Dec 524/00 M Print S5897
AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION
Workplace Relations Act 1996
s.45 appeal against decision Print S2466
issued by Commissioner Simmonds on 13 January 2000
P. Crozier
(C No. 30520 of 2000)
s.170CE application for relief in respect of termination of employment
P. Crozier
and
Palazzo Corporation Pty Limited t/as Noble Park Storage and Transport
(U No. 31013 of 1999)
VICE PRESIDENT ROSS |
|
SENIOR DEPUTY PRESIDENT ACTON |
|
COMMISSIONER CRIBB |
MELBOURNE, 11 MAY 2000 |
Appeal re termination of employment - valid reason - whether subjective or objective test applies when reason for termination relates to capacity or performance - subjective test rejected - whether notified of reason for termination - meaning of word "notified" - difference between notice given before or after decision to terminate employment - giving notice after decision to terminate is not notification under s170CG(3)(b) - opportunity to respond - opportunity to respond under s170CG(3)(c) is reference to such opportunity when notification of reason for termination is given before decision to terminate - warning - being aware of employer's dissatisfaction on performance does not amount to warning under s170CG(3)(d) - fair go all round - absence of procedural fairness in particular circumstances did not make termination harsh, unjust or unreasonable.
DECISION
Background
[1] This decision deals with an appeal by Mr Crozier against a decision made by Commissioner Simmonds on 13 January 2000 to dismiss his application for relief under s.170CE of the Workplace Relations Act 1996 (Cth) (the WR Act). Before turning to consider that decision and the grounds set out in support of the appeal we propose to set out some of the background to the termination of Mr Crozier's employment.
[2] In July 1998 Mr Crozier applied for the position of sales executive with Palazzo Corporation Pty Limited (trading as Noble Storage and Transport), the respondent in these proceedings. The respondent operates a commercial storage facility. The advertisement for the position to which Mr Crozier was ultimately appointed was in the following terms:
"Sales Representative
An opportunity exists for an experienced Salesperson with a proven track record preferably in the Warehousing and Transport Industry.
Applicants should be able to source and develop new business opportunities via new and existing clients and possess excellent communication and negotiating skills. A complete understanding of warehousing and/or contract storage is essential in order to achieve the main focus of this position. Salary package negotiable ..."1
[3] Mr Crozier's application for the above position was marked as Exhibit B2 in the proceedings below. Mr Crozier's résumé was attached to that application. In his application Mr Crozier states, among other things:
"I have many years experience as a sales executive in the insurance and transport industries where I negotiated sales with both large and small companies in the private and government sectors.
I have a proven ability to find new prospects and make sales in difficult market areas together with the ability to work as part of a team or without supervision when required."2
In the résumé attached to his application Mr Crozier lists the following among his "main attributes":
"...9. Proven ability to find new prospects in difficult market areas.
10. Proven ability to work without supervision when required.
11. Ability to gain appointments with difficult clients using proven techniques to overcome any objections."
[4] Mr Crozier was interviewed for the advertised position and subsequently received a letter of offer from the manager of the respondent's business, a Mr Black. In the letter of offer Mr Black set out the terms and conditions pertaining to his new position. The letter then states:
"Peter, the main focus of this position is to generate new business and substantially increase our occupancy levels. Given your experience in the sales and marketing area you will bring with you another dimension to enable Company growth and we are confident that you will achieve these goals."3
[5] Mr Crozier accepted the terms offered and commenced work on 17 August 1998. It is clear from his evidence in the proceedings at first instance that Mr Crozier knew that a substantial part of his job was to acquire new business in a difficult market. He also knew that the main focus of his position was to generate new business and substantially increase occupancy levels.4
[6] In October 1998 Mr Crozier was successful in obtaining an order from Belmont Printing for the storage of 30 pallets. The value of this order was $1300. Mr Crozier did not achieve any other concluded sales during his employment.5
[7] On 1 March 1999 a meeting took place between Mr Black and Mr Crozier. At that meeting Mr Black said: "the situation is you have not made any sales, we cannot continue your employment any longer, your position as a salesman is ended immediately" (or words to that effect).6 Mr Crozier was informed that the respondent could not afford to continue to pay his salary as he was not making any sales. Mr Crozier's employment was terminated on 1 March 1999. The relevant employment separation certificate states that Mr Crozier was terminated due to "shortage of work".
Decision at First Instance
[8] Mr Crozier's s.170CE application for relief arising from the termination of his employment was heard on 17 November 1999. On 13 January 2000 Commissioner Simmonds issued a decision dismissing Mr Crozier's application.7
[9] In the proceedings below Mr Gray, who appeared on behalf of the applicant, contended that there was no valid reason for the termination of Mr Crozier's employment. In particular it was submitted that the applicant's limited success in generating new business was caused in part by the respondent's failure to provide appropriate support or assistance. Mr Gray argued that Mr Crozier had operated in a situation where no sales targets were set and there was inadequate training, assistance and advice about the work process. It was also argued that the applicant had been denied procedural fairness and had not been given any prior warning that his employment was at risk.
