerns were not responded to by the Respondent, other than to terminate her services. e) The evidence showed that Ms Skalrud employed 28 employees - but divided between two companies, with 14 employees in each. This explained why severance pay was not paid. CONSIDERATION The Dismissal Letter 13 The Applicant was dismissed by way of a letter inserted into her payslip envelope. She was given an envelope (which contained her payslip), as usual, on a Friday (11 March 2005). She did not open the envelope because her pay is transferred electronically into her account. On the following Monday, 14 March, she went to work but was asked by Farina Skalrud, director, as to why she was at work as a letter of retrenchment had been placed inside the Applicant's pay envelope. 14 The Applicant had not opened her payslip envelope and hence was unaware of the letter of termination. The letter of termination does not use the term "retrenched" (or variations thereof) to describe the ground for the Applicant's termination, but that is the gist of the letter. On that point, the letter relevantly states: " Dear Luba As you may be aware we have slowly been restructuring our business. We have now reached a point where we do not manufacture in Australia anymore. A consequence of this is that your position as sample machinist is no longer required. We have tried to keep you employed by doing other things around the factory, however, we can no longer justify this as work can be done by other people. As a consequence of this we are terminating your services as at 17 March 2005. " (Ex 1 - Annex C) 15 The Applicant had no prior knowledge that she was to be retrenched. 16 Given the circumstances in which the Applicant belatedly found out that she had been retrenched, then clearly there has been a denial of procedural fairness visited upon the Applicant. Farina Skalrud said under cross-examination, as to her not discussing the matter beforehand with the Applicant: " I didn't have the soul to do that … I just didn't have, I just could not bring myself to terminate Liubov Cherkashina because for so many years, I just didn't feel … I didn't feel right. " (Tr 27 - line 1 to 9) 17 The Applicant had been in the employ of the Respondent for some eight and a half years. 18 The Commission will return to this issue of lack of procedural fairness later in its deliberations. Genuine Redundancy? 19 The Applicant's solicitor submitted that the retrenchment of the Applicant was not genuine. The Respondent's solicitor submitted otherwise. For the record, the Applicant was not paid redundancy money on the ground that the Respondent only employed 14 employees at the time of the termination of the Applicant. That number also included Farina Skalrud (a director of the Respondent company) and her husband (status unknown). (Tr 22 - line 15 to 27) 20 The Applicant's solicitor submitted that the redundancy was not genuine on the following bases: a) A job advertisement, substantially similar to the Applicant's job, was placed in a newspaper around the time of the Applicant's alleged retrenchment. b) The alleged retrenchment took place some two years after a restructuring of the business had taken place; c) There was no clear business operation reason now (at the time of her termination) for the alleged retrenchment; and d) The Applicant was busy at work at the time of her termination. The Respondent's solicitor submitted that there was a lack of work and the Applicant had been unwilling to carry out other work. The proof of the lack of work was also shown by the logbooks kept by certain employees, including the Applicant. The Commission will now consider the matters raised by the Applicant's solicitor that she says shows that the retrenchment was not genuine. 21 The Applicant provided evidence of her job being advertised around the time of her alleged retrenchment. Attached to the Applicant's affidavit is a job advertisement, apparently from the Sydney Morning Herald, Weekend Edition, Mar 5-6, 2005, for a Patternmaker/Sample Maker. The inclusive duties are listed. The advertisement concludes: " Sample making is also essential. Fluency in Mandarin an advantage. " (Ex 1 - Attach. E) 22 Ms Skalrud deposed as to that job advertisement as follows: "I caused an advertisement to be placed in the Sydney Morning Herald, primarily seeking a person with Chinese language skills who could also carry out a range of sample machining and pattern-making duties. This position has not been filled, as existing employees have absorbed any required duties." (Ex 3 - para 22). 