[2011] FWA 3778

[2011] FWA 3778

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FAIR WORK AUSTRALIA

DECISION

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

Ms Michelle Holland
v
Qantas Airways Limited
(U2010/2140)

SENIOR DEPUTY PRESIDENT DRAKE

SYDNEY, 27 JUNE 2011

Application for unfair dismissal remedy - Jurisdictional Objection.

[1] Ms Holland filed an application pursuant to s.394 of the Fair Work Act 2009 (the Act). Qantas Airways Limited (Qantas) objected to Ms Holland’s application proceeding to arbitration. Qantas submitted that Ms Holland had never been dismissed and raised a jurisdictional objection on that basis. Jurisdictional objections and merit hearings are often heard together but, on this occasion, Qantas applied to have this jurisdictional objection heard separately.

[2] I heard Qantas’ jurisdictional objection on 6 May 2011 in Sydney. Mr Crawshaw, of senior counsel, with Mr Slevin, of counsel, appeared for Ms Holland and Ms Bernasconi, solicitor from Blakes, appeared for Qantas.

[3] Exhibits were tendered which went to both the jurisdictional objection and the substantive application on the basis that their tender was only for the limited purpose of the jurisdictional objection. Material that went to the merits was not considered.

[4] Ms Holland alleged that her employment as a pilot had been terminated by letter dated 24 November 2010 whereby she was demoted by Qantas from Pilot to First Officer effective 23 December 2010. Her submission was that her employment as a Pilot was terminated under protest as at that date and, although she has continued to work as a First Officer for Qantas, that employment continues pursuant to a new contract of employment.

[5] Dismissal is defined in the Act as follows:

“386(1) A person has been dismissed if:

(a) the person’s employment with his or her employer has been terminated on the employer’s initiative; or

---

386(2) However, a person has not been dismissed if:

---

(i) the demotion does not involve a significant reduction in his or her remuneration or duties; and

(ii) he or she remains employed with the employer that effected the demotion.”

[6] Both parties agreed that Ms Holland’s demotion resulted in a significant reduction in both remuneration and responsibilities and there is no dispute that Ms Holland rejected the demotion. She did so by a letter sent on her instructions by her Union dated 17 December 2010. A relevant extract is set out below:

“Captain Holland considers her demotion to First Officer B767 to be a repudiation of her contract of employment which constitutes dismissal and hereby advises that she does not accept the Company’s decision to demote her.

Captain Holland will perform a new contract of employment (as a First officer B767) under sufferance while reserving her legal rights to apply to a relevant court or tribunal to contest the Company’s repudiation of her contract.” 1

[7] Clause 14.9 of the Qantas Airways Limited Flight Crew (Long Haul) Certified Agreement 2005-2006 (EBA 7) is set out below:

“14.9 Demotion and Related Arrangements

14.9.1 Definition of demotion

A demotion is a change to a lower status.

14.9.2 Limit on the demotion of a flight crew member

A flight crew member may be demoted to a lower category but, in the first instance, a Captain will not be demoted to a status below that of First Officer.

14.9.3 Meeting to consider a flight crew member’s demotion

Where a flight crew member is being considered for a demotion on the basis of his or her operational suitability, a meeting will be convened to consider the case, subject to the following:

(a) the meeting will be comprised of four representatives from the Company’s Flight Operations division (one of whom will act as chairperson) and four members appointed by the Association (all of whom are senior check Captains, check and training Captains or, in the case of FEOs, senior check FEOs employed by the Company);

(b) prior to the meeting, the flight crew member may make written representations for consideration at the meeting;

[8] Qantas’ submission as to the legal position was as follows:

“9. A demotion which might otherwise amount to a termination of employment will not do so if the employee’s contract (or industrial instrument) contains an express term allowing demotion - see Hermann v Qantas Airways Limited [PR903096] and Boo Hwa Chan v Christmas Island Administration [Print S1443].

10. Clause 14.9 of EBA 7 empowered the respondent to demote the applicant due to operational suitability within the terms of the applicant’s employment.

11. The procedures set out in clause 14.9 have been followed in relation to the applicant.

12. Accordingly, the demotion of the applicant pursuant to clause 14.9.3 of EBA 7, does not constitute a termination of the applicant’s employment.

