Reed & AFMEPKIU v Riverhouse Packaging Pty Ltd [1995] IRCA 572

C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - UNLAWFUL TERMINATION - REDUNDANCY - VALID REASON - obligation of employer to consult in case of genuine redundancy - termination based in part on performance - opportunity to respond

Industrial Relations Act 1988, S170EA, S170DE, S170DC. CASES: Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20 Jones v Department of Energy and Minerals (unreported 16 June 1995) Fenton v Gallagher v Casey College of TAFE (unreported) 8 December 1994 Carydias v Greek Orthodox Community (unreported 31 March 1995) Papadopoulos v The Colonial Mutual Life Assurance Society Ltd (unreported 16 August 1994). Nicolson v Heaven and Earth Gallery Pty Limited (1994) 1 IRCR 199. REED & AFMEPKIU v RIVERHOUSE PACKAGING PTY LTD No. VI-95/2164 Before: Ryan JR Place: Melbourne Date: 24 October 1995

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY Matter No VI-95/2164 B E T W E E N: DEAN ANDREW REED Applicant AND: RIVERHOUSE PACKAGING PTY LTD Respondent RYAN JR MINUTES OF ORDER 24 OCTOBER 1995 THE COURT ORDERS THAT: The respondent pay to the applicant compensation in the sum of $12,700. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY Matter No VI-952164 B E T W E E N: DEAN ANDREW REED Applicant AND: RIVERHOUSE PACKAGING PTY LTD Respondent COURT: RYAN JR PLACE: MELBOURNE DATE: 24 OCTOBER 1995 REASONS FOR JUDGMENT CLAIM OF UNLAWFUL TERMINATION OF EMPLOYMENT Riverhouse Packaging Pty Ltd makes cardboard boxes. There are two major functions, corrugation and conversion. Corrugation involves making sheets of cardboard from pieces of paper. Conversion is the process whereby pieces of cardboard are turned into the finished product, the cardboard box. The applicant gave evidence that he: 1. had been involved in cardboard manufacture for fourteen years 2. worked for over nine years in cardboard manufacture for Amcor, eight years in conversion and about 14 months in corrugation 3. worked in cardboard manufacture for an unspecified period prior to the nine years at Amcor with a Smorgon Company called Cargo Newpak 4. had experience in dispatch and production planning 5. was invited to join Riverhouse by a former Amcor colleague who had been appointed as the General Manager of the Melbourne operation then being established 6. joined Riverhouse on 9 August 1993 as production supervisor initially with the corrugation, conversion and dispatch areas all reporting to him Bradley John Coad gave evidence which conflicts with the applicant's claim that he initially supervised corrugation in the period August to December 1993. Mr Coad stated that he became Production Manager in October 1993 and that Richard Cooper was Corrugation Supervisor and the applicant Converting Supervisor. The applicant concedes he reported to Mr Coad and that Mr Cooper took over as corrugating supervisor in December 1993 or January 1994 and that soon thereafter Cooper was promoted to "Quality Manager" and Joe Kovacevic was promoted from a position as Leading Hand Operator to the position of Corrugating Supervisor. The Court notes that Mr Coad gave evidence that the applicant was never in charge of corrugation but has concluded that the applicant was in fact Production Supervisor in charge of conversion, corrugation and dispatch for a brief period in August and October 1993 until Coad was appointed Production Manager. From October 1993 to 3 March 1995 it seems clear that the applicant was Conversion Supervisor with dispatch reporting to him and that briefly Cooper and then Kovacevic were in charge of corrugation with both the applicant and Mr Kovacevic reporting to the Plant Manager, Denver Alvis. THE TERMINATION The applicant claims that at the conclusion of the working day on Friday 3 March he went in to see the Plant Manager, Denver Alvis, in his office. The applicant states that Mr Alvis had a little earlier asked him whether he was going to stay and have a drink after work and that he had replied that he was intending to go straight home. Nevertheless, he attended on Mr Alvis at the request of the latter. The Sales Manager, Geoffrey Amman, joined them. According to the applicant, Mr Alvis announced to him that he had bad news, that he was to be made redundant and the company had no job for him. The applicant responded by asking whether the company had any other job for him and Mr Alvis indicated there was no other alternative employment available for the applicant. Soon thereafter, the applicant was escorted from the premises having been provided with a taxi voucher and a cheque for $7,806. The payment comprised 22.5 hours outstanding salary, 160 hours of accrued annual leave, one month's salary in lieu of notice and a further one month's salary as a redundancy payment. Mr Alvis gave similar if somewhat more detailed evidence of the termination meeting on 3 March. He stated that in the presence of Mr Amman he explained to the applicant that the company was continuing to sustain huge losses, a restructure was required in order that there could be a reduction in staffing and Mr Kovacevic was to be appointed as Production Supervisor in charge of both corrugation and conversion. Mr Alvis states that he explained that unfortunately that left no role for the applicant and that when the applicant asked him whether there was anything else