Shane McCarthy v IC Formwork Services Pty Ltd
[2024] FWC 2901
•21 OCTOBER 2024
| [2024] FWC 2901 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Shane McCarthy
v
IC Formwork Services Pty Ltd
(U2024/5685)
| DEPUTY PRESIDENT DEAN | CANBERRA, 21 OCTOBER 2024 |
Application for an unfair dismissal remedy – whether genuine redundancy – application dismissed.
Mr McCarthy was employed with IC Formwork Services Pty Ltd (IC Formwork) until he was dismissed on 3 May 2024 by reason of redundancy. He had worked for IC Formwork in various capacities from 1998 including a subcontractor, and then from 2010 as a permanent employee.
On 20 May 2024 Mr McCarthy made an application under s.394 of the Fair Work Act 2009 for a remedy, alleging that he had been unfairly dismissed by IC Formwork because his redundancy was not genuine.
IC Formwork objected to the application on the grounds that the dismissal was a case of a genuine redundancy.
The Commission must determine, by virtue of s.396 of the Act, the question of whether the dismissal was a genuine redundancy before considering the merits of the application.
At the hearing on 29 August 2024, Mr McCarthy was represented by the Mr T Fischer of the Construction, Forestry and Maritime Employees Union (Union) and IC Formwork was represented by Mr L Meagher of Counsel. Mr McCarthy gave evidence on his own behalf and Mr Michael De Simone (Managing Director) and Mr Graham Jackson (Chief Financial Officer) gave evidence for IC Formwork.
For the reasons set out below, I find that Mr McCarthy’s dismissal was a case of genuine redundancy, and he was therefore not a person protected from unfair dismissal.
Background
Mr McCarthy commenced his latest period of employment with IC Formwork on 11 August 2010. At the time of his termination, he was employed as a Construction Worker Level 6 (CW6) under the IC Formwork Services Pty Ltd and CFMEU ACT Enterprise Agreement 2022 (the Agreement).
IC Formwork is a family owned and operated business that has offices in Canberra and Newcastle. It provides services in formwork for construction projects and has worked on an array of commercial, multi-storey residential, industrial and civil projects. The work it performs includes installation of formwork systems and completing complex formwork projects including high rise structures.
CW6 is the highest level of construction worker under the Agreement, and Mr McCarthy was the only CW6 in the employ of IC Formwork.
On 2 May 2024 Mr De Simone made a decision to make Mr McCarthy’s role redundant.
On 3 May Mr De Simone met with Mr McCarthy and advised him that his role was redundant and that his employment was terminated.
The case for Mr McCarthy
Mr McCarthy gave evidence that in around 2017, his brother engaged in unrelated litigation against IC Formwork and the attitude of IC Formwork towards him changed at that time. He felt he was treated less favourably than other workers from that time onward.
He gave evidence that in recent years he has constructed formwork himself as well as supervising a team of other formwork carpenters to manage specific projects. He understood he was working as a leading hand and believed IC Formwork deployed him to undertake sensitive jobs that required significant attention to detail and ‘a skilled hand’. He said he was important to the organisation as their most senior tradesperson, and there were never any complaints about the high quality of his work. Unlike many formwork carpenters with less training, Mr McCarthy said he was an all-rounder who could be given any job, with a guarantee that he would provide a professional standard of work. He said he was instrumental in re-introducing traditional formwork techniques to the business that improved productivity and the quality of jobs. He also said he did not believe IC Formwork would be able to continue training its form workers to such a high level without him.
In April 2020 Mr McCarthy fell from a deck and broke his wrist while at work. The injury was compensable under workers compensation, and he had 11 weeks off work. He returned on light duties and continued to experience pain throughout 2020 and 2021.
In late November 2021, Mr McCarthy said he had returned after a lunch break and had a conversation with some other employees who told him IC Formwork wanted him to get an ABN and work as a subcontractor. He later told those employees he didn’t want to do that and said he did not hear anything further about it. In his evidence he referred to this incident as a ‘direction to quit’.
