FEDERAL COURT OF AUSTRALIA Diprose v Simplot Australia Pty Ltd [1999] FCA 1766 DIPROSE, RIES, BUCKLES, ARNOLD and HARDING v SIMPLOT AUSTRALIA PTY LTD TI 1060/96, TI 1062/96, TI 1063/96, TI 1064/96, TI 1065/96 RYAN J MELBOURNE (heard in HOBART) 17 DECEMBER 1999 IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TI 1060 OF 1996 BETWEEN: GREGORY REX DIPROSE Applicant AND: SIMPLOT AUSTRALIA PTY LTD Respondent JUDGE: RYAN J DATE OF ORDER: 17 DECEMBER 1999 WHERE MADE: MELBOURNE ORDER THE COURT ORDERS THAT: 1. The order of the Judicial Registrar that the respondent pay to the applicant the sum of $20,438.00 be affirmed. 2. The said sum of $20,438.00 be paid within twenty-one days of this Order. 3. The motion on notice herein dated 20 November 1997 be otherwise dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TI 1062 OF 1996 BETWEEN: DARRYL LANCE PETER RIES Applicant AND: SIMPLOT AUSTRALIA PTY LTD Respondent JUDGE: RYAN J DATE OF ORDER: 17 DECEMBER 1999 WHERE MADE: MELBOURNE ORDER THE COURT ORDERS THAT: 1. The order of the Judicial Registrar that the respondent pay to the applicant the sum of $14,905.00 be affirmed. 2. The said sum of $14,905.00 be paid within twenty-one days of this Order. 3. The motion on notice herein dated 20 November 1997 be otherwise dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TI 1063 OF 1996 BETWEEN: DAVID IAN BUCKLES Applicant AND: SIMPLOT AUSTRALIA PTY LTD Respondent JUDGE: RYAN J DATE OF ORDER: 17 DECEMBER 1999 WHERE MADE: MELBOURNE ORDER THE COURT ORDERS THAT: 1. The order of the Judicial Registrar that the respondent pay to the applicant the sum of $15,360.00 be affirmed. 2. The said sum of $15,360.00 be paid within twenty-one days of this Order. 3. The motion on notice herein dated 20 November 1997 be otherwise dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TI 1064 OF 1996 BETWEEN: PHILLIP JOHN ARNOLD Applicant AND: SIMPLOT AUSTRALIA PTY LTD Respondent JUDGE: RYAN J DATE OF ORDER: 17 DECEMBER 1999 WHERE MADE: MELBOURNE ORDER THE COURT ORDERS THAT: 1. The order of the Judicial Registrar that the respondent pay to the applicant the sum of $9,780.00 be affirmed. 2. The said sum of $9,780.00 be paid within twenty-one days of this Order. 3. The motion on notice herein dated 20 November 1997 be otherwise dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TI 1065 OF 1996 BETWEEN: KELVIN WILLIAM HARDING Applicant AND: SIMPLOT AUSTRALIA PTY LTD Respondent JUDGE: RYAN J DATE OF ORDER: 17 DECEMBER 1999 WHERE MADE: MELBOURNE ORDER THE COURT ORDERS THAT: 1. The order of the Judicial Registrar that the respondent pay to the applicant the sum of $10,278.00 be affirmed. 2. The said sum of $10,278.00 be paid within twenty-one days of this Order. 3. The motion on notice herein dated 20 November 1999 be otherwise dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TI 1060 OF 1996 BETWEEN: GREGORY REX DIPROSE Applicant AND: SIMPLOT AUSTRALIA PTY LTD Respondent TI 1062 OF 1996 BETWEEN: DARRYL LANCE PETER RIES Applicant AND: SIMPLOT AUSTRALIA PTY LTD Respondent TI 1063 OF 1996 BETWEEN: DAVID IAN BUCKLES Applicant AND: SIMPLOT AUSTRALIA PTY LTD Respondent TI 1064 OF 1996 BETWEEN: PHILLIP JOHN ARNOLD Applicant AND: SIMPLOT AUSTRALIA PTY LTD Respondent TI 1065 OF 1996 BETWEEN: KELVIN WILLIAM HARDING Applicant AND: SIMPLOT AUSTRALIA PTY LTD Respondent JUDGE: RYAN J DATE: 17 DECEMBER 1999 PLACE: MELBOURNE (heard in hobart) REASONS FOR JUDGMENT 1 There are before the Court five applications for review of orders made by a Judicial Registrar of the Industrial Relations Court of Australia on 3 October 1997 and 31 October 1997. The respondent, Simplot Australia Pty Ltd ("Simplot") has at all material times conducted a food processing plant at Ulverstone in Tasmania which it had acquired in September 1995. A decision was taken in about mid-1996 to "outsource" the provision of certain services which previously had been performed by employees of Simplot as an integral part of the operation of the plant. Those services comprehended security, despatch, refrigeration, electrical services and maintenance, the operation and maintenance of boilers and the provision of casual labour. The implementation of that decision involved the transfer of responsibility to a separate company, Manpower Engineering Contractors Pty Ltd ("Manpower") for all of the services just mentioned except despatch and refrigeration. As a result of that change, 123 employees who had formerly been employed by Simplot in each of the areas mentioned except refrigeration transferred their employment to Manpower or Mayne Nickless Ltd which took over the despatch function. Each of those employees effectively continued to carry out the same work for Manpower or Mayne Nickless Ltd as had previously been performed for Simplot. After the decision on "outsourcing" had been taken in principle, a meeting was held on 24 September 1996 between officials of each of the National Union of Workers ("NUW"), the Construction Forestry and Mining Employees Union ("CFMEU") and the Communications Electrical Plumbing and Allied Services Union ("CEPU") and executives of Simplot, including its Ulverstone Plant Manager, Mr McKellar, its Manager, Human Resources, Ms Pellas and its General Manager, Human Resources, Mr Howell. 2 Calculations had earlier been made of savings which could be effected by Simplot's "outsourcing" various functions including refrigeration. Those calculations included the costs of redundancy packages for four employees in the refrigeration department which were set out as follows: "G. Diprose 47,778 D. Ries 17,745 I. Buckles 17,717 K. Harding 11,668 Total 94,908" 3 Despite the fact that the calculations to which I have just referred had been made, an "issues paper" was tabled at the meeting on 24 September 1996 which made no specific reference to areas of employment in which redundancies were regarded as likely to occur. The only entries in the "issues paper" which touched on likely redundancies were the following under the heading "MANAGEMENT RESPONSIBILITY": Issues to be addressed Reasons 8. Overall Simplot Manning numbers Rationalise numbers on site to more closely reflect to be significantly reduced the work requirements and business needs 9. Any future Redundancies will be by We need to retain the people best suited to the needs Selection of the business and terminate those who have little to offer the business 4 It is significant in this context that an earlier "issues document" prepared by Ms Pellas solely for internal consideration by management contained these entries in relation to "refrigeration": ISSUES Priority Current Company Current Union Revised View H/M/L Position View and Reasons 9. Despatch H Lack of operating Union would see no Transfer operations to - Outsource to efficiency with reason to change and Manpower and reduce Manpower excessive amounts of would argue that manning level by 1 in - Incorporate overtime both Management should Despatch and remove the Defroster job fostered by current take more control dedicated Defroster into Despatch team work practices. positions from 2 to 0 and operation Defrosters are trades incorporate defrosting qualified and under- into the Despatch utilised Operator role 10.Refrigeration H Lack of operator We believe that the Outsource - Outsource to efficiency and union would see no Refrigeration to W&S W&S a flexibility and in- reason to change the which reduces manning Refrigeration house fighting exists. current situation by 4, increases Contracting Union issues have productivity and Company occurred. efficiencies in the area through minimisation of demarcations and eliminates ongoing problems with inter- union rivalries. 