Dec 1596/96 S Print N6928

AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

Workplace Relations Act 1996

s.170EC Application to the Commission for Consent Arbitration

K. Shorten

(U No. 23069 of 1996)

D. Hausfield

(U No. 23070 of 1996)

P. Elwell

(U No. 23071 of 1996)

B. Beaton

(U No. 23073 of 1996)

and

Australia Meat Holdings Pty Ltd

VICE PRESIDENT ROSS SYDNEY, 28 NOVEMBER 1996

DECISION

1. introduction

This decision deals with applications for relief, pursuant to s.170EA(1), by four former employees of Australian Meat Holdings Pty Limited (A.M.H.) in respect of the termination of their employment. The parties have elected, by notice in writing pursuant to s.170EB(3), to have this matter dealt with by consent arbitration.

At the parties request all four matters were heard together. The evidence was heard in Tamworth on 8 and 9 October 1996. The parties were then directed to file written submission and a short oral hearing took place in Sydney on 17 October 1996. Further to the hearing on 17 October the parties were provided with an opportunity to file additional material to clarify a number of points which arose at the hearing. This process was complete by 23 October 1996.

During the course of the proceedings I drew the parties attention to a number of Industrial Relations Court decisions and invited them to make submission as to their relevance to the determination of the matters before me.

I propose to deal with some aspects of the relevant statutory framework before turning to the evidence.

2. the statutory framework

2.1 Section 170DC - opportunity to defend against allegations

Section 170DC provides:

"An employer must not terminate an employee's employment for reasons related to the employee's conduct or performance unless:

(a) the employee has been given the opportunity to defend himself or herself against the allegations made.'

(b) the employer could not reasonably be expected to give the employee that opportunity."

A number of decisions of the Industrial Relations Court have clearly stated that s.170DC is not a mere technical requirement but provides employees with a valuable right. As noted by Moore J. in Perrin v. Des Taylor Pty Ltd (10 March 1995, unreported) the purpose of s.170DC is at least twofold. First, it gives the employee the opportunity to demonstrate that the allegations have no foundation in fact or they should not be viewed as reflecting on the employee's capacity.

A second purpose of s.170DC is that an employee with whom an allegation has been raised may be able to persuade the employer that, while the allegation is of substance, there are factors that should persuade the employer not to terminate the employment. They may be extenuating personal circumstances or they may involve undertakings about future conduct.

The rights of an employee to be consulted before dismissal now embodied in s.170DC are not novel: see Gregory v. Philip Morris Ltd (1988) 80 ALR 455 at 473; Wheeler v. Philip Morris Ltd (1988) 97 ALR 282 at 306; Bostik (Australia) Pty Ltd v. Gorgevski (1) 1992 36 FCR 20 at 35; and Byrne v. Australian Airlines Ltd (1994) 120 ALR 274. In the United Kingdom: see Spencer v. Paragon Wallpapers (1976) IRLR 373, Williamson v. Alcan (UK) Ltd (1978) ICR 104; and W Weddel & Co Ltd v. Tepper (1980) ICR 286.

In Nicholson v. Heaven and Earth Gallery Pty Ltd [(1995) 126 ALR 233] Wilcox CJ. made the following observations about s.170DC(a); at 243-244:

"The paragraph does not require any particular formality. But this does not mean that it is unimportant or capable of profunctory satisfaction. Section 170DC carries into Australian labour law a fundamental component of the concept known to lawyers as "natural justice" or, more recently, "procedural fairness". The relevant principle is that a person should not exercise legal power over another, to that person's disadvantage and for a reason personal to him or her, without first affording the affected person an opportunity to present a case. The principle is well-established in public administrative law. It was accepted into international labour law when Art 7 was inserted in the Termination of Employment Convention. Section 170DC is directly modelled on Art 7. The principle is, I believe, well understood in the community. It represents part of what Australians call "a fair go". In the context of s170DC, it is not to be treated lightly. The employee is to be given the opportunity to defend himself or herself "against the allegations made"; that is, the particular allegations of misconduct or poor performance that are putting the employee's job at risk. Section 170DC(a) is not satisfied by a more exhortation to improve . . .

For s.170DC(1) to be satisfied, it would have been necessary for the respondent to determine what aspects of Mr Nicholson's conduct or performance were such as to justify possible dismissal and put those matters squarely to him, under circumstances where he had a fair opportunity to defend himself. That would have had to be done at a relevant time, close to the date of dismissal. It would not suffice that something was said to Mr Nicholson four weeks earlier, after which he was allowed to go on with his work as before."

In Gibson v. Bosmac Pty Ltd (1995) 60 IR 1; Wilcox CJ. elaborated on the comments he made in Nicolson's Case; at 7:

"In Nicolson v. Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199 at 209; 57 IR 50 at 59 I discussed the significance of s.170DC. I observed that the section imposed an important limitation of an employer's power of dismissal. Ordinarily, before being dismissed the reasons related to conduct or performance, an employee must be made aware of the particular matters that are putting his or her job at risk and given an adequate opportunity of defence. However, I also pointed out that the section does not require any particular formality. It is intended to be applied in a practical, commonsense way so as to ensure that the affected employee is treated fairly. Where the employee is aware of the precise nature of the employer's concern about his or her conduct or performance and has a full opportunity to respond to this concern, this is enough to satisfy the requirements of the section." [Cf: Selvachandran v. Peteron Plastics Pty Ltd (1995) 62 IR 371.]

Further in Johns v. Gunns Limited (unreported, 18 May 1995), Northrop J. stated:

"In construing and applying section 170DC of the Act, it must be remembered that the section is to be applied in practical situations of employer and employee. In these circumstances it may not be appropriate to import into that section all the learning developed by the Courts when considering procedural fairness to be applied by a person exercising a power conferred by statute. The section applies where the employer proposes to exercise a personal right or power not conferred by statute. Section 170DC imposes an obligation on the employer to do something before he exercises that right or power. Whether the employer has observed that obligation or not depends upon the whole of the material before the Court, but a decision must be made having regard to the practical circumstances of the relationship of employer and employee. ... On general principles, in order for an employer to give an employee the opportunity to defend allegations made where the employee is in danger of having his or her employment terminated, the employer should state that the employee is in danger of having the employment terminated. This was not done in this case."

It is apparent from the decided cases that mere general exhortation to an employee as to a necessity for improved performance, even when rather pointed, will not satisfy the obligations in s.170DC. There needs to be:

(i) an identification to the employee of the aspects of performance with which the employer is unhappy - referred to as `allegations' in s.170DC(a); and

(ii) an opportunity afforded to the employee for him or her to respond to the criticism - referred to in s.170DC(a) as an opportunity to `defend himself or herself against the allegations': (Lloyd v. R.J. Gilbertson (Qld) Pty Ltd (unreported, 14 June 1996, Madgwick J.).

In assessing compensation for a breach of s.170DC the Court has had regard to whether or not the employee concerned would prove suitable in the position in the long term. In Nicolson v. Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233, where long term suitability was considered unlikely, Wilcox CJ. stated, at 247:

"If I had reached the question of compensation, I would have assessed it on the basis that the procedural irregularity deprived Mr Nicolson of a chance of retaining his employment. However, I would not have awarded him a large sum."

In different factual circumstances the Court has awarded a substantial amount of compensation for a breach of s.170DC. For example in Perrin v. Des Taylor Pty Ltd (unreported, 10 March 1995) Moore J. held:

"The conduct of the respondent in contravening s.170DC resulted in the applicant losing employment that, apart from the contravention, he might have remained in for some period of time.

In my opinion the applicant is entitled to a substantial and not nominal amount of compensation. He has been dismissed form employment of a type that he has generally been engaged in for eighteen years in contravention of s.170DC. He is 51 years old. His salary was, on average, approximately $410.00 per week gross. Making some allowance for the possibility that the applicant would have been lawfully dismissed during the period following his termination because his work was unsatisfactory, I decide that the applicant should be awarded $9,500 compensation for the loss of employment arising from the unlawful termination and I so order." [at pp. 10-12]

The operation of s.170DC in a redundancy situation was considered in Kenefick v. Australian Submarine Corporation Pty Ltd (No. 2) [(1996) 65 IR 366 per Ryan, Beazley and North JJ]. In that case the Court held, at 371

"Section 170DC(a) is directed to the individual termination of one employee's employment. Where it speaks of the reasons for the termination, it is speaking of the reasons for the individual termination.

In the circumstances of the present case, the decision to reduce the 170 hull shop employee numbers by nine welders did not, on its own, lead to the termination of employment of any individual. It was one step in a two step process. Only after the second step had been taken, was it possible to identify an individual as a person whose employment would be terminated. The two steps were both necessary to produce the result of the individual termination of employment. the excess of labour and the application of the criteria for selection were both reasons for the termination of the individual. In other words, there were two reasons for the termination of each appellant. This analysis departs from that favoured by the learned Chief Justice. He said (at 115):

`There was only one reason: the redundancy situation. That is so notwithstanding that particular retrenchees were selected because of conduct performance characteristics thought to make them less valuable ASC employees than others.'

In our view, the statement that the employees were selected for termination "because of employment/performance characteristics" indicates that those factors can properly be described as "reasons" for the termination within the meaning of s 170DC." [at 371]

In most redundancy situations two steps are necessary to produce an individual termination of employment:

(i) there must be an operational requirement to reduce the number of persons employed; and

(ii) the selection criteria adopted results in the termination of certain individuals.

Both are reasons for the termination of an individuals employment. In circumstances where the selection criteria is based on conduct or performance than s.170DC is brought into play. Support for such a conclusion is to be found in the judgment of a Full Court of the Industrial Relations Court in Kenefick v. Australian Submarine Corporation Pty Ltd (No. 2) [(1996) 65 I.R. 366]. In that case the Court gave the following reasons for the approach taken:

"It would be anomalous if s.170DC can be construed as providing an opportunity to an employee to defend himself or herself against allegations of misconduct or inadequate performance made in isolation but as denying the same opportunity to an employee against whom similar allegations are made in the context of a need to select a few employees for termination from a larger pool because of an excess of labour. In both cases an assessment is made by the employer of performance and conduct. In both cases the assessment determines whether or not the employee's employment is terminated. There is an equal need for the employee to have an opportunity to respond because, in each case a convincing defence to the allegations may persuade the employer not to terminate the employment of that employee. . .