In February 2022 Mr McCarthy re-aggravated his injury because a foreman had grabbed his arm. He said that around one week later the same foreman told him he “wasn’t cutting the mustard”. Mr McCarthy reported the aggravation to IC Formwork who raised it with their new workers compensation insurer. He said that due to this dispute he was kept in the yard from March to November 2022 during which time he began to receive negative comments from other employees about his injury or fitness, which escalated into general abuse about his hobbies and his personal life.
In relation to the termination of his employment, Mr McCarthy said that at around 10 am on 3 May 2024 Mr De Simone approached him in the yard and asked him to go upstairs to the meeting room in the office. When he asked what the purpose was, Mr De Simone said “we’re making you redundant”. Mr McCarthy said he refused to go to the office, and Mr De Simone then went to the office and returned with an envelope which he handed to Mr McCarthy. Mr De Simone told Mr McCarthy that “you’re a CW6 and we don’t need CW6s”, and that the business in Newcastle “wasn’t running so well”.
Mr McCarthy then collected his personal belongings and left the site. He later contacted his union and met with the union legal officer before opening the envelope which contained a letter notifying him of the termination of his employment by reason of redundancy. Also contained in the envelope were a separation certificate, final payslip and a statement of service.
The case for IC Formwork
IC Formwork refuted Mr McCarthy’s contention that his redundancy was not genuine. Because of the financial pressures, IC Formwork had reviewed its staffing levels and the operational needs of the business regarding the future forecast work to be performed. As a result, Mr De Simone made a decision to reduce labour costs by making Mr McCarthy’s CW6 role redundant. This decision only affected Mr McCarthy in that it was only his CW6 role that was made redundant at that time.
Further, IC Formwork contended it was not required under the terms of the Agreement to consult about the redundancy, and it was not reasonable to redeploy Mr McCarthy as there were no CW6 roles available, and in fact no vacant positions in any role within its business at all. As such, the termination was a genuine redundancy in accordance with s.389(1) of the Act.
Mr De Simone gave evidence that in around early February 2024 he had a conversation with Mr Jackson about the downward trend of work and the reduction in square meters laid and discussed options for cost cutting. Mr De Simone gave evidence that the downturn in business was evident from the metric of ‘square meters laid’ that demonstrated that costs saving measures were necessary. Mr Jackson explained that the single most important metric for IC Formwork was the number of square meters laid and formwork is measured by square meters.
Mr Jackson gave evidence about the business downturn, which included that as at April 2024, the square meters laid was down by around 31.3% from July 2023, and 38.44% down on the average of the 10 months from July 2023 to March 2024. He also gave evidence as to a number of projects due to be completed in May and June 2024, with a limited pipeline of work that did not come close to replacing the value of the completed projects.
As labour was the biggest cost to the business, they discussed the cost of IC Formwork’s construction workers.
Mr Jackson’s evidence canvassed the other measures taken to reduce costs including reviewing external contracts and suppliers (for which changes were made), and making the full-time administration assistant role redundant, which occurred in February 2024.
In late April 2024, IC Formwork was not successful in securing two key projects that it had anticipated receiving, as it was undercut on price by a competitor.
On or around 29 April 2024 Mr De Simone and Mr Jackson had a further conversation about the business’ finances and the downward trend of work. During this conversation, Mr Jackson suggested that IC Formwork should consider redundancies of construction workers. The nature of the work in the upcoming projects was also discussed, that being primarily labourers and carpenters in addition to foremen to oversee the work. Mr Jackson suggested that they approach the redundancies from the highest classification workers, that being CW6, as that level was not required on any of the projects IC Formwork had.
Mr Jackson gave evidence that prior to suggesting that consideration be given to a CW6 redundancy, he was not aware that Mr McCarthy was the only CW6.
Mr De Simone was aware Mr McCarthy was the only CW6 who was employed by IC Formwork, and on or around 2 May 2024 he decided that Mr McCarthy’s role was surplus to their needs and therefore the role was redundant. He said he was aware that there were no other roles available for Mr McCarthy as recruitment was one of his responsibilities. That same day, Mr De Simone spoke with Mr Jackson and informed him he had decided to make Mr McCarthy’s role redundant. He asked Mr Jackson to prepare the relevant paperwork, that being a summary of Mr McCarthy’s pay entitlements and a separation certificate.
