Federal Court of Australia

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Delta FM Australia Pty Ltd [2021] FCAFC 107

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    This appeal concerns the application of s 119(1) of the Fair Work Act 2009 (Cth) (the FW Act), which relevantly provides:

(1)    An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:

(a)    at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour …

(Emphasis added.)

2    The respondent, Delta FM Australia Pty Ltd, is a wholly owned subsidiary of Compass Group plc. It provides “facilities management” and “village management” services, including for construction projects.

3    In March 2019, the appellant union brought a proceeding in the Federal Circuit Court of Australia on behalf of three employees, a plumber, a refrigeration technician and an electrician, each of whom was employed pursuant to relevantly identical written contracts, claiming that they had been wrongly denied their entitlement to redundancy pay under s 119(1) of the FW Act. The application, which sought compensation and penalties under the FW Act, was dismissed, and this appeal ensued.

4    No question of principle arises on the appeal, and for reasons which we explain below, it should be dismissed. The primary judge was correct to dismiss the application.

The facts

5    In late October 2011, Bechtel (Western Australia) Pty Ltd (Bechtel) and ESS Thalanyji Pty Ltd (ESST) entered into a contract for ESST to provide operations, catering and maintenance services during the construction phase of the Wheatstone project, which involved the construction of an onshore facility that produces liquefied natural gas near Onslow, in the Pilbara region of Western Australia.

6    ESST commenced work under the contract in May 2012.

7    ESST initially engaged Delta Facilities Management Pty Ltd (another Compass Group company) to provide the maintenance services under the contract.

8    In mid-2017, the respondent took over the performance of those maintenance services. The employees who had been engaged by Delta Facilities Management Pty Ltd were “transferred” to the respondent.

9    No issue arises on this appeal about the effect of the transfer, because the primary judge found, and the appellant did not dispute on appeal, that each of the three employees the subject of the application was at all material times bound by relevantly identical contracts of employment. See the reasons of the primary judge at [63]-[66]. Where appropriate, references in these reasons to the respondent will include Delta Facilities Management Pty Ltd.

10    Originally the construction phase of the work that ESST was contracted to perform at Wheatstone was to finish around June 2017. After a number of extensions, in October 2017 the final “demobilisation date” was extended to 31 December 2018.

11    In August 2018, Bechtel notified ESST that provision of maintenance services under the contract would conclude on 30 September 2018. This meant that staff of the respondent were no longer required at the site.

12    On 31 December 2018, Bechtel issued a notice of final acceptance to ESST certifying that all maintenance services under the contract had been completed.

13    Mr Neil Cooper, Mr Timothy Redmond and Mr Robert Dickson (collectively, the employees) were all employed by the respondent to work at the Wheatstone project. On 30 September 2018, the respondent no longer required their jobs to be done by anyone and so their employment was terminated. They were not paid any redundancy payments.

14    Mr Cooper commenced employment with the respondent at the Wheatstone project in May 2013 as a full-time plumber.

15    Mr Redmond began working for the respondent in February 2012. At this time he was engaged to work at the Citic Pacific mine project at Eramurra in Western Australia on a full-time basis. At the end of July 2013, before that project had finished, the respondent told Mr Redmond that it had been unsuccessful in renewing its contract at that project. Mr Redmond was told that he would be redeployed to work at the Wheatstone project. He commenced employment with the respondent at the Wheatstone project in October 2013 as a full-time refrigeration technician.

16    Mr Dickson began working at the Wheatstone project in April 2014 as a casual electrician employed by another company. He was later engaged by the respondent as a casual electrician on the same project. In June 2015 he was offered a full-time contract of employment, which he accepted.

17    In early August 2018, each of the employees received a letter from the respondent informing them that they were being given two months’ notice that the project was coming to an end; that the respondent would attempt to secure suitable alternative employment for them, but, if this proved unsuccessful, their employment would cease on 30 September 2018; and that they would be paid their final pay and accrued leave entitlements. The full text of the letter is set out in the reasons of the primary judge at [71].

18    In the events that occurred, the respondent could not find alternative employment for the employees.

19    Each of the employees gave evidence before the primary judge of their understanding or expectations about their employment with the respondent.

20    Some of the primary judge’s findings in that regard need to be set out because they are relevant to the way that the appellant sought to argue the appeal.

21    Mr Cooper said that he was not made aware that his employment was on a project basis; that he was not provided with an end date for the project; that he was never made aware that his employment was temporary; that he believed that his employment was permanent because it was on a full-time basis; and that he believed that if the project ended, the respondent would redeploy him. He said that he was told that the respondent would always try to secure him alternative employment, and that he “did not think that [he] would not get a redundancy” if he were not redeployed. Mr Cooper also said that whilst he was not informed as to how long the project would take to complete, he was given verbal progress updates by management. He said that in July 2018 he and his crew were verbally advised that the project was winding up, and that he was repeatedly assured that the respondent would find him alternative employment if its bid for further work on the project did not succeed.

