DECISION APPEALED - SEE T11109

TASMANIAN INDUSTRIAL COMMISSION

Industrial Relations Act 1984
s.29 application for hearing of industrial dispute

Gregory Colin Riley
(T10796 of 2003)

and

Aquatas Pty Ltd

 

Industrial dispute - severance pay in respect of termination of employment as a result of redundancy - contractual terms - extended notice - order issued

REASONS FOR DECISION

(1) On 4 April 2003, Gregory Colin Riley (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 Aquatas Pty Ltd in respect to severance pay in respect of termination of employment as a result of redundancy.

(2) This matter was set down for a conciliation conference on 20 May 2003. Mr A Gaggin, solicitor, appeared for the applicant. Mr C Green, solicitor, appeared with Mr M Broad for the employer. At the conclusion of the conference the dispute remained unresolved and a hearing date was scheduled for 25 August 2003.

(3) Mr Riley commenced employment with Aquatas as Wet Area Manager on 29 August 1989. Prior to that he had held a number of positions in the fish processing industry.

(4) He was appointed Factory Manager on 3 April 1995.

(5) During the early 1990s salaried management staff were asked to sign contracts. Mr Riley initially declined to sign a contract in that he was concerned as to a "restraint" clause which effectively precluded him, on termination "for any reason", from gaining employment with an Aquatas competitor.

(6) The sticking point in the contract negotiations was the amount of notice the employer was required to give. In 1999 a clause was included which required the employer to give six months' notice in the event of a termination, "such as redundancy". As a consequence of this modification, Mr Riley signed the contract.

(7) Effective from 16 November 1999, Mr Riley was appointed Operations Manager.

(8) In October 2002 Mr Riley was advised by the Company Personnel Manager, Mr Broad, that his position was to be made redundant. Whilst the facts as to what was actually said at that meeting are largely in dispute, it is clear that the notice requirement as contained in the contract was not referred to.

(9) On 21 November 2002 the Company wrote to Mr Riley giving six months' notice and advising that his employment "will officially cease as of 21 May 2003".

(10) Subsequently Mr Riley asked about a redundancy payment and was told that he had already received that which he was entitled to.

(11) On 21 February 2003 Mr Riley was told that he was to finish work on 28 February 2003. He elected to take four weeks' long service leave and effectively severed ties with Aquatas at the end of March 2003.

(12) Mr Riley was paid a termination payment equivalent to 17 weeks' salary from 28 February, i.e. until 27 June 2003.

(13) The applicant asserts that he is entitled to a redundancy payment in addition to his formal notice, which expired on 21 May 2003. The claimed redundancy payment is two weeks' salary for each year of service, less the period of five weeks from 21 May to 27 June 2003.

(14) The respondent submits that Mr Riley was paid a redundancy payment equivalent to four months' salary, and when combined with an extended period of notice, the quantum of severance pay was reasonable.

(15) Mr Riley is 45 years old. At the time of termination, his salary, including a component for the private use of a car, was $1397.80 per week.

(16) Evidence was taken from Mr Riley and the Company Personnel Manager, Mr Martin Broad.

The Contract

(17) When first employed by Aquatas, Mr Riley did not have a formal written contract of employment. However in the early nineties managers were asked to sign contracts. Mr Riley declined, in that he considered the notice provision not to be commensurate with a "restraint" clause which effectively precluded employment with an Aquatas competitor during the 12 months following termination. His evidence on this point was as follows:1

"In the early '90s what was the position with contracts of employment?---They - the managers - the central salary staff were asked to go onto a contract - to sign contracts. There was several of us that wouldn't sign those at that stage mainly because of the notice that we'd been given.

Yes. And what exactly was the problem with the notice provisions?---Well, we believed it wasn't enough notice for us because the other terms in the contract to seek employment in other areas because of the - the contract said you weren't allowed to go back into the salmon industry in Australia.

And do you know what sort of notice was being bandied about in those draft contracts?---Well, the first one was a week; the second one was four weeks.