[10] The respondent's position was that Mr Crozier had failed to obtain business and such failure related to his capacity or conduct and it related to the operational requirements of the business. Mr Burchardt, appearing for the respondent, submitted that "the fact that there was effectively almost no sales, only $1300 in six months does provide a valid reason".
[11] At first instance the Commissioner concluded that there was a valid reason for the termination of Mr Crozier's employment. In the decision subject to appeal the Commissioner said:
"I am of the view that the training, assistance advice and counselling provided may have been lacking perfection. However, Mr Crozier's had considerable previous experience in the area as his application for employment discloses [Exhibit B2]. Thus I consider the shortfall does not affect the validity of the reason for termination, particularly as it relates to the issue of operational requirements. The evidence of Mr Crozier, which was not seriously challenged by the company, is that he was well organised and hard working. He brought a professional approach to his job. Within the constraints imposed by his employer regarding pricing structures and available facilities he did his best, and his best could not be faulted. It may be that the product he was to sell and the price at which he was to sell it made his task impossible. In the absence of some ulterior motive (and none was suggested here) it is not unreasonable for the employer to determine the nature of his product and the price at which it is to be sold. I think the situation is best described, again by Mr Burchardt as follows:
"In my respectful submission, sir, this episode was an unhappy one for all concerned. The company thought they were getting a person who could sell and Mr Crozier thought he could do it. Through no fault of his own, he was not able to. It was just a disastrous error of judgement by all." [transcript p.97]
As noted, there is no dispute that Mr Crozier was responsible for bringing in only $1300.00 (gross) worth of business. Moreover, there can be no dispute that in a little over six months of employment the employer paid to Mr Crozier, directly and indirectly an amount in excess of $22,000.00. To continue that situation, in the absence of any expected return, would be an invitation to economic ruin. There was no evidence of any certainty of future return as a consequence of the work performed by Mr Crozier.
In all of the above circumstances I am satisfied there was a valid reason connected with the operational requirements of the business for the company's termination of Mr Crozier's employment."8
[12] The Commissioner then went on to deal with the other matters which require consideration pursuant to s.170CG(3). In relation to s.170CG(3)(b) the Commissioner found that on the day Mr Crozier's employment was terminated he was notified of the reason for his termination.
[13] Section 170CG(3)(c) provides that the Commission must have regard to whether the employee was given an opportunity to respond to any reason for termination related to the employee's capacity or conduct. The Commissioner dealt with this issue in the following terms:
"On the day of termination Mr Crozier, on his own evidence was given an opportunity to respond, and he did. He specifically raised his concerns about the rates charged for storage being uncompetitive. By this time however the decision to terminate had been taken and there is no suggestion that there was any response he could have made that would have altered that decision. The extent to which he was given the opportunity to respond on other occasions is an issue inextricably interwoven with the dispute as to whether there were previous occasions on which he was warned about his performance. This is dealt with below."9
[14] The Commissioner went on to find that Mr Crozier had not been warned that his performance was unsatisfactory and that it could lead to the termination of his employment. The Commissioner concluded his decision in the following terms:
"From the above analysis it follows that I consider the company had a valid reason for terminating Mr Crozier and that they informed him of that reason. They did not however, give him any appropriate warning about his performance and there was only a limited opportunity to respond. I am not aware of any other relevant matters for consideration. In ensuring a `fair go all round' as I am required to do it is necessary to weigh up the effect of the failure to warn and to only provide a limited opportunity to respond. The failure to warn Mr Crozier about his performance and the consequent limited opportunities for him to respond, in this case, does not, in my view mean that the termination was harsh, unjust or unreasonable. There was no complaint about his effort, his approach or his demeanour as an employee. The real complaint was that he was not successful as a sales representative. Mr Crozier knew he was unsuccessful and made suggestions for changes to the company's approach, which the company did not totally accept. He continued to be unsuccessful, and it is not clear what effect a warning would have had. At most, he would have had the opportunity to seek other employment while still employed.
I cannot accept that Mr Crozier believed that he would continue in employment indefinitely despite his lack of success. I am surprised that he did not take the initiative to discuss his future with the company in the circumstances where he made no sales between October 1998 and the date of his termination on 1 March 1999.
On balance I do not consider that Mr Crozier was disadvantaged by the company's failure to warn him about his performance or to provide him with only limited opportunities to respond to concerns about his conduct or performance.
For the reasons set out above Mr Crozier's application for relief under section 170CE of the Act is dismissed. I so order."10
[15] The matter before us is an appeal from the Commissioner's decision.
Submissions on Appeal
[16] Mr Gray, on behalf of the appellant, advanced two broad grounds in support of the appeal:
- the Commissioner erred in concluding that there was a valid reason for the termination of Mr Crozier's employment as his conclusion was based on an erroneous assessment of the operational requirements of the respondent's business; and
- the Commissioner erred in failing to make an order under s.170CH despite his finding that the applicant had been denied procedural fairness.
