IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VI 1732 of 1994 VICTORIA DISTRICT REGISTRY B E T W E E N: DIMCE JANCESKI 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 This matter is an application pursuant to S170EA of the Industrial Relations Act 1988 in relation to the alleged unlawful termination of the applicant's employment. The applicant seeks 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 1988; (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: Dimce Janceski - the applicant Michael Veljanovski - the applicant's co-worker Hone Edwards - the applicant's co-worker and member of the gainsharing committee Richard Mikolajczyk - Human Resources manager Mijo Vidic - business centre manager at the Thomastown plant of the respondent Robert Arthur Crute - process control manger at the Thomastown plant Mohamed Elzanaty- manufacturing manager at the Thomastown plant I turn now to consider the background to the termination of the applicant's employment. 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 applicant was employed at the Thomastown plant. At the time of the termination of the applicant's employment there were approximately 450 Award and non-Award employees at that plant. The circumstances of the termination of the applicant's 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. There were to be 63 redundancies of a total workforce of 450 employees. 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 W1 and MG3). 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 W1 and MG3 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 on 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 of Mr Janceski was that he voted in favour of the agreement. 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. 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. The applicant 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 MG 11).The applicant contends that these advertisements are relevant to determining the issue of the bona fides of the entire redundancy process. The applicant submitted that the process was used as an opportunity to rid the respondent of persons who were vocal or active in union participation. Mr Elzanaty of the respondent 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 the time of the restructuring which resulted in the applicant's redundancy. 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 applicant's employment. Having regard to the evidence I am satisfied that the restructuring and redundancy process implemented by the respondent was bona fide and 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 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 applicant 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 is appropriately a consideration of whether there has been a bona fide application of the agreed criteria. The agreed criteria was set out in MG3. 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 W1 and MG3as 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 decision maker, in this case Mr Elzanaty, 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, in this case Mr Elzanaty, failed to apply these criteria to the applicant, or failed to turn his mind to the criteria in selecting or recommending the applicant 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 selection he did. With these matters in mind I turn now to consider the application of the selection criteria to the applicant. Criteria of selection of Applicant - S170DF(1)(b) and S170DE(2) The applicant was employed by the respondent on 10 November 1980 at its Thomastown operation. He commenced employment as a tyre builder building tyre carcasses, and remained in that position until 1985 when he was appointed to the position of tyre monitor. In 1989 he was promoted to the position of lead monitor and remained in that position until the termination of his employment on 16 September 1994. In late 1993 the applicant became a shop steward representing the National Union of Workers (Rubber Workers Division) in the production area, and also on the gainsharing committee. During the course of his employment with the respondent the applicant gained experience on all of the machinery in the production area and had extensive knowledge of the respondent's production operations. The applicant's evidence was that he too voted for the restructuring agreement, notwithstanding that he had full knowledge of the fact of redundancies arising out of it. The applicant's case is that he was selected for redundancy when on an objective and fair application of the selection criteria he ought not to have been so selected. It is further the applicant's contention that he was selected because of his union activity. The applicant was employed in Production Area B as a lead monitor. The evidence was that Mr Elzanaty was in consultation with the factory council responsible for selecting the applicant as a person to be made redundant. The decision to terminate was made by management on the basis of this advice. It is the criteria for selection applied by Mr Elzanaty and his reasons for the selection which are therefore of relevance to determining the issues in these proceedings. The evidence in the proceedings was that the applicant and Mr Elzanaty and others representing both the unions and the employer had been involved in discussions earlier in 1994 in relation to the monetary outcomes of a local agreement. These discussions became quite heated particularly as between the applicant and Mr Elzanaty. The applicant's evidence was that after that date Mr Elzanaty's attitude towards him changed and that this dispute between them was a reason or a part of the reason for the termination of his employment by the respondent. In this regard the applicant refers to and relies upon S170DF(1)(b). He says that he was engaged in union activity authorised by the employer and as a result of that activity he was selected for redundancy. Mr Elzanaty denied that this activity played any part in the decision to terminate and stated that he was made redundant pursuant to the agreed selection criteria. 