Stones v Simplot Australia Pty Ltd
[1997] IRCA 175
•30 Jun 1997
INDUSTRIAL RELATIONS COURT OF AUSTRALIA
INDUSTRIAL LAW - termination of employment - redundancies created by outsourcing - terminations without notice and without consultation - operational requirements - reinstatement - severance payments - transmission of employment - damages for shock and distress
Workplace Relations Act 1996 ss.170DE(1), 170EA, 170EE
STONES & OTHERS & C.E.P.U. -v- SIMPLOT AUSTRALIA PTY LIMITED
No. TI-1048/1059 of 1996
Ryan JR
Melbourne
30 June 1997
CASES:
Carydias v The Greek Orthodox Community (IRCA, unreported, North J, 20 February 1996)
Kenefick v Australian Submarine Corporation Pty Ltd No 1 (1995) 131 ALR 197, 62 IR 107
Kenefick v Australian Submarine Corporation Pty Ltd No 2 (1996) 65 IR 366
Mitchell-Collins v The Latrobe Council (1995) 60 IR 480
Quality Bakers of Australia v Goulding (1995) 60 IR 327
Jones v Department of Energy and Minerals (1995) 60 IR 304
Thomas v Ralph Lynch trading as Bellingen Grocery (IRCA, unreported, Wilcox J, 20 December 1996)
Nettlefold v Kym Smoker Limited (1996) 69 IR 370
Kerr v Jaroma Pty Ltd (IRCA, unreported, Marshall J, 7 October 1996)
Gerard Westen v Union des Assurance de Paris (IRCA, unreported, Madgwick J, 23 December 1996)
Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371
Gibson v Bosmac Pty Ltd (1995) 130 alr 245, 60 IR 1
Ferry v The Minister for Health of Western Australian (1995) 64 IR 28
Nicolson v Heaven and Earth Gallery Pty Ltd (1994) 1 IRCR 199
Liddell v Lembke (1994) 1 IRCR 466, 127 ALR 342
Perkins v Grace Worldwide (Aust) Pty Ltd (IRCA, unreported, Full Court, 7 February 1997)
May v Lilyvale Hotel Pty Ltd (1996) 68 IR 112
Termination Change and Redundancy Case (1984) 8 IR 34; 9 IR 115
Brackenridge v Toyota Motor Corporation (1996) 67 IR 162
Aitken v Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia - Western Australian Branch (1995) 63 IR 1
Burazin v Blacktown City Guardian (1996) 142 ALR 144
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
TASMANIA DISTRICT REGISTRY
TI-1048 of 1996
B E T W E E N :
STONES & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1049 of 1996
B E T W E E N :
MURPHY & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1050 of 1996
B E T W E E N :
PEEBLES & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1051 of 1996
B E T W E E N :
BOURKE & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1052 of 1996
B E T W E E N :
PYERS & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1053 of 1996
B E T W E E N :
STRATTON & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1054 of 1996
B E T W E E N :
SORENSON & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1055 of 1996
B E T W E E N :
RANDALL & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1056 of 1996
B E T W E E N :
MCGREGOR & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1057 of 1996
B E T W E E N :
STOTT & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1058 of 1996
B E T W E E N :
BASSETT & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
TI-1059 of 1996
B E T W E E N :
HORSMAN & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
MINUTES OF ORDERS
Judicial Registrar Ryan 30 June 1997
THE COURT ORDERS:
The Respondent pay the Applicant G A Stones compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $1,362 pursuant to s170EE(5) - total $4,362.
The Respondent pay the Applicant D M Murphy compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $4,571.68 pursuant to s170EE(5) - total $7,571.68.
The Respondent pay the Applicant R B Peebles compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $3,395.47 pursuant to s170EE(5) - total $6,395.47.
The Respondent pay the Applicant G D Bourke compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $5,714.60 pursuant to s170EE(5) - total $8,714.60.
The Respondent pay the Applicant J K Pyers compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $4,459.04 pursuant to s170EE(5) - total $7,459.04.
The Respondent pay the Applicant A J Stratton compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $4,571.68 pursuant to s170EE(5) - total $7,571.68.
The Respondent pay the Applicant M Sorensen compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $5,714.60 pursuant to s170EE(5) - total $8,714.60.
The Respondent pay the Applicant M A Randall compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $4,690.84 pursuant to s170EE(5) - total $7,690.84.
The Respondent pay the Applicant J M McGregor compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $2,228.70 pursuant to s170EE(5) - total $5,228.70.
The Respondent pay the Applicant P T Stott compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $4,571.68 pursuant to s170EE(5) - total $7,571.68.
The Respondent pay the Applicant S J Bassett compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $232.94 pursuant to s170EE (5) - total $3,232.94.
The Respondent pay the Applicant W R Horsman compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $5,863.55 pursuant to s170EE(5) - total $8,863.55.
The compensation and damages in 1 to 12 above are to be paid to each Applicant by the Respondent within 21 days.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
TASMANIA DISTRICT REGISTRY
TI-1048/1059 of 1996
B E T W E E N :
STONES & OTHERS & CEPU
Applicant
AND
SIMPLOT AUSTRALIA PTY LIMITED
Respondent
Before: Ryan JR
Place: Melbourne
Date: 30 June 1997
REASONS FOR JUDGMENT
The Respondent is a food processing company with premises spread throughout Australia. The company is part of an international operation. The Respondent took over the present Australian food processing Australian business in September 1995.
On or about 25 October 1996 the Respondent terminated the employment of 129 employees at the Ulverstone plant. These employees had worked in the security, refrigeration, boiler, electrical and despatch departments. The terminations resulted from a decision to contract out or “outsource” the functions carried out by those departments. The decision also embraced the outsourcing of all work performed by casual employees at the Ulverstone plant.
The decision was part of a strategy to concentrate on core activities at Ulverstone. The plant manager, Mr Mark McKellar described the strategy thus:
“The underlying principle we applied was that the business should focus on its core activities and that non-core activities, where possible, should be outsourced. The core activities of the business were the manufacture and packaging of french fries and potato products. On that analysis, I determined that the business could outsource the following functions:
(a) security;
(b) despatch;
(c) refrigeration;
(d) electricians;
(e) boilers; and
(f) casuals.”
On 25 October the Respondent terminated the employment of 129 employees. Six employees in the refrigeration department were made redundant immediately and were paid redundancy payments. Those six employees and two others have brought separate actions claiming unlawful termination of employment. Those applications are the subject of separate hearings.
The CEPU (the Union) lodged twelve separate applications under what is now s170EA of the Workplace Relations Act 1996. The twelve applications were lodged on behalf of the twelve electricians then comprising the Electrical Department at Ulverstone. In each case the Union and the former employee allege the termination by the Respondent was unlawful in that it was not for valid reason in terms of s170DE(1). Those twelve applications are the subject of this judgment.
The applications are unusual in that all twelve electricians (one was an apprentice) continued in substantially the same work at the same workplace but for another employer, the large contractor or “outsourcer”, Manpower Personnel Services, a division of Manpower Services (Australia) Pty Ltd (Manpower).
The Respondent concedes termination of the employment of the twelve electricians and concedes failure to provide notice in terms of s170DB but asserts:
the termination in each case was for valid reason and was based on the operational requirements of the Respondent’s business
in any event, if any or all of the terminations were to be found to be unlawful and not for valid reason pursuant to s170DE(1), none of the employees lost remuneration or sustained economic loss as a result of the terminations.
