Appeal - termination of employment - reinstatement - principles - Sprigg commented upon - factors relevant to reinstatemnet of employees selected for retrenchment on basis of WorkCover history or injury status considered.

[1] These are appeals by Mr A. Smith and Mr B. Kimball ("the Appellants"), pursuant to s.45(1)(b)[1] of the Workplace Relations Act 1996 ("the Act"), against a decision[2] and orders[3] made by Senior Deputy President Lacy on 23 January 2003.

[2] The present matter arises out of a redundancy process conducted by Moore Paragon Australia Ltd ("the Respondent") in early 2001. The company contemplated reducing its staff by about 36 employees. It called for volunteers to accept retrenchment and received 42 applications in response to that invitation. The company ultimately retrenched 42 employees. This included 13 involuntary redundancies, but not all of those who volunteered.

[3] The Appellants along with five other employees who were made compulsorily redundant by the Respondent sought a remedy under s.170CE of the Act in respect of the terminations of their employment. Their applications were refused by Commissioner Hingley on 7 November 2001 on the basis that the terminations were not harsh, unjust or unreasonable within the meaning of the Act.[4] The employees successfully appealed that decision, with a Full Bench of the Commission ("the First Full Bench") deciding on 21 March 2002 that the terminations of the employment of all of the appellants were unjust and unreasonable[5]. In particular, the First Full Bench held that the appellants "were selected to be made redundant on the basis of their WorkCover history or injury status" and that there was no valid reason for the termination of the Appellants' employment.[6]

[4] The First Full Bench directed that Senior Deputy President Lacy determine the question of remedy in each of the matters. By the time his Honour dealt with the question of remedy only two of the applicants, the present Appellants, were seeking reinstatement. They also sought an order for lost remuneration in the event reinstatement was ordered, or compensation pursuant to s.170CH(6) in the event that reinstatement was not ordered. Having determined that a remedy was appropriate in respect of both Appellants[7], Senior Deputy President Lacy, by decision dated 23 January 2003, determined that reinstatement was not appropriate and instead ordered an amount lieu of reinstatement. This appeal is from that decision.

[5] This appeal was heard on 18 and 19 June 2003. At the request of the parties this bench delayed its decision to enable a settlement conference to be conducted by Commissioner Smith to occur. That conference did not result in a settlement.

[6] An appeal to the Full Bench lies only by leave of a Full Bench: s.45(1). A Full Bench must grant leave to appeal if, in its opinion, the matter is of such importance that, in the public interest, leave should be granted: s.45(2). Otherwise, a grant of leave is governed by the conventional considerations for the grant of leave to appeal by an appellate court which include whether the decision is attended with sufficient doubt to warrant its reconsideration or whether substantial injustice may result if leave is refused[8]. However, "[t]hese `grounds' should not be seen as fetters upon the broad discretion conferred by s 45(1), but as examples of circumstances which will usually be treated as justifying the grant of leave" although "[i]t will rarely, if ever, be appropriate to grant leave unless an arguable case of appealable error is demonstrated. This is so simply because an appeal cannot succeed in the absence of appealable error"[9].

[7] The need for an appellant to demonstrate error is made explicit in the case of appeals from orders made in connection with an application under s.170CE. In particular, s.170JF(2) provides:

"For the avoidance of doubt, an appeal to a Full Bench under section 45 in relation to an order made by the Commission under Subdivision B of Division 3 may be made only on the grounds that the Commission was in error in deciding to make the order."

[8] The decision of the High Court in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission[10] makes it clear that an appeal under s 45 "is properly described as an appeal by way of rehearing", that the powers under s 45(7) "are exercisable only if there is error on the part of the primary decision-maker" and that this is so "regardless of the different decisions that may be the subject of an appeal under s 45".

DETERMINATION THAT REINSTATEMENT WAS NOT APPROPRIATE

[9] His Honour approached the issue of the appropriateness of reinstatement by reference to two matters, namely:

• the Respondent's capacity to provide meaningful employment to the Appellants; and
• the capacity of the Appellants.

[10] His Honour dealt with those two matters in the following way:

"Respondent's capacity to provide meaningful employment

[173] Mr McGilly, the respondent's National Manufacturing Manager, gave evidence to the effect that there was no vacancy for Mr Smith or Mr Kimball in their former work departments. If they, or either of them, were reinstated the respondent would need to retrench someone from the departments to which they would be appointed. From other parts of Mr McGilly's evidence, which I accept, it is clear that the respondent has been experiencing a downturn in its business and its financial fortunes. Structural changes to the business, including a management buy-out during the process of change, have been ongoing since the retrenchment of the applicants in February 2001. Although there have been no further retrenchments from Wodonga plants since February 2001, five employees who have left those plants have not been replaced and 32 employees have been retrenched from the respondent's plants in Clayton and Adelaide.

[174] There has been a requirement, during the period between February 2001 and June 2002, for additional employees in various of the respondent's departments. The vacancies were advertised internally, as and when they occurred, and the positions filled temporarily from existing employees. However, the respondent is not sufficiently confident about its future to engage new employees. In fact it is possible, if not probable, that more retrenchments will occur in the future.

[175] I am satisfied, taking account of all of the evidence that is before me, the respondent does not have a position to which Mr Smith and/or Mr Kimball could be appointed, on terms and conditions that are no less favourable than those they enjoyed immediately prior to the termination of their employment.

[176] Mr McKeown, in his submissions on behalf of the respondent in this aspect of the case, relies on that part of Mr Armstrong's submission that asserts Messrs Smith and Kimball continue to suffer a significant degree of impairment and their ability to work in new environments will necessarily be limited_. Mr Armstrong's contention had been in support of his submission that reinstatement was the appropriate remedy for Messrs Smith and Kimball. He was adverting to the disadvantage that they would suffer in trying to secure employment in the open market._

[177] Although there was no medical evidence given in respect of Mr Smith's physical capacity the indications are that he would, at the very least, need to be placed in a position with modified duties. In the course of Mr Smith's re-examination the following exchange occurred:

Have your treating doctors given you any prognosis as to when you will return to work?---Not yet. I'm still seeing the surgeon, I've got to go back to the surgeon, I think it is next week for another injection.

[178] A little further on in re-examination Mr Armstrong asked Mr Smith of his feelings about being able to return to work generally for the respondent and Mr Smith replied "I think I can work for the company".

[179] I am not prepared to infer, in the light of Mr Smith's evidence and, in the absence of his surgeon's evidence, that Mr Smith has a present capacity to perform the full range of duties of his former position. It was for the applicant to prove his case. As he is still under the supervision of his surgeon it is to be assumed that the surgeon would not have assisted his case in this regard if he was called to give evidence.

[180] The situation is much clearer as far as Mr Kimball is concerned. It is the opinion of Mr Kimball's treating physician, Dr Hayden, that Mr Kimball has a permanent 40 per cent loss of capacity and he cannot work night shift work. On the basis of that evidence, which I accept, Mr Kimball would require a permanently modified position to accommodate the limitations on his lifting capacity and his unavailability for night shift.

[181] In Smith and Roulston v Capral Aluminium_, Commissioner Whelan determined that unavailability of a job vacancy does not provide a basis for refusing to order reinstatement. Commissioner Cargill in_ Tagamalitsky v Commonwealth Bank of Australia stated that, where an order that the employee be reinstated to their former position would impose some difficulty upon the employer, the Commission may order reinstatement to another like position on terms and conditions no less favourable than those on which they were previously employed. In Cadbury Schweppes Limited v Peluso the Full Bench found that s 170CH(3)(b) does not allow the Commission to reinstate an employee in a lower position. If the Commission cannot find a position on terms and conditions no less favourable than those on which the employee was employed immediately prior to termination, then reinstatement is not appropriate, and compensation should be awarded instead.