In our view it would require intractable language to impute to the legislature an intention to make what it obviously regards as a fundamental right to an opportunity to respond to allegations of misconduct or poor performance depend on a distinction between a termination which results from selection from a larger pool of eligible employees and one that does not." [at 371]

Section 170DC will not apply to all redundancies. It is only where the employer chooses certain employees from a pool of eligible employees by reference to conduct or performance criteria that s.170DC will apply.

The following general principles in relation to s.170DC may be extracted from the cases referred to,:

1. Section 170DC is not a mere technical requirement, rather it provides employees with a valuable right. While it does not require any particular formality this does not mean that it is unimportant or capable of profunctory satisfaction: Perrin v. Des Taylor Pty Ltd (unreported, 10 March 1995, Moore J.); Nicholson v. Heaven & Earth Gallery Pty Ltd (1995) 126 ALR 233; Ryan v. Furneys Stockfeeds Ltd (unreported, 28 March 1996, Beazley J.). The section is intended to be applied in a practical, common sense way to ensure that the affected employee is treated fairly: Gibson v. Bosmac Pty Ltd (1995) 60 IR 1; Johns v. Gunns Limited (unreported, 18 May 1995, Northrop J.).

2. A mere general exhortation to an employee as to a necessity for improved performance, even when rather pointed, will not be sufficient to satisfy s.170DE(1). There needs to be:

· an identification to the employee of the aspects of performance with which the employer is unhappy (the `allegations') and;

· an opportunity afforded to the employee for him or her to respond to the criticism (i.e. an opportunity to `defend himself or herself against the allegations'): Lloyd v. R.J. Gilbertson (Qld) Pty Ltd (unreported, 14 June 1996, Madgwick J.).

3. If the selection criteria in a redundancy situation in based on conduct or performance then s.170DC is applicable: Kenefick v. Australian Submarine Corporation Pty Ltd (No. 2) (1996) 65 IR 366.

4. In assessing compensation for breach of s.170DC regard is had to whether or not the employee concerned would prove suitable in the position in the long term: Nicholson v. Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233; Perrin v. Des Taylor Pty Ltd (unreported, 10 March 1995, Moore J.).

2.2 section 170de - valid reason for termination

Section 170DE provides:

"(1) An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service.

(2) A reason is not valid if, having regard to the employee's capacity and conduct and those operational requirements, the termination is harsh, unjust or unreasonable. This subsection does not limit the cases where a reason may be taken not to be valid."

The onus of proof under s.170DE is governed by s.170EDA(1), which provides:

"(1) If an application under section 170EA alleges that a termination of employment of an employee contravened subsection 170DE(1):

(a) the termination is taken to have contravened subsection 170DE(1) unless the employer proves that, apart from subsection 170DE(2), there was a valid reason, or valid reasons, of a kind referred to in subsection 170DE(1); and

(b) if the employer so proves, the termination is nevertheless taken to have contravened subsection 170DE(1) if the applicant proves that, because of subsection 170DE(2), the reason or reasons proved by the employer were not valid.

Section 170EDA(1) provides that where an application alleges that a termination was not for a valid reason, the onus lies on the employer to prove that there was a valid reason (para (a) of s.170EDA(1)).

Section 170DF(1) is also relevant to meaning of the expression `valid reason' in s.170DE(1). Section 170DF(1) is in the following terms:

"(1) An employer must not terminate an employee's employment for any one or more of the following reasons, or for reasons including any one or more of the following reasons:

(a) temporary absence from work because of illness or injury;

(b) union membership or participation in union activities outside working hours or, with the employer's consent, during working hours;

(c) non-membership of a union or of an association that has applied to be registered as a union under the provisions of this Act;

(d) seeking office as, or acting or having acted in the capacity of, a representative of employees;

(e) the filing of a complaint, or the participation in proceedings, against an employer involving alleged violation of laws or regulations or recourse to competent administrative authorities;

(f) race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin;

(g) absence from work during maternity leave or other parental leave."

Section 170DF(1) is to be read in conjunction with s.170EDA(2) which states:

"(2) If an application under section 170EA alleges that a termination of employment of an employee contravened subsection 170DF(1) on the ground that the termination:

(a) was for a particular reason or reasons referred to in that subsection that were stated in the application; or

(b) was for the reasons stated in the application that included a particular reason of reasons referred to in that subsection;

the termination is taken to have contravened subsection 170DF(1) unless the employer proves that:

(c) the employment was not terminated for the particular reason or reasons or for reasons that included the particular reason or reasons; or

(d) the particular reason was a reason, or the particular reasons were reasons, to which subsection 170DF(2) or (3) applied."

Articles 4 and 5 of the Termination of Employment Convention also bear an evident relationship to s.170DE(1). These articles state:

"Article 4

The employment of a worker shall not be terminated unless there is a valid reason for such termination connected with the capacity or conduct of the worker or based on the operational requirements of the undertaking, establishment or service.

Article 5

The following, inter alia, shall not constitute valid reasons for termination:

(a) union membership or participation in union activities outside working hours or, with the consent of the employer, within working hours;

(b) seeking office as, or acting or having acted in the capacity of, a workers' representative;

(c) the filing of a complaint or the participation in proceedings against an employer involving alleged violation of laws or regulations or recourse to competent administrative authorities;

(d) race, colour, sex, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin."

In Victoria v. The Commonwealth (1996) 138 ALR 129 the High Court made the following observations about article 5, at 171:

"Art 5 is not an exhaustive one. There obviously will be other reasons for termination which, having regard to the capacity and conduct of the employee and the operational requirements of the employer, are not valid. However, the Convention does not specify in detail what those reasons are. It leaves general word "valid" as the cornerstone of Art 4."

Three points may be made in relation to s.170DE.

First, in Victoria v. The Commonwealth (1996) 138 ALR 129 the High Court considered, among other things, the constitutional validity of s.170DE(2). Their Honours reached the following conclusion in relation to that issue; at 171:

The changing onus in s 170EDA(1) indicates that the harsh, unjust or unreasonable criterion is broader than what otherwise would be the test for validity. This is reinforced by the nature of s 170DE(2) which, in contrast to s 170DE(1) and Art 4 of the Convention, goes not to the reason for termination but to the overall effects of the termination. It recognises that, while a reason for termination might be a valid one, the overall effect of the termination in the circumstances might be harsh, unjust or unreasonable. This supports the conclusion that the inclusion of the "harsh, unjust or unreasonable" criterion does not implement the terms of the Convention but goes beyond its requirements and adds an alternative ground for making terminations unlawful. For these reasons, ss 170DE(2) and 170EDA(1) are, at least in part, invalid."

The Court went on to decide that s.170DE(2) and part of s.170EDA(1) were structurally severable from the remainder of Division 3:

"The operation of the remainder of the provisions of the Division will not be affected by their severance. Section 170DE(1), which accords with the Convention, can operate unaffected by the invalidity of s.170DE(2), which does not. Similarly, s.170EDA(1)(a), read down to exclude references to s.170DE(2), will implement the terms of Article 9 of the Convention despite the invalidity of paragraph (b) in that subsection. Hence the stated purpose of the parliament in enacting the Division will not be affected." [at 171]

In this matter I am obliged to consider the proper meaning of s.170DE(1) undistracted by s.170DE(2) and s.170EDA(1)(b) which the High Court has found to be beyond the constitutional power of the Commonwealth.

The second point to address concerns the proper construction of s.170DE(1) and in particular the meaning of the expressions `valid reason' and `operational requirements'.

In this regard it is important to bear in mind that s.170DE(1) may be conceptually considered to comprise of two requirements, namely:

- there must be a valid reason or reasons;

- which is connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment service.

If the obligations in s.170DE(1) were satisfied simply by establishing that the termination was connected with the operational requirements of the business then such a construction would effectively rob the words `valid reason' of any operation. It is unlikely that this was Parliament's intention given that, as noted by the High Court in Victoria v. The Commonwealth, the word `valid' is the cornerstone of article 4 of the Convention on which Division 3 is based.

A number of decisions of the Industrial Relations Court make it clear that s.170DE(1) will not be satisfied simply because a termination is said to be connected to the operational requirements of the business.

In Nettleford v. Kym Smoker Pty Ltd (unreported, 4 October 1996) Lee J. said:

"An employer must prove that at the time of dismissal of an employee the operational requirements of the undertaking provided proper grounds for termination of the employee's employment. Proof that the employer acted in the belief that termination of an employee's services was based on the operational requirements of the employer's business would not satisfy the onus that the employer prove that there is a valid reason for the termination."

Similarly, in Kerr v. Jaroma Pty Ltd t/as Treasury Motor Lodge (unreported, 7 October 1996) Marshall J. said:

"It cannot be assumed that a mere desire by an employer to change the way in conducts its business which, in turn, leads to the termination of the employment of some of its employees will necessarily found a valid reason for the termination based upon the operational requirements of the undertaking . . . a decision to terminate employment taken for operational reasons from the subjective view of the employer will not necessarily result in a termination for a valid reason. There still must be a reason for such a termination which, on independent objective analysis, is capable of being proved by the employer to be valid."

In relation to the meaning of `valid reason' the following remarks of Northrop J. in Selvachandran v. Peteron Plastics Pty Ltd (1996) 62 IR 371 at 373 are relevant:

"Section 170DE(1) refers to a `valid reason, or valid reasons', but the Act does not give a meaning to those phrases or the adjective `valid'. A reference to dictionaries shows that the word `valid' has a number of different meanings depending on the context in which it is used. In the Shorter Oxford Dictionary, the relevant meaning given is" `2. Of an argument, assertion, objection, etc; well founded and applicable, sound, defensible: Effective, having some force, pertinency, or value.' In the Macquarie Dictionary the relevant meaning is `sound, just or well founded; a valid reason.'

In its context in s 170DE(1), the adjective `valid' should be given the meaning of sound, defensible or well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of s170DE(1). At the same time the reason must be valid in the context of the employee's capacity or conduct or based upon the operational requirements of the employer's business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. the provisions must `be applied in a practical, commonsense way to ensure that' the employer and employee are each treated fairly, see what was said by Wilcox CJ in Gibson v Bosmac Pty Ltd (1995) 60 IR 1, when considering the construction and application of a s170DC."

While the above statement was made prior to the judgment of the High Court in Victoria v. The Commonwealth his Honour's remarks have been adopted in two decisions subsequent to the High Court's judgment: Nettleford v. Kym Smoker Pty Ltd (unreported, 4 October 1996, Lee J.); and Kerr v. Jaroma Pty Ltd t/as Treasury Motor Lodge (unreported, 7 October 1996, Marshall J.).

