[2012] FWA 3901 |
|
DECISION |
Fair Work Act 2009
s.120 - Application to vary redundancy pay for other employment or incapacity to pay
Oscar Oscar Group Services Pty Ltd
v
Ms Alyce Lees
(C2011/6109)
COMMISSIONER ASBURY |
BRISBANE, 4 MAY 2012 |
Application to vary redundancy pay for other employment - case law and principles re exercise of discretion to reduce redundancy pay - whether employer provided acceptable alternative employment - application refused.
[1] This is an application under s.120 of the Fair Work Act 2009 (the Act) by Oscar Oscar Pty Ltd seeking an order to reduce the redundancy pay to which Ms Alyce Lees is entitled. The grounds upon which the application is made are that another position has been tailor made to suit Ms Lees and has not been accepted.
[2] Directions were issued setting the terms of s.120 of the Act and requiring (in some detail) that the parties file submissions, witness statements or documents in support of, and in response to, the application. Oscar Oscar filed a document in the form of a letter addressed: “To whom it May concern,” signed by its payroll officer Ms Webb who was also present at the hearing of this matter. The Company also filed a bundle of material comprising letters of offer and position descriptions for the original and the proposed alternative position. Ms Webb’s involvement in the circumstances and incidents relied on by Oscar Oscar as the basis for the application, was minimal. No other material was filed on behalf of Oscar Oscar. Ms Lees filed an outline of submissions and a witness statement appending relevant documentation, as required by the Directions. The position descriptions and letters of offer filed by Oscar Oscar were identical to some of the documents filed by Ms Lees. However, Ms Lees filed additional documents. All of Ms Lees’ material was served on Oscar Oscar as required and none of the documents provided by Ms Lees were challenged by Oscar Oscar. Accordingly I have relied on those documents.
[3] At the hearing, Oscar Oscar sought to be represented by Counsel. Ms Lees who was representing herself, objected. The issues in dispute were narrow and based on a position description relating to the position occupied by Ms Lees that was made redundant, and the position she was offered as an alternative to the redundancy.
[4] Permission was not granted for the Company to be represented by Counsel on the basis that the matter was not unduly complex and it would not be unfair given that Ms Lees was not represented and had taken all of the necessary steps to file and serve her material in accordance with the Directions.
[5] Notwithstanding that Oscar Oscar did not comply with the Directions, Ms Webb was permitted to adopt the letter under her signature and to give evidence on the basis of its contents. Ms Webb was also able to cross-examine Ms Lees, and was granted an adjournment to enable Counsel to prepare her to conduct the case for the Company. Counsel also remained in the hearing room during the hearing of the application. Further, the Company was permitted to tender detailed written submissions at the hearing, outside the time allowed in the Directions Order and these were accepted and considered.
Correspondence after the hearing of the application
[6] After the hearing of this application, the Managing Director of Oscar Oscar, Mr Oscar Cullinan corresponded with my Associate. In the correspondence Mr Cullinan apologised for what he described as the lack of preparation and disorganisation of the Company’s case, and acknowledged that directions had been received prior to the hearing giving the Company time to respond in the correct manner. Mr Cullinan stated that as he was unable to attend the hearing, the case was not properly presented, and requested a further opportunity to present the Company’s case. Mr Cullinan also stated that this would save the Tribunal’s time as the company would appeal any decision to grant redundancy pay to Ms Lees.
[7] Upon my instructions, my Associate responded to Mr Cullinan by email in the following terms, and forwarded a copy of the correspondence from Mr Cullinan and the response, to Ms Lees:
“Dear Mr Cullinan,
I refer to your letter of 25 November 2011. Commissioner Asbury has considered your letter and has instructed me to respond as follows. It is assumed that you did not forward a copy of your letter to Ms Lees, given that there is no indication that this has occurred. It is inappropriate for the Commissioner to receive ex parte communication – ie. communication from one party in a matter that has not been provided to the other party.
Further, it is inappropriate for the Commissioner to receive further submissions from a party once a hearing has been concluded and decision reserved, unless leave is sought and granted.
