Harding v South Coast Equipment Pty Limited [2016] FWC 3049 (19 May 2016) [2016] FWC 3049 FAIR WORK COMMISSION DECISION Fair Work Act 2009 s.394 - Application for unfair dismissal remedy Mr Adam Harding Mr Ian Boulding v South Coast Equipment Pty Limited T/A SCE Industrial Services (U2015/17094; U2015/17115) COMMISSIONER RIORDAN SYDNEY, 19 MAY 2016 Application for relief from unfair dismissal Application for relief from unfair dismissal. [1] This decision relates to applications for an unfair dismissal remedy by Mr Ian Boulding and Mr Adam Harding (the Applicants) against South Coast Equipment Pty Ltd (SCE) (the Respondent). SCE has raised a jurisdictional objection to these applications on the basis that the terminations were cases of genuine redundancy. For the sake of convenience, the parties agreed to join the applications for the purposes of the conciliation and hearing. [2] The Applicants were represented by an Industrial Officer of the Construction, Forestry, Mining and Energy Union (CFMEU), Mr Paul Quinn. Leave was granted to allow Mr Nick Chadwick from Chadwick Workplace Law to represent SCE. [3] For this jurisdictional hearing, Witness Statements were attested by Mr Troy Kembrey, the Operations Manager of SCE, Mr Daren Taylor, an Organiser with the CFMEU and Mr Ian Boulding who was employed as a Plant Operator for SCE for twenty two years before his termination. Mr Harding’s statement failed to meet the issued Directions deadline. It was agreed by the parties that Mr Harding’s evidence was a mirror copy of the evidence of Mr Boulding and was therefore of no additional evidentiary benefit. [4] Since 1961, SCE has been providing BlueScope Steel with load and haul services at their Port Kembla site. Until recently this necessitated the employment of 14 permanent front end loader operators and 17 permanent truck drivers. [5] BlueScope embarked on a major cost cutting drive in November 2014 across all sections of the Port Kembla Steelworks. Every department was required to provide cost savings. Further, on 24 August 2015, the Managing Director of BlueScope advised the Australian Stock Exchange (ASX) that if $200 million of on-going savings could not be found immediately, then the Steelworks would be closed. [6] Following extensive discussions between BlueScope Management and the Commonwealth and NSW Governments, as well as a complex mediation process conducted by Vice President Hatcher of The Fair Work Commission (FWC) with BlueScope and the Steel Unions, BlueScope announced the on-going operation of the Port Kembla Steelworks in November 2015. [7] SCE was caught up in this cost reduction process. BlueScope sought price reductions from SCE as well as embarking on a number of trials with modified manning structures across a variety of shifts. This resulted in some employees being displaced from their “normal” shift. These employees were found alternative work, undertook training or were directed to take leave. During this process, Mr Kembrey had regular meetings with the two site delegates of the CFMEU. [8] On 26 November 2015, BlueScope advised SCE to immediately implement the 12 hour day shift structure for one of the teams that had been on trial. [9] Mr Kembrey issued a communication to staff on 27 November 2015 which read, in part: “…The reduction in the 2A team, along with the reduction in work from both BlueScope and South32 has forced SCE to look at the number of permanent employees in Industrial Services. SCE will be in a position next week to indicate our intentions of any redundancies. I will hold a yard meeting on Thursday the 3 rd of December at 6.30am to discuss any redundancy intentions, the process which will be followed and answer any questions you may have. The meeting will take place in the main cribroom. Part of Fair Work Australia’s Model Consultation Term refers to “Major change” in a workforce. The first two steps in this process are; 1. Notification of the decision to introduce major change (which is the purpose of this communication) 2. The relevant employees may appoint a bargaining representative for the purposes of consultation With regards, to the second step, please inform your Supervisor or myself if a representative or representatives are to be nominated. Throughout the entire process, the Company will keep you informed of any changes and the process in which changes take place…” 1 [10] Mr Taylor was sent a copy of this notice. [11] SCE met with employees on 3 December 2015. Mr Brad Gibson, an Officer of the Transport Workers’ Union (TWU) attended the meeting. No Official from the CFMEU was present. [12] Following the meeting Mr Kembrey issued another communication to staff which said: “…The reduction in work from BlueScope has created an oversupply of labour within SCE Industrial Services. SCE has been forced to look at the number