[[2007] AIRC 952]

s.170LW - application for settlement of dispute (certified agreement)

Tontine Fibres (A Division of United Bonded Fabrics Pty Ltd)

TONTINE FIBRES & NATIONAL UNION OF WORKERS - MOOROOLBARK SITE ENTERPRISE PARTNERSHIP AGREEMENT 2005

Appeal - construction of certified agreement - site closure - whether redundancy - whether employer has obtained acceptable alternative employment - whether severance benefits should be varied - Workplace Relations Act 1996 (pre-reform) s.45, s.170LW, Workplace Relations Act 1996, Item 2(1)(e) of Schedule 7.

[1] This is an appeal by the National Union of Workers (NUW), expressed to be pursuant to s.120 of the Workplace Relations Act 1996 (the Act), against a decision by Commissioner Eames on 15 November 2007. [1] The decision arose from an application by the NUW and a counter-application by Tontine Fibres (a Division of United Bonded Fabrics Pty Ltd) (UBF) under s.170LW of the Act as it operated prior to the Workplace Relations Amendment (Work Choices) Act 2005 (the pre-reform Act), concerning the redundancy provision of the Tontine Fibres & National Union of Workers - Mooroolbark Site Enterprise Partnership Agreement 2005[2] (the 2005 Agreement). It is common ground that in dealing with the applications the Commissioner was exercising powers under cl.12 Dispute Prevention and Settlement Procedure of the 2005 Agreement and s.170LW of the pre-reform Act.

[2] The proceedings before Commissioner Eames concerned UBF's decision to close its Mooroolbark site operations and require NUW members to continue their employment at UBF's Coburg site, in another suburb of Melbourne, approximately 40 kilometres from the Mooroolbark site.

[3] Before Commissioner Eames, the NUW argued that the closure of the Mooroolbark site resulted in the redundancy of the position of each of its members and activated an entitlement to a range of redundancy payments under the 2005 Agreement. It sought a declaration by the Commissioner that each of the Mooroolbark employees was entitled to the redundancy benefits specified in the 2005 Agreement. UBF argued that, because alternate employment had been offered at its Coburg site, there was no redundancy and no entitlement to redundancy payments under the 2005 Agreement.

[4] UBF made a counter-application, to be determined in the event that the Commission found that the closure of the Mooroolbark site resulted in redundancies, to vary the general severance pay prescription within the 2005 Agreement on the basis that it had obtained acceptable alternative employment for each of the Mooroolbark employees, in the form of positions at its Coburg operations.

[5] In his decision the Commissioner decided:

"[89] I AM NOT PERSUADED THAT CLAUSE 17 OF THE EBA APPLIES, RELATED TO REDUNDANCY

[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."

[6] The NUW appeal seeks to challenge Commissioner Eames' findings that:

• the employees had not been terminated as a result of redundancy and had no entitlement to the redundancy benefits in the 2005 Agreement; and

• the offer of the positions at the Coburg site constituted acceptable alternative employment.

[7] A preliminary question arises concerning the legislative foundation for the appeal. Item 2(1)(e) of Schedule 7 to the Act provides that s.170LW of the pre-reform Act continues to apply to pre-reform certified agreements. The 2005 Agreement is such an agreement. An appeal against a decision made pursuant to s.170LW powers is properly brought under s.45 of the pre-reform Act. [3] Although the notice of appeal and the submissions refer to s.120 of the WR Act we have treated them as referring instead to s.45 of the pre-reform Act which is not materially different.

[8] It was agreed that the appeal was against a discretionary decision and governed by the approach in House v King: [4]

"The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred." [5]

[9] An appeal under s.45 of the Act lies only with the leave of a Full Bench. In Wan v Australian Industrial Relations Commission, the Full Federal Court stated that the appropriate test with respect to leave to appeal is as follows:

"Section 45 does not specify grounds for granting leave to appeal other than in the special case referred to in s.45(2). As we have previously observed, grounds traditionally adopted in granting leave have included considerations such as whether the decision is attended with sufficient doubt to warrant its reconsideration and whether substantial injustice may result if leave is refused. These `grounds' should not be seen as fetters upon the broad discretion conferred by s.45(1), but as examples of circumstances which will usually be treated as justifying the grant of leave. It will rarely, if ever, be appropriate to grant leave unless an arguable case of appealable error is demonstrated. This is so simply because an appeal cannot succeed in the absence of appealable error." [6]

[10] The 2005 Agreement is a site specific agreement applying to Tontine Fibres, a Division of UBF at its Mooroolbark site and to employees at that site. A separate site specific agreement applies at the Coburg site. [7] We shall refer to this agreement as the Coburg Agreement. The relevant terms of the 2005 Agreement read:

This Agreement shall apply to all employees employed by Tontine Fibres Mooroolbark site referred to in clause 6 who are employed in the process trade or business of

5.4 in assisting a storeworker, packer or sorter,

5.5 maintaining plant and equipment used in the process of manufacture of felts and wadding.

