Craig Cunningham v Scotia Inspection Consultants Pty Ltd T/A Scotia Inspection Consultants

[2016] FWC 5498

[2016] FWC 5498

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Craig Cunningham
v
Scotia Inspection Consultants Pty Ltd T/A Scotia Inspection Consultants
(U2016/6907)

SENIOR DEPUTY PRESIDENT O’CALLAGHAN PERTH, 19 AUGUST 2016

Application for relief from unfair dismissal - small business fair dismissal code not relevant to redundancy situation - genuine redundancy - consultation requirements.

[1] On 13 May 2016, Mr Cunningham lodged an unfair dismissal application pursuant to s.394 of the Fair Work Act 2009 (the FW Act) in relation to the termination of his employment with Scotia Inspection Consultants Pty Ltd T/A Scotia Inspection Consultants (Scotia). Scotia objected to the application on the basis that it asserted that the termination of Mr Cunningham’s employment was a case of genuine redundancy and was consistent with the Small Business Fair Dismissal Code (the Code). These initial issues were the subject of a determinative conference in Perth on 27 July 2016. At the conclusion of the conference, I invited both parties to provide material relating to a difference over the relevance and operation of the visa arrangement under which Mr Cunningham worked. I have taken that information into account. However, I have not had regard to a further submission received from Scotia on 1 August 2016. This supplementary submission also addressed visa related issues. Not only was this submission received outside of the agreed time limit, it appears to be predicated on material not before me in the determinative conference.

[2] Further, on 8 August 2016 I advised the parties that I would convene a brief telephone conference on 18 August 2016 to hear submissions about whether Mr Cunningham’s employment was covered by the Manufacturing and Associated Industries and Occupations Award 2010 (the Manufacturing Award), and if so, whether the consultation requirements in that Award were met. Both parties provided written submissions relative to this issue. I have taken these submissions and the matters addressed in that conference into account in reaching a conclusion.

[3] Mr Cunningham was represented by Mr McCorry as agent, and Scotia, by Mr Lewis of Counsel. Permission was granted in both instances pursuant to s.596(2) of the FW Act, that said, the manner in which the matter proceeded did not contribute a great deal to the efficiency objective in that sub-section.

[4] Scotia provides a range of non-destructive quality inspection services to the oil and gas industry. This work involves activities undertaken under contracts with oil and gas drilling contractors. Mr Cunningham was employed by Scotia from October 2011 pursuant to a subclass 457 visa. It appears that he was engaged as an Inspection Supervisor on an annual salary of $58,240 plus superannuation. There is very limited information before me about subsequent payment arrangements applicable to Mr Cunningham until September 2015, where it appears that an hourly rate of $40 or $79,000 per annum was agreed. In his evidence, the Scotia Director, Mr Theo, referred to Mr Cunningham’s role as that of a Country Manager until September 2015 and to an agreed reduction in remuneration in September 2015. 1 There is no dispute that Scotia experienced a significant business downturn associated with the contraction of the oil and gas exploration industry, which underpinned Mr Cunningham’s role change in September 2015. Notwithstanding that the parties entered into a new employment contract at that time, they disagree about the description of Mr Cunningham’s work function after September 2015 and the extent to which his position was award covered.

[5] In July or August 2015, Mr Cunningham advised Scotia that he would be submitting his resignation in April 2016 and finishing work in early July 2016 to return to the United Kingdom.

[6] Mr Cunningham was engaged pursuant to two subclass 457 visa agreements. The first of these was applicable from December 2011 for three years. 2 Mr Cunningham had a visa approval from 31 January 2012 to 31 January 2016.3 The second appears to have applied from 29 February 20164 and referred to Mr Cunningham’s occupation as a Metallurgical or Materials Technician and to his base rate of pay as $69,160.5

[7] Section 385 of the FW Act states:

“385 What is an unfair dismissal

A person has been unfairly dismissed if the FWC is satisfied that:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

(d) the dismissal was not a case of genuine redundancy.

Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.”

[8] Consequently, if Scotia was a small business and the termination of Mr Cunningham’s employment was consistent with the Code, that dismissal cannot then be unfair. Secondly, s.389 of the FW Act defines a case of genuine redundancy in the following terms:

“389 Meaning of genuine redundancy

(1) A person’s dismissal was a case of genuine redundancy if:

(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer’s enterprise; or

(b) the enterprise of an associated entity of the employer.”

