WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

PARTIES ZOLTAN FRED FARKAS

APPLICANT

-v-

ABACUS CALCULATORS (WA) PTY LTD

RESPONDENT

CORAM COMMISSIONER S J KENNER

HEARD WEDNESDAY, 25 MAY 2005

DELIVERED FRIDAY, 5 AUGUST 2005

FILE NO. APPL 584 OF 2004

CITATION NO. 2005 WAIRC 02267

Catchwords Termination of employment - Harsh, oppressive and unfair dismissal and denied contractual benefits - Failure by applicant to perform in accordance with obligations under Agreement over a lengthy period - Principles applied - Applicant not harshly, oppressively and unfairly dismissed - Whether applicant underpaid bonus payments - Adjustment of bonus by respondent for applicant's share of stock loss and inadequate performance assessments - Whether adjustments appropriate - Applicant underpaid bonus where adjustment made for stock loss - Application upheld in part - Order issued - Industrial Relations Act 1979 (WA) s 29(1)(b)(i), s 29(1)(b)(ii), s 26(1)(a), s 26(1)(c).

Result Order issued

Representation 

Applicant Mr K Trainer as agent

Respondent Mr D Johnston as agent

Reasons for Decision

1          The present application is one brought pursuant to s 29(1)(b)(i) and (ii) of the Industrial Relations Act 1979 (“the Act”).  The applicant alleges that on or about 7 April 2004 he was harshly, oppressively and unfairly dismissed by the respondent.  Additionally, the applicant claims he has been denied contractual benefits by way of outstanding bonus payments in the sum of $2,600.00

Facts

2          The applicant commenced employment with the respondent as a sales person on or about 13 January 2003.  The respondent is engaged in the industry of the sale of computer products through various retail outlets.  The applicant initially commenced at the respondent's Osborne Park store but shortly thereafter transferred to the Morley store.  The applicant also spent a period of time at the respondent's larger store in Cannington from in or about December 2003 to about February 2004, although there was some conjecture on the evidence about the precise period at that particular store.

3          As a sales representative, the applicant was offered and he accepted a contract of employment which included a bonus system.  The obligations and benefits of such a system were set out in a document entitled “Sales Rep's Assessment” (“the Agreement”) which set out in some detail, the performance requirements of sales representatives employed by the respondent participating in this arrangement.  A copy of this Sales Rep's Assessment, signed by the applicant was tendered as exhibit A1.  The terms of this document are important for the purposes of both limbs of the applicant's claim.  The bonus system was not simply based upon financial performance, but also upon overall work performance in a number of detailed criteria set out in the Agreement.  These matters included sales budgets; displays; in store signage; staff presentation; stock  levels; dusting; stock movement; complaints; training sessions; trade nights; product knowledge; staff attitude; telephone manner; telephone sales ability; administration procedures; staff punctuality; stock pricing; store organisation; sales ability; tidiness and organisation; following company directives; stock losses; and misrepresentation. 

4          The essence of this Agreement was that employees were required to meet a minimum gross profit of $13,500 per month beyond which, certain bonus payments would apply.  However, in order to receive bonuses under the Agreement, sales staff were also required to achieve at least a 75 per cent performance evaluation, undertaken monthly against the above criteria specified in the Agreement.  For employees who received a performance evaluation of between 75 per cent and 100 per cent, their bonus calculation would be that percentage of the available bonus depending upon the gross profit achieved in excess of $13,500 per month.  Employees achieving less than the 75 per cent evaluation score would not receive a bonus.  The Agreement further provided that if sales representatives did not achieve the minimum gross profit per month performance required, then following warnings, they may be liable to termination of their employment.

5          The applicant testified that he worked at the Morley store until about January 2004 when he transferred to the Cannington store.  He said that he had one meeting with the respondent's general manager of retail Mr Botwright, in March 2004, when he was counselled about his sales target performance and other matters.  A written record of this was tendered as exhibit A2.  It was the applicant's evidence that these matters related to his period of time at the Morley store.  Exhibit A2 refers to poor sales performance; some carelessness by the applicant in the performance of his duties; failure to perform tasks as directed; attending late for work and a reminder of the applicant's obligations under the Agreement.

