INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1729 of 1995 B E T W E E N : DENNIS WALTER CAMPBELL and CEPU Applicants AND PUBLIC TRANSPORT CORPORATION Respondent Before: Judicial Registrar Millane Place: Melbourne Date: 18 August 1995 REASONS FOR RULING The Applicant alleges that the Respondent contravened Division 3 Part VIA of the Industrial Relations Act 1988 (the Act) when it terminated his employment as a leading hand special class mechanic on 10 March 1995. The Applicant seeks reinstatement and compensation. The Respondent contends that the termination of the Applicant's employment was based on the operational requirements of the Corporation; in other words, the Applicant was declared surplus to the Respondent's requirements in about May 1994 as a result of an extensive restructuring program embarked upon from approximately 1992 onwards. By 10 February 1995, the Applicant was, for the last time, notified that he was to be made redundant from 10 March 1995. In summary, through his counsel, Mr Harris, the Applicant disputes the characterisation of his dismissal as being one due to the operational requirements of the Respondent. He argues that, on the facts, one of the reasons for the termination of his employment was his age and/or physical or mental disability. If this is so, the termination offends the prohibition against dismissal on one or any of these grounds contained in s.170DF(1)(f) of the Act. Even if the termination was otherwise based on the operational requirements of the Respondent, the contravention of the prohibition contained in s.170DF(1)(f) is sufficient to render the termination unlawful. The Applicant further argues that a finding that the termination was indeed a redundancy untainted by any of the matters prohibited by s.170DF(1)(f) should be followed by a finding that the termination was harsh, unjust or unreasonable; in that the Applicant was not made the subject of proper objective selection criteria generated by the Respondent and applied to the Applicant. Dr Jessup QC appears with Mr De Vries of counsel for the Respondent. The Respondent's primary contention is that this court has no jurisdiction to hear the Applicant's application because the termination by the Respondent of the Applicant's employment on 10 March 1995 was a termination on redundancy grounds. It is submitted that the Respondent, the Public Transport Corporation (the PTC), is established pursuant to the Transport Act 1983 (Victoria) and is an agency of the Government of the State of Victoria. This point does not appear to be disputed. The laws enacted by the Commonwealth in the exercise of its external affairs power under s.51(xxix) of the Constitution and contained in Division 3 Part VIA of the Act are, according to the Respondent, laws of general application which offend the implied limitation on the exercise of Commonwealth powers insofar as they purport to have any application to State Government employees; including the employees of its agencies. On 21 June 1995, the Respondent gave notice to the court that the proceeding involved a matter arising under the Constitution and its interpretation within the meaning of s.78B of the Judiciary Act 1903. Since that notification appropriate steps have been taken to notify the Attorneys General of the Commonwealth and the States of a cause pending in this court arising under the Constitution. As a result of such notification, when the court commenced hearing this proceeding on 24 July 1995, Mr Green of counsel appeared on behalf of the Victorian Attorney General, The Honourable Jan Wade, and sought and was granted leave pursuant to s.470 of the Act to intervene in this proceeding. Apart from relying on the force of the jurisdictional argument, the Respondent otherwise contends that the alleged redundancy is not on the facts one which the court should impugn in the exercise of its powers under the Act. Of course, this argument does not arise unless the court upholds its jurisdiction to hear this matter. Thus far the court has heard evidence from the Applicant and his witness, Edmund Blanchfield (Blanchfield), an organiser employed by the Communications and Electrical Plumbing Union (the CEPU). The Applicant intends to call a medical witness if this matter proceeds beyond this ruling. The Respondent has called evidence from its first two witnesses, Desmond Robert Davies (Davies), the group manager for Human Resources & Industrial Relations in the Respondent's infrastructures division and Brian Vaughan Priestnall (Priestnall), manager of the Respondent's Signals, Communication & Construction Department and the Internal Contracts Group of the Respondent's infrastructure division. At the conclusion of two hearing days and Priestnall's evidence, Dr Jessup has asked the court to rule on the jurisdictional issue asserting that there is sufficient evidence before the court to determine whether the termination was a redundancy; that is to say, the termination was based on the operational requirements of the undertaking, establishment or service. The Respondent has a further 7 witnesses it seeks to call to give evidence in the event that the court upholds its jurisdiction to proceed with the application. In the circumstances, it is both practical and convenient to make a preliminary ruling on the question of the jurisdiction of the court. It seems to me that the court is not required, nor