T10662 and T10741
|
TASMANIAN INDUSTRIAL COMMISSION Industrial Relations Act 1984 Tasman Group Services Pty Ltd and Michael Hughes Michael Hughes and Tasman Group Services Pty Ltd
Appeals against a decision handed down by Commissioner Abey arising out of T10339 of 2002 - Appeals dismissed - decision confirmed REASONS FOR DECISION [1] These proceedings concern two appeals against the decision of Commissioner Abey in T10339 of 2002 issued on 20 December 2002 in which he ordered "that Tasman Group Services Pty Limited trading as Longford Meat Works, Longford, Tasmania pay to Michael Hughes, of 3 High Street, Evandale, Tasmania an amount of eighty four thousand and thirty seven dollars ($84037), such payment to be made within 21 days of the date of this decision". [2] The first appeal was lodged by Tasman Group Services ("the appellant"), pursuant to s.70(1)(c) of the Industrial Relations Act, 1984 (the Act) (T10662 of 2003). [3] The second appeal was lodged on behalf of Mr Hughes, pursuant to s.70(1)(c) of the Act, (T10741 of 2003). [4] In his decision the Commissioner summarised the issues before him and gave a brief history of the background to the dispute. He said:
[5] The grounds of appeal are as follows: [6] First appeal, as amended:
[7] Second appeal:
[8] The appellant in the first appeal said that if the Full Bench were to be persuaded that the Commissioner made an error in relation to the question of the transmission of business then the order sought in the cross-appeal (that the matter be re-opened) would not be opposed. [9] For reasons that will become apparent, it is not necessary to deal any further with the second appeal. [10] The application before the Commissioner in the hearing below sought a review of the severance payment made to Mr Hughes on the termination of his employment with the appellant on 26 July 2002. [11] The severance payment made to Mr Hughes by the appellant was based on two weeks' pay in lieu of notice and a redundancy payment of 24 weeks' pay - a "cap" which was set out in the terms of a contract entered into between Mr Hughes and the appellant. The notice and the redundancy payment were calculated at the rate of $1702 per week. [12] Commissioner Abey determined that the payment for notice was insufficient and he ordered that the appropriate payment was eight weeks' pay in lieu of notice. He also determined that a severance payment be made based on two weeks' pay for each of Mr Hughes' 29 years of service and that the payment be based on the rate of $1990 per week. The higher weekly figure is a result of the inclusion of some other benefits which the Commissioner found to be part of Mr Hughes' employment package. [13] The appellant does not attack the findings of the Commissioner in relation to the award of a payment of eight weeks' pay in lieu of notice or the method of calculation of severance payment. [14] The principles adopted by the Commission in determining matters on appeal are those found in the decision of the High Court in House v The King1 which states:
[15] The appellant submitted that this appeal gives rise to some fundamental issues relevant to both grounds of appeal; that is, the nature of the jurisdiction to be exercised by the Commission. The appellant said that, whilst the respondent makes the point in written submissions that the nature of the jurisdiction of the Commission is arbitral rather than judicial, the line between arbitral and judicial power is legalistic and sometimes difficult to draw. Even if it is correct to say that the power of the Commission is arbitral, the power must still be exercised in accordance with the Act and in accordance with principle. [16] Section 71 authorises the Full Bench on appeal to interfere when and if it determines that a single Commissioner has acted on a wrong principle, and, the appellant submitted, the critical principle in this case is the purpose and underlying rationale of a redundancy payment. [17] The Australian Conciliation and Arbitration Commission in the termination change and redundancy case (the Federal TCR case) in 1984 said, at page 72:
[18] In the appellant's submission, a right to a severance payment may arise as a consequence of an agreement, award, or contract of employment. In the absence of these, the payment ought to be fixed according to the purpose of such payments as described in the Federal TCR case. [19] The respondent submitted that this was yet another invitation to the Commission to depart from the State's method of dealing with redundancy cases and to formulate the State's redundancy position in prescriptive terms according to the Federal TCR case. [20] Further the respondent said that each case has to be dealt with on its merits and according to the facts before the Commission at the time. While it is correct, as said by the appellant, that the Commission should exercise arbitral power in accordance with principle, the principle here is that the Commission should exercise its discretionary power on the merits. Appeal Ground 1
