Sultana & Australian Manufacturing Workers Union v Salmat Pty Ltd

[1997] IRCA 280

INDUSTRIAL RELATIONS COURT OF AUSTRALIA

INDUSTRIAL LAW  - TERMINATION OF EMPLOYMENT - Redundancies caused by loss of major contract - employer investigated and considered possibility of alternatives and concluded there were no alternatives which would save costs - terminations a logical response to operational requirements - no adequate consultation with employees prior to decision to terminate - employees had opportunity to suggest alternatives to redundancy after advice of terminations and during period of notice - employees did not suggest alternatives - unlikely that alternatives to retrenchment existed - consultation prior to decision to terminate would not have affected decision to terminate - no practicable alternatives to termination - costs could not be reduced substantially unless permanent employees retrenched - consultation prior to decision to terminate on grounds of redundancy or after decision to terminate and before decision effective not an absolute requirement - allegation of breach of award because terminations “harsh” - not established terminations were “harsh” - not established terminations in breach of a redundancy provision in the award.

Workplace Relations Act 1988 ss170DE, 170EA, 170EE

Kenefick v Australian Submarine Corporation (No 1) (1995) 62 IR 107
Victoria v Commonwealth (1996) 138 ALR 120
Jones v Department of Energy and Minerals (1995) 60 IR 304 at 312.
Nettlefold v Kym Smoker Limited (1996) 69 IR 37; Kerr v JaromaPty Ltd (1996) 70 IR 469 Thomas v Ralph Lynch trading as Bellingen Grocery (1997) 71 IR 307
Westen v Union des Assurance de Paris (IRCA, unreported, Madgwick J, 23 December 1996)
Carydias v The Greek Orthodox Community (IRCA, unreported, North J, 20 February 1996)
Ferry v Minister for Health (1995) 64 IR 28

Jupiters Ltd v Stephen Thirkettle and Steven McGinness (IRCA, unreported, Madgwick J,  25 July 1997)

Byrne v Australian Airlines Limited (1995) 131 ALR 422

SULTANA AND OTHERS AND AUSTRALIAN MANUFACTURING WORKERS UNION v SALMAT PTY LTD

NOS.  VI-2769, VI-2770, VI-2771, VI-2772 OF 1996

Before:          RYAN JR
Place:            MELBOURNE
Date:             10 OCTOBER 1997

INDUSTRIAL RELATIONS COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY  VI 2769 of 1996
  VI 2770 of 1996
  VI 2771 of 1996
  VI 2772 of 1996

BETWEEN:

GLENYS SULTANA AND AUSTRALIAN MANUFACTURING WORKERS UNION
FIRST APPLICANT

MARGARET ANNE HILL AND AUSTRALIAN MANUFACTURING WORKERS UNION
SECOND APPLICANT

AVRIL MILLS AND AUSTRALIAN MANUFACTURING WORKERS UNION
THIRD APPLICANT

LYNETTE JOY HUDSON AND AUSTRALIAN MANUFACTURING WORKERS UNION
FOURTH APPLICANT

AND:

SALMAT PTY LTD
RESPONDENT

JUDICIAL REGISTRAR:

RYAN

DATE OF ORDER:

10 OCTOBER 1997

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

THE APPLICATIONS BE DISMISSED

IN THE INDUSTRIAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY  VI 2769 of 1996
  VI 2770 of 1996
  VI 2771 of 1996
  VI 2772 of 1996

BETWEEN:

GLENYS SULTANA AND AUSTRALIAN MANUFACTURING WORKERS UNION
FIRST APPLICANT

MARGARET ANNE HILL AND AUSTRALIAN MANUFACTURING WORKERS UNION
SECOND APPLICANT

AVRIL MILLS AND AUSTRALIAN MANUFACTURING WORKERS UNION
THIRD APPLICANT

LYNETTE JOY HUDSON AND AUSTRALIAN MANUFACTURING WORKERS UNION
FOURTH APPLICANT

AND:

SALMAT PTY LTD
RESPONDENT

JUDICIAL REGISTRAR:	RYAN
DATE:	1 OCTOBER 1997
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

THE APPLICATIONS
On 18 November 1996 an organiser with AMWU filed four applications for relief in respect of termination of employment. The applications were signed by Glenys Sultana, Margaret Anne Hill, Avril Mills and Lynette Joy Hudson. The applicants did not seek reinstatement at that stage. They sought compensation.