In Nettlefold v. Kym Smoker Pty Ltd Lee J. made the following comments:

"Neither counsel made any submissions on the question whether the phrase "valid reason" used in sub-s170DE(1) of the Act imposed a requirement that in all the circumstances a termination of employment at the initiative of an employer not be unjust or unfair. The terms of the Act suggest that such a construction is arguable." [at p.5]

The Act does not define the term "operational requirements". Obviously it is a broad term that permits consideration of many matters including past and present performance of the undertaking, the state of the market in which it operates, steps that may be taken to improve the efficiency of the undertaking by installing new processes, equipment or skills, or by arranging for labour to be used more productively, and the application of good management to the undertaking. In general terms it may be said that a termination of employment will be shown to be based on the operational requirements of an undertaking if the action of the employer is necessary to advance the undertaking and is consistent with management of the undertaking that meets the employer's obligations to employees." [at p.8]

In the course of his judgment in Kerr v. Jaroma Pty Ltd t/as Treasury Motor Lodge Marshall J. made the following comments:

". . . a reason which is based on the operational requirements of an undertaking does not thereby become "valid" because of it being so characterised from the subjective view of the employer. The question remains as to whether the employer has satisfied its onus of proof in showing that a reason it alleges to be based on its operational requirements, in fact, was justified or objectively defensible in the circumstances. The Court will in each case determine, in the particular circumstances prevailing, whether any termination alleged to have been taken due to operational requirements was nonetheless effected for a valid reason, i.e., one which is defensible or justifiable on an objective analysis of the relevant facts." [at pp.20-21]

"In any event, I do not accept that in these cases the respondent has discharged its onus of proof under s170EDA(1)(a) of the Act. It has not persuaded me that it terminated the employment of the applicants for a valid reason connected with the operational requirements of its undertaking. I do not accept that the s170DE(1) of the Act, properly read, permits the termination of a good serving employee who is simply "tapped on the shoulder" and told she or he is no longer required because she or he no longer fits into an employer's vision for its business." [at p.22]

In Victoria v. The Commonwealth the High Court made the following observations which need to be considered in determining the meaning of the expression `valid reason' in s.170DE(1),:

· the harsh, unjust or unreasonable criterion is broader than what otherwise would be the test for invalidity. It goes not to the reason for termination but to the overall effects of the termination;

· the expression harsh, unjust or unreasonable is not merely a synonym for valid.

However the High Court's comments need to be seen in the context of the legislative provision they were construing, namely ss.170DE(1) and (2), and the shift in onus in s.170EDA(1). In particular the Court concluded that it was the shifting onus in s.170EDA(1) which `indicates that the inclusion of the harsh, unjust or unreasonable test is an additional ground of unlawful termination that goes beyond the requirement for the reason for termination to be valid'. [at 171]

The Court's observations do not, in my view, preclude a construction of s.170DE(1) such that the expression `valid reason' imposes a requirement that a termination of employment at the initiative of an employer is not to be unjust or unfair. I have reached this conclusion on the basis that I am, in effect, construing the meaning of s.170DE(1) in a different statutory context to that considered by the High Court in Victoria v. The Commonwealth. In particular I am considering the proper meaning of s.170DE(1) undistracted by s.170DE(2) or s.170EDA(1)(b).

A number of decisions of the Industrial Relations Court provide practical illustrations of what may or may not constitute a valid reason within the meaning of s.170DE(1).

For example it has been held that the failure to comply with an unreasonable direction does not provide a valid reason for the termination of a person's employment. In Izdes v. L.G. Bennett & Co Pty Ltd t/as Alba Industries [14 September 1995, unreported] Beazley J. stated

"In determining whether a refusal to carry out the lawful and reasonable directions of an employer constitutes a valid reason for termination, it is necessary to have regard to all the circumstances, including the nature and degree of the employee's conduct." [Cf: Tranter v. Council of the Shire of Wentworth (unreported, 24 October 1995, Marshall J.)]

Conversely the failure to follow a lawful instruction which was reasonable in the circumstances may provide an employer with a valid reason to terminate an employee's employment: Cox v. South Australian Meat Corporation [unreported, 13 June 1995 per von Doussa J].

It has also been held that a decision to terminate an employee in breach of the employers' obligations under State and Federal awards is not to terminate an employee's employment for a valid reason: Ferry v. Minister for Health, Western Australia [unreported, 25 August 1995 per Marshall J.].

Further the reason for the termination must be considered in the context of the penalty of termination of employment. On this basis a trivial misdemeanour may not constitute a valid reason for termination of employment. The penalty of termination must be proportionate to the reason relied upon: Abdallah v. Merino Gold Ltd [unreported, 14 October 1996, per Parkinson JR].

The third issue concerns the operation of s.170DE in redundancy situations.

In Victoria v. The Commonwealth, the High Court made it clear that a redundancy situation may nonetheless lead to a breach of s.170DE(1). The joint judgment states that, at 172-173:

". . . if s170DE(1) is read according to its terms, that aspect of it which requires that there be a valid reason for termination connected with operational requirements would operate to prevent a State from determining the number and identity of those to be made redundant. This operation is, nonetheless, avoided by reason that s6 of the Act is to be read down in the manner earlier indicated."

Further at 173:

"If read according to their terms, the prohibitions in ss 170DB, 170DC, 170DE(1) and 170DF leave the States free to determine the number and identity of those whom they wish to employ, the term of their employment and, save for s.170DE(1), the number and identity of those whom they wish to dismiss on redundancy grounds. However, in this last regard, the effect of reading down s6 is that the States are not bound by s 170DE(1) to the extent that it would otherwise operate to prevent them determining the identity and number of those they wish to make redundant." (emphasis supplied)

In Kenefick v. Australian Submarine Corporation Pty Ltd (1996) 65 IR 366, 372-373 a Full Court of the Industrial Relations Court held that the termination of employment of some employees on redundancy grounds contravened s170DE(1) of the Act in circumstances where the employer had not attempted to discharge its onus under s170EDA(1)(a) of the Act.

Section 170DE(1) is concerned with the termination of the employment of an individual employee. The terminations in the matters before me were effectively for two reasons. The decision to reduce the overall numbers of employees at the feedlot did not of itself lead to the termination of the individual applicants, and the process of selection was only commenced after the decision to reduce overall numbers had been taken. Consequently, the respondent carries the onus of showing that there was a valid reason for the selection of each applicant [at 372-373].

The following general principles in relation to s.170DE(1) may be extracted from the cases referred to:

1. Section 170DE(2) and s.170EDA(1)(b) are beyond the constitutional power of the Commonwealth. As these provisions are structurally severable s.170DE(1) can operate unaffected by the invalidity of the other provisions: Victoria v. The Commonwealth (1996) 138 ALR 129.

2. Section 170DE(1) should be applied in a practical commonsense way to ensure that the employer and employee are each treated fairly: Selvachandran v. Peteron Plastics Pty Ltd (1996) 32 IR 371.

3. To satisfy the requirements of s.170DE(1) an employer must prove that at the time of dismissal the operational requirements of the undertaking provided proper grounds for termination. Two elements must be established:

· a valid reason or reasons;

· which is connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service.

It is not sufficient for an employer simply to show that he or she acted in the belief that the termination was based on operational requirements. There must also be a valid reason for the termination.

Kenefick v. Australian Submarine Corporation Pty Ltd (1996) 65 IR 366; Nettlefold v. Kym Smoker Pty Ltd (unreported, 4 October 1996, Lee J); Kerr v. Jaroma Pty Ltd t/as Treasury Motor Lodge (unreported, 7 October 1996, Marshal J).

4. A redundancy situation may nonetheless lead to a breach of s.170DE(1). The termination must be for a valid reason connected with operational requirements: Kenefick v. Australian Submarine Corporation Pty Ltd (1996) 65 IR 366.

5. A valid reason is one which is sound, defensible or well founded. It must be defensible or justifiable on an objective analysis of the relevant facts: Selvachandran v. Peteron Plastics Pty Ltd; Nettlefold v. Kym Smoker Pty Ltd; Kerr v. Jaroma Pty Ltd t/as Treasury Motor Lodge. Accordingly the failure to comply with an unreasonable direction does not provide a valid reason for the termination of a person's employment: Izdes v. L.G. Bennett & Co Pty Ltd t/as Alba Industries (unreported, 14 September 1995, Beazley J); Tranter v. Council of the Shire of Wentworth (unreported, 24 October 1995, Marshall J.)

6. The expression `valid reason' in s.170DE(1) imposes a requirement that a termination of employment is not unjust or unfair: Nettlefold v. Kym Smoker Pty Ltd. In this regard the reason for the termination must be considered in the context of the penalty of termination. Such a penalty must be proportionate to the reason relied upon: Abdallah v. Merino Gold Ltd [unreported, 14 October 1996, Parkinson JR].

7. A reason which is capricious, fanciful, spiteful or prejudiced can never be a valid reason for the purposes of s.170DE(1): Selvachandran v. Peteron Plastics Pty Ltd.

8. The expression `operational requirements' is a broad term which permits consideration of many matters including:

- past and present performance of the undertaking; and

- the state of the market in which it operates.

A termination of employment will be based on the operational requirements of an undertaking if the action of the employer is necessary to advance the undertaking and is consistent with management of the undertaking that meets the employer's obligations to employees: Nettlefold v. Kym Smoker Pty Ltd.

2.3 remedy

On completion of a consent arbitration, s.170EC(4) provides that the Commission may make an award:

· that provides for a remedy of the kind able to be granted by the Court under section 170EE; or

· that provides that there is no entitlement to any such remedy.

Section 170EE is in the following terms:

"(1) In respect of a contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, the Court may, if the Court considers it appropriate in all the circumstances of the case, make the following orders:

(a) an order requiring the employer to reinstate the employee by:

(i) reappointing the employee to the position in which the employee was employed immediately before the termination; or

(ii) appointing the employee to another position on terms and conditions no less favourable than those on which the employee was employed immediately before the termination; and

(b) if the Court makes an order under paragraph (a):

(i) any order that it thinks necessary to maintain the continuity of the employee's employment; and

(ii) an order requiring the employer to pay the employee the remuneration lost by the employee because the termination.

(2) If the Court thinks, in respect of a contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, that the reinstatement of the employee is impracticable, the Court may, if the Court considers it appropriate in all the circumstances of the case, make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate.

