Australasian Meat Industry Employees' Union v Castricum Brothers Pty Ltd
[2001] FCA 584
•21 MAY 2001
FEDERAL COURT OF AUSTRALIA
Australasian Meat Industry Employees’ Union v Castricum Brothers Pty Ltd
[2001] FCA 584INDUSTRIAL LAW – termination of employment – seasonal shut down of beef operation prior to permanent closure - whether employees whose employment was terminated at time of seasonal shut down were entitled to redundancy payments – interpretation of redundancy clause in certified agreement – employees terminated prior to decision to close beef operation permanently – employees terminated for reasons other than a decision to close beef operation permanently.
AUSTRALASIAN MEAT INDUSTRY EMPLOYEES' UNION v CASTRICUM BROTHERS PTY LTD
V 501 of 2000
GOLDBERG J
21 MAY 2001
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 501 of 2000
BETWEEN:
AUSTRALASIAN MEAT INDUSTRY EMPLOYEES' UNION
ApplicantAND:
CASTRICUM BROTHERS PTY LTD
RespondentJUDGE:
GOLDBERG J
DATE OF ORDER:
21 MAY 2001
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 501 of 2000
BETWEEN:
AUSTRALASIAN MEAT INDUSTRY EMPLOYEES' UNION
ApplicantAND:
CASTRICUM BROTHERS PTY LTD
Respondent
JUDGE:
GOLDBERG J
DATE:
21 MAY 2001
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
Introduction
The applicant claims that the respondent, which at all times material operated an abattoir in Dandenong, has failed to pay employees, whose employment was terminated on 11 March 1999, redundancy payments to which they were entitled under a certified agreement between the applicant and the respondent. The applicant seeks orders that the respondent pay to the employees the amounts to which they are entitled under the certified agreement and also claims the imposition of penalties, pursuant to s 178(1) of the Workplace Relations Act 1996 (Cth) (“the Act”). The respondent denies that it is obliged to make the redundancy payments claimed by the applicant and contends that upon the proper interpretation of the certified agreement it is not obliged to do so.
Background
On 20 August 1997 the Australian Industrial Relations Commission (“the Commission”) certified the Castricum Brothers Pty Ltd Dandenong and the Australasian Meat Industry Employees’ Union Victorian Meat Processing Agreement No 2 1997 (“the agreement”) pursuant to the provisions of Div 4 of Pt VIB of the Act. Section 2 of the agreement provided for conditions of employment.
Clause 2.1.1 was headed “Regular Daily Employees”. Clause 2.1.2(a) provided:
“All employees other than drivers and the afternoon lamb cutting shift shall be engaged as regular daily employees on either time work or piece‑work.”
Clause 2.1.2(c) provided :
“The engagement of regular daily employees shall continue each day unless informed by the employer as set out in (d) below.”
Clause 2.1.2(d) provided:
“(i)When either the employer or a regular daily employee decides to terminate the employment for reasons other than those described in 2.1.6(e) (Summary Dismissal), the notice shall be given before 9.00 a.m. on the day of the intended termination. When such notice is given the employee shall be expected to complete their normal days work for that day.
(ii)In such cases, all monies due (other than any long service leave payments) shall be available for the employee no later than the end of the actual working day or, at the employee’s option, forwarded to the employee by post on the next working day.
(iii)In the event of the employee failing to give such notification, the employee shall be paid all monies due on the working day following such notification.”
Clause 2.1.7 was headed “Pieceworkers Alternative Employment” and provided:
“In respect to a piecework employee where work is no longer available in an employee’s classification, the employee may be offered alternative employment. The employee will not forfeit any entitlements under this Agreement if the employee declines alternative employment.”
Section 2.8 of the agreement was headed “Redundancy” and provided:
“2.8.1Where the employer decides to close down permanently all or part of an operation or calls for voluntary redundancies this clause shall apply.
2.8.2The employer will consult with the union immediately a decision in sub‑clause 2.8.1 is made:
(i) with respect to the likely effect on employees;
(ii)to ensure continuity of employment for as many employees as possible.
2.8.3In the event that employees are to be terminated as prescribed in sub‑clause 2.8.1 the following payments shall be made:
(i) two weeks payment in lieu of notice;
(ii) two weeks pay for each year of completed service;
(iii)pro rata payment for each completed month of an uncompleted year;
provided that such payments shall not exceed twenty six (26) weeks of ordinary pay and such payments shall be at ordinary rates of pay as defined in Clause 6.3 (Long Service Leave).