If you intend to seek leave of Fair Work Australia to make further submissions and/or call evidence in the above matter, you may make an application to do so and serve it on the other party to the proceedings. This is not an indication that such leave will be granted.
The Commissioner does not intend to take any further action in relation to your correspondence and it is reiterated that such correspondence should not have been sent and that you should refrain from engaging in any further communication of this kind.
A copy of your letter and this response has been sent to Ms Lees.”
[8] No formal application was received from Oscar Oscar for leave to re-open its case or put further material before Fair Work Australia. Accordingly the matter has been decided on the material before me at the hearing.
Legislative Provisions
[9] By virtue of s.119 of the Act:
(1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:
(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to ordinary and customary turnover of labour;
(b) because of the insolvency or bankruptcy of the employer.
[10] Section 120 of the Act provides as follows:
“120 Variation of redundancy pay for other employment or incapacity to pay
(1) This section applies if:
(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and
(b) the employer:
(i) obtains other acceptable employment for the employee; or
(ii) cannot pay the amount.
(2) On application by the employer, FWA may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that FWA considers appropriate.
(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.”
[11] The phrase “obtains acceptable alternative employment” was considered by a Full Bench of the Australian Industrial Relations Commission in Derole Nominees Pty Ltd and ACM 1. The principles established in that case have been applied in cases considering s.120 of the Act,2 and in my view are relevant to the present case. In Derole the Full Bench observed:
“The Award provision does no more than provide an avenue by which an employer may apply to the Commission to vary the obligation which would be otherwise imposed by the award. It does not follow from the terms of the clause that an employer coming within its scope will achieve necessarily full or partial relief. The level of relief, if any, to apply in a given case, is a matter to be determined as an exercise of discretion in the circumstances of that case.” 3
[12] The Full Bench cited the first decision in the Termination Change and Redundancy Case where it was stated that:
“We do not wish to prevent an employer making application to be exempted from the general prescription pursuant to this decision in cases where the employer obtains acceptable alternative employment for an employee but we would point out that, in our decision, severance payments are not made for the purpose of assisting employees to obtain alternative employment. Where such an application was made it would be important to consider whether previous service with the previous employer was recognised as service with the new employer.” 4
[13] In relation to the question of what constitutes “acceptable alternative employment” the Full Bench in Derole said that this is a matter to be determined on an objective basis.
“Alternative employment accepted by the employee (and its corollary, alternative employment acceptable to the employee) cannot be an appropriate application of the words because that meaning would give an employee an unreasonable and uncontrollable opportunity to reject the new employment in order to receive redundancy pay; the exemption provision would be without practical effect.
Yet the use of the qualification ‘acceptable’ is a clear indication that it is not any employment which complies but that which meets the relevant standard. In our opinion there are obvious elements of such a standard including the work being of a like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements. There will probably be others.” 5
[14] The Full Bench went on to observe that employees in that case had a variety of reasons for declining alternative employment, including being too old; location; type of work; method of payment; and that these could not displace the objective test. In this regard the Full Bench said that:
“Given the size of our cities and the common need to travel some distance to work; the fact that redundancy pay has been designed in part to tide an employee over after the loss of employment pending the attainment of another job and the fact that to reject available alternative employment which is objectively acceptable, by an election based on personal preferences is to place the right to receive full redundancy pay at risk.
The exemption provision imports the notion that effort of a sufficient kind by an outgoing employer may cause his obligation for redundancy pay to be reduced; a decision by an employee not to co-operate with an employer may well disentitle the employee to all or some of the payment.” 6
[15] In Clothing and Allied Trades Union v Hot Tuna 7 a Full Bench of the AIRC held that the onus lies on an employer seeking exemption from redundancy provisions to establish the acceptability of alternative employment, and that the test is an objective one, involving a consideration of such matters as pay levels, hours of work, seniority, fringe benefits, workload and speed, job security and other matters.8 In that case, the employer failed to adduce evidence about these matters and did not succeed with the application for exemption from the obligation to make redundancy payments.
