CEPU v ThyssenKrupp Elevator Australia Pty Ltd - [2014] FCCA 1615

FEDERAL CIRCUIT COURT OF AUSTRALIA

CEPU v THYSSENKRUPP ELEVATOR AUSTRALIA PTY LTD

[2014] FCCA 1615

Catchwords:
INDUSTRIAL LAW – Penalty hearing – breach of obligation to consult when implementing major workplace change.

Legislation:

Fair Work Act 2009, s.50

Kelly v Fitzpatrick (2007) 166 IR 14
Mason v Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7

Applicant:

COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING AND ALLIED SERVICES UNION OF AUSTRALIA

Respondent:

THYSSENKRUPP ELEVATOR AUSTRALIA PTY LTD

File Number:

BRG 762 of 2013

Judgment of:

Judge Jarrett

Hearing date:

16 July 2014

Date of Last Submission:

16 July 2014

Delivered at:

Brisbane

Delivered on:

16 July 2014

REPRESENTATION

Counsel for the Applicant:

Mr Dowling

Solicitors for the Applicant:

Hall Payne Lawyers

Counsel for the Respondent:

Mr Swan

Solicitors for the Respondent:

AI Group Legal

ORDERS

IT IS DECLARED THAT:

The respondent has contravened s.50 of the Fair Work Act 2009 (Cth) by contravening clause 10 of the ThyssenKrupp Elevator Australia Pty Ltd Enterprise Agreement 2011 by failing to consult with Mr David McDonagh and the applicant regarding the major workplace change which it implemented on 24 May, 2013.

THE COURT ORDERS THAT:

The respondent pay to the applicant a pecuniary penalty in respect of the contravention of s.50 of the Fair Work Act 2009 (Cth) fixed in the sum of $15,300.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 762 of 2013

COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING AND ALLIED SERVICES UNION OF AUSTRALIA

Applicant

And

THYSSENKRUPP ELEVATOR AUSTRALIA PTY LTD

Respondent

REASONS FOR JUDGMENT

Ex tempore

By its amended statement of claim dated 18 November, 2013 the applicant alleges that the respondent has contravened s.50 of the Fair Work Act2009 (Cth) by failing to comply with clause 10 of the ThyssenKrupp Elevator Australia Pty Ltd Enterprise Agreement 2011.
By an agreed statement of facts dated 28 March, 2014 ThyssenKrupp admits that it has contravened s.50 of the Fair Work Act by failing to comply with clause 10 of the ThyssenKrupp Agreement.
The parties agree that ThyssenKrupp’s contravention was constituted by its failing to consult with the applicant, and with its employee Mr David McDonagh, over its decision to downsize and restructure its repairs department. That action resulted in the termination of employment of Mr McDonagh’s employment with the respondent.
The applicant seeks a declaration that ThyssenKrupp has contravened s.50 of the Fair Work Act, the imposition of a pecuniary penalty upon ThyssenKrupp and an order that the penalty be paid to the applicant.
There is no dispute that there should be such a declaration, nor that there should be the imposition of a pecuniary penalty, nor that the penalty should be paid to the applicant. The dispute for determination is the quantum of the penalty.
The parties have both filed written submissions and supplemented those written submissions with oral submissions today. It will be apparent from the terms of these reasons for judgment that I have relied heavily on the work done by the parties in their written and oral submissions, for which I am grateful.
Section 50 of the Fair Work Act is a civil remedy provision. The maximum penalty available for a contravention of that provision, by a body corporate, is 300 penalty units. A penalty unit is $170. The total maximum penalty that might be imposed upon the respondent in this case is $51,000.
There is no dispute between the parties about the principles that are to be applied in determining the value of the penalty. It is a matter for the court’s discretion. There are any number of cases that set out any number of factors that might be seen as relevant in fixing that penalty. The decision of Mowbray FM in Mason v Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7, is often referred to as setting out a convenient checklist of matters that need to be determined. Kelly v Fitzpatrick (2007) 166 IR 14 that approves Mason. But as the authorities have made clear, checklists whilst helpful should not be allowed to divert attention from the particular facts and circumstances of the case at hand.
The ThyssenKrupp agreement is an agreement made under the Fair Work Act and was approved by Fair Work Australia on 17 February, 2012. The ThyssenKrupp agreement is, and was, in operation from 25 February, 2012. Clause 10 of the ThyssenKrupp Agreement sets out the obligations upon ThyssenKrupp in circumstances where it has made a definite decision to introduce a major change to production, program, organisation, structure or technology in relation to its enterprise; and that change is likely to have a significant effect on employees of the enterprise. Clause 10 of the ThyssenKrupp Agreement relevantly provides as follows:
10. CONSULTATION ABOUT MAJOR CHANGE
10.1 This term applies if:
a) the employer has made a definite decision to introduce a major change to production, program, organisation, structure, or technology in relation to its enterprise; and
b) the change is likely to have a significant effect on employees of the enterprise.
10.2 The employer must notify the relevant employees and were [sic] relevant their Union of the decision to introduce the major change.
10.3 The relevant employees may appoint a representative for the purposes of the procedures in this term.
10.4 If:
a) a relevant employee appoints, or relevant employees appoint, a representative for the purposes of consultation; and
b) the employee or employees advise the employer of the identity of the representative;
the employer must recognise the representative.
10.5 As soon as practicable after making its decision, the employer must:
i. discuss with the relevant employees and their union:
a) the introduction of the change; and
b) the effect the change is likely to have on the employees; and
c) measures the employer is taking to avert or mitigate the adverse effect of the change on the employees; and
ii. for the purposes of the discussion -- provide, in writing, to the relevant employees:
a) all relevant information about the change including the nature of the change proposed; and
b) information about the expected effects of the change on the employees;
and
c) any other matters likely to affect the employees.
…
10.7 the employer must give prompt and genuine consideration to matters raised about the major change by the relevant employees.
…
10.9 In this term, a major change is likely to have a significant effect on employees if it results in:
a) the termination of the employment of employee/s; or
b) change to the composition, operation or size of the employer‘s workforce or to the skills required of employees; or
c) the elimination or diminution of job opportunities (including opportunities for promotion or tenure); or
d) the alteration of hours of work; or
e) the need to retrain employees; or
f) the need to relocate employees to another workplace; or
g) the restructuring of jobs.
10.10 In this term, relevant employees means the employees who may be affected by the major change.
As at 24 May 2013, Mr David McDonagh was an employee of ThyssenKrupp and member of the applicant Union. On that day he was requested to attend, and did attend, a meeting with the respondent’s Queensland services manager, Mr John Day, and the respondent’s human resources manager, Ms Fiona Morgan.
During that meeting, Mr McDonough was told that he was being terminated because his position was redundant.
The respondent’s representatives that were present at the meeting, explained to Mr McDonough that he had been chosen for redundancy by reason of a performance matrix, which was used to determine which positions, within the respondent’s organisation, would be made redundant. The matrix was not provided to Mr McDonough and other than the reference to the matrix, there was no other explanation apparently given as to why Mr McDonough was selected for redundancy.
Ms Morgan provided Mr McDonagh with a letter terminating his employment and outlining the entitlements he would receive as a result of the redundancy.
The parties agree that the circumstances in which Mr McDonough came to be terminated engaged clause 10 of the ThyssenKrupp Agreement. The downsizing and restructuring of the repairs department, which led to Mr McDonough’s termination, is accepted by the respondent as being a major change for the purposes of clause 10 of the ThyssenKrupp Agreement.
The parties agree that the respondent was required to consult with Mr McDonough and the applicant in relation to that major change. However, in breach of clause 10, there was no consultation.
The parties are agreed that ThyssenKrupp was required to consult with Mr McDonagh and the applicant in relation to the downsizing which led to Mr McDonagh’s termination.
In breach of clause 10 of the ThyssenKrupp Agreement, at no time prior to the termination of Mr McDonagh did ThyssenKrupp discuss with Mr McDonagh and or the applicant:
a)the introduction of the major change;
b)the effects the major change was likely to have on the employees;
c)measures the employer was taking to avert or mitigate the adverse effect of the major change on the employees.
In breach of clause 10 of the ThyssenKrupp Agreement, at no time prior to the termination of Mr McDonagh did ThyssenKrupp provide to Mr McDonagh in writing:
a)all relevant information about the major change including the nature of the major change proposed; and
b)information about the expected effects of the major change on the employees; or
c)any other matters likely to affect the employees.
One of the significant issues, the subject of argument between the parties before me, is whether the applicant had suffered any loss, damage or other consequence as a result of the breach of clause 10 of the ThyssenKrupp Agreement. For the applicant, it is argued that consultation is an important and valuable right and, in the context of this case, it is not a right which can now be reinstated in the sense that Mr McDonough’s termination has been carried out, the relevant events have occurred and what has been done cannot now be undone.
The respondent, for its part, argues that there is really no loss or damage sustained by the applicant. But the respondent’s arguments seem to me not to recognise the very important nature of the consultation right that is granted by clause 10 of the ThyssenKrupp Agreement. As the applicant submits, the consultation entitlement, is “never to be treated perfunctorily or as a mere formality”: Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v QR Limited [2010] FCA 591 at [43] citing with approval Port Louis Corporation v Attorney-General of Mauritius [1965] AC 1111 at 1124 and TVW Enterprises Ltd v Duffy (No 2) (1985) 7 FCR 172 at 178. See also CFMEU v Laing O’Rourke Australia [2013] FCA 246 at [21].
