FEDERAL COURT OF AUSTRALIA

Community & Public Sector Union v Telstra Corporation Ltd [2001] FCA 267

INDUSTRIAL LAW – freedom of association – instruction by employer to discriminate against award-based employees in the process of selecting employees for redundancy – instruction not implemented – whether position of the employees has been altered to their prejudice for a prohibited reason

Workplace Relations Act 1996 (Cth) ss 298K and 298L

Gietzelt v Craig-Williams (No 2) (1959) 1 FLR 465 - cited

Squires v Flight Stewards Association of Australia (1982) 2 IR 155 - cited

Patricks Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1 - applied

Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 - cited

BHP Iron Ore Pty Ltd v Australian Workers’ Union (2000) 171 ALR 680 - considered

Flower & Hart v White Industries (Qld) Pty Ltd (1999) 87 FCR 134 - cited

COMMUNITY AND PUBLIC SECTOR UNION v TELSTRA CORPORATION LTD AND ANOR v TELSTRA CORPORATION LTD

V 505 OF 2000

JUDGES:       BLACK CJ, RYAN AND MERKEL JJ

DATE:            21 MARCH 2001

PLACE:          MELBOURNE

On appeal from a Judge of the Federal Court of Australia

THE COURT ORDERS THAT:

1.      The orders of the primary judge made on 23 June 2000 be set aside.

2.      The matter be remitted to the primary judge to be determined in accordance with these reasons for judgment.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

On appeal from a Judge of the Federal Court of Australia

REASONS FOR JUDGMENT

THE COURT:

1                     The appellant Unions (“the Unions”) have appealed against the dismissal of their application for the imposition of penalties on the respondent (“Telstra”) for a breach of s 298K(1) of the Workplace Relations Act 1996 (Cth) (“the Act”).

2                     The relevant facts were summarised by the primary Judge:

“1.       The respondent, Telstra Corporation Limited, as is well known, carries on very large operations.  Telstra is the leading telecommunications company in Australia.  It is one of this country’s largest employers with staff numbers exceeding 50,000.  This is significantly less than just a few years ago.  In June 1996 Telstra had more than 75,000 employees but since then it has been ‘downsizing’, that is reducing its staff by redundancy and natural attrition.

2.         On 8 March 2000 Telstra announced a record half yearly profit of $2.1 billion.  It also announced the continuation of a cost reduction program that would reduce staff levels by a further 10,000 by June 2002.  In that period it was anticipated that attrition would reduce employment by 3,000, redundancies by 8,000 and outsourcing would account for 2,000 jobs.  Over the same period Telstra was hoping to recruit 3,000 new employees. 

3.         The conditions of employment of most Telstra employees are governed by a series of awards and certified agreements; there are 10 awards and 20 agreements.  Telstra has approximately 7,500 employees that it has engaged under Australian workplace agreements.  These agreements were introduced by the Workplace Relations and Other Legislation Amendment Act 1996 (Cth).  They are entered into without the involvement of the Australian Industrial Relations Commission or unions.  Those employed under Australian workplace agreements do not have the benefit of awards, their entitlements being solely contractual. 

4.         Telstra has an Employee Relations group that has responsibility for managing its personnel.  Mr Cartwright is the group’s managing director.  On the same day that Telstra announced its record profit, Mr Cartwright sent an e-mail to the 275 managers and team leaders in the Employee Relations group, but not to the other staff in that group.  These are the people who are involved in, and to a large extent supervise, the ‘downsizing’ of Telstra.  Because of its importance it is necessary to have regard to the full text of the e-mail.  It reads (omitting a graph):

‘Subject:           Message to ER team leaders

TO:                  All ER Managers & Team Leaders

In the context of announcing the half year results today, the CEO has put particular focus on the need for Telstra to reduce costs in response to broader and tougher competition across our markets.  Specifically he refers to cost initiatives that are expected to reduce staff numbers by 10,000 by the end of fiscal 2001/02 and to target reduction of 220 senior manager (L1-4) roles.

At the whole-of-Company level, reductions are expected to result from technology change and automation, the Next Generation Cost initiatives, the application of e-Commerce tools to our business, and further outsourcing activity.  In addition to these Company projects, each line of business and BU has its own local initiatives.  So within ER we will continue emphasising and implementing process simplification, targetted at reducing processing activity within ER and improving the effectiveness of line managers.  Almost all of these improvement projects will already be general knowledge – for example, moving leave applications on-line.  Hopefully therefore, today’s announcement has little news content for ER people but reminds us of the size and challenge of the task to make Telstra cost competitive.

