[2014] FWC 2011

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Terence Lollback
v
University of Southern Queensland
(U2013/13554)

DEPUTY PRESIDENT GOOLEY

MELBOURNE, 2 APRIL 2014

Application for relief from unfair dismissal.

[1] Mr Terence Lollback was demoted by the University of Southern Queensland (USQ) on 23 August 2013. Mr Lollback claimed that the decision to demote him was a termination of his employment and that he had been unfairly dismissed. Mr Lollback did not accept the demotion and took sick leave and annual leave and is currently on leave without pay.

[2] USQ raised a jurisdictional objection to Mr Lollback’s unfair dismissal application. It contended that Mr Lollback had not been dismissed because The University of Southern Queensland Enterprise Agreement 2010-2013 (the Agreement) provided that the Vice Chancellor can take disciplinary action including demoting an employee provided the Vice Chancellor has complied with her obligations under clause 34 and 35 of the Agreement.

[3] On the application of USQ, I determined to hear the jurisdictional objection separately to hearing the merits of the application for an unfair dismissal remedy. At the mention of the matter I directed the parties’ attention to section 194(d) of the Fair Work Act 2009 (the FW Act) and subsequently my associate wrote to the parties asking that, at the hearing, they address the question of whether the term of the Agreement relied upon by USQ to demote Mr Lollback is an unlawful term because it modifies the application of Part 3-2 of the FW Act to the detriment of Mr Lollback.

[4] Section 194(d) of the FW Act provides as follows:

“194 Meaning of unlawful term

A term of an enterprise agreement is an unlawful term if it is:

(d) a term that excludes the application to, or in relation to, a person of a provision of Part 3-2 (which deals with unfair dismissal), or modifies the application of such a provision in a way that is detrimental to, or in relation to, a person;”

[5] Section 253(1)(b) of the FW Act provides that an unlawful term has no effect.

Background

[6] The Vice Chancellor advised Mr Lollback that there were three formal allegations of misconduct/serious misconduct made against him.

[7] In accordance with clause 35 of the Agreement, the allegations were referred to the Misconduct Investigation Committee (MIC).

[8] The role of the MIC is to report to the Vice Chancellor on the facts relating to the alleged misconduct or serious misconduct, including whether any mitigating circumstances are evident. 1

[9] The MIC reported to the Vice Chancellor who made a decision to demote Mr Lollback.

[10] It is not in dispute that the demotion involved a significant reduction in Mr Lollback’s remuneration or duties.

[11] It is also not in dispute that the MIC directed the parties to provide, where available, transcript of all text messages that passed between Mr Lollback and another employee. USQ provided transcript of text messages from Mr Lollback’s work mobile phone. It is not in dispute that both USQ and Mr Lollback had transcript of other text messages from Mr Lollback’s personal mobile phone but neither provided the transcript to the MIC.

Legislative Framework

[12] The FW Act provides at section 386(1) that an employee has been dismissed if:

“(a) the person’s employment with his or her employer has been terminated on the employer’s initiative; or

(b) the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.”

[13] The FW Act further provides section 386(2)(c)that an employee has not been dismissed if:

“(c) the person was demoted in employment but:

(i) the demotion does not involve a significant reduction in his or her remuneration or duties; and

(ii) he or she remains employed with the employer that effected the demotion.”

The Agreement

[14] The Agreement provides that if the Vice Chancellor considers that allegations involving misconduct or serious misconduct warrant further investigation, the Vice Chancellor must notify the employee in writing and provide the employee with an opportunity to provide a written response. Unless the Vice Chancellor decides that there is no misconduct or serious misconduct or decides to take no further action or counsel or censure the employee for unsatisfactory behaviour and take no other action, the Vice Chancellor must refer the matter to the MIC.

[15] The MIC must relevantly:

(1) provide an opportunity for the employee to be interviewed and ensure that the employee has an adequate opportunity to answer the allegations of misconduct or serious misconduct. The MIC may consider any further materials it believes appropriate to substantiate or otherwise the facts in dispute, and interview any other individual it sees fit to establish the merits or facts of the particular case;

(2) ensure that the employee or their representative has the right to ask questions of interviewees, to make submissions and to present and challenge evidence.

[16] Upon receipt of the MIC’s report, the Vice Chancellor may take disciplinary action which includes demotion.

USQ’s submissions

[17] USQ’s primary submission was that Mr Lollback was not dismissed because the demotion was authorised by the Agreement. Further, USQ submitted that the procedures set out in the Agreement were followed.