6.1 The National Union of Workers ("the Union"); and

6.2 Tontine Fibres, a Division of United Bonded Fabrics Pty Ltd, 238 - 240 Maroondah Highway, Mooroolbark, Victoria ("the Employer"); and

6.3 All employees of Tontine Fibres, whether or not they be members of the National Union of Workers, who are engaged in any of the activities covered by clause 5, at any time when the Agreement is in operation, subject to the Agreement."

[11] Clause 17 of the 2005 Agreement deals with "Redundancy and Relocation." Clause 17.1 sets out a requirement for consultation prior to termination in circumstances where "the employer has made a definite decision that it 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." This is consistent with the definition of redundancy contained in the Termination and Redundancy Model Clause, determined by the 2004 Termination and Redundancy Full Bench in its Supplementary decision:

"Redundancy occurs where an employer has made a definite decision that the employer no longer wishes the job the employee has been doing done by anyone and that decision leads to the termination of employment of the employee, except where this is due to the ordinary and customary turnover of labour." [8]

[12] Clause 17.3 "Selection for Redundancy" sets out obligations upon UBF prior to any redundancies taking place:

• to consider applications from volunteers (17.3.2).

[13] Clause 17.4 sets out compensation payable to employees in the event of redundancy:

A minimum of 4 weeks notification of the exact date of redundancy.

4 weeks pay for each year of service calculated on the basis of completed years and months service.

Payment of all accrued sick leave at time of termination.

Payment of all accrued annual leave entitlements with 17.5% loading to be paid at time of termination.

Long Service Leave to be paid out on redundancy on a pro rata basis from

Payment of all accrued banked hours, under the terms of the Mooroolbark Agreement, to be paid at the time of termination."

[14] Clause 17.6 provides for an application to be made to vary the redundancy benefits if UBF obtains acceptable alternative employment for an employee:

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."

[15] Commissioner Eames found that the Mooroolbark employees were not redundant. [9] He reached this conclusion by reference to the redeployment provision in cl.17.3.1. He found:

"[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."

[16] In our view the Commissioner misconstrued the operation of cl.17.3.1. Clause 17 sets out a staged process to be followed where the employer has made a definite decision that it no longer wishes the job an 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. Clause 17.1 requires consultation. Clause 17.3 then sets out obligations upon UBF prior to any redundancies taking place to redeploy employees (17.3.1) and to consider applications from volunteers (17.3.2). Clause 17.4 sets out compensation payable to employees in the event of redundancy.

[17] The Commissioner decided that cl.17 applied in that UBF had made a definite decision that it did not wish the jobs at Mooroolbark to be done by anyone. Although there is no explicit finding to that effect, we think it is to be implied from the fact that he went on to consider whether the redeployment obligation in cl.17.1.3 applied. But in any event the conclusion is inescapable that UBF had decided that it did not want the Mooroolbark jobs performed by anyone. While UBF argued that the jobs were simply being relocated to the Coburg site, we think that the closure of the Mooroolbark site speaks for itself. The terms of the 2005 Agreement are also relevant. It provides that the 2005 Agreement applies only at the Mooroolbark site and only binds the employees at that site. [10] Furthermore, it was clear that the grading scale in the Coburg Agreement is not the same as that which applies under the 2005 Agreement and employees transferring to the Coburg site would be classified in a grade attracting a lower rate of pay. These are further indications that the jobs to be performed at the Coburg site are not the same jobs as were performed at Mooroolbark.

[18] The obligation in cl.17.3.1 to redeploy employees whose employment might otherwise be terminated is in the following terms:

"Where possible, employees working within those redundant functions, will be transferred to existing vacancies within the Company."

