IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VI 1695 of 1994 VICTORIA DISTRICT REGISTRY B E T W E E N: NICKOLAOS MANDROULIAS Applicant A N D SOUTH PACIFIC TYRES (A partnership between Pacific Dunlop Tyres Pty Limited and Goodyear Tyres Pty Limited) Respondent A N D VI 1733 of 1994 B E T W E E N: HONE PIHAMA EDWARDS Applicant A N D SOUTH PACIFIC TYRES (A partnership between Pacific Dunlop Tyres Pty Limited and Goodyear Tyres Pty Limited) Respondent Reasons for Judgment 5 April 1995 PARKINSON JR These matters are applications made pursuant to S170EA of the Industrial Relations Act in relation to the alleged unlawful termination of the applicants' employment. These matters arose out of the same general factual circumstances, and the matters were for convenience heard together on 20, 21 and 22 February 1995. A related matter arising out of the same general factual circumstances was heard on 8 and 13 February 1995. The decision in the latter matter has been published earlier this day. The background and findings of fact in relation to the process which led to the termination of the employment of all of the applicants has also been considered in that decision. For convenience however I have set out in full in this decision the factual background and my findings in relation to the process adopted by the respondent. I deal separately with circumstances and findings applicable to each of the applicants. The applicants seek the following orders: 1. (a) an order declaring the termination of the employer's employment of the employee to have contravened Division 3 of Part VIA of the Industrial Relations Act; (b) an order requiring the respondent to reinstate the employee in employment; and (c) an order that the respondent pay compensation to the employee. 2. Such other order or orders as will put the employee in the same position (as nearly as can be done ) as if the employment of the employee by the respondent had not been terminated. The following witnesses gave evidence in the proceedings: Nickolaos Mandroulias - applicant Hone Pihama Edwards - applicant Robert Dramis - applicants' co-worker Richard Bladen - workers' compensation manager for the respondent Mohamed Elzanaty- manufacturing manager at the respondent's Thomastown plant Mijo Vidic - business centre manager for the respondent Darren James Murphy - shift supervisor for the respondent I turn now to consider the background to the terminations. The respondent manufactures tyres for the local and international market. In this regard it operates three manufacturing plants in Victoria which are located at Footscray, Thomastown and Somerton. The applicants were employed at the Thomastown plant. At the time of the termination of the applicants' employment there were approximately 450 Award and non-Award employees at that plant. The circumstances of the termination of the applicants' employment arise out of the adoption by the respondent in September 1994 of a restructuring program within its workforce at its Thomastown operation. It is appropriate to set out the background to the implementation of the restructuring program. The evidence was that the Australian tyre manufacturing industry was at this time operating in a state of some uncertainty, and was the subject of major pressures as a result of the reduction of tariffs on imported tyres, fluctuation of the value of the Australian dollar and competition from manufacturing bases located in third world countries. In late July or early August 1994 the National Union of Workers (Rubber Workers Division) ("the union") together with the site maintenance union served a claim for an 8% wage increase upon the respondent in respect of its employees at the plant. In the context of the business environment discussed above and the negotiations on the wage claim, a decision was taken by the respondent's management that for the manufacturing operation at Thomastown to remain viable in the long term, restructuring of the operations would need to occur. This restructuring included a necessity to reduce the number of employees. In negotiations which occurred on the claim, the respondent's position consistent with the decision it had taken in relation to restructuring and with the approach it had recently taken at its Somerton site, was that it was prepared to grant a wage increase in return for agreement on restructuring, and in particular certain nominated work practice and productivity improvements. It stated that any productivity improvements would necessarily involve a reduction in the number of staff and consequent redundancies. During August and early September 1994, various discussions were held with the union and the terms of a restructuring agreement were drafted by management of the respondent. The proposed agreement included such terms as the nature of productivity changes required, new work practices and procedures, and the number of redundancies which would arise and the areas within the respondent's operation from which they would be selected. In the production area it was decided that there would be 32 redundancies of approximately 315 employees. Also included in the agreement were improved terms of severance entitlements for those persons made redundant and, subject to certain preconditions as to customer demand, future job security guarantees for remaining employees (Exhibits M4 and M5). The severance entitlements included a one off ex-gratia payment of $5,000.00 to compensate for the involuntary nature of the redundancy, with an additional payment of three weeks pay for each year of service with the