[18] To support this submission USQ referred to the decision of the Full Bench of the Australian Industrial Relations Commission in Elizabeth Gorczyca v RMIT University 2 in which it was concluded that:

“The respondent argues there has not been a termination because the certified agreement permits the demotion without regard to the income loss and provides in effect that it is not a termination. We think that the latter proposition is correct. There has not been a termination because the certified agreement operates to preclude there being one in the circumstances of this case. Put another way we think, at law there has been no termination and if there has been no termination we do not see, notwithstanding the provisions of s.170CD(1B) that there has been a termination for purposes of the Act.” 3

[19] The Full Bench concluded as follows:

“It was not suggested by the respondent that the Commission’s jurisdiction under s.170CE was excluded by the certified agreement. Rather it was suggested that there is no termination of employment which would be sufficient to attract the jurisdiction. We agree with this submission. We do not think that paragraph 1(b) of Schedule 2 of the certified agreement operates to afford jurisdiction where there has not been (as we think there has not) a termination of employment at the initiative of the employer.” 4

[20] In Charlton v Eastern Australian Airlines Pty Limited 5 a Full Bench considered when the termination of employment occurs and held as follows:

“[32] Consistent with the decision in Boo Hwa Chan, a termination of employment occurs when a contract of employment is terminated. This necessarily occurs when the employment relationship comes to an end. However, it can also occur even though the employment relationship continues. Where a contract of employment has been terminated, but the employment relationship continues, this will be because a new contract of employment has come into existence. Therefore, whether the appellant’s demotion involved his employment being “terminated by the employer” within the meaning of s.170CE turns on whether his contract of employment was terminated notwithstanding the continuing employment relationship. This question is answered by reference to general law principles relating to the termination of contracts of employment, unconstrained by the Convention.

[33] The question of when a demotion constitutes a termination of employment within general law principles relating to termination of contracts of employment, unconstrained by the Convention, was given careful consideration by the Full Court of the Supreme Court of South Australia in Advertiser Newspapers Pty Ltd v IRC & Grivell. We respectfully adopt that analysis. Although the decision related to a different statutory context, that context required a consideration of general law principles that are equally applicable in the present case.

[34] Unless the contract of employment or an applicable award or certified/workplace agreement authorises an employer to demote an employee, a demotion, not agreed to by the employee, that involves a significant reduction in remuneration will amount to a repudiation of the contract of employment. If that repudiation is accepted, either expressly or by conduct, then the contract of employment is terminated. If, in such circumstances, the demoted employee then remains in employment with the employer, this occurs pursuant to a new contract of employment in respect of the demoted position. It may be noted that where the employment continues with the employee allegedly acquiescing in a reduction in salary or other terms of employment, difficult questions may arise as to whether the continued employment involves the continuation of the original contract of employment (but with the employer breaching that contract by paying the reduced salary), a consensual variation of the terms of the original contract or the termination of the original contract and a substitution of a new contract of employment. 6”

[21] At the time of these decisions, the Workplace Relations Act 1996 provided at section 170CD(1B) that termination of employment did not include a demotion if:

(a) the demotion does not involve a significant reduction in the remuneration or duties of the demoted employee; and

(b) the demoted employee remains employed with the employer who affected the demotion.

[22] Senior Deputy President Drake in Michelle Holland v Qantas Airways Limited 7 in dealing with a jurisdictional objection to an unfair dismissal application, adopted the approach outlined in Charlton and found “that a demotion arising from the application of clause 14.9 is not a termination of employment at the initiative of the employer or a repudiation of the existing contract of employment.”8

[23] USQ accepted that in these cases there was no question that the relevant provisions of the relevant enterprise agreement had been complied with.

[24] To the extent that Mr Lollback suggests that the Agreement had not been complied with, USQ submitted that the MIC report sets out that the mandated provisions of clause 34 and 35 had been complied with.

[25] Further, it submits that to the extent that Mr Lollback seeks to rely on text messages referred to at clause 2.2 of his application, he had in his possession, at the relevant time, the transcript of these text messages and he did not provide them to the MIC. Further it was submitted that the provision of these text messages would not have made a difference.

[26] It was also submitted that the question of whether the Agreement has been complied with should be pursued in another forum.

[27] USQ submitted that the FW Act does not define the expression “employment ....has been terminated on the employer’s initiative.” 9 It further submits that the FW Act does not define which demotions are terminations, it rather defines which demotions are not.

