Almondco Australia Ltd v Arnol, Kay
[1997] FCA 1023
•2 Oct 1997
FEDERAL COURT OF AUSTRALIA
Industrial Law - unlawful termination - review - redundancy - whether selection based on performance - whether breach of s 170DC of Workplace Relations Act 1996 - whether adequate consultation with employees - whether valid reason for termination - assessment of compensation.
Matter No. SG 66 of 1997
ALMONDCO AUSTRALIA LIMITED v KAY ARNOL, IVY WILSON, JOHN CAULFIELD, GLEN HANSFORD and COLIN SCUTTER
VON DOUSSA J
ADELAIDE
2 OCTOBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
SG 66 of 1997
BETWEEN:
ALMONDCO AUSTRALIA LIMITED
APPLICANTAND:
KAY ARNOL
FIRST RESPONDENTIVY WILSON
SECOND RESPONDENTJOHN CAULFIELD
THIRD RESPONDENTGLEN HANSFORD
FOURTH RESPONDENTCOLIN SCUTTER
FIFTH RESPONDENTJUDGE:
VON DOUSSA J
DATE OF ORDER:
2 OCTOBER 1997
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
The orders of the Judicial Registrar made on 30 July 1997 be set aside.
Within 14 days Almondco Australia Limited pay the following amounts to the applicants:
· Kay Arnol the sum of $3,117
· Ivy Wilson the sum of $1,715
· John Caulfield the sum of $3,417
· Glen Hansford the sum of $2,132
· Colin Scutter the sum of $ 363
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
SG 66 of 1997
BETWEEN:
ALMONDCO AUSTRALIA LIMITED
APPLICANTAND:
KAY ARNOL
FIRST RESPONDENTIVY WILSON
SECOND RESPONDENTJOHN CAULFIELD
THIRD RESPONDENTGLEN HANSFORD
FOURTH RESPONDENTCOLIN SCUTTER
FIFTH RESPONDENT
JUDGE:
VON DOUSSA J
DATE:
2 OCTOBER 1997
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
By a notice of motion filed on 12 August 1997 Almondco Australia Limited (“Almondco”) seeks review under s 377 of the Workplace Relations Act 1996 (“the Act”), of a decision of a Judicial Registrar delivered on 30 July 1997.
The decision determined the separate claims under s 170EA of the Act by five former employees of Almondco who I shall refer to as the applicants. The employment of the each of the applicants had been terminated on 25 September 1996. The applicants gave evidence at the trial before the Judicial Registrar that whilst they were not told why they had been selected for termination, they understood that they were being treated as redundant. The Judicial Registrar held that part of the reason for the termination of the applicants’ employment was their performance or conduct, that being a criterion for their selection as employees who were to be made redundant. As not one of them had been given the opportunity to defend himself or herself against whatever aspect of their alleged performance or conduct formed the basis of the decision to terminate their employment, the Judicial Registrar held that there had been a contravention of s 170DC of the Act.
The Judicial Registrar also held that Almondco did not have a valid reason for the terminations and was therefore in contravention of s 170DE(1) of the Act. It is not clear whether the Judicial Registrar reached this conclusion because the terminations occurred in contravention of s 170DC, or because she considered the terminations had occurred in breach of some (unidentified) clause of an Enterprise Bargaining Agreement entered into between Almondco and the Australian Workers’ Union acting on behalf of Almondco employees, or because there had been inadequate consultation with the employees by Almondco in relation to their pending redundancy.
The case of each applicant had been conducted before the Judicial Registrar on the footing that reinstatement was impracticable. The Judicial Registrar therefore awarded compensation as the appropriate remedy under s 170EE. She said that in assessing the appropriate amount of compensation she had regard to the decision of the Full Court of the Industrial Court of Australia in Kenefick and Others v Australian Submarine Corporation, unreported judgment 8 July 1997. The Judicial Registrar assessed the chance that each applicant would not have been terminated so soon had each applicant been given the opportunity to argue that his or her name should not be on the list of those to be laid off, and had there been proper consultations.
The Judicial Registrar concluded that a fair estimate of the competing chances would be achieved if compensation were assessed by finding that their employment would not have been terminated for another three months following 25 September 1996. From the earnings that would have been received over that three month period, the actual earnings of each applicant were deducted, to arrive at the following awards:
· Kay Arnol $5,064
· Ivy Wilson $3,938
· John Caulfield $5,412
· Glen Hansford $3,378
· Colin Scutter $ 600
On the hearing of the review, counsel for Almondco has contended that the terminations were not in contravention of the Act, and that in any event the awards of compensation are grossly excessive.
