Mr Leon Morgan v Mineral Technologies Pty Ltd

[2015] FWC 4142

[2015] FWC 4142

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr Leon Morgan
v
Mineral Technologies Pty Ltd
(U2015/3198)

SENIOR DEPUTY PRESIDENT RICHARDS BRISBANE, 24 JUNE 2015

Summary: unfair dismissal application - whether application jurisdictionally competent - s.389 - failure to comply with prescriptions of award consultation - compliance in other respects - whether dismissal harsh unjust or unreasonable - application under s.394 of the Act dismissed.

[1] This is an application by Mr Leon Rex Morgan under s.394 of the Fair Work Act 2009 (“the Act”) seeking an unfair dismissal remedy in respect of his termination as a full-time Packing Technician from Mineral Technologies Pty Ltd (“the employer”).

[2] Mr Morgan had commenced his duties as a Packing Technician on 20 February 2012. He was terminated on 6 February 2015, ostensibly for reasons of his position having become redundant.

[3] Mr Morgan was said to have been employed pursuant to the Mineral Technologies (MT) Enterprise Bargaining Agreement 2012 (“the Agreement”).

[4] The notice of redundancy received by Mr Morgan on 6 February 2015 read relevantly as follows:

“This letter serves to confirm our verbal discussions, that due to the economic downturn and the resulting drop in production levels and our ongoing order book, the company has had to re-evaluate the level of positions required to support the reduction in work levels. As a result of this, I regret to advise that your position of production technician – packing will be made redundant.

We have explored suitable alternative redeployment options, and regrettably we have been unable to identify a suitable alternative option for you.”

[5] In essence, Mr Morgan accepted that there were genuine operational circumstances that necessitated his position being made redundant. Mr Morgan however disputes that the selection process was objective (believing that he was selected for reason of his age) and considers that there was a lack of consultation regarding the redundancy situation.

[6] In these respects, Mr Morgan made the following introductory comment in his witness statement:

“I believe when carefully examining the events of my tenure leading to 6 February 2015, there was an underlying tone that in the event of a downturn in business activity (which I am not disputing) I would be the one most likely to be dismissed, as a result of my age, regardless of any selection criteria.”

[7] Mr Morgan was 62 years of age the time of his termination.

[8] Mr Morgan also noted that “much to MT’s credit there were warnings of market downturns likely to affect MT’s operations, in meetings addressing the pool of workers and although magnanimous, it does not mitigate the lack of individual consultation that is an important part of a fair redundancy in the accepted normal in 2015.” (sic)

[9] Mr Morgan complained that the selection process suffered from a “lack of objectivity” and he was not made aware of the selection criteria. Mr Morgan believed himself to have been increasingly marginalised over time in the workplace owing to his age, and that by implication the employer’s conduct in this regard was expressed in the decision to terminate him as a result of his position being made redundant. Mr Morgan contends that the selection criteria must have ignored his attendance record, disciplinary record, his performance and his experience. Mr Morgan argued that the selection process ignored the “standard norm” of “last on, first out.”

[10] Mr Morgan also complained, consistent with his direct comments cited above, that there was a lack of consultation prior to the dismissal.

[11] The employer contended that due to the economic downturn and the resulting drop in production levels and the impact on the order book, the company adjusted its manning levels accordingly. This meant that in the manufacturing department out of a total of 85 employees, 17 employees’ positions were made redundant and one casual employee had his engagement terminated on 6 February 2015. Over the course of the full month of February 2015 a total of 26 terminations took place across the company as a result of the changed economic circumstances. Over the period 1 January 2014 to 25 February 2015 the employer contended that a total of 48 terminations had taken place as a consequence of the need to align the manning levels with the order book.

[12] Despite the work being performed by Mr Morgan being covered by the Agreement, the employer’s obligation to consult arises from clause 9 of the Manufacturing and Associated Industries and Occupations Award 2010 (“the modern award”), which is incorporated into the Agreement.

[13] Evidence was given on behalf of the employer by Mr Peter Dolder, the Global Manufacturing Manager and Ms Lisa Phillips, the Manager - People and Organisational Change.

[14] Mr Dolder claimed that the manufacturing output in relation to demand from the mining sector had been in decline since 2012. Mr Dolder set out a detailed series of decisions from late 2012 onwards, made to adjust the employer’s manning levels in light of its declining production demand. It is enough to say that the company had been in dialogue with its employees for a very lengthy period of time about the continuing impact of the change in production demand on its workforce profile.

[15] Ms Phillips gave evidence that over the period 2012 – 2015, the employer’s revenue had dropped by some 55%.

[16] During the two-year period from January 2013 to February 2015, the employer worked through three rounds of redundancies across the entirety of the business. The viva voce further evidence was that redundancies have continued across the business in the more recent period.