Okay. And what was your position so far as signing a contract in those terms?---I wouldn't sign it because of the - I didn't believe the terms were - would give me enough time to get another job.

Yes. And so what did you end up doing in relation to the contract and the terms generally?---Basically with - through talking things with the general managing director we came up with a six month notice clause to be put into my contract.

Okay. And that was agreed between yourselves and Aquatas?---Yes.

And how many people actually have that type of provision, that is the six months notice?---To my knowledge there was only two of us that had that put into our contract."

(18) The Restraint clause referred to by Mr Riley reads:2

"Aquatas has to protect it's trade connections, trade interests and goodwill from former employees using personal knowledge or know-how of Aquatas' business, customers, sales policies, and such information to Aquatas's disadvantage.

Therefore, upon termination of your employment for any reason you will not for a period of one year after leaving the Company within Australia and its territorial waters be directly or indirectly involved or interested in the business of selling or marketing salmonid or any other product being produced or developed by Aquatas at the time of termination or in any business of the kind carried on by Aquatas at the time of termination.

However, this clause may be varied in good faith by the Managing Director (or Chief Executive Officer if there is no Managing Director) for any fair, just and reasonable cause. If you are still not satisfied you may then present your case for external mediation."

(19) The provision relating to the six months' notice period appears to be grafted onto a pre existing "Termination of Employment" clause, which on its face could potentially give rise to some curious inconsistencies. This, however, is not a matter of concern for the Commission. It is well established that it is beyond the power of the Commission to enforce the terms of a contract, as to do so would be to act judicially. It is however open to the Commission to have regard to the terms of the contract in exercising a discretion to settle an industrial dispute. The notice provision reads:3

"Your employment may be terminated by Aquatas at any other time, such as redundancy, upon six months written notice being issued to you. Upon such written notice being issued the Company may elect to pay you your entitlements equating to six months employment with the Company and terminate your employment forthwith from that time."

(20) Mr Riley signed the contract on 2 June 1999 although the document is headed:

"Statement of Terms and Conditions as at 1 October 1997"

(21) Under cross-examination Mr Riley said:4

"Can you explain to me why, if the contract is dated 1997 it is signed in 1999?---Because I wouldn't sign it in 1997.

Right. What happened in the intervening period between October 1997 and June 1999?---To make me sign this?

Yes?---The six month - the six months notice was put into it.

Okay. It took that long for - - -?---It took longer than that.

Right. So - - -?---These originally went out in probably '94, '95.

Okay. And in what terms were they proposed? Were they generally similar to this document or were they - - -?---It was the same - it was a very similar document apart from the fact of the 6 months notice was put into this - into it."

(22) In relation to redundancy, Mr Riley's evidence was:5

"Now, during the course of your negotiations, was there any consideration given to things such as redundancy?---No.

And what was - at the time you signed your contract, what was your understanding of the provisions in relation to notice that we have been - - -?---It would be 6 months notice."

(23) Mr Broad was not involved in the contract negotiations as it was prior to his involvement with Aquatas.

October 2002 Meeting

(24) Some time in October 2002 Mr Riley was called to a meeting with Mr Broad. The evidence as to what precisely happened at that meeting is in conflict. Mr Riley's recollection was:6

"Can you state exactly what that was all about?---I don't know about exactly but I mean - Martin called me in and told me that my position would become redundant and that I would be finishing within a month - at the end of the month."

(25) Whereas Mr Broad said:7

"Now, in your position you had various discussions with Mr Riley. Can I take you to the first occasion you had to speak with Mr Riley? On what date was that?---It was during October, mid to late October 2002. I think Greg came to my office and I advised Greg of the circumstances and the fact that his position would no longer be a viable position into the future, he would be maintained until early 2003 due to the fact that Aquatas was moving into its busy season at that point in time and there were a couple of projects that Greg was working on which they wanted to bring to fruition prior to his departure."

(26) Mr Broad denied that he had given Mr Riley one month's notice.

(27) It is clear that neither the contract nor the matter of six months' notice was raised at this meeting.

