Orthotic and Prosthetic Centre Pty Ltd v Mr Jeff Philp

[2014] FWC 7651

[2014] FWC 7651

FAIR WORK COMMISSION

DECISION

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

Orthotic & Prosthetic Centre Pty Ltd
v
Mr Jeff Philp
(C2014/6467)

COMMISSIONER JOHNS MELBOURNE, 28 OCTOBER 2014

Redundancy - entitlement under the NES - application to vary redundancy pay due to other employment whether employer obtained the other employment - assisted but not obtained - no basis to reduce severance entitlement - application dismissed.

Application

[1] This decision is about whether Orthotic & Prosthetic Centre Pty Ltd (OPC) should be allowed to reduce, by 50%, the amount of redundancy pay that is otherwise due to its former employee, Mr Jeff Philp. OPC has made an application pursuant to s.120 of the Fair Work Act 2009 (FW Act) on the basis that it allegedly obtained acceptable alternative employment for Mr Philp.

[2] Mr Philp opposes the application. He says that it was principally through his own efforts that he obtained employment after the cessation of his employment with OPC.

[3] For the reasons set out below, the Commission, as presently constituted, agrees with Mr Philp.

LEGISLATIVE SCHEME

[4] Section 120 of the FW Act provides as follows:

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

(1) This section applies if:

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

(b) the employer:

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

(ii) cannot pay the amount.

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

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

[5] The redundancy pay provided by s.119 is as follows:

“119 Redundancy pay

Entitlement to redundancy pay

(1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:

(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or

(b) because of the insolvency or bankruptcy of the employer.

Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.

Amount of redundancy pay

(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:

Redundancy pay period
Employee’s period of continuous service with the employer on termination	Redundancy pay period
1	At least 1 year but less than 2 years	4 weeks
2	At least 2 years but less than 3 years	6 weeks
3	At least 3 years but less than 4 years	7 weeks
4	At least 4 years but less than 5 years	8 weeks
5	At least 5 years but less than 6 years	10 weeks
6	At least 6 years but less than 7 years	11 weeks
7	At least 7 years but less than 8 years	13 weeks
8	At least 8 years but less than 9 years	14 weeks
9	At least 9 years but less than 10 years	16 weeks
10	At least 10 years	12 weeks

.....”

RELEVANT AUTHORITIES

[6] The immediate issue is whether OPC obtained the alternative employment for Mr Philp within the meaning of the FW Act.

[7] In Hunt Energy & Mineral Company Australia Pty Ltd v Thomas 1, Commissioner Hampton wrote2,

The history and intent of this element of the legislation 3 is in effect explained by the Full Bench of the Australian Industrial Relations Commission in Australian Chamber of Manufacturers and Derole Nominees Pty Ltd - Clothing Trades Award 19824 in the following terms:

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

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

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

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

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

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

Dealing with the circumstances in which the general prescription the Full Bench was awarding might be departed from, the decision in the Termination, Change and Redundancy Case indicates that particular regard was paid to, inter alia, the S.A. Milk Processing and Cheese Etc. Manufacturing decision. Viewed in this way it will be seen that the intention is not to impose an absolute test on the employer’s ability to “obtain” alternative employment but rather it refers to action which causes acceptable alternative employment to become available to the redundant employee. The employer must be a strong, moving force towards the creation of the available opportunity.”  5

[8] The operation of section 120 of the FW Act has more recently been considered by a Full Bench of this Commission. In Maritime Union of Australia v FBIS International Protective Services (Aust) Pty Ltd 6 the Full Bench upheld an appeal and quashed the decision of the Commissioner at first instance who had found that the previous employer had obtained employment for its redundant workers. The Full Bench cited the decision of Justice Marshall in Allman v Teletech International Pty Ltd7in the following terms:

[44] In Allman v Teletech International Pty Ltd, 23 Marshall J considered whether Teletech International Pty Ltd (Teletech) had been “able to arrange alternative employment” which appeared in provisions for relief from the obligation to pay redundancy payments within relevant workplace agreement, upon its employees being offered employment by Telstra upon taking over a contract formally held by Teletech. His Honour considered the Full Bench decision in Derole Nominees, finding that “[t]here is no material difference between obtaining alternative employment and being able to arrange it.”
[45] Justice Marshall found that Teletech assisted its employees to apply for jobs with Telstra, had active involvement in the transition of the employees to work with Telstra, met with Telstra to discuss the possible employment of the employees by Telstra and secured a commitment from Telstra that Telstra would give all redundant Teletech employees the opportunity to apply for employment with Telstra. He found:

“Teletech was not, however, a strong moving force towards the creation of the available opportunity. The available opportunity arose because Telstra was to perform functions formerly performed for it by Teletech. Telstra required staff. It made sense for it to approach Teletech staff. Teletech did not secure the offer of a job for Teletech staff with Telstra. As counsel for the applicants submitted, Teletech arranged an opportunity for the employee applicants to participate in a recruitment process undertaken by Telstra.”

[46] Whilst accepting that Teletech brought the employees and Telstra together and that Teletech’s conduct was one of the factors that brought about the employment, Justice Marshall found that it did not mean that Teletech was able to arrange the employment, finding that Teletech facilitated its staff applying for jobs with Telstra, competing on their merits for the available positions. His Honour found that:

“The encouragement and facilitation of a process is not the same as doing everything possible to ensure a result. Arranging alternative employment means bringing about that employment should the employee choose to accept it. Anything short of that, such as competing with competitor applicants (albeit limited to two categories of applicant: existing Telstra and Teletech employees) does not meet the test provided by the relevant sub-clause in the AWAs.” 

[9] The Full Bench then went on to assess the efforts undertaken by the previous employer,

[48] Mr Christmas’ witness statement discloses that the action taken by the Respondent to obtain employment with ACG for its soon to be redundant employees was to provide a list of employees and their contact details to ACG in respect of those employees who gave permission to do so, with the two main communications in evidence of employee details occurring on 9 October 2013 in respect of 32 of the employees subject to the orders made and 21 October 2013 in respect of an additional 15 employees subject to the orders made. Two employees subject to the orders – Mr S Clancy and Mr N Giffen – were not identified in either of the emails.
[49] The provision of the lists of employees did not obtain employment with ACG for employees, rather it simply facilitated an invitation by ACG to the Respondent’s employees to apply for a position and undertake an interview. That action by the Respondent did not have the impact of securing employment for the employees, as is evident from the 25 October 2013 advice to Mr Christmas by four employees that they had been interviewed by ACG but had been unsuccessful in obtaining positions. The action by the Respondent to facilitate contact between its employees and ACG did no more than to secure the employees an opportunity to enter the recruitment process of ACG which may or may not have resulted in an offer of employment. The evidence of Mr Christmas concerning the four employees was consistent with the written submissions to Commissioner Gregory by Brisbane based employees:

“. . . the applicant did not obtain acceptable employment on our behalf. To obtain employment with the new provider we were all required to submit applications and attend interviews. These interviews were not facilitated by FBIS and at any time the new provider could have replaced all staff with other staff of their own.”

[50] The limited role of the Respondent in the employment of the employees by ACG is confirmed by Mr Christmas’ evidence of approaches by the Respondent to ACG on 23, 30 and 31 October 2013 in which it sought information from ACG as to which employees had been offered employment and, when ACG declined to provide it, the Respondent’s 31 October 2013 request to employees asking them, as a matter of priority, to advise if they had been offered employment with ACG and to provide a copy of the letter of offer. It is plain on this evidence that the Respondent had no knowledge of which employees had been offered employment by ACG or of the terms and conditions of employment contained in any offer. There was no basis to suggest, in these circumstances, that the Respondent had “obtained” employment for its employees. At the time the employment with the Respondent came to an end, the Respondent was unaware as to whether their employees had obtained employment with ACG and, if so, on what terms. The Respondent’s action in providing contact details of employees to ACG did no more than facilitate contact in order that the employees could engage in the recruitment process undertaken by ACG.

