Colin Nicholas Mifsud, Paul Anthony Filippi, Paul Joginder and Muininder Sandhu v Pacific Dunlop Tyres and Goodyear Tyres (trading as South Pacific Tyres) [1995] IRCA 501

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2041 of 1994 B E T W E E N: Colin Nicholas MIFSUD Applicant A N D PACIFIC DUNLOP TYRES PTY LTD and GOODYEAR TYRES PTY LTD (t/as South Pacific Tyres) Respondent VI 2144 of 1995 B E T W E E N: Paul Anthony FILIPPI Applicant A N D PACIFIC DUNLOP TYRES PTY LTD and GOODYEAR TYRES PTY LTD (t/as South Pacific Tyres) Respondent VI 1890 of 1995 B E T W E E N: Paul JOGINDER Applicant A N D PACIFIC DUNLOP TYRES PTY LTD and GOODYEAR TYRES PTY LTD (t/as South Pacific Tyres) Respondent VI 1891 of 1995 B E T W E E N: Muininder SANDHU Applicant A N D PACIFIC DUNLOP TYRES PTY LTD and GOODYEAR TYRES PTY LTD (t/as South Pacific Tyres) Respondent REASONS FOR DECISION 19 September 1995 PARKINSON JR This decision is in relation to applications made pursuant to S170EA of the Industrial Relations Act 1988 by Messrs. Sandhu, Joginder, Filippi and Mifsud. Each of the applications was filed out of time. Leave to proceed out of time was granted in other proceedings to Mr Sandhu and Mr Joginder. No issue was taken by the respondent with the late filing by Mr Filippi and Mr Mifsud, however, in so far as it is necessary to do so, leave to proceed out of time is granted. The circumstances of the terminations were that the applicants were each selected by the respondent for redundancy during the course of what was submitted by the respondent to be a broad scale restructuring program implemented by it as a result of negotiations and industrial agreements as to wages and other matters. Mr Mifsud was employed as a stocker and had been employed by the respondent for eighteen months. Mr Filippi was employed as a linesman and had been employed for five years. Mr Joginder was employed as a tyre sorter and had been employed for twelve years. Mr Sandhu was employed as a tyre sorter and had been employed for six years. The applicants' submissions contest the validity of the process of restructuring adopted by the respondent and the bona fides of the alleged operational requirement that there be termination of employment as a result of redundancy. There were a number of aspects to the proceeding involving consideration of the operation of S170DE(1) and (2); S170DF(1)(a) and (f), and S170DC of the Act. At the conclusion of the evidence on 14 July 1995 I raised questions as to the application of the legislation in circumstances of a bona fide redundancy situation. Counsel addressed those matters in the course of their written submissions filed in accordance with directions made at the hearing. It is appropriate to set out those matters raised. 1. How do S170DF(1)(a) and (f) operate in the context of a retrenchment? 2. If a respondent is selecting persons for retrenchment, all other things being equal, what criteria is the respondent expected to use? 3. How does an employer select or apply selection criteria in a situation where it is not terminating employment for misconduct, but the selection criteria itself contemplates consideration of such matters? 4. Do the same requirements pursuant to S170DC apply where the employment is not being terminated for misconduct or work performance difficulties, but they are matters relied upon in selection for redundancy? I have had regard to the written submissions dealing with these issues and I deal with each of these considerations during the course of this decision. I turn now to consider the issue of the validity of the reason for the termination of the employment, and in particular the evidence as it applies to the stated reason of operational requirement. S170DE(1) - Valid Reason of Operational Requirement The evidence was that the respondent decided it was necessary to restructure its operation as a result of the anticipated demands for future production, and consequent upon wages claims being made. Mr Elzanaty's evidence was that as a result of anticipated production level decline, and cost pressures as a result of importing of tyres, the respondent needed to reduce the actual production cost of each tyre. This could best be done by the implementation of various efficiency measures, reorganising the workplace and reducing the number of employees. I accept this evidence. I am satisfied that there was a bona fide decision by the respondent to restructure its operations, and that that decision was made in the context of the industrial negotiations between the respondent and the industry union, having regard to the ongoing productivity improvements and likely production levels necessary to be achieved at the relevant time. In contesting the validity of the reason for the terminations, and in particular the bona fides of the redundancy, the applicants pointed to advertisements placed by the respondent for production workers in December 1994 and July 1995, as a result of which, the evidence was, the respondent engaged a small number of additional production workers. In my opinion a decision to employ additional employees in a workplace which had recently been the subject of a large redundancy exercise