Industrial Relations Commission of New South Wales CITATION: Sommerville v Open Arms Care [2010] NSWIRComm 1010 APPLICANT: PARTIES: Mr Andrew Sommerville RESPONDENT: Open Arms Care Inc. FILE NUMBER(S): 1656 of 2009 CORAM: Ritchie C Unfair dismissal claim. Applicant signed an annual contract of employment. Last contract dates sought to be extended by respondent, not accepted by applicant. At a time beyond the date of the contract respondant advised that no new contract would be offered. CATCHWORDS: No reason given. Applicant believed he was a permanent employee. Never advised of any poor performance issues. Respondent did not give reasons for termination because they believed did not have to,as contract had come to a conclusion. Commission found that contract dates had passed and that the respondent not in a position to use such an argument. Commission found that applicant had not been given procedural fairness and that termination was harsh, unjust and unreasonable. Compensation awarded. LEGISLATION CITED: Industrial Relations Act 1996 Ngoc Toan Nguyen v Oliveri Transport Services [2005]NSWIRComm1121 CASES CITED: PSA &Professional Officers Amalgamated Union of New South Wales (on behalf of Susan Esther Benfell ) v DET [2008]NSWIRCComm16 Antonapoulos v State Bank of NSW(1999) 91IR385 HEARING DATES: 16/02/10 DATE OF JUDGMENT: 2 March 2010 Applicant: Mr M Felle of Jobs Australia Limited LEGAL REPRESENTATIVES: Respondent: Ms M Harding of Michelle Harding Lawyer DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: RITCHIE C. 2 March 2010 Matter No IRC 1656 of 2009 IN THE MATTER OF: Andrew Jay Sommerville and Open Arms Care Inc Application by Andrew Jay Sommerville re unfair dismissal pursuant to section 84 of the Industrial Relations Act, 1996 DECISION [2010] NSWIRComm 1010 Background. 1 Mr Andrew Jay Sommerville (the applicant) filed a claim for unfair dismissal under section 84 of the Industrial Relations Act, 1996 on 21 October 2009. In his application the applicant stated that he commenced employment on 1 March 2002 and was terminated on 28 September 2009. The name of the employer on termination was Open Arms Care Inc. (the respondent). 2 Teleconferences took place on 9 November and 18 November 2009 but were not successful in resolving the matter and Directions for the filing and serving of evidentiary material were provided to the parties. 3 The matter was listed for Hearing in Coffs Harbour on 16 February 2010. At the completion of submissions the Decision was reserved. Applicant's Case. 4 When terminated the applicant stated that he was a permanent full time employee and held the position of Chief Executive Officer. He stated that since 2004 or 2005 he had negotiated on an annual basis an "Agreement of Employment" (the agreement), as did all staff employed by the respondent, setting out the employment conditions not covered by, or above the award conditions. It was his view that the introduction of signed agreements came about to enable salary-sacrificing arrangements for individual employees to take place. All conditions not mentioned were as per the Social and Community Services (State) Award (the award). 5 The agreement was negotiated annually in relation to wage rates and conditions after the performance appraisal process. The last agreement signed by the applicant was for the period commencing 10 March 2008 and expiring on 8 March 2009. This agreement was signed on 18 March 2009 after two supervisors appraisals were completed on 17 March 2008. 6 In his affidavit the applicant stated that in March 2009 he emailed members of the Board seeking that his performance appraisal be done. This he again sought in April 2009. In early May 2009 he received correspondence dated 30 April 2009, from Mr Steve Dargue, the then President of the respondent. The correspondence stated that the Executive of the Management Committee would be conducting the review. It also proposed a temporary extension of his agreement up to 31 May 2009. The applicant replied to this correspondence requesting a meeting with the appropriate persons so as the performance appraisal could take place prior to 31 May 2009. The issue of whether he was a permanent employee as opposed to a fixed term employee was raised in the reply email. He also declined the offer of a one month extension. 7 A reply email from Mr Dargue dated 7 May 2009 outlined the importance of the Board meeting to discuss the review. The applicant replied seeking a date for the meeting. The applicant was later advised that he had approximately eight weeks annual leave in credit and replied that he would take leave in August and October 2009. 8 Some time late in May 2009 Mr Dargue took extended sick leave and a Mr Neil Hamilton took over as President. 9 In June 2009 the applicant sought permission to take three weeks leave in July 2009. 10 In late June 2009 the applicant received correspondence from Mr Hamilton informing him that he was to attend an appraisal panel meeting on 13 August 2009. He was requested to provide a number of documents and a written authority for the respondent to conduct a criminal record check. 11 The applicant replied to the request on 9 July 2009 requesting information as to what period of time he would be reviewed on and what areas as some areas he did not have sole responsibility. He did not receive a reply to this email. 12 On 4 August 2009 the applicant was advised by Mr Hamilton that the respondent intended to use peer review as part of the performance appraisal process. This the applicant objected to and advised members of the Board in an email. 