Richard Smith and AWU-FIME Amalgamated Union and Aiton Australia Pty Ltd

[1995] IRCA 239

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 94/2611

B E T W E E N

RICHARD SMITH & AWU-FIME AMALGAMATED UNION
Applicants

A N D

AITON AUSTRALIA PTY LTD
Respondent

Before:       Murphy JR
Place:        Melbourne
Date:           8 June 1995

REASONS FOR JUDGMENT

Introduction

In this application under Part VIA of the Industrial Relations Act (the Act) the first named applicant (the applicant) alleges that the termination of his employment by the respondent on 2 December 1994 was not for a valid reason and was harsh, unjust or unreasonable. The applicant seeks reinstatement to his position as a rigger with the respondent and payment of remuneration lost.

The following witnesses were called:  The applicant; Mr Nijenhuis, a fitter and fellow Occupational Health & Safety representative of the respondent; Mr Terry Lee, State Organiser of the applicant union; and Mr Roy Woeltjes, Rigging Supervisor of the respondent.  For the respondent the Court heard from Mr Gary Burslem, Quality Assurance and OHS officer, and acting Site Construction Manager; Mr Garry Anderson, Project Manager; and Mr Glen Orr, Site Manager and Construction Manager of the respondent.

The respondent is a building contractor involved in the manufacture and installation of steam pipe used in the construction of Unit 2 of the Loy Yang B Power Station in the Latrobe Valley in Victoria, for the SECV.  It has also been involved in Unit 1 of the same project.  The applicant had previously been employed by the respondent on the first unit of the power station over the period February 1991 to December 1992. 

He had a couple of other short periods of employment with the respondent and in September 1993 he commenced as a rigger and scaffolder on Unit 2 of the Loy Yang B Station.  In those duties, he was involved in a work team known as the heavy lifting team.  In addition to that, he performed other duties driving trucks and a fork lift.   He was also a member of the rescue team, and held a First Aid Certificate.

THE COURSE OF EVIDENCE

The evidence in this case focused on three specific issues which the applicant said impacted on the decision of the respondent on 2 December 1994 to terminate his employment.  It is proposed to consider each of these issues in turn.

THE X20 ISSUE

Both the applicant and Nijenhuis, a Fitter, attended an Occupational Health & Safety (OHS) course in February 1994 and were duly elected as OHS representatives.  They tended to perform their duties in co-operation with each other although they were in different workgroups.  Each Friday they would perform a Safety Walk together with Burslem, the respondent’s OHS Officer, and an SECV representative. 

In September 1994 a welder reported to management suffering nausea while welding a particular type of steel pipe, X20.  The matter was brought to the attention of the two OHS representatives, who raised it with Burslem.  He assured them that the practices presently adopted by the respondent were safe, but he would make enquiries.  The representatives also made their own enquiries with their Unions.  Subsequently Burslem produced a 4 year old report, which made reference to possible adverse health effects from a component of that particular steel.  Nijenhuis gave evidence that he had difficulty obtaining a copy of this report from Burslem. 

After the report was obtained the representatives saw the matter as very serious, and a meeting of all the work crew was called.  Management was called to address this meeting, but during the meeting Burslem and the other management left.  They did this on the basis that the matter was becoming an industrial issue and should have been addressed as an OHS issue to be determined within the designated work group, namely the welders and those closely associated with them.  At this time employees placed a ban on further work with X20 until the safety issue was resolved.  Subsequently the OHS representatives arranged a meeting with the Department of Labour and at that meeting, or subsequently, it was agreed that an outside consultant would conduct tests to seek to replicate the conditions for welders on the site.

The report was prepared by the consultant and handed to Anderson.  The OHS representatives attempted to obtain that report from him but he declined until  he had properly considered it.  Subsequently Lee became involved, and he was advised by Anderson that after the report had been returned to the consultants for editing changes it would be provided in due course to the OHS representatives. 

A few days later the report was received by Anderson and then distributed to the OHS representatives.  The report was damaging to the respondent because it did indicate that employees had been exposed to levels of exposure well above those recommended.

