Closure of operation - proposed redeployment - whether redundancy - whether suitable alternative employment - whether acceptable alternative employment - significance of additional travel time and toll expenses.

[1] By notification dated 16 July 2008, the National Union of Workers (NUW) requested the assistance of the Commission in the settlement of a dispute relating to redundancy and redeployment under the National Union of Workers (Scoresby - Gillette) Certified Agreement 2005-2008 (the Certified Agreement).

[2] Conferences held on 18 July and 29 July narrowed the issues in dispute. One outstanding issue which could not be resolved by conciliation concerned the rights and obligations of the parties in relation to the proposed redeployment of three employees from the Linfox Gillette operation at Scoresby, in Melbourne's eastern suburbs to the Linfox Coles operation at Altona in Melbourne's western suburbs.

[3] I issued directions regarding the identification of the questions needing to be determined and the filing of outlines of submissions and witness statements. The matter was heard on 21 August 2008. Mr P. Richardson represented the NUW. Mr R. West of counsel represented Linfox.

[4] Linfox has provided warehousing and logistic services to Gillette at a distribution centre in Caribbean Drive, Scoresby (the Scoresby Distribution Centre) since June 2000. A pack facility at the same site was also operated by Linfox until it was closed on 30 June 2008. All employees engaged in that part of the operation were redeployed to other Linfox sites.

[5] Gillette determined to close the Scoresby Distribution Centre on 29 August 2008. At the time Linfox employed 31 employees in this facility. Evidence given by Mr David van den Berg, the Group Manager, Employee Relations for Linfox was that Linfox has adopted and applied a policy to redeploy employees to other Linfox sites in the event of site closures. It implements retrenchments as a last resort.

[6] Standard letters of employment for weekly employees contain the following paragraph:

"Linfox may at its discretion and with one week's notice change your workplace, duties, classification, grade, rates of pay, hours of work, or reporting relationship at any time in order to meet its business needs. You agree that you will not claim or receive compensation for such changes."

[7] The identification of work location, duties and supervisor in the letter of offer is expressed to be of an 'initial' nature.

[8] The Certified Agreement contains the following relevant provisions:

16.1.1 Where the employer has made a definite decision that the employer no longer wishes the job the employee has been doing to be done by anyone and this is not due to the ordinary and customary turnover of labour and that decision may lead to termination of employment, the employer shall hold discussions with the employees directly affected and with their Union.

16.1.2 The discussions shall take place as soon as is practicable after the employer has made a definite decision which will invoke the provision of clause 16.1.1 hereof and shall cover, inter alia, any reasons for the proposed terminations, measures to avoid or minimise the terminations and measures to mitigate any adverse effects of any terminations on the employees concerned.

16.1.3 For the purpose of the discussion the employer shall, as soon as practicable, provide in writing to the employees concerned and their Union, all relevant information about the proposed terminations including the reasons for the proposed terminations, the number and categories of employees likely to be affected, and the number of workers normally employed and the period over which the terminations are likely to be carried out. Provided that the employer shall not be required to disclose confidential information the disclosure of which would be inimical to the employer's interest.

Where an employee is transferred to lower paid duties for reasons set out in clause 16.1 hereof the employee shall be entitled to the same period of notice of transfer as he/she would have been entitled to if his/her employment has been terminated, and the employer may at the employer's option, make payment in lieu thereof of an amount equal to the difference between the former ordinary time rate of pay and the new lower ordinary time rates for the number of weeks of notice still owing.

16.3.1 Where a business is on or after the date of this agreement, transmitted from an employer (in this clause called the transmitter) to another employer (in the clause called the transmittee) and an employee who at the time of such transmission was an employee of the transmitter in that business becomes an employee of the transmittee:

16.3.1(a) the continuity of the employment of the employee shall be deemed not to have been broken by reasons of such transmission; and

16.3.1 (b) the period of employment which the employee has had with the transmitter or any prior transmitter shall be deemed to be service of the employee with the transmittee.

16.3.2 In this clause business includes trade, process, business or occupation and includes part of any such business and transmission includes transfer, conveyance, assignment or succession whether by agreement or by operation of law and transmitted has a corresponding meaning.

16.4.1 During the period of notice of termination given by the employer an employee shall be allowed up to one day's time off without loss of pay during each week of notice for the purpose of seeking other employment.