suitable for him he indicated that there was no suitable full-time position available. Mr Amman gave similar evidence to Mr Alvis except that he added that Mr Kovacevic was identified as more appropriate than the applicant for the position of Production Supervisor in terms of skills, performance and attitude. However, in response to a question from the Court, Mr Amman could not recall any details which were raised in relation to the relative skills, performance and attitude of the applicant and Mr Kovacevic. OPERATIONAL REQUIREMENTS The respondent claims that: 1. the termination was justified by the operational requirements of the business 2. the relatively new operation in Noble Park had lost 7 million dollars in seven months and at the date of hearing in July 1995 was still losing $100,000 a month 3. there were aspects of the applicant's performance which were unsatisfactory and, in any event, an assessment of his suitability for the position of Production Supervisor in a streamlined, restructured production unit was made and Mr Kovacevic was regarded as clearly better suited for that position Having heard the totality of evidence, the Court has no doubt that further substantial restructure is essential if the Noble Park plant is to survive as a viable unit. The Court doubts that the relatively modest restructure of 3 March 1995 was ever likely to contribute much to staunching the losses and notes that as soon as Mr Kovacevic resigned from the respondent company on 15 June 1995 the company reverted to a structure similar to but not the same as that which had operated prior to the termination of the applicant. However the Court is quite satisfied that the modest and probably ineffectual restructure of 3 March was motivated by operational requirements and, to the extent it saved any costs or reduced losses, the amalgamation of conversion and corrugation from 3 March 1995 to 15 June 1995 constituted a valid reason for what was a genuine if short term redundancy of the converting supervisor position held by the applicant from about November 1993 to March 1995. REVERSION TO EARLIER STRUCTURE The fact that the resignation of Kovacevic led to a reversion to a structure with a converting supervisor position, and the fact that the applicant was not, or may not, have been seriously considered for re-appointment to the re-established converting supervisor position, does not alter the fact that the earlier restructure of 3 March 1995 was genuinely motivated by operational requirements. During the hearing a good deal of time was devoted to the fact that the applicant was not reappointed to the re-established converting supervisor position in June 1995. This is not relevant to the termination of the applicant on 3 March but it is relevant to the possible reinstatement of the applicant. The applicant was never genuinely considered for the re-established converting supervisor position which was advertised in the Age on 17 June and the Dandenong Journal on 20 June. Although the re-established position was advertised as Production Supervisor Corrugated Packaging, the position was that of Converting Supervisor and the advertisement required "experience in corrugated converting with emphasis on printing, slotting, folding and glueing" (Exhibit A7). Mr Alvis gave evidence that the position was offered to Joe Goluska on 20 June, three days after the Age advertisement and the same day as the Dandenong Journal advertisement. Mr Alvis claims that the applicant was genuinely considered for the position within the first few days after Mr Kovacevic resigned on 14 June. The Court finds this unlikely. Mr Alvis admits the position was offered to Mr Goluska on 20 June, after the Kovacevic resignation and fourteen days before the applicant responded in writing to the advertisement in the Dandenong Journal, (an advertisement which he had not seen but which was brought to his attention by his mother-in-law). Mr Alvis denied that Mr Goluska was only appointed as Converting Supervisor on 6 July but conceded that he did not begin in that role until 10 July (i.e. two days before the hearing began on 12 July). Mr Stan Olszewski was General Manager Packaging with the respondent but resigned on 10 July effective 10 January 1996 or earlier if otherwise agreed. Indeed, at the date of the hearing, Mr Olszewski did not seem to have any function with the respondent Riverhouse. Mr Olszewski gave evidence that: 1. Visyboard and Amcor held 98% equity in Riverhouse 2. Stone Container Corporation of Chicago have taken an equity position of 20% going to 50% (and the Court assumes this will reduce the combined Visyboard/Amcor equity to 40%) 3. a new Chief Executive Officer, Ronald Gordon Ross began at Riverhouse on 13 February 1995 4. Mr Alvis was directed in early February to review the structure and in the last week of February Olszewski approved of the restructure which led to the applicant's termination on 3 March 5. Mr Kovacevic met the competency, leadership and planning skills required for the combined conversion/corrugation position far better that the applicant 6. he (Olszewski) was deeply involved in the replacement of Mr Kovacevic after his resignation on 14 June and directed that advertisements be placed in the Age and the Dandenong Journal Despite the direction to place the advertisements, Mr Olszewski, like Mr Alvis, concedes