Maxworthy and Crossley Real Estate Pty Ltd [2001] NSWIRComm 1009 (19 February 2001)

Last Updated: 9 March 2001

INDUSTRIAL RELATIONS COMMISSION OF NSW

CORAM: PATTERSON C

19 February 2001

MATTER NO IRC 4324 of 1999

IN THE MATTER OF Catherine Anne Maxworthy and Crossley Real Estate Pty Ltd

Application by Catherine Anne Maxworthy re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996

DECISION

This Application for Relief was filed on behalf of Catherine Anne Maxworthy, "Sales Representative", who was dismissed from Crossley Real Estate Pty Ltd following her refusal to accept the Respondent's proposal to vary her contract of employment.

Ms Maxworthy was "happily" employed there for 2½ years.

After being presented with a letter of termination which initially provided for one week's pay in lieu of notice, and refusing an offer of "reinstatement" or "re-employment" (?) a few days later -- on terms which are not so disputed in their expression as in their implication -- Ms Maxworthy's termination was later accompanied by 2 weeks' pay in lieu of notice in accordance with the relevant provisions of the Real Estate Industry (State) Award (1999).

The Facts

Located in Wyong, on the Central Coast region of New South Wales, the Respondent's business had enjoyed a particularly buoyant period in listings and sales during 1997/1998 when, in 1999, the number of sales achieved was not being correspondingly replenished by new listings, or "stock".

Faced with an accelerating decline in potential business during the first half of that year -- sales outputs being unmatched by new listing inputs -- the Respondent's principal, Paul Levick, had expressed his mounting concerns to staff over a number of months.

Having then formed the view that sales staff, by their efforts to date, appeared unresponsive to the emerging priority for new listings Mr Levick decided to introduce a new form of motivation.

During a weekly sales meeting held on 6 July Mr Levick announced his intention to unilaterally vary the employment contracts of all sales staff so as to provide scope for incremental penalty against any sales representative who failed to achieve a requisite number of listings per month. This penalty was intended to apply in the form of a sliding scale debit against commissions on sales otherwise, and previously, earned.

A three-page document was issued to those present:

"TO ALL SALES STAFF

AMENDMENT TO SALES TARGETS AND COMMISSIONS"

-- in providing an opening reference to the previous year's sales and listings history:

"Although in some cases gross commissions fluctuated violently from month to month it appears that over the last 12 months minimum targets have been met and in some cases exceeded. However nobody came even close to producing the required number of listings" (8?) "in accordance to" (a purported previous) "agreement. As a result of this we find ourselves in the middle of 1999 critically short of listings which will have a profound affect on our income during the late winter and early spring months ..."

The "notice" described the situation as having marginally improved since the appointment of two additional staff whose efforts were specifically focused on new listings and then announced:

"As of the 1st August 1999 I am offering each Sales person the option of continuing at the same rate of commission payable ie. 10% of gross commissions etc or accepting a new scale as laid out below ..."

Whatever their individual election:

"Both scales will have conditions that relate to listings ..."

Whatever their previous individual contractual arrangements the new "agreement" would apply:

"irrespective of anniversary dates from the 1st August 1999 ..."

The alternative commission options were tabulated with one, where employment would be provided on a sales "Commission-only" basis, being subject to:

"a 10% discount as per existing agreement covering franchise and administration fees ...".

Whatever their current contractual arrangements, and whatever their future individually chosen option for commissions on sales, the "notice" then deals with listings and prescribed penalties:

"LISTINGS

From the 1st August 1999 it is a requirement of each sales person in return for commissions payable in accordance to the options above, to produce a number of viable listings per month.

MONTHLY TARGET

u 8 exclusive and viable listings to include 2 Auctions

u Minimum expectations 6 exclusive viable listings ..."

Following a section dealing with "vendor contributions" toward "marketing costs" the document effectively concludes with --

"SPECIAL CONDITIONS THAT APPLY

It is a condition of this company paying commissions with either of the options above that each sales person achieve a minimum number of listings required. From the 1st of August 1999 in the event that any sales persons fail to reach the minimum number of listings the commissions payable with either of the above options will be debited from the following months commission by one sixth for every listing that sales person is short for the respective month.