[9] Scotia’s initial assertion was that at the time of the termination of Mr Cunningham’s employment it was a small business and that the termination of Mr Cunningham’s employment was consistent with the Code. Additionally, Scotia asserts that the termination of Mr Cunningham’s employment met the relevant requirements of this section so as to be a case of genuine redundancy. In this respect, Scotia asserts that Mr Cunningham was not an award covered employee. In the alternative, Scotia asserts that irrespective of the issue of award coverage, consultations which occurred with Mr Cunningham, followed by the letter of termination of Mr Cunningham’s employment, of 1 February 2016, met the necessary consultation obligations. Scotia assert that it was not able redeploy Mr Cunningham to a lower paid position because of its subclass 457 visa obligations.

[10] Mr Cunningham’s position is that Scotia employed more than 15 employees at the time of the termination of his employment so that the Code did not have effect. Mr Cunningham asserts that his employment was covered by the Hydrocarbons Industry (Upstream) Award 2010 (the Hydrocarbons Award), but that, in the alternative, the Manufacturing and Associated Industries and Occupations Award 2010 (the Manufacturing Award) covered his employment. Independent of which of these two awards covered his employment, Mr Cunningham asserts that the termination of his employment did not meet the definition of a genuine redundancy in either award and also asserts that it would have been reasonable for him to be redeployed to alternative work between May and July 2016.

The Legislation

[11] Section 385 of the FW Act states:

“385 What is an unfair dismissal

A person has been unfairly dismissed if the FWC is satisfied that:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

(d) the dismissal was not a case of genuine redundancy.

Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.”

[12] Consequently, if Scotia was a small business at the time of the termination of Mr Cunningham’s employment, and if the termination of his employment was consistent with that Code, his dismissal cannot be unfair.

[13] At the commencement of the determinative conference on 27 July 2016, I observed to the parties that the Code provides only very limited reference to a redundancy situation. In the main, the Code is directed at an employee’s behaviour, conduct or capacity. Almost by definition, a redundancy circumstance is directed at a position rather than the employee in that position. Consequently, I proposed that it seemed that there was little utility in determining whether Scotia was a small business for the purposes of the Code. Further, I observed that it was clear that in addition to his unfair dismissal claim Mr Cunningham was pursuing, or considering the pursuit, of a claim for redundancy payments which had been refused by Scotia on the basis that, at the relevant time, Scotia was a small business. Such a claim, were it to be made, would be separate to this application and would not be within the jurisdiction of the Commission. The assessment of whether Scotia was a small business for the purpose of the application of redundancy payments appeared to be more relevant to that issue.

[14] Scotia advised that it was no longer pursuing its initial position with respect to the Code so that I have not further considered this issue.

[15] The second Scotia objection remains to be determined. Section 389 of the FW Act defines a genuine redundancy in the following terms:

“389 Meaning of genuine redundancy

(1) A person’s dismissal was a case of genuine redundancy if:

(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer’s enterprise; or

(b) the enterprise of an associated entity of the employer.”

[16] If each of the requirements of that definition is not met, a dismissal may be unfair even if it reflected a redundancy situation in that the subsequent consideration of the nature and manner of the dismissal may disclose unfairness. 6

The Evidence

[17] Whilst I have taken all of the information before me into account, I have summarised the witness evidence in the following terms.

[18] Mr Cunningham’s evidence went to his employment history and to the work he undertook for Scotia. He advised that, while he was initially engaged as a Senior Inspection Supervisor, he agreed to work under a revised contract as an Inspection Supervisor from September 2015 as a consequence of the global downturn in the oil and gas industry. He asserted that a revised contract reflecting this was signed in January 2016. Mr Cunningham’s evidence went to the duties he undertook.

[19] Mr Cunningham advised that, on 29 January 2016 he was advised that an anticipated contract had not eventuated and that Scotia would need to make various personnel redundant. Following further discussions with Scotia management the termination of Mr Cunningham’s employment, effective from 22 April 2016, was confirmed on 1 February 2016. He subsequently engaged in unsuccessful discussions with Scotia management over his claim for redundancy pay. His evidence was that this claim was refused because Scotia asserted that it was not obligated to make redundancy payments because it was a small business.

[20] Lastly, Mr Cunningham’s evidence went to his understanding that another person had been engaged to do the same job he had been undertaking on the day he finished working for Scotia.

[21] Mr Theo is the Director of Scotia. His evidence was that Mr Cunningham was engaged as an Inspection Supervisor - Oil Country Tubular Goods (OCTG) under subclass 457 visa contracts entered into in December 2011 and January 2016. Mr Theo gave evidence about the nature of the work undertaken by Mr Cunningham. He explained the reasons for his conclusion that Mr Cunningham was not engaged under the terms of an award.

