DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Adam Piggott
v
Wellpark Holdings Pty Ltd T/A ERGT Australia
(U2016/482)

Application for relief from unfair dismissal.

[1] On 5 February 2016 Mr Adam Piggott lodged an application under s.394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy. It is agreed that no jurisdictional issue exists and that Mr Piggott is a person protected from unfair dismissal.

[2] Permission for the parties to be represented was sought and granted pursuant to s.596 of the Act for reasons given at a short hearing on 23 May 2016.

[3] The facts of the matter were agreed, and at the hearing on 23 May 2016, the parties asked for the matter to be determined on the papers before the Commission.

[4] I have taken account of all the evidence and submissions.

Consideration

Valid Reason: s.387(a)

[5] Mr.Piggot was terminated on 11 January 2016 by letter stating that he had not agreed to a temporary reduction in his base pay and that therefore the employer was giving him notice of termination. The letter is headed “re termination of contract and new offer of contract of employment”, and also states that “if you do not accept this new contract by 15^th January 2016, the offer will lapse and your employment with ERGT Australia will terminate on January 25^th 2016.” The date of January 25^th 2016 is stated as the dismissal date, and the letter is referred to in the application as the letter of termination.

[6] A refusal to accept a reduction in pay is not a valid reason related to Mr.Piggot’s capacity or conduct within s.387(a). Indeed the employer concedes that he had capacity to perform the work 1. There is no valid reason for termination of employment.

Notification of reason – s.387(b)

[7] Given that there was no valid reason, there was no notification of a valid reason: Chubb Security Australia Pty Ltd v. Thomas 2.

Opportunity to respond – s.387(c)

[8] Mr.Piggot was given an opportunity to respond to the letter of 11 January 2016 by accepting the reduction in pay or being terminated. That is not an opportunity to respond to ‘any reason related to the capacity or conduct of the person’ within s.387(c), given that there was no reason related to the capacity or conduct of the person, and this is not the opportunity to respond contemplated by the subsection.

Support person – s.387(d)

[9] There was no claim that the employer refused to allow a support person to be present, and this is not relevant.

Unsatisfactory performance – s.387(e)

[10] The dismissal was not for unsatisfactory performance, and this is not relevant.

Size of business, human resources personnel – s.387(f)(g)

[11] The respondent does not contend that its decision to dismiss the applicant arose from any size based considerations or lack of access to HR specialists within its business.

Other – s.387(h)

[12] In this case other employees took a pay cut of 10 per cent on a temporary basis in order to save the business, and save jobs. The reasons for this, and the manner in which it was done, were outlined in the witness statement of Mr.Paul Skuse, General Manager Operations. In summary, in 2015 the employer suffered an unforeseen and significant reduction in revenue and a significant cash flow problem. It had already cut expenditure in every other party of the business where money could be saved. The employer avoided cutting labour costs ‘for as long as we could, and the management team was very conscious that many of our staff needed their jobs and, if they lost their jobs, would struggle in a tight labour market’. The ‘obvious solution’ was to reduce labour headcount, but the employer was reluctant to do this. In order to retain existing staff levels it ‘decided to engage with our employees, to tell them about our financial difficulties, and to ask them to take a 10% pay cut, for a few months while we worked at overcoming the cash flow problem that confronted us’. The employer arranged to meet with employees around that country and put the alternative of a voluntary, temporary, pay cut as an alternative to cutting jobs. The ‘vast majority’ accepted this, except for the applicant. Without such an ‘overwhelming and uniform support from our staff, we would have had to cut jobs and reduce our headcount’. As a result of the staff sacrifice full pay was restored to all staff by 7 March 2016.

[13] This is a legitimate course of action taken by the employees and employer, and no criticism should be made of it in my view. Indeed it might be said that it appears to be the sort of joint effort by employees and employer which should be encouraged by this tribunal. Unfortunately not all employers and employees are able to work together constructively in this way to save a business and a substantial number of jobs.

[14] However, in this case Mr.Piggott was not consulted about this. Other employees were given a presentation from management while he was absent on leave. Mr.Piggott however returned to work from annual leave on 4 January 2016 and was given a letter advising that he had until the close of business the next day to agree to a 10 per cent wage reduction or be terminated.

