Barsha v Motor Finance Wizard (Sales) Pty Ltd [2002] QIRC 150 (2002) 171 QGIG 139

18 October, 2002 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 139 ########################################################################################################################### QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 – s. 74 – application for reinstatement Chris Barsha AND Motor Finance Wizard (Sales) Pty Ltd (No. B492 of 2002) COMMISSIONER ASBURY 4 October 2002 Termination of employment – s. 74 application for reinstatement – Applicant ceased to act as Working director –Applicant advised in writing of reversion to another position – Contention that applicant resigned as Working director bringing contract of employment to an end – Contention that applicant reverted to another position on a temporary basis – Assertion by respondent applicant not dismissed – Applicant forwarded invoices for commission payments under contract of employment to respondent under name of a registered company – Payments on invoices from registered company made by respondent directly into applicant’s personal bank account – Argument by respondent applicant excluded employee by virtue of s. 72(1)(e)(iii) by virtue of commission payments – Finding that applicant dismissed by respondent – Finding that applicant not excluded under s. 72(1)(e)(iii) – Case law in relation to commission payments – Consideration of whether dismissal unfair – Case law on unfair dismissal – Right of employee to raise legitimate concerns about terms and conditions of employment – Obligation on employers to take reasonable steps to address legitimate concerns of employee about terms and conditions of employment – Rights and obligations in relation to grievances under contract of employment – Failure to follow grievance procedure in applicant’s contract of employment – No warning given to applicant – Expectation created that conduct of applicant accepted and reversion to another position agreed – No evidence this arrangement temporary – Finding applicant unfairly dismissed – Consideration of appropriate remedy – Finding that reinstatement is impracticable – Consideration of whether commissions are included in wages for purposes of calculation of compensation under s. 79(2) – Applicant not to benefit from arrangements for payment of commissions – Compensation awarded on basis of applicant’s base weekly salary – Question of costs reserved – Application to be re-listed at request of either party in the event of application for costs. DECISION 1. OVERVIEW 1.1 The contract of employment Mr Chris Barsha (the applicant) commenced employment with Motor Finance Wizard (Sales) Pty Ltd (the respondent) on 16 July 2001. The applicant said in his evidence that he was employed as a licensed manager and approximately one week after commencing employment was given a contract to sign. The contract, which was attachment CBH1 to the applicant’s witness statement (exhibit A1) stated that the duties and responsibilities of the applicant were to act as a Finance Consultant/Sales Manager and/or as described in the attached position description. The position description attached to the contract of employment, stated: “POSITION DESCRIPTION Employee: Chris Barsha Commencement Date: 16 July 2001 Sales Manager • Salesman/Finance Consultant • Working director • The employee will be entitled to Commission on sales made by him personally and overriders on sales made by the Sales team (excluding sales made by him personally).”. The contract of employment contains a number of references which indicate that it was intended to be formalised as an Australian Workplace Agreement. There was no evidence that this formalisation took place. However, neither the applicant nor the respondent argued that the contract of employment was not valid and binding. 1.2 The role of Working director A central area of disagreement between the parties related to the role of Working director, and the significance of that role to the applicant’s contract of employment. What is clear is that the applicant commenced to fill this role approximately two months after the commencement of his employment. The applicant’s evidence is that he was requested to fill the role at a lunch with two directors of the respondent, Mr Peter Llewellyn and Mr Rod James. The applicant said that he expressed some concern about the responsibilities associated with this position, and was assured that the respondent would indemnify him with respect to the role of Working director. The applicant subsequently advised Mr Llewellyn that he agreed to perform the role of Working director. The applicant’s evidence was that he was not provided with detailed information about the role of Working director at the time he was offered employment with the respondent. Mr James in his evidence said that the role for which the applicant was employed was Working director who would also perform the functions of sales manager/salesman/finance consultant. The objective in employing the applicant was to fulfil a corporate plan involving the establishment of a head dealership of Motor Finance Wizard (Sales) Pty Ltd at Underwood. At the time of the offer of employment to the applicant, (the respondent) did not yet hold a corporate motor dealer’s licence for the dealership located at Underwood, with that dealership being operated as a branch of Gold Icon Pty Ltd, a head dealership located at Southport. The agreement of the applicant to act in the role of Working director was a formality, because this had already been agreed at the time the applicant was employed. -- 1 of 8 -- 140 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 18 October, 2002 The respondent said that the applicant performing the role of Working director, was extremely important to its business. This was because the regulatory position under the Property Agents & Motor Dealers Act 2000 is that as a holder of a Corporate Motor Vehicle Dealers Licence, the respondent was required to have a Working director always in attendance at the place of business. If a Working director was unable to be in attendance at all times, the motor vehicle dealer must have in addition, a licensed manager in attendance. There was no requirement to have a Working director and a sales manager in the same car yard. The Working director in the performance of his duties also performed the duties of a sales manager and finance consultant. The evidence of Mr James was supported by Mr David Kenny, a Working director of the respondent. The respondent forwarded a letter to the applicant dated 26 September 2001, thanking him for consenting to the appointment as Working director. Attached to this correspondence was a document addressed to the applicant headed “Indemnity” signed by Mr James and Mr Llewellyn, and a copy of a notification to the Office of Fair Trading advising of the applicant’s appointment as Working director. The letter to the Office of Fair Trading stated that it was the respondent’s understanding that the only impediment to the application for a corporate licence, was the nomination of a Working director holding a current motor dealer manager’s licence. The letter also stated that the applicant held such a licence and attached a copy. This correspondence was Attachment CB2 to Exhibit A1, the applicant’s witness statement. 