13 On 14 August 2009 the applicant attended a meeting with the appraisal panel, the members of which were Mr Hamilton, Mrs Margaret Grundy and Mr Mark Taylor. The applicant completed a questionnaire that he was provided with. Discussion took place on the strategic plan outcomes. There was no discussion as to the applicant's performance. 14 The applicant never received any comment back with respect to his performance. 15 On 28 September 2009 the applicant attended a meeting of the Board. Present was only Mr Hamilton and Mrs Grundy. The applicant presented and discussed the financial reports for August 2009 and the draft budget for 2009/2010. Mr Hamilton then informed the applicant that the Board would not renew his agreement and he was to finish immediately. No reason was given to the applicant for the Board's decision and no further discussion took place. He was not given the opportunity to say goodbye to his staff. 16 On 8 October 2009 the applicant corresponded with Mr Hamilton requesting a meeting, which did take place on 14 October 2009. At that meeting the applicant received an undated letter which stated: As already advised to you personally on 28 September 2009, after extensive deliberation the Board of Open Arms Care Inc (OAC) has at the Board meeting held on 28 September 2009 decided not to further extend your current contract extension. The letter went on to outline the outstanding payments the respondent believed it owed the applicant. It also stated : There are no severance payments payable to you on cessation of your employment. At the time of the hearing of this matter the applicant and respondent were still in disagreement with respect to outstanding annual leave. 17 It was the applicant's view that the Board failed to follow the respondent's own policies and procedures. He believed the Board should have followed the policy of Staff Supervision and Support and Staff Performance Dispute and Staff Performance Dispute Procedure. 18 He also believed that the termination notice as expressed in the agreement was in conflict to the award. The extension sought by the respondent was only up to 31 May 2009. The offer of this extension was declined by the applicant as he was already a full-time permanent employee. It was also his view that no review was ever undertaken by the Board and that his performance appraisal was never completed. 19 Since his termination the applicant stated in evidence that he had applied for a number of jobs with Bellingen Council, ANZ Bank, Bamboo and Solar Direct and Origin Energy. In the week prior to the Hearing the applicant worked for three days on a casual basis for a bush regeneration entity. 20 His position to his knowledge has still not been filled. 21 In final submissions Ms Harding for the applicant stated that the applicant had been a permanent employee who had been terminated without being provided reasons, without procedural fairness and without due process. Respondent's Case. 22 The reasons for dismissal as expressed in the Employer's Reply to Application for Relief to Unfair Dismissal were: 1. Applicant engaged on fixed term contract. 2. Employment contract came to an end and not extended. 23 The respondent provided Mr Neil Hamilton as a witness. Mr Hamilton is the President of the respondent and has held that position since 26 May 2009 and has been a member of the Board since December 2008. Prior to these appointments he was a member of the Bellingen Shire Family & Childrens Services. This entity was one of several that became Open Arms Care Inc. (the respondent). 24 The respondent is a not for profit, community based body. The Board is comprised of community and service user representatives, who meet regularly, are responsible for the running of the services of the respondent and that it receives funding for from both Federal and State Governments. 25 It was his view that whilst the applicant stated that he declined the extension of his agreement it was clear from his conduct and that of the respondent that in fact it was extended and continued. The applicant continued to work and the respondent continued to pay him. 26 It was his belief that a review in accordance with the agreement did take place. He agreed when giving evidence that at the time of the meeting with the applicant on 28 September 2009, no reason was given to the applicant as to why no further employment was being offered. The concerns the Board had with respect to the applicant's performance were not expressed to the applicant at the time of the meeting on 14 August because as Mr Hamilton stated in evidence "acting on the best advice of counsel, we deferred from that course." 27 Mr Hamilton stated that whilst the position of Chief Executive Officer is still vacant the respondent did intend to fill it in the future. In response to a question as to why he had not been filled he stated that " finances precluded it". There was little money in the kitty. 28 In final submissions Mr Felle for the respondent stated the fact that whilst the contract of employment was extended to 31 May 2009 by correspondence and then beyond up to the point of termination it did not give it an ongoing character of employment. He admitted that as a consequence at times of the unavailability of people that they may not have followed best practice in that process of review, however by the very nature of the contract of employment in place, they had available to them, the capacity to not renew the contract and to bring it to an end. It was also his view that in bringing the contract to an end there was no requirement to provide reasons for the non renewal. Consideration and Decision. 