PR908053
AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION
Workplace Relations Act 1996
s.45 appeal against decision and orders
issued by Commissioner Whelan on 13 February 2001
[PR901073], [PR901074], [PR901075], [PR901076], [PR901077] and [PR901078]
Lockwood Security Products Pty Limited
(C2001/1250)
s.170CE application for relief in respect of termination of employment
Sulocki
(U No. 32069 of 2000)
Myers
(U No. 32070 of 2000)
Clarke
(U No. 32071 of 2000)
Titford
(U No. 32072 of 2000)
Tilburn
(U No. 32224 of 2000)
and
Lockwood Security Products Pty Limited
JUSTICE GIUDICE, PRESIDENT |
|
SENIOR DEPUTY PRESIDENT LACY |
|
COMMISSIONER BLAIR |
MELBOURNE, 23 AUGUST 2001 |
Appeal - termination of employment - whether harsh unjust or unreasonable - no error found - remedy - orders for payment in lieu of reinstatement - calculation of amounts ordered - failure to mitigate - inconsistency of treatment - relevance of single parenthood - assessment of contingencies - orders varied.
DECISION
INTRODUCTION
[1] Lockwood Security Products Pty Limited (the appellant) has applied for leave to appeal against the decision of Commissioner Whelan given in Melbourne on 13 February 2001.1 The application is made pursuant to s.45 of the Workplace Relations Act 1996 (the Act).
[2] Commissioner Whelan's decision concerned applications for relief in relation to the appellant's termination of the employment of Ms Elizabeth Sulocki and Messrs Christopher Myers, Vincente Clarke, Darren Titford and Rodney Tilburn (collectively, the respondents). The respondents' applications were made under s.170CE of the Act. After a hearing of three days duration, in which the appellant was the respondent and the respondents were the applicants, Commissioner Whelan determined that the appellant had terminated the respondents' employment harshly, unjustly or unreasonably and ordered that the appellant pay:
as amounts in lieu of their reinstatement.2
[3] On 16 March 2001, Senior Deputy President Lacy made an order by consent of the parties, that the appellant pay the sum of $55,000.00 into an interest bearing deposit until further order, and staying the operation of Commissioner Whelan's orders of 13 February 2001, pending the hearing and determination of the appeal or until further order.3
[4] The appellant contends that Commissioner Whelan made errors in the process of determining that the termination of employment of each of the respondents was harsh, unjust or unreasonable and in determining the amount of the payments that the appellant is required to pay to them in lieu of reinstatement. In essence, the appellant asks the Full Bench to set aside the Commissioner's decision and determine for itself whether the terminations were harsh, unjust or unreasonable and if so the amount if any which should be ordered in lieu of reinstatement. The respondents have opposed the application for leave to appeal and made submissions in support of the Commissioner's decision, urging the Full Bench to uphold the orders that the Commissioner made.
[5] A person's standing to appeal to a Full Bench of the Commission in relation to matters arising under Part VIA of the Act derives from s.170JF of the Act. That section also stipulates that appeals under subdivision B of Division 3 of Part VIA of the Act may be instituted only on the ground of error. The provisions are as follows:
"170JF
(1) An appeal to a Full Bench under section 45 may be instituted by any person who is entitled under section 170JD to apply for the variation or revocation under this Part.
(2) For the avoidance of doubt, an appeal to a Full Bench under section 45 in relation to an order made by the Commission under Subdivision B of Division 3 may be made only on the ground that the Commission was in error in deciding to make the order."
[6] The classes of persons identified by s.170JD of the Act are employers covered by the order or employees to whom the order relates, and their respective representatives. The appellant therefore has standing to appeal.
[7] The source of the Commission's jurisdiction to hear and determine appeals is found in s.45 of the Act. That section relevantly provides as follows:
"45 Appeals to Full Bench
(1) Subject to this Act, an appeal lies to a Full Bench, with the leave of the Full Bench, against:
(a) .......
(b) an award or order made by a member of the Commission, other than an award or order made by consent of the parties to an industrial dispute;
(c) .......;
..........
(2) A Full Bench shall grant leave to appeal under subsection (1) if, in its opinion, the matter is of such importance that, in the public interest, leave should be granted.
(3) An appeal under subsection (1) may be instituted:
(a) in the case of an appeal under paragraph (1)(b) that is not against an order under Part VIA - by an organisation or person bound by the award or order;
(aa) in the case of an appeal under paragraph (1)(b) against an order under Part VIA - by a person entitled under section 170JF to institute the appeal:
(b) ...