gives cause to examine the entire circumstances of the redundancy critically. In this case, however, I accept the evidence of Mr Elzanaty of there having been unforseen subsequent events involving production changes at Ford Australia, which led to a need to employ a small number of additional production persons some time after the large scale redundancy program had been implemented. I have further had regard to the evidence of Mr Bladen, the respondent's workcare manager at the relevant time, to the effect that a large number of employees who either had been suffering, or continued to suffer, from work related illnesses and injuries were not selected for redundancy. I accept that there was a bona fide restructuring exercise, and am further satisfied that it was not an exercise undertaken or initiated with a view to or for the purpose of ridding the employer of employees who were injured or suffering from ill health, or for any of the reasons set out in S170DF of the Act. I therefore find that the reason for the termination of the employment of the applicants was for valid reason being the operational requirements of the respondent. I turn now to consider the issues raised in respect of the application of S170DF in so far as it relates to the application of selection criteria. S170DF (1)(a) and (f) The applicants in these matters allege that the termination of their employment was nevertheless brought about by their selection as a result of the application of improper or invalid selection criteria. Mr Joginder and Mr Sandhu submit that the reason for their selection related to the fact that they were not of Macedonian nationality. This claim raises the operation of S170DF(1)(f) of the Act. Mr Filippi and Mr Mifsud submit that the reason for their selection was because of their temporary absence on account of illness or injury. This more specific aspect of the application of S170DF(1)(a) was also a part of the case of Mr Sandhu. The respondent denied that any of these matters had been a part of the selection criteria and said that the selections were based upon an application of the selection criteria by the relevant supervisor and in a bona fide manner. The question which arises is whether, once it has been established that the termination of employment was for valid reason, S170DF operates at all in respect of the consideration of the application of, or adoption of, selection criteria. In my view S170DF uses language which is not confined to the principal reason but may also extend to include matters taken into consideration even if they formed only part of the reason for the actual selection of the applicants in this matter. If in the selection process part of the reason for the selection was as a result of a matter which is proscribed by the operation of S170DF then the termination of the employment would not be for valid reason, despite the bona fides of the operational requirement. This view is consistent with the approach of Chief Justice Wilcox in Kenefick & Ors and AFMEU v Australian Submarine Corporation Pty Ltd, Industrial Relations Court of Australia, 11 August 1995, as yet unreported, where his Honour observed at page 19: An employer may have more than one reason for terminating an employee's employment. If so, a provision of Subdivision B of Division 3 of Part VIA that relates to a reason will apply, notwithstanding that a different provision applies to another reason. The termination will be lawful only if every reason complies with the pertinent statutory provisions. However, this principle is not relevant to the present cases. There were not two reasons for termination of the present applicants' employment. 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 this context, I turn now to consider the issue of the application of S170DF(1)(f) to the circumstances of this matter. Mr Sandhu and Mr Joginder are both of Indian descent. A large number of employees with whom they worked were described as being of Yugoslavian descent; that is, from the former State of Yugoslavia, encompassing states including Macedonia, Serbia and Croatia. No distinction was made between any ethnic group for the purposes of these proceedings, and for convenience of description I refer to the class of employees as Yugoslavian. Mr Vidic gave evidence as to the matters he took into account. His evidence was that he did not give preference to or retain persons of Yugoslavian origin over those of other ethnic backgrounds. The respondent's personnel officer, Mr Bimrose gave evidence as to the birthplace of all employees made redundant, together with the number of persons from various ethnic backgrounds made redundant. The evidence identified at least a statistical consistency between the proportion of persons selected for redundancy from a particular ethnic group and their numerical representation in the workplace, both before and after the redundancies had been effected ( Exhibit R19). There was no imbalance towards or against any particular ethnic group, and whilst I appreciate that there are limits to the usefulness of statistics such as these, the materials at least indicate that there was a proportionate impact. The applicant Mr