CPSU, The Community and Public Sector Union v Telstra Corporation Limited

Federal Court of Australia|2000-06-23|Before: Finkelstein J

1 The respondent, Telstra Corporation Limited, as is well known, carries on very large operations. Telstra is the leading telecommunications company in Australia. It is one of this country's largest employers with staff numbers exceeding 50,000. This is significantly less than just a few years ago. In June 1996 Telstra had more than 75,000 employees but since then it has been "downsizing", that is reducing its staff by redundancy and natural attrition.

2 On 8 March 2000 Telstra announced a record half yearly profit of $2.1 billion. It also announced the continuation of a cost reduction program that would reduce staff levels by a further 10,000 by June 2002. In that period it was anticipated that attrition would reduce employment by 3,000, redundancies by 8,000 and outsourcing would account for 2,000 jobs. Over the same period Telstra was hoping to recruit 3,000 new employees.

4 Telstra has an Employee Relations group that has responsibility for managing its personnel. Mr Cartwright is the group's managing director. On the same day that Telstra announced its record profit, Mr Cartwright sent an e-mail to the 275 managers and team leaders in the Employee Relations group, but not to the other staff in that group. These are the people who are involved in, and to a large extent supervise, the "downsizing" of Telstra. Because of its importance it is necessary to have regard to the full text of the e-mail. It reads (omitting a graph): "Subject: Message to ER team leaders TO: All ER Managers & Team Leaders In the context of announcing the half year results today, the CEO has put particular focus on the need for Telstra to reduce costs in response to broader and tougher competition across our markets. Specifically he refers to cost initiatives that are expected to reduce staff numbers by 10,000 by the end of fiscal 2001/02 and to target reduction of 220 senior manager (L1-4) roles. At the whole-of-Company level, reductions are expected to result from technology change and automation, the Next Generation Cost initiatives, the application of e-Commerce tools to our business, and further outsourcing activity. In addition to these Company projects, each line of business and BU has its own local initiatives. So within ER we will continue emphasising and implementing process simplification, targetted at reducing processing activity within ER and improving the effectiveness of line managers. Almost all of these improvement projects will already be general knowledge - for example, moving leave applications on-line. Hopefully therefore, today's announcement has little news content for ER people but reminds us of the size and challenge of the task to make Telstra cost competitive. Please brief your teams immediately on the CEO's announcement. It is fundamentally important that our staff members hear the news first from you, rather than from the news media. In briefing your people, please include the following messages.

This is largely business as usual for ER. We have worked hard over recent years to take the tough medicine early, to get the major cost and staff reductions behind us early and to institutionalise continuous improvement. So staff numbers will continue to decline steadily as we identify further simplification and process improvements, most of which are already under discussion within the component groups of ER. But this announcement does not imply a major change from what we are already doing. (Please take the opportunity to discuss with your team the local initiatives and how those projects will affect them.)
Expected staff reductions highlighted today confirm the continuation of the strong focus on costs over recent years. However, the loss of employment does not equate to the staff reduction expected, contrary to the assumptions of many commentators. Over the last three and a half years the Company's full time staff total has reduced by 28 441 (or 34%). Of those who have left the company in that period, 42 percent was natural attrition or completion of fixed term contracts, at least 8 percent have taken roles with other employers in outsourcing arrangements and 50 percent have taken redundancy. We expect continuation of this kind of pattern, with natural attrition contributing a large part of the reduction - at least 5000 over the next two years. (Most people dramatically underestimate the impact of natural attrition in these dynamics; and also miss the fact that outsourcing does not necessarily lead to loss of employment.)
Although direct employment in Telstra is reducing, the telecommunications industry is the fastest growing industry in Australia.
Over the last two years, 59% of all employees in redundant roles have chosen to take advantage of the Company's Career Transition Service, providing career counselling and outplacement service nationally. 88% of active job seekers in that program have found and retained alternative work.
The Company is increasing its efforts to develop high performing staff with the most appropriate skills for front line customer service roles. Support for staff upgrading their skills for data, internet and wireless applications is a priority. Targetted recruiting will continue in order to provide specialist skills for growth segments within the Company. Accordingly, new opportunities will open up for staff members at the same time as the Company makes adjustment to the realities of ever tougher competition.
Staff members who have transferred to individual contract have placed their trust in their managers and the Company to create a work environment that reinforces respect and dignity for the individual, and which places primary emphasis on productive relationships in which individual accountability encourages each person to contribute to his/her full potential. Managers must not under any circumstances compromise these important values in the way they implement cost reduction initiatives which lead to staff reductions. Managers will be held accountable to support the values of the Company's preferred model of individual employment.
Please work with your BU clients to support them in communication of these messages and particularly in understanding the practical importance of point 6."

