Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union v Australian Dried Fruit Sales Pty Ltd (t/as Sunbeam Foods)
[1997] FCA 931
•11 SEPTEMBER 1997
FEDERAL COURT OF AUSTRALIA
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - UNLAWFUL TERMINATION - OPERATIONAL REQUIREMENTS -CONDUCT AND PERFORMANCE - OPPORTUNITY TO RESPOND - AWARD - employer and union had agreement that seniority principle apply to seasonal REDUNDANCY - employer purported to change practice to skills - whether an implied term of EMPLOYMENT CONTRACT - parties remained in dispute - matter referred to the AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION - terminations proceeded on basis of skills without resolution of dispute and without consultation with individual employees - whether VALID REASON - REMEDY - REINSTATEMENT.
Workplace Relations Act 1996 (Cth) ss170DC, 170DE, 170EA, 170EE, 170MA
Nettlefold v Kym Smoker Pty Ltd (1996) 69 IR 370
Mahmud v Bank of Credit and Commerce International SA [1997] 3 WLR 95
Byrne v Australian Airlines Ltd. (1995) 131 ALR 422
Re Cram; Ex Parte NSW Colliery Proprietors’ Association Ltd (1987) 163 CLR 117
Woods v W M Car Services (Peterborough) Ltd [1982] ICR 693
Quality Bakers of Australia Ltd v John Goulding (1995) 60 IR 327
Kenefick v Australian Submarine Corporation Pty Ltd (No.2) (1996) 65 IR 366; (No. 3) (unreported, Industrial Relations Court of Australia, Wilcox CJ, 26 July 1996)
Thomas v Lynch (1996) 71 IR 307
Perrin v Des Taylor Pty Ltd (1995) 58 IR 254
Anthony Smith & Associates Pty Ltd v Sinclair (1996) 67 IR 240
AFMEPKIU and MARCON, KELLY, JEANES, MOTT, LEERSON and PASCALE v AUSTRALIAN DRIED FRUITS SALES PTY LTD
(trading as SUNBEAM FOODS)
VI 1042, VI 1043, VI 1044, VI 1045, VI 1046, VI 1047 all of 1997
Before: MURPHY JR
Place: MELBOURNE (Heard in MILDURA)
Date: 11 SEPTEMBER 1997
IN THE FEDERAL COURT GENERAL DISTRIBUTION
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1042 of 1997
BETWEEN:
AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION
and EMILIA MARCON
Applicants
AND
AUSTRALIAN DRIED FRUIT SALES PTY LTD
(trading as SUNBEAM FOODS)
Respondent
BEFORE: MURPHY JR
PLACE: MELBOURNE (Heard in MILDURA)
DATE: 11 SEPTEMBER 1997
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The Court declares the respondent has breached s 170DE(1) of the Act;
The respondent pay to the applicant the sum of $5,957.64.
The respondent may offset against the amount in paragraph 2 hereof any amounts paid to the Australian Taxation Office.
Liberty to apply.
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules
IN THE FEDERAL COURT GENERAL DISTRIBUTION
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1043 of 1997
BETWEEN:
AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION
and JANNETTA JEANES
Applicants
AND
AUSTRALIAN DRIED FRUIT SALES PTY LTD
(trading as SUNBEAM FOODS)
Respondent
BEFORE: MURPHY JR
PLACE: MELBOURNE (Heard in MILDURA)
DATE: 11 SEPTEMBER 1997
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The Court declares the respondent has breached s 170DE(1) of the Act;
The respondent pay to the applicant the sum of $5,957.64.
The respondent may offset against the amount in paragraph 2 hereof any amounts paid to the Australian Taxation Office.
Liberty to apply.
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules
IN THE FEDERAL COURT GENERAL DISTRIBUTION
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1044 of 1997
BETWEEN:
AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION
and ROSS KELLY
Applicants
AND
AUSTRALIAN DRIED FRUIT SALES PTY LTD
(trading as SUNBEAM FOODS)
Respondent
BEFORE: MURPHY JR
PLACE: MELBOURNE (Heard in MILDURA)
DATE: 11 SEPTEMBER 1997
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The Court declares the respondent has breached s 170DE(1) of the Act;
The applicant, within seven days, be reinstated to his former position with the respondent on the same terms and conditions;
The respondent for all purposes is to treat the applicant as continuously employed from the date of termination until the date of reinstatement;
The respondent pay to the applicant the remuneration lost because of the termination after taking into account amounts already paid and the applicant’s earnings.
The respondent may offset against the amount in paragraph 4 hereof any amounts paid to the Australian Taxation Office.
Liberty to apply;
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules
IN THE FEDERAL COURT GENERAL DISTRIBUTION
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1045 of 1997
BETWEEN:
AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION
and ALAN MOTT
Applicants
AND
AUSTRALIAN DRIED FRUIT SALES PTY LTD
(trading as SUNBEAM FOODS)
Respondent
BEFORE: MURPHY JR
PLACE: MELBOURNE (Heard in MILDURA)
DATE: 11 SEPTEMBER 1997
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The Court declares the respondent has breached s 170DE(1) of the Act;
The applicant, within seven days, be reinstated to his former position with the respondent on the same terms and conditions;
The respondent for all purposes is to treat the applicant as continuously employed from the date of termination until the date of reinstatement;
The respondent pay to the applicant the remuneration lost because of the termination after taking into account amounts already paid and the applicant’s earnings.