16.4.2 If the employee has been allowed paid leave for more than one day during the notice period for the purpose of seeking other employment, the employee shall, at the request of the employer, be required to produce proof of attendance at an interview or he/she shall not receive payment for the time absent.

16.4.3 For the purpose of 16.4.2 a statutory declaration will be sufficient.

Where a decision has been made to terminate employees in the circumstances outlined in clause 16.1, the employer shall notify Centrelink (or its successor) thereof as soon as possible giving relevant information including the number and categories of the employees likely to be affected and the period over which the terminations are intended to be carried out.

This subclause shall apply only in respect of an employee's former weekly employment (if any) by Gillette Australia Pty Ltd under the terms of the Gillette - NUW certified agreement [Print 5280 [GI103]] and where such employment immediately preceded employment by Linfox Transport (Aust.) Pty Ltd under the terms of this agreement. Provided that the total severance sum (excluding notice I pay in lieu of notice component) calculated in accordance with this subclause shall be reduced by 60% in consideration of payments previously received by each such employee in compensation for revised terms and conditions of employment with Linfox Transport (Aust.) Pty Ltd, as reflected in clause 49.

Note: severance entitlements for service as an employee of Linfox Transport Pty Ltd shall be negotiated at the time that redundancies occur or appear likely to occur.

16.6.1 In addition to the period of one month's notice prescribed for ordinary termination in clause 17.1.1 of this agreement, and subject to further order of the Commission, an employee whose employment is terminated for reasons set out in clause 16.1 hereof shall be entitled to the following amount of severance pay in respect of a continuous period of service.

Where an employee's services are terminated through redundancy, redundancy pay will be made at the employee's normal rate of pay (excluding overtime and shift premium) according to the following schedule:

16.6.2 In addition to the service factor payments outlined in 16.6.1, employees with over two years' service, meeting the age factor requirements listed below, will be eligible for the following additional severance benefits:

16.6.3 Weeks' pay means the ordinary time rate of pay for the employee concerned.

16.6.4 Provided that the severance payments shall not exceed the amount which the employee would have earned if employment with the employer had proceeded to the employee's notional retirement date.

16.6.5 1 For the purpose of this clause, continuity of service shall be calculated in the manner prescribed in clause 29.9 of this agreement.

An employee whose employment is terminated for reasons set out in clause 16.1 may terminate his/her employment during the period of notice and, if so, shall be entitled to the same benefits and payments under this clause had he/she remained with the employer until the expiry of such notice. Provided that in such circumstances the employee shall not be entitled to payment in lieu of notice.

The employer, in a particular redundancy case, may make application to the Australian Industrial Relations Commission to have the general severance pay prescription varied if the employer obtains acceptable alternative employment for an employee.

This clause shall not apply where employment is terminated as a consequence of conduct that justifies instant dismissal including malingering, inefficiency or neglect of duty, or in the case of casual employees, apprentices or employees engaged for a specific period of time or for a specific task or tasks.

An employee will not be retrenched if objectively fair suitable alternative employment is available. Any grievances related to redeployment will go to the Australian Industrial Relations Commission pursuant to sI7OLW of the Act, subject to the parties' continuing rights under s105 of the Act and to file appeals on industrial merit and/or other grounds (including under s45 of the Act).

Subject to the following, all employees who were recruited from Gillette in June 2000 will remain at the Scoresby warehouse. However, redeployment of such individuals from the Scoresby warehouse may occur as a result of economic necessity (eg loss of customer contract, downturn in the business), as an alternative to dismissal in the event of serious behavioural or performance deficiencies, or otherwise by agreement.

In these and other circumstances (eg relocation of the Gillette operation, or parts thereof) redeployment or relocation will occur only after appropriate discussion and consultation, including with the Union.

An employee may be redeployed to alternative duties at another workplace where Linfox considers this necessary for operational or commercial reasons, including as an alternative to retrenchment.

In determining whether a redeployment opportunity constitutes 'suitable alternative employment' reference shall be made to the following objective criteria:

• The employee's skills, experience and physical capacity;

• The rates of pay, hours of work, duties and conditions of employment associated with the proposed job;

• Whether or not continuity of employment is provided to the employee;

• The extent of any additional travel distances from home to the new place of work and whether the employee has to substantially alter their method of travelling to and from work in order to attend to duty.

• The level of any compensation available in mitigation of disturbance factors and disadvantages involved.