Appellant's Submissions [21] Whilst not challenging any of the facts found in relation to the changes of business ownership, the appellant challenged the determination that the entire length of service ought to be taken into account in the calculation of a redundancy payment. [22] The appellant submitted that the Commissioner fell into error when he found at paragraph 62 of his decision that neither R J Gilbertson nor SBA Foods terminated the employment contract with Mr Hughes. On change of ownership of a business a new employment contract comes into place. As a matter of law Mr Hughes was not employed continuously over the whole period, he had a series of contracts of employment in the same terms. It is accepted that the mere fact that there was a change in the contracts of employment is not determinative or binding on the Commission, but they are factors to take into account and simply were not considered in this case. [23] The issue of transmission of business was never squarely before the Commissioner. The employer made a submission about it at the conclusion of the evidence that gave rise to an application to re-open the proceedings, which was not granted. The Commissioner, the appellant submitted, should have agreed to do so to allow such discussion. [24] Contracts are relevant to a determination of a claim for redundancy pay as was demonstrated by the decision of the Full Bench of the Industrial Commission of South Australia in Mockford v Evin's Stores ("Mockford").3 The appellant said that an issue in that case was whether or not the whole period of service ought to be taken into account when calculating a redundancy payment. The Full Bench in Mockford concluded that:
[25] Whether or not the circumstances relevant to the question being considered in Mockford existed in this case were never ventilated before Commissioner Abey. [26] Mr Hughes was employed by Tasman Group Services from 1 March 2002. If it is correct to calculate an entitlement to severance payment according to length of service rather than to contractual entitlement, then the length of service must be the length of service [approximately four months] with the employer who made the employee redundant. [27] The Commissioner was wrong to take into account the continuous service provisions of the Long Service Leave Act 1976. That obligation depends entirely upon the operation of the relevant legislation. The operation of that legislation cannot be extended to impose an obligation on an employer to pay severance pay for redundancy. [28] The Commissioner found that a new employer should provide notification to an employee if it did not wish to recognise previous service (paragraphs 65 and 69). This is not relevant. An employer's obligations to do so or not must arise from the operation of law, not from its own wishes. Respondent's Submissions [29] The respondent submitted that the Commission's power to settle the dispute is found in the Act at section 31(1). The power is arbitral. Authority for this is found in Saarinen v University of Tasmania.4 The distinction between arbitral power and judicial power is critical to the resolution of this case. Judicial power is concerned with the ascertainment, declaration and enforcement of the rights and liabilities of the parties as they exist, or are deemed to exist, at the moment the proceedings are instituted. The arbitral power of the Commission is exercised for the purposes of settling industrial disputes by ascertaining and declaring what ought to be the respective rights and liabilities of the parties in relation to each other. The duty of the Commission is to determine whether new rights ought to be conceded. What the Commission was required to do in this dispute was to decide the rights of the parties afresh in order to settle the industrial dispute. [30] The respondent said that the appellant contended that the sale of the business had certain legal consequences on the respondent's employment with each of the employers. That as a matter of law there is a contract, therefore there was a termination at law because when SBA sold the business, strictly speaking, Mr Hughes ceased to be an employee of SBA and started a new contract with Tasman Group Services. It invites the Commission to exercise judicial power, to determine the rights of the parties as they existed, rather than to determine the industrial dispute raised in the application. [31] In this ground of appeal, the respondent said, the contract is largely irrelevant because the issue for the Commission in exercising its discretion is: was there continuity? The enquiry the Commissioner embarked upon was a factual test, which was: what are the relevant facts that might lead a reasonable person to say that there was continuity of employment? If the Full Bench is satisfied that the Commissioner got the test right, then the factual enquiry that he embarked on is unassailable. [32] The test that the Commissioner put to himself when exercising his discretion was: what would a reasonable person say about whether or not Mr Hughes' employment was continuous? Bystanders would say that Mr Hughes was the manager of the Longford Meat Works. It would not matter that Tasman Group Services bought the works the day before, or a month before; a reasonable person would say that he had been employed there for 25 [actually 29] years. The test propounded by the Commissioner was not inherently unreasonable and does not seem to have been attacked. [33] The Commissioner made the finding that (paragraph 65) "in all other material respects the employment contract remains