T8170 and T8171
|
TASMANIAN INDUSTRIAL COMMISSION Industrial Relations Act 1984 Geoffrey Gerald Corrigan Kelair Pumps Australia Pty Ltd Kelair Pumps Australia Pty Ltd and Geoffrey Gerald Corrigan
Appeals - termination of employment resulting from redundancy - severance pay not compensation - decision and order revoked - original application referred to another member to hear and determine the question of severance pay in accordance with directions of the Full Bench REASONS FOR DECISION On 3 December 1998, after a hearing in respect of Application T7771 of 1998, lodged pursuant to section 29(1A) of the Industrial Relations Act 1984, Deputy President King made an order to settle an industrial dispute between Geoffrey Gerald Corrigan and Kelair Pumps Australia Pty Ltd in respect of the alleged unfair termination of Mr Corrigan's employment and his claim for a severance payment of four weeks' pay per year of service in respect of the termination of his employment. Briefly, the background of the dispute is that Mr Corrigan was initially engaged by a firm referred to as Douglas and Fraser on 11 August 1986 as a Sales Engineer. Douglas and Fraser was taken over by Kelair Pumps Australia Pty Ltd. For the last 12 months of Mr Corrigan's employment with Kelair, that is until 3 July 1998 when his employment was terminated, he was employed as the Industrial Products Manager, with state-wide responsibilities, based in Hobart. His salary at the time of his termination was $42,262 per annum and in addition he had the private use of a company vehicle. On 22 January 1998, Mr Corrigan was informed that the Hobart office of Kelair would be closed on 30 June 1998. It appears that Mr Corrigan was offered a position in the Launceston office of the company on the same salary level, with the use of a company vehicle. An alternative offer of continuing employment with the company was made. The latter position was to be as Internal Engineer in Hobart at the same rate of pay but without the private use of a motor vehicle. Both of those offers were confirmed to Mr Corrigan on 13 May 1998. There was some dispute as to the genuineness of the offers but neither offer was accepted and Mr Corrigan's employment was terminated as from the close of business on 3 July 1998. It appears that on the following working day, Monday 6 July 1998, Mr Corrigan commenced work for another company, referred to as John Crane Australia, Tasmanian Branch, as sales manager, in the same office, at approximately the same salary level with the private use of a motor vehicle. He was engaged under "a one-year contract". In addition to his statutory entitlements, Mr Corrigan was paid an amount equivalent to nine weeks' pay as a "termination payment". After hearing the parties Deputy President King determined that Mr Corrigan was entitled to compensation amounting to an additional eight weeks' pay and on 3 December 1998 he made an order to that effect. By way of application T8170 of 1998, Mr Corrigan appealed the order citing the following grounds of appeal:
By way of application T8171 of 1998, Kelair Pumps Australia Pty Ltd also appealed the order citing the following grounds of appeal:
Submissions In relation to the first ground of appeal, Mr Cooper, for the first appellant, submitted that a redundancy package is designed to compensate an employee for: non-transferable credits; inconvenience and hardship imposed through no fault of the employee; disruption to the employee's routine; disruption to the employee's social contacts; and opportunities forgone in the continuous service of the employer. He said, in respect to the first ground of appeal, that this "wholistic approach" had been overlooked by the Deputy President and that the Deputy President attached "far too much weight" to the fact that Mr Corrigan had obtained a new position in the same office and basically at the same salary as his previous position. The new job involved a one-year contract only and, Mr Cooper said, the short-term nature of the contract should have been taken into account by the Deputy President because of the loss of security and other entitlements based on service which the applicant had accumulated during his time with Kelair and his previous employer. In addition he argued if such a proposition was accepted, it would encourage employees to "sit on their hands" and do nothing about securing alternative employment in order to maximise the amount of compensation they might receive. In response Mr Hudson submitted that the Deputy President had directed himself correctly to the underlying purposes of redundancy payments. He said the Deputy President had not given too much weight to the fact that Mr Corrigan had obtained alternative employment. Mr Hudson suggested that the Deputy President had simply said the fact that he had secured alternative employment was a matter that he could not ignore. He had not specified how much weight he had accorded that fact. However Mr Hudson submitted in any event the Deputy President should have accorded it substantial weight. Mr Hudson also submitted there had been no loss of non transferable credits as Mr Corrigan had received his annual leave entitlements and had been paid his pro rata long service leave entitlements to 3 July 1998. He argued there was no inconvenience, hardship or change to Mr Corrigan's social routine as he had commenced employment with a new employer on the