The respondent may offset against the amount in paragraph 4 hereof any amounts paid to the Australian Taxation Office.
Liberty to apply;
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules
IN THE FEDERAL COURT GENERAL DISTRIBUTION
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1046 of 1997
BETWEEN:
AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION
and BRYAN LEERSON
Applicants
AND
AUSTRALIAN DRIED FRUIT SALES PTY LTD
(trading as SUNBEAM FOODS)
Respondent
BEFORE: MURPHY JR
PLACE: MELBOURNE (Heard in MILDURA)
DATE: 11 SEPTEMBER 1997
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The Court declares the respondent has breached s 170DE(1) of the Act;
The applicant, within seven days, be reinstated to his former position with the respondent on the same terms and conditions;
The respondent for all purposes is to treat the applicant as continuously employed from the date of termination until the date of reinstatement;
The respondent may offset against the amount in paragraph 4 hereof any amounts paid to the Australian Taxation Office.
The respondent pay to the applicant the remuneration lost because of the termination after taking into account amounts already paid and the applicant’s earnings.
Liberty to apply;
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules
IN THE FEDERAL COURT GENERAL DISTRIBUTION
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1047 of 1997
BETWEEN:
AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION
and TONY PASCALE
Applicants
AND
AUSTRALIAN DRIED FRUIT SALES PTY LTD
(trading as SUNBEAM FOODS)
Respondent
BEFORE: MURPHY JR
PLACE: MELBOURNE (Heard in MILDURA)
DATE: 11 SEPTEMBER 1997
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The Court declares the respondent has breached s 170DE(1) of the Act;
The applicant, within seven days, be reinstated to his former position with the respondent on the same terms and conditions;
The respondent for all purposes is to treat the applicant as continuously employed from the date of termination until the date of reinstatement;
The respondent pay to the applicant the remuneration lost because of the termination after taking into account amounts already paid and the applicant’s earnings.
The respondent may offset against the amounts in paragraph 4 hereof any amounts paid to the Australian Taxation Office.
Liberty to apply;
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules
IN THE FEDERAL COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1042
VI 1043
VI 1044
VI 1045
VI 1046
VI 1047
all of 1997
BETWEEN:
AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION
and EMILIA MARCON, ROSS KELLY, JANNETTA JEANES, ALAN MOTT, BRYAN LEERSON and TONY PASCALE
Applicants
AND
AUSTRALIAN DRIED FRUIT SALES PTY LTD
(trading as SUNBEAM FOODS)
Respondent
BEFORE: MURPHY JR
PLACE: MELBOURNE (Heard in MILDURA)
DATE: 11 SEPTEMBER 1997
REASONS FOR DECISION
Introduction.
The six individual applicants (“the applicants”) are members of the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (“the union”). The union brings these proceedings on their behalf under s 170EA of the Workplace Relations Act 1996 (Cth), (formerly the Industrial Relations Act 1988 (Cth)) (“the Act”). The proceedings come before the Federal Court of Australia under the provisions of Schedule 16 of the Workplace Relations and Other Legislation Amendment Act 1996 (Cth).
The proceedings concern the respondent’s 1996 seasonal lay-off. The respondent traditionally used seniority as the criterion to respond to the seasonal downturn in demand for labour. In 1996 it used skills or competencies as the criterion. Using that criterion the applicants were each selected for redundancy. The respondent’s approach was over the opposition of the union. In Court the applicants asserted that the respondent had no valid reason to terminate their employment, and further that the respondent had failed to properly consult each of them. The respondent’s defence was that it had a valid reason to reduce its labour force based on its operational requirements. Further, it had selected the applicants on a defensible basis and the proceedings as a whole were merely an attempt by the union to defend the seniority principle.
Industrial background to the “old chestnut”.
There was much common ground in the proceedings.The respondent is involved in the production and distribution of dried fruit. Its business has traditionally been the subject of seasonal fluctuations. Business is quiet in the first quarter of the year but picks up as the crop is harvested. In October and November there is a downturn as the year’s production is completed and order books closed in the run up to Christmas. The respondent has a core permanent labour force which is supplemented by casual staff as required. From about March and April each year there are additions to the casual staff. In October or November the respondent reduces its staff to a level commensurate with its needs until the following season.
From at least 1979 the seasonal lay-off was governed by the seniority principle, the subject of an unregistered agreement with the union. Employees were retrenched based on a last-on first-off principle, depending on the date of their first employment with the respondent. They were re-engaged on the same basis. Over time employees who had worked as casuals and had been retrenched at the end of each year had moved up the seniority list to become part of the permanent workforce and not subjected to the seasonal lay-off.
Employment conditions at the workplace are governed by the Food Preservers’ Interim Award 1986 (“the Award”) of the Australian Industrial Relations Commission (“AIRC”). From 1990 it contained a variant of the redundancy clause established in the Termination, Change and Redundancy Case (1984) 8 IR 34. The relevant clause provided for a maximum payment of eight weeks wages in the event of a termination of employment due to redundancy. The parties had negotiated a variation that the maximum severance pay was to be nine weeks wages.
