DECISION NO:653/96

IN THE INDUSTRIAL RELATIONS COURT

OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VI 1407 of 1996

VI 1408 of 1996

B E T W E E N:

Bruce LEAFORD

Applicant

A N D

James DUNN

Applicant

A N D

CONSTRUCTION MINING FORESTRY & ENERGY UNION

Applicant

A N D

D & R HENDERSON PTY LTD

Respondent

REASONS FOR DECISION

17  December 1996                                                                    PARKINSON JR

This is an application made pursuant to Section 170EA of the Workplace Relations Act 1996 (‘the Act’). The hearing of these proceedings occurred on 28 and 29 October, 1996. These are my reasons for decision. The applicants contend that their employment was terminated without valid reason and for the reason of their participation in proceedings in the Australian Industrial Relations Commission (‘the Commission’) and as a consequence of their membership of the Construction Forestry Mining and Engineering Union. (‘the Union’)  The applicants contend that they were selected for redundancy as a consequence of these matters and not as a consequence of any objective assessment of their skills and capacity. 

Further it was submitted that the applicants were each entitled to the benefit of a preference clause contained in the Timber Industry Consolidated Award 1990, (‘the Award’) an Award of the Australian Industrial Relations Commission, and that the respondent failed to apply the provisions of that clause and also failed to adopt the procedures provided for in that Award as applicable in circumstances where employment is to be terminated for redundancy.  The respondent contends that the termination of employment of both applicants was as a consequence of the operational requirements of the business.  It contends that there had been a reduction in production and profit in the business centre and that the applicants were selected for redundancy as a consequence of an assessment of their skills and capacity as compared to other employees.  The respondent denies that the applicants’ membership of the union or participation in proceedings of the Commission formed any part of the reason for the termination of the employment. 

The respondent operates a number of manufacturing premises which process raw timber product into a value added product.  It manufactures particleboard and creates melamine laminated product, together with a rough pine saw milling facility.  The applicants were employed at the respondent’s melamine production facility at Cooloroo in Victoria.  Mr Dunne was employed as a process worker/general hand on 27 March 1995.  He was initially employed as a casual employee and subsequently became a permanent employee.  During the course of his employment with the respondent he operated most of the equipment in the premises.  Mr Leaford was employed as a process worker/general hand.  He also was initially employed as a casual employee and subsequently became a permanent  employee. 

The evidence of Mr Casper, the general manager of the respondent, is that he was concerned about the profitability of the Cooloroo operation and had discussions with the local management at the facility on a number of occasions.  These discussions, on two occasions resulted in the resignation of key employees of the plant, including the plant manager and the plant supervisor.  There were ongoing discussions in the workplace held with a view to increase the productivity of the plant and the quality of the product produced. 

In cross examination Mr Casper stated that he was not in a position to inform the Court of financial information to support his evidence of the profitability and production levels of the respondent at around the time of the termination of the employment.  His evidence was that this was material within the information of the shareholders and he informed counsel for the applicants that he would have to ask the shareholders.  This evidence identifies a clear lack of appreciation on the part of the respondent that it bears the onus to establish on balance of probabilities that the respondent terminated the employment as a consequence of the operational requirements of the business.  The respondent called one witness in the proceeding, Mr Casper, and he was authorised to give evidence as to the business position of the respondent and the validity of its reason for terminating the employment.  It was necessary, and would have been appropriate, for the respondent to provide to the Court the material and information cross examined upon by the applicants’ counsel, for the purpose of founding objectively the validity of the reason relied upon.  This it did not do and I am not satisfied on the evidence before the Court that the respondent had valid reason for the termination of the employment of either of the applicants based upon the operational requirements of the business.

Consequently, the respondent has contravened s170DE(1) of the Act.  Further, there are other matters which arise in this proceeding about which the respondent’s evidence was inadequate in establishing that the reason for the termination of the employment, was its operational requirements.  It is appropriate to set out my findings in relation to these matters and I now turn to do so. 

