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TASMANIAN INDUSTRIAL COMMISSION Industrial Relations Act 1984 Paulina Martin and The People Source Ltd
Industrial dispute - termination of employment - valid reason but termination still unfair and unjust - entitled to appropriate remedy - compensation ordered REASONS FOR DECISION On 7 September 2000, Paulina Martin (the applicant) applied to the President, pursuant to Section 29(1A) of the Industrial Relations Act 1984, for a hearing before a Commissioner in respect of an industrial dispute with The People Source Ltd trading as North Western Group Training (the employer) arising out of the alleged unfair termination of her employment. On 20 September 2000, the A/President convened a hearing before myself at "Lyndhurst", 448 Elizabeth Street, North Hobart to commence at 9.30am on Thursday 28 September 2000. When the application came on for hearing Mrs A Burrows-Cheng, a solicitor, sought and was granted leave to appear for the applicant. Mr P Mazengarb of the Tasmanian Chamber of Commerce and Industry Limited (TCCI), together with Mr R Jones and Mr W Wells, appeared for the employer. In an opening submission Mrs Burrows-Cheng contended that the applicant had been offered a full-time position with the employer, based on a salary of $34500 per annum, a company car and telephone. Mrs Martin commenced work in training phase, effectively "shadowing" the person she was replacing. A few days later she was advised:1
Jurisdictional Challenge Mr Mazengarb raised a preliminary issue contending that the Commission had no jurisdiction to hear the application. Mr Mazengarb based this argument on the existence of a letter dated 21 August, from the employer to the applicant, which stated inter alia:2
Mr Mazengarb submitted that there was no offer of continuing employment beyond 1 September and hence there was no termination. The contract of employment simply came to an end. As such the Commission had no jurisdiction to hear the matter. In opposing the preliminary application Mrs Burrows-Cheng submitted that contracts of employment can be formed orally and many are formed in this way. Whilst there was no dispute as to the existence of the 21 August letter, Mrs Burrows-Cheng contended that the letter did not reflect what was formed in the circumstances. She referred to a detailed statement from Mr Mike Ellis, entered into evidence3, which went to background circumstances of the offer and acceptance upon which the applicant relied.
In response Mr Mazengarb submitted that discussions leading up to an offer of employment do not form part of the contract. He contended that a written offer of employment is fundamental to good employment practices and acts as a disciplining process on both parties. A decision on this preliminary application was issued on transcript and which I now confirm. In clear cut cases whereby a freely entered into fixed term contract comes to an end, and there are no other factors which may in some way "colour" the contract, I agree that the Commission has no jurisdiction to hear an application such as this. This was not however the situation with the instant application and, as I said at the time, there was prima facie evidence of a conversation or conversations which raised in the mind of Mrs Martin that she was to be offered employment commencing on 22 August of a more substantial nature than that which is indicated in the 21 August letter. Whilst the veracity of this evidence was yet to be tested, I ruled that Mr Mazengarb's preliminary application was rejected. Conciliation Following the determination of the preliminary question, the hearing was adjourned into private conference, with the Commission, in an effort to find a resolution to the dispute. This however proved to be unsuccessful and the application was adjourned until 30 October for hearing. At the request of the respondent, the hearing was postponed until 17 November 2000. The Evidence The following witnesses gave evidence to the Commission:
A number of documents were also entered into evidence, including statements from the three witnesses. In this decision, where there is no material conflict in or challenge to the evidence it will simply be recorded as a statement of fact. Summary of Events On 7 July 2000 Mr Ellis raised with Mr Wells the need for an additional contract trainer at the Hobart office. This need was driven by the demands of the business which was in a growth phase. Mr Ellis indicated that he knew someone who may be suitable for the position [Mrs Martin} and it was agreed that Mr Ellis would "sound her out" as to whether she might be interested. Mrs Martin was a personal friend of Mr Ellis but was not known to Mr Wells at the time. Indeed the evidence of Mr Wells was that Mr Ellis did not identify who was to be approached, but nothing turns on this aspect. On 8 July Mr Ellis met with Mrs Martin and her husband for some two hours at her home. They discussed a number of employment possibilities relating to assessing and possibly sales work on a contract, casual or part-time basis. Mrs Martin expressed some interest, although she did have some concerns as to her qualifications for the role. On 13 July Mrs Martin "sat in" on some assessments undertaken by Mr Ellis at a People Source client. The purpose of this was to get a feel for what the job entailed. Mr Wells had approved of this arrangement.5 On 20 July a meeting took place involving Mrs Martin, Mr Wells and Mr Ellis. Options of part-time and contract employment were discussed. Mr Wells undertook to draft a contract when he got back to Ulverstone and send it down to Mr Ellis to fill in the details. Under cross-examination Mr Wells said as follows:6