next working day, in the same office, selling the same products, with a car supplied by the employer; he had no need to move house; he had no need for any retraining, and he considered John Crane Australia to be a "good employer". Mr Hudson conceded there might be some substance in the claim that Mr Corrigan had lost the advantage of being a senior employee, but if Mr Corrigan had wished to seek advancement with Kelair he would have had to move to Launceston which he had declined to do, and in any event, he said, there was no evidence that Mr Corrigan intended to seek any advancement with his new employer. The contention that redundant employees would avoid obtaining fresh employment, in order to maximise their compensation package was rejected because, Mr Hudson claimed, dismissed employees were under "an obligation to seek alternative employment" to mitigate their loss. Mr Hudson submitted there was no evidence that the Deputy President had overlooked the fact that Mr Corrigan's contract with his new employer was a one-year contract. He said that fact was adverted to by the Deputy President in his decision, "albeit not completely directly". As to the second ground of appeal, Mr Cooper submitted that the eight weeks' pay ordered by Deputy President King as compensation was manifestly inadequate because it failed to take into account Mr Corrigan's length of service, i.e. 12 years; his age, i.e. 59 years; his loss of job security; the lack of counselling from Kelair; the lack of a genuine effort by the company to consider alternatives to closing the Hobart office; and the lack of a genuine attempt by Kelair to find alternative employment for Mr Corrigan. Mr Hudson argued that if Mr Corrigan had stayed with Kelair for an extra year he would have been worse off after adjustments for income tax than if he had received the 48 weeks' severance pay he had claimed. He said that Mr Corrigan had been given almost six months' notice and had indicated he would retire one year early if his claim for redundancy was met and that he was planning to retire at age 60 on 30 June 1999 in any event. Mr Cooper however submitted that there was no evidence that Mr Corrigan definitely intended to retire on 30 June 1999. Mr Hudson contended that Mr Corrigan would have been more deserving of compensation if he had been unable to find alternative employment. Given that he did obtain alternative employment the allegation that the employer did not assist Mr Corrigan to obtain alternative employment was therefore of less weight. With respect to the third ground of Mr Corrigan's appeal, Mr Cooper drew our attention to the letter from Kelair to Mr Corrigan dated 13 May 1998 which referred to the two job offers, one in Launceston and one in Hobart. Mr Cooper submitted, as he had in the hearing at first instance, that the offers were "just a sham". He said their purpose was to "minimise the potential damage to the employer". He claimed the Deputy President was "wrong to make a finding of fact that (the offers) were genuine" and that having made "the wrong finding of fact, the rest of the decision-making process (was) flawed". In that respect we were referred in particular to the Deputy President's decision at pages 4 and 5 in which it was stated:
We were asked to have regard also to the discussions between Mr Gibbons and Mr Corrigan on 22 January 1998 and the understanding from those discussions that moving to Launceston was not really an option for Mr Corrigan. Two months later, Mr Cooper said, when lawyers for the company were involved, offers of a job in Launceston were made, even though it had been agreed that such a job in Launceston was not an option. Mr Cooper also queried the logic of the Hobart job offer given that the company's main objective was to close the Hobart office. He referred the Bench to the Deputy President's acknowledgement that there "were some unanswered questions" in relation to that offer. To reinforce his claim that the Hobart offer was a sham, Mr Cooper referred us to the April 1998 issue of the Kelair Chronicle, the company's in-house newspaper, which was Exhibit C2 in the original hearing. It recorded that:
He said that exhibit was not challenged. Another significant factor concerning the Hobart offer, again not challenged he said, was the evidence from Mr Corrigan in relation to a letter from Kelair to John Crane Australia early in April 1998 which advised that the Hobart office was closing and that Mr Corrigan was retiring. Mr Cooper asserted that the Hobart offer was "designed as damage control" and was not genuine. Accordingly he submitted that the Deputy President fell into error in accepting that the offers were genuine and that the error was so "critical and fundamental" that it "ought to change the ultimate outcome" arrived at by the Deputy President. Mr Hudson submitted that the Deputy President had found that the offers were genuine. At page 4 of the Deputy President's decision he had stated that in the absence of any clear evidence to support the claim that they were not genuine he accepted them "at face value". Mr Hudson repeated that the evidence was that the offers were genuine and that the evidence should have been challenged during the hearing at first instance if it was not accepted. Mr Hudson submitted that the appellant's claim that a finding that eight weeks' pay as compensation was not open to the Deputy President could