Although there is no notice of motion by the applicants seeking a review of the decisions, their counsel has not only sought to uphold the findings of contravention of the Act, but has forcefully argued that the awards of compensation are too low.
This hearing is a review by way of rehearing. In this instance the parties have been content to argue the review on the evidence received by the Judicial Registrar without further supplementation. The Judicial Registrar decided one disputed question of fact on credit to which I refer later in these reasons. I have not seen or heard the witnesses and I do not have the benefit which was enjoyed by the Judicial Registrar of seeing and hearing them. Counsel for Almondco concedes, correctly in my view, that I must be guided by the Judicial Registrar’s conclusion on credit on that point and in relation to that witness. Nevertheless my function is to form my own view of the facts subject only to that consideration about credit.
Almondco from the beginning of 1995 has been engaged in the processing of almonds, mainly for the export market. Its work load is seasonal, the busiest period being the months of March to June in each year.
In June 1996 Mr Rogerson, the operations manager of Almondco, met with Mr O’Neill of the Australian Workers’ Union, and informed him that the company was considering purchasing a sophisticated and expensive automatic sorting machine. If the Board decided to go ahead with the purchase there would be redundancies. At that point, Almondco had not made a definite decision to purchase the machine and Mr O’Neill did not report the meeting to the company’s employees.
On 16 September 1996 the Board of the company made a firm decision to purchase the sorting machine. On 17 September 1996 Mr Rogerson met again with Mr O’Neill. Others were present at the meeting including Almondco’s solicitor. Mr Rogerson informed the meeting that a decision had been made to buy the machine. The expected delivery date would be January 1997. Mr Rogerson said that the current year’s almond crop was also down by some 15 per cent. He explained the seasonal nature of Almondco’s work and said that there was insufficient work for the existing staff for the remainder of the year. He said restructuring of the work force had to occur forthwith to take account both of the downturn in the harvest and the pending arrival of the new machine.
Clauses 18 and 19 of the Enterprise Bargaining Agreement relating to the introduction of change and redundancy are as follows:
“Clause 18 INTRODUCTION OF CHANGE
(a) Where the Company has made a definite decision to introduce major changes in production, programme organisation, structure or technology that are likely to have significant effects on employees, the Company shall notify the employees who may be affected by the proposed changes and the Union.
(b) The Company shall discuss with the employees affected through the site Consultative Committee, the introduction of the changes referred to in sub-clauses (a) the effects the changes are likely to have on employees and shall give prompt consideration to matters raised by the employees and Site Consultative Committee in relation to the changes.
Clause 19 REDUNDANCY
(a) Obligation to consult
(i) Where the Company has made a definite decision that it no longer wishes the job an employee has been doing done by anyone and this is not due to the ordinary and customary turnover of labour and that decision may lead to termination of employment, management shall hold discussions through the Site Consultative Committee and with the Union of the employees directly affected.
(ii) The discussions shall take place as soon as is practicable after the company has made a definite decision which will invoke the provisions of sub-clause (i) hereof and shall cover, inter alia any reasons for the proposed termination, measures to avoid or minimise the terminations and measures to mitigate any adverse effects of any termination of the employees concerned.
(iii) For the purpose of the discussion the Company shall, as soon as practicable provide in writing through the Site Consultative Committee to the employees concerned and the Union all the relevant information about the proposed terminations including the reasons for the proposed termination the number of workers normally employed and the period over which the terminations are likely to be required to be carried out. Provided that the Company shall not be required to disclose confidential information, the disclosure of which would be inimical to the Company’s interests.
(iv) Positions to be made redundant will be sourced voluntarily from the employees employed by the Company, provided that employees who are identified as key personnel, will not be accepted for redundancy. Failing to achieve the required numbers through voluntary redundancy, the Company will then implement the reduction of the workforce based on performance.”
On 18 September 1996 there were consultations with staff. Mr O’Neill in his evidence before the Judicial Registrar made no criticism of the consultation process engaged in by Almondco, but this lack of complaint by the Union official does not mean the Judicial Registrar or this Court must find that no breach of the consultation requirements of clauses 18 and 19 occurred. Whether a breach occurred is to be determined having regard to all the evidence, and in particular as to the evidence as to the level of consultation that took place in the circumstances of this case.