(3) In working out the amount of the compensation for the purposes of subsection (2), the Court is to have regard to the remuneration that the employee would have received, or would have been likely to have received, if the employer had not terminated the employment, but the amount of compensation:

(a) must not exceed, in respect of any employee, the amount of the remuneration that would have been received by the employee in respect of the period of 6 months that immediately followed the day on which the termination took effect if the employer had not terminated the employment and the employee had continued to receive remuneration in respect of the employment at the rate at which he or she received remuneration immediately before the termination took effect; and

(b) must not exceed, in respect of an employee who is not employed under award conditions, the applicable amount on the day on which the termination took effect.

(4) The applicable amount for the purposes of paragraph (3)(b) is:

(a) subject to paragraph (b), $30,000; or

(Note: indexed to $32,000 from 1 July 1996 - see Reg 30DA)

(b) if regulations made in accordance with Subdivision CA prescribe a formula for the annual indexation of the amount referred to in paragraph (a) - the amount worked out using that formula as it applied from time to time.

(5) In respect of a contravention of section 170DB constituted by the termination of employment of an employee, the Court may make an order requiring the employer to pay to the employee an amount of damages equal to the amount of the compensation which, if it had been given by the employer to the employee when the employment was terminated, would have resulted in the employer not contravening that section.

(6) Nothing in this section limits the Court's power to make an interim or interlocutory order in relation to an application referred to the Court under section 170ED.

(7) For the purposes of this section, an employee is taken not to be employed under award conditions if wages and conditions of employment of the employee are not regulated by one or more relevant awards that binds the employer of the employee.

(8) In this section:

"relevant award" mean an award or State award;

"termination of employment" means a termination of employment that occurred before, or occurs after, the commencement of this section, but does not include a termination of employment in respect of which an application under section 170EA was made to the Court before the commencement if the Court pronounced final judgment in respect of the application before that commencement."

It is apparent from s.170EE that reinstatement is intended to be the primary remedy to a contravention of a provision of Division 3 of Part VIA of the Act (other than s.170DB or 170DD). This is confirmed by the joint judgment of Wilcox CJ. and Keely J. in Liddell v. Lembke (1994) 127 ALR 342. In that case the Court was concerned with the question whether the Industrial Relations Act (NSW) provided an adequate alternative remedy to the Federal Act. The extent of the remedies provided under each Act was relevant to that issue. Wilcox CJ. and Keely J. stated, at 360:

"Plainly, it was Parliament's intention that the primary remedy for unlawful termination should be reinstatement and that compensation should be available only where this was impracticable.

The precise meaning of "impracticable" in this context should be left to another day; the question is one of general importance and it was not fully argued in this case. But, although "impracticable" does not mean "impossible", it means more than "inconvenient" or "difficult". The imposition of such a stringent limitation on the court's power to award compensation, rather than order reinstatement, is inconsistent with the notion that Parliament intended the court to have an open discretion whether to intervene at all."

The meaning of the word `impracticable' was given some further consideration by Wilcox CJ. in Nicholson v. Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233 where his Honour said, at 244:

"It is important to note that Parliament stopped short of requiring that, for general compensation to be available, reinstatement be impossible. The word `impracticable' requires and permits the court to take into account all the circumstances of the case, relating to both the employer and the employee, and to evaluate the practicability of a reinstatement order in a commonsense way. If a reinstatement order is likely to impose unacceptable problems or embarrassments, or seriously affect productivity, or harmony within the employer's business, it may be "impracticable" to order reinstatement, notwithstanding that the job remains available."

This approach was followed by von Doussa J. in Cox v. South Australian Meat Corporation (unreported, 13 June 1995) and by Beazley J. in Izdes v. L.G. Bennett & Co Pty Ltd t/as Alba Industries (unreported, 14 September 1995).

Both Liddell v. Lembke and Nicholson v. Heaven & Earth Gallery Pty Ltd were decided prior to the amendment of s.170EE(1) to insert the words `if the court considers it appropriate in all the circumstances'. However, in Patterson v. Newcrest Mining Ltd (unreported, 6 June 1996, Wilcox CJ., von Doussa and North JJ.) the Court held that the subsequent amendment of s.170EE(1) did not lead to a need to reconsider what had been said in the joint judgement in Liddell v. Lembke regarding reinstatement. The Court went on to indicate that the requirement to consider the impracticality of reinstatement necessarily requires the Court to have regard to all the relevant circumstances of the case relating to the employer and the employee. This process involves evaluating the practicality of a reinstatement order in a commonsense way.

The fact that the applicant's position has been filled by another person does not make reinstatement impracticable. A contrary conclusion would make the primary remedy ineffective. An employer could refill the position immediately thereby depriving the terminated employee of the remedy of reinstatement: Johns v. Gunns Limited (18 May 1995, unreported, Northrop J.).

Section 170EE(1)(b) provides that if the Court or the Commission orders reinstatement then if it considers it appropriate in all the circumstances of the case, then the following orders may be made:

"(i) any order that it thinks necessary to maintain the continuity of the employee's employment; and

(ii) an order requiring the employer to pay to the employee the remuneration lost by the employee because of the termination."

While orders relating to continuity of employment and lost remuneration are discretionary such orders are generally made when reinstatement is ordered. As Northrop J. said in Johns v. Gunns Limited (unreported, 18 May 1995):

"The policy of the present legislation is to give protection and relief to employees who have been terminated for no valid reason. Where reinstatement is practical, as here, the employee should be reimbursed any wages lost."

It has been suggested that it is only in exceptional circumstances that an order for lost remuneration would not be made where reinstatement is ordered [Klingenberg v. I.R. Cootes Pty Ltd, 24 August 1995, unreported, Marshall J.; Ferry v. Minister for Health for Western Australia, 25 August 1995, unreported, Marshall J.].

In my view a test of `exceptional circumstances' is too restrictive. The discretion is general in nature. Such orders may be made if the Court or Commission considers them to be `appropriate in all the circumstances of the case'. The comments in Klingenberg and Ferry are distinguishable as those cases were decided prior to the amendment of s.170EE(1) to include the expression `if the Court considers it appropriate in all the circumstances of the case'.

No doubt orders relating to continuity of employment and lost remuneration would generally be made when reinstatement is ordered. Nevertheless one can conceive of circumstances where such orders are not appropriate. For example an order for lost remuneration may not be appropriate where the Commission forms the view that the employees' misconduct warranted suspension rather then termination. Similarly in circumstances where the employee was on workers compensation prior to termination and in the period after termination such an order would not be appropriate as there has been no loss of remuneration.

If reinstatement is impracticable then consideration must be given to what compensation should be awarded. In this regard s.170EE(3) provides that in working out the amount of compensation the Court (or Commission as the case may be) is to `have regard to the remuneration that the employee would have received, or would have been likely to have received, if the employer had not terminated that employment.'

The expression `having regard to' has a generally accepted meaning in a context such as s.170EE(3). A variant of this was discussed by Mason J. in R v. Hunt; Ex parte Seas Investments Pty Ltd (1979) 25 ALR 497 at 504:

"When sub-s(7) directs the Permanent Head to "have regard to" the costs, it requires him to take those costs into account and to give weight to them as a fundamental element in making his determination."

and later:

"However, the sub-section does not direct the Permanent Head to fix the scale of fees exclusively by reference to costs necessarily incurred and profit. The sub-section is so generally expressed that it is not possible to say that he is confine to these two considerations. The Permanent Head is entitled t have regard to other considerations which show, or tend to show, that a scale of fees arrived at by reference to costs necessarily incurred, with or without a profit factor, is excessive or unreasonable." [Cf Municipal Officers' Association of Australia v. Lancaster & Anor (1981) 37 ALR 559 at 578-9 and 590, Croft v. Minister for Health (1983) 45 AKR 449 and 457 and Queensland Medical Laboratory & Ors v. Blemett & Ors (1988) 84 ALR 615 at 623]

Having regard to the decisions cited s.170EE(3) requires lost remuneration to be considered as a fundamental element in assessing compensation though it is not the only matter that might be considered. The terms of s.170EE(3) tends to focus attention on the circumstances of the employee. Indeed the use of the expression `compensation' is consistent with the Commission's task being to review the effect of the termination on the employee [see Krupp - Geir v. Open Family (Australia) Incorporated, 6 February 1996 unreported, Moore J.].

The Industrial Relations Court has generally adopted a five step approach to the assessment of compensation. A useful illustration of this approach is set out in Slifka v. J.W. Sanders Pty Limited (unreported, 19 December 1995, North J.). The steps involved are as follows:

Step 1: The employee is to be put in the financial position he or she would have been in but for the unlawful termination. This involves estimating how long the employee would have remained in the employment. In circumstances where the Court or Commission forms the view that the employee would have stayed in his or her former job for a number of years then remuneration that would have been received over that period is calculated. This may include long service leave and potential bonuses: Slifka v. J.W. Sanders Pty Limited.

Alternatively the circumstances of a particular case may lead to the conclusion that the employment would only have continued for a matter of weeks: Reine v. Rumpe [unreported, 1 November 1995, Madgwick J.].

Non-pecuniary benefits such as remuneration can be included as `remuneration' under s.170EE(3). In May v. Lilyvale Hotel Pty Ltd [1 December 1995, unreported, Wilcox CJ.] Wilcox CJ said:

"That Parliament intended `remuneration' in s.170EE(3) to cover more than salary and wages is suggested by the Act itself. The amending legislation that inserted the present s.170EE (Act no. 97 of 1994) also inserted s.170CD. That section excludes from Subdivisions B, C, D, E and F of Division 3 employees whose `relevant wages' exceed particular amounts. Plainly, the word `remuneration' was chosen, for s.170EE(3), in order to denote a concept wider than wages. Non-monetary benefits are not wages: see Ardino v Count Financial Group Pty Limited (1994) 1 IRCR 221 at 228-229. But they fall within the concept of remuneration." [Cf: Rigby v. Technisearch Ltd, (3 May 1996, unreported per Marshall J.)]

Accordingly the calculation of lost remuneration includes superannuation contributions and the value of non-pecuniary benefits such as the provision of a car [Messervy v. Maldoc Pty Ltd, (1995) 63 IR 61; Izdes v. L.G. Bennett & Co Pty Ltd t/as Alba Industries, (unreported, 14 September 1995, Beazley J.)], or free board and/or meals: Christine May v. Lilyvale Hotel Pty Limited, (unreported, 1 December 1995, Wilcox CJ.); Johnson v. Halsmoree Pty Ltd (unreported, 31 May 1995, von Doussa J); Kerr v. Jaroma Pty Ltd t/as Treasury Motor Lodge (unreported, 7 October 1996, Marshall J.)].