I accept that consultation, in the present context, is designed to assist management, not just to assist employees and unions. It is designed to assist management because it gives the employer access to ideas from employees and their unions and it presents an opportunity for there to be a truly consultative process around the restructuring of businesses for the benefit of both employers and employees. It is, as I have already remarked more than once, an important and valuable right.
I accept the applicant’s submission that the applicant and Mr McDonough were denied that right, and the right has been irretrievably lost. At least insofar as Mr McDonough is concerned.
Senior management was involved in the offending conduct. In particular, the respondent says that the decision, or the lack of a decision to consult with the Union, was a decision made by Ms Fiona Morgan. She was the company’s human resources manager and remains so. She was cross-examined this morning during the course of this hearing. Her written evidence is to the effect that the failure of the respondent to consult with the Union was a result of a mistake made by her concerning the nature of the obligations cast on the respondent by clause 10 of the agreement.
The applicant points out, with some force, that her mistake is unexplained and is, in the circumstances, inexplicable. Ms Morgan accepts now that clause 10 is very clear in its terms. She could not provide an explanation, in any precise terms, as to why what now appears to be clear was not so clear back in May, 2013. But people make mistakes. And what appears clear in hindsight, often enough, appears less clear at the time when the impugned conduct occurs.
There is, I am satisfied, nothing in the evidence, either written or oral, which suggests that Ms Morgan made a conscious decision not consult with the Union about Mr McDonough’s redundancy all the time knowing that a proper construction of clause 10 of the agreement required it to do so. I accept her evidence that she has made a genuine mistake and she is now at a loss to explain that mistake.
I do not accept that others in senior managerial positions employed by the respondent and, in particular, Mr Horner and Mr Day, were complicit in Ms Morgan’s mistake. Whilst Ms Morgan said they would have read clause 10 of the relevant agreement at the relevant time, my view is that she was clearly speculating. She used the word “presumption” and, as counsel for the applicant quite properly points out, she confirmed that it was the practice, at the relevant time, of senior management to read these agreements. But that is not to say that that is, in fact, what happened. There is no evidence upon which I intend to place any weight that the mistake that occurred in this case went any further than Ms Morgan. I accept her evidence about how it came to be made.
There is no dispute in this case that the respondent is a large proprietary company. It is the employer of 418 people including 67 in the state of Queensland.
The annual report of ThyssenKrupp for the year ended 30 September, 2013 discloses that:
a)for the year ended 30 September 2013 the total revenue from rendering of services and sale of goods was $111,221,522;
b)for the year ended 30 September 2012 the total revenue from rendering of services and sale of goods was $99,744,903;
c)for the year ended 30 September 2013 ThyssenKrupp reported total assets of $62,195,993;
d)for the year ended 30 September 2012 ThyssenKrupp reported total assets of $55,969,435;
e)for the year ended 30 September 2013 ThyssenKrupp reported gross profit of $17,155,962;
f)for the year ended 30 September 2012 ThyssenKrupp reported gross profit of $14,695,890;
g)for the year ended 30 September 2013 ThyssenKrupp reported net profit after tax of $5,927,803; and
h)for the year ended 30 September 2012 ThyssenKrupp reported net profit after tax of $3,964,931.
ThyssenKrupp’s annual report for the year ended 30 September, 2013 shows that 100% of the issued ordinary shares of ThyssenKrupp are owned by ThyssenKrupp Lifts Pacific Pty Ltd. The ultimate parent and ultimate controlling party is ThyssenKrupp AG (incorporated in Germany) which at 30 September, 2013 owned 100% of the issued ordinary shares of ThyssenKrupp Lifts Pacific Pty Ltd.
The annual report for the year ended 30 September, 2013 for ThyssenKrupp Lifts Pacific Pty Ltd discloses that:
a)it had reported total assets of $75,160,945;
b)it reported total revenue of $113,270,317.
Another issue which attracted debate between the parties this morning is whether the respondent is truly contrite about the contravention in this case. I must confess to having some difficulty with the submission from the respondent, that it truly is contrite. There are two aspects to that. The first is that there has been, published by the applicant with the respondent’s consent, a statement. The statement is in the following terms:
On 29 August 2013, the CEPU commenced litigation against ThyssenKrupp Elevator Australia Pty Ltd. The proceedings alleged that the employment of a CEPU member and delegate, David McDonough, was terminated by Thyssen in May 2013, because he was a union delegate who had actively represented the interests of union members. ThyssenKrupp denied these allegations and said that it terminated Mr McDonough’s employment because his job was redundant. Thyssen, the CEPU and Mr McDonough have now resolved this particular dispute. All parties regret that the termination of Mr McDonough’s employment led to a legal dispute. ThyssenKrupp acknowledges that CEPU delegates can play a constructive role in its workforce. ThyssenKrupp and the CEPU recognise the rights and obligations of union delegates in the workplace and will continue to act to ensure that those rights and obligations are respected. Both the CEPU and ThyssenKrupp renew their commitment to treating each other with mutual respect and courtesy and to a continued and constructive engagement with each other.
To the extent that the applicant suggests that the statement is of no particular use in these proceedings, I disagree. It is a statement which reinforces the role that the union has to play in the respondent’s business. The statements which appear in the last two sentences of the extract above, are particularly strong in that respect. However, the statement does not, in fact, refer directly to the contravention in these proceedings.
The second matter, which is relevant to this issue, is what occurred in December of last year. The respondent argues that the evidence shows that the respondent has acted in a way which is consistent with it fully understanding the nature of its obligations under clause 10 of the agreement. In early December, 2013, the respondent resolved that two further employees needed to be made redundant. It is said from the Bar table, and it may well be in the evidence, although I was unable to find it myself, that that decision was made on 2 December, 2013.
On 4 December, there was an email sent by a representative of the respondent to the applicant giving notice of the proposed redundancies. The email giving notice purports to do so in exercise or in discharge of the obligations under the agreement. The notice made it clear that the redundancies were to be given effect to on 6 December, 2013 - so two days later. That did not occur because the Union, in response, sought a meeting with the respondent.
There was a meeting on 9 December, 2013 between the relevant union representative and the respondent, but it all happened very quickly. I accept that these things might well happen very quickly, but what concerns me most about it is the fact that:
a)a decision had been made on 2 December not just to make some employees redundant had been made, but the decision extended to which particular employees would be made redundant; and
b)that it was not until 4 December, 2013 that notice was given to the Union of any proposed redundancies.
The content of the obligation under clause 10 of the agreement is important and the content of the right that it conveys to the employees concerned and the applicant is important. I referred to that content earlier. It is a right to engage in the process and to essentially share ideas, suggestions and alternatives. The circumstances that are described in the evidence which occurred in December last year demonstrate that the respondent does not understand that. There was no opportunity, it seems to me on the evidence, for there to be the exchange of ideas which might even have meant that the decision to make particular employees or particular positions redundant may have been avoided. There was no opportunity to explore alternatives in a meaningful way. It seems to me to that the respondent was paying mere lip service to its obligations under clause 10. To the extent then that the respondent relies on that as evidence of contrition, I reject that the events of December, 2013 that I have just described demonstrate contrition.