On 3 May 2024 Mr De Simone approached Mr McCarthy at work and asked him to go with him to his office to talk. Mr McCarthy did not want to go to the office and insisted that the conversation take place outside. Mr De Simone advised him of the decision to make his role redundant and that his employment was terminated. The reasons provided were that there had been a reduction in square meters laid, that a number of projects had finished and two projects had been lost, and there was a need to reduce business’ expenses as a result. Mr De Simone also stated that Mr McCarthy was the only CW6. Mr McCarthy was given a termination letter, separation certificate, and a summary of his pay entitlements. He subsequently left the site.
Mr De Simone denied making Mr McCarthy’s role redundant because he had made a workers compensation claim in 2021. He said he understood the claim was concluded in 2022 and this did not factor into his decision.
Mr De Simone also gave evidence that since 3 May 2024 to the date of the hearing, IC Formwork had continued on a downward trend of square meters laid and there were ongoing assessments being made of the viability of the business.
Mr Jackson gave evidence that he did not make a severance payment to Mr McCarthy because the Agreement provides that severance is to be paid into the Australian Construction Industry Redundancy Trust (ACIRT) and can be accessed by employees if and when they are made redundant. He also gave evidence that IC Formwork has no visibility over or access to the funds held by ACIRT for Mr McCarthy and it is incumbent on him to make a claim to the trust in order to receive his redundancy pay. Mr Jackson’s evidence was that he estimated IC Formwork had contributed around $75,000 to ACIRT for Mr McCarthy over the course of his employment.
Consideration
Under s.385(d) of the Act a person is not unfairly dismissed if the dismissal was a genuine redundancy. The term ‘genuine redundancy’ is defined in s.389 of the Act:
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.
There are three relevant matters for consideration in determining whether Mr McCarthy’s dismissal was a case of genuine redundancy, namely:
1. Did the employer no longer require the employee’s job to be done by anyone because of changes in the operational requirements of the employer’s enterprise?
2. Has the employer consulted in accordance with the consultation provisions of a relevant modern award or enterprise agreement?
3. Was it reasonable in all the circumstances for the employee to be redeployed in the employer’s enterprise?
The Explanatory Memorandum to the Fair Work Bill 2008 provides that a redundancy may be genuine where, for example, the employer only needs three people to do a particular task or duty instead of five, or where the tasks done by a particular employee are distributed between several other employees and therefore the person’s job no longer exists.[1]
Further, the process for selecting an individual employee for redundancy is not a relevant question as to whether the redundancy is a genuine redundancy.[2]
Did the employer no longer require the employee’s job to be done by anyone because of changes in the operational requirements of the employer’s enterprise?
As noted above, in considering the question of whether an employer ‘no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise’, it is well established that the test can be met when job functions are retained but are redistributed.
An employee’s job may be genuinely made redundant when the employee’s duties, or aspects of them, are still being performed by other employees.[3] The test is whether the job previously performed by the employee has survived the restructure or downsizing, not whether the duties have survived in some form.[4]
The reference to ‘changes in the operational requirements of the employer’s enterprise’ in s 389(1)(a) of the Act includes circumstances where an employer restructures its business to reduce costs or improve efficiency, productivity, sales, revenue or some other aspect of performance.[5] The operational circumstances of a business which may result in a redundancy are in the direct knowledge of the employer. The evidentiary onus is on the employer to provide direct evidence about the nature of the employee’s job and why it is no longer required to be performed as a result of changes in the operational requirements of the employer’s enterprise.[6]
In Ulan Coal Mines Limited v Henry Jon Howarth and others[7], the Full Bench said:
“[17]It is noted that the reference in the statutory expression is to a person’s ‘job’ no longer being required to be performed. As Ryan J observed in Jones v Department of Energy and Minerals (1995) 60 IR 304 a job involves ‘a collection of functions, duties and responsibilities entrusted, as part of the scheme of the employees’ organisation, to a particular employee’ (at p. 308). His Honour in that case considered a set of circumstances where an employer might rearrange the organisational 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. In these circumstances, it was said that:
‘What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organisation, 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…’ (at p.308)
This does not mean that if any aspect of the employee’s duties is still to be performed by somebody, he or she cannot be redundant (see Dibb v Commissioner of Taxation (2004) FCR 388 at 404-405). The examples given in the Explanatory Memorandum illustrate circumstances where tasks and duties of a particular employee continue to be performed by other employees but nevertheless the ‘job’ of that employee no longer exists.
