K Mihos v Multipipe Pty Ltd
[2014] FWC 8866
•11 DECEMBER 2014
| [2014] FWC 8866 [Note: a correction has been issued to this document See [2014] FWC 8866_PR558964 and [2014] FWC 8866_PR558928] |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
K Mihos
v
Multipipe Pty Ltd
(U2014/11083)
SENIOR DEPUTY PRESIDENT WATSON | MELBOURNE, 11 DECEMBER 2014 |
Application for relief from unfair dismissal – application granted – compensation ordered.
[1] On 22 July 2014, Mr K Mihos (the Applicant) made application under s.394 of the Fair Work Act 2009 (the Act) for relief in respect of the alleged termination of his employment by Multipipe Pty Ltd (the Respondent).
BACKGROUND
[2] The Applicant was employed on an ongoing full-time basis for the Respondent from May 2008, following six months of casual employment. From July 2010, he worked on the PowerCorp contract. 1 Under the PowerCorp contract, the Respondent provided “PowerCorp with 2 x civil crews [of two employees] to perform major civil and underground services”.2 The termination of the Applicant’s employment followed the unsuccessful tender by the Respondent for a new contract with PowerCorp to follow its existing contract which expired on 30 June 2014. The Respondent was advised by PowerCorp of its failure to secure the new contract on 9 May 2014.3
[3] The Respondent communicated the loss of the PowerCorp contract to its employees at a Toolbox meeting on 30 May 2014. 4 At the time the Respondent was “unsure” if it could obtain project work with PowerCorp.5
[4] Over the course of June 2014, 6 Mr S Dale, the Managing Director and Mr M Pitt, the Operations Manager of the Respondent, had numerous conversations about how the business could absorb the four employees working on the PoweCorp contract.7 Due to resignations of excavator drivers in other areas of the business, the two excavator drivers on the PowerCorp project were retained in their employment and the managers focussed on the truck drivers – Mr B Kemp and the Applicant. They decided that Mr Kemp would be retained in order to provide power cable pulling services due to utilisation of his winch skills. Opportunities to retain the Applicant in employment were explored but the managers believed they had “one too many truck drivers”. These discussions continued up until the end of June 2014. By 1 July 2014 Mr Dale and Mr Pitt decided to make the position of the Applicant redundant and took steps to promptly give effect to the termination of the Applicant’s employment.8
[5] On 2 July 2014, Mr Pitt asked the Applicant to return from a job site, to which he had been told to attend on the previous day, to a meeting at the depot without being told the purpose of the meeting. 9 The evidence of all witnesses was consistent as to the content of the meeting. Mr Pitt told the Applicant that his position had been made redundant due to no work. The applicant asked if his age was the reason for his redundancy and was told it was not and that the Respondent wanted to retain the right people with the right skills. The Respondent terminated the Applicant’s employment in that meeting on 2 July 2014, on the basis that the Respondent had experienced a downturn in workload, associated with the expiry of the contract in respect of which the Applicant performed work for the Respondent.
[6] The Applicant was handed his termination letter at the meeting and told that his termination took effect immediately. The termination letter, headed “Notice of Redundancy” and dated 2 July 2014 advised that, further to the 2 July 2014 meeting, a decision had been made to terminate the Applicant’s employment, by “reason of redundancy”. 10
THE ISSUES AND OUTCOME
[7] The Applicant submitted that the termination was harsh, unjust or unreasonable.
[8] The Respondent opposed the application on the basis that the dismissal was a genuine redundancy within the meaning of s.389 of the Act and, as a result, the Applicant was not unfairly dismissed under s.385 of the Act. The Respondent also contended, in the alternative, that if it was wrong in relation to the genuine redundancy objection, there was a valid reason for the termination and, having regard to s.387 of the Act, the termination was not harsh, unjust or unreasonable.