Redundancy and retrenchment is an absolute last resort where an employee cannot be reasonably allocated suitable alternative duties or employment at another contract or site. Employees who cannot be reasonably allocated suitable alternative duties or employment at another contract or site shall be paid severance pay as provided for in this agreement.

[9] On various dates during August 2008 Linfox identified 28 vacant positions at five eastern suburbs sites and notified 28 of the Scoresby employees of redeployment to those facilities. No further positions were available in the eastern suburbs of Melbourne for the remaining three employees.

[10] Other options were considered at other Melbourne locations. Linfox determined that the next best option was redeployment to the Coles Altona Regional Distribution Centre (the Coles Altona RDC) at 676 Kororoit Creek Road, Altona. It advised the three employees that the company intended that they will:

• where applicable, receive higher rates of pay under the enterprise agreement applying at that site or alternatively have their rates of pay maintained until met or exceeded by those rates applying at the new site. They would be eligible to receive anticipated increases in pay currently being negotiated with the TWU;

• receive a total payment of $5,000 in three instalments to defray travel costs associated with the new work location; and

• have priority in being offered appropriate positions in the eastern suburbs as vacancies occur for 12 months following the redeployment.

[11] The NUW on behalf of the three affected employees challenged the right of the company to compulsorily redeploy the employees to the Altona site. It contended that the company was bound to make the employees redundant and pay them redundancy pay. In settlement of the matter the NUW sought the determination of the following questions by the Commission:

1. Whether or not the said [three] employees are redundant within the meaning of the certified agreement, and;

2. If it is determined that the said [three] employees are redundant, whether the positions proposed by the Company and located at Altona constitute acceptable alternative employment.

[12] Linfox led evidence about the residential and work locations of several management employees and the residential locations of its employees at the Coles Altona RDC. This evidence showed an incidence of travel of a similar extent to that required for the three employees. It led evidence about similar redeployments including those arising from the relocation of the Coles operation from Hampton Park to Altona in 2006, a distance of some 55.9 kilometres.

[13] Each of the employees gave evidence about the change in travel time and expenses incurred in travelling on the quickest, most efficient route from their home to the Coles Altona RDC. The additional travel distance each way ranged from 14 to 40 kilometres, the total distances travelled ranged from 31 to 77 kilometres, the additional travel time each way ranged from 7 minutes to 30 minutes and the anticipated additional costs ranged from $75.25 per week to $148.40 per week. It was not the case however that the highest dimension applies to the same employee. For example, one employee, who lives only 4 kilometres from the Scoresby site, would be required to travel an additional 40 kilometres each way to the Altona site but would be able to make the trip in an anticipated 37 minutes. The shift commencement and finishing times of 6am to 2.30pm, at the Coles Altona RDC, the same as at the Scoresby Distribution Centre, was said to give rise to a level of reliability in the anticipated travel times because traffic at those times is relatively light.

[14] Linfox submitted that it was under a duty to avoid retrenchments, it did so only as a last resort, it exercised a right to redeploy the employees under contracts of employment and the certified agreement, and in any event the redeployment was suitable alternative employment and/or acceptable alternative employment within the terms of the certified agreement.

[15] The NUW submitted that as the jobs at Scoresby are no longer required to be done by anyone, the employees are redundant within the terms of the Certified Agreement.

[16] In my view the answer to the question posed requires a clear understanding of the concepts involved and the terms of relevant contracts of employment and the governing certified agreement.

[17] A potential redundancy situation arises when a role disappears, work disappears or an operation of the employer at a particular work location disappears. Whether this leads to the termination of employment of the affected employees depends on what the employer decides to do with the employees consequent upon the relevant event. Whether an obligation arises to pay or negotiate redundancy pay depends on the wording of the relevant instrument creating the redundancy entitlement or obligation to negotiate.

[18] If another position is found for the employee, and this position is within the scope of the contract of employment, then at common law the redeployment to that other position will not constitute an express or constructive termination of employment.

[19] This situation may be altered by the terms of an award or certified agreement. Entitlements to redundancy pay often arise from such instruments rather than the contract of employment and therefore the circumstances that give rise to an entitlement are to be considered by reference to the tests in such instruments.

[20] Certified agreement clauses have been held to provide for no entitlement to redundancy pay, even when the employment has been terminated, because the work has been transferred to another employer. [1] Indeed under the standard award clause regarding a limitation on redundancy pay, reflected in clause 16.8 of the Certified Agreement, acceptable alternative employment is often with a different employer and necessarily under a new contract of employment. The rationale for these provisions was that redundancy pay is intended to compensate employees for the loss of employment, not changes in work location or conditions.

