National Union of Workers v United FM Pty Ltd trading as United KFPW

National Union of Workers v United FM Pty Ltd trading as United KFPW - [2009] NSWIRComm 1036 - NSWIRComm 2009 case summary — Zoe

[39]

11 In United FM Group Pty Ltd t/as United KFPW v National Union of Workers, New South Wales Branch [2006] NSWIRComm 391; (2006) 158 IR 336, the Full Bench considered the operation of an award-based redundancy provision that is relevantly identical in its effect to cl 6(iii) of the Determination. The Full Bench noted at para [71] that the work "obtains" qualifies the words "acceptable alternative employment" or, by analogy in this case, acceptable alternative work. Although Sigma endeavoured to obtain work for the drivers with Blue Circle, Sigma did not, in my view, "cause it to be available on acceptable terms", in the sense discussed by the Full Bench at para [80]. The evidence does not lead me to conclude Sigma established a case to support the making of an order from the Commission under cl 6(iii) of the Determination. If one scratches the veneer of what was contended by Sigma to be acceptable alternative work, it becomes reasonably clear the terms and conditions of engagement with Blue Circle involved some significant industrial detriments for the drivers in comparison with the terms and conditions at Sigma. 12 My reasons for so concluding focus principally on three matters, though not in any particular order of importance. First, the evidence would not lead to a conclusion there was negotiation on guarantees of on-going work with Blue Circle, whereas the work with Sigma carried a reasonable expectation of permanency - at least as that descriptor ordinarily might be understood by contract carriers in the transport industry. For instance, if a driver's contract was to be terminated at Sigma's initiative before the expiry date, Sigma was to pay-out the driver the minimum rate for the duration of the unexpired contractual period. In contrast, the evidence indicated the drivers were to be engaged on a job-by-job basis with Blue Circle, with no guarantee of work. Sigma did not require written terms and conditions as between the drivers and Blue Circle as part of the tendering. The terms and conditions of engagement were entirely matters between Blue Circle and individual drivers and, in practice, seemed on the evidence to be somewhat informal in their application. Moreover, the contract between Sigma and Blue Circle itself was envisaged as being for only two years. 13 Second, Sigma made no arrangements with Blue Circle concerning continuity of service. As such, the drivers, some of whom had quite lengthy service with Sigma, lost the industrial benefits attaching to that service with Sigma upon commencing work with Blue Circle, pertinently service-related entitlements otherwise available under cl 6(i) of the Determination on termination by redundancy. This is not a hypothetical scenario: Blue Circle in fact dispensed with the services of six drivers when these proceedings were afoot. Given the comparatively short time the drivers in question had worked with Blue Circle, they did not have an entitlement under the Determination to any severance payments on termination from Blue Circle. In United FM Group, the Full Bench at para [91] considered the loss of service-related entitlements of this type was relevant in determining whether an employer could be regarded as having been a strong moving force in causing acceptable alternative employment to be made available to the employees in those proceedings. Similar considerations apply here.

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14 Third, Sigma relied on evidence it brokered arrangements with Blue Circle to maximise the drivers' rates of remuneration, being rates above the minimum remuneration specified in the relevant contract determination. As the evidence of Mr Buis indicated, Sigma negotiated on the rates with Blue Circle because Sigma wanted to ensure there was "a high percentage of conversion". 15 Absent any other considerations, the evidence about rates might tend to give some support to the proposition Sigma obtained acceptable alternative work for the drivers. As the TWU's submissions noted, however, the Blue Circle terms and conditions concerning remuneration were, properly considered as a whole, substantially inferior to those attaching to the Sigma contracts, e.g., absence of minimum rates/retainers, whereas at Sigma the drivers were guaranteed a minimum daily payment. Similarly, the hourly rate described in Sigma's evidence was to be paid by reference to the time a run notionally would take to perform, rather than the time it actually took to perform - with the result that the true hourly remuneration potentially would be lower than the nominal rate brokered by Sigma, and potentially lower even than the minimum in the general contract determination. The evidence of Grahame Allard, Site Supervisor, indicated Blue Circle does not have the capacity to pay drivers for any time a run may take beyond the notional time, because Blue Circle and Sigma are contractually bound to those notional run-times. If some drivers' earnings have increased with Blue Circle, it is because more work is being performed; but the run review which saw drivers receiving additional work at Blue Circle was a post-termination event rather than something Sigma had brokered with Blue Circle before the redundancies. Mr Buis conceded in cross-examination most drivers were earning less than when they worked for Sigma, even taking into account the fact Saturday work is now being performed as well as weekday work. The drivers' conditions of engagement with Blue Circle involved what Mr A Hatcher of counsel, for the TWU, succinctly described as more work for less money.

