Ekanayake v Calum Textiles Pty Ltd
[1996] IRCA 423
•26 August 1996
DECISION NO: 423/96
CATCHWORDS
INDUSTRIAL LAW- UNLAWFUL TERMINATION OF EMPLOYMENT - VALID REASON - REDUNDANCY - selection process that did not involve CONDUCT AND PERFORMANCE - HARSH UNJUST OR UNREASONABLE
Industrial Relations Act 1988 ss170DC, 170DE, 170EA Quality Bakers of Australia Ltd v John Goulding & Anor. (1995) 60 IR 327;
Selvachandran v Peteron Plastics (1995) 62 IR 371;
Kenefick and Ors. v Australian Submarine Corporation Pty Ltd ( No. 1) (1995) 62 IR 107;
Kozel v Kellog (Aust.) Pty Ltd, (Wilcox CJ, 26 July 1996, unreported);
Kenefick and Ors. v Australian Submarine Corporation Pty Ltd (No. 2) (Ryan, Beazley & North JJ, 26 March 1996, unreported);
Leddicoat v Schiavello Commercial Interiors (SA) (von Doussa J, 18 October 1995, unreported)
EKANAYAKE v CALUM TEXTILES P/L
VI96/4779
Before: MURPHY JR
Place: MELBOURNE
Date/s of hearing: 22 MARCH AND 23 AUGUST 1996
Date of judgment: 26 AUGUST 1996
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI96/4779
BETWEEN:
SUBHA EKANAYAKE
Applicant
TEXTILE CLOTHING & FOOTWEAR UNION OF AUSTRALIA
Applicant
AND
CALUM TEXTILES PTY LTD
Respondent
BEFORE: MURPHY JR
PLACE: MELBOURNE
DATE: 26 AUGUST 1996
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The application is dismissed.
Note: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI96/4779
BETWEEN:
SUBHA EKANAYAKE
Applicant
TEXTILE CLOTHING & FOOTWEAR UNION OF AUSTRALIA
Applicant
AND
CALUM TEXTILES PTY LTD
Respondent
BEFORE: MURPHY JR
PLACE: MELBOURNE
DATE: 26 AUGUST 1996
REASONS FOR DECISION
Delivered ex tempore - revised from the transcript
The applicant seeks a remedy under s170EA of the Industrial Relations Act (“the Act”) following the termination of her employment on 31 August 1995. On that day the respondent, on the grounds of redundancy, dismissed her from her position as a quality control assistant in its physical testing laboratory. The applicant alleged that the respondent had no valid reason to dismiss her, its selection process was flawed, and that it had failed to take proper measures to avoid termination of employment. The respondent's defence was that the termination was for genuine operational reasons, the selection process was an objective one, it had explored alternatives to termination, and paid a severance payment.
Background.
The respondent is a member of a group of companies involved in various aspects of the textile industry. Two companies, the respondent and Genevieve Yarns, operate on a single site in the Melbourne suburb of Thomastown. In August 1995, the quality control manager of the respondent was Mr Noel McGrann. He reported to Mr Rick Halpin, the General Manager Manufacturing.
For some time prior to August the textile industry and, in particular, the business of the respondent was in a downturn. The respondent's volumes were down by 30 per cent. In July the plant had been closed for a week and employees were being encouraged to take any leave owing, and some took unpaid leave. The respondent, according to Mr Halpin, had undertaken a number of other cost cutting measures to "ease the burden on the profitability of the business".
In August 1995, Mr Halpin instructed Mr McGrann to reduce the physical testing laboratory by one person. He told him:
"I said that the volume was down; it was forecasted to stay down, that it did not appear the volume was coming back, that we had built that area up in the recent period and that the number of batches going through that area required us to significantly reduce our manpower in that area".
Mr McGrann said he was told:
"Yes, Rick (Halpin) had got me into his office and said that due to the downturn in overall business, and the need for a quicker customer response to their needs, they needed to integrate the quality assurance administrator's job into a laboratory, and therefore they would need to reduce the staff levels by one in the physical testing laboratory".
Mr McGrann was told to consult the Human Resources Department to carry out the order in a fair and equitable manner. At the time Mr McGrann was in charge of three areas or departments - the physical testing laboratory, the shade testing laboratory, and inspection. The two laboratories were physically separate, and performed different types of tests. There were four employees in the physical testing laboratory. There were three in the shade testing laboratory. Also under the control of Mr McGrann was Ms Townsend-Booth, who was the Quality Assurance Administrator. She controlled the documentation associated with the quality assurance function within the respondent. She was to be integrated into the physical testing laboratory. Staff in the physical testing laboratory were to be cut from four to three as a result of the decision.