BACKGROUND - DEMARCATION DISPUTES
The Respondent took over the Australian food processing operations, including Ulverstone, in September 1995. Demarcation issues were alleged to have been a long standing problem at Ulverstone where production, despatch, security and mechanical maintenance employees were members of AMWU, refrigeration employees members of NUW, electricians members of CEPU, administrative employees members of ASU and boiler employees members of the CFMEU, NUW and AMWU.
The need to remove demarcation barriers and increase productivity had been the subject of management union discussions prior to the takeover. The minutes of the Single Bargaining Unit (SBU) meeting on 30 August 1995 (Exhibit R3) refer to:
management union discussions on 30 May, 26 July and 30 August 1995
“no major opposition raised (at the Bass and Flinders plants) regarding the removal of demarcations”
the recording of “demarcation improvements (and indication of) savings”
the view of management (SBU meeting 30 August 1995) that “the removal of demarcation barriers is a fundamental part of the EBA”
a reported statement from CFMEU and AMWU representatives (SBU meeting 30 August 1995) reaffirming a “previous position of not moving any further (on lowering of demarcation barriers) until other unions were prepared to do the same”
The CEPU organiser, Arnold Sierink and the Shop Steward, Mark Randall, are recorded as present at the SBU meeting on 30 August 1995. Both were also present at the next SBU meeting on 6 October 1995. By then the Respondent had taken over and the name “Simplot Australia Pty Limited” appears on the letterhead of the minutes of this meeting. The minutes (Exhibit R4, page 3) contain the following statement:
“Note: unions have decided that the demarcation issues are a union issue to be discussed within unions and demarcations to be taken off the agenda. They are aware of what they are and they want to work through them themselves”.
Mr McKellar admitted in evidence that at that stage (6 October 1995) the management of the Respondent’s Ulverstone plant was not prepared to confront the unions on demarcation issues. He referred to “operational and industrial problems” and stated that the problems included:
(a) high labour costs due to overmanning and a lack of multi-skilling
(b)strict demarcations between work performed by sections of employees of particular trade background
(c)ongoing industrial disputes involving work stoppages over demarcations and inter-union fighting
(d)a lack of co-operation between employees from different unions
CONSIDERATION OF OUTSOURCING
Mr McKellar’s evidence continued as follows:
“Since about 30 May 1995, the Business has attempted to resolve these problems by holding meetings with the relevant union officials and union delegates to discuss the problems. However, despite management’s efforts, the discussions did not result in any of the matters being resolved.
In the period from about 20 June 1996 to the end of July 1996, there were constant work stoppages. The work stoppages were in relation to disputes over the implementation of 12-hour shifts and an inter-union dispute between the NUW, CFMEU and AMWU was also on-going.
In about June 1996, management started to explore the possibility of outsourcing a number of functions of the Business. From about this time, we made enquiries with labour hire contractors about the services they could provide and the cost of the services. These enquiries progressed slowly at first, however, as the industrial disputes escalated, the pace of my enquiries accelerated.
By early September 1996, management began to seriously consider the logistics of outsourcing a number of functions of the Business. We prepared a number of calculations of the savings that would be produced as a result of outsourcing specific functions.”
Mr McKellar admits that the second series of calculations (Option Y) were produced in “June or July 1996”. Option Y and an earlier version, Option X, are headed “Outsourcing Cost Benefit Analysis”. Both options calculate savings from wide scale outsourcing and redundancies. Both options and Mr McKellar’s evidence confirm that the Respondent was seriously considering outsourcing in June 1996 and had completed a preliminary but detailed analysis of savings by outsourcing the entire electrical function to Manpower.
The Respondent did not inform the electricians (the Applicants) or the Union. There is no evidence the Respondent told the Union or the Applicants until the terminations of employment were announced on 25 October 1996.
GENERAL ADVICE OF “REDUNDANCIES” 24 SEPTEMBER 1996
Mr McKellar claims that Messrs Sierink and Randall were advised on 24 September 1996 “that there would be redundancies across all areas of the business” but that “details of the numbers to be made redundant were not available at that time”.
On 16 September 1996 Messrs Sierink and Randall were invited to attend a management union meeting. They attended as representatives of the CEPU. Representatives of NUW and SFMEU were also at the meeting. The Respondents representatives tabled a paper entitled “Discussion document - private and confidential”. This paper (Exhibit R6) became known as the “38 issues document”. It contains 36 issues not 38 issues. That is neither here nor there. It is a wide ranging document prepared from an earlier internal document which had been circulated among the Respondent’s management representatives. The earlier document was not circulated to the union representatives. It was tabled as Annexure B to Mr McKellar’s Statement of Evidence (Exhibit R1).
Annexure B contains 40 issues and was described by Mr McKellar in his Statement of Evidence:
“As part of Simplot’s strategy to deal with the ongoing problems with the Business and because the Business had started to consider the possibility of outsourcing, management prepared a document (“the Issues Paper”) which detailed all of the issues that had to be resolved for the Business to operate efficiently. This document was first prepared on 4 September 1996. A copy of the document is annexed and marked “B”. The purpose of the document was for management to be able to put to the unions the issues that needed to be addressed and to give them an opportunity to respond and demonstrate that they could assist management make the necessary changes. The Issues Paper, among other things, identified the over-manning issues and foreshadowed that the Business wanted to implement a number of redundancies.”
Annexure B may have been prepared to enable “management to put to the unions the issues (which the Respondent had concluded) ....needed to be addressed” but it was not the document which was put to the union representatives at the meeting on 24 September. Annexure B contained 40 issues and for each issue the Respondent set out the “current company position” and a position which was described as the “current union view” and the position the Respondent wanted to achieve appeared against each issue under the heading of “Revised view and reasons”.
The 40 issues are comprehensive and deal with contractors agreements, a seniority list for casual employees, overtime, theft, sabotage, drugs, alcohol, reduction of “manning numbers” on the Ulverstone site, leave, absenteeism, a proposed system of “formalised, standard contracts of employment”, hours of work, consultation, union access, stop work meetings, restriction of union delegates to conducting union business at lunch time, prohibition of extra claims during the life of an Enterprise Agreement, removal of demarcations, extension of maintenance tasks by and to operators, quality assurance and multi-skilling through job rotation.
Thirty-three of the issues were translated entirely into Exhibit R6 (the discussion document provided to the union representatives on 24 September 1996). One issue, Issue 6, was translated with significant omissions to Exhibit R6 and appears there as Issue 1.8 and was referred to often in the hearing as “Issue 8” or “Point 8”. Four issues, Issues 7 to 10 of annexure B, do not appear in Exhibit R6 and were not therefore available to the union representatives on 24 September. Issues 7 to 10 of Annexure B provide quite specifically for outsourcing of security to MSS Security Services, reduction of boiler house staff with outsourcing to Manpower, outsourcing of despatch to Manpower and outsourcing of refrigeration to W & S Refrigeration. There are two issues in respect of training which appear in Exhibit R6 and are not included in Annexure B.
Exhibit R6 does not contain the Respondent’s original position on each issue and understandably does not contain the Respondent’s assessment of the “current union view”. However, Exhibit R6 sets out, beside each of the 36 issues, the action which the Respondent proposes. The proposed action appears under the heading “Reasons”, presumably on the basis that the Respondent is setting out the reasons for the action it proposes to take.
UNION REQUESTS FOR INFORMATION
Messrs McKellar and Randall stated that Arnold Sierink asked at the meeting on 24 September whether Issue 8 (1.8 in Exhibit R6) applied to the union (CEPU).
Issue 1.8 reads:
“Issue to be addressed: Overall Simplot Manning numbers to be significantly reduced.
Reasons: Rationalise numbers on site to more closely reflect the work requirements and business needs.”
