District Court New South Wales Medium Neutral Citation: Smith v Onesteel Limited & Anor [2013] NSWDC 18 Hearing dates: 12/03/2013 - 14/03/13 Decision date: 15 March 2013 Jurisdiction: Civil Before: Elkaim SC DCJ at Newcastle Decision: Judgment for the plaintiff against the second defendant for $153,316.39 Catchwords: Redundancy payments, acceptable alternative employment. Legislation Cited: Fair Work Act 2009 Cases Cited: Clothing & Allied Trades Union of Australia v Hot Tuna Pty Ltd (1988) 27 IR 226 Kucks v CSR Ltd (1996) 66 IR 182 Central Norseman Gold Corp Ltd v Kempton [2010] FWA 5316 National Union of Workers v Linfox Australia Pty Ltd [2008] AIRC 647 Von Bibra Robina Autovillage Pty Ltd (C2007/2676) UXC Connect v Moore [2012] FWA 4296 Category: Principal judgment Parties: Kelvin Smith (Plaintiff) Onesteel Limited (First Defendant) Commonwealth Steel Company Pty Ltd (Second Defendant) Representation: P J Bambagiotti (Plaintiff) T Saunders (Defendants) Thomas Mitchell Solicitors (Plaintiff) Herbert Smith Freehills (Defendants) File Number(s): 2011/00358212 Publication restriction: No Judgment 1The plaintiff was born in 1954. He commenced work with the second defendant in 1978 as a labourer. Over time, and with on the job training and experience, he became a furnace operator. He achieved this position in the early 1990s. 2The plaintiff says he was made redundant in November 2010. This action is a claim for redundancy payments that he says he should have received. 3The parties agreed that the jurisdiction exercised by the court was conferred by the Fair Work Act 2009. For present purposes, the only practical implication of this jurisdiction concerns the awarding of costs in accordance with Section 570 of this Act. 4The parties also agreed that the second defendant employed the plaintiff. Accordingly the first defendant is not relevant to the proceedings. I will refer to the second defendant as "the defendant". 5The defendant denies the plaintiff's entitlement to redundancy payments. 6The plaintiff's contract of employment was oral but as at 2010 was governed by an Award (Exhibit A). The redundancy provisions are at page 32 of the Award. 7The plaintiff relied on his own affidavit sworn on 19 June 2012. The defendant relied on the affidavit of Mr Paul Berthold sworn on 12 July 2012 and on the affidavits of Mr Kevin Roberts, sworn on 12 July 2012 and 6 March 2013 respectively. All of the deponents were cross-examined. 8There is no dispute that in June or July of 2010 the furnace operators were told that due to a lack of work there would need to be some operational changes. Initially the plaintiff was given some extra duties outside the furnace section with which he coped and caused him no concern. He was still primarily a furnace operator. 9In late October 2010, however, the plaintiff was told that he was to be transferred to the "Railway finishing line" which is an entirely separate section of the defendant's business to the furnace section. Most of the work in the finishing line, according to the plaintiff, concerned the painting of railway wheels plus some other unskilled work. 10The plaintiff says that he found assignment to the finishing line to be humiliating and also physically difficult because he suffered from osteoarthritis in his legs, in particular his knee joints. The painting of railway wheels needed to be done standing up over long periods. His capacity to stand without a break was about an hour. 11In addition the plaintiff, on his first day in the finishing line, discovered he had been replaced in the forge department by a lesser qualified furnace operator. 12The plaintiff gave the defendant a letter of resignation on 9 November 2010 (Annexure KJR4 to Mr Roberts' first affidavit). The plaintiff claims that this letter of resignation was not a voluntary cessation of his employment but rather that he had already been terminated as a furnace operator by the actions of the defendant. If this is the case he says he is entitled to redundancy payments to the extent set out in Exhibit B. 13The defendant concedes that if the plaintiff is entitled to redundancy payments then the figures in Exhibit B represent the appropriate quantum. 14In his opening remarks counsel for the plaintiff said there were two areas of primary contest. The first was whether or not the change of the plaintiff's position from furnace operator to finishing line attendant was a "fundamental rupture" of the employment relationship. It was said that a move from a highly specialised and responsible position to, by way of example, the 'mail room', was "of such a character as to amount to a change of the employment". It was submitted that the perspective of the employee was a critical factor. 15The second issue advanced by the plaintiff concerned whether or not the redundancy provisions of the Award applied to the plaintiff. This question, submitted the plaintiff, would entitle the plaintiff to a verdict in his favour even if he was unsuccessful on the first issue. In respect of the Award, the plaintiff submitted the following: (a)The redundancy provision applied. (b)The required notice of redundancy had not been given. (c)The employer had "made a decision that the employer no longer wishes the job an employee has been doing done by anyone ...". The defendant conceded this point. (See the definition of "redundancy" in the Award, Exhibit A) (d)The first of the general exclusions in the redundancy provisions did not apply because the employer had not offered "the employer acceptable alternative employment". 