At that time the applicant worked in the physical testing laboratory. She was the last of four to join the laboratory. She had commenced work with the respondent on the production floor in June 1993. In September 1994 she had been transferred to the physical testing laboratory. Mr McGrann sought the advice of Ms Duncan, the Human Resources Manager. He was told to seek a volunteer first. He was told of other vacancies within the group, and also told that the selection criteria could include length of service, efficiency, and attendance. He was told to involve the second applicant, the union.
On Thursday, 24 August, Mr McGrann spoke to the four staff in the physical testing laboratory. He told them of the need to reduce the laboratory staff by one. He gave them details of a vacancy on afternoon shift in the laboratory of another group company, Genevieve Yarns. He told them that if no-one volunteered, then he would seek a person to be retrenched on the basis of criteria open to him, for example, last in - first out, length of service, and by skills and experience. He advised the staff to consider the matter over the weekend.
On Monday, 28 August, Mr McGrann ascertained that there were no volunteers among the four staff affected. He advised the union's shop steward, Mr Brooks, of the matter and told him he would need to be involved the following day when he advised the four staff which of them had been selected to be made redundant. On Monday, Mr McGrann decided to apply the last in - first out principle to select who was to be made redundant. He said:
"Well, I had a number of criteria which as I've said was (sic) skills, experience, length of service, and last in and first out - and everybody was doing the same job, there was no sort of difference in what they were doing, they were all doing equally well. I selected the only personal reason was (sic) last in/first out, was (sic) - I thought was the best selection I could use; the only selection, and (sic) to the physical testing laboratory".
On Tuesday 29 August the applicant was called in to the training room and advised that she had been selected for redundancy. Mr McGrann was present, as was Mr Mascoll, the Technical Manager, and Mr Brooks, the shop steward. The applicant was advised of other vacancies that existed within the plant "that she would have the opportunity to apply for". The vacancies were an afternoon shift position in the laboratory at Genevieve Yarns, machine operator positions on the site with the respondent, and a customer services position at Moorabbin. The minutes (Exhibit R1) record that the applicant agreed to be interviewed by Mr Taylor of Genevieve Yarns for the laboratory position, and that "she would advise him that the hours of 11 am - 7 pm would suit her personell (sic) requirements".
The minutes record that Mr Brooks and Mr Mascoll "commented that it would be wise to take up any of the above vacancies if offered to her as a stop gap until any other positions became available that suited her personell (sic) requirements".
Efforts to redeploy the applicant.
In his evidence Mr Mascoll said the applicant's response to the production positions was that they were a demotion. Mr McGrann said that she said she would not go back to where she originally came from. After the meeting the applicant spoke to Ms Donis, the Human Resources Consultant of the respondent. She had been delegated the assignment by Ms Duncan. Ms Donis advised the applicant about the production positions. The applicant was adamant she was not interested in those positions. Ms Duncan, the Human Resources Manager, confirmed that the applicant expressed the same attitude to her about the positions. Ms Donis discussed the position at Moorabbin with the applicant. The applicant advised her a day or so later that for reasons relating to distance, and child care she was not interested in applying for that position. Ms Duncan said she was present when this conversation occurred. Mr McGrann said the applicant stated on 31 August that travelling to Moorabbin was too far.
Ms Donis arranged for an interview between Mr Fisher, of Genevieve Yarns, and the applicant in relation to the laboratory position there. He gave evidence that he had an informal interview with the applicant regarding a vacancy in his laboratory. The position he sought to fill was an afternoon shift from 3 pm to 11.20 pm. The applicant "kind of declined" the position on offer. She said that the hours did not suit her. She wanted Mr Fisher to arrange to change the hours of other staff so that she could work 2 pm to 10 pm, or 1 pm to 9 pm. Mr Fisher told her that he would take what she had told him on board. The applicant did not have any of the analytical background in a laboratory that he was looking for. He subsequently told Ms Donis that the applicant was not suitable, and in September advertised externally. The external advertisement (Exhibit A2) imposes a minimum of VCE in chemistry, and states that any applicants must be prepared to work an eight hour shift.
On 30 August, the applicant was absent from work. She tendered a medical certificate on 31 August stating that she was suffering from stress. On 31 August a meeting was held. Present were Mr McGrann, Mr Brooks, Ms Donis, and the applicant. At that meeting, Ms Donis again went through the positions that were available. Her evidence was:
"As I said earlier the finishing position, the dye house, or the machine operators positions, and also the Moorabbin position. It was clear at that time she did not want to pursue any of those positions".