of Industrial Services permanent employees. SCE has made the decision to make redundant 3 Plant Operators and 9 Truck Drivers. The Process that will be followed will be in accordance with both CFMEU and TWU Agreements. A selection criteria will be developed and employees will be assessed by a number of Supervisors. The selection criteria assessed will include; general performance, skills, safety, discipline, attendance, length of service and customer relationship. Employees will be scored against the criteria, scores will then be totalled to give an overall score. The 3 Plant Operators and 9 Truck Drivers with the overall lowest score will be selected for redundancy. Commencing at shift changeover this afternoon, Supervisors will hold further toolbox meetings with all Industrial Services employees to discuss the methodology referred to above; the effect that the decision is likely to have on employees and measures that SCE is taking to avert or mitigate the adverse effect of the change on employees…” 2 (my emphasis) [13] Mr Taylor spoke to Mr Kembrey on the afternoon of 3 December 2015. Whilst the language that was used by Mr Taylor may be regarded by some as being offensive, it was not abusive or targeted. Mr Taylor sent an email to Mr Kembrey the following day, which said: “Hi Troy I tried to call you but I haven’t had a response as yet. I am requesting to see the ‘selection criteria’ as outlined in clause 27.2 Redundancy subclause (e). I believe you are looking at a selection criteria that has been implemented in some other section of the business. The agreement requires this selection criteria to be drawn up through a consultative process that effects the workers of the SOUTH COAST EQUIPMENT PTY LTD PLANT OPERATOR CFMEU ENTERPRISE AGREEMENT. Furthermore the union is to be consulted through this process. Also part (f) of the redundancy clause requires monthly consultative meetings to take place to discuss these issues. I am requesting the last 6 months minutes of the monthly consultative meetings as well as the consultation minutes in regards to the selection criteria for redundancies asap. I wish to have these in hand before our meeting on Wednesday. Kind regards Darren Taylor CFMEU” 3 (my emphasis) [14] Mr Kembrey met with Mr Taylor and Mr Wally Beliaiev, one of the CFMEU’s delegates, on 9 December 2015 at noon. Discussions took place in relation to the redundancy and consultation process. [15] Mr Kembrey had embarked on the selection process between November 30 and December 7 2015, based on the selection criteria that he had developed. As a result of the Supervisors’ assessment of this criteria, Mr Boulding was made redundant on the evening 9 December 2015 and Mr Harding on 10 December 2015. Mr Kembrey did not advise Mr Harding’s of these imminent redundancies at the meeting, nor did he say that the selection criteria had been finalised and conducted. Regulations [16] The relevant sections of the Fair Work Act, 2009 (the Act), to this proceeding are: 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. 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. [17] The relevant provisions of the South Coast Equipment Pty. Ltd Plant Operator CFMEU Enterprise Agreement 2013 4 are: “ 27.3 Redundancy a) An Employee will only be entitled to a severance payment or any other payment in relation to termination (other than accrued leave benefits otherwise provided in this Agreement) when a job becomes genuinely redundant due to the fact that the Employer no longer requires that function to be performed. b) Employees leaving of their own accord or due to disciplinary action will not be entitled to redundancy pay. This includes Employees retiring or resigning from the Employer. c) A job becomes redundant when the Employer no longer requires that function to be performed and there is no alternative work with the Employer. Following any redundancy in accordance with this clause, any transfer will be subject to the displaced Employee successfully obtaining the appropriate licences, tickets or permits and the Employee having the required aptitude for the new position. d) Redundancy may be caused by factors including but not limited to: (i) technological change, (ii) Company merger, (iii) takeover or reconstruction of the business, (iv) economic recession, or (v) any other reason that may result in a consistently reduced foreseeable workload. e) Should there be an oversupply of labour due to a completion of or loss of contracts, or a general downturn of industry for any reason, a "selection criteria" will be developed and applied to any redundancies. Seniority will form part of those selection criteria. The Union will be consulted throughout this process. f) The position regarding future employment levels of the Employer shall be an agenda item on the monthly Consultative