DECISION NO:240/97
C A T C H W O R D S
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - Whether VALID REASON based on OPERATIONAL REQUIREMENTS - failure to consult - wage subsidy agreement - associated jurisdiction - alleged battery - alleged BREACH OF CONTRACT.
Workplace Relations Act 1996 (formerly Industrial Relations Act 1988)
Ss 170EA, 170DE(1), 430.
Victoria v The Commonwealth (1996) 138 ALR 129
Brackenridge v Toyota Motor Corporation Australia Limited 67 IR 162
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363
Nettlefold v Kym Smoker Pty Ltd (unreported, IRCA No. 469 of 1996, Lee J, 4 October 1996)
Thomas v Lynch (unreported, IRCA No. 627 of 1996, Wilcox CJ, 20 December 1996)
Carydias v The Greek Orthodox Community (unreported, IRCA No. 31 of 1997, North J, 20 February 1997)
Louise Deannea SIBLEY -v- Loretta VLAKHOUDIS (trading as MORLEY DAY CARE CENTRE)
WI 1150 of 1996
BEFORE: R. D. FARRELL JR
PLACE: PERTH
DATE: 29 July 1997
IN THE INDUSTRIAL RELATIONS )
COURT OF AUSTRALIA )
WESTERN AUSTRALIA )
DISTRICT REGISTRY )
No. WI 1150 of 1996
BETWEEN:
Louise Deannea SIBLEY
Applicant
AND:
Loretta VLAKHOUDIS
(trading as MORLEY DAY CARE CENTRE)
Respondent
MINUTE OF ORDERS
BEFORE: R. D. FARRELL JR
PLACE: PERTH
DATE: 29 July 1997
THE COURT DECLARES THAT:
1. The termination of the applicant’s employment by the respondent contravened Section 170DE(1) of the Workplace Relations Act 1996.
AND THE COURT ORDERS THAT:
2. Within 21 days of the date of making these orders, the respondent pay to the applicant compensation in the sum of $1,560.00 less any amount payable to the Commissioner of Taxation pursuant to the Income Tax Assessment Act 1936 and actually paid.
Note: Settlement and entry of Orders is dealt with by Order 36 of the Industrial Relations Court Rules.
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WI 1150 of 1996
BETWEEN:
Louise Deannea SIBLEY
Applicant
AND:
Loretta VLAKHOUDIS
(trading as MORLEY DAY CARE CENTRE)
Respondent
REASONS FOR DECISION
29 July 1997 R. D. FARRELL JR
This is an application under Section 170EA of the then Industrial Relations Act 1988, now known as the Workplace Relations Act 1996 (“the Act”). The application is for compensation arising from the alleged unlawful termination of the employment of the applicant, Louise Deannea Sibley (“Ms Sibley”), by the respondent, Loretta Vlakhoudis (“Mrs Vlakhoudis”), trading as the Morley Day Care Centre (“the Centre”). Reinstatement is not sought.
Ms Sibley was employed by Mrs Vlakhoudis on 16 October 1995 as a child care giver at the Centre. Ms Sibley had previously been unemployed for more than twelve months, so that her wages were subsidised by the then Commonwealth Department of Employment, Education and Training (“D.E.E.T.”) for a limited period. Ms Sibley was given notice of termination on 30 January 1996, and her employment ended on 9 February 1996.
Mrs Vlakhoudis contends that Ms Sibley’s employment was terminated for a valid reason based on the operational requirements of the Centre after the number of children enrolled in the Centre declined. Ms Sibley disputes that there was a valid reason based on the operational requirements of the Centre.
Ms Sibley contends that:
· she was not consulted before she was given notice of her dismissal;
· Mrs Vlakhoudis was obliged to continue the employment for a year, given that the employment arose in the context of a wage subsidy agreement between the Centre and D.E.E.T.; and
· she was dismissed because Mrs Vlakhoudis had discovered she had caused a complaint to be made to D.E.E.T., and had formed the view that she was a troublesome employee.
