[2013] FWC 7996

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr Gerardo Papalia
v
Co.As.It. - Italian Assistance Association T/A Co.As.It.
(U2013/5638)

COMMISSIONER ROE

MELBOURNE, 22 OCTOBER 2013

Application for unfair dismissal remedy - jurisdiction - whether dismissal at initiative of employer - effluxion of time outer limit contract - position subject to funding.

Introduction

[1] This matter concerns an unfair dismissal remedy application made by Mr Gerardo Papalia (the Applicant). The application was made against Co.As.It - Italian Assistance Association (the Respondent).

[2] The Respondent submits that the Applicant was employed under a contract of employment dated 28 March 2011. The Respondent says that the contract was renewed on 13 December 2011 until 31 December 2012 without change other than to the expiry date. The renewal letter stated that: “your employment with Co.As.It has been renewed until the 31st December 2012. All Terms and Conditions of Employment are as stated in your Employment Agreement…”

[3] The Respondent accepts that the contract allowed for termination during its period and it is therefore not a fixed term contract. The Full Bench decision in Department of Justice v Sarah Lunn is authority for the proposition that a contract with a nominated end date is not a contract for a specified period of time if the contract provides for a broad right of termination during its term as is the case in this matter. 1 I agree with the Respondent that the contract was not a fixed term contract and the Applicant is not excluded from unfair dismissal protection for this reason. However, the Respondent submits that the contract had a maximum term and is therefore a maximum term or outer limit contract.

[4] There was a dispute during 2012 about changes to the position description and reporting arrangements for the Applicant. The Applicant’s solicitor wrote protesting these changes and commented that the Applicant “was engaged for a five year term”. The Applicant made further allegations of harassment and unfair treatment over the following months. On 9 September 2012 the CEO, Mr Martini-Piovano, advised the Applicant’s solicitor that the contract was only until 31 December 2012. On 8 November 2012 the CEO advised that: “as per our correspondence dated 13 December 2011, your employment contract with Co.As.It will cease on 31 December 2012. No contract will be offered after this date.”

[5] The alleged contract consists of a letter of offer of employment dated 28 March 2011. That letter begins:

“Following your verbal acceptance I am pleased to formally offer you employment with Co.As.It in the position of Collections Administrator for the Italian Historical Society. Your employment is on a part time basis (25 hours per week) with commencement on Monday 11th April 2011. This appointment is for twelve months and is subject to a probationary period of three months which will enable both parties to satisfy themselves of the suitability of the arrangements….The renewal of such contract is subject to the availability of funding.”

[6] The letter sets out the proposed salary package. A document headed “Employment Agreement” was attached. That document includes provisions for long service leave, notice of termination of employment and redundancy. The document says that “the employee will be paid a salary package as per Letter of Appointment” and “hours of duty are as detailed in the job description (25 hour week)”. The document says in respect to “commencement date” that “employment will commence (but not before this offer is returned signed to the employer) on the 11th April 2011.” The “Employment Agreement” has provision for signatures by the employee and the employer. The “Employment Agreement” is signed and dated 11 April 2011.

[7] The Applicant argues that in the written offer of employment the only condition precedent to the renewal of contract was the continued funding of the Museo Italiano. 2 The Applicant also argues that there was a meeting attended by the Applicant, the manager of the proposed position, Mr Carlo Carli, and the CEO on 1 April 2011 at which the Applicant expressed his concerns about two matters. He gave evidence that he was concerned about aspects of the position description and the discussion resulted in amendments to the document. He also gave evidence that at the meeting he sought and obtained assurances about ongoing employment but these assurances did not lead to any change in the “Employment Agreement” document which was signed on 11 April 2011.

[8] The Respondent argues that the Full Bench decision in Department of Justice v Sarah Lunn is authority for the proposition that if there was a contract of employment which provided for a fixed expiry date then the ending of the employment at that fixed expiry date is not a dismissal at the initiative of the employer. 3 The Act defines dismissed for the purposes of unfair dismissal as an event where “the person’s employment with his or her employer has been terminated on the employer’s initiative”. The Respondent argues that earlier legislation similarly referred to employment being terminated by the employer.