[17] Mr Dolder claims that the Executive General Manager of the employer met with all staff in December 2012 and explained the changing economic circumstances and their impact on current and prospective work. Mr Dolder contended that the employees were informed of the need to align the workforce with the current and forecast orders and that as part of that exercise it would investigate redeployment opportunities within the Downer Group (of which the employer is a part).

[18] In the packing and shipping area in which Mr Morgan performed his duties there was an anticipated staffing level reduction of 40%, at that time. It would appear that Mr Morgan was exposed to a decision to make his position redundant in late 2012 or early 2013 but as a number of other employees found work elsewhere, his position was maintained.

[19] In mid-2013 the employer conducted a week-long shutdown and a rolling four-day week in order to control production. It did so with the consent of the workforce. The business climate continued to deteriorate over the course of 2013 and 2014 and further manning-level adjustments were made as a consequence.

[20] The employer took steps to mitigate the effects of the downturn on employees by instigating a further shutdown. Mr Dolder explained that the employer’s plant was shut down between 19 December 2014 and 12 January 2015, with employees being permitted to go into 10 days arrears with annual leave.

[21] By early 2015 it was necessary to make further reductions in manning levels.

[22] Mr Dolder explained that on 4 February 2015 he addressed all manufacturing employees and informed them that market conditions continued to be depressed and that there would need to be redundancies in the manufacturing operation. Mr Dolder contended that he discussed for some 30 minutes the circumstances that the employer faced and responded to questions from employees. He explained at that time that particular individuals had not been selected for redundancy although a 25% cut across the manufacturing work centres was anticipated. Mr Dolder explained that the employer was looking at employment opportunities within the wider Downer Group to assist in redeploying employees where it could do so.

[23] Following that meeting, the employer made its decisions as to the number of positions which were to be made redundant and the identity of the affected employees became apparent. Mr Morgan’s position was declared redundant.

[24] On 6 February 2015, consistent with Mr Morgan’s evidence as set out above, Mr Dolder spoke personally with Mr Morgan and each of the employees whose position had been made redundant. Mr Dolder explained that the conversation with Mr Morgan lasted for approximately 10 minutes and involved explaining to Mr Morgan the need to align production with the order book and that the company had made efforts to explore suitable alternative redeployment options for him (Mr Morgan) but that investigation had not been successful.

[25] Mr Dolder gave evidence that throughout the course of the conversation he gave Mr Morgan an opportunity to raise issues with him and to question any of his claims. Mr Morgan was said not to have asked any questions.

[26] As mentioned above, on 6 February 2015, the day Mr Morgan was terminated, some 17 other employees were terminated (with all bar one - a casual employee - being as a consequence of their positions becoming redundant). Further details (provided by Mr Dolder) as to the number of employees made redundant in February 2015 are set out earlier.

[27] Ms Phillips’ evidence was to the effect that she had made efforts - in her role as Manager - People and Organisational Change - to identify alternative positions within the Downer Group to which the affected employees could have been redeployed. She could identify no position that was appropriate for Mr Morgan’s skill profile. Ms Phillips says that she went about this task by corresponding with the National Recruitment Network operated by the Downer Group and notifying it of all of the positions which were about to be made redundant and of the skills of each of the affected employees. The correspondence disseminated by Ms Phillips in this respect formed part of her evidence.

[28] Ms Phillips claims that she received some responses about alternative positions, but these were in respect of process improvement engineers and senior process engineers. These were not roles which Mr Morgan was suitably qualified to perform. Indeed, given that the Downer Group is principally involved in construction and mining and only to a small degree is involved in manufacturing, the prospect of Mr Morgan obtaining alternative employment elsewhere in the Group were always minimal (given the overall business conditions in the industry).

[29] As to Mr Morgan’s claims that he was selected on the basis of his age, Mr Phillips claims that his allegation in this regard could not be made out on an empirical basis. Ms Phillips gave evidence that there were 68 employees in the manufacturing department (as at the date of the termination) and that there was a reasonable distribution of age across that group. Indeed, in the specific packing and shipping section within the manufacturing department, besides Mr Morgan, the other employee who was made redundant was 28 years of age.

[30] It was otherwise contended that in so far as Mr Morgan was employed at the age of 59 years, that in itself was demonstrative that the employer did not discriminate on the basis of age.

[31] Section 389 of the Act provides as follows:

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.

[32] The onus to make out the grounds under s.389 of the Act falls upon the employer.

[33] The Explanatory Memorandum to the Fair Work Bill 2008 provides some insight into the scope of meaning of a redundancy as contemplated under the Act:

Clause 389 – Meaning of genuine redundancy

1546. This clause sets out what will and will not constitute a genuine redundancy. If a dismissal is a genuine redundancy it will not be an unfair dismissal.

