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[2007] AIRC 952
Australian Industrial Relations Commission
2007-11-15
Mr P
Original judgment source is linked above.
Note: An appeal pursuant to s.45 (C2007/3768) was lodged against this decision - refer to Full Bench decision dated 6 December 2007 [[2007] AIRCFB 1016] for result of appeal.
s.170LW - pre-reform Act - application for settlement of dispute (certified agreement)
Tontine Fibres (A Division of United Bonded Fabrics Pty Ltd)
Tontine Fibres (A Division of United Bonded Fabrics Pty Ltd)
Alleged dispute concerning unreasonable redeployment options and failure to offer employees severance payments.
[1] This decision flows from an application made pursuant to s.170LW of the Workplace Relations Act 1996 (the Act) by the National Union of Workers ("NUW") on behalf of a number of its members employed by Tontine Fibres (A Division of United Bonded Fabrics Pty Ltd) ("UBF") at it's Mooroolbark premises in Melbourne.
[2] The NUW alleged dispute concerned UBF's decision to close the Mooroolbark operations, and offer continued employment to the NUW members, at their Coburg Plant, in another suburb of Melbourne, approximately 40 kms away. Employees were advised on 27 March 2007.
[3] The NUW argued that UBF had offered unreasonable redeployment options and had failed to offer the affected employees appropriate severance payments, which should now be ordered, by the Commission.
[4] On 5 June 2007, UBF announced to employees that it would implement 8 hour rotating rosters, to replace the then existing 12 hour rotating rosters, effective 2 July 2007.
[5] On 27 June 2007, the Commission as constituted in these proceedings determined that UBF was able to make its desired shift change.
[6] The matter was lodged with the Commission on 15 June 2007, and several hearings and conferences were held, in the Commission in an attempt to resolve the matter, unsuccessfully.
[7] The parties then agreed to have the matter determined by the Commission, and final submissions and evidence were put before the Commission on 7 November 2007.
[8] As the decision to relocate operations was to take place by the end of November, this decision has been issued as a matter of urgency, and I expect will be acted upon forthwith.
[9] Mr A Portelli put submissions for the NUW and Mr P O'Grady of counsel was granted leave to represent UBF in the proceedings.
[10] Inter Alia, the NUW argued that the dispute concerns the context of the term "Redundancy" in Clause 17 of the Tontine Fibres & National Union of Workers - Mooroolbark Site Enterprise Partnership Agreement 2005 [AG845763 PR967217] ("the EBA").
[11] It was put that relocation amounts to a repudiation of the contract of employment (and therefore gives rise to a redundancy) where that change of location goes to the root of the employees contract.
[12] The EBA at Clause 17.3.1 that "where possible employees working within those redundant functions, will be transferred to existing vacancies within the company" was highlighted by Mr Portelli.
[13] He continued that this provision cannot be viewed as anything other that a clause with an objectively discernable operation. In other words, relocation could only occur when objectively, such relocation is possible. Such an examination, as always in redundancy and relocations scenarios, needs to take into account the reasonableness or otherwise of the proposed relocation, which by definition then requires an examination of such factors as distance, hours of work, travelling time, earnings, skills and status, family responsibilities and other factors.
[14] It was also put that Clause 17.3.2 of the EBA further provides that employees currently working "within the redundant functions (as all employees are) will be asked if they are prepared to volunteer for redundancy" and further, that if "the employees agree and the number of volunteers match the number of redundant positions, then redundancy will occur."
[15] Mr Portelli continued, that in this case the employees have all indicated that they wish to take up the option of redundancy. UBF, however, has steadfastly refused to even consider the option in spite of its obligations under the EBA.
[16] The NUW put that the proposed relocation:
accordingly, does not amount to acceptable alternative employment.
[17] Mr Portelli argued that termination occurs by reason of relocation from Mooroolbark to Coburg, with the termination of the employees' employment a consequence of a repudiation of their contract of employment by UBF.