Sandhu's evidence was that certain incidents during the course of the employment suggested that Mr Vidic had a negative attitude towards persons of Indian descent. The first related to Mr Vidic having allegedly said words to the effect of "he didn't like to see two Indians working together". The second related to the moving of one of Mr Sandhu's colleagues away from his work area, although the evidence is unclear at best as to the reason it is alleged that this occurred. Neither of these matters were directly put to Mr Vidic, so the court had no opportunity to consider his evidence as to this matter. In so far as the first incident is concerned, it was apparent from the evidence of Mr Sandhu that the comment, indefensible as it is, was made by Mr Vidic in anger and frustration during a line breakdown sometime in February 1994. As I appreciated the evidence of Mr Sandhu, he had an appreciation that the comment was made in a fit of frustration. As to the second matter, I am not satisfied that the evidence establishes anything other than that the changes were made as a result of the production requirements of the respondent and the need to accommodate personnel requirements. The onus rests with the respondent to establish that the termination of the employment was not for the reason of the applicants' race. The evidence in the proceeding, together with the cross examination, focused upon the question of sick leave and absence from work of these applicants. Mr Vidic gave extensive evidence as to the matters he took into account in relation to Mr Sandhu and Mr Joginder. This evidence included matters relating to the absences from work and the circumstances of such absences. Whilst the onus rests with the respondent to establish that the termination, (in this case, read: selection for termination) of the employment was not for the reason of race, it is difficult in this case to make such a finding. This is because notwithstanding the incidents of derogatory comments discussed earlier, the applicants themselves say that the reason was not to do with being Indian, but rather for not being Macedonian. The evidence shows that there were a number of persons of Yugoslavian origin who were made redundant in the production workforce, and in particular in B Division where Mr Vidic was responsible for the selections. Finally, the evidence of the respondent establishes that there were alternative reasons for the selection which were not related to the race of Mr Sandhu and Mr Joginder. On balance, having regard to all of these factors, I am satisfied that the applicants were not selected for redundancy on the basis of their not being of Yugoslavian background. I do not accept that this formed any part of the decision of Mr Vidic to select the applicants Mr Sandhu and Mr Joginder for redundancy. I turn now to consider the application of S170DF(1)(a) to the circumstances of this matter. In my view, the selection of the applicants was made as a result of absences from work which, in the view of the respondent as indicated by various warnings and counselling sessions, reflected a questionable attendance record. I am satisfied on the basis of the reasons given that the selection was not made because of a temporary absence on account of illness or injury. I discuss the nature of this aspect of the selection later in this decision. However, I am satisfied that the applicants were not selected for redundancy on account of a matter proscribed by S170DF(1)(a) of the Act. S170DE(2) - Issues as to the selection criteria actually adopted Having regard to my findings earlier herein that the reason for the terminations was operational requirement, and that this was the only reason, it is appropriate to set out my approach to the assessment of the validity of the selection criteria and its application. In an earlier decision involving this respondent and this redundancy process I have discussed the approach which I am of the view is appropriate to adopt in relation to selection criteria. This is set out as follows: In my view what is in 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 persons who were selected to be made redundant.... ...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.... 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: Nikolaos Mandroulias and Hone Pihama Edwards v South Pacific Tyres (A Partnership between Pacific Dunlop tyres Pty Ltd and Goodyear Tyres Pty Ltd), Parkinson JR, 5 April 1995, unreported. Mr Vidic was the supervisor responsible for the selection of the persons to be made redundant in the areas where the applicants were employed . He was the process coordinator. Mr Vidic was a person who was familiar with the day to day operations of the workplace and familiar with the individual employees whom he was required to assess and ultimately select for redundancy. He had daily contact with the workplace and the day to day work of employees in it. He was a long way from being a manager with no hands on, or actual experience or knowledge of the employees' day to day performance. I do not accept, as was implicit from the cross-examination, that the failure in this case to consult the line supervisors as to the individual