2.8.4Employees who receive payments under sub‑clause 2.8.3 shall be considered for employment on the same basis as new employees to the employer.
2.8.5Any dispute with respect to the application of this clause shall be determined in accordance with Clause 8.3 (Settlement of Disputes).”
The respondent carried on both beef and lamb processing operations at its premises. Prior to March 1999, a beef line had been in operation for approximately twelve years and had sustained only one shut down, an eight week seasonal shut down in 1998. During the early part of 1999, the respondent’s beef operation was incurring trading losses caused by difficult trading conditions, shortage of suitable stock and prices higher than its export customers were prepared to pay. The respondent’s margins were very poor.
In February 1999 a paper was prepared for the consideration of the Board of the respondent. It was in the following terms:
“Some key conclusions were reached about the beef business:
1.South East Asian business had disappeared since the economic crisis.
2.Irish beef was setting the price in the Middle East.
3.Prices in Japan had dropped due to strong supply from lower cost high production “US Style” plants in Northern Australia.
4.Our kill numbers had dropped dramatically due to the loss of Coles to a new competitor.
5.The collapse of Ravensworth had reduced production in the boning room.
6.We are not competing effectively with low cost non-union cow plants in Victoria, which have also adopted hot boning systems.
7.Live cattle in Victoria are being depleted by inter-state feedlots and live cattle shipments.
8.Supply of steer cattle was reducing after the drought of 1997/98, poor returns to farmers, heavy cow slaughter and moves to cash cropping. Gippsland supply was particularly down.
9.While our kill had reduced by almost 50%, our costs have not. Our boning room costs of up to 58 cents per kg were uncompetitive and capacity was not sufficient to maintain slaughter at historic levels of 500 to 550 per day.
10.Our Enterprise Agreement did not allow Castricum to compete effectively with non-union and interstate plants, which now are the majority of competition.
Our options are as follows:
1.Continue as present and hope for a drop in beef livestock prices.
2.Cease beef on a seasonal basis, keep lamb as it is, and restart beef after winter. This option would involve a shutdown of at least six months requiring a significant restructure for the period. Additional beef customers for boning products and contract slaughter would need to be developed.
3.Cease beef on a seasonal basis, increase lamp processing, and return to beef after winter with a smaller capacity. Restructure beef manning and process speed in accordance with the current Enterprise Agreement.
4.Cease processing beef permanently and concentrate on lamb only, increasing throughout significantly.
5.Cease beef processing until a new Enterprise Agreement could be formed and operate an expanded lamb operation in the meantime.
6.Close beef on a seasonal basis and reopen, convert the beef operation to a hot boning system, and reopen in October or November.
Options 2, 3, 4 and 5 would require a significant restructure of operating costs. Food Service would need to source its own beef. Rendering would require EPA authorisation to process material from other abattoirs.”
The Board considered the matters raised in the paper at a Board meeting on 11 February 1999 and it was resolved that beef processing should cease should gross margins on beef boning fall below 25¢ a kilogram, or prior to the onset of winter, or prior to 30 June 1999, whichever was the earlier. It was also resolved that the shut down should be on a seasonal basis during which the management:
“will undertake a detailed livestock, cost and market analysis. All non-essential operating costs are to be removed and surplus staff made redundant. Only those costs essential to maintain lamb processing, rendering, food service and skins shall be maintained. Management is to retain only core knowledge of beef processing within production and quality management.”
By 10 March 1999 the gross margin on the beef line had fallen below 25¢ per kilogram. Mr Gary Castricum, the Managing Director of the respondent, reported to a Board meeting on 10 March 1999 that consistently with the decision on 11 February 1999, he had commenced preparation for a seasonal shut down of beef processing. At that Board meeting, it was resolved that:
“Accordingly, beef processing will cease on Thursday March 11th on a seasonal shut down basis.”
On the same day, Mr Castricum arranged for an information release relating to the seasonal beef shut down to be prepared. The information release stated that trading conditions, shortage of suitable stock and an uneven competitive playing field had forced the respondent to commence an early seasonal shut down of its beef operations which would cease on 11 March 1999. The information release set out the reasons for the seasonal shut down and stated:
“We intend to recommence beef operations once the situation eases and market conditions improve, but it is difficult to set a specific date at this time. This situation will be reviewed regularly but we do not expect to recommence beef operations until after winter.”