On 26 July Mrs Martin resigned from one of her other positions, namely Alliance Marketing Corporation [AMC]. I will return to Mrs Martin's other positions later in this decision. At some time, most likely prior to 8 August, Mrs Martin was given a draft contract. Initially Mr Wells was to prepare this contract but pressure of work resulted in a collaborative effort between Mr Wells and Mr Ellis. This contract7, titled "An Agreement To Deliver Qualification Services" is a comprehensive 15 page document which includes a schedule of fee payments. This contract was never signed. Under cross-examination Mr Wells offered the following explanation:8
Mrs Martin agreed that the contract was never finalised. She described the status of the document in the following terms:9
On 8 August Mrs Martin was to commence working with Mr Ellis on a voluntary basis, "To bring her up to speed with the assessment process and to help her gain the relevant assessment qualifications".10 Instead of commencing work Mr Ellis informed Mrs Martin that he was about to resign as a consequence of an unexpected job offer. This effectively created an uncertainty about Mrs Martin's future with The People Source and Mr Ellis suggested that Mrs Martin discuss the position with Mr Wells at the first opportunity. The meeting between Mrs Martin and Mr Wells took place in Ulverstone on 11 August. It is clear that a range of employment options was discussed. According to Mrs Martin this included a sales role, with which she was comfortable. She also said that full-time employment was discussed, but at the time she wasn't interested in a full-time role. This was effectively confirmed by Mr Wells when he said:11
It is also apparent that a TAFE training course was discussed and there was an agreement that Mrs Martin would "shadow" Mr Ellis over his last couple of weeks. Mrs Martin said:12
To this point any conflict or inconsistency in the evidence is of a minor nature and not material to the outcome of the application. It is for events from 18 August onwards whereby serious conflicts in the evidence emerge. 18 August 2000 Mr Ellis met with Mr Wells in Ulverstone. It is unclear who initiated the discussion on the arrangements for Mr Ellis' replacement, but suffice to say it was a major item of discussion. In his statement Mr Ellis says: 13
The evidence of Mr Ellis during the hearing was consistent with this statement.14 The evidence of Mrs Martin was that she had been contacted by Mr Ellis on 14 August who had confirmed that her commencement date would be 22 August. Presumably this was in the "shadowing " role discussed at the 11 August meeting. In relation to the meeting between Mr Ellis and Mr Wells earlier on 18 August, Mrs Martin said as follows:15
The evidence of Mr Wells in relation to events on 18 August will be covered later in this decision. 21 August 2000 Mr Wells was to come to Hobart and discuss the position with Mrs Martin. However he was diverted to Launceston and telephoned Mrs Martin instead. The evidence of both Mrs Martin16 and Mr Ellis17 was that they were to proceed "as planned". It is common ground that the plan was for Mrs Martin to work initially on a casual basis three days a week for the last two weeks of Mr Ellis' employment. It is what was to follow from that which is at the heart of this dispute. 22 August 2000 Mrs Martin commenced work in the Hobart office and began "shadowing" Mr Ellis. According to Mrs Martin:18
Mr Ellis said:19
Mrs Martin continued on this basis for the balance of the week [three days]. 25 August 2000 There was a staff meeting in Launceston. Neither Mrs Martin nor Mr Ellis attended this meeting. According to Mrs Martin:20
The Hobart office receptionist returned from the meeting and told Mrs Martin that Daniel, from the Launceston office, was coming down to Hobart to work. In relation to this Mrs Martin said:21
On the same day [presumably after work] Mrs Martin received a letter dated 21 August 2000.22 Through an administrative oversight this letter was not posted until 24 August. It was expressed in the following terms:
This is the letter on which Mr Mazengarb's preliminary jurisdictional application was based. 28 August 2000 There was a meeting at the Hobart office involving Mr Wells, Mr Ellis and Mrs Martin. The following is Mrs Martin's outline of events:23
The comments of Mr Ellis on the same meeting were as follows:24
And later:
29 August 2000 A further meeting involving Mrs Martin, Mr Wells and Mr Ellis took place. Mrs Martin expressed concern as to the turn of events the previous day.25
A discussion then ensued between Mr Wells and Mr Ellis with Mr Wells suggesting that Mr Ellis had misinterpreted what Mr Wells had intended at the 18 August meeting. There was a discussion concerning the possibility of a part-time position becoming available in the event that the Health Insurance Commission signed a contract. According to Mrs Martin it was at this stage that Mr Wells expressed doubt as to his preparedness to employ Mrs Martin in any capacity. Asked to elaborate, Mrs Martin said:26
1 September 2000 This was the last day of employment with The People Source. Mrs Martin subsequently received a letter dated 1 September expressed in the following terms:27