...
(7) On the hearing of the appeal, the Full Bench may do one or more of the following:
(a) confirm, quash or vary the decision or act concerned;
(b) make an award, order or decision dealing with the subject-matter of the decision or act concerned;
(c) direct the member of the Commission whose decision or act is under appeal, or another member of the Commission, to take further action to deal with the subject-matter of the decision or act in accordance with the directions of the Full Bench;
(d) ......
.......
(9) Each provision of this Act relating to the hearing or determination of an industrial dispute extends to the hearing or determination of an appeal under this section."
[8] We note that s.45(1)(b) is the paragraph of s.45 of the Act applicable in this case. It permits, relevantly for present purposes, appeals to a Full Bench against "an ... order... other than an... order made by consent of the parties to an industrial dispute." There is no provision in s.45 of the Act permitting appeals to be made against a decision of the Commission under Part VIA of the Act, other than a decision not to make an order, a refusal or failure to exercise jurisdiction, or a decision that the Commission has jurisdiction in a matter. The application before us purports to be an application for leave to appeal against the decision of Commissioner Whelan on 13 February 2001, and not against the orders that the Commissioner made on the same day. As no issue was taken on the hearing of the appeal about the competency of the application, we have decided to treat the application as if it is an application for leave to appeal against the orders of Commissioner Whelan. A party seeking to invoke the jurisdiction of the Commission under s.45 needs to exercise care in identifying the matter the subject of the appeal in the preparation of applications for leave to appeal.
[9] An appeal may only be brought with the leave of the Full Bench. Subsection 45(2) of the Act requires the Full Bench to grant leave if it forms the opinion that the matter is of such importance that, in the public interest, leave to appeal should be granted.
[10] The nature of an appeal under s.45 of the Act was the subject of consideration by the High Court of Australia most recently in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission4 (Coal & Allied). Gleeson CJ, Gaudron and Hayne JJ, in a joint judgment, said:
"Because a Full Bench of the Commission has power under s.45(6) of the Act to receive further evidence on appeal, an appeal under that section is properly described as an appeal by way of rehearing. And because there is nothing to suggest otherwise, its powers under sub-s (7) are exercisable only if there is error on the part of the primary decision-maker. And that is so regardless of the different decisions that may be the subject of an appeal under s.45." 5
[11] The types of error that may constitute grounds for review of a discretionary decision of the kind here under consideration were re-stated in Coal & Allied in the following way:
"Because a decision-maker charged with the making of a discretionary decision has some latitude as to the decision to be made, the correctness of the decision can only be challenged by showing error in the decision-making process [See Norbis v Norbis (1986) 161 CLR 513 at 518-519 per Mason and Deane JJ]. And unless the relevant statute directs otherwise, it is only if there is error in that process that a discretionary decision can be set aside by an appellate tribunal. The errors that might be made in the decision-making process were identified, in relation to judicial discretions, in House v The King in these terms:
`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. [(1936) 55 CLR 499 at 505 per Dixon, Evatt and McTiernan JJ].' "6
[12] It is common ground that the terminations of employment in this case arose out of the appellant's decision to effect changes in its operational requirements. The factual background of relevance to this matter can be briefly outlined under three headings as follows:
A. The appellant's decision to rationalise its operations
B. The asbestos issue
C. The redundancy process
COMMISSIONER WHELAN'S FINDINGS
[13] Commissioner Whelan in her decision made nine principal findings:
7. There was no certainty that the role the dismissed employees had played in the asbestos issue was not a factor in their selection.
9. The likely period of employment for each of the dismissed employees, had their employment not been terminated, would have been 12 months.
[14] Commissioner Whelan made the following orders:
[15] Mr McKeown of counsel, appearing on behalf of the appellant, began by referring us to a number of authorities concerning the granting of leave to appeal under s.45 of the Act. He submitted that the formulation of the principle in House v The King,8 as set out above, seemed appropriate in this case. Mr McKeown then proceeded with his submissions in support of the grounds of appeal. He contended that Commissioner Whelan erred, first in the process of determining whether there was a valid reason for termination of employment of each of the respondents, and then in determining the amount of remuneration to be paid to each employee in lieu of reinstatement.