16In discussion plaintiff's counsel suggested the damages to which the plaintiff might be entitled could arise from breach of contract although be measured in the same quantum as the lost redundancy payments. I pointed out that this relief was not sought in the Amended Statement of Claim. I rejected a submission that the claim fell within paragraph 9. I also rejected a later application to amend the Amended Statement of Claim. 17The effect of the pleadings, in their current form, is that the plaintiff can only succeed if he is entitled to redundancy payments under the Award. 18The defendant said that there was a real issue as to whether the decision to move the plaintiff to the finishing line had resulted in the termination of his employment. It was submitted that he had voluntarily resigned and therefore he had not been constructively dismissed nor had there been any repudiation of the contract of employment capable of being accepted by the plaintiff. 19The defendant submitted that, under the redundancy provisions in the Award, alternative acceptable employment had been offered. It further submitted that the test for this issue was objective and not to be measured against the subjective thoughts and characteristics of this plaintiff (compared to any other furnace operator). In particular any health problems suffered by the plaintiff were not relevant. 20In final written submissions the defendant succinctly summarised its position in this way: "1. The central issue in these proceedings is whether the plaintiff is entitled to redundancy pay under the relevant enterprise agreement applying to his employment. The defendants' case is that: (a) it offered the plaintiff "acceptable alternative employment" in accordance with the relevant provisions of the enterprise agreement; (b) alternatively, it made bona fide efforts to secure an alternative position for the plaintiff, and the plaintiff acted unreasonably and failed to co-operate, so as to disentitle him to redundancy pay; and (c) in any event, the plaintiff voluntarily resigned." 21I put to defendant's counsel that resolution of the case involved resolution, and no more, of the issues quoted in the preceding paragraph. He agreed. I have generally proceeded accordingly but also dealt with other aspects of the redundancy provisions raised by both counsel. 22It is arguable that in respect of the application of an exclusion to the redundancy provisions of the Award that there was an evidentiary onus on the defendant. Notwithstanding this I have proceeded on the basis that the onus in respect of the whole of his case has remained on the plaintiff. 23The parties agreed that there was no change to the plaintiff's salary consequent upon his transfer to the finishing line and that the two jobs were at the same plant with the same hours required. The plaintiff also agreed that there was to be a possible re-assessment of the transfers in January 2011. 24The plaintiff was cross-examined on his affidavit. A good deal of the cross-examination included the putting to him of various conversations alleged by Mr Berthold, especially concerning the reasons the plaintiff was selected for transfer to the finishing line. 25A number of the answers given by the plaintiff were that, unsurprisingly, he did not recall the conversations with precision. He did, I think, generally agree with the propositions put to him although was firm in his rejection of having been told about selection criteria. My general impression of the plaintiff was that he was an honest witness, although one has to take into account that Mr Berthold has the advantage of having made some notes of the conversations. In the final analysis, I do not think my acceptance of Mr Berthold's versions of conversations affects the plaintiff's credit but, perhaps more importantly, I do not think that the content of the disputed conversations has any particular effect on the outcome of the case. 26The clear impression given by the plaintiff was that transfer to the finishing line was tantamount to a demotion notwithstanding that he would remain on the same pay scale. Further he felt the re-assessment in January 2011 was of little import because he would still have to work in the finishing line for at least two months. 27The plaintiff had been in the forge department for many years and he had a view of his job as carrying significant responsibility as a cog in the company's business and in relation to the safety of his fellow employees. The move for him was one of being taken from a longstanding position, in which he had accumulated experience and being placed, without choice, in a job that he did not like, did not want, and felt was beneath the status that his long service in the company had given him. 28The perception of a demotion is contrary to the evidence of Mr Roberts who suggested that, although the jobs were different, they both required a level of skill that was roughly equal. He said that it could take up to a month to train a finishing line attendant and the same period of time was needed for a furnace operator. 