The evidence establishes that new and additional employees were engaged at the Cooloroo plant after the termination of the applicants’ employment, and that a casual employee was made a permanent employee after the applicants’ termination.  The evidence is also that another employee, the workplace shop steward, who subsequent to the redundancies being announced, elected to take voluntary redundancy and this was granted to him by the respondent.  As a consequence there was at least one position no longer required to be made redundant.  In circumstances where the respondent’s evidence was that it was necessary to terminate the employment of two permanent employees on the grounds of redundancy, the failure of the respondent to substitute at least one of the applicants for the person who elected to take a voluntary redundancy, suggests that the decision to terminate the employment was not sound or defensible or well founded. 

During the course of the proceeding the respondent tendered a document which identified the date of the appointment of a casual employee to permanent status as being 22 January, 1996.  The document, Exhibit R6, was apparently signed by the employee in the space provided.  That document was a copy of a facsimile document.  Counsel for the applicant called for the original document.  An original document was produced to the Court and tendered by counsel for the applicant.  The document produced was also apparently signed by the same employee.  The original document, which was subsequently produced and marked Exhibit A7 was dated 1 March, 1996 a date different to that on Exhibit R6.  The evidence of Mr Casper, was that it was for the respondent’s Head Office to authorise any permanent appointments.  The document which is Exhibit A7 establishes that the date of the appointment of the casual employee to permanent employment, post dated the date of the termination of each of the applicant’s employment.  The evidence of each of the applicants and that of the officer of the union, Mr Piper, was that at the time of the termination of the employment, the respondent had been reminded that there was a casual employee, who having regard to the terms of the relevant award and in particular the redundancy and preference provisions therein, ought to have been selected for redundancy before permanent employees.  The respondent declined to consider this approach. 

The evidence of Mr Casper was that he was “unaware” that there had been additional employees engaged by the respondent after the termination of the applicants’ employment.  He did not deny that this was however the case.  His evidence as to the employment of the casual employee on a permanent basis after the termination of the applicants’ employment was at best unclear and the documentary evidence first tendered by the respondent conflicts with the later material as to the dates.  I was not assisted by the respondent’s documentary evidence in this regard, nor in general by Mr Casper’s oral evidence.  Mr  Casper’s evidence was further that the failure to have regard to the casual employee in selecting the applicants was an oversight on the part of the respondent, for which it apologised. 

These latter matters are relevant in these proceedings.  The lack of evidence as to the financial position of the respondent, together with the unsatisfactory manner in which the respondent conducted its analysis of its labour requirements and the inconsistency between the documentation produced, identify a lack of real consideration of the operational requirements of the business.  A consideration, which ought objectively be undertaken in circumstances where a respondent contends that the operational requirements of the business necessitated that the employment be terminated. 

The evidence was also that some weeks prior to the termination of the employment of the applicants, a number of casual employees had their employment terminated and resignations were received from the plant manager and a supervisor.  There were discussions with the union in this regard and I am satisfied that no mention was made of terminating the employment of any permanent employees.  A dispute arose as to the operation and utilisation of the Right of Entry Clause in the Award.  That clause enables, on conditions, the relevant union to obtain entry to the premises for certain specified purposes.  As a consequence of this dispute proceedings were initiated in, and dealt with by, the Commission.  The applicants were the only employees who attended at the Commission hearing.  They attended in the company of the union representatives and at least one of the applicants voiced support for the union official whose entry to the premises was the subject of the proceedings.   On 26 February, 1996 without notice to the union, and without any notice to the applicants, the applicants were handed letters terminating their employment with the respondent. 