22    Mr Redmond said that when he began working at the Wheatstone project he was given a completely new contract which designated that his work would be at Wheatstone as a full-time refrigeration technician; that he was not told that his employment would cease at the completion of the project; that he was not provided with an expected timeframe as to when the project would be complete; that he formed a view that, when the Wheatstone project finished, he would transition to another position as had previously happened to him with regard to his work on the Citic Pacific mine project; and that he assumed that if the respondent’s tender at Wheatstone was unsuccessful he would be redeployed, as had happened previously.

23    Mr Dickson said that because the project involved the construction of a mine he knew that it would end at some stage, but he did not know exactly when; that in his experience it was standard for redundancy payments to be paid to employees who stop working because a project has ended; that he believed that he would be transferred elsewhere once the Wheatstone project had ended; and that when he and his crew were told that they would finish their work at the project on 30 September 2018, he assumed that he would either receive a redundancy or be redeployed.

24    The employees also said that they had not read, or carefully read, their respective contracts of employment; that they did not understand what they, or a related enterprise agreement (to which reference is made below) relevantly provided for; and that the effect of the relevant provisions was not explained to them by the respondent. The primary judge held that such evidence was irrelevant, citing Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 180-1 [45] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). See the reasons of the primary judge at [109]-[110]. The appellant did not challenge the finding about the irrelevance of that evidence.

25    Each of the employees’ contracts of employment relevantly provided in cl 3:

POSITION & WORK LOCATION

Your job title is …

You are employed on a Full Time basis under the classification …

Your site will be Wheatstone

During your employment, you may be required to work in another classification of work that is within your skills and competencies and the Company may transfer you to another work location which is reasonable. If your position or work location changes (other than on a temporary basis) you will be issued with a new contract.

26    Each of the employees’ contracts of employment relevantly provided in cl 9:

CONTINUING EMPLOYMENT

The Company operates on sites under contracts between the Company and its clients. Your continuing employment is subject to the operational requirements of the Company’s business, which is directly affected by the needs of our clients. You understand that continuous employment and wages, working hours or other conditions of employment cannot be guaranteed.

As a result of changes in operational requirements, there may no longer be a position for you at your current site. If that occurs, you may be given the opportunity, or required, to transfer to another location on different wages or other terms and conditions of employment. Any such changes will be discussed with you and, if agreement is reached, you will be given a new contract of employment.

If an alternate position is offered and not accepted by you, or if there are no suitable alternative positions available for you, the Company may terminate your employment by giving you notice (or payment in lieu) in accordance with this contract.

Termination of employment due to a change or loss of contract between the Company and a client is a usual reason for a change in the Company’s workforce and is part of the ordinary and customary turnover of labour within the Company.

Under contractual terms between the Company and its client, a client may, at their sole discretion, withdraw your site access. In such circumstances, wherever practicable, the Company may relocate you to another site on similar terms and conditions or subject to such variations as are agreed, in writing, with you. However, where site access is withdrawn as a result of your refusal or neglect of duty, or serious misconduct, this may lead to disciplinary action or termination of your employment.

27    Each contract also contained an acknowledgement that the employee had read, understood and accepted the contract.

The reasoning of the primary judge

28    The primary judge dismissed the application, reasoning relevantly as follows:

89    … In this case … there was a construction of a mining facility. A construction project will, necessarily, have a beginning and will have an end.

90    The nature of the work that is conducted by the Respondent is such that there will be a beginning and an end. It may very well be that there will be quite an effluxion of time between the beginning and the end, but that does not derogate from the finite nature of the work.

91    In this case, the work was expected to begin in mid-2012 and conclude in mid-2017. That did not happen and the contract was extended. It was obvious to all concerned from the early part of 2018 that the construction project was winding down, and the employees, by their own evidence, were well aware of this. There was hope that there would be a new contract for the production phase of the project but this was never more than hope.

92    It seems to me that the work undertaken by the Respondent is such that there will be a turnover of employees. The Respondent operates in an environment where projects are begun and ended. As a project ends, there will be no need for there to be anyone doing particular tasks because the need for the work will have ended.

93    As the Respondent moves on to the next contract, there will be a need for employees to enable the Respondent to fulfil that contract. However, this will not necessarily mean that the same employees, either in number or in skills, will be needed to enable the Respondent to fulfil the next contract as was needed in fulfilling the last contract.

