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[2018] FWC 3542
General information, not legal advice.
Fair Work Commission
2018-07-19
Original judgment source is linked above.
s.120 - Application to vary redundancy pay for other employment or incapacity to pay
The Trustee for Altman Unit Trust No1 T/A Southgate Holden
Application for variation of redundancy pay - employee's position redundant - new job offered within the same business - employee declined proposal on basis of concerns about new position and elected to be made redundant - whether employer obtained other acceptable employment - approach to acceptable employment considered and applied - same salary, location and general working conditions with no loss of accrued service or entitlements - significant differences in the nature of work and required skills considered - mitigation strategies and all relevant circumstances taken into account - on balance, not satisfied that alternative employment was objectively acceptable - discretion does not arise but in any event would not have been exercised given the basis upon which the employee elected to accept the redundancy - application dismissed.
[1] The applicant in this matter is the Trustee for Altman Unit Trust No1 T/A Southgate Holden (Southgate Holden). Southgate Holden is a South Australian based Holden dealership which provides vehicle sales and service and it has made an application pursuant to s.120 of the Fair Work Act 2009 (the FW Act) seeking a reduction in the redundancy pay otherwise due to a former employee, Mr David Klemm.
[2] Mr Klemm commenced employment as a Parts Driver with Southgate Holden on 20 October 2008 and at the time of the redundancy his employment was covered by the Vehicle Manufacturing, Repair, Services and Retail Award 2010 (the Award). The Award provides that the redundancy entitlements are as established by the National Employment Standards (NES) of the FW Act.
[3] Accordingly, the application concerns redundancy payments provided by s.119 of the FW Act which are established in the following terms:
(1) An employee is entitled to be paid redundancy pay by the employer if the employee's employment is terminated:
(a) at the employer's initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b) because of the insolvency or bankruptcy of the employer.
Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement."
(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee's base rate of pay for his or her ordinary hours of work:
Employee's period of continuous service with the employer on termination
[4] The application has been made under s.120 of the FW Act which provides as follows:
"120 Variation of redundancy pay for other employment or incapacity to pay
(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and
(i) obtains other acceptable employment for the employee; or
(2) On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.
(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination."
[5] There is no dispute that Mr Klemm's position has been made redundant; that is, it is agreed by the parties that Southgate Holden no longer requires that position to be done by anyone. There is also no dispute that Mr Klemm has now been terminated and is entitled to a redundancy payment as a result of s.119 of the FW Act. Indeed, this is the premise of the application.
[6] Southgate Holden contends that it has "obtained other acceptable employment" for Mr Klemm in the form of a Parts Sales Representative position within its own business and as a result, it seeks that the Commission exercise its discretion under s.120(1)(b)(i) of the FW Act to reduce the redundancy amount to nil. I note that Southgate Holden does not contend that it cannot pay the redundancy payment, and as a result, does not seek to rely upon s.120(1)(b)(ii) of the FW Act.
[7] Mr Klemm disputes that the position offered was other acceptable employment and, in any event, contends that it would not be appropriate for the Commission to reduce the redundancy payment in the circumstances, including what he asserts was his acceptance of a redundancy package proposed by Southgate Holden.
[8] A directions conference was initially conducted by telephone on 24 May 2018 where the parties agreed to have the application determined "on the papers". Both parties subsequently provided written submissions and evidence in the form of affidavits or statutory declarations in support of their respective positions.
[9] In light of some issues which arose from the material filed with the Commission, on 10 July 2018 I conducted a telephone hearing to enable final submissions to be provided. Despite the Commission raising issues about the factual disputes, neither party sought to lead oral evidence or to challenge the other evidence through cross-examination.[1] As a result, I have determined the factual disputes based upon the sworn statements with particular reliance upon the common written material. I have also had regard to the consistency, objectivity and overall probability of the evidence when resolving these conflicts.
[10] Southgate Holden was represented by Mr Mahoney from the Motor Trade Association (MTA). The MTA, on behalf of Southgate Holden, provided written submissions in support of the application along with a statutory declaration from Mr Gavin Miller, General Manager of Southgate Holden. Mr Miller's evidence canvassed the proposed change in role for Mr Klemm and the steps taken by the employer in the lead up to, and during, discussions regarding the redundancy.
[11] With written reply submissions, two additional statutory declarations from Southgate Holden's Parts Managers, Mr Peter Donaghey and Mr Steve Spall, were also provided. Each of these statements were largely in response to a statutory declaration by Mr Klemm's representative about a particular critical meeting but also made observations about Mr Klemm's good character and work performance and their view about his capacity to transition to the proposed new role.
[12] Southgate Holden contends that the Parts Sales Representative position offered to Mr Klemm was acceptable alternative employment. That is, the position maintained his hours of work, rate of pay, previous service, fringe benefits, distance to/from work, and workload and that the position involved approximately 90% of the same duties required in the previous role.
[13] In response to the concerns expressed by Mr Klemm about the sales aspect of the new position, Southgate Holden stated that it had offered him training and advised that his sales targets would be reviewed after a period of 6 months. It submits that this reinforced the acceptable nature of the offer of alternate employment. Further, it contends that Mr Klemm could have earned commission on sales in the new role and this was potentially additional remuneration that was designed to encourage Mr Klemm to take up, and succeed in, the new role.