1547. Paragraph 389(1)(a) provides that a person’s dismissal will be a case of genuine redundancy if his or her job was no longer required to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. Enterprise is defined in clause 12 to mean a business, activity, project or undertaking.

1548. The following are possible examples of a change in the operational requirements of an enterprise:

a machine is now available to do the job performed by the employee;
the employer’s business is experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five; or
the employer is restructuring their business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore the person’s job no longer exists.

1549. It is intended that a dismissal will be a case of genuine redundancy even if the changes in the employer’s operational requirements relate only to a part of the employer’s enterprise, as this will still constitute a change to the employer’s enterprise.

1550. Paragraph 389(1)(b) provides that it will not be a case of genuine redundancy if an employer does not comply with any relevant obligation in a modern award or enterprise agreement to consult about the redundancy. This does not impose an absolute obligation on an employer to consult about the redundancy but requires the employer to fulfil obligations under an award or agreement if the dismissal is to be considered a genuine redundancy.

1551. Subclause 389(2) provides that a dismissal is not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise, or within the enterprise of an associated entity of the employer (as defined in clause 12).

1552. There may be many reasons why it would not be reasonable for a person to be redeployed. For instance, the employer could be a small business employer where there is no opportunity for redeployment or there may be no positions available for which the employee has suitable qualifications or experience.

1553. Whether a dismissal is a genuine redundancy does not go to the process for selecting individual employees for redundancy. However, if the reason a person is selected for redundancy is one of the prohibited reasons covered by the general protections in Part 3-1 then the person will be able to bring an action under that Part in relation to the dismissal. [...] [My emphasis]

[34] On the basis of the evidence led by Mr Dolder and Ms Phillips, and in light of Mr Morgan’s concessions, it is clear that the employer faced difficult trading conditions since 2012 and sought continuously from that period to 2015 to align its manning levels with its order book.

[35] That is to say, the employer had an authentic and real operational reason for effecting the changes to the composition of its workforce (by way of redundancy and otherwise).

[36] Mr Morgan did seek to argue that his various duties associated with his position were still being performed elsewhere in the employer’s business, and that his position was not redundant as a result. But as the Explanatory Memorandum makes clear (see above as highlighted), the disaggregation of tasks and duties to form a composite position is a redundancy nonetheless.

[37] Generally then, the requirements of s.389(1)(a) of the Act can therefore made out: Mr Morgan’s position was made redundant because of operational circumstances bearing upon the employer’s business.

[38] Section 389(1)(b) of the Act requires that the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy. As mentioned above, the obligation that falls on the employer in this case arises from the modern award.

[39] The modern award provides at clause 9 in the following relevant terms:

9. Consultation

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.

[40] On the materials before me, it is evident that the employer had engaged with its workforce since 2012 to explain the deteriorating business conditions and the continuing need to address those through workforce realignments. The employer’s explanations during this period were to the point and free of ambiguity. The workforce was subject to several staged redundancy phases and shutdowns as a result of the difficult trading conditions in the mining industry.

[41] It cannot be said on any reasonable basis that Mr Morgan was not consulted over time in respect of the circumstances facing the business and the potential outcomes in respect of his position, along with those of others. The scale of the downsizing between 2012 and 2015 and engagement with the entire workforce in respect of that significant development was significant.

[42] In any event, on 6 February 2015 Mr Dolder met personally with Mr Morgan and explained the situation in which the employer found itself in relation to its inability to preserve his employment any longer. Mr Dolder on his evidence provided Mr Morgan with an opportunity to engage with him about any of the issues he raised over the course of the discussion and Mr Morgan did not raise any matters.

[43] Mr Morgan reasonably appreciated the full context of the employer’s decision making in this regard and that is evidenced by his concession as to his awareness of the operational circumstances facing the employer.

[44] That said, the modern award is prescriptive as to the manner in which consultation is staged. It requires as follows:

[...]
(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.

[45] That is, the employer is obligated under the modern award to put in writing all relevant information about the changes including the nature of the changes proposed, expected effects of the changes on the employee and any other matters likely to affect the employee, for the purpose of the discussions it has in respect of the significant change.

[46] No written document of this form is in evidence in these proceedings.

[47] I cannot therefore conclude that the consultation clause under the Agreement (imported from the modern award) was discharged fully in respect of the level of prescription it demands of an employer.

[48] Of course, as I have noted above, Mr Morgan reasonably could not have misunderstood the circumstances affecting the employer. But that said, the modern award requires the employer to put all matters in writing to the employee for the purpose of its discussions with the affected employee. Perhaps this is a document that could have been prepared and distributed in 2012 in respect of the ongoing challenges that would face the employer in the coming business cycle. Equally, however, it could have been a document prepared for the purpose of the discussion held with Mr Morgan on 6 February 2015.