is it bound, at this stage to making a finding that there was or was not a redundancy in order to properly respond to the submission made by the Respondent; namely, that where there is a termination on redundancy grounds the court lacks the jurisdiction to proceed beyond such a finding. The submission made is one of general application: not confined to the facts of this case. However, notwithstanding this observation, I note that the Applicant has not objected to the court embarking on this preliminary exercise, although I understand the Applicant's position to be that if such a reason for termination exists it is, in this case, nullified by the existence at the time of termination of reasons prohibited by s.170DF(1)(f) of the Act. The Respondent submits that, once there is a finding that this was a termination on redundancy grounds, as distinct from a finding that the Applicant was in fact redundant, it is not necessary to go beyond that finding to determine the lawfulness of the termination process in accordance with the Act. In other words, the court need only make the preliminary finding and, once it has done so, the decision of the High Court in Re Australian Education Union (1995) 128 ALR 609 (the AEU case) pre-empts any application of the Commonwealth law contained in the Act to the Respondent as an agency of the State of Victoria. The termination of the employment of an employee by a State Government or its agency on redundancy grounds, the Respondent contends, constitutes a function or activity of the State Government immune from Commonwealth legislation made under the powers conferred by s.51(xxix) of the Constitution. I further understood the Respondent's submission to be that this court when determining the threshold question; that is to say, deciding what the ground or grounds for termination were, may even enquire as to whether the alleged ground for termination was in fact that which was stated as the ground for dismissal and not merely a sham. However, beyond this point, the court cannot venture to determine, for instance, whether the dismissal was justified by reason of that ground. To do so, in the Respondent's submission, would be to traverse an area of State Government activity protected by the implied limitation and recognised by the High Court in the AEU case as being immune. Put at its highest, the submission of the Respondent and the State Attorney General, inasmuch as Mr Green adopted and expanded upon the arguments put to the court by the Respondent, is that the High Court in the AEU case identified for the State an essential right to make State Government employees redundant or to terminate their employment on redundancy grounds, with or without notice; thereby placing the employees outside the Federal legislation enacted by reason of the Commonwealth's external affairs power. Having considered the implications of the initial part of the submission made it appears to me that the Respondent seeks to limit the permitted enquiry to whether the alleged ground was the actual ground given for termination without going further to decide whether such a ground could be substantiated and the termination was warranted by reason of that ground. I find the distinction sought to be made an untenable one. It allows the State as an employer to identify any termination as being made on redundancy grounds and by so stating allegedly attract the protection of the implied limitation irrespective of whether there is substance to or justification for such a reason being advanced for termination of any employee's employment. The extremity of the argument in my view takes it far beyond the "raison d'etre" for the existence and application of the implied limitation which is primarily concerned with protecting the essential functions of the States from substantial interference by the Commonwealth. The implied limitation should not be called upon to deprive employees of the benefit of minimum standards applying to the termination of their employment. In order to consider the elements of the Respondent's submission, the first question to be decided is whether the termination of an Applicant's employment was made on redundancy grounds. The Act makes no mention of redundancy as such; rather s.170DE(1) provides: "An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service." The court was referred to two recent decisions of this court in Jones v Department of Energy & Mineral (Ryan J. unreported VI94/529, 16 June 1995) and Quality Bakers of Australia Ltd v John Goulding & Anor and Bob Wickham & Anor v Quality Bakers of Australia Ltd (Beazley J. unreported RWIR 142/94 and RWIR 154/94, 23 June 1995). The abovementioned judgments clearly support the notion that the reference in s.170DE(1) to "the operational requirements of a business may include a redundancy" and, as Beazley J. went on to say at pages 13 and 14 of her judgments, "a redundancy will arise where an employer has labour in excess of the requirements of the business; where the employer no longer wishes to have a particular job performed; or where the employer wishes to amalgamate jobs... It is not necessary for the work to have disappeared altogether." At this preliminary stage and for the purpose of making a ruling on the court's jurisdiction to proceed to further hear this application, I do not propose to make a detailed analysis of the evidence other than to say that