Trent Sauerwald v CME Civil Pty Ltd

[2014] FWC 9132

[2014] FWC 9132

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Trent Sauerwald
v
CME Civil Pty Ltd
(U2014/12212)

SENIOR DEPUTY PRESIDENT O’CALLAGHAN ADELAIDE, 17 DECEMBER 2014

Application for relief from unfair dismissal - s.389 - consultation requirements not met - harsh, unjust or unreasonable - compensation.

[1] On 3 September 2014 Mr Sauerwald lodged an application pursuant to s.394 of the Fair Work Act 2009 (the FW Act) in relation to the termination of his employment with CME Civil Pty Ltd (CME). The application was referred to me for determination.

[2] The CME position was that the termination of Mr Sauerwald’s employment was a case of genuine redundancy. CME did not identify any other initial or jurisdictional impediments to the application. Section 396 requires that, before considering the merits of the application the Fair Work Commission (FWC) must be satisfied about any such initial issues. Section 385 of the FW Act states:

“385 What is an unfair dismissal

A person has been unfairly dismissed if the FWC is satisfied that:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

(d) the dismissal was not a case of genuine redundancy.

Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.”

[3] Consequently, if the termination of Mr Sauerwald’s employment was a case of genuine redundancy, it cannot then be unfair. I am satisfied that the question of genuine redundancy is the only relevant initial issue for the purposes of s.396.

[4] At a directions conference on 20 October 2014 the parties agreed that this genuine redundancy issue, together with the merits of the application, would be the subject of a determinative conference on 15 December 2014. Both parties lodged witness statements and material in support of their respective positions. At the 15 December 2014 conference, Mr Sauerwald represented himself and provided evidence. Ms Ebert, a Director of CME, represented CME.

[5] Mr Sauerwald was employed by CME as a full-time Site Supervisor from 14 January 2013 to 18 August 2014. He primarily worked on a site at Moonta. He was advised on 18 August 2014 that CME was not successful in winning a particular project (the Cowell tender) and that he was being made redundant.

[6] Amongst a range of other matters, Mr Sauerwald’s evidence went to his concern that other factors resulted in the decision to terminate his employment. These included an on-site safety incident which he reported on 15 August 2014 and which involved a son of one of the CME Directors. Further, he argued that CME did not take the necessary steps under the agreement applicable to his employment to consult with him prior to advising him that he was redundant. Mr Sauerwald argued that redeployment opportunities were not extended to him and that account should have been had to his engagement under a minimum two year contract. He expressed concern that the advice provided to him by other employees indicated that his position as site supervisor had been filled by another employee shortly after he was dismissed and, later, by a subcontractor. In terms of the merits of the application, Mr Sauerwald’s position was that there was no valid reason for the termination of his employment, he was not warned about any performance deficiencies and that the process followed to terminate his employment was inherently unfair.

[7] The CME position was that the termination of Mr Sauerwald's employment met all of the requirements for a genuine redundancy. In the alternative, I have taken the CME position to be that it had a valid reason for the termination of Mr Sauerwald’s employment and that the process it followed to effect that dismissal was appropriate in the circumstances.

[8] Ms Ebert is a part owner and Director of CME. Her evidence was that after reviewing its financial position the CME Directors resolved at their meeting on 18 July 2014 that, unless CME won a major project it would need to reduce overhead costs by making a supervisor on its Moonta project redundant. The Board agreed to review its position in this respect at its next monthly meeting. Ms Ebert advised that she was advised on 12 August 2014, that CME had not been successful in a bid for a project at Cowell. She reported this at the 15 August 2014 meeting where the Directors agreed that one of the two supervisors on the Moonta project needed to be made redundant and resolved that this would be Mr Sauerwald as the other supervisor was assessed as having greater experience, flexibility and service.

[9] Mr McNeil is also a part owner and Director of CME. His evidence was consistent with that of Ms Ebert. Mr McNeil asked Mr Mumford to be a witness in a discussion he had with Mr Sauerwald on 18 August 2014 where he advised Mr Sauerwald that he was redundant and that there were no other supervisor positions available within the company.

[10] Mr Cronje is also a part owner and Director of CME. Again, his evidence confirmed the decision reached by the Directors on 15 August 2014.