1.3 Applicant ceasing to act in the role of Working director The applicant performed the role of Working director up until 20 February 2002. On 19 February 2002, the applicant said that he received a facsimile advice from Mr James and Mr Llewellyn informing him that all enquiries from the Office of Fair Trading were to be directed to the respondent’s head office. The applicant became concerned about his position, as the respondent’s business at Underwood was operating under his licence as a motor dealer. This concern caused the applicant to raise a query with his solicitor. After receiving advice the applicant said that he spoke to Mr James and told him that his solicitor was concerned about indemnity, as it was not worth the paper it was written on, if the directors did not have any assets in their names. The applicant said that Mr James offered to have Mr Llwellyn, who was also a solicitor, redo the indemnity. The applicant said he would agree to this if it was done in conjunction with his solicitor, and the respondent agreed to pay his legal costs. The applicant then said that approximately two hours later, he received a telephone call from Mr James, during which Mr James made disparaging remarks about the applicant’s solicitor, and angrily told the applicant that his actions would “cost” him. The applicant also said that he had no intention of ceasing to act in or resigning from the role of Working director, but was simply seeking to have concerns about the indemnity which the respondent had provided to him addressed. The applicant also denied that he resigned as Working director on 19 February 2002. The applicant subsequently received a letter dated 20 February 2002, which stated: “Dear Chris Re Ceasing to Act as Working director We confirm that you no longer wish to continue as a Working director of Motor Finance Wizard (Sales) Pty Ltd and we advise that we have today notified ASIC you cease to hold that office with the company. We note that you will now revert to the position of Licensed Manager at Brisbane and we enclose copy letter (sic) addressed to the Office of Fair Trading in this regard. Thank you for your past assistance. Yours Faithfully MOTOR FINANCE WIZARD.”. A copy of a letter to the Office of Fair Trading in the following terms, was also attached to the letter to the applicant of 20 February 2002: “Further to our letter of 10 January 2002, please be advised that Mr Chris Barsha … has ceased to act as a Working director of Motor Finance Wizard (Sales) Pty Ltd. Mr Barsha has reverted to the position of Licenced (sic) Manager at 16-22 Compton Road, Underwood. Mr David Kenny ... has been appointed Working director to replace Mr Barsha effective 20 February 2002 (copy Licence enclosed) Yours faithfully LLEWELLYNS.”. The applicant said that when he received this correspondence he had been happy to revert to the position of licensed manager, as this was the role that he had held upon commencing employment with the respondent. When the applicant had taken on the role of Working director there had been no change to his remuneration and he expected that his remuneration would also remain unchanged when he reverted to the position of licensed manager. The applicant denied that he had been told that this would be a temporary arrangement until a replacement Working director was found. Mr James’ version of the telephone conversation of 19 February 2002, is quite different to that of the applicant. Mr James stated that the applicant had advised that he no longer wished to continue as Working director and that his resignation as a director of the respondent was effective immediately. Mr James also stated that the applicant reverting to the position of licensed manager was a temporary arrangement, and this was made clear to the applicant. The applicant had agreed to remain with the respondent for a further week, to enable a replacement Working director to be found. Mr Kenny was appointed as Working director on an interim basis to replace the applicant on 20 February, and this arrangement was subsequently confirmed one week later. Evidence was given by Mr James and Mr Kenny about the impact on the respondent of the applicant ceasing to act in the role of Working director. Mr Kenny advised that the respondent had intended to open a motor vehicle dealership on the Sunshine Coast. The applicant was to act as the Working director of that dealership and as branch manager on the Sunshine Coast until the licence was granted. The resignation of the applicant as Working director forced the respondent to reconsider its plans in this regard, and to put those plans on hold. The sudden need to find a replacement Working director had harmed the respondent operationally. Mr Richard Burgess and Mr James Phelan also gave evidence for the respondent, to the effect that the applicant had told them that he was considering starting up a business using the respondent’s system. 1.4 The cessation of the applicant’s employment Mr James said that a decision was made by the respondent to finalise the applicant’s employment on 27 February 2002. A replacement Working director who would assume the role of sales manager had been located. Mr James telephoned the applicant on 28 February 2002, to inform him that his -- 2 of 8 -- 18 October, 2002 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 141 employment was terminated. When the applicant asked why, Mr James’ advised that the decision was due to his resignation as Working director, and that a permanent replacement had been found for him. Further, Mr James said that the applicant was told that the decision was irreversible. The applicant’s version of this conversation is that Mr James told him that his contract had been terminated immediately, because of lack of loyalty and because the respondent wanted someone long-term. The applicant also said that Mr James had agreed during this conversation that it was not a condition of the applicant’s employment that he be a Working director. The respondent argued that the role of Working director was an essential element of the applicant’s contract of employment and was his substantive position at the time employment ceased. When the applicant “resigned” as Working director, the effect of the “resignation” was to bring his employment to an end, subject to him remaining for a further week on a temporary basis, to enable a replacement Working director to be found. It was also contended that the applicant’s salary package had been intended to compensate him for fulfilling the role of Working director, at the point this became necessary, in accordance with the corporate plan. The applicant had “slipped comfortably” into the role of Working director and had worked in that role for five months, before raising any concerns about the indemnity. It was submitted for the respondent that the evidence clearly established that the applicant’s resignation as Working director had been