[17] Mr Gray also challenged the Commissioner's findings pursuant to s.170CG(3)(b) and (c). It was contended that contrary to the Commissioner's conclusion Mr Crozier had not been "notified" of the reason for his termination within the meaning of s.170CG(3)(b). In relation to s.170CG(3)(c) the Commissioner concluded that Mr Crozier had been given a "limited" opportunity to respond to the reason for his termination. Mr Gray argued that in fact the appellant had not been afforded any genuine opportunity to respond to the reason alleged by the respondent to justify the termination of his employment. It was submitted that the Commissioner had effectively ignored the criterion in s.170CG(3)(c) or that he had given "grossly insufficient" consideration to it in his reasoning.
[18] In relation to s.170CG(3)(e) the appellant contended that the Commissioner had erred in failing to make a clear division between his assessment of the merits and the question of remedy. As a consequence of this failure the Commissioner had regard to irrelevant considerations.
[19] In concluding the appellant submitted that:
- the Commissioner made numerous errors of fact and law which justify leave to appeal being granted in the public interest and in quashing the order subject to appeal;
- the reason for the termination of Mr Crozier's employment was not related to his capacity or conduct, no matter which standard his performance is measured against;
- even if there was a valid reason for termination, the appellant was denied an opportunity to respond to that reason and had not been sufficiently warned about his alleged unsatisfactory performance; and
- the appeal bench should quash the Commissioner's order dismissing Mr Crozier's application and make an order for compensation in favour of the appellant pursuant to s.45(7)(b).
[20] In reply the respondent submitted that the Commissioner's finding in respect of the issues identified in s.s 170CG(3)(a) to (e) and his conclusion were correct or, in the alternative, reasonably open on the evidence. The respondent contended that the Commissioner turned his mind to a proper balancing of the competing considerations imposed by s.170CG(3). It was argued that the Commissioner's reasoning in that regard was "wholly conducted in accordance with the Act and discloses no appreciable error". The respondent challenged a number of the assertions made by the appellant and argued that the submissions filed on behalf of the appellant ignored the objective of the statutory regime which is to provide a fair go all round.
[21] The respondent concluded by submitting that leave to appeal should not be granted and the appeal should be dismissed.
Consideration of the Submissions
[22] The appellate jurisdiction conferred on us by s.45 in relation to an appeal concerning an order arising from the arbitration of an application under s.170CE is conditioned by s.170JF(1) which limits the grounds of an appeal. The only ground is that the member of the Commission who conducted the arbitration was in error in deciding to make an order. That can be an error of fact or an error of law.11
[23] Because the order of Commissioner Simmonds is a discretionary one, the appeal is to be determined in accordance with the principles applicable to appeals from such an order; that is, the principles stated in House v The King.12
[24] In House v The King, Dixon, Evatt and McTiernan JJ stated these principles as follows:
"The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred."13
[25] In the light of the principles applicable to an appeal from a discretionary order, we now turn to consider whether an error within these principles was made by the Commissioner in the exercise of his discretion.
[26] The terms of s.170CG(3) are critical in the determination of this appeal. Section 170CG(3) states:
"(3) In determining, for the purposes of the arbitration, whether a termination was harsh, unjust or unreasonable, the Commission must have regard to:
(a) whether there was a valid reason for the termination related to the capacity or conduct of the employee or to the operational requirements of the employer's undertaking, establishment or service; and
(b) whether the employee was notified of that reason; and
(c) whether the employee was given an opportunity to respond to any reason related to the capacity or conduct of the employee; and
(d) if the termination related to unsatisfactory performance by the employee - whether the employee had been warned about that unsatisfactory performance before the termination; and
(e) any other matters that the Commission considers relevant."
[27] In determining whether a termination of employment was "harsh, unjust or reasonable", s.170CG(3) requires the Commission to consider each of the matters in s.170CG(3)(a), (b), (c) and (d), as well as any relevant matter within the scope of s.170CG(3)(e). Not only must the matters be considered but the words "must have regard to" signify that each must be treated as a matter of significance in the decision making process.14 A consequence of this construction of s.170CG(3) is that the Commission is obliged to make a finding in respect of each of the circumstances specified in s.170CG(3)(a), (b), (c), (d) and (e) insofar as each of these paragraphs is relevant to the factual circumstances of a particular case.15
[28] In the decision subject to appeal the Commissioner determined that there was a "valid reason" for the termination of Mr Crozier's employment "connected with the operational requirements of the employers undertaking". The appellant challenges the Commissioner's finding on this issue and contends that the Commissioner made an "erroneous assessment of the operational requirements of the respondent's business".
[29] In Cosco Holdings v Thu Thi Van Do (Cosco) the Federal Court considered the meaning of s.170DE(1) in the former Industrial Relations Act 1988 (Cth) (the former Act). Section 170DE(1) of the former Act was in the following terms:
"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."