Given the High Court’s ruling in Victoria v The Commonwealth (1996) 138 ALR 129 that Section 170DE(2) was unconstitutional, I have had regard to Ms Sibley’s contentions that the termination was “harsh, unjust or unreasonable” only to the extent that they may be relevant to the validity of Mrs Vlakhoudis’ reasons for termination.
Finally, Ms Sibley seeks damages:
· in tort, arising from an incident in which she was allegedly grasped by the arm and pushed to the ground by Mrs Vlakhoudis; and
· in contract, for breach of an alleged term of the employment contract that the employment would continue for at least a year.
Ms Sibley gave evidence on her own behalf. She also called Mr Ahmet Eren (her flatmate), and Ms Estelle Newport, Mr Adrian Ferguson and Ms Janice Black, (all from D.E.E.T.) as witnesses. Mrs Vlakhoudis also gave evidence on her own behalf. She then called Ms Christine Clohessy and her daughter, Nicole Vlakhoudis, both of whom are child care workers at the Centre, and Mr Angus Graham, her accountant, to give evidence.
The Relevance of the Wage Subsidy Agreement
Ms Sibley’s employment with Mrs Vlakhoudis was brokered by representatives of D.E.E.T. Ms Sibley qualified for a wage subsidy. Prior to paying the subsidy to Mrs Vlakhoudis, D.E.E.T. required that she enter into an agreement with D.E.E.T. concerning Ms Sibley’s employment. Part of that agreement addresses the danger that an employer might seek to abuse the offer of the subsidy by employing the D.E.E.T. client only for so long as the subsidy was available. Accordingly, the wage subsidy agreement offered to Mrs Vlakhoudis provides that:
“...the Employer must... provide the Job for the Subsidy Period (which was from 16 October 1995 to 14 July 1996) and Post-Subsidy Period (which was from 15 July to 15 October 1996).”
I am satisfied on the evidence that Mrs Vlakhoudis’ immediate reason for employing Ms Sibley was the need to replace Ms Faye Cranwell, another child care employee, while she took prolonged sick leave to have an operation. Mrs Vlakhoudis also intended to take some time off to visit one of her daughters in Sydney, who was about to give birth to her first child. Mrs Vlakhoudis regarded Ms Sibley, therefore, as a “relief” employee. However, Mrs Vlakhoudis was also aware that her other daughter, Nicole, who also worked at the Centre, was pregnant, and would be leaving on maternity leave by March 1996. It therefore seemed likely, with the additional need to relieve employees taking usual annual leave and other leave, that there would be full-time “relief” work available for Ms Sibley for the next 12 months.
Mrs Vlakhoudis therefore felt able to sign the agreement. She maintains, however, that she sought and obtained an assurance at the time she signed the agreement from Janelle Black, the D.E.E.T. clerical officer who attended the Centre to sign Mrs Vlakhoudis up for the Jobstart scheme, to the effect that either party could terminate the employment at any time.
While Ms Black has no specific recollection of that visit, she confirms that her understanding of the scheme was that the D.E.E.T. agreement was not binding for the full Subsidy and Post-Subsidy Period if there was something in the nature of the employment relationship that meant that that wasn’t possible. She says she would advise employers that D.E.E.T. didn’t hold them to keeping the person on if it “wasn’t working out”. She added that this would include insufficient work. She believed, however, the employer would continue to be bound in its dealings with its employees by any other rules and legislation that would otherwise apply if the Jobstart subsidy was not being paid.
Ms Newport, who was Ms Sibley’s case manager at D.E.E.T., says that the criteria for the subsidy scheme at the time required that the position be a permanent ongoing position, “as far as the employer knows”. She adds that she believed that the normal employer/employee relationship existed and that the employer had the right to hire and fire in the normal way. A temporary job would qualify for the subsidy if it were for twelve months.
Mr Ferguson, the Regional Manager of Ms Newport’s office of D.E.E.T., confirmed that employers retained the right to hire and fire because it is a normal employer/employee relationship. He would not regard an employer putting a subsidised employee off because of a downturn in business as an abuse of the Jobstart scheme.