[19] The expression "employees working within those redundant functions", when read in the context of cl.17 as a whole, refers to the functions associated with the jobs the employees had been doing. As we have already indicated, the closure of the Mooroolbark site creates a situation whereby the jobs the Mooroolbark employees have been doing are no longer required to be done by anyone. Seen in that way the functions were in fact redundant.

[20] In our view, the Commissioner erred in finding that the functions performed by the Mooroolbark employees were not redundant and that the employees were not being made redundant. Accordingly, we grant leave to appeal. In light of the circumstances it is appropriate that we determine the outstanding matters ourselves.

[21] We have already found that the positions of the Mooroolbark employees were redundant. There are two further matters which require consideration in order to determine the appeal. The first concerns the operation of cl.17.3.1. UBF has required the employees to transfer to jobs at the Coburg site, relying on the terms of cl.17.3.1. The question which arises is whether this situation affects the employees' entitlement to severance benefits on redundancy pursuant to cl.17.4. The second matter, which is only relevant if the employees are redundant, is UBF's application pursuant to cl.17.6 to vary the severance benefits on the basis that UBF has obtained suitable alternative employment for the employees at the Coburg site. We shall deal with the question of the transfer and the terms of cl.17.3.1 first.

[22] We have already set out the terms of cl.17.3.1. It provides that employees whose functions are redundant are to be transferred to existing vacancies "where possible". It must be accepted that the literal meaning of the expression "where possible", which is quite broad, should be subject to an implied limitation of reasonableness. In other words, the clause does not impose an open-ended obligation to transfer employees to a vacancy for which the relevant employee is not qualified, for example, or which involves terms and conditions or other circumstances associated with the vacancy which are unreasonable. It could not have been contemplated that an employee working as a skilled machine operator, for example, could be compulsorily transferred to just any vacancy and that the employer would thereby be relieved of the obligation to make severance payments. In this case, however, there has been no transfer in fact, because all of the employees with whom we are concerned have refused to accept jobs at the Coburg site. For that reason cl.17.3.1 does not affect the employees' entitlement to severance benefits. We shall proceed on the footing that the employees are redundant. The efforts made by UBF to relocate the employees to the Coburg site are nevertheless relevant to our consideration of the outcome of the appeal, as we shall indicate in the next part of our decision.

[23] We now turn to UBF's application for a variation of the severance benefits in cl.17.4. In the proceedings before Commissioner Eames, UBF sought that the prescription be varied to remove the severance entitlements or, in the alternative, to reduce them very substantially. [11] The NUW opposed any variation to the severance benefits. It is well established, and common ground in the appeal, that the concept of acceptable alternative employment is to be determined objectively. As noted by a Full Bench in Australian Chamber of Manufacturers v Derole Nominees Pty Ltd:

"What constitutes "acceptable alternative employment" is a matter to be determined, as we have said, on an objective basis. Alternative employment accepted by the employee (and its corollary, alternative employment acceptable to the employee) cannot be an appropriate application of the words because that meaning would give an employee an unreasonable and uncontrollable opportunity to reject the new employment in order to receive redundancy pay; the exemption provision would be without practical effect.

Yet, the use of the qualification "acceptable" is a clear indication that it is not any employment which complies but that which meets the relevant standard. In our opinion there are obvious elements of such a standard including the work being of like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements. There will probably be others." [12]

[24] The onus of establishing that the alternative employment in question is acceptable rests with the applicant employer. [13] In order to establish whether the alternative employment obtained by the employer is acceptable it is necessary to have regard to such matters as pay levels, hours of work, seniority, fringe benefits, workload and speed, job security and other matters (including the location of the employment and travelling time).[14] It is also quite clear from the text of the provision that the Commission may remove the employer's severance benefit obligations completely or may simply reduce them.

[25] In this case it is clear that the jobs in prospect at the Coburg site are very similar if not the same in nature as the jobs the employees were performing at the Mooroolbark site. In that respect the alternative employment must be characterized as acceptable. But there are a number of other circumstances which tend against the conclusion that the employment is acceptable in the relevant sense.

[26] The first relates to wages rates. We were told that many employees will be subject to different, lower pay scales, and although their current rates will be maintained, they will not receive any pay increases until the differential is removed by increases in the Coburg Agreement rates. As we understand the evidence the difference in hourly rates varies in a range from $1.28 to $3.37. Over a week of 38 ordinary hours the range is from $48.64 to $128.06. This means that until the base rates in the Coburg Agreement increase by those amounts the employees concerned will receive no increases. It appears also that there may be some effect on the seniority or status of some employees.

