T10678 - 23 June
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TASMANIAN INDUSTRIAL COMMISSION Industrial Relations Act 1984 Bernard John Boot and Connorville Station Pty Ltd
Industrial dispute - alleged unfair termination of employment and severance pay in respect to termination of employment as a result of redundancy - severance payment confirmed - inadequate notice - parties directed to confer with recourse to the Commission if necessary REASONS FOR DECISION (1) On 21 January 2003, Bernard John Boot (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 Connorville Station Pty Ltd arising out of the alleged unfair termination of his employment and severance pay in respect to termination of employment as a result of redundancy. (2) The matter was listed for a conciliation conference on 2 April 2003. Mr S Cooper, a solicitor, sought and was granted leave to appear for the applicant. Mr R Pearce, a solicitor, sought and was granted leave to appear for the employer, together with Mr R O'Connor. An initial attempt to resolve this matter through conciliation was unsuccessful and the matter was set down for hearing on 12 May 2003. (3) Mr Boot was appointed to the position of Manager, Connorville Station Pty Ltd [Connorville] on 1 September 1980. He is 56 years old and has spent virtually his entire working life in farming. (4) Connorville, described in the hearing as one of Tasmania's "rural icons", is a significant rural holding of 41000 acres situated in the Cressy region of northern Tasmania. The property carries 41000 sheep, 2300 breeding cows, 200 stud cows and, in recent years, a large acreage of poppies. The property has been in the O'Connor family since the 1830s and the Company has a board of directors of eight. (5) Mr Boot described his duties as follows:1
(6) The Company employed a staff of ten, including Mr Boot. The staff, apart from the manager, are classified as stockmen, jackeroos and a tractor driver. (7) Mr Boot lived on the property in a substantial five-bedroom house. He said that he had significantly enhanced the property through the creation, almost from scratch, of a "very worthwhile garden". (8) In January 2003 Mr Boot was made redundant. Mr Boot described the circumstances of this termination as follows:2
(9) The following day Mr Boot received a telephone call from a Launceston based accounting firm asking him to attend a meeting to discuss the redundancy. Mr Boot described this meeting, which took place on Wednesday 8 January, in the following terms:3
(10) The text of the letter referred to by Mr Boot read:4
(11) At or about the same time Mr Boot received a letter from the Company Secretary in the following terms:5
(12) Mr Boot was paid a redundancy payment based on two weeks' pay for each year of service. In addition he was paid an amount of eight weeks' pay in lieu of notice. This was calculated on the basis of a cashed up salary of $71429 pa6 which included components for car lease, salary sacrifice, allowance for housing, and rations, electricity and other miscellaneous. (13) Mr Boot continued to have use of the house and car until "one or two days after 6 February" at which time his possessions were moved into storage. (14) Mr Boot said that had applied for three positions in Tasmania and been approached by a fourth. He had been interstate twice for interviews. At the time of hearing he had been unsuccessful in obtaining alternative employment. (15) Mr Boot said that he experienced ongoing difficulties as a consequence of a work related knee injury in 1995. He also suffered from a hand ailment. Both ailments required management and ongoing treatment. (16) In relation to the profitability of the property Mr Boot said:7
(17) Mr Boot acknowledged that it would be unlikely for there to be an alternative management role in the Connorville operation. (18) Mr Roderic O'Connor is the Chairman of the Board of Directors of Connorville Station Pty Ltd. According to Mr O'Connor the board of eight contained a range of expertise across agriculture, commercial accounting and legal fields. The role of the Board was to oversee the management and direction of the business with Mr O'Connor responsible for the day-to-day management and decision-making of the Company. (19) Mr O'Connor said that in early September 2002 he formally approached the Board with a proposal to restructure the management of the business. He said:8
(20) Mr O'Connor said9 he had started thinking about this proposal in June 2002 and by September "I knew exactly what I needed to do". (21) He said:10
(22) The Board formally approved the proposal on 12 September with Mr O'Connor empowered to proceed "as I see fit"11, with recourse to two members of the Board. (23) Mr O'Connor agreed that as at early September 2002, the only way he could achieve his wish of spending more time on the farm, was at the expense of Mr Boot's position.12 (24) Mr O'Connor said that following the Board decision, he then sought legal and accounting advice. (25) Mr O'Connor acknowledged that he did not discuss the pending redundancy with Mr Boot at any stage prior to 6 January 2003, the date of termination. His explanation for this absence of consultation is captured in the following exchange:13
