Employer’s prerogative in retrenchments

Cases

Employer’s prerogative in retrenchments

It is not part of the jurisdiction of the New South Wales Industrial Relations Commission to "intrude into the manner in which an employer conducts his business" when dealing with the issue of whether an employee’s retrenchment was unfair.

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It is not part of the jurisdiction of the New South Wales Industrial Relations Commission to "intrude into the manner in which an employer conducts his business" when dealing with the issue of whether an employee’s retrenchment was unfair.

Background

The employee was employed as a commercial traveller under the terms of the Commercial Travellers (State) Award and sold a range of different medical and scientific equipment. He had been a long serving employee and his performance was considered good (Reading v Radiometer Pacific Pty Ltd, Matter No IRC 1356 of 1997).

The employee was retrenched on 19 February 1997 after a substantial restructure of the organisation’s operations. The sales staff were aware that there would be retrenchments as part of that process.

The employer stated that the employee was selected for retrenchment because he did not have a lot of experience selling the product lines which were to be the focus of the restructured organisation. The employee was not expecting to be retrenched because of his length of service and good performance.

The employee’s severance payment consisted of 18 weeks’ salary for six or more years of service (two weeks more than the standard 16 weeks) and he also received three weeks’ pay in lieu of notice (two weeks more than that prescribed under the award).

Remuneration

Before the issue of whether the dismissal was harsh, unjust or unreasonable was dealt with, the issue of remuneration and monetary compensation arose. It was decided that, if the dismissal was found to be harsh, then the remedies of re-employment or reinstatement would be inappropriate, leaving compensation.

For the purposes of s89(5) of the Industrial Relations Act 1996(NSW), it was decided that ‘remuneration’ included non-monetary benefits and other additions to the basic salary, such as bonuses and the use of the company car.

Another issue which arose from the possibility of paying compensation was whether the employee would in fact be entitled to a further monetary amount as he received a severance payment in excess of the recognised standard and particularly as he had found another job, mitigating his loss. On this point, the Commission stated:

"There is something inherently unsatisfactory if an employee who makes an effort to obtain alternative employment, and mitigate his loss thereby, should be prejudiced over an employee who makes no such effort."

Whether dismissal unfair?

The final decision on the abovementioned issues depended on the finding of the Commission about whether the termination of the employee’s service was unfair.

On this matter, the Commission held:

"Bearing in mind [the employee’s] overall length of service and his good sales figures, I regard him as a surprising choice for retrenchment. But is it open for me to conclude that [the employer] was wrong in its choice of [the employee] for retrenchment? I do not believe that it is.

"It is not my position to intrude into the manner in which an employer conducts his business. My role under Part 6 [of Chapter 2 of the Act] is considerably more modest. The fact that if I were in [the employer’s] position, it may have been my decision to retain [the employee] does not count".

There was no evidence before the Commission to suggest that the employee had been victimised and that the decision made was not based on what the employer genuinely believed to be in the company’s best interests.

The Commission declined to intervene on behalf of the employee and as the dismissal was not found to be unfair, the issues regarding remuneration were not decided upon.

 

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