Quarterly Review

The employment of sales persons is subject to the above conditions being met and reviewed quarterly.

All other conditions relating to the split in commissions etc that currently apply shall continue to do so ...".

Irrespective of their current contractual arrangements -- and there appears on the evidence to have been some considerable variance within the sales ranks as stated -- all, or nearly all, of that would be cast aside and unilaterally replaced by this new arrangement, or series of new arrangements, with the expressed hangover of sliding penalties to be applied or offset against actual achievement on one level (sales) by lack of achievement in another (new listings).

From the Respondent's perspective Mr Levick was driven by so serious a concern that his "proposal" to sales staff, represented by any view of the evidence, nothing less than an ultimatum.

The general response from members of the sales staff was, in varying degree, one of disapproval. One sales person was bluntly told, after reminding Mr Levick that his own employment agreement was not approaching renewal, and the listing targets were unreasonable, that it would be nevertheless replaced by the new "agreement" and the matter was "not negotiable".

Ms Maxworthy strongly protested against the imposition of the penalty scale and offered her opinion that "no agency on the (Central) Coast has a financial penalty for unattained (new) listings".

Mr Levick responded that he was "sick of carrying people", accused his sales staff of not wanting to work and, when asked by Ms Maxworthy of the consequences if she personally chose neither contract option, he allegedly retorted:

"There's the door . . . use it!".

When Mr Levick convened a further weekly sales meeting, on 13 July, he asked if "everyone" had signed his new "proposal". Nobody had signed it appears and, after a period of stoney silence, one newly acquired staff member agreed to comply.

Ms Maxworthy states that when she, then, refused to sign Mr Levick said:

"There's one gone . . . who else is leaving?"

Whilst Mr Levick denies offering the "door" to anyone who resisted his proposals, together with the alleged comment/threat above, he does admit to putting his proposal in the strongest of terms.

"I did say at the meeting `... if members of staff are not prepared to commit themselves to the targets that I have set, which are considered by the trade as reasonable, then the Company would need to seriously consider their on-going employment' ".

Whilst some sales staff appear to have progressively and subsequently signed up for the new sliding penalties arrangement the Applicant continued to refuse. After continually rejecting the pressure that Mr Levick allegedly sought to impose upon her Ms Maxworthy was then approached on 16 July by his wife, who is a Co-director of the Company.

Rather more diplomatic than her husband in advancing the new "proposals", Mrs Levick explained that the company did not wish to "lose" the Applicant's services. On Ms Maxworthy's evidence she was told that the penalty arrangements contained no serious implication for her own personal earning capacity or security. Rather, it was introduced as a vehicle for "getting rid of" two other sales persons who were not expected to meet the monthly new listings target. Mrs Levick denies making such a statement.

During this discussion Mr Levick entered the office and joined them in conversation. Shortly after Ms Maxworthy repeated an earlier offer to work on a "commission-only" basis, provided she not be required to contribute towards franchise fees. The conversation ended there with Mr Levick becoming increasingly frustrated and making a statement in words to the following effect:

"No, I offered everybody commission-only and they rejected it. Forget the whole thing. I withdraw my offer. They can all go to buggery. I'll sack the lot of them and close my doors before I will be ganged up on by sales people and they can take me to Court ...".

There seems to have been no further discussion until the afternoon of 21 July, eight days later. Ms Maxworthy had arranged for the morning off so as to take her eleven-year old son, Daniel, to Sydney for an appointment with an artificial eye consultant. Some months earlier, the lad had suffered terrible injuries, including the loss of an eye, the details of which require no discussion here.

Having attended the consultant Ms Maxworthy came away particularly distressed and states that she left there "with the belief that Daniel would never look the same by reason of the horrific injuries suffered by him".