[14] Southgate Holden contends that in circumstances where acceptable alternate employment was offered it was unreasonable for Mr Klemm to refuse to accept the position and that as such the redundancy entitlement that would have otherwise been paid should be reduced to nil.
[15] In relation to Mr Klemm's contention that the Commission should not exercise the discretion to reduce the redundancy pay due to the "acceptance of a redundancy package", Southgate Holden contends that:
Mr Klemm was not advised by the AMWU that Southgate Holden could apply under s.120 of the FW Act to reduce the redundancy payment and this was a representative error for which it (the employer) should not be held responsible;
The failure of Mr Klemm's representative to provide such information was a breach of her duty to him and amounts to negligence for which he may seek relief for an amount equivalent to the redundancy payment;
If Southgate Holden was required to advise Mr Klemm of its intention to make this application then this would mean that no application could be made by any employer pursuant to s.120 of the FW Act unless the relevant employee had been put on notice;
There was no redundancy package offered and, in any event, any offer which Mr Klemm may have believed to had been made was not binding because it was not made in a form that could be accepted by Mr Klemm;
Even if the redundancy package was an offer, the AMWU on behalf of Mr Klemm made a counter proposal which was in turn rejected. Accordingly, the only remaining proposal was that Southgate Holden would meet its obligations and this included the potential for a s.120 application to be made;
No agreement exists which prevents Southgate Holden from making an application under s.120 of the FW Act; and
In not accepting the alternative position, Mr Klemm had breached his "duty of fidelity" and the damages suffered by him flowing from that breach are equal to the redundancy entitlement which may have been paid by the applicant employer.
[16] Mr Klemm was represented by Ms Coppock from the "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU). The AMWU provided written submissions in support of his position to the Commission along with two statutory declarations.
[17] Mr Klemm made a statutory declaration going to the history of his employment along with the processes and background leading to the redundancy. This included his views about the change in responsibilities between his former and proposed new roles and what he saw as the focus upon sales in the latter position.
[18] Ms Coppock also provided a statutory declaration which largely dealt with the discussions held with Southgate Holden in relation to Mr Klemm's redundancy.
[19] Mr Klemm contends that he was not able to accept the Parts Sales Representative position, and that it was not acceptable alternative employment, for the following reasons:
The new position includes major and significantly different duties to the skillset held by Mr Klemm;
The new skills required by the position could not be easily or quickly learnt by a reasonable person;
There was no clear definition around the sales objectives to be achieved or what goals to be maintained;
Travelling interstate for the training would be extremely disruptive to Mr Klemm's home life and not a viable option;
The new position, despite the additional duties, was offered on the basis of the same remuneration as the former role; and
The workload is excessive as he would be required to perform his previous position along with what was essentially a new full-time sales role.
[20] Mr Klemm also contends that the redundancy, and the position that was offered, was a form of "punishment" and that he was being targeted for involving his Union in an unrelated underpayment of wages matter for which he received a significant amount of back pay in March 2017. A further reason for his scepticism around the redundancy, and in accepting the revised position, included a contention that the new position had a "probation" period and that this was particularly significant as it was scheduled to end one month prior to his pro-rata long service leave entitlements becoming due. Mr Klemm suggested that it was possible that he may be dismissed by Southgate Holden so as to avoid their obligations to pay his long service leave entitlement.
[21] Mr Klemm states in effect that, in any event, the redundancy package was already offered by Southgate Holden and accepted by him prior to the employer making this application. Having elected to accept the redundancy on that basis, the Commission should not exercise any discretion that might arise to reduce the redundancy payment now due to him.
[22] As a result, Mr Klemm seeks the full payment of his statutory redundancy entitlements and, in effect, that this application be dismissed.
[23] Before dealing with the nature and consequences of the new position and employment offered by Southgate Holden, it is appropriate to put the redundancy decision and the ultimate redundancy in context based upon the evidence that is before the Commission.
[24] In 2017, following a process which also involved the AMWU, Mr Klemm was reclassified as a Level 4 (from Level 2) under the Award. Mr Klemm considers that since that time he was targeted by the company. The latter part of this suggestion is strongly disputed by Southgate Holden and I am unable to make any findings about this aspect given the nature of the determinative process agreed by the parties.
[25] Throughout 2017 and January 2018, Southgate Holden was encouraged by General Motors Holden Australia Pty Ltd to include a new role of Parts Sales Representative into its team. Southgate Holden agreed to do so and determined that Mr Klemm's position would be made redundant as a result of the creation of this new position.
[26] In late March 2018, Mr Klemm met with his managers at Southgate Holden who explained to him that he would be offered a new position, with a revised contract, as a Parts Sales Representative. Mr Klemm expressed concerns over certain elements of the role, and in particular, the sales requirement of the position.
[27] Following those initial discussions, Mr Klemm contacted his union representative, Ms Coppock, for advice. On 5 April 2018, Ms Coppock emailed Southgate Holden at the request of Mr Klemm to seek a meeting to discuss the proposed new contract.
[28] On 6 April 2018, Mr Klemm and Ms Coppock met with General Manager, Mr Miller, and Parts Managers Mr Donaghey and Mr Spall, to discuss the new position.
[29] Mr Klemm and Ms Coppock contend that the AMWU raised various matters including the proposed conditions of employment, and whether the redundancy would still be on offer if Mr Klemm did not take up the new position, or did so, but later found the new role to be unsuccessful. Southgate Holden rejects the notion that some of these issues were discussed at the meeting and also contends that any question surrounding the concerns that were raised on Mr Klemm's behalf were answered. This included an indication that the KPIs would not be set until Mr Klemm had completed 6 months service and that all training and support would be offered.