Upon receipt of the report by the OHS representatives, there was a meeting of employees involved and a list of demands was made upon the respondent.  This included implementation of the recommendations of the report and the provision of letters detailing the exposure of each of the welders to the toxic material.  The company agreed to implement the report and the demands.  Subsequently additional equipment was obtained and after some teething problems with the new equipment work on the X20 steel resumed.

The applicant, corroborated by Nijenhuis, claimed that from the time of the X20 incident the company’s attitude to them as OHS representatives changed adversely.  Their evidence was that  because of their activities as OHS representatives it had caused the respondents welding program to get out of balance and cost additional monies not budgeted for in the project.  They claimed the respondent resented this.  Nijenhuis also claimed that Burslem was on occasions short with him when he raised OHS issues.  After work resumed on the X20 steel Orr ordered that the applicant and Nijenhuis no longer conduct a joint safety walk.  He claimed that this was to return to the position on Unit 1 where the safety walks were separately conducted for each designated work group.

The respondent’s representatives denied that there had been any change to its attitude to safety or to the applicant following the X20 incident.  Burslem could not remember ever being short with Nijenhuis.  The respondent did concede however, that the incident had caused its program to become unbalanced but maintained that it had been able to continue other welding work while the workban was in place.  Anderson was emphatic that the respondent acted properly after the hazard was brought to its attention.  In cross-examination the applicant conceded that the Respondent had acted reasonably.  He maintained, however, that aspects of the matter, namely the letters to employees, were only just being completed at the time of the hearing.

THE SECOND ISSUE

The second incident relied on by the applicant was an industrial dispute involving a former employee of the respondent, Barry.  Barry had resigned but had not then been paid a week’s pay, which was regarded as normal on the project.  Further, the employee, although originally due to start work at another company in Western Australia, had this employment terminated, allegedly as a result of information which flowed indirectly from, or via, another employer on the project.  In November 1994 industrial action in the form of a half day stoppage, work bans, and a one week strike resulted, before the issue died a natural death.  The applicant gave evidence that he and other employees who were subsequently retrenched had been active in this particular industrial dispute.  Barry had been the employee first involved in the X20 matter.

THE THIRD ISSUE

A third incident which the applicant raised was an incident the result of a difference of opinion between the applicant and Lasagne, a welder, as to how to approach a particular task.  The applicant left the site one afternoon.  As a result of this, a counselling session involving the work team occurred, and that was the end of the matter.  The applicant no longer worked in close proximity to Lasagne in performing his duties.

TERMINATION OF THE APPLICANT’S EMPLOYMENT

On 2 December 1994 the applicant and Nijenhuis were called into Orr’s office by Burslem.  They were told that due to the wind-down of work they were to be retrenched.  Three other employees were retrenched the same day and Woeltjes, the supervisor of the applicant, was retrenched a couple of days later.

There was little real discussion between the applicant and Orr as to why he was retrenched.  The applicant and Nijenhuis were surprised by this unexpected action.  Woeltjes and another supervisor were also surprised when they were told of the action.

Orr’s evidence was that work had progressed on the job to the point where he no longer needed two crews of riggers.  Seven employees, including two riggers, had been retrenched in October.  The applicant and another rigger were retrenched on 2 December.  Orr claimed that he had mentioned to the union site convenor, Kevin Hills, that the respondent was carrying too many staff and that there would have to be a reduction.  Orr further attributed the need for the retrenchments to the fact that 85% of the pipes had at that stage been lifted into place.  The respondent was only using one crew of welders, and thus there was a reduced need for riggers (who operated after the welders) and only one crew was required.

Orr had to choose between two existing crews of heavy lift riggers and chose a crew that did not include the applicant.  He claimed it was a close decision - “the toss of a coin”.

The evidence from Woeltjes was that when there had been retrenchments in the past the supervisors had been involved in the selection.  Orr’s response to this was that the supervisors could not be involved here because one of the supervisors also had to be retrenched consequent upon the retrenchment of a crew.

Subsequent Events

Immediately after being told he was terminated the applicant went to the union site convenor, Hills.  Hills then approached the respondent with a request that the applicant not be required to work out his period of notice, but be paid instead.  On 6 December the applicant union wrote to the respondent seeking the waiver of the requirement to work out the period.  The request was without prejudice to the union disputing the validity of the termination.