Committee Meeting. g) Four ( 4) weeks' notice or pay in lieu will be provided to an Employee whose employment is to be terminated because of redundancy. In the case of Employees over the age of forty five (45) years, five (5) week's notice will be given or paid in lieu. During the period of notice, the Employer shall allow the redundant Employee paid leave of absence to attend job interviews. Such leave shall not exceed five (5) days without the Employer's permission and the Employer shall be entitled to have a job interview verified by the potential employer. h) Employees being made redundant shall be paid four (4) weeks pay. A further four (4) weeks will be paid for every year of service to a maximum of thirty four (34) weeks pay plus usual entitlements and over award payments averaged out over the preceding three (3) month period. i) Additionally, an Employee will be entitled to be paid his accrued personal/carer's leave entitlement to a maximum of four (4) week's less any personal/carer's leave taken during the period of notice of redundancy. j) This clause cannot be used as a precedent under any circumstance to change the position that an Employee is not entitled to the payment of untaken accrued personal/carer's leave upon the ordinary termination of employment in whatever circumstance other than redundancy. This includes retirement or termination by the Employee or the Employer other than the situation of redundancy. k) All Employees made redundant shall receive a Certificate of Service and a Separation Certificate. 1) All Employees made redundant shall be offered first opportunity of re-employment should a suitable position become available within twelve (12) months of redundancy occurring. Upon re-employment their entitlements shall recommence from the date of re-employment. m) Should an Employee who is made redundant decease before the redundancy takes effect, all the forgoing benefits will be paid to the Employee's estate. n) This clause does not apply to casual Employees; Employees engaged for a specific period of time or specific task/s; Employees dismissed for reasons other than redundancy; Employees who terminate their employment with the Employer, Employees who retire; Employees transferred to an alternative position. 43. Introduction of change a) The parties to this Agreement accept that prior to the Employer making any significant change to the normal conditions of employment they will consult with the Union. Where the parties are unable to agree on the change the dispute settlement procedure in clause 32 of this Agreement will be followed.” (my emphasis) Evidence [18] Mr Kembrey’s evidence was open and forthright. Mr Kembrey explained the relationship between SCE and BlueScope and the obvious cost pressures which existed throughout 2015. Mr Kembrey stated that SCE had no real option but to comply with the requests/demands of BlueScope in relation to service delivery and contract modifications. [19] As a result of BlueScope’s decision to only have a crew on day work, SCE lost core hours from its contract. Mr Kembrey testified that some of these hours still have to be worked but because they are highly irregular and intermittent it is impracticable and unprofitable to employ full time staff for these hours. These variable hours are now covered by permanent staff working overtime or the utilisation of labour hire personnel. [20] Relevantly, Mr Kembrey advised me that he had formulated the selection criteria himself after taking into consideration two recent examples that had been utilised elsewhere in SCE. In response to my questions, Mr Kembrey acknowledged that he did not consult the Union in relation to this criteria: “PN172 Do you think it would have been appropriate to consult the union about that?---Yes. PN173 Why didn't you?---I suppose I was trying to get ready for what potentially was coming. So I was trying to be organised. As far as going through the process question by question with the union, I thought it would be bogged down in a lot of arguments. The other places hadn't - organisations hadn't done that as well and I was just, I suppose, modelling off their selection criteria and the process. PN174 You are aware of this provision in the agreement?---Yes. PN175 You accept Mr Quinn's definition that it means that you are supposed to talk to the union or consult with the union during the formation of the selection criteria?---Yes. PN176 You made a conscious decision not to because you didn't want the process to get bogged down?---Yes. I suppose that wasn't the only reason. I thought the questions were fair, the categories were fair. It had been used before twice in the company and I felt I was doing the - I was trying to do the right thing by the employees that were going to be rated, so that wasn't affected.” 