In early 1996 the respondent and the union were negotiating an enterprise agreement under the Act and the “old chestnut” of redundancy was on the table. On 25 March 1996 the respondent proposed (Exhibit A1) that the severance payment be increased from a maximum of nine weeks wages (three weeks per year of service) to a maximum of thirty weeks wages (three weeks per year of service for ten years service). The letter went on:
“[t]he current Seniority Agreement remains, however we seek the following alteration to (sic) existing agreement, the reduction from 6 months to 3 months that a redundant employee remains on the Seniority list.”
In April 1996 the general manager of the respondent, Mr Neil White, received informal advice that the seniority principle contravened federal and state equal opportunity laws. Acting on this on 22 April (Exhibit A2) the operations manager, Mr Trevor Bruhn, advised the union and all employees that:
“the Seniority List, which may or may not exist at (the respondent) is hereby terminated. The impact of this decision will be discussed with your union organiser, Sally Biddle.”
The employees responded with the imposition of overtime bans. Under s 99 of the Act the respondent notified the AIRC of an industrial dispute. On 1 May 1996 the dispute was the subject of a recommendation by the AIRC that:
“(1)There is to be a return by both sides to the status quo....which prevailed before notification of this dispute;
(2)Overtime bans are to be lifted and management instructions about changed working hours are to be withdrawn;
(3)The Company and Union representatives are to resume enterprise bargaining discussions and those discussions are to be wide ranging.
....” [emphasis added]
Negotiations to secure an enterprise agreement continued and the question of redundancy was set to one side to be determined later. It was common ground that at no stage subsequently did the respondent resile from its earlier advised position that seniority as a basis of selection for the seasonal lay-off was unlawful. At no time did the union provide any material to the respondent seeking to assert that this position was wrong in law.
An enterprise agreement effects a workplace culture change.
In early May 1996 an enterprise agreement was reached between the parties (“the EA”). It was not certified under s 170MA of the Act until 18 October (Print N5672) but the parties acted on it from May. The agreement provided for major changes in work practices at the respondent. In particular it proposed that the respondent implement the Award provisions relating to multi-skilling, increase productivity, and move to a “teamwork culture” within the workplace. Under the EA employees received a pay rise upon their commitment to its provisions, with two further pay rises to follow. The EA runs until 6 May 1998 and provides that, to the extent of any inconsistency, it is to prevail over any industrial awards (cl 5). Other relevant provisions include:
“7. National Standards
.....The parties agree for the life of this agreement not to reduce existing employment conditions and to continue to abide by the current terms of all relevant awards/agreements. The company will maintain the existing collective bargaining process of negotiation through the unions that are parties to the single bargaining unit.
....
9. No extra claims
......
The parties to this agreement are committed to maintaining secure employment opportunities. If in the future redundancies become necessary, such matters and provisions shall be discussed by management, the appropriate union and the affected employees at that time.” [emphasis added].
Cl 10 is titled ‘Avoidance of Industrial disputes’ and provides “(i)n the event of any dispute arising out of the operation of this agreement” the parties shall observe cl 42A of the Award. That clause is in common form and provides a “settlement of dispute procedure”. The procedure provides for employees to raise matters of concern with their supervisors for resolution. Matters unresolved may be referred up through a hierarchy of the union and management for resolution, and if the matter remains unresolved may be submitted to the AIRC for resolution. Para 42A(f) provides that “(t)he parties shall at all times confer in good faith and without undue delay.”
After reaching the agreement the parties set out to implement it. The respondent retained the services of a Melbourne based workplace change consultant, Mr Mike Hulks, and formed an implementation team to progress the changed workplace culture that was a central feature of the EA. This team consisted of three shop stewards from the workplace and three management representatives. It was led by Mr Bruhn, and sponsored by Mr White. Mr Hulks was the team facilitator. The aim of the team was to prepare appropriate competencies to allow the employees to be allocated to a team-based work environment.
The activities of the implementation team involved many hours work in August and September. The minutes of the meetings were displayed within the workplace. Various aspects of the activities of the team were discussed at monthly sausage sizzles held by the respondent during working hours. A particular task of the team involved the adaptation of a food and vegetable industry competency standards document to the operations of the respondent. This was completed in September (Exhibit R8). When competencies for the various tasks undertaken in the workplace were identified the team then proceeded to undertake an assessment of each of the employees to allow the allocation of those employees to particular work teams. The process was facilitated by Mr Hulks, who outlined to the implementation team how the process was to be undertaken. Each employee was assessed under a number of agreed criteria and awarded a score out of a hundred. The assessment document was headed “training needs analysis form”. It was based on the duties that each of the assessed employees were doing at the time, rather than what they may have done at some time in the past. The employees were ranked and three teams established. These were machine operators, the warehouse, and the afternoon shift. The remaining employees were allocated to a residual general hands team. Employees were given their assessments and invited to approach members of the implementation team to discuss them. In early September a full ranked list of all employees assessed was signed off by the implementation team, including the two union shop stewards then involved, Messrs Gary Walters and Steven Birch.
The looming seasonal lay-off.
