[2010] FWAFB 3488 Download Word Document FAIR WORK AUSTRALIA DECISION Fair Work Act 2009 s.604 - Appeal of decisions Ulan Coal Mines Limited v Henry Jon Howarth and others (C2010/2789) JUSTICE BOULTON, SENIOR DEPUTY PRESIDENT SENIOR DEPUTY PRESIDENT DRAKE COMMISSIONER MCKENNA SYDNEY 10 MAY 2010 Appeal against decision [2010] FWA 167 ]] of Commissioner Raffaelli at Sydney on 27 January 2010 in matters number U2009/11892, U2009/11904, U2009/11906, U2009/11909, U2009/11911, U2009/11913, U2009/11916, U2009/11918, U2009/11919 and U2009/11920 re unfair dismissal applications and genuine redundancy. [1] This is an appeal under s.604 of the Fair Work Act 2009 (the Act) by Ulan Coal Mines Limited (the Company) against a decision of Commissioner Raffaelli given on 27 January 2010 ( [2010] FWA 167 ]). The decision concerned applications lodged by the Construction, Forestry, Mining and Energy Union - Mining and Energy Division (CFMEU) on behalf of 10 former employees (the Applicants) alleging that the termination of their employment by the Company was unfair and seeking relief. A threshold jurisdictional issue was raised by the Company in regard to each of the applications, namely that the employees had not been unfairly dismissed as the dismissals were the result of “genuine redundancy”. [2] The relevant provisions of the Act are ss.385 and 389. Section 385 sets out when a person has been unfairly dismissed. One of the requirements in the section is that Fair Work Australia (FWA) must be satisfied that “the dismissal was not a case of genuine redundancy” (s.385(d)) . Section 389 sets out what will and what will not constitute a genuine redundancy. It provides: “ 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.” [3] In his decision, the Commissioner considered the circumstances of the dismissals and decided that they were not cases of genuine redundancy as defined in s.389 of the Act. This was because it could not be said that the Company no longer wanted the jobs of the Applicants to be performed by anyone (s.389(1)(a)) and because the Company had not complied with the obligations under the relevant enterprise agreement to hold discussions with the employees directly affected (s.389(1)(b)). [4] In the appeal proceedings, it was submitted by the Company that the Commissioner erred in finding that the requirements of s.389(1)(a) and (b) were not met and that the dismissals were not cases of “genuine redundancy”. It was said that the Commissioner’s decision involved significant errors of fact as well as errors in the interpretation and application of the relevant statutory provisions and the consultation provision in the Agreement. [5] Section 604 provides for an appeal to a Full Bench, with the permission of the Full Bench, against various decisions of Fair Work Australia (FWA). The Full Bench has a wide discretion as to the circumstances in which it might grant permission to appeal. However permission must be granted where the Full Bench is satisfied that it is in the public interest to do so (s.604(2)). The Company submitted that the appeal raises important questions as to the proper interpretation and application of the redundancy provisions in the Act and the way in which standard obligations in enterprise agreements regarding consultation in redundancy situations should be observed. It was therefore in the public interest that permission to appeal be granted. [6] We agree that the appeal does raise issues of possible wider application going to the construction of the redundancy and consultation provisions in the Act and the Ulan Coal Mines Underground Mine Enterprise Agreement 2006 (the Agreement) and that it is in the public interest that any significant errors in the decision under appeal should be corrected. Accordingly, we have decided to grant permission to appeal in this matter. [7] We now turn to consider the findings of the Commissioner and the submissions presented in the appeal. Paragraph 389(1)(a) – redundancy where job no longer exists [8] Paragraph 389(1)(a) of the Act provides that a person’s dismissal will be a case of genuine redundancy if his or her job is no longer required to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. [9] The evidence before the Commissioner was that in the first half of 2009 the Company conducted a review of operations at its underground coal mine near Mudgee in New South Wales. The object of the review was to improve the productivity and efficiency of the enterprise. As a result of the review, various changes were decided upon, including “reducing the number of employees, outsourcing ancillary and intermittent functions, increasing the proportion of employees with trades qualifications in underground crews and redistribution of labour.” In consequence some 38 mineworker positions (19 fixed term positions and 19 permanent positions), 6 staff positions and 75 contractor positions were determined to be surplus to requirements. As a result of the desire of the Company to increase the proportion of mineworkers with trades qualifications on some underground work crews, there was a need to increase the trade-qualified mineworker positions at the mine by 11. [10] The reductions in the mineworker workforce were to be achieved through a process which included the termination of fixed term employees, calling for volunteers from permanent (non-trades) mineworkers and then identifying how many non-trades mineworkers needed to be retrenched. Ultimately 14 permanent