On the first day of the hearing, Ms Flint, Union Solicitor and Research Officer, appeared for the applicants and advised the Court that Sultana, Hill and Hudson sought leave to amend their applications in that they had decided to seek reinstatement as a remedy for the alleged unlawful termination of employment. Mills did not seek to amend her application. She maintained her claim for compensation.

The respondent, Salmat Pty Ltd, filed a notice of employer’s appearance and stated therein that the employment of each applicant had been terminated on the grounds of redundancy. Ms Cleary, an Employee Relations Officer with the Printing Industries Association of Australia, appeared for the Respondent.

HISTORY
A long established company, R L Polk Pty Ltd, conducted a mailing house business with storage and distribution arms in Northcote. The respondent purchased this business and from 15 January 1996 ran the mailing house operations (first at Northcote and later at Heidelberg) as a division of a larger business with major premises in Mulgrave. The mailing house operation inherited from R L Polk was known within the respondent’s structure as Salmat Fulfilment Services (SFS).

Mills, Sultana and Hills came across to SFS having commenced employment with R L Polk in 1990, 1993 and 1994 respectively. Hudson commenced work with SFS on 1 May 1996.

RESTRUCTURE
After the takeover of R L Polk, the respondent found itself with a mailing house operation which it wanted to concentrate in Mulgrave. However, according to the State Manager (also the General Manager of SFS), Mr Ryan, the new company feared the loss of SFS personnel if the whole Northcote operation was translated to Mulgrave. A restructure in January 1996 resulted in some “fulfilment” or mailing house business being taken from Northcote and conducted by other divisions in Mulgrave. This transfer of business deprived SFS of annual business worth approximately one million dollars.

In the short term, the respondent sought to discount this loss by bearing on behalf of SFS management fees which were normally charged to Salmat divisions for the provision of head office services including information technology. Mr Ryan assessed the cost of the notional management fees at 5% of SFS turnover. He conceded that if SFS had been forced, initially, to bear these head office costs, the division would have run at a significant loss. In my view, even without intervening events, which exacerbated the parlous position of SFS, the division was faced with operational difficulties and a lack of viability because of the transfer of significant business to Mulgrave.

Be that as it may, disaster struck on the 29 October 1996 when a major customer, Nissan Motor Company, advised Mr Ryan, in his capacity as State Manager of SFS, that “a supply arrangement with Salmat....will cease....effective 30 November, or earlier if by mutual agreement” (Exhibit R2).

Mr Ryan sought advice from the Operations Manager at SFS, Mr Lloyd Hill, and from the Financial Accountant at the Mulgrave plant, Mr Butcher. Messrs Ryan, Hill and Butcher all gave evidence that:

• Nissan work constituted 15% of SFS “gross profit” and 9% of SFS  sales between 31 October and 5 November

• Hill and Butcher researched alternative options to SFS retrenchments and reported to Ryan

• Ryan requested Hill and Butcher to “look at all options”

• Ryan, Hill and Butcher considered there was “minimal” scope to reduce fixed overheads like telephone and power and no scope to reduce set costs in rent and leasing

• Ryan, Hill and Butcher identified permanent SFS staff as the only area in which costs could be effectively reduced and tentatively identified six positions for possible retrenchment

• after further reflection, the four positions occupied by the applicants were determined as appropriate for retrenchment

Mr Ryan said “in the end we decided to operate with four less people rather than six. They selected themselves”.

COMMUNICATION WITH HEAD OFFICE
Messrs Ryan, Hill and Butcher made this “decision” or fixed on this “recommendation” at some time on 6 November. Once the “decision” was made Mr Ryan communicated by memo with three senior Mulgrave operatives (Podmore, Ward and Smith) and advised them that the applicants Hill, Hudson, Sultana and Mills, identified respectively as supervisor, production hand, supervisor and custom service co-ordinator, were not needed to “run our core business”.

Mr Ryan indicated that he “would be most interested in hearing about any positions (which were or could be made) available...for anyone, or all of these employees”. He concluded each memo as follows:

“If you require any additional details, I have available a full training history, skills matrix and current job description.

I seek from you a response by Thursday 7th November, to enable me to finalise my options by Friday 8th November.”

I observe that Mr Ryan had already determined that, in the absence of any available positions at Mulgrave, the four applicants would be made redundant on Friday 8 November.

