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T11379

 

TASMANIAN INDUSTRIAL COMMISSION

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

Shop, Distributive and Allied Employees Association, Tasmanian Branch
(T11379 of 2004)

and

A W Birchall & Sons Pty Ltd

 

COMMISSIONER T J ABEY

HOBART, 10 May 2004

Industrial dispute - alleged unfair termination of employment - no valid reason for termination - denial of procedural fairness - termination unfair - reinstatement or re-employment impracticable - compensation ordered

REASONS FOR DECISION

[1] On 9 March 2004, Shop, Distributive and Allied Employees Association, Tasmanian Branch (SDAEA) applied to the President, pursuant to Section 29(1) of the Industrial Relations Act 1984, for a hearing before a Commissioner in respect of an industrial dispute with A W Birchall & Sons Pty Ltd arising out of the alleged unfair termination of employment of Igor Saarinen.

[2] The matter was listed for a hearing (conciliation conference) on 16 March 2004 and further listed for hearing on 15 April 2004. Mr P Griffin appeared for the SDAEA. Mr J Munro, of Durkin & Associates, with Mr G Tilley, appeared for the employer.

[3] Mr Saarinen was employed as Store Manager of Birchalls Brisbane Street, Launceston store on 23 August 1999. Prior to this appointment he had extensive management experience in the retail industry extending over more than 30 years. Mr Saarinen reported directly to the General Manager, Mr Graeme Tilley. Mr Tilley's office was in the Launceston store, and whilst he had responsibility for the overall company, it would seem that the working relationship between the two on a day-to-day basis was reasonably close.

[4] The first four years of Mr Saarinen's employment appear to have been uneventful. Indeed substantial cash bonuses were paid to Mr Saarinen at the end of the first two financial years. In April 2003 he took extended leave to travel overseas, returning in June 2003. It was from this point that the relationship between Mr Saarinen and Mr Tilley began to deteriorate.

[5] From Mr Saarinen's point of view the main cause of this deterioration was an apparent reluctance on Mr Tilley`s part to authorise leave for Mr Saarinen to visit his elderly and unwell mother in Victoria. The evidence of Mr Tilley pointed to a number of incidents, which Mr Tilley considered undermined his authority, and/or challenged the essential notion of trust between the two.

[6] Matters came to a head in February 2004 when Mr Saarinen approached the pay officer asking her to calculate the number of rostered days off (RDOs) which Mr Saarinen believed had accrued over the previous four and half years in accordance with his contract. This amounted to some 50 days, of which Mr Saarinen immediately applied to take 20 days in March/April 2004. This approach and leave application was made directly to the pay officer, without prior reference to Mr Tilley. It was however common ground that the leave application would be referred by the pay officer to Mr Tilley for approval.

[7] Mr Saarinen was absent from work on Monday 23 February. This he said was an RDO referred to in the previous paragraph. It had not been authorised by Mr Tilley although certain staff members knew he would be absent. Mr Tilley contacted Mr Saarinen late that day at home requiring him to attend a meeting the following day to discuss the matter. This meeting was subsequently deferred until 25 February to enable Mr Saarinen to obtain a witness.

[8] Following a lengthy meeting on 25 February, which was adjourned a number of times, Mr Tilley terminated the services of Mr Saarinen forthwith, with an offer to negotiate.

[9] By letter dated 3 March 2004 Mr Tilley outlined the reason for the termination in the following terms:1

"The reason for dismissing you was that there has been a breakdown in the working relationship and I no longer have confidence in you, particularly in these difficult times."

[10] The letter went on to indicate that as there had been no response to the offer to negotiate a settlement, one weeks' pay in lieu of notice was enclosed.

[11] The applicant contends that the termination was unfair both as to substance and absence of procedural fairness. The applicant seeks reinstatement or, if that is found to be impracticable, compensation.

The Contract of Employment and RDOs

[12] The contract of employment is contained in correspondence from Mr Tilley to Mr Saarinen dated 4 August 1999. Relevantly the hours of work are found in the following passage:2

"The hours of work for the Store Manager Position are as follows:

Standard Day: 8.30am to 5.30pm with 1 hour for lunch. Must be present on the shop floor from 11.00am to 2.00pm each day.