6          The applicant said that when he moved to the Cannington store, there was no issue taken with his performance.  At least none that he could recall in evidence.  The applicant testified that whilst at this store, he did achieve some improvement in his sales target performance.  Following a period at the Cannington store, the applicant moved back to the Morley store he thought, at about the end of February or early March 2004.  Mr Botwright was then located at this store and the applicant reported directly to him.  A copy of the applicant's sales performance in terms of gross profit by month was tendered as exhibit A6.  This document shows that in the period from March 2003 up to and including April 2004, the applicant achieved the minimum gross profit of $13,500 per month on only three occasions over that 13 month period. 

7          According to the applicant's testimony, the only discussions he had with Mr Botwright, apart from that leading to exhibit A2, were general discussions about improving his sales performance.  On or about 7 April 2004, the applicant testified he was called into Mr Botwright's office and told by him his employment was being terminated and was given a letter of the same date, tendered as exhibit A4.  A number of matters are referred to in this letter.  As to staff presentation, the applicant said he considered his presentation to be above the standard required and only wore a T-shirt to work on one occasion.  In relation to trade nights, he was not aware of the allegation that he failed to attend a trade night as specified.  In relation to staff attitude, the applicant denied any knowledge of this matter.  There was reference to a complaint made by a customer arising from events on 3 April following the purchase of a faulty cartridge.  The applicant said it was company policy to not give refunds and the customer became agitated and he requested she leave the store.  As to punctuality, the applicant denied he attended work late and testified that he always attended about 30 minutes prior to the store opening and sometimes stayed behind if required.  As to the tidiness of his work area, the applicant denied that he was responsible for this matter.  The applicant did admit however, that on occasions he had made some errors in relation to the invoicing of goods but not significantly so. 

8          The applicant was paid two weeks salary in lieu of notice and left the store that day.  He immediately sought alternative employment and commenced in another position in July 2004.  He testified that he was seeking compensation for his period of unemployment.

9          As to bonuses, the applicant said that by exhibit A6, he achieved his minimum gross monthly sales qualified for bonus payments in August 2003, and in January and February 2004.  As noted above, these were the only three months that the applicant achieved the minimum sales performance figure.  According to the applicant, he did not receive all of his bonus payment for August 2003, because of deductions made against all staff for missing stock and in relation to January and February 2004, because of poor performance evaluations in accordance with the Agreement.

10       As is often the case in matters of this kind, the respondent's evidence as to the applicant's period of employment was in contrast to the applicant's testimony.

11       Mr Dowley was employed by the respondent between April 2003 and October 2004.  He was the store manager at Cannington from January 2004.  Mr Dowley gave evidence about the monthly performance evaluation process and how gross profit and bonuses were calculated.  He testified that the end of month gross profit figures were adjusted for both stock losses and for sales by finance transactions.  In the case of the latter, a ten percent reduction of gross profit figures was made to allow for finance deals.  In the case of rentals, there was an increase in the gross profit figure plus a bonus retail voucher was given to employees.

12       Mr Dowley gave evidence about two performance evaluations he did for the applicant on 1 February and 2 March 2004, both of which were tendered as exhibit R2.  Both performance evaluations were unsatisfactory in relation to the applicant's performance, save for product knowledge, which was acknowledged to be good.  Additionally, Mr Dowley testified that the applicant was continually late for product training which commenced generally at 8.15am in the store, 30 minutes prior to the store opening time.  This was stressed as an important part of sales training for staff.  I note that this is also referred to in the Agreement.  Furthermore, Mr Dowley testified that he often found the applicant argumentative in his dealings with him and was reluctant to accept constructive criticism. According to Mr Dowley, being the largest store of the respondent, capacity to achieve high sales figures was substantial and the applicant did not achieve anywhere near the sales figures of other sales persons at the Cannington store.  Overall, Mr Dowley was of the view that the applicant really did not wish to sell and that he would not achieve the required results in his store.  Ultimately, he recommended that the applicant be transferred to the Morley store as it was, in Mr Dowley’s view, more suitable for him and would be closer to his home.