Please brief your teams immediately on the CEO’s announcement.  It is fundamentally important that our staff members hear the news first from you, rather than from the news media.  In briefing your people, please include the following messages.

1.         This is largely business as usual for ER.  We have worked hard over recent years to take the tough medicine early, to get the major cost and staff reductions behind us early and to institutionalise continuous improvement.  So staff numbers will continue to decline steadily as we identify further simplification and process improvements, most of which are already under discussion within the component groups of ER.  But this announcement does not imply a major change from what we are already doing.  (Please take the opportunity to discuss with your team the local initiatives and how those projects will affect them.)

2.         Expected staff reductions highlighted today confirm the continuation of the strong focus on costs over recent years.  However, the loss of employment does not equate to the staff reduction expected, contrary to the assumptions of many commentators.  Over the last three and a half years the Company’s full time staff total has reduced by 28 441 (or 34%).  Of those who have left the company in that period, 42 percent was natural attrition or completion of fixed term contracts, at least 8 percent have taken roles with other employers in outsourcing arrangements and 50 percent have taken redundancy.  We expect continuation of this kind of pattern, with natural attrition contributing a large part of the reduction – at least 5000 over the next two years.  (Most people dramatically underestimate the impact of natural attrition in these dynamics; and also miss the fact that outsourcing does not necessarily lead to loss of employment.)

3.         Although direct employment in Telstra is reducing, the telecommunications industry is the fastest growing industry in Australia.

4.         Over the last two years, 59% of all employees in redundant roles have chosen to take advantage of the Company’s Career Transition Service, providing career counselling and outplacement service nationally.  88% of active job seekers in that program have found and retained alternative work.

5.         The Company is increasing its efforts to develop high performing staff with the most appropriate skills for front line customer service roles.  Support for staff upgrading their skills for data, internet and wireless applications is a priority.  Targetted recruiting will continue in order to provide specialist skills for growth segments within the Company.  Accordingly, new opportunities will open up for staff members at the same time as the Company makes adjustment to the realities of ever tougher competition.

6.         Staff members who have transferred to individual contract have placed their trust in their managers and the Company to create a work environment that reinforces respect and dignity for the individual, and which places primary emphasis on productive relationships in which individual accountability encourages each person to contribute to his/her full potential.  Managers must not under any circumstances compromise these important values in the way they implement cost reduction initiatives which lead to staff reductions.  Managers will be held accountable to support the values of the Company’s preferred model of individual employment.

7.         Please work with your BU clients to support them in communication of these messages and particularly in understanding the practical importance of point 6.’

5.         The applicants are four unions, many of whose members are employed by Telstra.  They charge Telstra with having breached s 298K(1) of the Workplace Relations Act 1996 (Cth).  That subsection provides:

‘An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following:

(a)        dismiss an employee;

(b)        injure an employee in his or her employment;

(c)        alter the position of an employee to the employee’s prejudice;

(d)        refuse to employ another person;

(e)        discriminate against another person in the terms or conditions on which the employer offers to employ the other person.’

6.         The allegation is that for a prohibited reason Telstra has injured or threatened to injure its employees in their employment or has altered or threatened to alter the position of its employees to their prejudice.  The employees said to be injured, prejudicially affected or threatened to that effect, are those who are covered by awards and certified agreements.  The ‘prohibited reason’ relied upon is that stated in s 298L(1)(h) which provides that conduct is for a prohibited reason if it is carried out because an employee ‘is entitled to the benefit of an industrial instrument or an order of an industrial body’.  It is common ground that the awards and certified agreements are respectively orders of an industrial body and industrial instruments.  If Telstra has contravened s 298K(1) it has not committed an offence (s 298X) but is liable to have orders made against it (s 298U), which orders may include the imposition of penalties.

7.         Section 298K can be traced back to s 9 of the Conciliation and Arbitration Act 1904 (Cth).  Although the language of the section has changed from time to time, its overall thrust remains the same.  Broadly speaking, s 298K is designed to protect an officer, delegate or member of an industrial organisation against discrimination by his employer.  One objective of s 298K is to ensure the threat of dismissal or discriminatory treatment cannot be used by an employer to frustrate an employee’s right to take the benefit of awards or certified agreements reached through arbitration, collective bargaining or conciliation.”  [Emphasis added]

3                     The primary Judge found that paragraphs 6 and 7 of the e-mail would have been regarded by some managers as “an instruction to discriminate against employees because they are entitled to benefits under an award or a certified agreement” (at [18]).  That finding followed from the fact that all employees who were not employed under Australian Workplace Agreements (“AWAs”) (ie individual contracts) were employed under a certified agreement (an industrial instrument) or an award (an order of an industrial body).  In reaching his finding, his Honour considered “how the e-mail would have been understood by those who received it” (at [10]), and concluded that the e-mail would have been understood by managers to whom it was sent to mean that they “should give employees on individual contracts more favourable treatment when it comes to redundancy”.  The primary Judge’s finding on that issue was not seriously challenged on the appeal.