As the traditional seasonal downturn approached Mr White became concerned that the question of seasonal redundancies, left unaddressed in the EA, needed to be addressed. On 15 October Mr Bruhn contacted Ms Sally Biddle, an Adelaide based Regional Secretary of the union whose area of responsibility included the respondent. He advised her that the respondent intended to use the competencies that had been developed under the EA as the basis on which to determine its seasonal redundancies. She advised Mr Bruhn that in the event of any terminations the union would lodge “unfair dismissal applications” on behalf of any dismissed employees. Ms Biddle immediately contacted the Victorian office of the union for advice. At that stage responsibility for the respondent within the union was in the process of being transferred to Victoria. Ms Biddle also forwarded to Melbourne for comment a copy of the competency standards that the implementation team had prepared.
On 18 October Mr White informed Mr Tom Ryan, a Melbourne based Regional Secretary of the union, of the respondent’s position when they met at the AIRC on the day the EA was ratified. Mr White’s evidence was that Mr Ryan indicated that the union’s position was that the seniority principle should be utilised, and further that there be no upper limit on the severance payments. Mr White gave unchallenged evidence that on earlier occasions in conversation he had asked the union whether there was any alteration to its position in relation to the seniority principle and had been advised that it was not negotiable.
On 29 October Mr White and Mr Alan Long, a production supervisor who was a member of the implementation team, met with the shop stewards. Ms Biddle and Mr Ryan also attended from Adelaide and Melbourne respectively. At that meeting the question of the seasonal redundancies was discussed. Both sides put their competing positions. The respondent’s position was that seasonal redundancies should be selected on the basis of competencies that had been developed by the EA implementation team, and with some additional managerial input. Approximately fifteen employees would have to be laid off and the respondent was still finalising the list. The union made it clear that any basis other than seniority was unacceptable to it. The union representatives raised some concerns about the competency assessment process. This was that the standards may breach equal opportunity principles because of lack of access to training opportunities. The union also sought to negotiate an improved redundancy package. It sought to at least match the deal that it had achieved in another local enterprise, Mildura Fruit Juices, which was three weeks per year of service to a maximum of sixty weeks. The union sought four weeks pay per year of service with no limit. The respondent repeated its April offer of three weeks pay per year of service to a maximum of thirty weeks. The union also proposed that the respondent should seek volunteers for redundancy.
The parties met again on 30 October when their respective positions were repeated. There was an impasse. The respondent did agree to call for volunteers for redundancy, but reserved its right to retain those individuals whose skills were needed. The union advised the respondent that it intended to notify a dispute to the AIRC, and again stated that if the respondent proceeded with seasonal redundancies with the selection based on competencies, then it would issue “unfair dismissal” proceedings on behalf of those terminated.
The selection of the individual applicants.
While the respondent was negotiating with the union it was making its own arrangements to prepare for the seasonal redundancies. Mr White gave evidence that he felt that it was inappropriate to use only the competencies assessments that had been developed, with the involvement of the shop stewards, by the implementation team. He decided that in order to determine who was to be made redundant there should be some an additional managerial input to the existing competencies assessments. He sought advice from Mr Hulks, who provided him with additional criteria. These were teamwork, self-management, problem solving skills, customer orientation, co-operation, and commitment to corporate goals and objectives. Performance criteria and an evidence guide were also provided. Mr White then arranged for the three supervisors, including one who gave evidence, Mr Long, to be trained by Mr Hulks and then to rate each of the employees on the criteria with a score out of ten. Those scores were then moderated by Mr White and averaged. This average score was then added to the earlier competencies assessment undertaken by the EA implementation team. The competencies assessment undertaken by the EA team was slightly modified in that only those competencies relating to the particular team to which the employees were then assigned were used. The two scores were summed and the result was a ranked list of the forty-five employees in the general hands team. The respondent then concluded that it only needed to retain twenty-eight employees following the seasonal downturn. This process occurred in late October and on 1 November a final list was produced.
A negotiating stalemate.
On 1 November (Exhibit R10) the union notified the AIRC of a dispute “over the Breach of an Enterprise Bargaining Agreement.” It sought a hearing “in view of the seriousness of the matter”. On 4 November (Exhibit R11) the matter was listed for hearing on 20 November before Deputy President Williams. On 4 November, in two letters, Ms Biddle of the union confirmed the position it had put at the meetings. In the first letter (Exhibit A8) it put its position in relation to the severance package. Relevantly, the union rejected the respondent’s thirty week offer and claimed:
“.....
2. Redundancy payment of 4 weeks per year of service or part thereof.
.......7.The redundancies will be sourced voluntarily from the employees employed by the Company, provided that employees who are identified as having key skills will not be accepted for redundancy.
.....”
The letter concluded by offering to further discuss the matter in order to reach agreement.
In the second letter (Exhibit A10) the union referred to the competency standards and stated that it had information that the competency standards should be rejected as they did not meet industry standards. The letter went on:
“As you are aware we also have major concerns that the “competency assessment” will be used for determining workers to be made redundant.”
The union concluded that until it received further advice its “participation in the process is put on hold”.