not be substantiated. However he claimed that the finding of eight weeks was manifestly excessive because the alternative employment found by Mr Corrigan paid only $262 per year less than his previous job; he chose to ignore the annual leave loading payment of approximately $560 per year referred to, in evidence, by Mr Corrigan. Findings The application at first instance alleged "unfair termination" and sought a "severance pay due to redundancy'. However, since reinstatement was not sought that part of the application alleging unfair termination was not addressed during the hearing or dealt with by the Deputy President in his decision. Whilst that part of the claim is not recorded as being determined we consider that no damage has been done to the remainder of the application as the parties appear to have accepted that there was a genuine redundancy because Mr Corrigan's position of Industrial Product Manager was dispensed with on 30 June 1998. On the material put to the Deputy President we consider there is no doubt that Mr Corrigan's job in Hobart was abolished effectively making his services in Hobart unnecessary, a clear example of a redundancy. Whilst the job offers in Hobart and Launceston were discussed in some detail, no finding was made as to whether or not they were acceptable alternatives to his job in Hobart as Industrial Products Manager. The appellants counter claimed, in their respective Grounds 1 of their appeals, that the Deputy President on the one hand gave too little weight to the fact that Mr Corrigan had secured alternative employment and, on the other hand, that he gave too much weight to that fact. It is clear from the Deputy President's decision that the fact that Mr Corrigan had a new job to go to, albeit with a different employer, starting on the next working day, in the same office, at basically the same salary, was a matter which he could not ignore and which he considered must mitigate against Mr Corrigan. It is not clear, however, that the Deputy President took account of the fact that, in his evidence, Mr Corrigan had indicated that his new job was for one year only and that he was provided with a fully serviced motor vehicle as had been the case at Kelair. In summing up the Deputy President did not accept the argument put on behalf of Kelair that the only consideration in cases such as the one before him was the loss of income. The Deputy President made no comment on the factors put on behalf of the former employee as warranting consideration when determining the level of payment, but he declared there were "two components to the consideration of a redundancy payment: compensation per se and compensation for loss of earnings". We have some concern with this approach. Section 29(1A)(b) of the Act provides that a former employee may apply for a hearing in respect of an industrial dispute relating to "severance pay in respect of employment of the former employee terminated as a result of redundancy". Section 31(1C) provides that in hearing an industrial dispute relating to termination of employment resulting from redundancy a Commissioner may make an order in respect of severance pay for a former employee whose employment has been terminated. There is no suggestion in either subsection that "compensation" may be ordered in respect of a redundancy situation. Compensation however is referred to in section 31(1B); it is available as a remedy where the termination of employment is considered by a Commissioner to have been unfair but where reinstatement of the former employee is considered impractical. The ILO Convention concerning Termination of Employment at the Initiative of the Employer provides in Article 12 that a worker whose employment has been terminated shall be entitled, in accordance with national law and practice, to 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"; or to benefits from unemployment insurance or social security payments; or to a combination of both. Article 12 in our opinion is the only Article in the Convention, apart from Article 11, Period of Notice, which provides for payments to be made to employees whose employment has been justifiably terminated. It would appear from the evidence that one week's notice was paid. The former employee did not contest the matter of notice. However, in coming to his conclusion, the Deputy President appears to have overlooked the guidance available from Article 12 and he determined, as we have mentioned previously that there are two different components to the consideration of a redundancy payment. We do not think that the Act or the ILO Convention envisages that an employee whose employment is terminated as the result of redundancy is entitled to compensation. The wording of Article 12 when compared with Article 10, which deals with unjustifiable or unfair termination, is directed at a payment based on length of service and the level of wages whilst Article 10 provides for reinstatement or, if reinstatement is found not to be practicable, compensation. Section 31 of the Act is at pains to reflect the ILO Convention and it too confines an order for compensation to the situation where an employee has been unfairly dismissed and where reinstatement is impractical (see s.31(1B)). As we have mentioned previously s.31(1C), which deals with orders in respect of industrial disputes relating to termination resulting from redundancy, allows for