Dickinson v Workscan [2002] QIRC 85 (2002) 170 QGIG 199

14 June, 2002 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 199 ########################################################################################################################### QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 – s. 74 – application for reinstatement Dawn Elaine Dickinson AND Workscan (No. B158 of 2002) COMMISSIONER BLOOMFIELD 31 May 2002 Reinstatement – Dismissal – Termination of employment – Recruitment consultant – Company restructure – Redundancy – Arbitrated matter – Commission found termination was harsh, unjust or unreasonable – 7 weeks’ compensation awarded. DECISION Background Mrs Dawn Dickinson was employed by Workscan, the recruitment arm of Daryl Damerow Consultants Pty Ltd, as a business development consultant in May 2001 after being head-hunted by a specialist recruiting firm. The respondent was, itself, engaged in the business of recruiting and placing staff into a variety of industry sectors most specifically in engineering related industries. Mrs Dickinson’s services were terminated on the day of her return from annual leave on 7 January 2002. She seeks relief in respect of what is argued to be a harsh, unjust or unreasonable termination of her employment. Was the applicant notified of the reason for her dismissal? Mrs Dickinson said that her termination on 7 January 2002 came as a complete surprise and she still did not understand the reasons for it. She said Mr Damerow told her he had engaged an outside management consultant to review the business. On the advice of the consultant he had decided to make changes to the structure of the company. Mrs Dickinson said Mr Damerow showed her a new organisational chart which contained one less position than previously and told her that her position had been made redundant. She said Mr Damerow gave conflicting reasons for her termination. Firstly, he said it was because of financial reasons. Later, he said it was because he did not wish to pursue the type of business Mrs Dickinson had been chasing. On the other hand, Mr Damerow said “all staff were aware and made aware that business conditions were tough and that Workscan was not meeting its targets”. Further, he said he had told all staff on 19 December 2001 that he had injected capital into the business and told some of the staff – including the applicant’s husband but not the applicant herself – on 21 December that the business had made a $28,000 loss in the financial year to date. Mr Damerow also said he addressed all staff on 7 January 2002, prior to meeting with the applicant, re-confirming that the firm had undergone difficult economic trading conditions, that it had made significant losses over recent months, that a capital injection had occurred during December, that a comprehensive review of the business had taken place during the Christmas break and that it was necessary for the business to be restructured. This evidence was specifically rejected by Mr and Mrs Dickinson and by Mr Daugalis, another ex-employee of the firm. Mr Damerow also said he had met with Mrs Dickinson after the staff meeting and explained that because of business conditions and the losses, he needed to restructure the business for financial reasons. He said he explained to her that her role had been selected for redundancy because he could cover Workscan’s role in the engineering and related fields whilst her husband could continue to focus on the architectural sector, as well as assuming some involvement with engineering clients. After considering the evidence of Mr and Mrs Dickinson, Mr Daugalis and Mr Damerow, I have decided to accept the employees’ evidence that Mr Damerow did not make the type of staff announcement recorded above prior to the meeting with Mrs Dickinson on 7 January 2002. I have also decided to substantially accept the evidence of Mr and Mrs Dickinson as to what they were respectively told about the reasons for Mrs Dickinson’s termination. Mrs Dickinson’s version of events is recorded above. Mr Dickinson said that in his one-on-one discussion with Mr Damerow he had been told his wife -- 1 of 4 -- 200 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 14 June , 2002 was being made redundant not because of performance, personal or financial reasons but simply because Mr Damerow no longer wished to pursue the industries that Mrs Dickinson had been servicing. Instead, Mr Damerow wanted to concentrate on the architectural market. Put at its highest level I accept that Mr Damerow told Mrs Dickinson (and her husband) that he had decided to restructure the business by reducing staff numbers. However, I do not accept that Mr Damerow conveyed in any meaningful way, firstly, that the decision was based on financial factors and, secondly, that he (personally) would concentrate on the engineering and related areas and have Mr Dickinson concentrate on the architectural sector. In particular, I accept Mr and Mrs Dickinson’s evidence that Mr Damerow’s explanation was unclear and, at times, contradictory. I experienced the same problem whilst listening to, and attempting to understand, his evidence about the reasons for the restructure (see below). Was the termination based on the operational requirements of the employer’s undertaking? In his witness statement Mr Damerow set out the reasons why he had decided to restructure the business in January 2002. Superficially, the reasons appear fairly logical. Mr Damerow said he had injected $29,000 of personal funds into the business in October 2001 on the basis that he had made losses totalling roughly that amount in the previous three months and because he needed to make BAS payments to the Australian Taxation Office. He had also made a further cash injection of $90,000 on 19 December 2001. This additional capital injection was secured by a second mortgage on his home. Further, Mr Damerow said that he had sought the advice of a business consultant about the state of the business over the Christmas/New Year period. He had been told that the business was top-heavy and it required more operational support at office level. Mr Damerow said that after discussing the whole matter with the business consultant he had decided to terminate one of the business development positions, being Mrs Dickinson’s, and to retain the other role which was to concentrate on the architectural sector. Although Mr Dickinson’s period of employment was shorter, and he was receiving a higher salary than his wife, Mr Damerow felt that Mr Dickinson would be the best person to service the architectural sector. This was mainly because of his wider experience and also because it would involve less disruption in a firm-to-client contact sense. Mr Damerow already had some relationships with many of the firm’s engineering clients and he could establish relationships with those clients of Mrs Dickinson which he did not already know. This would allow Mr Dickinson to continue to service his existing architectural clients undisturbed and to assume some role in servicing the firm’s engineering clients. Other relevant matters Mrs Dickinson gave uncontested evidence that she had stressed to Mr Damerow at the time of her interview for employment that she was seeking a long- term position with a decent base salary and a level of autonomy. Mr Damerow agreed that these were reasonable requests and accepted them. He also made the comment that he, also, wanted her to stay for the long-term. During July 2001 the respondent entered into discussions with the applicant’s husband, Mr John Dickinson, about some role within the organisation. Each of Mr and Mrs Dickinson said the approach was initiated by Mr Damerow and initially involved discussions about Mr Dickinson becoming a business mentor or consultant to Mr Damerow. Mr Damerow claimed the discussions had been initiated by Mr and Mrs Dickinson and that Mr Dickinson approached him for employment. Irrespective of how the discussions began (I am inclined to accept Mr and Mrs Dickinson’s version) they led to Mr Damerow offering Mr Dickinson a position as a business development consultant concentrating in the architectural field. Mrs Dickinson also gave uncontested evidence that at the time that Mr Damerow was speaking to her husband about employment in July they (Mr and Mrs Dickinson) expressed surprise that the business could afford Mr Dickinson’s higher salary. She said Mr Damerow told them that the company was in “more than a sound financial position”. During the month of November Mr Damerow held a performance review with each of Mr and Mrs Dickinson and Mr Daugalis. It was Mrs Dickinson’s uncontested evidence that Mr Damerow told her “there were many exciting times ahead, things were going well and that the date for (her) next review would be in May 2002”. Mr Dickinson gave uncontested evidence that in the lead-up to the Christmas break Mr Damerow asked him about prospects for the new year. Mr Dickinson said he told Mr Damerow there was some exciting times ahead and that Mr Damerow might need to look at his capital because the new prospects could place a strain on his cash flow if they eventuated. Mr Dickinson said that Mr Damerow indicated that he “had this well covered with the bank”. Mr Dickinson also gave uncontested evidence that several weeks prior to this discussion he had been involved in a similar discussion with Mr Damerow. In early December 2001 Mr Damerow and Mr Dickinson spoke about further expanding the workforce to deal with the expected future workload. Mr Damerow authorised Mr Dickinson to advertise for and attempt to locate a