29Mr Roberts' comparison of the two jobs (paragraph 38 of his first affidavit) has two significant shortcomings. Firstly the plaintiff had been a furnace operator for some 20 years during which time he continually gained experience. His commencement in the finishing line involved him starting afresh. He needed immediate training. He was therefore changing from a position based on seniority (even if only derived from length of service) to one in which, notwithstanding the similar pay scale, he became a trainee. I regard the shift as reflecting a substantial change in seniority. 30Secondly while a person doing the one job might theoretically be capable of the second job, the two jobs were different. The finishing line position, in my view, had no real "connection with the employee's demonstrated skill and experience." (Von Bibra Robina Autovillage Pty Ltd (C2007/2676), decision of Senior Deputy President Richards in the Australian Industrial Relations Commission). This is exemplified by the plaintiff needing to be retrained in the new work. I think a trainee finishing line attendant is a significantly different job to that of an experienced furnace operator 31Mr Berthold, after some prompting, agreed that a shift heater is an important and responsible role. The operation of the furnaces is, of course, vital to the business of the defendant. Their correct and safe use was under the control of the furnace operators. This is consistent with the perception the plaintiff had of his position in the company. No doubt the work of a finishing line attendant is also important, but it is different work to that of a furnace operator requiring different skills and new learning. 32When the plaintiff was transferred to the finishing line no specific enquiries were made of his capacity to do that job. Mr Roberts did know the plaintiff, having worked in the same department from 2004 to 2007, but he had no regular contact with him after the latter date. Mr Roberts was the Superintendent of the "Railway Products Cold Section" when the plaintiff was transferred. 33When the plaintiff, together with three other workers from the forge, came across to the finishing line, no examination was made of their personal files. As I understood Mr Roberts, the suitability to work in the finishing line was derived from a conclusion that if the worker could work in the forge then he was capable of working in the finishing line, subject to appropriate training. No consideration was given to whether the plaintiff had any medical problems that might have impacted upon his capacity to work in the finishing line. 34It is difficult to reach any precise conclusion about the comparative levels of skill required for each position. I generally accept Mr Roberts' evidence that the jobs, in skill level, were not significantly different. Nevertheless I accept the plaintiff's evidence that, against a background of having worked for many years in a skilled and responsible position, that the transfer to the finishing line was something of a demotion. 35If it is relevant I am satisfied that the plaintiff had a reasonable basis to be distressed at the transfer. I think the level of distress explains the following facts: (a)Having been transferred he did not speak to any superior employee about his concerns. (b)He did not speak to the union representative. (c)He did not tell any person that he could not do the work because of his injuries. (d)He did not attempt a trial period, beyond one day, knowing there was to be a re-assessment in January 2011. (e)He did not mention the reasons for his resignation in his letter of 9 November 2010. 36As outlined above, the plaintiff's primary case was that the failure to offer him alternative acceptable employment entitled him to redundancy payments under the Award and in turn rendered his resignation an effective acceptance of repudiation of his contract of employment. 37Both parties ultimately agreed, as I understood their submissions, that the most significant issue that I needed to decide was whether or not the plaintiff fell within the redundancy provisions of the Award, and if he did, whether he was nevertheless not entitled to redundancy payments because the first of the general exclusions applied to him. 38Redundancy is defined in the Award as follows: ""redundancy" means the employer has made a decision that the employer no longer wishes the job an employee has been doing done by anyone, and this is not due to the ordinary and customary turnover of labour; and that decision results in the termination of employment." 39The defendant conceded that "the employer has made a decision that the employer no longer wishes the job an employee has been doing done by anyone ...". The defendant, however, denied that this decision had resulted "in the termination of employment". The defendant said that there had not been a termination of employment because the plaintiff had been offered another position. Further he had voluntarily resigned. The plaintiff's employment had therefore not been terminated by the defendant. 40The defendant submitted that the termination referred to in the definition of redundancy could only be a termination by the employer. The plaintiff made two points in response: (a)The definition did not dictate by whom the termination should be made, so that it was open for an employee to terminate the employment and still be entitled to redundancy payments. (b)The cessation of the plaintiff's position in the forge was, for purposes of the Award, a termination of his employment. 