Intending, then, to take Daniel home she called into the office en route "to see if there were any messages" at about 1.30 pm. She then took him home and returned to the agency approximately 30 minutes later.

Shortly after, Paul Levick called her into his office and handed her a letter expressed in the following terms:

"Dear Cathy

You have advised us that you are not prepared to commit yourself to our new employment agreement that takes effect from August 1^st 1999.

Your request for us to give consideration to a commission only proposal has been discussed and subject to you obtaining your license. We are prepared to employ you on the following terms.

Commission only will include holidays (4 weeks) sick leave and other entitlements under the award shall be paid.

40% 1^st 120,000 i.e. $10,000 per month.

45% Thereafter.

All gross commissions are subject to the usual 10% deductions for franchise fees etc.

You will be required to reach your target of $120,000 before the increase shall take effect.

If this is agreeable we can fine-tune such an agreement to commence on you obtaining your license. However, we require your acceptance or rejection of this proposal today."

Mr Levick demanded a positive response "by 5 pm" on that day. Ms Maxworthy then spent some time attempting to calculate her potential net earnings under such an arrangement whilst Mrs Levick approached her at some stage. When Ms Maxworthy announced her need to discuss the matter further Mrs Levick said her husband was busy and suggested she drop around to the Levick home on the following Saturday morning at 9.00 am.

The Applicant did so only to find that the Levick's had visitors at the time. Paul Levick then suggested that he meet her at the office.

During her attempts to fully understand the implications of a 10% contribution towards franchise fees, in the event that they agreed she be employed on a commission-only basis -- and despite his efforts to fully explain -- she asked:

"What if I pay 5% franchise fees?".

The evidence does not seem to be seriously disputed by his response:

"O.K., done. Do not discuss these terms with any of the other staff in the office".

Ms Maxworthy agreed that their discussions would remain confidential. She returned to her own office area and calculated the implications further. After arriving at a conclusion she was then unable to meet with Mr Levick later that day due to his own commitments elsewhere and she then produced a letter which was arranged for his personal assistant to provide to him subsequently.

Her letter was expressed in the following terms:

"Dear Paul

Since our meeting this morning and after much consideration I feel that I was pressured to reach an agreement, which I am not comfortable with.

I needed time to consider how this decision would effect my family and myself financially. It is very hard to answer a flat yes or no without working out figures and based on my last years figures it is not worth the financial risk to me to earn the extra few thousand.

As a commission agent only there is no risk to the company. If I don't sell I simply don't get paid and will leave.

Paul, I am committed to the company and would like to get past all the political garbage that's going on and get back to what I'm here for and start working as a happy team again.

I would hope that you would reconsider this:-

40% Flat

with no franchise fees.

For commission only agents 40% is the standard across the board, Superannuation, workers compensation, 4 weeks annual leave, sick leave.

If not alternatively, I wish to stay on my previous arrangement

My figures from January to July 1999 are as follows . . .

Yours sincerely"

Shortly after, Mrs Levick arrived at the office and asked to meet with the Applicant.

On the evidence, the two engaged in spirited discussion with Mrs Levick suggesting, on behalf of her husband, that the Applicant had withdrawn from an understanding or agreement. Ms Maxworthy complained that, following her own crude calculations -- and without the benefit of complete discussion with Paul Levick who had, by then, become unavailable -- a "commission-only" arrangement was now realised as not "worth the risk ... for an extra couple of grand".

After he left the office Mrs Levick questioned Ms Maxworthy's judgment, suggested her to be adopting a "stubborn" approach, allegedly said that "Paul is not going to back down ... agree to this or the previous proposal or Paul will terminate you ... you are both being stubborn ... you are being silly ...".

In the absence of accommodation Mrs Levick then informed the Applicant that "Paul has instructed me that if you don't agree to either of these options then I am to terminate you".

With no agreement in sight -- the Applicant was then handed a pre-prepared letter of termination by Mrs Levick -- signed by Paul Levick -- which states:

"Dear Cathy

You have stated that you are not prepared to continue your employment under my letter of appointment as amended and to take effect as of 1^st August 1999.

