T10716
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TASMANIAN INDUSTRIAL COMMISSION Industrial Relations Act 1984 James Arpad Babos and Statewide Independent Wholesalers
Industrial dispute - alleged unfair termination of employment - severance pay in respect of termination of employment as a result of redundancy - genuine redundancy - additional payment in lieu of notice ordered REASONS FOR DECISION (1) On 20 February 2003, James Arpad Babos (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 Statewide Independent Wholesalers arising out of the alleged unfair termination of his employment and severance pay in respect of termination of employment as a result of redundancy. (2) This matter was set down for a conciliation conference on 18 March 2003 at the Supreme Court, Cameron Street, Launceston. Mr R Pearce, solicitor, sought and was granted leave to appear for the applicant. Mr S McElwaine, solicitor, sought and was granted leave to appear, together with Mr D Lanham and Mr D Sutherland, for the employer. The matter was subsequently listed for hearing on 13 May 2003. (3) Mr Babos is 50 years old. He was employed by Statewide Independent Wholesalers [SIW} in the position of Distribution Manager at the Prospect warehouse on 18 November 1996. (4) Prior to relocating to Tasmania, Mr Babos had extensive warehouse and logistics experience at a management and operational level in Victoria and NSW. Mr Babos purchased a hotel upon his arrival in Tasmania in the late 1980s. Over the succeeding years the hotel was either managed by Mr Babos, or alternatively, leased out. At all times relevant to this application, Mr Babos was managing the hotel in partnership with his wife, whilst continuing to undertake his responsibilities at SIW. (5) Mr Babos was responsible for the supervision of 120 staff. He usually worked from 6.00am to 3.00pm, depending on requirements. Initially Mr Babos reported to the General Manager. Subsequently this changed to the Assistant General Manager and later again to a position titled Operations Manager. (6) During 2002 SIW underwent a fundamental restructure of management positions. Mr Babos applied for three positions, which evolved as a consequence of the restructure, but was unsuccessful in each case. (7) On 31 January 2003 Mr Babos was made redundant. He was paid a severance payment based on two weeks' pay for each year of service [pro rata for the incomplete year] together with five weeks' pay in lieu of notice. His salary at the time of termination was $59500 pa. (8) Mr Babos was escorted from the premises immediately upon receipt of his redundancy notice. (9) The applicant submits that he was unfairly terminated and at the very least, his termination payment should be substantially increased, both in terms of notice and severance payment. Management Restructure (10) According to the Acting General Manager, Mr Lanham, the management restructure was one component of a major business reorganisation known as "Project Rethink". There were two key drivers for this reorganisation:
(11) The management restructure would result in a flatter structure. The position of Assistant General Manager was to be abolished and the duties associated with the positions of Operations Manager and Business Manager were to be substantially revamped. (12) Mr Babos operated at the same level as the then Warehouse Manager. Essentially both shared the responsibilities for the running of the Distribution Centre on a cooperative basis. It was made clear at the time of engagement that ultimately these positions would be merged into one position. According to Mr Babos, he accepted that there was as a consequence a degree of competition between the two incumbents. Mr Babos agreed that his input had been sought, and he in fact endorsed the merging of these two roles into a position known as Distribution Centre Manager [DC Manager].1 Operations Manager (13) Mr Babos submitted an application for the new position of Operations Manager. (14) Mr Lanham said that an external consultant had been engaged to assist with the assessment process:2