[30] Section 170CG(3)(a) of the WR Act adopts some of the wording of s.170DE(1) of the former Act, but the context is different. The differences between these two provisions were considered by a Full Bench of the Commission in Windsor Smith v Liu and others. In that case the Commission said:
"Section 170CG(3)(a) adopts some of the wording of s.170DE(1) of the IR Act but the context is entirely different. Section 170DE(1) of the IR Act contained a prohibition on termination of employment except for a valid reason or valid reasons. Section 170CG(3) does not. Whether there was a valid reason for the termination is only one of four separately specified matters which the Commission must now have regard to. The Commission must also have regard to any other matter it considers relevant. There is no causal connection between a finding that there was no valid reason for the termination and a conclusion that the termination was harsh, unjust or unreasonable. In summary, the question of whether there was a valid reason for termination of employment is no longer the critical question in determining whether the termination was contrary to the Act."16
[31] Despite these differences we think that the observations of the Federal Court in Cosco are of assistance in construing s.170CG(3)(a). In that case the majority, Lindgren and Lehane JJ, said:
"To say that the `valid reason' must be `based on' operational requirements must mean that it has a real, not merely specious, foundation in those requirements. To say, as the section does, in addition that the reason must be `valid' is, no doubt, to add a further element to that requirement of a genuine foundation." 17
[32] A number of other authorities suggest that a "valid reason" for termination is a reason which is "sound, defensible or well founded". It must be defensible or justifiable on an objective analysis of the relevant facts.18 Viewed in this way we do not think that it was reasonably open to the Commissioner to conclude that there was a valid reason for the termination of Mr Crozier's employment based on the operational requirements of the respondent's undertaking. There is no sound evidentiary basis for such a finding.
[33] Mr Crozier's employment separation certificate states that he was terminated due to "shortage of work". In his evidence Mr Black explained why he had categorised Mr Crozier's termination in this way:
"There wasn't any work coming in to the business, absolutely none whatsoever and as a result of that, I had other people's positions to consider, such as the warehousing staff and the supervisory staff and it was a major consideration of mine. There just wasn't any business coming into the company. That was the reason I ticked shortage of work."19
[34] Mr Palazzo's evidence also went to the reason for Mr Crozier's termination. Mr Palazzo is the principal of the respondent company. The following exchange took place during the course of his cross examination:
"Mr Gray: Now, when you spoke to Mr Black about dismissing Mr Crozier in the week prior to the dismissal, did you talk to him about the reason for the dismissal?
Mr Palazzo: Well, he didn't keep to his words. In other words, he didn't achieve what he said he was going to achieve. He achieved nothing, actually. In the six and a half months that he's been there, I don't think he paid for the coffee that he drinks in the place. That's the whole dilemma.
Mr Gray: Yes, I think that is admitted. So that was the reason and that was unsatisfactory performance, was it not?
Mr Palazzo: Well, we had a long meeting in November and we made the situation very clear, so we have no other way to go, no other option.
Mr Gray: And there was no doubt about that. It was staring you in the face. He had not paid for his own coffee and it was nothing to do with a shortage of work?
Mr Palazzo: Well, if he hasn't been able to create any work, there is a shortage of work."20
[35] It is relevant to note that Mr Black reported to Mr Palazzo and that they had discussed, and agreed upon, the termination of Mr Crozier's employment.
[36] In our view the evidence clearly discloses that the reason for the termination of Mr Crozier's employment was his failure to secure sufficient new business. In the circumstances of this case that reason relates to Mr Crozier's capacity or performance rather than the operational requirements of the respondent's undertaking. The evidence does not suggest that there was a sound or defensible reason for Mr Crozier's termination based on the operational requirements of the respondent's undertaking. Other than the general observation made by Mr Black - and set out at paragraph 33 of this decision - there is no evidence of any operational requirement to terminate Mr Crozier's employment. To constitute a valid reason based on operational requirements a termination must be defensible or justifiable on an objective analysis of the relevant facts. In this case there was no factual basis upon which an objective analysis would lead to the conclusion that Mr Crozier was terminated for a valid reason based on operational requirements.
[37] We are satisfied that the Commissioner erred in concluding that there was a valid reason for the termination of Mr Crozier's employment based on the respondent's operational requirements. This amounts to a reviewable error within the meaning of s.170JF of the WR Act. On that basis we have decided to grant leave to appeal.
[38] The appellant submitted that if we decided to grant leave to appeal we should quash the order subject to appeal and make an order for compensation in favour of the appellant pursuant to s.45(7)(b). Section 45(7)(b) provides:
"s.45(7) On the hearing of the appeal, the Full Bench may do one or more of the following:
...(b) make an award, order or decision dealing with the subject-matter of the decision or act concerned;"
[39] No one submitted that we should remit the matter to the Commissioner at first instance pursuant to s.45(7)(c).