[182] I am satisfied that the respondent does not have a position on terms and conditions no less favourable than those on which Mr Smith was employed immediately prior to termination of his employment. Furthermore it is a reasonable inference that Mr Smith does not have a present capacity to perform the role that he was employed to perform immediately before the termination of his employment.

[183] Mr Kimball has a present capacity to perform the modified role that he was performing immediately before the termination of his employment. However, I am satisfied that Mr Kimball would not be able to perform the full range of duties that attach the position that he occupied immediately before the termination of his employment. Furthermore, I am satisfied that the respondent does not have a position on terms and conditions no less favourable than those on which Mr Kimball was employed immediately prior to termination of his employment.

[184] In my view, orders for reinstatement of Messrs Smith and Kimball would be inappropriate. This is in spite of what I consider to be their genuine claims that each would otherwise have for reinstatement; i.e. their advancing age, the service that they have provided to the respondent, what they have sacrificed for the respondent and the established reason for the termination of their employment. However, there is no useful purpose in creating a fiction to return them, or either of them, to a situation that is, in my view, entirely problematic. That would be even more cruel than refusing their claims for reinstatement.

[185] The claims for reinstatement must fail. In the circumstances it is unnecessary for me to consider whether any amount lost or likely to have been lost by Messrs Smith or Mr Kimball because of the termination of their employment. [sic] However, it remains for me to consider the amount of remuneration in lieu of reinstatement that may be awarded to each applicant, including Messrs Smith and Kimball.

[11] We think it clear from the emphasised portions that the proposition of law asserted in the last sentence of paragraph 181 ("the key proposition"), for which no authority is cited, is the lynch-pin in his Honour's reasoning leading to a conclusion that orders for reinstatement for Messrs Smith and Kimball would not be appropriate. There is a tension between the key proposition and the decision of the Full Bench in Steggles Limited v West[11]. There the Full Bench upheld an order for reinstatement where the Commissioner at first instance "clearly was not concerned to reinstate the respondent to the position he occupied at the time of the termination" but rather "was intent on the respondent being reinstated as an employee of the appellant and was prepared to leave it to the appellant to place the respondent in a position of no less standing than his previous position."[12]

[12] In Anthony Smith & Associates Pty Ltd v Sinclair[13], the Full Court of the Industrial Relations Court of Australia was concerned with the terms of s.170EE(1)(a)(ii) of the Industrial Relations Act 1988. Section 170EE(1) provided:

170EE(1) [Orders] In respect of a contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, the Court may, if the Court considers it appropriate in all the circumstances of the case, make the following orders:

(a) an order requiring the employer to reinstate the employee by:

(i) reappointing the employee to the position in which the employee was employed immediately before the termination; or

(ii) appointing the employee to another position on terms and conditions no less favourable than those on which the employee was employed immediately before the termination; ...

[13] The Full Court held[14]:

"We have already set out the terms of s170EE(1)(a)(ii) of the Act. The sub-paragraph empowers the Court to require the employer to reinstate the employee by appointing him or her "to another position on terms and conditions no less favourable than those on which the employee was employed immediately before the termination". This might be a specific position, the availability and suitability of which is revealed by the evidence. On other occasions, the Court will not specify a particular position. Provided that the Court is satisfied that reinstatement is practicable and appropriate, it is open to the Court to make an order in terms of par (a)(ii), leaving it to the employer to choose the position and to comply with the Court's order to provide terms and conditions that are no less favourable than those on which the employee was employed immediately before the termination. If this course is taken, the employer may select an existing position, or he or she may create a new position for the purpose. If the latter, contrary to the submission of counsel for the employer, it will not be to the point that, in the absence of the order, the employer might not have created the position. We appreciate that creation of a new position may occasion a cost, or other disadvantage, to the employer. Where there is evidence that this will be so, that evidence may be relevant on the issues of practicability and appropriateness. But it would be contrary to principle to treat such evidence as necessarily determinative. The occasion for the order arises because the employer has acted unlawfully in terminating the employee's employment. A reinstatement order is akin to an injunction compelling a wrongdoer to restore the position of the innocent party. In considering whether to grant an injunction, a court will always take into account the consequences of an order to the wrongdoer but the existence of adverse consequences has never been regarded as excluding the possibility of an order being made."

[14] We are satisfied that, notwithstanding the differences between s.170EE(1) and s.170CH(3), the approach adopted by the Full Court is equally applicable to the Commission's task when considering whether or not to exercise the power in s.170CH(3)(b) because under both provisions the touchstone for determining whether or not to order reinstatement is what is "appropriate". The approach of the Full Court in Sinclair is incompatible with the key proposition upon which his Honour relied in determining that reinstatement was not appropriate. We respectfully conclude that his Honour erred in relying on the key proposition.

[15] It will often, if not typically, be the case that the position occupied by an applicant for relief under s.170CE of the Act will, at the time the application is arbitrated, either no longer exist or no longer be vacant. In our view that bare fact would rarely, on its own, justify a conclusion that an order for reinstatement was not "appropriate". To adopt such an approach would tend to defeat the remedial purpose of the legislation. The unavailability of a job vacancy is simply one factor to be taken into account in deciding whether or not an order for reinstatement is appropriate.

[16] Having concluded that reinstatement was not appropriate, his Honour proceeded to determine an amount of compensation pursuant to s.170CH(6), applying the "guidelines" articulated by the Full Bench of the Commission in Sprigg v Paul's Licensed Festival Supermarket[15]. His Honour's reasons were as follows[16]:

"[188] The Full Bench in Sprigg endorsed the following approach to the assessment of the amount:

Step 1 : Estimate the remuneration the employee would have received, or have been likely to have received, if the employer had not terminated the employment.

Step 2 : Deduct moneys earned since termination. Workers compensation payments are deducted but not social security payments. The failure of an applicant to mitigate his or her loss may lead to a reduction in the amount of compensation awarded. ]

Step 3 : The remaining amount of compensation is discounted for contingencies.

Step 4 : The impact of taxation is calculated to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.

Step 5 : The legislative cap on compensation is applied.

[189] I propose to take these matters into account in the context of the provisions of s 170CH(7).

[190] Although I am satisfied that there is an adverse trend in the direction of the respondent's business, it was neither suggested nor established that orders for the maximum or any amount in lieu of reinstatement for each applicant, would affect the viability of the respondent's undertaking. The respondent has, and is continuing, to put in place measures to correct the adverse trend. These measures, unfortunate as it is, are the origin of the present situation. I do not feel constrained by this consideration in terms of the amount that I may order in lieu of reinstatement.

[191] Beyond acknowledging what I have said in paragraphs [127] and [128] above it is unnecessary for me to repeat those findings here. It is clear that in all cases except Messrs Murphy and Perret the length of the applicants' service is a significant factor in determining the amount in lieu of reinstatement. Those employees other than Messrs Murphy and Perret had accumulated significant non-transferrable benefits in their jobs. Apart from the severance payments they received, the equity in their jobs is lost forever.

[192] Mr Murphy's length of service is, in the context of an amount in lieu of reinstatement, of some minor consequence. In the same context it may be said that Mr Perret's length of service is not inconsequential. The future prospects for these two applicants would be less certain than the others.

[193] This consideration necessarily involves an assessment of the duration or likely duration of the employee's employment if the employment had not been terminated when it was. Mr Armstrong's submission is to the effect that each of the applicants could have expected to remain in the respondent's employ until they were retrenched or retired. Mr McKeown relevantly submitted that there was a statistical chance that each would have been retrenched in February 2001 in any event or, at the least, in the foreseeable future.

[194] I do not understand Mr Armstrong's submission to go so far as to suggest that the employees had a job for life. It is established and well accepted that in the absence of the clearest indication in the employment agreement between the parties permanency does not imply a job for life. Similarly, in the absence of some probative evidence to the contrary, I consider it difficult, in any case, to make any estimate of continued employment beyond five years.

