PR972773
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AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION
Workplace Relations Act 1996
s.120 - Appeal to Full Bench against an ex tempore decision
issued by Commissioner Raffaelli on 31 March 2006
Andrew Kenneth Charlton
and
Eastern Australia Airlines Pty Limited
(C2006/2519)
Before Commissioner Raffaelli
Andrew Kenneth Charlton
and
Eastern Australia Airlines Pty Limited
(U2006/2379)
Airline operations | |
VICE PRESIDENT LAWLER |
|
DEPUTY PRESIDENT BLAIN |
|
COMMISSIONER GAY |
SYDNEY, 7 JULY 2006 |
Appeal - termination of employment - demotion with significant reduction in remuneration - repudiation of contract of employment - new contract of employment for demoted position - whether demotion involved termination of employment within the meaning of s.170CE - effect of s.170CD(2) - whether “termination” and “termination of employment” in s.170CE have the same meaning as in the termination of employment convention.
DECISION
[1] This is an application for leave to appeal and, if leave is granted, an appeal against a decision and order of Commissioner Raffaelli dismissing the appellant’s application for relief against termination of employment brought pursuant to s.170CE of the Workplace Relations Act 1996 (“the WR Act”).
Background
[2] The appellant is a commercial airline pilot and was employed as a captain by the respondent. On 9 January 2006 he was demoted to the position of first officer over contested performance issues. The appellant remained employed by the respondent although in solicitors’ correspondence he contested the demotion and reserved his rights. On 19 January 2006 the appellant filed his application for relief against termination of employment.
There was no written contract of employment in evidence before the Commissioner and no attempt to tender any written contract of employment before us as fresh evidence on the appeal. We understand that there was a written contract of employment when the appellant was first placed in the position of first officer but no written contract when he was subsequently promoted to the position of captain (which we take to have involved a consensual variation to the posited written contract of employment that existed in relation to the appellant’s prior position as first officer).
[3] The respondent moved to dismiss the appellant’s application on the basis that the Commission had no jurisdiction because there had been no termination of employment at the initiative of the employer. The appellant argued that the demotion involved a termination of employment at the initiative of the employer.
[4] The Commissioner, in a brief ex tempore decision, allowed the respondent’s motion and dismissed the appellant’s application for relief. The Commissioner said:
"This is an application by Eastern Airlines alleging there is no jurisdiction because the demotion that has occurred does not amount to termination. I have been taken to the provision of section 170CD(1B). It does not fall into that category in that I am satisfied that there is a significant reduction in remuneration. However, that doesn't close the door. In my view, it is still a demotion and there's still no termination of employment. Consequently, the application is struck out for want of jurisdiction. A formal order will issue in due course."
[5] The Workplace Relations Amendment (WorkChoices) Act 2005 (“WorkChoices Act”) effected major amendments to the WR Act. The vast majority of those amendments took effect on 27 March 2006. As noted, the appellant’s application for relief was filed on 19 January 2006. To the extent that there was a termination of employment it had certainly occurred by that date, that is, before the reform commencement. The hearing before the Commissioner took place on 31 March 2006, several days after the reform commencement. The appeal proceeded on the basis, we think correctly, that none of the amendments affect the outcome of the appeal. For convenience, and because of transitional issues that were not argued before us, we will refer to the relevant provisions of the WR Act with the numbers they had prior to the renumbering effected by Schedule 5 of the Workchoices Act.
The central issue
[6] The appellant correctly accepts that the decision of the Full Court of the Industrial Relations Court of Australia in Brackenridge v Toyota Motor Corporation Australia Ltd 1 (“Brackenridge”) is authority, binding on this Full Bench, for the proposition that the expressions “termination” and “termination of employment” in the Termination of Employment Convention refer to a termination of the employment relationship and do not include a demotion where the employment relationship continues.
[7] The decision of the Full Court of the Industrial Relations Court in Brackenridge was handed down on 13 December 1996. It was concerned with whether a demotion where employment continued involved a termination of employment within the meaning of s.170CE of the Industrial Relations Act 1998 (“the IR Act”). The decision placed particular reliance on s.170CB of the IR Act which provided:
170CB. An expression has the same meaning in this Division as in the Termination of Employment Convention.
[8] Section 170CB was within Division 3 of Part VIA of the IR Act dealing with termination of employment, as was s.170CE of the IR Act, the provision conferring a right to make an application for relief against termination of employment.