[9] For the reasons set out below, I find that:
● the Applicant’s dismissal was not a case of genuine redundancy;
● the termination was harsh, unjust or unreasonable; and
● the Applicant was unfairly dismissed.
[10] I was satisfied that reinstatement was inappropriate in the circumstances and determined that an order for the payment of compensation at the level of four week’s wages should be made.
REASONS FOR DECISION
[11] Under s.385 of the Act, a person has been unfairly dismissed if the Fair Work Commission (the Commission) 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.”
[12] In this case there in no dispute that the Applicant had been dismissed and the Respondent was not a small business to which the Small Business Fair Dismissal Code applied.
[13] Accordingly, it is only necessary to consider and determine whether the Applicant’s dismissal was a case of genuine redundancy, within the meaning of s.389 of the Act and, if it was not a genuine redundancy, whether the termination was harsh, unjust or unreasonable.
[14] If the dismissal was not a case of genuine redundancy and the termination was harsh, unjust or unreasonable, the Applicant would have been unfairly dismissed and it becomes necessary to consider remedy under the Act.
Genuine redundancy
[15] Section 389 of the Act provides:
“(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.”
No longer required the Applicant’s job to be performed
[16] I find that the Respondent no longer required the Applicant’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise, associated with the loss of the PowerCorp contract.
[17] The evidence was:
● with the loss of the PowerCorp contract, the Respondent no longer required four workers who were engaged to work under the contract;
● whilst three of the employees were able to be redeployed in the Respondent’s business, it no longer required the work of one driver to be performed; and
● a decision was made, in that context, to make the Applicant’s position redundant.
[18] I find that the reason for the dismissal by the Respondent of the Applicant’s employment was that the Respondent no longer required the job to be performed by anyone because of changes in the operational requirements of its enterprise, consequent upon the loss of the PowerCorp contract. The evidence does not establish that there was any other reason for the Applicant’s dismissal.
Consultation
[19] The Multipipe Pty Ltd & ETU Powerline Enterprise Agreement 2011-2013 (the Agreement) 11 applied to and covered the Applicant in respect of his employment with the Respondent. Clause 41.1 – Introduction of Change – of the Agreement imposes obligations in relation to consultation on the Respondent in relation to “a definite decision to introduce major changes in production, program, organisation, structure or technology that are likely to have significant [e]ffects on employees”.
[20] The Respondent submitted that:
“a small contract change affecting one redundancy would not be considered a major change in a company with approximately 22 employees and as a result, the ‘major change’ clause would not be applicable in this situation.” 12
[21] The Respondent’s contentions in this regard misconstrued the basis upon which the obligation to consult arises in clause 41.1 of the Agreement. The Respondent’s focus on the significance of the impact on employees, in that the change only resulted in a single redundancy, is misplaced. The obligation arises in respect of major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees. If there is a definite decision to make major changes likely to significantly affect employees, the obligation to consult arises. It is not relevant that the ultimate effect on employees is not significant. A major purpose of the consultation clause is to identify measures to avert or mitigate the adverse effects of the changes on employees and if fruitful can reduce the impact, or avoid any impact, on employees of the significant change. In this case, the changes consequent upon the loss of the contract removed the need for the employment of four employees but, due to other circumstances, only one redundancy was ultimately required. That did not reduce the significance of the change or the likely significant effect on employees. It is the definite decision to introduce major changes likely to have significant effects on employees which activates the obligation upon the employer to consult.