[15] This is not an appropriate manner to approach such a serious issue as a 10 per cent reduction in pay for an employee. The employer should have advised Mr.Piggott of the problems that the company had, and provided other relevant details, as well as the opportunity to ask questions and consider the issue, and to respond. He should in other words have been treated as other employees were. I also note that there is strong support in the Act, awards and authorities for consultation before such drastic steps are taken 3. For example sections 387(b), (c) and (d) of the Fair Work Act 2009 refer to various forms of procedural fairness, and these are factors which must be given weight in considering the fairness or otherwise of a termination of employment. In this case the factors referred to in ss.387(b) and (c) weigh against the employer.

Harsh, unjust or unreasonable

[16] Overall the factors in ss.387(a),(b) and (c) weigh against the employer, and I note that s.387(a) is specifically limited in its nature. I am required to have regard to and give weight to each of the factors in s.387. This is a case in which there is no valid reason and procedural fairness was lacking, although there are other matters recognised in s.387(h) which weigh in favour of the employer. I have taken all matters into consideration. In my view the termination of employment of Mr.Piggot was harsh, unjust or unreasonable. I now turn to remedy.

Remedy

[17] Mr.Piggott does not seek reinstatement pursuant to s.391. I accept his view and the employer’s that reinstatement is not appropriate in the circumstances.

[18] In the alternative I am required (s.392) to consider an order of compensation in lieu of reinstatement. Mr.Piggot seeks 6 months pay, the statutory maximum, submitting that employment would have continued for a further two years. However, if the employer had followed an appropriate procedure of consultation and discussion with Mr.Piggott this would have taken perhaps 2-3 weeks. It is possible that Mr.Piggott would have accepted that the employer’s approach was correct as other employees apparently did almost uniformly. Alternatively, the employer would have taken the same action it took with other employees, or changed its approach and allowed Mr.Piggott to retain all or some of previous earnings rather than requiring him to accept the full 10 per cent cut in pay. The employer however submitted:

‘The Respondent was not willing to allow the Applicant to place himself in a financially better position than those employees who sacrificed their legal right to higher levels of remuneration, so that their colleagues’ jobs might be preserved.

The Respondent was mindful that, had it allowed the Applicant’s employment to continue unchanged, other employees may have perceived the Respondent’s acceptance of the Applicant’s stance as affording him preferential treatment by comparison with each of them.

No-one who accepted the temporary pay cut wanted to receive less remuneration. They accepted it because it assisted the Respondent in its efforts to preserve prevailing staff numbers and the jobs of many who could not afford to lose them.’

[19] Mr.Skuse gave evidence to similar effect. It seems most unlikely given this that Mr.Piggott would have been employed for a further two years. There is not a sufficient evidentiary basis for such a finding. On the employer’s statements he would have been employed for no longer than a decent period in which appropriate discussions with him would have occurred, which I have estimated to be 2 weeks. The employer would not have changed its approach for the reasons it gave in evidence before me. The estimated future employment period is 2 weeks.

[20] In Bowden v Ottrey Homes Cobram and District Retirement Villages 4 the Commission said that the first step to be taken in assessing compensation is to consider s.392(2)(c) - that is, to determine what the applicant would have received, or would have been likely to receive, if the person had not been dismissed. In Bowden this was described in the following way:

“[33] The first step in this process - the assessment of remuneration lost - is a necessary element in determining an amount to be ordered in lieu of reinstatement. Such an assessment is often difficult, but it must be done. As the Full Bench observed in Sprigg:

‘... we acknowledge that there is a speculative element involved in all such assessments. We believe it is a necessary step by virtue of the requirement of s.170CH(7)(c). We accept that assessment of relative likelihoods is integral to most assessments of compensation or damages in courts of law.’

[34] Lost remuneration is usually calculated by estimating how long the employee would have remained in the relevant employment but for the termination of their employment. We refer to this period as the ‘anticipated period of employment’...”