5 It will be seen that Ms Pellas' prediction that reduction in manning of four would be brought about by a transfer of some refrigeration functions to W&S Refrigeration ("W&S") (an outside contractor) was reflected in the calculation of the costs of outsourcing refrigeration which assumed the provision of redundancy packages for four named employees in the refrigeration department. 6 There was evidence from Mr McKellar that, at the meeting on 24 September, "little progress was made in resolving any of the issues raised by the document" and: "The Unions were told that there would be redundancies across all areas of the Business, however, details of the numbers to be made redundant were not available at that time. My recollection of the Unions' response is that they said the Business's plan was an overreaction and that the Business was not as inefficient as management said. The lack of progress in resolving the outstanding issues and the unions' and employees' attitude to the Business's concerns strengthened management's resolve to explore its options in relation to outsourcing." 7 Despite that evidence, there seems to have been no communication between Simplot and the NUW or any of its members between 24 September and 11 October 1996 as, on the latter date, Mr Strickland, the Secretary of the Tasmanian Branch of the NUW, wrote to Ms Pellas in these terms: "As you are aware the National Union of Workers is extremely concerned with the way your Company is handling the issue of its proposed reduction to the workplace. On the 24th September, the Company made a general statement that it intended to significantly reduce its workforce. Since this time, the Company has failed to further progress this matter and as a result, employees are suffering undue stress. Accordingly the National Union of Workers request you commit to finalising this matter by Friday October 25, 1996. We further request you provide us with set times and dates to achieve the above. This advice is to be received by close of business 5.00 pm Monday October 14, 1996. It is essential I receive the requested information by 5.00 pm Monday in order to keep this matter in its current context." 8 That letter elicited the following non-committal reply dated 14 October 1996: "I am in receipt of your correspondence dated 11 October 1996. Unfortunately, because of the absence of some key players in this issue I am unable to make any commitment to providing set times and numbers by the close of business today. As soon as I am able I will provide you with additional information. I am cognisant of the unrest which our discussions have generated and I have certainly appreciated your efforts to date to keep things in their proper perspective." 9 However, on the same day there had been a meeting in Launceston between representatives of Simplot management and officials of the AMWU at which agreement was reached on a number of matters as recounted in these passages from a letter dated 15 October 1996 from Ms Pellas' superior, Mr Howell, to Mr Marshall of the AMWU: "Following our meeting at Launceston on Monday 14th October I have prepared a summary of my understanding of our agreed position. The date to implement the contracting out of Security, Refrigeration, Electrical and transfer despatch to Mayne Nickless may have to be brought forward to Monday 28th October 1996. As you are aware we are meeting with all other unions represented at the Ulverstone site on Friday 25th October 1996 at 1.00pm. I would think there is a high probability that we will face immediate industrial action which will force the outsourcing issue forward to Monday 28th October. … 2) Contract out refrigeration – 6 redundancies NUW, this includes the defrosters. … 7) Appoint production team leaders from start up 1997. Appoint maintenance team leaders from Monday 28th October 1996. There will be four maintenance teams, these are: Planning Refrigeration Projects Maintenance" 10 There is evidence from Mr Howell that, on 22 October 1996, he gave a copy of that letter to Mr Paul Richardson, a national organiser for NUW who was based in Sydney and told Mr Richardson of Simplot's intention to announce to its workforce on 25 October 1996, amongst other things, that six employees in the refrigeration department were to be retrenched. However, there is also uncontested evidence from Mr Strickland that he was never apprised by Mr Richardson of the intended retrenchments and had never seen a copy of Mr Howell's letter of 15 October 1996. It may be that Mr Strickland's lack of foreknowledge is to be explained simply by the failure of Mr Richardson to contact him or anybody else within the Tasmanian Branch of the NUW before Simplot made its announcement on 25 October. Alternatively, Mr Howell may have provided Mr Richardson with an edited version of his letter to Mr Marshall of 15 October. That edited version was confined to matters of direct concern to the AMWU and a copy of it was produced from the custody of the applicants in the course of cross-examination of Mr Howell when he appeared to concede that the edited version had been supplied to the AMWU in order to keep confidential the other matters of no direct concern to the AMWU which were detailed in the fuller version of the same letter. 11 It is unnecessary for me to reach a concluded view on this issue because I agree with the finding of the learned Judicial Registrar that, even if notice of the proposed retrenchments had been given to the NUW on 22 October 1996 in the way described by Mr Howell, that could not amount to consultation, in a realistic sense, with that Union about those retrenchments which Simplot had determined by 15 October at the latest, were to be implemented on 25 October. 12 At about 2.00pm on 25 October 1996, officials of various unions with members employed at the Ulverstone plant were advised of a number of decisions which had been taken by Simplot management with respect to its future operations. That advice included statements to the effect that Manpower would immediately assume responsibility for security, boiler operations, electrical operations and the supply of all "overload labour" and that despatch operations would transfer to Mayne Nickless with current employees in that area to transfer to Mayne Nickless forthwith on their current rates of pay and conditions. A statement to this effect was made about the refrigeration department: "Refrigeration operations will be contracted out today and there will be 5 redundancies as a result – effective immediately. These people will be paid out under the current Redundancy Agreement." 