Around this time the respondent notified a dispute under the Disputes Avoidance Procedure of the site Agreement.  A meeting of the Disputes Committee was convened for 9 December.  That meeting did not proceed due to the absence of a union delegate.  The applicant, along with some of the other retrenched employees, attended.  Another meeting was also convened for 13 December, but again did not proceed due to the absence of another union delegate.  After that there were other attempts to reconvene the meeting but these were thwarted by proximity to Christmas.  A further attempt was made in January but the evidence was that the applicant union at that stage desired to pursue the proceedings in the Court.

The respondent’s evidence was that this procedure should have been pursued by the applicant.  It referred to a 1991 termination of a union shop steward which was the subject of a dispute.  That employee was reinstated while the process was progressed until ultimately the termination was upheld.  The respondent claimed, and the applicant and Lee accepted, that it was no fault of the respondent that the procedure was not progressed to finality.

Did the respondent however have a valid reason under s.170 DE to terminate the applicant’s employment?

It was the respondent’s case that its valid reason to terminate the applicant’s employment was a decline in labour requirements due to progress in the job.  In particular, Orr claimed that he formed the view that the respondent could operate with only one heavy lifting crew because, at that stage, 85% of the pipes on the job had been put in place.  Due to a decline in the number of welders working, there was now less need for riggers to follow the welding crew.

The applicant was not in a position to contradict this evidence of the respondent.  The applicant believed that there was work available for him to perform.  On Unit 1 of the project, he had been retained by the respondent until the acid clean stage, which was not due until June 1995 on this unit.  The respondent gave a reason why certain riggers were maintained on the previous unit which was not applicable to this unit.  The applicant also alleged that, subsequent to his departure, the remaining crew performed overtime.  The respondent countered by submitting that of the seven riggers on the site two had previously been retrenched and another was retrenched at the same time as the applicant.  The respondent also said that overtime had been worked after the retrenchments but had been as a result of the SECV seeking to accelerate progress on the project.  Further, Orr claimed that he had proved that, at the date of the termination, the applicant was not required because the project had been brought to completion on target with the only remaining crew.

The applicant, supported by Nijenhuis, alleged in his evidence that he and the other retrenched employees had been singled out because of X20 incident and the later incidents that he had been involved in.  It was suggested that it was strange that all those involved in the various incidents had been retrenched on the one day.  He pointed to the fact that Woeltjes and another supervisor were shocked by the termination and that the termination of all the five workers on the one day was a surprise to them.

A further reason why the applicant alleged that the respondent did not have a valid reason to terminate his employment was the additional skills that he had.  He had worked previously with the respondent, had a First Aid Certificate, and had completed an OHS course.  He performed other duties such as semi trailer and fork lift driving and was a member of the rescue team.

According to Orr, the choice of the applicant for termination flowed from a decision to select one team of riggers over the others.  He maintained that the skills were evenly balanced and that it was close choice.  Woeltjes gave evidence that the teams were equally skilled.  Woeltjes indicated however that, in the past, at times of retrenchment there  had been more elaborate selection process.

Findings on Valid Reason

This is a case where, in relation to the termination, every action of the respondent can be seen to be either innocent or for an ulterior motive.  The applicant asserts that the ulterior motive was his OHS status and his industrial involvement.  The respondent asserted that it chose to terminate on the basis of a choice between two equally skilled crews of riggers.  Counsel for the respondent submitted that the case against the respondent on this basis was at its highest circumstantial.

The Court is satisfied that the respondent has discharged its onus of proof that it had a valid reason connected with its operational requirements to terminate the applicant’s employment.  I accept Orr’s evidence that the job was entering a wind-down phase and that this required less labour.  I accept he chose the applicant for termination consequent upon a decision as to which of the heavy lifting rigging crews were to be retained.  I find that the applicant’s role as an OHS representative was not a motivating factor nor was his involvement in the other two matters discussed above.  I am not satisfied that there was anything personal to the applicant which motivated the respondent.