[16] In essence, Mr McKeown submitted that the Commissioner made three appeallable errors in the process of determining whether the terminations of employment were harsh, unjust or unreasonable, namely:
· the Commissioner's finding that the terminations were harsh, unjust, or unreasonable failed to give weight to the evidence concerning the operational requirements of the appellant;
· the Commissioner's findings in relation to the Skill Matrix were not open; and
· the Commissioner failed to give sufficient weight to the warehouse manager's evidence that he had been the warehouse manager for 20 years and worked on a daily basis with these respondents and knew their capabilities.
[17] On the issue of remedy, Mr McKeown advanced four propositions that he submitted showed error in the process of calculating the amount to be awarded to each of the dismissed employees in lieu of reinstatement. The four propositions were:
· as between each of the amounts ordered there is a clear inconsistency in the application of the principles for calculating compensation;
· the Commissioner failed to consider properly or at all the evidence of mitigation in determining the amount of compensation to be awarded to the respondents;
· that the amount that has been ordered is manifestly unjust; and
· that the Commissioner's findings are unreasonable and fail to give weight to the evidence.
Was there error in determining that the termination of employment was harsh, unjust or unreasonable?
[18] The argument advanced on behalf of the appellant in support of its contention that Commissioner Whelan did not give weight to the evidence concerning the appellant's operational requirements acknowledges the fact, undisputed in the proceedings before the Commissioner, that there were operational reasons for the respondent to determine in May 2000 that the number of positions in the warehouse should be reduced by seven from 28 to 21. The argument seems to proceed on the premise that, because of the size of the appellant's workforce, the mere existence of the operational requirement allowed management some degree of latitude in selecting the employees to be retrenched. It matters not, so the argument appears to run, that employees were selected for dismissal on the basis of personal characteristics or attributes because the management knows what is best for the business.
[19] If our characterisation of the argument is correct, we are satisfied that no error has been shown in this regard. Clearly, Commissioner Whelan did take account of the fact that the appellant's operational requirements had changed. The Commissioner was satisfied of the appellant's need to reduce the number of positions in the warehouse by seven.9 However, the Commissioner, consistent with principle, and correctly, in our view, held that, while operational requirements may provide a valid reason for staff reductions they do not necessarily provide a valid reason for the retrenchment of particular employees. The Commission must be satisfied, on the facts, as they appear before it, that there is a valid reason for the termination of the employment of the particular employees who have been selected for retrenchment. We discern no error in the Commissioner's reasoning in this regard.
Were the Commissioner's findings in relation to the Skill Matrix erroneous?
[20] The appellant challenged Commissioner Whelan's finding that there was not a valid reason for the terminations because an examination of the Skill Matrix revealed that there were a number of employees with fewer skills than the respondents. Mr McKeown submitted that the finding was not open because the evidence was ambiguous.
[21] The Skill Matrix is a graphic representation showing the surnames and, with one exception, initial of the warehouse employees on a vertical axis and the list of tasks in the warehouse operation on the horizontal axis. There are 28 names and 26 tasks listed in the document. A legend at the bottom of the page suggests that, in respect of each task, there are four levels of skill. It is possible to indicate on the matrix the skill level that each employee has achieved in each task by means of a square which is divided into four quadrants. According to the legend, if an employee is assessed as unable to perform a particular task all squares in the quadrant are left blank. If a person is in training one quadrant is blacked out. If a person is capable of performing a task under supervision two quadrants are blacked out. If a person is assessed as capable of performing a task without supervision three of the quadrants of the square are blacked out. If a person is assessed as capable of training others in a particular task that is signified by blacking out all four quadrants of the square in the relevant column.
[22] Commissioner Whelan concluded that, taking into account all the circumstances of the case, the terminations were harsh, unjust or unreasonable.10 Part of her reasoning was that on its face the Skill Matrix does not justify the selection of the dismissed employees. It is true that, as is suggested by Mr McKeown's submissions, the Skill Matrix is a graphic that is difficult to decipher. However, following our consideration of the matrix in the context of the evidence before Commissioner Whelan, we are satisfied that the conclusion reached by the Commissioner in this regard was correct.