[18]In Kekeris v A. Hartrodt Australia Pty Ltd[2010] FWA 674 Senior Deputy President Hamberger considered whether a dismissal resulting from the restructure of a supervisory team was a case of genuine redundancy. As a result of the restructure, four supervisory team leader positions were replaced by three team leader positions. The Senior Deputy President said:
‘When one looks at the specific duties performed by the applicant prior to her termination they have much in common with those of two of the new positions in the new structure. The test is not however whether the duties survive. Paragraph 1548 of the explanatory memorandum makes clear that it can still be a ‘genuine redundancy’ where the duties of a previous job persist but are redistributed to other positions. The test is whether the job previously performed by the applicant still exists.’”
I accept the evidence of Mr De Simone and Mr Jackson that IC Formwork had suffered a downturn in business, which is evident from the metric of square meters laid and the loss of anticipated projects. I accept this led to a review of its costs and resulted in a decision to reduce labour costs by making the only CW6 role redundant. This decision only affected Mr McCarthy as he was the only CW6.
I also accept the evidence of Mr De Simone that the upcoming projects were not complex and could be completed with lower level roles.
As a result, I am satisfied that IC Formwork did not require Mr McCarthy’s job to be performed by anyone because of changes in the operational requirements of IC Formwork.
Has the employer consulted in accordance with the consultation provisions of a relevant modern award or enterprise agreement?
Clause 53 of the Agreement deals with consultation regarding major change as follows:
53. Consultation regarding Major Change
53.1 This clause applies where the Company is seriously considering, and prior to the taking of any definite decision on the introduction of major workplace changes that are likely to have a significant effect on Employees.
53.2 The Company must notify and consult with the Employees and their Union,
where the Union is the employee’s chosen representative) or other representative/s, if any, as soon as practicable and Discuss:
(a) The introduction of the change and the timing of the changes; and
(b) The effect of the change is likely to have on Employee; and
(c) Measures the Company is taking to avert or mitigate the adverse effect
of the change on Employee.53.3 For the purposes of the discussion—provide to the relevant Employees and their Union, where the union is the employee’s chosen representative/ (), or any other representative in writing:
(a) All relevant information about the change, including the nature of the
change; and
(b) Information about what the Company reasonably believes will be the effects of the change on the Employees; and
(c) Information about any other matters that the Company reasonably believes are likely to affect the Employees; and53.4 Invite the relevant Employees to give their views about the impact of the change (including any impact in relation to their family or caring responsibilities).
53.5 Relevant Employees may appoint a person or organisation of their choosing to represent them in the consultation process. Union members shall be represented by their Union at all stages of the consultation process where they choose to be represented by the Union.
53.6 The Company is not required to disclose confidential or commercially sensitive information to the relevant Employees.
53.7 The Company must give prompt and genuine consideration to matters raised
about the change by the relevant Employees and the Employee/s representative/s (if any).53.8 In this term ‘relevant Employees’ means the Employees who may be affected by a change referred to in subclause 53.1 of this Agreement.
53.9 The Company must recognise the Union or other representative appointed by an Employee and consult in good faith in relation to such proposed changes.
53.10 In this Clause major workplace changes that are likely to have a significant
effect on Employees includes:
(a) Termination of employment;
(b) Changes to composition, operation or size of the workforce or the skills
required of Employees;
(c) Elimination or diminution of job opportunities (including promotion/tenure)
(d) Retraining, relocation or restructuring; and
(e) Changes to the legal or operational structure of the Company or
business, including changes to business ownership or control.
Mr McCarthy pointed to clause 51 of the Agreement which deals with dismissal, and to clause 37 of the Award which is incorporated into the Agreement and deals with consultation about major workplace change.