(28) Mr Broad agreed that he did indicate to Mr Riley that he would provide details of the "package" at some later stage.8

(29) Mr Broad went on to say:9

"So when you gave an indication that you would give some consideration to the details of the package, what did you have in mind?---I needed to determine when his actual period of employment would cease so that I could calculate and advise him of the tax implications of the redundancy payments and his leave entitlements.

So it was a taxation issue?---Sorry?

It was a taxation issue?---Yes, to try and calculate the best way possible of providing the redundancy payment to Greg.

I am just interested as to why you didn't raise the 6 months issue in October?---I probably should have done but I chose not doing it at that stage - myself."

21 November Meeting

(30) A further meting with Mr Broad took place on 21 November 2002. Mr Riley was handed a letter expressed in the following terms:10

"Dear Greg

Further to our previous meeting, at which you were advised that owing to operational issues your position of Factory Manager was to be made redundant. In line with the terms of your contract please be advised that you are provided with 6 months notice as from the date of this letter.

Your employment with Aquatas Pty Ltd will officially cease as of 21 May 2003 inclusive.

Yours faithfully
M D Broad
Human Resources Manager"

Events Subsequent to 21 November

(31) Some time after 21 November and before the end of 2002 Mr Riley approached Mr Broad in relation to redundancy entitlements. Mr Broad said:11

"During the course of the remainder of 2002, did you have any other discussions with Mr Riley?---An exchange of emails at one stage when Greg emailed me and advised that he had received advice that he was entitled to 4 weeks pay for each year of service that he had completed and I replied to him that that's not my understanding of the case and I'd already advised the appropriate entitlements."

(32) Mr Riley said that he approached his reporting manager seeking advice as to what was happening with his job in terms of a finishing date. However he said "no one got back to me on anything". This in turn had, according to Mr Riley, prevented him from applying for other positions external to Aquatas, in that he didn't know whether he would be required to work until May 2003.12

(33) On 21 February 2003 Mr Riley was called to a meeting with Mr Broad and Aquatas General Manager, Mr Pritchard. Mr Riley was told he would finish on 28 February. At or about this time Mr Riley was handed a document setting out two alternative propositions. The essential difference between the two alternatives was the treatment of long service leave. Both alternatives provided for a finish date of 28 February and four months' "Redundancy". In relation to this document, Mr Broad said:13

"You will see on the redundancy clause on the first page there, there is no taxation taken out of that amount. Why was no taxation taken out?---Taxation is not applicable to a redundancy payment.

It is clearly stated as a redundancy, was it provided to Mr Riley as a redundancy?---Yes, it was.

On what basis was it provided to Mr Riley as a redundancy?---Sorry, what?

Why was the decision made to pay Mr Riley a redundancy?---As his position had become no longer required and we provided him with notice and the general manager actually instructed me to provide him with the redundancy further beyond the letter we had previously given him for another, I think, 6 weeks."

(34) A further meeting took place on 24 February. Mr Riley chose the option of taking four weeks' long service leave immediately following his cessation of work on 28 February. Mr Riley continued to have use of the company provided car and mobile telephone during this period.

(35) Mr Broad acknowledged that, prior to 21 February, Mr Riley would have had "no idea" he was to finish on 28 February 2003.

(36) There is a disagreement as to the reason Mr Riley chose the four weeks' long service leave option. Mr Riley said he chose this option to give him time to seek legal advice.14 Mr Broad said the long service leave option had been suggested because it would look better to a prospective employer if Mr Riley was still in gainful employment.15

(37) This latter comment was in the context of a management position with a King Island joint venture operation. Mr Broad said that the Company had sought to assist Mr Riley with an application for this position. This included flying Mr Riley and his wife to King Island to view the operation. However Mr Riley withdrew his application prior to finalisation of the application process.

(38) On 30 March 2003 Mr Riley received his final "Employee Pay Advice".16 This included the following reference:

"TERMINATION PAY 4.00 @ 5981.1300 23924.52"

(39) At the time of termination Mr Riley had 874 hours accumulated sick leave, which was foregone.