13. The respondent relies on the decision of the Full Bench of the Australian Industrial Relations Commission in Elizabeth Gorczyca v RMIT University (PR922414) (RMIT) at para [14].

14. The question of whether there has been a termination is a question of jurisdictional fact - RMIT at para [19]. In this case, the certified agreement gives a right to demote without termination, therefore there has not been a termination for the purposes of the Act - see RMIT at para [21].

15. The decision of the Full Bench in RMIT has been cited with approval and followed in a number of subsequent decisions of the AIRC, for example see PR953053, PR944681 and PR936527.

16. The decision of the Full Bench of the AIRC in Charlton v Eastern Airlines [PR972773] also supports the legal position adopted in RMIT without expressly referring to that decision - see paras [34] and [35].

17. There is no decision of the AIRC or FWA stating that RMIT is no longer good law in relation to demotions. The demotion carve out to unfair dismissals is relevantly in the same terms in the Fair Work Act as it was in the Workplace Relations Act at the time RMIT was decided.

Conclusion

18. There has been no dismissal for the purposes of section 385(a) of the Fair Work Act.

19. Accordingly, the tribunal does not have jurisdiction to further hear the applicant’s claim.

20. The application must be dismissed.” 2

[9] The applicant’s Outline of Submissions are partly extracted below:

“13. In Visscher Heydon, Crennan, Kiefel and Bell JJ say at [37]:

Section 170CD(1B), by implication, treated a demotion as a termination of employment where it involved a significant reduction in the remuneration or duties of the employee’.

14. Therefore, by parity of reasoning, irrespective of the terms of EBA7, a demotion which involves a significant reduction in the remuneration or duties of the demoted employee will necessarily be treated as a dismissal for the purposes of s 386 of the FW Act.

15. The Respondent relies on the obiter dicta of the Full Bench in Charlton at [34] which suggests that there is no termination of the contract of employment if a contract of employment or an applicable award or certified/workplace agreement authorises an employer to demote an employee. However, a dismissal or termination for the purposes of the statute may occur even if there is no termination of a contract of employment. Thus, in Visscher Heydon, Crennan, Kiefel and Bell JJ said at [53]:

The reasons of Buchanan J elide the concepts of termination of an employment relationship and the discharge of a contract of employment. The concepts are different. It does not follow from the fact that a wrongful dismissal is effective to bring the employment relationship to an end that it thereby discharges the contract of employment.

16. Alternatively, if a demotion which involves a significant reduction in the remuneration or duties of the demoted employee is not necessarily a dismissal for the purposes of s 386 of the FW Act, EBA7 could only have the effect that there is no dismissal for the purposes of s 386 of the FW Act, if it could be construed as providing that such a demotion will not be treated as a dismissal or termination.

(My emphasis)

17. EBA7 does not provide that a demotion will not be treated as a dismissal or termination. In particular, the provisions in relation to demotion in subclause 14.9 of Schedule B of the Certified Agreement, relied on by the Respondent, do not provide in any way that if demotion is carried out pursuant to those provisions then such a demotion is not a dismissal from or termination of employment.” 3

[10] Mr Crawshaw further submitted that the agreements or other documents which applied in the cases relied upon by Qantas were distinguishable from clause 14.9 of EBA 7.

“18. In this respect EBA 7 is distinguishable from the cases relied on by the Respondent where it has been found that a certified agreement or other document allows demotion or redeployment without a termination of employment occurring:

(i) In Elizabeth Gorcyca v RMIT University (PR922414) the certified agreement drew a distinction between demotion and termination as follows (see [2] of the decision):

‘Disciplinary action’ means action by RMIT University to discipline a member of academic staff for unsatisfactory performance, misconduct or serious misconduct and is limited to:

(1) Formal censure or counselling;

(2) Demotion by one or more classification levels or increments;

(3) Withholding of an increment;

(4) Suspension with or without pay;

(5) Transfer to another position in the same or another department, at the same or another RMIT campus or site;

(6) Termination of employment

(emphasis added)

The Full Bench said (at [19]):

The respondent argues there has not been a termination because the certified agreement permits the demotion without regard to the income loss and provides in effect that it is not a termination. We think that the latter proposition is correct.

(emphasis added)

(ii) In Hermann v Qantas PR903096 the manual provided:

The following disciplinary options may be considered as an alternative to termination of employment:

• extension of probation period, if appropriate,
• withdrawal of staff travel benefit/cargo concessions where the employee is found to abuse these concessions,
• demotion, or
• withholding an increment, if permissible under a relevant award.