[27] Another consideration is the distance employees will have to travel to work at the Coburg site. The evidence indicates that the increase in the daily travel requirement will be very significant. Employees will be required to travel distances up to 80 kilometres extra per day, adding up to more than an hour and a half to their travelling time, These calculations are based on the most direct route and do not allow for peak hour conditions which might apply on the roads. While some employees will not be disadvantaged in this way, they are quite a small minority. UBF has undertaken to transport employees between the Mooroolbark site and the Coburg site and to pay one hour of travelling time per day. This arrangement is temporary, however, and will cease after 12 months. Employees who take responsibility for their own transport during the first 12 months, and all employees after 12 months, will incur very considerable extra costs.

[28] We should also mention that there was a deal of evidence from employees concerned about the potential effect of the extra travelling time on their family responsibilities. This was countered to some extent by evidence indicating that many of the employees expressing such concerns had a record of working significant overtime. There was also a small number of employees who produced medical evidence which it was said made travelling the extra distance to the Coburg site on a daily basis a health risk.

[29] It should be said in UBF's favour that it has sought to alleviate the effect of the extra travelling time by introducing some transitional arrangements. We can also see the difficulty arising from differences in the grading and pay scales under the two site Agreements which UBF has had to grapple with. It is also important to acknowledge that the employees would have had an assurance of continued employment with continuity of service-related benefits had they taken up positions at Coburg.

[30] We have concluded that UBF has obtained suitable alternative employment for the employees but we are not satisfied that the alternative employment warrants full relief from the obligations under cl.17.4. The impact on rates of pay, although cushioned by red-circling, will be significant in many cases and very significant in others. We also have in mind the considerable distance between the employment locations and the considerable additional travelling time and costs associated with the alternative employment, notwithstanding some relief reflected in arrangements proposed by UBF during the first 12 months. We are also of the view that the additional distance has the potential to affect the family responsibilities of the employees. Although limited to a small number of employees the medical considerations cannot be overlooked either.

[31] The employment offered at Coburg, whilst not justifying full relief from UBF's obligations to pay redundancy benefits under cl.17.4, provides an alternative which addresses to some degree the matters for which severance payments are intended to compensate employees. Some relief from the obligations in cl.17.4 is justified. We shall vary the obligation in cl.17.4.2 to provide for 3 weeks pay for each year of service rather than 4.

[32] We note that Commissioner Eames also concluded that acceptable alternative employment had been obtained, but that he did so in a context in which he had already concluded that the functions were not redundant. Because we disagree with that conclusion it is appropriate that we decide UBF's counter-application afresh, as we have done.

[33] We grant leave to appeal, uphold the appeal and quash Commissioner Eames' decision. Our order will be that the employees affected, other than Mr Strasser, who has accepted a position at Coburg, will be entitled to the payments and benefits in cl.17.4 of the 2005 Agreement except that the severance payment in cl.17.4.2 should be reduced from 4 weeks pay per year of service to 3 weeks pay per year of service.

T Lyons with A. Portelli for the National Union of Workers

P. O'Grady of counsel for Tontine Fibres (A Division of United Bonded Fabrics Pty Ltd)

[1] [2007] AIRC 952; PR979814.

[3] Australian Workers' Union v Tristar Steering and Suspension Australia Ltd [2007] AIRC FB 273 at paras 6 and 7.

[4] [1936] HCA 40; (1936) 55 CLR 499, at 504-505.

[5] ibid, per Dixon, Evatt, McTiernan JJ, at 504-505.

[6] [2001] FCA 1803 per Spender, Kiefel, Dowsett JJ, at para 30, 17 December 2001.

[7] The Tontine Fibres Coburg Site and National Union of Workers Certified Agreement 2004-2006. AG837330, PR952945.

[8] Redundancy Case Supplementary Decision [2004] AIRC 564, Appendix A; PR062004 Appendix A.

[9] [2007] AIRC 952 at para 91; PR979814 at para 91.

[10] See cll. 5 and 6, AG845763, PR967217.

[11] UBF written submissions before Commissioner Eames at para 54 and transcript PN 551-2.

[12] Clothing Trades Award 1982 (1), (1990) 140 IR 123 at 124, 12 September 1990.

[13] Re Target Retail Agreement 2001, PR916204, at para 6.

[14] Re Clerks Salaried Staffs (Agriculture Award) 1999, Print S1216.

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