13 About half an hour later on the same day, Ms Pellas made a similar statement to employees at the site with remarks to the following effect being addressed to the employees from the refrigeration section who were to be retrenched: "Due to a restructuring plan formulated by this Company the decision has been made to contract out the Refrigeration and Maintenance Operation. Consequently all of your positions are now redundant effective immediately. This decision has been made on economic grounds. We would like to thank you for your past work and effort. We'd also like to apologise for the shock that this decision may cause you, but in the interest of all parties it is better that this is carried out quickly and without delay. Your Redundancy cheques have been made up along with payment for the current week. (Hand out cheques at this point) We ask that you collect your personal effects and leave the site immediately. We will arrange for you to be accompanied to your lockers to do this." 14 Six employees from the refrigeration section were retrenched on 25 October 1996 including the present five applicants. Two employees from the refrigeration section were retained in the employ of Simplot and a third, Mr Teague Murphy, who was apparently an adult apprentice in the first year of his apprenticeship was transferred to Manpower on the understanding that he would continue to receive appropriate "on the job" experience under the supervision of Mr Derek Diprose, one of the refrigeration employees to be retained by Simplot. The retention of the two employees from the refrigeration section who remained in Simplot's employ was explained by Mr McKellar as follows: "In relation to the refrigeration function, the entire function was not outsourced, six employees were made redundant and two employees were retained. One of the employees retained, Derek Diprose, was offered a team leader role which he accepted. Mr Diprose was previously a foreman on the site and was the only refrigeration employee with management skills. This was an essential requirement of the team leader position. The other employee retained, Karl Braun, was the most suitable person for the position on an assessment of his skills, personality, and focus on the job. Both Mr Diprose and Mr Braun were also the longest serving employees in refrigeration." 15 All of the employees retrenched from the refrigeration section were members of the NUW whereas Mr Derek Diprose and Mr Braun were members of the CFMEU. The evidence suggests that Mr Murphy had no union affiliation. 16 Each of the present applicants gave evidence of the manner in which he learned of his retrenchment and its effects upon him. It is convenient to summarise that evidence by reference to each applicant. Mr Gregory Diprose 17 This witness was an NUW shop steward and in that capacity attended a meeting, perhaps that on 24 September 1996, which was also attended by Ms Pellas and Mr McKellar on behalf of Simplot. According to Mr Diprose, the NUW representatives at that meeting were assured that Simplot's proposed rationalisation of its work force would not affect NUW members. He had no intimation before 25 October that he was to be retrenched. Mr Ries 18 Like Mr Gregory Diprose this applicant said that he had no intimation before the meeting on 25 October that he was to be made redundant. Mr Arnold 19 This applicant similarly claimed to have been unaware before 25 October that there was a risk of his being retrenched. Mr Buckles 20 This applicant was not working at the site on the afternoon of 25 October having finished his nightshift at 7.15am on the morning of that day. However, he had learned that Simplot had arranged to meet with representatives of the NUW on the afternoon of 25 October and returned to the plant to attend that meeting at which he believed matters arising from the "issues paper" which had been tabled on 24 September and a request by the NUW for appointment of another defroster to the refrigeration section would be discussed. Mr Harding 21 This applicant has been described as an "adult apprentice", having entered into a contract of training dated 19 October 1993 with Edgell Birds-Eye, Simplot's predecessor in the operation of the Ulverstone plant. That contract was concluded under the auspices of the Training Authority of the State of Tasmania and provided that Mr Harding was to receive training for the trade of refrigeration mechanic. The operative part of the contract was in these terms: "This 'Contract of Training' commences on 13.9.93 and terminates on 12.9.97. Extensions or reductions of the term of this contract may be approved by the Training Authority of Tasmania. Both parties agree to abide by the requirements of off-the-job and workplace training established for this Scheme of Training and to take part in the assessment of specified skills. I, the employer, agree: (a) to ensure that the apprentice/trainee receives workplace instruction according to the requirements of this Scheme of Training and to provide the appropriate facilities for the provision of workplace instruction; (b) where necessary to release the apprentice/trainee as required by the Training Authority of Tasmania, and give every encouragement to the apprentice/trainee to attain the required standard of off-the-job training. I, the apprentice/trainee, agree: (a) to attend and participate in off-the-job training in accordance with the requirements of this Scheme of Training; (b) to undertake the tasks required by the employer for the occupation for which training is being provided. Both parties agree that: (a) the conditions of employment, including remuneration, shall be as prescribed from time to time by the appropriate industrial award, order, industrial agreement or the provisions of the Tasmanian Industrial and Commercial Training Act, 1985, Section 37. (b) no change shall be made to the terms of this Contract without prior approval of the Training Authority of Tasmania." 22 Mr Harding was approached towards the end of September 1996 by Mr Marshall, Simplot's Plant Engineer at Ulverstone, and asked whether he would join in an approach to the Training Authority for an early release from his contract of training leading to an accelerated acquisition of his trade qualifications. When he asked Mr Marshall why Simplot was seeking an early completion of his apprenticeship, Mr Harding was told it was normal practice with adult apprentices. Upon Mr Harding asking whether it had anything to do with the reduction levels in manning at the plant, Mr Marshall replied "No comment." 23 Several issues involving the application to the facts recounted above of ss 170DC, 170DE(1) and 170DF(1) of the Industrial Relations Act 1988 ("the Act") and Reg 30B(1)(a) of the Industrial Relations Regulations ("the Regulations") have been agitated in the course of these reviews. It is convenient to examine each of those issues separately before considering the relief (if any) to which each of the applicants is entitled. (a) Was there a valid reason for the terminations? – s 170DE(1) 24 Section 170DE(1) of the Act provided: "An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service." 25 By s 170EDA, a termination was taken to have contravened sub-s 170DE(1) unless the employer proved, apart from sub-s 170DE(2), there was a valid reason or valid reasons of a kind referred to in sub-s 170DE(1). It is clear from the language of s 170DE(1) that the inquiry which the Court is required to conduct is into the validity of the reason for the termination of the employment of each individual employee. Thus, it was observed by a Full Court of the Industrial Relations Court of Australia in Kenefick v Australian Submarine Corporation (No 2) (1996) 65 IR 366 at 372: "Section 170DE(1) is concerned with the termination of the employment of an individual employee. As was said in relation to s 170DC, the terminations in this case were for two reasons. Both were based on the operational requirements of the respondent. One reason was the need to reduce the workforce, the other was to retain some rather than other employees of the existing workforce. Without both steps, no individual would have been terminated. The decision to reduce the overall numbers of welders in the hull shop did not of itself lead to the termination of individual appellants, and the process of selection was only commenced after the decision to reduce overall numbers had been taken. Consequently, the respondent carried the onus of showing that there was a valid reason for the selection of each appellant. This conclusion is consistent with the scheme of ss 170DE and 170EDA(1). The scheme of the sections provides for the employer to carry the onus on matters peculiarly within the knowledge of the employer, and for the employee to carry the onus on matters peculiarly within the knowledge of the employee. Thus, in the present case, the respondent made the decisions concerning the selection of each particular appellant, and determined the basis on which the selection was to be made. The respondent should justify those decisions. To cast on the employee the onus of showing that the basis of selection has been harsh, unjust or unreasonable would be inconsistent with the apparent intention that this legislation should accord an accessible and inexpensive means by which a dismissed employee can seek a remedy. That consideration derives particular force when it is remembered that often an individual employee will not know why he or she has been selected for retrenchment." 