4                     The primary Judge concluded, however, that there had not been a contravention of s 298K(1) of the Act as there had been neither a threat of prohibited conduct nor an injury to, nor a prejudicial alteration of the position of, any employee.

5                     The Judge held that the word “threaten” in s 298K(1) meant “to menace or warn beforehand of an intention” to inflict harm.  Accordingly, his Honour held that there had been no threat of proscribed conduct, as Telstra had not communicated to any employee who might be the subject of the proscribed conduct that such conduct would be undertaken.

6                     The Judge accepted that s 298K(1) should be given a broad construction, but held that an instruction that had not been acted upon could not give rise to an injury or a prejudicial alteration of an employee’s position as it was “necessary for the employee to be in fact treated differently” (at [22]).  Thus, although his Honour considered that there may well have been an intention to act against certain employees, as no action had in fact been taken it could not be concluded that any employee had been injured or prejudicially altered in his or her position.

7                     On appeal the Unions relied, essentially, upon two grounds.  The first was that his Honour had taken an unduly narrow approach to determining what conduct constitutes a threat for the purposes of s 298K(1).  It was contended that a declaration of an intention to engage in proscribed conduct made to persons other than those who were intended to be the subject of the proscribed conduct was capable of constituting a threat: see Gietzelt v Craig-Williams (No 2) (1959) 1 FLR 465 at 466, 467 and 468.  The second ground related to his Honour’s finding that for an employee to be injured or prejudicially affected it was necessary for the employee to be in fact treated differently.  The Unions contended that injury can occur whenever an employee is “treated substantially differently to the manner in which he or she is ordinarily treated and where that treatment can be seen to be injurious or prejudicial”: see Squires v Flight Stewards Association of Australia (1982) 2 IR 155 at 164 per Ellicott J.  The Unions also contended that, for the purposes of s 298K(1)(c), there is a prejudicial alteration of an employee’s position when there is any adverse change in the advantages the employee previously enjoyed: see Patricks Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1 at 18 per Brennan CJ, McHugh, Gummow and Hayne JJ.

8                     Telstra contended that the primary judge was correct in his conclusions of law.  Telstra also contended that, in any event, the e-mail constituted no more than a proposal which had not been acted upon or implemented, with the consequence that, as a matter of fact, it was incapable of constituting a threat of an injury to, or an alteration in the position of, any employee.

9                     An understanding of the competing contentions is assisted by a brief outline of the process within Telstra for determining which employees were to be made redundant.  At the date of the e-mail, Telstra had instituted a process for selecting staff members for redundancy on the basis of merit.  The process, known as “resource rebalancing”, had been implemented since October 1997, and followed extensive proceedings in the Australian Industrial Relations Commission involving the Unions.

10                  Resource rebalancing required the relevant manager to identify the most suitably skilled staff to be retained.  The process by which this was to be achieved involved the manager assessing and rating each individual according to five principal criteria, namely: customer focus; effectiveness; team work; skills and knowledge; and safety.  After the staff rating, the individuals concerned were to have an opportunity to comment on their respective ratings.  The staff were then ranked and the selection process which followed was based on a combination of each staff member’s rating and his or her preference in relation to whether to stay in employment or leave under a voluntary redundancy scheme.  If a staff member elected to remain in Telstra’s employ then suitable alternative employment was to be sought for that member.  However, if he or she could not be redeployed within three months, that employee was liable to be retrenched without the benefit of a voluntary redundancy scheme.

11                  The Unions commenced their proceeding before the instruction in the e-mail had been acted upon in respect of any particular employee.  Thus, no employee had been injured in his or her employment.  The question which therefore remains is whether the instruction in the e-mail changed the criteria for selection for redundancy to the detriment of those employees entitled to the benefit of a certified agreement or an award, and thereby altered their position to their prejudice.

12                  The offer of a voluntary redundancy, without more, has been held not to constitute a threat to cause injury to the employee’s position (Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 at 73).  However, in the present case there was more.  Telstra’s implementation of “downsizing” exposed its employees to a prospect of redundancy that was not truly voluntary.  The process involved the selected employee accepting redundancy or redeployment, but if redeployment had been selected but was unavailable the employee was to be dismissed.  In those circumstances the selection of an employee for redundancy altered the employee’s position to his or her prejudice.