accepted on 20 February 2002, and the applicant had been appointed temporarily to the role of licensed manager, until a replacement Working director could be found. For the applicant, it was argued that the termination occurred on 28 February 2002, during a telephone conversation between the applicant and Mr James. During that conversation, Mr James had told the applicant that his employment was being terminated for disloyalty. The applicant’s evidence was that the role of Working director was not mentioned to him until September 2001 when the role was offered to him and accepted. Ms Prior submitted that the documentary evidence is supported by the applicant’s version of events. It was argued that the Working director role was not raised in the letter of offer of employment to the applicant. Further, that role was listed in the position description appended to the contract of employment as an element or an adjunct of the position. Even if the employer’s assumption that the applicant resigned from the role of Working director was correct, it did not mean that the entire role filled by the applicant ceased to exist. Further, even if the employer’s assumption in this regard was correct, the action of the applicant in seeking to have concerns about acting in the role of Working director addressed, could not have brought the contract of employment to an end. 1.5 Payment of commissions to the applicant A further issue which arises in this case, is the manner in which the applicant was paid commissions pursuant to his contract of employment. During the applicant’s evidence, it became apparent that while his salary was paid to him personally, the commission he received under his contract of employment was paid to a company, Barsha Consultancy Pty Ltd, ABN 46096786980. This issue arose when the applicant put into evidence documentation to establish the quantum of commissions he had been paid, to support an argument that he should be compensated for commissions lost because of his unfair dismissal. The applicant tendered eight invoices from Barsha Consultancy Pty Ltd, ABN 46096786980, 42 Poincianna Crescent, Stretton, 4116 (Exhibit A3). These invoices were directed to a variety of entities: Motor Finance Wizard Sales; P.R. Administration Pty Ltd and Gold Icon Pty Ltd. The applicant also tendered bank statements showing deposits into his personal bank account (exhibit A4) for amounts corresponding to amounts invoiced by Barsha Consultancy Pty Ltd, ABN 46096786980. It was contended for the applicant that this evidence established that his average monthly commission earnings were $5,915.10, and that such an amount should be taken into account in calculating lost remuneration and/or compensation, for his unfair dismissal. The respondent contended in submissions that the applicant was an excluded employee pursuant to s. 72(1)(e) of the Industrial Relations Act 1999, (the Act). It was submitted that the applicant was seeking to claim lost wages at the amount of $700 per week, and an additional amount of $5,915.10 per month for commissions received. Mr Byrne for the respondent argued that the commissions paid to Mr Barsha were wages, (as that term is used and defined in the Act at Schedule 5), and that it did not matter that they were paid on behalf of the employee into another fund: see Rigby v Technisearch (Industrial Relations Court of Australia 156/96). When commissions were taken into account, the applicant was in receipt of an annual wage of $107,381.20, which was clearly in excess of the amount specified in s. 72(1)(e)(iii) of the Act and Regulation 4 of the Industrial Relations Regulation 2000. For the applicant, Ms Prior relied on the decision of the President in O’Connor v Electroboard Administration Pty Ltd (2001) 168 QGIG 90, where it was held that commission paid for sales made, and which were paid in accordance with an employment agreement, is not included in the calculation of annual wages for the purposes of s. 72(1)(e)(iii) of the Act. Accordingly, Ms Prior argued that the applicant was not an excluded employee by virtue of that section. It was also argued for the respondent that the applicant’s taxation arrangements in relation to the manner in which he was paid commission, indicated that he was a liar. In this regard, the applicant had given evidence that in the period he was employed by the respondent, he had personally received an amount of $44,363.26 as commission payments, and that such an amount had been paid into his personal bank account. However, those monies were paid to the applicant’s service company, Barsha Consultancy Pty Ltd, ABN 46 096 786 980 pursuant to tax invoices, which the applicant had provided to the respondent. Some invoices had been directed to Gold Icon Pty Ltd, when the applicant had been employed by Motor Finance Wizard (Sales) Pty Ltd. The applicant had also given evidence that Barsha Consultancy Pty Ltd had completed a business activity statement and recorded the amounts as per the tax invoices as income received and as GST collected by that company. This meant that the applicant had personally received the monies by way of commissions, but had also claimed through the business activity statement of Barsha Consultancy Pty Ltd, that those same monies (and the concomitant GST) was paid to the company as income, pursuant to those tax invoices. Further, the applicant also stated that the company, Barsha Consultancy Pty Ltd, would have declared on the business activity statement that the information was correct. It was submitted that the applicant had been untruthful to the Australian Taxation Office with respect to his taxation arrangements. It was further submitted that the applicant’s evidence was severely tainted by his untruthfulness, and that his evidence about the terms and conditions of his contract of employment and his interpretation of it, was suspect, in light of the fact that he had the business acumen and wherewithal to set up a service company to minimise his taxation liabilities. 2. CONCLUSIONS 2.1 Issues for Determination The issues for determination in this case are as follows: 1. Was the applicant dismissed by the respondent? -- 3 of 8 -- 142 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 18 October, 2002 If the applicant was dismissed by the respondent, then: 2. Is the applicant excluded from making an unfair dismissal application by virtue of s. 72(1)(e)(iii) of the Act? If the applicant is not excluded from making an unfair dismissal application: 3. Was the dismissal unfair? and 4. If the dismissal was unfair, what is the appropriate remedy? 