Although much was made of the applicant’s (and indeed Nijenhuis’) role as an OHS officer, I am not satisfied that this was the reason for the termination.  The X20 issue, when it was raised, involved the designated work group.  The Department of Labour was brought in.  The respondent had little choice but to retain outside consultants and then to implement the report.  Removal of the applicant would not have allowed the respondent to wind back any of the consultant’s recommendations.  The applicant as OHS officer had the extra protection that he was elected by the employees.  He also had to be given an extra week’s notice.

Although I have no reason to doubt Nijenhuis’ evidence that he was under the impression that the respondent resented him raising matters about the implementation of the report, I am not satisfied that this provided the reason for the terminations of employment of both OHS officers.

Similarly, I reject the argument that it is more than a coincidence that those who were active in the industrial action involving Barry had been retrenched.  Orr gave evidence, which I accept, explaining how those retrenched on that day were selected.  It related to choosing one crew.  In one particular case it also involved the need for retention of a trades assistant.  I am satisfied that it was these operational requirements, rather than any propensity to industrial activity, which was the operative reason for the choice of the applicant and others.

I accept the respondent’s evidence that the retrenchment did not involve discussion with the supervisors because they were also affected by the downturn in labour requirements. I am satisfied that any overtime which was worked subsequent to the retrenchment was not such as to suggest that the retrenchment was not necessary. On the contrary, I accept that the overtime was invoked in response to a later request from the SECV to expedite the project. It follows from the above that the respondent has discharged its onus of proof that it had valid reason to terminate the applicant’s employment under s170 DE(1) of the Act.

Was the termination in breach of s170 DE(2) of the Act?

Counsel for the applicant’s argument was that in the event that there was a valid reason for the termination, the respondent was in breach of the procedural and substantive requirements that are imposed by s170 DE(2) of the Act. It was argued that there had been a failure to consult the applicant or the applicant union, and that the applicant had been denied procedural and substantive fairness by the failure of the respondent to turn its mind to any selection criteria. It had failed to consider the extra skills which the applicant held and thus his termination contravened s170 DE(2).

Consideration of this issue requires a discussion of the SECV Latrobe Valley Construction Projects Metal Trades Agreement 1993.  This agreement is a comprehensive agreement covering industrial relations on the site.  It is known on the site as the “blue book”.  It is expressed to operate until the handover of the Loy Yang B Unit 2 to Mission Energy.  The parties to the Agreement, including the two unions which now form the applicant union, state at Clause 7 that “the rates of pay and conditions of employment contained in this Agreement take into account and make provision for the special and peculiar circumstances prevailing on the State Electricity Commission of Victoria’s construction sites in the Latrobe Valley and cannot be used as a basis for altering existing rates of pay or allowances on any site not covered by this Agreement.”

In Clause 4.1, the Agreement is expressed to vary the rates of pay, conditions and allowances prescribed in two construction industry Awards.  In Clause 4.2, the two unions which now form the applicant union are agreed to be bound by the Agreement.  The agreement is expressed to also bind all contractors employing metal trades labour for or on behalf of the SECV.  It was common ground that the respondent was bound.

Clause 15.5 provides that the changes in the wages and conditions of employment in the Agreement  “are in full settlement of the union claims and there will be no further claims”  until the handover,  “against the individual employers for increases in over award payments or for changes in any of the conditions of employment dealt with in this Agreement.”

The Agreement provides, in Clause 8.5.1.2, that employees accrue termination pay at the rate of $2 per hour.  Clause 8.5.1.3 provides for an additional one week’s pay upon retrenchment.  Clause 8.5.1.7 provides for the crediting of sick leave credits in the event of a retrenched employee being re-employed by the same employer or by another employer within 12 months. 

Disputes Avoidance Procedure

Clause 3 of the Agreement provides for a “disputes avoidance procedure”.  Clause 3.1 the procedure is stated to be aimed to “eliminate, by direct negotiation and consultation between the parties to this Agreement, any dispute, claim or grievance which is liable to cause a stoppage or other form of ban or limitations upon the performance of work.” 