the Respondent has called evidence to show that the termination was a termination on redundancy grounds. This is regardless of whether or not other grounds existed giving rise to the decision to terminate. Exhibit A1 is a letter from the Respondent to the Applicant dated 16 July 1993 notifying the Applicant, who was then working for the Respondent in the country, that his "position had been determined as surplus to the PTC." The letter offered, amongst other things, the opportunity to the Applicant to explore the possibility of redeployment. It is common ground that the Applicant was redeployed from the country to Caulfield where he had previously worked. By a letter dated 31 May 1994 (Exhibit R1) from the Respondent to the Applicant, the Applicant was again notified that his position was surplus and again the possibility of redeployment was raised. The Applicant remained in employment with the Respondent until he received a further letter from the Respondent dated 10 February 1995 (Exhibit A2) notifying him that his position was determined as surplus to PTC requirements whilst allowing the possibility of redeployment. The Applicant was not redeployed and his employment came to an end on 10 March 1995. Having regard to the Applicant's opening and the evidence called thus far, it appears that, in reality, the Applicant does not challenge the proposition that at least one of the reasons advanced for termination was redundancy. What he does challenge is the assertion that it was a lawful redundancy in the terms of the Act and, further, he challenges the bona fides of the Respondent's reasons for selecting him for redundancy alleging that such reasons included his age, his physical or mental impairment and his conduct. There is still evidence to be called in order to decide whether or not under the Act the Respondent acted lawfully when it purported to make the Applicant redundant on 10 March 1995. Nevertheless, I am satisfied that at least one ground advanced by the Respondent for termination was redundancy brought about by the restructuring of the Respondent's department in line with budgetary constraints and the requirements imposed on the Respondent by the incumbent government (see Exhibit R4). Until all the evidence is heard I am unable to be satisfied that the Respondent has otherwise discharged the burden of proof it carries both with regard to s.170DE(1) of the Act and the prohibitions contained in s.170DF(1)(f) of the Act. The Decision in the AEU Case This was a decision dealing with the application of the Commonwealth conciliation and arbitration power and, in particular, the States' immunity from the exercise of that power where federal awards infringed the implied limitation on Commonwealth legislative power, protecting as it does the existence of the States and their capacity to function as governments. In that case, the High Court struck down a number of interim federal awards which did not allow the States or their agencies to terminate the services of employees on redundancy grounds. The offending award provisions directly prohibited the States from terminating on redundancy grounds. At page 629 of the decision, the majority of the High Court described the scope and content of the implied limitation in the following way: "The limitation consists of two elements: (1) The prohibition against discrimination which involves the placing on the States of special burdens or disabilities (the limitation against discrimination) and (2) The prohibition against laws of general application which operate to destroy or curtail the continued existence of the States or their capacity to function as governments." The court went on to say at page 630: "At this point it is convenient to consider South Australia's argument based on impairment of a State's "integrity" or "autonomy". Although these concepts as applied to a State are by no means precise, they direct attention to aspects of a State's functions which are critical to its capacity to function as a government. It seems to us that critical to that capacity of a State is the government's right to determine the number and identity of the persons whom it wishes to employ, the term of appointment of such persons and, as well, the number and identity of the persons whom it wishes to dismiss with or without notice from its employment on redundancy grounds. An impairment of the State's rights in these respects would, in our view, constitute an infringement of the implied limitation." In the AEU case, the High Court recognised that State autonomy in itself is limited and rejected the States' argument for a wide-ranging operation of the implied limitation, saying, at page 631 of the majority decision: "...that the Commission has power to make awards binding the States and their agencies in relation to minimum wages and working conditions which take account of the special functions and responsibilities, if any, of a broad range of public servants and employees, including many members of the SPSF." Between the parties it is common ground that the implied limitation applies to the legislative exercise of the Commonwealth's external affairs power pursuant to s.51(xxix) of the Constitution (see The Tasmanian Dam case (1983) 158 CLR 1) and I proceed to make this ruling on the basis that this is so. However, acceptance of this primary proposition does not, in my view, lead inexorably to the