that first of all Philip Ferguson was put in the position of converting supervisor on 19 June but rejected the appointment after one day and that on 20 June the position was offered to Mr Joe Goluska. Mr Olszewski is blunter than Mr Alvis. He claims that, while he reflected on "revisiting the Reed situation" (i.e. reflected on the possibility of appointing the applicant), he "dispensed with this...fairly rapidly". He also admits that the applicant's written application was not and could not have been considered (given the timing) but that the possibility of appointing the applicant had been considered (if fleetingly) as soon as Mr Kovacevic resigned on 14 June. It matters not whether Mr Goluska was appointed on 20 June or 6 July or that he may only have begun as Converting Supervisor on 10 July. The reality is that on 20 June he had already been selected for the position. Despite the claim of Mr Alvis in evidence that the applicant was considered for the position, unsolicited as it were, between 14 and 20 June, and supporting evidence to the same effect from Mr Olszewski, the Court has concluded that the applicant was never really given serious consideration. His written application was received well after the decision had been made to appoint Mr Goluska. However, this is beside the point, except to the extent that there may be some relevance to the issue of reinstatement. The issue is whether the termination on 3 March, genuinely based on operational requirements, was harsh, unjust or unreasonable. In Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20, Sheppard and Heerey JJ at 28 said of the expression: "These are ordinary non-technical words which are intended to apply to an infinite variety of situations where employment is terminated. We do not think any redefinition or paraphrase of the expression is desirable. We agree with the learned trial judge's view that a court must decide whether the decision of the employer to dismiss was, viewed objectively, harsh, unjust or unreasonable. Relevant to this are the circumstances which led to the decision to dismiss and also the effect of that decision on the employer. Any harsh effect on the individual employee is clearly relevant but of course not conclusive. Other matters have to be considered such as the gravity of the employee's misconduct." Mr Annon gave evidence which supports the applicant's contention that he was not consulted or given any notice of the restructure which led to his termination. Mr Annon admitted that the applicant seemed "very surprised" when informed of his termination and the applicant asked: "Why me?...and...who made the decision?" Mr Annon gave evidence as follows: "Nobody gave him an answer. I said that it did not matter who had made the decision, the decision had been made and not a lot could be done." VALID REASON The Court has concluded that the termination was for the valid reason of operational requirements despite the reversion to substantially the same operational structure in just over 3 months. HARSH UNJUST AND UNREASONABLE - LACK OF CONSULTATION However, the Court has also concluded that the termination was harsh, unjust and unreasonable. First and foremost, while some assessment of the applicant may have been undertaken before the employer concluded that another employee, Mr Kovacevic, was more suitable for the short lived combined corrugation and conversion position of production supervisor, the applicant was never consulted. The applicant was never given an opportunity to suggest any alternative option. The applicant also seems to have been incorrectly assessed as entirely lacking corrugation experience and furthermore the evidence of respondent witnesses suggests that the applicant had wider and longer experience in cardboard manufacture than was attributed to him. The obligation on an employer to consult in the case of a genuine redundancy has been outlined in numerous decisions of this Court including Ryan J in Jones v Department of Energy and Minerals (unreported 16 June 1995, VI94/527), Parkinson JR in Fenton v Gallagher v Casey College of TAFE (unreported) 8 December 1994 VI94/1106 and VI94/1107 summarised in (1995) AILR 3-046, Staindl JR in Carydias v Greek Orthodox Community (unreported 31 March 1995 VI94/1786) and Ryan JR in Papadopoulos v The Colonial Mutual Life Assurance Society Ltd (unreported 16 August 1994). In Jones at 17 Ryan J stated: "The authorities in this area support the view that the content of the duty of fairness, in the sense of the procedures to be followed before deciding to dismiss an employee, will vary according to the circumstances of each case. No generally applicable rule can be formulated as stipulating, for example, the required extent of consultation with the employee facing dismissal, or the lengths to which the employer must go in attempting to find other work for that employee. In Gregory v Philip Morris (1988) 80 ALR 455, Jenkinson J recognised the need for flexibility in determining the appropriate process, saying at 457: "The question whether the termination was unreasonable is, I think, one of fact. This question requires a determination, by reference to moral values and prudential considerations current in the community, of what the tribunal of fact thinks a reasonable employer in the circumstances would have decided to do at the time when the