[10] Having regard to the authorities it is necessary to consider whether OPC was the strong, moving force behind the creation of the opportunity subsequently taken up by Mr Philp. However, as Commissioner Hampton stated in Hunt Energy “This is not an absolute test but rather one that needs to be realistically assessed in the particular circumstances of each case”. 8

UNCONTESTED OR UNCHALLENGED FACTS

[11] The following facts are either agreed by the parties, or at least are not in dispute:

• Mr Philp was made redundant on 26 September 2014;



• He is, subject to this application, entitled to (notice and) redundancy payments based upon his years of relevant continuous service (26 years);



• The redundancy entitlement arises from s.119 of the FW Act;



• Mr Philp has found acceptable alternative employment within the meaning of s.120(1)(b)(i). Namely, on 30 September 2014 Mr Philp commenced employment with Wootten Cordwainer and Leather Craftsmen (Wootten). He initially commenced on a part time basis, but then became full-time. In that position Mr Philp is paid slightly less than his position with OPC. However, after a three month probation, Wooten has agreed to match Mr Philp’s pay with his OPC pay. 9 His duties are very similar to those he performed at OPC.10 It is not contested that it is acceptable alternative employment. However, it is relevant that, in commencing employment with Wootten Mr Philp’s continuity of service has not been recognised and therefore he will have lost any accrued personal leave credits he had with OPC; and



• OPC is not claiming that it cannot pay the amount of redundancy pay (s.120(1)(b)(ii)).

[12] As outlined above, there is however a dispute as to whether OPC obtained the alternative employment for Mr Philp within the meaning of the FW Act and whether there should be any reduction in the amount of redundancy pay due to Mr Philp.

[13] OPC seeks a 50% reduction in the level of redundancy payments provided by s.119 of the FW Act. That is, a reduction of 6 weeks.

EVIDENCE

[14] OPC provided evidence from Mr Wayne Bowker, who was at the relevant time the owner and principal of OPC. The substance of Mr Bowker’s evidence was as follows:

• OPC is “a distribution business supplying product to the allied health market in Australia, primarily physiotherapy, occupational therapy, prosthetics and orthotics, as well as a bit of chiropractic and podiatry work.” 11



• He “set the business up in 1985, which was originally a custom orthotic manufacturing business and clinical treatment business. Over the past 30 years, we have built the distribution business to the point that it's now 90 per cent of our income revenue” 12



• He had discussions with Mark Randall (who was employed by OPC as a senior orthotist) about the viability of the business and that he was looking at winding out the manufacturing area. 13



• “I was trying to work out an exit strategy for the two guys [Mr Randall and Mr Philp] ... So Mark went on long service ...When he came back, I said, "Well, look, what we need to do is see if we can find you work in the industry," and managed to secure Mark Randall a position with our competitor, Orthopaedic Appliances [also known as OAPL].”¹⁴

e) “At the same time whilst seeking employment for Mark, I was having discussions with their [OAPL’s] managing director ... about also securing Jeff a job” 15

• “I managed to secure Mark a job and then they decided that they were not going to go ahead with another footwear technician, and so I was unable to secure Jeff a job.” 16



• On or about 29 August 2014, he had a conversation with Mr Philp about closing down the business manufacturing side of the business. 17



• I had suggested Mark have a discussion with Jess Wootten about going to ... Custom Fit (Wooten). That's what he trades as in his footwear division. Because Mark Randall would see Jeff on a day-to-day basis - he was our contractor to manufacture custom made shoes for our patients ... I asked Mark would he mind having a word to Jess and see if there's a possibility of getting Jeff a job. If that was the case, I would then contact Jess myself. If that wasn't the case, well, then there was no point. At that time, which was about a week after I'd advised Jeff that we were no longer going to continue, I advised him that we were having discussions with Jess 18