conclusion that the implied prohibition contained in the Constitution applies to and affects the Commonwealth's exercise of its external affairs power in precisely the same way or to the same extent as the exercise of the Commonwealth's conciliation and arbitration power conferred by s.51(xxxv) of the Constitution. The prohibition against impairing the capacity of the State to function as a government is a principle applied to the powers exercised by the Commonwealth under s.51 of the Constitution. As Mason J. said in The Tasmanian Dam case at p.139: "... it must emerge that there is a substantial interference with the State's capacity to govern, an interference which will threaten or endanger the continued functioning of the State as an essential element of the Federal system." In the exercise of its external affairs power the Commonwealth has enacted Division 3 Part VIA of the Act. Unless there is a clear and unambiguous statement from the High Court demonstrating that all or some of the termination of employment provisions are made without power or infringe the implied limitation, it is not appropriate for this court at first instance to forsake the jurisdiction directly conferred by the enactment of those provisions. In any event, having read the decision in the AEU case, I am far from satisfied that the provisions in question should be and can be interpreted as impairing any functions singled out by the High Court as being essential to or critical to the capacity of the State to function as a government. In Jones' case the jurisdictional question was not raised, even though on the facts before the court the Applicant appears to have been employed by a State agency at the relevant time. However, the question of the court's jurisdiction to hear applications by employees of the State or its agencies where those employees have been terminated as a result of the employer's operational requirements has been upheld in this court by Ryan JR in his recent decision in Bannister v Department of the Treasury (unreported VI1504/95 14 July 1995). Interestingly enough, the Australian Industrial Relations Commission has, since the High Court decision in the AEU case, had occasion to uphold its jurisdiction to make an award with respect to PTC apprentices by drawing a distinction between the PTC's right to determine "the number and identity of the persons whom it wishes to dismiss with or without notice from its employment on redundancy grounds" and an award which seeks to provide what the Commission refers to as "fair compensation for apprentices whose services have been terminated by the PTC (see the Apprentices case AIRC 11 July 1995 at page 15)." The distinction so drawn, in my view, states the obvious. It is contended by Dr Jessup and Mr Green that Bannister's case is wrongly decided because the decision is at odds with the decision of the High Court in the AEU case. At page 6 of his decision the Judicial Registrar says, and these appear to be the paragraphs which cause the greatest concern: "As far as I am concerned, it is not clear precisely what the majority intended by the word "identity" when referring to restrictions on the State's ability to determine the identity of the persons whose employment it wishes to terminate. It may be that the majority is referring to skills and attributes, rather than personal identity of employees. A State's ability to function requires that it be able to decide what kind of skills and experience it has in its workforce, not the actual personal identities of its employees per se. I have concluded that the requirements imposed by Division 3 constitute restrictions on a State government's ability to hire and fire employees. However, they are not impairment of a State government's ability to make and implement decisions about its workforce which are necessary for its function as a government. Division 3 Part VIA of the Industrial Relations Act does not impair a State's ability to dismiss employees with or without notice; rather, it requires that employees be treated fairly by (sic) the dismissal process. In other words, the rights accorded to a State government by the majority in the State Employees case, do not constitute an absolute right to hire and fire employees at will, since such right is not essential to the capacity of a State to operate as a government. Division 3, in my view, therefore, does not infringe the implied limitation as set out in the State Employees case." The passages cited from Ryan JR's decision in Bannister's case underscore the lack of precision and clarity in the passage in the AEU case relied upon by the Respondent to oust the jurisdiction of this court. I understand Ryan JR's argument to be that the decision of the majority of the High Court in the AEU case in no way supports a broad proposition that States have an unrestricted right to terminate their employees on redundancy grounds because such a right is critical to or essential to the capacity of the State to function as a government. As a direct consequence of the application of the Commonwealth's external affairs power it is undeniable that the provisions of Division 3 Part VIA of the Act do restrict the freedom of the States to terminate employment, broadly speaking, in breach of the statutory provisions giving effect to international standards set by the Convention Concerning Termination of Employment at the Initiative