Mr Ryan also sent a memo dated 6 November to the General Manager of the respondent company, Mr Pitt (Exhibit R4). He pointed out that:

• the loss of the Nissan business forced an examination of every facet of the SFS operation “to reduce overheads until the business can be gained to compensate”

• SFS had been operating for months at break even point and only avoided a “loss situation” because head office fees were not incurred

• potential to reduce fixed overheads was “minimal”

The memo analysed current workloads and the impact of the Nissan loss on permanent SFS staff positions.. Mr Ryan did not identify the applicants by name or position as he had in the memos to Podmore, Ward and Smith. He stated:

• “we are unable to accommodate the two (permanent) employees in the (Nissan) section...in other areas”

• “the client support area...is where we can gain efficiencies and reduce members (and) I will need to look at which member will give us the least impact with our client base if gone”

• “we only have one permanent in (the general distribution) area and this is where work has been very spasmodic, and at times non-existent...this position will be addressed”

• areas of concern

  Nissan  x   2    personnel
  Sales  x   1    personnel
  General Distribution             x   1    personnel

• “I intend to discuss the above with the individuals concerned by Friday, however, I have written to each State Manager at Mulgrave asking if any suitable positions are available and will await their urgent reply prior to finalising any plans”

Mr Pitt did not give evidence. There is no way of knowing if he knew or could deduce that the “individuals concerned”, with whom Mr Ryan proposed to hold discussions before “finalising plans”, were the applicants. However, it is clear that the two permanent employees in the Nissan section were Hill and Hudson, Mills worked in sales and Sultana was the permanent employee in general distribution and her position was to be “addressed”. It is also clear that “addressed” in this context meant “made redundant” and that Mr Ryan, with the support of Messrs Hill and Butcher, had specifically identified the applicants by name and position as redundant and had informed Podmore, Ward and Smith accordingly.

On 7 November Messrs Podmore, Ward and Smith replied in writing and told Mr Ryan that they did not have any vacancies at Mulgrave for any of the applicants (Exhibit R6).

Late on 7 November Mr Ryan wrote to Mr Pitt again. It is obvious from the general tenor of evidence that this memo (Exhibit R7) was written no earlier that 4.30 pm or 5.00 pm. The wording is ambiguous in part but Mr Ryan seems to be saying that some time on 7 November “before the end of the shift” the applicants had been told that their positions had been made redundant and that their permanent employment would cease on 30 November.

The memo reads as follows:

“Ken,

Further to my memo re Nissan, the following has now been actioned:

1. M. Hill  )
          L. Hudson     )
          A. Mills         )         effected personnel
          G. Sultana     )

Each of the above has been spoken to regarding redundancies, outlining the effect on our business of the Nissan loss and the reasons why we have a need for redundancies, (refer to my memo 6/11/1996), plus proposed redundancy payouts.

Each Production person was also offered the opportunity for casual employment once permanency ceases on the 30th November, 1996.

1. The entire workforce was addressed yesterday, (6/11/1996), and told of the Nissan loss, the effect on our business, and our intention to do our sums and come back to them with our plans.

1. Our on-site Union representative, Marlene Stevens, had a discussion with myself re our plans on Thursday, 7th November 1996, where again our reasons were outlined, our payouts discussed, and our offer of casual employment put forward.

Marlene asked that all staff be spoken to that day to inform them of our decisions and stop uncertainties.

1. All staff were addressed on Thursday, 7th November, 1996 at the end of the shift and again our reasons for the obvious need for redundancies was outlined.

Also discussed was the offer of casual employment for those Production personnel effected.

I will keep you informed of any further developments.

Regards,

Peter Ryan.”

In paragraph 1:

• the applicants are named and are described as “effected personnel”

• the applicants are identified as “spoken to regarding redundancies...plus proposed redundancy payments”

• the statement “each production person was also offered the opportunity for casual employment once permanency ceases on the 30 November 1996” applies to Sultana, Hill and Hudson.

According to paragraph 3, on 7 November at some time prior to “the end of the shift”, Mr Ryan told the union representative, Marlene Stevens, that the applicants had been made redundant, would be given redundancy “payouts” and had been offered casual employment.

EVIDENCE FROM AND ON BEHALF OF THE APPLICANTS
Ms Stevens gave evidence. She claims that Mr Ryan did not tell her of the redundancies until Friday 8 November. In examination in chief, her evidence was as follows:

“I think it was 8 November. I spoke to Mr Ryan after morning tea. He confirmed the redundancies.”

Later, in cross-examination, she said:

“The conversation with Mr Ryan was not 7 November but 8 November. I asked him to hold a meeting with all the staff. He did that just before 4.30 pm.”