[22] The Respondent also submitted that it was well understood throughout the company and its workforce that the PowerCorp contract expired on 30 June 2014 and, unless it was successfully tendered for a replacement contract, the work would cease at that point, such that the loss of the contract was not a change. It was the definite decision to introduce major changes likely to have significant effects on employees which activates the obligation upon the employer to consult. That is so whether the changes arise out of unexpected circumstances which prompt the changes or the changes are responsive to known or likely circumstances. In any case, non-renewal of the contract was unexpected. Mr Dale’s evidence was that until the 9 May 2014 advice by PowerCorp that its tender was “unsuccessful”, the Respondent believed that the contract would be renewed. 13
[23] The organisational change flowing from the non-renewal of the PowerCorp contract was a major change with likely significant effects on employees. Clause 41.1 of the Agreement provision obliged the Respondent to consult about the redundancy in that it was a significant effect of a definite decision of the Respondent to introduce major changes in the organisation within its business, necessitated by the loss of the contract. It follows, that for the Applicant’s dismissal to be a case of genuine redundancy the Respondent needed to comply with clause 41.1 – Introduction of Change – of the Agreement.
[24] The Respondent contended that it did consult in accordance with the requirements of clause 41.1 of the Agreement on three occasions:
1. Through a Toolbox meeting of 30 May 2014:
According to Mr Pitt’s evidence, in the 30 May 2014 Toolbox meeting he advised employees that the PowerCorp tender had been unsuccessful and the loss of contract could “potentially lead to redundancies” and provided the employees with an “opportunity to ask questions and discuss the matter”. 14 Employees were informed that the Respondent was unclear as to whether it was able to “perform any kind of work” (e.g. project work) for PowerCorp following the loss of the contract.15
2. Advice by Mr A Fevola, a Project Manager of the Respondent to employees in mid June 2014:
Mr Fevola attended at the site and told the Applicant about the status (loss) of contract and that it may affect his employment. 16 Mr Fevola’s evidence is that he went to the PowerCorp yard and stated that the Respondent had “lost the contract”. Mr Kemp asked “[w]hat does that mean to us” and was advised to attend at the Respondent’s depot “from 1 June”:17
3. The 2 July 2014 meeting at which the Applicant was advised on the termination of his employment
The Applicant’s evidence 18 was that, at the 2 July 2014 meeting, Mr Pitt advised him that his “position had been made redundant due to no work”. The applicant asked if his “age” was the reason for his redundancy and was advised it was not and that the Respondent wanted to “retain the people who have the right skills”. The Applicant was handed his “termination letter” and he was advised that his “dismissal took effect immediately”. The Applicant’s evidence was consistent with that of the Respondent’s witnesses.
[25] I find that the Respondent did not comply with its obligation under clause 41.1 of the Agreement to consult the Applicant about the changes which led to his redundancy. The Toolbox meeting and Mr Fevolva’s meeting went no further than to advise employees of the loss of the PowerCorp contract and the potential for redundancies. Even accepting that employees were invited by Mr Pitt to “discuss the matter” on 30 May 2014, I am not satisfied that either meeting involved consultation in a meaningful sense.
[26] The 2 July 2014 meeting certainly did not constitute consultation with the Applicant. The Respondent did no more than to notify the Applicant of the termination of his employment due to redundancy and explain why the Applicant had been selected for redundancy. It did not constitute consultation in any sense.
[27] In any case, s.389(1)(b) of the Act requires compliance with any obligation in clause 41.1 of the Agreement to consult with the Applicant. Clause 41.1 of the Agreement contains a range of specific obligations:
● A requirement to discuss with the employees “affected and their representatives”, the changes and their likely effect on employees and measures to avert or mitigate the adverse effects of such changes on employees (clause 41.1.2(a)). No such discussion occurred with the Applicant. No steps were taken by the Respondent to ascertain from the Applicant the identity of any person he wished to represent him, in order that the Respondent could comply with its obligation to discuss the required matters with the Applicant’s representative.
● A requirement to “provide in writing to the employees concerned and their representatives, all relevant information about the changes including the nature of the changes proposed; expected effects of the changes on employees and any other matters likely to affect employees” (clause 41.1.2(c)). No written information was provided to the Applicant and no attempt made to identify his representative.
● A requirement to “provide information in languages other than English for employees of non-English speaking background” (clause 41.1.3)). The Applicant appears to be a person of a non-English speaking background. 19 No written information was provided to the Applicant in a language other than English (or in English) which, on the evidence was not his native language.