of the Employer and the Recommendation Concerning Termination of Employment at the Initiative of the Employer (see s170CA of the Act and Schedules 10 and 11 respectively). The object of Division 3 Part VIA of the Act is stated by s.170CA(1) of the Act as being to give effect or give further effect to: "(a) the Termination of Employment Convention; and (b) The Termination of Employment Recommendation, 1982, which the General Conference of the International Labour Organisation adopted on 22 June 1982 and is also known as Recommendation No. 166, and a copy of the English text of which is set out in Schedule 11." Insofar as the Commonwealth has sought to implement the provisions of the Convention through legislation it has taken steps to honour the obligations caste on it by the Convention. However, the giving of effect to the Convention within Division 3 of the Act only amounts to the enactment of minimum conditions for the termination of employment, including terminations based on the operational requirements of an employer. The submission of Dr Jessup takes the Respondent's critical analysis of Ryan JR's findings even further by suggesting that the Judicial Registrar was attempting "to re-invent the wheel." I understood this submission to be a reference to any attempt by the Judicial Registrar in his decision to decide what functions are essential to or critical to a State's ability to function as a government in circumstances where the decision of the majority of the High Court in the AEU case has, according to the Respondent, already decided this point. Of course the Respondent's submission requires me to assume that any implied limitation identified by reference to the exercise of the Commonwealth's conciliation and arbitration power applies with equal force to the exercise of the Commonwealth's external affairs powers. That is an assumption I have already indicated I am not prepared to make. One of the errors I perceive in the arguments advanced by the Respondent and the Attorney General is that they come perilously close to reciting a proposition rejected by the High Court in the AEU case at page 627; namely, that the impairment referred to extends to any impairment of the State's capacity to exercise government functions. As was said by the majority at page 628 of that case: "To press the limitation as far as the prosecutor seeks to take it would travel beyond the language of s.106 and would confer protection on the exercise of powers by the States to an extent which is inconsistent with the subordination of those powers to the powers of Commonwealth through the operation of s.109 of the Constitution. And the argument, if successful, would protect a substantial part of a State's workforce from the impact of federal awards, notwithstanding that the operation of those awards in relation to school teachers, health workers and other categories of employees would not destroy or curtail the existence of the State or its capacity to function as a government. The fact is that the existence of the States and their Constitutions and their capacity to function as governments would not be impaired by the operation of federal awards made in respect of the vast majority of the employees sought to be covered by the logs of claims, at any rate, if the award provisions were confined to minimum wages and working conditions which take appropriate account of any special functions or responsibilities which attach to them. The freedom of State governments to determine terms and conditions of employment of employees would be restricted but that is a consequence of the application of the arbitration power to State. Whether the making of a comprehensive award would result in a relevant impairment is another question which we leave for later discussion." One of the conclusions I draw from the abovementioned passages is that there must be "relevant impairment" and that is probably something more than an indirect connection between any restrictions under the Act and the State's freedom to determine the number and identity of the employees it seeks to terminate on redundancy grounds without notice. If for the purpose of considering the Respondent's submission it is assumed that the decision in the AEU case applies mutatis mutandis to the exercise of the Commonwealth's external affairs power, the impairment, if it is to have any operation at all, is necessarily tied to functions essential to or critical to the State government's capacity to function as a government. The High Court, on my reading of the decision, did not say that it is essential to or critical to the State government's capacity to function as a government that it have, to use Ryan JR's words, "an absolute" right to terminate employees at will without affording them procedural fairness in the process and with no regard for minimum international standards applying generally to employer and employee relationships. Apart from relying on what was said in the AEU case those who oppose the jurisdiction of the court to proceed have offered no other evidence from which the court should conclude that Division 3 Part VIA of the Act operates to destroy or curtail the continued existence of the State or its capacity to function as a government. Again, for the purpose of considering the Respondent's submission, if the court proceeds on the assumption that it is critical to the State's capacity to