Ms Sultana stated that on Thursday 7 November Mr Ryan called a meeting of all staff and advised that the Nissan contract had been lost and that he needed “to look into it and what came out of it”.

Her evidence included the following:

“Nothing was said about redundancies. I thought he said it would take two weeks. He did not give a reason as to why the Nissan contract was lost. I was standing next to Avril Mills. I felt Mr Ryan was looking at us the whole time.

On Friday 8 November, before morning tea, I was called into the boardroom. I passed Maggie (Hill) and Lyn (Hudson). They were upset. They said they had been retrenched. As I was going to the boardroom I knew in my heart that was what I was going for. Mr Ryan said that he was sorry. They had lost the Nissan contract. They had looked into other feasibilities. The gist of it was that I was retrenched and he was sorry. I said that I had expected to be put off because I had just passed Maggie and she was upset and I knew what was coming.”

Ms Hudson’s evidence included the following:

“On 6 November, Wednesday night after 4.30 pm Mr Ryan and Mr Lloyd Hill spoke to Maggie Hill and to me. They said that we had lost the Nissan account and that they would try and still hang on. They said that they would get back six months down the line.

On Thursday morning there was a meeting and everyone was told what was going on and that we had lost the Nissan contract. Peter (Ryan) said that we would have to work things out and assess the situation and what was going on but I thought he said it would take a few weeks.

On Friday morning 8 November Maggie and I were told we would be made redundant. Peter said that we could finish the following week but I was asked to stay on to wind Nissan down. My last day was 29 November.”

Ms Hill’s evidence included the following:

“On Wednesday 6 November after work at 4.30 pm Lyn Hudson and I were asked to come up. Peter Ryan mainly spoke. Lloyd Hill was present. We were told that Nissan had decided to pull the plug and that it was a great loss and that they were our second biggest client. Basically we were told that they would have to think about it. I saw Avril (Mills) walk by. Avril just looked in. Mr Ryan said that no doubt she knew before this.

When we were told that we had to go Lyn and I were told that they would call a meeting of all staff. They said that a meeting would be called the next day to tell all staff.

About morning tea on Thursday (i.e. 7 November) there was a general meeting and the staff were told about Nissan. The next day, Friday 8 November, before morning tea Lyn and I were called up to the boardroom. Peter Ryan said that we were terminated. There was just me and Lyn and Peter Ryan.

I was told I only had to be given two weeks notice but that I would be given three weeks notice. I finished up on Friday 15 November.”

Ms Mills evidence included the following:

“Mr Ryan told me on Wednesday or Thursday of the loss of the Nissan contract. He said that we had lost the contract and that would take a few weeks how it would affect us. He said that Nissan had given costs as the reason but I believe there was more to it.

On Friday 8 November, in the morning, Peter Ryan saw me on my own and told me that I would be retrenched with four weeks notice and that I could leave or work it out. That is all I remember.”

EVIDENCE FOR THE RESPONDENT

In respect of the terminations Mr Ryan gave evidence which included the following:

“I received responses early in the morning of 7 November from Messrs Podmore, Ward and Smith. After I got these memos I met Hill and Hudson. Hill supervised the process in our Nissan area. I told her of the impact of the loss of Nissan and that we had looked at other alternative options and I told her that we had no other option except casual employment because she was employed exclusively on Nissan work. We immediately gave her the option of casual employment. I am not aware that she has ever contacted us or taken up casual employment.

Hudson was a bench hand in the Nissan processing area. At the same meeting I gave her the same advice. Lloyd Hill was present. Hill and Hudson were the only two permanent employees in the Nissan process. I am also not aware of any contact from Hudson in relation to casual employment.

I then had a meeting with Sultana. She and I were the only two persons present. I told her of the impact of the Nissan loss and that this affected everyone and affected profit. I told her that it was not just a matter of redundancy in the Nissan area and that we had looked everywhere for alternatives in the building. She supervised the general distribution area where the workload was very spasmodic. She said that she was expecting it or she said that it was not unexpected. She was offered casual employment. I am not aware of any contact from her and I am not surprised there has been no contact from these three (i.e. Hill, Hudson and Sultana).

Mills was involved in sales co-ordination. She looked after sales and purchasing and the processing of sales information into production. We have two sales people and three sales co-ordinators. I told her the significance of the Nissan account. I told her that we had looked at the whole business because Nissan generated an enormous amount of gross profit as our number two client and therefore affected sales. I told her that she was the last on, the last customer service contact on and that she was the obvious choice (for retrenchment). She said that she should have taken “the fucking package” and I assume she was referring to the package passed through Polk in January 1996.”

