Mcwhynie v Arnotts Biscuits Limited [1996] IRCA 152

DECISION NO: 152/96 CATCHWORDS INDUSTRIAL LAW - complaint of UNLAWFUL TERMINATION - whether termination for VALID REASON of OPERATIONAL REQUIREMENTS - REDUNDANCY - whether termination HARSH UNJUST OR UNREASONABLE - whether REINSTATEMENT Industrial Relations Act 1988, ss 170EA, 170DE(1), 170DE(2) MARK McWHYNIE v ARNOTTS BISCUITS LIMITED HANG TROUNG v ARNOTTS BISCUITS LIMITED THONG DO v ARNOTTS BISCUITS LIMITED VI 4447 of 1995 VI 4448 of 1995 VI 4449 of 1995 Before: PARKINSON JR Place: MELBOURNE Date: 24 APRIL 1996 IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 4447 of 1995 VI 4448 of 1995 VI 4449 of 1995 B E T W E E N: Mark McWHYNIE Applicant A N D ARNOTTS BISCUITS LIMITED Respondent Hang TROUNG Applicant A N D ARNOTTS BISCUITS LIMITED Respondent Thong DO Applicant A N D ARNOTTS BISCUITS LIMITED Respondent REASONS FOR DECISION 24 April 1996 PARKINSON JR This is a decision in relation to applications made by Mr Truong, Mr McWhynie, and Mr Thong Do pursuant to s170EA of the Industrial Relations Act 1988. An application made by Mr Kiet Do was adjourned to further mention at the date of this decision. The applicants were each employed by the respondent as cleaners at the respondent's manufacturing premises. They were employed in the hygiene department. Mr Truong was employed on 7 August 1989, Mr McWhynie was employed on 10 January 1994, and Mr Thong Do was on 26 March 1984. The employment of the applicants was terminated on 28 July 1995. The circumstances of the termination of employment of each applicant was that the respondent made a decision to contract out its factory cleaning, work which at that time was being performed by the applicants together with other employees in the hygiene department. The evidence of the respondent as to the circumstances of the tender and the time frames within which decisions were made was limited. The evidence is that the decision as to which tender to accept was made on Friday 21 July 1995 with the contract commencing on Monday 31 July. The employment of each of the applicants ceased on Friday 28 July 1995. I turn now to consider the operation of S170DE(1). The respondent submitted that it had valid reason for the termination of employment based upon the operational requirements of the business. The evidence was that the respondent had determined that it would be more financially efficient for it to tender out all of its cleaning functions to a contract cleaning service. The consequence of this was that the respondent would no longer require any person employed by it to perform the cleaning functions which were at that time being performed by the applicants. There was sufficient evidence in these proceedings to establish on balance that the respondent had a valid reason for the termination of employment, based upon the operational requirements of the business. The circumstances of the reorganisation of the cleaning functions does not suggest that it did not lead to a bona fide situation of redundancy affecting the applicants. The evidence of Mr McHutchison, the Human Resources Manager, was that the decision was based upon a decision of the respondent to concentrate its efforts on its core business operations and to tender out the less central operations. His evidence was that there were substantial cost savings to be made as a consequence of tendering out the cleaning function and that this work could also be done more effectively by outside contractors. The applicants submitted that there were flaws in the decision making process of the respondent as to the viability or productivity of direct employees as against contract employees being used or retained by the respondent. Reliance was placed upon the contents of the tender document (exhibit R1) in terms of hours quoted together with an analysis of other financial accounting documents of the respondent (Exhibit R2). Whilst I accept that there were aspects of the limited financial analysis provided by the respondent which were not entirely satisfactory, this fact does not convert what is on the evidence a genuine decision by the respondent to tender out its cleaning operations. There is no evidence that as to the decision to contract out the work on the grounds enumerated by Mr McHutchison there was a lack of bona fides. There was sufficient evidence in these proceedings to establish on balance that the respondent had a valid reason for the termination of employment, based upon the operational requirements of the business. I am satisfied that the termination of the applicants' employment was for valid reason based upon the operational requirements of the business. I turn now to consider the operation of s170DE(2) of the Act. S170DE(2) - Harsh, Unjust or Unreasonable. It is necessary for me to decide whether the termination of the employment, whilst made for the genuine reason of redundancy, was nevertheless harsh, unjust or unreasonable. The termination of employment may be harsh for a range of reasons including the manner in which the termination of employment was notified or implemented. In this present matter the applicants rely upon the circumstances surrounding the termination of employment as establishing that it was harsh, unjust or unreasonable. The circumstances relied upon include the fact that the applicants were not individually counselled or advised of the termination, together with the timing of the termination and the manner of implementation. The applicants also rely upon the operation of various workplace agreements and awards as establishing that the termination of employment was harsh or unjust or