[49] That said, for the purposes of completion, I indicate that the materials are sufficiently compelling as to the employer’s efforts to discharge its obligations under s.389(2) of the Act. Ms Phillips’ evidence was that she made genuine efforts to identify alternative positions for Mr Morgan to which he could have been redeployed. But in the business circumstances and given the nature of the business of the Downer Group, such a position could not be identified. Mr Morgan was not qualified for those vacancies that did exist.

[50] Given that I have concluded that the employer has not discharged its obligations under the consultation provisions of the Agreement I must now turn to consider whether or not the dismissal was harsh unjust or reasonable for the purposes of s.387 of the Act.

[51] In that respect I make the following findings:

LEGISLATIVE REQUIREMENTS

[52] The relevant legislative provisions arise under s.387 of the Act, which provides as follows:

387 Criteria for considering harshness etc.

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.

CONSIDERATION

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)

[53] Mr Morgan’s dismissal did not relate to his capacity or his conduct. Mr Morgan was dismissed owing to the operational circumstances of his employer which necessitated his position being declared redundant. In this sense, there was no valid reason for Mr Morgan’s dismissal for the purposes of s.387(a) of the Act.

Whether the person was notified of that reason

[54] Section 387(b) of the Act refers to Mr Morgan having been notified of “that reason”, being the valid reason for purposes of s.387(a) of the Act.

[55] As there was no definable valid reason for the dismissal, the notification of such a reason was not possible. Section 387(b) of the Act is therefore of neutral consequence for my overall deliberation.

Whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person

[56] Section 387(c) of the Act requires me to take into account whether or not Mr Morgan was given an opportunity to respond to the reason for his dismissal as it might relate to his capacity or conduct. As I have indicated above, Mr Morgan’s dismissal did not relate to his capacity or conduct and therefore this subsection of the Act bears in neutral terms upon my overall deliberation.

Any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal

[57] Section 387(d) of the Act requires me to take into account any unreasonable refusal by the employer to allow Mr Morgan to have a support person present at the dismissal discussions. There is no evidence such an act of refusal took place. Equally however, Mr Morgan was not advised of the pending communication of the redundancy or any necessity to have a support person with him in the discussions with Mr Dolder. This is a matter that is pertinent to s.387(h) of the Act as it is suggestive of an element of harshness to the dismissal.

If the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal

[58] Section 387(e) of the Act does not apply to the circumstances in which Mr Morgan was dismissed from his employment, and therefore bears in neutral terms in respect of my wider deliberations.

The degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal

[59] Section 387(f) of the Act is not a relevant consideration.

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

[60] Section 387(g) of the Act is not a relevant consideration for reasons that the employer had access to human resource expertise for the purposes of effecting Mr Morgan’s dismissal.

Any other matters that the FWC considers relevant

[61] Section 387(h) of the Act requires me to take into account any other relevant considerations. I referred to one such matter earlier. I refer also to the fact that Mr Morgan was not given a written document of the kind contemplated in the consultation clause in the modern award. When the totality of the circumstances are considered this is a procedural oversight of limited effect or consequence.

[62] Mr Morgan’s employment was terminated because his position was made redundant owing to authentic operational circumstances arising from particularly significant changes in the business cycle affecting his employer. His employer had sought to manage this issue over a number of years and had used its best endeavours to secure alternative employment for Mr Morgan.

[63] In all, the employer had a reason for the dismissal of Mr Morgan that was sound, defensible and reasonable.

[64] Mr Morgan made claims as to the descriptors used by his employer in identifying him for redundancy. The employer’s evidence is that its decision-making in this regard was reasonably balanced in respect of the age profile of those employees who were made redundant and no case for selectivity based on age could be empirically founded. Ms Phillip’s evidence in this regard was compelling.

[65] Mr Morgan also made reference to the failure of his former employer to apply the ‘last on, first off’ standard in selecting employees for redundancy. This is an irrelevant consideration for the purposes of this application and it is a selection criterion that in any event may compromise the productivity of the employer and exacerbate the business difficulties facing the company. It is not a selection criterion to which the employer gave any consideration whatsoever.

Conclusion

[66] Given the circumstances of this matter and my discussion above, Mr Morgan was not dismissed from his role for reasons that could be found to be harsh, unjust or unreasonable. Mr Morgan’s application under s.394 of the Act is therefore dismissed.

SENIOR DEPUTY PRESIDENT

Appearances:

Mr L. Morgan, Applicant

Mr D. Miller, of Australian Industry Group, for the Respondent

Hearing details:

Brisbane

2015

18 June

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