94    This is the inherent nature of the work that is undertaken by the Respondent …

29    Under the rubric “The Reasonable Expectations of the Employees”, the primary judge continued:

97    The employees were engaged to work on the Wheatstone project. Their contracts are clearly referable only to the Wheatstone project …

…

101    The three employees realistically all knew that the work at the Wheatstone project would end. They were told this at regular site meetings by management. All of them accepted that they knew that the nature of the work was that they would work at a particular site, because of a contract between their employer and the main contractor; and when the work was completed, they would no longer be working at that site.

102    They have all said that their expectation was that they would either be redeployed or they would be given a redundancy. That concession, by the employees, speaks volumes. The employees could not have had a reasonable expectation of ongoing employment if it were that they were expecting that there was a realistic possibility that they would be getting a redundancy.

103    The effect of the evidence of the employees was that they expected one of two possibilities; either they would be redeployed or they would be given redundancy pay. As was made clear in Berkeley [(2020) 279 FCR 249] and in all of the previous cases referred to by the Full Court, it is the expectation of ongoing employment that is important. All things being equal, if an employee has an expectation of continued employment and that employment ceases, the employee should be compensated by way of redundancy.

104    But that is not the case here. The employees did not have an expectation of ongoing employment; they had an expectation that they would either be redeployed or compensated by way of redundancy payment. But the expectation of being compensated by way of redundancy payment is not an aspect that a Court must look at in deciding whether the termination is due to the ordinary and customary turnover of labour.

105    The reasonable expectation of the employees must also be looked at having regard to their employment contracts and the enterprise agreement.

…

108    … The fact that cl.9 is in all of the employees’ contracts and that cl.17.1 is in the enterprise agreement, is part of the whole circumstances that a Court must look at in deciding whether it is reasonable for the employees to have an expectation of ongoing employment.

…

111    It is when one combines the effect of those clauses with the other circumstances that pertain to the nature of the work that the employees were undertaking, that the Court is informed as to the reasonableness of any expectation that the employees had of ongoing employment.

112    On the evidence before me, I am satisfied that the employees could not have had a reasonable expectation of ongoing employment.

30    Under the rubric “Were the Terminations made due to the Exception?”, the primary judge concluded:

113    Using the definition of ‘ordinary and customary turnover of labour’ approved by the Full Court, it seems to me that the terminations, in this case, were commonplace in that such terminations occur when contracts have been fulfilled. It also seems to me that the terminations, in this case, were usual, in that terminations such as these were habitual and of long-standing practice.

114    In other words, the terminations came about because, in the business in which the Respondent operated, work is undertaken by the Respondent in accordance with contracts that are limited and finite. When those contracts have been fulfilled, there was no longer any requirement by the Respondent for the job, to be done by the employee, to be done by anyone. Because of this, the employment of the employees was terminated which is what occurs when these circumstances arise.

…

115    I am satisfied that the Respondent has discharged the onus. The nexus between termination and the exception is clear. I am satisfied that the termination of the employment of the employees was due to the ordinary and customary turnover of labour.

The appellant’s submissions

31    The appellant’s notice of appeal contains the following grounds:

1    The Primary Judge erred in concluding that the Respondent’s termination of the employment of Neil Cooper, Timothy Redmond and Robert Dickson (the Employees) by reason of redundancy was due to the ordinary and customary turnover of labour for the purposes of s 119(1)(a) of the Fair Work Act 2009 (Cth) (FW Act), including in that the Primary Judge:

1.1    failed to apply the correct criterion for the exception under s 119(1)(a), by considering the exception by reference to the Employees’ ongoing work at the Wheatstone Project (Project) rather than their ongoing employment with the Respondent;

1.2    misunderstood and/or failed to have proper regard to the terms of clauses 3 and 9 of the Employees’ contracts of employment;

1.3    placed undue weight on Employees being told by management that work at the Project would end, when the evidence was that Employees were told this only in the months preceding redundancy and not at any point contemporaneous with the Employees commencing employment with the Respondent or other entities in the Compass Group;

1.4    considered as dispositive and/or placed undue weight on the Employees’ belief that if they were not redeployed from the Project and were terminated, they would receive redundancy pay;

1.5    failed to consider or give any or appropriate weight to the Respondent’s evidence that the Respondent and other members of the Compass Group had a policy and practice that, wherever possible, employees who were working on a particular contract that comes to an end will be redeployed to another contract;

  1.6    failed to take into account or give adequate weight to the evidence:

(a)    of the Relevant Employees that they were not told that their employment was limited to the Project and would end when the Respondent’s work on the Project ended;

(b)    of the Relevant Employees that they were told the Respondent would try to secure them alternative employment if work on the Project ended; and

(c)    of the Relevant Employees that they believed that when the Respondent concluded performing work on the Project, they would be transferred elsewhere.