The two letters must be read together and in the context of the meetings on 29 and 30 October. Mr White said that he saw the second letter as a bargaining ploy by the union to obtain an increased severance payment offer. The union did not propose any alternative selection basis for the seasonal redundancies. In cross-examination Ms Biddle said that she could have gone further in the letters but did not. I accept Mr White’s evidence that in the meetings he invited the union to put alternatives to his proposal to use competencies. No suggestions were forthcoming. Mr White’s evidence was that from the tenor of the meetings and the two letters, the union was seeking to negotiate on the size of the redundancy package and not on the method of selection. It was his view that this was what the union wanted determined by the AIRC.
On 7 November Mr White wrote back (Exhibit R9) reiterating the respondent’s previous offer of a maximum of thirty weeks redundancy pay. The letter concluded:
“As in other years our seasonal redundancies take place around this time, usually within a few weeks. The offer is well in excess of the Award provision and we would hope that we can reach agreement prior to our need to implement. Should this not be the case, we will have no option but to make redundancies consistent with our offer.”
On 12 November Mr White posted a notice to all employees (Exhibit R6). The notice reminded employees that the seasonal redundancies would not be selected on the basis of seniority, but on the basis of “skills that the (respondent) requires to remain competitive”. It sought volunteers but retained the right to refuse a volunteer whose skills it required. It concluded:
“...we would be happy to hear from anyone in the next few days who may be looking for a package and will try to accommodate them within the process.
Please let the Foremen know ASAP if you would like to be included in the list.”
As a result of this request six employees volunteered. One was rejected as his skills were required. The respondent then finalised a list of fourteen employees, including the individual applicants, who were to be retrenched. On Friday 15 November the employees were called in, advised that they didn’t have the skills the respondent required, paid the appropriate notice due under the Award, and any redundancy entitlements, and terminated. They were not asked to work out their periods of notice.
Issues in determining the validity of the respondent’s decision.
From the above narrative what is common ground was that as in previous years, the respondent had an operational requirement around November 1996 to reduce its labour force in line with the seasonal downturn. The manner in which it did this was not, as in the past, the subject of agreement with the union in this “closed shop” workplace. To select the applicants the respondent applied a skills or competencies criterion, rather than seniority. The issues for determining whether the respondent has discharged its onus of proof that it had a valid reason to terminate the employment of the individual applicants are whether the respondent was entitled to proceed to use the competencies criterion when it did, and whether it applied the criterion in a fair manner and in conformity with its obligations to the individual applicants?
The solicitor for the respondent argued that the union was seeking to uphold the seniority principle to maintain its role in the workplace. He argued that this criterion was unlawful and that the respondent was acting reasonably in choosing to determine the redundancies by reference to competencies. This applied particularly when at no stage did the union put forward any alternative basis. He submitted that provided the respondent was prepared to accept the industrial consequences of a move from the seniority principle, it was free to do so.
The representative for the applicants submitted that there had been an agreement between the parties in the past and the respondent was not entitled to unilaterally depart from that agreement. He further submitted that the respondent had breached s 170DC of the Act by failing to give the applicants, on an individual basis, the opportunity to respond to the basis on which they were selected for redundancy.
In the application of the Act, it has been repeatedly stated that its provisions require employers to treat their employees fairly. The employer may arrange to use labour more productively and apply good management. The employer’s actions must however be “consistent with management of the undertaking that meets the employer’s obligations to employees”: Nettlefold v Kym Smoker Pty Ltd (1996) 70 IR 370 at 373. This is an aspect of the mutual duty of good faith and fidelity that is recognised as implied as a matter of law in all contracts of employment: Mahmud v Bank of Credit and Commerce International SA [1997] 3 WLR 95.
The contract of employment and the redundancy selection criterion.
There is a relevant distinction here between the contract of employment of the individual applicants and the rights accorded them under collective industrial agreements. The respondent must comply with both for its decision to terminate to be valid, in the sense of being sound, defensible or well founded.
I am satisfied that prior to May 1996 it was an implied term of the contract of employment of the applicants that the respondent would apply the seniority principle in selecting individuals in that workplace for the seasonal redundancy. This was the custom and practice in the workplace. That custom and practice met the test endorsed in Byrne v Australian Airlines Ltd (1995) 131 ALR 422 at 442 per McHugh and Gummow JJ, that:
“it must be so well known and acquiesced in that persons making a contract in that situation reasonably can be presumed to have imported it into their contract.”
If I am wrong in my conclusion that the seniority principle was implied as a matter of fact, I am satisfied that in the circumstances of the individual contracts of employment it was an aspect of the mutual duty of good faith and fidelity that is implied as a matter of law. It was an aspect of the obligation of the employer to be “good and considerate” to its employees: Woods v W M Car Services (Peterborough) Ltd [1982] ICR 693.
The respondent, for reasons that I am satisfied it genuinely held, determined to resile from the seniority principle. It advised all employees of its position on 22 April 1996. It is not for the Court to pronounce on the legal merits of the advice on which it was acting. The different practice it intended to apply to all its employees does not, however, relieve it of its contractual obligations to the individual applicants. Its position was also arguably inconsistent with its acceptance of the AIRC recommendation and the provisions of cls 7 and 9 of the EA extracted above.