Counsel: “What did she say to you to make it clear?”
Witness:“Well, I said, do you understand? She said”, “yes”. “Do you want to consider any positions?” She said “ no”. “Do you want the redundancy?” She said, “yes”. “ We then drew up the paperwork.”
The applicant was then paid two weeks pay in lieu of notice, six weeks severance pay pursuant to the award, and her accrued entitlements.
The applicant's account.
The applicant's account in evidence was in general accord with what has just been outlined. The areas where she differed related to the question of when the redundancy was first raised. She maintained that the possibility of redundancy was not raised until 31 August. This is contrary to the weight of evidence of the respondent's witnesses, and in particular Mr McGrann, who said he raised it on 24 August. I prefer the respondent's version of events on this issue.
The most significant issue of dispute was the applicant's response to the proposed alternative positions. She maintained in her evidence she told Mr McGrann, Ms Duncan, and Ms Donis, that she rejected the alternative positions on the production floor because of a medical problem with her arms. All the relevant respondent's witnesses deny that the applicant had raised the question of her physical capacity to perform the production positions. On this issue I accept that the only reason proffered by the applicant for not considering the positions offered on the production floor was that they were a backward step, or a demotion. I am satisfied that the applicant declined to consider those positions in the face of advice from Mr Brooks, Mr Mascoll, and Ms Duncan, that she should do so as a stop gap measure pending the possible availability of other positions later.
The third area of dispute related to the Moorabbin job. The applicant maintained that Ms Donis virtually talked her out of applying for the position, because of the travel involved, the fact that it had already been externally advertised, and had created a lot of interest. Ms Donis denied this. She said that she merely asked the applicant to consider the distance from her home in Mill Park when applying. The applicant had not sought to pursue the matter. On this issue I accept the evidence of Ms Duncan, Ms Donis, and Mr McGrann, that the applicant had raised the distance, and her own domestic difficulties, as the reason for not pursuing that vacancy. I am satisfied that the respondent took no action to deter the applicant from applying. The applicant virtually conceded as much in her evidence when she said, "I thought it not really worth going up to Moorabbin".
Was this a genuine redundancy?
Much of the cross-examination of the respondent's witnesses sought to impugn the decision of the respondent to reduce by one the staff numbers in the physical testing laboratory. It was put to the respondent's witnesses that the quality control department should have been treated as consisting of the physical testing laboratory and the shade testing laboratory. It was also put that it should have included the administrative assistant, Ms Townsend-Booth. It was suggested that the staff member position to be eliminated should have come from this pool of employees. The line of cross-examination flies in the face of decisions of the court in Quality Bakers of Australia Ltd v John Goulding & Anor. (1995) 60 IR 327, Selvachandran v Peteron Plastics (1995) 62 IR 371 and Kenefick and Ors. v Australian Submarine Corporation Pty Ltd ( No. 1) (1995) 62 IR 107.
The court is not required to sit in the employers managerial chair when an employer is restructuring its operations. It was a managerial decision, in the face of economic pressures and a production downturn, to reduce the number of staff in the physical testing laboratory by one. In a recent decision Kozel v Kellog (Aust.) Pty Ltd, (Wilcox CJ, 26 July 1996, unreported) Wilcox CJ has confirmed that this comment from Kenefick (No. 1) (above) at 116 remains unaffected by Kenefick and Ors. v Australian Submarine Corporation Pty Ltd (No. 2) (Ryan, Beazley & North JJ, 26 March 1996, unreported):
“While the subsection (s170DE(1)) requires the employer to establish that the termination was a logical way of dealing with the problem of employee capacity or conduct, or operational requirements, that gave rise to it, it does not require proof that this was the only logical course. The subsection was designed to inhibit capricious terminations, not to put the Court in the employer's managerial chair.”
In Quality Bakers (above) at 332, Beazley J said:
“There was no dispute that "the operational requirements" of a business may include redundancy. A redundancy will arise where an employer has labour in excess of the requirements of the business; where the employer no longer wishes to have a particular job performed; or where the employer wishes to amalgamate jobs....”
That was the position here. I am satisfied on the evidence that the staff in the two departments under Mr McGrann performed different functions and the two departments remained as discrete departments. Ms Townsend-Booth performed administrative tasks associated with the quality assurance function. Her duties were not the same as those performed by the members of physical testing laboratory, although she liaised with them. I accept the evidence of Mr Halpin and Mr McGrann as to the business downturn, and in this context that this resulted in an operational requirement of the respondent to reduce numbers in the physical testing laboratory.