13       Mr Botwright has many years sales management experience.  His evidence was that the assessment of sales persons’ performance was not simply based on gross sales but also on all round performance in the various areas set out in the Agreement.  He testified that by agreeing to participate in the bonus remuneration system and signing the Agreement, the applicant committed to its requirements.  Mr Botwright testified in relation to stock takings and stock variances and how the respondent allocated responsibility for stock losses amongst all employees in a particular store, which would then affect the payment of any bonuses for that month.  In the case of Cannington, there was a significant stock loss of some $14,000 which impacted on bonus payments.  There was also some significant stock loss at the Morley store in June and September 2003 which affected the applicant’s bonus payments.  According to Mr Botwright, for the August 2003 period, the applicant was in fact paid a bonus that he was not strictly entitled to, because of an error in calculations for a previous period.

14       When the applicant moved from Cannington to the Morley store, Mr Botwright assumed direct supervision of him.  Mr Botwright performed the applicant's April 2004 performance evaluation tendered as exhibit R7.  His evidence was he was very disappointed with the applicant's review, not just in terms of sales but his overall work performance as set out in the review.  His evidence was the applicant's demeanour had changed and he did not appear to be interested in receiving assistance.  Additionally, Mr Botwright testified that the applicant became disruptive in the store by making derogatory comments about the respondent to other employees.  The evidence of Mr Botwright was that after his meeting with the applicant in March 2004 where the applicant committed to improving all aspects of his performance, none was being demonstrated.  The comments section in exhibit R7 read as follows:

“Zolton after signing an agreement on 25/3/04 where you clearly indicated you would improve your performance in all areas of responsibility I am at my witts (sic) end, yesterday you were sick, but failed to inform anyone of your whereabouts, as I have instructed you on numerous occasions to do so, I feel you have not made the slightest effort to improve on any issues.  Unfortunately I have no alternative but to issue you with this final warning and if an immediate improvement is not seen, your employment with Abacus will be immediately terminated.” 

15       The applicant refused to sign this document.

16       About a week later on 7 April 2004, Mr Botwright testified that no change had been seen in the applicant's performance or attitude and he issued him with the letter as exhibit A4, terminating his employment.

Consideration

Unfair Dismissal Claim

17       Whilst there was some attack on the credibility of Mr Dowley's evidence overall, I am satisfied that all witnesses who testified in this matter did so to the best of their recollection and I found overall their evidence to be credible.  Whilst the applicant could not recall discussing the content of the performance evaluations with Mr Dowley, I am satisfied they were performed consistent with the respondent’s practice. In any event, the content of these performance evaluations were generally consistent with that performed by Mr Botwright in April 2004.

18       The principles to apply in determining whether a dismissal is harsh, oppressive and unfair are well settled.  In matters such as these that the test as to whether a dismissal is harsh, oppressive or unfair is whether the right of the employer to dismiss an employee has been exercised so harshly or oppressively such as to constitute an abuse of that right: Miles v Federated Miscellaneous Workers Union of Australia, Industrial Union of Workers, Western Australian Branch (1985) 65 WAIG 385.

19       Additionally, in assessing a claim such as the present matter, it is not the province of the Commission to assume the role of the manager, but to consider the dismissal objectively and in accordance with the obligations imposed on the Commission pursuant to ss 26(1)(a) and 26(1)(c) of the Act. Moreover, in objectively assessing the circumstances of the case, the practical realities of the workplace need to be considered and a commonsense approach to the application of the statutory provisions should be adopted: Gibson v Bosmac (1995) 60 IR 1.