[18] He also submitted that UBF had failed to give any proper consideration of the individual circumstances of the effected employees and the forced relocation of those employees is also unreasonable considering the circumstances of the employees.
[19] It was submitted that the proposed transfer of the employees to Coburg is an unreasonable distance for most employees from their home (in or near Mooroolbark for most) and therefore is in and of itself a breach of their employment contract.
[20] In the present case, all employees bar two live further away from the Coburg site than they do to the Mooroolbark site and one while living closer to the Coburg site, would nevertheless be subjected to additional daily travel time due to road and traffic conditions. The majority of employees live a significant additional distance (generally around 35 to 40 additional kilometres "(one way)") from the Coburg site.
[21] Mr Portelli also argued that most employees will suffer a significant reduction in earnings as a result of the relocation, even though the Company is "grandfathering" employees hourly rate. Employees will not receive wage increases until the lower Coburg rates "catch up" with the grandfathered rates.
[22] The Coburg site will operate on 8 hour fixed shifts. For most employees, this would represent a significant drop in income. This is because the fixed shift weekly rates (aside from permanent night shift) are less than the 12 hour rotating shift weekly average rates, and also less than the newly introduced rotating 8 hour shift weekly average rates (aside from permanent night shift).
[23] In addition, there has traditionally been a large amount of overtime worked by employees which will not be available at the new site. Taking into account average overtime worked provides a more accurate representation of employees' potential loss of earnings.
[24] Mr Portelli contended, based on the witness statements of NUW members, tendered in the proceedings that the increased distances to work virtually all employees would be required to travel, would severely impact on care related costs, such as petrol, car maintenance and other running costs (including in some cases tolls).
[25] It was also contended that all the employees' lifestyle and family lives would suffer as a result of the relocation, and many of the employees have significant family responsibilities which would severely hamper their ability to relocate.
[26] Mr Portelli referred to UBF seeking an order from the Commission that "all employees comply with a direction to relocate (and accordingly elect their preferred option as part of the relocation, as previously requested of the employees, being a one off payment, or access to a free bus service and paid travel time)."
[28] Mr Portelli submitted that the relevant standard of alternative employment has not been obtained in the current circumstances, and therefore roles at the Coburg site do not constitute acceptable alternative positions.
[29] He referred several times in his submissions to the fact that UBF has been unable to provide employees with job descriptions for their proposed new roles.
[30] In conclusion it was put that the proposed relocation of employees from Mooroolbark to Coburg amounts to a repudiation of their employment contracts and therefore the employees are entitled to severance payments. In the alternative, the NUW put that the proposed relocation gives rise to redundancies due to the additional distances involved, the impacts on employee remuneration (and additional costs), and the impact on employees' family responsibilities and lifestyle.
[31] Witness statements from the NUW organiser Ms J Warren and all of the affected employees were tendered and considered by the Commission in this matter.
[32] The witnesses were not cross examined as was agreed by the parties to expedite the proceedings, for which the Commission was grateful.
[33] The fact that the proposed witnesses were not subject to cross examination was not a factor in arriving at my decision.
[34] Mr O'Grady submitted that the primary position of UBF was that the functions of each of the employees at its Mooroolbark site are not being made redundant and that those functions are being transferred to their Coburg site, and therefore Clause 17 of the EBA does not apply.
[35] In the alternative it was put that if the functions of each of the employees are redundant, those employees can be transferred to the Coburg site in accordance with Clause 17.3.1 of the EBA. As a consequence, the employees have not been made redundant for the purposes of the compensation entitlements in Clause 17.4 of the EBA.
[36] The third leg of UBF's opposition to the NUW claim was that if the functions of each of the employees have been made redundant and, as a consequence the employees are made redundant, and are entitled to severance pay under Clause 17.4 of the EBA, the Commission should vary the general severance pay in accordance with Clause 17.6 of the EBA because, by obtaining employment for each of the employees at its Coburg site, UBF has obtained acceptable alternative employment for each of the employees.