In the absence of any objective material identifying the true financial operational position of the respondent, together with the evidence of the anomalies in the selection process vis a vis the permanent employees and casual employees, the failure by the respondent to have regard to any of the Award provisions as to notification of change and consultation with the union, and the relationship in time between the Commission hearing and the termination of the employment, I am not satisfied that a denial by the respondent’s witness is sufficient to meet the onus of proof borne by the respondent in relation to s170DF(1)(b) and (e).  I have had regard to the decision of Northrop J in Johns and Gunns Ltd (1995) 60 IR 258 where his Honour said;

(at page 268 )

“On the facts of this case, on the assumption that subsection 170EDA(2) applies, it would not be sufficient for the respondent to establish the reasons for dismissal as set out in the affidavit of the respondent and that they constituted valid reasons for termination under subsection 170DE(1).  The respondent has to establish a negative namely that the reasons for dismissal did not include the reason that Mr Johns was temporarily absent from work because of injury.  A mere denial may not be sufficient.  All the facts and circumstances of the case have to be considered.  ”

It is also appropriate to set out an extract from a recent decision of his Honour Marshall J in Kerr v Jaroma (unreported IRCA Marshall J 7 October 1996).

(at page 16 )

“While the present cases do not per se involve redundancies, the abovementioned references to the recent High Court decision and to Kenefick illustrate that a decision to terminate employment taken for operational reasons from the subjective view of the employer will not necessarily result in a termination for a valid reason.  There still must be  a reason for such a termination which, on independent objective analysis, is capable of being proved by the employer to be valid.          ”

I have also considered the evidence in the proceedings as to the application of selection criteria, in selecting which employees ought be selected for redundancy.  It is clear that there was a failure in the respondent to obtain full and complete information in relation to the skills of each of the applicants and the work which they had in fact undertaken for the respondent.  The document produced as being a comparative analysis matrix of the various skills held by each employee was incomplete in so far as each of the applicants was concerned.  This is evidenced by the failure of Mr Casper to appreciate that the applicants had each operated machines without supervision, during the course of their employment, for which they were given no credit in the skills matrix. It is apparent that they had operated this equipment and that there were other employees who had not.  The respondents own skills matrix, created at the workplace some months after the applicants employment was terminated, confirmed this was the case.  I am not satisfied that the skills analysis relied upon by the respondent in this proceeding was an objective analysis of the skills of all employees.  In so saying, I am not suggesting that it is appropriate for the Court to substitute its conclusions as to the credit or points to be given for each task to each employee, however it is necessary to be satisfied that the task of assessment of comparative capacity of employees undertaken, which is relied upon as objective, can truly be characterised as such.  In this case I am not satisfied this is so. 

For all of the reasons set out above, I am satisfied that the termination of the applicants’ employment was capricious and not based upon any evidenced operational requirement.  I am not satisfied that the respondent did not have as part of its reason for terminating the employment of the applicants their membership of the union and their participation in the recent industrial proceedings in the Commission.  I find that the respondent has contravened s170DF(1)(b) and s170DF(1)(e) of the Act. 

I turn now to consider the matters arising out of the operation of the Award on the employment and its consequences in relation to the operation of s170DC of the Act.  The Award operates in the workplace and contains provisions for consultation and discussion in relation to major workplace change and redundancy.  No discussion took place, despite there being discussions with the union in relation to an industrial dispute in the week prior to the redundancies being announced.  Section 170DC requires that there be provided to the employees an opportunity to be heard in relation to allegations as to their work performance or conduct.  In Kenefick v Australian Submarine Corporation (1996) 65 IR 366 the Full Court determined that in circumstances of redundancy where an employee is selected as a consequence of an assessment of work skill or performance, including by comparison to other employees, that employee must be given an opportunity to be heard in relation to those matters.  In this case no such opportunity to be heard was given to either of the applicants, either individually or through their union representatives.  My earlier findings as to the deficiencies in the skills matrix clearly identifies how such a failure to allow an opportunity to respond can operate to the detriment of an employee.  In this case had the applicants been accorded such an opportunity they may have been able to fully inform the respondent as to the extent and nature of the work they had undertaken, the skills they had and the machinery they were competent at operating. 

