Industrial Relations Commission New South Wales Medium Neutral Citation: Notification under section 332 by Transport Workers' Union of New South Wales of a dispute with Post Logistics Australasia Pty Ltd and another re schedule A [2011] NSWIRComm 1034 Hearing dates: 25 March 2011 Decision date: 08 July 2011 Jurisdiction: Industrial Relations Commission Before: Tabbaa C Decision: Applicant to pay lesser amount of Severance payment to contract carriers Catchwords: Industrial dispute - transport industry-retrenchment of contract carriers - suitable alternative employment - application to pay a lesser (or no amount) of severance pay Legislation Cited: Industrial Relations Act 1996 Cases Cited: Transport Industry - Redundancy (State) Contract Determination [2007] NSWIRComm 183 Sigma Pharmaceuticals Pty Ltd [2009] NSWIRComm 1036 TWUv Toll North Pty Ltd [2008] NSWIRComm 1107 Category: Separate question Parties: Post Logistics Australasia Pty Ltd (Applicant) Transport Workers' Union of NSW (Respondent) Representation: Ms L Bernasconi Blake Dawson (Applicant) Mr S Bull Transport Workers' Union (Respondent) File Number(s): IRC 112 of 2010 DECISION The Dispute Notification 1The Transport Workers' Union of New South Wales ("the TWU"), on 17 February 2010, notified the Commission, pursuant to section 332 of the Industrial Relations Act 1996 ("the Act") of a dispute with Post Logistics Australasia Pty Ltd ("the Company"). 2The notification advised as follows: 1. Post Logistics is a transport company based at Eastern Creek. 2. The Company engages contract carriers to perform delivery services in the Sydney metro area pursuant to the SWADS Agreement. This unregistered agreement is underpinned by the industrial instrument which is the Transport Industry (State) Redundancy Contract Determination. 3. The Company has advised the contract carriers that it intends to terminate their services effective 28 February 2010. This was communicated in writing to the contractors on 28 January 2010. 4. The Union, on behalf of its members, commenced discussions with the company regarding suitable alternative engagements or, in the alternative, the obligatory redundancy entitlements. 5. The Company has indicated that it has arranged suitable alternative engagement. That engagement is with Messenger Post Couriers. The company has then indicated it will not pay redundancy payments to the contract carriers pursuant to the Transport Industry (State) Redundancy Contract Determination. 6. The Union disputes that the engagement with Messenger Post Couriers is suitable alternative engagement, and therefore maintains that the company has an obligation to pay the redundancy payments to the contract carriers pursuant to the redundancy determination. This claim is on the basis that unless the company provides suitable alternative engagement, the carriers are redundant and therefore entitled to the prescribed payment. 7. The Union rejects the company's suitable alternative engagement offer on the following basis: (a) The terms and conditions offered by Messenger Post are inferior to those currently enjoyed at Post Logistics. These include eg inferior rates of remuneration, no guaranteed minimum hours and no paid phone calls etc. (b) The terms and conditions offered by Messenger Post does not recognise any continuity of service from Post Logistics. Several carriers have lengthy periods of service with Post Logistics. Post Logistics acquired SWADS several years ago and these carriers were engaged by SWADS prior to the time of the acquisition. 8. The Union has participated in discussions with Messenger Post Couriers and they have indicated that they will not recognise any continuity of service or any continuity of terms and conditions despite the claims of Post Logistics. 9. The Union respectfully seeks the assistance of the Commission by asking the Commission to conduct a compulsory conference between all the parties so they can crystallise their respective positions. 3On 4 March 2010, the Company filed an application on 4 March 2010 seeking an order that no amount, or a lesser amount of severance pay, be paid to the nine contract carriers who claimed entitlement to such payment. 4The dispute was unable to be resolved and the dispute was ultimately arbitrated before Connor C on 26 May 2010. The Commissioner was required to determine an application pursuant to clause 6 (iii) of the Transport Industry - Redundancy (State) Contract Determination. 5In a decision, dated 24 June 2010 ([2010] NSWIRComm 1030), the Commissioner held that, while he was satisfied that the Company provided alternate work, he did not believe that it was entirely "acceptable" alternate work except with respect to those still working on the SWADS agreement. He declined to award payment in regards to the latter. In addition, the Commissioner accepted the Company's submissions that the full amount of severance payment should not be made and made his own assessments in relation to six of the nine contract carriers engaged under the former category. 6An application for leave to appeal and if leave is granted, to appeal against the decision of Connor C was filed by the Transport Workers' Union of NSW (Matter No IRC 561 of 2010). An application for leave to cross appeal and cross-appeal against that decision was also made by the Company (Matter No IRC 693 of 2010). 7The Full Bench of the Commission (Walton J Vice-President, Grayson DP and Ritchie C), on 8 November 2010, found that there was sufficient grounds upon which to grant leave to appeal, to uphold the appeal and refuse leave to cross appeal and did so accordingly. The orders of Connor C were quashed and set aside and the matter remitted to the Commission as currently constituted to determine the matter in accordance with the appeal decision. The Factual Matrix 8On Monday, 22 January 2007, Post Logistics took over the business of J R Haulage Pty Ltd trading as State Warehousing and Distribution Services (SWADS) which was engaged in transporting white goods primarily within the Sydney metropolitan area. Post Logistics took over 17 contract carriers and maintained the terms of their engagement which they had negotiated with J R Haulage (the SWADS contract agreement). The SWADS contract agreement contained a provision recognising goodwill in the event of the sale of the vehicle. 9In mid 2009, Post Logistics sought to convert its contract drivers from the SWADS agreement to a new contract agreement (the Post Logistics contract agreement) which did not contain the provision relating to goodwill. 