29 The applicant filed his unfair dismissal application on 21 October 2009. He was advised by the respondent that his contract would not be extended on 28 September 2009. The applicant therefore filed his application two days late. In his original application the applicant stated in reasons why he filed his application more than 21 days after the date that he ceased working for the respondent was: Posted by express post on 19/10/09. Applicant has been attempting to negotiate with former Employer, so has left his application until now. The Commission has the power to accept an out of time application in accordance with section 85(3) of the Act. Taking into consideration the reason for the delay and the very short length of the delay, the hardship that may be caused to the applicant if his application is not accepted, in that he has yet to find alternative full time employment and the lack of reasons given to the applicant at the meeting on 28 September 2009, I determine to use my discretion and accept this application. 30 The applicant stated and was not contradicted that since approximately 2004 or 2005 he and other employees of the respondent would each year be presented with a document entitled AGREEMENT OF EMPLOYMENT. The only changes from one agreement to the next, was generally with respect to rates of pay and dates. The reason for the introduction of the agreement was so as to be able to take advantage of the salary sacrifice tax benefit. His last agreement was between Bellingen Shire Support Network Inc and Andrew Sommerville employed in the position of Chief Executive Officer. 31 This agreement stated in part that: Length of Agreement This Agreement is for a term commencing on 10th March 2008 and expiring 8th March 2009. At the expiry of this term, a review will be conducted by the executive of the Management committee. This Agreement may be terminated by the employer by giving to the employee not less than 14 days notice in writing, that their employment will cease on the expiry of the current term of employment. Also it stated: Termination The employment of a full time or part time employee may be terminated by twp weeks' notice by either side or by the payment by the employer or forfeiture by the employee of two weeks pay in lieu of notice. This shall not affect the employer's right to dismiss an employee without notice for misconduct which justifies instant dismissal. The respondent sought by correspondence dated 30 April 2009 to extend the length of the agreement. It stated in part: This temporary extension will (be) for the period up to 31 May 2009 unless otherwise advised in writing. The applicant did not receive anything further in writing with respect to this extension. The applicant did not accept this extension because he believed he was a permanent employee. The applicant worked until 28 September 2009 when he was verbally advised that the Board would not renew his Agreement of Employment". 32 It was the respondent's submission throughout this case that as the applicant worked under a fixed term contract the employment had come to an end and was not going to be extended, there was no requirement on behalf of the respondent to provide reasons for the non- extension. As to what fixed term contract or expressed agreement the applicant was employed under between 8 March 2009 and 31 May 2009 and 28 September 2009 was not explained by the respondent. In circumstances where the applicant had continued to work beyond the date of the fixed term contract I do not believe that the respondent is then in a position to conclude that a date of their choosing is now the new date when the contract then ceases. 33 Mr Hamilton gave evidence that the respondent made a decision not to offer another contract of employment to the applicant at their August 2009 Board meeting. This evidence is contrary to what was expressed in the correspondence given to the applicant on 14 October 2009 when it was stated that the decision to terminate the applicant was made on 28 September 2009. 34 This decision was not made known to the applicant until 28 September 2009. No reason was given by the respondent for the delay in advising the applicant. Mr Hamilton reasons as to why they were not going to offer a further contract of employment were based on the performance of the applicant. No evidence was placed before the Commission with respect to any person advising the applicant in writing with respect to any work performance issues. 35 It would seem the process used by the respondent is to place employees on a fixed term contract and if they pass a performance appraisal prior to the expiry of their contract then another contract will be offered. It would also seem that if the performance appraisal is not satisfactory then no further contract is offered. 36 I note the comments of Cambridge C in Ngoc_Toan Nguyen v Oliveri Transport Services[2005] NSWIR Comm1121: …….Fixed term contract employment should not be used as a convenient means to dispense with particular employees without having to provide any justification for the termination of the employment. 34. If there was genuine commercial basis underpinning the need for some fixed term characteristic to the employment, then there should be no unexplained targeted application of fixed term employment. There should be clear evidence as to the reason for the requirement to have an anticipated expiry date for the contract of employment. Without clear reason, the introduction of fixed term employment becomes a device to dismiss without proper basis. No comment was made as to why these contracts were brought into being other than to allow for the salary sacrifice process to take place. 