Step 2: Monies earned since the date of the termination are deducted. In this regard it should be noted that workers compensation payments are deducted from the amount of compensation calculated in Step 1 but social security payments are not.

In Brown v. Colin Power and Kay Power t/as Royal Hotel Tumut (unreported,19 April 1996) Moore J. took workers compensation payments into account and distinguished them from social security payments.

In Mullany v. Active Concrete (unreported, 3 May 1995) Wilcox CJ. said:

"The Court is required under s.170EE(3), in working out the amount of compensation, `to have regard to the remuneration that the employee would have received or would have been likely to have received if the employer had not terminated the employment'; but the amount must not exceed the amount of remuneration that would have been received by the employee in respect of the period of six months that immediately followed the date of termination.

I think that the subsection directs attention to remuneration received in respect of work done, not money received from other sources and unrelated to work done; for example, social security receipts or gifts received from organisations or persons who take a charitable interest in the employee's plight. Accordingly, I do not propose to reduce the amount of compensation to which I think the applicant is otherwise entitled because of the social services payments." [Cf: Janick v. ICI Dulux Australia (unreported, 4 September 1995, Wilcox CJ.); Tranter v. Council of the Shire of Wentworth (unreported, 24 October 1995, Marshall J.)]

The question of whether or not an employee whose services have been terminated has an obligation to mitigate his or her loss does not appear to have been conclusively determined in the Industrial Relations Court. In Bechara v. Healey Madgwick J. expressed the view that such a duty exists:

"In a practical sense, I think there is a duty upon an employee whose services have been terminated to mitigate the loss for which he or she seeks compensation pursuant to s.170EE(2) of the Act. So much is inherent in the notion of `compensation', upon which the unfair termination provisions of the Industrial Relations Act take their stand. . .

For lawyers, the essence of compensation is that a loss is to be made up for. This is a notion quite consonant with the ordinary meaning of that word. It is generally thought not to be just to make up for a loss which might reasonable have been reduced or avoided by the claimant for compensation. That is so in all cases of common law civil liability, whether tortious or contractual. I am not aware of any doctrine that a statutory right to "compensation" connotes, by contrast, a lack of obligation to mitigate the losses that are to be compensated. Indeed, if a loss might have been avoided by action an employee has unreasonably failed to take, it is difficult to understand what legislative policy or purpose might be served by mulcting an employer in purported compensation for such a loss. The relevant provisions of the statute are not penal. Neither is the compensation which may be awarded either a mere solatium or a discrete entitlement, such as a social security benefit, where considerations of reasonable self-protection might be misplaced.

In any case, the compensation is to be "of such amount as the Court thinks appropriate". There is plainly a discretion vested in the court to award nothing if the court thinks that appropriate . There is plainly a discretion vested in the court to award nothing if the court thinks that appropriate. There is no reason not to adopt the guidance of the common law as to civil remedies. In actions for breach of statutory duty generally, e.g., for damages for personal injury caused by unsafe work practices, it is beyond question that the plaintiff must mitigate. What, one may ask, is s.170EE(2) but a statutory from of action for breach of statutory duty?" [Decision No. 142/96, 19 April 1996 at pp. 8-9, as yet unreported]

His Honour's decision was subsequently upheld on appeal [Bechara v. Healey Decision No. 282/96, 3 June 1996 per von Doussa, Marshall and North JJ., as yet unreported]. However the question of mitigation was not argued. In the course of argument counsel for the appellant indicated that he did not seek to dispute, as a matter of general principle, his Honour's statement that in a practical sense there is a duty upon an employee whose services have been terminated to mitigate his or her loss.

Failure to mitigate loss led to a reduction in compensation: Blanch v. Tjuwanpa Resource Centre (Aboriginal Corporation) [3 April 1996 per von Doussa J].

A contrary view is taken by Marshall J. in Ferry v. Minister for Health Western Australia (25 August 1995), in which his Honour said:

"The fact that the applicant has not obtained work since his dismissal was not developed in evidence or submissions other than the Court being informed by Mr Herron to the effect that the applicant is currently a student. In any event, there is no obligation on an employee dismissed for no valid reason to mitigate his or her losses. See Australasian Meat Industry Employees' Union v. Sunland Enterprises Pty Ltd (trading as Sunland Wholesale Meats) (1988) 81 ALR 213, 222 (lines 36-37) per Gray J., in the similar context of the predecessor to s.334(7) of the Act."

I prefer the view expressed by Madgwick J. in Bechara v. Healey. It is the more recent decision and, unlike Ferry v. Minister for Health Western Australia, it was decided after the amendment of s.170EE(1) to insert the phrase `if the Court considers it appropriate in all the circumstances of the case'.

Step 3: The remaining compensation amount is then discounted for `contingencies'. For example, regard is had to the fact that the applicant may not have remained in his or her former employment for the full length of time on which the loss was calculated in Step 1. This process takes account of the fact that the employee is receiving a lump sum now rather than periodic payments over some future period. Accordingly some allowance is made for the fact that part of the compensation will be received earlier than if the applicant had completed his or her employment with the respondent. In Slifka v. J.W. Sanders Pty Limited North J. discounted the compensation amount by 25% for contingencies.

Step 4: The impact of taxation is then calculated to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment. This process is explained in some detail in Slifka v. J.W. Sanders Pty Limited. In essence the Court adopts a two stage approach:

- the compensation amount is reduced by the tax the applicant would have paid if he or she had not been terminated receiving the money as wages. This gives a net amount.

- the net amount is then increased by the amount of tax the applicant will be liable to pay on the compensation awarded by the Court or the Commission. Compensation awards are eligible termination payments within the definition contained in s.27A(1) of the Income Tax Assessment Act 1936. This is because they are payments made in consequence of the termination of the employment of the taxpayer: Atlas Tiles Ltd v. Briers (1978) 144 CLR 202 at 224; Reseck v. Federal Commissioner of Taxation (1975) 133 CLR 45. Eligible termination payments may be tax free or may attract tax at special rates up to 30% of the amount of the payment. The factors which govern the applicable rate include the age of the recipient, the source of the payment, and whether the payment exceeds a specified dollar threshold: see especially s.159A of the Income Tax Assessment Act 1936. The tax payable on an award in a particular case will need to be determined having regard to these factors.

In Slifka the practical consequence of this approach was that the compensation award was reduced by 28% and the remainder was then increased by 15%.

Step 5: The legislative cap on compensation is then applied. Section 170EE(3)(a) provides for the relevant limit on the amount of compensation which may be awarded under s.170EE(2). Such compensation may not exceed the amount of remuneration that would have been received by the applicant in respect of the period of six months after the date of termination. The applicable rate is the rate of remuneration received before the termination took effect. As noted in Step 1 remuneration in context would also include an amount equivalent to any non-pecuniary benefits received such as a car, free board and/or meals: May v. Lilyvale Hotel Pty Ltd (unreported, 1 December 1995, Wilcox CJ.).

In circumstances where the Court is satisfied that a reasonable assessment of compensation would exceed the statutory ceiling then it has decided that it is not necessary to determine the extent of that excess: May v. Lilyvale Hotel Pty Ltd (unreported, 1 December 1995, Wilcox CJ.).

It can be seen that the approach taken in a number of cases in the Industrial Relations Court is to assess the appropriate amount of compensation in the light of all relevant circumstances, including the remuneration that the employee would have received, or have been likely to have received, if the employer had not terminated the employment and, if that amount exceeds the permissible figure, reduce the compensation to that figure.

In this regard it should be noted that the Court has stated that s.170EE(3) limits the Court and the Commission to an amount not exceeding the amount of remuneration that the employee would have earned in the six months immediately following the termination, if termination had not occurred. This formula does not set the top of a range of appropriate compensation that must be adjusted downwards to allow for contingencies. It is simply an arbitrary cap on the amount that may be awarded. In this regard I agree with what Moore J. said in Perrin v. Des Taylor Pty Ltd (10 March 1995, unreported),:

"I do not accept the submission of counsel for the respondent that the statutory limits found in s.170EE(3) and (4) on the amount that the Court might award by way of compensation indicates a range where the statutory limit is to be seen as the maximum amount to be awarded only in the most grievous or serious contravention of a provision in Div3. The purpose of those provisions is no more than to limit the jurisdiction of the Court so as to preclude awards of compensation in excess of those amounts. That view is consistent with the legislative history of s.170EE which was enacted by the Industrial Relations Reform Act 1993 containing no limit on the amount of compensation that might be awarded by was amended to introduce the limit found in s.170EE(3) and (4) by the Industrial Relations Amendment Act (No. 2) of 1994."

Further in Bean v. Milstern Retirement Services Pty Ltd (unreported, 2 June 1995) Moore J. reaffirmed the view expressed above and said:

"The provisions of s.170EE which enable compensation to be ordered are not intended to punish an employer for contravening the Act on the basis that a less serious contravention should attract a small amount of compensation whole a more flagrant contravention should attract a greater amount of compensation. The purpose of s.170EE(3) is to compensate an employee for the unlawful termination though plainly the subject matter of the statutory provision that is found to have been contravened may be relevant."

The views expressed by Moore J. have been adopted by von Doussa J. in Cox v. South Australian Meat Corporation (unreported, 13 June 1995); Wilcox CJ. in Messervy v. Maldoc Pty Limited t/as Toongabbie Hotel (unreported, 30 June 1995); North J. in Slifka v. J.W. Sanders Pty Limited (unreported, 19 December 1995).

In Aitken v. The Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia - Western Australian Branch ( 7 August 1995) Lee J. made the following general observation:

"The compensation to be ordered to be paid under s.170EE(2) is such amount as the Court thinks appropriate. It is a statutory remedy for which no criteria of assessment are prescribed, other than a requirement in s.170EE(3) that the Court have regard to the remuneration that the employee would have received, or would have been likely to have received, if the employer had not terminated the employment and subject to the limit set in that sub-section.

In assessing what compensation is appropriate, therefore, the Court will have regard to what is reasonable in the circumstances and will look at what would have been likely to occur had the Act not been contravened (See: Nicolson v. Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233 at 246 per Wilcox CJ.). The Court will consider the detriment occasioned to the employee by employer's the contravention of the Act, and the extent to which it is reasonable to compensate the employee for such events by reason of the employer's failure to adhere to the provisions of the Act. Division 3 of the Act provides the context in which s.170EE is to be constructed and the contract indicate that the Act is concerned, inter alia, with the protection of the dignity of employees and a breach of the Act in respect of which s.170EA provides a right to seek redress and s.170EE provides an entitlement to receive compensation may be said to have some of the characteristics of a statutory tort . . .