10Of the seven contract carriers involved in these proceedings: Three of those who were subsequently retrenched elected to enter into the new contract agreement: Messrs. Sam Paulus, Duc Kim and Vasko Bosevski; Six others - namely, Messrs Murphy and Kostrubiec and those who were subsequently retrenched, Messrs Andrew Kulibab, Garry Walsh, Gus Santos and Tam Nguyen elected to remain under the SWADS contract agreement. 11Connor C found that there was no evidence to suggest that the contract drivers who elected to remain under the SWADS contract agreement were penalised by experiencing a reduction in work nor that those contract drivers who elected to enter into the new contract agreement did so under duress. 12Post Logistics was suffering from financial hardship and undertook a review of all of its operations, including line haul and local delivery in each State. After considering a range of options, Post Logistics decided to outsource its local delivery work to Messenger Post Couriers, a division of Australia Post, effective from 1 March 2010. Post Logistics gave its carriers notice on 28 January that their agreement would be terminated effective Saturday, 28 February 2010. The Company negotiated with Messenger Post for the latter to offer to take over the nine contract carriers commencing 1 March 2010.. 13Messenger Post offered all nine contract carriers engagements to continue to do the same work that they were doing with Post Logistics as well as having the opportunity to do additional new work. Messenger Post offered them contracts based on its standard form of contract albeit with two concessions - they would be retained on their existing level of remuneration with Post Logistics and their prior service with Post Logistics would be recognised with respect to any future redundancy situations. 14Although all nine contract carriers were advised to take the offer whilst reserving their position with respect to these proceedings, four contract carriers declined to do so - namely, Messrs. Kostrubiec, Kulibab, Walsh and Nguyen. Connor C found, and the parties agreed, that no distinction ought to be made between those two groups of contractors so far as determining an entitlement to severance payment is concerned. 15It is Messenger Post policy, reflected in its standard contract, that all of its contract drivers trade as corporations. It insisted on the maintenance of that policy with respect to the contract drivers it adopted from Post Logistics. Mr Kostrubiec was the only one of the nine retrenched contract drivers who did not trade as a corporate entity and, despite encouragement from Mr Hurst to form himself as a corporation, he refused to do so. 16The parties did not disagree with the summary of the position of each of the contract drivers as set out below: Mr Kulibab: Trades as A S and E A Kulibab Pty Ltd; Engaged on the SWADS contract; Refused to convert to the Post Logistics contract in mid 2009; Declined to accept the offer to work with Messenger Post; Estimate of Severance Payment, if entitlement exists: $29,741.99 Mr Walsh: Trades as Gazmac Transport Pty Ltd; Engaged on the SWADS contract; Refused to convert to the Post Logistics contract in mid 2009; Declined to accept the offer to work with Messenger Post; Estimate of Severance Payment, if entitlement exists: $23,183.77 Mr Murphy: Trades as Jacklin Consulting Pty Limited; Engaged on the SWADS contract; Refused to convert to the Post Logistics contract in mid 2009; Accepted the offer to work with Messenger Post; Estimate of Severance Payment, if entitlement exists: $26,741.63 Mr Santos: Trades as S G Santos Pty Ltd. Engaged on the SWADS contract; Refused to convert to the Post Logistics contract in mid 2009; Accepted the offer to work with Messenger Post; Estimate of Severance Payment, if entitlement exists: $30,808.06 Mr Nguyen: Trades as Tan Transport and Removal Pty Limited; Engaged on the SWADS contract; Refused to convert to the Post Logistics contract in mid 2009; Declined the offer to work with Messenger Post; Estimate of Severance Payment, if entitlement exists: $28,537.58 Mr Kostrubiec Sole Trader; Engaged on the SWADS contract; Refused to convert to the Post Logistics contract in mid 2009; Declined to accept the offer to work with Messenger Post; Estimate of Severance Payment, if entitlement exists: $33,630.27 Mr Paulis: Trades as Pony Transport Pty Limited; Accepted conversion to the Post Logistics contract in mid 2009; Accepted the offer of work with Messenger Post; Estimate of Severance Payment, if entitlement exists: $13,951.26 Mr Kim: Trades as Quang Thanh Transport Pty Limited; Accepted conversion to the Post Logistics contract in mid 2009; Accepted the offer of work with Messenger Post; Estimate of Severance Payment, if entitlement exists: $22,581.61 Mr Bosevski: Trades as VAS Transport Pty Limited Accepted conversion to the Post Logistics contract in mid 2009; Accepted the offer of work with Messenger Post; Estimate of Severance Payment, if entitlement exists: $19,080.80 The Award Provision 17Section 6 (iii) of the Transport Industry - Redundancy (State) Contract Determination provides ("the Determination"): Subject to an application by the principal contractor and further order of the Commission, a principal contractor may pay a lesser amount (or no amount) of severance pay than that contained in subclause (i) of this clause if the principal contractor obtains acceptable alternative work for the carrier. The Full Bench Decision 18The Full Bench accepted that the sub-section required the Commission to, firstly, consider whether acceptable alternative work was obtained for each of the nine retrenched carriers. If the Commission made a positive determination in that regard, then it was required to proceed to the next step to determine what flows from that. In other words, the Commission is required to exercise its discretion in determining whether the amount of severance pay for each carrier should be reduced and, if so, to what extent. 19The Full Bench determined that the following appealable errors had occurred and remitted the following two issues to the Commission as currently constituted to be determined in accordance with its decision: 19.1 In relation to the six carriers engaged under the SWADS contract agreement, Connor C failed to make a positive finding in relation to the provision of "acceptable alternative work" prior to determining to reduce the severance payments for: Jacklin Consulting S G Santos A S & E A Kulibab Gazmak Transport Tan Transport J M HM Kostrubiec If the Commission, as currently constituted, determines that the work is not "acceptable alternative work", then the full severance entitlement should be paid. If the Commission determines in the alternative, then it must determine whether it is appropriate to pay a lesser amount, or no amount, of severance. 