[23] Of the 28 employees' names included in the matrix only one, namely D. Roberts, is shown as being "in training". He is shown as being in training in two of the 26 tasks. Leaving aside training, the matrix shows the following numbers of skill levels out of the 26 tasks for each of the warehouse employees:
Name |
Trainer |
Works unsupervised |
Works under supervision |
No Skill |
B Meade |
12 |
7 |
2 |
5 |
D Brooker |
12 |
5 |
8 |
1 |
P Lambert |
9 |
7 |
3 |
7 |
T Ogden |
6 |
8 |
3 |
9 |
M Mcdonald |
6 |
8 |
3 |
9 |
J Delaltre |
5 |
8 |
5 |
8 |
M Briggs |
4 |
9 |
5 |
8 |
I Zuscak |
8 |
5 |
4 |
9 |
C Simpson |
5 |
8 |
4 |
9 |
J Lee |
4 |
8 |
4 |
10 |
A Keeshan |
4 |
8 |
5 |
9 |
V Braganza |
7 |
5 |
4 |
10 |
P Fiddes |
0 |
12 |
4 |
10 |
M Rose |
0 |
12 |
4 |
10 |
D Titford* |
0 |
12 |
4 |
10 |
J Sassos |
4 |
7 |
3 |
12 |
C Myers* |
0 |
11 |
5 |
10 |
A Periera |
4 |
6 |
5 |
11 |
Roula |
5 |
5 |
4 |
12 |
V Clarke* |
4 |
6 |
6 |
10 |
A Gideon |
4 |
6 |
3 |
13 |
I Fish |
0 |
10 |
9 |
7 |
M McMillan |
0 |
10 |
4 |
12 |
R Tilburn* |
0 |
12 |
4 |
10 |
S Farrell |
3 |
6 |
8 |
9 |
L Sulocki* |
4 |
5 |
5 |
12 |
J Dirckze |
0 |
9 |
5 |
12 |
D Roberts |
3 |
2 |
6 |
13 |
NB: * Denotes the dismissed employees (Keeshan was also dismissed).
[24] We have listed the employees in descending order referable to the aggregate of the number of tasks in which an employee is capable of training and working unsupervised - skills at levels 3 and 4. However, it is clear that whichever way one looks at the matrix there are employees who have fewer skills than each of the dismissed employees. It cannot be denied that the Matrix was an attempt to separate the possible candidates for redundancy by reference to their skills. But the document simply does not support the selections which were made.
What weight is to be given to the Warehouse Manager's evidence?
[25] Mr McKeown submitted that the Commissioner failed to give sufficient weight to the warehouse manager's evidence that he had been the warehouse manager for 20 years and worked on a daily basis with the employees and knew their capabilities "in the context that we have a situation of the employer must choose six out of 26 [sic]". It was contended that the warehouse manager was fully conversant with the skills of the dismissed employees and their work performance. While reliance was placed on the Skill Matrix in determining who should be retrenched the information reflected in it was but a snapshot of the fuller or more comprehensive knowledge that the warehouse manager had of all of the warehouse employees' skills and work performance. Consequently, it was said, weight should have been given to the warehouse manager's evidence and the conclusion reached that the selection process was fair.
[26] There are a number of difficulties with this argument. There is no clear evidence that the warehouse manager had a comprehensive understanding of the employees' skills and work performance. Nor is it clear that if he did have such understanding he applied it in selecting the employees to be dismissed. What does appear from the evidence, as the Commissioner found, is that the warehouse manager relied on factors within his personal knowledge in determining who was to be retrenched. It is not at all clear what criteria were actually used or how they were applied in a particular case. During cross-examination about the process of selection he said: "it was a combination of this matrix and - and you know, last in first out basis, and - and the problems that we'd been experiencing with this [sic] people".11 The subjective factors that the warehouse manager identified included matters pertaining to the respondents' capacity or performance.
[27] As noted earlier, the fact that there were operational reasons for the appellant to reduce the number of positions in the warehouse in May 2000 by seven was undisputed.
[28] In determining whether there is a valid reason for termination pursuant to s.170CG(3)(a) the Commission must be satisfied that there was a valid reason for the dismissal of the particular employee in question in that the reason was "sound, defensible or well founded"12 and not "capricious, fanciful, spiteful or prejudiced"13in relation to that employee.
[29] We agree with Commissioner Whelan's assessment of the evidence which ultimately led her to conclude that the terminations were harsh, unjust or unreasonable in the context of s.170CG(3) of the Act. The selection of the respondents as candidates for redundancy could not be described as sound, defensible or well founded. We agree with the Commissioner's findings to that effect, which it is not necessary to set out.14
[30] However, we think it appropriate to address briefly the appellant's failure to give the respondents an opportunity to respond to the reasons for the termination of their employment relating to their capacity or conduct. Section 170CG(3) of the Act requires the Commission to take into account in determining applications of this kind whether the employees were given an opportunity to respond to any reason related to their capacity or conduct.