41I do not think the plaintiff's first point has merit. It is entirely contrary to a purposive approach in the interpretation of the redundancy provisions that payments might arise upon a voluntary resignation by an employee. The provisions are clearly intended to arise when an employer can no longer continue the employment of an employee in his current position. 42I do think, however, that the plaintiff's second point is correct. In order to explain my reasons it is first of all necessary to look at the first of the general exclusions in the redundancy provisions (the second exclusion is not relevant). The first exclusion is as follows: "Nothing in this clause shall be read as: requiring the employer to extend a redundancy benefit to an employee where the employer offers the employee acceptable alternative employment (including alternative employment with rate retention arrangements as elsewhere provided for under this award) giving rise to an entitlement to a voluntary redundancy benefit in the absence of a formal offer by the employer" 43The use of the word "alternative" in my view gives rise to a meaning of a different employment. An employment which is alternative to another employment is necessarily separate to it. When I put this interpretation to defendant's counsel he responded by submitting that the meaning of employment in the definition of redundancy was different to that in the exclusion. He said I should take a broad approach to the interpretation of the Award in line with the comments of Madgwick J in Kucks v CSR Ltd (1996) 66 IR 182 at 184. I have no difficulty with his Honour's approach but I do find it difficult to attribute different meanings to the same word within the same section of the Award. 44In addition, I think my interpretation is consistent with the principles applied by Madgwick J in that the intent of the redundancy provisions is that if the employee is no longer required to do the job he has been doing then, in order to avoid the payments, he must be offered alternative (different) employment. 45I am therefore of the view that, subject to the exclusion, Mr Smith was made redundant within the meaning of "redundancy" in the Award and that this occurred when he was assigned to the finishing line. 46The next question is whether he was offered acceptable alternative employment. 47In relation to the test for acceptable alternative employment the defendant primarily relied upon the decision of the Australian Industrial Relations Commission in the Clothing Trades Award 1982 (1) hearing (1990) 140 IR 123. The Commission quoted with approval this passage from Clothing & Allied Trades Union of Australia v Hot Tuna Pty Ltd (1988) 27 IR 226: "We do not propose to repeat here the thoroughly detailed argument presented by counsel for the union. A considerable part of that case was devoted to questions of onus, and to supporting the proposition that the test of acceptability of the alternative employment is an objective one involving a consideration of such matters as pay levels, hours of work, seniority, fringe benefits, workload and speed, job security and other matters. It was argued that the failure of the employer to adduce evidence of such matters caused the company to fail to make out a case for an exemption. We have no doubt that there is an onus on the employer invoking subclause 51(c) and that matters of the kind referred to by the union may be relevant in assessing the position in a particular case." 48A little later in the judgment the Commission said the following: "What constitutes "acceptable alternative employment" is a matter to be determined, as we have said, on an objective basis. Alternative employment accepted by the employee (and its corollary, alternative employment acceptable to the employee) cannot be an appropriate application of the words because that meaning would give an employee an unreasonable and uncontrollable opportunity to reject the new employment in order to receive redundancy pay; the exemption provision would be without practical effect. Yet, the use of the qualification "acceptable" is a clear indication that it is not any employment which complies but that which meets the relevant standard. In our opinion there are obvious elements of such a standard including the work being of like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements. There will probably be others. This approach to the test demonstrates that any alternative employment available to the eighteen former employees of the company cannot be regarded as "acceptable" merely because a number of other former employees took up employment at the new location. The relevant aspects of the job must be examined objectively to determine whether the employment is "acceptable"." 49I think it also worth quoting from the decision relied upon by the plaintiff (UXC Connect v Moore [2012] FWA 4296). At paragraph 14 the Commissioner said this: "The determination of that issue may involve a consideration of such matters as pay levels, hours of work, seniority, fringe benefits, work load and speed, job security and travelling time. The determination of the question of acceptability of the employment however can only be done on the evaluation of the facts proved in evidence or otherwise established." 