[22] Mr Theo’s evidence went to the contract loss that prompted a meeting on 29 January 2016 with Mr Cunningham and other key staff members. At this meeting he advised Mr Cunningham that his position had been identified as redundant. He advised that, as Mr Cunningham had earlier indicated that he intended to leave Scotia in July 2016, he offered him the opportunity to resign early.

[23] Mr Theo’s evidence was that at a further meeting on 1 February 2016, Mr Cunningham confirmed that he did not wish to resign and that he then gave him a draft employment termination letter. This letter was subsequently signed and given to Mr Cunningham. 7

[24] Mr Theo advised that some days later Mr Cunningham requested a redundancy payment but that this was refused because Scotia considered that it had fewer than 15 employees. Mr Theo detailed the basis for this conclusion about the number of employees engaged by Scotia.

[25] Ms Jiumsrisukont is the Scotia Finance and Administration Manager. Her evidence went to confirm that of Mr Theo in relation to the employment of Mr Cunningham and the circumstances of his dismissal. Further, Ms Jiumsrisukont’s evidence went to the number and nature of employment arrangements within Scotia.

Findings

[26] In the course of my consideration of the mandatory requirements of s.389 of the FW Act, I have explained my findings about the various facts about which the parties are in dispute.

Section 389(1)

[27] I have concluded that the change to Scotia’s contractual position in early 2016 meant that the position of Inspection Supervisor, previously held by Mr Cunningham, was no longer required.

[28] In his evidence, Mr Cunningham acknowledged that the role of Inspection Supervisor was directly related to the contract that was terminated in January 2016. 8

[29] In his evidence Mr Theo 9 confirmed the differing skill levels for non-destructive testing personnel and the extent to which lower level staff could undertake various general functions.

[30] The loss of that contract meant that Scotia no longer required the position held by Mr Cunningham to be performed.

Consultation Obligations

[31] Subsection 389(1)(b) of the FW Act requires consideration of whether Mr Cunningham was covered by a modern award or by an agreement. Mr Cunningham asserts that he was covered by the provisions of the Hydrocarbons Award or, in the alternative, by the Manufacturing Award and the requisite consultation requirements were not met. Scotia asserts that neither award had application, and that Mr Cunningham was an award free employee. In the alternative, Scotia assert that the consultation requirements in either award were met in this instance.

[32] Clause 4.1 of the Hydrocarbons Award states:

“This industry award covers employers throughout Australia who are engaged in the hydrocarbons industry in respect of work by their employees engaged in the classifications listed in this award, to the exclusion of any other modern award.”

[33] Clause 4.2 of the Hydrocarbons Award defines the industry to which that Award applies in terms which I am satisfied had application to Scotia, in terms of Mr Cunningham’s employment. However, the application of that Award to Mr Cunningham is dependent on whether there is a classification applicable to him.

[34] Mr Theo’s evidence was that:

“He was not employed by reference to any industrial award. The role of an Inspection Supervisor – Oil Country Tubular Goods (OCTG) is very specialised to the industry and involves the following duties (but not limited to):

• Perform Non-Destructive Testing (NDT) Inspection and reporting.



• Perform Oil Country Tubular Goods (OCTG) Inspection and reporting



• Perform Lifting/Lifted equipment Inspection and reporting.



• Conduct Practical / Competency assessment to Inspectors.



• Determine work requirements and allocates duties to Inspectors.



• Confers with Managers to coordinate job orders and projects form clients.



• Oversees the works process/ procedures and suggests improvements and changes.



• Ensure and enforce safe work practices are complied with according to the company’s work, Health and Safety Policy.” 10

[35] I am not satisfied that there is a classification relevant to the work undertaken by Mr Cunningham in the Hydrocarbons Award. However, it does not follow that simply because Mr Cunningham was not then engaged under the provisions of any award. The coverage of an award is determined by its provisions rather than as a matter of election.

[36] Clause 3 of the Manufacturing Award states:

“3.1 In this award, unless the contrary intention appears:

…

vocational fields are the five vocational fields recognised within the classification structure of this award, namely, trade, technical, engineering/manufacturing, supervisor/trainer/coordinator, and professional. The fields are defined as the:

…

(b) technical field which includes:

(i) production planning, including scheduling, work study, and estimating materials, handling systems and like work; or

(ii) technical work including inspection, quality control, supplier evaluation, laboratory, non-destructive testing, technical purchasing, and design and development work (prototypes, models, specifications) in both product and process areas and like work; or

(iii) design and draughting and like work.” (Underlining added)

[37] Notwithstanding that the definition of a “Technical Worker” is differently phrased, I have concluded that Mr Cunningham should be regarded as a Technical Worker and that his employment was covered by the Manufacturing Award. I have not determined the relevant or specific classification, as that is not fundamental to the issue before me. In any event, because the consultation requirements in the Hydrocarbons Award and those in the Manufacturing Award are common provisions, the question of which of the two awards applies, matters little for this purpose.