This leads to a different issue which is whether at any stage there was any agreement that a new term governing redundancy be incorporated into the contract between each individual applicant and the respondent. The respondent led no evidence that it ever reached such an agreement. In his memorandum to staff on 12 November 1996 (Exhibit R6) Mr White stated that the respondent was “in dispute” regarding the redundancies. The evidence of the individual applicants that they were shocked when advised that they had been terminated is itself some evidence that no new term had been substituted. The union at no time agreed on behalf of its members to any new arrangement for the selection of individuals for seasonal redundancies. This is not to say that the parties were not seeking to negotiate a new term which covered the situation. They were, but remained in negotiation, in circumstances where the EA recorded the maintenance of the status quo and left redundancy for further discussion.
The collective industrial agreements.
In the absence of any agreement between the respondent and the individual applicants to substitute competencies for seniority, the provisions of the collective agreements binding on the parties become important. The EA specifically provides for discussions with “the affected employees” in the event that future redundancies “become necessary”. Although the wording of the provision in that respect is similar to the wording of cl 8B(a)(i) of the Award, the EA provision must be seen within the context of the prior seniority principle, the May industrial dispute, and the failure of the parties to reach any agreement on selection criteria to replace seniority, or on a maximum redundancy payment.
Here the Award did not provide for any criteria in the event of redundancies. The custom and practice was the seniority principle. The respondent sought to alter this. The union refused to accept the change and the parties remained in conflict on the matter, as well as on the quantum of redundancy pay. At the time the terminations were effected the union had sought, as it was entitled to do under the EA and the Award, to invoke the dispute settling role of the AIRC. The employees, through their union, were seeking the intervention of the industrial umpire to resolve a dispute with their employer. They were doing what the respondent had done in May. While the Act encourages industrial parties to bargain and reach agreements at a workplace level, at the end of the day it remains the role of the AIRC to supervise bargaining, certify agreements, and resolve industrial disputes of this type. A proceeding in the Court is not the way to resolve what should have been resolved in an arbitral framework.
The respondent was on notice that the employees were not accepting the change it proposed. Had the AIRC not been able to resolve the issue then the respondent could defensibly have acted unilaterally. It could not defensibly so act until the AIRC had that opportunity. That is a different question from whether the AIRC, as a matter of discretion, would have made an “award in settlement of a dispute where that award amounts to a substantial interference with the autonomy of management to decide how the business shall be efficiently conducted”: Re Cram; Ex Parte NSW Colliery Proprietors’ Association Ltd (1987) 163 CLR 117 at 137. Given the industrial background here the respondent, by terminating the applicants before the AIRC was seized of the dispute, deprived the union, on behalf of the individual applicants, of the chance in an arbitral forum to reach an agreement on the two issues that divided them. It is not to the point that Mr White believed that the union was only seeking to negotiate on quantum. It never let go the seniority principle. The applicants had significant service. The debate on quantum was very significant and they lost the chance, in a process mediated by the AIRC, to trade off the selection issue with their length of service, or to negotiate an outcome that did not involve the termination of their employment. In acting when it did and in this industrial context, the respondent did not accord the applicants the level of management to which they were entitled.
The role of individual consultation.
In his final submission the representative for the applicants laid particular emphasis on the failure of the respondent to consult with the applicants individually. The solicitor for the respondent submitted that consultation is not an absolute requirement and that here the applicants had been told the basis of the selection. He said competencies was a perfectly rational and appropriate criterion on which to select. Further, he argued that the respondent was selecting on the basis of competencies and thus there were no “allegations” for the applicants to be given the opportunity to respond to - s 170DC was inapplicable. He submitted that it was not suggested to the witnesses for the respondent that they held any animus against any of the applicants such as to suggest that the actual selection process was not carried out fairly and in an impartial manner.
In considering the role of consultation the dual aspect of the seniority principle must be considered. For those employees on the list it protected both their security of employment in the event of a seasonal downturn and gave them priority of re-employment in the event of the seasonal upturn. This latter aspect of the principle is very significant here because in this redundancy the respondent was, in effect, requiring all employees in the general hands team to reapply for their own jobs. The process had never occurred in the past and the seniority list was not and would never again be relevant. In this process the respondent was making a selection to retain twenty-eight employees out of the forty-five then in the team. It was using as the substantial basis for its selection the competencies which had been assessed for another purpose, and as part of a different process. It did this in circumstances where it at no time discussed with the employees selected for redundancy the basis on which they were individually selected. It was on this basis that the applicants relied on decisions such as Quality Bakers of Australia Ltd v Goulding (1995) 60 IR 327; Kenefick v Australian Submarine Corporation Pty Ltd (No.2) (1996) 65 IR 366; and Thomas v Lynch (1996) 71 IR 307, to submit that the respondent had breached both ss 170DE(1) and 170DC of the Act.