50There are two elements in the current facts that I think require some initial discussion in relation to the question of whether the defendant had offered acceptable alternative employment. 51The first concerns the plaintiff's reaction to the change. His counsel described the reaction as one of humiliation and stress. I have already discussed this issue above and accepted that it was reasonable for him to have these personal feelings. However, it would not be correct to conclude that his humiliation and stress were factors in deciding if there had been an offer of acceptable alternative employment. That would be to apply a subjective analysis. 52I do, however, accept that the plaintiff's reaction can be seen as evidence of one of the objective factors that can be taken into account, namely the change in status between the two jobs. As already mentioned, the plaintiff went from a 20 year plus furnace operator to a finishing line trainee. In my view his reasonable reaction provides evidence of the difference in status between the two jobs. 53I also think that the difference in status reflects a significant change in seniority, a factor envisaged as relevant in UXC Connect. Seniority is not only defined by a technical grading, such as Level 1 or Level 2, but must also take into account years of service in a particular position. 54The second issue that I think needs resolution concerns the plaintiff's health. He said, and there was no challenge to this evidence, that his joint condition prevented him from carrying out prolonged painting work. Dr Holman, the workers compensation doctor retained by the respondent to the workers compensation proceedings, supports him. Dr Holman said: "In my opinion, Mr Smith remains fit for pre-injury duties as a furnace operator but is unfit to work in the new position to which he was moved which involved him standing for a full shift alongside a conveyor belt". 55The defendant said Dr Holman's report should be ignored because the history given to him about the time spent painting was incorrect. There is some force in this point but it does not derogate from Dr Holman's distinction between the two types of work required. 56Mr Berthold at paragraph 66 of his affidavit said that health considerations were taken into account. They may have been in relation to a position as a steel worker but I reject his evidence to the effect that it suggests the plaintiff's health was considered when deciding to move him to the finishing line. I also reject any suggestion of a proper consultative process before the transfer. There was a clear air of casual disregard for the interests of an employee who had been with the company since 1978, the last twenty years of which had been in the same position. There was never an "offer" of alternative employment. There was only a direction to work in the finishing line. 57Not only was the plaintiff not consulted about his health and suitability for the job but no independent assessment was made, let alone even an enquiry made of the plaintiff's team leader, for his opinion. 58Despite my above observations the real point in relation to the plaintiff's health is whether it can be taken into account as an objective factor in applying the test for acceptable alternative employment. The defendant's counsel said it could not. He submitted that the comparison needed to be made between the attributes of the two jobs and this necessarily excluded the personal health of the employee. My first reaction to this submission was that it could not be correct because the capacity of a particular person to do a particular job must be relevant to whether that job is "acceptable". 59I first of all note that I do not think the plaintiff's position gains any support from the passage quoted in Central Norseman Gold Corp Ltd v Kempton [2010] FWA 5316 from the decision of Vice President Watson in National Union of Workers v Linfox Australia Pty Ltd [2008] AIRC 647, at paragraph 31 of the former judgment. This passage is clearly limited to the facts in that case where the Award specifically included a reference to physical capacity. 60The defendant said that the examples of factors given in the various expressions of the tests were all confined to the requirements of the particular job, not the employee. I have already mentioned Von Bibra. The defendant relied on this passage from that case: "The test is not whether or not the employee is capable of carrying out the new employment as such, it is whether there is sufficient correlation between the relevant indicia of the current work and the alternative employment as proposed." [paragraph 26]. 61The plaintiff also drew some support from Von Bibra, in particular this sentence in paragraph 28: "That is, the alternate employment has sufficient connection with the employee's demonstrated skills set and experience.". 62I have already decided that the job in the finishing line does not have the above quality. 