32    Taking the submissions made in respect of each ground in turn:

Ground 1.1

33    The appellant submitted that the primary judge “applied the wrong test and failed to address the correct question as to whether the [e]mployees had a reasonable expectation of ongoing employment” because his Honour’s “focus at [99]-[103], which led to the conclusion at [104], that the [e]mployees did not have an expectation of ongoing employment, fixated on the expectations of the [e]mployees about the continuing or likely duration of work at the Wheatstone project. This was an error of principle, as the primary judge focused on the wrong question. The issue was not the [e]mployees’ expectation of continuing to perform work at the Wheatstone project. Rather, it was their expectation of the duration of the employment relationship”.

34    The appellant pointed to the evidence of the employees “that each of them expected the employment relationship to remain on foot after work at the Wheatstone project concluded, as they expected to be redeployed” as being evidence of “an expectation that their employment would continue”, which was contrary to the primary judge’s finding at [104] that they expected their employment would come to an end once work at Wheatstone concluded. It was also submitted that this “was consistent with the standard form contracts which provided for permanent employment and allowed the [r]espondent to reassign the [e]mployees to work at other sites”.

Ground 1.2

35    The appellant submitted that the primary judge misunderstood and/or failed to have proper regard to the terms of cll 3 and 9 of the employees’ contracts of employment, in particular in (incorrectly) finding that the employees “were engaged to work on the Wheatstone project”. It was submitted that the primary judge ought to have found, on the proper construction of those clauses, that “[t]hey did not stipulate that their employment was limited or tied to the Wheatstone project, or to the ongoing performance of work by the [r]espondent at Wheatstone. Rather, clause 3 conferred a power on the [r]espondent to transfer employees to other work locations that were reasonable. These transfers could be on a temporary or permanent basis. Where the transfer was permanent, clause 3 provided that a new contract would be issued. In other words, the [r]espondent had an unfettered right to direct the [e]mployees to work, temporarily or permanently, at sites other than Wheatstone”.

Ground 1.3

36    The appellant submitted that the primary judge’s conclusion at [101] that the employees “knew that work at the Wheatstone project would end” was “contrary to the evidence and involved a misapplication of principle” because “[t]here was no evidence that before they were employed or when they were first employed, the [e]mployees were told that the [r]espondent’s work at the Wheatstone project would be for a particular time or when it would come to an end”.

Ground 1.4

37    This ground seeks to take issue with what the primary judge said at [102]-[104], set out above. The gist of it is that his Honour “erred in concluding that the [e]mployees’ expectation that they would either be redeployed or given a redundancy was ‘a concession that spoke volumes’ and entailed that they could not have had a reasonable expectation of ongoing employment”.

Ground 1.5

38    The gist of this ground is that the primary judge failed to consider, or give appropriate consideration to, the fact that the respondent had a policy and a practice of redeploying employees into suitable alternative employment elsewhere within the respondent or the Compass Group when a client service contract came to an end, which “support[s] the reasonable expectations held by the [e]mployees that the employment relationship would be ongoing, rather than limited only to a particular contract or the [r]espondent’s work at the Wheatstone project”.

Ground 1.6

39    This ground is substantially a repetition of grounds 1.1 and 1.5.

Consideration

40    None of the grounds of appeal can succeed. Each ground seeks to challenge the primary judge’s construction of the terms of each employee’s contract of employment in light of the evidence of matters known to both parties when they entered into that employment and as it continued.

41    The insuperable difficulty with the case argued below, and on appeal, is that it flies in the face of, or seeks assiduously to avoid addressing, the unambiguous terms of the contracts of employment by which the parties were bound. (It was not contended that the contracts were not freely entered into, that they were brought about by a misrepresentation, or that they were an artifice.)

42    This is not a case that invites a factual inquiry into alleged normal, habitual or long-standing practices concerning termination with respect to particular jobs or a particular kind of employment, or anything of the sort. Compare, by way of example only, Berkeley Challenge Pty Ltd v United Voice (2020) 279 FCR 249 (Rares, Collier and Rangiah JJ) and Fair Work Ombudsman v Spotless Services Australia Ltd [2019] FCA 9 (Colvin J). In the circumstances of this case, the terms of the contracts of employment constitute the metes and bounds of what the parties must be taken relevantly to have understood or expected.