While this evidence is not conclusive as to the proper interpretation of the wage subsidy agreement, it is notable that the agreement goes on to provide that “the Employer must... notify the CES (which is a Division of D.E.E.T.) without delay if the Job is terminated before the end of the Post-Subsidy Period...” setting out “all relevant details including the date of and reasons for termination...” This provision contemplates that terminations will occur. There is no express reference to when, if ever, such terminations are permitted.
Reading the agreement as a whole, I would have been prepared to imply a term into the agreement permitting the employer to terminate the employment the subject of the agreement, subject to the employer’s compliance with any obligations imposed on it by the Act or by other applicable awards or legislation. It is at least arguable that such a term would meet the preconditions for implication set out by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363. The matter was not the subject of argument.
Indeed, it was agreed that the matter did not arise directly, given the larger issue of privity of contract. The Jobstart agreement is between D.E.E.T. and the employer. It confers no rights upon the employee. If it were the case that Mrs Vlakhoudis was in breach of the agreement by terminating Ms Sibley’s employment before the end of the relevant period, then it would be D.E.E.T. who may be entitled to enforce the agreement, should it choose to do so. Mr Ferguson gave evidence that D.E.E.T.’s usual response where the employer does not meet its commitments is to effectively “blacklist” the employer from future access to the scheme. Ms Sibley cannot enforce the agreement on her own account.
However, Ms Sibley submitted that the relevant terms of the Jobstart agreement were incorporated by reference into her employment contract with Mrs Vlakhoudis. She relied on the fact that she received a letter from D.E.E.T. dated 10 October 1995 in the following terms:
“Dear Louise Sibley,
Congratulations on your being placed in employment under the Job Start program. Under this program, the CES has agreed to pay your employer a subsidy for a period of 39 weeks from 16-10-95 to 14-07-96. In return your employer is to give you a job to help you gain a firm foothold in the workforce.
For your information, a copy of the Wage Subsidy Agreement between your employer and the CES is enclosed.
During the subsidy period your employer cannot change any of the terms and conditions of your employment as shown in the Wage Subsidy Agreement, for instance the hours that you work or your rate of pay, without the approval of the CES. If you are ever in any doubt please contact us....”
In my view, there is insufficient evidence to support a finding that the relevant term of the Job Start agreement became part of the employment contract. Accordingly, I find no breach of contract.
The Alleged Incidents of Physical and Verbal Abuse
By letter dated 30 January 1996, Mr Narayanan, a solicitor instructed to act for Ms Sibley, wrote to D.E.E.T. in the following terms:
“I refer to the telephone conversation between the undersigned and Ms Elaine Burgess of your office on the 30th instant.
Our client has instructed that in the course of undertaking employment duties with the employer at 2 Mansell Street since October last year, she has been subjected to acts of trespass to the person (ie. physically) as well as verbal abuse (including insulting language) not infrequently. This has caused our client severe mental and emotional stress, anxiety and distress to the point it has resulted in illness including depression.”
On the evidence, I am satisfied that Mrs Vlakhoudis did not become aware of this complaint to D.E.E.T. until after she had already given Ms Sibley notice of termination. Accordingly, I am satisfied it did not motivate her decision to dismiss Ms Sibley in whole or in part.
Ms Sibley seeks to claim damages in tort for battery on the basis of the alleged physical abuse.
A common substratum of facts is required to exist between the alleged breach of Section 170DE of the Act and the alleged incidents before the claim can be brought in the associated jurisdiction of the Court pursuant to Section 430 of the Act: Brackenridge v Toyota Motor Corporation Australia Limited 67 IR 162 per Beazley J at 185-186 and the authorities there cited.
Mrs Vlakhoudis’ representative submitted at the beginning of the hearing that there was not a sufficient common substratum of facts to found the claim in tort. I decided not to rule on that issue until I had heard the evidence; the issues to be raised by Ms Sibley in connection with her unlawful termination claim had not been conveyed to me with sufficient precision at that stage for me to be sufficiently certain ambit of the relevant facts.
Having now heard the evidence, I find that the incident complained of was related to the alleged improper motive for the termination considered above. While I have not upheld the submission that Mrs Vlakhoudis was motivated in dismissing Ms Sibley by knowledge of the complaint to D.E.E.T., I do not consider it colourable. I am satisfied therefore that the required common substratum of facts existed, and that the claim for battery can properly be brought in the Court’s associated jurisdiction.
