16 December, 2017
Shire of Denmark v Robert Whooley [2017] WAIRC 01009
By a majority of 2:1, the Full Bench of the WA Industrial Relations Commission has held that failing to comply with section 5.37 of the Local Government Act 1995 (WA) when dismissing a senior local government employee does not render the decision to dismiss invalid.
The Full Bench also affirmed that claims for unpaid superannuation in accordance with Commonwealth legislation, and unpaid accrued annual leave in accordance with the Minimum Conditions of Employment Act 1993 (WA), are not capable of being dealt with by the WA Industrial Relations Commission in the context of applications alleging denial of contractual benefits.
Background
Mr Whooley was employed by the Shire of Denmark on 17 October 2005.
He entered into a three-year fixed term contract on 8 September 2014 as the Director of Infrastructure Services. By virtue of holding that position he was a "senior employee" for the purposes of section 5.37 of the Local Government Act 1995 (WA). That section provides that:
(1) A local government may designate employees or persons belonging to a class of employee to be senior employees.
(2) The CEO is to inform the council of each proposal to employ or dismiss a senior employee, other than a senior employee referred to in section 5.39(1a), and the council may accept or reject the CEO’s recommendation but if the council rejects a recommendation, it is to inform the CEO of the reasons for its doing so.
Mr Whooley's employment was terminated by letter dated 5 June 2015 on grounds of breaches of his employment contract and the Shire's code of conduct. The decision to dismiss was made by the Shire's CEO.
After his dismissal Mr Whooley was elected to be a councillor of the Shire. This was an important event having regard to section 2.26 of the Local Government Act 1995 (WA) which provides that "If a person who is employed by a local government is declared to be elected as a member of the local government’s council then, by operation of this section, the person’s employment with the local government ends when the person begins his or her term of office as a member". On 19 October 2015, Mr Whooley sent an email to the CEO, councillors and councillors elect in which he stated that he considered his dismissal to be unlawful. He went on to say "So there is no ambiguity, or conflict, with legislation relating to being both an employee and Councillor, I hereby reluctantly tender my resignation as Director of Infrastructure for the Shire of Denmark, in accordance with my contract".
In April 2016, Mr Whooley commenced a claim for denial of contractual benefits in the WA Industrial Relations Commission alleging non-compliance with section 5.37(2) in that the CEO did not make a recommendation to council in respect of the termination of Mr Whooley's employment and the council did not approve the termination of Mr Whooley's employment, prior to the dismissal. Mr Whooley's case was that the breach of section 5.37(2) made his termination unlawful. As such he was entitled under his contract to the balance of the remuneration that would have been paid to him from the date of termination until 7 September 2017 when his employment contract would have expired.
Hearing
At the hearing of Mr Whooley's application the Shire accepted the CEO did not comply with section 5.37(2), but argued that it could not have been Parliament's intention that an act done without compliance with section 5.37(2) is invalid.
The Shire submitted it is conceivable that a person might be employed for years despite, due to oversight or poor process, non-compliance with section 5.37(2) and it would be absurd and highly inconvenient if that non-compliance made the person's appointment invalid. The Shire also submitted that it would be absurd if council acceptance of a proposal was required before the CEO could take effective action because the council might, for some reason, neither accept nor reject a proposal leaving the CEO, and the administration of the local government, "in limbo".
The Commissioner at first instance determined that the only sensible construction of the Local Government Act 1995 (WA) is that the ultimate decision making power to employ and dismiss senior employees resides with council. As such the failure to comply with section 5.37(2) meant Mr Whooley's termination was invalid and ineffective.
The Commissioner ordered that Mr Whooley be paid the remuneration he would have earned from the date of his dismissal until his resignation on 19 October 2015. However, the Commissioner declined to order the payment of any accrued annual leave or superannuation for that period. The Commissioner found that any entitlement to accrued annual leave arises under an award or legislation and not under contract. In respect of superannuation, the Commissioner's view was that the WA Industrial Relations Commission does not have jurisdiction to enforce such payments as the obligation to make such payments, and what occurs where there is a failure to do so, arises under Commonwealth superannuation legislation.
Appeals
Both the Shire and Mr Whooley appealed the Commissioner's decision. The Shire's main grounds of appeal was that the Commissioner erred in holding that Mr Whooley's termination was invalid and ineffective because section 5.37(2) of the Local Government Act 1995 (WA) was not complied with. Mr Whooley's grounds of appeal included that the Commissioner erred in finding that the WA Industrial Relations Commission does not have the power to award compensation for accrued annual leave or superannuation.
The appeals were heard together by the Full Bench of the WA Industrial Relations Commission. The Full Bench upheld the Shire's appeal. Mr Whooley's appeal was dismissed.
In a majority decision delivered by the Honourable Acting President Smith, the Full Bench found that the operative effect of section 5.37(2) when employing or dismissing senior employees is simply a directive to the CEO to first submit a recommendation to council for the council to accept or reject, before employing or dismissing a senior employee. The responsibility for employing and dismissing senior employees rests with the CEO and not the council. For that reason, any non-compliance with section 5.37(2) does not deem the employment or termination invalid.
In respect of Mr Whooley's appeal the Full Bench found that any claim for accrued annual leave under the Minimum Conditions of Employment Act 1993 (WA) is not capable of being claimed in an application for denial of contractual benefits. It is a matter for the jurisdiction of the Industrial Magistrates Court.
The Full Bench also noted that Mr Whooley's employment contract provided for the payment of 5% superannuation in addition to the statutory minimum of 9.5%. Accordingly, the 5% could be claimed in a claim for denial of contractual benefits as it was a contractual and not a statutory entitlement. However, the non-payment of statutory superannuation is not within the jurisdiction of the WA Industrial Relations Commission.
Lessons
The decision of the Full Bench does not mean that local government CEOs can ignore section 5.37(2).
CEOs still have an obligation under section 5.37(2) to submit a recommendation to council before employing or dismissing senior employees. A failure to do so may more appropriately be dealt with as a performance issue in respect of the CEO, but it does not render the CEO's decision invalid. That is because the CEO, and not the council, is responsible for the employment and dismissal of senior employees.
The decision also serves as a reminder about what can be claimed within an application to the WA Industrial Relations Commission alleging denial of contractual benefits. Put simply, only benefits arising under a contract can be pursued. Benefits that arise under awards or legislation cannot be enforced. In particular, claims for accrued annual leave under the Minimum Conditions of Employment Act 1993 (WA) and superannuation under Commonwealth legislation do not fall within the jurisdiction of the WA Industrial Relations Commission.
Clyde & Co acted for the Shire of Denmark.
For further information, please contact:
Jonathan Wyatt, Partner, Clyde & Co
jonathan.wyatt@clydeco.com