[9] The equivalent of that provision in the WR Act is 170CD(2). That provision was amended in 2003. Prior to the 2003 amendment taking effect it provided that:
(2) An expression used in Subdivision C, D or E of this Division has the same meaning as in the Termination of Employment Convention.
[10] In 1999, in Bluesuits Pty Ltd v Graham 2 (“Bluesuits”), a Full Bench of the Commission considered the legislative history in detail and held that there was no requirement under the WR Act, as it then stood, to interpret the provisions of Subdivision B by reference to the Convention. The omission of a reference to Subdivision B in s.170CD(2), as it then stood, was central to the reasoning of the Full Bench: it gave rise to an “unmistakeable” inference.3
[11] Shortly after the decision in Bluesuits, the specific issue of whether a demotion where the employment relationship continued involved a termination of employment within the meaning of s.170CE of the WR Act was considered by Senior Deputy President Polites in Boo Hwa Chan v Christmas Island Administration. 4 His Honour held that the phrase “termination of employment” includes both the termination of a contract of employment and the termination of the employment relationship and observed:5
“There is not doubt that the construction of the Act in Brackenridge's Case was influenced by the earlier decisions in Siagian v Sanel Pty Ltd [(1994) 1 IRCR 1] and Strachan v Liquorland (Australia) Pty Ltd [IRC of A, NI 1266R of 1995, 6 February 1996, unreported] in which reference is made to the ILO Termination of Employment Convention in construing the provisions of the then Act. I accept the argument that there has been a material legislative change in the position since Brackenridge's Case was decided. The constitutional validity of the bulk of unfair termination provisions, especially those material to this case, are now dependent on the corporations power rather than the external affairs power. Moreover, as noted above s.170CB of the Industrial Relations Act 1988 materially influenced the decision in Brackenridge's Case. It no longer appears in the Act. It matters not in my view that there was no comment on the correctness of Brackenridge's Case in the second reading speech or other associated documents when the Act was amended. The substantive changes in the provisions speak for themselves. I would add that this view of the effect of the legislation is consistent with a recent decision of a Full Bench of the Commission in Bluesuits Pty Limited v. Graham [Print S0282]. Accordingly, if it were necessary to express a concluded view on the matter I would indicate that in my view the decision in Grivell's Case is consistent with both legal principle and with the older authorities in relation to the effect of a significant demotion in employment and I would be inclined to follow it. Brackenridge's Case on the other hand as I have noted above was clearly influenced by the form of the legislation at the time it was decided.”
[12] In summary, the position is as follows. If the expressions “termination” and “termination of employment” have the same meaning as in the Termination of Employment Convention then they do not extend to a demotion where the employment relationship continues. 6 If the construction of those expressions is unconstrained by the Convention then they refer to a termination of the contract of employment or a termination of the employment relationship and therefore extend to a demotion that involves a termination of a contract of employment even if the employment relationship continues pursuant to a new contract of employment.7
[13] The provisions of the IR Act with which the Court in Brackenridge was concerned required the expressions to be given the meaning they have in the Convention. Prior to 2003 the provisions of the WR Act did not require expressions used in s.170CE to be given the meaning they have in the Convention. Section 170CD(2) was amended in 2003 and now reads:
(2) An expression used in this Subdivision or Subdivision C, D or E has the same meaning as in the Termination of Employment Convention. [emphasis added]
[14] The central issue in this appeal is whether this amendment to s.170CD(2) now requires the Commission to give the expressions “termination” and “termination of employment”, as they appear in s.170CE, the same meaning as in the Convention.
The effect of s.170CD(2)
[15] Section 170CD is within Subdivision A of Division 3 of Part VIB of the WR Act. Section 170CE is within Subdivision B of Division 3 of Part VIB of the WR Act. Subsection 170CD(1) contains a series of definitions that are applicable to the whole of Division 3 of Part VIB, including Subdivision B. Section 170CD relevantly provides:
(1) In this Division:
...
termination or termination of employment means termination of employment at the initiative of the employer.
...
(1B) For the purposes of this Division, termination or termination of employment does not include demotion in employment if:
(a) the demotion does not involve a significant reduction in the remuneration or duties of the demoted employee; and
(b) the demoted employee remains employed with the employer who effected the demotion.
...
(2) An expression used in this Subdivision or Subdivision C, D or E has the same meaning as in the Termination of Employment Convention.
[16] Subsection 170CD(1B) was last amended in 2001. That is, it was left in its present form at the time the Parliament amended s.170CD(2).