[30] After the meeting, Southgate Holden confirmed its understanding of the outcome of the meeting in two separate emails to Ms Coppock sent on 6 April 2018 in the following terms:
"Further to message below we would appreciate finalising this matter before or by the 23rd which is David's return date from annual leave.
If you have any questions in the meantime, please don't hesitate to contact me.
"Would like to confirm a few things from today's meeting.
If David accepts the new restructured position, there is no fall-back position in regards to redundancy. It is a completely new position and will be treated as such.
David's income will be $20.21 / hour and working Monday - Friday.
He is also entitled to a commission of 3% of Gross Profit of the sales that he is responsible for. After the 6 month period there will be minimum targets to achieve and commission will be paid once those targets are reached.
[32] This correspondence suggests that concerns of the nature cited by the AMWU were raised at the meeting but addressed, either during or after that discussion, through the email clarification.
[33] On 20 April 2018, Mr Klemm, through Ms Coppock, asked for a breakdown of the redundancy payment. The purpose of this request was stated to be:
David has indicated that he is carefully considering the proposal put forward by the Company in relation to the new position being offered. In order to make an informed decision, it would be useful to be provided with a complete description of David's total financial separation package for his consideration should he decide to accept the terms of a redundancy.
[34] At that time, Mr Klemm was certified unfit to return to work from his annual leave which he had been due to return from on 23 April 2018. A medical certificate was provided for the period from 23 April 2018 to 27 April 2018 inclusive.
[35] In response to the request made on 20 April 2018, a written breakdown of the redundancy entitlements including annual leave was provided in a table which had been prepared by the MTA,[4] and forwarded to Ms Coppock by Mr Miller on 23 April 2018. This indicated as follows:
[36] On 26 April 2018, Ms Coppock contacted Mr Miller by email and thanked him for providing the calculation of the redundancy payment and at the same time further queried the absence of a payment related to a notice period for Mr Klemm. I note that at this stage, Mr Klemm had not provided a final response as to whether he would accept the new position.
[37] On 2 May 2018, Ms Coppock, on behalf of Mr Klemm, wrote to Mr Miller to advise that Mr Klemm did not think he would be able to succeed in the new position due to the "major changes in responsibilities" and "massively increased workload". Ms Coppock raised concerns about a potential breach of the Award in relation to Part 2 - Consultation and Dispute Resolution. A proposal was also put forward on Mr Klemm's behalf to settle and resolve all matters in relation to the cessation of his employment. This offer was made on a "confidential without prejudice basis" and included some proposals beyond the legal entitlements existing at that point, including the payment for long service leave not yet due.[5] The operative part of the proposal was in the following terms:
We therefore would like to discuss, without prejudice, opening up a dialogue in regards to a separation package for David to part ways amicably with Southgate Holden. This agreement would discharge all parties from any future claims.
We propose the following based on a standard working week of 38 hours at the hourly pay rate of $20.20. This settlement would take effect at the completion of David's current sick certificate, being 7 May 2018:
In relation to serving out the 4 week notice period, it is our understanding that the whole matter has placed a great amount of stress and anxiety on David. We would be encouraging him to see a medical professional to determine his ability to return to work during this period.
Lastly, we propose that settling on a mutually agreeable separation package between the two parties will allow both to move on amicably and essentially have a fresh start. Our Union is happy to present the agreed details in a 'Settlement and Release Agreement' which ensures there is no derogatory behaviour moving forward and both parties are well aware of their responsibilities in the cessation of David's employment with the Company.
[38] On the same date, Mr Miller responded by email to Ms Coppock and rejected Mr Klemm's proposal in the following terms:
We have reviewed your Member's offer of settlement and consider this to be unreasonable in the circumstances. As this is the case, this offer is rejected.
We ask that your Member reconsider our offer of employment in the new role which has been offered to him. Should your Member reject this offer, we suggest that the only appropriate course of action will be for your Member's role to be made redundant.
Should your Member be made redundant, Southgate Holden will comply with its obligations under the applicable Awards and legislation.
[39] On 4 May 2018, Ms Coppock on behalf of Mr Klemm responded to Mr Miller and advised that he did not wish to accept the new position and as a result she confirmed the acceptance of the "redundancy package". Ms Coppock further indicated that she would provide an update on Mr Klemm's medical condition as at that point he was still currently unfit for work. This was stated in the following terms:
"I have spoken with David and understandably we are disappointed to hear that Southgate Holden is of the impression that the offer of (sic) part ways, as presented in good faith below, has been considered to be unreasonable.
Due to extenuating factors we had mentioned in relation to David feeling he would be unable to succeed in a predominately sales role, he feels he has no other option but to accept the Company's offer of a redundancy. As you can imagine, without only 5 months left until David would have been eligible for pro-rata long service leave, he is extremely disappointed that this has been the outcome of his long standing loyal employment history with Southgate Holden. We would like to reiterate that David previously had no intention of parting ways with Southgate Holden should his current position remained as the status quo.
This incident has unfortunately placed a lot of stress and anxiety on both David and his partner. It is my understanding that David has a medical appointment scheduled for Monday 7th May at 5:45 pm to further discuss his current medical condition. We understand that he will advise our Union on Monday evening as to what his Doctor suggests is the most appropriate was to move forward with his health. As soon as this information is received, I will be in further contact.