One Friday night and Saturday (opening hours: 8.30am - 5.00pm) to be worked every three weeks.

One Rostered Day Off per month.

To work every second weekend in December and the last Saturday before Christmas.

Some extra week nights in December as required."

[13] In practice Mr Saarinen took both the Sunday and Monday as days off immediately following his regular roster to work one Friday night and all day Saturday without payment of overtime. This occurred once every three weeks. [Note: The requirement to work Friday night was relaxed in October 2003 as a consequence of a medical condition. This however does not appear to be material to the circumstances of this case.]

[14] Mr Saarinen contended that under this arrangement he worked an average of 41 hours per week [40 hours per week post October 2003]. This evidence was not challenged.

[15] Mr Saarinen said that this arrangement was consistent with industry practice since the introduction of all day Saturday trading in 1994. It was an arrangement linked specifically to the Friday night/Saturday roster and not connected to the one RDO allowed per month in accordance with the contract of employment.

[16] Mr Tilley had a different view of the arrangement. He said that he was content with the Monday off following the Saturday roster. This however was a RDO in accordance with the contract, and indeed amounted to three extra RDOs per year.

[17] The above arrangement continued for four years. Mr Saarinen had every third Monday off following the rostered Saturday, but did not seek to avail himself of any additional RDOs.

[18] The matter came to a head in early 2004. Mr Saarinen said in evidence:3

"Now, as we come towards February of this year, what was your position in seeking or taking those rostered days off per month? Did you have a view that there was days owing to you?---Yes.

Or had you always had that view that the days were owing, you had never taken them, but they were still owing?---I knew they were owing, but, I guess, just to clarify that query for you, is that on one of the occasions where I applied for two days - or one day off to go and see my sick mother, and basically put in the form in the usual procedure, Graeme advised me that on that particular instance, that I had no time owing, I was in the red because of my holidays that I took earlier that year, and you realise you don't have any time owing whatsoever, unless you can come back to me with any leave that I am not aware of - and these were his exact words - "At this point in time, you will need to make up those particular two days that you will take to see your sick mother." So from that point on, I went back and checked the contract, and I asked Cheryl Smith to go back to when I started as far as the rostered days off, or the interpretation, and it turned out that I was in fact owed 54 days which had accumulated. However, after Cheryl calculated my leave and a few other extras as far as the time for the four-and-a-half years, the figure was reduced to 50 days."

Note: Miss Cheryl Smith is the pay officer.

[19] Mr Saarinen denied that he had instructed Miss Smith to put the 50 days "against [his] name" in the computer records.4

[20] Mr Saarinen lodged an application to take 20 days leave (part of the 50 days he considered to be owing) during the March/April 2004 period. This application was lodged directly with Miss Smith, some time during the week ending 20 February 2004. It was common ground that Miss Smith would pass the application on to Mr Tilley for consideration and approval. Mr Tilley sighted the application on Friday 20 February, but chose not to discuss it with Mr Saarinen that day due to other pressing commitments.

[21] Mr Saarinen acknowledged that he had signed the application for leave both as the applicant and as the approver. This he said was a mistake and inadvertent.

[22] Questioned as to why he did not discuss the leave application with Mr Tilley, Mr Saarinen said:5

"Didn't you think it would be a contentious issue?---I am glad you raised that, because in the past where I have submitted annual leave, and it was like waving a red flag to Graeme, because he would become very volatile, and in the finish I had no confidence in presenting any form or document regarding me having further time off to - whether to see my sick mother who has had a stroke, or otherwise. So in other words, it was a case where, how dare you put in an annual leave document or time off in lieu, etcetera, etcetera. So I actually lost confidence in actually going to him direct. I then adopted that procedure which I have done for the four-and-a-half years. I put that document into Cheryl Smith. She would in turn hand it to Graeme and forward it on. And basically in that last instance that I put in that time off in lieu for the March period, Cheryl did come back to me and say, "Well, he had certainly a big reaction and grabbed the document" and that's all she heard from Graeme, and I didn't hear anything else since then.

So is your evidence that you didn't have the confidence to discuss this issue with the manager?---Correct."

Termination of Contract of Employment

[23] Mr Saarinen was absent from work on Monday 23 February 2004. He had not worked on the previous Saturday and hence it would appear that this day was one of the 50 RDOs that Mr Saarinen considered were owed to him.

