Badham v Hardy Brothers Pty Ltd [2002] QIRC 125 (2002) 170 QGIG 483

483 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 30 August, 2002 no.19 30.08.02 QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 – s. 278 – application for unpaid wages Graham William Badham AND Hardy Brothers Pty Ltd (No. W82 of 2002) COMMISSIONER FISHER 22 August 2002 Application for unpaid bonus – s. 278 Industrial Relations Act 1999 – Definition of wages – Case law – Change of duties – No change to contract of employment – New bonus system – Memorandum – Bonus to be paid within 30 days of release of decision. DECISION This is an application by Graham Badham under s. 278 of the Industrial Relations Act 1999 (the Act) seeking an order that Hardy Brothers Pty Ltd (the Company) pay to him an amount of $20,000, such amount being for bonuses not paid for the period 30 June 2001 to 31 January 2002. An application for the recovery of bonus payments that are not prescribed by an industrial instrument can be made pursuant to s. 278 of the Act. In Giddins v Turner Valuers (2002) 169 QGIG 295 I decided that such an action could be brought. In doing so I relied on a decision of Hall, P in O’Connor v Electroboard (2001) 168 QGIG 90 that the meaning of the term “wages” includes bonuses. Further, Hall, P determined that the definition of “wages” where it appears in Schedule 5 of the Act could comfortably be inserted into s. 278(1)(a) of the Act “without violence to the language”. The President also commented that employees not engaged under industrial instruments are permitted to bring applications for the recovery of wages. Mr Badham commenced employment with the Company on 10 March 1996 as a Stock Controller. At no time during his employment was Mr Badham employed under the terms of an industrial instrument. In or around November 1997, Wallace Bishop Pty Ltd purchased the Company. The Managing Director, Wal Bishop, promoted Mr Badham to the position of National Manager in or about February 1998. In that new position Mr Badham was entitled to a base salary, car allowance and superannuation. The memorandum to Mr Badham from the Company Secretary, Ian Winterburn, dated 12 February, regarding the salary arrangements to apply, indicated these three components comprised his “total package”. In addition, the memo advised that he would be paid a bonus based on Store Performance of between $5,000 to $10,000. A handwritten note is to the effect that this was a per annum amount. A letter from Mr Bishop to Mr Badham dated 20 July 1998 clarified aspects of the “Hardy Brothers Management Bonus System”. The letter stated that “the Bonus is paid monthly” and the “National Manager receives 33 1/3% of collective bonuses paid to Managers (over the top).”. In about August 1999 Mr Bishop and Mr Badham entered into an oral agreement whereby the 33 1/3% figure was increased to 50%. Mr Badham was paid all bonuses until June 2001. While he was aware of the method of calculating his bonus he was not privy to the method of calculating the bonuses paid to store managers. This lack of knowledge caused some difficulty in quantifying the claim. The argument between the parties is whether the payment of the bonus formed part of Mr Badham’s contract of employment or whether it was separate to it and paid entirely at the discretion of the employer. Mr Badham relies on the documents referred to above to support his claim that the bonus formed part of his contract of employment. In opposing the claim the Company relies on the change in Mr Badham’s duties that occurred in July 2001 to argue that he was no longer responsible for the performance of the stores and hence not entitled to payment of a bonus. Secondly, and perhaps more importantly, the Company relies on a memorandum headed “New Bonus System” issued by Mr Winterburn to all Hardy Brothers Associates (employees) on 14 May 2001 which stated, inter alia: “A couple of questions about bonus and superannuation matters following my recent memo which require clarification. . . . 2. A reminder too that any bonus payment is entirely discretionary and all rights are reserved by management. 3. Any incentive or bonus scheme that is offered in good faith from time to time is completely separate from any contract of employment.”