In his Statement of Evidence Mr McKellar dealt with this issue:
“The unions were told that there would be redundancies across all areas of the business, however, details of the numbers to be made redundant were not available at that time. My recollection of the unions’ response is that they said the business plan was an over reaction and that the business was not as inefficient as management said.”
At trial Mr McKellar described his response to Mr Sierink as:
“Review was to be over all the functions and all functions were going to be affected”.
In evidence in chief he said the reduction in manning was to be “across the board”.
Mr Randall, in evidence-in-chief, described the exchange between Mr Sierink and Mr McKellar:
“I believe Arnold Sierink did ask a question about issues 8 and 9. He asked what exactly did they mean. The answer was about numbers...that they were looking across the site...in all areas but the company did not know at that time which areas would be directly affected.”
Issue 9 (1.9 of Exhibit R6) reads:
“Issue to be addressed: Any future Redundancies will be by Selection.
Reasons: We need to retain the people best suited to the needs of the business and terminate those who have little to offer the business.”
Later, but still in evidence-in-chief, Mr Randall described the response of Mr McKellar:
“The company expressed...that it was looking at every area on the site in regards to manning. They could not confirm the areas.”
In cross-examination, Mr Randall agreed the response to Mr Sierink’s question on Issue 8 (Reduction in Manning) was “the company.....was looking across the board...at all areas”.
The Court has concluded Mr McKellar gave a general response to Mr Sierink’s question and stated there would be reductions in manning and those reductions would be “across the board” and “in all areas”. Mr McKellar did not give numbers or location of possible reductions and he did not respond to Mr Sierink with a specific statement which included or excluded definite reductions in manning in the electrical department. However, it is clear that at the meeting on 24 September a general statement of intention to “significantly reduce the workforce” was made.
On 11 October the State Branch Secretary of the National Union of Workers wrote to Ms Bethany Pellas, Human Resources Manager at Ulverstone:
“Dear Ms Pellas
As you are aware the National Union of Workers is extremely concerned with the way your Company is handling the issue of its proposed reduction to the workplace.
On the 24th September, the Company made a general statement that it intended to significantly reduce its workforce. Since this time, the Company has failed to further progress this matter and as a result, employees are suffering undue stress.
Accordingly the National Union of Workers request you commit to finalising this matter by Friday October 25, 1996.
We further request you provide us with set times and dates to achieve the above. This advice is to be received by close of business 5.00 pm Monday October 14, 1996.
It is essential I receive the requested information by 5.00 pm Monday in order to keep this matter in its current context.
I await your reply.
Yours faithfully
Darryl M Strickland
SECRETARY”
Ms Pellas wrote back on 14 October:
“Unfortunately, because of the absence of some key plays in this issue I am unable to make any commitment to providing set times and numbers by the close of business today.
As soon as I am able I will provide you with additional information.
I am cognisant of the unrest which our discussions have generated and I have certainly appreciated your efforts to date to keep things in their proper perspective.”
The Branch Secretary of the National Union of Workers was concerned the “significant reductions in workforce” might apply to his members. The Court has concluded CEPU did not take the general statement of reduction in workforce as likely to apply to it. Even if Messrs Sierink and Randall had been more alert and perceptive, the general statement and the response to Mr Sierink on 24 September did not constitute adequate or specific consultation with CEPU or the twelve electricians.
THE RECOMMENDATION TO OUTSOURCE
On 14 October Mr McKellar, “made a recommendation to Simplot Senior Management as to which functions should be outsourced”. No evidence was given as to the nature and extent of the recommendation. It is clear from Mr McKellar’s evidence of the advice he gave to the Ulverstone employees on 25 October that the recommendation of 14 October included
termination of employment of employees in security, boiler, electrical, refrigeration and despatch
immediate “transfer” of employees in security, boiler and electrical departments to Manpower with maintenance of pay and conditions
immediate “transfer” of employees in despatch department to Mayne Nickless with maintenance of pay and conditions
immediate payment of redundancy or severance payments pursuant to the Redundancy Agreement to five employees in the refrigeration department
conversion in early 1997 of Ulverstone boilers to limited attendance boilers and the intention, at that time, that “five trade employees...be made redundant” ....with the Simplot Redundancy Agreement applied (i.e. appropriate severance payments)
supply of overload labour (casuals) to Ulverstone site by Manpower
IMPLEMENTATION
On 15 October the Respondent took steps designed to implement outsourcing proposals by 28 October. Steps taken included:
a letter from Ron Howell, General Manager, Human Resources, Simplot Australia, to Mr Neil Marshall, Australian Manufacturing Workers Union, outlining “an agreed position...following our meeting at Launceston on Monday 14 October”.
The “agreed position” was then set out in 21 statements. The eleventh statement is:
“All site electricians will transfer to Manpower on Monday 28th October 1996, who will then be responsible for the provision of labour to meet our electrical requirements.”
The second paragraph reads:
“The date to implement the contracting out of Security, Refrigeration, Electrical and transfer despatch to Mayne Nickless may have to be brought forward to Monday 28th October 1996. As you are aware we are meeting with all other unions represented at the Ulverstone site on Friday 25th October 1996 at 1.00pm.”
Mr McKellar wrote to Mr Chris McKay of Manpower (Exhibit R1 Annexure D) and identified functions which would transfer to Manpower on 28 October, referred to “fruitful discussions with AMWU on Monday (i.e. 14 October)” and stated “all site electricians will transfer to Manpower on or about Monday 28 October 1996”.
Ms Bethany Pellas, Human Resources Manager (Ulverstone) wrote to Mr Sierink (Attachment A) and invited him to a “meeting with Simplot Management Representatives and other union organisers...on Friday 25 October...to discuss remaining issues arising out of the previously tabled “issues document””.
CONSULTATION WITH ONE UNION, NO CONSULTATION WITH OTHER UNIONS
It is clear that by 15 October the Respondent had not only determined to terminate the employment of the electricians in the Electrical Department and transfer or outsource the work to Manpower but had also confirmed that intention in writing to another union, AMWU and to Manpower but took no action to consult or advise the affected union, CEPU.
The CEPU members and especially Messrs Randall and Peebles had prepared a response to the “38 issues”. The response was finalised on the morning of 25 October and taken by Mr Randall to the meeting with the Respondent scheduled for 1 pm.
THE TRANSFER OF FUNCTIONS 25 OCTOBER 1996
At the meeting the CEPU representatives were told by management representatives and by Mr McKay of Manpower that “electrical operations will transfer to Manpower immediately - all current pay and conditions will be maintained...Manpower will be available to discuss any issues with the personnel concerned after this meeting” (Exhibit R1, Attachment E, paragraph 4).
The Applicants all gave evidence that they were told that if they did not accept employment with Manpower immediately they would be treated as having abandoned their employment. Specific evidence to this effect is contained in their written statements of evidence. All of the Applicants adopted their written statements. All were available for cross-examination and most were cross-examined. Relevant extracts from the statements of the Applicants are set out as follows:
David Murphy (Exhibit A5, paragraph 6)
“Shell-shocked by this we discussed our options, being limited to not knowing where we legally stood due to the fact we had been told if we did not sign with Manpower before the beginning of our next shift we would be abandoning our employment.”
Jason McGregor (Exhibit A6, paragraphs 5 and 6)
“I was in Queensland enjoying my honeymoon on the week leading up to and two days after 25 October, so I was completely unaware of any meetings our Union had with Simplot management. That was until I received a phone call from Rodney Peebles on the afternoon of 25 October. Rodney outlined that we had all been sacked from Simplot and had to sign up with a contractor called Manpower. So when I returned from my honeymoon on 28 October, to remain employed, that was what I was forced to do.”