[28] It is submitted that whether a demotion is a termination by the employer is a question of fact and a demotion which is authorised by an employee’s conditions of employment including a term of an enterprise agreement is not repudiatory. 10

[29] It submitted that the Full Bench in Gorczyca gave consideration to whether the agreement could oust the Commission’s statutory jurisdiction and concluded that it did not. The Full Bench concluded that the Commission did not have jurisdiction because there was no termination.

[30] It was further submitted that the term of the Agreement which permitted the demotion does not alter or modify any provision in Part 3-2 of the FW Act as this part only operates if there has been a termination. As Part 3-2 does not define termination, an enterprise agreement which permits conduct which falls short of termination does not modify Part 3-2.

[31] Further it submitted that there was no legislative intent to invalidate provisions in enterprise agreements which permitted demotion. It was submitted that if such provisions were not lawful they may result in employees being dismissed instead of demoted. It was submitted that such an outcome would disadvantage both employers and employees.

[32] Further, it was submitted that if Parliament had intended that every demotion that involved a significant reduction in remuneration and duties was a termination at the initiative of the employer, it would have said so. It was submitted that the authorities which established that demotions authorised by enterprise agreements did not amount to a termination were well know when s194(d) was drafted and if it had been intended to override those authorities, Parliament would have done so in clear terms.

[33] USQ distinguished Timothy Visscher v the Honourable President Justice Giudice & Ors 11. In Visscher, Mr Visscher was demoted by his employer. He did not accept the demotion and it was held by the High Court that his employment had been terminated because section 170CD(1B) by implication treated a demotion as a termination of employment where it involved a significant reduction in the remuneration of duties of the employee.12 The High Court, it was submitted, did not accept the employer’s submission that the enterprise agreement authorised the demotion.

Lollback’s submissions

[34] Mr Lollback submitted that it can be implied by virtue of section 386(2)(c) that a demotion which involves a significant reduction in remuneration or duties of the employee is a dismissal. Mr Lollback relied upon the decision of the High Court in Visscher 13 to support the proposition that such a demotion amounts to a dismissal for the purposes of the FW Act.14

[35] It was Mr Lollback’s submission that the Agreement was not complied with because the transcript of certain text messages was not provided by USQ to the MIC and because the MIC did not call a relevant witness. 15 USQ conceded that the witness referred to by Mr Lollback was not called and that the transcripts were not provided though it submitted that Mr Lollback did not provide the transcript either.

[36] The submissions of Mr Lollback on this point were confused. At the hearing Mr Stephens, Mr Lollback’s counsel submitted that the question of whether failure of the MIC to have the transcript before it meant that the procedures were not followed was a matter for the trial and should not be determined at the jurisdiction hearing. 16 Mr Stephens submitted that the question of non compliance with the procedure is not a question of jurisdiction and they had not had the opportunity to put that argument. He submitted that this was a jurisdiction hearing and not one in which findings of fact could be made that there had been compliance with the Agreement.17

[37] At the hearing I advised Mr Stephens that the matter to be determined at the jurisdictional hearing was whether the objection raised by USQ should be upheld. 18 Central to the case put by Mr Lollback was that the authorities relied upon by the USQ were distinguishable because USQ had not complied with the Agreement.19 Mr Lollback had addressed this in the submissions he had filed prior to the hearing and Mr Stephens advised that he relied upon these submissions.20

[38] Mr Stephens submitted that if a term of the Agreement operated to deny Mr Lollback a remedy under the FW Act then it is an unlawful term. 21

[39] While Mr Lollback’s statement was not tendered at the hearing because the facts, for the purpose of this hearing, were not in dispute, in response to the submissions of USQ that neither party had put the transcript before the MIC, Mr Stephens submitted that Mr Lollback had attempted to do so and had been denied. Mr Stephens relied upon the statement of Mr Lollback to support this contention.

[40] This contention is not supported by Mr Lollback’s statement as it was his complaint in that statement that the MIC did not have this material before it, not that he had attempted to put the material before it and had been denied. 22 He further sought to raise this with the Vice Chancellor before she made her decision.23

[41] Mr Stephens referred to paragraph [34] of Mr Lollback’s statement to suggest that Mr Lollback had tendered the document. However Mr Stephens mischaracterises Mr Lollback’s statement. There is nothing in that statement which suggests that Mr Lollback sought to put the transcript before the MIC and was denied that opportunity. Such a denial would have been significant.

Conclusion

[42] I do not accept the submissions of Mr Lollback that this jurisdictional objection cannot be determined without a hearing of the merits. Mr Lollback knew that the jurisdictional hearing was held to determine if Gorczyca was still good law and if it was, whether it could be distinguished because in this case the Agreement had not been complied with. That did not require any determination of whether Mr Lollback had or had not breached to code of conduct or whether the termination of his employment was harsh, unjust or unreasonable.