[40] Before deciding to grant a remedy of the type contemplated by s.170CH we must first determine whether the termination of the appellant's employment was "harsh, unjust or unreasonable" (see s.170CH(1)). Such a determination requires us to have regard to the matters identified in s.170CG(3)(a), (b), (c) and (d) as well as any relevant matter within the scope of s.170CG(3)(e). We propose to deal with each of the matters identified in s.170CG(3) in turn.
Valid Reason
[41] Section 170CG(3)(a) provides that in determining whether a termination was harsh, unjust or unreasonable the Commission must have regard to whether "there was a valid reason for the termination related to the capacity or conduct of the employee or to the operational requirements of the employer's undertaking, establishment or service".
[42] We have already rejected the proposition that there was a valid reason for the termination of Mr Crozier's employment based on operational requirements. The issue which now requires consideration is whether there was a valid reason which related to "the capacity or conduct of the employee". Mr Crozier's conduct is not in issue. The question is whether there was a valid reason for termination related to Mr Crozier's capacity.
[43] In this context the appellant submitted that a subjective test should be applied. It was argued that such an approach would allow an employer to lawfully terminate the employment of an employee who was performing below their inherent capacity while simultaneously protecting the position of employees who were performing as well as could be expected.
[44] In the proceedings at first instance and on appeal counsel for the appellant submitted that Mr Crozier's failure to obtain sales during the period he was employed by the respondent was attributable to external factors rather than any lack of endeavour by Mr Crozier. It was argued that Mr Crozier's limited success in generating new business was caused in part by the failure of the respondent to provide appropriate support or assistance. Simply put it was argued that Mr Crozier did the best he could with the constraints imposed on him.
[45] In his witness statement Mr Crozier said:
"Before Christmas 1998, I submitted several proposals to potential clients including Penguin Books, Amcal Chemist, Lockwood, Priority Plastics, Truspice International, and PGA Logistics. All these proposals were rejected, with the following reasons given:
(a) the rates were approximately 30% higher then what they were currently paying with other storage and transport companies. There would also be the additional cost of moving their stock to our premises.
(b) The company did not have any trucks for distribution. Many companies I contacted expected us to do so, as the trading name implies this.
(c) The warehouse had no racking system to store pallets which most companies require, and most storage companies have these so products are not damaged. I asked both John Black and Tony Palazzo to purchase racks for this purpose but my request was refused. I was told that they were not prepared to spend the money on racking but instead would purchase racking if required after we had got the business.
(d) There was no sprinkling system in the empty warehouse. This was the reason stated in writing by a prospective customer PGA Logistics in December 1998 for not giving us their business which would have been a large sale (approximately 50,000 square feet which would have filled one warehouse)."21
[46] In our view the weight of the evidence does not support the contention that "external factors" - including those identified in Mr Crozier's statement - were a significant factor in Mr Crozier's lack of success in securing sales.
[47] Mr Black's evidence was that the respondent's storage rates ranged from $1.10 to $1.70 per pallet per week. The $1.10 rate applied to a long standing customer and the price range which operated during Mr Crozier's employment was between $1.20 and $1.70.22 Mr Black also said:
"According to the industry, the average rate is somewhere between $1.50 to $1.70, going up to $2 for the same services offered by ourselves."23
[48] In relation to the issue of pricing the evidence discloses that Messrs Black and Palazzo had been flexible in setting the prices for the services offered by the respondent.24
[49] The respondent has been in the storage business for some 13 years. The fact that the company is still in business suggests that the prices of its services are competitive. It is difficult to argue with the following proposition put by Mr Black during the course of his evidence that if the company's prices were not competitive they wouldn't have any customers.25
[50] In his oral evidence Mr Crozier maintained that the fact that the respondent did not own any trucks made it "very difficult" to obtain business.26
[51] Messrs Black and Palazzo also gave evidence about whether the fact that the company did not own any trucks had an adverse impact on sales. The following exchange took place during the course of Mr Black's cross-examination:
"Mr Gray: Now, the company's name includes the word transport, does it not?
Mr Black: It does.
Mr Gray: But it does not actually transport, does it?
Mr Black: The company itself does not transport.
Mr Gray: And that must have been a problem because you must have had people ring up and say, well, we have got this stuff that we want to store, can you come and pick it up and take it away and send us the bill?
Mr Black: No, that didn't pose a problem whatsoever because we had the services of various transport companies that were made available to us to utilise their services, which we did. One of those companies was a company called Douglas Transport and that company was a client of ours."27
[52] Mr Palazzo also dealt with this issue in the course of his cross examination:
"Mr Gray: Now, the fact that your company is called Noble Storage and Transport does not mean that the company itself runs trucks, does it?
Mr Palazzo: It doesn't. Occasionally we organise for some customers, but we don't own our own trucks, if that's what you mean.
Mr Gray: All right, and Mr Crozier raised that concern with you, did he not, about the lack of trucks, because he was saying the customers expect Noble to arrange the pick-up and storage itself?
Mr Palazzo: Mr Crozier at one stage became like the fox that couldn't reach the piece of meat and says it's no good, it stinks, I don't want it. That's what he became.