non-trades mineworkers had to be dismissed and these were chosen on seniority grounds in accordance with clause 23.1 of the Agreement. The 10 Applicants were among the 14 permanent mineworkers whose employment was terminated. [11] In his decision, the Commissioner distinguished between the reductions in the mineworker workforce at the mine resulting from the contracting out of functions and the terminations which resulted from the decision to increase the proportion of trade-qualified mineworkers in underground crews. In the latter case, it was said that the functions performed by underground crews and their mineworker components were still being performed as they had been in the past and that the work being performed by all mineworkers, whether trades qualified or not, remained essentially the same. The Commissioner said: “the evidence is that the functions performed by crews and their mineworker components are still being performed as they were previously. The fact that additional trade-qualified mineworkers might enhance repairs and maintenance does not meaningfully diminish the fact that the work performed by all mineworkers (including the applicants) remains essentially the same. Where the surplus of mineworkers has been the result of a change in the trade/non-trade proportion, it can not be said of those positions that the jobs are no longer needed to be done.” (at pars [28] and [29]) In these circumstances, the Commissioner concluded that the employer still wanted the jobs of the dismissed mineworkers done, albeit by someone else including by new employees. [12] In relation to the mineworker jobs which were affected by contracting out, the Commissioner found that these terminations would fall within the definition of genuine redundancy. However as the evidence was not clear as to which mineworker jobs were affected by contracting out, as distinct from those lost as a result of the increase in trade-qualified personnel, the Commissioner said he could not be satisfied “that the termination of any of the ten applicants was because the jobs in question were no longer required to be performed by anyone because of changes in the operational requirements of Ulan’s enterprise” (at par [34]). The Commissioner concluded that the requirement in s.389(1)(a) was not made out and therefore that the dismissals were not cases of genuine redundancy. [13] In so concluding, we accept the Company’s contention that the Commissioner failed to recognise and take full account of the nature and circumstances of the changes in the Company’s operational requirements and the way in which those changes, and the application of seniority in selection, led to the retrenchment of the Applicants. We also consider that the Commissioner misconstrued the relevant statutory provisions. [14] The changes in the operational requirements at the mine included changes in the composition of the workforce, in the tasks and functions that would be performed by contractors and employees, and in the number and skills mix of mineworkers required to be employed. As a consequence of the changes it was determined that there were a number of non-trades mineworker positions that were surplus to requirements as they were no longer needed for the Company’s operations. Ultimately it was decided that 14 permanent non-trades mineworkers would have to be retrenched. The basis on which mineworkers were selected for redundancy was seniority, as provided under the Agreement. They were not selected according to any individualised approach based on the particular position or work being performed by them whether in underground crews or in surface functions. The need to reduce the overall number of non-trades mineworkers, together with the application of the seniority principle for selection, meant that mineworkers from different parts of the operations would be retrenched and that other mineworkers might need to be reallocated into available mineworker jobs. [15] These were the circumstances in which it was necessary to consider the meaning and application of the relevant statutory provisions and, in particular, the expression “the person’s employer no longer required the person’s job to be performed by anyone” in s.389(1)(a) of the Act. These words have long been used and applied in industrial tribunals and courts as a practical definition of redundancy (see e.g. R v Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Cooperative Limited (1977) 16 SASR 6; Termination, Change and Redundancy Cases (1984) 8 IR 34 and (1984) 9 IR 115; Short v F.W. Hercus Pty Limited (1993) 40 FCR 511). They have also been adopted in the National Employment Standards provided under the Act in dealing with entitlements to redundancy payments (see s.119). [16] The Explanatory Memorandum to the Fair Work Bill 2008 provides examples as to when a dismissal will be a case of genuine redundancy: “1547 Paragraph 389(1)(a) provides that a person’s dismissal will be a case of genuine redundancy if his or her job was no longer required to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. Enterprise is defined in clause 12 to mean a business, activity, project or undertaking. 