respondent, payment of five weeks pay in lieu of notice and payment of accrued and pro-rata leave entitlements including long service leave after three years service. A cash payment was also made for all accrued sick leave. The selection process for redundancies was also described in the document although there was no detail as to its definition or application. It was a term of the agreement that the redundancies would be selected by management. On 12 September 1994 there was a presentation by the company of the proposed agreement as set out in Exhibits M4 and M5 to the unions and their elected workplace representatives. At that presentation the number of positions to be made redundant from various divisions was identified. This identification was of job title or type rather than by individual names or identities, although it is clear from the evidence that the company had already selected which persons in various categories of positions were the persons who were to be made redundant and this was known to the union and to the employees. The process had involved identification of which work was to be rearranged or restructured and then a selection of persons to be consequently redundant, with the selection based upon predetermined criteria. The proposed agreement was formally put to a meeting of the union members, being all of the production workers, on 14 September 1994. This meeting, held in the absence of management, was convened for the purpose of the production employees voting on whether to accept or reject the entire package of the agreement, including restructuring, productivity and work practice improvements, wage increases and a designated number of redundancies. Attendance at the meeting by each shift of production workers was compulsory. The meetings voted overwhelmingly to accept the agreement. The evidence is that Mr Mandroulias and Mr Edwards in fact voted against the adoption of the agreement at the mass meetings. The evidence in this matter was of extensive negotiations and consultation in relation to the furtherance of the operational goals of the respondent. These negotiations took place with representative federally registered organisations consistent with the operation of the Industrial Relations Act 1988. I am satisfied that the implementation of a large scale redundancy program was a bona fide outcome of that process of implementing the productivity and efficiency goals of the respondent. Whilst the evidence of the applicants Mandroulias and Edwards was that individually they had voted against the agreement, the evidence is of a properly implemented and progressed process of industrial negotiations and consultation being undertaken by the employer in circumstances where there was an immediate requirement that there be changes of a substantial nature to its operations. A major issue in the proceedings was the bona fides of the redundancy process itself. Part of the applicants' case was that the entire restructuring process was simply a process of ridding the company of a large number of injured employees. This was an issue which was said to be relevant to both the adoption of the restructuring process in its entirety and the selection of the individuals to be made redundant. I deal with the process in its entirety at this point and will turn to look at the application of the selection criteria in relation to each individual later in this decision. The evidence was that the company still retains a large number of employees who are suffering from work related injuries and illnesses, the majority of whom are on alternative duties, but some of whom are not in attendance at the workplace. Mr Bladen's evidence was that of the 32 production employees who were made redundant he was able to identify 15 who had at some time during the two years prior to their redundancy had suffered some type of work related injury or illness (Exhibit HE1). He was unable to state in relation to the majority of the rest. His evidence was further that there were at end August 1994, 22 persons who were either totally unfit for work or on alternative duties (Exhibit M6). Of those 22 persons, eight persons were made redundant. Of the six persons identified in Exhibit M6 as totally unfit for work at that time, three were made redundant. There was no evidence in the proceedings that the workers compensation records of any of the applicants were taken into account in deciding who was to be made redundant. The evidence was that the respondent continues to employ a large number of employees who have suffered or who continue to suffer a work related illness or injury. I am satisfied that there was no policy decision taken to select employees for redundancy who were or had been suffering from temporary illness or injury. The applicants further relied upon the subsequent conduct of the respondent in December 1994 as evidencing the lack of bona fides of the restructuring and redundancy process. The evidence was that on 10 December 1994 after the redundancy program had been implemented, the respondent advertised for and employed shift work employees in its production area (Exhibit NM3). The applicants contend that these advertisements are relevant to determining the issue of the bona fides of the entire redundancy process. It was the applicants' submission that there was no requirement to restructure or reduce the workforce numbers and this, it is said, is evidenced by the respondent's subsequent conduct in advertising for employees. The applicants submitted that the process was used as an opportunity to rid the respondent of persons