2.2 Was the applicant dismissed? Essentially, the respondent contended, the applicant acting in the role of Working director was a fundamental term of his contract of employment, and a breach of that term by the applicant “resigning” from that role brought the contract of employment to an end at the initiative of the applicant. I am unable to accept this contention. All of the evidence, in particular the documents attached to the applicant’s witness statement (exhibit A1) were to the contrary. The applicant’s written contract of employment indicated at clause 1.1 that his duties and responsibilities were to act as finance consultant/sales manager and/or as described in the attached position description. The position description indicated that the role of Working director was one aspect of the applicant’s role. There is nothing in the contract of employment to indicate that the role of Working director was of any more significance than any other role which the applicant could have performed under his contract of employment. The letter to the applicant on 26 September 2001 referred to the applicant consenting to the appointment of Working director, and confirmed that the respondent had agreed to meet the cost of the applicant’s motor dealer licence fees whilst he was engaged as a Working director. If the applicant had been employed at the outset on the condition or understanding that he act in the role of Working director, it would not have been necessary to obtain his consent to that appointment on 26 September 2001. Further, the letter of 26 September 2001 and the attached indemnity referred to the “engagement as Working director” carried the implication that this engagement was different to roles the applicant had previously undertaken for the respondent. The letter from the respondent to the Department of Fair Trading dated 26 September 2001 indicated that the respondent had already made an application for a corporate licence and the only impediment to the application was the nomination of a Working director who was a current license holder. The letter went on to advise that the applicant had been “appointed a Working director” to fulfil that requirement. Of particular significance was the letter to the applicant dated 20 February 2002 which confirmed that he no longer wished to continue as a Working director and would revert to the position of licensed manager at Brisbane. The same statement was made by the respondent in a letter to the Office of Fair Trading dated 20 February 2002. The contents of these letters were entirely inconsistent with the applicant’s resignation from a substantive position, and the proposition that his employment with the respondent had ended on 20 February 2002. Further, the correspondence suggested that the applicant’s choice to cease acting as a Working director had been accepted, and notwithstanding, that he would revert to the position of licensed manager. There is no evidence that the applicant resigned his employment upon ceasing to perform the role of Working director, or that the respondent accepted the actions of the applicant as a resignation from employment. Mr Llewellyn, a director of the respondent is a solicitor. The letter to the Office of Fair Trading dated 20 February 2002 advising that the applicant had reverted to the position of licensed manager is signed for Llewellyns, Mr Llewellyn’s firm of solicitors. The evidence for the respondent was that the applicant ceasing to act as Working director had a significant and adverse impact on its business, and that this role was viewed as a fundamental part of the applicant’s contract of employment. In my view, it is improbable that a letter written a short time after a heated conversation about the applicant ceasing to act in this role, would not confirm the respondent’s understanding that the applicant had resigned his employment and was acting in another role only on a temporary basis. Furthermore, it is clear that by 20 February 2002, when the letters to the applicant and the Office of Fair Trading were written, that a replacement Working director had been found. Even if Mr Kenny had only been appointed on 20 February 2002, on a temporary basis, on the respondent’s own evidence there should have been no need for the applicant to remain in employment. There is no evidence that Mr Kenny was immediately needed to act as Working director at any other location. In fact the evidence shows that the respondent’s expansion plans had slowed down, and that this was not due to the applicant ceasing to act as a Working director. Further, the letter to the Office of Fair Trading on 20 February 2002, makes no mention of the fact that Mr Kenny’s appointment as Working director at that stage was only temporary. This is at odds with the respondent’s often-stated concern to comply with requirements of the Office of Fair Trading. Mr James stated that Mr Kenny’s appointment as Working director had been temporary and may not have been the ideal situation “down the track”, because the applicant and Mr Kenny did not get on. Yet only one week later a decision had been made that Mr Kenny would fill the role of Working director on a permanent basis and the applicant’s temporary role as licensed manager would end. Mr James also agreed under cross-examination that he had terminated the applicant’s employment because of disloyalty. In my view, this evidence is much more consistent with the respondent putting in place an arrangement on 20 February 2002 whereby Mr Kenny would take on the role of Working director and the applicant would revert to the role of licensed manager, and then forming a view at some time during the following week that such an arrangement was unworkable. This view may have been formed for any number of reasons – that it was not cost effective or efficient for the respondent to operate in that manner or that the applicant and Mr Kenny did not get on. This view was not formed on 19 February 2002, when the applicant had a telephone discussion with Mr James, or on 20 February 2002, when the letter confirming that the applicant no longer wished to act as Working director was forwarded to him. The view was in all probability formed at some point after the letter was forwarded to the applicant on 20 February 2002 and 28 February 2002, causing Mr James to terminate the applicant’s employment on 28 February 2002. The evidence about the conversation between the applicant and Mr James on 19 February 2002, is more consistent with the applicant’s version than that of Mr James. Mr James agreed under cross-examination that the applicant did raise the issue of the indemnity, and the advice the applicant had received in relation to the indemnity had been discussed. Further, Mr James confirmed that the applicant had said his legal advice about the indemnity was that it was not worth the paper it was written on and was only as good as the directors who gave the indemnity. Mr James also said in his evidence-in-chief that he had told the applicant that his actions would cost him more than he realised, and confirmed that he referred to the applicant’s solicitors in a demeaning way. I wonder at why Mr James would have thought that the applicant’s actions would have cost him anything, if he believed that the applicant had just resigned his employment. This statement on the part of Mr James is much more consistent with Mr James forming a view that he would be taking action against the applicant at some point in the future, than it is with the applicant resigning his employment and remaining with the respondent in some temporary capacity for a further week. On balance I am reasonably satisfied that the applicant