[9] I note that although the requirement that termination be at the initiative of the employer is maintained in the present Act there are some important differences between the legislative scheme under which Lunn was decided and the present Act.

[10] The Workplace Relations Act 1996 (WR Act) specified a range of exclusions from the operation of the unfair dismissal provisions of the legislation including exclusions related to types of employment including certain casual employees and employees engaged under a contract of employment for a specified period of time (Section 638 of the WR Act). The current Act does not exclude types of employment from unfair dismissal protection. Rather it requires that an employee must have a minimum period of employment and must have been dismissed and then defines certain types of employment as not within the meaning of dismissed or not counting towards minimum period of employment (Sections 384 and 386 of the Act). There are also significant differences between the objects of the earlier legislation and the present Act.

[11] These considerations may affect the applicability of the decision in Lunn to maximum term contracts under the present legislation. The actual nature and purpose of the employment relationship may be a more important consideration in the current scheme. This may make the decision of Justice Marshall in D’Lima of greater relevance. 4 The importance of considering the true nature of the employment relationship in considering whether a person has been dismissed rather than simply focusing upon the employment contract was illustrated in the recent Full Bench decision in Il Migliore Pty Ltd T/A Il Migliore v Miss Kelly McDonald.5 However, it is not necessary to determine this matter in the circumstances of this case.

[12] The essential matter to be considered in this case is what was the nature of the contract of employment which was signed on 11 April 2011? The Respondent argues that the nature of the contract was not altered by the renewal on 13 December 2011. The Respondent argues that the decision in Lunn is also authority for the proposition that the renewal of a contract with a fixed expiry date does not of itself change the essential nature of that contract. I consider that it is possible that repeated rollover of a contract, particularly in cases where that occurs automatically, might change the nature of the contract and the nature of the employment relationship but I accept that the single rollover with written notice in the circumstances of this case is unlikely to change the nature of the contract or the employment relationship.

[13] The first matter to consider is what is the nature of the written contract? I reject the proposition put forward by counsel for the Applicant that the contract is the “Employment Agreement” and the letter of offer forms no part of the contract. The “Employment Agreement” refers to the letter of offer or letter of appointment and the salary cannot be found in the “Employment Agreement” but only in the letter. The letter explains the linkage to relevant policies. The “Employment Agreement” also refers to the position or job description.

[14] I am satisfied that read in context the words of the letter of offer that “the renewal of such contract is subject to the availability of funding” qualify the earlier words that “this appointment is for twelve months.”

[15] Read in context it is not appropriate to interpret the words “the renewal of such contract is subject to the availability of funding” as meaning that the contract may be renewed and the availability of funding is a factor which may influence a decision to renew. The word “may” does not appear and I am satisfied should not be read into the phrase.

[16] I am satisfied that read in context the term “the renewal of such contract is subject to the availability of funding” means that the contract of employment will be renewed provided funding is available.

[17] The Applicant argues that the words “availability of funding” need to be considered in the context of the verbal agreement reached at the meeting on 1 April 2011. The Applicant argues that the signing of the Employment Agreement on 11 April 2011 was based on this additional verbal agreement. The Applicant also argues that the context of the employment practices of the Respondent are relevant to an understanding of the employment contract and they argue that it should lead to a conclusion that the evidence of the Applicant and Mr Carli is likely to be correct.

[18] The evidence of the Applicant, Mr Carli and Mr Martini-Piovano differed concerning the employment practices at Co.As.It. However, Mr Martini-Piovano accepted that it was common for positions subject to similar letters of offer to have their employment continued subject to funding continuing to be available. He also accepted that where funding for a particular project came to an end affected employees were, where ever possible, moved to other suitable jobs. He said that there were possibly 20 such cases over the long period of his association with Co.As.It. Mr Martini-Piovano did not state that rollover of employment was guaranteed.

