CPM Engineering Projects Pty Ltd T/A CPM Engineering

[2014] FWC 2600

[2014] FWC 2600

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120 - Application to vary redundancy pay for other employment or incapacity to pay

CPM Engineering Projects Pty Ltd T/A CPM Engineering
(C2014/3166)

SENIOR DEPUTY PRESIDENT RICHARDS BRISBANE, 22 APRIL 2014

Summary: application to vary redundancy pay - whether applicant ‘obtained’ employment herself or whether employment ‘obtained’ by the employer - discussion of authorities - meaning of verb ‘obtains’ - obligation to pay redundancy pay varied to nil.

[1] This matter arises from an application by CPM Engineering Projects Pty Ltd T/A CPM Engineering (“the employer”) under s.120 of the Fair Work Act 2009 (“the Act”). The employer provides fabrication services to the drilling and mining industry, and is based in Gympie, in Queensland.

[2] The issue in contest concerns whether or not the employer has an obligation to pay redundancy pay to Mrs Leanne King, who performed administration functions as an assistant to a project manager for the employer. Mrs King had been employed in February 2011 as a casual administration employee, but since 28 June 2011 had been employed as a permanent employee.

[3] Mr Jason McPherson (the employer’s principal) provided evidence that in September 2013 the employer’s largest contract, which accounted effectively for the great majority of its business focus, indicated that it was ceasing component orders and in fact had over ordered components (that the employer was in the process of fabricating).

[4] The employer took an immediate decision to cease the engagement of 12 casual employees upon being informed of this business development, and employees were generally informed about the circumstances.

[5] Though Mrs King was advised initially that there might be some opportunity for her to remain in her role, on Monday 30 September 2013 a decision was taken by the employer to make Mrs King’s role or position redundant, and to allocate her remaining duties to other employees.

[6] Following working out a two week notice period, Mrs King’s employment ceased with the employer on 15 October 2013.

[7] Mr McPherson undertook that he would make endeavours to see whether he could secure further employment in another business for Mrs King.

[8] Mr McPherson gave further evidence in these proceedings to the following effect.

[9] He contacted two businesses and sought out information as to whether they might be able to employ Mrs King.

[10] Mrs King acknowledged Mr McPherson’s efforts in this respect in somewhat glowing terms on her Facebook page (which form part of the evidence in these proceedings).

[11] I do not take any of the aforementioned matters to be in any contest. But the positions of the parties differed somewhat in relation to the following matters.

[12] On (what Mr McPherson) claimed was 1 October 2013 Mrs King approached Mr McPherson to advise that she had observed that a business, KJ Bolt Trade Fasteners Pty Ltd (“KJ Bolt”) was advertising a position and that she felt she may be qualified to perform the relevant role. Mr McPherson was to also claim in his viva voce evidence that Mrs King had enquired as to whether he had any “pull” in relation to KJ Bolt.

[13] Mr McPherson immediately contacted the owner of KJ Bolt, Mr Paul Sutton, with whom he had a business relationship (KJ Bolt having been a supplier to Mr McPherson’s business). Mr Sutton was said to have indicated that the position was for a salesperson.

[14] Mr McPherson claims that he set out Mrs King’s skills and attributes and explained the circumstances of the cessation of employment. Mr McPherson also claims that he explained that Mrs King had been “an excellent employee and that she knew, from her work with CPM, ‘nuts and bolts’ and this would assist KJ Bolt and that she was bubbly and very good at sales and would be a good employee for KJ Bolt take on.”

[15] Mr McPherson also made a personal appeal to Mr Sutton that “you will be doing me a massive favour if you can give her [Mrs King] a start.”

[16] Mr Sutton was then said to have requested Mrs King’s resume and indicated to Mr McPherson that “he would certainly consider everything that [Mr McPherson] had said.”

