Paul Huang v Forgacs Engineering Pty Limited

[2014] FWC 2264

[2014] FWC 2264 [Note: An appeal pursuant to s.604 (C2014/4293) was lodged against this decision - refer to Full Bench decision dated 19 August 2014 [[2014] FWCFB 5549] for result of appeal.]

FAIR WORK COMMISSION

DECISION

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

Paul Huang
v
Forgacs Engineering Pty Limited
(U2013/2827)

VICE PRESIDENT HATCHER SYDNEY, 11 APRIL 2014

Application for relief from unfair dismissal - genuine redundancy.

Introduction

[1] Mr Paul Huang, the applicant in this matter, has filed an application for an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (the Act) in respect of the termination of his employment with Forgacs Engineering Pty Limited (Forgacs). Under s.396 of the Act it is necessary for me to determine four specified matters before the merits of the application may be considered. If in respect of any of those matters I decide against Mr Huang, his application must be dismissed.

[2] There was no dispute concerning the first three of those matters. I find that:

(1) Mr Huang’s application was made within the 21-day period required in s.394(2)(a).

(2) Mr Huang was a person “protected from unfair dismissal” within the meaning of that expression in s.382 at the time of his dismissal by Forgacs.

(3) Forgacs was not a “small business employer” within the meaning of that expression in s.23, and accordingly the issue of consistency with the Small Business Fair Dismissal Code does not arise.

[3] The fourth matter is “whether the dismissal was a case of genuine redundancy”. The parties were in dispute about this matter. Forgacs contended that its dismissal of Mr Huang was a genuine redundancy within the meaning of s.389 of the Act. Mr Huang denied this.

[4] Section 389 defines what is a case of genuine redundancy for the purpose of the Act. It provides:

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.

The facts

[5] Forgacs is a manufacturing and engineering business. It has a major contract with ASC Shipbuilding Pty Ltd (ASC), which is the prime contractor for the Air Warfare Destroyer Project under which warships are being constructed for the Australian Navy. Forgacs’ main role in the project is the manufacture and supply of hull modules. Its operations in this respect are carried out at locations in Tomago and Carrington in the Newcastle area. It employs about 850 employees for this purpose.

[6] It is anticipated that Forgacs’ role in the project will end in about May 2015 when the final hull module is delivered. Its contract with ASC is a cost-reimbursable rather than a fixed price contract, with the result that ASC commercially oversees Forgacs’ business costs to a considerable degree to ensure that the payments it makes under the contract are minimised and not inflated. This includes oversight over the number of staff employed in Forgacs’ project management office.

[7] Mr Huang is a career accountant. He holds degrees as a Bachelor of Economics and a Master of Accounting, and is a member of the CPA. He was employed by Forgacs as a Project Management Accountant effective from 8 June 2011. His role was in the area of earned value management, and his position was also described as that of “Earned Value Management Accountant”. The purpose of his position was described in his position description as follows:

“Provides analytical support to the business by generating, evaluating, recommending, monitoring and producing accurate data, forecasts and information for the organisation’s production of strategic components that supports best practice earned value accountancy metrics. The position is required to deliver accurate and timely reports and analytics to relevant departments and the line manager whilst providing specific reporting on matters such as by not limited to earned value and total cost, measured against contractual agreements and the project plan.”

[8] Mr Huang’s prime responsibility, using a computer system known as “Cobra”, was to produce monthly reports which analysed the cost of work completed pursuant to pre-planned work schedules and reconciled differences between the projected cost of the work to be performed and the actual cost of the work actually performed.

[9] His salary package by the time of his dismissal was about $117,000. His employment contract provided that he was to be employed for a maximum period of three years and two months. This reflected the fact that, with respect to each position in the project management office, there was an estimated time at which the position would no longer be required for the purpose of the project and would come to an end. These estimates were revised from time to time as the project as a whole progressed.

[10] In the period immediately before he was dismissed, Mr Huang’s position was one of three in Forgacs’ Cost and Schedule Management team. The two other positions in the team were those of Program Scheduler, held by Mr Greg Fairweather, and Production Scheduler, held by Mr Daryl Ball. The team reported to Mr Tim Gay, Program Support Manager.