. The first argument relates to the change in Mr Badham’s duties in July 2001. Prior to that date a significant proportion of Mr Badham’s duties were directed to the sales performance of the stores and the performance of employees. In early 2001 Mr Badham also assumed responsibility for marketing on the resignation of the marketing co-ordinator. From July 2001 Mr Badham’s focus was directed to stock control in order to reduce the over supply of stock in stores and to ensure that more appropriate stock was placed in Hardy Brothers Stores. The responsibility for the sales performance of employees and the stores was directed to two other employees. In addition to the changed focus of Mr Badham’s role, his reporting relationship changed and his office was relocated from the City to Newstead where other head office staff were located. Mr Winterburn said that although Mr Badham’s title may not have changed, it was clear that there had been a fundamental alteration to his position and this was permanent. The change had occurred because of poor sales performance of the stores. While Mr Badham had not been personally criticised or warned about poor performance, repeated criticism and concern had been expressed at the Board of Governance such that action had to be taken to arrest the slide in sales. Since the change in allocation of duties, sales had increased markedly. The Company argued that it was the duties of managing sales performance of employees and the stores that attracted the payment of a bonus and it did not matter what the title of Mr Badham’s position was because it was sales performance that determined whether a bonus would be paid, not the title of the position. Mr Winterburn said that the change in role for Mr Badham meant that he was no longer responsible for the sales performance of stores. He could not therefore expect to be paid a bonus that is based upon store performance. The other two employees who had assumed Mr Badham’s sales performance role had been paid the bonus, however, Mr Badham, like other head office employees, did not have an entitlement. All bonuses were premised on sales performance. Mr Badham said that Mr Bishop did not tell him that the change in duties resulted from unsatisfactory performance by him. He did not believe the change was permanent and considered his focus on stock issues would only continue until those issues were under control. In addition, and importantly, Mr Badham said that Mr Bishop had not told him that the bonus would not be paid as a result of the change in his duties. I accept Mr Winterburn’s evidence that the alteration to Mr Badham’s duties in terms of the removal of the management of sales performance was permanent. Even if this had not been the original intention, in light of the marked improvement in sales performance after the re-allocation of duties, it would be unlikely that the Company would have wanted to change a winning formula. The real question is whether the bonus was part of Mr Badham’s contract of employment, irrespective of the title of his position. The term of the contract of employment regarding the bonus was reflected in the letters -- 1 of 2 -- 30 August, 2002 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 484 of 12 February 1998, 20 July 1998 and the oral agreement made between him and Mr Bishop in or about August 1999 that increased the percentage bonus figure. The evidence is that Mr Badham was not issued with any written document advising of any changes to his remuneration aspects of his conditions of employment. Neither did Mr Bishop advise him orally of any such changes. Although there may have been a mutually agreed change to the duties to be performed by Mr Badham, there was no associated agreement to the change in the remuneration aspects of his package. A party to a contract cannot unilaterally vary a contract. There was no mutual consent to any change and the decision not to pay the bonus from July 2001 was a unilateral change made by the Company and not one consented to by Mr Badham. Mr Badham indicated that he had not accepted the change by raising with Mr Winterburn both in writing and orally the non-payment of the bonus in November 2001. Mr Badham said at that time that Mr Winterburn told him that Mr Bishop would raise the issue with him. When this did not occur, he wrote again two days before his resignation took effect in January 2002. Mr Badham said it was not unusual for bonuses to not be immediately paid but after payment of the bonus had been raised in the September Board of Governance meeting and he had not been paid in October he thought a reasonable period of time had elapsed for him to raise the issue. Although the first document provided to Mr Badham about his remuneration did not include the bonus as part of his total package, it was clear that a bonus would be paid based on store performance. I am of the view that from this letter and subsequent actions of the Company in paying and increasing the bonus that it formed part of his contract of employment. While I am satisfied that Mr Badham accepted changes to his duties to focus on stock control and away from managing store performance, I am not satisfied that along with this he accepted an alteration to his contract of employment that removed an entitlement to a bonus payment. In