William Robert Horseman (Exhibit A8, paragraphs 2 and 3)
“After the meetings held earlier in the afternoon of 25 October 1996 I was advised at a CEPU report back meeting at 3.00 pm that I was effectively terminated by Simplot and had until the start of my next shift to sign on as a Manpower employee. I was told that failure to do this would mean I would no longer have been employed at all at the Simplot Site with only accrued leave entitlements being paid out but no accrued long service leave or redundancy payment.”
Peter Stott (Exhibit A10, paragraph 12)
“All employees affected were told to go to the Conference Room to sign up with Manpower by 7.00 pm that day, or they would be deemed to have abandoned their employment.”
Gleyn Stones (Exhibit A12, paragraph 23)
“Shell shocked by this we discussed our options, being limited to not knowing where we legally stood due to the fact we had been told if we did not sign with Manpower before the beginning of our next shift we would be abandoning our employment.”
Graeme D Bourke (Exhibit A14, paragraphs 4 and 5)
“At that time I was on my days off and was away in the Central Highlands. I was amazed and totally stunned to receive a phone call from my girlfriend on the Sunday night that I returned home to be told that I have been sacked by Simplot and had to sign with a contractor called Manpower. I then rang our Union representative Mark Randall to confirm what I had been told. It was true.”
Rodney Bruce Peebles (Exhibit A16, paragraph 7 and attachment A, paragraph 9)
“Mark McKellar, Manager, then opened the meeting by saying that no further discussions would take place on the 28 point document but that he would make a statement on this later. He also stated that nothing would be in writing and that we all should take our own notes. At this time he then went on to read out the items which are on “Attachment A”. There was no discussion upon these items, at which time the Company, AMWU and CFMEU left the remaining SBU members sitting there in disbelief.”
Attachment A to the statement of Mr Peebles is headed “CEPU, SBU Meeting 25 October 1996”. The attachment is clearly a record of the meeting at 1 pm and has been signed by Messrs Randall, Peebles and Sierink and paragraph 9 reads:
“If we don’t sign up we will have abandoned employment, no redundancy also.”
Samuel James Bassett (Exhibit A19, paragraph 27)
“We were then told that all people affected by the changes were to go to the front conference room to sign with Manpower by 7.00 pm that day or it would be considered we had abandoned our employment.”
Ian Pyers (Exhibit A21, paragraph 6)
“I was then informed that we were no longer employed by Simplot and that if we did not sign with the company “Manpower” then we would be without a job.”
Max Sorensen (Exhibit A23, paragraph 3 and 4)
“But I was informed late in the day, by a work mate, that my employment with Simplot had been terminated and if I wanted to keep my job at the factory, I was to sign up with a company called “Manpower”, before I was to commence my shift on Monday 28 October 1996 at 18.45 for night shift. I was also told that if I did not sign on with the new employer “Manpower” my job was terminated there and then.”
Anthony Stratton (Exhibit A25, paragraph 10)
“We then went with other CEPU members to see the manpower representatives, but we were kept waiting until 4.00 pm. At that time we had discussions with Mr McKay from Manpower. We were told by Mr McKay everyone must sign up with Manpower on that day to stay employed.”
Mark Randall (Exhibit A27, paragraph 12)
“Mr McKellar also said, when discussing the contracting out of work, words to the effect that “if you don’t sign up with Manpower, you will be considered to have abandoned your employment and will not be allowed back onsite”.”
The Court is satisfied that Rodney Bruce Peebles has given a reasonably accurate description of what transpired after the 1 pm meeting. His account is contained in paragraphs 8 to 14 of Exhibit A16, a statement signed by Mr Peebles on 24 March 1997 and adopted by him in his evidence. Paragraphs 8 to 14 read as follows:
At 1.30 pm the remaining members of the SBU had an informal discussion of the events at which time A Sierink rang our National Union Secretary and informed him of the Company’s actions.
At 2.00 pm the Company returned to the Conference Room to meet with us again (CEPU, NUW and ASU). It was pointed out to the company that they had breached the Enterprise Agreement as well as the Award. The Company would not accept the status quo and furthermore that if we don’t sign with our new employer, Manpower, then we are regarded as having abandoned our employment and therefore not allowed back on site. The Company representatives then left the meeting, it was then decided that the 3 unions would report back to their members.
10.A Sierink, M Randall and myself then tried unsuccessfully to meet with Manpower representatives.
11.At 3.00 pm I attended a meeting with fellow CEPU members on Front Lawn to report back on events of the past 2 hours, 3 members were not present. After Report Back we waited for Manpower.
12.At 4.00 pm Manpower (C McKay) and Simplot (E Marshall) finally met with us in the Electrical Workshop to discuss our concerns. Discussions were as per “Attachment C”.
13.At 5.00 pm CEPU members discussed our options and decided to accept the Simplot and Manpower offer as there was NO other option available, this was a decision made under protest in order to keep our jobs.
14.At 5.45 pm I attended a meeting in the Conference Room with Manpower Representatives, J Smith and C McKay. Employment Contracts were handed out and upon reading of these it was highlighted that these were for TEMPORARY/CASUAL positions. Employment Contract was then amended to disregard clauses pertaining to Temporary/Casual positions. Contract was then signed but it was stated that it was done under protest.”
The “concerns” of the Applicants and the “discussions” at 4.00 pm with the Respondent’s Mr Marshall and Manpower’s Mr McKay appear in Attachment C to Mr Peebles statement. Attachment C is typed on the letterhead of CEPU Electrical Division Tasmanian Branch and reads:
“Manpower Meeting
25 October 1996
4.30 pm
(Attachment C)
Has contract until year 2000 at least.
Have to sign over to hold job as permanent all conditions and entitlements to transfer over.
Employs 2000 Australian wide, e.g. at S.J. Johnson (Wax Factory) 1.5 million worldwide, 7 million on books in 42 countries.
Will give opportunity to upskill and training opportunity to transfer interstate (maybe).
Chris McKay gave undertaking that we remain as is: conditions, pay rates, superannuation, hours of work, etc. Not prepared to put anything in writing but were asked to trust him.
Also guaranteed manning numbers (+ apprentices). Also brought up about permanent, casual for last 3 years, will discuss further with Simplot and Manpower.
Does Sam Bassett need to resign indentures, as manpower is new employer.
C. McKay said that he would try and find us local work first if no longer required at Simplot Ulverstone. If no local work available will be offer work elsewhere. If don’t want to go elsewhere be paid out redundancy. Defined local work as travel time no longer than it takes at the moment, eg. to Ulverstone.
All Members to Sign.”
The signatures of all Applicants appear on Attachment C.
TERMINATIONS WITHOUT NOTICE AND WITHOUT CONSULTATION
The evidence is overwhelming. The Applicants were not consulted. The union was not consulted. The Respondent concedes the employment of the Applicants was terminated without notice. The Respondent claims the general advice of redundancies “across the board” on 24 September 1996 constituted a form of consultation. That general advice was not consultation and I have already found that to be so.
In Carydias v The Greek Orthodox Community (IRCA, unreported, 20 February 1996), North J commented at 40:
“The need to consult is not a rigid requirement. The extent to which it is required, how it is to be satisfied, and even whether it is required at all, depend on the circumstances of the case.”
These are cases where the circumstances did require consultation with the union and each Applicant. The consultation did not occur and, to rub salt in the wounds, another union was consulted.
TERMINATIONS BASED ON OPERATIONAL REQUIREMENTS
The operational requirements of a business can provide a valid reason for termination of employment. Section 170DE(1) provides for valid, lawful terminations based on operational requirements. There are many cases of redundancy that are based on the operational requirements of the business. There are many cases where the circumstances are such that claims for reinstatement and/or compensation filed under s170EA and relying on ss.170DE(1) and 170EE will fail. There are many cases where the circumstances are such that claims of this nature will succeed.