[11] In around late May or early June 2013 ASC made it clear to Forgacs that it wanted a reduction in the number of staff employed in the project management office. ASC sent a letter dated 5 June 2013 to Mr David Miller, the then Managing Director - Shipbuilding of Forgacs, which stated the following:

“As Forgacs is no longer required or authorised to perform the function of CNR assessment, based on the bookings detailed at Attachment A for the past 5 months, ASC expects to see a reduction in the Forgacs Project Management team in the order of 9-10 Project Management personnel who have been booking virtually full time to this activity. This reduction in Project Management personnel is expected to occur by no later than the end of the June 2013 Progress Payment period.”

[12] There were some negotiations between Forgacs and ASC about the contents of this letter, and ultimately it was agreed that Forgacs would reduce its project management staff by four. The result of this was that Forgacs was required to undertake a review of the functions of its project management personnel to see whether functions could be consolidated and four positions made redundant. Mr Miller made a decision to focus on the Configuration and Document Control, Cost and Schedule Management, and Technical and Drafting teams in this respect. This meant that Mr Huang’s position was one of those that was analysed as part of the review. Based on information supplied by Mr Huang himself as to the time he took to perform his work tasks, it was concluded that his position could only justify 11 to 13 working days per month, or a full time equivalent (FTE) of 0.5-0.6. The other positions in the Cost and Schedule Management team were also analysed, and the total FTE positions in the team as a whole were assessed as approximately 1.5. On this basis, it was decided that the Cost and Schedule Management team could be reduced from three positions to two in order to supply one of the necessary redundancies.

[13] It then remained for Forgacs to determine which one of the three positions in the Cost and Schedule Management team would be made redundant. With two exceptions, each person in the three teams under review were assessed according to performance criteria, and given a score out of 4. The two exceptions involved two persons in the Technical and Drafting team. One was a “contractor” (which I understand to mean a person supplied by an employment hire agency) who was immediately selected for removal, on the basis that Forgacs had a policy that “contractors” were to be removed before company employees were made redundant. The other had already accepted another role within Forgacs’ operations.

[14] In the Cost and Schedule Management team, Mr Gay evaluated the three employees against the performance criteria. Eight criteria were scored: safety, skills, application, work quality, communication, flexibility, customer focus and attendance. Mr Fairweather was scored at 3.4 out of 4. Mr Huang and Mr Ball were each scored at 2.7.

[15] Mr Miller ultimately made the decision that it was Mr Huang’s position that would be made redundant and that he was to be dismissed. Although the basis on which he made that decision was not made precisely clear, I infer from the evidence that he made the decision on the advice of Mr Gay. It was apparent from the evidence that it was determined that Mr Huang was the least suitable to remain because of his perceived lesser capacity to be flexible and take on new and different duties. This was regarded as a critical matter because the abolition of one position would mean that its functions would need to be redistributed to the other two positions, so that the remaining two persons in the Cost and Schedule Management team would have to take up new duties.

[16] Prior to the final decision being made about Mr Huang’s dismissal, some efforts were made to identify options for redeployment within Forgacs. This process was conducted by Ms Kerstin Davey, who was at the relevant time working as an HR Consultant to Forgacs. The first option considered was the position of Management Accountant reporting to Mr Daniel Pike, the Finance Manager. The occupant of the position, Mr Aaron Abela, had left Forgacs. The evidence as to when he left was inconsistent, but I find that it was some time in the period from April to early June 2013, and before Forgacs began the process of identifying positions to be made redundant. Shortly before Mr Abela’s departure (so that there was a handover period) the work of the position began to be performed by Mr Laurie Turner. Mr Turner was not at that time employed by Forgacs; his labour was provided by an employment agency. It was clear that Mr Pike was highly impressed by Mr Turner’s skills and competence; Mr Turner had previously held roles as a financial controller and a chief financial officer, but was nearing retirement age and was happy to take a more junior role.

[17] About one to two months after Mr Turner commenced, Forgacs entered into discussions with Mr Turner and his employment agency about engaging Mr Turner directly as an employee. The employment agency advised Forgacs that if it directly engaged Mr Turner within six months of the time he had commenced doing the work, Forgacs would have to pay the employment agency a finder’s fee, so that it would be cheaper to continue the existing arrangement until the six months period had expired, and engage him directly at that point. Forgacs then made what Mr Miller described as a “formal commitment” and a “verbal offer” to employ Mr Turner full time consistent with the employment agency’s advice. The time at which this occurred was not specifically identified in the evidence, but I infer that it happened some time in June-July 2013 and before Mr Huang was dismissed. Mr Turner was later employed by Forgacs on a six-month fixed term contract at a salary package of $115,000. That salary package was higher than it otherwise would have been to reflect the limited-term nature of the engagement; Mr Abela had been on a lower salary package of about $90,000.