23 Under cross-examination, Ms Skalrud was questioned on this job advertisement and she agreed that the listed inclusive duties of pattern-making, samples and specifications, was work that the Applicant could do, "but she refused". Ms Skalrud explained that the Applicant had approached her in November 2004 and said that she should be paid more money for the job she is performing. Ms Skalrud responded in the negative to that request from the Applicant who allegedly, the next day, refused to do specifications, patterns and alterations. Ms Skalrud said that that response left no choice but to advertise the job performed by the Applicant. (Tr 26 - line 18 to 49) 24 The Commission notes that this evidence of Ms Skalrud, given under cross-examination, as to the Applicant's refusal to carry out her duties (specifications, patterns and alterations) is hearsay evidence. Ms Skalrud's knowledge about this alleged refusal to carry out duties is deposed to in her witness statement and is hearsay. Thus: " I am informed and believe that Jane Dwyer, the Applicant's Supervisor, asked her to carry out work on a number of occasions after December 2004, which involved work other than sample machining work. To the best of my knowledge, the Applicant declined to carry out these duties. " (Ex 3 - para 18) 25 The source for Ms Skalrud's hearsay evidence is Jane Dwyer, Sales and Development Manager. 26 The evidence of Jane Dwyer on this point is limited to her witness statement. She gave no oral evidence as she was not required for cross-examination. Her witness statement relevantly states: " In late 2004, after her (the Applicant) return from a trip to Russia, I noticed a change in Lubiov's attitude around the work place. She became less willing to carry out any duties which she considered were not part of her job specifications. As sample machining work had virtually disappeared, this meant that less and less work was available that she was prepared to carry out. " (Ex 5 - para 9) 27 The Commission notes that the foregoing extract does not expressly state that the Applicant refused to carry out duties. The extract states that the Applicant was "less willing" to carry out duties, but that is not necessarily the same as a refusal of duties. An employee can be "less willing" but still be carrying out duties. The foregoing extract also says: " that less and less work was available that she was prepared to carry out ". Even if this extract was correct (it was denied by the Applicant), it sheds no light on the issue of refusal to carry out duties, being the duties as defined by Ms Skalrud. Thus the extract does not stipulate the alleged duties that the Applicant was less prepared to carry out. Are these duties the same as defined by Ms Skalrud? There was no evidence clarifying this point because Jane Dwyer did not clarify this point in her witness statement. As well, she could not clarify this point in the witness box because she was not required for cross-examination. 28 This hearsay evidence that the Applicant refused to carry out work was not put to the Applicant during her cross-examination. In any event, the Applicant was asked in evidence-in-chief, if she had refused to carry out any work that was asked of her in the last one or two months before she was terminated, and she responded in the negative. (Tr 5 - line 9 to 12). This evidence by the Applicant only refers to a time frame (and onwards) in 2005 and does not take in the November 2004 time frame (and onwards) when it was alleged the Applicant refused to do work. Be that as it may as to the 1 November 2004 time frame, the Applicant's claim that she had not refused to carry out any work was not challenged during cross-examination. 29 The Commission finds that Ms Skalrud's hearsay evidence that the Applicant refused to carry out work is rejected because it was not only hearsay but as well it was not put to the Applicant. Further, and in consequence, the Commission rejects Ms Skalrud's justification for inserting the March 2005 job advertisement in the newspaper. The justification given by her (but not put to the Applicant) was the Applicant's refusal to carry out work because Ms Skalrud had not agreed to a pay rise sought by the Applicant. The Commission also notes in passing that for Ms Skalrud to give evidence that she terminated the Applicant for refusing to carry out work, is a reason inconsistent with the claim that the Applicant was retrenched (which is the gist of the termination letter). 30 The Commission's rejection of the refusal of duties claim by the Respondent, brings the Commission back to the original issue as to the motive in placing the March 2005 job advertisement. 31 Farina Skalrud said of that job advertisement that its purpose was to replace the Applicant. As previously discussed above, Ms Skalrud responded specifically as to the job advertisement: " Q. So those - in that advertisement, it refers to pattern making, samples and specs, which is specifications? A. Correct. Q. So these are all positions, roles that Mrs Cherkashina (the Applicant) could do? A. Could , but she refused. Yes. " (emphasis added) (Tr 26 - line 18 to 45) 32 The Commission has already rejected the defence of Ms Skalrud that she was justified in advertising the position, because the Applicant refused to carry out duties. The Commission is left simply with the bottom line that the Respondent decided to rid itself of the Applicant, and replace her with someone else who would perform the duties that Ms Skalrud said that the Applicant "Could (do), but she refused". (The fact that no-one applied for the job is an irrelevancy. The motive of the Respondent is the key issue.) 