unreasonable. It is relevant in these circumstances in determining whether or not the process adopted by the respondent was harsh, unjust or unreasonable, to look at all of the circumstances, including any industrial regulation or pattern of approach or process which applies to the workplace. The applicants rely upon the application of the Building Services Award 1992 an award of the former Industrial Relations Commission of Victoria. The provisions of this award are agreed as applying to the employment. Also applicable to the employment is an enterprise agreement made pursuant to s170MA of the Industrial Relations Act 1988. That agreement is known as the Arnotts Biscuits Limited - Burwood Enterprise Agreement. Further, an unregistered agreement between the respondent and the Liquor Hospitality and Miscellaneous Workers Union operated to provide for various above award payments in circumstances of redundancy. It is appropriate to set out the provisions of the Award in relation to operational change and redundancy. The award provisions set out a process to be undertaken in circumstances where there is to be major change or redundancies. Clause 2(a) regulates Introduction of Change and Clause 3(a) regulates Redundancy. The provisions of Clause 2 provide: (a) (i) Where an employer has made a definite decision to introduce major permanent changes in production program, organisation, structure or technology that are likely to have significant effects on employees, the employer, shall notify the employees who may be affected by the proposed changes and their union. ... (b) (i) The employer shall discuss with the employees affected and their union, inter alia, the introduction of the changes referred to in sub-clause 2 (a) hereof , the effects the changes are likely to have on employees, measures to avert or mitigate the adverse effects of such changes on employees and shall give prompt consideration to matters raised by the employees and /or their Unions in relation to the changes. Clause 3(a) provides as follows: (i) Where an employer has made a definite decision that the employer no longer wishes the job the employee has been doing, done by anyone and this is not due to the ordinary and customary turnover of labour and that decision may lead to termination of employment, the employer shall hold discussions with the employees directly affected and with their union or unions. (ii) The discussions shall take place as soon as is practicable after the employer has made a definite decision which will invoke the provision of sub clause 3(a)(i) hereof and shall cover, inter alia, any reasons for the proposed terminations, measures to avoid or minimise the terminations and measures to mitigate any adverse effects of any terminations on the employees concerned. (ii) For the purpose of the discussion the employer shall, as soon as practicable, provide in writing to the employees concerned and their union or unions, all relevant information about the proposed terminations including the reasons for the proposed terminations, the number and categories of employees likely to be affected, and the number of workers normally employed and the period over which the terminations are to be carried out. Provided that any employer shall not be required to disclose confidential information the disclosure of which would be inimical to the employer's interests. The Enterprise Agreement sets out at clause 5 the aims of the agreement. It is appropriate to set out those objectives. 5. OBJECTIVES: Arnotts Biscuits Limited - Burwood is committed to becoming a World Class Biscuit Manufacturing and Distribution operation. The aim of this Enterprise Agreement is to further develop an enduring productive culture dedicated to achieving real and measurable improvement through teamwork, participation, trust and mutual respect. This requires a commitment by all at Burwood to the ideals of ownership, accountability and implementation, with particular regard to: Maintaining quality Customer satisfaction Improving productivity Reducing waste Arnotts Biscuits Limited - Burwood is adopting a Quality Enterprise Philosophy in which is the key to future manufacturing success will be through an "employee centred focus". This approach is intended to ensure job security through the growth of markets for the company's product including the export market. 6. CONSULTATIVE MECHANISMS: a. A single bargaining unit comprising representatives of the Unions and of the employer shall constitute the Negotiating Committee for this Agreement. The Negotiating Committee may constitute sub committees to work towards the objectives of this agreement. b. Amongst the Committees established has been the Productivity Initiatives Consultative Committee. c. The Negotiating Committees shall discuss, during the term of this Agreement measures to develop industry related accredited training programmes or recognition of acquired skills, within the framework of the National Biscuit Manufacturing Skills Analysis Project of the National Food Industry Training Council. d. The Negotiating Committee shall, during the terms of this Agreement, examine the concept of a single site award to which all the parties to the agreement would be parties. Such an award would not result in reductions in conditions of employment except where it is agreed by those specific employees in receipt of such conditions. e. The Negotiating Committee shall, during the terms of this Agreement, develop more flexible employment arrangements to better integrate work and family responsibilities. Factors to be considered to be leave with pay to care for ill family members, and more flexible employment. f. The Negotiating Committee shall during the term of this Agreement develop a skill based classification structure to facilitate the acquisition and utilisation of skills, the recognition of skills already held and the promotion of a culture of learning. g. The issues referred to in this clause are illustrative and are not exhaustive. 