[24] Mr Saarinen had not informed Mr Tilley of his intended absence. According to his evidence he had informed the accountant, the pay officer and the receptionist.

[25] Mr Tilley said it had been his intention to discuss the leave application with Mr Saarinen on Monday 23 February but this was frustrated by Mr Saarinen's absence. Mr Tilley said he was unable to make contact with Mr Saarinen until 6.20pm on that day. Mr Tilley said:6

"And then you organised a meeting?---I did organise a meeting. I said to Igor I would like to speak to him about it the next day, and he informed me that it was his entitlement, that it was in his employment contract. And I said, okay, that's his interpretation, and I would like to discuss it the next day, and this is a serious matter. And that it might be advisable for him to bring someone along to observe the meeting."

[26] The meeting scheduled for Tuesday 24 February was postponed until the following day to enable Mr Saarinen to organise a witness.

[27] Mr Tilley's account of the meeting held on 25 February is contained in the following passage:7

"And what happened at 9.30 the next day?---We had the meeting. I had Stephen Booth, the accountant, there, Mr Saarinen, and Judy Timbs, who was a personal friend of Mr Saarinen's. Basically, we went through his - well, I asked him about the rostered days off and the employment contract and things like that. He offered his explanation. He couldn't point out to me on the employment contract where it said that he was entitled to any days in lieu, or anything like that. He then - - - 

Did he state to you at that time that it clearly states in the employment contract that he is entitled to RDOs?---Yes, he did.

And did you discuss with him the fact that the RDOs he was taking were in fact those days?---Yes.

And what did Mr Saarinen say to you about the working relationship between you and him?---He advised me that it was his impression that the working relationship had declined ever since he had returned from his 10 weeks holidays in June.

And did he indicate to you that he thought you were harassing him?---Yes, he did.

And did you have a discussion about the trading position of the company, at that meeting?---Yes, we did. He said that he was aware the company wasn't trading profitably at that point.

And that meeting started at 9.30?---Yes.

And concluded around lunch time?---Yes."

[28] Asked why he had not discussed the leave application with Mr Tilley, Mr Saarinen said:8

"Because I had no confidence in coming to Graeme. Every time I came to him, he would react in an adverse manner. So I decided to put my form in through my normal channel, which was Cheryl Smith. That's what I did do."

[29] Mr Tilley gave the following reasons for his decision to terminate:9

"I didn't make that decision lightly. I adjourned the meeting several times during the course of it, and one of those times was to consider his explanation for those rostered days off. But the rostered days off were really just an example to me as to how the working relationship had deteriorated, and I felt that I didn't have any confidence in Mr Saarinen to continue on in such a high level position.

And were you concerned about the timing of the 20 days that he had approved for himself to take off?---Yes, I was.

Why?---To me, that was once again proof that he had no real concern for the company and for what we were trying to achieve. We were trying to turn the company around, and out of the blue he puts in an application for pretty much a month worth of leave. I mean, we had a lot of things that we had to achieve before the end of June, and there was no consultation or discussion with me whatsoever.

And you offered to reach a settlement on his employment contract at that time?---Yes, that's correct.

And how was that received?---Judy - Ms Timbs actually said that there would be no settlement, they wouldn't enter into any agreements, and that they would be taking it further."

Other Issues

[30] Whilst the RDO issue brought matters to a head, Mr Tilley `s evidence went to a number of other matters which, by inference, contributed to a progressive breakdown in the relationship, and a consequent lack of confidence in Mr Saarinen. These issues included the following:

  • A number of departmental managers raised with Mr Tilley concerns about Mr Saarinen's management style. When told of this Mr Saarinen said "that he would need to review his position". Mr Tilley interpreted this as veiled threat of resignation. Mr Saarinen denied that he considered resignation, explaining the comment as a "heat of the moment" reaction. The issue was in any event satisfactorily resolved following discussions between Mr Saarinen and the managers concerned.
  • An incident involving staff allocation for a "back to school" project in which Mr Saarinen had said (to Mr Tilley in the presence of another staff member) "I don't know who to believe, you or M...".
  • In January 2004 Mr Saarinen asked for a day's leave to visit his mother in Victoria. It transpired that Mr Saarinen had an open airline ticket and took two days' leave.