The purpose of awarding compensation to an employee for an employer's failure to abide by the terms of the Act is not only to redress a wrong done to an employee to secure, in the public interest, greater awareness of, and adherence to the provisions of the Act and a measure which provides compensation for consequences caused by conduct the Act seeks to prevent meets that purpose." [at pp. 10-11]

The following general principles regarding reinstatement and compensation may be extracted from the cases referred to:

1. Reinstatement is intended to be the primary remedy to a contravention of a provision of Division 3 of Part VIA of the Act (other than ss.170DB or 170DD): Liddell v. Lembke (1994) 127 ALR 342; Nicholson v. Heaven & Earth Gallery (1994) 126 ALR 233; Patterson v. Newcrest Mining Ltd (unreported, 6 June 1996, Wilcox CJ., von Doussa and North JJ.).

2. If reinstatement is ordered then orders relating to continuity of employment and lost remuneration may be made pursuant to s.170EE(1)(b). While such orders are discretionary they are generally made: Johns v. Gunns Limited (unreported, 18 May 1996, Northrop J.).

3. The practicality of reinstatement should be evaluated in a common sense way. If a reinstatement order is likely to impose acceptable problems or embarrassments or seriously affect productivity, or harmony within the employer's business, it may be impracticable to order reinstatement notwithstanding that the job remains available. Nicholson v. Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233; Cox v. South Australian Meat Corporation (unreported, 13 June 1995, Beazley J.); Izdes v. L.G. Bennett & Co Pty Ltd t/as Alba Industries (unreported, 14 September 1995, Beazley J.); Patterson v. Newcrest Mining Ltd (unreported, 6 June 1996, Wilcox CJ., von Doussa and North JJ.).

4. If reinstatement is impractical then consideration is to be given to whether compensation, if considered appropriate in all the circumstances of the case, should be awarded.

5. Lost remuneration is a fundamental element in assessing compensation though it is not the only matter that may be considered: Krupp - Geir v. Open Family (Australia) Incorporated (unreported, 6 February 1996, Moore J.).

6. In assessing the amount of compensation to be awarded the following approach has been adopted by the Court:

STEP 1: Estimate the remuneration the employee would have received, or have been likely to have received, if the employer had not terminated the employment.

STEP 2: Deduct monies earned since termination. Workers compensation payments are deducted but not social security payments. The failure of an applicant to mitigate his or her loss may lead to a reduction in the amount of compensation awarded.

STEP 3: The remaining amount of compensation is discounted for contingencies.

STEP 4: The impact of taxation is calculated to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.

STEP 5: The legislative cap on compensation is applied. Section 170EE(3) limits the Court and the Commission to an amount not exceeding the amount of remuneration that the employee would have earned in the six months immediately following the termination, if the termination had not occurred. This is simply an arbitrary cap on the amount that may be awarded. It does not operate as a maximum amount to be awarded only in the most grievous or serious cases: Perrin v. Des Taylor Pty Ltd (unreported, 10 March 1995, Moore J.); Bean v. Milstern Retirement Services Pty Ltd (unreported, 2 June 1995, Moore J.); Cox v. South Australian Meat Corporation (unreported, 13 June 1995, von Doussa J.); Messervy v. Maldoc Pty Limited t/as Toongabbie Hotel (unreported, 30 June 1995, Wilcox CJ.); Slifka v. J.W. Sanders Pty Ltd (unreported, 19 December 1995, North J.). [see generally Slifka v. J.W. Sanders Pty Ltd (unreported, 19 December 1995, North J.)]

In my view it is appropriate that, in the absence of any Commission decision to the contrary, I apply the principles developed by the Court in respect of the assessment of compensation in unlawful termination cases. The consistent application of such principles is necessary to promote certainty and avoid the arbitratrary determination of compensation.

I now turn to consider the evidence in the proceedings before me. I will then apply the general principles set out above to the determination of these matters.

3. the evidence

Eleven witnesses were called in the course of these proceedings. In addition to the four applicants the following persons gave evidence:

- Mr Downer: occupational health and safety officer and mill hand at the Caroona Feedlot;

- Mr McDermott: AWU organiser in the New England region;

- Mr Hartin: mill foreman at the Caroona Feedlot;

- Mr Mathers: manager of the Caroona Feedlot;

- Mr Mann: former mill manager of the Caroona Feedlot;

- Mr Woods: stock manager of the Caroona Feedlot;

- Ms Hoggan: branch accountant at the Caroona Feedlot.

While there were a number of conflicts in the evidence given it appeared to me that most witnesses gave their evidence honestly and to the best of their recollection. Despite this general observation I have formed the view that the evidence given by Mr Mathers and Mr Mann was, for different reasons, unreliable. In circumstances where the evidence of these witnesses was in conflict with other evidence I have preferred the evidence of the other witnesses. My reasons for forming this view are set out below.

Mr Mathers is the manager of the Caroona Feedlot. His evidence gave the impression of being fashioned to place him and the respondent's case in the best possible light. He was evasive under cross-examination and his evidence contained a number of internal inconsistencies. Two examples serve to illustrate this point.

First, during his examination in chief Mr Mathers gave evidence that at a meeting on 7 August 1996 he had made a number of comments regarding the economic position of the feedlot. In particular Mr Mathers stated:

"I had another planned meeting just to advise - because there had been certain other circumstances prevail, I got the people together to say, well, look, you know, the situation has not improved. These redundancies are necessary. Voluntary redundancies are still open. Those people who are not happy working on this plant, or happy working under my leadership or both Leo and Trevor, are free to leave, or to take voluntary redundancy." [Transcript at 107]

Later, during cross-examination, Mr Klepac asked Mr Mathers about the meeting on 7 August 1996 in the following terms:

"Mr Klepac: And you also said that `People who were not happy working under my leadership could go'?

Mr Mathers: People who were unhappy at this plant, voluntary redundancy was still open and if people were unhappy working at this plant, then they were free to leave.

Mr Klepac: No, but did you say that `People who were not happy working under my leadership could go'?

Mr Mathers: I doubt whether - leadership, working at this plant. I mean the gist of the - if I can use the word - the gist of it was if there were people who were unhappy and based on the fact - and I got this based on the fact that redundancies were there and Bruce Hartin had indicated they were unhappy. Like things were going to be a lot harder because the workloads would more than likely increase around the plant. And that if people didn't want to - I mean, we were going to go through a tough time.

Mr Klepac: Excuse me, you have not answered the question. Yes or no, did you say that, `People not happy working under my leadership could go, take the voluntary redundancy'?

Mr Mathers: I'd question the word, `my leadership', but the gist of it is, yes.

Mr Klepac: Generally your direction, your management?

Mr Mathers: The direction in the way this plant is run.

Mr Klepac: But you question whether you specifically said your leadership?

Mr Mathers: Yes.

Mr Klepac: You made that statement in evidence with Mr Rowe just now. I believe those were the words you used, `Not happy working under my leadership'. Do you want to adjust that to reflect that?

Mr Mathers: I'll let it - if I've said it once then I'll let it stand.". [Transcript 9 October 1996 at 157-158]

Second, during his evidence Mr Mathers was questioned about the functions being performed by Mr Zoccili. Mr Zoccoli worked in the mill section. During his examination in chief the following exchange took place between Mr Rowe and Mr Mathers:

"Mr Rowe: So he was not actually operating the mill, he was driving the feed truck?

Mr Mathers: No. No, he was only driving the feed truck." [Transcript at 116]

During cross-examination the following exchange took place between Mr Klepac and Mr Mathers:

"Mr Klepac: Now, you maintained that Mr Downer and Mr Zoccoli, they are only operating mill trucks, is that correct?

Mr Mathers: They drive mill trucks yes . . .

Mr Klepac: Why only have someone drive a mill truck and not perform other work in the mill if the whole point of this exercise was to have some multiskilling?

Mr Mathers: Well, you can get around it, and that's the - I mean everyone's - everyone

Mr Klepac: Well, excuse me. Are they performing purely driving the mill truck or are they performing a range of tasks in the mill?

Mr Mathers: They perform a range of tasks in the mill." [Transcript at 136-137]

I found Mr Mathers to be an unreliable witness.

In relation to Mr Mann the major difficulty was the fact that his recollection of the relevant events tended to be vague and uncertain, more so than any of the other witnesses. His demeanour was also hesitant and uncertain.

I do not wish to suggest that Mr Mann was deliberately obstructive rather that he seemed unable to clearly recall relevant events and conversations. For this reason I find his evidence to be unreliable.

I will now deal with the facts which emerge from the evidence.

The Caroona Feedlot is owned by A.M.H. and is located at Spring Ridge Road, Caroona, NSW.

Each of the applicants was, prior to their termination, employed by A.M.H. to perform work at the Caroona Feedlot.

Mr Mathers is the manager of the feedlot and is responsible for ensuring that it is run in a cost effective manner.

At the time of the terminations which are the subject of these proceedings Mr Mann was the mill manager and Mr Woods was the stock manager. Both reported directly to Mr Mathers.

The Caroona Feedlot is entirely export orientated. The material before me clearly shows that the cattle industry in Australia has been depressed for some time, partly as a result of declining world demand. This in turn has affected the Caroona Feedlot.

The Feedlot has a capacity of about 25,000 head of cattle. It last operated at or near capacity in January 1995. Since that time the number of stock in the feedlot has decreased and at the time of the redundancies the subject of these application's the feedlot was operating at about half of its capacity.

In March 1996 two employees elected to take voluntary redundancy and three employees were subject to compulsory redundancy. These three employees were Mrs Passfield (office worker) and Messrs Marshall and Busby who worked in the mill. The criteria used to select these three employees was length of service, i.e. last on first off. [see evidence of Mr Mathers, at 106 of the transcript]

In May 1996, A.M.H. made a decision to downsize all A.M.H. operations. Three of the companies eight meatworks and one of the five feedlots were closed. Further, the Mungindi feedlot was `mothballed'.

In July 1996 Mr Rod Hadwen, A.M.H. General Manager Feedlots and Mr Mathers' immediate superior, instructed Mr Mathers to take steps to reduce the operational cost of the Caroona feedlot and to implement tighter staffing arrangements. Mr Mathers subsequently decided to reduce the number of mill employees by three and the number of stock employees by two.

Mr Mathers asked Mr Mann and Mr Woods to consider which employees in their respective sections, should be made redundant. As a result of this process five employees were ultimately made redundant,:

Mill Section Stock Section

- Mr Beaton - Mr Hausfield

- Mr Elwell - Mr Shorten

- Mr Chaffey

These employees were informed that they had been made redundant on 26 July 1996.