Mr Lloyd Hill and Mr Butcher gave evidence which corroborated Mr Ryan in respect of the investigation of the impact of the loss of the Nissan contract.

Mr Hill also stated that:

• he was present in the canteen on 6 November when Mr Ryan advised all SFS staff about the loss of the Nissan contract

• Mr Ryan told staff that the impact of the loss was being evaluated and that staff would be kept “posted”

• Ms Stevens was present at the staff meeting on 6 November

• he (Hill) was present at a meeting on 6 November when Ms Hill and Ms Hudson were told by Mr Ryan of the loss of the Nissan contract but were not told of any particular redundancies at that time

• on 7 November he was present when Mr Ryan advised Ms Hill and Ms Hudson that their positions in the Nissan section would be redundant with effect from 29 November

• on 28 November he wrote to Ms Hill and Ms Hudson and confirmed the redundancies were to take effect on 29 November “as advised and agreed 7 November” (Exhibits R14 and R15)

CONFLICTS IN EVIDENCE
The four applicants and Ms Stevens are all adamant that the meetings advising the applicants and the staff of the redundancies took place on Friday 8 November. Messrs Ryan and Hill assert the advice of the terminations of employment and the final meeting advising staff took place on Thursday 7 November.

Ms Hill and Ms Hudson agree that they met Mr Ryan and Mr Hill on 6 November and Ms Mills has stated that Mr Ryan told her of the loss of the Nissan contract on 6 or 7 November (i.e. Wednesday or Thursday).

Ms Hill, Ms Hudson and Ms Sultana all state that there was a meeting with all the staff on 7 November but that there was no specific advice of specific redundancies at that meeting.

In my view, it is not a matter of major moment whether the applicants were told of their redundancies on 7 November as the respondent asserts or on 8 November as the applicants assert. Given the written documentation from and to Mr Ryan on 6 and 7 November (Exhibits R3, R4, R6 and R7) and from Mr Hill on 28 November (Exhibit R14 and R15), I am of the view that it is more likely than not that the respondent has correctly fixed the advice of the redundancies to the applicants and SFS staff at 7 November. However, even if the applicants and Ms Stevens were correct in placing these events on 8 November, I am also of the view that none of the applicants was adequately consulted prior to the decision to terminate employment on the grounds of redundancy.

OPERATIONAL REQUIREMENTS
I have no doubt that the operational requirements of the respondent’s business were such that the termination of the employment of at least four SFS staff could have been validly undertaken without breach of s170DE(1).

The evidence suggests SFS was in a parlous financial position before the loss of the Nissan contract and in an unviable position thereafter. The question is whether the terminations of the employment of the applicants were for valid reason based on operational requirements.

I am satisfied that the respondent investigated the possibility of alternative options and that there were no other means of effectively reducing costs other than by retrenching permanent employees. Indeed, at the time of the hearing, I was by no means convinced that SFS could become or remain a viable arm of the respondent’s overall business given the structure and operating returns revealed through the SFS 1996 budget (Exhibit R1). In terms of Kenefick v Australian Submarine Corporation (No 1) (1995) 62 IR 107 at 116 there was “a causal relationship between the reason and the terminations and the terminations were a logical response to the employer’s operational requirements”. The terminations were a logical way of dealing with operational requirements and with the substantial losses flowing from the removal of the Nissan business. The employer does not have to prove that the terminations were the only logical course although, in my view, the redundancies were indeed the only logical course. However, the Court need not and should not put itself in the employer’s managerial chair.

CONSULTATION
In many cases decided prior to Victoria v Commonwealth (1996) 138 ALR 120, that is prior to 4 September 1996 this Court, the Federal Court of Australia, and State Courts and Tribunals have found terminations of employment unlawful when an employer has terminated employment on the grounds of redundancy without consulting the employee: Jones v Department of Energy and Minerals (1995) 60 IR 304 at 312.

Likewise in post validity cases like Nettlefold v Kym Smoker Limited (1996) 69 IR 37; Kerr v JaromaPty Ltd (1996) 70 IR 469; Thomas v Ralph Lynch trading as Bellingen Grocery (1997) 71 IR 307 and Westen v Union des Assurance de Paris (IRCA, unreported, Madgwick J, 23 December 1996) termination of employment without consultation has been held a breach of s170DE(1) as termination without valid reason.

