[2011] FWA 6872 Download Word Document FAIR WORK AUSTRALIA DECISION Fair Work Act 2009 s.394 - Application for unfair dismissal remedy Mrs Xiao (Jade) Wang (U2011/9313) Mrs Lan (Libby) Xiu (U2011/9322) Mrs Min Li (U2011/9335) Mrs Brenda Leung (U2011/9355) Mr You Bin (Peter) Yang (U2011/9370) v Specialty Fashion Group Ltd VICE PRESIDENT WATSON SYDNEY, 20 OCTOBER 2011 Termination of employment - whether termination a genuine redundancy - whether employer had an obligation to consult - whether consultation obligations met - Fair Work Act 2009 - ss 394, 387, 389. Introduction [1] This decision concerns applications for an unfair dismissal remedy by Mrs X. Wang, Mrs L. Xiu, Mrs M. Li, Mrs B. Leung and Mr Y. B. Yang concerning the termination of their employment by Specialty Fashion Group Ltd (SFG). The applications are made under s 394 of the Fair Work Act 2009 (the Act). [2] At the hearing of the matter on 5 and 6 October 2011, Mr C. Indrele with Mr A. Koleda represented Mrs Wang, Mrs Xiu, Mrs Li and Mrs Leung, Ms K. Balendra of counsel with Ms L. Tchoulak represented Mr Yang and Ms S. Bingham of counsel with Ms J.Duff represented SFG. [3] SFG contends that the terminations of employment were not unfair because the terminations were the result of genuine redundancies. Pursuant to s 385 of the Act a person is not unfairly dismissed if the dismissal is a genuine redundancy, as defined in s 389. Fair Work Australia is required to determine this question before considering the merits of the dismissal: s 396. The hearing of the matters on 5 and 6 October concerned the initial issue of whether the terminations of employment were genuine redundancies. Background [4] The key factual matters relevant to the determination of this preliminary question are not in dispute. [5] SFG is a publically listed company involved in the design, procurement, marketing and sale of women’s apparel including the operation of Millers, Crossroads, Katies, City Chic, and La Senza branded stores. SFG was affected by adverse retail trading trends in the financial year 2010-2011. From February 2011 its Executive Team began a process of identifying the causes of the profit decrease. Over subsequent months each of its operational divisions considered potential cost efficiencies that could be implemented. [6] From approximately mid-May 2011 the management of the Design and Production Team began assessing its budget, cost efficiencies and overall restructure of its team. On approximately 1 June 2011 a definite decision was made to restructure the Design and Production Team. This involved the achievement of cost efficiencies by moving work closer to the sources of product and thereby reducing the number of roles based in Australia. More post production work was intended to be carried out in China, Bangladesh, Cambodia and India. [7] On 1 June 2011 representatives of the Human Resources Department Ms Moura and Mr Swain met with the General Manager of Operations Ms Clough and the then head of Design and Production Ms O’Brien. Of the 72 employees in the Design and Production team, 21 roles were identified as excess to requirements. The Human Resource representatives advised Ms Clough that an objective assessment would need to be conducted to determine which employees would be selected for redundancy based on the ongoing requirements of the department. [8] Ms Clough and Ms O’Brien then identified the experience required for the ongoing Merchandiser, Quality Control and On Road Quality Control roles. These requirements became the selection criteria to determine which employees would be retained. [9] On or about 8 June 2011 the four management representatives met again. Ms Clough and Ms O’Brien advised that they had assessed the employees against the selection criteria and identified 21 employees for redundancy. [10] Further meetings were held between the four management representatives between 9 and 17 June. At those meetings a communication strategy was developed and dates were decided for informing employees and providing appropriate assistance to them. It was decided to schedule a series of meetings on 23 June 2011 which was to include an announcement by SFG CEO Gary Perlstein at approximately 9.30am on that day. [11] On approximately 10 June 2011 Ms Moura and Mr Swain met to consider whether alternative roles existed for the surplus employees. They considered the selected employees against the current SFG vacancy list and known planned new roles. No alternative roles were identified for the applicants in this matter. [12] At 9.30am on 23 June Mr Perlstein met with all Production and Design team members and advised them that the Design and Production team was to be restructured and as a result 21 employees would be made redundant with immediate effect. He read from an announcement which stated: “ Comms to D&P About 2 years ago, we commenced the ‘new world’ project in pursuit of a design lead business with the goal of giving us a competitive edge within the Australian market place We 100% believe in continuing to pursue a design lead business but despite the tremendous effort and work, the strategy requires a change in direction. As a result of this, to ensure the success of the ‘new world’ strategy, we will need to approach the strategy differently & recalibrate how we approach internal sourcing. This means, that today some people will be made redundant. This decision has not been taken lightly. Of all the decisions and things we have ever faced, this is the hardest - to communicate to those of you who are leaving and those of you who are staying. There is no easy way to say this. Throughout the day, we will speak with each of you. There are several people here who will be available to support you all throughout the day - Daphne & Rose will be facilitating meetings with you along with Paul & Brooke from HR - Janet will be in D&P throughout the day along with Wells & Brooke - I would also like to introduce Noel Walker. Noel is a Psychologist that will be available to anyone who feels they need it. He will be in Meeting Room 1 There are a few more things: - Because we would like to speak with you all, I ask that you stay within D&P. We will be providing you with food throughout the day - I also want you to know that you will not have access to your computers throughout the day. If any of you have anything mission critical that needs to be done, can you please speak with Janet. - You will also not have access to the swipe cards, so if you need to come in & out of D&P, you will need to do that through reception. - Finally, for those of you who would like Wells to be available to translate, can I invite you to please speak with Wells. WELLS WILL THEN TRANSLATE THIS PART. We will now start to speak with you each individually. Can I please ask you to return to your desks/ what you were doing.” 