[19] The Applicant gave evidence, supported by Mr Carli who was also present, that at the meeting on 1 April 2011:

“The CEO reassured me. He stated that the one year clause was required by the Board in case of funding cuts from government funding sources, but that employees were re-employed at the end of the year as a matter of course. However, he stated that if government funding was cut he preferred to redeploy people within the organization. He also said that in the case of Museo Italiano there was an agreement with the Victorian Government through VOMAC apportioning five years of funding, including specific staffing levels. Hence there was a commitment to at least five years of employment for IHS and Museo staff and I would have job security for the next five years.” 6

[20] Mr Carli gave evidence that:

“..he insisted that the one year employment clause was required by the Board. However, he stated that employees will have their position rolled over at the end of the year and the clause would only be used in case of funding cuts from Government funding sources. However, even in those cases he stated that employees would not be dismissed but would be reemployed within the organization. After my first year at CoAsIt my position was extended automatically for another year without any discussion. This was the practice with all the staff.

Mr Martini also said that in the case of the Museo Italiano there was an agreement with the Victorian Government through the Victorian Office of Multicultural Affairs and Citizenship (OMAC) that a 5-year funding agreement was to be in place, which specified staffing levels. So that there was a commitment to at least five years of employment.

OMAC had provided $1.45 M from the Cultural Precincts and Infrastructure Fund to establish the Museo Italiano. A key condition of this funding was the development and implementation of a 5 year operational plan which included specific commitments with regard to public engagement, education, marketing and promotional activities. Soon after my appointment I completed a funding agreement with the State Government which included a two year work plan and a commitment to five year of financial support from Co.As.It.

The Museo Italiano Business Plan 2011-2012 (20th April 2012) was approved by IHS sub-committee, the Co. As. It Board, Arts Victoria, and VMOC. This document sets out the respective roles of the five members of the Museo Italiano staff and described a model of a multidisciplinary group managing the Museo Italiano.” 7

[21] Mr Martini-Piovano said in his statement that: “Mr Papalia and Mr Carli have alleged that I made a number of statements during my meeting with them on 1 April 2011… which I deny having made.” He also says at another point: “I do not recall saying to Mr Papalia during our meeting on 1 April 2011 that I preferred to redeploy employees if there were government cuts.” 8

[22] The Museo Italiano was part of the Italian Historical Society and was a showcase for its activities. 9 Mr Martini-Piovano and the Applicant and Mr Carli were in agreement that the Museo Italiano project was integrated with the activities of the Italian Historical Society and related cultural programs. The project planning and funding were for this group of related activities under the banner of the Museo Italiano. The reference to funding for Museo Italiano is properly understood as a reference to this group of activities. I was reinforced in this conclusion by the evidence of Mr Carli about the history of the concept of the Museo Italiano and its relationship to the Italian Historical Society. The Applicant was not solely engaged in these activities but the Museo Italiano project was the catalyst for his employment.

[23] During the proceedings Mr Carli and the Applicant suggested that the reference to funding was not confined to specific government funding for the Museo Italiano and the related Italian Historical Society but was a reference to the general funding for the whole of Co.As.It. During the proceedings Mr Martini-Piovano suggested that he did not have any recollection of a meeting on 1 April 2011 and suggested that he had had discussions with the Applicant about the employment prior to the 28 March 2011 letter of offer. The written statements of Mr Carli and the Applicant were to the effect that discussions prior to the 28 March 2011 were between Mr Carli and the Applicant and Mr Carli and Mr Martini-Piovano. They say that any understandings about the employment arose through these conversations and the discussion of 1 April 2011.

[24] In respect to these matters I prefer the earlier written statements of the witnesses where there was contradictory oral evidence given during the proceedings. Given the centrality of these matters I doubt that they would have been missed in the preparation of the witness statements.