5 [21] Mr Kembrey also accepted that the wording in the two communications was slightly misleading in relation to the selection criteria but that his reason for starting the process on 30 November 2015 was to get the assessment of one of the Supervisors before they went on leave. [22] Mr Chadwick described Mr Taylor as being an unreliable witness. Whilst Mr Taylor’s recollection of meetings and discussions was far from perfect, I do not regard his imprecise memory to be deliberate or contrived. [23] Mr Taylor acknowledged that he does not have a close relationship with his delegate Mr Beliaiev. Mr Taylor accepted that discussions/consultation may have been on-going between Mr Kembrey and the CFMEU Delegates but he was unaware of any discussions. Mr Taylor admitted that Mr Beliaiev had advised him that everything was “fine” at SCE after the yard meeting on 3 December 2015. [24] Mr Taylor accepted that Mr Kembrey may have raised the potential of redundancies down the track in a telephone conversation on 9 November 2015. [25] Mr Taylor reiterated to Mr Kembrey that he wanted to be consulted in relation to the selection criteria by way of email on 4 December 2015. Mr Taylor was of the view that this issue would be one of the agenda items at the scheduled meeting with Mr Kembrey on 9 December 2015. [26] Mr Boulding provided detailed documentary information to show that there has been little or no reduction in the workload at BlueScope since he was terminated. [27] Mr Boulding also testified that he was only aware of the uncertain future of the Steelworks after he had been affected by the changing rosters and trials. Submissions [28] Mr Chadwick argued that the Applicants had been terminated for reasons of genuine redundancy. He stated that SCE had complied with of all its obligations under the Act and the Enterprise Agreement. He stated that, unfortunately, SCE did not have any vacancies in which to redeploy the Applicants. [29] Mr Chadwick submitted that SCE had consulted on a regular basis over the previous four months with the delegates of the CFMEU in relation to the possibility of future redundancies. Mr Chadwick drew my attention that neither of the CFMEU delegates had been called to give evidence and invited me to draw a “ Jones v Dunkel 6 ” inference as a result of their absence. [30] Mr Chadwick provided a detailed submission in relation to clause 27.3(c) of the Enterprise Agreement: “PN732 Insofar as clause 27.3(e) is concerned, Commissioner, we make this submission. Mr Kembrey seemed to concede that he did not consult with the union about the selection criteria. I think that was his evidence. What we say about that is if one looks at the words of clause 27.3(e), it seems to be in three parts. The first is a reference to the fact that should there be an oversupply of labour, and so on, that a selection criteria will be developed and applied to any redundancies. We submit that that occurred. PN733 The next bit refers to the fact that seniority will form part of those selection criteria. We submit that my client complied with that part of the paragraph. But the last bit seems to be in issue and that is, the last sentence of 27.3(e) says, "The union will be consulted throughout this process". It doesn't say the union will be consulted in relation to the selection criteria, which I think is where the union has gone with this case. So our submission is this. When one looks at 27.3(e), notwithstanding Mr Kembrey's evidence about, well, no, I didn't really consult with the union about the selection criteria, per se, that doesn't mean the client hasn't complied with 27.3(e).” 7 [31] Mr Chadwick argued that the “process” identified in this clause means “the process of redundancy.” [32] Mr Quinn provided a detailed submission in relation to the provisions of the Act and the Agreement. Mr Quinn stressed the point that Mr Kembrey admitted that he did not consult with the CFMEU in relation to the selection criteria and that he knew that this action was a breach of the Agreement. [33] Mr Quinn referred me to the explanatory memorandum of the Act at paragraph 1550 which states: “1550. Paragraph 389(1)(b) provides that it will not be a case of genuine redundancy if an employer does not comply with any relevant obligation in a modern award or enterprise agreement to consult about the redundancy. This does not impose an absolute obligation on an employer to consult about the redundancy but requires the employer to fulfil obligations under an award or agreement if the dismissal is to be considered a genuine redundancy.” [34] Mr Quinn highlighted the evidence of Mr Kembrey who started the selection process on 30 November 2015 but only raised the issue for the first time with the employees and their Union representatives at the yard meeting on 3 December 2015. [35] Mr Quinn submitted that, based on the amount