did not resign his employment on 19 February 2002. Rather, the applicant’s employment was terminated by Mr James on behalf of the respondent on 28 February 2002, during a telephone conversation. -- 4 of 8 -- 18 October, 2002 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 143 2.3 Is the applicant excluded from making an unfair dismissal application? Section 72(1)(e) of the Act provides that s. 73(1) (When a dismissal is unfair) does not apply to employees who are not employed under an industrial instrument; are not public service officers employed on tenure under the Public Service Act 1996; and whose annual wages immediately before the dismissal are more than the amount prescribed under s. 72(1)(e)(iii). That amount is currently $75,200.00 by virtue of Regulation 4 of the Industrial Relations Regulation 2000. In the decision of the President in O’Connor v Electroboard Administration Pty Ltd (2001) 168 QGIG 90, the question of whether commission paid for sales made and paid under an employment agreement was included in the calculation of annual wages for the purpose of s. 72(1)(e)(iii), was answered in the negative. In this decision the President was considering a case stated by a member of the Commission under s. 282 of the Act. The case stated to the President included the following question: “1. Should commission which is paid for sales made and paid pursuant to an employment agreement be included in the calculation of annual wages for the purpose of s. 72(1)(e)(iii) of the Act?”. After considering a number of authorities on the term “wages”, the President held that: “Wages at s. 72(1)(e)(iii) should be given its natural meaning not the meaning at the definition of wages in Schedule 5. The answer to question 1 is “No”. ((2001) 168 QGIG 90 at 92).”. There are some additional issues raised in this case, which in my view also require consideration. The evidence clearly disclosed that the applicant caused invoices to be provided to the employer in the name of a business entity, Barsha Consultancy Pty Ltd, ABN 46096786980 for commissions which he was entitled to be paid under a written contract of employment. The invoices variously itemised “consultancy fees”; numbers of deliveries or names. They were paid by the respondent or related companies, directly into the applicant’s personal bank account. The applicant said under cross-examination that the invoiced amounts were commissions. The fact that the applicant gave evidence that Barsha Consultancy Pty Ltd, ABN 46 096 786 980 paid tax on this income is irrelevant. The relevant point and the inference I draw from the evidence, is that tax was paid on income which was earned pursuant to a contract of employment at a lower rate, applicable to corporate entities. Although the respondent’s witnesses did not give evidence in chief or under cross-examination in relation to this arrangement, I also draw the inference that at very least, the respondent acquiesced to such an arrangement. I draw this inference on the basis that there was a written contract of employment between Motor Finance Wizard (Sales) Pty Ltd, CAN 096 676 596 and Chris Barsha, 42 Poinciana Crescent, Stretton, Queensland, 4116. That written contract of employment provided for payment of commission to the applicant personally in his capacity as an employee, and not to Barsha Consultancy Pty Ltd, ABN 46 096 786 980. The respondent paid the amounts set out in the invoices directly into the applicant’s personal bank account, by electronic transfer of funds. Some of the invoices were directed to another entity, also outside of the contract of employment between the applicant and the respondent – Gold Icon Pty Ltd. The evidence shows that Gold Icon Pty Ltd had some relationship to the respondent, as the respondent’s operation at Underwood was initially a Branch of Gold Icon Pty Ltd. Further, there is no evidence that the payments to Barsha Consultancy Pty Ltd were for anything other than commissions payable to the applicant by the respondent pursuant to the applicant’s contract of employment. Regardless of how the payments were made to the applicant, both parties to the contract under which the entitlement to them arose, agreed that they were commissions. Accordingly, consistent with the decision of the President in O’Connor v Electroboard Administration Pty Ltd such payments are not included in the calculation of annual wages for the purposes of excluding the unfair dismissal application pursuant to s. 72(1)(e)(iii) of the Act, I reject the respondent’s submissions in this regard. The submissions for the respondent made allegations of dishonesty on the part of the applicant in relation to these arrangements, and in my view, completely overlooked the fact that such arrangements could not have operated without the respondent’s acquiescence. Having acquiesced to such arrangements for the payment of commissions it would be inconsistent with the objects of the Act and the public interest for the respondent to benefit from those arrangements by succeeding with an argument that they result in the applicant being excluded from seeking a remedy for an unfair dismissal on the basis that they are not commissions. For this reason, even were it not for the decision in O’Connor v Electroboard Administration Pty Ltd I would not have taken the commission payments into consideration to establish whether the applicant was an excluded employee for the purposes of s. 72(1)(e). 2.4 Was the dismissal of the applicant unfair? By virtue of s. 73(1)(a) of the Act, a dismissal is unfair if it is harsh, unjust or unreasonable. In deciding whether a dismissal was harsh unjust or unreasonable, s. 77 of the Act requires the Commission to consider: “(a) whether the employee was notified of the reason for the dismissal; and (b) whether the dismissal related to – (i) the operational requirements of the employer’s undertaking, establishment or service; or (ii) the employee’s conduct or capacity or performance; and (c) if the dismissal relates to the employee’s conduct, capacity or performance – (i) whether the employee had been warned about the conduct, capacity or performance; or (ii) whether the employee was given an opportunity to respond to the allegation about the conduct, capacity or performance; and (d) any other matters the Commission considers relevant.”. In Stewart v University of Melbourne (U No 30073 of 1999 Print S2535) Ross VP of the Australian Industrial Relations Commission considered the decision of the High Court in Byrne v Australian Airlines (1995) 185 CLR 410 and the joint judgement of McHugh and Gummow JJ in relation to the expression “harsh, unjust or unreasonable” finding the following observations at 465-468, highly persuasive: “It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment may be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted. … -- 5 of 8 -- 144 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 18 October, 2002 Procedures adopted in carrying out the termination might properly be taken into account in determining whether the termination thus produced was harsh, unjust or unreasonable. The submissions for the respondent in the present appeals appeared to concede this. But the burden of the respondent’s submissions is that there was error in determining the issue without regard to the very material circumstance of the finding of the primary judge as to the complicity of the appellants in pilfering. Those submissions should be accepted. This means that the primary judge was bound to consider whether, on the evidence given at the trial, the respondent could resist the allegation of breach of cl. 11(a), provided that the evidence concerned circumstances in existence when the decision to terminate employment was made.”