[38] The consultation clause in the Manufacturing Award relevantly states:

“9. Consultation

[9—Consultation regarding major workplace change renamed and substituted by PR546288 ppc 01Jan14]

9.1 Consultation regarding major workplace change

(a) Employer to notify

(i) Where an employer has made a definite decision to introduce major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the employer must notify the employees who may be affected by the proposed changes and their representatives, if any.

(ii) Significant effects include termination of employment; major changes in the composition, operation or size of the employer’s workforce or in the skills required; the elimination or diminution of job opportunities, promotion opportunities or job tenure; the alteration of hours of work; the need for retraining or transfer of employees to other work or locations; and the restructuring of jobs. Provided that where this award makes provision for alteration of any of these matters an alteration is deemed not to have significant effect.

(b) Employer to discuss change

(i) The employer must discuss with the employees affected and their representatives, if any, the introduction of the changes referred to in clause 9.1(a), the effects the changes are likely to have on employees and measures to avert or mitigate the adverse effects of such changes on employees and must give prompt consideration to matters raised by the employees and/or their representatives in relation to the changes.

(ii) The discussions must commence as early as practicable after a definite decision has been made by the employer to make the changes referred to in clause 9.1(a)

(iii) For the purposes of such discussion, the employer must provide in writing to the employees concerned and their representatives, if any, all relevant information about the changes including the nature of the changes proposed, the expected effects of the changes on employees and any other matters likely to affect employees provided that no employer is required to disclose confidential information the disclosure of which would be contrary to the employer’s interests.”

[39] I am satisfied that Scotia engaged in discussions with Mr Cunningham soon after it became aware of the contract loss which precipitated his redundancy, in a manner consistent with this clause of the Manufacturing Award. Those discussions were followed by the written advice of 1 February 2016. This advice stated:

“Dear Craig,

Termination of Full-Time Employment

The purpose of this letter is to advise the outcome of recent changes in Scotia Inspection Consultants Pty Ltd’s business operations and what this means for you.

Due to unforeseen business circumstances affecting Scotia Inspection’s book of business, it is unfortunate that Scotia has to undertake business restructuring. A decision has been made to terminate your full-time employment service effective 01 February 2016.

This unfortunate management decision is not performance related issue and it is not a dismissal. (sic)

Based on your length of employment service and terms & conditions of employment, the company is providing you with 12 weeks’ notice with this termination & your last day of employment will be 22 April 2016.

You are required to return all company’s properties under your possession on your last day of servic (in distinct) final payment & leave balances calculated due to you. (sic)

We thank you for your valuable contribution during your employment with us. Please contact me if you wish to obtain a reference in the future.

Yours sincerely,

…” 11

[40] The plain words of this advice confirm that the termination of employment decision was made by the time this advice was provided to Mr Cunningham. The advice cannot be regarded as consistent with consultation directed at explaining the effects of the change proposed and measures to avert or mitigate those effects. Whilst I acknowledge that this advice was prepared in the context of discussions with Mr Cunningham about whether he was prepared to resign his employment, the written advice cannot be regarded as indicative of preparedness on the part of Scotia to review its position. Consequently, I am not satisfied that Scotia provided Mr Cunningham with the written advice required by Cl 9.1. This means that I cannot be satisfied that the consultation requirements referenced by s.389(1)(b) of the FW Act have been met in this instance.

Redeployment considerations

[41] Mr Cunningham asserts that Scotia failed to comply with this requirement in that there were opportunities to redeploy him into other roles which were neither pursued, nor investigated. Mr Cunningham asserts that on his last day at work he met another person who, he asserts, was commencing work in the position he had held.

[42] Mr Theo’s and Ms Jiumsrisukont’s evidence confirmed that other employees were engaged on a casual basis but that these employees were appointed at a lower skill and experience level than Mr Cunningham as this reflected the skills then required. 12 Furthermore, Mr Theo’s evidence13 was to the effect that he had a reasonable basis upon which to conclude that the visa contract, under which Mr Cunningham was engaged, prohibited Scotia from paying the lower rate of pay applicable to those employees working as non-destructive testing personnel after the termination of Mr Cunningham’s employment. In this respect, Scotia assert that the web based information relating to visas of this nature indicated that Scotia was required to continue to pay Mr Cunningham the remuneration specified in his visa contract and that penalties could apply in the event that this remuneration was reduced.