Mr Gray: All right, so he did become a bit of a whinger, you say?
Mr Palazzo: Yes. We went through that situation where we had a transport company which was no good for the business and we dispose of it for $1.
Mr Gray: Yes, all right?
Mr Palazzo: Regarding trucks, I said to Mr Crozier if you ever come back to me with a company who wants 10 trucks, I'll get it to you within a week."28
[53] Mr Crozier's evidence was that "a lot of companies required racking" and that the lack of racking had "a big impact".29
[54] During the course of his evidence Mr Black rejected the proposition that the lack of racking was a problem in securing sales:
"Mr Gray: Now, the lack of racking was a problem in terms of promoting the business to other customers, was it not?
Mr Black: No. Racking is a materials handling piece of equipment that is not always required by clients. In actual fact, the majority of people making inquiries would rather that the building be completely vacant of anything in order to enable them to design a system that would apply to their particular business. An existing racking system would have to be modified in order to suit their particular requirements so that is not always the case. In fact, in the majority of cases, that is not so.
Mr Gray: But it would have been handy to have some racking?
Mr Black: It would be convenient to have some racking, somewhere in the region of maybe a 100 pallets basis or thereabouts."30
[55] We prefer the evidence of Messrs Black and Palazzo on these issues. They have had considerably more experience in the storage industry than Mr Crozier. Further, Mr Crozier only identifies some six potential customers which rejected his proposals for reasons relating to pricing and a lack of transport, racking and sprinklers. Mr Crozier's evidence was that during the course of his employment with the respondent he had contacted some 750-800 potential customers.31 In relation to PGA Logistics we note that this involved a potentially substantial sale - approximately 50,000 square feet - which did not proceed because there was no sprinkler system in the warehouse. But Safeway subsequently entered into an arrangement to take up all this space despite the absence of a sprinkler system.
[56] It was also contended that Mr Crozier's limited success was caused in part by the failure of the respondent to provide appropriate support or assistance.
[57] Mr Crozier's evidence was that he was not provided with any formal training, but he acknowledged that he received "some informal training" from Mr Black. Mr Black is the manager of the respondent's business and Mr Crozier reported to him. The focus of the assistance provided was to enable Mr Crozier to better understand the storage business and some of the problems he was likely to come across.32
[58] The evidence also establishes that Mr Crozier was not given any sales targets he was required to meet.33 In his witness statement Mr Black sought to explain this omission in the following terms:
"It is important to note, as I made clear to the Applicant, and indeed he already knew, that there were no specific sales targets. This was because we were selling a service not selling items."34
[59] In the course of his evidence Mr Crozier confirmed that Mr Black had made it clear to him that there were no specific sales targets because what they were selling was a service, rather than particular items.35
[60] In the decision subject to appeal the Commissioner said:
"I am of the view that the training, assistance advice and counselling provided may have been lacking perfection. However, Mr Crozier's had considerable previous experience in the area as his application for employment discloses [Exhibit B2]. Thus I consider the shortfall does not affect the validity of the reason for termination ..."36
[61] We agree with the above observation. The evidence discloses that Messrs Black and Palazzo took a number of steps to assist Mr Crozier. Mr Black accompanied Mr Crozier (at his request) in visits to a number of clients and potential clients.37 Further, he suggested a number of potential customers to Mr Crozier for him to follow up.38 Mr Black also agreed to delete handling charges in appropriate cases in order to give Mr Crozier a better chance of making sales.39 As a means of attracting customers Mr Palazzo proposed that potential customers could have signwriting to their specifications on trailers which the company was proposing to buy.40
[62] We find that there was a valid reason for the termination of Mr Crozier's employment related to his capacity. In our view an employee's performance is an incident of his or her "capacity" within the meaning of that word in s.170CG(3)(a). A consequence of the adoption of the test posited by the appellant would be that an employer would never have a valid reason to terminate an employee based on his or her capacity if the employee was doing his or her best. This would be so despite the fact that the employee may be entirely unsuited for their position or they do not fulfil a key requirement of their position which was reasonable in the circumstances, as was the case in the matter before us.
[63] Mr Crozier knew that a substantial part of his job was to acquire new business in a difficult market. He also knew that the main focus of his position was to generate new business and substantially increase occupancy levels. He was an experienced sales person who listed among his attributes a "proven ability to find new prospects in difficult market areas". Despite his best endeavours Mr Crozier failed to meet the key objective for which he was employed. He only achieved one sale - valued at $1300 - during the six and a half months of his employment. Contrary to the submission put on behalf of the appellant we find that the weight of the evidence does not support the contention that external factors or the respondent's failure to provide appropriate support and assistance were significant factors in Mr Crozier'' lack of success in securing sales.
Notification
[64] Section 170CG(3)(b) requires the Commission to have regard to "whether the employee was notified of that reason". The reference to "that reason" is a reference to the "valid reason" for the employee's termination. This is clear from the juxtaposition of s.170CG(3)(a) and (b).