Counsel for the union and the twelve electricians does not accept that these terminations at Ulverstone were based on operational requirements. She submits:
“the purported valid reason based on the operational requirements of the undertaking...was apparently the desire to save money through outsourcing the electrical maintenance function”
“the Respondent has not put forward any reason why outsourcing and consequently the termination of each of the Applicants’ employment was objectively necessary or desirable”
“under the arrangements between Simplot and Manpower the alleged savings arose from two factors, a reduction in the electrical workforce from twelve to eight and a change from seven day shift rosters to six day shift rosters”
“the evidence shows that the route....taken costs substantially more than the cost would have been if the Respondent had pursued the changes....without taking the steps of contracting out work”
There are many submissions made by counsel for the union and the Applicants with which I agree but the four submissions above are not among them. Without doubt, the Respondent did seek to justify the terminations on a restructure, a re-organisation, a contracting out of labour designed to reduce the costs of such labour. However, I do not accept that “the evidence shows that the route...taken costs substantially more than the cost would have been if the Respondent had pursued the changes...without taking the steps of contracting out work”. On my assessment, the balance of the evidence indicates that the Respondent has achieved and will continue to achieve cost savings. I have also concluded that the Respondent relied on broader operational requirements than those identified by Counsel for the Applicants. The Respondent wanted to reduce, and if possible avoid, the demarcation disputes which bedevilled the Ulverstone site before and after the Respondent took over the business. I have no reason to believe that the outsourcing of the electrical maintenance function has not led to a reduction in demarcation disputes.
In any event, in terms of assessment of the benefits of the restructure by outsourcing, I would not be minded to sit in the managerial chair (See Wilcox CJ in Kenefick and Others v Australian Submarine Corporation Pty Ltd No 1, 62 IR at 107. Furthermore, it is not necessary that an employer prove that a restructuring was justified on economic or financial grounds: Spender J, Mitchell-Collins v The Latrobe Council (1995) 60 IR 480 at 489. The proposition was rejected by Beasley J in Quality Bakers of Australia v Gouldings (1995) 60 IR 327 at 333:
“If the submission was correct, it would be necessary in every case of termination because of a redundancy for an employer to call expert economic or financial evidence to support an operational decision to make jobs redundant and the Court would become the arbiter of whether the employer’s operational decision was justified. There is nothing in the Act to justify such an approach.”
Ryan J in Jones v Department of Energy and Minerals (1995) 60 IR 304 at 308 stated:
“It is within the employer’s prerogative to 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. It is inappropriate now to attempt an exhaustive description of the methods by which a reorganisation of that kind may be achieved. One illustration of it occurs when the duties of a single, full-time, employer 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 reorganisation, 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”: R v Industrial Commission of South Australia; ex parte Adelaide Milk Supply Co-operative Limited (1977) 44 SAIR 1202.
In my view, the Respondent has put forward reasons why outsourcing, and the consequent termination of the employment of the twelve electricians, could have been justified objectively and on the valid reason of operational requirements. However, I do not accept the Respondent has or can justify these particular terminations on the grounds of operational requirements.
TERMINATIONS OF EMPLOYMENT BASED ON OPERATIONAL REQUIREMENTS BUT NEVERTHELESS UNFAIR, UNJUST, AND UNLAWFUL TERMINATIONS
In the circumstances of these cases, I agree with Counsel for the Applicants that:
the Respondent has “not put forward any reason why outsourcing had to be effected on 25 October 1996”
“there was no objectively valid reason to terminate the...employment particularly at the time the terminations occurred”
“the timing of the outsourcing is all the more relevant when (account is taken of) the Respondent’s failure to comply with its obligations towards the Applicants”
the Respondent “had an obligation to inform, an obligation to consult, and an obligation to give each of the Applicants time to give proper consideration to the specific matters raised”
In Quality Bakers at 333 Beasley J concluded that “a redundancy will arise where an employer no longer wishes to have a particular job performed...”.
Counsel for the Respondent made a qualified concession that the termination of employment of the twelve electricians by the Respondent demonstrated “features of redundancy” but asserted that there has never been a claim of unlawful termination of employment “based on s170DE where each Applicant continued at the same workplace doing the same job and with benefits preserved”.
He also asserted that these were “unusual cases which involved some aspects of transfer of business”.
The “aspects of a transfer of business” are relevant, in my view, to the question of whether redundancy or severance payments were required pursuant to the Edgell-Birds Eye Redundancy Agreement but the transfer of the electrical maintenance function to Manpower does not avoid the creation of redundancies. The termination of the employment of the twelve electricians by the Respondent because the Respondent had contracted for the electrical maintenance function to be carried out by Manpower resulted in the Respondent “no longer wishing” the function, i.e. “the particular job”, performed by its own employees. Clearly, the Respondent by its action made the electrician positions with the Respondent redundant.
The procedural requirements placed on an employer where redundancies are created were discussed in the context of the now defunct s170DE(2) in Quality Bakers at 334 to 336, in Mitchell-Collins at 488 to 491 and in Jones v Department of Energy and Minerals at 308 (all in (1995) 60 IR).
Recent authorities as to valid reason under s170DE(1) are summarised by Wilcox CJ in Thomas v Ralph Lynch trading as Bellingen Grocery, IRCA, unreported, 20 December 1996:
“One of the purposes of Division 3 of Part VIA of the Act was to improve the way employers treat their employees. It is conducive to that purpose to interpret s170DE(1), in a situation like this, as requiring that, before a notice of termination of employment is given the employer attempt a real discussion with the employee about the best way of handling the problem confronting them both”.
It is clear from Bellingen Grocery and from Nettlefold v Kym Smoker Limited (1996) 69 IR and from Kerr v Jaroma Pty Ltd (IRCA, unreported, Marshall J, 7 October 1996) that, to be for a valid reason a termination must not be unjust or unfair and the validity of the employers reason for termination cannot be divorced from its effect on the employee.
In Nettlefold Lee J observed:
“In general terms it may be said that a termination of employment will be shown to be based on the operational reasons of an undertaking if the action of the employer is necessary to advance the undertaking and is consistent with the management of the undertaking that meets the employers’ obligations to employees.”
The proper construction of “valid reason” was further considered by Madgwick J in Gerard Westen v Union des Assurance de Paris (IRCA, unreported, 23 December 1996). Madgwick J adopted the approach of Lee J in Nettlefold and concluded that considerations of harshness, injustice or unreasonableness “are not irrelevant; indeed they could hardly be so”.
His Honour reached this conclusion on an analysis of the international instruments to which s170DE is designed to give effect and observed:
“operational requirements is a broad term, apt to encompass everything that might affect the economic or efficacious performance (or cessation, or alteration of the mode of performance) of the undertaking, but necessarily including “the application of good management to the undertaking”, which in turn involved” management of the undertaking that meets the employer’s obligations to employees.”
Madgwick J further observed at 14:
“....the first task is to focus on the relevant inquiry. This is not whether some change in the functioning of the undertaking, which change accompanies or immediately precedes or follows the employees’ determination, is made for a valid reason based on the operational requirements of the undertaking. The inquiry is whether there was a valid reason for the actual termination in question...there is no acceptable evidence that, consistently with such a reorganisation, there was no reasonably practicable alternative to the termination of Mr Weston’s employment or that there was no reasonably practicable or acceptable alternative employment which might have been offered to or arranged with him. In particular, he was not told why there was no such alternative, nor was he invited to propose one. In my view, it will often be difficult for an employer to show that there was no such alternative unless the employee has been offered such an explanation and/or opportunity....”