19.2 In relation to the three carriers on the PLA contract, Connor C made a positive finding that the offer made by Messenger Post was acceptable alternative work for the purposes of Clause 6 (iii) of the Redundancy Determination. However, the Commissioner failed to exercise his discretion to reduce or not reduce the amount of severance pay because the Commissioner considered that they were automatically disqualified from severance payments. The Contract Carriers involved were: Pony Transport Quang Thanh Transport VAS Transport 20The Commission, as currently constituted, is required to determine whether full severance payments, or a lesser amount, or indeed, no amount, should be paid. SUBMISSIONS Agreed Matters 21The parties were agreed that there was no dispute that the termination of the contract carriers was a redundancy event in terms of clause 6 (i) of the Determination . 22The parties were also in agreement as to what constitutes the carriers' full severance entitlement. 23The parties were further agreed that the matters for determination were the following. 23.1 Firstly, did Post Logistics Australasia Pty Ltd obtain alternative work for each of the carriers? 23.2. Secondly, if so, was that work "acceptable alternative work"? 23.3 Thirdly, if answered in the positive, then it enlivens a discretion as to whether the redundancy payments provided for in clause 6 (i) of the Redundancy Determination should be paid in full or reduced so that Post Logistics pays no amount, or some lesser amount, of severance pay to those carriers? 24In relation to the first issue, Connor C found, and the parties were agreed, that Post Logistics obtained alternative work for all of the carriers with Messenger Post. SUBMISSIONS 25As indicated previously, it was not disputed that Post Logistics obtained alternative work for its carriers with Messenger Post. 26The Union submitted that Sams DP had, in approving the Contract Determination, recognised that the carriers are workers who have exclusive permanent relationships with their principals and, by virtue of the fact that they make a much more significant investment in the working relationship than an employee, are deserving of the type of protection being sought in these proceedings. They have to invest in capital by purchasing a vehicle, incur ongoing administration costs, and absorb more of the risk. If they lose a contract, they have an asset parked out the front of their house, frequently with money owed on it. 27The Union pointed out that the Redundancy Determination obligates a severance payment to be made in circumstances where there has been a termination by a principal arising from changes in " production, program, organisation, structure or technology ". The prima facie position, therefore, is that severance is payable and relief from payment is an exception ( Australian Workers' Union (NSW) v Great Lakes Community Resources [2004] NSW IRC 327 at para 26) unless the Respondent is able to meet the evidentiary onus of providing persuasive, cogent and reliable evidence, to the satisfaction of the Commission, that the alternative work is "acceptable" and that an amount less than the full amount, or no amount, should be paid. The Union submitted that where there is doubt, the carriers should be given the benefit of the doubt because they have that prima facie position. 28The Union argued that there was no basis on which the Commission could conclude that the alternative work obtained for the SWADS Carriers with Messenger Post is "acceptable alternative work" as the contractual arrangements with the latter are significantly inferior and the work is significantly different in practise and unacceptable. It was pointed out that the "significant uncertainty and ambiguity" demonstrated in the evidence ought lead to the Commission resolving the matter in favour of the Carriers as it is not their responsibility to establish that the work is unacceptable. Carriers on PLA Contracts 29In relation to the Carriers on PLA Contracts, Post Logistics pointed out that the Union has not identified any relevant differences between that Contract and the terms offered by Messenger Post. None of the three carriers were called to give evidence about their personal circumstances or any particular factors that would convince the Commission to grant a redundancy payment in the circumstances. In other words, Post Logistics' evidence and submissions in relation to those carriers should therefore be accepted. All three carriers accepted the offer of acceptable alternative work. It was submitted that none of the arguments advanced by the Union related to these Carriers and therefore there was no proper basis to make a finding that Post Logistics should pay any amount of redundancy pay to these Carriers. 30In addition, a significant issue applied in that Messenger Post had agreed to recognise each carrier's prior service with PLA for the purposes of any future redundancy. 31Post Logistics submitted that the Commission should confirm the finding of Connor C that Post Logistics obtained "acceptable alternative work" for each of the carriers on the PLA contract: Pony Transport Quang Thanh Transport VAS Transport 32The Commission was reminded that the finding was not challenged on appeal and was not one of the matters overturned by the Full Bench on appeal. 33Although the Union conceded that the alternative work obtained for the PLA Carriers was "acceptable alternative work", it was submitted that some amount of consideration of the redundancy event was warranted given the significant issues raised about the working environment with Messenger Post. The Union cited the Full Bench of the Australian Conciliation and Arbitration Commission in the Termination, Change and Redundancy Case [1984] 8 IR 34 as authority for the submission that the disruption caused to a worker's life that is implicit in any redundancy event justifies the payment of part severance despite the finding that the alternative work is acceptable: ..... it would be misleading to assume that success in obtaining a new job indicated that an individual made redundant had managed to recover the security built up over years of service in the redundant job.... . (at p. 73) Carriers on SWADS Contracts 34Post Logistics submitted that similar submissions apply in relation to those previously on the SWADS contract, 35It was submitted on behalf of Post Logistics that the second issue, whether the work offered to those on the SWADS contract could be considered to be " acceptable " alternative work, must be determined objectively by conducting a comparison of the work performed for it by Carriers and that offered by Messenger Post. 36Post Logistics argued that it is not practical to deal with the claim in the manner in which the union chose to do - in other words, to obtain evidence from an Officer of the union on a line by line comparison of both contracts. The more realistic and practical assessment of Post Logistics was to be preferred. Mr Murphy had given evidence as to the overall picture, the practical reality of work on the ground, and, it was noted, the union had chosen not to take the opportunity to cross-examine him to challenge that evidence. 