The fact that there may have been other ways of dealing with the downturn is, subject to s170DE(2) of the Act, not relevant. The respondent's decision was one of a series to maintain the viability of the business in difficult economic times. Much was made of apparent assurances of job security during enterprise bargaining negotiations prior to August. I accept the evidence of Mr Halpin and Mr McGrann that the position had changed in August and in the face of a continuing downturn a decision was taken to make a position in the physical testing laboratory redundant.
The respondent thus had a sound or defensible reason to integrate Ms Townsend-Booth into the physical testing laboratory, and as part of that integration to reduce the number of assistants from four to three. It is not for the Court to substitute its own view as to whether in the face of the operational requirements of a production downturn, squeezed margins and cost cutting, one particular course of action should have been chosen over another. The respondent has satisfied its onus of proof that it had a valid reason to terminate the applicant's employment.
Was the termination harsh, unjust or unreasonable?
The applicant carries the onus of proof on this issue. The respondent is required to act not unreasonably when faced with a redundancy. This imposes obligations for consultation, exploration of lesser options, the adoption of proper selection criteria and the payment of appropriate severance and termination pay. It was argued here that the process of consultation was truncated and the applicant had no opportunity to discuss the severance payment. It was also argued that the issue of redundancy had not been concluded in the enterprise bargaining negotiations.
Here the respondent has discharged its obligation to consult both the union and the applicant. I draw an inference against the applicant for the failure to lead any evidence from the union to support her version of events and her criticism of the process. The shop steward was involved in the process and efforts were made to contact the union organiser. The only failure of the respondent was to notify the union in writing. In the overall context of three meetings at which Mr Brooks was involved, and attempts by Ms Duncan to contact the union organiser, this was a minor matter. Continuing enterprise bargaining negotiations where redundancy may have been an issue do not prevent the respondent proceeding with an individual redundancy, provided it followed a fair process and consultation. Here both the applicant and the union were consulted as part of the process. The decision Leddicoat v Schiavello Commercial Interiors (SA) (von Doussa J, 18 October 1995, unreported) is not directly analogous given the efforts made here to involve the union in the process, and to explore other alternative employment options.
It was submitted that the respondent failed to make proper efforts to redeploy the applicant. I have already indicated that I prefer the respondent's version of events relating to the offer of production jobs and the job at Moorabbin. I am satisfied that the applicant at no time raised her medical problem as a ground to refuse to consider the production positions. I am further satisfied that the applicant, for personal reasons, declined to pursue the possibility of applying for the Moorabbin position.
Similar considerations apply in relation to the Genevieve Yarns position. That company is a discrete entity and was entitled to consider the applicant within its own productive requirements. The applicant was unable, or unwilling, to offer herself for the position for the shift that was sought. This, combined with her limited experience in that type of laboratory, gave Mr Fisher reasonable grounds for indicating to the respondent that he found her unsuitable. I am satisfied that the efforts made by the respondent to avoid the redundancy here were reasonable and appropriate.
It was argued that the selection criteria infringed the Act. Kenefick (No. 2) (above) shows that employers are, in a redundancy, entitled to use non-evaluative criteria where the case involves "a choice between employees, all of whom were satisfactory." That is what was used here. No personal attribute, either favourable or unfavourable, that the applicant could respond to, was used. S170DC of the Act has no application here. The respondent used a fair and reasonable process to select the applicant, namely last in - first out to the laboratory. And the union, which knew about the process, has not come to court to levy any criticisms. There is no merit in the submission that criticises the selection process.
Similar considerations apply to the argument that the applicant was unable to negotiate her severance payment. The payments made comply with what was set out in the relevant award. The respondent, having exhausted alternatives short of termination acted not unreasonably, and in accordance with its obligation in the award, in making those payments.
Having regard to all these matters, the applicant has not discharged her onus of proof that the termination of employment here contravenes s170DE(2) of the Act. The application will be dismissed.
I certify that this and the preceding eleven (11) pages
are a true copy of the reasons for decision of
Judicial Registrar Murphy as recorded in the transcript
and revised by the Judicial Registrar.
Associate: KAREN HALSE
Dated: 26 August 1996
APPEARANCES
Counsel appearing for the applicant: Mr Neville Kenyon Solicitors for the applicant: Maurice Blackburn & Co. Counsel appearing for the respondent: Mr S Wood Solicitors for the respondent: Freehill Hollingdale & Page Dates of hearing: 22 March and 23 August 1996 Date of Judgment 26 August 1996
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