[37] It was put that employees will be entitled to severance payments only if their employment is terminated and Clause 17 of the EBA distinguishes between "redundant functions" and "redundancies".
[38] Clause 17.3 only comes into operation in the event that the employees functions become redundant, and only in the event of redundancies occurring (that is, termination of employment, as opposed to functions becoming redundant) does the entitlement to compensation in Clause 17 arise.
[39] Mr Liaskos, UBF's Managing Partner was called to give evidence in the proceedings and was cross-examined on his evidence.
[40] His evidence was that the functions of each employee, apart from one, would continue to be performed, at Coburg, following the closure of the Mooroolbark site.
[41] In relation to the one employee, there is no rolling materials functions available at Coburg.
[42] Mr O'Grady submitted that each employee moving to Coburg will:
[43] It was also put in response to the NUW claim that Clauses 5 and 6 of the EBA support the submission that there is no express or implied term of the employees contract of employment which allows for their relocation to Coburg, that those clauses simply identify the scope and operation of the EBA.
[44] Mr O'Grady on behalf of the UBF accepted that the vast majority of employees will be required to travel a greater distance to work at Coburg.
[45] With regard to the claim that there will be a substantial loss of earnings associated with the move to Coburg it was put that the relevant comparison is between what the employees would earn if they continued in their employment at Mooroolbark, with what they will earn when working at Coburg, not what they have earned in their work at Mooroolbark in the past bearing in mind the legitimate change in rosters in accordance with the Commission's decision of 28 June 2007. [Print PR977504 Eames C]
[46] It was put that UBF has agreed to maintain current rates of pay in accordance with the EBA until such time as the rates in the Tontine Fibres Coburg Site Collective Agreement 2006 - 2008 ("Coburg EBA") catch up.
[47] There will be a $25.00 per week increase in the rates contained in the Coburg EBA with effect from 1 December 2007.
[48] It was submitted that the additional cost of travel can be minimised by the UBF undertaking in the following options:
[49] It was acknowledged by Mr O'Grady on behalf of UBF that the Company acknowledged the importance of recognising people's family responsibilities but both EBA's contained generous sick leave and carers leave provisions, which are open to be accessed by employees in the event of illness in the family or a family emergency.
[50] On the question raised by three employees on medical grounds which would not allow a transfer to the Coburg site, Mr O'Grady did not seek to test the medical opinions advanced on behalf of those employees, contained in their affidavits, but did submit the offer of transport, car pooling, public transport did in his view, address those concerns.
[51] In summary it was contended that none of the employees have been terminated and their current functions are required and will continue at Coburg, which in the view of UBF, provides for acceptable alternative employment, consistent with the requirements and provisions of the EBA.
[52] The relevant sub-clauses of the EBA are as follows:
Before any redundancies take place, the company will do the following.
Where possible, employees working within those redundant functions, will be transferred to existing vacancies within the Company.
Employees who currently work within the redundant functions will be asked if they are prepared to volunteer for redundancy. If the employees agree and the number of volunteers match the number of redundant positions, then redundancy will occur. If the numbers do not match, then a selection process will be used.
The selection process which will be used by the Company for employees within the nominated redundant function, will be based on the principle as outlined in Attachment 4 of the agreement.
The employer, in a particular redundancy case, may make application to the Commission to have the general severance pay prescription varied if the employer obtains acceptable alternative employment for an employee."
[53] In Q Automotive Group Pty Ltd, Richards SDP, 28 September 2006 [PR032004], 26 March 2004, Giudice J, Ross VP, Smith C, Deegan C) ("TCR review case").
[54] In the TCR review case at [129] to [156], the Full Bench of the Commission said that the overarching considerations are as follows:
(a) loss of non-transferable credits (primarily accrued untaken personal leave and contingent long service leave accruals, pro rata annual leave loading and unpaid parental leave) are a significant factor;
(b) loss of security or involuntary change in status;
(d) hardship associated with retrenchment of longer serving employees.
[55] Taking into account these considerations the factors evidence from the evidence given in this matter indicates.