However, I find against Ms Sibley in relation to the claim. The onus rests on Ms Sibley to establish the elements of the tort of battery, and having heard the evidence of Ms Sibley, Mr Eren, Mrs Vlakhoudis and Nicole Vlakhoudis, I am not satisfied that the relevant physical contact between Mrs Vlakhoudis and Ms Sibley was deliberate. Mrs Vlakhoudis says that she accidentally tripped in the bathroom and grabbed Ms Sibley’s arm to keep her balance, so that Ms Sibley fell over. While Ms Sibley’s account had some differences with regard to the exact location of the incident and its aftermath, I accept on balance that they are describing the same incident. It may be that Ms Sibley genuinely interpreted the incident as an aggressive act of Mrs Vlakhoudis’ part, but she has not satisfied me that it was Mrs Vlakhoudis’ intention to touch her in that way.
Whether There was a Valid Reason for Termination Based on the Operational Requirements of the Centre
Section 170DE(1) of the Act requires that there be a valid reason for the termination of the employee’s employment connected with the employee’s capacity or conduct or based on the operational requirements of the undertaking, establishment or service. Section 170EDA(1)(a) confers the onus on the employer to prove the existence of such a valid reason.
Mrs Vlakhoudis gave Ms Sibley a letter of termination dated 9 February 1996, which states in part:
“Further to your verbal notification of termination of employment on Tuesday 30/1/96. As discussed, you were employed as a relief worker and regretfully we do not have the number of children we expected and our numbers have diminished quite badly. We intended to keep you on for a longer period but things have not turned out as expected...”
The Centre was licensed for twenty children. A summary of attendance records shows that the average number of children attending the centre per week ranged from:
· 16.8 to 19.8 in the first seven weeks of Ms Sibley’s employment;
· 13.5 to 15.2 over the next six weeks (which included the Christmas period); and
· 10.0 and 11.2 in the final two weeks of Ms Sibley’s employment.
Mrs Vlakhoudis attributed the decrease to the opening of additional child care centres in the area.
Ms Sibley conceded that she had noticed a decrease in the number of children at the Centre, and that there had been discussions between the employees concerning the decrease in children and its potential consequences. She says of the notice of termination, “...maybe I expected it.”
Accounts for the Centre as at 30 April 1996 were tendered through Mrs Vlakhoudis’ accountant. Fees paid by parents fell from a monthly average of $2,696 for the quarter ending on 31 December 1995 to a monthly average of $2,201 for the quarter ending on 31 March 1996. The accounts showed an assumed profit for the Centre (after allowing for Mrs Vlakhoudis’ notional salary) of $8,653 for the financial year ending 30 June 1996, compared to a profit of $27,174 for the previous year. Wages comprised 65% of the Centre’s expenses, not including Mrs Vlakhoudis’ notional salary.
Ms Sibley’s representative submitted that because the Centre was still solvent, there was no operational requirement to reduce the number of employees. I accept that the preservation or increase of profitability can be a valid reason for redundancy.
Having accepted that there was a genuine basis for reducing the wage costs of the Centre, it remains to be considered whether there was a valid reason for selecting Ms Sibley for redundancy.
The Centre had four child care workers in addition to Mrs Vlakhoudis, the proprietor, who worked at the Centre. Her daughter Nicole worked there but was going on maternity leave in March 1996. It would thus not assist the Centre’s financial position to terminate her employment. It had originally been intended to retain Ms Sibley as her replacement while she was on leave, so that three workers remained. However, given the fall in the number of children, a further reduction was required.
The Centre was obliged to meet certain licensing requirements with regard to the qualifications of the staff rostered on at any given time. Ms Fay Cranwell was a registered mothercraft nurse, which is a relevant qualification under the licence requirements. Had she been dismissed, the Centre could not have met those requirements. Her dismissal was not, therefore, an option.
However, Ms Christine Clohessy, like Ms Sibley, held no such relevant qualification. She had been employed at the Centre since June 1994, and as a seventeen year old was paid at junior rates.