(15) Mr Babos was interviewed for the position but was unsuccessful. (16) Mr Babos agreed that the duties for this position were far more extensive than that which he had previously undertaken and that he did not have the appropriate experience or qualifications for the role.3 (17) He also agreed that the assessment and selection process was fair.4 (18) The successful applicant was Mr Bill Pearce, a person with extensive Distribution Centre management experience in Victoria. Mr Pearce commenced with SIW on 28 January 2003. Distribution Centre Manager (19) Mr Babos applied for this position along with the Warehouse Manager, Mr Lees. He said:5
(20) Mr Nott denied that he had indicated that the unsuccessful candidate would automatically be appointed as a Shift Manager.6 He did however agree that it was widely expected that the unsuccessful candidate would gain a Shift Manager position, provided they accepted the lower salary.7 (21) The process for the DC Manager selection was comprehensively outlined in correspondence dated 12 December 2002.8 This included the involvement of the external consultant, the selection criteria, and automatic consideration for a Shift Manager position if unsuccessful together with salary arrangements for the latter position. (22) The external consultant interviewed both applicants with reports forwarded to Mr Nott. The original intention was that Mr Lanham conduct the second interview. However as the position would be reporting to the Operations Manager, Messrs Lanham and Nott decided that Mr Pearce should be involved, even though he was not due to commence until late January. (23) The interviews took place on 3 January 2003 with Mr Pearce flying in from Melbourne that morning. (24) Asked as to the attributes he was looking for, Mr Pearce said:9
(25) Mr Pearce had not met either candidate but had read the resumes. He said:10
(26) The interview process consisted of a walk around the warehouse in the presence of both applicants followed by formal interviews. Mr Pearce said he asked the same questions of both applicants.11 (27) Mr Babos agreed that the DC Manager position was more demanding than his current role. (28) At the conclusion of the interview process Mr Pearce prepared a detailed file note which was sent to Mr Lanham. The file note included an "overall impression" of both applicants. In Mr Babos' case the comments were largely negative and included a reference relating to lack of trust and difficult to work with. The file note concluded with the following "Recommendation":12
(29) Mr Lanham's evidence in relation to the recommendation was as follows:13
(30) Mr Babos agreed that the assessment report prepared by the external consultant was fair.14 (31) Mr Babos agreed that the interview process was fair15 but the comments written by Mr Pearce were unfair. He said:16
(32) And later:17
(33) As to the outcome, Mr Babos said:18
(34) Mr Babos was verbally advised that he was unsuccessful shortly thereafter. (35) By memoranda dated 6 January Mr Babos was advised that:19
(36) Mr Babos was absent on sick leave from 13 January to 24 January. Shift Manager Positions (37) The salary for the Shift Manager position [$45000 approximately] was substantially lower than Mr Babos' existing salary. He had previously been advised of a proposed arrangement whereby the differential would be phased in over a 9-month period. (38) There were three positions available. However Mr Babos had previously advised management that he was only interested in the Day Shift 1 position, as that would facilitate his continued involvement with his hotel. (39) Mr Babos' interview was scheduled for 30 January. (40) On 29 January Mr Babos was called to a meeting with Mr Lanham. His recollection of the meeting was as follows:20
(41) Mr Lanham's explanation for the timing was:21
(42) The following day Mr Babos was interviewed for the shift coordinator position. On his own admission he performed poorly at the interview:22
(43) Mr Babos' explanation for his negative attitude at the interview was, "I was fairly devastated the company had even anticipated giving me a payout".23 (44) The following exchanges are illustrative of Mr Babos' state of mind at the time:
...