26 In the same case, speaking of the application of s 170DC(a) to a termination for reasons related to the employee's conduct or performance, the Full Court said, at 370: "Section 170DC(a) is directed to the individual termination of one employee's employment. Where it speaks of the reasons for the termination, it is speaking of the reasons for the individual termination. In the circumstances of the present case, the decision to reduce the 170 hull shop employee numbers by nine welders did not, on its own, lead to the termination of employment of any individual. It was one step in a two step process. Only after the second step had been taken, was it possible to identify an individual as a person whose employment would be terminated. The two steps were both necessary to produce the result of the individual termination of employment. The excess of labour and the application of the criteria for selection were both reasons for the termination of the individual. In other words, there were two reasons for the termination of each appellant. This analysis departs from that favoured by the learned Chief Justice. He said (at 115): 'There was only one reason: the redundancy situation. That is so notwithstanding that particular retrenchees were selected because of conduct/performance characteristics thought to make them less valuable ASC employees than others.' In our view, the statement that the employees were selected for termination 'because of employment/performance characteristics' indicates that those factors can properly be described as 'reasons' for the termination within the meaning of s 170DC." 27 In the present case there was a similar compound reason or reasons for the termination of the employment of each of the applicants. In the first place, there was a perceived need to eliminate six positions from the refrigeration section of Simplot's operation. That part of the reason was based on the operational requirements of the undertaking or service as that expression is used in s 170DE(1). In view of the calculations, made, before the event, of the savings to be achieved by the elimination of those positions and the evidence that the predicted savings were actually exceeded after the introduction of W&S, that reason was available as a matter of objective fact. I find, moreover, that it actually operated as a reason on the minds of those who decided on behalf of Simplot to terminate the services of each of the applicants. In those circumstances, the validity of that part of the decision cannot be questioned because the Court or some other person standing hypothetically in the shoes of those entrusted with Simplot's managerial prerogative would have decided not to eliminate the six positions in the refrigeration section. See e.g. Quality Bakers of Australia Ltd v Goulding (1995) 60 IR 327 at 333, Mitchell-Collins v The Latrobe Council (1995) 60 IR 480 at 489 and Kenefick v Australian Submarine Corporation Pty Ltd (1995) 131 ALR 197 per Wilcox CJ at 208. 28 However, the enquiry for the purposes of s 170DE(1) does not end there. As in Kenefick, as analysed by the Full Court, the decision to terminate the employment of each of the applicants involved a stage beyond the determination that six positions in the refrigeration section required to be eliminated. It involved a decision, I find, that Mr Derek Diprose and Mr Braun were more suitable for appointment to the two positions which were to remain in the refrigeration section than any of the applicants and that, as the applicants were all currently employed in the refrigeration section, they should be selected for retrenchment. 29 Evidence was given by Mr McKellar that Mr Derek Diprose had previous experience as a foreman which was seen as giving him superior claims to the position of team leader which was to be created as part of the restructure of Simplot's refrigeration section. Of the employees in the refrigeration section on 25 October 1996, Mr Derek Diprose, Mr Braun, Mr Gregory Diprose and Mr Buckles were each employed in the highest award classification, "C8", although Mr McKellar conceded under cross-examination that he was unaware whether that classification reflected greater length of service or the possession of additional skills or training or a combination of both those qualifications. Of those in the "C8" classification, Mr Derek Diprose and Mr Braun had the longest service at the Ulverstone plant. It will also be recalled that Mr Braun had been regarded by Mr McKellar as the most suitable person to be retained in Mr Derek Diprose's team "on an assessment of his skills, personality and focus on the job". 30 Had Simplot's whole workforce been confined to those in the refrigeration section, the reason or reasons which I have just imputed to the selection of the applicants as those to be retrenched would have been valid in the sense used by Northrop J in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 where his Honour observed at 373: "Section 170DE(1) refers to 'a valid reason, or valid reasons', but the Act does not give a meaning to those phrases or the adjective 'valid'. A reference to dictionaries shows that the word 'valid' has a number of different meanings depending on the context in which it is used. In the Shorter Oxford Dictionary, the relevant meaning given is: '2. Of an argument, assertion, objection, etc; well founded and applicable, sound defensible: Effective, having some force, pertinency, or value.' In the Macquarie Dictionary the relevant meaning is 'sound, just, or well founded; a valid reason'. In its context in s 170DE(1), the adjective 'valid' should be given the meaning of sound, defensible or well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of s 170DE(1). At the same time the reason must be valid in the context of the employee's capacity or conduct or based upon the operational requirements of the employer's business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. The provisions must 'be applied in a practical, commonsense way to ensure that' the employer and employee are each treated fairly, see what was said by Wilcox CJ in Gibson v Bosmac Pty Ltd (1995) 60 IR 1, when considering the construction and application of s 170DC. The requirements of s 170DE(1) should not impose a severe barrier to the right of an employer to dismiss an employee. Nevertheless, in cases similar to the one before the Court, the application of s 170DE(1) should always be considered and decided before consideration is given to the additional