I regret that your proposal of the 22^nd July 1999 is totally unacceptable and as such you give me no alternative but to give you 7 days notice to terminate your employment as of today's date.

The policy of this company is to pay one week's wages in lieu of time and as such I would appreciate you finishing immediately.

Your pay in lieu of notice and all other entitlements will be banked into your account today.

You will be further required to leave your diary and inform us of any unfinished business that you may believe have commission entitlements."

Ms Maxworthy then arranged to collect all of her personal belongings and asked Mrs Levick to remain in her presence as she did so. The Applicant offered Mrs Levick a cup of tea during this process whilst the latter persisted in trying to convince Ms Maxworthy that she was acting unwisely.

When Paul Levick returned to the office shortly after there was a brief discussion and the Applicant then left, after he confirmed the dismissal, and after declining an offer from Mrs Levick that they share a drink.

On the following day Ms Maxworthy received a phone call to her home from Mrs Levick who expressed regret on the outcome of events and suggested she speak again with her husband. Mrs Levick offered to encourage Paul to accept a contract providing for "four (new) listings with a penalty and a $10,000 target".

When the Applicant confirmed her refusal to accept a "listing penalty" Mrs Levick said that she was still going to try to sort things out.

Further approaches from the latter led to a meeting between the two ladies in the Applicant's home where Mrs Levick disclosed that her husband had said:

"You can come back on a $10,000 monthly target plus a monthly listings target of six. Paul has backed down".

Although the Applicant repeated her refusal she was handed a letter which I set out below:

"Dear Cathy

Further to our offer on re-instatement I put to you the sequence of events leading up to your termination.

On the 5^th July 1999, I put to you as well as all other sales staff members a proposal to introduce a number of targets to take effect from 1^st August 1999. In spite of my offer to discuss the proposal personally with each staff member you chose not to take up this offer and instead bluntly and quite rudely refused to sign without discussion.

On the 13^th July 1999, you asked if I would consider employing you on a commission only basis subject to you obtaining your real estate licence which you believed would be forthcoming in the event of your application. You informed me that you had completed the necessary courses.

On the 20^th July 1999, I presented to you a proposal on a commission only basis at which time you requested 24 hours to give it consideration and meeting with me the following day.

On the 22^nd July 1999, you met with me in my office when I answered your questions relating to this proposal, you successfully negotiated a 50% reduction in franchise fees and an agreement was struck.

It was on the afternoon of 22^nd July 1999 that you left a letter on my desk rejecting the agreement that we had already made that morning.

As I had appointments that afternoon I left instructions with my wife to inform you that the deal we had negotiated that morning was very much in her favour and I was happy to accept. I was not prepared to enter into any further negotiations. I informed my wife that if this was not satisfactory I was unable to offer you further employment. You chose not to accept the agreement we had already made and left us with no option but to serve a termination notice on you.

On Friday 23^rd July 1999, my wife offered you re-instatement on your original agreement without change with the exception of the inclusion of a monthly monetary target which you already exceed and therefore should not prove to be a problem, plus a monthly listing target of 6 without penalty. All other members of my staff currently work to these targets and in some cases higher and have done so for a number of years.

My wife informed me that after having given you this offer of re-instatement subject to these targets, you took some hours to consider the offer before you returned her phone call to inform her that you were not prepared to accept the offer.

I now put this offer to you in writing and if your position is unchanged I hereby inform you that the termination handed to you on Thursday 22^nd July 1999 stands."

Mrs Maxworthy states that she did not read the letter at the time and, in any event, strenuously denies certain of the chronology where it is at variance with her own sworn version of events.

CONSIDERATION

Since it is unnecessary, in my opinion, to refer in detail to the variances in evidence as to who said what, and when, it seems sufficiently clear that the Respondent's quest to re-arrange the employment contracts of sales staff was driven by a genuine and serious concern.