(45) Mr Babos agreed that the interview process was fair.26 (46) Mr Pearce said that at the time of the DC Manager appointment, he considered Mr Babos to be "probably more than suitable for the shift manager's position" but this was dependent on how he adapted to not getting the DC position.27 (47) Prior to the interview commencing, Mr Pearce said, "I thought Mr Babos would have been a shoe-in for the position".28 (48) Mr Lanham agreed with the proposition that Mr Babos would have been "perfectly capable of performing the duties as a shift manager".29 Mr Nott expressed a similar sentiment.30 (49) Mr Pearce's observations on the interview were:31
(50) Both Mr Pearce and Mr Lees prepared file notes which did not recommend the appointment of Mr Babos.32 (51) Mr Lanham accepted the recommendations of the interview panel.33 (52) Mr Babos was called to a meeting with Mr Lanham at 7.30am the next day. He was accompanied by a witness. Mr Babos was advised that he had been unsuccessful. As there were no other positions available he would be offered a redundancy payment. Mr Lanham said that in light of the outcome it would be better if he left the site immediately. He asked Mr Pearce to assist with personal belongings etc. (53) Mr Babos left the site shortly thereafter. Closing Submissions Mr Pearce, for the applicant (54) Mr Babos has been treated quite unfairly. This is not strictly a redundancy in that his duties are still being performed by the management team. (55) Mr Babos was the only person to lose his job and was effectively replaced by an external appointment. (56) He was not given any advice of his potential redundancy until the day before the interview. That was quite unfair in that it clearly impacted on his performance in the interview. (57) Mr Babos had every reasonable expectation that he would be successful in respect of the shift coordinator position. On the evidence the Commission must conclude that Mr Babos was terminated "for factors other than the fact that he wasn't a suitable candidate for the job". (58) It was unfair on the Company's part to disregard knowledge gained over the past six years as to Mr Babos' performance and capability in favour of Mr Pearce's judgement based on two sessions with Mr Babos in an interview situation. (59) If redundancy was a potential outcome of the restructuring process, then Mr Babos should have been advised well in advance. This would have placed Mr Babos in a position to pursue alternative employment from a position of strength. (60) In all the circumstances Mr Babos should have received at least three months notice together with an enhanced severance payment. Mr McElwaine, for the respondent (61) The restructuring process undertaken by SIW resulted in a fundamental reorganisation. It was plainly not a sham or charade to mask what was otherwise a termination for cause of Mr Babos. (62) There was a valid reason for termination. (63) On the evidence the interview process, including the use of an external consultant, was fair. (64) Dissatisfaction with an outcome is not a ground for review under the Act. (65) It was open to Mr Pearce to focus on the characteristics which he considered critical to both positions, i.e. ability to promote change, loyalty and the ability to work with the new Operations Manager. (66) Whilst Mr Babos was eminently qualified for the shift position, the fact that it went "horribly wrong" can only lay at the feet of Mr Babos. Firstly he limited his options to one position, and secondly, the attitude portrayed at the interview was of his own making. (67) It was legitimate for Mr Lanham to have thought ahead as to the possibility of Mr Babos being unsuccessful, and therefore raise the redundancy option. (68) There is no position to reinstate to. It follows that reinstatement is impracticable. (69) General notice of the restructure was given in September 2002. (70) It is conceded that the specific notice might be viewed as inadequate although the outer limit of any additional notice should be an additional two weeks' pay. There is however no basis for an additional severance payment [see Hughes v Tasman Group Services]. Findings (71) There can be no doubt that SIW undertook a major management restructure between September 2002 and January 2003. There is no evidence to support the notion that the restructure was a sham or charade aimed at camouflaging the real reason for the termination of Mr Babos. Indeed such a notion was not seriously suggested although Mr Pearce does invite the Commission to conclude that Mr Babos was terminated for factors other than his suitability for the position. (72) The issue for the Commission to determine is whether or not Mr Babos received fair treatment at each stage of the restructure process. (73) It is important at this stage to draw a distinction between process and outcome. (74) Section 3[1] of the Act specifically excludes from the definition of "industrial matter":