[16] Section 120 of the Act is an avenue for the employer to apply to the Commission to vary an obligation which would otherwise be imposed to make redundancy payments. That section provides that FWA “may” determine to reduce the amount of redundancy pay up to an amount of nil, indicating that the granting of full or partial relief from the obligation is an exercise of discretion in the circumstances of the case. The employer bears the onus of establishing that there are grounds justifying the exercise of the discretion.
[17] In deciding whether to exercise discretion on the grounds that the employer has obtained acceptable alternative employment, FWA must be satisfied that the employer took positive and proactive steps to obtain such employment, so that it can be said that the employer is a strong moving force towards the creation of the opportunity for the employee to gain alternative employment.
[18] The question of whether alternative employment is acceptable, must be assessed on an objective basis. It is relevant to the assessment that redundancy payments are not made solely for the purpose of assisting employees to find alternative employment. Redundancy payments are intended to tide an employee over during the search for alternative employment, and to compensate the employee for loss of credits for sick leave, long service leave and other entitlements based on length of service. The question of whether previous service with the previous employer is recognised as service with the new employer, will also be relevant.
[19] Other considerations will be whether the alternative employment is of a like nature; a reasonable distance from the previous employment; whether pay and conditions are comparable; hours of work and job security in relation to the new position. The fact that an alternative position does not meet the personal preferences of an employee, may place the right to receive full redundancy pay at risk, where the employee refuses a position that is found to be acceptable on an objective basis.
Evidence
[20] According to the evidence of Ms Webb, the decision to make Ms Lees’ position redundant was made on 6 September 2011. It was decided a new role would be offered to Ms Lees. Ms Lees was informed of this immediately and over the following weeks discussions occurred with her as to the nature of the new role.
[21] By 27 September 2011 a new role had been determined - Ms Lees would work as a stylist 4 days per week and would undertake education and ‘Brand Ambassador’ activities the remaining 1 day. The Managing Director of the Respondent went through this with Ms Lees, and according to Ms Webb, Ms Lees responded favourably. The offer was reduced to writing and emailed to Ms Lees on 29 September 2011. Ms Lees declined the offer by email the same day.
[22] On 30 September 2011 a meeting was held with Ms Webb, Ms Lees, the Managing Director and the Operations Manager. Ms Lees was concerned that the restraint of trade clause had been broadened from that contained in her previous contract. Ms Lees also stated that she was declining the offer as she wished to pursue a full-time educator role. Ms Webb stated that doubts arose as to whether the restraint clause was the true reason for Ms Lees declining the new role.
[23] When asked in cross-examination whether she considered that at the 30 September meeting the Managing Director was intimidating Ms Lees, Ms Webb responded that she did not consider the behaviour intimidating, but conceded that the Managing Director did the majority of the talking and did not give anyone else at the meeting the opportunity to say much. Ms Webb also agreed that at the meeting the Managing Director made clear that he did not consider any redundancy pay would be owing to Ms Lees, as a new role had been offered.
[24] Further, Ms Webb agreed that Ms Lees explained that she was declining the new role because she wanted a full-time education role, and because of the restraint provisions. In relation to the restraint provision, Ms Webb agreed that the contract offered to Ms Lees included a separate ‘Restraint Bonus’ and a separate amount of $8,000 relating to the ‘Ambassador’ role. However the evidence was not clear as to how the restraint bonus was linked to the ‘Ambassador’ role, and whether the $8,000 was payable if Ms Lees did not undertake the Ambassador role.
[25] Ms Lees said that she commenced working for the Respondent in January 2009 as a full-time hairdresser. As part of her remuneration Ms Lees received $100 per week as a ‘restraint bonus’ on the condition that for 12 months after the employment relationship ended she would not work in any salon within 5 kms of any of the Respondent’s salons that she had worked at. Ms Lees entered into a written contract of employment which was appended to her witness statement. 9
[26] The contract provided that Ms Lees was employed in the occupation of Artistic Director/Technical Director and could be employed in such other capacity or location as the employer may reasonably require in the business carried out by the employer. The weekly salary was $750 and there were additional payments totalling $100 per week termed a “Restraint Bonus Payment”. Those payments were apportioned over clauses of the written contract dealing with the requirement of Ms Lees to give faithful service and not work in hairdressing services while employed by Oscar Oscar, and during a period of twelve months after termination, not to work in a variety of positions within a 5 km radius of Oscar Oscar Salons that Ms Lees worked in for 12 months prior to termination. Essentially the salary plus the Restraint Bonus payment was $44,200 per annum.