limitations on the right of an employer to terminate the employment of an employee imposed by ss 170DE(2) and 170DC. The purpose of these two provisions is to confer a greater protection on employees from termination of employment. In this regard the provisions are not very different from the consequences flowing from an award provision similar to that considered in Byrne v Australian Airlines Ltd (1995) 47 FCR 300; 52 IR 10 and discussed in Johns. There procedural fairness was held to have been imported by implication as well as the substantive protection conferred by the award. The statutory provisions now apply, by reason of the Act, with minor exceptions, to all employees. The construction and application of ss 170DC and 170DE(2) were considered by Wilcox CJ in Gibson. His Honour discussed s 170DC under the heading 'Procedural fairness'. With respect, I agree with his opinion on this matter. I expressed similar views in Johns. But with respect, for reasons already expressed, the question of procedural fairness arises only after a finding has been made that the employer has established a valid reason or reasons under s 170DE(1)." 31 In the present case there was evidence that each of the applicants had qualifications and experience which gave him claims to be considered for retention in areas of Simplot's workforce other than the refrigeration section. It further appears that, since October 1996, a few former casual employees, perhaps two or three, have been appointed to permanent positions in day engineering or maintenance. As well, the evidence indicates that, as at 25 October 1996, Simplot had 222 permanent employees and 91 casuals. As a result of the restructuring, the number of permanent employees has been reduced to a present level of about 192 with approximately 60 casual workers being supplied by Manpower. I accept that, in the light of operational requirements as they existed after 25 October 1996, a decision to deploy one of the applicants to an area outside the refrigeration section would have entailed the retrenchment in his place of one of the 192 or so employees who were retained by Simplot and who became, or remained, permanent employees. 32 However, there is no evidence of the length of service of those employees who were retained in the "core" parts of the operation or the rates of remuneration payable to those employees. Nor does the evidence suggest that any consideration was ever given by anybody on behalf of Simplot to the possibility of retaining any of the applicants in preference to any of the persons employed in those other areas. In these circumstances, applying s 170DE(1) in a practical and commonsense way in the practical sphere of the relationship between employer and employee as the evidence suggests it had been developed at the Ulverstone plant, I am not persuaded that Simplot has discharged, in respect of any of the applicants, the onus imposed on it by s 170EDA. (b) Should the applicants have been given an opportunity to respond to allegations? - s 170DC 33 The applicants also relied on s 170DC of the Act which provided: "An employer must not terminate an employee's employment for reasons related to the employee's conduct or performance unless: (a) the employee has been given the opportunity to defend himself or herself against the allegations made; or (b) the employer could not reasonably be expected to give the employee that opportunity." 34 It not infrequently happens that the selection of employees to be made redundant involves a comparative assessment of the conduct or capacity of all employees who are in the class from which the selection is to be made. In that sense, "allegations" within the meaning of s 170DC may be made by implication. To those allegations, I consider, the legislature intended that an employee should have an opportunity to respond before his or her employment was terminated on the ground of redundancy. If it were otherwise, the employee's employment might be terminated on the basis of a mistaken belief by the employer that the employee had been guilty of some misconduct or lapse from some standard of performance which rendered the employment of that employee more appropriate for termination than that of other employees potentially liable to be selected for redundancy. Thus, in Kenefick v Australian Submarine Corporation Pty Ltd (No. 2) (supra) the Full Court observed, at 371: "It would be anomalous if s.170DC can be construed as providing an opportunity to an employee to defend himself or herself against allegations of misconduct or inadequate performance made in isolation but as denying the same opportunity to an employee against whom similar allegations are made in the context of a need to select a few employees for termination from a larger pool because of an excess of labour. In both cases an assessment is made by the employer of performance and conduct. In both cases the assessment determines whether or not the employee's employment is terminated. There is an equal need for the employee to have an opportunity to respond because, in each case a convincing defence to the allegations may persuade the employer not to terminate the employment of that employee. The need for an opportunity to defend is illustrated in the evidence of the appellants in this case. For example, the fifth appellant was selected for retrenchment in part because of the quality of his workmanship. In his affidavit, filed before the Judicial Registrar, that appellant said that no workmanship of his ever had to be repaired but on one occasion when his work had been questioned it turned out that the work had been done by another tradesman. In our view it would require intractable language to impute to the legislature an intention to make what it obviously regards as a fundamental right to an opportunity to respond to allegations of misconduct or poor performance depend on a distinction between a termination which results from selection from a larger pool of eligible employees and one that does not. We do not share the view of the Chief Justice that the present case cannot properly be described as involving allegations against the appellants. The concerns list contained direct allegations of inadequate performance. The criteria set by Mr Bews included "performance" and "timekeeping", and the basis for termination of the appellants was described in the evidence of Mr Dawson, extracted earlier in these reasons, as relating mainly to performance. The fact that the performance was assessed by comparison with that of other employees is not significant. Performance criteria will always have some reference point. The relevant consideration is that a decision is proposed to be made by accepting or rejecting a criticism of the employee. By s.170DC the employee must be given a chance to answer the criticism, whatever be the reference point upon which the criticism is made. The evidence does not permit this case to be regarded as presenting a choice between employees, all of whom were satisfactory. Clearly some were more satisfactory to the respondent than others. Otherwise the respondent would have confined the selection to volunteers or, if there had been insufficient volunteers, would have determined those to be retrenched by lot or some other non-evaluation criterion. The choice was made based on conduct or performance. That brought s.170DC into play. This does not mean that s.170DC will apply to all redundancies. It is for the employer to choose the basis for selection for redundancy from the pool of eligible employees. It is only if the employer chooses by reference to conduct or performance criteria that s.170DC will apply." 