1548 The following are possible examples of a change in the operational requirements of an enterprise: a machine is now available to do the job performed by the employee; the employer‘s business is experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five; or the employer is restructuring their business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore the person‘s job no longer exists.” [17] It is noted that the reference in the statutory expression is to a person’s “job” no longer being required to be performed. As Ryan J observed in Jones v Department of Energy and Minerals (1995) 60 IR 304 a job involves “a collection of functions, duties and responsibilities entrusted, as part of the scheme of the employees’ organisation, to a particular employee” (at p. 308). His Honour in that case considered a set of circumstances where an employer might rearrange the organisational structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly-created positions. In these circumstances, it was said that: “What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organisation, any duties left to discharge. If there is no longer any function or duty to be performed by that person, his or her position becomes redundant…” (at p.308) This does not mean that if any aspect of the employee’s duties is still to be performed by somebody, he or she cannot be redundant (see Dibb v Commissioner of Taxation (2004) FCR 388 at 404-405). The examples given in the Explanatory Memorandum illustrate circumstances where tasks and duties of a particular employee continue to be performed by other employees but nevertheless the “job” of that employee no longer exists. [18] In Kekeris v A. Hartrodt Australia Pty Ltd [2010] FWA 674 Hamberger SDP considered whether a dismissal resulting from the restructure of a supervisory team was a case of genuine redundancy. As a result of the restructure, four supervisory team leader positions were replaced by three team leader positions. The Senior Deputy President said: “When one looks at the specific duties performed by the applicant prior to her termination they have much in common with those of two of the new positions in the new structure. The test is not however whether the duties survive. Paragraph 1548 of the explanatory memorandum makes clear that it can still be a ‘genuine redundancy’ where the duties of a previous job persist but are redistributed to other positions. The test is whether the job previously performed by the applicant still exists.” (at par [27]) [19] In the present case, the Commissioner appears not to have drawn an appropriate distinction in his reasoning between the “jobs” of the mineworkers who were retrenched and the functions performed by those mineworkers or take proper account of the nature of the restructure at the mine which led to an overall reduction in the size of the non-trades mineworker workforce. The Company restructured its operations in various ways including by outsourcing certain specialised, ancillary and other work and increasing the proportion of trade-qualified mineworkers in underground development and outbye crews. As a result, it was identified that there were 14 non-trades mineworker positions which were surplus to the Company’s requirements. The mineworkers whose employment was to be terminated were determined according to the seniority principle as provided in the Agreement. This did not mean that the functions or duties previously performed by the retrenched mineworkers were no longer required to be performed. It also did not mean that the positions of some of these mineworkers (e.g. in underground crews) did not continue, although those positions might after the restructure be filled by more senior non-trades mineworkers transferred from other parts of the operations or by trade-qualified mineworkers. However fewer non-trades mineworker jobs were required overall at the mine as a result of the operational changes introduced and, for this reason, the jobs of the 14 mineworkers selected for retrenchment could be said to no longer exist. [20] These circumstances readily fit within the ordinary meaning and customary usage of the expression in s.389(1)(a) of the Act where a job is no longer required to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. Paragraph 389(1)(b) – consultation about redundancy [21] Paragraph 389(1)(b) of the Act provides that for there to be a genuine redundancy the employer must have complied with any obligation in a modern award or enterprise agreement to consult about the redundancy. [22] It was common ground in the proceedings before the Commissioner that the relevant provisions of the Agreement with which the Company was required to comply for the purposes of s.389(1)(b) are those contained in sub-clause 23.1 of the Agreement. Clause 23 of the Agreement deals with Redundancy and Retrenchment and sub-clause 23.1 provides: “Discussion Before Terminations (1) Where the Company has made a definite decision that the Company no longer wishes the job the employee has been doing, done by anyone and this is not due to the ordinary and customary turnover of labour and that decision may lead to termination of employment, the Company will hold discussions with the employees directly affected and with the employee’s representative. (2) The discussions will take place as soon as is practicable after the Company has made a definite decision which will invoke the needs for consultation and include 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. (3) For the purposes of the discussion the Company will, as soon as practicable, provide in writing to the employees concerned and their representatives, all relevant information about the proposed termination including the reasons for the proposed terminations, the number and classification 