However, none of the cases hold that consultation is always and on every occasion and in every circumstance essential. Indeed Thomas, Nettlefold and Kerr were not strictly redundancy situations where an employer had labour in excess of the requirements of the business. They were cases where the employer sought to reduce costs by particular terminations but where the work still had to be undertaken.

In Thomas at 312 the Chief Justice said:

“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 have been defensible for the company to terminate the employment of one or both 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 problem.”

I do not believe the respondent dealt with the problem of the loss of the Nissan contract in an arrogant manner. In my view, the employer could have dealt with the problem in a more appropriate way. The employer could have put the cards on the table with some of the applicants as soon as Nissan advised the work was being transferred. The employer could have warned Ms Hill and Ms Hudson as early as 30 October that their jobs were at risk. They were the Nissan section. There work was definitely disappearing. However, the respondent did tell Hudson and Hill on 6 November that their jobs were at risk and told all the applicants on 7 November that their positions would be redundant from 29 November.

This did not constitute effective consultation prior to the decision but it did constitute consultation prior to putting the decisions into effect. While Ms Mills chose to leave immediately, that was her decision. All the applicants, including Mills, had an opportunity to suggest other alternatives albeit after the respondent had determined that there were no other practicable alternatives.

In my assessment, real consultation prior to the decision would have made no difference because there were no other practicable options. Work was substantially reduced. SFS could not survive without reducing costs. Costs could not be reduced substantially unless permanent employees were retrenched.

In any event, while lack of consultation will often render invalid a termination based upon operational requirements, consultation prior to the decision to terminate or after the decision and before the decision is effective is not an absolute requirement.

As North J said in Carydias v The Greek Orthodox Community (IRCA, unreported, 20 February 1996) 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.”

ALLEGATIONS OF BREACH OF AWARD - “HARSH, UNJUST OR UNREASONABLE” TERMINATION

Ms Flint, on behalf of the applicants, challenged the validity of the terminations on the alternative ground that the terminations were in breach of the relevant award. The applicants did not seek to amend their claims to sue for the imposition and/or recovery of penalties for breach of award under s178. Rather, Ms Flint argued that the terminations of the applicants breached Clauses 4.4.1(a)(x)(A) and (B) of the Graphic Arts - General Interim Award 1995 and could not, on that account, be terminations for valid reason and were accordingly unlawful terminations and in breach of s170DE(1).

Clause 4.4.1(a)(x)(A) and (B) reads as follows:

“(A)Termination of employment by an employer shall not be harsh, unjust or unreasonable.

(B)For the purposes of this sub-paragraph, termination of employment shall include terminations with or without notice. Without limiting the above, except where a distinction, exclusion or preference is based on the inherent requirements of a particular position, termination on the ground of race, colour, sex, sexual preference, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction and social origins shall constitute a harsh, unjust or unreasonable termination of employment.”

Matters caught by clause 4.4.1(a)(x)(B) are often pursued in proceedings under s170EA but when pursued notice is uaually given and normally such matters are alleged as an invalid termination for a prohibited reason or reasons under s170DF(1). However, it is questionable whether in proceedings under s170EA an applicant can argue that a termination is unlawful because harsh, unjust and unreasonable and in breach of a wide and general clause like Clause 4.4.1(a)(x)(A) unless the respondent is given notice of such a claim and the claim is pursued separately from the application under s170EA.

S170DE(2) purported to invalidate a reason for termination if, having regard to all the circumstances of the case, the termination was harsh, unjust and unreasonable. In Victoria v Commonwealth the High Court found s170DF(2) invalid.

While a termination in breach of award has been held to be a termination not for valid reason (see Ferry v Minister for Health (1995) 64 IR 28), I do not consider that that case, or any other, is authority for the conduct of a hearing under the banner of s170EA in which an applicant may seek to demonstrate that a termination was harsh, unjust and unreasonable and therefore in breach of award and therefore a termination without valid reason under s170DE(1). Of course evidence may be given in a hearing under s170EA which leads a court to conclude that a termination would be harsh although otherwise valid under s170DE(1). In the absence of a TCR clause like 4.4.1(a)(x)(A) any harshness would not be relevant to the decision of the employer. If such a clause applies and the Court has evidence which leads to a conclusion of harshness Jupiters Ltd v Stephen Thirkettle and Steven McGinness (IRCA, unreported, 25 July 1997) may well apply. There Madgwick J found two terminations of employment harsh and therefore in breach of s170DE(1). However, the circumstances there were quite different to the circumstances before me today. In Jupiters the Court was reviewing a decision of a Judicial Registrar who had found that there was a valid reason for the two terminations but that the terminations were harsh, unjust and unreasonable. After the Judicial Registrar’s decision was handed down, the High Court delivered its decision in State of Victoria v The Commonwealth (the Validity Case), in which their Honours found that s170DE(2) (as it was then called) was invalid. The case involved two long serving security officers dismissed for using excessive force when ejecting unruly patrons from a casino. Madgwick J concluded his judgment at 15 as follows:

“The factual question then arises: was the termination of either employee by the company “harsh, unjust or unreasonable” within the meaning of the Award? The employees should be regarded as bearing the onus on this question. I have given this matter anxious consideration but, on balance, I am satisfied that there was a breach of the Award: the termination of each employee was, in my opinion, harsh. My reasons for this conclusion are principally these: the period of employment for each employee was not short; each was well-regarded; this incident occurred with greater provocation that usual; its duration was brief; the contract of employment very sensibly, especially in this employment, allowed for a graduated range of disciplinary responses by the employer, and it will still be open to the employer, if the employees are re-instated, to take such reasonable measures from among that range as it wishes. I would add that, even in the criminal law, with its high purpose of protection of the lives and physical safety, as well as the property, of citizens, there are doubts felt in some respectable quarters about the moral justification for sentencing on a policy of “general deterrence” as distinct from individual deterrence: see, for example, George Zdenkowski, Sentencing of Federal and A.C.T. Offenders: Some Reform Proposals, Australian Law Reform Commission, 1986. The same kinds of reservations would indicate that it would ordinarily be somewhat harsh to punish one employee to deter others, at least in the case of “first offenders” who were severely provoked.

In summary, therefore, if not for clause 18.6 of the Award, the company would have a valid reason to terminate the employment of Mr McGinness and Mr Thirkettle for the reasons I have set out above, and any harshness of the termination would not be relevant to its decision: Validity Case. However, as the Award imposed a legal obligation upon the employer to refrain from effectuating a harsh termination upon an employee, a failure to act according to that legal obligation means that the employer could not be said to have a valid reason for the terminations. There was a failure so to act, because each termination was harsh. There was, therefore, no valid reason for each termination.”

It is clear that the Court in Jupiters was able “after anxious consideration” to conclude that the terminations were harsh and “on balance” in breach of Clause 18.6 of the relevant award on the basis of the evidence before the Court.

The applicants in this case have not satisfied me that the terminations were harsh or unjust or unlawful and accordingly in breach of Clause 4.1.1(a)(x)(A).

I am fortified in that conclusion by certain observations of McHugh and Gummow JJ in Byrne v Australian Airlines Limited (1995) 131 ALR 422 at 438, 460, 461 and 462. While Byrne dealt with whether the clause of an industrial award could be implied into a contract of employment, the clause, Clause 11(a) and (b) of the Transport Workers (Airlines) Award 1988 was in exactly the same form as Clause 4.4.1(a)(x) of the Graphic Arts Award 1995. These particular clauses were inserted in many awards as a sequel to the Termination, Change and Redundancy Case (1984) 8 IR 34. The observations of their Honours in Byrne at 438, 460, 461 and 462 are as follows:

“The respondent contests the holding by the Full Court that the dismissal procedure had been unreasonable. It seeks special leave, in each proceeding, to cross-appeal. That leave should be granted. The respondent also submits that the Full Court erred in not considering whether, in all the circumstances of the case, including the findings by Hill J as to the complicity of the appellants in pilfering, the termination was in breach of the award. The submission is that the Full Court did not deal adequately with the question of breach of the award because it had dealt only with the “procedural” aspects of the dismissal of the appellants and had not given weight to the “substantive” aspect of the matter, the dismissal for involvement in the pilfering of luggage.”

“The hearing of the appeals in the Full Federal Court occupied three days. In this court, we were told that a significant part of this time was taken up with an analysis of the evidence before the primary judge, in support of the submission that Hill J should have found that in fact the appellants had not been guilty of any wrongdoing. But, as will be apparent, the Full Court did not enter into that matter when allowing the appeal on this branch of the case. The appellants sought, before this court, to support the holding in the Full Court as to breach of the award on the footing that all aspects of the matter had been dealt with at the intermediate appellate level. Plainly that is not the case.

It is also apparent that the majority had proceeded on the footing that termination of employment might be unreasonable, within the meaning of cl 11(a), by reason of “procedural” deficiencies without the need to go further into “substantive” aspects of the matter.

It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust.”