[31] It was following this latter incident that Mr Tilley put in place daily meetings with Mr Saarinen. He said that this was in an effort to improve communications. Mr Tilley said that Mr Saarinen reacted positively to these meetings.

Procedural Fairness

[32] Mr Saarinen's letter of appointment states:

"A performance appraisal will be done initially after 3 months and once per year thereafter."

[33] Mr Tilley acknowledged that this did not occur in a formal sense. He said:10

"Did that occur?---Not in a formal sense. I guess there are different types of performance appraisals in a large company-type circumstance, you would have a formal appraisal which would go through basically a copy of your position description. I feel that at the level of the position that we're discussing here, that being a shop manager, that that wasn't really necessary. And I mean, that's okay if you are talking about a normal shop assistant, but I think communication is the key factor and I was satisfied that we were communicating on mostly a weekly basis, we would have a formal meeting weekly. At busier times of the year, that didn't happen. And if there were any issues of concern, I felt I could discuss that with Mr Saarinen at those times.

So you consider that a formal appraisal didn't occur, but informal appraisals did occur?---Yes."

[34] On the matter of performance related warnings, Mr Tilley said:11

"And at any point prior to the termination did you indicate to Mr Saarinen that you were reviewing his performance at work and if it didn't improve to a level of your satisfaction that you would terminate his services?---No.

Why not?---I was at a point where there were things that needed to be done in order for us to achieve our goals and objectives to become profitable, and repeatedly things that needed to be done were not done. And I guess there are several different courses of action in which you can go. Bearing in mind that this is a top manager, this is one of three key people in the company, and we are meant to be working as a team. If I went to Mr - well, it was my belief that if I went to Mr Saarinen and said, "Look, these are the areas that you are not meeting my expectations in your position," that would be a decline of our working relationship anyway. So what I decided to do was to instigate daily meetings to improve the communications and try and work through this with him."

[35] Mr Saarinen said that he had never been subject to a formal appraisal, counselling or given any idea that Mr Tilley may have been concerned as to his performance.12

[36] In relation to the meeting on 25 February, Mr Saarinen said:13

"After a short discussion, I was advised by Graeme that my employment was to be terminated. I received no warning that this was Graeme's intention, and no indication that I was anything less than a capable and competent manager. I left the store in shock and disbelief. I have had an extensive experience of treating staff fairly in an industrial setting. Graeme made no effort to comply with any policies governing termination of employment, including those contained in Birchall's own policy document. My termination was without just cause or fair warning, and I could not come to terms with such an attack on my professional standing and the abrupt loss of income."

Findings

[37] At the heart of this matter is the issue of RDOs in all its manifestations.

[38] Nothing in the letter of appointment provides for a Monday off immediately following the rostered Friday night/Saturday. Equally there is no direct link between the RDOs and the Friday night/Saturday roster.

[39] There is force in what Mr Saarinen asserts as to "industry practice" following the advent of all day Saturday trading. After allowing for every third Monday off, Mr Saarinen still averaged 41 hours per week (later 40 hours). Thus an additional RDO each month would be a typical arrangement for an employee on a 38-hour week in the retail industry.

[40] I conclude therefore that the construction Mr Saarinen placed on his contract of employment was a view that was reasonably open to him.

[41] I also conclude that Mr Tilley was equally entitled to take a contrary view, particularly as Mr Saarinen's construction did not emerge until more than four years after the event. It was Mr Tilley who wrote the letter of appointment and it may well have been intended as an "all up" salary package with in-built compensation for hours worked beyond an average of 38 per week.

[42] Hence we have a situation whereby the General Manager and the Store Manager have a different view on the proper construction of a document. Ordinarily such a situation would not be life threatening, and capable of resolution through sensible and rational discussion.

[43] Regrettably Mr Saarinen felt he could not discuss the matter directly with Mr Tilley (at least in the first instance) and chose to work through an intermediary (the pay officer). I do not accept that there was any intention to deceive Mr Tilley. It was common ground that the leave application would be passed to Mr Tilley for approval or otherwise. I do accept that Mr Saarinen chose this avenue because, based on previous experience, he feared a negative reaction if he approached Mr Tilley directly. Whilst the outcome in all likelihood would be the same, it would seem that Mr Saarinen was seeking to avoid what he anticipated as an unpleasant exchange with Mr Tilley.