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 the Company will not be required to disclose confidential information. (4) Should the redundancy of employees be necessary over the life of this agreement the Company will first exhaust voluntary redundancies prior to implementing forced redundancies. Where it is necessary to implement forced redundancies the Company will select employees for redundancy having regard to the needs of the business. Where as a result of discussions and the needs of the business are satisfied, seniority will apply to forced redundancies.” [23] There was extensive evidence before the Commissioner regarding the steps taken by the Company to consult with the workforce about the restructure and the implementation of the changes. These included advice to the CFMEU on 30 July 2009 about the proposed restructure and the reductions in mineworker positions and various consultation and discussion meetings with employees and with CFMEU officers and officials between late July and 18 August 2009. [24] There was evidence that the Company considered a range of proposals or concerns raised by the CFMEU and, as a result, made some changes. However this is not to say that the CFMEU was satisfied with the consultation process. The Commissioner notes in his decision that the CFMEU considered the consultations were “mere formalities” and that it was not given a “real opportunity” to influence the outcome. However the Commissioner said that there was no evidence that at the time the CFMEU complained that there was not real discussion prior to the terminations or that sub-clause 23.1 of the Agreement was not being followed (par [42]). [25] The Commissioner found that the process of discussion and consultation conducted by the Company met its obligations under sub-clause 23.1 of the Agreement as to the holding of discussions with the CFMEU and with mineworker employees generally (pars [46] and [48]). However the Commissioner considered that the obligation under the sub-clause required something more than this. The Commissioner was of the view that the obligation did not relate to mineworker employees generally but to the particular mineworkers who were dismissed due to redundancy. The Commissioner considered that it was this group of mineworkers who are referred to in sub-clause 23.1 as being the employees who were “directly affected” (cl. 23.1(1)) or the “employees concerned” (cl. 23.1(3)) and that the sub-clause required that the discussions be held with them (par [49]). The Commissioner said that the discussions with this class of employees were to be concerned with the reasons for the proposed termination, measures to avoid or minimise the terminations and measures to mitigate any adverse effects of any terminations (par [48]). As it could only be known with certainty how many and which employees were “directly affected” on 19 August 2009 (when the voluntary redundancy process was completed) and as there were no discussions held between 19 August and 24 August (when most of the employees were terminated), the Commissioner found that the Company did not hold discussions with employees directly affected before the terminations occurred, and that this amounted to a failure to comply with the obligation in the Agreement to consult about redundancies (at par [61]). [26] In reaching this finding, we consider that the Commissioner erred in his interpretation of the relevant provisions of the Agreement and in the application of those provisions in the circumstances of the matter before him. [27] As a general principle, there are sound reasons as a matter of good practice for there to be consultations and discussions with the particular employees or groups of employees to be dismissed due to redundancy. As the Commissioner notes in his decision, such discussions may enable “a better focus on individual circumstances and opportunities available in order to mitigate adverse effects” (at par [58]). However, whatever the general desirability of such consultations might be, the inquiry in the particular factual circumstances of the present case and for the purpose of determining whether the requirement in s.389(1)(b) of the Act is satisfied, must be directed to the proper construction of the obligation set out in sub-clause 23.1 of the Agreement. [28] Sub-clause 23.1 is in somewhat similar terms to the consultation provisions determined in the TCR Cases . It is clear that the intention in those cases is that the employees and their representatives should be involved in the problems of redundancy as soon as a firm decision has been taken that retrenchments might be necessary (see TCR Case [1984] 8 IR 34, at 62-64). This intention can also be discerned from the wording of sub-clause 23.1 of the Agreement itself. The requirement is for discussions to begin “as soon as is practicable” after a definite decision is made about redundancies. The decision is described in the sub-clause as one which “may” lead to termination of employment (par 23.1(1)) and the discussions to be held will include consideration of the reasons for “proposed terminations” and measures to “avoid or minimise the terminations” (par 23.1(2)). The discussions as such will be of relevance to the entire workforce of an enterprise or at least to that part of the workforce whose work or jobs will be affected by terminations due to redundancy. In the present case, this would be the mineworker employees at the mine. These are the