[18] Ms Davey approached Mr Pike and discussed with him the possibility of Mr Huang being redeployed to the Management Accountant’s position previously held by Mr Abela. Mr Pike told her that, due to a headcount and structure review in the Finance Team, there was unlikely to be a permanent or long-term replacement in the position, that it was lower paid than Mr Huang’s position, and that Mr Huang’s capabilities did not sufficiently match those required by the position. Mr Pike clarified this last matter in his evidence by saying that it was not that Mr Huang was unsuitable for the role, but that he preferred Mr Turner’s experience and skills. Mr Huang himself gave evidence that he had the capability to perform the duties of the position, and I accept that evidence. Mr Pike did not, in his discussion with Ms Davey, refer to any commitment or offer made to Mr Turner as a reason why Mr Huang could not fill the position.

[19] The second option was redeployment to an accounting or other financial role in the Group office at Carrington. Ms Davey’s inquiries disclosed that there were no vacant positions and none could be created. Ms Davey reported back to Mr Miller that there were no positions to which Mr Huang could be redeployed.

[20] Mr Huang was advised by Mr Gay that he was to be made redundant at a meeting which occurred on 6 August 2013. His dismissal was effective from that day, in that he was paid an amount in lieu of notice as well as his other entitlements. He was provided with a statement of service, and given information about “support assistance” which was provided, including an introduction to key contacts at local recruitment agencies and outplacement support and counselling with Forgacs’ employees assistance provider.

[21] The meeting on 6 August 2013 at which he was informed of his dismissal was the first time that Mr Huang learned anything about the process by which persons were to be identified for redundancy. He had not been informed that he was being evaluated according to performance criteria let alone consulted about it, and he was not informed or consulted about the efforts to explore whether he could be found another position in Forgacs.

[22] Some weeks after Mr Huang was dismissed, in August or September 2013, Forgacs engaged a Mr David Bowen to perform work. Mr Bowen had previously been Mr Huang’s predecessor in the Earned Value Accountant’s role. The basis upon which Mr Bowen was engaged, and the duties he performed, were somewhat unclear. Mr Gay said he was engaged under an “hourly arrangement”. His duties did not include any element of earned value or accountancy, although it appears that he was given the task of identifying and rectifying flaws in the earned value management system operated by Forgacs. He also provided “tender and bid support”, and was also described as a “project control specialist”.

[23] Mr Huang’s former duties are now largely performed by Mr Fairweather, but 50-60% of Mr Fairweather’s workload still consists of scheduling duties.

Consideration

[24] I am satisfied that the criterion in s.389(1)(a) is satisfied - that is, that Forgacs no longer required Mr Huang’s job to be performed by anyone because of changes in the operational requirements of Forgacs’ enterprise. The facts of this case, which I have earlier set out, make it clear that Forgacs, in response to ASC’s demand that it reduce the size of its project management team, determined that Mr Huang’s position was one of four that was to be eliminated from its organisation.

[25] Mr Huang’s submission as to s.389(1)(a) was twofold. Firstly, he said that the real reason for his dismissal was that he had fallen out of favour with Mr Gay, not that there had been any real changes in Forgacs’ operational requirements. Secondly, he submitted that the duties of his position had not disappeared but had merely been re-allocated to Mr Fairweather, confirming his first proposition that his dismissal had not been caused by any genuine change to operational requirements. I do not accept that submission. As to the first proposition, while the evidence did tend to indicate that there were some tensions in the relationship between Mr Huang and Mr Gay as to various mistakes which arose and which each tended to blame on the other, the evidence leaves no room for doubt that the necessity for Forgacs to reduce the size of its project management team was the cause of the elimination of Mr Huang’s position. As to the second proposition, the fact that the duties of a particular job or position which has been abolished have been re-allocated to other positions as part of an employer’s restructure does not alter the fact that the employer no longer requires that position or job to be performed by anyone. In Jones v Department of Energy and Minerals 1the Industrial Relations Court of Australia (Ryan J) said:

“However, it is within the employer's prerogative to rearrange the organizational structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly-created positions. It is inappropriate now to attempt an exhaustive description of the methods by which a reorganization of that kind may be achieved. One illustration of it occurs when the duties of a single, full-time, employee are redistributed to several part-time employees. What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organization, any duties left to discharge. If there is no longer any function or duty to be performed by that person, his or her position becomes redundant in the sense in which the word was used in the Adelaide Milk Co-operative case.”