[195] There is little evidence upon which I could be satisfied that any of the applicants would have there [sic] employment terminated in the foreseeable future by reason of redundancy. In my view the integrity of the respondent's selection process for retrenchment was compromised to the extent that I can place no faith in it in determining the possibility of any of the applicants being retrenched in February 2001 or in the foreseeable future. I reject the respondent's submissions to the contrary.

[196] I turn now to assess the duration or likely duration of each applicant individually. In so doing I regard the following factors as particularly relevant to the assessment of the likely duration of continued employment in this case:

• employee conduct and performance;
• length of service; and
• employee capacity.
• Mr Smith

[197] Mr Smith, at the time of the termination of his employment, had completed 23 years service. There is no evidence to suggest that his conduct would have been a factor in the continuation of his employment. The evidence does not suggest that his performance was unsatisfactory. Mr Armstrong's contentions suggest that I should determine that Mr Smith's employment would have continued until he was retrenched sometime in the foreseeable future or until he elected to retire.

[198] All things being equal a long serving employee with an acceptable level of performance, such as Mr Smith, could normally expect to have continued in the position in which he was employed for at least another five years. However, all things are not equal. Mr Smith was not, at the time of the termination of his employment, engaged in the position for which he was employed. That seems to have been the situation for a substantial period of the time between 1995 and 2001. He was engaged on modified duties and, unfortunately, unable to perform the full range of the duties of his substantive position by reason of his work related injuries.

[199] Since February 2001, Mr Smith was not fit for any duties for 40 per cent of the time and fit for modified duties for the remaining 60 per cent of time. In my view the remuneration that he would have earned in that period must be discounted by 40 per cent.

[200] An employer is not bound to continue indefinitely the employment of an employee who is unable to perform the duties for which they were employed. In the circumstances of Mr Smith's history I consider it more probable than not that the respondent in this case would have terminated Mr Smith's employment within two years. This is likely for two reasons. First, the respondent, as it proved, had limited capacity to provide suitable alternative employment for Mr Smith. Second, I infer from the evidence as a whole that Mr Smith could not have fulfilled the inherent requirements of the position for which he was employed over the course of the two years following the termination of his employment. The respondent would have been entitled to terminate the employment in those circumstances, provided that it was done lawfully and it was not otherwise harsh, unjust or unreasonable. Accordingly, it is my assessment that, subject to the contingencies specified below, Mr Smith would have received, or would have been likely to receive two years remuneration.

[201] I am satisfied, having regard of the history of Mr Smith's physical condition, it is more likely than not that, over the course of the two years, Mr Smith would have been in receipt of WorkCover benefits amounting to at least 40 per cent of his earning capacity over that time. Consequently I would allow a 40 per cent reduction of the amount that would be earned in the period between the date of the hearing and 7 February 2003.

[202] In view of my findings about Mr Smith's prospects for future employment with the respondent, it is unlikely that Mr Smith would have been retrenched. Accordingly, I will allow for deduction of the retrenchment benefit that Mr Smith received on termination of his employment.

[203] The calculation of the amount of remuneration, not including mitigation, thus takes the following form:

· deduct 40 per cent for period of incapacity up to hearing

· deduct retrenchment benefit paid on termination

[17] In relation to the specific circumstance of Mr Kimball, the Senior Deputy President stated[17]:

[210] With 16 years service Mr Kimball reasonably could have expected to continue his employment with the respondent, in the ordinary course of events, for at least another five years. I am satisfied that Mr Kimball's conduct at work would not have diminished the amount of time he could have expected to work for the respondent. His work performance was at least satisfactory in terms of the level of his capacity. However, at the time of the termination of his employment Mr Kimball was not filling the position for which he was employed. It is not evident to me that Mr Kimball held a substantive position at all. Mr Kimball was working at 40 per cent reduced capacity. It is unlikely that he would return to full working capacity. Furthermore, it is unlikely that Mr Kimball could have filled the position for which he was employed in the foreseeable future. In the circumstances, I am satisfied that, more likely than not, the respondent could and would have terminated Mr Kimball's employment by February 2003.

[211] I take account of the evidence of Mr Kimball's treating physician in assessing Mr Kimball's remuneration and conclude that, over the two year period, his remuneration is likely to have been made up by a WorkCover benefit of about 40 per cent. Accordingly, I allow a deduction of 40 per cent for the benefit contingency and 10 per cent for other contingencies. It is unlikely, in the circumstances, that Mr Kimball would have received a retrenchment benefit. I deduct the severance payment received accordingly.

ERROR IN RELATION TO DEDUCTION FOR WORKCOVER BENEFITS

[18] The evidence demonstrated that each of the Appellants, notwithstanding his injuries and WorkCover status, was in fact performing full-time, productive work prior to and at the time of the termination of his employment, albeit within a range of modified duties dictated by those injuries. The Respondent does not challenge such a conclusion. For the purposes of the Sprigg guidelines, his Honour proceeded on the basis that in the hypothetical period of employment following the date of termination each of the Appellants would not be working for 40% of the time and would have instead received workers' compensation in respect of that non-worked time.

[19] Moreover, while each Appellant had been assessed, for Workcover purposes, as being 40 per cent incapacitated, prior to the termination of their employment neither Mr Smith nor Mr Kimball was receiving regular weekly WorkCover benefits for loss of remuneration. Both were entitled to WorkCover benefits for medical and like expenses prior to the termination of their employment and became entitled to weekly WorkCover payments once their employment was terminated subject to the operation of s.96 of the Accident Compensation Act 1985 (Vic).

[20] Mr Brett Kimball is aged in his early 60's and, at the time of the termination of his employment, was employed by the Respondent as an operator on a Roto Slitter machine and as a flyer on other machines. He commenced employment in May 1984 and was employed full time. Subsequent to injuries sustained at work in 1998 he was subject to medical restrictions which meant that he was unable to lift weights above 15 kilograms and could not work a three shift rotation. These injuries had led to him being placed in a position referred to as "Mix Man". That position was subsequently abolished and he was placed on the alternative duties outlined above. Whilst his injuries had been accepted for workers' compensation purposes Mr Kimball was only being reimbursed for medical and like expenses, due to his full time employment. He was not receiving weekly workers' compensation payments.

[21] Mr Kimball's employment was terminated in February 2001. He stated that at the time of his termination he "had a lot of accrued sick leave" and that he had "...only taken two days off with WorkCover and my back"[18]. Due to the operation of s.96 of the Accident Compensation Act 1985 (Vic), any entitlement to weekly workers' compensation payments was suspended for a period equivalent to the value of his retrenchment benefit and accumulated long service leave.

[22] Elsewhere in this decision we deal with the conclusion of SDP Lacy that "...Mr Kimball would not be able to perform the full range of duties that attach the position that he occupied immediately before the termination of his employment. Furthermore I am satisfied that the respondent does not have a position on terms and conditions no less favourable that those on which Mr Kimball was employed immediately prior to termination of his employment."[19] Although there was evidence which suggested that Mr Kimball's health may deteriorate further over time[20] there was no evidence to suggest that Mr Kimball was unable to perform the duties he was undertaking at the time of the termination of his employment.

[23] There was no evidence to suggest that Mr Kimball was other than a productive employee albeit working two shifts rather than three and having a restriction on lifting weights (which did not appear to interfere with the efficient carrying out of the duties he had been assigned).

[24] In summary the evidence in relation to Mr Kimball established that;

• Prior to the termination of his employment he worked a 38-hour week and had minimal absences due to sick leave. He was engaged on modified duties but these did not result in him not being a productive employee.
• Weekly payments of workers' compensation did not commence until his redundancy payments and accrued long service leave were accounted for.
• His fitness for work was, at the time of the hearing before this Full Bench, at the same level as at the time of the termination of his employment.