Mrs Vlakhoudis decided to keep Ms Clohessy on, rather than Ms Sibley, because Ms Clohessy:
· had been employed longer;
· was more appropriately paired with Ms Cranwell, doing more of the non-contact, cleaning work, given her lower level of experience and skills; and
· cost less to employ, even allowing for Ms Sibley’s subsidy.
I accept that these are rational, justifiable criteria for selection which were objectively applied.
Finally, I must consider Ms Sibley’s contention that she was denied procedural fairness in that Mrs Vlakhoudis did not consult with her or discuss alternatives to dismissal prior to giving her notice of the termination of her employment.
While this submission was directed to Section 170DE(2), in my view it also has some application to Section 170DE(1), given that the phrase “valid reason” has been held to embrace issues of fairness or injustice (Nettlefold v Kym Smoker Pty Ltd, unreported, IRCA No. 469 of 1996, Lee J, 4 October 1996) and to extend to the effect of the termination on the employee as well as the employer’s point of view (Thomas v Lynch, unreported, IRCA No. 627 of 1996, Wilcox CJ, 20 December 1996).
While he did not have to decide the point, North J volunteered in Carydias v The Greek Orthodox Community (unreported, IRCA No. 31 of 1997, North J, 20 February 1997) that it was arguable that a termination which was procedurally unfair, or failed to take into account the personal circumstances of the employee, would not be justified in all the circumstances, and thus would not be for a “valid reason” as that phrase has been interpreted in the cases cited above.
Having considered these authorities, I have decided this application on the basis that Mrs Vlakhoudis’ failure to consult with Ms Sibley prior to termination has rendered invalid a reason for termination that would otherwise have been valid, and has made unjustified a dismissal which would otherwise have been justifiable.
Compensation
In assessing the compensation that is appropriate, the Court will have regard to what is reasonable in the circumstances and will look at what would have been likely to occur had the Act not been contravened.
While the various alternatives to termination were not discussed with Ms Sibley, Mrs Vlakhoudis says that was because she already knew that there were no other alternatives available. Ms Sibley was given the opportunity in the course of the hearing to indicate what alternatives she might have suggested, had she been consulted. She suggested that she would have preferred to work less hours than be dismissed, and would like to have job-shared.
It was accepted in submissions that the only employee with whom Ms Sibley could have job-shared was Ms Clohessy. Mrs Vlakhoudis says she had consulted with Ms Clohessy about job sharing in the context of Nicole’s return to work after her pregnancy. Ms Clohessy would not agree. Given her junior rate of pay, Ms Clohessy told her she could not afford to take home any less pay, and would be forced to resign if her hours were cut. Ms Clohessy confirmed in evidence that this was her position. Mrs Vlakhoudis thus proceeded on the basis that she would need to dismiss either Ms Sibley or Ms Clohessy.
While it cannot be assumed that Ms Sibley would have been dismissed anyway had the options been discussed with her, I am of the view, having heard all the evidence, that Ms Sibley’s termination was by far the most likely outcome in any event. Accordingly, I will award only nominal compensation, taking into account the possibilities that consultation might have led Mrs Vlakhoudis to defer Ms Sibley’s termination, given foreseeable relief requirements, and given her additional notice or retained her as a part time employee while leaving Ms Clohessy to work full-time.
Conclusion
I have ordered that compensation equal to four weeks’ wages be awarded. Given that the assessment of compensation is directed at the loss suffered by the applicant rather than the cost to the respondent, the order will include the amount that would otherwise have been subsidised. I have made the usual orders in relation to taxation.
I certify that this and the preceding 8 pages
are a true copy of the reasons for decision of
Judicial Registrar R.D. Farrell.
Associate:
Dated: 29 July 1997
APPEARANCES
Counsel appearing for the applicant: Mr C G Narayanan
Solicitors for the applicant: Pynt & Associates
Representative for the
respondent: Miss M A Marchese of
Chamber of Commerce & Industry of Western Australia (Inc)
Dates of hearing: 25, 26 July and 1 August 1996