[26] In relation to s.389(1)(b), Mr Huang submitted that his employment was covered by the Manufacturing and Associated Industries and Occupations Award 2010 2(Award), and that there had been a failure by Forgacs to consult with him about his redundancy in accordance with clause 9 of the Award. Forgacs does not contest that, if the Award applied to Mr Huang’s employment, it did not comply with clause 9. However Forgacs submitted that the Award did not apply.

[27] Clause 4.1 of the Award provides:

“4.1 This award covers employers throughout Australia of employees in the Manufacturing and Associated Industries and Occupations who are covered by the classifications in this award and those employees.”

[28] The expression “Manufacturing and Associated Industries and Occupations” is defined in clause 4.9 read together with clause 4.10. It is not necessary for me to set out that provision in full because there was no contest, and it is clearly the case, that Forgacs as a ship manufacturer falls readily within the scope of that expression. The critical issue is whether Mr Huang’s former position was one which was covered by a classification in the Award.

[29] Mr Huang contended that he was covered by a classification in the Award because he was a “production planner”. “Production planner” is referred to in clause 4.9(c)(iv) as an occupation which falls within the definition of “Manufacturing and Associated Industries and Occupations”. The expression “production planner” is defined in clause 3 as follows:

“production planners are employees who are or who are mainly engaged in either parts of, or a combination of, or all of:

(a) the planning of operations, methods or processes including the estimation of requirements of labour, tools or other equipment or components of goods by engineering processes; or

(b) the performing of routine tasks requiring engineering skill or knowledge, such as calculations or analysis of technical information, in trades involving structural engineering or the manufacture of agricultural implements, machine tools, motor cars and other vehicles, or electrical goods and equipment.”

[30] The classification structure definitions in clause B.2.1 of Schedule B of the Award include reference in a number of classifications to an “Engineering Associate/Laboratory Technical Officer” or an “Engineering/Laboratory Technician. The term “Engineering Associate/Technician”, which I take as referable to these expressions in the classification definitions, is defined in clause B.3.1(b)(iii) of Schedule B as follows:

“Engineering Associate/Technician is a generic term which includes technical officers in a wide range of disciplines including laboratories and quality assurance, draughting officers, planners and other para-professionals.”

[31] The reference to “planners” in the above definition I take to be a reference to, or at least include, production planners. I cannot find a reference to any other type of planner in the Award. The classifications in which Engineering Associates and Laboratory Technicians or Technical Officers appear require, in general terms, the completion of or progression towards educational qualifications in engineering, laboratory skills and or manufacturing technology or their equivalent.

[32] I do not consider that Mr Huang’s former position fell within any of the classifications of the Award. His educational qualifications related to his profession as an accountant. He had none of the qualifications referred to in the Award’s classification structure, or any equivalent training or experience. As an earned value accountant, his principal function was to provide reports concerning costs and expenditure at various stages of the production process. Although this involved him working in conjunction with the schedulers, who probably did fit the Award definition of production planners, Mr Huang did not himself perform production planning work as such. While he was closely involved in analysing the costs incurred in relation to production schedules produced by the schedulers, he himself did not produce such schedules.

[33] There is no other modern award which Mr Huang identified as applicable to his employment. I cannot identify any such award. Therefore, for the purposes of s.389(1)(b), there were no modern award obligations concerning consultation with which Forgacs had to comply in relation to Mr Huang’s redundancy.