[25] In relation to Mr Kimball, there was no evidence that he had been unfit for work in the period between the termination of his employment and the hearing before Senior Deputy President Lacy. If, as the Respondent concedes, Mr Kimball had been performing full-time productive work prior to, and at the time of, the termination of his employment, there was no factual basis for his Honour's approach in determining that Mr Kimball "was working at 40% reduced capacity" insofar as that could be taken to mean that his productive capacity was only 60% of that of a fully productive employee. The evidence supported a conclusion on the balance of probabilities that, but for the termination of his employment, Mr Kimball would have continued performing full time, productive work, albeit within a range of modified duties dictated by his injuries. His Honour's finding to the contrary[21] was not open on the evidence.

[26] His Honour made a deduction for the retrenchment benefit received by Mr Kimball and, in addition, made a deduction for weekly WorkCover benefits receivable by him at a rate of 40% in respect of the whole of the period following the termination of his employment. However, by virtue of s.96 of the Accidents Compensation Act 1985 (Vic), WorkCover benefits are suspended for a period equivalent to the value of severance benefits paid to an employee[22]. That is, the weekly Workcover benefits to which the Appellant would otherwise have been entitled following the termination of his employment were suspended for a period equivalent to the value of the retrenchment benefits and accrued long service leave he had received. Accordingly, his Honour's approach involved an error because he deducted monies that would not be, and were not in fact, received by Mr Kimball during a substantial period following the termination of his employment. Before us, counsel for the Respondent accepted that, in relation to Mr Kimball, deducting both the whole retrenchment benefit and 40 per cent of the two years' remuneration for WorkCover benefits involved a measure of erroneous double deduction[23].

[27] Arthur Smith is aged in his early 40's and, at the time of the termination of his employment, was employed by the Respondent as a Press Operator. He commenced employment in January 1978 and was employed full time. Subsequent to injuries sustained at work his employment was subject to medical restrictions which meant that he could not climb stairs, stand for long periods or do a lot of walking. Whilst his injuries had been accepted for workers' compensation purposes he was only being reimbursed for medical and like expenses. He was employed full time and was not receiving weekly compensation payments.

[28] Mr Smith's employment was terminated in February 2001. Over the next two years he had several surgical procedures related to compensable injuries:

• July 2001 - arthroscopy on ankle. Unable to work for three weeks[24];
• November 2001 - surgery to remove a ganglion cyst which had developed around a ruptured tendon in ankle. Unable to work until July 2002. Restricted duties from that time[25];
• Prospective - further surgery on ankle was proposed for July 2003 to repair damaged tendon. Unable to work for six weeks[26].

On leaving Moore Paragon, Mr Smith was entitled to payments for recreation leave, long service leave and redundancy. He told us that he did not begin receiving WorkCover weekly payments until November 2002[27], although in his evidence before Senior Deputy President Lacy, he stated that his weekly workers' compensation payments would comence some 72 weeks after the date of the termination of his employment. i.e. approximatley July 2002. Nothing turns on this discrepancy in the evidence.

[29] At the time of the hearing before Senior Deputy President Lacy (June 2002) Mr Smith was recuperating from surgery and unfit for work. In the period between the time of the termination of his employment and the hearing before his Honour, Mr Smith had been unfit for work for about 40% of that period. (There is a confusing identity between this figure and Mr Smith's level of incapacity assessed for WorkCover purposes.)

[30] In the calculation at [203] of his Decision, Senior Deputy President Lacy, in respect of the period up to hearing (4 June 2002), correctly deducted "40 per cent for incapacity" from the wages earned in that period. However, in relation to the period after the hearing ("the second period") his Honour deducted "40 per cent capacity contingency". It is clear from the last sentence of para [201] that this deduction represents WorkCover weekly benefits which his Honour assumes would have been received in the second period. However, because of the operation of s.96 of the Accidents Compensation Act 1985 (Vic) Mr Smith would not have begun receiving, and did not receive, weekly benefits until after his retrenchment benefit and accrued long service leave entitlements had been exhausted. That did not occur until part way through the Second period if, despite what he told his Honour, he did not in fact receive workers' compensation payments until November 2002.

[31] In summary the evidence relating to Mr Smith before this Full Bench established that:

• Prior to the termination of his employment he worked a 38 hour week as a Press Operator. He was engaged on modified duties but was a productive employee.
• Subsequent to the termination of his employment he was unable to work for around eight months due to surgery and periods of recuperation in relation to compensable injuries. Due to the operation of s.96 of the Accident Compensation Act 1985 (Vic) Mr Smith did not receive weekly compensation payments for any of that period.
• Weekly payments of workers' compensation did not commence until November 2002.
• At the time of the current hearing he was anticipating further surgery on his ankle in July 2003 which meant that he was unable to work for around six weeks.
• Following the surgery in July 2003 Mr Smith would have been fit to return to productive work at Moore Paragon on the restricted duties which he was engaged on prior to his termination.

COMMENT IN RELATION TO THE GUIDELINES IN SPRIGG

[32] It seems to us that the amounts arrived at by the application of the guidelines in Sprigg in the present matter are on their face manifestly inadequate for employees with the length of service of the Appellants, the circumstances of their dismissal and their poor prospects for future employment. This causes us to sound a warning in relation to the application of Sprigg. The guidelines laid down in Sprigg and refined in Ellawala v Australian Postal Commission[28] are clearly designed to serve the proper and desirable purpose of fostering uniformity and consistency in decision-making by individual members of the Commission when assessing compensation pursuant to s.170CH(6). However, those guidelines are not a substitute for the words of the Act[29]. By virtue of s.170CH(2), any remedy ordered by the Commission must be a remedy that the Commission considers "appropriate" having regard to all the circumstances of the case including the matters set out in s.170CH(2). Section 170CH(6) confers a general discretion "if the Commission considers it appropriate in all the circumstances of the case" to "make an order requiring the employer to pay the employee an amount ordered by Commission in lieu of reinstatement" subject to the Commission having regard "to all the circumstances of the case including" the matters listed in s.170CH(7) - the same list of matters set out in s.170CH(2) - and subject also to the `cap' provided for in s.170CH(8) and (9). If an application of the guidelines in Sprigg yields an amount which appears either clearly excessive or clearly inadequate, then the member should reassess any assumptions or intermediate conclusions made or reached in applying the guidelines so as to ensure that the level of compensation is in an amount that the member considers appropriate having regard "to all the circumstances of the case" including the matters listed in s.170CH(7) and subject to the `cap' provided for in s.170CH(8) and (9). In this context it should be borne in mind that the result yielded by an application of the Sprigg guidelines may vary greatly depending upon particular findings in relation to the various steps including, in particular, step one, which necessarily involves assessments as to future events that will often be problematic.

[33] In light of the errors we have identified we grant leave to appeal. Leave to appeal having been granted the appeal proceeds by way of rehearing.

[34] There is no challenge on appeal that a remedy is appropriate. Nevertheless, we are obliged to consider the matters specified in s.170CH(2) for ourselves. It is now well settled that when determining an appropriate remedy under Division 3 of Part VIA of the Act, the Commission must consider reinstatement first, and it will be ordered unless considered to be inappropriate[30]. We approach the matter in that fashion.