selections was a flaw in the process which would constitute the terminations as harsh, unjust or unreasonable. The evidence was that Mr Vidic was briefed by Mr Elzanaty as to the criteria for selection, and that he then set about making the unhappy selection. This is an onerous responsibility to give to a supervisor in any workplace, and it is easy in retrospect to criticise the manner in which the task was performed or to find one or more aspects which may not be entirely satisfactory. Perhaps it may have been more prudent for the respondent's managers to ensure that the selection process was assisted by another person. However, this does not mean that in failing to reach the standard of perfection in the task, that its outcome is necessarily then described as harsh, unjust or unreasonable. Mr Vidic's approach to selection was criticised on the basis that he had failed to apply the criteria set out in Exhibit R22. I do not agree that this is the case. Whilst it is clear that Mr Vidic is not articulate and has some difficulty with expressing himself, I am not satisfied that his evidence revealed a failure to understand or to apply the selection criteria. Mr Vidic's evidence was not that he deliberately ignored the selection criteria, but that he had formed a view that in terms of the actual skills required to perform the work, all employees had the necessary skill level. His evidence was that all employees were capable of performing at a particular skill level, however, in a nutshell, his assessment was that not all of the employees were motivated to the same degree as others. This is what his evidence as to work performance was directed towards, and although he was not able to articulate this clearly in his evidence, nevertheless that in my view was its effect. Mr Vidic informed the court that as part of the process of selection he reviewed the personnel files of all of the employees he was considering. In doing so he had particular regard to any warnings recorded thereon, and he also had regard to the level of absence of the particular employees. His evidence was that in respect of the latter he was particularly concerned to identify regular attendance difficulties, and that the personnel files of the applicants contained material upon which he relied in relation to one or other of each of these matters. In so far as the absenteeism is concerned, this was characterised by counsel for the applicants as selecting employees on the basis of temporary absence from work on account of illness or injury. However, I am of the view that the termination of the employment was not in this case on account of a "temporary absence" because of illness or injury, but rather because of an ongoing pattern of absence. In this regard I agree with the submissions of counsel for the respondent (at page 7.17 of the written submissions) that: "No single absence on sick leave had any influence upon the decision to terminate. Rather, it was the examination of the totality of the records which was relevant." What was being looked at was the issue of absence from work in particular patterns, and the overall history of attendance of the employee. My observations above are pertinent in relation to each of the applicants in this aspect of the proceeding, but I turn now to consider the factors which were relied upon by Mr Vidic to select the applicants in turn. The following matters were identified as being relevant to the decision to select the applicants. Mr Mifsud: Mr Mifsud was the subject of a written warning in March 1994 for alleged sleeping at the workplace, and whilst there is some dispute in the proceeding as to the actual circumstances, the notes of the warning meeting indicate that there was an acknowledgment of wrongdoing on his part. The evidence establishes that he was again warned in July 1994 for being absent from his workplace. Mr Filippi: Mr Filippi had also been warned in relation to absenteeism. His level of absenteeism had earlier been explained by him as being due to personal problems. There was also an incident in February 1994 relating to absence from duty at the plant without explanation during the course of which he tore up a sick leave form presented to him by his supervisor for completion. Mr Joginder: The evidence was that Mr Joginder was absent from work for a significant period of time during the period between January 1993 and September 1994. Further, the evidence was that account was taken by Mr Vidic of Mr Joginder having been absent from work for the purpose of working in his own business during that period. Mr Sandhu: The evidence was that Mr Sandhu had been counselled by his supervisor once in 1992 and twice in 1993, with a warning in November 1993 being extended as a result of concerns as to the patterns of his absence. The evidence established on the face of the records that he was frequently absent on Mondays and Fridays, and on days following rostered days off. The evidence was that it was the pattern of the absences, and the warnings in this regard that were of significance in Mr Vidic's decision. There was in my view material before Mr Vidic which, when taking into account the selection criteria and the