. These observations were distilled by Ross VP into the following considerations for the purpose of s. 170CG(3) of the Workplace Relations Act 1996 (Cth): “a termination of employment may be: • harsh, because of its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct; • unjust, because the employee was not guilty of the misconduct on which the employer acted; and/or • unreasonable, because it was decided on inferences which would not reasonably have been drawn from the material before the employer.”. Section 170CG(3) of the Workplace Relations Act 1996 (Cth) is in substantially similar terms to s. 77 of the Industrial Relations Act 1999 (Qld). In my view, the observations of Ross VP are equally relevant to the matters the Commission is required to consider under s. 77 of the Industrial Relations Act 1999 (Qld). There is no evidence of any warnings or allegations of poor work performance being put to the applicant by the respondent prior to his dismissal. The evidence in this case discloses that the applicant raised issues in relation to the indemnity which had been provided to him by the respondent as a consequence of him agreeing to act in the capacity of Working director. In my view, it is not unreasonable for an employee to raise legitimate concerns with the employer about any aspect of the employment relationship. An employer who does not enter into meaningful discussions about legitimate concerns on the part of an employee, and who subsequently dismisses that employee, runs a real risk that such a dismissal, if it relates to the concerns raised by the employee, will be found to be unfair. In this case, there was a written contract of employment between the applicant and the respondent, providing a detailed mechanism for issues in dispute to be raised and resolved. I accept that the applicant had a concern about the implications for him of acting as a Working director. I also accept those concerns were arguably legitimate given the facsimile from the respondent dated 19 February 2002, indicating that the applicant was not to discuss certain matters with the Office of Fair Trading, notwithstanding that the respondent was operating a business under the auspices of the applicant’s motor dealer’s licence. Certainly the applicant was entitled to raise such a concern and to have that concern addressed in accordance with the dispute resolution procedure in his contract of employment. The evidence discloses that Mr James reacted with hostility to the applicant’s concerns, and did not make any attempt to enter into reasonable discussions with the applicant to resolve those concerns. Further, Mr James did not tell the applicant that in raising these concerns, and leading the respondent to form a view that he did not wish to act in role of Working director, he was putting his employment in jeopardy. After a heated discussion between Mr James and the applicant, a letter was forwarded to the applicant confirming that he would revert to the position of licensed manager. This was also confirmed in a separate letter to the Office of Fair Trading, a copy of which was provided to the applicant. Neither of these letters indicated that this arrangement was temporary or that the conduct of the applicant was considered by the respondent to have brought the employment to an end. As a result of the telephone conversation with Mr James of 19 February 2002, and the correspondence of 20 February 2002, it was reasonable for the applicant to have formed a view that his ceasing to act in the role of Working director had been accepted by the respondent, and that notwithstanding this, he would remain in the role of licensed manager. For the respondent’s directors to have subsequently formed a view that the applicant’s conduct showed disloyalty, and that his employment should be terminated, after having created this expectation, was unfair. On Mr James’ own evidence, the allegations about the applicant’s perceived lack of loyalty were not put to him before the decision to terminate his employment was taken and conveyed to the applicant. It is also apparent that there was no allegation put to the applicant by Mr James about the operational difficulties caused by the applicant not acting in the role of Working director, or concerns about the applicant’s ability to work with Mr Kenny. The decision was communicated to the applicant with very little discussion at all. Indeed, during Mr James’ evidence-in-chief he said: “Yes, I told him that we were terminating and that Mr Kenny would be staying on as a permanent Working director and that we were terminating. He asked why and I had told him that the position – that the decision was irreversible, that Mr Kenny would replace him as such … he wanted to know why.”. I accept that the conduct of the applicant caused operational difficulties for the respondent. I do not accept that the conduct was such a significant repudiation of the applicant’s employment contract, or that it caused such serious difficulties to the respondent, that the respondent was entitled to terminate the applicant’s employment with no discussion and on one week’s notice. In my view, it is not sufficient to completely negate a finding of unfairness that the respondent can demonstrate to the Commission major operational difficulties were caused by the applicant’s conduct, or that significant restructuring was required to overcome those difficulties. The issue is whether prior to the dismissal of the applicant, those allegations were put to him, and whether reasonable steps were taken by the respondent to at least consider whether the dismissal could have been avoided by restructuring prior to the dismissal of the applicant, or by addressing his concerns about continuing to act as a Working director. Indeed, Mr James gave evidence that he was now in a position to reinstate the applicant as a licensed manager, but could not point to any real consideration of whether the applicant could have been accommodated in such a role prior to the decision to terminate his employment, or that any of these operational issues were canvassed with the applicant before that decision was taken. On balance, I am satisfied that the dismissal of the applicant was unfair. The dismissal was harsh because of its consequences for the personal and economic situation of the applicant, who was dismissed with one week’s notice. Further, the dismissal was unfair because it was disproportionate to the gravity of the conduct on the part of the applicant. The applicant was