Section 170CH(2)(a): the effect of the order on the viability of the employer's undertaking, establishment or service

[35] The Respondent conducts a substantial business in several states. It employs over 200 persons at its Wodonga plant and, nationally, has a turnover in the order of $100m a year. Mr Patrick McGilly, the Respondent's National Manufacturing Manager, described the financial position of the company as at the time of the appeal hearing as "very precarious". However, Mr McGilly gave fundamentally contradictory evidence about the annual performance and monthly performance of the Respondent's business. In light of that unsatisfactory evidence, we are disinclined to act simply on the generalised evidence of Mr McGilly. It was open to the Respondent to tender evidence in the form of management accounts that would demonstrate the true financial position of the Respondent assuming the accounts to be reliable (a reasonable assumption to make in the absence of the evidence to the contrary). We indicated our preparedness to adjourn the matter to enable the Respondent to call further evidence to demonstrate that the viability of the Respondent's undertaking, establishment or service was at risk in the event that orders were made in favour of the Appellants. In particular, the Respondent was offered an opportunity to call evidence that an order for reinstatement of the Appellants and a consequential order pursuant to section 170CH(4) might have a consequence of rendering the company insolvent or liable to the appointment of a receiver or would involve or precipitate an event of default under the Respondent's facilities. The Respondent declined that offer. We infer, in all the circumstances, that an order for reinstatement of the Appellants and a consequential order pursuant to section 170CH(4) would not have a material effect on the viability of the Respondent's undertaking, establishment or service.

Section 170CH(2)(b): the length of the employee's service with the employer

[36] Mr Smith and Mr Kimball had, at the time of the termination of their employment, 23 and 16 years' service respectively with the Respondent. This lengthy period of service is a factor favouring a grant of relief and, indeed, favouring an order for reinstatement.

Section 170CH(2)(c): the remuneration that the employee would have received, or would have been likely to receive, if the employee's employment had not been terminated

[37] If the Appellants' employment had not been terminated, they would have continued to receive their usual weekly salary subject to contingencies including the possibility that they may have lawfully had their employment terminated in the period between the termination and the present time. We note, however, that despite evidence given to Senior Deputy President Lacy regarding further retrenchments [31] the evidence provided by Mr McGilly in the current matter was that there had been no further redundancies at the Wodonga plant.[32]

Section 170CH(2)(d): the efforts of the employee (if any) to mitigate the loss suffered by the employee as a result of the termination

[38] His Honour found that each Appellant had taken reasonable steps to mitigate his loss[33]. We see no reason to depart from that finding.

Section 170CH(2)(e): any other matter that the Commission considers relevant

[39] The advancing age of the Appellants, their relatively limited skills outside the Respondent's operation, the incapacity arising from their injuries, their obligation under State legislation to inform any prospective employer of the fact of their work-related injuries and the limited employment opportunities in a regional centre such as Wodonga all mean that the Appellants have little prospect of finding new work and face a real prospect of long term, if not permanent, unemployment.

[40] Counsel for the Respondent argued, in effect, that the incapacity of the Appellants resulting from their injuries was such that neither could perform the full range of duties associated with his substantive position and that this should be a determinative consideration against reinstatement. Counsel for the Respondents placed particular reliance on Cosma v Qantas Airways Limited both at first instance[34] and on appeal[35].

[41] Counsel for the Appellants submitted that this Full Bench should endorse the principle that where a reason relied upon by an employer has been found not to be a valid reason for termination of employment, then the employer cannot rely upon that same reason as a basis for opposing reinstatement. Applied to the present case, counsel for the Appellants submitted that the First Full Bench, having found that the employment of the Appellants was terminated because of their WorkCover history or injury status, it was not open to the Respondent to rely upon their injury status, and thus upon their incapacity, as a basis for opposing their reinstatement. Counsel for the Appellants argued that it is antithetical to the beneficial objects of the Act that an invalid reason motivating a termination could be a valid reason for precluding the remedy to undo it. He submitted that such an approach would encourage employers to engage in such conduct secure in the knowledge that the worst outcome would be having to `pay the price' in the form of s170CH(6) orders which are capped at six months of the dismissed employee's salary.

[42] While the proposition advanced by counsel for the Appellants has some attraction we are reluctant to endorse it without qualification. Specifically, the characterisation of the "reason" for termination and the "reason" advanced as a basis for opposing an order for reinstatement must be approached with care.

[43] It is well established that a respondent employer may rely upon circumstances discovered after the date of termination to demonstrate a valid reason for the termination notwithstanding that the reason relied upon by the employer at the time of termination was not a valid reason: Australia Meat Holdings Pty Ltd v McLauchlan[36]. In the same way, where there has been a finding that the reason relied upon for a particular termination was not a valid reason leading to a conclusion that the termination was harsh, unjust or unreasonable, it is open to a Respondent to rely upon other reasons that are valid reasons in opposing reinstatement, even if those reasons involve the capacity of the employee to perform his or her contractural obligations.

[44] The present case provides an illustration. As the First Full Bench found, where the reason for termination is that an employee has a WorkCover history, that reason without more will not be a valid reason for termination. It would not of itself provide any basis for opposing an order for reinstatement. However, under the general law an employer may lawfully terminate, or perhaps treat as frustrated, the contract of employment of an employee who, by reason of illness or injury, does not have an ongoing capacity to perform the duties of the position in which he or she is employed. Hence the need for provisions in workers' compensation legislation protecting an injured employee for a period following the injury and a provision such as s.170CK(2) in the Workplace Relations Act 1996. However, ongoing incapacity arising from illness or injury can certainly be a valid reason for termination of employment within the meaning of s.170CG(3)(a)[37].

[45] It is well established that a particular termination may be for a valid reason and yet still be harsh, unjust or unreasonable within the meaning of s.170CE[38]. In the same way, the mere fact that an employee suffers from a level of incapacity that prevents the employee from performing all of the duties associated with the employee's position does not automatically mean that reinstatement is not appropriate. For example, in Britax Rainsfords Pty Ltd v Jones[39] a Full Bench upheld an order for the reinstatement of an employee with an ongoing incapacity arising from injury but who was fit to perform the light duties she was performing at the time of her dismissal.

[46] Nevertheless, an employer in the position of the Respondent is entitled to contend that, notwithstanding a finding that it terminated the employment of an employee for an invalid reason, it could have terminated the employment of that same employee for a valid reason and may seek to rely on that valid reason in opposing an order for reinstatement. Specifically, the Respondent in the present matter can properly rely upon the incapacity of the Appellants (arising, as it does, from their injuries) as a matter which weighs in favour of a determination that reinstatement is not appropriate. The distinction between injury or WorkCover status on the one hand and incapacity resulting from injury may well be fine but, for the reasons we have given, it is a distinction that is properly drawn.

[47] The Appellants submit that it is the "modified duties" positions they were in at the time of the termination of their employment that are relevant for the purposes of s170CH(3)(a) and (b), such that the Commission can order reinstatement to these modified duties positions. This submission is contrary to the decision of the majority of the Full Court of the Federal Court in Ramsey Butchering Services Pty Ltd v Blackadder[40]. While we can see considerable merit in the dissent of Justice Moore and the unanimous decision of the New South Wales Court of Appeal in State Rail Authority (NSW) v Bauer[41], we are bound by the decision of the majority in Blackadder, namely that that the "position" referred to in s.170CH(3)(a) is the substantive contractual position occupied by the employee under his or her contract of employment.[42] Of course, any order for reinstatement in the present case will necessarily involve the Respondent providing the Appellants with modified duties within their substantive contractual positions. As to the distinction between a person's job and a person's position, see the judgment of McHugh, J in Qantas Airways Ltd v Christie [43] at [72-73].

[48] The traditional view was that when an employee is so incapacitated by illness or injury that he or she cannot work, at least in the longer term, the contract may be frustrated and thus terminated by operation of law[44] and not at the initiative of the employer[45]. In Marshall v. Harland & Wolff Ltd[46] Donaldson J, giving the judgment of UK National Industrial Relations Court stated[47]:

"In the context of incapacity due to sickness, the question of whether or not the relationship has come to an end by frustration sounds more difficult than it is. The tribunal must ask itself: 'Was the employee's incapacity, looked at before the purported dismissal, of such a nature, or did it appear likely to continue for such a period, that further performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and agreed to be accepted by the employer under the agreed terms of his employment?' In considering the answer to this question, the tribunal should take account of:

(a) The terms of the contract, including the provisions as to sickness pay

The whole basis of weekly employment may be destroyed more quickly than that of monthly employment and that in turn more quickly than annual employment. When the contract provides for sick pay, it is plain that the contract cannot be frustrated so long as the employee returns to work, or appears likely to return to work, within the period during which such sick pay is payable. But the converse is not necessarily true, for the right to sick pay may expire before the incapacity has gone on, or appears likely to go on, for so long as to make a return to work impossible or radically different from the obligations undertaken under the contract of employment.