Evidence of Mr Wells Up until 18 August the evidence of Mr Wells is broadly consistent with that of Mr Ellis and Mrs Martin. In relation to the 18 August meeting, Mr Wells said as follows:28
Mr Wells denied that there had been any discussion concerning conditions of employment for Mrs Martin.29 Mr Wells said:30
In relation to the meeting on 28 August Mr Wells said:31
In response to Mrs Martin's comments as to the loss of the full-time position at the 29 August meeting, Mr Wells said:32
Mr Wells confirmed that at the same 29 August meeting he did advise Mrs Martin that she would have ongoing employment [presumably part-time or contract] in the event that the Health Insurance Commission signed up.33 Mr Wells was extensively cross-examined as to the circumstances under which Mrs Martin finished her employment with The People Source and in particular the letter of termination dated 1 September 2000. His response to a question from the Commission provides a good summary of this evidence.34
There was also extensive cross-examination on the issue of when the decision to transfer Daniel from Launceston to Hobart was taken. In summary, the evidence of Mr Wells is that the decision was taken on the day Mr Ellis resigned [10 August], Mike Ellis was advised of this on 14 August, he {Mr Wells} was "pretty sure" that the people in Hobart were aware of it but that Mrs Martin was not.35 Mr Wells denied that he only became aware of Daniel's wish to move to Hobart some time after 18 August. Mrs Martin's Other Positions As of July 2000 Mrs Martin was employed by two companies. One position was that of a merchandiser with Alliance Marketing Corporation. She was initially paid at the rate of $14.75 per hour for 15 hours per week. This was to increase to 20 hours a week from 17 July with some likelihood that this would increase further. A letter from AMC dated 10 July was tabled in evidence.36 This letter states in part:
The second position was with Gordon and Gotch. According to the pay slips37 the hourly rate was $16.20. In July Mrs Martin was working 16 hours per week. This has reduced to 11 hours per week as of November 2000. Prior to any discussions with The People Source a commercial conflict of interest had arisen which meant that Mrs Martin had to resign from one of the positions. Initially Mrs Martin chose to resign from Gordon and Gotch on the basis that this was the lesser of the two positions. This took effect around the time of the initial discussions with The People Source. The position changed following the meeting with Mr Wells on 20 July. Mrs Martin was then confident that she had a future with The People Source. She withdrew her resignation from Gordon and Gotch and resigned from AMC. The rationale for this was as follows:38
Questioned as to what would have been the position in the absence of The People Source prospect Mrs Martin said:39
Findings The only formal documentation in relation to an offer of employment is the letter dated 21 August 2000 and received by Mrs Martin on 25 August. This is an offer of employment of three days per week for two weeks to a maximum of 42 hours in total. In my view it defies rational thought that this was all that was in the minds of the parties when Mrs Martin commenced on 22 August. I say this for the following reasons. Firstly, the style of the letter contemplates something beyond a short term casual contract. I instance the following expressions:
This letter makes sense in the context of a contract to cover the period during which Mrs Martin "shadowed" Mr Ellis, with something more substantive to follow. However to suggest that it should stand alone as the only material consideration flies in the face of the evidence. Prior to the commencement of Mrs Martin on 22 August there had been extensive discussion over at least four meetings in Hobart and Ulverstone. A 15 page draft contract had been prepared. It was common ground that following the 20 July meeting, Mrs Martin had a firm expectation of ongoing employment with The People Source. This was sufficient comfort for Mrs Martin to resign her preferred alternative position, a decision which no-one in The People Source sought to dissuade her from. Mr Wells was to discuss the position with Mrs Martin in Hobart on 21 August. When this proved to be impossible, the instruction was to "proceed as planned". There is no doubt in my mind that probably at least until 29 August all the relevant parties had an expectation that Mrs Martin would be engaged in ongoing employment with The People Source post 1 September 2000. The question for determination is, in what capacity? To complete the picture it is necessary to record that the contract with the Health Insurance Commission was subsequently signed. There can be no question that prior to 18 August the only contract in anyone's mind was that of a part-time or contract nature. That all changed following the meeting between Mr Wells and Mr Ellis on 18 August and a meeting later that day involving Mrs Martin and Mr Ellis. After carefully reviewing the evidence I am satisfied that an offer of full-time employment was made to Mrs Martin. Further I am satisfied that offer was made in the precise terms of a $34500 per annum salary, a company car with petrol and telephone. The commencement date was to be 22 August 2000. The evidence of both Mrs Martin and Mr Ellis on this aspect was in all material respects consistent and unshaken under cross-examination. If there were any lingering doubts as to whether an offer of this nature was made, it was put to rest by the evidence of Mr Wells in relation to the meeting of 29 August. In describing the reaction of Mrs Martin, Mr Wells said:40