Should you have any queries in relation to the confirmation of David accepting Southgate Holden's offer of a redundancy package, please contact me at your earliest convenience.
[40] On 14 May 2018, Ms Coppock again wrote by email to Mr Miller to provide an update on the status of his medical condition:
"David has advised he has a medical appointment scheduled with his treating practitioner again this evening at 5.45 pm.
As soon as we are advised of the outcome of this medical appointment, I will be in touch with you to let you know how David's health is progressing.
Has Southgate Holden reconsidered any of the details which were put forward below?
If you would like to discuss the matter in further detail, please feel free to call me or even schedule a meeting to hopefully finalise this matter for all parties involved.
[41] On 15 May 2018 at 8:46 am, Mr Miller sent an email to Ms Coppock and stated that:
"I believe that your previous correspondence expressed a clear refusal by David to accept the new role that has been offered, this is despite the extensive correspondence during which Southgate Holden has responded to the concerns raised by David.
Southgate Holden is of the understanding that David has accepted his redundancy with notice of termination commencing from 4 May 2018, being the date of this acceptance of the redundancy package by David.
As this is the case, I confirm that David is currently working out his notice period while concurrently taking a period of personal/carer's leave.
[42] Ms Coppock responded to this email at 10:13 am on that day and confirmed as follows:
"Please find attached a current medical certificate for David Klemm indicating he is unfit for work from 14 May to 28 May 2018 inclusive.
We acknowledge your reference to David accepting the redundancy and understand his last day of employment with Southgate Holden will effectively be 1st June 2018. It is currently our understanding that David would more than likely still be unwell enough to return to duties for that last week. Please advise if you still require David to supply a medical certificate for the remaining dates of 28 May to 1 June 2018.
To finalise matters, we would expect the final termination settlement, as at 1 June 2018, to include the following:
It would be appreciated if this payment could be made within seven (7) days of David's final date of employment.
[43] This application was filed with the Commission on 15 May 2018 at 8:52 am by the MTA on behalf of Southgate Holden.
[44] The MTA confirmed with the Commission on 16 May 2018 that a copy of the application was to be provided by them to Mr Klemm that day, and this took place. I note that Mr Miller apparently understood that the s.120 application would be provided to Mr Klemm by the Commission upon filing.
[45] On 17 May 2018, Mr Miller provided a brief response to Ms Coppock's email of 15 May 2018 and requested that a medical certificate be provided for the remainder of Mr Klemm's notice period but did not otherwise address the details of the redundancy or related arrangements. No mention of the s.120 application was made.
[46] In order to determine this question, it is necessary to consider both the appropriate approach to be taken by the Commission to s.120 of the FW Act and the nature of the alternative position in the context of these parties.
[47] The historical context for the nature of the provisions that are now found in s.120 of the FW Act is summarised by the Full Bench of the Australian Industrial Relations Commission in Australian Chamber of Manufacturers and Derole Nominees Pty Ltd - Clothing Trades Award 1982[12] (Derole) in the following terms:
This term originates from the first decision in the Termination, Change and Redundancy Case where the Full Bench said:
"Two particular instances, which the employers argued might warrant an application for relief from the obligation to pay the general prescription, which were brought to our attention in the proceedings were when an employer obtains acceptable alternative employment for the employee, and where employees receive the benefit of superannuation schemes on retrenchment.
We do not wish to prevent an employer making an application to be exempted from the general prescription pursuant to this decision in cases where an employer obtains acceptable alternative employment for an employee but we would point out that, in our decision, severance payments are not made for the purpose of assisting employees to find alternative employment. Where such an application was made it would be important to consider whether previous service with the previous employer was recognized as service with the new employer."
The word "obtains" does not appear in its context to mean actually obtain in the fullest sense possible. In circumstances like those occurring at the company one employer is incapable in law of effecting a contract of employment between his employee and another employer whether by assignment or otherwise; the creation of the legal relationship of master and servant depends on a mutuality being arrived at between the individual and the incoming employer. Therefore, the pursuit of alternative employment by the outgoing employer cannot be expected, by reason of itself alone, to produce new employment; there will usually and perhaps always remain the opportunity for the incoming employer, and the employee, to disagree as to matters such as terms of employment, suitability of the job to the employee and vice versa so that alternative employment may not eventuate.
It follows that "obtain" must be given some lesser meaning. The Shorter Oxford Dictionary (third edition, revised) provides as its relevant meaning, the definition of "obtain" as "to procure or gain, as the result of purpose and effort". It seems to us that meaning is of assistance here; that is, the employer by purpose and effort may establish an opportunity which suits the employee and which crystallises as alternative employment of an acceptable kind.
This approach is supported if the passages quoted above from the Termination, Change and Redundancy Case are read in conjunction with what was said under the heading "assistance in seeking alternative employment". There the Commission records the ACTU objective of achieving award provisions "designed to ensure that the employer assists the employee to find alternative employment".
Reliance was placed by the ACTU on a decision of the South Australian Industrial Commission in the Milk Processing and Cheese Etc Manufacturing Case:
"where it was decided that there should be included in any detailed prescription on redundancy an obligation on the employer actively to offer, or to make reasonable endeavours to procure, suitable alternative employment for redundant employees."