[17] It was the employer’s evidence that Mr McPherson then informed Mrs King of the telephone call and indicated to her that she should provide her resume to KJ Bolt. In the afternoon of 1 October 2013 Mrs King was said to have informed Mr McPherson that she had an interview for the sales position at KJ Bolt.

[18] Mr McPherson claimed that he provided leave for Mrs King to attend the interview.

[19] On or about 4 October 2013, Mrs King advised Mr McPherson that she had been contacted by KJ Bolt and they had confirmed she had been made an offer of employment, which she had accepted.

[20] In this matter, Mr Paul Sutton, the sole owner of KJ Bolt, gave evidence which corroborated that of Mr McPherson. Mr Sutton claimed that he recalled Mr McPherson promoting Mrs King’s qualities and attributes. Mr Sutton further recalled that Mr McPherson made a personal appeal to him to employ Mrs King.

[21] Given the business relationship between Mr McPherson and KJ Bolt, Mr Sutton placed Mrs King “at the head of the queue so to speak in filling the role that we had available.”

[22] Mr Sutton gave evidence that he took the telephone call from Mr McPherson around 9AM, and received Mrs King’s resume at 1:16PM the same day, 1 October 2013. As Mr McPherson has attested, Mr Sutton claims receipt of the resume was consistent with his request of Mr McPherson to encourage Mrs King to submit her resume to KJ Bolt.

[23] Mr Sutton gave evidence that on the basis of Mr McPherson’s approach to him he arranged an interview Mrs King that afternoon (that being to 2:30PM on 1 October 2013):

Given the call from Mr McPherson and the subsequent receipt of the resume we quickly decided to interview Mrs King. So we arranged an interview for 2:30 PM that very day on 1 October 2013. If Mrs King was the right person for the job I was keen to employ her as quickly as possible given the call from Mr McPherson that he was seeking our assistance in engaging her, and also on the basis that it was obvious that Mrs King would be looking for other work and if she was the right candidate we did not want to miss out on her.

[24] Mr Sutton went on to claim that:

I am firm that but for the call from Mr McPherson we would not have processed her application [...] as quickly. Further I cannot say whether we would have interviewed her in any event, and it was definitely the call from Mr McPherson that caused me to take steps to interview her and to very much consider at the highest level Mr McPherson’s position that it would be doing him and Mrs King a great benefit to employ her.

[25] Mr Sutton claimed in addition to the above that:

At the end of the day it was ‘black and white for me’ in that if Mr McPherson had not called me and use the words that he did and promoted Mrs King and approved her as being employed by KJ Bolt then I would not have employed her. I say that in the context that Mrs King still needed to attend an interview and come up to the proof as to what Mr McPherson had promoted in her as an ideal employee for us.

I have no doubt in my mind that Mr McPherson ‘got the job’ for Mrs King at KJ Bolt.

[26] Mrs King finished her employment during her notice period on 8 October 2013.

[27] Mrs King subsequently agitated for the payment of redundancy pay.

[28] Though Mr McPherson did not agree that he was obliged to pay redundancy pay to Mrs King he nonetheless provided her with a week’s payment (on the basis that Mrs King had realised that she would not be paid for several weeks with her new employer, KJ Bolt (as its pay role cycle operated on a monthly basis).

[29] Mr McPherson was subsequently contacted by the Fair Work Ombudsman following a complaint having been made to that body by Mrs King concerning the failure to discharge an obligation to pay redundancy pay. The Fair Work Ombudsman was said to have advised that a total of six weeks redundancy pay should have been paid to Mrs King.

[30] Mr McPherson subsequently made application under section 120 of the Act, seeking that the employer’s obligation to pay redundancy pay be reduced to nil (given that one week’s pay had already been paid to Mrs King on 18 October 2013).

Mrs King’s claims

[31] Mrs King argues essentially that it was by her own efforts that she obtained employment at KJ Bolt.