function as a government that it has the right to determine the number and identity of the persons it wishes to dismiss with or without notice from its employment on redundancy grounds, the court must decide whether Division 3 Part VIA of the Act has such an effect. Does the Division impair the State's alleged right to decide: (a) the number of persons whom it wishes to dismiss with or without notice; and (b) the identity of the persons whom it wishes to dismiss with or without notice; on redundancy grounds? The impairment referred to is limited to the State's ability to determine the number and the identity of the employees involved, it does not refer to or nominate any other characteristics of the employees and their employment, or the terms and conditions of their employment and the procedures adopted for terminating their employment. The Act does not concern itself with the number and the identity of the employees who may be dismissed as a result of the employer's operational requirements. Unlike the awards struck down by the High Court, nothing in Division 3 of the Act specifically prevents the State from terminating any number of employees, class of employees, type of employees or named employees with or without notice on redundancy grounds. The combination of s.170DE(1) and s.170EDA require the employer to show that there is a valid reason connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service in order to lawfully dismiss an employee. Having rejected the Respondent's argument that once there is a finding that it was a termination on redundancy grounds I am precluded from proceeding to further hear the application, it follows from my earlier comments that, in my view, s170DE(1) and s170EDA do not infringe any prohibition, if there be one, by creating a minimum requirement that there exist a valid reason at the date of termination. This view is reinforced by the High Court's loose and interchangeable use of the phrases "on redundancy grounds" and "on the ground of redundancy" (see pages 630 and 631 respectively of the AEU case). In my view it overstates any position outlined by the High Court to suggest that a statement to the effect that an employee is redundant is sufficient without there being proof of a genuine redundancy. My conclusion is that the provisions of Division 3, once a valid reason has been found to exist, do no more than require all employers including the State and its agencies to accord procedural fairness to an employee and abide by minimum international standards during the termination process. The provisions do not prohibit termination of employment per se; nor do they tell a State employer how many, what class of employee: be they employees with certain skills or named employees, the employer may determine to be redundant. Section 170DB provides for compensation in lieu of notice and, therefore, does not in any sense prevent the employer from terminating on redundancy grounds without notice. I interpret this aspect of the High Court decision to be a concession to the State's need to end the employee's employment on redundancy grounds forthwith. The decision says nothing of matters to do with the payment of compensation for the immediacy of the termination. My attention was further directed to the remedies available under the Act (see s170EE) and, in particular, the principal remedy of reinstatement where the court finds a contravention of a provision of the Division other than Sections 170DB or 170DD. This remedy, it is contended, directly impairs the States' alleged right to; for instance, determine the number of employees it seeks to terminate on redundancy grounds. Of course, the remedy is a discretionary one and arises for consideration where, for example: (a) the State fails to prove that it was a termination based on the operational requirements of the State; (b) the State fails to prove that it did not discriminate against the employee in a manner prohibited by s170DF(1); or (c) the employee proves that the termination was harsh, unjust or reasonable. The remedy of reinstatement, if granted by the court, may at first appear to impact on the State's determination that a certain number or classification of employee be terminated on redundancy grounds. However, it should be kept in mind that reinstatement is only relevant where a State is found to have acted unfairly or in a discriminatory manner in the termination process. In my view it cannot be said that a finding that there has been a contravention of the Act directly impairs, or put another way, relevantly impairs the States' alleged right to determine the number and identity of the employees to be terminated on redundancy grounds. The reinstatement of an employee because of such a finding is therefore only a consequence of the application of the Commonwealth's external affairs power and not a relevant impairment. Taking into account the abovementioned matters I am unable to conclude that the provisions of Division 3 Part VIA of the Act impair any right of the State government identified either by the High Court in the AEU case or elsewhere as being essential to or critical to the State's capacity to function as a government. Accordingly, my ruling is that this court has jurisdiction to proceed to hear the extant application and these written reasons will form part of my final judgment in due course. Associate: Dated: 18 August 1995