[56] A significant aspect related to the NUW claim, was the extra distance to be travelled, by most employees as a result of the move from Mooroolbark to Coburg.
[57] UBF acknowledged this concern and as part of their attempt to smooth the transition offered, and sought to minimize the cost of travel by:
[58] Another significant aspect of Mr Portelli's submissions concerned the impact on family responsibilities, as a result of the relocation.
[59] I have perused the witness statements tendered in the proceedings and as conceded by Mr O'Grady, the relocation does have an impact, but one must look at that impact objectively. How significant is the impact?
[60] It appears none of the employees want to relocate and cite various difficulties including the impact on their health in some cases; impact on school activity involvement; impact on sporting involvement including coaching and the general impact on their family and social life.
[61] In some cases, statements are made by witness's along the lines of "none of my skills will be utilised" or "the opportunity of overtime will be non-existent" and some of the witnesses express concern about extra travel time in emergency situations.
[62] General concerns expressed by the witnesses do not in my view provide solid evidence about their futures. Most, if not all skills will be utilised on the evidence before me and overtime has already been reduced at Mooroolbark, due to the change in the shift patterns and times.
[63] In emergency situations the Coburg EBA does provide for carers leave and family leave etc, and it would appear, that in the past, 12 hour shifts and additional overtime did not impact negatively on employees family responsibilities and their ability to cater to the needs of extended family members and sporting activities.
[64] One assumes that working less hours than previously worked, bearing in mind there is increased travel time, may assist in addressing employees family responsibilities, but that is for the future and one can't make certain predictions about that, or make assumptions based on what one thinks may happen.
[65] With regard to the overtime potential or the claimed loss of overtime, the Commission, in the circumstances of this case, cannot guarantee overtime or place any impost on UBF to provide overtime on any basis, other than to pay appropriate overtime rates for any period of overtime required by the business, when employees work overtime at either Mooroolbark or Coburg.
[66] To describe their financial losses, as a result of the move, in terms of overtime or changes in shift, cannot in my view, assist the claim for severance pay. Overtime cannot be guaranteed.
[67] The Commission can't look at matters in isolation and must look at all issues raised and question whether overall, in the light of the move to Coburg, is one left with a situation, where what is offered by UBF, is objectively acceptable alternative employment?
[68] Clause 17 of the EBA is titled "Redundancy and Relocation Agreement", and Sub-clause 17.3 is headed "Selection for Redundancy".
[69] Sub-clause 17.3 begins with the words "Before any redundancies take place the company will do the following:
[70] In my view, the EBA always contemplated the possibility of redeployment within the Company and not just at the Mooroolbark site.
[71] Many of the witness statements indicated the possibility of a move from Mooroolbark was not discussed with them at the time of engagement, but it is clear, that the EBA which sets out their terms and conditions of employment, did contemplate such a scenario, and set out the way in which that would work.
[72] The clause talks about "redundant functions" and again in this case, the functions will not be redundant, but are required to be performed at another site. The employees are not being made redundant, per se, nor are their functions.
[73] The claim is that they, the employees are redundant because UBF has not obtained pursuant to Sub-clause 17.6, acceptable alternative employment, for their employees.
[74] Sub-clause 17.4 which deals with compensation for employees "who are made redundant during the life of the agreement" does not apply to "redundant functions."
[75] Redundancy means termination and UBF have strenuously argued that all of their employees are required, and will not be terminated.
[76] Mr Portelli argues that the change to Coburg is essentially a breach of the employees contract of employment, but I am not persuaded by that argument.
[77] An entitlement to severance pay arises from the terms of the EBA, not from the contract. One does look at all of the circumstances of the move to Coburg and one does look at the reasonableness or otherwise of the change and distance is a factor, but only one factor.
[78] The Full Bench decision in United Rubber v NUW [1989] AIRC 528; (1989), 31 IR 35, which has adopted by a Full Bench of the Commission in Liu v NHP Electrical Engineering Products P/L, Giudice J, Ives DP, Eames C, 28 February 2005 [PR956111] was referred to by both advocates in their submissions.