suitable additional consultant for the firm. An advertisement was placed and Mr Dickinson interviewed one of the candidates during his Christmas vacation between 21 December 2001 and his return to work on 7 January 2002. Each of Mr and Mrs Dickinson and Mr Daugalis specifically rejected that they had been informed prior to 21 December 2001 that there was any financial, or other, potential difficulties confronting the business. Mr Dickinson and Mr Daugalis said the only indication that they had received that there were any difficulties was when Mr Damerow mentioned to them, on 21 December, that the business made a $28,000 loss for the financial year to date. I accept their evidence. As noted above, Mrs Dickinson only heard of the loss from her husband as she was absent on 21 December. Further, each of Mr and Mrs Dickinson and Mr Daugalis rejected Mr Damerow’s evidence that he had held a staff meeting at around 2.00 p.m. on 7 January 2002 and informed them that the firm had undergone difficult trading conditions, the business was not travelling well, that he had made a cash injection during December, that the firm had made significant losses over recent months, that a comprehensive review of the business had taken place during the Christmas break and it was necessary for the business to be restructured. Their evidence, which I accept unreservedly, was that Mr Damerow simply made a brief announcement that he wished to have individual discussions with staff to talk about their individual assignments and plans for the new year. It is common ground between the parties that Mr Dickinson offered to resign his employment at his meeting with Mr Damerow on 7 January in order that his wife might continue to be employed. Further, it is common ground that Mr and Mrs Dickinson offered to take a reduction in salary or to work reduced hours to assist Mr Damerow to overcome any financial difficulties he was facing. It is also common ground that Mr Damerow agreed to re-think the whole restructuring proposal over the evening of 7 January in light of the offers made by Mr and Mrs Dickinson (immediately above). However, after reviewing the options Mr Damerow decided to stay with his original decision to terminate Mrs Dickinson’s employment. He communicated this to her on the following day. -- 2 of 4 -- 14 June, 2002 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 201 Conclusions After considering the evidence I have come to the conclusion that Mrs Dickinson’s termination on 7 January 2002 was harsh, unjust or unreasonable in all of the circumstances. In arriving at this decision I have had particular regard to the following matters:– • The fact that Mrs Dickinson was “head-hunted” just some seven months previously. • The fact that Mrs Dickinson clearly expressed that she was looking for a long-term future with the business and Mr Damerow agreed that he, also, was looking for a long-term relationship. • The fact that Mr and Mrs Dickinson were assured, at the time of Mr Dickinson’s employment, that the business was financially sound and capable of sustaining his (and other employees) employment. • The fact that there was no warning to any of the employees until 21 December 2001 that the business was in any way in trouble. • The fact that as late as 21 December 2001 Mr Damerow was considering recruiting an additional consultant. • The fact that the decision to restructure seemed to have been taken hastily and, with due respect to Mr Damerow, has still not been satisfactorily explained. This point is reinforced by Mr Damerow’s whole approach to the issue on 7 January 2002. Whilst initially advising the Dickinsons of the direction in which he wished to take the firm, Mr Damerow appeared to be rather uncertain about the whole rationale for his decision (and the direction). This uncertainty was exemplified by his decision (however commendable) to review the whole matter after they made certain suggestions and put certain offers to him. • The fact that Mrs Dickinson was only given four weeks’ pay in lieu of notice. • The fact that the decision did not appear to be soundly based or well founded. Overall, after listening to the evidence of all of the witnesses – especially Mr Damerow – I have concluded that Mr Damerow had no firm idea where he wanted the business to go during the seven months of Mrs Dickinson’s employment and that he was still uncertain about its future direction when he had the discussion with Mrs Dickinson, and later Mr and Mrs Dickinson, on 7 January 2002. Mr Damerow seems to have decided to expand his business during 2001 without a careful analysis of his financial ability to do so. He recruited Mr Dickinson in July/August 2001 after assuring each of Mr and Mrs Dickinson that he could afford to finance Mr Dickinson’s employment when they specifically