[65] An issue arises as to what is meant by the word "notified" in the context of s.170CG(3)(b).
[66] In the circumstances of the matter before us it is uncontested that Mr Crozier was not notified of the reason for his termination before a decision was taken to terminate his employment. Does s.170CG(3)(b) refer to the giving of notice prior to a decision to terminate? Or is it sufficient if the employee is told of the reason for termination after the employer has made the decision to terminate their employment?
[67] Looked at in isolation the word "notified" in s.170CG(3)(b) is somewhat ambiguous and may support either of the two interpretations advanced. We think the first interpretation is to be preferred, for three reasons.
[68] First, the interpretation we favour is consistent with one of the meanings attributed to the word "notified". The Oxford Dictionary41 states that one of the meanings of the word "notify" is "to intimate, give notice of, announce".
[69] Second, the Explanatory Memorandum relating to s.170CG(3) says:
"7.43. Subsection 170CG(3) sets out the matters that the Commission must have regard to in determining whether a termination was harsh, unjust or unreasonable. These matters are:
· whether there was a valid reason for the termination related to:
- the capacity or conduct of the employee; or
- the operational requirements of the employer's undertaking, establishment or service;
· whether the employee was notified of that reason;
· whether the employee was given the opportunity of responding to a reason which related to the employee's capacity or conduct;
· whether the employee had been warned about unsatisfactory performance if the termination was based on unsatisfactory performance; and
· any other matters the Commission considers relevant.
7.44. Affording employees procedural fairness in relation to a termination will be relevant in establishing whether or not a termination is harsh, unjust or unreasonable. However, as procedural fairness is to be only one factor to be considered along with other relevant factors, the intention is that undue weight will not be given to procedural defects in a termination."42
[70] Section 170CG(3)(b) and (c) are clearly related to the concept of "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. This principle is a well established incident of public administrative law.43 It is apparent from the Explanatory Memorandum that s.170CG(3)(b) and (c) are intended to import the principle into Australian labour law.
[71] Having regard to whether the employee was notified of the valid reason for his or her termination before rather than after the decision to terminate his or her employment is more consistent with the reference to procedural fairness set out in the Explanatory Memorandum.
[72] Third, the interpretation we propose to adopt is consistent with the context in which the provision appears, in particular its relationship with s.170CG(3)(c).
[73] As a matter of logic procedural fairness would require that an employee be notified of a valid reason for their termination before any decision is taken to terminate their employment in order to provide them with an opportunity to respond to the reason identified. Section 170CG(3)(b) and (c) would have very little (if any) practical effect if it was sufficient to notify employees and give them an opportunity to respond after a decision had been taken to terminate their employment. Much like shutting the stable door after the horse has bolted.
[74] We find that Mr Crozier was not notified of the valid reason which led to the termination of his employment.
Opportunity to Respond
[75] Section 170CG(3)(c) provides that the Commission must have regard to "whether the employee was given an opportunity to respond to any reason related to the capacity or conduct of the employee". For the reasons we have set out in relation to s.70CG(3)(b) we think that the "opportunity to respond" referred to in s.170CG(3)(c) is a reference to any such opportunity which is provided before a decision is taken to terminate the employee's employment.
[76] We find that Mr Crozier was not provided with an opportunity to respond to the reason for his termination.
Warning
[77] Where a termination of employment is related to unsatisfactory performance by the employee - as is the case here - the Commission must have regard to whether the employee had been warned about that unsatisfactory performance before termination (s.170CG(3)(d)).
[78] Some months after he started work Mr Crozier met with Messrs Black and Palazzo. There is a dispute about when the meeting took place. Mr Crozier says October 1998 and Messrs Black and Palazzo say 20 November 1998. It is unnecessary for us to resolve this conflict. It is not contested that at that meeting Mr Crozier was asked to provide an overview of his performance and he produced a list of the businesses he had contacted. During the course of the meeting Mr Palazzo said that he was unhappy with Mr Crozier's performance.44 Mr Crozier had agreed with the proposition that his results were not good but he said that he was confident that he would be able to get more business in the future.45
[79] While Mr Crozier would have been aware that his employer was unhappy with his performance that fact does not amount to a warning within the meaning of s.170CG(3)(d). We find that the statements made to Mr Crozier during the course of his employment lack the particularity required of the type of warning contemplated by s.170CG(3)(d).
[80] We find that Mr Crozier was not warned about his unsatisfactory performance prior to his termination.
[81] We have had regard to the matters specified in s.170CG(3)(a), (b), (c) and (d). Pursuant to s.170CG(3)(e) we have regard to the fact that Mr Crozier would have been aware that his employer was unhappy with his performance as a consequence of comments made by Mr Palazzo during a meeting some months after he started work. It is also reasonable to assume that Mr Crozier knew that his employment would not continue indefinitely without an improvement in his sales performance.46 We have also had regard to the fact that the relevant statutory regime is intended to ensure that "in the consideration of an application in respect of a termination of employment a `fair go all round' is accorded to both the employer and the employee concerned" (see s.170CA(2)). There are no other relevant matters to which we have had regard pursuant to s.170CG(3)(e).