(b) How long the employment was likely to last in the absence of sickness

The relationship is less likely to survive if the employment was inherently temporary in its nature or for the duration of a particular job than if it was expected to be long term or even lifelong.

Where the employee is one of many in the same category, the relationship is more likely to survive the period of incapacity than if he occupies a key post which must be filled and filled on a permanent basis if his absence is prolonged.

(d) The nature of the illness or injury and how long it has already continued and the prospects of recovery

The greater the degree of incapacity and the longer the period over which it has persisted and is likely to persist, the more likely it is that the relationship has been destroyed.

A relationship which is of long standing is not so easily destroyed as one which has but a short history. This is good sense and, we think, no less good law, even if it involves some implied and scarcely detectable change in the contract of employment year by year as the duration of the relationship lengthens. The legal basis is that over a long period of service the parties must be assumed to have contemplated a longer period or periods of sickness than over a shorter period.

These factors are inter-related and cumulative, but are not necessarily exhaustive of those which have to be taken into account. The question is and remains: 'Was the employee's incapacity, looked at before the purported dismissal, of such a nature, or did it appear likely to continue for such a period, that further performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and accepted by the employer under the agreed terms of his employment?' Any other factors which bear on this issue must also be considered."

[49] The traditional approach was subjected to a careful and comprehensive analysis by Wootten J in Finch v Sayers[48] who concluded[49]

"The review of the authorities shows that, before one can answer the question whether a contract of employment is frustrated, one must look at the whole of the terms of the contract, express and implied, and at all the surrounding circumstances, including the provisions made for the sickness and retirement of the employee and the general practice of the particular employer, or in similar employment. When one does this, it may well be that, in many areas of employment in contemporary society, particularly where one is dealing with an indefinitely continuing relationship, and not the performance of a specific task, there is relatively little room for the operation of the doctrine of frustration due to illness. It is notable that...employers...in every reported case in the last seventy years, have in fact acted on the basis that it was for them to terminate the sick employee's employment when they were no longer willing to maintain the continuity of his employment."

[50] The approach of Wootten J in Finch v Sayers has been approved and applied by the New South Wales Industrial Relations Commission in Court Session in Cachia v State Authorities Superannuation Board[50] and in Hilton Hotels of Australia Limited v Pasovska[51]. It has also been applied in this Commission by Simmonds C in his careful decision in Foster v Copper Mines of Tasmania Pty Ltd[52]. We endorse that approach.

[51] The weight to be accorded to ongoing[53] incapacity on the part of an employee when considering whether reinstatement pursuant to s.170CH(3) is appropriate will depend upon all the circumstances of the case. However, when considering whether reinstatement is appropriate for an employee who has an ongoing incapacity arising from illness or injury, the guiding principle ought be that generally reinstatement of a materially incapacitated employee will not be appropriate where:

• further performance of the employee's contractual obligations in the future would either be impossible or would be a thing radically different from that undertaken by him or her and accepted by the employer under the agreed terms of his or her contract of employment;
• reinstatement would involve imposing a material future productivity burden or some other unreasonable burden on the employer[54]; or
• reinstatement would impose an unreasonable burden on other employees.

Exceptional circumstances would be necessary before reinstatement could properly be regarded as appropriate in such cases.

[52] Reinstatement will involve a material future productivity burden on an employer when the employee cannot be fully or substantially fully productive within the ambit of the employee's substantive position.

[53] Whether reinstatement would involve an undue burden on other employees will depend on the particular circumstances of the case. The facts of Qantas Airways Limited v Christie [55] provide an example. Qantas terminated the employment of Mr Christie who was a 747 pilot who had turned 60 years of age. Mr Christie commenced proceedings alleging that the termination of his employment was for a prohibited reason under s.170DF of the Industrial Relations Act 1988, namely discrimination on the basis of age. Qantas, inter alia, relied upon s.170DF(2) and contended that Mr Christie could not perform the inherent requirements of his position. Mr Christie's age meant that the only destinations in the Qantas network to which he could fly were New Zealand, Fiji and Bali which were all short haul flights. Local laws in all other destinations to which Qantas flew prohibited flights flown by a pilot over 60 years of age. Because Mr Christie could not fly to most of Qantas' destinations a majority of the High Court held that he "could not perform the inherent requirements of the particular position" and therefore by operation of s.170DF(2), his dismissal was not prohibited by s.170DF. More importantly for present purposes, the reinstatement of Mr Christie would have imposed an undue burden on other pilots because a materially disproportionate share of flights to New Zealand, Fiji and Bali would have had to be allocated to Mr Christie for him to fly the number of hours required of a full time pilot as part of his or her contract of employment. That, in turn, would have meant that other pilots would have been deprived of a fair share of the more desirable short haul flights and would have been subjected to difficulties in meeting minimum hours requirements in their rosters.

[54] In summary, subject to the guiding principle referred to in paragraph [51] above, the following matters are relevant to the weight to be accorded to an employee's ongoing incapacity arising from injury or illness when considering whether reinstatement pursuant to s.170CH(3) is appropriate:

• The terms of the contract of employment including, in particular, the extent to which the contract of employment specifies inherent requirements for the employee's contractual "position".[56]
• The nature of the employee's incapacity and whether it prevents the employee from satisfying the inherent requirements of the employee's contractual position.
• The breadth of the contractual "position" occupied by the employee and the duties or job actually performed by the employee at the time his or her employment was terminated. Where a given "position" covers a wide range of duties and jobs within the employer's business, it is less likely that an inability to perform some only of those duties or jobs will be determinative against reinstatement.
• The practicality and reasonableness of providing modified work arrangements (including, possibly, the provision of special equipment) or modified duties to an employee so as to enable the employee to make a fully or substantially fully productive contribution to the employer's enterprise albeit within the restrictions arising from the employee's injury or illness. Clearly, it will often be impractical or unreasonable for a small employer to provide modified work arrangements or modified duties.
• The likelihood, if any, of a substantial recovery by the employee from his or her illness or injury and the consequent work restrictions.
• Any statutory duties falling upon the employer under workers' compensation or other legislation[57] and whether such duties have been complied with.

[55] These factors are interrelated and cumulative. This list is not exhaustive.

[56] We turn to consider these matters in the present case. There is no letter of engagement or written contract of employment in evidence for either of the Appellants. At the time of his termination, Mr Smith's substantive position was that of "operator"[58]. Mr Kimball's substantive contractual position is not entirely clear. The Senior Deputy President found, correctly, that at the time of the termination of his employment Mr Kimball worked as an "operator" on the Roto-Slitter Machine and as a "flyer" on various machines[59].

[57] The precise range of duties of an "operator" or "flyer" are not clear on the evidence although these descriptors appear to be broad generic position labels covering a number of different jobs and a large range of duties performed at the Wodonga 2 plant. Not all of the duties that might be performed by an operator could be regarded as inherent requirements of the position. For example it was conceded that some duties involving lifting heavy weights could not be performed by women.

[58] It is not in dispute that, as a result of their injuries, neither of the Appellants can perform the full range of duties associated with the positions of "operator" (in the case of Mr Smith) and "operator" or "flyer" (in the case of Mr Kimball) within the Respondent's Wodonga 2 plant. Each of the Appellants was performing "modified duties" at the time of the termination of his employment. However, the evidence demonstrated that each of the Appellants, notwithstanding his injuries and WorkCover status, was in fact performing full-time productive work prior to and at the time of the termination of his employment, albeit within the range of modified duties dictated by those injuries. That is, each of the Appellants was productively performing work that needed to be done by an operator (and/or flyer).