13                  Telstra contended that, as the e-mail had not been circulated to all managers involved in the “resource rebalancing” process, it was more akin to a proposal or a declaration of intention.  Accordingly, so it was said, it did not, in substance, change the selection criteria.

14                  We do not accept Telstra’s contention.  Mr Cartwright, acting as the Employee Relations Group’s managing director, sent the e-mail to the managers and team leaders in the Group who had “a leadership role”.  It was open to the primary judge to conclude, as he did, that:

·        the e-mail was sent to 275 managers and team leaders in the Employee Relations Group who were all involved in and, to a large extent, were to supervise, the “downsizing” of Telstra;

·        although the process of selection for redundancy was required to be “fair and consistent”, with the object of Telstra keeping the most skilled and committed staff, the system was largely “grounded in the subjective opinion of management where matters of impression can often be as important as facts”(at [13]);

·        the selection process was one which could be influenced by senior management;

·        many managers would understand the e-mail to be an instruction to give employees on an individual contract more favourable treatment in the redundancy selection process.

15                  Two further matters are relevant.  The first is the announcement in the e-mail that 8000 further redundancies would occur by June 2002.  Thus, the further redundancies were imminent and there could be little doubt that the e-mail was to be taken into account in respect of them.  Second, the e-mail refined the five criteria involved in the resource rebalancing process by requiring that preference be given in that process to employees who had signed Australian Workplace Agreements.  Managers were told that they “must not in any circumstances compromise these important values” and were also told that they “will be held accountable to support the values of the Company’s preferred model of individual employment.”

16                  In these circumstances the e-mail constituted an instruction that employees employed under awards or certified agreements were to be discriminated against in the redundancy process.

17                  The question is whether, by sending the e-mail to its recipients, Telstra had altered the position of any of its employees to the employee’s prejudice within the meaning of s 298K(1)(c).  In Patrick Stevedores (CLR at 18) the majority of the High Court held that the sub-section covers “not only legal injury but any adverse affection of, or deterioration in, the advantages enjoyed by the employee before the conduct in question”.  The majority also observed (at 20) that the reorganisation of companies within the Patrick Group resulted in the security of the employer companies’ businesses being “extremely tenuous” with the “security of the employees’ employment [being] consequentially altered to their prejudice”.  The reorganisation did not directly affect or alter any legal rights or obligations of the employees but it left their future employment less secure.  Although this issue was not in dispute, the majority appears to have had no difficulty in accepting reduced security of future employment as falling within s 298K(1)(c) because it brought about an adverse affection of, or a deterioration in, the advantages enjoyed by the employees before the reorganisation.

18                  Where the alteration of position is alleged to be indirect or consequential, as in Patrick Stevedores and in the present case, a difficult question may arise as to whether a prejudicial alteration of position has in fact occurred.  Answering that question may involve questions of degree.  It is sufficient for present purposes to say that if the prejudicial alteration is real and substantial, rather than merely possible or hypothetical, it will answer the description in s 298K(1)(c).

19                  Before the sending of the e-mail Telstra’s employees employed under awards and certified agreements enjoyed the benefit of being subject to redundancy only in accordance with a process which rated their eligibility for redundancy on the basis of merit, which was to be determined by application of the five principal criteria stipulated for the resource rebalancing process.  There was an adverse affection of, or deterioration in, that benefit after the sending of the e-mail as a result of the additional detrimental criterion applicable to employees employed under awards or certified agreements.  The detrimental criterion was real and substantial for the employees whom it affected.

20                  Thus, while the refined or amended criterion had not been acted upon, and therefore may not have caused any injury to an employee, the employment of employees on awards or certified agreements had become less secure, in a real and substantial manner, than it had been previously.  In those circumstances the position of the relevant employees had been altered to their prejudice within the meaning of s 298K(1)(c).  It follows that while we consider that the primary Judge was correct in concluding that, as the e-mail had not been acted upon, it did not injure any employee, we do not agree with his Honour’s conclusion that the e-mail had not altered the position of any of the employees to their prejudice.

21                  Telstra also relied on the observation by a Full Court of this Court in BHP Iron Ore Pty Ltd v Australian Workers’ Union (2000) 171 ALR 680 at [35] that the proscription in s 298K(1)  “is essentially against an intentional act of the employer directed to an individual employee or prospective employee”.  Telstra contended that the e-mail was not an intentional act directed at any individual employee.  However, the observation of the Full Court also holds true where the act is intentionally directed at a number of unidentified employees.  The e-mail in its terms discriminated against each employee of Telstra who was employed under an award or a certified agreement.  Accordingly, liability arises where the conduct is directed at a number of ascertainable employees as well as against a particular employee.