who were vocal or active in union participation. In this regard I have considered carefully the evidence relating to union membership and participation and have decided that it reveals no pattern of selection of union representatives which would enables such an inference to be drawn generally in relation to the process. As to the individual selection criteria applied to the applicants, I discuss this aspect in relation to each applicant. Mr Elzanaty gave evidence as to the circumstances of the advertising and the hiring. His evidence was that it arose as a result of an unforcasted and unexpected increase in demand by a major local customer. His evidence was that the respondent was only made aware of this likely increased demand in December 1994. The increase in demand arose out of a decision of a major local car manufacturer to recommence round the clock production. I accept this evidence and I am satisfied that the additional hiring requirement was due to there being an unexpected extension of the demand for product from a local purchaser, a circumstance beyond the control of the respondent and one which was not and could not reasonably have been anticipated by it at the time of the restructuring which resulted in the applicants' redundancies. Whilst it is unfortunate that the respondent did not see fit to consider the rehiring of persons who had been made redundant, this is not a relevant matter for the purposes of determining the bona fides of the redundancy, and consequently the issue of whether there existed a valid reason relating to the operational requirements of the respondent for the termination of the applicants' employment. Having regard to the evidence I am satisfied that the restructuring and redundancy process implemented by the respondent was bona fide and was brought about as a result of the operational requirements of the respondent arising from the various economic factors discussed herein. I find that the restructuring process was not implemented for the purpose of removing from the respondent's workforce persons who were injured or who had a history of workers compensation claims. Nor was it implemented for the purpose of ridding the respondent of employees who were active in participation in union affairs or activities. Having dealt with the general question as to the bona fides of the reason given for the termination of employment, I turn now to consider the outstanding issue of the application of the selection process to the applicants in these matters. The application of the selection criteria - S170DE(2) A key issue in these proceedings is whether an industrial agreement and the endorsement by the respondent's workforce of such an agreement which results in the loss of employment by persons who are the subject of that agreement, is relevant to the determination of questions which arise pursuant to S170DE(1) and (2) of the Industrial Relations Act 1988. The respondent contends that to go behind the agreement by examining the selection decisions made by the respondent would be to impose upon it a great burden and make it impossible for the respondent to enter into meaningful negotiations or industrial agreements of such a nature with the industry unions in the future. Whilst I accept the proposition that going behind the agreement in relation to the matters which are agreed in the course of industrial relations bargaining would be likely to create industrial uncertainty, the provisions of Division 3 Part VIA of the Industrial Relations Act are directed towards the protection of individuals against what may be conveniently described as unlawful termination of their employment. Whilst the court may well be assisted, in determining questions of alleged harshness or unjustness, by the terms of the agreement or by the extent of participation in, or endorsement of, the agreement by persons who are bound by it or who accept some benefit pursuant to it, nevertheless the court is required to look at the individual circumstances of each applicant who comes before it. This is not to accept that the agreement is irrelevant to this process, particularly an agreement which was negotiated in good faith by parties to it or by agents of those parties, and one which, as in this case, is clearly endorsed by the vast majority of individuals affected by it. In my view what is at issue in this matter is not the agreement which was entered into, nor even the selection criteria adopted, but rather the manner in which the selection process was applied to the persons who were selected to be made redundant. The respondent contends that pursuant to the agreement it entered, it was entitled to select the people to be made redundant. Whilst it is clear that no provision was made in the agreement for supervision by the union of the selection process, there was nevertheless an agreed selection criteria endorsed by the production employees themselves. Whether the union was entitled to participate in or review the application of that criteria pursuant to the terms of the agreement is irrelevant to the court's consideration of the fairness of the application of the criteria to the individual applicant. However I am of the view that in circumstances where there is a bona fide redundancy, there is a limit to the extent to which this court ought go behind the application of the selection criteria. In my view that investigation is appropriately a consideration of whether there has been a bona fide application of the agreed criteria. The agreed criteria were set out in Exhibit M5. These were described as being "having