Dealing with the circumstances in which the general prescription the Full Bench was awarding might be departed from, the decision in the Termination, Change and Redundancy Case indicates that particular regard was paid to, inter alia, the S.A. Milk Processing and Cheese Etc. Manufacturing decision. Viewed in this way it will be seen that the intention is not to impose an absolute test on the employer's ability to "obtain" alternative employment but rather it refers to action which causes acceptable alternative employment to become available to the redundant employee. The employer must be a strong, moving force towards the creation of the available opportunity." [13]
[48] I note that one element of the approach taken in Derole must however now be considered subject to the later decision of the Full Federal Court in FBIS International Protective Services (Aust) Pty Ltd v The Maritime Union of Australia.[14] In particular, the Court has qualified that the appropriate reference point to assess the efforts of the applicant employer in obtaining alternative employment does not involve consideration of whether the employer was the strong, moving force towards the creation of the available opportunity.[15]
[49] In any event, there is no doubt in this case that Southgate Holden obtained the alternative employment for Mr Klemm. It organised the position within its own business and has made a definitive offer of the new position in such a manner that Mr Klemm could accept the same.
[50] The critical issue here is whether the alternative position was acceptable.
[51] It is well established in this jurisdiction that the concept of acceptable alternative employment is to be determined objectively by the Commission and that the mere rejection of the alternative does not make it objectively unacceptable. As noted by the Full Bench in Derole:
"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." [16]
[52] The onus of establishing that the alternative employment in question is acceptable rests with the applicant employer[17] and it is a serious step for the Commission to make an order to limit or remove an employee's statutory entitlement to redundancy payments.[18] In order to establish whether the alternative employment obtained by the employer is acceptable, it is necessary to have regard to all relevant matters including factors such 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.[19]
[53] It is also clear that acceptable employment does not mean identical employment; however, it has been held by the Commission that:
"...the objective test of acceptability appears to be that the alternative work bears a sufficient comparability to the original work and is not unreasonably removed from the employee's original duties, skills set, qualifications, experience and other terms and conditions of employment. The test is not whether or not the employee is capable of carrying out the new employment as such, it is whether there is sufficient correlation between the relevant indicia of the current work and the alternative employment as proposed."[20]
[54] As observed by Bissett C,[21] this approach is consistent with other authorities.[22] I also understand that this approach is illustrative of the Commission's assessment of the circumstances rather than any form of decision rule.[23]
[55] Further, employees should not unreasonably refuse offers of alternative employment merely because they wish to access the benefits of redundancy pay.[24]
[56] If the Commission is satisfied that acceptable alternative employment has been obtained, a discretion arises to reduce all or some of the redundancy pay having regard to all of the relevant circumstances.[25]
[57] I therefore turn to the consideration of the Parts Sales Representative position. I leave aside for the moment the consideration of any consequences of the process following the offer of the proposed position.
[58] The Parts Driver position Mr Klemm had been performing was a full-time role working 38 hours per week and predominately included him picking up and delivering parts, unpacking and putting away stock, acting as a courier between different sites, customer pickups and drop offs, general data entry and any other duties as authorised by management. The position required him to interact with service advisors and the workshop controller, and would have involved some interaction with customers.
[59] The position description for the Parts Driver job relevantly provided as follows:
This job function is to assist with customer pickups, customer drop offs, parts pick ups and deliveries and any other functions deemed necessary by the Fixed Operations Manager.
To perform this job successfully, an individual must be able to perform each essential duty satisfactorily. The requirements listed below are representative of the knowledge, sill, and/or ability required.
No prior experience is necessary for this position.
[60] The description also made reference to language skills, reasoning ability and licencing requirements, physical demands and work environment. These are largely consistent with those for the proposed role although expressed in different terms.
[61] The position description for the new Parts Sales Representative role was a more contemporary and comprehensive document and provided the following:
It is the responsibility of the Parts Representative to actively seek out and engage customer prospects, in a business development role broadening our customer base in the PMA. You will provide complete and appropriate solutions for every customer in order to boost top-line revenue growth, customer acquisition levels and profitability.
[62] The new position of Parts Sales Representative as stated in the position description is for the most part centred on achieving sales targets and developing customer relationships, in addition to delivering parts and stock to customers. The position description sets out a number of tasks which relate to the sales aspects of the position including cold calling new business opportunities, creating and delivering presentations, presenting parts to dealer and wholesale customers, and the supply of reports on customer needs, opportunities and competitive activities. The position maintained the same rate of pay but also included a commission of 3% of gross profits on sales. Minimum sales targets (KPIs) would be set upon completion of a 6 month period.
[63] It is also the case that many of the stated functions of the proposed new role were common with that of Mr Klemm's existing position. In effect, the new role adds to the existing duties. However, the sales orientation in what was considered to fundamentally be a "business development" role, as opposed to the parts pickup and delivery focus of the former position, are clear from a comparison of the two position descriptions. In that context, it is the overall role and responsibilities that must be considered rather than some form of numerical comparison of stated duties. The practical operation of the proposed role as envisaged by Southgate Holden was to build upon what it saw as Mr Klemm's excellent customer service, and in effect, for him to enquire if customers to whom he was delivering parts would be interested in purchasing further parts.[28]
[64] I do not doubt the bona fides of the Parts Managers who expressed their confidence in Mr Klemm's capacity to undertake the new role and their expectation of what that role would represent in practice. However, for reasons previously outlined, in the absence of the capacity for the competing evidence to be properly tested, it is the objective documents that must be given some prominence. In any event, it is the Position Description itself that was the basis of the proposed new role and the offer that was made to Mr Klemm. It is also a reasonable inference that the Position Description would become the reference point for any future purposes, including assessments as the success of Mr Klemm in the role. That role was materially different in that the focus was firmly upon the business development elements that were introduced in response to suggestions for a new role from GMH.