37Post Logistics pointed out that - * all Carriers performed the same type of work as each other with Post Logistics; and * work was offered by Messenger Post on the same terms to all Carriers; and * the test applied in determining whether work offered is "acceptable alternative work" in the situation of Contract Carriers is far narrower than the test applied in an employer/employee relationship. * the only two decided cases on the application of clause 6 (iii) of the Redundancy Determination are consistent with the approach adopted by the Company. Whilst it was acknowledged that in those decisions it was held that the work was not acceptable, the facts in those cases are clearly distinguishable from the present circumstances; 38The Commission was advised that the evidence given on behalf of Post Logistics by Patrick Ryan was unchallenged and no evidence was led from any of the Carriers or any other TWU witnesses in contradiction of that evidence. 39Finally, in determining whether the Carriers ought to receive any redundancy payment in circumstances where acceptable alternative work has been obtained, Post Logistics submitted that the justification enunciated by DP Sams in the making of the Transport Industry - Redundancy (State) Contract Determination [2007] NSWIRComm 183 was relevant. It was pointed out that the hardships and inconvenience identified by his honour as key considerations for determining whether a severance payment is warranted were absent in these proceedings - finding alternative work, particularly when specialised equipment is involved, standing costs associated with maintaining an idle vehicle during periods of unemployment, and so on. 40Post Logistics drew a distinction between the two concepts - contracts of engagement and employment contracts. The former was a narrower concept involving a focus on the work to be done in order to determine whether or not it is acceptable alternative work. By contrast, employment contracts involve an examination of the engagement and the terms of the engagement, 41It was also submitted by Post Logistics that none of the differences between the work arrangements of Post Logistics and Messenger Post relied upon by the union are sufficient to warrant any severance payment being made to the Carriers. Indeed, it was submitted, a line by line comparison of the contracts and compensation for every little change (for example $100 parking fine) is not an approach that is required by the Determination and is both unrealistic and unwarranted. 42Post Logistics submitted that the following factors support an order pursuant to clause 6 (iii) of the Redundancy Determination that no redundancy payment should be made to any of the Carriers on the SWADS contract. The Commission was reminded that Patrick Ryan had given evidence in that regard when examining whether the alternative work offered to all Carriers , not just those on PLA contract, is acceptable work: - The nature of the work itself - The rate of pay for the work - Recognition of Prior Service - The location of the work - The equipment required for the work 43Post Logistics also submitted that no distinction should be made between those Carriers who accepted the offer and those who did not. 44The Union argued that the following factors should also be taken into account: - Continuity of service - Severance payment - Goodwill - Insurance - Payment of fines - Uniforms - Parking Fines - Superannuation - Damage to Goods - Payment of Fees The Nature of the Work Itself 45Post Logistics submitted that Messenger Post offered all of the carriers the work outsourced to it by Post Logistics, that is, bulk operations transporting white goods in the Sydney metropolitan area. That work is identical to the work undertaken by Post Logistics as the work was outsourced by the latter to the former. 46The Union pointed out that the work provided by Messenger Post was an "amalgam" of the work provided by SWADS, Post Logistics and Messenger Post. The Union stated that the evidence did not support the contention by the Company that the SWADS contractors are doing the same work for the same money. It was argued that some drivers who did SWADS work, which is paid at the higher rate, had already been made redundant by Post Logistics prior to the redundancies which are the subject of these proceedings as that work had diminished. It was pointed out that the SWADS work that remained will be intermingled with a large fleet or carriers who will not necessarily be paid at the SWADS rate. 47Despite the union submission, its witness, Mr Murphy, gave evidence that he was not getting any Messenger Post work - he was just continuing to do the PLA work. Therefore the submission re amalgam of work at different rates does not bear out in light of the union's own evidence. The rate of pay for the work 48Post Logistics submitted that Messenger Post guaranteed the PLA rates of pay for all of the PLA work outsourced to it by Post Logistics. The carriers continue to earn a similar level of earnings, or more, with Messenger Post. The only Carrier who took up the offer of employment with Messenger Post and gave evidence in these proceedings stated that he is earning the equivalent amount or more with Messenger Post. 49Post logistics also submitted that there was no downtime between cessation of work with Post Logistics and commencement of work with Messenger Post. 50Post Logistics advised that there was a greater opportunity for the Carriers to pick up additional work and more career opportunities given that Messenger Post is a bigger business that Post Logistics. 51The Union submitted that the SWADS carriers were guaranteed a minimum of four hours' pay per day with Post Logistics. There is no guaranteed work with Messenger Post. 52The Union pointed out that the fact that the hourly rate of remuneration, the most fundamental fact upon which acceptability is assessed, for the Messenger Post work has never been disclosed is a "significant evidential lacuna" that disadvantages the Union in its attempt to convince the Commission that the work obtained is "acceptable". 