[31] In Windsor Smith v Liu and Others,15 (Windsor Smith) a Full Bench discussed the issue of redundancies in the context of s170CG(3) of the Act. After considering the effects of Kenefick v Australian Submarine Corporation Pty Ltd (No 2),16 Cosco Holdings v Thu Thi Van Do,17 and Victoria v Commonwealth,18 the Full Bench found that:
"...where employment is terminated on redundancy grounds, it is a question of fact whether the employees selected for redundancy were selected for a reason related to the operational requirements of the employer's business, for a reason related to the employee's capacity or conduct, or for reasons of both kinds. Where the reason for selection is related solely to the operational requirements of the employer's business, it is not necessarily significant if no opportunity was given to employees to comment on the basis for their selection. Where the reason for selection is related to the capacity or conduct of the employees or includes such a reason, and no opportunity is given to the employees to respond to that reason, that is a factor which the Commission must take into account".19
[32] The opportunity to respond as envisaged by the Full Bench in Windsor Smith was not given to the respondents. The appellant alleged that the Skill Matrix was the primary basis for selection of the respondents as candidates for redundancy. It is clear that the matrix was an attempt to measure the capacity of all of the employees including the respondents. It was not until the termination interview, however, that the respondents became aware of the significance of the matrix in the selection process. The opportunity to comment on the accuracy of the matrix was thus less than a full one. The appellant cited other reasons for its decision to select the respondents for redundancy. Those reasons related to the capacity or conduct of some of the respondents. For example, it was alleged that Ms Sulocki and Mr Tilburn had some history of poor time-keeping and attendance. However, such reasons were never put to the respondents. In the circumstances it cannot be said that the respondents were given an opportunity to respond to the reasons behind their respective dismissals. This is a factor which the Commission must take into account in arriving at its decision. The Commissioner did so.
[33] The fact that the respondents were not given an opportunity to respond to the appellant's allegations of unsatisfactory performance justified the finding that the termination of the respondents' employment was harsh, unjust or unreasonable. This is so even though there was a genuine need to reduce the number of positions in the warehouse.
REMEDY
[34] Under s.170CH(6) of the Act, if the Commission finds a termination to be harsh, unjust or unreasonable and that reinstatement of the employee is inappropriate, it may order that the employee receive "an amount ... in lieu of reinstatement."
[35] During the course of the proceedings before Commissioner Whelan none of the respondents sought reinstatement and persuasive evidence was given by both the respondents and Mr McLean that reinstatement would be an inappropriate remedy. In the circumstances we agree with the Commissioner's finding that reinstatement is an inappropriate remedy. On the appeal it was not suggested otherwise.
[36] As we have already noted, the appellant submitted that the Commissioner erred because she dealt inconsistently with the respondents in the assessment of the amount to be ordered in lieu of reinstatement, failed to properly consider the evidence in relation to mitigation of loss and that her decision was manifestly unjust and unreasonable. It will be convenient to deal with these matters by reference to the steps which the Commissioner went through in making the assessment. First, however, we set out the relevant terms of s.170CH(7):
"
... in determining an amount for the purposes of an order under subsection (6), the Commission must have regard to all the circumstances of the case including:
(a) the effect of the order on the viability of the employer's undertaking, establishment or service; and
(b) the length of the employee's service with the employer; and
(c) the remuneration that the employee would have received, or would have been likely to receive, if the employee's employment had not been terminated; and
(d) the efforts of the employee (if any) to mitigate the loss suffered by the employee as a result of the termination; and
(e) any other matter that the Commission considers relevant."
[37] In considering the application of these provisions the Commissioner followed the approach adopted by Vice President Ross in Shorten v Australian Meat Holdings Pty Ltd20 (Shorten) as developed by a Full Bench in Sprigg v Paul's Licensed Festival Supermarket21 (Sprigg). It is not necessary to examine those decisions in detail. Nevertheless we shall use the approach they contain as the basis for our analysis of the Commissioner's decision. We note that the approach is not a substitute for the statutory considerations in s.170CH(7). In particular it does not deal with the matters in s.170CH(7)(a) and (b) to which the Commission must also have regard. We consider the approach an appropriate way of addressing the requirements of paragraphs (c), (d) and (e) of s.170CH(7), subject to some observations we make later.
