C A T C H W O R D S INDUSTRIAL LAW - Termination of Employment - whether termination of employment for a valid reason based on operational requirements - onus of proof - redundancy - selection criteria - compensation. INDUSTRIAL RELATIONS ACT 1988, ss.170EA, 170DE, 170DC, 170EDA, 170EE R.v.Industrial Commission (S.A).; Ex p. AMSCOL[1977] 44 SAIR1202 at 1205 No SI 290 of 1994 TREVOR KENEFICK -V- AUSTRALIAN SUBMARINE CORPORATION No. SI 292 of 1994 PETER DIGGLE -V- AUSTRALIAN SUBMARINE CORPORATION No. SI 293 of 1994 IAN CHEONG -V- AUSTRALIAN SUBMARINE CORPORATION No. SI 294 of 1994 PETER HILL -V- AUSTRALIAN SUBMARINE CORPORATION No. SI 295 of 1994 BRONTE NAGEL -V- AUSTRALIAN SUBMARINE CORPORATION JUDICIAL REGISTRAR: L FARRELL PLACE: ADELAIDE DATE: 20TH APRIL 1995 INDUSTRIAL RELATIONS COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY No. SI 290 of 1994 B E T W E E N: TREVOR KENEFICK -and- AUSTRALIAN SUBMARINE CORPORATION Applicant Respondent AND No. SI 292 of 1994 B E T W E E N: PETER DIGGLE -and- AUSTRALIAN SUBMARINE CORPORATION Applicant Respondent AND No. SI 293 of 1994 B E T W E E N: IAN CHEONG -and- AUSTRALIAN SUBMARINE CORPORATION Applicant Respondent AND No. SI 294 of 1994 B E T W E E N: PETER HILL -and- AUSTRALIAN SUBMARINE CORPORATION Applicant Respondent AND No. SI 295 of 1994 B E T W E E N: BRONTE NAGEL -and- AUSTRALIAN SUBMARINE CORPORATION Applicant Respondent MINUTES OF ORDER Judicial Registrar Farrell 20 April 1995 THE COURT ORDERS THAT: 1 The termination of the employment of Mr Kenefick, Mr Diggle, Mr Cheong, Mr Hill and Mr Nagel by the Respondent contravened Part VIA of Division 3 of the Industrial Relations Act 1988. 2 The Respondent pay to Mr Kenefick compensation in the sum of $9000 within 14 days of today's date. 3 The Respondent pay to Mr Diggle compensation in the sum of $8000 within 14 days of today's date. 4 The Respondent pay to Mr Cheong compensation in the sum of $9000 within 14 days of today's date. 5 The Respondent pay to Mr Hill compensation in the sum of $4500 within 14 days of today's date. 6 The Respondent pay to Mr Nagel compensation in the sum of $6500 within 14 days of today's date. NOTE: Settlement and entry of Orders is dealt with by Order 36 of the Industrial Relations Court Rules INDUSTRIAL RELATIONS COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY No. SI 290 of 1994 B E T W E E N: TREVOR KENEFICK -and- AUSTRALIAN SUBMARINE CORPORATION Applicant Respondent AND No. SI 292 of 1994 B E T W E E N: PETER DIGGLE -and- AUSTRALIAN SUBMARINE CORPORATION Applicant Respondent AND No. SI 293 of 1994 B E T W E E N: IAN CHEONG -and- AUSTRALIAN SUBMARINE CORPORATION Applicant Respondent AND No. SI 294 of 1994 B E T W E E N: PETER HILL -and- AUSTRALIAN SUBMARINE CORPORATION Applicant Respondent AND No. SI 295 of 1994 B E T W E E N: BRONTE NAGEL -and- AUSTRALIAN SUBMARINE CORPORATION Applicant Respondent BEFORE: JUDICIAL REGISTRAR FARRELL PLACE: ADELAIDE DATE: 20TH APRIL 1995 REASONS FOR JUDGMENT These Applications pursuant to Section 170EA of the Industrial Relations Act 1988 follow the termination of the employment of the Applicants by the Respondent. The Applicants claim that the termination of their employment was unlawful. Each Applicant seeks compensation. I was asked to rule in relation to the issue of the onus of proof placed on the employer in respect to this matter. Essentially I was asked to decide whether the employer had the onus of proving a valid reason with respect to each Applicant or whether it had only to prove that it had a valid reason with respect to the need for the redundancies, the number of redundancies, and the classification of persons whose positions were to be made redundant. I ruled that the employer has the onus of establishing a valid reason in respect of each employee terminated and that included proving that the employer had a valid reason for choosing each employee for redundancy. The effect of that ruling was that the employer put its evidence to the Court in respect of those issues prior to the Applicant putting its case. In addition I made an Order in relation to each of these matters that evidence in each matter be evidence in every other matter. I find the facts as follows. The Applicants were employed in the hull shop of the Respondent as welders. There were approximately 170 welders employed in the hull shop of the Respondent at Osborne. Each Applicant received severance payments in accordance with the Enterprise Bargaining Agreement which had been certified by Commissioner Lewin of the Australian Industrial Relations Commission on the 20th January 1994 following extensive negotiations between the Unions and the Respondent. Three of the Applicants, Mr Hill, Mr Diggle and Mr Nagel had their employment terminated on the 7th December 1994. Mr Cheong and Mr Kenefick were advised on the 7th December that no alternative duties were available for them and they were given notice that their employment would be terminated as from the 4th January 1995. The Applicants' employment was terminated following the release of the Federal Government's Defence White Paper on 30 November 1994. The White Paper included an announcement that the submarines known as 07 and 08 would not be considered before 1996. Following the release of the White Paper Mr Hans Ohff, Managing Director of the Respondent, made a public statement that redundancies would occur at the Submarine Corporation. The employer lead extensive evidence from Mr Bews, the General Manager of the Respondent, and to a lesser extent from Mr Dawson, the Hull Manager and Mr Hickey, a Senior Foreman in the Hull Shop, regarding the need to reduce the size of its work force. It is my view that the employer has only to show that it no longer wished the job the employees had been doing to be done by anyone (Bray C.J. R.v.Industrial Commission (S.A).; Ex p. AMSCOL[1977] 44 SAIR1202 at 1205). The Applicants could only attack the Respondent if it did not honestly intend to reduce the size of its work force. There was no attack on the Respondent on that basis. The