dismissed some seven days after the conduct upon which the respondent relied to justify the dismissal occurred, and after the respondent had given a clear indication that the conduct had been accepted, and had created a reasonable expectation on the part of the applicant that his employment would continue, notwithstanding that conduct. The dismissal of the applicant was unjust because in seeking to raise a legitimate and understandable concern about his legal position, he was not guilty of any misconduct at all. Further, injustice to the applicant occurred because the legitimate issue which he had raised was not dealt with in accordance with the procedure in his written contract of employment. The fact that the contract of employment established such a procedure, which was extremely detailed, in my view created an obligation on the parties to use that procedure to deal with grievances, and a legitimate expectation that this would occur. I would add that the right of an employee to raise a legitimate issue of concern with that employee’s employer may also exist under a dispute settlement procedure in an award or certified agreement. It may also be implicit in a contract of employment whether oral or written, that mutual rights and -- 6 of 8 -- 18 October, 2002 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 145 obligations include the right of an employee to raise a legitimate grievance about his or her terms and conditions of employment, and a corresponding obligation on an employer to make a reasonable attempt to address that concern. I am also of the view that the failure of the parties to use the grievance procedure to resolve the matters in dispute, was principally because of the reaction of the respondent’s directors to the issue raised by the applicant and the pre-emptive decision to dismiss him. I am also satisfied that the dismissal of the applicant was unreasonable, because it was decided on inferences – that the applicant was disloyal – which could not have reasonably been drawn from the material before the employer. In my view it is entirely unreasonable that an employee who raises a legitimate concern with his employer, or indeed, an employee who raises any concern in a legitimate manner, however trivial the employer may think that concern to be, should be dismissed because of “disloyalty”. I have also given consideration to whether the respondent’s operational requirements were impacted by the applicant not acting in the role of Working director, to such an extent that those operational requirements could outweigh the unfairness of the dismissal. In my view, before it could even be considered whether operational requirements could outweigh considerations of unfairness those operational requirements would need to be extremely urgent or acute. In this case, there is no evidence upon which I could be satisfied that the operational requirements of the respondent necessitated the immediate dismissal of the applicant with one week’s notice; without any attempt to address the concern he had raised; without any discussion with him about alternatives; or any warning that his conduct had lead to a situation where his job was in jeopardy. 2.5 Appropriate Remedy The application before the Commission in this matter sought reinstatement. The applicant said in his evidence that although he was seeking reinstatement, he did not think it would be pleasant, or comfortable. The applicant also expressed concern about how he would be treated if he was reinstated. In submissions for the applicant it was at first contended that reinstatement was not impracticable, and that the applicant should be reinstated, and paid total base salary and average commissions for the period between the dismissal and the reinstatement. As I understand the respondent’s submissions, the respondent saw no difficulty with reinstatement, provided that the applicant was reinstated to the role of Working director. Further the respondent said that it would be prepared to find a sales managers position for the applicant at one of the new dealerships. The respondent also submitted that lost remuneration for the purpose of any compensation which may be awarded to the applicant, was limited to his base salary of $700 per week. This submission was somewhat at odds with the evidence of Mr James which was in part that the applicant could be reinstated at a sales manager at a lower level of remuneration. The evidence of Mr James in this regard demonstrates that he has no real concept of what reinstatement means, and I have put very little weight on that evidence. In submissions in reply the position on behalf of the applicant changed and it was contended that the necessary trust between the applicant and the principals of the respondent had broken down, to the extent that reinstatement was not practicable. It was further contended that the nature of the relationship, requiring as it did that the respondent’s business operate under the auspices of the applicant’s motor dealers’ license, made the need for mutual trust in the employment relationship event more critical. Accordingly, the applicant sought compensation for his unfair dismissal, based on his “total package” including commission payments. After considering the evidence and the submissions, I have reached the view that reinstatement is not practicable. In reaching this view I have given consideration to evidence of Mr James about the perceived disloyalty of the applicant. I have taken into consideration the submissions on behalf of the applicant, who I have found to have been unfairly dismissed, and the fact that he no longer desires to be reinstated. Accordingly, I have determined that the requirements in s. 79(1) for reinstatement to be impracticable have been met, and the applicant should be awarded compensation for his unfair dismissal, pursuant to s. 79(2) of the Act. 2.6 Compensation Section 79(2) of the Act provides that the Commission must not award an amount of compensation that is more than: “(a) if the employee was employed under an industrial instrument – the wages the employer would have been liable to pay the employee for the 6 months immediately after the dismissal, paid at the rate the employee received immediately before the dismissal; or (b) if the employee was not employed under an industrial instrument – the lesser of the wages under paragraph (a) and an amount equal to half the amount prescribed under s. 72(1)(e)(iii).”