unchanged". This is a finding of fact about whether there was continuity of the respondent's employment in the business. It is not a statement of law or of the legal rights of the parties and should be read in that context. It is common in sales of business that rights and obligations to employees are dealt with between the outgoing and incoming employer. Employees are usually unaware of what these arrangements are, except for the purposes of termination, or continuing their employment. [34] Mockford's case has little relevance to the considerations of the Commission in this instance. The appellant said that it was relevant because it showed how a sale agreement might be applied. There was no evidence in this case of the sale agreement. If the sale agreement was so relevant, then why was it not put before the Commissioner? It should not be found that as a result of the conduct of the case by the appellant at first instance, that the Commissioner was led into error. If the case was lost on that point it was lost because of their mistake, not because of anything the respondent did. Commissioner Abey was required to make his decision on the evidence before him. [35] In continuing the respondent's employment, the appellant gained an asset, which included critical knowledge of the business. There is nothing inherently unfair or against good conscience for an employer to make an appropriate payment to an employee where the employee's employment has been continued and utilised for business purposes after the business has been transmitted. [36] In determining the dispute it was relevant to consider that the respondent's service, whilst of value to the appellant for a period, may well have substantially limited his future prospects by reason of age, specialisation in one industry and similar factors. He is a manager in a very specialised business. The question of non-transferable credits is not the whole of the definition in the Federal TCR case, the test is stated categorically to apply to the future. What does the future hold for this man? What are his prospects arising out of his employment history? The proper enquiry was the effect that redundancy would have on the respondent, ie the inconvenience and hardship as a result of the loss of employment, through no fault of the employee. This must be determined according to the merits of the case. The Commissioner adopted a proper test for these purposes. It is not based on the legal rights and entitlements of the parties, but rather on notions of reasonableness, equity and good conscience. That is what is required by the arbitral function. [37] The appellant misstated the Commissioner's findings in relation to notification to an employee by an employer if it did not wish to recognise previous service. The Commissioner correctly made the point that there was no evidence on the issue of notification. [38] The Commissioner's observation about the Long Service Leave Act 1975 should be read in context. It was an observation of fact, not law. The Commissioner was well aware of the legal and factual context in which the observation was made. Finding: Appeal Ground 1 [39] We agree that the exercise of the Commission's power in this case is arbitral not judicial. It is not for the Commission to determine the parties' rights at law. The Commission is required, after affording the parties the opportunity to be heard, to determine what action should be taken to settle the dispute before it according to equity, good conscience and the merits of the case. [40] The application before the Commissioner was an industrial dispute, concerning an industrial matter, brought under section 29(1A)(b) about a dispute in relation to severance pay. [41] Section 31(1C) provides:
[42] An order made pursuant to section 31(1C) is discretionary. [43] The Commissioner found, at paragraph 91, that "Mr Hughes had nearly 30 years of loyal service at the Longford abattoir." This is a statement of fact. The Commissioner also found that Mr Hughes attended work regularly for over 29 years with no change in his material circumstances as a result of changes of ownership. The effect, or otherwise, of the contracts may be of significance in a Court determining what are the rights of the parties, but that was not the enquiry the Commissioner was required to embark upon. The Commissioner, when determining length of service for the purposes of severance payment, considered how long Mr Hughes had worked at the Longford Meat Works, however described. It was open to him in the exercise of his discretion to take into account the long period of service with the business when determining the amount of severance pay to be awarded. [44] The Commissioner also took into account the fact that at no stage during that period of employment, prior to being made redundant, were Mr Hughe's accrued annual leave and long service leave entitlements paid out. We agree that this was a relevant consideration. [45] The appellant said that the Commissioner was wrong to take into account the continuous service provisions of the Long Service Leave Act 1976. In our view, the Commissioner did no more than make an observation about the requirements for continuous service applicable under the Long Service Leave Act 197. We detect no error. [46] Similarly, the Commissioner's observation at paragraph 69 in relation to notice being given to an employee if a new employer does not wish to recognise previous service is simply an observation. Neither comment does any damage to the Commissioner's findings. [47] We do not consider Mockford to be relevant because the issues canvassed in that decision relate to a sale and purchase agreement. There was no evidence before Commissioner Abey in relation to any sale and purchase agreement. [48] Although not tendered as an authority before us, we note the observation of Deane J in Sullivan v Department of Transport:
[49] The appellant submitted that, if Commissioner Abey's decision is upheld, it would follow that an employer who purchases a business will always have the obligation to meet severance payments for the entire length of service including that with previous owners and that this would place employers in a very difficult position. This submission is misconceived as it fails to take into account the case-by-case approach adopted by this Commission in respect to applications for severance pay. Any determination will depend on the circumstances of the particular application. [50] We dismiss Appeal Ground 1 Appeal Ground 2
Appellant's Submissions [51] The appellant did not submit that the existence of the contract ousts the jurisdiction of the Commission but said that the Commissioner fell into error in that he should have found himself bound to give effect to the contract between the parties, or he ought to have given the contract more weight than he did. He determined that the contract had no effect at all. Having concluded that the existence of the contract was not a barrier to a review of the redundancy payment, he then appears to have left the effect of the contract aside. Barwick CJ in Stephenson v Barnham, when dealing with the unfair contracts provisions of the New South Wales legislation, said:
[52] The appellant submitted that it is clear that Tasman Group Services felt itself bound to pay the redundancy payment in accordance with the contract. There was a new employment contract with Tasman Group Services but it was on the same terms as the contract with the previous owners. For the purposes of that contract, the appellant acknowledged continuity of service for a period of over 25 years. Whether it was obliged to as a matter of law is a different question. [53] This Commission will generally order two weeks' pay per year of service regardless of the length of service, the appellant said. In doing so the Commission adopts a position quite different from other jurisdictions in Australia which base severance payments closer to the approach of the Federal TCR case. The purpose of severance payments is to cover the loss of non-transferable credits and the inconvenience and hardship to employees, but not, for example, time spent unemployed. The Commissioner in this matter has applied, what has in effect become a general standard of two weeks' pay per year of service unless there is some reason to vary up or down, without regard to the contract. [54] The appellant submitted that the fundamental entitlement to severance pay on redundancy in Tasmania has not been determinatively raised since the Tasmanian Termination, Change and Redundancy case, T125 of 1985 (T125).7 But, it was argued, T125 is not authority for the application of two weeks' pay per year of service without regard to the basic purpose of severance payments. That case said nothing about the basis upon which relief would be granted and said that each dispute would be dealt with case by case. There was no consideration of why an employee may be entitled to a severance payment and how such payment would be calculated. Further the appellant said there is no doubt that the Tasmanian Industrial Commission has jurisdiction to make orders concerning severance payments, however there is nothing in the legislation which prescribes the basis upon which severance payments are to be determined. In determining applications on a case by case basis the Commission must take into account the reasons why severance payments are made. The source of a claim for a severance payment on redundancy has to be as set out in the Federal TCR case, or pursuant to some contract, award or industrial agreement. The appellant said that was why the terms of the contract were so important in this case. [55] It was submitted by the appellant there was not an exhaustive consideration of this issue in T7168 of 1997 ALHMWU and Fosseys (Fosseys) where the President said:
[56] Mr Hughes has no right to a redundancy payment arising from an award or registered industrial agreement. At common law there is no entitlement to a redundancy payment. It is clear that one basis upon which an entitlement may arise is as a term in a contract of employment. It is suggested in authorities from other jurisdictions that without such a contractual entitlement there is no basis for a redundancy payment. In Ajax Cooke v Nugent ("Ajax")9 the entitlement of an employee to redundancy was found to depend upon the inclusion of a term to that effect in a contract of employment. It has been found that there is no implied term to include a right to redundancy payment. Authorities are Dellys v Elderslie Finance Corporation ("Dellys") and Macken et al Law of Employment.10 [57] It was claimed by the appellant that the Commissioner took into account a wrong or irrelevant consideration when he found that it was unfair for Mr Hughes to be barred, by reason of the contract, from pursuing a right under s29(1A) when the avenue did not exist at the time the contract came into place. A contract will have effect regardless of circumstances that existed when the contract was first formed. The Commissioner ought to have given it much more force than he did. In all the circumstances of this case, in accordance with equity and good conscience and the merits of the case, the maximum redundancy payment that should be awarded is the 24 weeks' pay as set out in the contract. Respondent's Submissions [58] The insistence of the appellant that the contract of employment is binding on the Commissioner is misconceived because it fails to recognise the distinction between judicial and arbitral power and it fails to recognise the purpose and effect of the Act, ss20 and 31(1) and (1C). [59] The appellant is correct that in common law there is no general rule that a term will be implied into a contract of service to the effect that severance pay will be made in every case. In this case there is no issue about an implied term, the issue does not turn on the legal entitlements of the parties. The cases cited by the appellant are distinguishable because of their facts or the legislation under which they were decided. The case of Ajax can be distinguished on the basis that it was a classic case of an exercise of judicial power, and the circumstances were entirely different. [60] The common law position has little relevance to the enquiry before the Commission. The appellant concedes that the contract does not oust the jurisdiction of the Commission; a number of things follow from that, the first being that the appellant is confined to saying that the Commissioner gave the contract insufficient weight. The law is clear about the exercise of discretion. It is a matter of giving things weight as the Commissioner at first instance thinks fit. Unless it can be affirmatively shown that the failure to give it weight has led the officer off the rail, then it is not for this Bench to tinker with the decision. [61] This Full Bench is being asked to overturn Commissioner Abey's decision, which was an exercise of discretion, on the grounds of insufficient weight being given to the contract. The Commissioner said that he would be reluctant to interfere with the redundancy provision in a contract freely negotiated between parties in a similar bargaining position, particularly if it had been negotiated before the employment commenced, but the Commissioner said this contract does not sit comfortably with that category of contracts. You cannot say that, as a result of the Commissioner's commentary, he did not place enough weight on the contract, or that the weight that he did or did not place on it was sufficient to lead him into error. [62] Once it is accepted, as the appellant has done, that the Commission's discretion is not ousted by the existence of the contract, then the issue becomes: whether 24 weeks' pay is sufficient, or, what is the correct amount of severance pay in this case? That is the only issue. [63] The formula of two weeks' pay for every year of service is, in ordinary cases, applied as a rule of thumb by the Commission. The Commission is entitled to an across the board policy, departed from in appropriate cases. In dealing with matters on their merits, the policy is not inflexible. In O'Connor and Capital Hill ("O'Connor")11 the Commission ordered four weeks pay per year of service. In dealing with matters on a case by case basis there is nothing wrong with a two week formula. It is a convenient starting point. The two weeks formula is explicable both in administrative law terms and also according to the general law of how Tribunals and Courts work. [64] It was not correct, as asserted by the appellant, that this is the first time since 1985 that it has been argued that the Commission should departed from the approach set out in T125. In O'Connor the Commission declined to follow the prescriptive approach adopted in the Federal TCR case, and the Commission did so again in Fosseys12. The Full Bench in Fosseys exhaustively considered submissions from counsel about what constituted a national law in practice. The issue was whether or not, in terms of the ILO Convention, Tasmania was in line with national law and practice. For precisely the reasons that those arguments were rejected twice before, they should be rejected again. The Commission affirmed the view that under its legislation and the legislative scheme that exists in Tasmania it should deal, and should continue to deal, with redundancy matters on a case by case basis. Finding: Appeal Ground 2 [65] The parties agreed that the existence of a common law contract does not oust the jurisdiction of the Commission. We agree. [66] We disagree with the submission of the appellant that the Commissioner fell into error as he was bound to give effect to the contract between the parties and did not do so. It is not for the Commission to enforce a contract made at common law, it is for the Commission to consider the merits of the case before it. We rely on our reasons