[27] In January 2010, Ms Lees was appointed Salon Trainer for the Oscar Oscar Salon at Broadbeach. In this role, Ms Lees was responsible for training apprentices and new staff on Tuesday nights at Broadbeach, and also on a day to day basis in the Broadbeach Salon.
[28] In or about November 2010, after seeking to leave the employment of Oscar Oscar to undertake an educator role with another employer, Ms Lees was asked to put a proposal under which she would undertake a training and development role with Oscar Oscar. In December 2010 Ms Lees signed a letter of offer to indicate her acceptance of a new position entitled Education and Development Manager. 10 The role was said to involve Ms Lees leading, mentoring and managing the vision and performance of the Company’s hairdressers, by focusing on growing and developing their technical and communication skills. The role was also said to require Ms Lees to be on the road 4 days a week, plus working on the floor on Sundays as a Dual Operator at Pacific Fair with a service target of $750 and a retail target of $100 for that day. Termination of employment was required to be in accordance with the National Employment Standards (NES).
[29] Ms Lees entered into a further written contract of employment for this role 11 and commenced in February 2011.
[30] The contract provided for a salary of $1,057.69 per week ($55,000 per annum) plus car allowance of $192.31 per week ($10,000 per annum) which is shown as part of the salary. The salary was said to include compensation for Award conditions and the post employment restraint of trade. In addition Ms Lees received:
[31] Other key features of the contract were that it provided for 12 weeks notice of termination of employment to be given by the Company after 1 years service, other than in a case of termination for serious misconduct. The contract also contained a comprehensive post employment restraint of trade provision operating throughout New South Wales, Victoria, Queensland, Sydney, Melbourne, Brisbane and the Gold Coast with respect to a range of activities. The period over which the restraint operated ranged from 24 to 3 months and it was expressed to operate cumulatively for each activity in each area and for each listed period, and required all possible combinations to be complied with. The restraint of trade in that contract was limited to customers, clients or suppliers of Oscar Oscar, and prevented Ms Lees from being associated with, engaged or employed by any competitor of Oscar Oscar.
[32] The contract further provided that Ms Lees was based on the Gold Coast but may be required to perform duties at other locations within Queensland and interstate. Further the contract stated that the responsibilities and functions may be varied by the Company in accordance with its needs, and Ms Lees may be required to perform other duties not expressly listed in the schedule to the contract but are within her skills, competence and training. In addition to the education duties, the contract required Ms Lees to work every Saturday in either Gold Coast salon and to fulfil targets while performing such work.
[33] Ms Lees said that the role entailed education activities 4 days a per week at salons in Queensland, New South Wales and Victoria, and working at head office at Molendinar on the Gold Coast, to create and implement training programs and plans for each salon. Ms Lees said her work involved presenting workshops over several days, running bespoke evening seminars for salon locations, organising and participating in photo shoots, trouble shooting underperforming operators, identifying weaknesses through in-salon day time education, attending evening training to oversee what was going on in all locations and creating guest artist programs to present on behalf of Oscar Oscar.
[34] Every Saturday Ms Lees worked on the floor at the Broadbeach salon with approximately 15 staff, and every fourth Saturday at the Versace Location where two staff were employed. Ms Lees was also an ambassador doing workshops, media events and seminars in relation to a variety of products.
[35] Ms Lees said that on 6 September 2011 she was advised by the Managing Director that her position was being made redundant due to the financial position of the company. The Managing Director raised the possibility of her going back to a full-time stylist role.
[36] Over the next few weeks Ms Lees spoke to the Managing Director and Operations Manager about her future. A number of options were raised and Ms Lees requested that they be put in writing so she could properly consider them. Ms Lees repeated her request for the offer of alternative employment to be put in writing so that she could properly consider her options, on a number of occasions and this information was not provided until 29 September 2011.