(40) Mr Riley of his own volition obtained a six-month consultancy position with a fish processing company in Whyalla. This role commenced at the end of April and will conclude on 31 October 2003. Mr Riley is to be paid $45000 for the contract but does not receive sick leave, annual leave or superannuation contributions.

(41) Mr Riley was responsible for the relocation costs for his wife and himself to Whyalla, estimated at $1000. He has taken rented accommodation in Whyalla, at a weekly rental of $150. He continues to maintain his home in Blackmans Bay where two of his children continue to live. This involves servicing a mortgage.

(42) Mr Riley has been successful, again of his own volition in obtaining a management position in Tasmania, which will commence in December 2003.

Closing Submissions

Mr Gaggin, for the applicant:

(43) The respondent has accepted that it was required to give six months' notice under the contract of employment.

(44) The period of notice expired on 21 May 2003 and the applicant is entitled to a redundancy payment on top of that.

(45) The six months' notice requirement was freely negotiated over a period of time and was in specific recognition of the Restraint clause.

(46) Mr Riley was unable to obtain specific information as to the date of termination, which in turn had led him to believe that it was not open or appropriate for him to apply for positions external to Aquatas.

(47) Tasmania is very much home for Mr Riley and his wife, both of whom have family in Tasmania. The move to Whyalla has caused substantial disruption and inconvenience.

(48) Mr Riley has foregone a significant amount of accumulated sick leave. In addition he has been unemployed for two months and has incurred substantial relocation and living costs associated with the Whyalla move, which are over and above the costs of maintaining his Blackmans Bay property.

(49) Based on the authority of Hughes v Tasman Group Services Pty Ltd17 which was confirmed on appeal, Mr Riley is entitled to a redundancy payment based on two weeks' salary for each year of service, with the value of the private vehicle use to be included in the salary. From this an amount equivalent to five weeks' salary, representing payment made beyond 21 May 2003, should be deducted.

Mr Green, for the respondent:

(50) Under the contract the respondent may provide a redundancy or it may provide notice. It is not obliged to provide either.

(51) The relevant clause provides for Aquatas to elect to pay entitlements equating to six months' employment with the company or terminate employment forthwith. The election of the Company was a combination of both.

(52) The contract does not provide for a redundancy payment in addition to six months' notice.

(53) Consistent with the findings in Boot v Connorville Pty Ltd18 the employer provided as much notice as possible, and had assisted Mr Riley in finding alternative employment.

(54) There is no evidence which indicates that Mr Riley was prevented by the respondent from applying for alternative positions external to Aquatas.

(55) It is contradictory to argue that the loss of 874 hours' sick leave imposes hardship whereas Mr Riley had somehow "lost" 200 hours sick leave in 1996/97 and had not pursued it.

(56) Mr Riley's actual financial loss is minimal.

(57) There is no barrier to the Commission assessing a long period of notice to offset a redundancy claim, particularly where the employer has assisted the employee and the employee has difficulty in establishing any loss.

(58) On the authority of Lindgren J. in Riverwood International Australia Pty ltd. v McCormick,19 there is no warrant to imply a redundancy clause into a contract.

(59) In all the circumstances, the combination of extended notice and four months' redundancy pay is reasonable and there is no basis for this to be disturbed.

Findings

(60) The only evidence in relation to the contract came from Mr Riley. No issues of witness credit were raised and indeed both witnesses presented in a creditable manner, notwithstanding conflict on certain aspects of the evidence.

(61) The contract in question applied to Mr Riley alone and perhaps one other senior staff member. I accept that it was freely negotiated by parties in similar bargaining positions.

(62) I accept Mr Riley's evidence that he declined to sign a contract over a period of several years. I also accept that the major sticking point was the issue of inadequate notice (in Mr Riley's eyes) in light of the restraint clause, which effectively precluded employment with an Aquatas competitor for a period of one year after termination.