[32] Mrs King claimed that she sourced her new position on her own merit and that Mr Sutton had indicated to her that that was the case. She also contends that she had found the advertisement for the vacant position at KJ Bolt on the same day as she was given notice and e-mailed an application through on that day, being (she claimed) 1 October 2013. Mrs King claimed that she only indicated to Mr McPherson the potential position the following morning (2 October 2013) and after she had submitted her resume to KJ Bolt.

[33] In effect, Mrs King was claiming that she was responsible for obtaining her employment with KJ Bolt on her own terms and at her own initiative.

[34] Mrs King claimed essentially that both Mr McPherson and Mr Sutton had a confused chronology. Essentially she claimed that both Mr McPherson and Mr Sutton had conflated the chronology so that all the events took place on one day, that being 1 October 2013. Mrs King claimed that the chronology, when accurately set out, demonstrates that she made the job application to KJ Bolt the day before she had informed Mr McPherson. That is, Mrs King had taken the elemental steps to identifying the role and submitting an application without the intervention of Mr McPherson.

[35] Mrs King contended that Mr Sutton had indicated to her that he was interviewing her at his own initiative and without the prompting of Mr McPherson. She says that over the course of her employment on some two occasions Mr Sutton had conveyed to her that she had won the job on her own merits. By this Mrs King believed that Mr McPherson had not obtained the employment at KJ Bolt for her.

Legislative context

120 Variation of redundancy pay for other employment or incapacity to pay

(1) This section applies if:

(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and

(b) the employer:

(i) obtains other acceptable employment for the employee; or

(ii) cannot pay the amount.

(2) On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.

(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.

Consideration

[36] To determine whether the application made by the employer can be subject to the Commission’s discretion, two matters must be established on an objective basis. The first of these is whether the employment that may have been obtained by the employer was “acceptable”. The second matter to be determined is whether the (acceptable) employment was “obtained” by the outgoing employer.

[37] The approach in this regards was set out in the Full Bench in Print J4414: 1

This approach is inconsistent with the decision of a Full Bench of the Commission (Munro J, Peterson JJ and Leary C) in a decision on appeal concerning an application by a company known as Hot Tuna Proprietary Limited for exemption under subclause 51(e) of the award.(4) This decision makes clear that the test to be applied to determine whether employment is "acceptable" within the meaning of the clause is an objective one. That is to say the question whether particular employment for an employee is acceptable must be determined according to objective standards. In the Hot Tuna Case the following was said:

“We do not propose to repeat here the thoroughly detailed argument presented by counsel for the union. A considerable part of that case was devoted to questions of onus, and to supporting the proposition that the test of acceptability of the alternative employment is an objective one involving a consideration of such matters as pay levels, hours of work, seniority, fringe benefits, workload and speed, job security and other matters. It was argued that the failure of the employer to adduce evidence of such matters caused the company to fail to make out a case for an exemption. We have no doubt that there is an onus on the employer invoking subclause 51(c) and that matters of the kind referred to by the union may be relevant in assessing the position in a particular case.”

[38] The Full Bench went on to endorse the findings of the Full Bench in Re: Hot Tuna (referred to above) into state that:

“Acceptable alternative employment”

What constitutes “acceptable alternative employment” is a matter to be determined, as we have said, on an objective basis. Alternative employment accepted by the employee (and its corollary, alternative employment acceptable to the employee) cannot be an appropriate application of the words because that meaning would give an employee an unreasonable and uncontrollable opportunity to reject the new employment in order to receive redundancy pay; the exemption provision would be without practical effect.

Yet, the use of the qualification “acceptable” is a clear indication that it is not any employment which complies but that which meets the relevant standard. In our opinion there are obvious elements of such a standard including the work being of like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements. There will probably be others.

[39] The evidence before me is that the position Mrs King held at KJ Bolt had improved conditions (such as access to a motor vehicle and a mobile telephone), similar hours of work and a more flexible approach to working hours. The base rate of pay, however, was not as high as that which she had experienced prior to the redundancy.