7. PRODUCTIVITY INITIATIVES: (a) The objectives in relation to improved quality and production will be accomplished by ensuring the maximum number of tasks and responsibilities are devolved to those actually doing the work. (i) Identify and eliminate work which is of no value in all areas of the Company; (ii) allowing employees to manage their workplace which will allow them to have pride and purpose in their work and assume ownership for their processes and performances. ... It is apparent from the above material that there was an extensive and ongoing process of consultation and co-operation undertaken by the parties to the agreements and the awards, and that that process extended to all major aspects of the parties relations with each other and was continuing at the time of the termination of the applicants' employment. The applicants submit that the process adopted by the respondent in respect of the termination disregarded all of these consultative mechanisms and agreements, and that this procedural defect of itself constituted the termination of employment as harsh, unjust or unreasonable. I turn to consider the detail of the process adopted. The decision to accept the tender of Menzies International was, on the evidence of Mr McHutchison, made on 21 July 1995. There was clearly a process of inviting tenders and considering the various merits of the tenders submitted, and negotiations in that regard for many weeks prior to the final agreement being concluded. However, the only evidence before me in this proceeding is as to the timing of the decision to accept the Menzies International tender and the subsequent timing in terminating the employment. Mr McHutchison gave evidence as to the circumstances of notification of employees in the hygiene department. Employees who were on afternoon shift were advised in a group meeting at the start of the shift. Mr Thong Do was present at this meeting as was Mr McWhynie. Employees who were on night shift were advised at the end of the night shift. Mr Hang Troung was present at this meeting. Mr McHutchison's evidence was that he first informed the applicants of the impending termination of their employment on Monday 24 July 1995. His evidence was that he advised them their employment would terminate on Friday 28 July 1995. The applicants' evidence is that they were informed on Wednesday 26 July 1995 that their employment would cease on Friday. The evidence of Mr Robinson, the union organiser, is that he first heard of the redundancies from the local union representative, Ms Lyn Bradley, on Wednesday 26 July by telephone. He said he then attended the workplace on Thursday and Friday of that week to discuss the matters with the applicants and the respondent. His evidence was that whilst he had been present at the respondent's premises on Monday 24 July 1995 this was for the purpose of a Consultative Committee Meeting and that he was not informed at that time of any proposed redundancies. The extracts from the sign in book (Exhibit R5) identify that on Monday 24 July 1995 Mr Robinson was present at the site from approximately 2.45 pm to 5.15 pm. Also present at the site at that time were a number of officials from other unions also participants in the consultative arrangements. All of these delegates left the site at or around the same time. The sign in book then records Mr Robinson as having attended the site again on Thursday 27 July at approximately 6.30am and leaving at 7.44am. This is consistent with the evidence of each of the applicants as to the time of day when they first met with him after being informed of their redundancy. The sign in book does not record any other attendances by Mr Robinson, although his evidence was that he also attended on Friday 28 July 1995. Ms Bradley gave evidence that she along with the applicants was informed of her own redundancy on that date and that she advised the union of this fact on that day. She was firm about her evidence in this regard and I was impressed by her evidence overall. It is clear from the above that there was some dispute as to the timing of the advice given to employees. Having regard to the evidence of Ms Bradley and the conclusions I have drawn from the sign in book, I am satisfied that the advice as to redundancy was given to the employees on Wednesday 26 July 1995. In so finding it should be noted that this finding does not constitute a finding as to the credit of any witness in these proceedings. The evidence in these proceedings as to dates and times of events was generally unsatisfactory and suffered from a lack of formal documentation on the part of the participants. Both cases suffered from this deficiency. The applicants rely upon the time frame of the advice as identifying an unreasonably hasty process of implementation in the absence of full and proper information. In my view, the time frames involved although relevant are only one aspect of the circumstances to be considered in determining whether the termination of the employment was harsh, unjust or unreasonable. The evidence of the respondent in relation to the advice given to employees was that they were informed as soon as the "decision was made" and that this "was all they were required to do". This was the evidence of Mr