[65] Mr Klemm expressed concerns with Southgate Holden, in particular, to the focus of the new position on sales. In response to those concerns, Southgate Holden undertook to provide training which involved travelling to Sydney. It further provided a period with minimum sales targets being set upon completion of that period.
[66] There is not a sufficient basis for the Commission to accept that the proposed interstate training, which was envisaged to be over a few days, was of itself unreasonable as suggested by Mr Klemm. I do however accept that for a person who lacked any significant computer skills and apparently little more recent formal education, the prospect of training for the new aspects of the role would have been daunting. Despite this, objectively some of these measures are factors with the potential to mitigate the consequences of the extent of the change proposed.
[67] Whilst I acknowledge Mr Klemm's scepticism about the overall proposal and its timing in relation to his pro-rata LSL, I note that the six months review period proposed by Southgate Holden would have extended beyond that due date. I also note that this aspect was conceded in final submissions. Further, for reasons stated earlier, I do not consider that any of these apparent concerns arising from the earlier events surrounding the reclassification would make the new role objectively unacceptable and I place no weight upon those aspects for present purposes. On balance, I consider that the proposal made by Southgate Holden was a genuine offer that was not deliberately set up to fail.
[68] The fact that there would be a six months review period in the new position is somewhat of a mixed consideration. It provided the opportunity for Mr Klemm to work in the position without KPIs and to have that experience taken into account when the KPIs were being set. Further, Mr Klemm had the opportunity to earn some commission on sales in that period without reference to the KPIs. On the other hand, it was tolerably clear that after six months, Southgate Holden would also be considering whether to continue with Mr Klemm in that role and there was to be no fall-back position, or guaranteed access to the redundancy package in the event that the trial did not work out. As stated by Mr Miller, "it is a completely new position and will be treated as such."[29]
[69] As indicated, despite the proposed extended role and responsibilities, Mr Klemm's remuneration would have continued at the same base rate. However, for the first six months of the proposed role, he would have had access to the potential of 3 per cent commission on gross sales. Based upon the information before the Commission, it is likely that Mr Klemm's remuneration would have increased as a result of the sales commission; however, the extent of any potential additional earnings is not clear.
[70] In terms of workload, whilst there was, in effect, a potentially significant additional role, the positon was a full-time contract with fixed hours. Although this might have added to Mr Klemm's concerns, objectively, he could only do what was reasonably required within those hours. However, the fact that the new position was built on top of the existing duties might have made it more difficult for the untrained and inexperienced (in sales) Mr Klemm to find the time to adequately undertake those additional sales duties and related new functions which underpin much of the new role.
[71] I have found that there was a significantly different emphasis in the new role and that this was a major change from the role previously undertaken by Mr Klemm. Despite the fact that some of the duties were built onto the earlier role, it was a completely new position and there is no suggestion that Mr Klemm had any sales experience. As a result, the formal position as proposed was meaningfully different from his skill-set, experience and previous duties. There were also some uncertainties about the new position which must be considered. Equally, I have also taken into account the maintenance of the employment conditions and certain mitigating strategies proposed by Southgate Holden including the training and support that would have been available from the Parts Managers.
[72] Having regard to all of the above factors and the circumstances more generally, and weighing the contentions of the parties in light of the evidence and material that is before the Commission, I am on balance not inclined to the view that the proposed position, and the alternative employment, was objectively acceptable. In effect, I have not been persuaded by Southgate Holden that the precondition of s.120(1)(b)(i) of the FW Act has been met. As will become clear, I would in any event not have exercised any discretion in favour of the application given the particular circumstances of this matter.
[73] Given my view above, a discretion to determine whether there should be a reduction (including potentially to zero as sought here) in the amount of the redundancy payments does not arise. However, it is important that I do confirm why I would not in any event have reduced the redundancy payments due to Mr Klemm. As outlined earlier, this would be a matter of discretion to be exercised having regard to all of the relevant circumstances of a particular matter.
[74] Southgate Holden contends that where the Commission finds that acceptable alternative employment was obtained and the employee rejects the offer, the Commission must exercise the discretion to order a variation to the redundancy payments. This overstates the position and is not supported by the terms of the FW Act or the authorities. Rather, the Commission must exercise any discretion having regard to all of the relevant circumstances including the apparent purpose of the provision, the objects[30] of the FW Act and what is fair and just.[31] In that regard, the refusal to accept an offer of acceptable employment, and not adopt the measures that would mitigate the consequences of the redundancy, would be a significant, but not necessarily determinative, consideration in favour of doing so.[32]
[75] In this case, I consider that the particular circumstances are such that any discretion, which might otherwise arise, should not be exercised.
[76] In reaching this conclusion I have also considered the various propositions advanced on behalf of Southgate Holden about the implications of the conduct of the parties, and their representatives, when assessed through the lens of contract law.