[45]

18 Higher scale of severance payments: The TWU seeks a new contract determination to apply to the drivers and Sigma specifying severance payments higher than the scale in the Determination. The TWU's grounds and reasons in support of the application contended a new contract determination should be made because the Determination specifies only minima, rather than a cap, and because the drivers became redundant as the result of a cost-saving exercise by Sigma. Given that many of the drivers had lengthy periods of service with Sigma then, as a matter of fairness, the redundancy benefits should be commensurate with those extended periods of service. Mr Hatcher also drew attention to the redundancy arrangements that apply to Sigma's employees in support of the application for a new contract determination for the drivers. 19 True it is Sigma's reason for tendering the work was a bald, cost-cutting measure and various drivers had worked for Sigma for periods well-exceeding six years. However, the TWU has not, in my opinion, made out a case as to why these factors, without more, give grounds for departing from the settled terms of the Determination. The Determination is a comparatively new industrial instrument in the transport industry, having been made by Sams DP on 2 August 2007. It seems to me the Determination ordinarily would be appropriate for application in the event of redundancies in the industry, and I accepted the submissions by Mr M Byrnes, solicitor, for Sigma, the Commission should be cautious about stepping outside the comparatively newly-introduced industry standard. I have not been satisfied it would, in all the circumstances, be appropriate to depart from the scale of entitlements in the Determination solely or principally because the redundancies were effected as cost-cutting measures or because there are drivers who had periods of service with Sigma exceeding six years, or both. These factors would be typical of redundancies in very many workplaces within the transport industry and, for that matter, beyond the transport industry. The case advanced by the TWU did not persuade me there were any substantially distinguishing features that would justify taking the drivers' redundancy payments beyond the scale that applies across this industry to contract carriers, even taking into account the evidence as to the redundancy entitlements of Sigma's employees. 20 Adjustment to formula for calculating severance payments. Clause 6(i)(c) of the Determination defines "weeks pay" for the purposes of calculating severance payments as follows: "Weeks pay" means the weekly average gross remuneration the carrier received from the principal contractor for the previous twelve months for work performed by the carrier on behalf of the principal contractor, less the percentage amounts set out in schedule A to this contract determination on account of running costs.

[47]

22 The evidence established, as the TWU contended, the drivers' weekly earnings with Sigma reduced after the run restructure was introduced by Sigma from around October 2007. Against that background, the TWU's case for adjusting the formula was predicated on the contention the proper application of the Determination would visit a financial unfairness on the drivers if the post-restructure earnings were the basis for the severance payment formula, given the fact the drivers' regular earnings reduced in the period from the implementation of the restructure to the date of the redundancies. 23 The evidence of Mr Buis indicated advice about the termination of the contracts and the reduction in runs was communicated to the drivers on the same day. He said Sigma was aware the run reduction would result in reduced incomes for the drivers and the company would have cost-savings. Nonetheless, the evidence indicated the run reductions were introduced by Sigma for legitimate business purposes and that the decision-making was not made locally. The unfortunate financial corollary for the drivers was a reduction in earnings and, collaterally, the amount of the weekly pay for the purposes of cl 6 of the Determination was adversely affected. I appreciate why the drivers and the TWU consider it unfair to base the calculations on a time-frame which included a period of reduced earnings which differed from what had been typical, pre-restructure earnings. In my opinion, however, it generally would not be appropriate for the Commission to make industrial instruments effectively cherry-picking the time-frames for the calculation of severance payments. In this particular case, I have not been satisfied the TWU has established a case for selecting the pre-restructure period of 1 October 2006 to 1 October 2007 for the purposes of calculating the meaning of weekly pay for redundancy payments, in circumstances where the run reduction was effected for apparently legitimate business purposes. 24 If the Commission were to accept the TWU's submission it would be an appropriate exercise of discretion to select a period of time for redundancy calculations which differed from that specified in the Determination, it is not difficult to envisage situations where principal contractors may, in turn, bring applications seeking that the formula be applied to a time when drivers had fewer runs and lower earnings. If a run restructure at Sigma had, by way of hypothetical example, significantly increased drivers' earnings in the several months preceding the redundancies, I would not, had such an application been made by Sigma, make a contract determination with severance payments referable to a pre-restructure period when earnings were ordinarily lower.