22                  As we are satisfied that the sending of the e-mail altered the position of the relevant employees to their prejudice, and therefore falls within s 298K(1)(c), it is unnecessary to consider whether the conduct also constituted a threat to alter the position of those employees. We are inclined to agree with the primary Judge that, on the facts of the present case, as Telstra did not directly or indirectly communicate the contents of the e-mail to any of the employees whose position might have been altered by it, there has not been a threat to engage in proscribed conduct for the purposes of s 298K(1).

23                  The remaining question is whether Telstra altered the position of the relevant employees to their prejudice for a prohibited reason.  The prohibited reason relied upon by the Unions was that the employees whose position was prejudicially altered by the e-mail were entitled to the benefit of an award or a certified agreement.  Paragraphs 6 and 7 of the e-mail, implicitly if not explicitly, indicate that the reason for the prejudicial alteration of the position of those employees was that they had chosen to remain entitled to the benefit of an award or a certified agreement rather than enter into AWAs.  That reason is discernible from the explanation given to the managers for the favourable treatment they were instructed to give employees who had accepted employment under individual agreements.  Those employees were said to have “placed their trust in their managers and the Company to create a work environment that reinforces respect and dignity for the individual, and which places primary emphasis on productive relationships in which individual accountability encourages each person to contribute to his/her full potential”.  The clear implication is that the employees who chose to remain employed under an award or a certified agreement were persons who had thereby not displayed those qualities.  As stated earlier, that view of the e-mail was not seriously challenged on appeal.

24                  Telstra contends that it discharged its onus under s 298V of disproving a prohibited reason by adducing uncontested evidence from Mr Cartwright that, in paragraphs 6 and 7 of the e-mail, he was concerned to see that staff on individual agreements “were treated fairly in the downsizing exercise”.  Mr Cartwright stated that he “did not mean that an AWA staff member is to be accorded favouritism over an award staff member” in the redundancy process.

25                  The difficulty with Mr Cartwright’s evidence is that it is contrary to what he wrote in the e-mail.  His evidence, which asserts that he did not “mean” prejudicially to alter the position of the relevant employees, actually amounts to saying that he did not mean what he said.  In the e-mail Mr Cartwright published to Telstra’s managers Telstra’s reason for the prejudicial alteration, namely that the employees had chosen to remain entitled to the benefit of an award or a certified agreement rather than enter into AWAs.  That reason is a prohibited reason.

26                  Telstra contends, however, that the issue whether Telstra’s reason for the prejudicial alteration includes a prohibited reason is a question of fact that cannot be determined without regard to the reasons proffered by Mr Cartwright for sending the e-mail.

27                  Although there would seem to be a degree of improbability about Mr Cartwright’s explanation, his affidavit appears to have been admitted into evidence without objection and he was not cross-examined upon it.  In Flower & Hart v White Industries (Qld) Pty Ltd (1999) 87 FCR 134 at 148 the Full Court said:

“As a general rule, before an adverse finding is made against a witness in contradiction of sworn testimony given by that witness, [on] a matter in issue, the subject of that finding, must be put to the witness in cross-examination to enable him or her to give an explanation.  However, there can be no need to put such an issue to a witness who has notice that there is other material in the proceedings that will be relied upon to contradict the evidence of the witness: see Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation (Cth) [1983] 1 NSWLR 1 at 16; R Cross, Cross on Evidence (4^th ed, 1991) par 17445.”

28                  The primary Judge did not find it necessary to make any findings on the issue of reason arising under s 298L(1).  The transcript of the hearing before the primary Judge did not form part of the appeal book.  It is therefore not possible to determine why Mr Cartwright was not cross-examined, how the evidence in question was relied upon by Telstra and whether Mr Cartwright was on notice that other material would be relied upon by the Unions to contradict his evidence.

29                  The question is whether this Court should determine the issue of reason or remit it to the trial judge.  Although we have some difficulty in accepting that Mr Cartwright’s evidence proffers a reason for the prejudicial alteration of position of the relevant employees, we are of the view that this issue, which has not been fully explored before us, should be remitted to the primary judge to determine.

Conclusion

30                  For these reasons we conclude that the primary judge erred in concluding that the position of the relevant employees had not been altered to their prejudice within the meaning of s 298K(1)(c).  Accordingly, the Unions are entitled to succeed on their appeal.  The orders of the primary Judge are to be set aside and the matter is to be remitted to the primary Judge to be determined in accordance with these reasons for judgment.

Associate:

Dated:              21 March 2001