respondent terminated the appellant's employment. The process is similar to that by which the questions whether a personal injury or damage to a chattel has been caused by a person's negligence are resolved: what does the tribunal of fact think that a reasonable person placed in the circumstances in which that person was placed would have done?" In Gregory, the court considered what measures a large corporate employer should have taken before deciding to dismiss a worker because he was not a member of the relevant union. It was found that, before taking that action, the employer should, at least, have established the facts on which it purportedly based its decision, and explored any available alternative to dismissal. That view also found expression in the joint judgment of Wilcox and Ryan JJ which again emphasised the need to consider the circumstances of each case before deciding what procedures must be observed to render a termination just and reasonable. "We would not wish to propound any universal rule, but it seems to us that a provision such as that contained in cl 6(d)(vi) of the Metal Industry Award may often necessitate consultation with the employee before a decision to dismiss. The necessity for consultation has been emphasised in the United Kingdom: see Spencer v Paragon Wallpapers (1976) IRLR 373; Williamson v Alcan (UK) Ltd (1978) ICR 104; W Weddel & Co Ltd v Tepper (1980) ICR 286." (80 ALR 455, 473). In Gregory the dismissed employee's status (as a non-union member following his expulsion from the union) would have made it practically impossible for him to have continued to work without causing significant difficulties for the employer. However there may have been an expedient, like temporary suspension, which Mr Gregory could have suggested to his employer had he been consulted. Alternatives of that kind do not suggest themselves as readily where the proposed dismissal results from redundancy, but that consideration does not absolve the employer from the need to consult in some way with the employee affected by a proposed dismissal. Recognition has been accorded by decisions of Judicial Registrars of this court to the importance of consultation as an element of procedural fairness in dismissals for redundancy. Similarly, the Employee Relations Commission of Victoria has also found that a total failure to consult can render unfair a termination resulting from redundancy: see Shearer v Action Mercantile Pty Ltd (1993) 5 VIR 149; Budget Couriers Equity Management v Beshara (1993) 5 VIR 173." PERFORMANCE - OPPORTUNITY TO RESPOND Secondly, respondent witnesses have conceded that the termination was partially based on what was categorised as unsatisfactory performance. There was no satisfactory evidence of unsatisfactory performance but, in any event, the applicant was given no opportunity to respond to any allegations of poor performance. Indeed no such allegations were made. The supposed unsatisfactory performance may well have been only a secondary ground for termination but, if it was a ground at all, clearly the termination was unfair and in breach of S170DC(a). The Court relies on the exposition of S170DC in Nicolson v Heaven and Earth Gallery Pty Limited (1994) 1 IRCR 199 at 209 and 210. REINSTATEMENT The Court has had some difficulty in determining whether reinstatement is practicable. The applicant was never really given any fair or genuine consideration when Mr Kovacevic left and the respondent reverted to the previous conversion and corrugation supervisor positions. However, applying the criteria outlined by the Chief Justice in Nicolson at 210 and 211, I have concluded that reinstatement would "impose unacceptable problems...and ....seriously affect productivity". In the circumstances reinstatement is impracticable. Indeed, I have already expressed the view that the Noble Park plant is unlikely to survive without further substantial restructure. My view on future viability is neither here nor there except to the extent that it influences my view on the practicability of reinstatement. Given the substantial and continuing trading losses I am of the view reinstatement is impracticable. COMPENSATION The Court proposes to order compensation and, within the terms of S170EE, substantial compensation. The termination was manifestly unfair and the redundancy payment of $3,166.67, the equivalent of one month's salary, quite inadequate in the circumstances. The applicant was unemployed from 4 March to 16 May, a period of ten weeks and two days. The Court is satisfied that the applicant tried hard to mitigate his loss and that he has done that through his new employment from 17 May but his rate of pay in his new position was, at the date of the hearing, significantly less than his rate of pay while working for the respondent. ORDER Having taken into account the redundancy payment of one month's salary, the ten weeks of unemployment, the lower rate of pay in the present employment and the circumstances of the termination and the fact that the termination was harsh, unjust and unreasonable, the Court orders compensation in the sum of $12,700 (i.e. some $33.00 in excess of the applicant's salary for 4 months at the rate applicable at the date of termination). I certify that this and the preceding pages are a true copy of the Reasons for Judgment of Judicial Registrar Ryan. Associate :