of hours that continues to be work by the remaining employees and the supplementary labour hire employees, SCE has failed its obligations in relation to redeployment. Consideration [36] I have taken into account all of the evidence and submissions that have been put before me by the parties. [37] I have taken into account the evidence of Mr Kembrey who testified that he deliberately did not consult with the CFMEU in relation to the formulation of the selection criteria. I need to determine whether the actions of Mr Kembrey were in accordance with the Act and the Agreement. [38] A Full Bench of the FWC has conveniently summarised all of the relevant authorities in relation to the legal basis for the interpretation of Agreements in The Australasian Meat Industry Employees Union v Golden Cockerel Pty Limited. 8 The Full Bench set out the following criteria: “[41] From the foregoing, the following principles may be distilled: 1. The AI Act does not apply to the construction of an enterprise agreement made under the Act. 2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity. 3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists. 4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement. 5. If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement. 6. Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include: (a) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement; (b) notorious facts of which knowledge is to be presumed; (c) evidence of matters in common contemplation and constituting a common assumption. 7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose. 8. Context might appear from: (a) the text of the agreement viewed as a whole; (b) the disputed provision’s place and arrangement in the agreement; (c) the legislative context under which the agreement was made and in which it operates. 9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement. 10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.” [39] I have taken this into account. Determination [40] I do not accept the argument of the CFMEU in relation to redeployment. SCE were advised by BlueScope that they were cutting core hours. SCE could not be expected to carry staff on the basis that BlueScope might need some work undertake at short notice or in irregular intervals. I accept the evidence of Mr Kembrey that this would lead to a significant amount of unproductive downtime for these employees. I accept that this restructuring was part of the $200 million of cost savings that have been identified and implemented by BlueScope to keep the Steelworks operational. [41] In applying the ordinary meaning to the words of clause 27.3(e) of the Agreement, I cannot support the interpretation of Mr Chadwick. The three sentences do not stand alone as suggested. SCE had an obligation to consult with the CFMEU before applying the selection criteria. This did not happen. [42] Even if I were to support Mr Chadwick’s submission, SCE still had an obligation to consult about the selection criteria because the selection criteria is an integral part of the redundancy process. [43] Mr Kembrey used language in his communication notices which was misleading and inappropriate. He stated on 27 November that there would be further consultation in relation to the redundancy process. On 3 December 2015 Mr Kembrey said that a selection criteria will be developed. However, Mr Kembrey implemented the selection criteria on 30 November 2015, four days prior to the yard meeting and his communication memo. Such action was disingenuous and a breach of the Agreement, a breach that Mr Kembrey admitted. [44] For a termination to be classified as a genuine redundancy, the provisions of section 389 of the Act must be satisfied. Section 389(1)(b) of the Act requires SCE to comply with the provisions of the Agreement. Section 27.3(e) of the Agreement requires consultation with the CFMEU in relation to the development of the selection criteria to be used in identifying the employees to be made redundant. This consultation is a mandatory requirement of the Agreement and, therefore, the Act. [45] I find that SCE, by not consulting with the CFMEU in relation to the selection criteria to be used for identifying which employees were to be made redundant, has failed to comply with the Agreement and the Act. Therefore, the termination of Mr Harding and Mr Boulding were not cases of genuine redundancy. [46] The jurisdictional objection of SCE is dismissed. [47] Directions for the substantive hearing will be issued separately. COMMISSIONER 1 Exhibit S2 – Annexure D 2 Exhibit S2 – Annexure F 3 Exhibit S2 – Annexure G 4 [2013] FWCA 9470 5 PN172 – 176 Transcript – 3 May 2016 6 (1959) 101 CLR 298 7 PN732 – 733 Transcript – 3 May 2016 8 [2014] FWCFB 7447 Printed by authority of the Commonwealth Government Printer <Price code C, PR580369>