objectives which the company sought to achieve in terms of its future workforce, would establish a basis for the selection of the applicants for redundancy. This process has been described by counsel for Mr Sandhu and Mr Joginder as being one of looking for something to pick on, or looking for any faults that could be found, and in one sense that is the truth of the matter when a selection such as this has to be made. It is unpleasant, and its impact upon those persons who are selected is harsh and painful. However I am not satisfied, as I must be, that in the circumstances the selection of the applicants, as opposed to any other employee, was harsh, unjust or unreasonable. I am satisfied that in the circumstances there was sufficient material based upon the criteria established for selection for Mr Vidic to reasonably come to the selections he did. Application of S170DC to redundancy The applicants submit that in view of there being taken into account matters of conduct and complaints recorded in their personnel files, they ought to have been given an opportunity to be heard in accordance with the requirements of S170DC. In Kenefick, cited above, the operation of S170DC was considered in the context of a redundancy situation. The following passage extracted at page 20 of the decision is of assistance to me in this regard: There are difficulties in applying s.170DC to the situation that confronted Mr Bews in early December 1994. There were then no allegations against any of the people nominated by Mr Dawson. There had been problems about some of them. But they were listed by Mr Dawson because, in his opinion, they did not meet Mr Bews' criteria as well as others. If there was an allegation current on 6 December, it was that. This was not an allegation about conduct or performance but an assessment of relative merit. It would be difficult for an employee to rebut an assessment of that nature. ....In a genuine redundancy situation, it is not unreasonable for an employer to determine who shall go by considering its own needs, rather than accepting all who volunteer. With respect to the contrary opinion of the Judicial Registrar, my view is that S170DC has no application to these cases. I consider that his Honour's observations in that case are equally applicable to the circumstances of these proceedings. In this case, the reason for the termination is redundancy. The evidence was that in the circumstances the respondent was looking to retain those employees whom it thought most suited its ongoing and future requirements. This is consistent with the documentation provided to the union and to the employees. The selection criteria was one part of an overall strategy of improvement of productivity and competitiveness, and this is clearly established by reference to Exhibit A1. The termination of the employment was brought about as a result of the operational requirements of the business. It was not brought about as a result of the conduct of the employees, although it was necessary for the respondent to make a selection of the employees whom it thought were most suited to the restructured work environment. In this respect I refer to the comments of the Chief Justice in Kenefick at page 26, wherein his Honour said: "Although all the welders in the trade shop has acceptable trade qualifications, some handled these changes better than others. The achievement of maximum productivity being a matter of critical importance to ASC, the company cannot fairly be criticised for selecting criteria designed to maximise the productivity of its retained employees rather than a formula, such as "last-on, first-off", that might cost it some of its best employees." S170DE(2) - Procedural Fairness The selection criteria adopted in this case was adopted in the course of an industrial negotiation, and was the subject of an industrial agreement voted upon and endorsed by the majority of the members of the respondent. Further, the evidence shows that the workplace is a unionised workplace with all production and maintenance workers being members of the relevant industry or enterprise unions, being the National Union of Workers and the Australian Manufacturing Workers Union. The process adopted which led to the termination of the employment, together with the provision of information to employees, occurred in the context of the agreement negotiated between the parties. The various local union representatives were provided with detailed information as to the respondent's proposals for restructuring. This occurred by way of information sessions and meetings. After this stage of discussion and consultation with the representatives, the process adopted was one of information provision by way of meetings held by the unions with their members, where the material contained in Exhibit A1 was discussed. The meetings were scheduled of all production shifts, and in attendance at those meetings were all production employees present at the workplace at that time, together with their relevant union officials. The meetings took place on 12 September 1994. I am satisfied that the process adopted by the respondent to inform employees and obtain their views were