1 [13] From 10.00am on that day Human Resources and Operational management employees of SFG met individually with employees to inform them of the situation and in the case of 21 of the employees that their positions were made redundant. For those made redundant a standard script was used which stated as follows: “As Gary said, to ensure the success of the New World strategy we will need to approach the strategy differently. The decision has not been taken lightly. Your role is affected by the strategy and has been made redundant. Before this meeting we looked for alternative roles within your skill set but there are no alternative roles in the business We have prepared a pack which contains: 1. A letter confirming that your role has been made redundant. This also explains the contents of the pack. 2. A payment information sheet confirming what your final payment is made up of 3. A Certificate of Service which confirms your role and length of service. 4. An Employment Separation Certificate, which you use to take to Centrelink 5. Information from DBM, an outplacement consultancy. We would also like to offer you a Career Transition Program to assist you. SFG has appointed DBM, an outplacement consulting and career transition service to support you at this time. DBM will assist you with a Market Ready Program. The detailed pack is also enclosed. Your letter also confirms that we will contribute up to $1500 towards career development at a recognised Education Institute. We recognise that this is a difficult time and would like to support you if you need any additional training or qualifications. If you wish to utilise this please use the contact details on the letter to get more information. Your employment ends today and you will not be required to work your notice. You will still be paid your notice, severance pay and other monies, as listed in your payment letter. You will receive this into your bank account tomorrow morning. HR support person explained how the payment calculations were made up. When you leave this meeting you can return to your working area and take your personal items. You will not be able to take any work materials including files or documentation. A packing box will be available for your personal items. Please take the time you need, there is no hurry. Feel free to say goodbye to your friends. Someone from HR will be available to assist you if you wish. You will need to leave all company property (refer to asset list). Any assets the Team Member has in their possession will now need to be returned. You will not have access to your computer. If you have any personal files, or require any information from your work computer or blackberry you can request this by emailing Brooke Roberts in HR. Her email address is in your pack. Once you leave the building you will not be able to return without prior agreement from HR. If you return, it will be in the capacity of a visitor. Do you have any questions? I will take you back to D&P now to pack your personal effects. Do you need to call anyone first? In which case I can take you somewhere private to make a phone call. Do you need any assistance with your travel home? You may wish to call someone to come and collect you. If you cannot take your personal items home we can send them to you by courier.” 2 [14] More detailed evidence was given by the applicants and SFG witnesses about the content of these meetings. It is not necessary that I summarise this evidence. Genuine Redundancy [15] As noted above a dismissal that is a case of genuine redundancy is not an unfair dismissal: s 385. The meaning of the term “genuine redundancy” is dealt with in s 389 which 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.” [16] In order to find that a dismissal is a case of genuine redundancy this definition requires a finding that both elements of s 389(1) are present and that the circumstances described in s 389(2) do not apply. The main issues which arise in this matter are whether the employer complied with an obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy and whether it would have been reasonable to redeploy the applicants within the SFG enterprise. Some more minor questions also arise in relation to s 389(1)(a). Consultation [17] A consideration of this requirement first involves the question whether a relevant obligation to consult existed and secondly whether the obligation was complied with. [18] It is common ground that no enterprise agreement applies to the employees in question. It is also common ground that if any award applies the standard award consultation clause applies to the employment and the terminations in question. [19] SFG submits that the employees are award free because their work does not fall within the classifications of the General Retail Industry Award 2010 3 (the General Retail Award), the Textile, Clothing, Footwear and Associated Industries Award 2010 4 (the TCF Award) or the Clerks (Private Sector) Award 2010 5 even though SFG does operate within these industries as defined in the former two awards, and the