[28] The Respondent did not comply with any of these specific requirements of clause 41.1 of the Agreement.
[29] I find that the Respondent did not comply with its obligation in the Agreement to consult about the redundancy, as required by s.389(1)(b) of the Act.
Redeployment
[30] I find that the Respondent did consider redeployment options but was unable to identify any. There was no evidence of suitable positions to which the Applicant could have been reasonably redeployed.
Conclusion as to genuine redundancy
[31] The Respondent did not comply with its obligation under clause 41.1 of the Agreement to consult the Applicant about the redundancy. The dismissal was not a case of genuine redundancy.
Harsh, unjust or unreasonable
[32] In order to determine whether the Applicant was unfairly dismissed it is necessary to consider whether the termination was harsh, unjust or unreasonable, against the criteria in s.387 of the Act:
“In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:
(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and
(b) whether the person was notified of that reason; and
(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and
(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and
(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and
(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
(h) any other matters that the FWC considers relevant.”
[33] In the circumstances of this matter, involving a redundancy, but not a genuine redundancy within the meaning of s.389 of the Act, I have regard to:
● the observations of Vice President Watson in J Maswan v Escada Textilvertrieb T/A ESCADA (Escada) 20 that “. . . a decision to dismiss on account of redundancy will only be harsh, unjust or unreasonable if the rationale for the decision is seriously undermined or if there is a serious error in procedure such that renders the termination unfair in the circumstances”; and
● the majority decision in UES (Int’l) Pty Ltd v Harvey (UES) 21 in which it was found that the termination was harsh, unjust or unreasonable, notwithstanding “sound, defensible and well-founded reasons for . . . dismissal, being that [the employer] no longer required [the employee’s] job to be performed by anyone because of changes in the operational requirements of its enterprise and it was not reasonable in all the circumstances to relevantly redeploy [the employee].22
Valid reason (s.387(a) of the Act)
[34] The Applicant’s employment was terminated because the Respondent no longer required his job to be performed by anyone because of changes in the operational requirements of its employer’s enterprise, in the context of the loss of the PowerCorp work as a result of the unsuccessful tender for a new contract.
[35] The reasons for the dismissal of the Applicant were not related to his capacity or conduct. There was no evidence of any problems with the Applicant’s conduct or performance.
[36] Accordingly, there cannot have been and was not a valid reason for the Applicant’s dismissal which related to his capacity or conduct. This is a neutral matter as to whether the Applicant’s dismissal was harsh, unjust or unreasonable in the context of the current matter.
Notification and opportunity to respond (ss.387(b) and (c) of the Act)
[37] The matters in ss.387(b) and (c) are concerned with whether there was procedural fairness in respect of a reason for dismissal related to the Applicant’s capacity or conduct. In fact, given the evidence as to the meeting on 2 July 2014, the Applicant was notified of the reason for his dismissal but not given an opportunity to respond on that date or at any other time. However, given the dismissal was not based on the Applicant’s conduct or performance, these are neutral matters.
Support person (s.387(d) of the Act)
[38] The Respondent did not unreasonably refuse to allow the Applicant to have a support person present to assist at any discussions relating to his dismissal, although the calling of the Applicant to the meeting at which he was dismissed, without notice of the purpose of the meeting, denied him any real opportunity to obtain representation. I consider this to be a neutral matter with respect to whether the dismissal was harsh, unjust or unreasonable.
Unsatisfactory performance (s.387(e) of the Act)
[39] The Applicant’s dismissal did not relate to his unsatisfactory performance.
Size of the enterprise and human resource management (ss.387(f) and (g) of the Act)
[40] The Respondent has just over 20 employees and does not have dedicated human resources staff. I accept that the absence of specialist human resources expertise adversely impacted upon the Respondent’s deficiencies in meeting its obligations under clause 41.1 of the Agreement.