I intend to deal with the redundancies in the mill section first and then with those in the stock area.

Mr Mann was the mill manager at the feedlot at the time Messrs Beaton and Elwell were made redundant. In July 1996 Mr Mathers had instructed Mr Mann to select three mill employees for redundancy. In his witness statement [Exhibit AMH8] Mr Mann stated:

"16. The only criteria I used in assessing which employee should be made redundant was that we had to retain our most valuable and reliable employees."

17. As Mr Beaton was not happy with his employment and was considering leaving and Mr Elwell did not intend returning, I considered that I could not rely on their continued employment and commitment."

In the course of his evidence Mr Mann stated that the `primary factor' in the selection of Mr Beaton for redundancy was a comment Mr Beaton had made to Mr Hartin to the effect that he was not happy in his employment with A.M.H. and that if offered redundancy he would most definitely take it. [Exhibit AMH8 at paragraph 2 and Transcript at 192] Mr Mann stated that Mr Hartin had relayed the substance of Mr Beaton's remarks, to him.

Mr Mann also stated that the `main factor' in the selection of Mr Elwell for redundancy was a statement by Mr Hartin to the effect that Mr Elwell did not intend to return to work after his workers compensation case had been resolved. [Exhibit AMH8 at paragraph 9 and Transcript at 201] During the course of his cross-examination Mr Mann conceded that Mr Hartin had not had a direct conversation with Mr Elwell but rather had been informed of Mr Elwell's intentions by another employee, Mr Chaffey. [Transcript at 200]

It is apparent that in the case of both Mr Beaton and Mr Elwell a major factor in their selection for redundancy related to their alleged future intentions. Mr Mann's information in this regard had not been obtained directly from either employee. Rather Mr Mann relied on information conveyed to him by other employees as to comments made to them by Messrs Beaton and Elwell. In the case of Mr Elwell this information was said to have been conveyed by Mr Chaffey to Mr Hartin and then to Mr Mann.

Despite the absence of any direct information from the employees themselves Mr Mann chose not to discuss these matters with either Mr Beaton or Mr Elwell prior to terminating their employment. This is apparent from the following exchange between Mr Mann and myself,:

"VP Ross: Did you have any direct discussion with Peter Elwell or Bruce Beaton about either their desire to take redundancy or the fact they did not with to return to work?

Mr Mann: No, not really, sir, and only in the time of dealing with the matter of redundancy and it was made clear to me at that time that - in Peter Elwell's case, it was made clear to me that - his words to me were something like, `I expected to see you before this', and that I explained everything to him and he accepted and had no complaint about . . .

VP Ross: That was after the decision - you took the decision to make them redundant?

Mr Mann: That's right.

VP Ross: Right. Prior to the decision to make them redundant, did you have any discussion with Mr Beaton or with Mr Elwell about their future work intentions whether they intended to return or they wanted to?

Mr Mann: No, sir." [Transcript at 201]

Further, Messrs Hartin, Beaton and Elwell all gave evidence denying the substance of the conversations which Mr Mann said he had relied on in selecting the employees for redundancy. [see Transcript at 48, 64 and 86]

In the course of his evidence Mr Mann made it clear that the fact that Messrs Beaton and Elwell had filed workers compensation claims was not the reason they were selected for redundancy. [Exhibit AMH8 at paragraph 19] However I have formed the view that this was a factor which contributed to their selection. While it may not have motivated Mr Mann to select these employees I am satisfied that it was a consideration in Mr Mathers decision to terminate their employment.

While Mr Mann initially selected Messrs Beaton and Elwell for redundancy, this decision was subject to Mr Mathers approval as the Feedlot manager. Indeed Mr Mathers gave evidence to this effect. [Transcript at 114]

Mr Downer gave evidence that Mr Mathers had told him that Messrs Elwell and Beaton had been selected for redundancy because they were on workers compensation. According to Mr Downer, Mr Mathers had said that he was going to `jerk it up them', a comment made shortly before Messrs Beaton and Elwell were made redundant. [Transcript at 78-79]

Mr Mathers denied that workers compensation was a factor or that he made the comment reported by Mr Downer. However, for reasons previously expressed, I prefer the evidence of Mr Downer on this point. Further the version of events described by Mr Downer is consistent with Mr Mathers' demonstrated hostility to Mr Elwell's workers compensation claim. Mr Downer gave evidence that Mr Mathers had instructed him to delay the processing of Mr Elwell's workers compensation claim. [Transcript at 78] In the course of his evidence Mr Mathers conceded that he had instructed Mr Downer to `put some pressure on Peter Elwell' in relation to his workers compensation claim. [Transcript at 121]

In relation to the mill employees made redundant, Mr Beaton had been employed at the Feedlot as a mill operator since January 1990. He was a leading hand and AWU delegate at the time of his termination. He underwent an operation for a work related injury in April 1996 and was off work on workers compensation from 29 April to 22 July 1996. He resumed work in late July for a short period and performed light duties prior to his termination. Mr Beaton was described by Mr Hartin, the mill foreman, as a `very good worker'. [Transcript at 89]

Mr Elwell had been employed as a mill hand at the Feedlot since April 1992. As a result of work related injuries Mr Elwell had been on workers compensation for some time and had not worked since January 1996. Mr Elwell was also described as a `very good worker' by Mr Hartin. [Transcript at 93]

In the course of his evidence Mr Hartin said that the employees brought into the mill since the termination of Messrs Beaton and Elwell, namely Mr Zoccoli and Mr Downer, had no experience in mill work. [Transcript at 85] By comparison it was said that Messrs Elwell and Beaton had extensive experience and could do every job in the mill. [Transcript at 85] Mr Hartin stated that he had been effectively running the mill at the feedlot for 10 years. He was not cross examined on this aspect of his evidence. [Transcript at 89]

The final point to note in relation to the mill section is that since the termination of Messrs Beaton and Elwell the overtime being worked by employees in the mill has increased. Mr Hartin expressed the view that the mill employees were working excessive overtime, i.e. between 20 and 40 hours per fortnight. [Transcript at 86] The thrust of Mr Hartin's remarks in this regard were supported by the evidence of another mill employee, Mr Downer. [Transcript at 83]

I will now turn to the redundancies in the stock section of the feedlot.

As previously mentioned Mr Woods was the stock manager at the time Messrs Shorten and Hausfield were made redundant. In July 1996 Mr Mathers instructed Mr Woods to select two stock employees for redundancy. In his witness statement [Exhibit AMH6] Mr Woods stated:

"3. The selection criteria I used to select the employees to be made redundant were reliability and experience.

4. First I considered which employees I could not do without. I decided I could not do without Glen Morgan the assistant livestock manager and Meg Ferguson the head stock person.

5. I then assessed the remaining employees by attendance, for this purpose I got Dennis Downer who produced me a list of the employees absences. A copy of the list is attached hereto and marked `A'.

6. I also considered whether any of the employees had been unreliable in the recent past. In particular Darrell Hausfield had on several occasions been absent without advising me of such and on other occasions had not advised me that he would be absent until very late which caused me problems with replacement."

It should be noted that one of the occasions on which Mr Hausfield was said to be absent without advising Mr Woods related to the illness of Mr Hausfield's father-in-law, Mr Townsend. Mr Hausfield had left work suddenly after receiving a phone call advising him that Mr Townsend had been hospitalised. He informed Mr Woods that he was leaving work but did not advise him of the reason. Mr Townsend died in hospital later that week. [Transcript at 179]

The attendance information referred to in Mr Woods' witness statement is set out below.

Table 1

Sick Leave Taken Jan 1995 - July 1996

Name of employee	Total Hours Taken	Total Days Absent
Hausfield	76	10
Shorten	68.4	9
Ferguson	68.4	9
Morgan	60.8	8
Ryan	30.4	4
Wadwell	30.4	4
Hamilton	7.6	1

In the course of his evidence Mr Woods made it clear that the main selection criteria he relied on was the attendance records [Transcript at 166 and 187]. In this regard he took into account total sick leave including the days for which a doctors certificate was provided [Transcript at 179 and 185].

Mr Woods was unable to identify any of the absences set out in the above table which he did not believe were genuine. [Transcript at 182] In his evidence Mr Mathers made it clear that he didn't question the genuineness of a sick leave claim in circumstances where the employee produced a doctors certificate. [Transcript at 148] In his view where a doctors certificate was provided `sick leave is not an issue'.

Further Mr Mathers agreed that it would not be fair to select people for redundancy on the basis of a document that includes sick leave where doctors certificates have been produced. In his view it was uncertificated sick leave that is the important criteria in assessing employees for redundancy. [Transcript at 149] This is a somewhat curious observation in the circumstances. It clearly does not reflect the actual criteria used by Mr Woods - namely total sick leave.

Further, if the criteria identified by Mr Mathers had been used as the main criteria it is difficult to see how Messrs Shorten and Hausfield could have been selected for redundancy, as illustrated by the table below.

Table 2

Name of employee	No. of Hours Uncertified Sick Leave Jan 1995 - July 1996	No. of days
Ryan	15.2	2
Wadwell	15.2	2
Ferguson	7.6	1
Morgan	7.6	1
Shorten	7.6	1
Hausfield	7.6	1
Hamilton	nil	0

If Mr Mathers is correct as to the selection criteria it would appear that Messrs Shorten and Hausfield were selected for redundancy on the basis of one days uncertified sick leave over an 18 month period.

In addition to attendance it is also apparent that in selecting these two employees Mr Woods had regard to a number of disputes he had with each employee in the past. [see Transcript at 173, 178 and 187] In particular he had a dispute with Mr Shorten when Mr Shorten brought a stallion on to the Feedlot. The stockpersons are expected to provide their own horses. A written horse policy governed the provision of such horses. At the time of the dispute over the stallion the policy did not prohibit stallions being used by employees. The policy was subsequently amended to exclude the use of stallions. Mr Shorten gave evidence that his relationship with Mr Woods deteriorated after the stallion issue.

In the course of his evidence Mr Mathers referred to a `long record of conflict' between Mr Woods and Mr Hausfield. [Transcript at 153]

In relation to the stock employees made redundant Mr Shorten had been employed at the Feedlot as a stockperson since March 1990. He was promoted to leading hand in about September 1991. Mr Shorten is an experienced stockperson. Since his termination he has only been employed for four days, doing contract mustering.