the skill, knowledge, aptitude and work performance required to achieve the objectives for Thomastown." Those objectives had been earlier described in Exhibits M4 and M5 as the productivity improvements sought to be achieved by behavioural and attitudinal changes in the workplace. These selection criteria necessarily involved an assessment by the local supervisors of the capacity of individual employees to adapt and to accept the changes in work practices that were to be implemented. It was in my view a process by which the supervisor, in this case Mr Vidic, would make an assessment based upon his knowledge of the employees' work history and having regard to the objectives which had been agreed upon in the restructuring package which were changes to work practices. This was not a process of revisiting past work performance issues and relying upon them to, of themselves, found a decision to terminate the employment. Rather it was a process of selecting those persons who it was felt would be most able to accommodate the future directions and changes in the workplace. In my view the question is not whether the court would have on the material come to a different view as to the outcome, but whether the person responsible for selection, Mr Vidic, failed to apply these criteria to the applicants, or failed to turn his mind to the criteria in selecting or recommending the applicants for redundancy, or whether on the evidence there was not sufficient material based on the criteria which had been determined and agreed, for him to have reasonably come to the selections he did. With these matters in mind I turn now to consider the application of the selection criteria to each of the applicants. Mr Mandroulias: Mr Mandroulias was employed by the respondent in 1987 initially as a tyre sorter and subsequently performed various duties within the respondents' production operation on the night shift. At the time of his termination of employment he was employed on afternoon shift and worked as a trackerman, with responsibility for driving an electric vehicle used to transport tyres in the curing area. His evidence was that he felt his employment had been terminated because he suffered from a work related injury, and that it was on this basis he had been selected by the supervisor Mr Vidic. Mr Mandroulias suffered from a back injury in 1988 which required the performance of light duties on an intermittent basis. His evidence was that he had also suffered from a wrist injury for which he had required some attention. The evidence in this matter does not satisfy me that the continuing injury of the applicant was a matter taken into account by the respondent's supervisor in selecting the applicant Mandroulias. The evidence of Mr Vidic was that the applicant's work performance was taken into account in his selection. To make this assessment Mr Vidic had regard to various matters including the applicant's record of attendance at work and his absenting himself from the production line on a number of occasions without authorisation. Those matters had been discussed with Mr Mandroulias on previous occasions during the course of his employment. Various documents from the applicant's personnel file were tendered which identified that there was an ongoing concern in the respondent as to the manner in which the applicant performed his duties and in particular in relation to his attitude towards his work(Exhibits M15 up to and including M19). I am satisfied that the evidence establishes that there existed sufficient material in this regard for the supervisor to have made a decision based upon it. I am satisfied that Mr Vidic in the selection process had regard to matters which were within the criteria set out in the agreement as to restructuring and redundancy. Having regard to the evidence of these performance related matters, I am not satisfied that the termination of the applicant Mr Mandroulias' employment by the respondent was harsh, unjust or unreasonable. Mr Edwards: The applicant Edwards was employed by the respondent in October or November 1985 in the position of tyre builder. The evidence of the respondent was that Mr Edwards was selected for redundancy on the basis of performance issues, including the number of tyres built by him as compared to other persons during a selected period. Extensive evidence was given in relation to the issue of the applicant's performance in this regard. The evidence identified that the applicant produced the second lowest amount of tyres over the previous six month period of his employment. The respondent's evidence was that Mr Edwards and the lowest producer were both made redundant (Exhibits M2, M11 and M20). The statistical representations in these exhibits were contested by the applicant's counsel on the basis that they failed to take into account or carefully identify all absences from the production line due to union business and due to light duties. The applicant pointed to his average hourly earnings as being indicative of his capacity to build tyres extremely quickly and to perform as one of the best builders. To establish average hourly earnings for the purpose of wages calculations, a pre-designated period of eight weeks in a year is selected and the employee's performance in that period is assessed. This assessment ultimately affects the ongoing income received by the employee. I accept that Mr Edwards was capable of building tyres at the average hourly earnings level. However the assessment for average hourly earnings purposes does little to assist in any assessment of the applicant's