Burslem and Construction, Forestry, Mining & Energy Union v Ajax Gregson Roofing Tiles Pty Ltd [1996] IRCA 153

DECISION NO: 153/96 CATCHWORDS INDUSTRIAL LAW - complaint of UNLAWFUL TERMINATION - whether termination for VALID REASON of OPERATIONAL REQUIREMENTS - whether HARSH UNJUST OR UNREASONABLE - COMPENSATION Industrial Relations Act 1988, ss 170EA, 170EA(3), 170DE(1), 170DE(2), 170EE JOHN BURSLEM and CONSTRUCTION FORESTRY MINING & ENERGY UNION v AJAX GREGSON ROOFING TILES PTY LTD VI 5143 of 1995 Before: PARKINSON JR Place: MELBOURNE Date: 24 APRIL 1996 IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 5143 of 1995 B E T W E E N: John BURSLEM and CONSTRUCTION FORESTRY MINING & ENERGY UNION Applicants A N D AJAX GREGSON ROOFING TILES PTY LTD Respondent REASONS FOR DECISION 24 April 1996 PARKINSON JR This is an application made pursuant to s170EA of the Industrial Relations Act 1988. The applicants in this proceeding are the CFMEU ("the union") and Mr John Burslem ("the applicant"). The application was made prior to recent amendments to the Act. The amendments which apply to the determination of this matter are those which relate to the operation of S170EE. In so far as is necessary I shall apply those amendments. The applicant was employed by the respondent as a roof tiler from 3 October 1976 to 31 August 1995, a period of 19 years. His employment was terminated as a result of the respondent taking a decision to cease to employ daily or weekly hire labour and moving to engaging or employing independent or sub-contractors to perform roof tiling functions. Jurisdiction Issue The respondent contends that the applicant's employment was terminated effective 1 September 1995. It is clear that the applicant was paid no wages after 30 August 1995. The s170EA application was filed on 9 October 1995. The respondent relied upon the letter of 7 August 1995 (exhibit R1) as constituting written notice to the applicant that his employment would be terminated. In my view the contents of the letter were ambiguous. The effect upon the applicant's continued employment with the respondent were not clear, and in the absence of any direct discussion with the applicant to explain the contents or to clarify them, the meaning of the letter is not on its face clear. I do not accept that the letter of 7 August 1995 constituted written notice of termination of employment such as to bring into operation the provisions of s170EA(3) operating at that time. In the absence of written notice of termination of employment, the applicant was not required to file the application within any specified time. Background and findings of fact The evidence is that the respondent is a participant in the roof tiling industry and, prior to the decision referred to above, it employed approximately 60 roof tilers as direct labour. The respondent's managing director, Mr Turner gave evidence that as a result of competitive pressures a decision was taken that it would be cheaper for the respondent to engage only independent contractors to perform tiling work. Mr Turner's evidence was that it was cheaper for the respondent to engage labour in this manner as it was then no longer responsible for group tax, workers' compensation and other statutory payments. He also said that he believed that the employees would work harder if they were working "for themselves". The respondent relies upon this alteration as the reason for the termination of employment. I accept that this was the reason for the termination of employment and that the respondent did not contravene s170DE(1) of the Act. I turn now to consider further factual material and the operation of s170DE(2) of the Act. There was no evidence in these proceedings that the applicant was anything other than a good worker, and no evidence of any basis for complaint as to his work performance or conduct. The practical effect of the decision and its implementation was that the former employees would from the date of agreement operated as subcontractors to the respondent. There was no evidence that there was any practical alteration in the manner in which work was performed, or in the day to day accountability of the labour to management of the respondent. The evidence was that on 7 August 1995 the applicant was informed by the respondent that the respondent required that he become an independent contractor. This information was conveyed to him by letter of that date. There was some evidence that the respondent had earlier conveyed this intention through the applicant's uncle by telephone, however the evidence is clear that there was no conversation with the applicant directly in this regard up to that date. The parties alluded to a relationship between the respondent and the applicant's uncle, however no detail as to this relationship was provided to the court, save that he had at some time previously been employed by the respondent. At the time of the termination of the applicant's employment, he had no relationship with the respondent. No evidence was called as to the detail of this conversation and the evidence of the applicant identifies clearly that he was uncertain and unsure of what was occurring and that he did not appreciate, even after receipt of the letter of 7 August, that the arrangements were to affect him directly. On 7 August 1995 the applicant was sent a letter by the respondent advising him in the following terms: Dear John, As you would be aware, as of 1st September, 1995 Ajax Gregson Roofing Tiles Pty Ltd will only be employing independent contractors to fix roofs. Please find enclosed Agreement which is to be signed and returned in the envelope provided A.S.A.P. Yours sincerely, AJAX GREGSON ROOFING TILES PTY LTD From 7 August until after the termination of the employment by the respondent on 1 September 1995, there were no discussions with the applicant directly as to his options or alternatives until a conversation which took place between the a person in some way associated with the respondent's business, Mr Geddes, and the applicant on 4 September 1995 at the respondent's premises. In this conversation the applicant was advised that he ought agree to the independent contract. The applicant did not agree to alter his status from that of a direct employee of the respondent to sub-contractor. The applicant's evidence was that he was unsure of what the proposed arrangements meant and did not feel comfortable with the proposed arrangement. This is not unreasonable in view of the ambiguity contained in the