[43] Mr Cunningham’s position was that there were no visa obligations which would have prevented him from undertaking work at a lower rate. Implicit in this position is the premise that Mr Cunningham would have accepted that work.

[44] Given the conclusion I have reached relative to s.389(1)(b) of the FW Act, it is not essential that I consider this issue. Nevertheless, I have concluded that the visa arrangement under which Mr Cunningham worked established obligations on both him and on Scotia. The information provided to me expresses those obligations in the following relevant terms:

[45] The “8107 - WORK LIMITATION” condition is found in schedule 8 of the Migration Regulations 1994 (Cth) under the Migration Act 1958 (Cth) in terms which are dependent on the nature of the sponsorship arrangement. However, regulation 2.79 appears to require that employment cannot be provided in terms and conditions less favourable than those specified in the nomination application; therefore the terms and conditions of employment cannot then be reduced.

[46] Consequently, I am satisfied that the internet based information which was available to Mr Theo indicated that Scotia was obligated to ensure that the employment provisions offered to Mr Cunningham were no less favourable than the terms and conditions which were specified at the time of the nomination. 14 Further, that a breach of this obligation could lead to penalties.15

[47] Consequently, I have concluded that the requirements of s.389(2) of the FW Act were met in this instance as Scotia would have been required to provide redeployment opportunities to Mr Cunningham at a wage rate equivalent to his current rate when the evidence of Mr Theo was that this was not commensurate with the work requirements. 16

[48] Notwithstanding my conclusion in this respect, I do not consider these obligations necessarily would have precluded Mr Cunningham from accepting a lower paid job had such a role been offered to him. However, that is not the test to be applied as the obligation in s.389(2) is directed at the employer.

Conclusion

[49] For the termination of Mr Cunningham’s employment to be regarded as a genuine redundancy such that it simply cannot then be considered to be unfair, I need to be satisfied that each of the elements of the definition in s.389 of the FW Act have been met. I am not satisfied that the requirements of s.389(1)(b) were met in this instance. Accordingly, the Scotia objection to the application must be dismissed. An Order (PR583905) to this effect will be issued and the application will be referred for conciliation.

[50] Two related final observations are appropriate. My conclusion in this regard should not be misconstrued in that it is not indicative of unfairness simply because that issue has not yet been considered. Indeed, if the application ultimately proceeds to a determination on the merits, the termination of Mr Cunningham’s employment could be determined to be fair or unfair. Further, it may be the case that the extent of any unfairness is marginal in that it is limited to the time involved in complying with the relevant consultation requirements. The Full Bench decision in UES (Int’l) Pty Ltd v Harvey 17(UES) may provide some guidance in this respect. The long period of notice provided to Mr Cunningham in this instance may become particularly relevant to the application of the approach in UES.

[51] Secondly, the potential for other litigation associated with Mr Cunningham’s claim for redundancy payments is obvious. To the extent that the parties are able to negotiate an agreed position with respect to all and any claims Mr Cunningham may have, this may be a sensible solution.

Appearances:

G McCorry as agent, for the applicant.

R Lewis of Counsel for the respondent.

Hearing (Conference) details:

2016.

Perth:

27 July.

Adelaide:

18 August.

 1   Transcript 27 July 2016 at 12:45pm

 2   Exhibit R2, attachment AJ1

 3   Respondent’s Submissions on 457 Visa Requirements dated 29 July 2016

 4   Respondent’s Submissions on 457 Visa Requirements dated 29 July 2016

 5   Respondent’s Submissions on 457 Visa Requirements dated 29 July 2016

 6   UES (Int’l) Pty Ltd v Harvey [2012] FWAFB 5241

 7   Exhibit R3, attachment AJ2

 8   Exhibit A2

 9   Transcript 27 July 2016 at 1.06-1.08pm

 10   Exhibit R3

 11   Exhibit R3, AJ2

 12   Transcript 27 July 2016 at 12.30pm and 12.40pm

 13   Transcript 27 July 2016 at 12.41pm

 14   Respondent’s Submissions on 457 Requirements dated 29 July 2016, attachment x

 15   Respondent’s Submissions on 457 Requirements dated 29 July 2016, attachment y

 16   Transcript 27 July 2016 at 12:40pm

 17   [2012] FWAFB 5241

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<Price code C, PR583903>