Is the term an unlawful term?

[43] I do not find that clause 35.4.1 of the Agreement which authorises the Vice Chancellor to demote an employee is an unlawful term.

[44] I reach this conclusion for these reasons. While the High Court in Visscher accepted that a demotion which results in a significant reduction in wages and conditions is a termination the case did not determine that a demotion authorised by an enterprise agreement or a contract of employment was a termination of employment.

[45] The High Court in Visscher found that there was nothing in the certified agreement before it which suggested its subject matter included the reallocation of the positions of individual officers. 24 Further the grading list in the certified agreement did not “reveal any intention to effect a change to the position of any officer upon the Certified Agreement coming into force.”25 I don’t accept the submission of Mr Lollback that Visscher makes Gorczyca bad law.

[46] Further, while under a different statutory regime, the Full Bench in Gorczyca considered whether a similar clause ousted the jurisdiction of the Commission. 26 The Full Bench found that there had been no termination because “the certified agreement operates to preclude there being one in the circumstances of this case.”27

[47] I also accept the submissions of USQ that there is nothing in the Explanatory Memorandum that suggests that Parliament intended overturning this case law when drafting section 194(d).

[48] I therefore conclude that the term of the Agreement which authorised the demotion of Mr Lollback does not exclude or modify the operation of Part 3-2 in a way that is detrimental to or in relation to Mr Lollback.

Has the enterprise agreement been complied with?

[49] The role of the MIC is to report on the facts relating to the alleged misconduct. The Agreement provides that the MIC “may consider any further materials it believes appropriate to substantiate or otherwise the facts in dispute and interview any other individual it sees fit to establish the merits or facts of the particular case.”

[50] The MIC found the existence of a number of facts. The central fact that was disputed by Mr Lollback, was that he had a personal relationship with an employee which should have been disclosed to his supervisor as required by the Code of Conduct.

[51] I do not accept that there is anything in the Agreement which compels the MIC to call particular witnesses. I accept that in some circumstances the failure to call a particular witness would be a denial of procedural fairness. 28 In this case Mr Lollback complained that the MIC did not call the other party to the text messages.

[52] It is clear that the MIC saw its task as determining what “upon a reading of the material any reasonable person could reasonably conclude.”

[53] The MIC was entitled to make its factual findings on the face of the text messages. There was nothing in the Agreement that compelled them to call witnesses. Equally there was nothing to prevent Mr Lollback calling witnesses to support his interpretation of the text messages. The MIC was entitled to make an objective assessment of the text messages. The views of either party, to the text messages, was not determinative of such an assessment.

[54] The MIC made its findings based on the text messages and the evidence of Mr Lollback. Mr Lollback contended that the MIC did not see a text message from the other party in which she stated that she was “really not ready to start any type of relationship at the moment” because the additional text messages were not provided to the MIC. He contends that if the MIC had seen this message it would have concluded that there was no personal relationship. While it was accepted that there was transcript of additional text messages that were not before the MIC, Mr Lollback could have put that transcript before the MIC. The orders issued by the MIC were directed to both Mr Lollback and USQ.

[55] Mr Lollback contended that because of the omission of the transcript the MIC was not able to report on the facts. 29

[56] I do not accept the submission of Mr Lollback that because these text messages were not before the MIC that the USQ did not comply with its obligations under the Agreement.

[57] It is clear that the MIC reached its findings based on the text messages before it. In reaching that conclusion it did not make any factual findings about whether the other employee considered that there was a personal relationship between her and Mr Lollback. It relevantly found whether the other employee “was as emotionally involved is not something that can be assessed as she was not called to give evidence.” It was entitled to make an assessment that the relationship should have been disclosed to Mr Lollback’s supervisor and the views of the recipient of the text messages was not determinative of this assessment.

Conclusion

[58] Given I have found that the term of the Agreement was not an unlawful term, I am bound by the authority in Gorczyca that provided that where the Agreement has been complied with, a demotion authorised by a enterprise agreement is not a termination of employment. In this case I find that the termination was authorised by the Agreement and as the terms of the Agreement have been complied with, Mr Lollback’s application for an unfair dismissal remedy is dismissed.

DEPUTY PRESIDENT

Appearances:

L Stephens for the Applicant.

C Pugsley for the Respondent.

Hearing details:

2014.

Melbourne:

10 February.