Estimate of remuneration which the respondents would have received, or have been likely to have received, but for the termination.
[38] The Commissioner decided that but for the termination of their employment each of the respondents would have been employed for a period of 12 months. At first sight this finding is in conflict with the finding that there was an operational need to reduce the number of positions in the warehouse by 7, from 28 to 21. It follows from this finding that each of the employees had a 1 in 4 chance, on a purely statistical basis, of losing their employment in the short term. For this reason the Commissioner's finding that all 5 of the respondents would, but for the termination of their employment, have been employed for a further 12 months has the appearance of unreality. The probability of termination of employment due to redundancy should have been taken into account by the Commissioner at some point in her calculation of the amount to be awarded in lieu of reinstatement. This was an issue which was addressed in Kenefick & Ors v Australian Submarine Corporation.22 In that case the Full Court of the Industrial Court of Australia, addressing the issue of compensation for employees whom the court had found were unlawfully selected for retrenchment on the grounds of capacity or conduct and for a reason related to operational requirements, stated:
"As to the question of valuing the loss, it is inescapable that, in order to properly determine the loss (if any) sustained by each appellant, there should be brought into consideration the chance that he would in any event have his employment very soon terminated. That is logically so because what is really being compensated is each appellant's loss, predicated upon the chance that his employment would not have been so terminated had the employer obeyed the law."23
[39] Although the Court was dealing with different statutory provisions we have no doubt that its finding applies, although perhaps not with equal force, to the calculation of an amount to be awarded pursuant to s.170CH(7). At the very least the possibility of early termination of employment must be taken into account.
[40] One one view in not taking the possibility of early termination of employment into account in assessing the likely duration of the respondents' employment the Commissioner fell into error. Nevertheless we accept that the Commissioner's estimate was not unreasonable for the sole reason that there was no certainty that any one of the respondents would have been selected. That said, however, the possibility that one or more of the respondents would have been dismissed in the near term should have been taken into account at some point in the assessment. We shall deal with this question in considering the amount to be allowed for contingencies.
Deduct moneys earned since termination. Failure of an applicant to mitigate his/her loss may lead to a reduction in the amount awarded.
[41] The second step concerns the deduction of amounts earned since termination and whether any amount should be deducted in relation to failure of one or more of the respondents to mitigate their loss.
[42] Firstly we note that the Commissioner deducted severance payments from the amount to be awarded to all five respondents. That is an appropriate course.
[43] The Commissioner found, and it is not disputed, that Mr Myers was the only respondent who had actively sought employment since his dismissal. Mr Myers had also undertaken a 12 week training course. The Commissioner deducted the money which Mr Myers had actually earned but made no deduction on account of his failure to mitigate his loss. The Commissioner's assessment in that respect seems to us to be free of error.
[44] In relation to Messrs Clarke and Tilburn the Commissioner deducted an amount of $10,000 for the failure of those two respondents to mitigate their losses by seeking alternative employment. While there is no clear rationale for the amount, it cannot be said that the assessment was not reasonably open to the Commissioner. We find no error in this respect either.
[45] It seems clear that the Commissioner decided not to discount the award to Ms Sulocki and Mr Titford for any failure to mitigate because of the evidence that they were single parents who were looking after their children. While the fact of being a single parent is a matter which may be taken into account in considering mitigation, it does not, in our view, entirely absolve the party from the obligation to make some effort to mitigate their loss. The primary question is whether the party has acted reasonably. As Madgwick J stated in Westen v Union des Assurances de Paris, "[t]he party claiming damages need only act reasonably."24 To what extent then were the parents' alternative arrangements during employment a financial burden, and what other obstacles or limitations preclude the person from making any attempt to find alternative work? Those questions do not appear to have been addressed.