[21] The cases also distinguish between a position redundancy and an employee redundancy. The former may not necessarily lead to the termination of employment as alternative positions may be available with the employer. Usually the entitlement to redundancy pay depends on a position becoming redundant, the resultant termination of employment of an employee and circumstances which do not fall within the exceptions to the payment of redundancy pay. [2]

[22] In my view the Certified Agreement in this case draws a similar distinction and incorporates similar concepts. Properly construed, it comprehends both the potential redundancy of employees arising from terminations of employment when the employer no longer wants a job to be done by anyone (clause 16) and the obligation of an employer not to retrench an employee where objectively fair suitable alternative employment is available (clause 49). It is appropriate to read the provisions together so as to establish a consistent regime.

[23] The Certified Agreement does not establish obligations to pay severance pay except for employees previously employed by Gillette prior to being employed by Linfox. Otherwise the Certified Agreement requires severance entitlements to be negotiated at the time of redundancies.

[24] In my view the contracts of employment of the employees concerned comprehend employment at locations other than the Scoresby Distribution Centre. It is likely that an alternative position would need to be at a reasonable commuting distance from the original work location and the residence of the employees affected. I do not consider that the additional travel time of approximately 30 minutes is unreasonable in this regard. I therefore do not believe that there is an express or constructive termination of employment of any of the three employees.

[25] This is not conclusive to the question whether there is a redundancy under the Certified Agreement. It is clear that the positions themselves are redundant. But whether the employees are redundant under the agreement is another question. In my view that question depends on whether the Coles Altona RDC positions constitute objectively fair suitable alternative employment within the meaning of clause 49. Consideration needs to be given to the criteria in clause 49. I turn to those matters.

[26] The employee's skills, experience and physical capacity: Each of the employees is capable of performing the work at the Coles Altona RDC. Although the nature of the operation is different, it involves the operation of similar stores equipment. The Coles Altona RDC vacancies are at a base level classification.

[27] The rates of pay, hours of work, duties and conditions of employment associated with the proposed job: Each of the employees will receive either a pay increase or the continuation of their current rate of pay if higher. Hours of work are identical. There are some differences in conditions of employment, such as the replacement of two ten minute rest breaks with one 15 minute rest break. Some conditions are more advantageous. In my view the differences are not significant.

[28] Whether or not continuity of employment is provided to the employee: continuity of employment is afforded to employees in all respects.

[29] The extent of any additional travel distances from home to the new place of work and whether the employee has to substantially alter their method of travelling to and from work in order to attend to duty: These are outlined above. In my view the additional travel time is not insignificant, but nor is it of a level which makes travel unfairly onerous. Additional costs associated with travel are of a significant level because travel on the quickest routes will incur toll charges.

[30] The level of any compensation available in mitigation of disturbance factors and disadvantages involved: The payment of $5,000, higher base rates of pay in most circumstances and the priority for eastern suburbs vacancies in the next 12 months are significant mitigating factors in the employees' favour.

[31] Having regard to all of the relevant circumstances I am of the view that the Coles Altona RDC positions are objectively fair suitable alternative employment opportunities. I therefore do not consider that the employees are redundant under the terms of the Certified Agreement.

Do the Coles Altona RDC Positions Constitute Acceptable Alternative Employment?

[32] In view of the conclusion I have reached to the question of whether there is a redundancy, it is unnecessary that I decide this question. I indicate however that if this question was determined, it should be determined in the same manner as the question of whether the Altona positions constitute objectively fair suitable alternative employment and the same affirmative conclusion should be reached.

[33] For the reasons above I determine that the employees are not redundant under their contracts of employment or the Certified Agreement, that the redeployment to the Coles Altona RDC is suitable alternative employment and no obligation to pay or negotiate a redundancy payment with respect to the employees arises in the circumstances of this case.

R West, of Counsel, for Linfox Australian Pty Ltd.

[1] See eg Commonwealth Bank of Australia v Finance Sector Union of Australia [2002] FCAFC 193; 125 FCR 9; Amcor Ltd v CFMEU [2005] HCA 10; (2005) 138 IR 286.

[2] See eg NUW v Tontine [2007] AIRC FB 1016.

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