McHutchison. The decision to which he was referring was the decision that a particular contract cleaning company, Menzies International Pty Ltd, was to be awarded the contract and were to commence on Monday 31 July. The explanation given by the respondent in relation to this matter is that its view of any obligation it had was that it was required to consult after it had made a definite decision. I am satisfied that a definite decision was made to contract out the work well prior to the actual tender of Menzies International Pty Ltd being accepted and the contract entered. I do not agree with Mr McHutchison that the relevant decision in this circumstance was merely the decision to award the contract to Menzies International. The other relevant decision was the decision of the respondent to contract out the work of its entire hygiene department and thus make that department's workforce redundant. No information of any kind was given to employees in this regard, notwithstanding that the tender process was implemented and considered in detail by the respondent. At the very least, it was established on the limited evidence in these proceedings there were negotiations occurring as to the detail of the contract documents with Menzies International three weeks prior to the applicants being informed of their redundancy. The applicants were kept in the dark as to the respondent's intentions until some three days prior to the actual implementation of the new contracting arrangements. Further during the entire process, notwithstanding all of the Industrial Agreements and Awards touching upon these matters, the respondent failed to consult or advise the applicants or their union of its intentions. The manner of advising these employees of the termination of their employment contrasts strongly with the process of consultation and discussion that had been occurring at the premises in relation to productivity and efficiency improvements. A consultative committee had been established pursuant to the 1994 Enterprise Agreement. This process involved examination of the operations of each individual department on an ongoing basis to ascertain where improvements in these areas could be achieved. The hygiene department was one of the areas of ongoing consideration and regular meetings considered each department and its progression. These meetings were continuing to take place at the respondent during the period in which the tender process was undertaken and no advice or information was given to either the consultative committee or to the union or individual employees. I am satisfied, having regard to the Introduction of Change provisions set out above and to the limited time frames adopted by the respondent at its own initiative, that the respondent ought to have consulted and provided information earlier than it did. I am also so satisfied because the matters considered by the Joint Consultative Committee, and those specified in the Enterprise Agreement clauses set out earlier, were directed towards reducing costs to the respondent in the manner or way in which work was performed. This in my view could reasonably be relied upon by the applicants as creating an expectation that adequate advance warning of possible redundancy would occur, together with discussion as to ways to alleviate the consequences for individual employees. The matters considered by the consultative committee included such things as reducing time worked by employees in overtime, changeovers and related matters. The evidence of the applicants was that it also included matters such as redundancy proposals. The respondent's evidence was that this committee was merely an administrative structure. I do not accept that this was either the stated intent of the agreement or the committee, nor its practical operation. Further, I am satisfied that it was the intention of the parties to the agreement that matters such as major changes to the way in which work was to be done at the respondent, such as contracting out or redundancies, would be discussed at the consultative committee. This is apparent from the use of language such as "teamwork, participation, trust and mutual respect", and: "Arnotts Biscuits Limited - Burwood is adopting a Quality Enterprise Philosophy in which the key to future manufacturing success will be through an 'an employee centred focus'. This approach is intended to ensure job security through the growth of markets for the company's product including the export market". It is also apparent from the detailed consideration of the productivity measures to be taken including "Identify and eliminate work which is of no value in all areas of the company." Advice of both the decision and the termination of employment was given at the same time and only days before the implementation of the new arrangements. The employees were told they were to finish on the forthcoming Friday. In my view whether this advice was given on Monday or Wednesday is not really to the point in these proceedings. The time frame imposed by the respondent were inadequate, particularly in the absence of no consultation or discussions having occurred. There were no discussions implemented in an attempt to avert or mitigate the adverse effects upon the employees. There were no discussions with employees as to alternatives, and the evidence of the applicants, which I accept, is that the employees were not informed that they were entitled to apply for employment with the contractor and that the contractor was obliged pursuant to the tender agreement to interview them. The evidence is that they were only so informed when they inquired and