Clause 19(a)(iv) assumed importance in the case.
The disputed question of fact to which I earlier referred concerned what was said by Mr Rogerson to Mr O’Neill on 17 September 1997 about the selection process that would be used in determining which employees were laid off. Mr O’Neill gave evidence that he was told that eight employees would be made redundant. There were two groups, four sorters (out of a total of 12 or 13), from whom volunteers would be sought. If there were insufficient volunteers, then there would be selection based on a performance assessment. Also there would be laid off a cleaner/supervisor, one packer/machine operator, one packer, and one forklift driver. The names of these four people were offered to Mr O’Neill, but he declined to be told the names during the meeting.
Mr Rogerson said that he could not remember the detail of what was said at the meeting, but was sure that he did not say selection would be on a performance assessment as he had received legal advice that selection should be on some other basis such as the selection of positions. The advice was that a criterion based on positions would not attract the complications which selection based on performance was likely to attract: cf Kenefick v Australian Submarine Corporation, unreported decision Industrial Relations Court of Australia (F.C.) 26 March 1996.
Mr O’Neill had notes which he said were contemporaneous ones, which seem to support his version of the discussion. But it was suggested to Mr O’Neill in cross-examination that he had added to these notes on this topic later. The Judicial Registrar preferred the evidence of Mr O’Neill about the conversation.
Another witness, Ms Ivy Wilson also gave evidence about a meeting between Mr Rogerson and employees of the company on 18 September 1996. She said:
“He [Mr Rogerson] advised that there was going to be redundancies from the Sorting Room, that it would not be last-on first-off, that you would be chosen by your performance, your attendances, your supervisor’s reports and that sick days, whatever, will all be taken into accordance[sic].”
That evidence was not the subject of cross-examination. So the evidence shows that on 18 September 1997 this was still Mr Rogerson’s understanding, namely that there was to be selection by performance assessment. This was the day after the meeting with Mr O’Neill at which the solicitor who was said to have given the advice was present.
Clause 19(a)(iv) of the Enterprise Bargaining Agreement specifically required that if the company implemented the reduction in the workforce otherwise than through volunteers the reduction would be based on performance.
Mr Rogerson denied that performance was the basis of selection. He said that reason was avoided because of the legal advice. But the rejection of his evidence means at the least that he was wrong about when the legal advice was received. It is implicit, in my view, from the conclusion reached by the Judicial Registrar that there had been a breach of s 170DC, that she not only rejected Mr Rogerson’s evidence about what was said on 17 September 1996, but that she also rejected his evidence that performance was not a reason in the selection process.
Once that evidence of Mr Rogerson is rejected, the balance of the evidence, as a matter of probability, indicates that performance was a factor that was taken into consideration. On 17 and 18 September it is plainly said that performance would be a selection criterion. The dismissal pays were made up very shortly thereafter, so the selection must have been made at about the time that these statements were made at the meetings. The short time span in which all this occurred makes it probable that performance was in fact a selection criterion. From that conclusion it follows in the circumstances of this case that a breach of s 170DC occurred.
Almondco is in my view on the horns of a dilemma in contending that there was no contravention of the Act. Under the Enterprise Bargaining Agreement the prescribed selection criterion was to be according to performance. A valid reason for dismissal therefore had to be based on that criterion. If performance were the reason for selection the employees provisionally selected for redundancy were entitled to be given the opportunity to respond to the allegations about their performance, pursuant to s 170DC. On the other hand if performance were not the reason for dismissal, then the dismissal was in breach of clause 19(a)(iv) of the Enterprise Bargaining Agreement. In other words there was not a valid reason.
Counsel for Almondco argued that clause 19(a)(iv) did not apply to the four employees who were chosen by position, and whose names were offered to Mr O’Neill on 17 September 1996. He argued that the clause cannot apply where only one person is in a position which will become redundant. In my view this argument must fail. The Enterprise Bargaining Agreement was one entered into specifically in relation to this workplace, and this workforce, and was entered into as recently as March 1996. Clause 19(a)(iv) expressly contemplates that even where a position is to be abolished there will still be a selection process based on performance. The evidence shows that within the workplace multi-skilling and mixed function duties were common. In this situation such a clause is not surprising.
Further, the evidence shows that three of the four persons chosen did not hold unique positions. There were other employees engaged by the company to perform similar tasks. So the notion of selection according to performance is not one impossible to implement.