35 In the present case, as indicated in my examination of the application of s 170DE(1), the choice of Mr Derek Diprose and Mr Braun as those employees from the refrigeration department to be retained was made partly on the basis that those employees had the longest periods of employment by Simplot and its predecessor. The selection of Derek Diprose was reinforced because of his possession of leadership capabilities demonstrated by previous service as a foreman. It is true that Mr Braun retained the advantage derived from his greater length of service because of Mr McKellar's "assessment of his skills, personality and focus on the job." However, I do not consider that the reinforcing effect of those considerations had the result that "the choice was made based on conduct or performance". In the absence of resort to evaluative criteria, no occasion arose for the employees who were made redundant to be given an opportunity to press their claims for retention as superior to those of Mr Derek Diprose or Mr Braun. 36 In the joint judgment of Lindgren and Lehane JJ in Cosco Holdings Pty Ltd v Do (1997) 150 ALR 127, it was pointed out, at 152, that: "Kenefick is authority for the proposition that where there are two operative reasons for a decision to dismiss an employee, one based on operational requirements and the other connected with the employee's capacity or conduct, the employer must comply with s 170DC. That, with respect, is in our view correct and follows plainly from the opening words of s 170DC. In Kenefick the Full Court, disagreeing with the decision of Wilcox CJ at first instance, held that there were two operative reasons for the termination of the appellants' employment. Whether that is so in any given case is, of course, a question of fact." 37 I have resolved that question of fact by finding that the reasons for the termination of the applicants' employment were the operational requirement of Simplot's undertaking to dispense with directly employed personnel in the refrigeration department except for Mr Derek Diprose and Mr Braun. The latter employees were retained, as I have found, principally by reference to length of service with the super-added qualification possessed by Mr Diprose that he had demonstrated a capacity to be the team leader. Accordingly, I have concluded that the applicants have not made out a contravention of s 170DC. (c) Did the reasons for the terminations include union membership? -s 170DF(1) 38 Section 170DF(1) of the Act provided, so far as is relevant: "An employer must not terminate an employee's employment for any one or more of the following reasons, or for reasons including any one or more of the following reasons: ...... (b) union membership or participation in union activities outside working hours or, with the employer's consent, during working hours; (c) non-membership of a union or of an association that has applied to be registered as a union under the provisions of this Act; (d) seeking office as, or acting or having acted in the capacity of, a representative of employees;" 39 Section 170DF(1) attracted the operation of s 170EDA(2) which provided: "If an application lodged under section 170EA alleges that a termination of employment of an employee contravened subsection 170DF(1) on the ground that the termination: (a) was for a particular reason or reasons referred to in that subsection that were stated in the application; or (b) was for reasons stated in the application that included a particular reason or reasons referred to in that subsection; the termination is taken to have contravened subsection 170DF(1) unless the employer proves, in any consent arbitration arising from the application or in any proceedings arising on the referral of the application to the Court, that: (c) the employment was not terminated for the particular reason or reasons or for reasons that included the particular reason or reasons;" 40 Each applicant has alleged that Simplot contravened s 170DF(1) by terminating his employment by reason of his membership of a union. For example, in the summary of the applicant's case filed on behalf of Mr Gregory Diprose it was alleged: "4. The Respondent terminated the Applicant on the basis of a prohibited reason namely by reason of his membership of a union, in that: (a) the Applicant resigned membership with the Construction, Forestry, Mining & Engineering Union (Tasmania Branch) and joined the National Union of Workers. (b) the Applicant was elected the Shop Steward for the National Union of Workers in the refrigeration section of the plant. (c) the entire workforce within the refrigeration section of the plant joined the National Union of Workers with the exception of Mr Derek Diprose, Mr Carl Braun and Mr Tague Murphy. (d) all members of the National Union of Workers within the refrigeration section were dismissed by the Respondent. (e) to the Applicant's knowledge Mr Derek Diprose, Mr Carl Braun and Mr Tague Murphy were not dismissed by the Respondent." 41 It follows from my acceptance, in paras 29 and 35 of these reasons, that Mr Derek Diprose and Mr Braun were retained in employment in preference to the applicants solely because of their greater length of service, Mr Diprose's proven capacity for leadership and Mr McKellar's assessment of Mr Braun's "skills, personality and focus on the job", that the terminations of the applicants' employment were not for reasons that included their union membership. It is true that the "issues paper" which preceded the restructuring expressed Simplot's desire for "all demarcations to be removed" or eliminated immediately to improve "efficiencies and flexibility". However, the evidence suggests that the "issues paper" was prepared before Simplot became aware that some employees in the refrigeration department, including the applicants, had transferred their allegiance from the CFMEU to the NUW. Although there is some evidence to indicate that a third union, the Amalgamated Metal Workers Union, was consulted by Simplot about the proposed restructuring earlier and more extensively than the NUW and the CFMEU, at least two of the employees in the refrigeration department who were retained in employment were members of the CFMEU. Mr McKellar acknowledged that he had perceived a demarcation problem between the NUW and the CFMEU in the refrigeration area, but there is no evidence that NUW members as such had been involved in demarcation disputes before 25 October1996. Nor, it appears, were NUW members in the refrigeration department involved in industrial action against the working of twelve hour shifts, which was one of the matters which had prompted Simplot to implement the restructuring. 42 In these circumstances, I am satisfied that Simplot has discharged the onus imposed by s 170EDA(2) of proving that the applicants' membership of the NUW was not one of the reasons for the termination of their employment. Accordingly, it is unnecessary to resolve the interesting question of whether "union membership" in s 170DF(1) comprehends membership of a particular union as against membership of another union favoured or preferred by the employer, or whether it denotes only membership of any union as against non-unionism. (d) Was Mr Harding engaged under a contract of employment for a specified period of time? Regulation 30B(1)(a). 