[77] In Australian Workplace Solutions Pty Ltd v P. Fox[33] the Full Bench of the Australian Industrial Relations Commission (AIRC) set out some of the elements of a contract as follows:
"The elements of a contract are stated in Macken, McCarry and Sappideen's "The Law of Employment" (4th edition, 1997 by the Hon James Macken, Paul O'Grady and Carolyn Sappideen) (Macken, McCarry and Sappideen), a text to which reference was made both before Simmonds C and us, as follows (p.74):
"The law holds that before any simple contract is enforceable it must be formed so as to contain various elements. These are:
2. There must be an offer by one party and its acceptance by the other.
3. The contract must be supported by valuable consideration.
4. The parties must be legally capable of making a contract.
5. The parties must genuinely consent to the terms of the contract.
In relation to the first of these elements, the learned authors say (p. 74):
"The first element essential to the existence of any contract is the requirement that the parties have a mutual intention to create a legally enforceable bargain."
[78] For reasons that will become clear, I will deal only with the propositions advanced by Southgate Holden against the notion of a contract.
[79] Southgate Holden contends that there was no binding contract to pay the redundancy package as set out in the correspondence from Mr Miller on 23 April 2018 on a number of grounds. Firstly, it is suggested that the form of offer was not capable of acceptance and was mere "puffery". It is well established that there must be knowledge of an offer and sufficient details for its terms to be accepted.[34] In this case, those elements appear to all be present with the 23 April correspondence.
[80] Secondly, it is contended that there was no consideration in relation to the proposal, or any "contract" more generally. The consideration was to be in the form of the payment of the redundancy package as part of an agreement to accept the conclusion of the relationship through the redundancy.
[81] Thirdly, it is contended that any offer that was made on 23 April 2018 was rejected by the AMWU on behalf of Mr Klemm when it made a counter proposal, and as a result, lapsed. I accept that this analysis is correct and may mean that a formal agreement around the 23 April becomes problematic. However, if a finding on this aspect was required, I would need to take into account the fact that Mr Miller considered that Mr Klemm had accepted the "redundancy package" on 4 May as confirmed in his 15 May 2018 email. Given the sequence of events, the only "package" that this could refer to would be the 23 April 2018 proposal.
[82] However, and in any event, the present exercise of discretion is not a question to be determined simply by reference to the laws of contract. That is, it is not just a question as to whether there was a binding agreement to pay the redundancy package or whether there was some form of undertaking not to make a s.120 application. Rather, the discretion requires the Commission to have regard to all of the relevant circumstances including the overall fairness and justice of the matter. What occurred was not industrial fair play, and whilst I accept that this may not have been intended, the injustice arose from the sequence of events as they unfolded. This becomes clear from a consideration of the events leading to the agreement by Mr Klemm to accept the redundancy and the redundancy package.
[83] I have earlier set out the sequences of events leading to the redundancy. This included:
Following discussion about the new role and contract and Mr Klemm's concerns, on 23 April 2018 Southgate Holden provided a breakdown of the redundancy entitlements that would arise from an election to be made redundant. This included 16 weeks redundancy pay.
There was subsequently a discussion about whether pay in lieu of notice was to form part of the package and this was rejected by Southgate Holden on the basis that actual notice would be provided.
The AMWU made a counter proposal for a package to "part ways", including payment of LSL which was not yet an entitlement, and this was rejected by Southgate Holden. In so doing, on 2 May 2018, Southgate Holden indicated that given Mr Klemm's rejection of the new role, "we suggest that (the) only appropriate course of action was for (Mr Klemm) to be made redundant" and should that occur, Southgate Holden will comply with "its obligations under the applicable Awards and legislation". No mention was made of Southgate Holden's intention to make the s.120 application.
On 4 May 2018, Mr Klemm, through the AMWU, accepted the redundancy package and this was acknowledged by Southgate Holden when Mr Miller stated that "Southgate Holden is of the understanding that David has accepted his redundancy with notice of termination commencing from 4 May 2018, being the date of this acceptance of the redundancy package by David."
[84] There was an acceptance of the concept of the redundancy and the redundancy package by Mr Klemm on 4 May 2018. The events that occurred after that point are not directly relevant to the present assessment given that the redundancy then proceeded and is not itself in dispute. It is therefore appropriate to consider the reasonable understanding of the redundancy and the package at the point that it was accepted by Mr Klemm and the implications of the parties' conduct.
[85] Southgate Holden had offered the position and made some accommodations for the concerns raised by Mr Klemm. He had been advised of the redundancy package details including the payment of 16 weeks redundancy pay (which represented the full s.119 entitlements but without any reference to the NES or the potential to make a s.120 application) and later advised that given the rejection of the proposed role his only course was to be made redundant. I accept that an employer is not under the terms of the FW Act required to advise of an intention to make a s.120 application. It was however, not appropriate to mislead Mr Klemm, even if unintentionally, about the consequences of his decision to accept the new employment or the redundancy. The reference relied upon by Southgate Holden to alert Mr Klemm to the potential for the s.120 application, and to explain why it did not mislead Mr Klemm, was its statement that Southgate Holden would comply with its "obligations under the applicable Awards and legislation".
[86] Given that the full payment of 16 weeks redundancy had earlier been expressly advised to Mr Klemm as being part of the package, and given that he was making a decision whether to accept the new role, take some other action such as to dispute the redundancy, or accept the redundancy, a much more express reference to the intention to make the s.120 application was in all fairness required to explain any change to the package as proposed by Southgate Holden. This is particularly the case as this response, "to comply with its obligations under the applicable Awards and legislation", was advanced as part of its rejection of the proposal put forward by the AMWU that the employer should pay out the LSL, in effect, beyond its legal obligation to do so. Further, the 16 weeks redundancy pay was stated to be part of the package without any actual or implied caveat.