[46] Mr Jackson, on behalf of the respondents, submitted, correctly in our view, that the appellant bears the onus of demonstrating that the respondents failed to mitigate their respective losses. However, it seems to us self-evident that neither Ms Sulocki nor Mr Titford, according to the findings of Commissioner Whelan, made any effort to secure other employment. The Commissioner appears to have accepted that their parental responsibilities absolved them from their obligation to mitigate. While we are prepared to accept the proposition that parental responsibilities may be a relevant consideration in assessing compensation for harsh, unjust or unreasonable termination of employment, it cannot, in all cases, be a proper basis for excusing a failure to make any effort to mitigate. This is particularly so where there is entitlement to financial assistance by way of social security for single parents. Each of Ms Sulocki and Mr Titford gave evidence that they were in receipt of single parent payments for childcare. Single parenthood cannot be accepted as an excuse for failure to attempt to mitigate their loss. If that status did in fact prevent them from seeking employment it would also have impacted on their ability to continue to work for the appellant had their employment not been terminated. Furthermore, in assessing the amount to be awarded to Messers Clarke and Tilburn, the Commissioner deducted an amount of $10,000 in each case by reason of their failure to mitigate their loss. That inconsistency of treatment is not satisfactorily explained by the fact that Ms Sulocki and Mr Titford are single parents.
[47] We are satisfied that Commissioner Whelan made an error in the process of determining that Ms Sulocki and Mr Titford had acted reasonably in their efforts to mitigate their losses.
Deduction for Contingencies
[48] The Commissioner made a deduction of 25 per cent for contingencies from the amount notionally to be awarded to each of the respondents. The deduction applied only to the period subsequent to the hearing in November 2000. It will be recalled that the employment of each of the respondents was terminated on 25 May 2000. We think that there is a difficulty with the Commissioner's decision in this regard.
[49] The effect of the Commissioner's decision overall is that no allowance whatever was made for the fact that there was a genuine need for a reduction in the number of employees working in the warehouse. As we have noted, that fact was not taken into account by the Commissioner in assessing the likely duration of the respondents' employment had they not been made redundant in May 2000. By not taking that fact into account either in the assessment of the likely period of employment, or by way of contingency, the Commissioner fell into error.
[50] We point out in passing that it may be inappropriate to treat the amount the employee would have earned between the date of dismissal and the date of the trial as not being subject to any deduction for contingencies. The assessment should take account of the earnings the employee might have received had the employment not in fact been terminated. Even though it is informed to some extent by actual events, that assessment remains hypothetical. The position can be contrasted with the nature of the assessment required in a common law action for damages for personal injuries. In such cases the extent of the injury is known at the date of trial and no estimation of loss is required up to that point in time. In making the assessment required by s.170CH(7), however, an estimate is required because the amount should be calculated on the basis that the employment was never terminated. Cases such as this one demonstrate that where there is a likelihood that the employment would have been terminated within a short time in any event, some allowance should be made for that likelihood in assessing the amount to be deducted for contingencies unless that likelihood has been taken into account elsewhere in the assessment process.
[51] In deciding to make no allowance for contingencies for the period up to the hearing, the Commissioner relied upon the case of Slifka v JW Sanders Pty Limited25. Slifka was referred to with apparent approval in both Shorten and Sprigg. Relevantly, the case concerned the calculation of compensation to be awarded pursuant to ss.170EE(2) and (3) of the Industrial Relations Act 1998. Section 170EE(3) required the Court to have regard to the sum which the applicant would have received or would have been likely to have received if the respondent had not terminated the employment. It was in that context that the Court decided that the amount the applicant had notionally lost between the date of termination and the date of the trial was clearly ascertainable and should not be discounted for contingencies. The Court was obviously of the view that the applicant's employment would have continued during that period, assuming the termination had never occurred. There could be no other basis for the decision. In this case, in contradistinction, there was a chance that the employment of each of the respondents might have been terminated for redundancy before the hearing took place. Furthermore we note that in Sprigg the Full Bench made a deduction for contingencies in respect of the whole of the period since termination, not just the period since the trial. We think that is also the more appropriate course in this case.
Impact of taxation is considered.
[52] No relevant issue arises in this connection. We note in passing that in Sprigg the Commission decided to settle a gross amount and leave the question of taxation for determination.
The legislative cap on the amount to be awarded is applied.
[53] It is unnecessary to consider this issue.
Additional Matter
[54] Finally, we note Mr Jackson's submission on behalf of the respondents that the compensation ordered by Commissioner Whelan should be increased by 8 per cent to recognise that superannuation forms part of the respondents' remuneration and, accordingly part of the compensable loss. It is not apparent that this point was argued before Commissioner Whelan. In any event, the respondents have not sought leave to appeal from the Commissioner's decision on compensation. The powers of the Commission under s.45 of the Act are predicated on an application for leave to appeal and a finding of error in the decision from which the appeal is brought. In the circumstances we decline to consider this aspect of the respondents' submissions.