20       In this matter, it is important to observe that the applicant, by entering into the Agreement, committed to its terms and in particular, the performance obligations specified by the respondent.  In particular, I note the minimum performance obligations in relation to sales budgets in the Agreement. As set out above, the evidence was the applicant did not meet the minimum sales targets for most of his employment with the respondent.  Save for the first few months of training on only three of ten months did the applicant achieve the required minimum gross profit figure.  Despite this, the applicant's employment was not terminated, as it could have been, pursuant to the express terms of the Agreement, to which the applicant committed.  Furthermore, I accept on all of the evidence, that there were serious issues raised by the respondent in relation to important aspects of the applicant's overall performance, not just sales.  I am far from persuaded that the applicant did not have reasonable notice of these issues in particular, given the terms of exhibit A2, which fairly and squarely raised significant matters of performance for the applicant to address.  Whilst the agent for the Applicant sought to attack the conclusions reached by Mr Botwright following the performance review of April 2004, in terms of those matters being known at the time of termination of the applicant's employment, that does not detract from the fact that the applicant had consistently failed to perform in accordance with his obligations under the Agreement over a lengthy period of time.  On one view of the evidence in this matter, it seemed that the respondent had carried the applicant in employment for a lengthy period of time, in circumstances where it could have insisted upon strict performance of the terms of the Agreement and terminated the applicant's employment considerably earlier than it did.  In my opinion, as a matter of equity and good conscience, the applicant cannot now complain that he has been unfairly dealt with in all of these circumstances.

21       I find therefore that the applicant’s dismissal was not harsh, oppressive or unfair.

Bonus Claims

22       In my view, at least in part, the applicant is on stronger ground relation to these claims. 

23       Pursuant to the Agreement, the applicant was entitled to a ten percent bonus for gross sales profits between $13,500 and $18,500.  I am satisfied that these bonuses were an entitlement that the applicant had under his contract of employment with the respondent: Hotcopper v Saab (2001) 81 WAIG 2704.  For the month of August 2003, according to exhibit A6, the applicant achieved a gross sales profit figure of $17,929.  The respondent, in purported reliance upon cl 22 of the Agreement, dealing with loss of stock, adjusted the applicant’s bonus payment by reducing it by his share of the stock loss.  In my opinion, the respondent was not permitted to do this, unless it was established that the applicant was responsible for the stock loss either through his negligence or failure to follow the respondent's established procedures.  The plain language of clause 22 of the Agreement does not permit a simple allocation of loss to all employees, irrespective of the cause of the loss.   Accordingly, I am satisfied that the applicant has been underpaid his bonus for the month of August 2003.  By exhibit A8, the applicant received a bonus payment of $1,278.78.  He should have received a bonus payment of $1,792.90 leaving a shortfall of $514.12.  The applicant has been denied this as a contractual benefit and I find accordingly.

24       As to the applicant’s claims for bonuses for January and February 2004, I am not satisfied the applicant has made out these claims.  Whilst the agent for the applicant sought to attack the assessments undertaken by Mr Dowley of the applicant for these months, as an experienced store manager, the Commission has no basis to go behind those assessments.  I am not satisfied that they were actuated by any malice or improper motive.  Furthermore, as I have noted above, the applicant's performance assessments for January and February 2004, were not inconsistent with the assessment performed by Mr Botwright in April 2004, evidencing a continuing trend of inadequate performance in a number of significant areas.  Consistent with the terms of the Agreement, to which the applicant submitted, he was required to achieve at least 75 per cent of the performance evaluation factors, before being entitled to any bonus payment, regardless of an actual sales performance gross profit figure.  On that basis alone, in my view, the applicant had no entitlement to performance bonuses for the two months claimed and those claims are refused.

25       An order will issue giving effect to the Commission’s finding that the applicant was denied a contractual benefit by way of an under payment of his performance bonuses for August 2003 but otherwise the applicant’s claims will be dismissed.