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26 I turn now to aspects of the evidence involving Bradley Jon Gibson, who formerly was employed by Sigma as a Distribution Centre Manager. Mr Gibson's role in the allocation of Sigma's driving work formed part of the case advanced by the TWU in support of the contention it would be appropriate to depart from the formula for calculating the meaning of weekly pay for the purposes of redundancy payments. In short, the TWU invited the Commission to draw the inference a company named Couriers By Demand Pty Ltd ("CBD") was paying amounts of money to Mr Gibson personally in connection with the referral of Sigma delivery work to CBD. CBD filed a notice of motion in the proceedings to oppose the production of certain financial records involving itself and Mr Gibson, which I dismissed on 8 April 2009. For his part, Mr Gibson failed to attend the Commission to give evidence on 25 May 2009, in circumstances where I earlier adjourned proceedings specifically to allow him the opportunity to obtain his own legal advice given the nature of the matters to be put to him. 27 The TWU invited the Commission to draw the inference CBD had been paying Mr Gibson "secret commissions", as Mr Hatcher characterised matters, to give work to CBD. The evidence leads me to conclude this is a reasonably available inference. In circumstances where it appears reasonable to infer Mr Gibson was directing work to CBD in return for secret commissions, the TWU invited the Commission to conclude: (a) the work Mr Gibson referred to CBD otherwise would have been available to the drivers; and (b) the drivers' earnings were reduced during the relevant period as a result of Mr Gibson's referral of work to CBD, such as to adversely affect the drivers' redundancy payments. The TWU submitted Mr Gibson's redirection of work from the drivers to CBD formed a further basis on which it would be appropriate to depart from the standard formula in the Determination, more particularly in circumstances where most of the work was brought back to the drivers from outside transport providers after Blue Circle assumed the contract. 28 Mr Buis acknowledged a substantial amount of work was removed from the drivers as part of the run reduction and given to two outside courier companies. He explained the reason was that the sales department had "come up with a plan of delivery time" to meet the logistics of deliveries and market requirements, with the result that work was then given to outside companies. In this context, the issues involving Mr Gibson and CBD raise, in my view, difficult discretionary considerations concerning the application brought by the TWU as is concerns the proposed adjustment to the calculation formula. It seems reasonable to expect the earnings of the drivers, either individually or collectively, may have been, at least to some extent, adversely affected by the diversion of work to CBD - when that work otherwise may have been, or would have been, performed by Sigma's own drivers. To that extent, the drivers, either in individual cases or collectively, most likely suffered a financial detriment in terms of weekly earnings. 29 Mr Byrnes submitted Mr Gibson was off on a frolic of his own in relation to CBD. Indeed, it may be inferred that if Mr Gibson was receiving secret commissions to refer work to CBD, Sigma did not know about the payments. Certainly, there was no evidence to suggest otherwise. Mr Hatcher submitted Mr Gibson took advantage of the run restructure to outsource work to a company from which he was receiving secret commissions. If that is the case, Sigma may have an inappropriate windfall benefit from Mr Gibson's covert and otherwise unauthorised conduct, given the impact on the calculation of weekly pay for scale redundancy payments brought about by the diversion of work to CBD. On the other hand, it may be the case, as Mr Byrnes submitted, some or all of the work would, in any event, have been given to outside transport providers following the run reduction, but, if all other things had been equal, the work otherwise would have been given to CBD's business competitors. That is, it may be the case the volume of work given to outside transport providers rather than the drivers would have been no different following the run reduction, but that the CBD's competitors would have had a greater share of it.

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33 On further consideration of the parties' submissions in the preparation of this decision, I have decided it would not be appropriate to make findings at large, as it were, about whether individual drivers were contract carriers within the meaning of s 309 of the Act or whether the termination of some of the drivers' engagements with Sigma amounted to redundancies. That is, each of the applications before the Commission is concerned with discrete and confined issues. In IRC08/625, the initiating process sought an order under cl 6(iii) of the Determination on the basis Sigma had obtained acceptable alternative work. Within terms, that application is concerned with seeking "an order or orders under cl 6(iii)", albeit Sigma proposed such orders should be determined on a case-by-case basis. To the extent the application proposed a case-by-case approach, that presupposes such an approach to the question of whether Sigma had obtained suitable alternative work for any one or more of the individual drivers, based on the characteristics of the work so obtained. For example, in National Union of Workers v United FM Pty Ltd trading as United KFPW [2006] NSWIRComm 1112, an employer sought an exemption from making redundancy payments to a number of employees on the basis it had obtained suitable alternative employment with a successor employer. The individual circumstances were dealt with on a case-by-case basis, in as much as I concluded the employer had obtained suitable alternative employment for one employee within a group of several employees - such as to ground an order for exemption from payment in relation to her, albeit not the other redundant employees. In this case, I have not been satisfied Sigma established a case it obtained suitable alternative work for any of the drivers as a class, given the characteristics that were common to the alternative work with Blue Circle. There is no cause for any further case-by-case consideration in that respect concerning the suitability of the work for individual drivers. 34 Similarly, in IRC08/884, the initiating process sought a new contract determination in the terms proposed by the TWU concerning improvements to scale redundancy payments and an adjustment to the calculation formula. Had the TWU's application proceeded in its initial form with individual drivers named in a schedule (rather in its more general amended form filed on 16 February 2009), I consider it may have been appropriate or necessary to make findings concerning individual drivers' contested status as contract carriers and whether the termination of their engagements amounted to redundancies. However, given the more general, final form of the TWU's application, I do not consider it would be appropriate, under the umbrella of the application for a general contract determination which did not include a schedule with named individuals, to determine which drivers had contract carrier status or whether the termination of the engagements of shorter-term drivers amounted to redundancies.

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