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Federal Court of Australia |
INDUSTRIAL LAW - termination of employment - redundancies created by outsourcing - terminations without notice and without consultation - operational requirements - reinstatement - severance payments - transmission of employment - damages for shock and distress
Workplace Relations Act 1996 ss.170DE(1), 170DB, 170EA, 170EE
Stones & Others & CEPU v Simplot Australia Pty Ltd (IRCA, unreported 30 June 1997)
Diprose and Others & National Union of Workers v Simplot Australia Pty Ltd (IRCA, unreported, Judgments 3 and 31 October 1997)
Abbott-Etherington v Houghton Motors Pty Ltd (1995) 63 IR 394
Perkins v Grace Worldwide (Aust) Pty Ltd (1997) 72 IR 186
Kozelz v Kellogg Australia Pty Ltd (IRCA, unreported, 26 July 1996)
Victoria v Commonwealth (1996) 138 ALR 129
Patterson v Newcrest Mining Limited (1996) 68 IR 419
Nicolson v Heaven and Earth Gallery Pty Ltd (1994) 1 IRCR 199
Liddell v Lembke (1994) 1 IRCR 466, 127 ALR 342
PETER GEORGE HINGSTON AND STANLEY LEWIS KAINE v SIMPLOT AUSTRALIA PTY LTD
TI-1066 of 1996
TI-1067 of 1996
Judicial Registrar Ryan
Melbourne
12 February 1998
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IN THE FEDERAL COURT OF AUSTRALIA | |
| VICTORIA DISTRICT REGISTRY | TI-1066 & TI-1067 of 1996 |
|
BETWEEN: | PETER GEORGE HINGSTON
First Applicant
STANLEY LEWIS KAINE Second Applicant |
|
AND: | SIMPLOT AUSTRALIA PTY LTD
Respondent
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JUDICIAL REGISTRAR: | RYAN |
| DATE OF ORDER: | 12 FEBRUARY 1998 |
| WHERE MADE: | MELBOURNE |
THE COURT ORDERS THAT:
1. The respondent pay the applicant Peter George Hingston compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $2,689.44 pursuant to s170EE(5) - total $5,689.44.
2. The respondent pay the applicant Stanley Lewis Kaine compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $2,361.63 pursuant to s170EE(5) - total $5,361.63.
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| VICTORIA DISTRICT REGISTRY | TI-1066 & TI-1067 of 1996 |
|
BETWEEN: | PETER GEORGE HINGSTON
First Applicant
STANLEY LEWIS KAINE Second Applicant |
|
AND: | SIMPLOT AUSTRALIA PTY LTD
Respondent |
JUDICIAL REGISTRAR:
RYAN DATE: 12 FEBRUARY 1998 PLACE: MELBOURNE
On or about 25 October 1996 the Respondent terminated the employment of 129 employees at the Ulverstone plant. These employees had worked in the security, refrigeration, boiler, electrical and despatch departments. The terminations resulted from a decision to contract out or "outsource" the functions carried out by those departments. The decision also embraced the outsourcing of all work performed by casual employees at the Ulverstone plant.
The decision was part of a strategy to concentrate on core activities at Ulverstone. The plant manager, Mr Mark McKellar described the strategy thus:
"The underlying principle we applied was that the business should focus on its core activities and that non-core activities, where possible, should be outsourced. The core activities of the business were the manufacture and packaging of french fries and potato products. On that analysis, I determined that the business could outsource the following functions:
(a) security;
(b) despatch;
(c) refrigeration;
(d) electricians;
(e) boilers; and
(f) casuals."
THE APPLICATIONS IN STONES & OTHERS & CEPU v SIMPLOT AUSTRALIA
The union, CEPU, lodged twelve separate applications seeking relief for unlawful termination of employment. The applications were lodged on behalf of twelve electricians who had, prior to 25 October 1996, comprised the electrical department at the respondent's Ulverstone plant. In Stones & Others & CEPU v Simplot Australia Pty Ltd, (IRCA, unreported 30 June 1997) the Court found that
* the respondent had failed to establish a valid reason for the termination of employment of any of the twelve applicants
* damages for termination of employment without notice were to be awarded to each applicant equal to the compensation which would have been given if the respondent had complied with the "notice provisions" of s170DB of the Workplace Relations Act 1996 (the Act)
* reinstatement of any of the applicants was impracticable
* severance and service payments were not payable because in each case there had been transmission of employment from the respondent to an outsourcing employer, Manpower Pty Ltd
* there was no satisfactory evidence before the Court of economic loss to any of the applicants as a result of the terminations and transmission of employment
* there were unusual, exacerbating circumstances that warranted compensation in the sum of $3,000 to each applicant for distress unnecessarily caused to each applicant and directly flowing from the failure of the respondent to consult the applicants or their union
THE APPLICATIONS IN DIPROSE AND OTHERS AND NATIONAL UNION OF WORKERS v SIMPLOT AUSTRALIA
Six employees in the refrigeration department at Ulverstone were made redundant on 25 October 1996 and were paid redundancy payments. They and their union filed applications for relief in respect of unlawful termination of employment.