In Kerr Marshall J observed at 14:
“It cannot be assumed that a mere desire by an employer to change the way in which it conducts its business which, in turn, leads to the termination of the employment of some of its employees, will necessarily found a valid reason for the terminations based upon the operational requirements of the undertaking.”
In Kerr at 20 His Honour concluded:
“As is clear from Kenefick, a reason which is based on the operational requirements of an undertaking does not thereby become ‘valid’ because of it being so characterised from the subjective view of the employer. The question remains as to whether the employer has satisfied the onus of proof in showing that a reason it alleges to be based on its operational requirements in fact, was justified or objectively defensible in the circumstances.”
Counsel for the Applicants has asserted, and I agree, that the Respondent “made a deliberate decision not to inform and not to consult on its proposals and in the course of the hearing proferred no explanation as to that decision”.
The observation of the Chief Justice in Bellingen Grocery is apposite:
“Consultation between Mr and Mrs Lynch and Mr and Mrs Thomas might have failed to yield an outcome compatible with the company’s business needs. If so, it would probably would have been defensible for the company to terminate the employment of one or both of the Applicants; in that event it would have been able to demonstrate the existence of a valid reason for the termination related to the operational requirements of its business. The company deprived itself of this possibility because of the arrogant way it dealt with its problems.”
Here too consultation might have failed to yield an outcome compatible with the Respondent’s needs to cut costs and reduce demarcation disputes. Here too it might well have been defensible for the company to terminate the employment of the Applicants and, in that event, the Respondent might have been able to demonstrate the existence of a valid reason for the terminations related to the operational requirements of the business. Here too the Respondent deprived itself of that possibility because of the arrogant way it dealt with its problems.
Indeed, in these cases, the Respondent treated the employees as chattels to be “sold” or “transferred” to Manpower in order that the Respondent might contract back the electrical maintenance function and achieve the economies and other aims the Respondent and predecessor employers had manifestly failed to achieve. The Applicants and their union were given no time to obtain adequate advice. The Applicants and their union were given no time to properly consider whether each Applicant wanted to enter a contract with Manpower or decline such employment and accept a severance payment as provided under the Redundancy Agreement. The Applicants and the union were given no time to consider and suggest other alternatives.
The Respondent has failed to establish a valid reason for the termination of the employment of any of the Applicants. The reasons for each termination in the circumstances were not sound, defensible or well founded in the terms outlined by Northrop J in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371. The reasons for each termination were not applied as they could have been applied in a practical commonsense way which would have treated each employee fairly: Gibson v Bosmac Pty Ltd (1995) 60 IR 1.
The reasons for each termination were not fair and just and objectively defensible in terms of Kerr and Jaroma, Nettlefold v Kym Smoker and Bellingen Grocery and Westen.
BREACHES OF AWARD
The Applicants in their Statement of Case claimed breaches of clauses 6(d)(i), 6(d)(iv), 41 and 42 of the Metal Industry Award 1984 and assert that in terms of Ferry v The Minister for Health of Western Australian (1995) 64 IR 28 the terminations were not for a valid reason. In Ferry at 36 Marshall J said:
“To terminate an employee in breach of the employer’s obligations under State and Federal Awards is not to terminate an employee’s employment for a valid reason.”
The terminations as effected breached several clauses of the Award and in accordance with the reasoning in Ferry were unlawful and not for valid reason. It is not necessary to rely on the breaches of the Award to conclude that the terminations were unlawful but the breaches are another reason for reaching that conclusion.
REMEDY - REINSTATEMENT
Reinstatement is the primary remedy but I have concluded that it is impracticable. I rely on Nicolson v Heaven and Earth Gallery Pty Ltd (1994) 1 IRCR 199 and Liddell v Lembke (1994) 1 IRCR 466 and on the analysis of those authorities in Perkins v Grace Worldwide (Aust) Pty Ltd IRCA, unreported, 7 February 1997. In Perkins at 7-10 the Full Court said:
“In Patterson v Newcrest Mining Limited (IRCA, Full Court, 6 June 1996, unreported) Wilcox CJ said:
‘. . . The word ‘impracticable’ has caused difficulty in relation to unlawful termination claims. It appears in subs. (2) and has led Judges of the Court, including myself, to describe the scheme of s.170EE as one providing a primary remedy of reinstatement and a secondary remedy of compensation where reinstatement is impracticable. These comments must be read in the light of the amendments, where they apply, requiring the Court to reach a determination that it is ‘appropriate in all the circumstances of the case’ to order reinstatement. Contrary to the submission put by counsel for the appellant, it is my opinion that the matter of appropriateness, where that concept applies, is not restricted to the form of a reinstatement but applies to the initial question whether reinstatement shall be ordered or not.”
Wilcox CJ said he was “content to adhere” to what he said in Nicolson v Heaven and Earth Gallery Pty Limited (1994) 1 IRCR 199 at 210 regarding the meaning of “impracticable”. He added:
“The requirement to consider the impracticability of reinstatement necessarily requires the Court to have regard to all the relevant circumstances of the case relating to the employer and the employee; as I said in Nicolson, to evaluate the practicability of a reinstatement order in a common sense way.”
von Doussa J agreed with the Chief Justice’s construction of the word “impracticable” in s170EE of the Act. North J did not find it necessary to deal with that issue.
In Nicolson, Wilcox CJ said at 210:
“It is important to note that Parliament stopped short of requiring that, for general compensation to be available, reinstatement be impossible. The word ‘impracticable’ requires and permits the Court to take into account all the circumstances of the case, relating to both the employer and employee, and to evaluate the practicability of a reinstatement order in a commonsense way. If a reinstatement order is likely to impose unacceptable problems or embarrassments, or seriously affect productivity, or harmony within the employer’s business, it may be ‘impracticable’ to order reinstatement, notwithstanding that the job remains available.”
In Liddell v Lembke (1994) 1 IRCR 466 at 487, Wilcox CJ and Keely J said:
“. . . Plainly, it was Parliament’s intention that the primary remedy for unlawful termination should be reinstatement and that compensation should be available only where this was impracticable.
The precise meaning of ‘impracticable’ in this context should be left to another day; the question is one of general importance and it was not fully argued in this case. But, although ‘impracticable’ does not mean ‘impossible’, it means more than ‘inconvenient’ or ‘difficult’. The imposition of such a stringent limitation on the Court’s power to award compensation, rather than order reinstatement, is inconsistent with the notion that Parliament intended the Court to have an open discretion whether to intervene at all.”
Gray J said at 495 that the practicability of reinstatement:
“. . . does not depend on notions of loss of confidence in the employee.”
However, it is important to note that his Honour did not say that loss of confidence could never be relevant to the issue of impracticality. He was contrasting s170EE of the Act with the judge-made rule against ordering specific performance of contracts of employment because of a reluctance to force parties into a personal relationship involving elements of mutual confidence. Gray J was making the point that the Act did not evince that reluctance. It established a different test: impracticability.”
These are cases where it is not practicable to unscramble the omelette and order the reinstatement of the electricians as employees of the Respondent. In an absolute sense, it would be possible to order reinstatement. At the time of the hearing, eight of the Applicants were still working at Ulverstone and essentially in their old jobs while four of the Applicants had had their employment terminated by Manpower. These four were paid severance payments in accordance with the Redundancy Agreement. In other words, Manpower honoured the Redundancy Agreement initially entered when Edgell-Birds Eye were a predecessor employer prior to Simplot.