Mr Shorten's future employment prospects are likely to be adversely affected by his age - 54 years - and a damaged hand which affects his ability to ride horses. In his evidence Mr Woods stated that he agreed that Mr Shorten's bad hand would limit his employment prospects. [Transcript at 173]

Mr Hausfield had been employed as a stockperson at the Feedlot since September 1992 and was a leading hand at the time of his termination. He also has had extensive experience as a stockperson.

Mr Hausfield was an AWU delegate at the time of his termination.

Mr Hausfield has only been able to obtain a limited amount of casual employment since his termination and the future availability of such work is uncertain.

4. submissions

In his written submissions Mr Klepac argued that the terminations were in breach of a number of provisions in s.170DF, in particular:

- s.170DF(1)(a) : temporary absence [in each case]

- s.170DF(1)(b) : union activities [in the case of Messrs Hausfield and Beaton]

- s.170DF(1)(f) : age [in the case of Mr Shorten].

Further it was submitted that in each case there had been a breach of s.170DC as the applicants had not been given an opportunity to respond to the allegations and the termination were in breach of s.170DE.

Mr Klepac also argued that the redundancies, at least in the case of Messrs Beaton and Elwell, were not genuine as the work they had previously performed as now being carried out by others. The judgment of Gray J. in McGarry v. Boonah Clothing Pty Ltd (1993) 49 IR 66 was relied on in this context.

The consultation process carried out by the employer culminating in the redundancies was subjected to a detailed attack by Mr Klepac on behalf of the applicants.

Reinstatement was sought in each case.

In reply Mr Rowe submitted that the terminations before me were made for a valid reason based on the operational requirements of the business. He submitted that in these circumstances it was not necessary for an employer to provide an opportunity for an employee to respond to allegations made against them. This was said to be so because the operational requirements of the business was the reason for the termination not the conduct or performance of the employee. The decision of the Full Court in Kenefick was characterised as flawed insofar as it was inconsistent with Mr Rowe's submissions.

In the alternative Mr Rowe argued that the decision to terminate Messrs Beaton and Elwell was not based on their conduct or performance. In this regard it was submitted that the evidence supported a finding that these employees were selected for redundancy on the basis that they had expressed a wish or intent to leave their employment with the company.

I note that Mr Rowe did not argue that the termination of Messrs Shorten and Hausfield was unrelated to conduct or performance. Indeed given the evidence such a submission was not sustainable.

In relation to compensation Mr Rowe argued that even if the Commission decided that the respondent had technically breached his obligations under the Act the same result would have eventuated in the absence of such a breach.

5. decision

As I have noted there was considerable debate between the parties as to the level of consultation which took place in relation to the redundancies. Given the other conclusions I have reached it is unnecessary for me to resolve the considerable conflict in the evidence on this issue.

Further the question of whether or not the redundancies were `genuine' is not in my view material. In this regard McGarry's case is distinguishable as it concerned the breach of an award provision relating to redundancy. I agree with Mr Rowe's submission to the effect that the expression `operational requirements' in s.170DE(1) is a broad one and is not limited to a redundancy situation in the traditional sense. [see Nettleford v. Kym Smoker Pty Ltd, unreported 4 October 1996 per Lee J.]

However I am unable to agree with Mr Rowe's able submissions in relation to the construction of s.170DE(1) and the application of s.170DC. As dealt with earlier in this decision the obligations in s.170DE(1) are not satisfied simply by establishing that the terminations were connected with the operational requirements of the business.

To satisfy the requirements of s.170DE(1) an employer must prove that at the time of the dismissal the operational requirements of the undertaking provided proper grounds for termination. Two elements must be satisfied:

- a valid reason or reasons;

- which is connected with the employee's capacity or conduct or based on the operational requirements of the undertaking.

Further if the selection criteria in a redundancy situation is based on conduct or performance then s.170DC is applicable.

I also disagree with Mr Rowe's characterisation of s.170DC breaches as technical. As previously discussed s.170DC is not a mere technical requirement, rather it provides employees with a valuable right. While it does not require any particular formality this does not mean that it is unimportant or capable of profunctory satisfaction.

In relation to the substantive issues I shall firstly deal with Messrs Beaton and Elwell.

I agree with Mr Rowe's submission that the evidence supports a finding that the main reason these employees were selected for redundancy related to their alleged future intentions with respect to continuing employment at the Caroona Feedlot.

However in my view such a basis for selection is not a valid reason pursuant to s.170DE(1). As previously noted s.170DE(1) should be applied in a practical commonsense way to ensure that the employer and employee are treated fairly. In this regard a valid reason is one which is sound, defensible or well founded. The reason given for the selection of Messrs Beaton and Elwell for redundancy does not meet these requirements.

In concluding that the applicants did not wish to continue working at the Feedlot the respondent was relying on second or third hand information. The respondent did not take the trouble to raise the issue of their future intentions with the employees themselves. Hence the reasons given cannot be regarded as well founded.

In my view the termination of Messrs Beaton and Elwell was in breach of s.170DE(1).

In relation to the question of remedy I have already noted that reinstatement is intended to be the primary remedy to a contravention of a provision of Division 3 of Part VIA of the Act.

I am not satisfied that reinstatement is impracticable in respect of Messrs Beaton and Elwell. I have reached this conclusion for two reasons:

(i) Since the termination of Messrs Beaton and Elwell the level of overtime being worked in the mill has increased. Indeed Mr Hartin expressed the view that the mill employees were working excessive overtime. Clearly there is work available in the mill.

(ii) As Messrs Beaton and Elwell are on workers compensation their reinstatement will not add to the labour costs at the Feedlot - at least not until they are able to fully resume their duties or their compensation entitlements ceased [see evidence of Mr Mathers at 163 and 165 of the Transcript]

In respect of Messrs Beaton and Elwell I have decided that the appropriate remedy in all the circumstances is reinstatement. I am also satisfied that such an award should be accompanied by an order relating to continuity of employment and a requirement that the two applicants pay A.M.H. an amount equal to the redundancy payments made to them.

I now turn to deal with the applications by Messrs Shorten and Hausfield.

The evidence supports a finding that the main reason these employees were selected for redundancy was absenteeism.

As previously noted Mr Shorten was absent from work for a total of 9 days in the 18 month period prior to his termination. Mr Hausfield had been absent for 10 days over the same period.

In the 18 months prior to their termination each employee had only one days absence without a doctors certificate.

In my view the selection of these employees for redundancy on the basis of this level of absenteeism did not constitute a valid reason within the meaning of s.170DE(1).

A valid reason must be defensible or justifiable on an objective analysis of the relevant facts. The expression `valid reason' in s.170DE(1) imposes a requirement that a termination of employment is not unjust or unfair.

In my view the reason given for the selection of these employees was not justifiable on an objective analysis of the relevant facts. Further their selection on the basis stated was demonstrably unfair. Indeed, in the course of the evidence, Mr Mathers agreed that it would not be fair to select people for redundancy on the basis of a document that includes sick leave where a doctors certificate has been produced. [Transcript at 149] Yet this was the very criteria used by Mr Woods - namely total sick leave. [Transcript at 179 and 185]

Two further points are relevant.

First, Mr Woods was unable to identify any of the absences set out in the above table which he did not believe were genuine. [Transcript at 182] In his evidence Mr Mathers made it clear that he didn't question the genuineness of a sick leave claim in circumstances where the employee produced a doctors certificate. [Transcript at 148] In his view where a doctors certificate was provided `sick leave is not an issue'.

Second, if, as suggested by Mr Mathers, it was uncertified sick leave that is the important criteria in assessing employee for redundancy [Transcript at 149] it is difficult to see how Messrs Shorten and Hausfield could have been selected given the information set out in Table 2 on page 32 of this decision.

In my view Messrs Shorten and Hausfield were terminated in breach of s.170DE(1). Further the criteria for their selection for redundancy was related to their conduct - i.e. attendance at work - and they were not provided with an opportunity to defend these allegations. Hence their termination was also in breach of s.170DC of the Act.

For the reasons advanced in the proceedings I accept that reinstatement is not practicable.

Given the economic position of the employer reinstatement would necessitate further redundancies. The factors identified in respect of Messrs Beaton and Elwell do not apply to Messrs Shorten and Hausfield.

Given my finding as to the practicality of reinstatement I now turn to consider the question of compensation. In this regard I have applied the principles and steps associated with assessing compensation which are set out earlier in this decision.

In my view had the applicant's not been unlawfully terminated they would have remained in employment for at least two to three years It is also likely that the applicants will remain without full-time employment for a considerable period. I have reached this conclusion despite the fact that unemployment in the Quirindi area is lower than the national average. I have had regard to the age of the applicants, the fact that Mr Hausfield's damaged hand will adversely effect his employment prospects and the depressed state of the industry in which they have previously worked. Taking into account monies earned since termination, a 50 per cent discount for contingencies and the impact of taxation, the amount of compensation I would award would be well in excess of the legislative cap of six months.

In circumstances where the Commission is satisfied that a reasonable assessment of compensation would exceed the statutory ceiling it is not necessary to determine the extent of that excess: May v. Lilyvale Hotel Pty Ltd (unreported, 1 December 1995, Wilcox CJ.).

I should note that I determined a relatively high discount factor for contingencies on the basis of the depressed nature of the Feedlot business.

In summary I reached the following conclusions:

1. The termination of each applicant's employment was in breach of s.170DE(1);

2. Messrs Shorten and Hausfield were terminated in breach of s.170DC;

3. Messrs Beaton and Elwell are to be reinstated without loss of continuity of employment and are to repay the redundancy monies paid to them; and

4. Messrs Shorten and Hausfield are each to be awarded compensation of six months remuneration.

Given the nature of my conclusions it is unnecessary for me to deal with the other grounds relied on by Mr Klepac.

I direct the applicant to confer with the respondent as to the form of an appropriate award to give effect to my decision.

A proposed award is to be filed within 7 days. If necessary a conference will be convened for the purpose of settling the terms of such an order.

BY THE COMMISSION:

VICE PRESIDENT

Termination of employment - unlawful termination - consent arbitration - various, meat industry - substantial review of authorities in relation to; opportunity to defend allegations, valid reason for termination, and remedy - Commission found in all cases there was no valid reason for termination - held onus not satisfied by simply establishing that the terminations were connected with operational requirements - failure to consult not merely a technical breach, rather, provides employees with a valuable right - held two employees selected because they were on workers compensation - other employers selected because of quantum of sick leave (including certificated leave) taken - reinstatement ordered to employees on workers compensation - compensation awarded to other employees.

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