[11] Mr Mumford is the Site Manager for CME at the Moonta site. His evidence went to his involvement in the meeting between Mr McNeil and Mr Sauerwald on 18 August 2014 where Mr Sauerwald was advised of his redundancy as a consequence of CME's failure to win the Cowell tender. Mr Mumford's evidence was that Mr Sauerwald indicated that he expected this because he had overheard part of a conversation about that possibility. Nevertheless he expressed concern that his redundancy was connected with his report of a safety incident. Mr Mumford was aware of that incident, but he advised that he had not, at that time, reported it to Mr McNeil.

Findings

[12] Section 389 states:

“389 Meaning of genuine redundancy

(1) A person’s dismissal was a case of genuine redundancy if:

(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer’s enterprise; or

(b) the enterprise of an associated entity of the employer.”

[13] I have considered each of the three components of this section on the evidence before me.

[14] I have accepted the combined evidence of Ms Ebert, Mr McNeil and Mr Cronje, to the effect that the financial position of CME was such that, after it failed to win the Cowell tender, a reduction in staffing levels was required. I am satisfied that the termination of Mr Sauerwald's employment occurred for that reason and that CME no longer required the job which Mr Sauerwald had been doing to be done by anyone else. I am not satisfied that the termination of Mr Sauerwald's employment was related to a safety incident which he reported shortly before he was dismissed. I have noted that Mr Sauerwald has made various assertions, based on advice provided to him by other persons, to the effect that his position as Supervisor has been filled by either other CME employees or by a subcontractor. Those assertions have not been substantiated and I have accepted the advice provided to me by CME to the effect that Mr Sauerwald has not been replaced and that given reductions of current project work it continues to have only one Supervisor. On the approach adopted in UES (Int'l) Pty Ltd v Harvey 1 I have not further assessed the selection criteria applied by CME. I am satisfied that the requirements of s.389(1)(a) are met in this instance.

[15] My consideration of s.389(1)(b) must be predicated by a finding that Mr Sauerwald's employment was covered by a relevant modern award or agreement. The parties provided me with the CME Civil Enterprise Agreement 2011 (the Agreement). The CME evidence was that whilst Mr Sauerwald was engaged under the terms of the Agreement his pay rate was a matter that was negotiated with him on commencement without involving the allocation of a particular classification in the Agreement.

[16] The Agreement covers CME and “the Employees”. The Employees are defined in the following terms:

“Employee means or refers to an Employee of the Company who falls within the classification of work and application of the agreement.” 2

[17] The classification structure is derived from the Building and Construction General On-Site Award 2010 (the Award). Mr Sauerwald’s evidence was that he had substantial on-site work experience and various plant operator certificates. The evidence of Mr McNeil and other CME witnesses was that the role of the site supervisor was to oversee various workgroups, each of which was the responsibility of a Leading Hand. I have concluded that the work undertaken by Mr Sauerwald was covered by the Agreement. I consider that, notwithstanding the substantial supervisory component of that role, Mr Sauerwald’s skills and qualifications are covered by the higher end classifications within the Award such that he is covered by the Agreement.

[18] Clause 1.7 of the Agreement deals with consultation in the following terms:

“1.7 CONSULTATION

1.7.1 This term applies if:

(a) the Company has made a definite decision to introduce a major change to production, program, organisation, structure, or technology in relation to its enterprise; and

(b) the change is likely to have a significant effect on Employees of the Company.

1.7.2 The Company must notify the relevant Employees of the decision to introduce the major change.

1.7.3 The relevant Employees may appoint a representative for the purposes of the procedures in this term.

1.7.4 If:

(a) a relevant Employee appoints, or relevant Employees appoint, a representative for the purposes of consultation; and

(b) the Employee or Employees advise the Company of the identity of the representative; the Company must recognise the representative.

1.7.5 As soon as practicable after making its decision, the Company must:

(a) discuss with the relevant Employees:

(i) the introduction of the change; and
(ii) the effect the change is likely to have on the Employees; and
(iii) measures the Company is taking to avert or mitigate the adverse effect of the change on the Employees; and

(b) for the purposes of the discussion - provide, in writing, to the relevant Employees:

(i) all relevant information about the change including the nature of the change proposed; and
(ii) information about the expected effects of the change on the Employees; and
(iii) any other matters likely to affect the Employees.

1.7.6 However, the Company is not required to disclose confidential or commercially sensitive information to the relevant Employees.

1.7.7 The Company must give prompt and genuine consideration to matters raised about the major change by the relevant Employees.

1.7.8 If a term in the Agreement provides for a major change to production, program, organisation, structure or technology in relation to the enterprise of the Company, the requirements set out in subclauses (1.7.2), (1.7.3) and (1.7.5) are taken not to apply.