Reinstatement of the Applicants would, in my view, adversely affect productivity and could lead to a re-emergence of demarcation problems. At the time of the hearing the work originally done by the twelve Applicants was being undertaken effectively by eight of the Applicants. The old, expensive seven day shift rosters had been replaced by more efficient six day shift rosters. I have concluded that Manpower and the outsourcing contract between the Respondent and Manpower have achieved economies and efficiencies and work practices which the Respondent and predecessor employers failed to achieve. If the omelette was unscrambled it would impose “unacceptable problems (and) seriously affect productivity (and) harmony in the employer’s business”. Such reinstatement would be “impracticable” in the sense in which that word has been defined in Nicolson and Liddell. In this respect, I simply do not agree with Counsel for the Applicants that “it would not be difficult for the Respondent to revert to pre-October 1996 arrangements”.
REMEDY - COMPENSATION
I accept the proposition of Ms Howell, Counsel for the Applicants, that if reinstatement be deemed impracticable compensation should be payable to each of the Applicants pursuant to s170EE(3) and damages pursuant to s170EE(5) for contravention of s170DB - Notice of Termination.
Mr McDonald, Counsel for the Respondent has conceded that the employment of the Applicants was terminated without notice and damages will be ordered under s170EE(5) for amounts which, if paid at termination, would have avoided breach of s170DB.
Principles for assessment of compensation under s170EE(3) are outlined in May v Lilyvale Hotel Pty Ltd (1996) 68 IR 112 at 117 where the Chief Justice states:
“A redundancy payment must clearly be taken into account in considering the extent of the employee’s loss, and therefore the amount of compensation that would be appropriate in the absence of the s170EE(3) cap. As has been pointed out more than once, the proper approach is for the person assessing compensation, first, to assess the appropriate amount of compensation in the light of all relevant circumstances (including any redundancy payment) but disregarding the cap; secondly, to consider whether that amount exceeds the permissible maximum award and, if so, thirdly, to reduce the assessed amount accordingly: see Perrin v Des Taylor Pty Ltd (1995) 58 IR 254 at 258; Cox v South Australian Meat Corporation (1995) 60 IR 294 and Messervy v Maldoc Pty Ltd (1995) (63 IR 61).”
Ms Howell submits that the Applicants would each have received a severance payment in compliance with the Redundancy Agreement (Exhibit A2), “if... their employment had (been) validly terminated by the Respondent”. In my view, severance payments under the Redundancy Agreement do not turn on valid or invalid termination but on the application of the Agreement.
The preamble to the Agreement and Clauses 1, 2 and 12 read as follows:
“This Agreement is made with the Unions listed in Schedule 1 (the “Unions”) and Edgell-Birds Eye (a Division of Petersville Industries Ltd) (the “Company”), and sets out the terms and conditions to be followed as a consequence of terminations due to redundancy at the Company’s premises listed in Schedule 2.
This Agreement shall also apply in the event of terminations due to redundancy at any of the Company’s remaining premises listed in Schedule 3.
The following conditions shall apply.
NOTIFICATION:
.(a) Each employee involved shall be provided with a minimum of four (4) weeks notice of termination.
(b)Should for any reason the required period of notice not be provided to an employee, payment-in-lieu will be made to the extent of the notice period not provided.
(c)An employee may elect not to serve out all or any of the four (4) weeks of the required notice period, in which case a payment-in-lieu will not be made to the extent of the notice period not served.
(d)In cases where payment in-lieu is to be made, such payment will be based on the employees “ordinary rate of pay” (as defined), inclusive of shift allowance and all purpose allowances.
REDUNDANCY PAYMENTS AND CONDITIONS:
(a) Redundant employees shall receive:
- a severance payment of four (4) weeks; and
- a service payment of four (4) weeks for each completed twelve months service or pro rata part thereof.
Such payments are inclusive of award TCR requirements.
(b)In no circumstances shall the maximum service payment exceed the amount an employee would have received if he/she had continued in employment up to his/her normal retirement age.
(c)Severance and service payments will be based on the employee’s “all purpose rate of pay” (as defined), exclusive of shift allowances
TERM OF AGREEMENT:
This agreement is to remain in force indefinitely, save for the provision of six (6) months written notice by either the Company or the combined Unions of the intention to vary the agreement.”.
Redundancy is defined in Clause 15 as follows:
“Redundancy refers to a declaration by the Company that a permanent award covered employee’s contract of employment is to be terminated, not on account of any personal act or default of the employee, but because, as a result of Company restructuring, the job of the employee is no longer required to be done, by anyone.”
Retrenchment is defined in Clause 15 as follows:
“A termination of the contract of employment of a permanent award covered employee by the Company for reasons of redundancy.”
The CEPU, as the successor in law to the Electrical Trades Union, is a Union “listed” in Schedule 1 and the processing plant at Ulverstone is “listed” in Schedule 3.
The Court notes that redundancy, severance and service payments “received” under Clause 2(a) are “inclusive of award TCR requirements”.
I have concluded that the Redundancy Agreement should be read in the light of the decision of the Australian Conciliation and Arbitration Commission in the Termination Change and Redundancy Case (1984) 8 IR 34. At 74 the Commission indicated that it had regard to the:
(a)Milk Processing and Cheese Manufacturing Etc. (Appeal) CASE ((1978) 45 S.A.I.R. 902) redundancy clause;
(b)decision of Mr Justice Fisher Re Employment Protection Act;
(c)decision of Mr Commissioner Neyland in the Trustee Officers Award case which was confirmed in substance on appeal by the Full Bench; and
(d)decision of Mr Commissioner Cox in the Clothing Trades Award case.
The Commission pointed out that:
the above awards have restrictions placed on their applicability either by the terms of the legislation in accordance with which the decisions were made or as a result of the decisions
the decision of Mr Justice Fisher was made in the context of the Employment Protection Act which required notice and/or reasons for termination to be given to the Registrar in certain instances
(iii)in addition to an exemption from notification and the giving of reasons for termination where severance payments are made at the rate prescribed by Mr Justice Fisher in his decision of 29 July 1983 there are other exemptions from or limitations on the Act’s application.
(iv)the exemptions include persons who remain employees when a business undertaking or establishment, or part thereof, is transmitted from one employer to another
The Commission further stated at 74:
“Furthermore, the decision of Mr Justice Fisher applies only to terminations due to economic grounds. Terminations due to “seasonal shifts in markets, loss of contracts or changes in contracts not relating to recession, changes in model or product, shifts in marketing emphasis” and the like are not included and cases involving “retrenchments due to technological change” and “retrenchments due to company reconstruction, mergers and takeovers” are expected to be dealt with “on the particular merits of the case rather than by way of broad prescription”.
The legislation also provides for an employer to request the Commission to take into account “the financial and other resources of the employer concerned” and the “probable effect the order, if made, will have in relation to the employer.”
Mr Commissioner Neyland’s decision in the Trustee Officers Award case, and the decision of the Full Bench on appeal, did not provide severance pay for employees whose employment was transferred to another trustee company.”
At 75 the Commission stated:
“We have already decided that our decision will apply to redundancy, whatever be the cause, and we have decided that there should be a right to have the general prescription varied, by order of the Commission, where employers in particular cases argue that they do not have the capacity to pay.
However, we would make it clear that we do not envisage severance payments being made in cases of succession, assignment or transmission of a business. We intend to provide for transmission of employment in terms similar to cl.5(5) of the Metal Industry (Long Service Leave) Award (1976) 183 C.A.R. 67.”
The Commission confirmed transmission of business as an exemption from severance payments in the Supplementary Decision of 14 December 1984, 9 IR 115 at 129.