[87] I acknowledge the evidence of Mr Miller that he had concerns about Mr Klemm's health in late April and early May 2018 and this meant that he did not wish to exacerbate the employee's health, or create pressure, by informing him about the potential s.120 application. I would observe that the impact of informing Mr Klemm about the application after he had made the election would be expected to have a negative impact upon him and these concerns should not have prevented the AMWU being informed of the intended s.120 application. In any event, the lack of advice (for whatever reason) that the redundancy package upon which Mr Klemm was making his decision might change, or was now subject to a caveat, has in this case provided some of the directly relevant context in which Mr Klemm made his decision to elect for the redundancy.
[88] On that basis, Mr Klemm would reasonably have understood that his election to accept the redundancy and the package meant that he would be paid the full 16 weeks redundancy payments (in effect his full NES redundancy pay entitlements). Given the sequence of events, it was also reasonable that his decision was made in that light. As discussed earlier, this is also consistent with the approach adopted by Mr Miller on 15 May 2018, who confirmed his understanding that Mr Klemm had accepted the redundancy package.
[89] This approach does not mean, as contended by the applicant employer, that an employer is bound to advise an employee of the s.120 application before doing so. This is not required by the FW Act and does not arise as a consequence of this decision. The particular sequence of events that have led to this factor being significant in this case have been outlined earlier in this decision. Further, given that sequence of events and nature of communications about the redundancy package at the point it was accepted by Mr Klemm, there is no basis to suggest that some alternative advice should have been provided to him by the AMWU.
[90] I have not been persuaded that Southgate Holden obtained other acceptable employment for Mr Klemm within the meaning of s.120(1)(b)(i) of the FW Act. Given the onus upon the applicant employer to demonstrate satisfaction with this precondition, the application cannot succeed. In any event, in circumstances where Mr Klemm made the election to accept that redundancy on the basis of the package that was offered by Southgate Holden, it would not be reasonable or fair to reduce the redundancy pay that forms part of that package after that election has been made.
[91] As a result, I consider that any discretion to reduce the NES redundancy payments due to Mr Klemm should not, in any event, be exercised in the particular circumstances of this case.
[92] The application is dismissed.
C Mahoney of the Motor Trade Association for Trustee for Altman Unit Trust No1 T/A Southgate Holden.
N Coppock of the Australian Manufacturing Workers' Union for Mr Klemm.
[1] This was confirmed through emails with the parties and at the outset of the hearing.
[2] The evidence of Ms Coppock, Annexure C.
[3] The evidence of Ms Coppock, Annexure D.
[4] The evidence of Ms Coppock, Annexure E.
[5] As a result of the preserved application of the Vehicle Industry Repair Services and Retail Long Service Leave Award 1977 which provides that pro-rata LSL payments were not due until the completion of 10 years of continuous service.
[6] The evidence of Ms Coppock, Annexure G.
[7] The evidence of Ms Coppock, Annexure H.
[8] The evidence of Ms Coppock, Annexure I.
[9] The evidence of Ms Coppock, Annexure J.
[10] The evidence of Ms Coppock, Annexure K.
[11] The evidence of Ms Coppock, Annexure L.
[12] Australian Chamber of Manufacturers and Derole Nominees Pty Ltd - Clothing Trades Award 1982 (1)[1990] AIRC 980; , (1990) 140 IR 123 per Peterson J, Marsh DP and Oldmeadow C.
[17] Re Target Retail Agreement 2001, PR916204, 4 April 2002, at para 6.
[18] Clothing and Allied Trades Union v Hot Tuna (1988) 27 IR 226.
[19] Re Clerks Salaried Staffs (Agriculture Award) 1999, Print S1216, 24 November 1999, drawing upon Derole.
[20] Von Bibra Robina Autovillage Pty Ltd [2007] AIRC 397 (16 May 2007) at [26].
[21] In Vicstaff Pty Ltd T/A Stratco v May and McFerran [2010] FWA 3141 at [28].
[22] Clothing and Allied Trades Union v Hot Tuna (1988) 27 IR 226.
[23] See by analogy Toms v Harbour City Ferries Pty Ltd [2015] FWC 35 per Buchanan J at [100].
[24] See also NUW v Tontine Fibres [2007] AIRCFB 1016 and Spotless Services Australia Limited [2013] FWC 4484 per Sams DP.
[25] Re Clerks Salaried Staffs (Agriculture Award) 1999, Print S1216, 24 November 1999, drawing upon Derole.
[26] The evidence of Ms Coppock, Annexure B.
[27] The evidence of Ms Coppock, Annexure C.
[32] See the discussion of the exercise of discretion in Coal and Allied v AIRC [2000] HCA 47; (2000) 99 IR 309 per Gleeson CJ, Gaudron and Hayne JJ at [19]; CEPU and AG Coombs Fire Protection Pty Ltd [AIRC Print Q1727] (Giudice J, Polites SDP, Hingley C, 17 June 1998) (at p 2); and Warrell v Walton [2013] FCA 291 at [24].
[34] Carhill and Carbollic Smoke Ball Company [1892] 2 QB 484 at 489.
Printed by authority of the Commonwealth Government Printer
(2000) 99 IR 309
(1990) 140 IR 123
(1988) 27 IR 226