On 9 March 1999, Mr Castricum had advised Ms Amanda Bryant, the respondent’s Operations Manager, to commence the organisational and administrative work required for a seasonal shut down. Ms Bryant prepared lists of persons whose employment would cease and prepared letters and notices to the employees who would be affected. All the beef line employees to be terminated were regular daily employees within cl 2.1.2 of the agreement.
On 11 March 1999, Ms Bryant advised meetings of the beef boning employees of the seasonal shut down. On the same day, the respondent sent a letter (dated 10 March 1999) regarding the shut down to the kill-floor employees in the beef operation who were on a rostered day off. The letter relevantly stated:
“Due to extremely difficult Trading conditions being experienced in the Beef industry Castricum Brothers has, reluctantly, made the decision to commence a Seasonal shutdown in the beef department.
This shutdown is effective from the close of business on 11 March 1999.
All outstanding entitlements are being paid to you and any outstanding wages will be put into your bank account as normal next week. If you are owed any other adjustments these will be forwarded to you by mail over the next few weeks.
…
The company will contact you some time before the recommencement of the Beef Operation and if you wish to return you will be advised of the date at that stage.
…”On 11 March 1999, the respondent terminated the employment of the employees in the beef operation and provided them with employment separation certificates which indicated that their employment was terminated due to a shortage of work. No employee was paid redundancy payments as provided for in cl 2.8 of the agreement.
On 12 March 1999, the seasonal shut down took effect at the respondent’s premises. Thereafter the respondent made offers of employment in the respondent’s lamb operation to some of the employees who had been involved in the respondent’s beef operation. Between March and October 1999, forty‑six employees who had worked in the respondent’s beef operation prior to 11 March 1999, and whose employment was terminated on 11 March 1999, accepted offers of employment in the respondent’s lamb operation.
Between March and October 1999, Ms Bryant had regular discussions with the applicant’s officials about the re‑opening of the beef operation.
On 30 September 1999, the respondent sent a letter to persons who had been employed as beef boners and labourers and whose employment had been terminated on 11 March 1999, but who had not accepted an offer of employment in the lamb operation. That letter offered those persons re‑employment in the beef operation commencing 12 November 1999. The letter, omitting formal parts, was in the following terms:
“Castricum Brothers is preparing for the reopening of our Beef operation. The beef will operate in future on a seasonal basis and we anticipate on 4 days per week for this coming season.
We need to plan the kill based on the availability of the boning crew and hence are approaching the beef boning employees first.
It is critical that we have all responses in by 8th October 1999 so that we can commence recruitment and plan the supply arrangements for the kill.
If you wish to return to work on 12th November 1999 please return the attached form to arrive at Castricums by the 8th October.
You will be contacted by the 15th October 1999 to advise you of arrangements for your medical etc.
There will be only one intake date this year but if you have any particular problem with the date (12 November 99) please contact the company to discuss your circumstances.”
At the same time, a notice was placed on employee notice boards at the respondent’s premises. The notice was in the following terms:
“Castricum Brothers
Employee Notice
30 September 1999
The company is preparing to reopen its beef operation in November 1999.
The beef operation will remain seasonal as it has become over the past few years and it is planned to operate 4 days per week.
Contact will be made with the former beef employees regarding their return over the next few weeks.
For ex‑beef employees now working on lamb, you can make application to transfer to the beef, but this will only occur once we have recruited and trained a replacement for you. You will loose [sic] your seniority on lamb. You are not under any obligation to return to beef as the company considers you a permanent part of the lamb operation. If for the purposes of training the company requests that you work briefly on the beef operation you will retain seniority in lamb and for all other purposes will be considered as lamb employees.
The exact details of the reopening of beef will be confirmed over the next few weeks.
Decisions regarding the working of any boning operation on afternoon shift have yet to be finalised and will be in part determined by the response from the beef boning team. Normal notice will be given if any shift change is required.”
The letter offering employment in the beef operation was not sent to those former employees who had been offered employment between March and September 1999, but who had indicated that they were not interested in returning to work with the respondent.