53It was pointed out that the income figures provided to the Commission were misleading as they do not indicate the rate of remuneration received nor the hours worked by the carriers for that remuneration nor do they indicate whether or not GST was included. The Union submitted that there was no probative evidence to support the Company's assertion that the carriers earn more or comparable amounts and hence the work is acceptable. The Union pointed out that the Company had ample opportunity to clarify this critical issue and chose not to do so either at the original proceedings before Connor C or before the Appeal Bench. 54It was submitted that the three carriers on PLA contracts will, in fact, be earning less once GST is taken into account, will receive lower volumes of work, will have to travel more kilometres to perform lesser amounts of work and incur greater running costs, Recognition of Prior Service 55Case law has considered recognition of prior service as relevant when considering whether the work offered is acceptable alternative work. Post Logistics pointed out that the evidence was unchallenged that Messenger Post agreed to recognise each Carrier's prior service with Post Logistics (including prior service with SWADS) for the purposes of any future redundancy. The location of the work 56Post Logistics pointed out that the work is being performed from the same location. The equipment required for the work 57Post Logistics submitted that the carriers continue to use the same vehicles and there was no requirement to make any changes to their trucks and no expense was incurred in that regard. Continuity of Service 58The Union pointed out that Post Logistics placed a great deal of reliance on the fact that Messenger Post had guaranteed continuity of service to all Carriers. Nevertheless, the only significant entitlement in that regard that would be carried across to Messenger Post would be the right to claim a severance payment under the Redundancy Determination. 59The SWADS carriers were guaranteed a nominal term and ongoing work with Post Logistics with their agreement to remain in place until replaced by a new agreement. Messenger Post has admitted that the PLA carriers are currently on a 12-month fixed term contract and that the work offered is on the basis of a 2-year contract which, if not renewed, would end the relationship automatically. The Union argued that continuity of service is a tool aimed at defeating a contract carrier's right to claim severance pay and the only benefit is to Australia Post as a global entity and not to the Carriers. 60Continuity of service was not included in the contracts - it was an offer made in individual letters, in some instances undated. It was presumed that the letters were provided in contemplation of the instant application being made in order to strengthen the Company's case. The Union submitted that there was a real risk that it is a ploy by Australia Post, as a global entity, to pay out the severance pay at a future date down the track when the carriers are receiving a lower rate and no guarantee of hours as it is calculated on the remuneration received over the preceding 12 months. It would therefore be of benefit to Australia Post to transfer the redundancy entitlement because all of the signposts indicate that it will be reducing a risk. Severance Payment 61The Union pointed out that there is no additional benefit available to the Carriers in regard to the continuity of service as the entitlement to severance pay is 16 weeks' pay (or 20 weeks pay in the case of a Carrier who is 45 years of age and over) for six years of engagement and over and all of the SWADS carriers had in excess of six years' service. 62A further and more critical concern to the Carriers is the fact that severance under the Redundancy Determination is calculated on the weekly average gross remuneration received for the previous twelve months. The Union held a genuine concern that if the Carriers earn lesser remuneration with Messenger Post than they did with Post Logistics, then they will incur a reduction in any severance payment they are liable to be paid. 63The Carriers are concerned that the assertion regarding recognition of continuity of service has not been included in the contracts albeit it is contained in a letter to each of the Carriers. In addition, the evidence indicates that it is the length of service as at the time of the transfer that is preserved, that is, service with PLA and SWADS. There is no guarantee that, at the conclusion of the contract with Messenger Post, severance payment would include service with that Company. Goodwill 64Post Logistics pointed out that the Carriers on the PLA contract did not have a right to goodwill. 65Post Logistics submitted that, in relation to the SWADS contract, it was silent on the issue of goodwill and the TWU was not able to produce any contrary evidence except in relation to Mr Kostrubiec and Jacklin Consulting. Additionally, a copy of a letter was tendered in the proceedings attesting to the fact that all Carriers were clearly informed that there should be no expectation of goodwill. The correspondence, dated 6 August 2008, from Ms Monica Attard, NSW State Manager-Transport, Post Logistics, confirmed that the purchaser of any of the vehicles should hold no expectation that they will be awarded a contract to perform services for Post Logistics. 66Oral evidence was given in relation to the contracts covering the engagement of Mr Kostrubiec and Jacklin Consulting. Those contracts contained a goodwill clause. Nevertheless, the clause stated that no payment for goodwill is payable in the event the contractor is made redundant or ceases to trade in its current form. 67Mr Kostrubiec gave evidence that he was the only person at that plant that bought in with goodwill. He said he paid an amount of $25,000 in 1992. He also stated that no offer for the sale of his run had presented itself. Post Logistics pointed out that Mr Kostrubiec had the benefit of the run for 18 years. It conceded that, had Mr Kostrubiec taken up an offer with Messenger Post, goodwill would not have been recognised and therefore he may have a basis to be awarded a nominal redundancy payment but no-one else. 68The Union pointed out that goodwill is a motivator used by principals to encourage the workforce to stay and maintain the integrity of their runs. The Union argued that the loss of goodwill must feature significantly in any decision made by the Commission as it is a major defect. The Union pointed out that those who took the offer of work would have limited or no rights to claim goodwill for the Post Logistics contract whilst those who did not take up the offer can make a claim pursuant to section 346 of the