43    The relevant question that arises under s 119(1) of the FW Act is whether “a reasonable person in the position of both parties to the contract of employment would have understood or expected, from its inception or nature or as the length of the employee’s service grew, that the job was not of a permanent or an ongoing nature, but would come to an end within a reasonably foreseeable timeframe”. See Berkeley Challenge Pty Ltd v United Voice (2020) 279 FCR 249 at 260 [32] (Rares J).

44    To the extent that evidence of the subjective understanding of the employees about an entitlement to a redundancy payment, or their “expectation” that the employment relationship was to remain on foot after work at the Wheatstone project concluded, is inconsistent with the plain words of the employment agreements objectively understood, it has no bearing on that question. See, for example, Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). And, in any event, the primary judge made his findings of fact after seeing and hearing each of the witnesses, including the three employees. The appellant could not identify any inference or finding that his Honour drew or made based on his impression of the witnesses or based on those in combination with primary facts that was “glaringly improbable” or “contrary to compelling inferences” so as to enable an appellate court to interfere with those findings. See Lee v Lee (2019) 266 CLR 129 at 148-9 [55] (Bell, Gageler, Nettle and Edelman JJ, Kiefel CJ agreeing). Accordingly, the appellant’s challenges to the critical primary and secondary findings of fact cannot succeed on appeal.

45    Each of the contracts of employment contained the following terms (which senior counsel for the respondent correctly characterised as “the heart of the matter”):

(1)    “The Company operates on sites under contracts between the Company and its clients”.

(2)    “Your site will be Wheatstone”.

(3)    “During your employment … the Company may transfer you to another work location which is reasonable. If your … work location changes (other than on a temporary basis) you will be issued with a new contract”.

(4)    “Your continuing employment is subject to the operational requirements of the Company’s business, which is directly affected by the needs of our clients”.

(5)    “You understand that continuous employment … cannot be guaranteed”.

(6)    “As a result of changes in operational requirements, there may no longer be a position for you at [Wheatstone]”.

(7)    “If that occurs, you may be given the opportunity, or required, to transfer to another location on different wages or other terms and conditions of employment. Any such changes will be discussed with you and, if agreement is reached, you will be given a new contact of employment”.

(8)    “If an alternate position is offered and not accepted by you, or if there are no suitable positions available for you, the Company may terminate your employment by giving you notice (or payment in lieu) in accordance with this contract”.

(9)    “Termination of employment due to a change or loss of contract between the Company and a client is a usual reason for a change in the Company’s workforce and is part of the ordinary and customary turnover of labour within the Company”.

46    Each of the contracts of employment also provided that “Your conditions of employment will be in accordance with this contract and the Compass Group (DeltaFM) Enterprise Agmt 2014 …” (the enterprise agreement), or a predecessor of that agreement. Clause 17.1 of the enterprise agreement provided:

Redundancy pay is provided for in the NES, which provides that an employee (other than a casual employee) is entitled to be paid redundancy pay if the employee’s employment is terminated at the Company’s initiative because the Company no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour. To avoid doubt, termination of employment due to a change to or loss/end of contract between the Company and the client is a usual reason for a change in the Company’s workforce and is part of the ordinary and customary turnover of labour within the Company.

47    In our view, a reasonable person in the position of both parties would have been bound to have understood, given the terms of the contracts set out at [45] above and the terms of the enterprise agreement, that the relevant jobs were not permanent or ongoing, but would inevitably come to an end, no later than the completion of the construction phase of the Wheatstone project, or earlier, depending on the operational requirements of the respondent’s business, and the primary judge was correct to conclude that the termination of the employment of the employees was due to the ordinary and customary turnover of labour, and thus to dismiss the application.

48    The primary judge made findings of fact at [101]-[103] and [111]-[112], which we have set out at [29] above, about the whole of the contractual circumstances as they affected the employees’ expectations about the nature of their employment. The appellant did not suggest that those findings were glaringly improbable or contrary to compelling inferences. Rather, its challenge, as articulated in the grounds of appeal and its submissions, was that his Honour erred in the weight he placed on different evidence and his conclusions. That challenge must fail. See Lee v Lee (2019) 266 CLR 129 at 148-9 [55] (Bell, Gageler, Nettle and Edelman JJ, Kiefel CJ agreeing).

Notice of contention

49    We note that the respondent formally submitted that that the terminations of employment at issue here satisfy the test for the application of the exception in s 119(1)(a) of the FW Act that was articulated in Compass Group (Australia) Pty Ltd v National Union of Workers [2015] FWCFB 8040; 253 IR 32 at 44 [27] (Watson VP, Kovacic DP and Wilson C). It is not necessary to consider that contention.

Disposition

50    The appeal will be dismissed.

Associate:

Dated:    18 June 2021