[40] There is no contest between the parties that the position is not “acceptable”. Mrs King took the view that the differences in the remuneration package tended to even themselves out.

[41] The point of contest, however, is whether or not the employer obtained the new employment for Mrs King, as I have alluded to above. This is the second matter that requires determination.

[42] Again, the Full Bench in Print J4414 set out the proper approach in these regards:

“Obtains”

This term originates from the first decision in the Termination, Change and Redundancy Case where the Full Bench said:

“Two particular instances, which the employers argued might warrant an application for relief from the obligation to pay the general prescription, which were brought to our attention in the proceedings were when an employer obtains acceptable alternative employment for the employee, and where employees receive the benefit of superannuation schemes on retrenchment.

We do not wish to prevent an employer making an application to be exempted from the general prescription pursuant to this decision in cases where an employer obtains acceptable alternative employment for an employee but we would point out that, in our decision, severance payments are not made for the purpose of assisting employees to find alternative employment. Where such an application was made it would be important to consider whether previous service with the previous employer was recognized as service with the new employer.”

The word “obtains” does not appear in its context to mean actually obtain in the fullest sense possible. In circumstances like those occurring at the company one employer is incapable in law of effecting a contract of employment between his employee and another employer whether by assignment or otherwise; the creation of the legal relationship of master and servant depends on a mutuality being arrived at between the individual and the incoming employer. Therefore, the pursuit of alternative employment by the outgoing employer cannot be expected, by reason of itself alone, to produce new employment; there will usually and perhaps always remain the opportunity for the incoming employer, and the employee, to disagree as to matters such as terms of employment, suitability of the job to the employee and vice versa so that alternative employment may not eventuate.

It follows that "obtain" must be given some lesser meaning. The Shorter Oxford Dictionary (third edition, revised) provides as its relevant meaning, the definition of "obtain" as "to procure or gain, as the result of purpose and effort". It seems to us that meaning is of assistance here; that is, the employer by purpose and effort may establish an opportunity which suits the employee and which crystallises as alternative employment of an acceptable kind.

This approach is supported if the passages quoted above from the Termination, Change and Redundancy Case are read in conjunction with what was said under the heading "assistance in seeking alternative employment". There the Commission records the ACTU objective of achieving award provisions "designed to ensure that the employer assists the employee to find alternative employment".

Reliance was placed by the ACTU on a decision of the South Australian Industrial Commission in the Milk Processing and Cheese Etc Manufacturing Case:

“where it was decided that there should be included in any detailed prescription on redundancy an obligation on the employer actively to offer, or to make reasonable endeavours to procure, suitable alternative employment for redundant employees.”

Dealing with the circumstances in which the general prescription the Full Bench was awarding might be departed from, the decision in the Termination, Change and Redundancy Case(10) indicates that particular regard was paid to, inter alia, the S.A. Milk Processing and Cheese Etc. Manufacturing decision. Viewed in this way it will be seen that the intention is not to impose an absolute test on the employer's ability to "obtain" alternative employment but rather it refers to action which causes acceptable alternative employment to become available to the redundant employee. The employer must be a strong, moving force towards the creation of the available opportunity. [My emphasis] [citations excluded]

[43] Rarely would it be the case (if it could ever be so) that an outgoing employer would obtain alternative employment for an employee (whose position has been made redundant) in an absolute sense. An incoming or new employer will often, it might safely be presumed, ensure a new employee’s skills and attributes are compatible with the vacant position and offer a contract of employment at its own initiative. Thus, the Full Bench rightly rejected the proposition that an outgoing employer must be responsible for obtaining the alternative employment in these more extended terms as well. That said, the outgoing employer does need to be a “strong, moving force towards the creation of the available opportunity,” or else to have demonstrated both purpose and effort to establish an opportunity for alternative acceptable employment for the employee concerned.

[44] This is a point of distinction that is important to this particular case.