Clause 3.2 provides:  “The contractors ... the unions and their members are agreed that they will use every possible endeavour to ensure that -

• any claim or grievance by any party to this Agreement which affects or could affect the operation of the Agreement; or

• any situation which could give rise to a dispute or claim or grievance affecting the operation of this Agreement;

shall be dealt with in accordance with in accordance with the provisions of this Clause.”

Can the Agreement be relied upon by the respondent to avoid breach of the requirements of s170 DE(2)?

There was little evidence as to the circumstances surrounding the making of the Agreement.  The evidence was however that a similar site agreement had been in place for some years.  It is clearly designed to comprehensively address a number of industrial issues thought to be inimical to the progress of projects in the LaTrobe Valley.  The Agreement, looked at as a whole, provides for the recognition of certain rights of employees and their unions, including a right to various payments.  It also establishes, in the form of the Disputes Avoidance Procedure, a mechanism which the parties are to have recourse to in the operation of the Agreement.

The Agreement does not make any provision for consultation between employees or their unions and employers in the event of retrenchment.
In Clause 8.5.5 the Agreement records that the provisions of the clause “are in lieu of Award and Industry Termination, Change and Redundancy provisions.”

The precise contents of the Award provisions relating to redundancy which were excluded by this clause were not in evidence.  Presumably they were in form similar to the standards set out in the Termination, Change and Redundancy Case (1984) 8 IR 34, at 97. General provisions relating to redundancy are also set out in Schedules 10 and 11 to the Act. Both the Convention Concerning Termination of Employment at the Initiative of the Employer (Schedule 10) and the Recommendation (Schedule 11) record that the provisions may be made effective by collective agreements.

There is no evidence to suggest that the Agreement is other than a genuine industrial agreement designed, inter alia, to minimise the effects of redundancy in this part of the construction industry.  The Court must give effect to the Agreement while at the same time ensuring that the provisions of Part VIA of the Act have not been breached.

The employer carries the onus of proof that it had a valid reason for the termination of the applicant’s employment.  The applicant, on the other hand, carries the onus of proof that the termination was otherwise harsh, unjust or unreasonable.

In considering whether this termination has breached s170 DE(2) I have weighed the following matters. The applicant was not given any specific forewarning of his termination, nor was the union consulted. The respondent did not have any specific predetermined criteria. It adopted an ad hoc criteria, namely, which of the two heavy lift crews of riggers to retain in the face of a diminishing work load. The applicant’s work history with the company and his additional skills and qualifications, namely, membership of the Rescue team, other licences, OHS course and First Aid certificate, were not considered.

The applicant’s counsel argued that the respondent had to consult and apply a proper selection criteria. It had failed to do so and this made the termination harsh. The respondent’s counsel, on the other hand, argued that the parties to the Agreement had chosen to leave the issue of the content of the selection process for redundancy as a matter for the respondent. He noted that the parties had chosen to provide for generous redundancy benefits (the applicant was paid 12.5 weeks normal pay after his 18 months’ service) and to put in place the grievance mechanism to address any grievance about the actual selection. Further, there had been previous redundancies on the site and no issue had arisen. It was further argued that this was the known and accepted practice in the Valley. The respondent argued that the Disputes Avoidance Procedure in the Agreement was the proper forum for the applicant to agitate any grievance which he might have about lack of consultation or the selection process. It was argued that this mechanism met the requirements in the Act that the termination not breach s170DE(2).

I am satisfied that the provisions of the Agreement here allow the respondent to resist a finding that the termination breached the requirements of s170DE(2) in so far as they relate to the procedure for the selection of redundant employees.

The actual procedure is different from that considered in Mandroulias v South Pacific Tyres (Industrial Relations Court of Australia, Parkinson JR, 5 April 1995) but the principles are the same. In that case the selection criteria were agreed. An agreement was in place and it was held to comply with the requirements of procedural fairness contained in s170DE(2) of the Act. In a related case, Janceski v South Pacific Tyres (Industrial Relations Court of Australia, Parkinson JR, 5 April 1995), it was held that the criteria agreed had not been properly applied.