[79] A warning was issued by the Full Bench in United Rubber that:
"...the application of these principles must turn upon the facts and merits of each particular case. Structural adjustment of Australian industry demands a relatively high level of organisation and employment mobility. It would be contrary to the public interest if liability for payment of severance benefits were to become a disincentive to necessary relocations of employment associated with organisational change. A careful assessment of the contract of employment and the surrounding circumstances is necessary to establish whether there is merit in a claim that a redundancy has been generated by a relocation of employment." [1989] AIRC 528; (1989) 31 IR 35 at 50
[81] Mr Liaskos gave evidence that rates will be grandfathered or "red circled" so that employees will continue on their current rates of pay until the Coburg EBA, another NUW EBA, catches up, if the rates at Coburg are less. In December a $25 wage increase is apparently to flow into the Coburg EBA.
[82] Allowances will continue to be paid where applicable. For example a first-aid allowance.
[83] Employees have been given the opportunity to express a preference as to which shift roster they would prefer. Day, afternoon or nights and whether they would prefer working a rotating shift.
[84] On the question of medical grounds providing a basis for making it impossible for people to move to Coburg, the Commission has before it, only limited medical opinions and grounds. I do not question those opinions. The grounds are not of sufficient significance in my view, to persuade me in favour of the claim for redundancy payments, by those who made the claim.
[85] The Full Bench in the TCR decision also issued a supplementary decision [PR062004] and at paragraph 9 of that decision they summarised the relevant considerations that underlie an entitlement to severance pay as follows:
"[9] In approaching this issue long service leave must be seen in its proper context. Our decision to increase severance pay for employees with 5 years' service or more was reached after considering a range of factors. Those factors were the inconvenience and hardship associated with redundancy, including the trauma of dismissal; loss of non-transferable credits, such as sick and long service leave; loss of employment security, inferior conditions, loss of seniority, lower job satisfaction or diminished job status. It is obvious that loss of non-transferable credits is only one of a number of relevant factors. Our decision also makes it clear that in our view it is not appropriate to fully compensate employees for loss of non-transferable credits. Finally, long service leave is not the only non-transferable credit."
[86] All of those considerations have been taken into account by UBF and transferred or compensated for with regard to these employees, by their employment at Coburg.
[87] It is very powerful argument for the view that it is adequate alternative employment and that severance payment ought not be made, when the continuing employment at Coburg is on offer.
[88] The issue of job descriptions is not a significant issue, in my view. The functions that each employee performs are set out in their witness statements and those functions will continue, certainly on different machinery in some cases, at Coburg. Within one week, on the evidence, employees will be able to perform satisfactorily at Coburg, if not sooner.
[89] I am not persuaded that Clause 17 of the EBA applies, related to redundancy in this matter.
[90] Redeployment is offered on the basis that employees functions are required at Coburg, and UBF wants all its employees to transfer.
[91] Employees have not been terminated as a result of redundancy.
[92] Sub-clause 17.6 would apply, if the employees were to be made redundant, however, in my view, UBF has obtained adequate alternative employment at Coburg, which I am satisfied should be acceptable, particularly in the light of the offer of 12 months free transport, or the payment of compensation for travel, based on years of service.
[93] For the reasons outlined I am not prepared to agree to the NUW claim on behalf of its members, and recommend those involved, now enable the move to Coburg to proceed smoothly.
[94] I do understand that this move does impact on peoples lives and is not how they saw their working lives developing however, as stated, I do not believe a case has been made out in their favour.
[95] There is, in my view, no entitlement to redundancy / severance pay. Employees should now indicate to UBF their preferred shift arrangements and whether they prefer the transport offer or the payment of compensation offered.
P. O'Grady of counsel for Tontine Fibres (A Division of United Bonded Fabrics Pty Ltd).
Printed by authority of the Commonwealth Government Printer
National Union of Workers
Tontine Fibres
(1989) 31 IR 35