IC Formwork contended it was excused from following these processes because the redundancy was not a ‘major change’ that could trigger clause 53 of the Agreement, and the use of ‘Employees’ in clause 53 means that a redundancy only affecting a single employee cannot trigger it.
Mr McCarthy contended that ‘serious consideration’ was given to a broader program of redundancies based on the evidence of IC Formwork, and by failing to consult at that point, IC Formwork had breached its obligations under the Agreement.
Recent decisions of the Commission make it clear that there is no ‘decision rule’ to the effect that, where there is a single redundancy or a relatively small number of redundancies, a major change will not arise. Consideration, then, needs to be given to the particular circumstances as to whether a redundancy brings about a significant change in the operation of that business with respect to its remaining employees.[8] Further, the size and importance of the change has to be assessed by reference to facts which go beyond, although they may include, the number of redundancies.[9]
In this case, I am not satisfied that the decision to make the CW6 position held by Mr McCarthy redundant to be a major change. Mr De Simone’s evidence was that IC Formwork employed 95 people. This is not a small business. The business operations have not changed in any significant way, in that it continues to provide formwork services in the construction industry. There is no evidence to support a finding that this workplace change is likely to bring about a significant change with respect to the remaining employees.
I do not accept that the evidence supports a finding that the consultation provisions were otherwise triggered because IC Formwork were ‘seriously considering’ a major workplace change as early as 11 April 2024. In my view, ‘seriously considering’ in this context requires something more than exploring options for reducing business costs.
Finally, I am not satisfied that clause 51, which deals with dismissal, is relevant in the context of s.389, in that it is not a provision which requires the employer ‘to consult about the redundancy’.
For these reasons, I am satisfied that IC Formwork was not required under the Agreement to consult with Mr McCarthy prior to making his role redundant.
Was it reasonable in all the circumstances for the employee to be redeployed in the employer’s enterprise?
As set out earlier, s.389(2) provides that a person’s 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.
For the purposes of section 389(2) of the Act, the Commission must consider whether 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. There must be an appropriate evidentiary basis for such a finding.[10] The word ‘redeployed’ in section 389(2) of the Act should be given its ordinary and natural meaning, which is to ‘transfer to another job, task or function’.[11]
I am satisfied on the evidence that IC Formwork did not have another position available. As a result, I am satisfied that it would not have been reasonable in all the circumstances for Mr McCarthy to be redeployed to another position within IC Formwork.
Conclusion
Mr McCarthy is clearly a highly skilled formwork carpenter and an all-rounder who consistently produced a high standard of work, and so it is difficult to see why IC Formwork would want to let someone with Mr McCarthy’s qualifications and expertise go, but that is not the test I am required to apply.
For the above reasons, I am satisfied that Mr McCarthy’s employment came to an end for reason of a genuine redundancy within the meaning of s.389 of the Act.
As a result, Mr McCarthy is not an employee who is protected from unfair dismissal and his application under s.394 of the Act must be dismissed. An order dismissing the application will be issued with this decision.
DEPUTY PRESIDENT
Appearances:
T Fischer for Shane McCarthy.
T Meagher of Counsel for IC Formwork Services Pty Ltd.
Hearing details:
2024.
By video:
August 29.
[1] See Explanatory Memorandum to the Fair Work Bill 2008 at paragraph 1548.
[2] See ibid at paragraph 1553.
[3] Dibb v Commissioner of Taxation (2004) 136 FCR 388 at 404-5.
[4] Kekeris v A. Hartrodt Australia Pty Ltd[2010] FWA 674 at [27].
[5] Nettlefold v Kym Smoker Pty Ltd [1996] IRCA 496 at p. 373.
[6] Kieselbach v Amity Group Pty Ltd PR973864 at [34].
[7] [2010] FWAFB 3488.
[8] Williams v KTC Refrigeration & conditioning Pty Ltd[2023] FWCFB 194 at [108].
[9] Port Kembla Coal Terminal Ltd v CFMEU [2016] FCAFC 99.
[10] Technical and Further Education Commission T/A TAFE NSW v Pykett [2014] FWCFB 714 at [36].
[11] Ibid at [25].
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