[17] The respondent contends that because the expression “termination of employment” is used in the definition of the terms “termination” and “termination of employment” in s.170CD(1) and is thus within Subdivision A, it must, pursuant to s.170CD(2), be given the same meaning as in the Termination of Employment Convention. The respondent then argues that by virtue of s.170CD(1), the meaning thus determined must be given to those terms throughout the whole of Division 3 including, in particular, in s.170CE in Subdivision B.
[18] The appellant accepts that the decision of the Full Court of the Industrial Relations Court of Australia in Brackenridge is authority, binding on this Full Bench, for the proposition that the expressions “termination” and “termination of employment” in the Termination of Employment Convention do not include a demotion where the employment relationship continues.
[19] The appellant submits that because s.170CD(2) expressly omits reference to Subdivision B the Parliament should be taken to have intended that s.170CD(2) had no operation in relation to Subdivision B. Moreover, the appellant correctly notes that:
[20] Given that s.170CD(2) must be construed in the context of the statute as a whole, including s.170CD(1B), we think that the appellant’s arguments demonstrate that the true intention of the Parliament in enacting s.170CD(2) is unclear and that resort to extrinsic materials and legislative history is permissible.
[21] The explanatory memorandum relating to the original enactment of s.170CD(2) is of no assistance. The same position obtains in relation to the explanatory memorandum for the original enactment of s.170CD(1B). The explanatory memorandum in relation to the amendment to s.170CD(2) does appear to be relevant. However, it needs to be placed in its historical context.
[22] Prior to 2003, certain classes of employee were excluded from access to the termination of employment remedies under the WR Act. That exclusion was effected through regulations 30B and 30BA of the Workplace Relations Regulations. In Hamzy v Tricon International Restaurants t/a KFC 8 the Full Court of the Federal Court held that reg 30B was invalid. The Parliament responded by re-enacting the exclusions as s.170CBA of the WR Act. That section was inserted into Subdivision A of Division 3 of Part VIA by the Workplace Relations Amendment (Fair Termination) Act 2003 (No 104 of 2003). The amendment to s.170CD(2) referred to above was effected by the same Act. The reason for the amendment to s.170CD(2) was set out in the explanatory memorandum:
This change is necessary so that expressions to be inserted into Subdivision A of Division 3 of Part VIA by this Bill would be taken to have the same meaning as those expressions in the Termination of Employment Convention.
[23] The appellant submitted that, plainly enough, the reference to “expressions to be inserted into Subdivision A of Division 3 of Part VIA by this Bill” is a reference, inter alia, to what was to become the new s.170CBA. However, it should be noted that s.170CBA contains references to both “termination” and “termination of employment”. The appellant submitted that the explanatory memorandum makes it clear that, in amending s.170CD(2), Parliament was only intending to affect the interpretation of new material being inserted into Subdivision A and was not intending to affect the meaning of the existing language of Subdivision B.
[24] The appellant submitted:
7. By introducing the words “this Subdivision or”, Parliament did not intend to (and did not) extend the operation of the Convention to other parts of the pre-reform Act. Had Parliament so intended, it would have replaced section 170CD(2) with the words used in section 170CB of the IR Act:
“An expression has the same meaning in this Division as in the Termination of Employment Convention.”
8. Instead of making such an amendment, Parliament chose to maintain the exclusion of Subdivision B from section 170CD(2).
[25] However, this misstates the position. On the respondent’s argument, the effect of the amendment to s.170CD(2) is not to extend the operation of the Convention to every expression in Subdivision B, but rather to extend its operation only in relation to the defined terms in s.170CD(1). On the other hand, the expressions “termination” and “termination of employment” are the central expressions in Subdivision B.
[26] There are unsatisfactory consequences attaching to each of the competing arguments in this case.
[27] The consequence of the respondent’s argument is that s.170CD(1B) is rendered nugatory in circumstances where it may be said to be unlikely that the Parliament would have left s.170CD(1B) in place if it intended the amendment to s.170CD(2) to have that effect.
[28] The appellant’s argument results in s.170CD(2) not applying in relation to the definition of “termination” and “termination of employment” in s.170CD(1) even though that provision is within “this Subdivision” (ie. Subdivision A) and may thus be said to be at odds with the plain meaning of the words of s.170CD(2). Alternatively, it assigns one meaning to the expressions “termination” and “termination of employment” in Subdivision A, including in s.170CBA, and a different meaning to those expressions in Subdivision B in circumstances where s.170CD(1), a definitional provision, purports to provide a single definition for those expressions throughout the whole of Division 3, including Subdivisions A and B.