The submissions on behalf of the applicants have substantial merit here because the change from seniority to competencies as the criterion did amount to a very substantial change which had the potential to impact very differently on individual employees. It was squarely within cls 7 and 9 of the EA. It effected a shift in the employment security each applicant held under the seniority principle. This was because the respondent was changing the rules. It wanted to retain only those employees it assessed as holding its chosen portfolio of skills. For any individual employee there may have been a host of reasons why he or she did not, or was not seen to, measure up on the new criterion. The reasons may have included matters personal to them, or past events that the employer may or may not have known about. Given this history the new criterion meant, for an employee who could not measure up, that fairness demanded he or she have the chance to plead a case for retention in any event. This is what s 170DC addresses: Perrin v Des Taylor Pty Ltd (1995) 58 IR 254 at 256 per Moore J. It is also an aspect of proper management of labour consistent with maintaining self esteem and confidence. It is about according a “fair go” to each individual employee. It is about the mutual duty of good faith and fidelity at the heart of the contract. In these circumstances the duty to the individual employee cannot be met by dealings with shop stewards or the union, particularly where the names of the applicants were not proffered. The authorities relied on by the solicitor for the respondent are thus distinguishable.
Support for this approach can also be seen, ex post facto, in personal matters that emerged in the evidence of the applicants. Mr Pascale had over twenty years service. He had a moderately disabling work related injury and was working mainly on clerical duties. In a discussion with Mr White before his termination he had expressed concern as to his ability to obtain other employment due to his disability. He, in a sense, sought to call into account the credit of his long and good service with the respondent. He also told Mr White that the competencies assessment operated unfairly on him because of the limited duties he was performing at the time, and the restrictions his injuries imposed. He left the conversation with Mr White with the impression that he would not be retrenched in the 1996 seasonal redundancies. He had no opportunity later to put these matters when he was actually selected. Similarly Ms Jeanes, who had also been employed for over twenty years, gave evidence that she had declined over the years to be trained on various machines because of her lack of confidence. Ms Marcon’s evidence was to the same effect. This evidence is very relevant because the EA envisaged that employees would be offered training to multi-skill them. Mr Kelly gave evidence that there were a number of duties that he had difficulty doing because of a work related injury that he carried. He said he could not be trained for some duties.
The fact that the applicants could have discussed the competencies assessment with the implementation team is not to the point because at that stage the assessments were not carried out to be used in a redundancy. The assessments were part of a wider process under the EA. Although I am satisfied that selection on the basis of competencies is, in the abstract, reasonable, and the selection of each individual here was carried out bona fide and fairly, the failure to give the individuals affected the opportunity to respond to their selection is a significant failing.
Conclusion - no valid reason.
For the above complex of reasons the respondent did not have a valid reason to terminate the applicants’ employment. The seniority principle had previously been incorporated into the individual contracts of employment and the respondent did not, as at 15 November, have the agreement of the applicants to apply a different criterion. In applying competencies it acted in breach of the EA, and before giving the AIRC an opportunity to become involved and discharge its dispute settling role. By failing to consult the individual applicants the respondent did not act fairly or accord them a level of management that a reasonable employer in the circumstances would have done. The respondent has not discharged its onus of proof. It has breached s 170DE(1) and I so declare.
Prohibited reason - s 170DF(1)(f).
The applicants Messrs Pascale, Leerson and Kelly had each sustained work related injuries. It was submitted that the respondent had failed to exclude from its reasons for termination a prohibited reason, namely physical disability. This submission was founded on evidence that each of those three applicants was impaired in the performance of duties in the general hands team. Having regard to my conclusion that the respondent has not discharged its onus of proof in relation to s 170DE(1), it is unnecessary to reach any conclusion on this aspect of the proceedings.
Remedy - reinstatement or compensation?
The applicants Emilia Marcon and Jannetta Jeanes did not seek reinstatement. The other four applicants did so. The Court is required to determine whether the primary remedy under the Act is appropriate in all the circumstances, and whether it is practicable. The matter is to be approached in a common sense way, with an evidentiary onus on the respondent because matters going to the practicability of a reinstatement order are within its knowledge.
The respondent opposed any reinstatement order. It submitted that it had assessed the applicants as not having the skill levels required for its operations and it should not be required to re-employ the four applicants in those circumstances. Mr Hulks gave evidence that reinstatement would set back the move to a team based culture. Mr White maintained that because he only required twenty-eight employees in the general hands team he would be forced to dismiss employees he assessed as less skilled than the applicants. He also said that reinstatement would bring the overall skill levels down, and impose additional work on the remaining members of the team who would have to give the less skilled members assistance.
The representative for the applicants submitted that reinstatement was appropriate. The applicants who sought reinstatement had not been able to obtain alternative employment.
I am of the view that reinstatement is both appropriate and practicable here. It is appropriate because it is the only way to right the wrong that has occurred. The wrong is the process by which the applicants had their employment terminated.
In Anthony Smith & Associates Pty Ltd v Sinclair (1996) 67 IR 240, the Full Court was discussing the rationale for s 170EE(1)(ii), which allows for a reinstatement order to a different position. While that is not in issue here because there is still a general hands team of which the applicants were members, the following comment at 244 is applicable:
“We appreciate that creation of a new position may occasion a cost, or other disadvantage, to the employer. Where there is evidence that this will be so, that evidence may be relevant on the issues of practicability and appropriateness. But it would be contrary to principle to treat such evidence as necessarily determinative. The occasion for the order arises because the employer has acted unlawfully in terminating the employee's employment. A reinstatement order is akin to an injunction compelling a wrong-doer to restore the position of the innocent party. In considering whether to grant an injunction, a court will always take into account the consequences of an order to the wrong doer but the existence of adverse consequences has never been regarded as excluding the possibility of an order being made.”