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 of 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. Mr Veljanovski gave evidence that he had been told by a manager of the respondent that the applicant's termination was for reasons other than redundancy. This was not however expanded upon by the manager. The witness was unable to recall which manager it was who made the comment although he was able to recall when and where it was made. The persons present on that occasion all denied making such a comment. I therefore do not find this evidence helpful in the determination of this aspect of the proceedings. Having regard to the circumstances of the termination of the employment, the evidence of Mr Elzanaty as to the reasons for selecting the applicant, and the general history of union representation and involvement in the plant, I am satisfied that the union activity of the applicant was not the reason or one of the reasons for the termination of the applicant's employment by the respondent. I therefore find that the respondent did not contravene the provisions of S170DF(1)(b) of the Act. A further matter relied upon by the applicant was that there was a failure to apply the criteria for selection adopted for the restructuring process. The evidence was that the applicant's overall performance in the position, including matters such as his attitude to work changes, was taken into account in his selection, and that in selecting the applicant the respondent's supervisor had an eye to the future requirements of the respondent's operation. This overall performance may include many matters and may include the application by the respondent of a subjective assessment of the applicant's capacity vis-a-vis other workers. However this assessment must be undertaken with regard to the criteria for selection and be reasonable having regard to the material upon which it is based. In this case, I am not satisfied this was the case. Rather I am of the view that the respondent took into account matters other than those matters set out in the agreement. It was clear upon cross-examination of Mr Elzanaty that he had misunderstood the meaning and contents of a psychological appraisal he had relied upon to assess the applicant's position. This misunderstanding occurred as a result of advice he had received in relation to a confidential skills assessment, being a psychological assessment of the applicant (Exhibit MG13). To enable a determination of whether the applicant met the criteria he had regard to this confidential skills assessment and skills analysis, which had been done in respect of the applicant when he had applied some six months earlier for a promotion. The advice received by Mr Elzanaty from a Mr Martin Penrose was that the report advised that the applicant was inflexible and uncooperative. Mr Elzanaty's evidence was that he did not actually look at the report, but relied upon the advice of Mr Penrose. The evidence is that nowhere in the report could it be construed that the applicant is inflexible and uncooperative. Rather than indicating this, the report indicates that the applicant would be receptive to change and progress. Further it is apparent that the document itself cautions against its use for purposes other than that for which it was originally produced, without the consent of the applicant. Whilst there was evidence of some other matters being relied upon as founding the basis for the conclusions drawn as to the suitability of the applicant, I am of the view that the principal matter relied upon by Mr Elzanaty in selecting this applicant was the incorrect information arising out of the report which was exhibit MG13. I am satisfied that the evidence did not identify a sufficient basis upon which, having regard to the selection criteria, the respondent could have reasonably selected the applicant for redundancy. I have therefore decided that the application of the selection process to this applicant was harsh, unjust and unreasonable. 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 evidence of the applicant was that he 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. Remedy - S170EE In view of my finding as to the unreasonableness of the termination I have decided to order that the applicant be reinstated by the respondent by appointing him to another position on terms and conditions no less favourable to that which he was employed at the time of the termination of his employment. Whilst this is a situation of redundancy, the information relied upon to select the applicant was on any view of the evidence, wrong. I do not find that it is impracticable to order the reinstatement of the applicant, notwithstanding that this was a large scale redundancy program. This is a large company and it is possible that vacancies may occur from time to time which require to be filled, but more importantly to this conclusion, the evidence was that production demands had increased subsequent to the restructuring program and this is confirmed by the advertisements discussed earlier in this decision. I also propose to order that the applicant be paid all remuneration lost between the date of the termination of the employment and the date of this order. Any amounts paid to the applicant by way of redundancy payment shall be reimbursed to the respondent or set off against any repayment of remuneration. The orders of the court shall be: 1. That in terminating the employment of the applicant, the respondent contravened Division 3 of Part VIA of the Industrial Relations Act 1988. 2. That the applicant be reinstated to another position on terms and conditions no less favourable to those previously enjoyed by him. 3. That the respondent pay to the applicant an amount equivalent to that which he would have earned had his employment not been terminated. 4. That the amount of redundancy payment paid to the applicant be set off against the amount ordered to be paid in order 3 and that any balance amount outstanding from the redundancy payment be repaid by the applicant to the respondent. 5. Subject to repayment by the applicant to the respondent of any amounts paid in lieu of annual leave, sick leave, long service or other leave entitlements, that the period between the date of termination and the date of reinstatement be treated as continuous employment for all purposes. 6. Leave is reserved to the parties to apply in relation to any difficulties which may be incurred in relation to the implementation of these orders. 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 applicant: Patrick Robinson & Co Counsel appearing for the applicant: Mr R McGarvie Solicitors for the respondent: Freehill Hollingdale & Page Counsel appearing for the respondent: Mr G Watson Dates of hearing: 8 & 13 February 1995 Date of judgment: 5 April 1995