. There is no evidence that the applicant in this case was employed under an industrial instrument. That term is defined in Schedule 5 of the Act to mean an award, certified agreement, Queensland Workplace Agreement, industrial agreement (also defined in Schedule 5), Enterprise Flexibility Agreement or order under chapter 5, parts 5 and 6. I can see no basis for finding that the written contract of employment is an industrial instrument for the purposes of s. 79(2)(a). Accordingly, the provisions of s. 79(2)(b) provide formula for determining the maximum compensation which can be awarded to the applicant. The issue which arises in this case is whether the applicant’s compensation should be calculated on the basis of his base salary of $700 per week and average commissions of $5,195.10 per month. It could be argued, that for the sake of consistency with the decision of the President in O’Connor v Electroboard Administration Pty Ltd the use of the term “wages” in s. 79(2) should also be given its natural meaning and that commissions made and paid under a written contract of employment should be excluded. The reference in s. 79(2)(b) to half the amount prescribed under 72(1)(e)(iii) lends support to this proposition. On the other hand, it could equally be argued that the context in which the term “wages” is used in s. 79(2) is different from that in which the term is used in s. 72(1)(e)(iii). In this regard, s. 78(4) which deals with payments to employees when reinstatement is ordered, contains a reference to “remuneration”. If the term “wages” in s. 79(2) was given its natural meaning, rather than the meaning ascribed to the term in Schedule 5 of the Act, the result would be that an employee who was successful in achieving reinstatement as a result of a finding of unfair dismissal, could also obtain an order against the employer for payment of lost commissions, while an employee who was found to have been unfairly dismissed, could not be compensated for lost commissions, if reinstatement was found to be impracticable. The question of what meaning the term “wages” in s. 79(2) should be given following the decision in O’Connor v Electroboard Administration Pty Ltd, was not argued in this case, and I do not propose to determine the point. Rather, for the reasons outlined in 2.3 above, I am of the view that the applicant should not benefit from the commissions in the calculation of compensation for his unfair dismissal, on the basis of the manner in which those commissions were paid. In this regard, the quantum of compensation which the Commission may award under s. 79(2) is discretionary, and I have determined to exercise this discretion in a manner which limits the basis for calculation of compensation under that section, to the applicant’s base salary of $700 per week. -- 7 of 8 -- 146 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 18 October, 2002 In terms of the total amount which should be awarded, in a significant number of unfair dismissal cases, the Commission has formulated compensation according to the following factors identified in Chenery v Klemzig Nursing Home (1988) 55 SAIR 544 at 551: • the nature of the employment; • the qualifications required for the position held by the dismissed employee and the qualifications actually held; • the dismissed employee’s salary with the respondent; • the dismissed employee’s age; • the normal retiring age for a person holding the position in question; • the salary scale (if any) attaching to the position; • notwithstanding the actual term of the contract, (ie. whether weekly, fortnightly, monthly, annual or fixed term etc.), what reasonable expectation might the dismissed employee have had for future job security; • the loss by the dismissed employee of a reasonable chance to qualify for long service or other leave of absence; • the loss by the dismissed employee of the chance to qualify for superannuation or other similar benefits; • the loss by the dismissed employee of sick leave credits; • the length of time that will probably elapse before the dismissed employee is likely to obtain equivalent or other suitable employment and at what likely remuneration. Consideration must be given here to evidence upon which a conclusion may be derived as not only to the availability of similar employment but also of the likely effect of the perception by prospective employers of the reasons for which the dismissed employee was dismissed; • What non-refundable remuneration (if any) the dismissed employee has received from any other source (other than interest from investments) between the date of the dismissal and the date of the assessment. In Griggs v Health Equipment Hire and Supplies Pty Ltd (1995) 149 QGIG 131 at 134 Bougoure C identified some additional factors for consideration as: • the remoteness of the loss on the basis that compensation should not be recovered if the loss is too remote; • assessment of future loss should include contingencies such as whether the employee would have left the job voluntarily or would have been forced to retire early; and • the requirement for the employee to take reasonable steps to mitigate his or her loss. The Commission has applied these factors on a global basis, emphasising those which are most relevant in the circumstances of each case, to determine compensation. It has also been held that the legislative cap on compensation is simply an arbitrary one. It does not operate as a maximum amount to be awarded only in the most serious or grievous cases: Sprigg v Paul’s Licensed Supermarket (1988) 88 IR 21 at 29; Perrin v Des Taylor Pty Ltd (1995) 58IR 254; Bean v Milstern Retirement Services Pty Ltd (unreported, Industrial Relations Court of Australia, 2 June 1995); Cox v South Australian Meat Corporation (1995) 60 IR 293; Messervy v Maldoc Pty Ltd (1995) 63 IR 61; Slifka v JW Sanders Pty Ltd (1995) 67 IR 316. In this case, the applicant was employed by the respondent for a relatively short period of time. There was evidence of the applicant’s mobility throughout his working life and that he had frequently changed jobs and relocated to do so. The applicant has qualifications which I am told make him employable particularly given recent legislative changes in the industry in which he has worked. There is no evidence that the applicant saw his role with the respondent as long-term, or as one where he would see out his working life. Indeed there is evidence the applicant was considering the possibility of setting up his own business, and that he had operated his own business in the past. The applicant had made enquiries to his contacts in the vehicle sales industry about employment and there is no evidence that he is having any difficulty in obtaining employment because of the manner in which his employment with the respondent ceased. I am also of the view that the resolution of the issues which the applicant had with the indemnity provided to him by the respondent would in all probability not have been capable of resolution to his satisfaction, and that he may have left employment in the future of his own volition. In all of the circumstances, I have decided to award the applicant the amount of $8,400.00, based on three months at the applicant’s base salary of $700.00 per week. I order that the respondent pay that amount to the applicant within twenty-one days of the date of release of this decision. Neither party has raised the issue of costs. I reserve the question of costs. The matter will be re-listed to hear any application for costs, at the request of either party. I Order accordingly. I.C. ASBURY, Commissioner. Released: 4 October 2002 Appearances: Ms K. Prior of Prior & Associates, instructed by A.J. Torbey & Associates for the applicant. Mr M.J. Byrne, instructed by Llewellyns Solicitors for the respondent. -- 8 of 8 --