[25] I am not satisfied that there were discussions about employment arrangements between the CEO and the Applicant before 28 March 2011. In this respect the evidence of the Applicant is supported by Mr Carli. I accept the evidence of the Applicant that he would not have accepted the job had it not been for the assurances given by the CEO at the 1 April 2011 meeting which satisfied him that his employment was going to continue for at least five years. I am satisfied that the discussion of 1 April 2011 did occur and that its content was largely as suggested by Mr Carli and the Applicant in their witness statements. I accept that recollections of what was said in such a conversation will not be completely accurate but I am satisfied that the general assurances about the security of employment were given. I note that the conversation provided reassurance about employment for the next five years because of the funding agreement to maintain the Museo Italiano but this did not alter the position that the continuation of the employment was subject to funding. 10

[26] There was considerable cross examination of the witnesses about what was in fact the nature of the funding arrangement or funding agreement. Mr Carli and Mr Martini-Piovano agreed that there was no agreement for government funding to continue for five years. The agreement was that in return for a capital grant and two years of start-up funding Co.As.It agreed for five years to maintain a level of ongoing Co.As.It funding of approximately $260,000 to the Museo Italiano and related activities, to have a business plan specifying the activities and to keep the Museo Italiano operating. The level of activity which was budgeted for in the first two years in the business plan amounted to approximately $400,000. The Co.As.It direct funding was supplemented by other sources including the State Government Arts Victoria start up grant. Mr Martini-Piovano gave evidence that he expected that this level of State Government funding would continue. Mr Carli gave evidence that although this particular program for further State Government funding was not likely to be available there were other possible sources of Government funding. I am satisfied that to maintain the level of funding to support the activities undertaken in the first two years of the business plan, that is during the period when the Applicant was employed, it was necessary for Co.As.It to supplement the Co.As.It funding with funding from other sources including government funding.

[27] I am satisfied that the reference to “subject to funding” in the contract was properly understood by the parties to be a reference to Government funding for the Museo Italiano and related activities. The plain words read in context cannot be reference to the general funding situation of Co.As.It but rather as a reference to Government funding for the Museo Italiano and related activities of the Italian Historical Society. The evidence in the witness statement of the Applicant does not suggest a guarantee of continuing employment regardless of funding. The Applicant says that Mr Martini-Piovano said that he “preferred” to see people redeployed in cases of funding cuts. This is not a guarantee.

[28] For these reasons I am satisfied that any agreement reached at the 1 April 2011 meeting is consistent with my reading of the plain words of the written contract considered in its industrial context. There was no oral contract which altered the meaning of the written contract. The discussions on 1 April 2011 were consistent with the plain meaning of the written contract that the employment was for 12 months but would be renewed if sufficient government funding for the Museo Italiano and related Italian Historical Society activity was available. In my view the word “funding” is not ambiguous or uncertain. Its meaning is established by consideration of the background facts and context known to both parties. Those background facts and context establish that the reference to “funding” is a reference to Government funding for the Museo Italiano and related activities of the Italian Historical Society.

[29] If I am wrong about the reading of the contract and the words “subject to the availability of funding” are uncertain or ambiguous then I am satisfied that the mutual intention of the parties was clarified by the meeting of 1 April 2011. That mutual intention was that the contract would be renewed if sufficient government funding for the Museo Italiano and related Italian Historical Society activity was available. The evidence concerning past employment practice at Co.As.It is not relevant to resolving issues of ambiguity in that past practice is not evidence of mutual intention. However, the evidence concerning past practice does provide a backdrop to the discussion of 1 April 2011 which adds credibility to the evidence of Mr Carli and the Applicant concerning what was agreed at that discussion which took place shortly before the signing of the contract of employment.

[30] The Respondent argues that if I found that the contract was subject to funding I should find that the condition was not met in that adequate government funding was not available after the end of 2012 and therefore the contract came to an end automatically.

[31] I accept the evidence of Mr Carli that the capital grant of $1.45M for the Museo Italiano was conditional upon a 5 year operational plan being developed. I agree with the CEO that there was a commitment to keep the Museo operating for 5 years and to maintaining the Co.As.It resources dedicated to this project. The contract for the capital grant also required an ongoing contribution of $80,000 per annum from Co.As.It to “Italian Historical Society Staff.” 11 It is not in contention that $260,000 of Co.As.It resources were allocated in each of the first two years and that this allocation has continued in the third year since the Applicant’s termination. The Business Plan 2011-12 does include the staffing levels including the Applicant’s position. However, that plan includes a funding budget of approximately $400,000 in 2011 and 2012. This funding level was in part supported by a two year start up funding agreement with the State Government (Arts Victoria). The Arts Victoria funding was conditional upon implementation of the programs and strategies as detailed within the business plan.12 The business plan provided that: “The funding agreement between VMC and COASIT stipulates the level of support required from COASIT over a 5 year period to ensure the viability of the permanent exhibition. This agreement is reflected in the Annual Costs and Budget Sources section of this plan.”13