[37] On 27 September 2011 Ms Lees met with the Managing Director who discussed the new role and showed her the first page of the letter of offer on his laptop. On 29 September the letter of offer was emailed. The letter of offer indicated that the position offered was Master Stylist / Master Technician at Palazzo Versace and Education Co-ordinator for Oscar Oscar Salons. It is further indicated that the role of Education Co-ordinator would involve liaising with partners and managers from Queensland, New South Wales and Victoria in regards to courses and salon education, as well as travelling on Tuesdays to oversee and monitor salon technical standards with all staff and specific attention to be placed on weaker skilled locations.
[38] The letter also indicated that Ms Lees would be a Brand Ambassador involving artistic shows and sessions styling, as well as directing and styling events and shows as necessary. Ms Lees was to be on the road for one day a week, and working on the floor as a Dual Operator at the Palazzo Versace Salon for the other four days, in the role of Master Stylist / Master Technician, building and growing a clientele and mentoring and guiding junior team members.
[39] The base annual salary as set out in the letter of offer and the proposed written contract of employment 12 was $48,172.80 per annum, plus an amount of $8,000. According to Ms Lees the additional amount of $8,000 was compensation for her undertaking a role of Aveda Ambassador, which was contingent on her agreeing to a more onerous restraint of trade provision than had applied under her previous contract. The contract also provided for a restraint bonus of $100 per week. In addition, there is a fuel card for $100 per month, a mobile phone with a cap of $130 per month and the provision of a laptop. There is no reference to internet services being provided. Commission targets are set as $3,300 for service and $350 for retail.
[40] It is unclear from the terms of the contract what the $8,000 payment is linked to and whether it is linked to the restraint of trade provisions in the contract. It is also unclear whether Ms Lees would have accepted the Aveda Ambassador role without agreeing to the restraint of trade. The restraint of trade provisions operate for a 12 month period post employment, over the Gold Coast region in relation to a wide variety of positions in the hair dressing industry. The notice of termination of employment set out in the proposed contract is in accordance with “the Act”.
[41] Ms Lees declined the offer by email the same day. The reasons given by Ms Lees as set out in the email were that the new role would be a step backwards and she wished to progress her career as an educator/trainer. Ms Lees also stated that she had decided to accept the redundancy and part ways with the company. 13
[42] On 30 September 2011 Ms Lees met with the Managing Director, Operations Manager and Ms Webb. Ms Lees contends that the Managing Director attempted to intimidate her into resigning at the meeting. Ms Lees taped the meeting on her mobile telephone and appended a transcript of the meeting to her witness statement. The transcript was tendered without objection. The transcript indicates that Ms Lees expressed concern about the breadth of the restraint of trade in the proposed contract and maintained that she wanted to undertake an education role. The transcript also contains statements by the Managing Director which indicate that the $8,000 was attached to the acceptance by Ms Lees of the Ambassador role, and she would not have been allowed to undertake this role without also accepting the restraint of trade.
[43] Under cross-examination, Ms Lees agreed that initially, when she was advised that her educator role was being made redundant she stated she may be happy working as a stylist in Brisbane. Ms Lees also said that she still wanted to work as a stylist one day per week but was more passionate about educating. Further, Ms Lees pointed to the fact that in the redundant role (4 days educating, 1 day hairdressing) she was subject to a narrower restraint agreement. The new role would be 4 days hairdressing in a small salon, 1 day educating, with a broadened restraint provision. These factors together led to her not accepting the new role. Ms Lees also stated that the primary reason she did not accept the proposed new role was the significant reduction in the education aspect of that role.
Conclusions
[44] It is not in dispute that Ms Lees’ position as Education Director with Oscar Oscar has been made redundant. It is also not in dispute that Ms Lees has at least two, but less than three years service with Oscar Oscar. In the absence of an Order under s.120 of the Act, Ms Lees is entitled to redundancy pay of 6 weeks.