5 The applicants are four unions, many whose members are employed by Telstra. They charge Telstra with having breached s 298K(1) of the Workplace Relations Act 1996 (Cth). That subsection provides:

"An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following: (a) dismiss an employee; (b) injure an employee in his or her employment; (c) alter the position of an employee to the employee's prejudice; (d) refuse to employ another person; (e) discriminate against another person in the terms or conditions on which the employer offers to employ the other person."

6 The allegation is that for a prohibited reason Telstra has injured or threatened to injure its employees in their employment or has altered or threatened to alter the position of its employees to their prejudice. The employees said to be injured, prejudicially affected or threatened to that effect, are those who are covered by awards and certified agreements. The 'prohibited reason' relied upon is that stated in s 298L(1)(h) which provides that conduct is for a prohibited reason if it is carried out because an employee "is entitled to the benefit of an industrial instrument or an order of an industrial body". It is common ground that the awards and certified agreements are respectively orders of an industrial body and industrial instruments. If Telstra has contravened s 298K(1) it has not committed an offence (s 298X) but is liable to have orders made against it (s 298U), which orders may include the imposition of penalties.

7 Section 298K can be traced back to s 9 of the Conciliation and Arbitration Act 1904 (Cth). Although the language of the section has changed from time to time, its overall thrust remains the same. Broadly speaking, s 298K is designed to protect an officer, delegate or member of an industrial organisation against discrimination by his employer. One objective of s 298K is to ensure the threat of dismissal or discriminatory treatment cannot be used by an employer to frustrate an employee's right to take the benefit of awards or certified agreements reached through arbitration, collective bargaining or conciliation.

8 The applicants argue that the e-mail constitutes an instruction to those within Telstra who will implement the company's "downsizing" to discriminate against employees whose employment is governed by awards or certified agreements. The instruction is said to "injure" those employees, within the meaning of s 298K(1)(b), by rendering them liable to a process of selection for redundancy to which they were not subjected immediately before the instruction. Even if the employees are not thereby "injured" then, so the argument goes, their position has been altered to their prejudice in contravention of s 298K(1)(c). If there have been neither injury nor prejudicial alteration of position, the applicants argue that the instruction is a threat to that effect, in contravention of the section.

9 Central to a determination of whether there has been a contravention of s 298K(1) is the meaning to be given to the e-mail. Is it or is it not an instruction to discriminate against employees operating under awards or certified agreements? On this issue, both the applicants and Telstra sought to lead evidence. For their part, the applicants called a number of witnesses who had read the e-mail and proposed to give their opinion as to its meaning. Telstra called Mr Cartwright to explain what he meant by the e-mail. At the hearing I indicated that I would not be assisted by this evidence. To my mind what must be determined is the meaning that would be given to the e-mail by those who received it. Here, neither the applicants' witnesses nor Mr Cartwright could assist. Further, no recipient of the e-mail was asked to give evidence. In that circumstance it is for me to decide how the e-mail would have been understood by those who received it. In undertaking that task, I will accept Telstra's invitation to take into account facts that would have been known to the recipients which may have affected their understanding of the contents of the e-mail. That is to say, to determine the meaning of the e-mail I will put myself into the position of its recipients as far as possible.

10 What follows are some of the matters of which managers in the Employee Relations group would have been aware and might have influenced how they construed the e-mail. An employee can become redundant in one of two ways. First, the position an employee holds may be no longer required. Second, a certain number of positions within one category may be no longer required and a choice must be made concerning which employees are to remain and which are to go. This case is concerned with redundancies in the second category.

