Employment with previous employer considered in termination pay ruling

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Employment with previous employer considered in termination pay ruling

An employee who had been dismissed after seven years work with his then employer had his termination package assessed on the basis of 30 years service - taking into account his employment time with the previous owner of the business.

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Australian Business Ltd   

 

An employee who had been dismissed after seven years work with his then employer had his termination package assessed on the basis of 30 years service - taking into account his employment time with the previous owner of the business. The employee was awarded over $130,000. 

This matter was an unfair contracts application under the Industrial Relations Act 1996 (NSW). See Sawyer v Cutler-Hammer Pty Ltd [2001] NSWIRComm 144 (Marks J) (9 December 2001).

Background

The applicant commenced employment with Email Ltd on 21 September 1970 as an electrical fitter. He was then aged 20. This was his first full time job since completing his apprenticeship. He was promoted to charge hand and later to factory foreman, factory superintendent and in 1989 to Production Manager. In 1994 he was promoted to Manufacturing Manager.

In April 1995 the applicant was offered employment by Eton Controls Pty Ltd, which was part of the Cutler-Hammer group (respondent). Eton Controls Pty Ltd had acquired the switchgear and control business of Email. The applicant was told that his accrued sick leave entitlement with Email would be transferred to Eton. The applicant was so employed by Eton Controls Pty Ltd as a Manufacturing Manager initially on a salary package of $75,764 per annum. A written contract of employment provided for termination of employment on five weeks' notice.

Whether redundancy

Marks J concluded that the reason for termination of the employment of the applicant by the respondent was associated with perceived problems with the applicant's performance and not associated with or by reason of any restructure or other circumstance enabling the applicant to be characterised as having been made redundant.

Termination pay offered

The applicant was paid moneys on termination of employment in addition to annual leave and long service leave entitlement of $10,800 which approximated five weeks of his then current annual salary.

Applicant not counselled

Evidence was produced during the course of the hearing concerning the action taken by Mr Trewin (the applicant's manager) to terminate the employment of a number of other employees. In each case it seems that all of the employees were counselled concerning their alleged shortcomings and were informed that failure to redress those shortcomings could result in termination of employment. Mr Trewin conceded that no such opportunity had been given to the applicant. He was unable to explain why.

Relevance of previous employment

In terms of the length of service of the applicant, counsel who appeared for the respondent submitted that while the applicant had had long standing employment with Email he had not commenced employment with the respondent until 1995. Although the applicant had been afforded continuity of service for entitlements to long service leave and the like his actual period of employment with the respondent was relatively short - as argued by the respondent.

Marks J rejected this submission:

'I do not accept this submission as being a proper basis upon which to consider length of service for the purpose of assisting in the assessment of what is reasonable notice of termination of employment. The respondent had acquired that part of the Email business in which the applicant had been employed. Although, at law, the contract of employment is not capable of being assigned because it is a contract of personal service, nevertheless in applying contemporary community values the applicant should be considered as being a long serving employee within "the business".

This is particularly so given the considerable amount of restructuring of business operations generally seen within the community over the last decade both by way of merger and acquisition. This approach is consistent also with the philosophical approach embodied in legislation in preserving a number of entitlements in the case of mergers and acquisitions such as long service leave, sick leave, annual holidays and superannuation. The vagaries of business life which produce rationalisation and the acquisition and disposal of businesses should not be permitted to deny an employee of long standing in a business such consideration as is appropriate in terms of his or her service.'

Reasonable notice

The critical element is assessing damages in this case was the length of reasonable notice. His Honour found that 15 months was reasonable:

'There is now an extensive body of case law dealing with what is reasonable notice. Of course, each and every case needs to be assessed in the context of the particular facts and circumstances which apply to that case. Accordingly, care needs to be taken in applying decisions concerning other cases.

...However there are a number of decisions of this Court and its predecessors which are useful in establishing some benchmark indicia as to what is reasonable notice, albeit in the particular circumstances of those particular decisions.

... They include Murphy v Australian Guarantee Corporation (2000) NSWIRComm 162, David Jones Ltd v Cukeric (1997) NSWIRC 172, Payne v Foxboro (1998) NSWIRComm 360, Newton v Goodman Fielder (1998) NSWIRC 116, Munro v Chubb Security Holdings (2000) NSWIRComm 215, Pullen v R & C Products (1994) NSWIRC 119and Caulfield v Broken Hill City Council (1995) NSWIRC 43.

... For the purpose of these proceedings I take into account the following matters:

  1. The applicant had 30 years service.
  2. The applicant held a senior position with the respondent.
  3. The applicant was aged 50 at the time of the termination of employment.
  4. In general terms the applicant had been favourably assessed by the respondent with respect to his work.

... it is my opinion that a reasonable period of notice to be given on termination of the applicant's employment was fifteen months.'

Unfair treatment

The respondent failed to provide the applicant with any opportunity to undertake training or counselling directed to the remediation or improvement of those matters about which complaint was made by management.

His Honour continued:

'On the basis of the evidence Mr Trewin knew and had worked with the applicant since 1987. Mr Trewin had personally assessed the applicant continually, intensely and frequently over some years. If Mr Trewin had genuinely formed the opinion that the applicant should not continue to perform the role of Manufacturing Manager whether by way of sudden revelation or as an evolving matter of judgment, there were obvious ways of communicating this fact to the applicant in a more humane, civilised and decent manner than that utilised by Mr Trewin.

There seems no reason why Mr Trewin could not have utilised the "quiet chat" or "tap on the shoulder" process which seems more appropriate to a relationship between a chief executive officer and a senior employee one step removed from that position in the respondent's employment hierarchy.'

Compensation

His Honour concluded:

'It is well established that the power of the Court to order just compensation under s 106(5) is broad. It is not confined to considerations of heads of damage which apply at common law. There are many instances where a range of factors have been taken into account in determining what is just compensation.'

The Orders handed down by his Honour read, in part:

'The respondent is to pay the applicant $132,950 together with interest thereon calculated in accordance with the Supreme Court Act from 24 January 2000 to date of judgment.'

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