In Diprose and Others & National Union of Workers v Simplot Australia Pty Ltd (IRCA, unreported, Judgments 3 and 31 October 1997) the Court
* declared the termination of the six employees unlawful and in breach of s170DC and s170DE(1) of the Workplace Relations Act 1996
* found reinstatement impracticable
* ordered compensation to each applicant based on an assessment of ongoing economic loss
THE APPLICATIONS OF HINGSTON AND KAINE
On 6 November 1996 the secretary of the National Union of Workers filed applications for relief in respect of unlawful termination of employment on behalf of Peter George Hingston and Stanley Lewis Kaine. Hingston was described as a security guard and Kaine as a fitter boiler operator. The employment of both men by the respondent was terminated on 25 October 1996 and both accepted immediate employment with Manpower Pty Ltd. Their positions were similar to the other 121 men who, on or about 25 October 1996, had their employment terminated by the respondent and began immediate employment with an outsourcing employer. Their position was even more similar to that of the twelve electricians in the Stones case in that, like the electricians, they sought reinstatement and/or compensation from the respondent on the basis of unlawful termination of employment.
Their positions were different to the six applicants in the Diprose case because Mr Diprose and his five colleagues were not offered or provided with transmission of employment but were provided with redundancy payments under the respondent's redundancy agreement.
It may have been possible, and perhaps it would have been practicable, for the Hingston and Kaine applications to proceed to hearing with Mr Stones and the other eleven electricians, although the applications of the electricians were pursued through CEPU and Hingston and Kaine pursued their applications through NUW. Be that as it may, no steps were taken to list the Hingston and Kaine applications with Stones and his colleagues. The two applications were listed for Burnie on 21 April 1997 when the six applications in Diprose were heard. Counsel in Diprose and for Hingston and Kaine was and is Mr McTaggart. Counsel for the respondent in this case and in Stones and in Diprose was and is Mr McDonald.
On 21 April Mr McTaggart sought adjournment of the Hingston and Kaine applications. At that time no judgment had been delivered in Stones. Similar issues seemed likely to be raised as had been canvassed in Stones. Mr McDonald consented to an adjournment of the Hingston and Kaine applications.
It is interesting to note that on 21 April 1997 the Court mentioned a Notice of Motion which had been filed on behalf of Hingston, was returnable in Burnie that day and sought to join Manpower Pty Ltd as a respondent in the matter of Hingston v Simplot. I commented at that time that I perceived some difficulties in a motion which sought to join another and later employer in an application against Simplot in respect of a termination of employment by Simplot on 25 October 1996. Although the Court was ready to proceed to hear the motion, the Notice of Motion was not pursued. Indeed, it seems that at that stage the Notice of Motion had not been served on Manpower and that company was not represented in Burnie on that day. The Notice of Motion has never proceeded but it is of interest in that the applicants, Hingston and Kaine and their union, NUW, are, in effect, as an alternative to reinstatement, seeking compensation for economic loss which it is asserted flows from the termination of Hingston and Kaine by Simplot on 25 October 1996.
The applicants and their union argue that although Manpower took over the employment from 25 October 1996 on the same terms and conditions as Simplot, the termination of Hingston's employment by Manpower on 28 October 1996, and the termination of Kaine's employment by Manpower in September 1997, and the termination of later employment of Kaine by Skilled Engineering on 30 January 1998, has resulted in economic loss which, in each case, can be attributed to the Simplot terminations of 25 October 1996.
CONCESSIONS MADE BY THE RESPONDENT
Counsel for the applicants (i.e. for Hingston and Kaine and NUW) and counsel for the respondent (i.e. Simplot) agreed at the commencement of the hearing on 2 February 1998 that the applications should be heard together and that, given concessions made by the respondent, the hearing be confined to whether reinstatement was practicable and, if not, the assessment of quantum of appropriate compensation.
The parties are commended for taking an approach which avoids traversing for a third time the circumstances of a substantial restructure which led to 129 terminations of employment, the transmission of employment of 123 of those employees to an outsourcing employer and redundancy payments to six employees.
The concessions made by the respondent are as follows:
* the conclusions of the Industrial Relations Court of Australia in Stones having been accepted by the respondent, the terminations of the employment of Hingston and Kaine by the respondent on 25 October 1986 were not for valid reason
* the respondent did not give notice of termination and accepts that appropriate orders should be made under s170EE(5) for damages for contravention of s170DB
* the applicants Hingston and Kaine have given evidence of shock and distress occasioned by the terminations made without notice, warning or consultation and the respondent consents to an order in each case for compensation pursuant to s170EE(3) in the sum of $3,000, this being the sum awarded to each applicant in Stones
CONTESTED ISSUES
The respondent asserted that reinstatement is impracticable and relied on the judgments in Stones and Diprose in support of the assertion.