covering letter of 7 August, where the applicant is advised that the respondent will only be "employing independent contractors". The consequence of the failure by the applicant to accept the independent contract arrangements by 1 September 1995, was that his employment was terminated and his entitlements were paid out by the respondent. It is clear that the only discussions which took place with the applicant, in which some information could have been conveyed to him, took place after the date by which the agreement was required to be signed. It appears on the evidence that there were no steps taken by the respondent until 4 September 1995 to clearly identify to the applicant that his employment had been terminated. The applicant's evidence was that he did not appreciate this was the case until the end of the meeting with Mr Geddes on 4 September 1995. Payment in respect of monies owing pursuant to the Award redundancy provisions and any outstanding holiday pay were recorded in the respondent's pay history records as being made on 13 September 1995 (exhibit R2). The last wages received by the applicant were in respect of the week ending 30 August 1995. It is notable that on the document setting out the payments made for that pay week, reference is made to the applicant's next rostered day off and no reference is made in the document to termination of employment, redundancy payment or any other entitlements (Exhibit R3). There was no discussion with the applicant as to alternatives to terminating his employment prior to the termination being effective on 1 September 1995. The applicant had no opportunity to discuss or canvass any matters with the respondent, and aside from an offer to the applicant to establish appropriate corporate or other business arrangements to facilitate his involvement in the independent contracting arrangements, no consideration was given to any other alternative. The applicant was given one option only, and that was to agree to become an independent contractor or have his employment terminated. The distinction between the employment relationship and the independent contracting arrangement in this proceeding rests purely upon the document created by the respondent and provided as the contract option. There appears to be little effective difference in the manner of operation of the respondent's business or the allocation of work to the persons performing it since the implementation of these arrangements and before. This distinction was not discussed with the applicant and the legal effect of the arrangements was not raised with him. The applicant had been an employee of the respondent for 19 years. He had worked all of his adult life with the respondent and yet no time was taken by the respondent to call him in prior to implementing the arrangements and the termination of his employment in order to discuss or explain any aspect of them. The applicant was left to interpret or to obtain advice upon the documents provided by the respondent in circumstances where he was not an experienced business operator and had no knowledge or familiarity with such arrangements. There was no consideration of the impact of the decision of the respondent upon the applicant and no measures were taken or considered to attempt to reduce the harm to the applicant. The discussions which took place with the applicant after the 30 August 1995 were cursory and designed only to obtain the applicant's agreement to enter the independent contracting arrangement, and not to consider any other matters relating to the mitigation of the adverse effects of the termination on the applicant. In the circumstances, having regard to the length of the applicant's employment with the respondent it seems harsh that a decision taken to alter the employment arrangements in such a fundamental manner was implemented with less than one months notice to the employee. The evidence was that there was no shortage of work and that the changes were made to suit the convenience of the respondent at a time convenient to the respondent. As a result of the matters set out herein I am of the view that the termination of the applicant's employment was harsh, unjust and unreasonable. Remedy The applicant had obtained alternative employment by the date of the trial and in the circumstances seeks compensation. I am satisfied that in view of the alternative employment obtained by the applicant together with the uncertainty as to employment status with the respondent, an order for reinstatement would be impracticable. I have also taken into account the fact that the respondent in the proceedings has indicated that it would not continue to employ direct labour in the tiling area. The applicant seeks compensation. The applicant obtained alternative employment approximately one month after the termination of his employment. However, the employment was casual on a less than full time basis, and a rate of pay approximately $30.00 per week less than that earned by him whilst in the respondent's employ. The applicant received eight weeks pay as a redundancy payment on 13 September 1995. The loss to the applicant of ongoing and long term employment and the accrual of entitlements which is associated with such employment, together with the ongoing reduction in wages, is relevant to take into account in determining the compensation appropriate to be awarded. In the circumstances, having taken into account the length of service of the applicant together with the above matters, I am of the view that the applicant is entitled to an amount of compensation equivalent to an additional three months employment with the respondent. In coming to this amount I have taken into account that it would have been reasonable for the respondent to anticipate a substantial period of notice of the proposed changes to his employment status with the respondent. The amount of compensation reached has also recognised the amount of redundancy payment made by the respondent and the fact that the applicant has obtained alternative earnings and employment in the period, albeit casual. The orders of the court shall be: 1. That the respondent pay to the applicant compensation in the sum of $6981.00. 2. That the time for payment is twenty one days from the date of order. I certify that this and the preceding seven (7) 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 T Campbell CFMEU Representative appearing for the respondent: Mr T Bourke Australian Chamber of Manufactures Date of hearing: 14 March 1996