[29] In Cooper Brookes (Wollongong) Pty Ltd v. Federal Commissioner of Taxation 9 Mason and Wilson JJ commented:10
The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction.
The rules, as D. C. Pearce says in Statutory Interpretation, p. 14, are no more than rules of common sense, designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the particular case he thinks is decisive. When he considers that the statute admits of no reasonable alternative construction it is because (a) the language is intractable or (b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the legislature.
On the other hand, when the judge labels the operation of the statute as “absurd”, “extraordinary”, “capricious”, “irrational” or “obscure” he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions.
Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended.
[30] Further, the requirement that the Court endeavours to give some effect to all provisions of an Act requires that where one interpretation will render a section ineffectual while another would give it a field of operation, the latter alternative should be adopted. 11 An example of this principle is provided by Pearce v Cocchiaro.12 The approach was put succinctly by Gummow J in Minister for Resources v Dover Fisheries Pty Ltd13 where his Honour, paraphrasing Lord Reid in AMP v Utilux Pty Ltd,14 said that since it is “improbable that the framers of legislation could have intended to insert a provision which has virtually no practical effect, one should look to see whether any other meaning produces a more reasonable result”.15
[31] In this case there are two strongly competing interpretations. On balance we think that the true intention of Parliament in amending s.170CD(2) was not to give expressions used in Subdivision B of Part VIA the same meaning as in the Termination of Employment Convention and that s.170CD(2) should be construed accordingly, that is, as applying to the balance of Subdivision A and not to s.170CD itself. If Parliament had intended terms in the definitions in s.170CD(1) to have the same meaning as in the Termination of Employment Convention then it might be expected to have removed s.170CD(1B) at the same time it amended s.170CD(2), particularly in circumstances where s.170CD(1B) itself contains the expression “termination of employment” and the existing authorities, of which the Parliament is presumed to be aware, place demotion entirely outside the meaning of the expression “termination of employment” as used in the Convention. The fact that s.170CD(1B) remains and the fact that it deals expressly with the issue of when a demotion is not to be taken as involving a termination of employment (and does this in terms that appear to assume that, but for the provision, a demotion may involve a termination of employment) cause us to favour the construction advanced by the appellant: it produces a fairer and more convenient operation that conforms to legislative intention and avoids adopting a construction that gives s.170CD(1B) no practical effect. We perceive the operation for which the respondent contends to be unintended by the Parliament.
Application of principle in the present case
[32] Consistent with the decision in Boo Hwa Chan, a termination of employment occurs when a contract of employment is terminated. This necessarily occurs when the employment relationship comes to an end. However, it can also occur even though the employment relationship continues. Where a contract of employment has been terminated, but the employment relationship continues, this will be because a new contract of employment has come into existence. Therefore, whether the appellant’s demotion involved his employment being “terminated by the employer” within the meaning of s.170CE turns on whether his contract of employment was terminated notwithstanding the continuing employment relationship. This question is answered by reference to general law principles relating to the termination of contracts of employment, unconstrained by the Convention.
[33] The question of when a demotion constitutes a termination of employment within general law principles relating to termination of contracts of employment, unconstrained by the Convention, was given careful consideration by the Full Court of the Supreme Court of South Australia in Advertiser Newspapers Pty Ltd v IRC & Grivell. 16 We respectfully adopt that analysis. Although the decision related to a different statutory context, that context required a consideration of general law principles that are equally applicable in the present case.
[34] Unless the contract of employment or an applicable award or certified/workplace agreement authorises an employer to demote an employee, a demotion, not agreed to by the employee, that involves a significant reduction in remuneration will amount to a repudiation of the contract of employment. If that repudiation is accepted, either expressly or by conduct, then the contract of employment is terminated. If, in such circumstances, the demoted employee then remains in employment with the employer, this occurs pursuant to a new contract of employment in respect of the demoted position. 17 It may be noted that where the employment continues with the employee allegedly acquiescing in a reduction in salary or other terms of employment, difficult questions may arise as to whether the continued employment involves the continuation of the original contract of employment (but with the employer breaching that contract by paying the reduced salary), a consensual variation of the terms of the original contract or the termination of the original contract and a substitution of a new contract of employment.18
[35] In the present case there is no evidence that the respondent was authorised by the contract of employment or any award or the applicable certified agreement to demote the appellant. We raised the possibility that industry regulations may oblige the respondent to remove a captain if certain circumstances exist and the possibility that this might give rise to an implied term authorising a demotion in such circumstances. However, the respondent was unable to point to any such regulations.