employees “directly affected” by the decision to change the size and composition of the mineworker workforce at the mine and the group with whom the Company must hold discussions. The discussions are envisaged to take place before the number of terminations is finalised and the particular employees to be retrenched are identified. [29] The benefit of having discussions at an early stage of the process is that it will allow the employees an opportunity to influence such decisions and to put proposals as to measures to avoid or minimise the terminations and to mitigate any adverse effects of the terminations on the employees concerned. In some cases, the discussions and consultations may cover the basis on which employees to be retrenched due to redundancy will be selected. However in the present matter this is determined by the Agreement to be according to seniority. Were it not for this factor, we consider there might be more weight to the Applicants’ submissions concerning more individualised consultation in connection with the impending retrenchments. [30] In the present case, the Company held discussions about the restructure and consequent redundancies with the entire workforce, including the mineworkers who were dismissed. There was evidence that each of the Applicants was present during the consultation meetings. The CFMEU as the representative of the employees was also involved and the discussions covered the matters referred to in paragraph 23.1(2) of the Agreement, namely the reasons for the proposed terminations, measures to avoid or minimise the terminations and measures to mitigate adverse effects. [31] We do not consider, in the particular circumstances of the present matter and having regard to the obligation under sub-clause 23.1 of the Agreement, that a further round of discussions was required to be held by the Company with the employees to be dismissed, either separately or as a group. This does not mean that such separate discussions might not be worthwhile and appropriate e.g. as part of the consideration of measures to mitigate the adverse affects of terminations or to ensure that opportunities for other employment and assistance are properly examined. However they are not part of the discussions envisaged and required under sub-clause 23.1 of the Agreement and that is the test in these particular circumstances. In different circumstances this will of course vary according to the terms of particular awards and agreements. [32] The Commissioner found that the Company had complied generally with the obligation in the Agreement by consulting with the CFMEU and the mineworker employees generally about the redundancies. This was sufficient to satisfy the requirement in s.389(1)(b) of the Act. Conclusion [33] For the above reasons, we have decided to allow the appeal. On the evidence and material before the Commissioner and the appeal bench, the requirements in both paragraphs (a) and (b) of s.389(1) of the Act have been met. Provided that the other requirement in s.389 is satisfied, namely that it would not have been reasonable in all the circumstances for the Applicants to be redeployed (see s.389(2)), the dismissals would be cases of “genuine redundancy” and the jurisdictional objection raised in relation to the unfair dismissal applications should be upheld. [34] The Commissioner decided that, in view of his conclusions regarding the matters in s.389(1), it was not necessary for him to deal with the third limb of the requirement for there to be genuine redundancy. As a consequence of our decision, it is now necessary that this part of the Company’s jurisdictional objection be determined. [35] It was submitted in the appeal proceedings by the Company that the determination of the redeployment issue will require findings of fact. It was said that there was substantial evidence before the Commissioner about the efforts made by the Company and the circumstances of the particular mineworkers involved and that the matter should be remitted to him for determination. This course was opposed by the Applicants on the basis that there have already been considerable delays in the prosecution of their claims and that the referral to the Commissioner would entail further delays. Some submissions were presented in the appeal proceedings by Senior Counsel for the Applicants as to why it would have been reasonable for the Applicants to be redeployed and, in this regard, we were taken to some of the evidence and submissions before the Commissioner. [36] We note that a decision under s.389(2) will involve a determination as to whether “it would have been reasonable in all circumstances” for the employees to have been redeployed. This will involve various findings of fact regarding evidence that was presented in the proceedings before the Commissioner. We consider that the Commissioner is in the best position to make these findings and to determine the remaining jurisdictional issue. Therefore the most appropriate course is to refer the matter to the Commissioner to deal with the issue arising under s.389(2) and to determine the threshold jurisdictional objection raised by the Company. We so order. SENIOR DEPUTY PRESIDENT Appearances : J.E Murdoch SC with A. Morris and T. Ross for Ulan Coal Mines Limited. S. Crawshaw SC with A.M Slevin of counsel and P. Pasfield for the respondents. Hearing details: 2010. Sydney: April, 21. Printed by authority of the Commonwealth Government Printer <Price code A, PR996697>