43 It will be recalled that Mr Harding had, on 19 October 1993, entered into a "contract of training" with Edgell Birds-Eye, Simplot's predecessor in the operation of the Ulverstone plant. That contract stipulated that it commenced on 13 September 1993 and would terminate on 12 September 1997. Regulation 30B of the Regulations made pursuant to s 170CC of the Act, provided: "Subject to subregulation (2), for the purposes of section 170CC of the Act, the following employees are excluded from the operation of Subdivisions B, C, D and E of Division 3 of Part VIA of the Act: (a) an employee engaged under a contract of employment for a specified period of time, being a contract that was entered into before 16 November 1994;" 44 It is clear that Mr Harding had been employed by Edgell Birds-Eye for approximately thirteen years pursuant to a pre-existing contract of employment before the "contract of training" was concluded. 45 There is no suggestion in the evidence that the pre-existing contract of employment had been terminated upon the parties entering into the "contract of training". Such a termination, presumably, would have required payment to Mr Harding of a sum representing, at least, accrued long service leave entitlements. Moreover, the "contract of training", in terms, contemplated that it should prescribe rights and obligations in parallel with those stipulated by a co-existing contract of employment by stipulating that "the conditions of employment shall be as prescribed from time to time by the appropriate industrial award, order, industrial agreement .....". In my view, that stipulation allowed the rights and obligations of the parties, as employer and employee, to be governed by a separate contract not necessarily co-extensive with the duration of the "contract of training". The decision of a Full Bench of the Australian Industrial Relations Commission in Qantas Airways Limited v Fetz (1998) 84 IR 52, does not assist Simplot in this respect because in that case it was found, or assumed, that "the contracts of employment were for the duration of the apprenticeship." In the present case the contract of employment was varied rather than terminated when the "contract of training" was entered into; c.p. Quinn v Jack Chia (Australia) Ltd (1992) 1 VR 567 at 576, 578. 46 The view which I have just expressed is consistent with the action of Mr Marshall in requesting Mr Harding to join in an approach to the Training Authority for an early release from the "contract of training". Had Mr Marshall, or any other representative of Simplot, regarded the early termination of the "contract of training" as entailing a simultaneous termination of Mr Harding's employment, it is difficult to conceive that such a consequence would not have been pointed out to Mr Harding at the time of the request. 47 Finally, in this context, it is to be borne in mind that Reg 30BA expressly applied to a trainee: "if the trainee's employment under a traineeship agreement: (a) is for a specified period; or (b) is for any other reason limited to the duration of the agreement." 48 The following relevant definitions were to be found in Reg 30A: ""trainee" means an employee (other than an apprentice) who is bound by a traineeship agreement; "traineeship agreement" means an agreement between an employer and an employee that: (a) is consistent with the award known as the National Training Wage Interim Award 1994, as in force on 16 November 1994; and (b) is registered: (i) with the relevant State or Territory training authority; or (ii) with NETTFORCE; or (iii) under a law of a State or Territory relating to the training of employees." 49 "Apprentice" was not defined in the Act or the Regulations and it may be doubted whether Mr Harding was an apprentice in the common law sense which is inconsistent with being a party to a contract of employment or service; see eg. Horan v Hayhoe [1904] 1 KB 288. However, it is unnecessary to resolve that doubt because the exclusion imported by Reg 30BA did not apply to every person who was a party to a traineeship agreement. Rather, it was restricted to a trainee whose employment was "under" a traineeship agreement and so did not apply to a trainee whose employment was regulated by a separate contract, albeit co-existing with the traineeship agreement. In addition, to attract the exclusion created by Reg 30BA, the trainee's employment had to be for a specified period expressed, or incorporated by reference, in the traineeship agreement, or must for some other reason have been limited to the duration of the traineeship agreement. Neither of those requirements for the application of Reg 30BA was satisfied in respect of Mr Harding's employment. 50 For these reasons, I have concluded that Reg 30B(1)(a) did not preclude Mr Harding from obtaining relief under Division 3 of Part VIA of the Act. (e) Remedies (i) Reinstatement Sub-sections 170EE(1) and (2) of the Act provided: "(1) In respect of a contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, the Court may, if the Court considers it appropriate in all the circumstances of the case, make the following orders: (a) an order requiring the employer to reinstate the employee by: (i) reappointing the employee to the position in which the employee was employed immediately before the termination; or (ii) appointing the employee to another position on terms and conditions no less favourable than those on which the employee was employed immediately before the termination; and (b) if the Court makes an order under paragraph (a) (i) any order that it thinks necessary to maintain the continuity of the employee's employment; and (ii) an order requiring the employer to pay to the employee the remuneration lost by the employee because of the termination. (2) If the Court thinks, in respect of a contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, that the reinstatement of the employee is impracticable, the Court may, if the Court considers it appropriate in all the circumstances of the case, make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate." 51 In the present case, it has never been practicable for Simplot to reappoint any of the applicants to the respective positions in which they were employed immediately before the termination because each of those positions was eliminated in the restructure which, I have found, was based on the operational requirements of Simplot's undertaking. The question of remedy has arisen because Simplot has failed to discharge the onus of proving that it had a valid reason in respect of each of the applicants for terminating his employment. That conclusion does not entail that Simplot would not have had a valid reason for taking that action had it correctly considered the way in which its decision to restructure its operations should have impinged on its employees, including the applicants. 52 Moreover, an order for reinstatement requiring appointment of any of the applicants to production positions would require termination of other, formerly casual, production employees who were made permanent as part of the restructure. A similar consideration weighed with von Doussa J in Manuel v Pasminco Cockle Creek Smelter Pty Ltd (1998) 83 IR 135 in declining to order reinstatement pursuant to what his Honour acknowledged, at 157, was a wide discretion to order reinstatement to be exercised having regard to all the circumstances of a particular case. It is true that an order for reinstatement can be made on condition that the applicant reimburses the employer for any redundancy or other payment made at the time of termination; see eg. Kozelj v Kellog (Aust) Pty Ltd (Industrial Relations Court of Australia, Wilcox CJ) (unreported, 26 July 1996) at p22. However, in the present case the size of the redundancy payments made to the applicants has, to a small degree, combined with the other factors already mentioned to influence the exercise of the Court's discretion against making any order for reinstatement. 