33 The Respondent did submit that it was a genuine redundancy and said that lack of work was proof of the same. Reference was made to a decline in sample machine work and the work logbooks which showed only a few work entries. 34 The core problem with this submission about lack of work is the placement of the job advertisement. Why place a job advertisement for a replacement employee for the Applicant, if there is a lack of work? 35 Having considered all of the evidence the Commission finds that the retrenchment of the Applicant was not genuine. CONCLUSION 36 The Commission has before it an unfair dismissal application by Ms Liubov Cherkashina (the Applicant) against Habaro Pty Ltd t/a Bia Clothing (the Respondent). 37 The Applicant was represented by Ms L Tucker, solicitor, who submitted that the dismissal was unfair because of a denial of procedural fairness and, as well, that the reason for dismissal (redundancy) was not genuine. 38 The Commission set out the circumstances surrounding the lack of procedural fairness and held that there had been a lack of procedural fairness. (paras 13 to 18) Briefly put, the lack of procedural fairness was how the Applicant belatedly found out that she had been retrenched when she turned up for work only to be told she had been retrenched and the notification of the same had been placed in her pay slip advice envelope. 39 Ms Swanson, solicitor for the Respondent, correctly conceded in the opening of her final submission that the manner and way in which the Applicant had been terminated was far from appropriate. 40 The Commission notes that when determining a claim as to the unfairness of a dismissal, that one of the matters for consideration is s 88(a) of the Act: "whether a reason for dismissal was given to the applicant ..." No reason was given at all. The Applicant found out about her dismissal after the fact of her dismissal. 41 Although there has been procedural unfairness, the Commission has still considered the substantive merits of the case, in considering whether, overall, there still exists an argument that the dismissal is unfair. That is, the Commission needs to consider whether the conduct of the Respondent renders the dismissal unfair. In that regard, the Commission found that the retrenchment of the Applicant was not genuine. The evidence relied upon for that finding was that of Farina Skalrud who said that the Applicant could (but refused) to carry out the pattern making, samples and specifications that was found in the job advertisement which was placed in the Sydney Morning Herald around the time of the Applicant's contract of employment being terminated. 42 Accordingly, the Commission finds that there was a lack of procedural fairness visited upon the Applicant by the Respondent and that the stated reason for termination (retrenchment) was not genuine. 43 In coming to that finding, the Commission has been using the general terminology of "unfairness" in assessing the Respondent's conduct towards the Applicant. To be precise in terminology, having regard to case law, the Commission finds that the dismissal of the Applicant was unjust and harsh: Outboard World Pty Ltd v Muir (1993) 51 IR 167 at 183 The Commission finds that the dismissal was unjust because the reason advanced for the dismissal (redundancy) was not genuine and harsh because of the consequences on the Applicant who was an employee of some nine and a half years standing. 44 The Applicant has sought compensation as her remedy. In assessing a claim for monetary compensation, the Commission must consider the provisions of s 89(6) - that is, whether an Applicant made a reasonable attempt to find alternative employment and the remuneration gained by an Applicant who succeeded in obtaining alternative employment. However, s 89(6) is not to be taken as a simple, mathematical formula in the assessment of compensation and the Commission retains its discretion to order the appropriate quantum of compensation, as the Commission deems appropriate for the circumstances under consideration: D and R Commercial Pty Ltd v Flood (2002) 113 IR 344. 45 The Commission also notes that reinstatement was not sought and the Commission has formed the view that reinstatement is impracticable. 46 In considering the quantum of compensation that is appropriate, the Commission has had regard to a number of matters: · the procedural unfairness visited upon the Applicant; · the retrenchment of the Applicant was not genuine; · the Applicant's nine and a half years service and · the Applicant's post dismissal employment situation. O R D E R S In this matter, for reasons outlined herein, I have determined that the dismissal was harsh and unjust and I hereby make the following orders: (a) The Commission orders that the Respondent pay to the Applicant an amount of compensation of $13,000 gross. (b) The amount of compensation specified above has been determined, having regard to section 89(5) and 89(6) of the Act. (c) The amount of compensation specified above is to be paid by the Respondent to the Applicant within twenty-one days from the date of this Decision. A Macdonald 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.