Further, the Award provides clearly for a mechanism for selection of employees for termination of employment in circumstances of redundancy.  The Award also has a specific preference in employment clause contained within it, which provides for preference of continued employment of employees who are members of the relevant union.  It is established law in the application of preference clauses, that such provisions operate in circumstances where all other things are equal.  (See generally R v Wallis (1949) 78 CLR 529, R v Findlay (1950) 81 CLR 537, R v Holmes (1972) 126 CLR 529 and FCU v Altona Petrochemical Co. (1973) 150 CAR 387.  )

It is relevant in proceedings such as these, where there is an industrial instrument governing the employment, to have regard to the contents of that instrument in determining questions which arise in relation to the termination of the employment.  I am not satisfied that the respondent paid any regard to its obligations under the Award in relation to these matters.  It is not appropriate, nor relevant in these proceedings to make any finding as to the outcome, had such an approach been taken.  It is relevant however to give consideration to these matters in determining whether there has been a failure by the respondent to apply the provisions of s170DC.  These matters are also relevant matters in my earlier consideration of whether the termination of the employment was sound, defensible, well founded and not capricious.  I have earlier found that it was capricious and not sound, defensible or well founded.  For the reasons set out herein I am not satisfied that the respondent had valid reason for the termination of the applicants’ employment.  I find that there has been a contravention of ss170DE(1), 170DC, 170DF(1)(b) and 170DF(1)(e) of the Act. 

It is therefore necessary to turn to the question of remedy and I now do so.  I am not satisfied that an order for reinstatement would be impracticable.  Each of the applicants seek such an order and it is clear that their losses in terms of earnings are ongoing.  Neither applicant has been able to obtain employment at a level of skill or wage equivalent to their employment with the respondent. Each of the applicants seek an order for reinstatement.  I have earlier found that the respondent has not established that its operational requirements were such that the termination of the applicants’ employment was valid.  I am not satisfied that there are circumstances relating to the respondent’s ongoing viability or employment levels which would warrant a finding that an order for reinstatement would be impracticable.  The Order of the Court will be that each of the applicants be reinstated to the position they held immediately prior to the termination of the employment.  The order for reinstatement will be effective as of the date of this decision in respect of Mr Leaford, and the order will be stayed for 14 days in relation to Mr Dunne to enable him to comply with obligations as to the provision of notice.

The applicants are entitled to an order for remuneration lost in the period from the date of the termination of the employment to the date of the order for reinstatement.  In assessing the amount of any such order it is necessary to have regard to the amount of income earned by the applicants in the intervening period.  It is clear that since the date of the termination of the employment each of the applicants have engaged in some income earning employment.  The order for remuneration lost will be the amount of ordinary time earnings which would have been earned by each of the applicants in the period between the date of the termination of the employment and the date of the reinstatement of each of the applicants. A deduction is to be made from that amount on account of the following matters: the amount required to be paid to the Australian Taxation Office on account of PAYE taxation obligations and actually paid by the respondent; any amount in lieu of notice already paid; any income earned in employment by each of the applicants in the relevant period and any social security payments received on account of the termination of the employment. The parties are to confer for the purpose of reaching an agreed amount.  In the event that agreement cannot be reached, this matter will be relisted and the Court will determine the amount.  There will also be an order for continuity of employment for all purposes. 

I certify that this and the preceding eleven (11) pages

are a true copy of the reasons for decision of

Judicial Registrar Parkinson.

Associate       :           Paul Ferguson

Dated              :           17  December  1996

APPEARANCES

Counsel appearing for the applicant         :           Mr. D. Staindl

Solicitors for the applicant                         :           Slater & Gordon

Counsel appearing for the respondent      :           Mr. Chan

Solicitors for the respondent                      :           Dunhill Madden Butler

Dates of hearing                                           :           28 & 29  October  1996