53 (ii) Compensation. The learned Judicial Registrar, after declaring that the employment of each of the applicants had been terminated unlawfully in breach of s 170DC and s 170DE(1) of the Act, adjourned his consideration of compensation to allow the parties to direct written submissions to that issue. His conclusions as to the appropriate amount of compensation for each applicant provide a useful point of reference for this part of the present review. In the reasons which preceded his orders awarding compensation, the learned Judicial Registrar said: "I am unsatisfied that any one of the applicants had a realistic chance of retention which could be reasonably assessed at above 20%. Furthermore, at least four of the applicants and perhaps all six of them were likely to have been terminated by Christmas 1996 if the respondent had acted regularly and accorded each an opportunity to argue a case for retention. In Nicolson v Heaven and Earth Gallery (1994) 1 IRCR 199 at 213 the Chief Justice found that, had it been necessary in that case to reach the question of compensation, he would not have awarded a large sum because the employer, acting regularly, would have been entitled to dispense with the employee's services and would have done so. I am convinced the respondent, acting regularly, would have dispensed with the services of at least four of the applicants and probably all six of them. I believe this could have been readily and lawfully achieved on the basis of operational requirements and within eight weeks or perhaps even within four weeks. However, given ongoing economic loss and given a 20% chance of retention of each applicant, which assessment may be generous, I propose to order each applicant be paid compensation generally based on three months continued employment at the rates then applicable." 54 He then went on to reject the invitation, extended by Counsel for the applicants, to add to the amount proposed to be awarded to each applicant some element of compensation for the shock and distress occasioned by the way in which their employment had been terminated. 55 It will be apparent from the analysis undertaken at paras 31 and 32 of these reasons that I do not consider that the assessment of the chance of each applicant's having been retained in Simplot's workforce should be measured solely by reference to his prospective retention within the refrigeration department. However, as Wilcox CJ observed in Kenefick v Australian Submarine Corporation Pty Ltd (No 3) (Industrial Relations Court of Australia, unreported, 26 July 1996): "Determination of compensation in these cases is not an easy task. There are so many unknown factors that it is not possible to do more than make general assessments. It is impossible to demonstrate mathematically the correctness of any particular award." 56 The learned Judicial Registrar acknowledged that his assessment of a twenty per cent chance of retention within the refrigeration department may have been "generous". When an evaluation is made of the chance of each applicant's having been retained in the wider Simplot production workforce taken as a whole, that assessment, I consider, becomes realistic, given the necessarily imprecise, almost intuitive, nature of the exercise. 57 There is a small area of dispute on the evidence as to whether or not it had been disclosed on 24 September 1996 that some of the positions in the refrigeration department would be made redundant as a result of the proposed "outsourcing". In the light of the generality of paragraph 8 of the "issues document" and the NUW's understanding of what was said at the meeting of 24 September 1996, I am disposed to accept that no assurance was given before 25 October 1996 that employees in the refrigeration department would be immune from redundancies brought about by the "outsourcing". However, I find that, equally, no express indication was given that some employees in that department would necessarily have their employment terminated as part of the reorganisation of Simplot's operations. It is possible that, because of a concentration on the transfer to Manpower of employees in areas other than refrigeration, the employees in the latter area assumed, wrongly, that they were not under threat of immediate termination. 58 I therefore accept the evidence adduced on the hearing of the review that the applicants had no intimation before 25 October 1996 that their employment was to be terminated. The precipitate way in which that was announced, combined with the fact that the applicants were escorted to their lockers, some by Mr Marshall and others by unidentified employees (presumably human resources officers from outside the Ulverstone plant), compels a finding that Simplot's handling of the terminations was insensitive to say the least. However, the evidence does not permit me to stigmatise Simplot's conduct as "arrogant" or "contemptuous" which was the language used at first instance Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144. In that case, the Full Court said, at 156: "In making its assessment, the court is obliged to have regard to lost remuneration, but is not limited to that item. If the evidence establishes other damage flowing from the unlawful termination, the court is entitled to take that into account in making its assessment, up to the limits prescribed by paras (a) and (b) of s 170EE(3). It follows that the shock, humiliation and distress suffered by Ms Burazin in respect of the unlawful termination of her employment are matters that Madgwick J was entitled to take into account in considering the proper amount of compensation to be ordered under s 170EE(2)." 59 In quantifying for itself the amount by which the compensation should be increased to take account of distress caused to the applicant, the Full Court went on to say (ibid): "There is an element of distress in every termination. To ensure compensation is confined within reasonable limits, restraint is required. But in this case there were unusual exacerbating circumstances that make it appropriate to include in the compensation an allowance for the distress unnecessarily caused to Ms Burazin. These circumstances include Ms Burazin having to suffer the humiliating experience of being escorted from Blacktown's premises by the police. Having regard to these circumstances, the compensation assessed by the trial judge should be increased by the sum of $2000, to $5000." 60 Bearing in mind that s 170EE(2) conferred a discretion to compensate applicants, not to punish respondents, I have not perceived unusual exacerbating circumstances which warrant the award of an additional amount to any applicant in respect of the distress caused by the implementation of the terminations. Accordingly, since I am not persuaded that the learned Judicial Registrar was wrong in any other respect in his approach to the assessment of compensation, I propose to affirm his award in each case. I certify that the preceding 60 (sixty) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RYAN. Associate: Dated: 17 December 1999 Counsel for the Applicant: Mr B McTaggart Solicitor for the Applicant: Jennings Elliott Counsel for the Respondent: Mr M McDonald Solicitor for the Respondent: Anderson Legal Date of Hearing: 6 and 7 October 1998 Date of Judgment: 17 December 1999