orders to be made only in respect of severance pay, not compensation. It appears to us that severance pay (severance allowance in the ILO Convention at Article 12) is a specific entitlement available to a worker whose employment has been terminated at the initiative of the employer as a result of his position being made redundant. It is a condition of the Convention that this allowance or payment be in accordance with national law and practice. The issue of national law and practice has been dealt with previously by the Commission.1 The Full Bench in that matter said, amongst other things, that the "ordinary and natural meaning of the phrase `national law and practice', as used in the ILO Convention, necessarily encompasses, in a federal system of government such as that in Australia, the law and practice of both the Commonwealth and the States." We agree with those views expressed in the context of this case and we consider that national law and practice includes the legislative arrangements operating in this State in respect of termination of employment resulting from redundancy and the decided cases in this jurisdiction and federally. In the circumstances we consider the finding by Deputy President King that there are "two components to the consideration of a redundancy payment; compensation per se and compensation for loss of earnings", is in error as it ignores the fact that neither the ILO Convention nor s.31(1C) of the Act, in relation to redundancy, refer to compensation in respect of redundancy. Given the provisions of Article 12 and s.31(1C), we do not consider that the Commission is required to assess the loss of earnings incurred by a dismissed worker, nor is the Commission required to take into account any monetary gain alleged to be achieved by the dismissed worker following termination for redundancy. We say this because of the wording of the two provisions and in a practical sense because of the difficulty in establishing or guaranteeing that such a loss might be sustained or such a gain achieved. Indeed, given the wording of Article 12, we consider the Commission, when determining the amount of severance pay due to a dismissed employee, must at the very least base the payment on the length of service and the level of wages of the dismissed worker. We will now respond to the grounds of appeal. Ground 1 of each appellant's application dealt with the issue of alternative employment. It was not disputed that Mr Corrigan's alternative employment with John Crane Australia was obtained without direct assistance from Kelair. The Deputy President considered the fact that Mr Corrigan "had a new position to go to (on the next working day) in the same office and basically at the same salary" was a matter which he could not ignore and "must mitigate against" Mr Corrigan. Bearing in mind what we have said about the requirements of the Act and the wording of Article 12 of the ILO Convention, we are not satisfied that, because an employee at risk of redundancy has been sufficiently resourceful to obtain immediate alternative employment, severance pay on account of redundancy should be discounted or reduced. We agree with Mr Cooper that such a finding, if endorsed by a Full Bench, would have undesirable consequences. Accordingly we consider the Deputy President erred in finding that the fact that Mr Corrigan had a new position to go to must mitigate against the employee in terms of his "ultimate order". We therefore uphold Ground 1 of the appeal lodged by Mr Corrigan and dismiss Ground 1 of the appeal lodged by Kelair. In the above circumstances, given the view we take concerning the distinction between compensation and severance pay and given the manner in which we consider this matter should be concluded, we do not find it necessary to make any findings in respect of Grounds 2 of each appeal. Ground 3 of Mr Corrigan's appeal was that the Deputy President erred in accepting that the offers of alternative employment by Kelair were genuine. We are satisfied that, on the material before the Deputy President, he had little alternative other than to find the offers were genuine. Of more importance in the context of this case we think is whether or not either one of the job offers was an adequate alternative to the position previously held by Mr Corrigan. However, Deputy President King made no finding on that point and apart from mentioning that he accepted that Mr Corrigan was offered jobs in Launceston and Hobart without a car and that he accepted the Hobart offer as genuine, there is no suggestion those findings influenced his assessment of the amount to be ordered in settlement of the dispute. In the circumstances we uphold the Deputy President's finding of genuineness and dismiss this ground of appeal. Given our finding in respect of Ground 1 of the appeal lodged by Mr Corrigan, pursuant to section 71(13) of the Act we revoke the decision and order made by Deputy President King in respect of application T7771 of 1998. Deputy President Johnson is directed to hear the parties to the dispute, having regard to the observations of this Full Bench, for the purpose of making an order pursuant to section 31(1C) of the Act in settlement of that part of this industrial dispute that concerns the quantum of severance pay for Mr Corrigan.
F D Westwood Appearances: Date and place of hearing: 1 Fosseys (Aust) Pty Ltd v ALHMWU & SDAEA (T7168 of 1997) |