Applicants did attack whether the Respondent needed redundancies to be carried out as early as it did but in my view that goes to the issue of whether or not the termination of these Applicants was harsh unjust or unreasonable and not to the issue of whether the employer had a valid reason for making redundant some of the jobs being done at it's Osborne plant. The employer also had to prove that it had a valid reason for choosing these particular employees. The employer had no established selection criteria for redundancies in existence at the time the decision to proceed with the redundancies was made. Mr Bews formulated the criteria as follows:- 'Skills, flexibility, commitment, time keeping, attitude, performance and supervisory requirements'. Mr Dawson, Mr Hickey and Mr Hartley had the job of applying the criteria to welders in the Hull Shop. Mr Dawson and Mr Hickey gave evidence of using a list referred to as a "disciplinary list" that became exhibit R7. That list had been in existence for at least 8 months prior to the termination of these Applicants. Every person whose employment was terminated had their name on that list. I have no doubt that each of the Respondent's witnesses did all that was required of them as honestly as they could. However I am not satisfied that these broad ranging criteria were capable of being applied objectively. The priority and weight to be given to each criterion was not clear. There was no evidence of an objective measure for the items of 'attitude' and 'commitment.' The pre-existing list (R7) did not relate to the criteria. In my view the employer has failed to demonstrate that, in accordance with Section 170DE(1) of the Act, it had valid reasons for choosing to terminate the employment of these Applicants rather than any other welders in the hull shop. If I am wrong about the employer bearing the onus of proof in establishing fair selection criteria and this matter does in fact go to the issue of whether or not the termination of employment of these Applicants was harsh, unjust or unreasonable then I would have found that the termination of the employment of these Applicants was harsh, unjust or unreasonable in accordance with Section 170DE(2) of the Act. The Applicants' representative argued that termination of their employment was in breach of Section 170DC of the Act because the reasons for selection of the employees as set out in the Affidavit of Mr Bews and in the evidence of the employer's witnesses related to the conduct or performance of the Applicants. It was not in dispute that the Applicants had no opportunity to respond to allegations about their conduct or performance. Their employment was terminated without any reason being given to them other than that there was a need for redundancies. In my view if any part of an employer's criteria for selection of employees for redundancies relates to those employees' performance or conduct then the employees must be given the opportunity to respond to those allegations about their conduct or performance prior to dismissal. Counsel for the Respondent argued that the termination of these employees did not relate to their conduct or performance but rather that what occurred here was a comparison between employees all of whom were satisfactory. The employees who were not selected were more satisfactory. This reasoning is faulty in my view. In my view the termination of these Applicants breached S.170DC of the Act. The Applicants do not seek reinstatement. I regard compensation as the appropriate remedy in these matters. In assessing the amount of compensation to be paid to each of the Applicants I have taken into account the amounts they have earned since their employment was terminated, the nature of that employment, and the payments that they received from the employer that relate to payment for public holidays subsequent to the termination of their employment. I have taken into account their age and matters raised in their evidence. I have had regard to the possibility that other events may have brought about the end of their employment with the respondent. Finally I have taken into account that it is probable that they would not have been employed by the Respondent beyond June of 1996 in any event. In respect of the two employees who were in receipt of workers' compensation payments I have also taken into account that they have lost the chance to be fully rehabilitated in the work environment, that they now seek employment from a position of disadvantage and that their rate of weekly payment of compensation is 20% less than the wages they would otherwise have earned. I have not taken into account in calculating the termination payments in respect of these employees the severance payments received pursuant to the Enterprise Bargaining Agreement. In my view those payments form part of a negotiated package of wages and conditions to which the applicants were entitled regardless of whether their employment was terminated unlawfully. They form part of the give and take of such negotiations. In this case it was not argued that the redundancy payments of themselves were inadequate. Rather it was the lawfulness of the terminations that was challenged and compensation ordered therefore reflects that issue rather than the adequacy of redundancy payments. I have however taken into account the monies paid for the additional public holidays that were agreed by the employer at the time of the termination of these employees' employment. Those payments are of a different nature to the payments made pursuant to the Enterprise Bargaining Agreement. I therefore award compensation to the Applicants as follows:- To Mr Kenefick the sum of $9,000. To Mr Cheong the sum of $9,000. To Mr Diggle the sum of $8,000. To Mr Hill the sum of $4500. To Mr Nagel the sum of $6500. I certify that this and the preceding 3 pages are a true copy of my reasons for judgment. COUNSEL FOR THE APPLICANTS: Mr S Blewett COUNSEL FOR THE RESPONDENT: Mr D Quick QC DATES OF HEARING: 27th, 28th, 29th, 30th & 31st March 1995