(63) I accept that the trigger for Mr Riley's subsequent acceptance of the contract was the inclusion of a six months' notice period in the event of a Company initiated termination for reasons "such as redundancy".

(64) Whilst a contract of employment providing for six months notice is perhaps unusual, in the context of a relatively onerous restraint clause, it was not, in my view, an unreasonable requirement on Mr Riley's part.

(65) I accept Mr Riley's evidence that the matter of redundancy payments was not considered during the contract negotiations.

(66) There are two other factors which I consider relevant.

(67) Firstly, the contract contains the following expression:

"Your employment may be terminated by Aquatas at any other time, such as redundancy, upon six months written notice being issued to you." [my emphasis]

(68) By implication, the six months' notice could apply in circumstances whereby the termination is the result of something other than redundancy.

(69) Secondly, the contract provision has few of the characteristics normally associated with a redundancy arrangement. In particular, it bears no relationship to length of service, a feature which has almost universal application in redundancy payments. Indeed, Article 12 of ILO Convention 158 reads:20

"1. A worker whose employment has been terminated shall be entitled, in accordance with national law and practice, to:

(a) a severance allowance or other separation benefits,   the amount of which shall be based inter alia on length of service and the level of wages, and paid directly by the employer or by a fund constituted by employers' contributions; or"

(70) I conclude that whilst Mr Riley's contract makes provision for notice, it is silent on the question of a redundancy payment.

(71) I accept Mr Green's contention that there is no warrant to imply a redundancy clause into a contract. Mr Riley's pursuit of a redundancy payment rests squarely on s.29(1A) of the Act which clearly provides for a former employee to make application for a severance payment in the event of termination as a result of redundancy.

(72) The Commission does not have jurisdiction to enforce the terms of the contract. The Commission is, however, in determining whether to exercise a discretion in settling an industrial dispute, able to take into account the terms of the contract and the actions of the parties.

(73) On 21 November 2002 Mr Riley was specifically advised that:21

• He had six months' notice of termination.
• His employment would officially cease on 21 May 2003.
• The notice was in line with terms of the contract.

(74) This advice, expressed in unambiguous terms, made no reference to the matter of a redundancy payment.

(75) Subsequently Mr Riley raised the issue of a redundancy payment with Mr Broad, who responded that none was owed.

(76) On 21 February 2003 Mr Riley was advised that he would physically cease work on 28 February. He was presented with a document outlining two options, both of which made reference to a redundancy payment of four months' salary. Whilst I have no doubt that this was presented by Mr Broad as a redundancy payment, I am equally certain that it was not accepted as such by Mr Riley, who immediately proceeded to obtain legal advice, which in turn led to an application to this Commission.

(77) According to the evidence, the Company made the decision as to taxation treatment of the payment. Interestingly the Employee Pay Advice issued on 30 March refers to the same payment as "Termination Pay", although probably nothing turns on this relatively minor inconsistency.

(78) In essence the employer has converted the component of the earlier notice, which relates to the period 28 February to 21 May 2003, to a payment in lieu of notice and described such payment as a redundancy payment.

(79) I would observe that the contract clearly allows the employer to convert part or all of the six months' notice to a payment in lieu.

(80) It is simply not open, however, for the employer to convert a component of a quite explicit period of notice, to a redundancy payment.

(81) I conclude, therefore, that only the component of the payment that relates to a period beyond 21 May 2003 can validly be considered a redundancy payment. On the available evidence this equates to an amount equivalent to five weeks' salary, or $6989.

(82) The question to be determined is whether a payment of five weeks' redundancy, coupled with six months' notice, is adequate in Mr Riley's case?

(83) In the TCR case22 the Full Bench made it clear that this Commission will follow the case-by-case approach. At p. 36 the Bench said:

"We have no difficulty therefore in deciding to reject the notion of making specific provision for redundancy or retrenchment procedures in favour of continuing the case-by-case approach. Moreover, we are firmly of the opinion that circumstances can and almost certainly do differ between employers and employees in the same industry and in different industries."