Industrial Relations Act 1996. That section states: SECTION 346 - CLAIM FOR COMPENSATION 346 (1) [Head contract of carriage terminated] A carrier whose head contract of carriage is terminated by a principal contractor may claim compensation from the principal contractor if: (a) the carrier entered into the head contract of carriage by arrangement with a previous carrier whose provision of services to the principal contractor under contracts of carriage was replaced by the carrier, and (b) under the terms of the arrangement between the previous carrier and the carrier, a sum of money was paid by the carrier to the previous carrier as a premium or fee in connection with the entry into the head contract of carriage by the carrier, and (c) it is a custom and practice in the relevant section of the industry or business of the principal contractor that such a premium or fee be paid, and (d) the principal contractor knew or ought reasonably to have known that such a premium or fee had been paid to the previous carrier, and (e) the principal contractor failed to take reasonable steps to advise the carrier that it was not a requirement of the principal contractor that such a payment be made or requested. 346 (2) [Carrier performs work for person other than principal contractor] A carrier is not prohibited from making a claim under this section because the carrier performs minor or incidental work for a person other than the principal contractor under the head contract of carriage. 69Goodwill was available with Post Logistics but not so with Messenger Post. The Union, in the original proceedings, had tendered an executed contract between Post Logistics and Anthony Murphy. That contract, executed in 2005, contained a goodwill clause unlike the unexecuted contract tendered on behalf of Post Logistics. In addition, the Union relied on a letter from the NSW State Manager - Transport, Post Logistics, dated 6 August 2008 which confirmed that goodwill was a live issue and that drivers, up until that time, were selling their vehicles with goodwill. The Union pointed out that Post Logistics should have been able to produce a comprehensive catalogue of all of the executed agreements but failed to do so. Insurance 70The Union submitted that the issue of insurances should also be taken into account in the determination of this issue. SWADS carriers were required by Post Logistics to take out: * $5M public liability cover. The requirement by Messenger Post is $10M (five times the industry standard); * SWADS carriers were required by Post Logistics to take out $5M comprehensive vehicle insurance (the industry standard). The requirement by Messenger Post is for $10M motor vehicle 3 rd party cover; * The SWADS carriers were indemnified against loss by Post Logistics in relation to Marine & Cargo. Messenger Post provides cover of $200,000 per load; * Unlike Post Logistics, Messenger Post does not provide dangerous goods cover; * Post Logistics required workers' compensation cover to be taken out only where the carrier is an incorporated entity. Messenger Post requires workers' compensation cover to be taken out by all carriers; * The requirement by Messenger Post that carriers take out Workers' compensation insurance is not an additional cost as the evidence before the Commission indicates that the rates of pay that were in place for the PLA and SWADS contractors prior to them being taken across by Messenger Post incorporated a component for workers' compensation insurance. Mr Murphy gave evidence that the level of insurance required by Messenger Post is a significant increase on that required by the Company. The Union argued against the submission by the Company that eliminating dangerous goods insurance is a compensatory benefit cannot be sustained. Uniforms 71The Union pointed out that uniforms and safety footwear were provided by Post Logistics. Messenger Post subsidises 50% of the cost and the Carrier is expected to pay the other half. Parking Fines 72The Union pointed out that Post Logistics paid one parking fine per carrier per annum unlike Messenger Post which does not subsidise fines. Superannuation 73SWADS carriers enjoyed a 9 per cent superannuation contribution on top of their remuneration which, the Union pointed out, is absent in the Messenger Post contract. Damage to Goods 74The Union pointed out that Messenger Post requires all SWADS carriers to accept liability for all freight loss unlike Post Logistics which had an increasing scale of liability (ranging from $250 - $1000) depending on the number of instances when damage was caused to goods. Payment of Fees 75Messenger Post pays its Carriers within 14 days of receipt of an invoice for work undertaken on its behalf. The Union compared that with Post Logistics which paid its drivers on the Friday of each week irrespective of whether or not an invoice had been received. 76The Union submitted that further administrative costs and significant delays will be incurred by the fact that their pays will be received within 14 days of receipt of an invoice Mr Kostrubiec 77Post Logistics pointed out that, in relation to the sole trader, Mr Kostrubiec, the offer that was made to him by Messenger Post was conditional on him incorporating and he chose not to do so despite offers being made to him to cover the cost associated therewith. It was submitted that the work offered was therefore objectively acceptable, notwithstanding the requirement to incorporate, and his personal choice ought not impact on the determination of the Commission. 78The Commission was advised that it was not disputed that Post Logistics had offered to reimburse all Contractors for the costs of incorporation. Mr Kostrubiec confirmed that offer in his evidence and confirmed that he had rejected it for personal reasons. He had rejected the offer from Messenger Post because it was conditional on him incorporating. It was submitted by the Union that his personal choice not to accept the conditional offer ought not impact on the determination as to whether the work itself was objectively acceptable. 79Mr Kostrubiec declined to incorporate in order to take up the work "obtained" by Post Logistics with Messenger Post. The Union pointed out that there are additional costs associated with incorporation including start up costs of $2000, on-going administration costs, workers' compensation insurance and other costs. It was argued by the Union that he should be placed in a category all his own and a finding made that Post Logistics did not obtain "acceptable" alternative work for him as it was only available if he became incorporated. It was argued that the arrangement entered into by Post Logistics did not allow for the possibility that a carrier may not want to conduct their business through a company. Concluding Submissions 80Post Logistics urged the Commission to exercise its discretion under clause 6 (iii) of the Determination to order that Post Logistics pay no severance pay in respect of each of the Carriers. 