(26) And later:14
(27) Mr O'Connor agreed that he did not at any stage assist Mr Boot in finding alternative positions external to Connorville. (28) Mr O'Connor agreed that "in hindsight" more warning of what was on his mind and the probability of redundancy would have been in Mr Boot's interests.15 (29) Mr O'Connor agreed that Mr Boot had been a "loyal and hardworking" employee for 22 years and that a world record price for superfine wool had been achieved under Mr Boot's stewardship. Closing Submissions Mr Pearce, for the respondent (30) Even though the Commission has an arbitral power, it still must be exercised in accordance with principle. (31) Whilst s.29 of the Act empowers the Commission to determine disputes about redundancy, the Act does not in itself create an entitlement. (32) An entitlement to a redundancy payment may arise from an award or industrial agreement, but no such entitlement exists in this case. (33) An entitlement may also arise from an express term in a contract of employment. There is however ample authority for the proposition that an entitlement to a redundancy payment will not be implied into a contract of employment (see Dellys v Elderslie Finance Corporation Ltd16). (34) Even in other jurisdictions there is no entitlement at all to a redundancy payment without a contractual entitlement. In Ajax Cooke v Nugent17 it was found that the entitlement to a redundancy payment was dependent upon the inclusion of a term in a contract of employment. (35) Notwithstanding these submissions as to jurisdiction, it is recognised that the Commission has a long-standing practice, arising out of the TCR case,18 of dealing with redundancy applications on a case-by-case basis. In the instant case the respondent had been guided by the decision in Hughes v Tasman Group Services.19 This was particularly relevant because of the similarities between the circumstances in both cases. (36) Whilst the respondent may be open to criticism in terms of absence of consultation and notice, in all other respects the employer has acted in a way that the Commission could expect of it. It follows that no case has been made out for any further payment. Mr Cooper, for the applicant (37) There is ample authority for the proposition that an entitlement does potentially arise under s.29 of the Act and has been dealt with on numerous occasions in the past. In Saarinen20 Underwood J indicated that the jurisdiction exercised by this Commission is arbitral, and, it follows, the existence of a contractual term is not a jurisdictional prerequisite for the exercise of a discretion that is clearly open under s.29. (38) In any event the respondent has in this instant made a redundancy payment, and "it is inappropriate and almost bold to be submitting that he gets nothing further". (39) The inconvenience, hardship and impact upon Mr Boot as a consequence of being made redundant after 22 years' service is significant and at the extreme end. Not only has he lost his job; he has lost his home and the lifestyle which goes with it. (40) There are limited job opportunities at the appropriate level, and Mr Boot's age, coupled with certain physical ailments, make it difficult for him to compete in this small and specialised market. This reality is underlined by his inability to secure a suitable position in the four months since his termination. (41) Consistent with the case-by-case approach, the specific factors identified justify raising the bar to award a redundancy payment calculated by reference to four weeks for every year of service. (42) It was clear that Mr O'Connor had made up his mind to make Mr Boot redundant as early as the first week in September 2002. There was no consultation, no advance warning and no assistance with the finding of alternative employment. There is an unexplained four month gap between the decision and the execution of the redundancy:21
Findings (43) I turn firstly to the jurisdictional question. (44) Mr Pearce contends that, absent an express contractual provision, there is no entitlement to a redundancy payment. He relies in particular on Dellys and Ajax Cooke Pty Ltd to support this proposition. (45) In my view both these cases are clearly distinguishable from the instant matter. (46) In Dellys, the Western Australian Industrial Appeal Court was asked to determine whether an entitlement to a redundancy payment should, in the absence of a specific term, be implied in the contract of employment. This question must be seen in the context of the specific Western Australian legislation. Section 29 of the Industrial Relations Act 1979 [WA] reads:
(47) The Commission in the instant matter is not asked whether a contractual provision [express or implied] exists in Mr Boot's contract of employment. In my view Dellys provides no assistance to Mr Pearce's contention in that the judgement was written in a legislative scheme quite different to that applicable in Tasmania. (48) In Ajax Cooke Pty Ltd the Victorian Supreme Court was dealing with the enforceability of a common law contract of employment. This is a judicial function beyond the power of this Commission. (49) It is clear from Saarinen that the jurisdiction exercised by this Commission is arbitral. The exercise of discretion pursuant to s.29[1A][b] of the Act is an appropriate function for an arbitral tribunal and, in my view, an accurate reflection of the will of Parliament. (50) I reject Mr Pearce's jurisdictional contention. (51) I turn now to the severance payment made to Mr Boot. (52) There can be no doubt that this is a case involving a genuine redundancy. It was perfectly open to Mr O'Connor to restructure the management in the manner he did. It is also plainly obvious that no suitable alternative positions were available for Mr Boot. The question to be determined is whether the payment of two weeks per year of service represents adequate compensation for the hardship and inconvenience imposed on Mr Boot as a consequence. (53) I have taken into account the specific factors which Mr Cooper contends are justification for "raising the bar". I note in particular that the loss of his home and associated lifestyle are elements rarely encountered in redundancy situations. Against this, I have taken into account the fact that the "cashed up" salary, used for the calculation of the severance payments, includes components for car lease, housing and other miscellaneous items. Together these items increase the salary package by approximately $15300 pa. On my calculation this increases the severance pay by some $13000 over and above what otherwise might have been paid. (54) Taking into account this method of calculation I am not persuaded that a case has been made out to alter the severance payment already made. (55) I deal now with the matter of notice. (56) It is very clear that Mr O'Connor had, by the first week of September 2002 at the latest, made up his mind that Mr Boot had to go. It was entirely his own decision which was subsequently approved by the Board, as distinct from a decision of the Board which Mr O'Connor implemented. (57) On the evidence it was a decision based on preferred lifestyle rather than financial stringency. Indeed there was no challenge to Mr Boot's evidence that the property "ran very profitably". (58) As of 12 September at least nine people (eight board members plus Mr O'Connor) knew that Mr Boot was to be terminated. Yet Mr Boot heard nothing until the day he was terminated. (59) Mr O'Connor concedes that he did not consult with Mr Boot or give any advance warning. His only explanation was that he was unsure as to how the staff would react. There is also some evidence to suggest that Mr O'Connor used the period between September 2002 and January 2003 to gain as much information as possible on the day-to-day running of the farm, from an unwitting Mr Boot. (60) In the TCR case the Full Bench dealt extensively with the matters of notice and consultation. The following extracts are instructive:
(61) The manner in which Mr O'Connor managed the redundancy of Mr Boot does not sit comfortably with these observations from the Full Bench. (62) All too frequently the Commission encounters situations whereby employers appear to place the highest priority on physically removing redundant employees from the workplace as quickly as possible. Implied in this behaviour is a belief that an employee who has been made redundant will in some way be disruptive to the business if allowed to work out notice. (63) In my view such a belief is outmoded and invariably misplaced. Aside from an individual's own skills and ability, the next most important factor in finding alternative employment, is the goodwill of the former employer, either by way of reference or proactive assistance. That is hardly an environment which would encourage disruptive behaviour on the part of the retrenched employee. (64) Redundancy invariably results in hardship and dislocation of varying degrees. The challenge is to manage the redundancy so as to minimize, to the extent possible, this hardship and dislocation. (65) Probably the foremost consideration is finding alternative employment for the redundant employee. The chances of a successful outcome are invariably maximised when the following elements are present:
(66) None of these elements were present in the instant case. Mr Boot should have been consulted about the impending redundancy as soon as possible after 12 September 2002. There is no apparent reason why he should not have been allowed to work out his notice with dignity and the advantages that come from being employed whilst seeking an alternative position. Given the standing of the Connorville property in rural circles, I feel confident that Mr O'Connor could have positively assisted Mr Boot in his pursuit of employment. (67) I am of the view that the notice given to Mr Boot was quite inadequate. (68) Mr Pearce submitted that should I reach the view that a further payment is warranted, then the parties should be allowed to make further submissions ahead of a final Order. Mr Cooper acquiesced to this proposal. (69) Accordingly I direct the parties to confer with recourse to the Commission if necessary. The file shall remain open until the applicant advises as to the future course of this matter.
Tim Abey Appearances: Date and Place of Hearing: 1 Transcript PN 27 |