In my view a comment like that could only come from a person who had been offered a company car in the first place. The evidence of Mr Wells and Mr Ellis is, on this aspect, diametrically opposed. I am unable to explain this inconsistency and nor, on reflection, is it necessary to do so. Having concluded that an offer was made, the remaining question is whether Mrs Martin could have reasonably been of the view that the offer was made with the authorisation of the management of The People Source. In his evidence Mr Ellis was adamant that he was simply acting as a conduit for management. He said:41
In the eyes of Mrs Martin, two alternatives could have reasonably been in her mind. Firstly, Mr Ellis had the authority to make the offer as there was nothing in the evidence which would have positively led her to believe that he lacked such authority. In the alternative Mrs Martin may have concluded that Mr Ellis was acting on the express instructions of Mr Wells. Given that Mr Wells had on a number of occasions deferred to Mr Ellis to sort out the details in respect of Mrs Martin's future employment, I suspect the latter is the more likely scenario. Either view was, in my opinion, reasonably open to Mrs Martin and I find no reason why she should have felt compelled to check it further following the meeting with Mr Ellis. I therefore find that all the essential elements of a valid contract of employment had been satisfied. There was an offer, there was acceptance and there was consideration. The reality is that the contract, though validly made in terms of the law, did not in practical terms, commence. We are left to ponder what actually changed. In closing submissions Mrs Burrows-Cheng invited me to conclude that transfer of Daniel to the Hobart office only became an option after 18 August and that had the dual benefit of keeping a valued employee and finding a ready made solution for the Hobart office. This of course would be a plausible explanation. It was however specifically denied by Mr Wells and, unfortunately, not put to Mr Ellis. I am therefore unable to make a finding one way or the other on this question. I am satisfied that the CEO of The People Source, who was apparently not aware of the 18 August meetings, did become involved on or about 1 September and challenged the financial viability of employing Mrs Martin in any capacity. This of course is his right, indeed his responsibility. It does not however alter the fact that Mrs Martin had done nothing wrong and indeed was entirely blameless. In terms of the International Labour Organisation (ILO) Convention I find that the employer did have a valid reason to terminate Mrs Martin. That reason was that the employer had formed the view that it was not financially viable to continue her employment in any capacity, let alone in a full-time role. The existence of a valid reason does not necessarily lead to an automatic conclusion that the termination was fair. In this particular case I have no hesitation in concluding that the termination was both unfair and unjust, and that the applicant is entitled to an appropriate remedy. Remedy Given that the employer has determined that it is not financially viable to maintain any additional position in the Hobart office, the primary remedy of reinstatement is clearly impracticable. There is, however, a clear case for compensation. This is a most unusual case in that, whilst a valid contract had been established, it did not in practical terms actually commence. In such circumstances the well-established principles of Nicolson v Heaven and Earth Gallery for the assessment of compensation do not sit entirely comfortably with the facts of this case. How do you estimate the likely duration of employment, had the termination not occurred, when it didn't actually start? In assessing compensation, I have therefore taken into account the following:
Article 11 of the ILO Convention states that:
Mrs Martin was not given any notice. In all the circumstances I consider a period of six weeks to be reasonable. Based on a salary of $34500 per annum, this equates to an amount of $3980. In assessing the actual loss occasioned by the resignation from AMC, I have taken the difference in the current earnings with Gordon and Gotch at 11 hours per week, and the potential earnings from AMC at 20 hours per week, which was to apply from 17 July. On my calculations this equates to an amount of $117 per week. This takes no account of the potential upside inherent in the AMC letter of 10 July.42 From the evidence of Mrs Martin it does not appear to be a realistic prospect that she will restore her position before February 2001. I therefore consider a period of 25 weeks from the date of termination as a realistic time frame for assessing this loss. From this the six weeks notice is to be deducted, making a total of 19 weeks at $117 per week. Order Pursuant to Section 31[1B] of the Industrial Relations Act 1984 I hereby order that The People Source Ltd trading as North Western Group Training, 14A Industrial Drive, Ulverstone 7315 pay to Mrs Paulina Martin of 27 Mellifont Street, West Hobart 7000 an amount of six thousand two hundred dollars [$6200]. I further order that such payment is to be made within 21 days of the date of this decision.
Tim Abey Appearances: Date and Place of Hearing: 1 Transcript p. 2 |