Here, Lee of the applicant union accepted that while it would be nice for the union to be consulted about redundancies, it did not always happen.  He further accepted that this was the first time that the union had raised the question of the criteria for selection for retrenchment.  It  had not been raised when employees were retrenched in October.  He accepted that the matter was not addressed in the Agreement.

Having regard to this evidence and the failure to make any provision in the Agreement, including a requirement that the parties consult prior to redundancies, I am satisfied that the failure to consult either the applicant or his union did not make this termination in breach of the requirements of s170 DE(2).

I am further satisfied that the manner in which the respondent chose and applied its own selection criteria here did not make the termination in breach of s170 DE(2). The presence of the Disputes Avoidance Procedure, and its invocation by the respondent, is critical here.

The parties have established their own mechanism to address concerns about any aspect of the Agreement.  The choice of the applicant for redundancy is one such aspect.  The respondent was ready, willing and able to participate in the detailed procedure set out in Clause 3.  Much was made of a failure by the respondent to offer to reinstate the applicant while the procedure was progressed.  The respondent was never requested, in the context of the procedure, to take that action.  This was because the applicant chose to leave the employment immediately rather than work out his notice as required for OHS representatives under the Agreement.

The applicant and the applicant union, for reasons which were not satisfactorily explained, chose not to progress the dispute through the mechanism.  In that respect, both of them are in clear breach of their obligations set out in Clause 3.2 above.

Whatever misgivings the applicants may have had about the selection of the men on 2 December 1994, the proper place for them to be aired, in the first instance, was in accordance with that procedure.  By doing so the parties would have been seeking to “avert or minimise as far as possible termination of employment for reasons of [redundancy], ... and to mitigate the adverse effects of any termination of employment for these reasons on the worker or workers concerned.”  (Recommendation (Schedule 11 to the Act) Cl. 19).

Where parties to an Agreement have set out a mechanism to provide a forum to argue about whether there is a precise need for redundancies, who should be made redundant, and what sort of criteria should have been applied, it is not for this Court to be the forum to have those arguments unless, for some reason, the earlier Agreement has not been complied with.

In circumstances where the respondent has complied with its obligations under the Agreement and the applicant has chosen not to utilise the Disputes Avoidance Procedure to seek to address his grievance with his termination, I am unable to find that the applicant has discharged his onus of proof that the termination beached s170 DE(2). The application must be dismissed.

THE COURT ORDERS THAT:

1. The application is dismissed.

I certify that this and the preceding sixteen (16) pages are a true copy of the reasons for judgment of Judicial Registrar Murphy.

Associate:
Dated:  7 June 1995

Solicitors for the Applicant:             Maurice Blackburn & Co
Counsel for the Applicant:              Ms Lita Gyfteas

Solicitors for the Respondent:       MTIA-MBAV Joint Venture
Counsel for the Respondent:  Mr J Douglas

Date of hearing:  17, 18 May 1995
Date of judgment:  8 June 1995

C A T C H W O R D S

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - REDUNDANCY - VALID REASON - HARSH, UNJUST OR UNREASONABLE - Industrial Agreement - Agreement silent on consultation or selection criteria - Agreement contained dispute resolution mechanism - Applicant failed to deal with matter under dispute mechanism - whether Agreement relevant to compliance with s170 DE of the Act

Industrial Relations Act 1988 s.170 DE

CASES:

Termination, Change and Redundancy Case (1984) IR 34

Mandroulias v South Pacific Tyres (Industrial Relations Court of Australia, Parkinson JR, 5 April 1995)
Janceski v South Pacific Tyres (Industrial Relations Court of Australia, Parkinson JR, 5 April 1995)

RICHARD SMITH & AWU-FIME AMALGAMATED UNION -v- AITON AUSTRALIA PTY LTD

No. VI 2611 of 1994

Before:  Judicial Registrar Murphy
Place:  Melbourne
Date:  8 June 1995

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 94/2611

B E T W E E N

RICHARD SMITH & AWU-FIME AMALGAMATED UNION
Applicants

A N D

AITON AUSTRALIA PTY LTD
Respondent

MINUTES OF ORDERS

Judicial Registrar Murphy  8 June 1995

THE COURT ORDERS THAT:

1. The application is dismissed.