latter award is a vocational award applying to all private sector clerical employees not otherwise covered by an industry award. [20] The applicants were variously employed as Merchandiser (Mr Yang) Merchandise Controller (Ms Wang), Senior Merchandiser (Ms Xiu), Quality Controller (Ms Leung), and On-road Quality Control Inspector (Ms Li). They perform their duties away from retail establishments which sell clothing to the general public. Position descriptions were submitted with respect to these roles. [21] SFG is fundamentally a retail industry employer and the vast majority of its 4,700 employees are engaged in that sector. The General Retail Award applies to SFG in relation to classifications of work described in the award. The first four classification definitions are confined to employees at retail establishments. Higher classifications apply to employees who perform their work in connection with a retail establishment. I am not satisfied that any of these classifications apply to the applicants in this matter. [22] The TCF Award at clause 3 contains very broadly defined definitions of the industries it covers. The clothing industry is defined as follows: “ clothing industry includes: wholly or partly designing, preparing, manufacturing, processing, labelling or, finishing, or wholly or partly controlling, managing or supervising the designing, preparing, manufacturing, processing or finishing, of any type of garment, apparel or articles (including aprons, napery, nappies, manchester, linen, handkerchiefs, mosquito nets, artificial flowers, cot covers, blankets, collars, cuffs, neckwear, earmuffs, rugs and mats, hats and headwear, umbrellas or parasols or the like) whether inside or outside of a factory or workroom” [23] In my view SFG is correct to concede that it falls within this definition - primarily because of the work of the Design and Production department. [24] The classifications are expressed as generic skill levels. They include the following: “ B.5 Skill Level 4 Employees at this level exercise the skills required to be graded at Skill Level 3 and have a comprehensive knowledge of product construction. Employees at this level will also: Apply skills and knowledge, equivalent to that of a qualified tradesperson, that have been acquired as a result of training or experience; or Hold a relevant trade certificate; and Work largely independently (including developing and carrying out of a work plan to specifications); and Exercise a range of skills involving planning, investigation and resolution of problems, and/or training, and/or supervision, and/or specialised technical tasks; or Make a whole garment or if in the footwear industry, a whole shoe to specifications, or exercise equivalent skills. In addition, according to the needs and operational requirements of the enterprise, employees at this level may: Be required to apply control/assurance techniques to their work group or team; Have designated responsibility for the training of other employees (and if so will be trained trainers); Be responsible for quality and production records relating to their own work group or team; Be required to take a co-ordinating role for a group of workers or in a team environment (which includes contributing to the identification and resolution of the problems of others and assisting in defining work group procedures and methods), where the members of the group or team are at Skill Level 4 and below; Be required to exercise advanced equipment maintenance and problem solving skills (including identification of major equipment faults and organisation or performance of necessary repair); and/or Commence training in additional skills required to advance to a higher skill level. B.6 Skill Level 5 Employees at this level exercise the skills necessary to be graded at Skill Level 4 and have a comprehensive knowledge of enterprise products and processes and are principally engaged in specialist tasks. An employee at this level will also: apply specialised technical knowledge beyond that of Skill Level 4 to specific task(s) in the product development or production, or production support, training or supervisory field; perform at least one of the following activities: consult/liaise with relevant personnel; contribute to product development or production planning; and/or liaise with clients/customers, internal or external; work independently to a general work plan or outcome sought, either individually or in a team environment; understand and implement quality control techniques and in the course of their work may: make contributions in the diagnosis of quality variations; and/or make or recommend adjustments to maintain quality standards; understand and apply workplace health and safety policies and procedures to work activities; exercise the skills associated with Skill Level 4 and perform one or more of the following Team Leader activities: allocate and determine work priorities; inspect and ensure the quality of work undertaken by employees; implement and monitor occupational health and safety policies and procedures; ensure labour, materials and equipment are available and used efficiently and, where appropriate, properly maintained; prepare and maintain records and incident reports; and/or exercise judgment and provide advice on matters requiring the application of the employee’s skill and knowledge; in addition to the other required skills, an employee at this level may also: exercise computer skills within the scope of their work; assist with on-the-job training in combination with supervisors/trainers; and/or provide reports and feedback to workplace meetings.” [25] Although these classification definitions appear to be drafted primarily with manufacturing operations in mind I do not believe that they are confined to that environment, particularly in view of the expansive definition of the clothing industry. By such a drafting technique and the significance of the definitions