Other matters (s.387(h) of the Act)
[41] I have already found that the Applicant’s employment was terminated because the Respondent no longer required the Applicant’s employment to be performed by anyone because of changes in the operational requirements of the employer’s enterprise, in the context of the loss of the PowerCorp contract. In my view, this provides a sound, defensible and well-founded reason for the Applicant’s dismissal and a valid reason for the termination not related to conduct or performance of the Applicant. This consideration goes against a conclusion that the dismissal was harsh, unjust or unreasonable.
[42] However, the Respondent failed to consult the Applicant as required by clause 41.1 of the Agreement. The failure to meet the consultation obligations was significant, with communication with the Applicant being no more than notification or advice of the possible redundancy of the Applicant’s position and the reasons for it. It did not constitute consultation at all in any meaningful sense. The failure to comply with specific requirements within clause 41.1 of the Agreement was significant in that the Applicant was without representation by his union which he would have otherwise obtained if he knew that hisemployment was at risk 23 and had no opportunity to engage in consultation or propose measures to mitigate or avoid the impact of the changes on him. In my view, the absence of consultation in accordance with the Agreement was a most serious procedural deficiency of a type contemplated by Vice President Watson in Escada. This consideration weighs heavily in favour of a conclusion that the Applicant’s dismissal was harsh, unjust or unreasonable.
Conclusion regarding harsh, unjust or unreasonable
[43] Taking into account the matters referred to above, I am satisfied that the dismissal of the Applicant by the Respondent was harsh, unjust or unreasonable. I accept, as noted by the majority in UES, 24that a failure to consult does not necessarily mean that a dismissal was harsh, unjust or unreasonable. However, in this case the failure to consult was significant and unreasonable and causes me to be satisfied that the dismissal was harsh, unjust or unreasonable, notwithstanding the valid reasons for the Applicant’s dismissal and the effect on process of the absence of human resources expertise within the Respondent’s business.
Unfairly dismissed
[44] The Applicant has been dismissed, the dismissal was harsh, unjust or unreasonable; the Small Business Fair Dismissal Code has no application in the circumstances of the present matter and the dismissal was not a case of genuine redundancy. I find that the Applicant was unfairly dismissed.
Remedy
[45] Given my finding that the Applicant was unfairly dismissed, it is necessary to consider remedy.
[46] In the circumstances where the Applicant’s employment was terminated because the Respondent no longer required the Applicant’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise, I am satisfied that reinstatement of the Applicant is inappropriate. I consider that an order for the payment of compensation is appropriate in all the circumstances of the case.
[47] In determining the compensation to be ordered, I am required to consider the matters in s.392(2) of the Act
Remuneration that would have been received (s.392(2)(c) of the Act)
[48] In circumstances where my finding is based on the failure of the Respondent to consult the Applicant in accordance with clause 41.1 of the Agreement, I am of the view that the amount the Applicant would have received, or would have been likely to receive, if he had not been dismissed would have been limited, extending no longer than the period which would have been required for compliance by the Respondent with its obligations under the Agreement.
[49] The Applicant submitted that it would have taken ten weeks for the consultation process to have been reasonably finalised, 25 relying on the obligations on the Respondent in clause 41.1.4(a) of the Agreement to “take reasonable steps to mitigate adverse effects of change upon employees”, the ability of the Applicant to challenge the reasonableness of steps taken under the disputes procedure of the Agreement and the continuation of the Applicant’s employment, reflecting the “status quo” under the disputes procedure until the completion of that procedure, through to arbitration. I do not accept the ten week period and the reasoning for it that it reflects the period reasonably required to comply with the requirements in clause 41.1 of the Agreement. The ten week period should be more properly seen as being at the outer limit.
[50] Having regard to the obligations on the Respondent in clause 41.1 of the Agreement, I find that had the Respondent complied with its obligations in the Agreement to consult with the Applicant about the change leading to and about the redundancy that led to his dismissal, the Applicant’s employment would not have continued beyond a further five weeks.