On 5 October 1999, Ms Bryant sent a letter to those former employees who had been employed on the beef kill-floor whose employment had been terminated on 11 March 1999, and who had not subsequently accepted employment in the lamb operation, notifying them that the respondent was preparing to re-open the beef operation in November 1999 as a seasonal operation. These persons were asked to complete and return the form attached to the letter if they wished to return to work.
One month prior to 12 November 1999 (the date of the proposed re-opening of the beef operation), the respondent notified the Australian Quarantine Inspection Service of the proposed re-opening.
On 16 October 1999, Ms Bryant arranged for the placing of advertisements in The Age newspaper seeking to recruit boners and slaughter people for permanent positions.
Notwithstanding the letters which the respondent sent to former employees and the newspaper advertisements, the respondent was unable to recruit a sufficient number of boners and slicers to commence boning operations in November 1999 and it was therefore impracticable to attempt to restart the beef operation at that time.
On or about 4 November 1999, Mr Castricum, as managing director of the respondent, decided that the respondent could not reopen the beef operation and that it should be closed indefinitely.
On 5 November 1999, Ms Bryant sent a letter to the employees who had indicated that they wished to return to work on 12 November 1999 advising them that it had been decided to close the beef operation permanently. The letter, omitting formal parts, was in the following terms:
“Castricum Brothers is faced with a significant difficulty with the reopening of the beef operation.
Due to a shortage of employees available to return and a less than adequate response to our efforts to replace former employees with external recruits we are unable to operate Beef boning.
As a consequence of this and the shortage of contract kill to compensate for our inability to bone beef we are unable to operate the kill floor effectively despite a good response from beef kill floor employees.
The decision has therefore been made to close beef operations at Castricum Brothers for the immediate future.
Those employees who have made themselves available for work as of the 12 November 1999 will be entitled to redundancy. As this has been a late decision we have not been able to prepare the calculations for each individual and will be progressively preparing the cheques on an alphabetical basis.
Cheques will be mailed to you as soon as they are prepared.
We thank you for making yourself available for work and apologise for the difficulties this decision will cause.
Thank you for your service to the company and we wish you well in the future.”
The issue for determination
The issue for determination is that the applicant contended that the employees whose employment was terminated on 11 March 1999, and who were not re-employed in the respondent’s lamb operation, or who did not inform the respondent that they were available to commerce work on 12 November 1999, were entitled to redundancy payments pursuant to cl 2.8 of the agreement as a result of the decision made in November 1999 that the beef operation was to be closed down permanently. The applicant contended that by refusing to pay redundancy payments pursuant to cl 2.8 of the agreement to those employees whose employment was terminated on 11 March 1999, the respondent was in breach of the agreement.
The applicant submitted that the decision made on 11 March 1999 was a decision to close down the beef operation permanently within the meaning of cl 2.8 of the agreement. The applicant submitted, in the alternative, that regardless of the absence of contemporaneity between the terminations of employment and the final decision to close down the beef operation permanently, the beef chain employees, other than those to whom redundancy payments have already been made, were entitled to redundancy payments pursuant to cl 2.8 of the agreement. It was submitted that cl 2.8 should be interpreted as not requiring contemporaneity between the date of the termination of the employment and the date of entitlement to be paid redundancy payments. In short, it was submitted that the character of the decision made on 11 March 1999 altered in November 1999 and that the March decision had an ambulatory effect, so that the persons dismissed in March 1999 were entitled to the benefit of the redundancy provisions in cl 2.8 as a result of the decision in November 1999.
The respondent submitted that cl 2.8.3 of the agreement did not operate retrospectively to confer an entitlement to a redundancy payment upon a person whose employment was terminated:
·prior to the decision to close down permanently all or part of an operation;
·for reasons other than a decision to close down permanently all or part of an operation.
It was submitted that cl 2.8.3 only confers an entitlement upon persons who are employees of the respondent at the time of a permanent close down decision and who are made redundant as a consequence of that decision.
I do not accept the applicant’s submission that the decision made on 10 March 1999 was a decision to close down the beef operation permanently. The Board decision was expressed in terms that the beef operation would cease “on a seasonal shut down basis”. The earlier resolution of 11 February 1999 was also expressed in terms of the shut down being “on a seasonal basis”. As the applicant submitted, the respondent’s characterisation of the shut down is not determinative of the matter. I should determine objectively what the evidence discloses to be the nature of the shut down. It was not contended that the respondent’s characterisation of the shut down was colourable; rather it was said that viewed objectively, the decision was to shut down the beef operation permanently.