37 I note also the comments of Boland J. in Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales (on behalf of Susan Esther Benfell) v Department of Education and Training [2008} NSWIRComm16 : ….But one may properly ask what was the real reason for Mrs Benfell's employment coming to an end? It was not as a consequence of a fixed term contract coming to an end by effluxion of time and, therefore, the employment ended by mutual agreement (see The State of Victoria v The Commonwealth of Australia (1996) 187 CLR 416; 66IR 392), because there was no fixed term contract. The true cause of the employment ending was that the Department, through Mrs Reeves, decided (for whatever undisclosed reason) at some time prior to the expiry of the appointment period that she no longer wanted Mrs Benfell as a TAS. The Department used the expiry of the appointment period as a convenient occasion to advise Mrs Benfell she was no longer required, but it could not, on any view of the evidence, be concluded that Mrs Benfell's employment terminated because the appointed period expired. and 57 In these circumstances, I consider it is open to conclude that the Department made a deliberate decision to terminate Mrs Benfell's employment in the absence of her consent and that this constituted a dismissal for the purposes of s 83 of the Act. In similar circumstances the respondent used the excuse that the Agreement of Employment had come to an end and a further agreement would not be offered. In reality the dates of the Length of Agreement had long past, the respondent had made a decision not to offer a further agreement because they were dissatisfied with the applicant's performance yet failed to give reasons for their actions. They failed to give reasons because of the mistaken belief that they did not have to because this agreement had come to an end. 38 In summary the respondent terminated the services of the applicant on the basis of poor performance. In carrying out this termination the respondent failed to give reasons for this termination thereby failing to give the applicant procedural fairness. 39 Having concluded that the applicant was dismissed and that he was not afforded procedural fairness, I turn to the authorities relevant to the issue as to whether of itself the failure to afford procedural fairness should lead to a conclusion that the dismissal was harsh, unjust or unreasonable. In Antonakopoulos -v- State Bank of NSW (1999) 91 IR 385, the Commission described the relevant principles thus: It is now well established that the exercise of the discretion of the Commission pursuant to s 84 of the Act must be directed to a determination as to whether a dismissal was harsh, unreasonable or unjust. A consideration of unfair procedures will be relevant to the determination of that question. It was stated by a Full Bench in Burke v McGirr (1995) 87 IR 56, that: "the discretionary basis for reinstatement resides in terms of the statute … A consideration of the procedures followed in implementing a dismissal may be relevant in a particular case. Nevertheless, all the relevant circumstances must be considered by the Commission in determining whether a dismissal was harsh, unreasonable or unjust, not merely such procedures alone." However, in our view, the adoption of, or application of, an unfair procedure, may, in itself, result in a dismissal being harsh, unjust or unreasonable. Authority for this approach is clear. For example, in the joint judgment of Brennan CJ, Dawson and Toohey JJ in Byrne v Australian Airlines (1995) 185 CLR 410 at 430; 61 IR 32 at 43, their Honours described the circumstances in which the adoption by an employer of an unfair procedure in the termination of an employee may appropriately give rise to a finding that a dismissal was harsh, unjust or unreasonable as follows: " Save for the prescription of periods of notice, cl 11 does not require the adoption of any particular procedure for the dismissal of an employee. However, it is clear that the use of an unfair procedure may result in a dismissal being harsh, unjust or unreasonable. For example, the failure to afford an employee the opportunity to explain apparent misconduct where there is an innocent explanation available would result in the dismissal of the employee being in breach of cl 11 (a): see Gregory v Phillip Morris Ltd (1988) 24 IR 397 at 412-413, 414-415; 80 ALR 455 at 471, 473 per Wilcox and Ryan JJ; Wheeler v Phillip Morris Ltd (1989) 32 IR 323 at 346-347; 97 ALR 282 at 306-307, per Gray J. In addition to the cases cited above, the Full Bench in Antonakopoulos also considered Mason v Electricity Commission of NSW (1995) 62 IR 436; McCabe v New South Wales Police Service (unreported, Cahill J, Vice-President, Hill J and Connor C, IRC3112 of 1994, 3 July 1996); Bigg v New South Wales Police Service (1998) 80 IR 434; Oswald v New South Wales Police Service (1990) 90 IR 42 and Johnson v Catholic Education Office, Diocese of Parramatta (1998) 87 IR 57. 40 It is my finding that the respondent failed to bring to the applicant's attention in any formal fashion their concern with respect to his performance during his employment. They continued this failing when they mistakenly used the expiration of the Agreement of Employment to terminate his services without giving a reason(s). 41 In conclusion it is my finding that the termination of the applicant was harsh, unjust and unreasonable. 42 In his application the applicant sought monetary compensation as the relief sought. 43 I therefore make the following ORDERS. ORDERS 1. In accordance with section 89(5) of the Act that Open Arms Care Inc. pay the sum of $17660.00 to Andrew Jay Sommerville. This sum of money is to be paid to Mr Sommerville as soon as practicable, and within 21 days from the date of this Decision. D. RITCHIE 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.