[45] It may well be true that Mrs King’s chronology is accurate and that Mrs King not only identified the position at KJ Bolt at her own initiative and provided her resume independently of any suggestion by Mr McPherson.

[46] Further, Mr Sutton did not seriously reject the proposition that he had on occasions informed Mrs King that she was responsible for obtaining the position on her own merit.

[47] Mr Sutton sensibly, and candidly in my view, explained that he would never have employed Mrs King if she had not demonstrated the required qualities at the interview. Indeed, Mr Sutton said Mrs King presented as a particularly intelligent and capable employee when he interviewed her for the position as a sales representative.

[48] But what Mr Sutton also made clear in his evidence was that he would never have contemplated interviewing Mrs King but for the intervention of Mr McPherson. Mr Sutton was unmoved in his fundamental position that regardless as to whether or not he had seen Mrs King’s resume before Mr McPherson contacted him, he would under no circumstances have contemplated interviewing let alone employing Mrs King. This was because he had a policy of not engaging with any employees who work in the current employment with any business with which he had a commercial arrangement.

[49] Mr Sutton contended, and was adamant in doing so, that he only set this policy aside because Mr McPherson had contacted him, explained the position that was facing his business and “raved” about Mrs King.

[50] Mr Sutton’s evidence in this regard is consistent with the evidence that Mr McPherson was diligent in and enthusiastic about seeking alternative employment for Mrs King.

[51] I have no reason to set aside Mr Sutton’s evidence in this regard. Mr Sutton’s evidence was not seriously challenged, in these respects, and did not betray any of the hallmarks of being fabricated in some manner to serve the interests of Mr McPherson, with whom he had a business relationship. I am not inclined to conclude, a priori, that the existence of a business relationship disposes the parties to corruption. On its face, Mr Sutton’s evidence was candidly given (despite his chronology being far from certain). Mr Sutton conceded points in his evidence (such as his admissions to Mrs King that he had informed her that she won the position on her own merit, for which he had an explanation) but nonetheless held to other positions firmly. This was not a case where the evidence was given from a fixed position and accommodated no ambiguity or complexity.

[52] Having heard Mr Sutton’s evidence at length, I think generally it should be framed in the context that Mr Sutton was motivated at all times to give an indication to Mrs King that she was a free agent and her position at KJ Bolt owed nothing to a personal or business favour.

[53] This no doubt motivated Mrs King to consider the question as to just who was responsible for obtaining her employment with KJ Bolt.

[54] The evidence before me supports such a conclusion in relation to the efforts made by the employer to obtain employment for Mrs King with KJ Bolt. Indeed, on the evidence before me the employer, through the agency of Mr McPherson, was instrumental to Mrs King obtaining employment with KJ Bolt. As the Full Bench cited above recognised, an employer does not face an absolute test to obtain acceptable alternative with employment for an employee.

[55] The employer must instead be a “strong, moving force towards the creation of the available opportunity,” or else to have demonstrated both purpose and effort to establish an opportunity for alternative acceptable employment for the employee concerned.

[56] This what Mr McPherson did, and it had a significant impact upon Mr Sutton’s disposition in relation to Mrs King’s capacity to take advantage of the opportunity of employment at KJ Bolt. The statutory test as required under s.120(1)(b)(i) of the Act has been discharged.

Conclusion

[57] The employer has obtained acceptable alternative employment for Mrs King. It has paid Mrs King one week’s pay in addition to its notice obligation. In my view, it would be appropriate, because of the circumstances as set out above, to vary the existing obligation to pay redundancy pay to nil. I so determine.

SENIOR DEPUTY PRESIDENT

Appearances:

Mr C. Campbell, of Aitken Legal, for the Applicant

Mrs L. King, on her own behalf

Hearing details:

By telephone

2014

14 April

 1 Industrial Relations Commission Decision 1029/1990 [1990] AIRC 980 (12 September 1990).

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