Here the respondent is a substantial enterprise engaged in a restructuring process to meet the competitive demands on it. The EA has achieved a major change to its workplace culture. The applicants were participating in the new culture until November last year. The implementation of the EA places obligations on both the respondent and all employees to co-operate in multi-skilling, retraining, and a teamwork culture. The applicants have lost the opportunity to be chosen to continue to participate in that team as a result of a process that earlier in these reasons I have concluded did not meet the standards of fairness expected of the respondent.
The evidence that a reinstatement order will cause disruption to the teamwork culture is not persuasive here. The respondent has adequate managerial skills and resources to overcome any short term difficulties. It is dealing with employees who it has employed for many years. There is no suggestion that each applicant will not co-operate. They each have a duty to. The increased size of the general hands team is a different issue, but does not make reinstatement impracticable. What the respondent has to do is to give the applicants a proper opportunity to be considered for retention in its workforce. It denied them that in November last year. The witnesses for the respondent impressed as fair-minded enough to accord them that opportunity. If as a result of the Court’s order it must terminate other employees, so be it. It must of course accord those employees their rights under the Act, but the requirements of the Act are not onerous on employers. If, after a proper process, the respondent reaches the conclusion that it cannot accommodate one or more of the applicants, so be it. The evidence led by the respondent does not satisfy me that a reinstatement order is impracticable.
I intend to order that the applicants Messrs Kelly, Mott, Leerson and Pascale be reinstated to the positions in which they were previously employed with no loss of continuity of service, and arrears of remuneration. Those applicants will be required to give credit for the payments they have received, and any wages they have earned.
The applicants Emilia Marcon and Jannette Jeanes seek compensation for the unlawful termination of their employment. Ms Jeanes has remained unemployed since she was dismissed, while Ms Marcon has obtained some limited amount of work. Her earnings to date did not emerge in evidence. The solicitor for the respondent submitted that no order for compensation should be made because already substantial termination payments have been made.
The two applicants have, as a result of the actions of the respondent, lost the opportunity that they should have been accorded to negotiate to remain employed despite their ranking on the competencies assessment and by the supervisors. They also lost the opportunity, either on a collective or an individual basis, to retain their employment or to extract a higher redundancy payment from the respondent.
I am of the view that an order for compensation is appropriate for both applicants. Ms Jeanes had very long service with the respondent and given her narrow skill base is at real risk on the labour market. Her earnings loss to date already exceeds the limit set under s 170EE(4). At the same time it must be recognised that Ms Jeanes was assessed, under a process that I am satisfied was fairly carried out, as having skill levels at the low end of the range among the labour force. The applicants admitted that the operational requirements of the respondent did necessitate a reduction in its labour force to twenty-eight. Had the process been properly carried out Ms Jeanes would have faced a significant risk of being terminated unless the respondent was able to find sufficient volunteers, or was prepared to accept a redundancy criterion that involved a ballot or gave significant weight to seniority.
Having regard to these considerations I propose to follow the approach in Kenefick v Australian Submarine Corporation Pty Ltd (No. 3) (unreported, Industrial Relations Court of Australia, Wilcox CJ, 26 July 1996), and assess compensation on the basis of the value of the chance to retain employment in a properly conducted redundancy. In proceeding this way it is appropriate to ignore the amounts already paid on redundancy. I am of the view that thirteen weeks wages is a proper measure of compensation for the respondent’s unlawful termination of Ms Jeanes’ employment.
Ms Marcon is in a similar position to Ms Jeanes. She lost secure employment and is currently undertaking a course to increase her employability. She had less service than Ms Jeanes but scored slightly higher on the competencies assessment. In undertaking the assessment of her chance of retaining employment, the two matters probably balance out. I propose a similar award of compensation for Ms Marcon. I have based the amounts on the wage rates in the termination payments.
ORDERS:
The Court declares the respondent has breached s 170DE(1) of the Act;
The applicants Messrs Kelly, Mott, Leerson and Pascale, within seven days, be reinstated to their former positions with the respondent on the same terms and conditions;
The respondent for all purposes is to treat the applicants Messrs Kelly, Mott, Leerson and Pascale, as continuously employed from the date of termination until the date of reinstatement;
The respondent pay to the applicants Messrs Kelly, Mott, Leerson and Pascale, the remuneration lost because of the termination after taking into account amounts already paid and the applicants’ earnings.
The respondent pay to each of the applicants Ms Jeanes and Ms Marcon the sum of $5,957.64.
The respondent may offset against the amounts in paragraphs 4 and 5 hereof any amounts paid to the Australian Taxation Office.
Liberty to apply.
I certify that this and the preceding sixteen (16) pages are a true copy of the reasons for decision of Murphy JR.
Associate: KAREN HALSE
Dated: 11 SEPTEMBER 1997
APPEARANCES
Appearing for the applicants: MR S BLEWETT Applicants’ Representative:
AFMEPKIU Appearing for the respondent: JONATHAN SANDLER Solicitors for the respondent: DUNHILL MADDEN BUTLER Dates of Hearing: 2, 3 & 4 JULY 1997 Date of Judgment: 11 SEPTEMBER 1997
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