in the determination of coverage of the award it is quite difficult to determine who the award applies to. As a general approach I do not believe the words in the definitions should be read down. I am satisfied that each of the employees concerned in these applications fall within the scope of these classification definitions. [26] Therefore the TCF Award applies to their employment and SFG is bound by the consultation clause which provides: “ 9. Consultation regarding major workplace change 9.1 Employer to notify (a) Where an employer has made a definite decision to introduce major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the employer must notify the employees who may be affected by the proposed changes and their representatives, if any. (b) Significant effects include termination of employment; major changes in the composition, operation or size of the employer’s workforce or in the skills required; the elimination or diminution of job opportunities, promotion opportunities or job tenure; the alteration of hours of work; the need for retraining or transfer of employees to other work or locations; and the restructuring of jobs. Provided that where this award makes provision for alteration of any of these matters an alteration is deemed not to have significant effect. 9.2 Employer to discuss change (a) The employer must discuss with the employees affected and their representatives, if any, the introduction of the changes referred to in clause 9.1 the effects the changes are likely to have on employees and measures to avert or mitigate the adverse effects of such changes on employees and must give prompt consideration to matters raised by the employees and/or their representatives in relation to the changes. (b) The discussions must commence as early as practicable after a definite decision has been made by the employer to make the changes referred to in clause 9.1. (c) For the purposes of such discussion, the employer must provide in writing to the employees concerned and their representatives, if any, all relevant information about the changes including the nature of the changes proposed, the expected effects of the changes on employees and any other matters likely to affect employees provided that no employer is required to disclose confidential information the disclosure of which would be contrary to the employer’s interests.” [27] As I have noted, this is a standard award clause. In relation to such a clause I have previously stated: 6 “[19] These provisions are of long standing, emanating from the Termination, Change and Redundancy test case in the early 1980s and from time to time have been reflected in legislation. The requirement to discuss proposed changes and consult about the changes has been held to require meaningful consultation and not merely an afterthought. Consultation after an irrevocable decision has been made has been held to not amount to meaningful consultation. [20] As Sachs LJ observed in Sinfield v London Transport Executive [1970] [at 558]: "Consultations can be of very real value in enabling points of view to be put forward which can be met by modifications of a scheme and sometimes even by its withdrawal. I start accordingly from the viewpoint that any right to be consulted is something that is indeed valuable and should be implemented by giving those who have the right an opportunity to be heard at the formative stage of proposals - before the mind of the executive becomes unduly fixed." (References omitted) [28] In this case a definite decision to make 21 redundancies in the Design and Production department was made on or about 1 June. Representatives of management then met amongst themselves to select the employees to be made redundant. They then planned an announcement to the workforce and made the announcement on 23 June. On that day they individually notified each of the redundant employees that they were redundant effective that day. [29] SFG contends that the “one on one” discussions with the employees were an opportunity for employees to raise selection issues and are properly viewed as an adequate consultation process. I reject that submission. The employees were told of the decisions without any invitation for matters relevant to the decision to be raised so that they could be considered by SFG. There was no indication of an opportunity for input or the SFG’s open mind on issues such as selection, redeployment, payments and alternatives to redundancy. [30] It may be that consultation was unlikely to alter the situation, but that is not the question I need to consider. The definition of genuine redundancy only applies if SFG has complied with its consultation obligations. On the evidence before me I am unable to conclude that it has. [31] It follows that this element of the definition of genuine redundancy is not satisfied and that is sufficient to find that the terminations are not a case of genuine redundancy as defined. As other matters argued before me may be relevant to subsequent proceedings and are unnecessary to determine at this preliminary stage I believe that it is preferable that I do not deal with those matters. Conclusions [32] For the above reasons I find that the terminations are not a case of genuine redundancy and the application cannot be determined on that basis. It will be necessary to relist the matter to hear further evidence and submissions on whether the terminations are harsh, unjust or unreasonable. VICE PRESIDENT WATSON Appearances : C. Indrele for Mrs Wang, Mrs Xiu, Mrs Li and Mrs Leung K. Balendra of counsel with L Thcoulak for Mr Yang S. Bingham of counsel with J. Duff for Specialty Fashion Group Ltd Hearing details: 2011. Sydney. October, 5, 6 1 Attachment PS8 to exhibit B1 2 Attachment PS9 to exhibit B1 3 MA000004 4 MA000017 5 MA000002 6 Mr Jamil Maswan v Escada Textilvertrieb T/A ESCADA [2011] FWA 4239 Printed by authority of the Commonwealth Government Printer <Price code C, PR515354>