81Post Logistics pointed out that, apart from possibly Mr Kostrubiec, none of the Carriers have given any evidence, despite being afforded the opportunity to do so, as to any particular hardship or loss suffered and why they should receive any redundancy payment in the circumstances described above. It was concluded that it is open to the Commission to conclude that their evidence would not have been supportive of the TWU claim and would not contradict the evidence given on behalf of the Post Logistics. Post Logistics was pressing for no amount being payable. 82Post Logistics submitted that where it has put on evidence about a matter and there is no contrary evidence from the Union, then it should be concluded that the Company has satisfied the relevant onus. 83It was submitted by Post Logistics that, in the alternative, if the Commission is to find against Post Logistics, then only a moderate amount (no more than 25 per cent) can be justified in all of the circumstances as a severance payment for those Carriers on the SWADS contract. 84The Union cited Sigma Pharmaceuticals Pty Ltd v TWU [2009] NSWIRC 1036 as authority for the principle that more work for less money is a critical factor in deciding that a new engagement is not acceptable alternative work. The Union pointed out that Post Logistics had a significant defect in its case as it failed to resolve the issue of GST and whether or not it was included in the figures provided to Connor C. On that basis, Post Logistics cannot categorically state that the carriers are in receipt in equivalent remuneration. 85In relation to Mr Kostrubiec, the Union advocated that he was deserving of the full amount of severance payment as incorporation would have involved legal complexities and additional and on-going costs. CONSIDERATION 86As indicated earlier, the parties were agreed that Post Logistics obtained alternative work with Messenger Post for each of the carriers. 87Connor C. has already made a positive finding that Post Logistics obtained "acceptable alternative work" for each of the carriers on the PLA contract. 88That decision was not set aside on appeal and is hereby confirmed. The Commission, as currently constituted, is required to: * Determine whether full severance payments, or a lesser amount, or indeed, no amount, should be paid to the carriers on the PLA contract, namely: Pony Transport Quang Thanh Transport VAS Transport 89In relation to the Carriers on the SWADS contract, the Commission, as currently constituted, is required to: * Firstly , determine whether Post Logistics obtained "acceptable alternative work" for each of the carriers on the SWADS contract; namely: Jacklin Consulting S G Santos A S & E A Kulibab Gazmak Transport Tan Transport J M HM Kostrubiec * Secondly , if it is determined in the affirmative, then make a determination as to whether the full severance entitlement, or a lesser amount or no severance payment should be paid. 90Section 6 (iii) of the Contract Determination focuses on whether the alternative work provided to the carrier is acceptable. I accept the submission by Post Logistics that the determination of the question as to whether the work offered by Messenger Post is "acceptable" alternative work is an objective test based on an examination of "the work". 91The evidence indicates that: 87.1 Post Logistics outsourced the transportation and delivery of heavy whitegoods within the Sydney metropolitan area. Regardless of whether they were on PLA or SWADS contract, the carriers were doing the same work with Post Logistics and the offer by Messenger Post was to continue to do the work directly outsourced to it by Post Logistics plus an opportunity to do additional new work; 87.2 Messenger Post guaranteed all nine carriers the same rates of pay that each was receiving for the work done for Post Logistics; 87.3. Although the work was outsourced to Messenger Post, the Carriers were required to continue to perform the work from the same location; 87.4 With the exception of Mr Kostrubiec who was required to incorporate, there was no requirement to make any changes to their vehicles nor were there any other expenses incurred in transferring from Post Logistics to Messenger Post; 92Post Logistics conceded that, in relation to Mr Kostrubiec, there was a change in the arrangements for him as the offer of work with Messenger Post was conditional on him incorporating. I accept the submission by Post Logistics that the conditional offer should not impact on whether the work itself was objectively acceptable. 93Having considered all of the evidence and the submission, I consider that the alternative work provided for the carriers by Post Logistics was "acceptable" alternative work for the purposes of section 6 (iii) of the Contract Determination . 94Having determined that limb of the exercise, it falls on me to determine what severance payments, if any, are to be paid to the SWADS carriers. 95I do not accept the Union's contention that each and every detail of the previous contract relationship with Post Logistics needs to be compared with the terms offered by Messenger Post. For example, I do not accept that merely because Post Logistics paid traffic fines on behalf of, or contributed towards the uniforms of, or accepted some liability for freight loss incurred by, the Carriers that these are matters that are fatal to the case put forward by Post Logistics. In making my determination, I have not taken into account the differences in administrative differences between both companies. 96By the same token, I do not accept that the determination of this limb is confined to a consideration of the headings suggested by Post Logistics. For example, I consider that matters such as goodwill, requirement to incorporate, a determined contract duration by Messenger Post when they enjoyed on-going work with Post Logistics (absent with Messenger Post contracts) are matters that need to be taken into account in determining this subjective matter and ought to be included in the package. 