(see decision at [77] emphasis added):

(iii) In Boo HWA Chan v Christmas Island Administration (Print S1443) the award drew a clear distinction in its terms between redeployment and termination giving the employer the option of terminating or redeploying (see decision at [19]).

19. Properly analysed, these cases do not stand for the general proposition, contended for by the Respondent, that a demotion which would otherwise be a termination of employment under the FW Act will not be such a termination merely because a statutory agreement contains a term allowing demotion.”

(my emphasis)

[11] I do not accept Mr Crawshaw’s submission that a clause dealing with demotion must necessarily make it clear by its express terms that any demotion the subject of a particular clause is not a termination of employment, and that if it does not do so such a demotion must be a termination of the existing contract of employment if there is also a significant decrease in both remuneration and responsibilities. I am not persuaded that the construction of clause 14.9 can be distinguished from the relevant awards and agreements in the other applications referred to in the manner submitted in support of this proposition in paragraph 18 of Qantas’ submission. I do not accept that there is any general proposition of this kind. It is a matter that arises for consideration having regard to the facts of each case and the construction of each clause and agreement.

[12] I do not accept, and I do not think Qantas submits, that there is a wider general proposition of the kind described by Mr Crawshaw in paragraph 19 of his submissions.

[13] In Charlton and Eastern Australia Airlines Pty Ltd (Charlton) the Full Bench said:

“[34] Unless the contract of employment or an applicable award or certified/workplace agreement authorises an employer to demote an employee, a demotion, not agreed to by the employee, that involves a significant reduction in remuneration will amount to a repudiation of the contract of employment. If that repudiation is accepted, either expressly or by conduct, then the contract of employment is terminated. If, in such circumstances, the demoted employee then remains in employment with the employer, this occurs pursuant to a new contract of employment in respect of the demoted position. It may be noted that where the employment continues with the employee allegedly acquiescing in a reduction in salary or other terms of employment, difficult questions may arise as to whether the continued employment involves the continuation of the original contract of employment (but with the employer breaching that contract by paying the reduced salary), a consensual variation of the terms of the original contract or the termination of the original contract and a substitution of a new contract of employment.

[35] In the present case there is no evidence that the respondent was authorised by the contract of employment or any award or the applicable certified agreement to demote the appellant. We raised the possibility that industry regulations may oblige the respondent to remove a captain if certain circumstances exist and the possibility that this might give rise to an implied term authorising a demotion in such circumstances. However, the respondent was unable to point to any such regulations.

(my emphasis)

[14] In Charlton there was no relevant clause in any applicable award or agreement. In this application there is a demotions clause to be considered.

[15] I have concluded that the context of clause 14.9 in EBA7 which deals with termination of employment in separate clauses, the subject matter of the clause itself and the language of the clause, are all factors that distinguish a demotion pursuant to clause 14.9 from a termination of employment at the initiative of the employer.

[16] EBA7 contains a number of clauses which separately deal with termination of employment. The context of clause 14.9 in EBA7 in an agreement of this kind supports a conclusion that demotions arising from the application of the clause are not terminations of employment.

[17] Clause 14.9 deals with failures of competence in pilots. The clause outlines a process to deal with this specific issue. The clause limits the possible extent of any demotion in the first instance. It is a discrete clause for a discrete purpose. There is no need for any express exclusion of termination of employment by demotion in this circumstance. In a clause specifically about a discrete issue it is not necessary to specify that the clause is not about something else.

[18] The language of clause 14.9 is clear and it is unnecessary for any express distinction to be drawn for the purpose of the clause to be understood. It is clear from its own language that clause 14.9 is a clause that contemplates demotion without termination of employment.

[19] I am satisfied that a demotion arising from the application of clause 14.9 is not a termination of employment at the initiative of the employer or a repudiation of the existing contract of employment. I am satisfied that clause 14.9 authorises Qantas to consider the flight competence of a pilot and demote that pilot if appropriate.

[20] The jurisdictional objection of Qantas is allowed.

[21] The application of Ms Holland is dismissed.

SENIOR DEPUTY PRESIDENT

1 Exhibit Holland 2 Attachment MMH 38

2 Exhibit Qantas 1

3 Exhibit Holland 1

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