overall performance or ongoing future capacities. The decision made by the respondent's supervisor was one related to overall performance directed towards the future operational requirements of the respondent. I am not satisfied that even having regard to the absences of the applicant during the period under question, that the applicant's performance in tyre building would have been so obviously better than other employees as to result in the decision of the supervisor based on performance to have been patently wrong or unreasonable. In addition, Mr Vidic's evidence was that he selected the applicant because of an assessment made by him as to the applicant's attitude towards his work, towards supervision and in particular his supervisor, and other attendance issues. Some of these matters had been recorded on the applicant's personal file. In particular there had been warnings as to the applicant's failure to comply with starting times. Other absences from the workplace during the course of the working day on other than on an authorised basis were also taken into account, and evidence as to these matters was extensively examined in the proceedings. Mr Vidic's evidence was of the applicant absenting himself from the workplace without authorisation (Exhibit M12) and the applicant gave evidence as to the circumstances of that absence from his designated work area and a confrontation which occurred with his supervisor as a result, and he conceded his work history in relation to persistent lateness for work. I am satisfied that Mr Vidic in the selection process had regard to matters which were within the criteria set out in the agreement as to restructuring and redundancy. Having regard to the evidence of these performance related matters. I am not satisfied that the termination of the applicant Mr Edwards' employment by the respondent was harsh, unjust or unreasonable. S170DF (1)(b) and (d) Mr Edwards contends that one of the reasons for the termination of his employment was his participation in union activities and his membership of the gainsharing committee on behalf of the Union. His evidence was that on occasions the negotiations in that committee became heated and he upset management. His evidence was that three of six union representatives on that committee were made redundant. In this context it is the reasons of Mr Vidic for the selection that I am concerned with. The evidence was that the workforce was highly unionised and that meetings between the unions and management occurred at the workplace frequently. Industrial negotiations were a common aspect of the workplace relations, as evidenced by the consultative process adopted in relation to the productivity and restructuring package agreed upon and the various meetings which were held between union members to consider the proposed redundancy agreement. Whilst the meeting referred to was a robust discussion, this is common in industrial relations discussions. Further the evidence was that the applicant was not the only person present at the meeting whose participation was robust. Having regard to the evidence of Mr Vidic in relation to the reasons for selection and having regard to the industrial history of this workplace, I am satisfied that neither the applicant's participation in union activities, nor his acting in the capacity of union representative on the gainsharing committee, were reasons for the termination of the applicant's employment. Procedural Fairness - S170DE(2) I accept the submission of counsel for the respondent that in this case there had been a process of discussion and consultation over a significant period of time in respect of the proposed redundancy. I am satisfied that the process adopted in respect of consultation and information resulted in there being a broad dissemination of information to all persons who may have been affected by the restructuring and redundancy process. Further the process was one which was adopted by a collective vote of all persons likely to be affected by it. The industrial agreement entered into informed the parties to it and those affected by it of its terms and the manner in which it was to be implemented. The evidence of the applicants was that they had been involved in the discussion and information sessions as to both the restructuring and the redundancies and had participated in the collective vote by production workers. I am satisfied that in so far as the redundancy process was concerned, the procedure adopted by the respondent as a result of the agreement of its employees was adequate for the purposes of meeting any requirement for procedural fairness pursuant to S170DE(2) of the Act. Having regard to the above matters I have decided that the respondent had a valid reason for the termination of the applicant's employment, which reason related to the operational requirements of the respondent. I am not satisfied that the termination of the employment of either of the applicants was harsh, unjust or unreasonable. Accordingly I will order that the applications be dismissed. Order: That the applications in VI 1695 of 1994 and VI 1733 of 1994 be dismissed. I certify that this and the preceding twenty (20) pages are a true copy of the reasons for decision of Judicial Registrar Parkinson. Associate: Dated: 5 April 1995 Solicitors for the applicants: Patrick Robinson & Co Counsel appearing for the applicants: Mr J Brett Solicitors for the respondent: Freehill Hollingdale & Page Counsel appearing for the respondent: Mr M McDonald Dates of hearing: 20, 21 & 22 February 1995 Date of judgment: 5 April 1995