97In determining whether the full amount of redundancy payment, or part thereof, or indeed no redundancy payment is applicable, I have taken into account the following factors: 97.1 The carriers did not experience any hardship and inconvenience in finding new engagements after a long engagement in that they did not have difficulties in finding alternative employment. It was provided to them from the very next day; 97.2 There was no down time between the ceasing of work with Post Logistics on 28 February 2010 and the commencement of work with Messenger Post on 1 March 2010; 97.3 There were no standing costs associated with maintaining an idle vehicle during a period of unemployment because the periods were continuous; 97.4 They continued to use the same vehicles without modification or expense; 97.5 Mr Murphy gave evidence that the work he was doing was the same work but that there had been a drop in the volume of that work. He further stated that he had not had access to anything other than SWADS work since joining Messenger Post. There was no evidence before the Commission that would test that assertion. Post Logistics pointed out that it had not guaranteed a volume of work prior to the termination just as there is no guarantee of work with Messenger Post. In fact, Mr Ryan gave evidence that the volume of that distribution work had been declining and a number of people had left over the preceding years. I accept the argument by Post Logistics that the decline in the volume of work is not classed as a change in the nature of the work. The work that was transferred across was the same work. 97.6 The only evidence in relation to an entitlement to goodwill is in relation to Mr Murphy of Jacqueline Consulting and Mr Kostrubiec. The rebuttal evidence from Mr Ryan, that their contract did not contain an entitlement to goodwill, was supported by a letter which was tendered in evidence from Post Logistics to each of the Carriers making it clear that the company did not recognise goodwill. Mr Murphy gave no evidence that he was in fact entitled to a goodwill payment or that he had ever made any payment in respect of goodwill to buy his run. Mr Kostrubiec gave evidence that he was the only carrier who bought in with goodwill. He said he paid $25,000 almost 18 years prior to the termination of his contract. He acknowledged, during cross-examination, that he had not received any offer for the sale of his run that he had turned down or lost the opportunity of. It was pointed out that he had enjoyed the benefit of the run for 18 years and there should be some discount applied in relation to that effect, if the Commission is minded to find some justification for a redundancy payment to Mr Kostrubiec. The PLA contracts did not contain a provision for goodwill and they had no right to goodwill anyway. 97.7 Apart from Mr Kostrubiec, there was no evidence led from any of the carriers as to their personal circumstances or any inconvenience or hardship that has arisen for them. 97.8 There was no definite evidence before the Commission as to whether the earnings figures tendered in the previous proceedings were inclusive or exclusive of GST. Mr Murphy gave evidence on behalf of the Carriers that he was not entirely clear but he thought that the Post Logistics figures did not include GST but that the Messenger Post figures did include GST. Post Logistics pointed out that if the figures on both columns include GST, then there has been a significant increase in earnings. If GST was added to the left column, there was still an increase in earnings with Messenger Post, not a decline. 97.9 There was an additional benefit to the carriers in that in addition to the Post Logistics work, they may also get access to other work from Messenger Post to supplement their earnings. In the absence of any evidence from any other carrier as to their level of earnings, it was open to the Commission to find, as had Connor C, that generally the carriers who had gone across to Messenger Post were receiving an equivalent level of earnings overall. I accept the argument by Post Logistics that the Commission should be very cautious of simply extrapolating Mr Murphy's evidence about his own particular circumstances and applying it to all other carriers, whether they went across to Messenger Post or not. 97.10 In the present circumstances, in view of the fact that the matter of goodwill was made clear in 2008 and in view of the evidence from Mr Kostrubiec, I do not intend to take goodwill into account except in relation to Mr Kostrubiec. 98All three PLA carriers accepted the offer of work with Messenger Post. There has not been any evidence from the TWU or the PLA carriers identifying any relevant contractual or other differences in respect of the PLA contractors that would warrant a finding justifying any severance payment and therefore the claim for a redundancy payment for the PLA carriers is without merit. 99The parties were not in dispute as to the circumstances surrounding the offer made to Mr Kostrubiec. While it is acknowledged that all contractors with Post Logistics had previously been made an offer by that firm to pay the cost of their incorporation and that Mr Kostrubiec had declined the offer for personal reasons, it is, in my opinion, not fatal to his entitlement. 100I note the Union's argument that Mr Kostrubiec is particularly deserving of a full severance payment as the requirement to incorporate involved a fundamental change in the legal capacity in which he did the work and a level of complexity. I accept that it was not unreasonable for him, in the circumstances, to reject the offer of engagement on that condition, albeit the offer related to "acceptable alternative employment". DECISION 101The decision by Connor C that Post Logistics obtained "acceptable alternative work" for each of the carriers on the PLA contract is confirmed. 102The Commission finds that the claim for severance payments for the Carriers on PLA contracts is rejected. 103The Commission finds that Post Logistics obtained "acceptable alternative work" for the Carriers on SWADS contracts. 104The Commission accepts that Mr Kostrubiec is in a different category to the other Carriers on SWADS contracts in that the offer by Messenger Post was contingent on him incorporating. In addition, he had bought in with goodwill which, I accept, ought be subject to discounting as he has had the benefit of it for 18 years. 105In relation to the SWADS Carriers I have assessed the following reduced level of severance payments as set out below. I have used the full severance entitlements provided by the Union as the basis for my assessments as there has been no indication given that the Union's calculations are incorrect: Mr Kulibab $ 7,500 Mr Walsh $ 5,750 Mr Kostrubiec $ 21,250 Mr Murphy $ 5,170 Mr Santos $ 7,750 Mr Nguyen $ 7,250 106Payment is to be made within 14 days of the date of the decision. 107Matter No IRC 112 of 2010 is hereby concluded. I Tabbaa COMMISSIONER DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 July 2011