[44] This was a most unfortunate circumstance. In any employment situation it would seem sensible that an employee would discuss proposed leave arrangements with their immediate supervisor prior to the lodgement of a formal application with the pay office. Such an arrangement should have applied to Mr Saarinen and Mr Tilley. It is not for the Commission to apportion blame for this apparent breakdown in communications. I am however of the view that a far more productive approach on the part of both individuals would be to address the cause rather than react to the symptoms.

[45] I am of the view that the RDO issue, irrespective of manifestation, did not justify termination.

[46] I am also of the view that the other issues Mr Tilley complained of, taken in isolation, similarly do not amount to grounds for termination. Taken together, they may well point to a breakdown in the relationship, which if not addressed, would probably end up as being terminal.

[47] But the parties had not, or should not have reached that situation on 25 February 2004. I conclude that circumstances did not exist at that time which would amount to a valid reason for termination.

[48] I reach this conclusion particularly in light of the evidence relating to procedural fairness.

[49] There can be no doubt that procedural fairness was afforded at the meeting on 25 February. Mr Saarinen was assisted by a person of his choosing, the allegations were properly put to him and he was given the opportunity to respond.

[50] Events prior to 25 February however point to a different conclusion. The evidence overwhelmingly creates a picture whereby Mr Saarinen had no idea that his performance was seen to be inadequate or that his position was in jeopardy. He was not told of the consequences of not meeting the employer's expectations, or it would seem, what those expectations were.

[51] I have no hesitation therefore in concluding that Mr Saarinen was denied procedural fairness.

[52] For the above reasons I find that the termination of Mr Saarinen on 25 February was unfair.

Remedy

[53] The working relationship between Mr Saarinen and Mr Tilley was extremely close with daily, indeed probably hourly, interaction. For such a relationship to work mutual trust and confidence are essential ingredients. The evidence points to a situation whereby at this late stage, these elements are missing and, in all likelihood, could not be retrieved.

[54] I therefore find that reinstatement or re-employment to be impracticable.

[55] In assessing compensation the Commission must have regard to all the circumstances of the case, including the following:14

"30.  ...

(11) In determining the amount of compensation under subsection (10), the Commission must have regard to all the circumstances of the case, including the following:

(a) the length of the employee's service with the employer;

(b) the remuneration that the employee would have received, or would have been likely to receive, if the employee's employment had not been terminated;

(c) any other matter the Commission considers relevant."

[56] Mr Saarinen had four and a half years' service in a senior management position. Of his own volition he has mitigated his loss by finding an alternative position to commence some time in May 2004, albeit at a lesser salary.

[57] Had Mr Tilley embarked on a proper course of procedural fairness, it is likely that a period of at least three months would be necessary to properly assess whether the employment relationship had a future.

[58] Taking into account the totality of the evidence and these specific factors, I conclude that compensation equivalent to an additional 12 weeks' pay based on Mr Saarinen's salary of $49000 pa should be paid.

ORDER

Pursuant to Section 31 of the Industrial Relations Act 1984, I hereby order that A W Birchall & Sons Pty Ltd, 118-120 Brisbane Street, Launceston 7250 pay to Igor Saarinen, 267 Rosevears Drive, West Tamar, Tasmania 7277, an amount of eleven thousand three hundred and eight dollars ($11308), such payment to be made not later than 5.00pm on Tuesday 1 June 2004.

 

Tim Abey
COMMISSIONER

Appearances:
Mr P Griffin for the Shop, Distributive and Allied Employees Association, Tasmanian Branch
Mr J Munro, of Durkin & Associates, with Mr G Tilley, for A W Birchall & Sons Pty Ltd

Date and Place of Hearing:
2004
March 16
April 15
Launceston

1 Exhibit R1
2 Exhibit A1
3 Transcript PN 96, 97
4 Transcript PN 179
5 Transcript PN 182/3
6 Transcript PN 469
7 Transcript PN 471 to 478
8 Transcript PN 318
9 Transcript PN 480 to 484
10 Transcript PN 452, 453
11 Transcript PN 493, 494
12 Transcript PN 67 to 73
13 Transcript PN 47
14 Industrial Relations Act 1984