11 There is in place a certified agreement covering award-based employees that prescribes procedures to be followed for both voluntary and involuntary retrenchment. This 'redundancy agreement', as it is called, contains mechanisms for the identification of redundant positions, the selection of staff for redundancy, procedures for notification of staff members affected by redundancy, consultations with unions, redeployment, voluntary retrenchment in lieu of redeployment, and involuntary retrenchment. In the case of involuntary retrenchment the procedures include a right of review by a review board.

12 Since October 1997 Telstra has been selecting staff for redundancy. The process is referred to as "Resource Rebalancing". The details of the process are known to managers who are required to decide who is to be made redundant. When two or more employees perform the same tasks in a particular location, the manager must identify the person with the superior skills and, prima facie, that is the person who is to be retained. The assessment is based on certain criteria: customer focus, effectiveness, team-work, skills and knowledge, and safety. Particulars of each criterion are developed so that they properly relate to the position under consideration. Initially, employees assess themselves against the criteria on a scale of one to five. Then they are assessed by a manager who is trained to carry out the process. The employees are then informed of the manager's assessment. Anyone with a preference to leave Telstra is usually accorded that preference. With regard to those who wish to remain, the rating will determine who stays and who is made redundant. There is, however, a right of internal review (referred to by Telstra as the "Fair Treatment Review process") pursuant to which any member of staff can appeal any stage of the redundancy process. The process for redundancy is required to be "fair and consistent", with its object being that Telstra should keep the most skilled and committed staff.

13 Viewed objectively the evidence shows that Telstra does have a fair procedure for selecting which of its staff are to be made redundant. Yet, to a large extent, it is a system that is grounded in the subjective opinion of management where matters of impression can often be as important as facts. It is, therefore, a system that can be influenced by senior management. In particular, a situation may easily arise where, all things being equal, staff who are seen to display loyalty to their employer will be accorded favourable treatment by being kept in employment rather than being made redundant.

14 In this connection it is necessary to say a little more about Australian workplace agreements. Centralised bargaining has long been a feature of Australian industrial relations. But there is a view that centralisation undermines economic performance and that private bargaining regimes are economically superior. Hence the introduction in 1996 of Australian workplace agreements. They were described by the Minister for Industrial Relations, during his second reading of the Workplace Relations and Other Legislation Amendment Bill 1996, as "formalised individual agreements" to be contrasted with "formalised collective agreements … made with unions": see Representatives Hansard, 23 May 1996, at 1300. Since October 1997 when Telstra introduced Australian workplace agreements to its workforce there has been strong union opposition to them. The agreements have been attacked on a variety of grounds including the fact that an individual contract removes the employee's right to the protection conferred by awards. The unions have advised employees that by entering into Australian workplace agreements they put at risk redundancy payments and the like. The unions have also warned employees who have signed such agreements that they were undertaking significant risks, including risks on termination of employment. At the same time, Telstra has made it clear that Australian workplace agreements are its preferred method of engaging staff.

15 These then are the circumstances to be taken into account in determining the meaning to be given to the e-mail. Now I must decide what the e-mail means. The principal focus of the e-mail is to inform managers how they should address the anticipated adverse reaction from the announcement that alongside record profits Telstra intended to make significant staff reductions. First it was pointed out that this was not a new policy but a continuation of an ongoing process: that it was "business as usual". Second, managers were reminded that a reduction of 10,000 staff did not mean that all of them would be made redundant: approximately 42 per cent would be lost by natural attrition. Then managers were told that many people who left the employ of Telstra would be able to find employment elsewhere. Finally it was pointed out that there would be enhanced opportunities for those who remained with the company and who improved their skill levels.

16 Next is the contentious paragraph in the e-mail, although it must be considered in context. The e-mail instructs managers that staff who signed Australian workplace agreements "have placed their trust in their managers and the Company", to create a work environment that "places primary emphasis on productive relationships". The arrangement was described as one that encourages the employee "to contribute to his/her full potential". Then there is the final sentence of the paragraph: "Managers will be held accountable to support the values of the Company's preferred model of individual employment".