The applicants sought reinstatement claiming that the circumstances of each application must be considered separately from earlier decisions which found reinstatement impracticable in similar circumstances.
Counsel for the applicants accepted that appropriate orders should be made under s170EE(5) for damages for contravention of s170DB.
Counsel for the applicants agreed with an order for compensation to each applicant pursuant to s170EE(3) in the sum of $3,000 (should reinstatement be found impracticable), but also argued that the applicants Hingston and Kaine should be awarded maximum compensation for economic loss occasioned by the terminations of employment by Simplot on 25 October 1996.
The respondent denied that either Hingston or Kaine sustained economic loss as a result of the terminations on 25 October 1996 and, if economic loss was later sustained because of later terminations by later employers, such loss, if sustained, should not be the subject of an order for compensation against the respondent.
The contested issues at hearing were confined to
1. reinstatement
2. question of any compensation to be ordered for economic loss
3. quantum of damages for contravention of s170DB
REINSTATEMENT
Counsel for the applicant submitted that
* certain work mates of the applicant who had their employment terminated by the respondent on 25 October 1996 and who accepted immediate transmission of employment with Manpower were later re-employed by the respondent in core positions in which they performed general core process work or maintenance of process equipment and some part-time checking of boiler maintenance
* the two individual applicants were qualified to perform process work and the applicant Kaine was qualified for maintenance of process equipment and part-time checking of boiler maintenance
* process workers undertaking core functions at Ulverstone are recruited from time to time as vacancies occur
* Hingston should be reinstated into a core process position and an order for such reinstatement is practicable, would not create undue financial hardship for the respondent and, if no immediate vacancy exists, would only mean that the respondent would have to "carry" an extra process worker until a vacancy occurred
* Kaine should be reinstated into a core position in process equipment maintenance or as a process worker, an order for such reinstatement is practicable and would not create undue financial hardship for the respondent and, if no immediate vacancy exists, would only mean that the respondent would have to "carry" an extra maintenance worker or process worker until a vacancy occurred
Counsel for the applicant did not dispute the authorities on reinstatement cited in Stones and Diprose but sought comfort from the comments of Marshall J in Abbott-Etherington v Houghton Motors Pty Ltd (1995) 63 IR 394 at 396, as cited in Perkins v Grace Worldwide Australia Pty Ltd, Industrial Relations Court of Australia (1997) 72 IR 186 at 190. Marshall J was referring to the very common assertion by employers that reinstatement will adversely affect "harmony at the workplace". He said
"in almost every conceivable case where the Court has found that an employer has terminated the employment of an employee in contravention of Div 3 of Pt VIA of the Act it is likely that an employer will form the view that harmony at the workplace will be affected by the return to work of the employee it has terminated. Such a happening, I believe, is unexceptionable. In my view it is no more than a view that reinstatement is `inconvenient' or `difficult' if an employer says that harmony may be affected by an employee's return to work in such circumstances ...."
I do not consider Abbott-Etherington assists the applicants. Marshall J conceded "serious disharmony" could constitute a ground for finding reinstatement impracticable. In any event my views on reinstatement in these cases are not based on the concept of disharmony.
Counsel for the applicant also cited Kozelz v Kellogg Australia Pty Ltd (IRCA, unreported, 26 July 1996). However, while Kozelz involved outsourcing, without transmission of employment, and an order for reinstatement, the circumstances are readily distinguished. First and foremost, the Chief Justice found that an employer's genuine belief on reasonable grounds, that substitution of an outsourcing contractor for an inhouse maintenance team, would lead to increased productivity and cost savings, was sufficient to constitute a valid reason for termination of employment under s170DE(1). Secondly, the Chief Justice found the termination in that case unlawful under s170DE(2) and s170DE(2) was itself found to be invalid in Victoria v Commonwealth (1996) 138 ALR 129. Thirdly, there was no transmission of employment.
I find that reinstatement, while it is the primary remedy, is impracticable in the cases of Hingston and Kaine and for the reasons I set out in Stones and in Diprose. I will not repeat what I said in those judgments but I primarily rely on what I said in Stones at 21 to 23 and rely on the same authorities namely Nicolson, Liddell and Perkins.
In these applications (of Hingston and Kaine) I place less emphasis on the potential for reinstatement of the two individual applicants to adversely affect productivity although, in the short term, the reinstatement of either or both into an additional position until a vacancy occurs would have some minor adverse effect on productivity. However, I remain as convinced now as when judgments were delivered in Stones and Diprose that the overall restructure has achieved savings, increased productivity and removed prime sources of demarcation disputes.