• ... over the period of the next two or three weeks, that eventuated. At that point, thinking I had secured Jeff a job - and I've had four discussions with Jeff through that process to say, "Yep, it looks like you are going to get a job." At that stage Jeff advised me that it could only be part-time, three days a week. We looked at the Fair Work Commission web site to say that, you know, if you've actively sought employment for one of your staff members, you can apply for redundancy relief. That's how this has all come about. 19



• Mr Randall making contact with Mr Wooten to secure a job for Mr Philp was at his [Mr Bowker’s] initiative and Mr Randall was acting as an agent for Mr Bowker at that time; 20

[15] Mr Philp provided evidence and the substance of that was as follows:

• “I have liaised with Custom Fit - Wootten Footwear. I was the liaison between OPC Health and Wootten Footwear. Mark Randall also liaised with Wootten Footwear. I rang Wootten Footwear approximately a week and a half or so after Wayne instructed me that things were winding up. I understand Wayne's reasons. Jess said, "We're always interested. Come down and we'll have a talk." 21



• “I have had talks with Mark Randall prior to him going on long service leave, saying he was getting vibes that perhaps OPC wasn't going to be keeping the custom manufacturing side, which is the side I was employed in. I thought, well, he might be letting off steam and then he went on long service leave, and came back and that was the last I heard of it. Then Mark tells me he has found employment - or Wayne has found him employment at OAPL and he'll be leaving, and then Wayne calls me in and says, "Look, thanks for your service and everything, but I've decided that I need the space that the custom area is taking up and I'll be ceasing your employment. You're being retrenched." That is the understanding. Mark talked to Jess. Mark has told me that. I don't know whether it was at the instruction of Wayne Bowker or whether Mark did it off his own bat.” 22



• About half way through September Mr Philp contacted Mr Wooten to see if there was a position there for him. 23 His evidence is that Mr Wooten said, "Mark was telling me that Wayne is thinking of closing up the manufacturing side." He said, "Mark has told me." Mark had already been talking to Mr Wootten.24

[16] Mr Philp also furnished the Commission with a letter from his new employer, Wootten. The letter (Exhibit “R1”) purports to be a statement from Mr Jess Wooten about the facts leading up Mr Philp’s employment with Wootten. Mr Wootten was not called to give evidence and was not required by OPC for cross-examination. Mr Wootten wrote,

“It has come to my attention that there is a dispute between OPC Health and Mr Jeff Philp regarding the handling of his entitlements.

I am not wishing to be involved or to take sides in this matter however after discussions with all parties involved it has become obvious to me that I and my company’s fole in this may be misrepresented so it seems important to clarify the events leading up to Mr Philp’s employment at Wooten.

I was first contacted by Mark Randall (who is a previous employee of OPC Health) a number of weeks before Jeff was told that his employment was to end. This was in late August/early September. Mark and I discussed Jeff’s employment on a couple of occasions. Mark was concerned for him and was trying to ascertain if we may have work available. Mark was acting under his own initiative being a long time colleague of Jeff’s.

Following these discussions Jeff and I had a couple of discussions over the phone and then made a time to meet at the workshop for an “interview”. The whole process was rather informal as I had been dealing directly with both Mark and Jeff through subcontracting to OPC for approximately 8 years so the three of us had a well-established relationship.

In the last week or two of September Wayne contacted me to see about employment for Jeff and to recommend him to me. I let him know that Mark, Jeff and I had been in discussions for a couple of weeks already and that Jeff was coming in to see our workshop and discuss possibilities.

Following all of these discussions we have decided to employ Jeff on a three month trial basis with the view of having him Full time ongoing employment here in 2015.”

[17] R1 made it clear that evidence from Mr Mark Randall (another previous employee of OPC) was critical in assessing the role that OPC had in securing Mr Philp employment with Wootten.