were then told that if they did achieve employment with the contractor they would lose their redundancy entitlements. Further, the timing of the implementation of the new system and contract arrangements was a matter arranged by the respondent with no regard to the interests of the applicants, and by its speed of implementation relative to the termination of employment left little room for discussions to occur or options or alternatives to be considered. An example of this latter consequence is that the contractor, Menzies International, had already filled all positions on its cleaning teams for Arnotts before the respondent had even told its employees that their jobs were gone and that their employment was to be terminated as a result of redundancy. The tender process was completed and the contractor engaged to commence on the following Monday before any information or advice was given to employees. I am satisfied that no regard was had to the individual circumstances of any of the applicants, and whilst some token efforts were made after the termination of Mr McWhynie's employment to arrange an interview for him with the contractor, this came to nothing for the reason that apparently all positions had been previously filled. I am satisfied that the process of implementation which was undertaken by the respondent was unreasonable and that the termination of the applicants' employment which resulted was, as a consequence of all of the factors I have set out herein, harsh and unjust. I am satisfied that the respondent contravened the provisions of S170DE(2) of the Industrial Relations Act 1988. I turn now to consider the question of remedy. Remedy The applicants in this proceeding each seek an order for reinstatement. The evidence of the respondent is that at the time of the termination of employment there were no full time positions available elsewhere in the factory. The evidence in the proceedings was that there had been a reduction in the overall staff numbers of the respondent nationally. The evidence was that there were casual employees engaged from time to time by the respondent but that it was a matter of policy of the respondent not to offer such positions, or indeed any other position to employees who had been made redundant, at least until the expiration of a substantial period of time. No explanation as to why this was so was given. I am not satisfied that any real effort was made to ascertain whether work was alternatively available anywhere in the respondent's operations. Certainly no enquiries were made of the applicants as to work they might be capable of undertaking. It is for the respondent to satisfy the court that an order for reinstatement would be impracticable. Save for the evidence set out above in relation to staffing numbers, there was no evidence called in this regard. There was evidence that casual employment was used by the respondent. None of the applicants has been able to obtain full time employment and have each expressed a desire to return to work for the respondent, together with indicating that they were prepared to undertake any work which was made available to them. I am not satisfied that an order for reinstatement would in the circumstances of this case be impracticable and I am of the view that it is the appropriate order to make. I will further order that the applicants be paid that remuneration to which they were entitled from the date of the termination of employment to the date of the reinstatement ("the relevant period"). From that remuneration the following amounts are to be deducted. An amount equivalent to the amount of redundancy and termination payments for notice made to the applicants. An amount equivalent to the amount of all other payments made on account of pro rata sick leave and long service leave. An amount equivalent to the amount of any social security benefits in the nature of unemployment benefits received by the applicants in the relevant period. It is not possible on the basis of the material before me to calculate what the balance of the amount is for lost remuneration. The parties are directed to calculate this amount according to the matters I have directed be taken into account. In the event that the parties cannot agree upon the amount of remuneration lost, I will determine the amount after hearing from the parties in that regard. The orders of the court shall be: 1. That the applicants in matters 4447 of 1995, 4448 of 1995 and 4449 of 1995 be reinstated by the respondent to another position on terms and conditions no less favourable than those on which they were employed immediately before the termination. 2. That the period between the date of termination and the date of reinstatement be treated as continuous employment for all purposes. 3. That the matter be adjourned to enable the parties to calculate in accordance with the principles set out in these reasons for decision the amount of the remuneration lost by each of the applicants. 4. That the parties file within seven days of todays date an agreed calculation of the amount of remuneration lost by each of the applicants. 5. That the matter be listed on 3 May 1996 at 9.30am for the making of final orders as to the amount of remuneration to be paid pursuant to s170EE(1)(b)(ii). I certify that this and the preceding fifteen (15) pages are a true copy of the reasons for decision of Judicial Registrar Parkinson. Associate: Dated: 24 April 1996 APPEARANCES Representative appearing for the applicant: Mr R Crampton ALHMWU Representative appearing for the respondent: Mr R Condie Australian Chamber of Manufactures Date of hearing: 4 March 1996