for dismissing appeal ground 1 in rejecting this submission. [67] The appellant also contended that the Commissioner gave the contract no weight, or insufficient weight. The Commissioner's decision shows that he not only considered the content of the contract but also the manner in which it was entered into. He found that the contract does not sit comfortably with the category of contracts freely negotiated by parties with equal bargaining power. We are satisfied that he gave the contract careful consideration and he concluded that the amount of severance pay to be awarded in settlement of this industrial dispute should be in excess of the amount set out in the contract. It was open to the Commissioner to do so and we detect no error. [68] It was argued by the appellant that in the absence of an entitlement to severance payment in an award or agreement, then the source of the claim has to be either that set out in the Federal TCR case or as prescribed in a contract, accordingly the terms of Mr Hughe's contract are important in this case. For reasons already given, we reject the proposition that an award of severance payment in this jurisdiction should be determined on the basis of or, as claimed in this case, the provision found in the contract. [69] We agree that T125 is not authority for the awarding of two weeks' pay for every year of service. We reiterate that claims for severance payments are determined case-by-case and on the merits of the particular application. [70] We record the comments of the Full Bench in T125 as to the approach to be adopted by this Commission in respect to claims for severance pay:
[71] The matter before Commissioner Abey was an application, pursuant to s.29 of the Act, relating to an industrial dispute regarding severance pay in respect to termination as a result of redundancy. The Commissioner was required to enquire whether, in all the circumstances of the case, the amount paid to the respondent by way of redundancy payment was adequate. The Commissioner determined that it was not. He based his determination on a number of factors. These included:
[72] We consider that these were reasonable and proper considerations. [73] The Full Bench decision in T125 requires that the Commission intervene only where the facts give rise to a finding of unfair, unjust or unreasonable treatment by an employer. In this matter the Commissioner agreed with the observation of Mr Hughes' solicitor that Mr Hughes had been subjected to shabby treatment by the employer. The Commissioner also noted that the basic rules of fair play, widely endorsed by this Commission, were not applied. We are of the view that it was open to the Commissioner, in the exercise of his discretion, to consider the factors that he did, and we endorse his approach. [74] An approach such as that urged upon us by the appellant would be at odds with that adopted by the Commission and endorsed by the Full Bench in Fosseys which states:
[75] We are not persuaded that the argument advanced by the appellant that the case-by-case approach adopted by this Commission should be departed from and agree with Commissioner Abey's approach. Further we doubt that this application is an appropriate forum for such debate. All parties with an interest in the industrial awards and the business of the Commission should have an opportunity to be heard in the event that an application were made to review or reconsider the findings in T125. [76] Further, the Commissioner did not accept the proposition, which was also advanced before us, that this Commission should determine matters before it on the same basis and by adopting the same rationale and formula found in the Federal TCR case. We also reject that proposition. [77] A claim for severance pay for a former employee whose employment has been terminated due to redundancy is an "industrial matter" as defined by section 3 of the Act which provides:
[78] Section 29 (1A)(b) enables a former employee to apply for a hearing in respect of a dispute concerning severance pay as a result of redundancy; and section 31(1C) enables a Commissioner to make an order in respect of severance pay. [79] The power to be exercised in this matter is discretionary. In exercising such power the Commission must act in accordance with section 20(1). Section 20(1) requires the Commission to act according to equity, good conscience and the merits of the case. [80] We do not find the cases of Ajax or Dellys relevant in this matter. We have previously addressed Ajax and in Dellys the Court was determining whether an entitlement to redundancy payment should be implied into a contract of employment. That is a different situation to the present case where there was a redundancy provision in the employment contract and severance payments are provided for in the Tasmanian Act. [81] We do not agree that the Commissioner was in error in failing to find that the amount of severance payment to which Mr Hughes was entitled was limited to the amount specified in his contract of employment. [82] We dismiss Appeal Ground 2. [83] Pursuant to Section 71(13) the appeal is dismissed and the decision of Commissioner Abey is confirmed.
P L Leary Appearances: Date and place of hearing: 1 House v The King (1936) [55 CLR 499, at 504-505 per Dixon, Evatt and McTiernan] |