63Returning, however, to the question of the relevance, as an objective factor, of the plaintiff's health. To some extent against an application of commonsense, I think the authorities probably support the defendant's submission that the personal capacity of the employee is not relevant. The plaintiff submitted that the reference to "other possible factors" mentioned in the authorities meant that it was open to me to include the plaintiff's health as a factor. Once again while I think this approach would be logical, I am not satisfied that it is supported by the authorities. I will therefore disregard the plaintiff's joint problem in considering whether or not there was an offer of acceptable alternative employment. I might also add, however, that the use of the word acceptable is arguably inconsistent with the approach I have taken. 64Notwithstanding my disregarding the plaintiff's health condition, I am nevertheless satisfied that the job of finishing line attendant was not acceptable alternative employment. 65Comparing the two positions there are obviously some similarities, including the pay scale, the place of work and the required hours. More importantly, however, I think the two positions are very different: The change in employment involved a significant change in status derived from being a 20 year plus furnace operator becoming a trainee finishing line attendant. Further, as already found, the two jobs in question are different. They may have both been related to steel but they had no production connection, they required different skills and were conducted in separate divisions of the plant. 66The next issue is whether the plaintiff acted unreasonably and failed to co-operate, thereby disentitling him to redundancy payments. The defendant submitted that the plaintiff, by not raising his health issues, by resigning without giving reason and by not invoking the dispute resolution provisions in the Award had acted unreasonably. I disagree. 67On my interpretation of the redundancy provisions, and in particular of the nature of the termination of employment, the termination occurred, accepting for present purposes Mr Berthold's version, in late October 2010. In paragraph 68 of his first affidavit Mr Berthold says that at this time Mr Smith's team leader "informed Mr Smith that he would be transferred to the finishing line attendant position in the Rail Division". The first point to be made is that the exclusion in the redundancy provisions requires an "offer" of alternative employment. Consistent with Mr Berthold's statement on 21 October 2010 (paragraph 57 of his affidavit) that rail transfers "will be locked in until at least January 2011" there is hardly a suggestion of an offer being made. 68Secondly the implementation of this direction later in the month, or possibly in early November, amounted to the termination of employment, all of which occurred prior to any actions of the plaintiff, thus rendering whatever action he took to be irrelevant. 69My conclusion on the interpretation of the redundancy provision also renders the argument about constructive termination and repudiation of contract to not be applicable. Once again, the termination occurred when the plaintiff was sent to a new job. This preceded his letter of resignation which had no effect on his already terminated employment, at least to the extent of his employment as defined in the redundancy provisions. 70In relation to the defendant's alleged bona fide efforts to secure an alternative position I do not accept that the efforts were in fact bona fide. This is indicated by the total absence of any attempt on the defendant's part to ascertain if the plaintiff was physically able to do the alternative job, by the absence of a proper consultative process and by the direction to work in the finishing line. 71As to the plaintiff's voluntary resignation, I accept that he did so resign. However, by this time there had already been a failure to provide the acceptable alternative employment generating his entitlement to redundancy payments so that the resignation is either irrelevant or subsequent to termination of employment for purposes of the redundancy provisions. 72The result is that I have found the plaintiff has established that: (a)He was terminated by the defendant for purposes of the redundancy provisions of the Award, (b)He was made redundant by the defendant, (c)The defendant did not offer him acceptable alternative employment. (d)The plaintiff is entitled to redundancy payments under the Award. 73Accordingly there will judgment for the plaintiff against the second defendant in the sum stated in Exhibit B. 74There will be judgment for the first defendant against the plaintiff. 75I will hear the parties on interest and costs and then make final orders. Final Orders: 1 Judgment for the first defendant against the plaintiff. 2 Judgment for the plaintiff against the second defendant in the sum of $153,316.39. 3 Subject to the following order each party is to pay its own costs of the proceedings. 4 In respect of the costs thrown away by the absence of counsel on the first day it is noted that the plaintiff's solicitor undertakes to pay the defendants' costs incurred by reason of the failure of the trial to commence on that date in an amount to be agreed or assessed. 5 Exhibits are to be returned after 28 days unless the Registry receives notification that an appeal is to be pursued. 6 A Stay of Judgment is granted on the condition that the second defendant files a Notice of Appeal within 28 days. ********** 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: 15 March 2013