raised that matter with him. He was even considering expanding the business, by recruiting yet another consultant, when everyone went on Christmas leave on 21 December 2001. Although the reasons for the restructure set out in the witness statement of Mr Damerow appear to be logical, those reasons, particularly the rationale underlying them, did not stand up to scrutiny under cross-examination. Mr Damerow was equivocal and uncertain about why it was necessary to make the decision to effect Mrs Dickinson’s termination. At times he stressed the financial factors. At other times he stressed that it was a problem with structure. With respect to him, the decision did not appear to have been soundly based but appeared, rather, to be the act of a desperate man who felt that he needed to do something to try to steer the ship away from the rocks before it grounded. Prior to 7 January Mr Damerow appeared to have been the captain of a ship without a rudder. He let it drift one way or another based upon what he felt was the right thing to do at the time. I am left with the clear impression that Mr Damerow made the decision to restructure in the few days prior to 7 January 2002 because he genuinely felt that he had to do something drastic if he was going to be able to steer the ship in a new direction and away from the rocks. It appeared that Mr Damerow agreed to a structure proposed by Mr Stouter on a “gut-feel” that it might improve things. As I observed above, it did not appear to be a soundly based or well founded decision in the sense that those words have been used in Selvachandran v Peteron Plastics ([1995] 62 IR 371) and the large body of subsequent cases which have followed the reasoning of Northrop J in that case. Neither Mr Stouter – the business consultant – nor Mr Damerow could satisfactorily explain the structural change and the hard data upon which the decision to terminate Mrs Dickinson was made. There was no reference to any reliable data on such matters as the income generated by each staff member versus the costs of employing them. There was also no reference to any financial assumptions such as income and expense projections, cash flow projections and the like which one would normally expect to see in such a situation. Given the whole history of the matter, Mrs Dickinson’s unexpected termination on 7 January 2002 with just four weeks’ pay in lieu, was harsh, unjust or unreasonable. It was unfair that she had to be the one to suffer the consequences of what were a series of poor business/management decisions by Mr Damerow during 2001. Remedy It is clear that the relationship between Mrs Dickinson and Mr Damerow has broken down to the point where it would be not just impracticable for her to be reinstated, it would be impossible. Accordingly, I am left to consider the only other possible remedy available under the Act, viz compensation. As noted above, Mrs Dickinson stressed that she was looking for a long-term engagement at the time of her employment. Mr Damerow agreed that he, too, was looking for a long-term relationship. It ended just seven months later in the circumstances described above which I have found to have been harsh, unjust or unreasonable. Following her termination Mrs Dickinson registered a new consulting business on 15 January 2002. She said the business had not commenced immediately and took some time to set up. She was not pressed on when it had actually started and how much income might have been generated since it commenced. At the time of the hearing she indicated she was pleased with the way that her new venture was going. -- 3 of 4 -- 202 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 14 June , 2002 In all of the circumstances, I have decided to award Mrs Dickinson a total amount of additional compensation of seven weeks’ wages at her normal wage rate prior to her termination. In assessing such amount I have approached the matter on the basis that reasonable notice, in all of the circumstances, would have been three months (13 weeks). Mrs Dickinson was paid four weeks in lieu of notice and I have discounted the overall amount of 13 weeks slightly – by approximately a further 2 weeks – to take into account Mrs Dickinson’s mitigation of the loss occasioned by her unfair termination. The amount of compensation determined, i.e. seven weeks, is to be taxed according to Australian taxation laws and paid to Mrs Dickinson within twenty- two days of the date of release of this decision. The Commission determines and orders accordingly. A.L. BLOOMFIELD, Commissioner. Appearances:– Mr J. Shepley, of Counsel, for Mrs D. Dickinson the Applicant. Released: 31 May 2002 Mr M. Gavin, of Queensland Chamber of Commerce and Industry Limited, Industrial Organisation of Employers, with Mr N. Damerow for Workscan. -- 4 of 4 --