consistent with the longstanding and formalised representative mechanism operating in the workplace and met the requirements of consultation and information provision implicit in the procedural fairness provisions of S170DE(2) of the Act. I am satisfied that the employees present at the meeting were fully informed as to the content and implications of the industrial agreement, together with the respondent's intentions regarding redundancies and selection methods in that regard. This included proposals as to the amount of redundancy payment to be made to employees selected. The agreed amount was three weeks pay per year of service with the respondent, together with payment of pro-rata long service leave, payout of sick leave credits and a $5,000.00 cash payment as a consequence of the redundancy being non-voluntary, that is selected by the respondent. This payment was substantially in excess of the minimum amount provided for by the relevant award of the Australian Industrial Relations Commission, which provided for up to 8 weeks pay depending upon years of service, and no doubt was designed to include an aspect of compensation for the effects of the redundancy. In so far as the applicants Mr Sandhu, Mr Joginder and Mr Mifsud were concerned, I am satisfied that they were informed of the background and circumstances of the redundancy and were provided with sufficient information to ensure that they were not caught by surprise by the circumstances. It follows from this conclusion that I am not satisfied that the termination of their employment in this circumstance was harsh, unjust or unreasonable. In so far as Mr Filippi is concerned, the evidence is clear that he was given no information as to the forthcoming meetings. It is not clear on the evidence as to whether he had any prior knowledge of possible redundancies in the workplace. He was absent from the workplace as a result of surgery on a work related injury. He was not present at the meetings of employees, and no information was forwarded to him by the respondent. The meetings were arranged and attendance made compulsory by the respondent, but no steps were taken to inform Mr Filippi of the meeting taking place. The first Mr Filippi heard about the matter was when he was telephoned and told to come into work, and then told to empty his locker and collect his pay. He had been absent from work on account of injury, and in the circumstances had no opportunity at all to turn his mind to an impending or possible redundancy. This being so, it is necessary to consider how this impacts upon the question of whether the termination of Mr Filippi's employment was harsh, unjust or unreasonable. Whilst it is clear that there was no consultation or discussion with Mr Filippi, the reality of the situation is that the circumstances would not have altered even had there been. However, it is clear is that he was entitled to information and to participate in the process adopted. This did not occur. In this respect the circumstance of this applicant's termination of employment could be said to be harsh in the sense contemplated by S170DE(2). It is appropriate therefore to consider the question of what if any remedy is appropriate. It is apparent that the termination would have occurred even had Mr Filippi been present at the meetings or had he been provided with the relevant information. The applicant was selected for redundancy as a result of work performance criteria, and therefore I am satisfied having regard to the appropriate and reasonable application of the selection criteria to him, together with the bona fide nature of the redundancy process, that an order for reinstatement would be impracticable. I am unable to conclude that it was likely or even possible that the period of his employment would have continued beyond that of the termination date had there been provision of the necessary information. The amount of compensation which was paid by the respondent, consequent upon the redundancy was in my view reasonable in the circumstances. I am not satisfied that it is appropriate that an order for compensation in addition to that amount ought be made in this matter. For the forgoing reasons the applications of Mr Mifsud, Mr Joginder and Mr Sandhu are dismissed. In respect of the application of Mr Filippi, the following orders are made: 1. The termination of the applicant by the respondent contravened S170DE(2) of the Industrial Relations Act in the the applicant was denied procedural fairness. 2. The application for compensation pursuant to S170EE(2) of the Act is refused. I certify that this and the preceding seventeen (17) pages are a true copy of the reasons for decision of Judicial Registrar Parkinson. Associate: Dated: 19 September 1995 Solicitors for Mr Mifsud and Mr Filippi: Toop Harris & Metcalfe Solicitor appearing for Mr Mifsud and Mr Filippi: Mr C Metcalfe Solicitors for Mr Sandhu and Mr Joginder: Patrick Robinson & Co Counsel appearing for Mr Sandhu and Mr Joginder: Ms F McNiff Solicitors for the respondent: Freehill Hollingdale & Page Counsel appearing for the respondent: Mr M McDonald Dates of hearing: 12, 13 & 14 July 1995 Written submissions complete: 15 August 1995