17 The critical question is what will a manager make of the instruction, for it is an instruction, to "support" Australian workplace agreements. There are two competing views. One is that the managers appreciate that the employees working under such agreements will feel vulnerable to harsh treatment during the process of selection for redundancy because of what they have been warned by the unions. The managers could therefore understand the instruction as an obligation to reassure those employees that they will be treated in the same way as award-based employees. The second possibility is that managers could view the e-mail as drawing a distinction between award-based employees and those who have signed Australian workplace agreements, the implication being that award-based employees may not contribute to the company's fortunes to the same extent as those who have contracted with the company in accordance with its "preferred model" of employment. The managers could well understand that the instruction to "support the values of the company" means that they should give employees on individual contracts more favourable treatment when it comes to redundancy. In my view there would be many managers who understood the e-mail in this latter light.

18 Notwithstanding that I consider the e-mail would have been regarded by some managers as an instruction to discriminate against employees because they are entitled to benefits under an award or a certified agreement, it does not necessarily follow that there has been a contravention of s 298K(1).

19 To succeed it is necessary for the applicants to show that there has in fact been an injury to, or an alteration in the position of, employees engaged under awards or certified agreements or that there has been a threat to that effect. I can immediately dispose of the allegation that there has been a relevant threat. In the context of this legislation, there will not be a threat of proscribed conduct unless the employer communicates to his employee that proscribed action will be taken. One meaning of the word "threaten" is to menace or warn beforehand of an intention to inflict harm. That is the meaning that should be given to the word in s 298K. It is the meaning that was adopted for the ancestor provision in the Conciliation and Arbitration Act: see Gietzelt v Craig-Williams Pty Ltd (No 1) (1959) 1 FLR 456. It is the meaning that accords with one of the objects of s 298K which is to prevent employers bullying employees by reason of matters connected with their terms and conditions of employment or the performance of their work.

20 Can the instruction which has not been acted upon constitute an injury to, or an alteration in the position of, an employee or a large group of employees? In my opinion there is a distinction to be drawn between on the one hand causing injury to an employee or altering his position and, on the other hand, an inchoate intention to do so. Injury is concerned with an actual adverse effect, usually by the loss or alteration of a legal right, in the position of an employee, in his capacity as an employee. In Childs v Metropolitan Transport Trust (1981) IAS Current Review 946, Smithers J said (at 948):

"I cannot help thinking that 'injury' refers to deprivation of one of the more immediate practical incidents of [an employee's] employment, such as loss of pay or reduction in rank."

21 In Squires v Flight Stewards Association of Australia (1982) 2 IR 155 Ellicott J said (at 164):

"The words 'injure in his employment' are in the context of s 5 words of wide import. I do not regard them as referring only to financial injury or injury involving the deprivation of rights which the employee has under a contract of service. They are, in my view, applicable to any circumstances where an employee in the course of his employment is treated substantially differently to the manner in which he or she is ordinarily treated and where that treatment can be seen to be injurious or prejudicial. Singling him out to be stood down from his employment for a period in circumstances where his fellow employees won't work with him for that period is in my view clearly an injury to him in his employment." The concept of "singling out" a member of a union for particular treatment was held by Marshall J in Health Services Union of Australia v Tasmania (1996) 73 IR 140 at 145 to constitute an "injury" to the employee in "his or her employment" within s 334(1)(a)(i) of the Industrial Relations Act 1988 (Cth).