[51] On the basis of weekly gross earnings of $1,308.80, which was utilised by the Respondent for payment in lieu of notices and recorded in the Separation Certificate 26 the remuneration lost over the five week period was an amount of $6,544.00 gross plus 9% superannuation.
Remuneration earned (s.392(2)(e) of the Act)
[52] The Applicant gave uncontested evidence that he had not earned any income since the termination of his employment. 27 I am satisfied that the Applicanthasearnedno remuneration from other sourcesfollowing his dismissal.
Income reasonably likely to be earned (s.392(2)(f) of the Act)
[53] The five weeks following the Applicant’s dismissal, on which the remuneration of $6,544.00 gross plus 9% superannuation is based, does not extend to the period referred to in s.392(2)(f) of the Act.
Other matters (s.392(2)(g) of the Act)
[54] No other relevant matters were put to me. There are no other relevant matters.
Viability (s.392(2)(a) of the Act)
[55] The Respondent made no submissions in respect of the effect of an order for compensation on the viability of its business. There was no evidence that an order for the amount in question would affect the viability of the Respondent’s enterprise.
Length of service (s.392(2)(b) of the Act)
[56] The Applicant had worked for the Respondent since 2008. That period of service provides no basis for reducing the amount of compensation.
Mitigation efforts (s.392(2)(d) of the Act)
[57] The Applicant gave uncontested evidence that he had sought other employment and had been unable to secure alternate employment. 28 His evidence was that when he had explained his skills and work history, he had been invited to forward a resume but had not received any calls back, which he attributed to the disclosure of his age – over 65 years when dismissed – in his resume. I am satisfied that the Applicant made reasonable efforts to mitigate the loss suffered by him.
Misconduct (s.392(3) of the Act)
[58] Misconduct did not contribute to the decision to dismiss the Applicant and there was no suggestion of misconduct on his part.
Compensation cap (s.392(5) of the Act)
[59] The amount of $6,544.00 gross plus 9% superannuation is less than the compensation cap in s.392(5) of the Act for the Applicant.
Conclusion as to remedy
[60] I am satisfied an order for the payment of compensation of $6544 gross plus 9% superannuation, less taxation as required by law, the Respondent to the Applicant in lieu of reinstatement is appropriate in all the circumstances of the case.
[61] An order to this effect is published in PR558758. The Respondent is required to make the payment within 21 days of the publication of the order.
SENIOR DEPUTY PRESIDENT
Appearances:
K Reidy on behalf of the Applicant.
A Van Den Brink on behalf of the Respondent.
Hearing details:
2014.
Melbourne:
November 18.
1 Exhibit M1, at para 7.
2 Exhibit MP2, at para 3.
3 Exhibit MP1, at para 7 and Exhibit MP2, at para 6.
4 Exhibit MP1, at para 8.
5 Exhibit MP2, at para 8.
6 Exhibit MP1, at paras 9–11 and Exhibit MP2, at para 9.
7 Exhibit MP2, at para 10.
8 Exhibit MP2, at para 11.
9 Exhibit MP1, at para 15 and Transcript at paras 192–194.
10 Exhibit MP1, Attachment MP4.
11 AE890958.
12 Exhibit MP6, at p. 6.
13 Exhibit MP2, at para 7.
14 Exhibit MP1, at para 8.
15 Exhibit MP1, at para 8.
16 Transcipt, at para 83.
17 Transcipt, at para 400.
18 Exhibit M1, at para 16.
19 Transcript, at paras 49–53.
20 [2011] FWA 4239, at para 39.
21 [2012] FWAFB 5241.
22 [2012] FWAFB 5241, at para 47.
23 Exhibit M1, at para 17.
24 [2012] FWAFB 5241.
25 Exhibit M4, at para 17.
26 Exhibit M2.
27 Exhibit M1, at para 20.
28 Exhibit M1, at para 19.
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