I do not consider that the evidence, viewed objectively, warrants that conclusion. The Board paper contained a number of options which included not only ceasing the beef operation on a seasonal basis, but also ceasing processing beef permanently. The decision made was chosen from the range of options and the terms of the Board resolution on 11 February 1999 support the findings that the shut down was not permanent at that time.
The applicant submitted that none of the considerations which the Board took into account (par 5 above) were seasonal in nature. It may well be that the considerations referred to had long-term consequences and effects, but it does not follow that the decision made had to be permanent rather than seasonal or at least less than permanent. The available options made this clear. They included ceasing beef on a seasonal basis, keeping lamb as it was and restarting beef after winter. The applicant’s submission confuses the decision made with the factors or considerations which give rise to a varied range of available options.
The chronology of events to which I have referred demonstrates that at the time the employees’ employment was terminated on 11 March 1999 no decision had been made to close down the beef operation permanently. Whatever be the definition of a “seasonal shutdown”, it does not include a permanent shutdown, and there is no suggestion in the contemporaneous documentation that the shutdown on 11 March 1999 was permanent. The respondent informed the employees whose employment was terminated that the company would contact them about returning to work sometime before the recommencement of the beef operation: see the letter dated 10 March 1999 (par 9 above). The information release prepared by the respondent (par 7 above) also made it clear that, at the time, the respondent had an intention to recommence the beef operation “once the situation eases and market conditions improve”. According to the information release, the recommencement of the beef operation was not expected “until after winter”.
I am satisfied that, objectively considered, the decision made on 10 March 1999 was not to close down the beef operation permanently. Thus, the termination of employment which occurred at that time was for reasons other than a decision to close down permanently the beef operation. It is not suggested that the decision which was made on 11 March 1999 was a sham or a contrivance, or that it was a cover up for a decision to close the beef operation permanently which had been made at that time.
I consider that upon the proper construction of cl 2.8.1 of the agreement, cl 2.8 only applies at the time a decision is made to close down permanently an operation or a part of an operation. It is only the employees who are to be terminated at that time who are entitled to redundancy payments pursuant to cl 2.8 of the agreement. It does not apply to persons whose employment was terminated prior to the time at which the decision was made to close down permanently the operation, and for reasons other than the decision to close down the operation permanently.
The applicant submitted that the decision by Mr Castricum on 4 November 1999 altered the character of the shut down which had been the subject of a decision on 10 March 1999, so that the shut down at all times was properly characterised as a permanent shut down. I do not accept this submission. On its proper construction, cl 2.8.1 requires a temporal relationship or connection between the decision to close down the operation permanently and the employees who are to be terminated as a result of, or by reason of, the decision to close down the operation permanently. There is no warrant in the language used in cl 2.8, or in the policy which lies behind it, for concluding that it can operate retrospectively in relation to employees whose employment was terminated on an earlier occasion for a reason unrelated to a decision to close down the operation permanently.
Further, it is clear from the events which occurred after 10 March 1999 that the intention to recommence the beef operation was carried into effect to the extent that the respondent informed employees on 30 September 1999 that it was preparing to open its beef operation in November 1999, and that contact would be made with former beef employees regarding their return to work over the following few weeks. Letters to the same effect were sent to former beef employees. It cannot therefore be said that the decision made on 4 November 1999 was a component part of the decision made on 10 March 1999.
The applicants sought to place significance on the fact that the employees whose employment was terminated as a result of the decision on 10 March 1999, were paid their relevant entitlement to long service leave. However, they were entitled to receive these payments pursuant to cl 2.1.2(d) of the agreement because, at that time, their employment and their engagement with the respondent was brought to an end. The fact that such payments were made does not bear upon the determination of the issue whether the respondent had decided on 10 March 1999 to close down its beef operation permanently.
The application will be dismissed.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.
Associate:
Dated: 21 May 2001
Counsel for the Applicant: E White Solicitor for the Applicant: Gill Kane & Brophy Counsel for the Respondent: M P McDonald Solicitor for the Respondent: Clayton Utz Date of Hearing: 4 May 2001 Date of Judgment: 21 May 2001
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