The fourth member of this group was Mr Caulfield, the cleaner/supervisor. I have already held that clause 19(a)(iv) applies to him, indeed to all the applicants. But even if he fell into a different situation from the others because his position was unique, and if, for that reason, clause 19(a)(iv) did not apply to him, I consider the evidence shows that there was no adequate consultation with him as required by clause 19.
The reason for his redundancy was not, it seems, really due to the new machine or to seasonal factors. Mr Rogerson was asked specifically about Mr Caulfield. He was asked:
“Now, Mr Caulfield was a cleaning supervisor. Why was a cleaning supervisor not required?---I had been instructed by the board in the middle of last year. They were very concerned about the money we were spending on cleaning. The fact that they felt that companies were heading more towards contract cleaning. That this is the way that we should be going. There had been previous discussion about that 12 months prior and it wasn’t followed up and so we looked at the cleaning side of the business. We had one permanent employee there and two casual employees, if you like, one of them being a contractor. That position became redundant because, you know, we want to go. We need to be more flexible in our cleaning operations and that is by having casual labour or contractors come in to do it.”
The need for the type of flexibility proposed in that answer is the very type of situation that should be discussed with the employee whose position is under question to explore ways in which the desired flexibility can be achieved without putting the employee off altogether. That is the very purpose of the clause. Here, there was simply no consultation at all.
For these reasons I conclude that there was no valid reason for the dismissal of the employees at the time when their employment was terminated and I also find that insofar as a selection process based on performance was used, there was a breach of s 170DC of the Act.
In my opinion the approach of the Judicial Registrar to the assessment of compensation was correct. It is necessary to estimate the chance that the employment would have continued beyond 25 September 1996 if the requirements of the Enterprise Bargaining Agreement and the Act had been followed. It is convenient to express that chance in terms of weeks or months as the Judicial Registrar did. In that way compensation can be readily assessed by reference to the earnings which would have been received in that period had the termination not occurred, minus the earnings that were actually received by each applicant.
The Judicial Registrar chose a period of three months. In the course of her reasons she referred to the South Australian Termination Change and Redundancy Case (1987) 54 SAIR 258 at 280. But with respect to the Judicial Registrar that decision seems quite irrelevant as here the applicable Award and Enterprise Bargaining Agreement had different provisions that were, in any event, complied with insofar as notice and payments in lieu thereof were to be made.
I think that in assessing the applicants’ chances of retaining employment in this case, it is important that the substantial reason for the need to put off eight employees was not so much the new machine but the seasonal factors that required redundancies to occur then and there in September 1996.
I think it is also important that performance played a part in the actual selection process. This follows from the findings already made. It seems that the employer had some reason on that score to select those who were made redundant. Perhaps if s 170DC had been complied with dismissal may not have occurred in relation to one or more of the employees, but the fact that performance factors were perceived to apply by the employer in my view increases the possibility of dismissal above a mere mathematical chance assessed by taking, for example, four sorters out of a total of 12 or 13, or eight permanent staff from a total of 31.
In my view the period fixed by the Judicial Registrar was too great. I consider the chances were not so favourable to the applicants. I think a more appropriate period would be eight weeks.
I have in each case multiplied the earnings rate of each applicant at the date of termination by eight and then deducted earnings received in that period. The evidence of earnings is not wholly satisfactory but I have utilised exhibit A6. I have made no allowance for Social Security payments that may have been received in that period by several of the applicants as it is likely that those payments will be repayable insofar as they were paid during the compensation period from 25 September 1996 to 20 November 1996, i.e. the eight week period.
In my view there should be orders for compensation in favour of each of the applicants as follows:
· Kay Arnol $3,117
· Ivy Wilson $1,715
· John Caulfield $3,417
· Glen Hansford $2,132
· Colin Scutter $ 363
The order of the Court will be that the orders of the Judicial Registrar made on 30 July 1997 be set aside, and that in lieu thereof it be ordered that Almondco Australia Limited pay the above amounts to the applicants within 14 days.
I certify that this and the 9 preceding pages are a true copy of the Reasons for Judgment of his Honour Justice von Doussa.
Associate:
Dated:
Counsel for the applicant : Mr J Hankin
Solicitors for the applicant : Thomson Playford
Counsel for the respondents : Mr S Lieschke
Solicitors for the respondents : Messrs Weatherill & Lieschke
Date of hearing : 1 October 1997
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