“The distinction between procedure and substance is elusive. This is so even in those fields of private international law, the statute law dealing with limitations of actions and the effect of repeal upon accrued rights, and the Statute of Frauds, where it has an entrenched operation. In our view, it is unhelpful and contrary to the tenor of the award to introduce it into cl 11(a).”

ALLEGATIONS OF BREACH OF AWARD - REDUNDANCY
Ms Flint also submits that the terminations are unlawful and not for valid reason under s170DE(1) because in breach of Clause 4.4.3(a) of the Award. Clause 4.4.3(a) reads:

“4.4.3     Redundancy
              4.4.3(a)  Discussions Before Terminations

4.4.3(a)(i)Where an employer has made a definite decision that the employer no longer has a need for the job the employee has been doing done by anyone else and this is not due to the ordinary and customary turnover of labour and that decision may lead to termination of employment, the employer shall hold discussions with the employees directly affected and with their union

.

4.4.3(a)(ii)The discussions shall take place as soon as is practicable after the employer has made a definite decision which will involke the provisions of sub-paragraph 4.4.3(a)(i) hereof and shall cover, inter alia, any reasons for the proposed terminations, measures to avoid or minimise the terminations and measures to mitigate any adverse effects of any terminations on the employees concerned.

4.4.3(a)(iii)For the purposes of the discussion the employer shall, as soon as practicable, provide in writing to the employees concerned and their union, all relevant information about the proposed terminations including the reasons for the proposed terminations, the number and categories of employees likely to be affected, and the number of workers normally employed and the period over which the terminations are likely to be carried out. Provided that any employer shall not be required to disclose confidential information the disclosure of which would be inimical to the employer’s interests.”

Firstly, I am not satisfied that any applicant other than Ms Mills was a member of the union at the time “the employer made a definite decision that the employer no longer had a need for the jobs the employees (the applicants) had been doing done by anyone else”.

Secondly, in respect of Ms Mills, I am not satisfied that the respondent has breached cl 4.4.3(a) with the possible exception of the provision in writing as soon as practicable of all relevant information pursuant to cl 4.4.3(a)(iii)

Thirdly, in respect of Hills, Hudson and Sultana, I am not satisfied that the respondent has breached cl 4.4.3(a) with the possible exception of the provision of relevant information pursuant to cl 4.4.3(a)(iii).

Fourthly, even if I was to be satisfied that the respondent was in breach of cl 4.4.3(a) in respect of all or any of the applicants, I am not convinced that a technical breach of the award would render a termination for valid reason based on operational requirements invalid. I am not convinced that a breach of formal procedure would be a matter of substance such as might render any of these terminations unlawful and not for valid reason.

THE CIRCUMSTANCES LEADING TO THE TERMINATIONS
I have taken account of the circumstances surrounding these terminations including

• the decision of Nissan to terminate the contract, a decision conveyed to the respondent on 29 October 1996 and taking effect on or before 30 November

• the financial position of SFS before and after the loss of the Nissan contract

• the investigation by the respondent of alternative options from 30 October to 6 November with the weekend of 2 and 3 November and the Melbourne Cup holiday of 5 November within that period

• the discussions with all staff on 6 November and specifically with Hill and Hudson on 6 November and Sultana and Mills on 7 November

• the offer to all applicants of notice to 29 November

• severance payments made in compliance with cl 4.4.3(c) of the Award

• the decision of Ms Mills to leave immediately on 8 November

• the fact that Ms Sultana, Ms Hill and Ms Hudson were all offered casual employment and none of them sought to avail themselves of the offer

FINDING
I find that

• the termination of the employment of the applicants by the respondent were for valid reason based on the operational requirements of the undertaking, establishment or service of the respondent

• the applications should be dismissed

I also add that if I am wrong and if it were to be held the terminations were not for valid reason I would have found that reinstatement was impracticable and in the circumstances as outlined above I would not have considered it appropriate to order compensation.

ORDERS
The Court orders that the applications be dismissed.

I certify that this and the preceding seventeen (17) pages are a true copy of the Reasons for Judgment herein of Judicial Registrar Ryan.

Associate:

Dated:  10 October 1997

Counsel for the Applicant:	Ms Penny Flint, Solicitor and Research Officer, AMWU for the Applicants
Counsel for the Respondent:	Ms Catriona Cleary, Employee Relations Officer, Printing Industries Association of Australia for the Respondent
Date of Hearing:	5, 6 and 7 May 1997
Date of Judgment:	10 October 1997