22 I accept that no narrow meaning should be given to the concepts of injury and prejudicial alteration of position referred to in s 298K(1): see Maritime Union of Australia v Patrick Stevedores No 1 Pty Ltd (1998) 77 FCR 456 at 462; Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 at 71. Notwithstanding that these concepts should be given a broad construction they do not, in my opinion, cover what was no more than an instruction to treat an employee in a different way that has not been acted upon. For an employee to be injured or prejudicially affected it is necessary for the employee to be in fact treated differently. The instruction by itself is not an "injury" or an "alteration of position". This conclusion follows not only from the words of the section, but also because it may turn out that no employee will be injured or affected in any way. In Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 Nicholson J, in a decision adopted by the Full Court (BHP Iron Ore Pty Ltd v Australian Workers' Union [2000] FCA 430), held that an offer of voluntary redundancy could not be a threat to cause injury. His Honour said (at 73):

"…I consider s 298K(1)(b) has the following effect in respect of voluntary redundancies: (1) an offer of voluntary redundancy is not a threat to injure an employee in his or her employment. It is an offer the employee may accept or reject. (2) Acceptance by an employee of payment of redundancy, a fortiori payment at an enhanced rate, is evidence of absence of injury in the employment to which the redundancy relates. (3) Once accepted by the employee, the redundancy takes effect and the employment ceases. There is therefore no relevant employment against which to measure any alleged injury arising from the redundancy. (4) Consequently, allegations of worse terms and conditions being inevitable on engagement in new employment are not relevant to alleged injury in the former employment. Section 298K(1)(b), even given its wide connotation, does not address employment as a general condition but is referable to the particular employment in which the injury is said to have occurred or been threatened; cf Australasian Meat Industry Employees' Union v R J Gilbertson (Queensland) Pty Ltd (unreported, Federal Court, Gray J, 8 December 1988) at pp 15-17." In other words, if an employee who takes up an offer of voluntary redundancy is not injured or prejudiced, then so long as it remains possible for Telstra's employees to be offered voluntary redundancy, they have suffered no injury, nor has their position been prejudicially altered. The same is true as regards the possibility of redeployment, which, in some cases, may be on more favourable terms than those presently available.

23 In BHP Iron Ore,supra (at para 35) the Full Court said: "It has to be borne in mind, in construing s 298K, that it proscribes conduct by 'an employer' directed to 'an employee' or 'other person'(emphasis added). That use of the singular suggests that the alleged injury or alteration of position has to be examined in the light of the circumstances of each individual employee. (It is not the point that in the interpretation of statutes, the singular ordinarily includes the plural; here we are concerned with the indications of legislative intention to be discerned from the actual language used.) It is also significant that the conduct struck at by each paragraph of s 298K is expressed by an active verb: 'dismiss', 'injure', 'alter the position', 'refuse to employ', and 'discriminate'. That implies that the proscription is essentially against an intentional act of the employer directed to an individual employee or prospective employee."

24 This passage indicates that it is necessary to assess the position of each individual employee in order to decide whether that employee has been injured or has had his position prejudicially altered. The implication is that the subject for investigation is the actual effect of the conduct about which complaint has been made. It is not sufficient for there to be only an intention to act against an employee for it to be concluded that an employee has been injured or has had his position altered. Before that can occur the intention must be acted upon in some way.

25 This is not to say, however, that the Court is powerless to intervene in the case of an imminent risk of injury as distinguished from injury which has already been inflicted. The power of the Court to grant quia timet relief to prevent a contravention of s 298K is not in doubt: see Patrick Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1. No application has been made for such relief, perhaps because of the difficulty of framing an appropriate order: Redland Bricks Ltd v Morris [1970] AC 652 at 666; see also Hackett v Baiss (1875) 20 Eq 494. The applicants may have had in mind a retraction published by Mr Cartwright.

26 Be that as it may, although there has been a "threat" to contravene s 298K(1) in the sense understood by equity lawyers, there has been no actual contravention of that section and, accordingly, this application must be dismissed. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Associate: Dated: 23 June 2000 Counsel for the Applicant: Mr H Borenstein Mr D Langmead

Solicitor for the Applicant: Maurice Blackburn Cashman

Counsel for the Respondent: Mr A Archibald QC Mr F Parry

Solicitor for the Respondent: Freehill Hollingdale & Page

Workplace Relations Act 1996(Cth)ss 298K, 298L

Workplace Relations and Other Legislation Amendment Act 1996(Cth)

Conciliation and Arbitration Act 1904(Cth)

Industrial Relations Act 1988(Cth)

At a glance

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Judgment (34 paragraphs)

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Legislation Cited (4)

Cases Cited (7)