[32] There may be ongoing disputes about what the commitments associated with the funding were but I can only rely on the contractual documents and evidence provided in these proceedings. I am satisfied that neither the capital grant funding nor the Arts Victoria funding required the maintenance of the particular level of staffing associated with the total budget which applied during the first two years when the Arts Victoria funding was available.

[33] The CEO gave evidence that Co.As.It applied for further State Government funding at the end of the two year start up funding period but was unsuccessful. Even if it is correct, as alleged by Mr Carli, that the CEO refused to pursue other particular funding grants 14 the fact is that grants beyond the two year start up funding from the State Government were not obtained. The current budget for the Museo and associated activities is some $50,000 less than it was during the period when the Applicant was engaged.

[34] Even though I am satisfied that the Applicant was given reassurance at the meeting on 1 April 2011 that five years funding and associated staffing was committed I am satisfied that in fact the staffing and funding arrangements which supported the Applicant’s position were not absolutely guaranteed for five years by the funding contracts. I am satisfied that the Respondent is correct that specific government funding which was utilized to maintain the staffing levels in the Museo and the Italian Historical Society, including the Applicant’s position, was not obtained after the end of 2012.

[35] However, even though I am satisfied that the funding may not be available, the written contract of employment in this case does not have a fixed end date because it’s duration is “subject to funding.” An employment contract the duration of which is “subject to funding” is not a contract which could be said to come to an end without the initiative of the employer anymore than a contract which is subject to conduct or performance standards being met comes automatically to an end if an employee fails to meet those standards. Under a contract which is “subject to funding” an employee may have a reasonable and legitimate expectation of ongoing employment at the end of the specified period. I am satisfied that this was the situation in this case. A common law contract which purports to come to an end if an employee fails to meet conduct or performance standards within it, does not generally prevent the employee from otherwise being protected from unfair dismissal. A dismissal in these circumstances will often be a dismissal at the initiative of the employer. Unlike a contract with a specific end date a contract which is “subject to funding” usually requires a level of judgment and decision making which introduces a level of uncertainty. The termination of employment in these circumstances will often be a redundancy. If it is a genuine redundancy there will be exemption from unfair dismissal protection. However, requirements such as the need to comply with consultation provisions, the need for satisfaction that the job is no longer required to be performed by anyone and satisfaction of consideration of redeployment opportunities, provide an employee with protection from unfair termination.

[36] The scheme of the unfair dismissal provisions of the Act allows an employee to contest the genuineness of termination including a redundancy when a position comes to an end due to what the employer alleges is lack of funding. An employee whose position comes to an end in these circumstances is dismissed; that is, their employment ends at the initiative of the employer. I consider that this is the essential character of the Applicant’s situation in this case.

[37] Having established that the contract of employment was not a maximum term contract I am satisfied that the Applicant’s employment was terminated at the initiative of the employer. The Applicant was dismissed within the meaning of Section 386(1)(a) of the Act and none of the exemptions or exclusions in that Section apply to the situation of the Applicant.

[38] In arriving at this conclusion I have had regard to the numerous cases which the representatives of the parties put before me. Essentially the Respondent relied upon the decision of the Full Bench in Lunn to support their position. However, I have found that it does not apply in this case because the contract of employment is not a maximum term or outer limit contract.

[39] Having determined that the Applicant was dismissed the jurisdictional objection is dismissed and the matter will be referred to another member of the Commission to determine the issue of whether the dismissal of the Applicant was fair or unfair.

COMMISSIONER

Appearances:

Mr V Morfuni with Mr F Butera appeared for the Applicant.

Mr M Follett with Ms J Fitch appeared for the Respondent.

Hearing details:

2013

Melbourne

September 27