I accept, however, the evidence that Ms Morgan gives, particularly that evidence in paragraphs 5 and 6 of her affidavit, to the effect that she is remorseful for her decision. It is important evidence. As the person who was ultimately responsible for the contravention in this case, it is evidence which is, in my view, significant.
There is no doubt, and the parties agree, that the respondent has been cooperative in these proceedings. The relevant admissions have been made early and there has been no trial conducted in these proceedings. The respondent has, in that sense, acted responsibly.
Having regard to what I have just said about the events in December 2013, I am not satisfied that this is a case where specific deterrence is not significant. It is something which is significant. The respondent needs to properly understand the nature of the obligations cast on it by clause 10 of the relevant agreement and agreements like it.
It is also important to take into account matters of general deterrence for, as was submitted by counsel for the applicant, the penalty needs to be such that an employer will consider whether it is worthwhile contravening the Fair Work Act and paying a penalty, or whether the easier course is simply to discharge one’s responsibilities and obligations.
It is not suggested that there are any other circumstances or events of contravention of which the respondent has been found liable. This is a single occasion. It is not a multiple contravention, but a single act. They are matters which are important. As far as the evidence reveals, the respondent is being dealt with for a breach of this particular provision of the Fair Work Act for the first time.
In all of those circumstances, the level of penalty needs to be such as to bring home to the respondent the significance of its contravention given the view that I have taken that it still does not properly understand the nature of the obligation cast on it by clause 10 of the agreement as revealed by its conduct in December, 2013. At the same time, the penalty must recognise that the contravention has come about through a genuine mistake made by a single employee in circumstances where it is not suggested that there have been similar contraventions or conduct.
In my view, a penalty which is 30 per cent of the maximum is appropriate. That is a penalty of $15,300.

ORDERS DELIVERED

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Judge Jarrett

Associate:

Date: 16 July 2014