the minds of Mr Bishop and Mr Winterburn such an outcome might have been implied or been consequential upon such acceptance of a change in duties but there was no express statement to that effect in order for Mr Badham to decide whether such changes in direction and remuneration were acceptable to him. It is not for me to contemplate what the Company might have done had Mr Badham not accepted the changes. His actions in seeking the payment of the bonus indicate that he had not accepted its removal and that he saw it as part of his contract irrespective of the change in duties. Accordingly I consider that the payment of a bonus was part of Mr Badham’s contract of employment. In relation to the “New Bonus Scheme” memorandum recited earlier in this decision, Mr Winterburn said that it had been prepared in consultation with Mr Badham. Given that it was addressed to “Hardy Brothers Associates” it was intended to apply to all employees. Mr Badham disputed this. He said there were two distinct schemes that were in operation at Hardy Brothers: one applied to sales assistants based on achievements of their sales budgets and the other payable to himself and store managers based on net profits. He said that the memorandum had not been prepared in consultation with him. Given that the memo in question referred to an earlier memo, the Commission sought its production in order to resolve the issue of whether the new bonus arrangements had application to Mr Badham. The RAQ, acting for the Company, supplied two memos; one that was sent only to Managers and Assistant Managers and the other that was sent to sales employees. The second memo advised of a new Associate Individual Incentive Scheme that was to operate for May and June 2001 with a view to extending it to the forthcoming financial year. The memo to the Store Managers and Assistant Managers enclosed a copy of the memo to Sales Associates and advised that the amended profit figures applied to their profit incentive system. It advised that the profit incentive arrangement that was set out in the memo replaced any previous agreements. In addition, the memo stated that Mr Bishop was considering extending the program to Store Managers. It is apparent from these memos that the new bonus scheme affected the Sales Associates. The effect on Store Mangers was to the extent of revised profit figures and notification that the new scheme could be extended to them in the future. There is nothing in any of the memoranda to support a conclusion that the bonus scheme that applied to Mr Badham was affected except to the extent that the revised profit figures affected the Store Managers’ bonus and hence the bonus paid to him. The memorandum headed “New Bonus System” that was attached to Mr Winterburn’s statement and which was relied on by the Company to support a contention that the bonus that applied to Mr Badham was separate from his contract of employment, clearly referred to his earlier memo to Sales Associates. Accordingly, the Commission cannot accept with the Company’s contention that this memo affected Mr Badham’s entitlement to a bonus. Specifically, the Commission rejects the Company’s contention that this memo altered Mr Badham’s contract of employment. The Commission has rejected the two arguments advanced by the Company that Mr Badham did not have an entitlement to the payment of the bonus for the period July 2001 to January 2002. The bonus payments remain outstanding and are to be paid. As mentioned at the outset, Mr Badham had some difficulty quantifying the amount of the unpaid bonuses because he was unaware of the method of calculation. In the discovery process two documents were produced that Mr Badham believed could be used to calculate the amount. One of these resulted in an amount of $20,000 being calculated while the other produced a figure of $11,712. The Commission asked Mr Winterburn while giving his evidence what the amount would be in the event Mr Badham was successful in his claim. He replied that the $11,712 figure would be correct. Given this and that Mr Badham said in his evidence that he would be prepared to accept Mr Winterburn’s assessment, I have decided that the amount outstanding in unpaid bonus payments is $11,712. Accordingly, the Commission orders that Hardy Brothers Pty Ltd pay to Graham Badham an amount of $11,712 being for bonuses unpaid for the period 30 June 2001 until 31 January 2002. Such amount is to be paid within 30 days of the release of this decision. Order accordingly. G.K. FISHER, Commissioner. Appearances: Released: 22 August 2002 Mr C. Pollard (Jones Ross) on behalf of the Applicant. Ms L. Vanderstoep for the Retailers’ Association of Queensland Limited, Union of Employers and with her Ms A. Price on behalf of the Respondent. -- 2 of 2 --