[45] In my view, this is not a case where the discretion to set aside some or all of the redundancy payments to which Ms Lees is entitled should be exercised. As the applicant, Oscar Oscar carried the onus of establishing that other acceptable alternative employment was obtained for Ms Lees. In my view the Company failed to meet this onus and make out its case.
[46] While I accept that some effort has been made to create an alternative position for Ms Lees, I am unable to accept that objectively, the position is an acceptable alternative. The salary for the Education Director’s position (the redundant position) was $65,000 per annum. Although this amount includes a car allowance, that allowance is expressed to be part of the base salary and Ms Lees was paid for all fuel costs in addition to the car allowance. Further, Ms Lees was provided with a mobile telephone with a cap of $130 per month and use of a laptop with internet access and a company credit card for work related expenses. The main focus of the role was education and training and Ms Lees spent four days a week, or 80% of working time undertaking education. It is also relevant that Ms Lees wished to develop her career as an educator and the role recognised this.
[47] On the basis of the evidence, it is more probable than not that the $8,000 component of the salary for the Aveda Ambassador position was subject to Ms Lees agreeing to a broader restraint of trade provision than had been applicable under her previous contract.
[48] The proposed alternative role had a total salary of $56,172.80. Even if it is accepted that the $8,000 payment which is included in that figure, could have been earned even if Ms Lees did not sign the post employment restraint of trade, the salary attaching to the alternative position is significantly lower. It is also the case that Ms Lees would have been working in a salon on four days of the week and performing an education role on one day each week and possibly not at all. This is a total reversal of the previous position and entailed Ms Lees spending at least 80% of her time on the salon floor. Further, in order to earn the full amount of the salary, Ms Lees was required to sign a restraint of trade agreement, which was considerably more prohibitive than that which applied under her original contract as an Artistic Director/Technical Director, or the role of Education and Development Manager.
[49] While Ms Lees accepted a restraint of trade restriction in her contract as Education Director, that was in the context of a position which had a wider sphere of operation and a significantly broader training focus than the alternative position she was offered. It is also arguable that the restraint of trade provisions under the previous contract were in the context of a 12 week notice period provided under that contract.
[50] Although the work that Ms Lees would be performing in the alternative position was within her skills, competence and training, it is also the case that Ms Lees had actively sought to create a career in education, and had negotiated an employment contract with her employer in order to carry out that work. The alternative position is a fundamentally different position, when the respective education content of the two roles is considered.
[51] I am also of the view that Ms Lees has not unreasonably refused an alternative position. Ms Lees spent a considerable period of time attempting to get details in writing, of the proposed alternative position from her employer. This was an entirely reasonable request and it was not complied with until some 23 days after Ms Lees was told her position was to be made redundant and in circumstances where she was being asked to make a quick decision about whether she was prepared to accept the new position.
[52] I do not consider that the employer has demonstrated that the alternative employment offered to Ms Lees is acceptable employment. The application for a reduction in the redundancy payments to which Ms Lees is entitled is therefore dismissed.
[53] Ms Lees is entitled to be paid the full redundancy amount owing to her, which is an amount of 6 weeks at her gross weekly wage comprising base salary of $1,057.69 plus car allowances of $192.31, totalling $7,500.00.
COMMISSIONER
Appearances:
Ms J. Webb on behalf of Oscar Oscar Group Services Pty Ltd.
Ms A. Lees on her own behalf behalf.
Hearing details:
2011.
Brisbane:
November 21.
1 (1990) 140 IR 123
3 Derole Nominees Pty Ltd and The Australian Chamber of Manufactures (1990) 140 IR 123 at 126.
4 Amalgamated Metals, Foundry and Shipwrights Union v Broken Hill Pty Co Ltd, Whyalla (Termination, Change and Redundancy Case) (1984) 8 IR 34 at 75, Whyalla Termination, Change and Redundancy Case); Print F6230 at 48.
5 Ibid p. 128.
6 Ibid p. 129.
7 (1988) 27 IR 226.
8 Ibid at 230-231.
9 Exhibit 2 Annexure A.
10 Exhibit 2 Annexure B
11 Exhibit 2 Annexure C
12 Exhibit 1 D.
13 Exhibit 2 Annexure F.
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