Reinstatement of either applicant by the Court would amount to interfering with the respondent's decision to use Manpower Pty Ltd as an outsourcer and as a recruitment agency for the identification of suitable staff for permanent employment by the respondent on core functions. If necessary I would be content to rely on my unwillingness to interfere with what I consider a legitimate management prerogative as sufficient grounds for finding reinstatement impracticable because "inappropriate in all the circumstances of the case" (see Patterson v Newcrest Mining Limited, (1996) 68 IR 419 at 420) where the Chief Justice said:
". . . The word `impracticable' has caused difficulty in relation to unlawful termination claims. It appears in subs. (2) and has led Judges of the Court, including myself, to describe the scheme of s170EE as one providing a primary remedy of reinstatement and a secondary remedy of compensation where reinstatement is impracticable. These comments must be read in the light of the amendments, where they apply, requiring the Court to reach a determination that it is `appropriate in all the circumstances of the case' to order reinstatement. Contrary to the submission put by counsel for the appellant, it is my opinion that the matter of appropriateness, where that concept applies, is not restricted to the form of a reinstatement but applies to the initial question whether reinstatement shall be ordered or not."
I find reinstatement impracticable for all the reasons outlined in Stones and I also find that reinstatement would be an inappropriate remedy.
ECONOMIC LOSS
I am not satisfied the either applicant has sustained economic loss as a result of his termination by the respondent on 25 October 1996.
The applicant Hingston worked briefly for Manpower for a couple of shifts between 25 October and 28 October when Manpower terminated his employment and he was paid the redundancy entitlements provided in the Simplot Redundancy Agreement. Had the applicant applied for relief alleging unlawful termination of employment by Manpower, and had he established that this termination of employment by Manpower was unlawful, and had reinstatement been held impracticable, he may have been able to demonstrate economic loss which may have been taken into account in a possible claim for compensation against Manpower under s170EE(3). However, the applicant has not established that economic loss flowed from the termination by the respondent of his employment on 25 October 1996 and he has not applied for relief against Manpower alleging unlawful termination of employment on 28 October 1996. I have referred earlier to the fact that the applicant filed a Notice of Motion seeking to join Manpower as a respondent in the termination of 25 October but never proceeded with the motion.
The applicant Kaine worked for about twelve months with Manpower immediately after the termination by the respondent on 25 October. He then worked with Skilled Engineering until Friday 30 January 1998, some two days before the hearing of his application against the respondent. The applicant has not established any economic loss flowing from the termination of employment by Simplot on 25 October 1996, or for that matter, although it is irrelevant, from the termination by Manpower late in 1997. He may perhaps be able to establish economic loss in the future as a result of the termination of employment on 30 January 1998 by Skilled Engineering but that is of no consequence in respect of any compensation which might be considered appropriate as a result of the termination by the respondent on 25 October 1996.
DAMAGES FOR FAILURE TO GIVE NOTICE OF TERMINATION OF EMPLOYMENT
Counsel for the applicants submits that in these cases payments in lieu of notice should be calculated on the basis of weekly average income as declared or assessed for the 1996 taxation year. Counsel for the respondent submits that payment in lieu of notice should be calculated on weekly wages at the time of termination.
If compensation had been paid under s170DB in lieu of notice, it would have been paid at the weekly rate then applicable. Damages under s170EE(5) are to be ordered in an amount equal to the amount of compensation which, if it had been given by the employer to the employee when the employment was terminated, would have resulted in the employer not contravening that section.
On the basis of attachment G to exhibit R1, counsel for the respondent calculated Hingston's weekly wage at $672.36. His length of service required four weeks wages in lieu of notice i.e.$2,689.44.
On the basis of attachment A to exhibit R2 Kaine seems to have received $787.21 weekly at termination assuming that, at that time, he was working twelve hour shifts. His length of service required three weeks wages in lieu of notice, i.e. $2,361.63.
ORDERS
The Court orders
1. The respondent pay the applicant Peter George Hingston compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $2,689.44 pursuant to s170EE(5) - total $5,689.44.
2. The respondent pay the applicant Stanley Lewis Kaine compensation in the sum of $3,000 pursuant to s170EE(3) and damages in the sum of $2,361.63 pursuant to s170EE(5) - total $5,361.63.
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I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of Judicial Registrar Ryan
|
Associate:
Dated: 11 February 1998
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Counsel for the Applicant: | Mr B McTaggart |
| Solicitor for the Applicant: | Jennings Elliott |
| Counsel for the Respondent: | Mr McLaughlin |
| Solicitor for the Respondent: | Andersen Legal |
| Date of Hearing: | Hobart, 2 February 1998 |
| Date of Judgment: | 12 February 1998 |
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