[59] As noted above, Mr Kimball is able to perform the modified duties he was performing at the time his employment was terminated.

[60] In the hearing before this Full Bench, Mr Smith acknowledged that his treating doctor had assessed him as having a "40% incapacity"[60]. However Mr Smith also gave evidence that his physical condition (subsequent to surgery in July 2003) was likely to be as good or better than the period prior to his termination of employment[61]. We accept that evidence. A medical report prepared for the respondent in March 2003[62] by Senior Consulting Surgeon Mr Peter Scott concludes:

"The worker is fit for light work only which does not require him to stand for any length of time or to walk any distance and one which does not require him to negotiate uneven surfaces, steps or stairs or ladders.

He is perfectly fit for light work such as a light clearing job or fork lift driving job or work as a truck driver and he has been seeking such work over the last six months."

This report tends to corroborate Mr Smith's evidence that he now has a similar capacity to that which he had at the time of the termination of his employment. In this context we should note that, on the state of the evidence before him in relation to Mr Smith's incapacity, his Honour was correct to conclude that reinstatement was not appropriate. At the time of the hearing before his Honour Mr Smith had been unfit for any work for a substantial portion of the period following the termination of his employment and was unfit for work at the time of the hearing. Of course, leave to appeal having been given the matter proceeds as a rehearing in which we have received fresh evidence as to the change of circumstances since the time of the hearing before Senior Deputy President Lacy.

[61] There is little prospect that either Mr Smith or Mr Kimball will recover fully from their injuries. That is, the incapacity of each of the Appellants will remain for the foreseeable future.

[62] There is no evidence to suggest that the Respondent has not complied with its statutory duties arising under workers' compensation legislation.

[63] Mr McGilly gave evidence-in-chief that the Respondent could not provide modified duties to the Appellants if they were reinstated[63]. This assertion appears to have been based on changes in the machinery at the Wodonga 2 plant. It became apparent from assumptions that Mr McGilly was asked to make in cross-examination, which were effectively conceded by the Respondent[64], that this evidence was unreliable. Indeed, it became apparent during his cross-examination that Mr McGilly did not have a clear idea of the skills of the Appellants or the work that they might be able to do. The evidence does not demonstrate that it is impractical or unreasonable for the Respondent to place the Appellants on modified duties which they could productively perform on a full-time basis if they are reinstated.

[64] In the present case, the Respondent had a valid reason to terminate the employment of a number of employees because of the restructuring necessary to meet changed business circumstances. Nevertheless, as Beazley J pointed out in Quality Bakers of Australia Limited v Goulding[65]:

"Even in the case of a genuine redundancy, the termination of employment of a particular employee may be harsh, unjust or unreasonable: Needham v Shepparton Preserving Company Limited (1991) AILR 395; Cheesman v Kinhill Engineers Pty Ltd 59 SAIR 168; Corkery v General Motors Holden Limited (1986) AILR 429; Hemmings v CPS Credit Union (1991) 58 SAIR 421."

Thus, the issue before the First Full Bench was whether there was a valid reason for selecting the particular employees who were selected for redundancy. The First Full Bench found the selection process was compromised and was not a fair selection process as required by the authorities because the selection criterion for the Appellants was their WorkCover status. The capacity of employees to perform the functions of their position and the capacity of employees to perform a range of functions are rational criteria which may form part of a fair selection process. If the evidence in the present case had demonstrated that, had the selection process been conducted fairly, the Appellants would still have been selected for retrenchment, then it would not be appropriate to reinstate them. However, we are not satisfied, on the evidence, that we can reach such a view. In particular, because the First Full Bench so found, we agree with Senior Deputy President Lacy's conclusion that[66]

"...the integrity of the respondent's selection process for retrenchment was compromised to the extent that I can place no faith in it in determining the possibility of any of the applicants being retrenched in February 2001 or in the foreseeable future."

[65] Counsel for the Respondents, while acknowledging that the fact that an employee if reinstated would continue to work under modified duties was not an obstacle to reinstatement, nevertheless submitted that this was a factor that can be taken into consideration by the Commission in exercising its discretion in relation to reinstatement. We agree with that submission and have taken that factor into account in reaching our decision in this appeal.

[66] We allow the appeal. Taking account of the matters specified in s.170CH(2), - including the "other" matters the Commission considers relevant pursuant to s.170CH(2)(e) - and in all the circumstances of the case, we have concluded in relation to each of the Appellants that an order for reinstatement pursuant to s.170CH(3) is appropriate and that orders pursuant to s.170CH(4) are also appropriate.

[67] The Appellants are men of advancing middle age whose skills beyond those required for the Respondent's operation are limited. Each has given long service to the Respondent. Each is suffering from a significant level of incapacity arising from injuries sustained whilst working for the Respondent. Each is obliged by State legislation to inform any prospective employer of the fact of his work-related injuries. They live in a regional centre where job opportunities are limited. These circumstances, taken together, mean that the prospects of either of the Appellants ever finding full time productive work again are poor. These circumstances, together with the findings of the First Full Bench, in our view, on fine balance, outweigh the factors against reinstating the Appellants. In particular, whilst the reduced capacity of the Appellants is a factor against deciding that reinstatement is appropriate we do not regard the Appellants' reduced capacity as a factor that outweighs the substantial merits of a determination that reinstatement is appropriate.

[68] We do not share his Honour's view that, despite the "genuine claims" of the Appellants

"...there is no useful purpose in creating a fiction to return them, or either of them, to a situation that is, in my view, entirely problematic. That would be even more cruel than refusing their claims for reinstatement."[67]

The reality is that each of the Appellants was performing full-time, productive work for the Respondent at the time of the termination of his employment, albeit that each was working on modified duties, and this had been the case for a significant period prior to termination. Given the fresh evidence received by this Full Bench in relation to Mr Smith's injury status and capacity to work, there is no reason to suppose that this would not be the situation for each of the Appellants following any reinstatement.

[69] We do not think that the decision Cosma v Qantas Airways Limited assists the Respondent in the present matter. In that case Mr Cosma was employed as a "Porter Ramp Services" (ie. a baggage handler). Mr Cosma was injured in 1991. His injuries prevented him from performing work as "Porter Ramp Services". He was given alternative work of a clerical and administrative nature during his substantial rehabilitation period. That work was not work within the ambit of the position of "Porter Ramp Services". By 1997 Mr Cosma's injuries had not resolved and he continued to be unable to perform the work of a porter and, as a result, Qantas terminated his employment. The Full Court of the Federal Court upheld the decision of Heerey J that the termination of Mr Cosma's employment did not involve a breach of the Disability Discrimination Act 1992 (Cth) because Mr Cosma was unable to perform "the inherent requirements of the particular employment" and thus the exception in s.11 applied. Cosma is distinguishable from the present case because here the Appellants are able to perform, and prior to the termination of their employment did perform, duties within the ambit of the positions to which they were appointed and within those modified duties were fully or substantially fully productive employees.

[70] The orders that are appropriate under s.170CH(4) are matters that have caused us some concern. It is now almost three years since the termination of the Appellants' employment. In that time there have been no fewer than seven separate stages in the Commission's processes: at least two conciliation hearings; two first instance hearings; two appeal hearings and a settlement conference presided over by a member of the Commission. This is the fourth decision handed down by the Commission in relation to this matter. Neither party can properly be seen as responsible for the delay in the resolution of this matter. While orders under s.170CH have essentially a restitutionary purpose, we do not think it appropriate to visit the whole of the consequences of the delay on the Respondent because the Respondent has been deprived of the benefit of the labour of the Appellants for the whole of that extended period.