[18] Mr Randall provided evidence and the substance of that was as follows:

• He first had some general no name discussions with Mr Wootten about possible positions available at Wootten; 25



• In or around early September 26 he was having a discussion with Mr Bowker. “I threw the name up [Mr Wootten] one day when we [he and Mr Bowker] were talking - that maybe Mr Wootten, given it's a similar occupational field, may be able to use Jeff. Then I think when I left his room I said, "Oh, I might give him a call" - Mr Wootten a call - and then I decided to do that on my way home that night, because I was anxious that if Mr Wootten, from our previous discussions, might have been interested in employing someone - and at that point I hadn't used Mr Philp's name, but I was just a bit anxious that he might employ someone and then Mr Philp may have missed the opportunity, so that was the reason why I decided to ring at the unusual time on the way home”27



• Mr Bowker did not ask him to contact Mr Wootten about finding another position for Mr Philp 28

CONSIDERATION

[19] At its highest, the action taken by Mr Bowker on behalf of OPC was to suggest to Mr Randall that he (Mr Randall) raise the prospect of possible employment of Mr Philp with Wootten. Thereafter, Mr Bowker vouched for Mr Philp as a referee. 29 The Commission, as presently constituted, finds that Mr Bowker’s actions assisted with the alternative employment ultimately found by Mr Philp.

[20] However, OPC did not:

● make any arrangements for contact between Mr Philp and Wootten,

● provide Mr Philp’s contact details to Wootten,

● arrange for an interview,

● supply his résumé,

● have any apparent role in the formation of the new employment contract, or

● secure continuity of service for Mr Philp.

[21] There is also no evidence that any transitional arrangements were made or proposed by OPC in relation to the new employment. In fact, the evidence is that Mr Philp initially commenced in a part-time position and in the precarious state of having to first serve a probation period. Although not all of these would need to be present to meet the criteria of obtaining the new employment, they are indicative of the kind of role envisaged by the s.120(1)(b)(i) of the FW Act.

[22] The background may have been set by OPC. It might even be said that it planted a seed with Wootten. However, it did not more and did even less that the facilitation undertaken by the respondent in Maritime Union of Australia v FBIS International Protective Services (Aust) Pty Ltd and, in respect of which the Full Bench found was inadequate for the purposes of section 120 of the FW Act.

[23] Based upon the evidence, the Commission, as presently constituted, finds that, in the end, it was Mr Philp, through his own efforts and based on his own merit, who obtained the new employment.

Conclusion

[24] On balance, the Commission, as presently constituted, is not persuaded that OPC obtained the new employment for Mr Philp within the meaning of s.120(1)(b)(i) of the FW Act.

[25] Accordingly, there is no basis to consider the reduction in the redundancy payments provided by s.119 of the FW Act and this application is dismissed.

COMMISSIONER

Hearing details:

2014

13 October

Melbourne

Representatives:

Mr W Bowker for OPC

Mr S Tsitas for Mr Philp

 1   [2012] FWA 7845.

 2   [2012] FWA 7845, [15].

 3   In the Australian Industrial Relations Commission’s supplementary decision in the 1984 Termination, Change and Redundancy Case Print F7262, the Full Bench adopted a provision which closely reflects s.120(1)(b)(i). Accordingly, although in the context of an award application under earlier legislation, the apparent purpose of s.120(1)(b)(i) of the FW Act with respect to reductions based upon obtaining alternative employment remains the same.

 4   Print J4414, 12 September 1990, per Peterson J, Marsh DP and Oldmeadow C.

 5   Print J4414, p. 4 and 5.

 6   [2014] FWCFB 6737.

 7 [2008] 178 IR 415.

 8   [2012] FWA 7845, [16].

 9   PN294

 10   PN292

 11   PN40

 12   PN40

 13   PN42

14 PN42

 15   PN43

 16   PN44

 17   PN88

 18   PN46

 19   PN48

 20   PN61-62

 21   PN75

 22   PNPN76

 23   PN78

 24   PN91

 25   PN189

 26   PN191

 27   PN192

 28   PN195, PN196

 29   PN59 and Exhibit R1

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