[34] In relation to s.389(2), the authorities have stated the following propositions:

(1) The exclusion in s.389(2) poses a hypothetical question which must be answered by reference to all of the relevant circumstances. 3

(2) The question is concerned with circumstances which pertained at the time of the dismissal. 4

(3) In order to conclude that it would have been reasonable to redeploy the dismissed person, the Commission must find, on the balance of probabilities, that there was a job or a position or other work within the employer’s enterprise (or that of an associated entity) to which it would have been reasonable in all the circumstances to redeploy the dismissed employee. 5

(4) A number of matters are capable of being relevant in answering the question, including the nature of any available position, the qualifications required to perform the job, the employee’s skills, qualifications and experience, the location of the job and the remuneration which it offered. 6

[35] Mr Huang submitted that it would have been reasonable in all the circumstances to redeploy him within Forgacs’ organisation to:

(1) one of the scheduler positions in the Cost and Schedule Management team; or

(2) the Management Accountant’s position previously held by Mr Abela; or

(3) the position in which Mr Bowen was subsequently engaged.

[36] I do not consider that it would have been reasonable to redeploy Mr Huang to a scheduler position in the Cost and Schedule Management team. Mr Huang’s redundancy was a product of a decision to reduce that team from three to two positions, and a performance evaluation process which resulted in the two schedulers, Mr Fairweather and Mr Ball, being retained with expanded duties, and Mr Huang being made redundant. That being the case, it simply makes no sense to suggest that Mr Huang could then have been redeployed into one of the scheduler positions. Mr Huang’s submission in this respect was in substance a plea for the Commission to assess for itself what should have been the proper outcome of the performance evaluation process involving himself, Mr Fairweather and Mr Ball. I do not propose to do this, for two reasons. Firstly, it is simply not relevant to the question of whether Mr Huang could reasonably have been redeployed for the purposes of the s.389(2) consideration. Secondly and in any event I do not consider that, absent the demonstration of some unlawful or improper purpose or evaluation criteria in connection with a performance evaluation process to select persons for redundancy, the Commission should attempt to “second guess” the outcome determined by the employer.

[37] The question of redeployment to the Management Accountant’s position is a more difficult one. At the time of the redundancy, the position was vacant in the sense that it was not filled by an employee of Forgacs. The work was being done by a “contractor”, in circumstances where Forgacs’ policy was that contractors were to be removed from the organisation before any employee was made redundant. As I have earlier found, Mr Huang was capable of performing the duties of the position. The fact that Mr Turner was perceived as preferable for the position does not mean that it would not have been reasonable to redeploy Mr Huang to the position. I do not consider, for the purpose of s.389(2), that an applicant has to demonstrate that he or she was the best possible person to fill an alternative position in order to satisfy the Commission that redeployment to that position would have been reasonable.

[38] Were they the only relevant circumstances, I would have concluded that it would have been reasonable for Forgacs to redeploy Mr Huang to the Management Accountant’s position. However it is also necessary to take into account the fact that at some time in June or July 2013 and before Mr Huang had been made redundant, Forgacs had committed itself to employing Mr Turner directly in the Management Accountant’s position once an initial six months’ period had elapsed. That commitment appears to have been contractual in nature. There is nothing in the evidence to suggest that the making of that commitment was for the purpose of shutting out Mr Huang from the position; to the contrary, the evidence demonstrates that this commitment was made entirely independently of the redundancy process and on the basis that Forgacs was very favourably impressed by Mr Turner’s work. Forgacs having made that commitment to Mr Turner, the redeployment of Mr Huang to the Management Accountant’s position (thus entirely displacing Mr Turner from the work) would have placed it in a very difficult position with respect to Mr Turner. For that reason, I consider that it would not have been reasonable in all the circumstances for Mr Huang to be redeployed into the Management Accountant’s position.

[39] I do not consider that the engagement of Mr Bowen subsequent to Mr Huang being made redundant bears upon my consideration under s.389(2). The evidence does not demonstrate that what Mr Bowen was engaged to do was a job, position or work in existence at the time of the redundancy. It was not therefore an option for redeployment which existed at that time.

Conclusion and order

[40] I find that Mr Huang’s dismissal was a case of genuine redundancy within the meaning of s.389 of the Act. His application is dismissed.

VICE PRESIDENT

Appearances:

P. Huang on his own behalf

M. Mead of Ai Group for Forgacs Engineering Pty Limited

Hearing details:

2014.

Sydney:

5 March.

 1 (1995) 60 IR 304 at 308

 2   MA000010

 3   Ulan Coal Mines Ltd v Honeysett [2010] FWAFB 7578, 199 IR 363 at [26]

 4   Ibid at [28]; Technical and Further Education Commission t/a TAFE NSW v Pykett [2014] FWCFB 714 at [24]

 5   Pykett at [36]

 6   Ulan at [28]

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