[82] Taking all of these matters into account we have decided that the termination of Mr Crozier's employment by the respondent was not harsh, unjust or unreasonable. In this regard we have been particularly conscious of the following features of this case:
- Mr Crozier had considerable experience as a salesperson and his application for the position with Noble Storage and Transport refers to the fact that he has a "proven ability to find new prospects and make sales in difficult market areas";
- at the time of his appointment Mr Crozier knew that the main focus of his position was to generate new business in a difficult market;
- in just over six months of employment Mr Crozier only succeeded in securing one order for the storage of 30 pallets. This order was worth $1300;
- external factors were not a significant factor in Mr Crozier's lack of success in securing sales; and
- in light of Mr Crozier's considerable experience the training and assistance afforded to him by the respondent, while less than perfect, was not so deficient as to significantly contribute to Mr Crozier's lack of success in securing sales.
[83] The result in this case turns on its own facts. In other circumstances the absence of procedural fairness evident in this case may lead to a conclusion that the termination was harsh, unjust or unreasonable.
[84] We grant leave to appeal and, as we have reached the same conclusion as the Commissioner at first instance, we dismiss the appeal.
BY THE COMMISSION:
Appearances:
J. Gray of counsel for P. Crozier.
P. Burchardt of counsel for Palazzo Corporation Pty Limited t/as Noble Park Storage and
Transport
Hearing details:
2000.
Melbourne:
April 28.
Printed by authority of the Commonwealth Government Printer
<Price code F>
4 Transcript 17 November 1999, p.24 at lines 1-5.
5 Transcript 17 November 1999, p.26 at lines 28-31.
6 Transcript 17 November 1999, p.40 at lines 5-10.
8 Print S2466 at paragraphs 11-13.
9 Print S2466 at paragraph 15.
10 Print S2466 at paragraphs 21-24.
11 Edwards v Giudice [1999] FCA 1836 per Moore J.
12 (1936) 55 CLR 499 at 504-5; see Construction, Forestry, Mining and Energy Union v Giudice at pp 28-29.
13 (1936) 55 CLR 499 at pp 504-5.
15 See generally Chubbs Security Australia Pty Ltd v John Thomas, Print S2679, 2 February 2000; King v Freshmores (Vic) Pty Ltd, Print S4213, 17 March 2000.
16 Print Q3462, 13 July 1998 per Giudice P, Polites SDP and Gay C at p.8.
18 Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371; Nettlefold v Kym Smoker Pty Ltd (1996) 69 IR 370; Kerr v Jaroma Pty Ltd t/as Treasury Motor Lodge (1996) 70 IR 469.
19 Transcript 17 November 1999, p.72 at lines 12-17.
20 Transcript 17 November 1999, p.81 at lines 31-33 and p.82 at lines 1-11.
21 Exhibit G1 at paragraph 21.
22 Transcript 17 November 1999 at pp.53 and 70.
23 Transcript 17 November 1999, p.57 at lines 16-18.
24 Transcript 17 November 1999, p.26 at lines 32-37; p.27 at lines 1-4; p.57; p.73 at lines 25-30; p.74 at lines 1-12; also see Exhibit B5.
25 Transcript 17 November 1999, p.53 at lines 25-30.
26 Transcript 17 November 1999, p.19 at lines 3-16.
27 Transcript 17 November 1999, p.55 at lines 24-30 and p.56 at lines 1-4.
28 Transcript 17 November 1999, p.83 at lines 17-31.
29 Transcript 17 November 1999, p.20 at lines 1-12.
30 Transcript 17 November 1999, p.67 at lines 15-26.
31 Transcript 17 November 1999, p.12.
32 Transcript 17 November 1999, p.10 at lines 3-6.
33 Transcript 17 November 1999, p.10 at line 7.
35 Transcript 17 November 1999, p.26 at lines 12-14.
36 Print S2466 at paragraph 11.
37 Transcript 17 November 1999, pp.24-25.
38 Transcript 17 November 1999, p.29 at lines 31-39; p.34 at lines 5-9.
39 Transcript 17 November 1999, p.30 at lines 5-9.
40 Transcript 17 November 1999, p.29 at lines 9-20.
41 The Oxford English Dictionary (Oxford University Press, Oxford, 1978) Vol VII at p.232.
42 Explanatory Memorandum, Workplace Relations and Other Legislation Amendment Bill 1996 (Cth), p.44.
43 FAI Insurances Limited v Winneke (1981-1982) 151 CLR 342; Kioa v West (1985) 159 CLR 550; Annetts v McCann and others (1990) 170 CLR 596.
44 Transcript 17 November 1999, p.56 at lines 31-33.
45 Transcript 17 November 1999, p.27 at lines 15-35; p.28 at lines 1-5.