[71] In all the circumstances we conclude that the following orders are appropriate:

· an order pursuant to s.170CH(3)(a) requiring the Respondent to reappoint each Appellant to the position on which he was employed immediately before termination, or if that is not practicable;

· an order pursuant to s.170CH(3)(b) appointing each Appellant to another position on terms and conditions no less favourable than those on which he was employed immediately before the termination; and

(ii) an order pursuant to s.170CH(4)(a) maintaining the continuity of the employment of each Appellant from the date of the termination of his employment; and

(iii) an order pursuant to s.170CH(4)(b) causing the Respondent to pay to each Appellant an amount in respect of remuneration lost by him but limited to a period of 78 weeks (ie about 18 months) from the date of termination. There ought be set off against that amount the redundancy payments made to each Appellant and retained by him and any other amounts paid pursuant to the orders made by Senior Deputy President Lacy. If, as we understand the position to be, the Appellants are liable to repay any weekly workers' compensation payments received during that period, there should be no set off on account of those payments received by the Appellants in the first 18 months following the termination of their employment to the extent that they are liable to be repaid.

[72] It is important for us to note that reinstatement does not make the employment of the Appellants immune from future termination by the Respondent. Indeed, we would have found that reinstatement was not appropriate if either:

• the Respondent had demonstrated that on a fair selection process the Appellants would have been chosen for retrenchment; or
• the Respondent demonstrated that the reinstatement of the Appellants would impose an undue productivity burden on the Respondent or an undue burden on other employees.

There was no acceptable evidence to establish either of those alternatives.

[73] It may be that, as a result of our orders or for other reasons, the Respondent will need to carry out a future round of redundancies and a fair selection process may result in the Appellants being selected for redundancy albeit with a consequent entitlement to redundancy payments in accordance with the appropriate award or agreement.

[74] This decision has occasioned us considerable difficulty. On the one hand, we have had to consider the interests of the Appellants who despite the factors that we have referred to that militate in favour of reinstatement are only capable of returning to their positions on modified duties. On the other, we have had to balance the interests of the employer in circumstances where it has reorganised its operations in the period since the terminations of employment in 2001 and this decision, as well as the lengthy period between termination and our decision. It is on fine balance, having regard to our obligations to ensure a fair go all round, that we have come to our conclusion that the orders we make are appropriate.

Termination of employment - reinstatement - remedy - appeal - full bench - appellants selected for retrenchment on basis of WorkCover history or injury status seek reinstatement - termination found harsh unjust unreasonable on first appeal - reinstatement considered inappropriate as no vacancies and capacity of employees for `modified duties' positions only due to medical condition - appellants not receiving weekly WorkCover benefits until termination yet deducted from remuneration calculations - held - Commission on remittance from first appeal erred in decision on remedy - unavailability of job vacancy only one factor in deciding if reinstatement appropriate - Commission erred by erroneous double deduction for retrenchment benefit and weekly WorkCover benefit - Sprigg guidelines inadequate for long serving appellants, circumstances of their dismissal, and poor prospects for future employment - where using Sprigg guidelines amount clearly excessive or inadequate assumptions of case should be reassessed - assessments of future events often problematic - leave to appeal granted by way of rehearing - no material effect on employer's viability - long service, skill level of appellants and regional location favoured reinstatement - distinction between injury and WorkCover status and incapacity resulting from injury a fine but properly drawn distinction - Blackadder binding in regard to reinstatement to `modified duties' positions - guiding principles when considering reinstatement appropriate for employee with ongoing incapacity outlined - incapacity will remain for foreseeable future - not satisfied if fair selection process that appellants would have been selected for retrenchment - appeal allowed - in all circumstances of the case reinstatement appropriate - reduced capacity a factor against reinstatement but does not outweigh substantial merits - Cosma distinguished - lengthy time since termination - reinstatement ordered to former positions or one no less favourable - continuity of employment - payment of lost remuneration limited to 78 weeks offset by redundancy payments received by appellants - no offset on weekly WorkCover payments received during that period - no immunity from future termination if selection process fair or demonstration that reinstatement imposes an undue burden - obligation to ensure fair go all round.

Appeal by Smith and Kimball against decision of Lacy SDP of 23 January 2003 [PR926979] Re: Moore Paragon Australia Ltd.

Printed by authority of the Commonwealth Government Printer

2 A Smith and others v Moore Paragon Australia Ltd PR926979 (Lacy SDP, 23 January 2003).

4 A Smith and Others v Moore Paragon Australia Ltd PR910494 (Hingley C, 7 November 2001)

5 PR915674 (Ross VP, Lacy SDP and Simmonds C, 21 March 2002)

7 See s.170CH(2); PR926979 at [131] with regard to Mr Smith and [134] with regard to Mr Kimball.

8 Wan v AIRC [2001] FCA 1803; (2001) 116 FCR 481 at [30]

10 [2000] HCA 47; (2000) 203 CLR 194 at [17]. See also Re Commonwealth of Australia; Ex parte Marks [2000] HCA 67; (2000) 177 ALR 491 per McHugh J at [23].

11 Print S5876 (Watson SDP, Williams SDP and Smith C, 11 May 2000)

13 (1996) 67 IR 240 (Wilcox CJ, Moore and Marshall JJ)

15 (1998) 88 IR 21 (Munro J, Duncan DP and Jones C)

22 See the letter from the workers compensation insurer at AB476

28 Print S5109 (Ross VP, Williams SDP, Gay C, 17 April 2000)

29 compare Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 at 572-3

30 Australia Meat Holdings Pty Ltd v McLauchlan Print Q1625 (Ross VP, Polites SDP and Hoffman C); Ellawala v Australian Postal Corporation Print S5109 (Ross VP, Williams SDP and Gay C)

35 [2002] FCAFC 425 (Black CJ, Finn and Dowsett JJ)

36 (1998) 84 IR 1 (Ross VP, Polites SDP, Hoffman C) see also MM Cables v Zammit (Ross VP, Drake SDP, Lawson C, 17 July 2000, Print S8106)

37 see, for example, Hobbs v Capricorn Coal Management Pty Ltd Print PR903643 (McIntyre VP, Cartwright SDP and Harrison C, 30 April 2001)

38 Windsor Smith v Liu Print Q3462 (Giudice J, Polites SDP and Gay C, 13 July 1998)

39 (2001) 109 IR 381 (Munro J, O'Callaghan SDP and Foggo C)

40 [2003] FCAFC 20; (2003) 196 ALR 660 (Tamberlin and Goldberg JJ; Moore J dissenting)

41 (1994) 55 IR 263

42 [2003] FCAFC 20; (2003) 196 ALR 660 at [77]

43 (1998) 193 CLR 280

44 see, for example, Simmons Ltd v Hay (1964) 81 WN Pt 1 (NSW) 358; Marshall v Harland & Wolff Ltd [1972] 1 WLR 899.

45 Marshall v Harland & Wolff Ltd [1972] 1 WLR 899 at 904

46 [1972] 1 WLR 899

48 [1976] 2 NSWLR 540

50 (1993) 47 IR 254 (Bauer, Hill and Maidment JJ)

51 [2003] NSWIRComm 17 (Wright P, Walton VP, Boland J)

53 We are not here concerned with temporary absence from work because of illness or injury as to which, see s.170CK(2)(a).

54 These are burdens different from those discounted by the Full Federal Court in Sinclair.

55 (1998) 193 CLR 280

56 It is important to bear in mind that events may result in a variation of an employee's contract such that the employee's substantive contractual position changes. Note also that Brennan CJ in Qantas Airways Ltd v Christie held that the terms of an employee's contract are not necessarily conclusive of whether a requirement is inherent in an employee's position.

57 For example, in Hobbs v Capricorn Coal Management Pty Ltd Print PR903643 (McIntyre VP, Cartwright SDP and Harrison C, 30 April 2001) the existence of statutory duties on the employer relating to safety was a significant factor in favour of a finding that reinstatement was not appropriate.

65 (1995) 60 IR 327