CONCLUSION
[55] In light of the errors we have identified we have decided to grant leave to appeal and to exercise our discretion to assess the appropriate amount in lieu of reinstatement for each of the respondents. In doing so we shall adopt the Commissioner's estimate of 12 months likely employment had the employment not been terminated. In each case severance payments should be deducted as the Commissioner correctly found. Amounts earned since termination should also be deducted. As already indicated, some deduction should be made for the failure of Ms Sulocki and Messrs Clarke, Tilburn and Titford to mitigate their loss. In the absence of any detailed material or submissions, doing the best we can we assess this amount as earnings for 10 weeks in each case.
[56] The allowance for contingencies we assess at 45%, rather than 25% as assessed by the Commissioner, because of the possibility of termination due to redundancy. The manner in which the allowance for contingencies should be made requires some comment. The approach generally followed, based upon the analysis in Shorten, is that the reduction on account of contingencies is calculated on the net figure derived after the deduction of amounts earned since termination and any amounts referrable to a failure to mitigate. We do not intend to follow that approach in this case. We think it is more appropriate to apply the contingency discount directly to the amount that we have estimated that each of the respondents would have earned but for the terminations before any other deductions are made. The main contingency in this case is the possibility that employment would be terminated fairly soon because of the need to reduce the warehouse workforce. The whole of the amount attributable to 12 months income should therefore be discounted.
[57] It was not suggested on the appeal that the Commissioner made any error referable to the obligation to have regard to the effect of the order she made on the viability of the employer's undertaking (s.170CH(7)(a)) and the length of the respondents' service (s.170CH(7)(b)). In the circumstances we see no reason to give any significance to those factors in our assessment. We are satisfied that the amounts we shall order represent a fair go all round in the circumstances. Our detailed calculations are set out in Schedule A.
[58] The order we shall make is that the Commissioner's order in each case be varied to the following amounts:
$ | |
Ms Sulocki26 |
3,110.00 |
Mr Myers27 |
9,720.00 |
Mr Clarke28 |
1,491.00 |
Mr Titford29 |
9,203.00 |
Mr Tilburn30 |
6,622.00 |
[59] We set aside the order made by Senior Deputy Lacy on 16 March 200131 and direct that such amount of interest payable on the deposit held on trust pending the hearing and determination of this appeal and attributable to the amounts herein ordered to be paid to the respondents, be paid to the respondents in addition to the sums ordered.
BY THE COMMISSION:
PRESIDENT
Appearances:
Mr G McKeown, of counsel, for Lockwood Security Products Pty Limited.
Mr R Jackson, solicitor, for Ms Sulocki and Messrs Myers, Clarke, Titford and Tilburn.
Hearing details:
2001.
Melbourne
May 28.
Printed by authority of the Commonwealth Government Printer
<Price code F>
Schedule A
$ |
$ | ||
Ms Sulocki |
Less - Severance pay Failure to mitigate 45% contingency |
7,620 5,770 13,500 26,890 |
30,000 3,110 |
Mr Myers |
Less - Earnings Severance pay 45% contingency |
2,672 4,108 13,500 20,280 |
30,000 9,720 |
Mr Clarke |
Less - Severance pay Failure to mitigate 45% contingency |
9,239 5,770 13,500 28,509 |
30,000 1,491 |
Mr Titford |
Less - Severance pay Failure to mitigate 45% contingency |
4,210 7,212 16,875 28,297 |
37,500 9,203 |
Mr Tilburn |
Less - Severance pay Failure to mitigate 45% contingency |
4,108 5,770 13,500 23,378 |
30,000 6,622 |
2 PR901074, PR901075, PR901076, PR901077 and PR901078.
4 (2000) 174 ALR 585; (2000) 74 ALJR 1348; (2000) 99 IR 309; [2000] HCA 47.
5 Coal & Allied (2000) 174 ALR 585, at 591.
8 (1936) 55 CLR 499; (1936) 10 ALJR 202.
11 Transcript PN2495 of proceedings before Commissioner Whelan.
12 Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373.
14 Print PR901073 paras [60] to [99]
22 Unreported, Full Court of the Industrial Relations Court of Australia, 8 July 1997.
23 See also: Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 57 IR 50, at 61-61 per Wilcox CJ.