[36] We are satisfied that, in demoting the appellant, the respondent repudiated the then existing contract of employment between the parties. There can be no doubt that the demotion in the present case involved a significant reduction in remuneration. After a short period of salary maintenance, the respondent reduced the appellant’s remuneration from that of a captain to that of a first officer: a reduction of $29,148 or about 36% per annum. 19 In our view, there can be no doubt that, by filing his application for relief against termination of employment, the appellant accepted the respondent’s repudiation and the pre-existing contract of employment was thereby terminated. It follows that the demotion of the appellant involved a termination of employment within the meaning of s.170CE of the WR Act notwithstanding that he remains employed by the respondent on a new contract of employment.
[37] The respondent also submitted that the demotion was temporary and, accordingly, could not amount to a termination of employment. It cited no authority for the proposition. Prima facie there is no reason in principle why a temporary demotion cannot, depending upon the circumstances, involve a repudiation of the contract of employment by the employer. However, it is unnecessary to decide that question in this case. The appellant challenged the factual submission that the demotion was temporary and, accordingly, this Full Bench cannot act on the respondent’s submission to that effect. 20 The only evidence on the topic is the letter of 9 January 2006 by which the appellant was advised of his demotion.21 Relevantly, that letter states:
"A First Officer training program will be formulated for you, and you will be advised by the Flight Training Manager this week of the training program schedule. Additionally, you will be rostered to attend the next available company CRM course. After a minimum twelve month period the Flight Standards Group will review your performance and future status."
[38] On this evidence, the suspension is for an indeterminate period. Depending upon future events it may prove to be temporary or it may prove to be permanent.
[39] We should note, as an aside, that we are in no way concerned with the merits of the respondent’s decision to demote the appellant. The respondent asserts that it was acting properly and, indeed, responsibly in relation to performance issues that went to the suitability of the appellant to command an aircraft. The appellant challenges the truth of underlying allegations. However, that contest does not arise in this appeal.
[40] We are satisfied that the appellant’s employment was terminated by the employer within the meaning of s.170CE of the WR Act. For the reasons we have given, the Commissioner erred in concluding otherwise and dismissing the appellant’s application. We grant leave to appeal, quash the decision and order of the Commissioner and dismiss the respondent’s motion. The matter will be remitted to Commissioner Raffaelli and should proceed in the usual way.
BY THE COMMISSION:
VICE PRESIDENT
Appearances:
Mr T Saunders of counsel for the appellant
Ms J Black for the respondent
Hearing details:
Sydney
2006
30 May
Printed by authority of the Commonwealth Government Printer
<Price code C>
1 (1996) 142 ALR 99
2 (1999) 101 IR 28
3 para [9]
4 (1999) Print S1443
5 at para [13]
6 Brackenridge v Toyota Motor Corporation Australia Ltd (1996) 142 ALR 99
7 Boo Hwa Chan v Christmas Island Administration (1999) Print S1443 ("Boo Hwa Chan"); Advertiser Newspapers Pty Ltd v IRC & Grivell (1999) 74 SASR 240
8 (2001) 115 FCR 78
9 (1981) 147 CLR 297
10 at pp 320-1
11 See generally Pearce & Geddes, Statutory Constructions in Australia, 4th edn, at [2.17]
12 (1977) 137 CLR 600 at 606-7 per Gibbs J (with whom Stephen, Jacobs and Aickin JJ agreed)
13 (1993) 116 ALR 54
14 [1972] RPC 103 at 109
15 at 63. See also Occidental Life Insurance Co of Australia Ltd v Life Style Planners Pty Ltd (1992) 38 FCR 444–50 at 449 per Lockhart J
16 (1999) 74 SASR 240 see esp at p 247ff per Bleby J (with whom Doyle CJ and Martin JJ agreed)
17 Advertiser Newspapers Pty Ltd v IRC & Grivell (1999) 74 SASR 240 and Tokyo Network Computing Pty Ltd v Tanaka [2004] NSWCA 263 at para 6 per Handley JA (with whom Mason P and Tobias JA agreed)
18 Reidel Investigation Services Pty Ltd v Wall (1992) 43 IR 110 at p 113 and see Rigby v Ferodo (1988) ICR 29 (HL) and Saad v TWT Ltd [1998] NSWCA 282
19 Appeal Book, pp. 27-8
20 R v Commonwealth Conciliation and Arbitration Commission; Ex parte The Melbourne and Metropolitan Tramways Board (1965) 113 CLR 228 at 243 per Barwick CJ
21 Appeal Book, p.20