And, whatever the continuing viability of the Respondent's business at the time -- and how this may, or may not, have been a reflection of trade fluctuations caused by factors within, or beyond, its own controls -- I am offered little specifics in order to reasonably understand the level of the Respondent's desperation.

For, desperate the Respondent claims to have been.

After all, whatever the enterprise -- if there is no stock there is nothing to sell. There is no business. Consequentially, there are no jobs.

However, Mr Levick's attempts to unilaterally cast aside a series of existing contractual agreements without any apparent regard for their legal validity -- made pursuant to the relevant award and registered accordingly -- were not the actions of an inexperienced real estate operator who has been thrust into blind panic.

I expect, in his long experience, that severe fluctuations in business activity would have been visited upon the Respondent previously. It is understandable that, whatever the state of the economy, and/or the real estate business, budgets or targets would be put in place for sales and new listings -- provided that current contracts are respected and provided that a sliding scale penalty cannot be debited by so-called lack of achievement in one area against demonstrated achievement by commissions actually earned in another.

I can see nothing in the relevant award which authorises an employer to make a deduction, by sliding scale penalty or any other means, from sales commissions already earned.

Further, in the circumstances of this matter, it is difficult to understand how any such "agreement" sought to be imposed on the Applicant could have any binding effect since it was attempted to be imposed under duress.

Worse, the evidence in this matter suggests that the sliding scale penalty would not be applied upon strict compliance with so-called new listing obligations according to contract but according to the Respondent's discretion.

However the Respondent may be reasonably expected to further direct and co-ordinate the efforts of his sales staff according to his exercise of "contractual" discretion remains unclear.

Clearly, his attempts to impose a sliding scale actual debit against sales commissions earned was not only flawed -- but, in my opinion, unnecessary.

In the business operational sense it is his prerogative to determine the boundaries of sales and/or new listings achievement -- realistically or otherwise. And, it is a matter for him to determine whether or not individual staff, or groups of staff, have met his reasonable expectations within the volatile economic climate which prevails.

Sliding class penalties which have been proposed, or sought to be imposed, here have been -- at the very least -- unreasonable.

So, too, has Mr Levick's efforts to extract or force consent from the Applicant in the form of the arrangement proposed/imposed here have been particularly unreasonable.

Mr Levick's "proposals", as represented to the Applicant were stepped up at a time when she was undergoing significant distress associated with the on-going treatment of her son, David. It occurred at a time when the Respondent was fully aware of an accumulation of problems that faced the Applicant at that time, including the death of her own father three months prior to dismissal and, as a single parent, having to move herself and her two children to live with her mother.

Whatever his so-called urgency, Mr Levick's business needs seem to have been pressed without any consideration at all for the Applicant and her apparent confusion as to, for instance, the implications of working on either of the options put forward.

On his evidence, as I understand it, Ms Maxworthy simply reneged on her agreement to enter into a new contract opportunity and one, on her evidence, which -- for someone who has yet to be appropriately licensed -- had no prior experience as a "commission-only" agent.

At the time that he had thrust the new opportunities and obligations upon her the Applicant was, for personal reasons, most vulnerable and confused. By their previous interactive personal contact this, in my opinion, could have been of no surprise to him.

There can be no doubt, on the evidence, that she became self-protective on his persistent presentation of the new contractual arrangements, against an arrangement that -- finally -- she did not fully understand and was not in a position to accept.

Whilst I do not obtain the opinion that Mr Levick sought, in any way, to have consciously exploited her state of mind at the time the evidence suggests that her concerns were disregarded.

CONCLUSION:

In my assessment of the evidence, and the demeanour of the witness I have formed the opinion that the Applicant's dismissal was harsh, unreasonable, and unjust.

In considering an appropriate form of relief I decide to make the following order:

ORDER

1. That the Respondent Crossley Real Estate Pty Ltd pay to the Applicant Catherine Anne Maxworthy the sum of five thousand dollars ($5,000).

2. That this sum shall be paid within twenty one days.

R J PATTERSON

Commissioner