Clause 5(5) of the Metal Industry (Long Service Leave) Award reads as follows:
“TRANSMISSION OF BUSINESS
(a) Where a business is, whether before or after 11 May 1964,
transmitted from an employer (in this sub-clause “the transmittor”) to another employer (in this sub-clause called “the transmittee”) and an employee who at the time of such transmission was an employee of the transmittor in that business becomes an employee of the transmittee:
(i)the continuity of the service of the employee shall be deemed not to have been broken by reason of such transmission;
(ii)the period of service which the employee has had with the transmittor or any prior transmittor shall be deemed to be service of the employee with the transmittee.
(b)In this sub-clause “business” includes trade process business or occupation and includes part of any such business, and “transmission” includes transfer conveyance assignment or succession whether by agreement or by operation of law, and “transmitted” has a corresponding meaning.”
I have concluded that the severance and service payments under Clause 2 of the Redundancy Agreement are not payable in cases of transmission of employment. I do not believe that the Agreement contemplates or provides for such payments where there has been transmission of employment. I do not believe that the Agreement contemplates or provides for such payment even in these circumstances where the employees accepted the transmission under duress and protest.
If severance payments are not an entitlement in these cases, and I so find, there is no satisfactory evidence before the Court of economic loss to the Applicants as a result of the terminations and transmission of their employment. In such circumstances a conclusion could be reached that it is not appropriate to order any compensation to the Applicants for terminations which I have found were unlawful, unfair and unjust. Indeed, if I was to follow Brackenridge v Toyota Motor Corporation (1996) 67 IR 162 at 184-185 that is the conclusion I would be required to reach. However, the approach taken in Aitken v Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia - Western Australian Branch (1995) 63 IR 1 at 9 and endorsed by the Full Court in Burazin v Blacktown City Guardian (1996) 1 42 ALR 144 at 155 leaves open the possibility of damages under s170EE(2) for the shock and distress occasioned to these Applicants by the way in which their employment was terminated by the Respondent.
In Aitken at 63 IR 9 Lee J said:
“The compensation be ordered to be paid under s170EE(2) is such amount as the court thinks appropriate subject to the limit set in s170EE(3). It is a statutory remedy for which no assessment criteria are prescribed, other than a requirement in s170EE(3) that the court have regard to the remuneration that the employee would have received, or would have been likely to have received, if the employer had not terminated the employment.
In assessing the compensation that is appropriate the Court will have regard to what is reasonable in the circumstances and will look at what would have been likely to occur had the Act not been contravened: (see Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199 at 211; 57 IR 50 at 61-2 per Wilcox CJ). The Court will consider the detriment occasioned to the employee by the employer’s contravention of the Act, and the extent to which it is reasonable to compensate the employee for such consequences. Division 3 of the Act provides the context in which s170EE is to be construed. It includes provisions intended to protect the dignity of an employee, in particular, s170EA provides an employee with a right to seek redress in respect of a breach of the Act and s170EE provides the entitlement to receive compensation as the remedy for such a breach, characteristics of a statutory tort. Therefore, in some cases principles relevant to the assessment of damages in tort may provide assistance in assessing the compensation to be paid under s170EE(2). That is to say it may be appropriate to include in the measure of compensation to be paid pursuant to s170EE(2) a sum sufficient to compensate an employee for mental distress or injured feelings caused by a harsh, unjust or unreasonable termination of employment...
It is also appropriate to keep in mind that the purpose of the Act in providing for compensation to be paid to an employee for an employer’s failure to abide by the terms of the Act is not only to redress a wrong done to the employee but, in the public interest, to instil greater awareness of, and adherence to, the provisions of the Act. A measure of compensation which addresses the consequences caused by conduct that has breached the Act assists to meet that purpose.”
In Burazin at 142 ALR 155 the Full Court set out the above passage and the contrary view outlined by Beazley J in Brackenridge at 67 IR 184 and said:
“We respectfully prefer the view of Lee J. We agree with Beazley J’s analysis of the structure of the section and with her statement that compensation, as such, is only payable if the court determines that reinstatement is impracticable and, in that event, is to be calculated in accordance with subs (3). We also agree with her observation about paras (a) and (b) providing limits on the available compensation. Further, we accept that the words “the remuneration that the employee would have received or would have been likely to have received” can be described as a “reference point” for the calculation of compensation. But they are no more than that. They do not exhaustively state the matters to be taken into account. The court’s power under s170EE(2) of the Act is to order payment of “such amount (of compensation) as the Court thinks appropriate”. In making its assessment, the court is obliged to have regard to lost remuneration, but is not limited to that item. If the evidence establishes other damage flowing from the assessment, up to the limits prescribed by paras (a) and (b) of s170EE(3). It follows that the shock, humiliation and distress suffered by Ms Burazin in respect of the unlawful termination of her employment are matters that Madgwick J was entitled to take into account in considering the proper amount of compensation to be ordered under s170EE(2).”
All the Applicants gave evidence of their shock and distress. The Court accepts that the circumstances of the termination occasioned shock and distress. Ms Howell has submitted that:
“Should the amount of compensation in relation to any of the Applicants fall short of the cap prescribed in s170EE(3)(b)...the court (should) award an amount of $5,000 to any such Applicant on the basis that the Respondent’s actions caused the Applicants shock, humiliation and distress.”
I am not convinced that the terminations caused humiliation. But they did cause shock and distress. I am mindful of the admonition of the Full Court in Burazin at 156 that:
“There is an element of distress in every termination. To ensure compensation is confined within reasonable limits, restraint is required.”
However, as in Burazin, I consider here there were unusual, exacerbating circumstances that warrant some compensation for distress unnecessarily caused to each of these Applicants. I have also taken account of what Lee J said above in Aitken in respect of public interest.
I assess appropriate compensation in each case at $3,000.
MINUTES OF ORDERS
THE COURT ORDERS:
The Respondent pay the Applicant G A Stones compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $1,362 pursuant to s170EE(5) - total $4,362.
The Respondent pay the Applicant D M Murphy compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $4,571.68 pursuant to s170EE(5) - total $7,571.68.
The Respondent pay the Applicant R B Peebles compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $3,395.47 pursuant to s170EE(5) - total $6,395.47.
The Respondent pay the Applicant G D Bourke compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $5,714.60 pursuant to s170EE(5) - total $8,714.60.
The Respondent pay the Applicant J K Pyers compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $4,459.04 pursuant to s170EE(5) - total $7,459.04.
The Respondent pay the Applicant A J Stratton compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $4,571.68 pursuant to s170EE(5) - total $7,571.68.
The Respondent pay the Applicant M Sorensen compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $5,714.60 pursuant to s170EE(5) - total $8,714.60.
The Respondent pay the Applicant M A Randall compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $4,690.84 pursuant to s170EE(5) - total $7,690.84.
The Respondent pay the Applicant J M McGregor compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $2,228.70 pursuant to s170EE(5) - total $5,228.70.
The Respondent pay the Applicant P T Stott compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $4,571.68 pursuant to s170EE(5) - total $7,571.68.
The Respondent pay the Applicant S J Bassett compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $232.94 pursuant to s170EE(5) - total $3,232.94.
The Respondent pay the Applicant W R Horsman compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $5,863.55 pursuant to s170EE(5) - total $8,863.55.
The compensation and damages in 1 to 12 above are to be paid to each Applicant by the Respondent within 21 days.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
I certify that this and the preceding 30 pages are a true copy of the reasons for judgment of Judicial Registrar Ryan.
Associate:
Dated: 30 June 1997
Representative for the Applicant: Mr J Rainford
Industrial Officer, CEPU
Counsel for the Applicants: Ms C Howell
Solicitors for the Respondent: Sharwood Eyers Wilkie
Counsel for the Respondent: Mr M P McDonald
Hearing: 24, 25, 26 and 27 March 1997
Judgment: 30 June 1997
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