1.7.9 In this term, a major change is likely to have a significant effect on Employees if it results in:

(a) the termination of the employment of Employees; or

(b) major change to the composition, operation or size of the Company's workforce or to the skills required of Employees; or

(c) the elimination or diminution of job opportunities (including opportunities for promotion or tenure); or

(d) the alteration of hours of work; or

(e) the need to retrain Employees; or

(f) the need to relocate Employees to another workplace; or

(g) the restructuring of jobs.

1.7.10 In this term, relevant Employees means the Employees who may be affected by the major change.”

[19] The evidence of the CME Directors was that there was a definite decision made at the 18 July 2014 Board Meeting to make one of the two Supervisors redundant in the event that CME did not win the Cowell tender. CME were advised on 12 August 2014 that it was unsuccessful in this bid. The CME Board then decided on 15 August 2014 that Mr Sauerwald would be made redundant. That redundancy decision was communicated to Mr Sauerwald on 18 August 2014. Consequently, I am not satisfied that CME met the obligations established by the consultation provisions in the Agreement before making Mr Sauerwald redundant. It may well have been the case that, had it done so, the redundancy decision would not have changed but the issue here is simply that CME was obliged, under the terms of the Agreement, to consult with Mr Sauerwald with that consultation addressing the effect that change was likely to have on him and measures that might be taken to avert or mitigate the adverse effect of the change. Clause 1.7.5(b) required information in this regard to be provided to Mr Sauerwald in writing.

[20] Consequently, I have concluded that the mandatory requirements specified in s.389(1)(b) have not been met in this instance.

[21] Notwithstanding this, and for the sake of completeness, I have considered whether redeployment was reasonable in the context of s.389(2). The evidence of Mr McNeil is that he considered redeployment possibilities and discounted these on the basis of his assessment of Mr Sauerwald’s skills and expertise. CME engaged another employee, initially on another project at around the same time of the termination of Mr Sauerwald’s employment. I have accepted the evidence that this other employee was engaged because CME required an employee with dogman and plant excavator qualifications which Mr Sauerwald did not have. I have also accepted the evidence of the CME Directors that suitable redeployment opportunities were not available within CME or its associated entities. Consequently, I am satisfied that the requirements of s.389(2) were met in this instance.

[22] As each of the requirements in s.389 must be satisfied in order for the termination of Mr Sauerwald’s employment to be regarded as a case of genuine redundancy, I have concluded that the CME failure to comply with the relevant consultation provisions means that this dismissal, whilst a bone fide redundancy, cannot be regarded as a genuine redundancy for these purposes.

[23] Consequently, I have considered the evidence before me against the factors set out in s.387 of the FW Act so as to determine if the termination of Mr Sauerwald employment was unfair. That section states:

387 Criteria for considering harshness etc.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant.”

[24] I have considered each of these factors.

Valid Reason

[25] Notwithstanding legislative changes made since that time, I have applied the approach set out by Northrop J in Selvachandran v Peterson Plastics Pty Ltd 3. I have concluded that the reason for the termination of Mr Sauerwald’s employment was CME’s assessed need to reduce its overhead costs after it had failed to win the Cowell tender. CME may have had some concerns about Mr Sauerwald’s work performance in certain respects, but I am not satisfied that these concerns reflected the reason for the termination of his employment. Additionally, I am satisfied that the termination of Mr Sauerwald’s employment was not related to the site safety issue that occurred on 15 August 2014. In this respect I have accepted the evidence of Mr McNeil that he was unaware of this incident whilst he was participating in the Board meeting where the termination of Mr Sauerwald’s employment was decided on.

[26] The CME decision to restructure its operations so as to have only one supervisor was the reason for the termination of Mr Sauerwald’s employment and must be regarded as a valid reason for that decision.

Notification of the reason

[27] Mr McNeil’s evidence was that:

“On Monday the 18th of August I asked Scott Mumford to act as a witness and I called the applicant into the site office at Moonta. In Scott’s presence I advised the applicant that due to not being successful with the Cowell CWMS tender, we had to make the applicants position redundant as the Moonta project could not afford two Supervisors. I confirmed the dismissal was that of redundancy and not based on work performance. In addition I advised the applicant we had no other Supervisor position available on any other sites within the company. The applicant was disappointed with the decision and made reference to the dismissal being about an site incident to which I was unaware at the time. I offered the applicant two weeks salary in lieu, advised he would receive full redundancy entitlements and offered to be a referee if required. The applicant left the site office.” 4

[28] That evidence was consistent with that of Mr Mumford. Indeed Mr Sauerwald’s evidence did not challenge this. Accordingly, I am satisfied that CME notified Mr Sauerwald of the reason for the termination of his employment.