(84) In this matter the applicant pursues a redundancy payment based on two weeks' salary for each year of service, a formula which some choose to describe as a "standard' of this Commission. Whilst there is ample authority for the proposition that such an outcome, absent special circumstances, is more likely than not, there are numerous examples whereby the commission has departed from this formula.

(85)Determining a redundancy claim is not a precise science and there is invariably a range of factors to be taken into account, in the mix.

(86) One such factor is the extended period of notice afforded Mr Riley. I accept Mr Green's submission that it is open to the Commission to take into account an extended period of notice in determining a redundancy payment. I do not, however, accept that this should be a one-for-one offset as implied in Mr Green's submission.

(87) In this instance a period of six months' notice was provided to Mr Riley. Whilst I accept that this was in recognition of the restraint clause in the contract, it is nonetheless significantly more generous than the norm and did serve to reduce any hardship facing Mr Riley. It is a factor that I have taken into account.

(88) I have also taken into account the assistance provided by the Company in relation to the King Island position.

(89) In the instant case we are aware with some precision of the degree of hardship and inconvenience which Mr Riley faced and indeed, continues to face.

(90) Firstly, it is abundantly clear that Mr Riley has satisfied any onus falling to him to mitigate his loss. He has obtained alternative employment entirely of his own volition.

(91) The extent of Mr Riley's loss can be summarised as follows:

• Accumulated sick leave of 874 hours.
• Two months' unemployment prior to the commencement of the Whyalla position, although, notionally at least, he was still being paid by Aquatas at the time.
• One month of unemployment between the Whyalla contract ending and his new position commencing in December 2003.
• Costs of relocation to Whyalla and return.
• Additional costs of maintaining accommodation in Whyalla and Tasmania at the same time.
• The dislocative impact of relocating his wife and self to Whyalla.

(92) As previously indicated, the assessment of an appropriate redundancy payment involves an assessment of a range of factors in a mix, rather than a simplistic arithmetic assessment of economic loss.

(93) I am of the view that a redundancy payment of five weeks' salary is quite inadequate given Mr Riley's length of apparently unblemished service.

(94) I am however of the view, that taking into account all the factors referred to above, there is justification for modification of the claimed two weeks for each year of service formula.

(95) I have decided that an appropriate redundancy payment in this case is an amount equivalent to 1.75 weeks salary for each completed year of service, from which five weeks' salary already paid should be deducted.

(96) I accept Mr Gaggin's submission that the value of the private use of a vehicle should be included in the salary for calculation purposes.

ORDER

Pursuant to Section 31 of the Industrial Relations Act 1984 I hereby order that Aquatas Pty Ltd, Marina Drive, Margate, Tasmania 7054, pay Gregory Colin Riley, 12 Tingara Road, Blackmans Bay, Tasmania 7052, an amount of twenty four thousand eight hundred and ten dollars [$24810] by way of a redundancy payment, such payment to be made not later than 5.00pm on 14 October 2003.

 

Tim Abey
COMMISSIONER

Appearances:
Mr A Gaggin, solicitor, Murdoch Clarke, for Mr G C Riley
Mr C Green, solicitor, Page Seager, with Ms C Buxton and Mr M Broad, for Aquatas Pty Ltd

Date and Place of Hearing:
2003
May 20
August 25
Hobart

1 Transcript PN 68 and following
2 Exhibit A2
3 Supra
4 Transcript PN 228 and following
5 Transcript PN 88 and 89
6 Transcript PN 132
7 Transcript PN 408
8 Transcript PN 512
9 Transcript PN 515 and following
10 Exhibit A4
11 Transcript PN 418
12 Transcript PN 149 to 151
13 Transcript PN 434 and following
14 Transcript PN 308
15 Transcript PN 425
16 Exhibit A6
17 T10339 of 2002
18 T10678 of 2003
19 2000/177 ALR 193
20 Convention Concerning Termination of Employment at the Initiative of the Employer
21 Exhibit A4
22 T125 of 1985