The proceedings provide an interesting case study for senior managers sitting on either side of the fence. In this edition of BTalk Australia Phil Dobbie talks to John Dawson from Carneys Lawyers, who represented Mr Campbell in court. Was the gamble worth it?
If you have experience of retrenchment disputes add them to the Talkback section at the bottom of this post.
- Today's Transcript
Midway through 2006 Encyclopaedia Britannica told its Australian General Manager, David Campbell that a new vision was needed for the local operation and that included a change in management. David Campbell was given three months pay and asked to move on but he thought he was entitled to more and when they refused, he took them to court. He enlisted John Dawson from Carneys Lawyers to assist with the case which it seems was a smart move because he won at the end of the day. So John what was the basis for this claim?
John Dawson: Well it was a number of bases for the claim, I suppose for the main one was that David Campbell had been astute enough when he had been promoted to the top job at Encyclopaedia Britannica, to ask for a letter confirming that he was entitled to nine months salary if he was made redundant; so what we said when he was terminated by the number of positions being combined that's a redundancy and what we said was that he was entitled to nine months salary.
Dobbie: Now he asked for that nine months did he get a confirmation from Encyclopaedia Britannica that he was entitled to it?
Dawson: Yes he got a signed letter from the person who appointed him as the CEO so when he was terminated and it was done in the usual way where he was told in the morning and walked out in the afternoon or an hour or so later. We really made an application on two grounds -- one that there was a contractual entitlement to the nine months under the letter which had confirmed his redundancy payment, but in the alternative if he wasn't entitled to that then he was entitled to a notice payment which equalled nine months and Justice Berg agreed with us.
Dobbie: Right so what was the argument from the side of Encyclopaedia Britannica? They were presumably saying "Hey look that was a letter, it wasn't a full employment contract".
Dawson: Well it's like EBA [Encyclopaedia Britannica Australia] said on a number of things. First of all they said it wasn't a redundancy and they filed a defence just simply pleading that he wasn't entitled to the nine months redundancy. When they filed their evidence the ground shifted. They suggested that it was a termination on performance grounds and that's how the case was run at the trial.
Dobbie: Even though presumably they were on shaky ground the minute they started doing that because if his job wasn't replaced, it's surely a clear cut case that it's a redundancy.
Dawson: There are different lines of authority. There's older authority which says that for a redundancy to arise the position must be abolished. In this particular case, the position wasn't abolished. The position was maintained. However, what EBA did was to combine two positions in Australia and the sales role that David Campbell had in Asia and China, that was delegated to someone in Chicago. So as far as the later authority, the later case law says where an employer redistributes the functions of a job irrespective of whether that particular job is gone, that constitutes a redundancy.
Dobbie: So what was the basis for saying that this was really a non-performance issue?
Dawson: Well this happens a lot in employment cases where an employer might take a decision to terminate an employee, particularly a senior employee and they do it because they want to change a direction or however it's rationalised, then when it becomes clear that the employee may have some grounds to make a claim, of course, there's some shifting of ground; the thing is reasoned out that it wasn't just a wrongful termination of employment, there were in fact grounds there and I suppose it sounds pejorative, but people dredge out all sorts of things and trot those out as reasons as to why the employee deserved to be sacked. Now without going into the specifics of the Campbell case, judges often take a view that those things that which have trotted out to justify the termination are nothing more than that.
Dobbie: Now this was obviously a very bold move by David Campbell because a lot of people would have just shrugged their shoulders and said well I've lost out on that. I'm not going to be able to compete against a big player like this. What did he stand to lose if he lost?
Dawson: He stood an awful lot to lose and that's one of the great weaknesses of the system where you've got an individual out against a large organisation. I think there's a number of lessons in this for all players. From the employer's side, you really have to put some time and effort into the contract when an employee's taken on, but also as they progress up the ladder there has to be some review of the terms and you've got to be clear about exactly what the terms are. In Encyclopaedia Britannica's case, it seemed apparent during the court case that they weren't actually aware and after the termination had taken place or when it was being considered, there was shock horror at what David Campbell was to receive. I guess the last lesson is when things go sour and an employee is terminated you've got to look at it very closely. You can't get advice on the run, you've got to look at it closely, and if there are grounds, usually you're far better off settling the case because once it runs to court and there's very, very large costs generated, what the unsuccessful party is paying is probably four or five times the amount which it would have taken to settle the case.
Dobbie: Now did the Encyclopaedia Britannica take any steps to try and resolve the issue before it got to court or even during the proceedings?
Dawson: I can't disclose everything that happened, but we tried very hard to settle it. There were negotiations but unfortunately the legal system gives an advantage to first of all large organisations, because if they lose it doesn't have the enormous impact on a large organisation as it does have on an individual.
Dobbie: Now it was a good win for him though? He did win the remaining six months pay out plus all the costs, do you think David was smart? Should others follow in his footsteps or it seems to me he was on pretty dangerous territory from the beginning.
Dawson: I think any intelligent person tries to stay away from court it's not a certain science in my view and obviously I'm on his side. He had a very, very strong case, but not withstanding that, there is a great deal of stress involved in going to court. There's a lot to lose in the courtroom particularly when a party is giving evidence; often they say things which don't come out how they intended and even the most winnable case can be lost on something which is completely unforeseen. So I think the lesson is, and most good solicitors, will try to get a settlement rather than having the matter run through court.
Dobbie: Well it seems a bit of a warning and also an inspiration doesn't it? Thanks very much for your time today.
Dawson: OK thank you.
Dobbie: Next time on BTalk Australia: are we guilty of capital xenophobia?
Kirchner: Well I think the main impact that foreign directing investment has in terms of long-term economic growth actually comes via productivity.
Dobbie: That's Stephen Kirchner from the Centre for Independent Studies. We ask: is Australian business losing out because we're restricting access to foreign direct investment? That's next time on BTalk Australia.