Opportunity to respond

[29] Mr Sauerwald was not given an opportunity to respond to the proposal that he would be made redundant. That redundancy decision was made on 15 August 2014 and the meeting with Mr Sauerwald on 18 August 2014 was simply for the purpose of conveying that redundancy decision. In reaching this conclusion, I have acknowledged that, even if Mr Sauerwald had been given an opportunity to respond, this was unlikely to alter the redundancy decision. Nevertheless, no such opportunity was given.

Refusal to allow a support person

[30] CME did not refuse to allow Mr Sauerwald to have a support person in the meeting on 18 August 2014 but the manner in which it arranged and conducted that meeting effectively deprived Mr Sauerwald of that opportunity.

Warnings for unsatisfactory performance

[31] Whilst CME took into account Mr Sauerwald’s previous work performance in selecting him for redundancy and in not offering him other work, albeit at a lower rate of pay, I am not satisfied that his work performance was the reason for the termination of his employment. As I have indicated, that reason related to the decision to restructure the business so as to eliminate one supervisory position.

Size of the employer’s enterprise - impact on procedures

[32] CME is a relatively small business. The evidence was that, at the time of the termination of Mr Sauerwald’s employment, it engaged some 26 employees. I have concluded that CME did not have sophisticated procedures for implementing a redundancy situation consistent with the obligations established by both the FW Act and the Agreement.

Size of the employer’s enterprise - access to dedicated human resource management expertise

[33] On the same basis I have concluded that CME was of a size which meant that it did not have specialist human resource management resources.

Other matters considered relevant

[34] Consistent with my conclusions with regard to s.389, I have taken the extent to which CME did not consult with Mr Sauerwald before making him redundant. I have concluded that, had it done so, that consultation process would not have taken more than a week and that it was unlikely to have resulted in any different outcome.

Conclusion - Harsh, unjust or unreasonable

[35] I have concluded that the termination of Mr Sauerwald’s employment was harsh, and unjust because of the manner in which he was advised of that redundancy and CME’s failure to consult with him before implementing it. I do not consider that the termination decision was unreasonable as it occurred for a valid reason. In these circumstances I have considered the issue of remedy. Mr Sauerwald does not pursue reinstatement which is the primary remedy provided for under s.390. Given the circumstances under which the termination of his employment occurred I have concluded that a relatively small amount of compensation is appropriate. Section 392 sets out the criteria which are relevant to the determination of the amount of compensation. I have applied these criteria.

Compensation

[36] There is nothing before me to indicate that the effect of the amount being contemplated would affect the viability of the CME business. Mr Sauerwald had been employed by CME for some 19 months. I do not consider this to be a long period of employment. Had Mr Sauerwald not been dismissed on 18 November 2014 I have concluded that it is most likely that the termination of his employment would have occurred within a week of that date.

[37] I am satisfied that Mr Sauerwald has taken appropriate steps to mitigate his losses arising from the termination of his employment. I have also taken into account the extent to which his earnings since the termination of his employment, and not including the five weeks redundancy pay provided to him by CME, amount to approximately $7000. I have also noted that he anticipates earning another $2000 in the immediately foreseeable future.

[38] I do not consider that any other matters are relevant to my considerations in this respect and do not consider that there is any basis upon which to reduce my estimate of an additional weeks pay that would have been payable to Mr Sauerwald had the appropriate consultation process occurred. In this respect I have applied the approach adopted in Sprigg v Paul’s Licensed Festival Supermarkets 5.

[39] An amount of one week’s pay at the rate of pay applicable to Mr Sauerwald, less tax, is appropriate in these circumstances. An Order (PR559126) giving effect to this decision will be issued.

Appearances:

T Sauerwald on his own behalf.

E Ebert representing the respondent.

Hearing (Determinative Conference) details:

2014.

Adelaide:

December 15.

 1   [2012] FWAFB 5241

 2   The Agreement, clause 1.2

 3 (1995) 62 IR 371 at 373

 4   Exhibit C3, para 5

 5   AIRC, Print R0235, (24 December 1998)

Printed by authority of the Commonwealth Government Printer

<Price code C, PR559125>