[21] In Brett Haigh v Bradken Resources Pty Ltd T/A Bradken 5 the Commission said:

‘[10] The frequently quoted case on compensation calculations is Sprigg v Paul Licensed Festival Supermarket in which a Full Bench of the Australian Industrial Relations Commission (AIRC) confirmed the following steps in determining compensation under the unfair dismissal provisions of the Workplace Relations Act:

“1. Estimate the amount the employee would have received or would have been likely to receive if the employment had not been terminated,

2. Deduct monies earned since termination,

3. Deductions for contingencies,

4. Calculate any impact of taxation,

5. Apply the legislative cap.”

[11] The legislation has been amended since that time by permitting a reduction in an amount otherwise payable if an employee’s misconduct contributed to the employers decision to dismiss. The Full Bench decision in Sprigg has also been the subject of comment by other Full benches. In Smith v Moore Paragon a Full Bench of the AIRC said:

“COMMENT IN RELATION TO THE GUIDELINES IN SPRIGG

[32] It seems to us that the amounts arrived at by the application of the guidelines in Sprigg in the present matter are on their face manifestly inadequate for employees with the length of service of the Appellants, the circumstances of their dismissal and their poor prospects for future employment. This causes us to sound a warning in relation to the application of Sprigg. The guidelines laid down in Sprigg and refined in Ellawala v Australian Postal Commission are clearly designed to serve the proper and desirable purpose of fostering uniformity and consistency in decision-making by individual members of the Commission when assessing compensation pursuant to s.170CH(6). However, those guidelines are not a substitute for the words of the Act29. By virtue of s.170CH(2), any remedy ordered by the Commission must be a remedy that the Commission considers “appropriate” having regard to all the circumstances of the case including the matters set out in s.170CH(2). Section 170CH(6) confers a general discretion “if the Commission considers it appropriate in all the circumstances of the case” to “make an order requiring the employer to pay the employee an amount ordered by Commission in lieu of reinstatement” subject to the Commission having regard “to all the circumstances of the case including” the matters listed in s.170CH(7) - the same list of matters set out in s.170CH(2) - and subject also to the `cap’ provided for in s.170CH(8) and (9). If an application of the guidelines in Sprigg yields an amount which appears either clearly excessive or clearly inadequate, then the member should reassess any assumptions or intermediate conclusions made or reached in applying the guidelines so as to ensure that the level of compensation is in an amount that the member considers appropriate having regard “to all the circumstances of the case” including the matters listed in s.170CH(7) and subject to the `cap’ provided for in s.170CH(8) and (9). In this context it should be borne in mind that the result yielded by an application of the Sprigg guidelines may vary greatly depending upon particular findings in relation to the various steps including, in particular, step one, which necessarily involves assessments as to future events that will often be problematic.” [footnotes omitted]

[22] In relation to s.392(2)(a) it is agreed that although the company did have difficulties an order of compensation will not adversely affect the viability of the enterprise, the length of service of the applicant was according to the application approximately 3 years (employed since 2013) within s.392(2)(b), the employee would have received only another 2 weeks remuneration pursuant to ss.392(2)(c),(f),(g) and had not received other remuneration since termination, had made efforts to mitigate loss within s.392(2)(d), and there is no evidence of remuneration within and there appears to be none within s.393(2)(e). I have taken into account all matters within s.392(2)(g). There was no misconduct.

[23] In the circumstances I will order that 2 weeks pay ($3,259.70) gross be paid. An order requiring the employer to pay to Mr.Piggott this amount, taxed according to law, is issued in conjunction with this decision.

DEPUTY PRESIDENT

Appearances:

Mr A Dircks for the applicant

Mr S Heathcote for the respondent

Hearing details:

2016

Melbourne and Perth

23 May

 1   Employer submission, paragraph 2.1

 2   Print S2679

 3   Eg. s.387(b)(c) and (d) of the Fair Work Act 2009 refer to various forms of procedural fairness; s.389 of the Act provides that a redundancy is not ‘genuine’ if the employer has not complied with consultation obligations; the Termination, Change and Redundancy Test Cases (1984) 8 IR 34, (1984) 9 IR 115 at 126-128, award clauses and other provisions in the Act.

 4   [2013] FWCFB 431

 5   [2014] FWCFB 236

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