(75) It would be beyond the jurisdiction for this Commission to substitute its view for that of the employer as to the actual choice of the successful applicant for any one position. The issue for the Commission is whether the process, which led to the ultimate choice, was fair. (76) I deal firstly with the position of Operations Manager. (77) The evidence points overwhelmingly to a process, which included the use of an external consultant, which was absolutely fair, indeed it could be described as "text book". Mr Babos accepted that the outcome was indeed fair. (78) The external consultant was also engaged for the DC Manager position and, again, this process could not be faulted. The major change in the process was the decision taken by senior management to involve the newly appointed Operations Manager, Mr Pearce, as the primary interviewer, notwithstanding the fact that Mr Pearce was yet to take up his appointment. (79) In my view this decision was reasonably open to the employer. The DC Manager would be reporting directly to the Operations Manager, and in such circumstances it makes sense for the latter to have a pivotal role in the selection process. It is important to note that Mr Pearce's role was limited to making a recommendation. The ultimate decision rested with Messrs Nott and Lanham, thus providing a built-in review mechanism in the event that a recommendation was plainly misplaced. (80) I am satisfied that Mr Pearce approached the interview with an open mind. He had not met either gentleman prior to the interview, and indeed, had formed the view that "on paper", Mr Babos was the better candidate. (81) Mr Pearce followed the same process with both applicants, including asking the same set of questions. Whilst clearly disappointed with the outcome, Mr Babos did not assert that the interview process was unfair. (82) It was open to Mr Pearce to determine the qualities and attributes which were important to him. I find no fault with Mr Pearce placing significant weight on the attributes of team player, loyalty and adaptability to change. (83) The comments made by Mr Pearce in his file note recommendation could well be described as blunt. It is not clear whether these comments came to the attention of Mr Babos before or after he was terminated. Either way, it is not difficult to understand why Mr Babos was incensed by the comments and challenged their veracity. (84) That aside, it is not for the Commission to second-guess the conclusions reached by Mr Pearce. My only concern is whether the process that led to these conclusions was fair. I conclude that it was. I also note that Mr Babos considered both applicants were "very equal". In such circumstances the acceptance by Messrs Nott and Lanham of the recommendation is understandable. (85) I turn now to the position of Day Shift Manager. (86) I do not accept that Mr Babos was promised a position of Shift Manager in the event that he was unsuccessful for the higher-level positions. (87) I do however accept that he was told that he would be automatically considered for the position, and further, it was the widespread expectation of the management team that he would be successful. (88) There can be no question that Mr Babos was well qualified for the position. Indeed Mr McElwaine suggested that he may have been "overly qualified". (89) Again I find no fault with the interview process. Indeed Mr Pearce spent some time in explaining why he was unsuccessful for the DC Manager position, thus inviting a response to quell any lingering concerns Mr Pearce may have held. (90) It is plainly obvious that Mr Babos was unsuccessful, not because of an inability to do the job, but as a consequence of a negative and antagonistic attitude displayed at the interview. (91) In normal circumstances such behaviour would be inexcusable. There is, however, one further factor to be considered. (92) The previous day Mr Babos had, for the first time, been confronted with the prospect of being made redundant. Whilst redundancy is a possible outcome of any restructure, it had not in this case ever loomed as a serious prospect. Indeed the restructure process had hitherto been conveyed in a relatively positive light. The following extracts from memoranda are illustrative:
(93) I accept that Mr Lanham was well intentioned in raising the subject in the manner he did. Had redundancy been raised in a general sense some months earlier, Mr Lanham's action would have been soundly based. (94) As it turned out Mr Babos reacted very negatively to this advice and there can be little doubt that this was the major factor in his substandard interview the following day. (95) However misplaced, it is understandable why Mr Babos felt that the die was cast and that, going into the interview, he effectively had no chance. (96) Without questioning Mr Lanham's well-intentioned motives, in the absence of general advice at a much earlier stage, I do not understand why it was necessary to raise the matter of redundancy on the eve of the Shift Manager interview. (97) On the available evidence, it is more likely than not that, had the issue not been raised, Mr Babos would have been successful. (98) I find that this was a genuine redundancy as distinct from an unfair termination. It follows that the question of reinstatement or re-employment does not arise. (99) I do not conclude that the Company acted unfairly in selecting Mr Babos for redundancy. I do however find that the actions of the company, in one material respect, directly led to a most unfortunate outcome for Mr Babos, and one which could not have been reasonably contemplated at the beginning of the restructuring process. (100) No case has been made for the alteration of the severance payment made to Mr Babos. (101) I do however find that in all the circumstances, the notice provided to Mr Babos to be inadequate and I propose to extend it by a further five weeks. ORDER Pursuant to s 31 of the Industrial Relations Act 1984, I hereby order that Statewide Independent Wholesalers Limited, 5 Trotters Lane, Prospect, Tasmania 7250, pay to James Arpad Babos, 908 Golconda Road, Lebrina, Tasmania 7254, an amount of five thousand, seven hundred and twenty one dollars [$5721] by way of additional payment in lieu of notice arising out of a genuine redundancy. Such payment to be made not later than 5.00pm 28 July 2003.
Tim Abey Appearances: Date and Place of Hearing: 1 Transcript PN 275 |