Compensation for unfair redundancy; yes, there is such a thing

A failure by an employer to comply in a meaningful way with the consultation obligations of an applicable modern award or enterprise agreement about redundancy will preclude the employer from relying upon the jurisdiction defence of genuine redundancy to an unfair dismissal claim.

However that is just the start of analysis which is required to be undertaken by the Fair Work Commission when determining an unfair dismissal case. For example in the case from which the following extract is taken, the Commission determined as fact that the employer a had failed to make out all of the statutory requirements for the establishment of the genuine redundancy, because “ For completeness, and although I have doubts about the correctness of the decision of the Full Bench in Tyszka, Varley’s significant failures in relation to consulting with Mr Crozier establish that Varley did not achieve any “general compliance” with the consultation obligations under the Agreement.”

Accordingly, the Deputy President moved on the deal with the issue of whether the dismissal was otherwise relevantly unfair; and decided that it was and that the employee should be compensated.

“Section 387(h) – other relevant matters

[54] There were sound, defensible and well-founded reasons for Mr Crozier’s dismissal, namely Varley no longer required his job to be performed by anyone because of changes to the operational requirements of Varley’s enterprise. Further, as I have concluded above, there were no reasonable redeployment opportunities available for Mr Crozier. These matters weigh against a conclusion that the dismissal was harsh, unjust or unreasonable. 42 Varley’s material failure to comply with its consultation obligations under the Agreement is also a relevant matter which should be considered pursuant to s 387(h) of the Act.43 However, a failure to consult does not necessarily mean a dismissal was harsh, unjust or unreasonable.44 The weight to be given to a failure to consult depends primarily on the degree to which, if any, the absence of proper consultation led to any unfairness in practice.45

[55] My view is that a proper consultation period which complied with the requirements of the Agreement would have lasted a further week after 7 May 2020. Although one week is a relatively short time amount of time, I am persuaded that it is the amount of time which would have been required because of the consultation already undertaken between the AMWU and Varley and Varley’s thorough consideration of ways to mitigate or avert the redundancies conducted prior to engaging with the relevant employees.

[56] The Applicant contended that even if there were no redeployment opportunities available at the time he was made redundant, had proper consultation taken place and continued for at least one week, he would have been redeployed to one of the positions advertised by Varley on 12 May 2020. The Applicant submits that as there were ultimately two boilermaker positions created and there were two boilermakers made redundant on the MHC Project both of the boilermakers made redundant could have been tested for the positions and, if they were suitably skilled could have been asked to take leave or perform other work until the positions commenced. 46 He also says that because of his qualifications and experience it is likely he would have passed the welding test that would have been required, been offered the position, and on the balance of probabilities he would still be employed by Varley. Varley argued that the two metal tradesperson roles ultimately created at Varley’s Carrington site did not become true vacancies until at least late June 2020 and an extended consultation period would not have continued the Applicant’s employment to that date such that he might have been redeployed into one of those roles.

[57] I am not satisfied, on the balance of probabilities, that had Varley conducted proper consultation with Mr Crozier that he would have been employed in one of the positions advertised by Varley on 12 May 2020. I accept that it is more likely than not that placing Mr Crozier into one of the six positions advertised on 12 May 2020 would have been considered by Varley had he still been employed at that time. Ms Dobbie gave evidence that she was aware of those positions by that date and was intimately involved in Mr Crozier’s dismissal and considering options to avoid or mitigate the redundancies. I also accept Mr Crozier’s evidence, which was not contested, that he had the necessary skills to at least apply for the positions. However, I am not satisfied, on the balance of probabilities, that Varley would have offered Mr Crozier one of the positions prior to him being made redundant for the following reasons. As Ms Farrar submitted, one cannot determine the likelihood of Mr Crozier being offered one of the advertised positions by reference to the events which actually transpired. The correct approach is to consider the situation and state of knowledge in the hypothetical seven day period (from 8 to 14 May 2020) during which Mr Crozier would have remained in employment. As at 12 May 2020 the positions did not actually exist and there was no certainty that they would be required in the future, or if so, when they would be required. The job advertisement for the positions stated that “the project is currently scheduled to start in approximately 4 weeks”. However, as at 25 May 2020 Varley had not been engaged by their client to undertake the project. It was not until the client engaged Varley in about June 2020 to undertake the project that Varley could and did make a decision about its additional labour needs and consequently employed two additional boilermakers. They commenced employment on 22 June 2020 and 13 July 2020 respectively. Having regard to the state of knowledge in the period from 8 to 14 May 2020, Varley was not in a position to offer Mr Crozier an alternative position because it did not have one available. The best it could have done would have been to say that a position for which Mr Crozier may have been suitable, subject to his welding and other skills meeting the required standard, may become available at some unknown time in the future. Mr Crozier only had about 28 hours of paid leave available at that time. It is possible that Mr Crozier could have sought unpaid leave for an unknown period of time to see if the project would proceed, but the prospect of such leave being sought and granted does not seem very high. In all the circumstances, I find on the balance of probabilities that Mr Crozier would not have remained in employment after 14 May 2020 even if he had been employed and consulted with in the period from 8 to 14 May 2020.

[58] Like the situation in cases such as Maswan (at [39]) and Smith v Alice Care Care Centre Pty 47 (at [53]), I am satisfied in the particular circumstances of this case that if consultation in accordance with the requirements of the Agreement had occurred, “it would have made no difference to the ultimate outcome”.48 Although I have concluded no different outcome would have resulted had proper consultation been undertaken, Varley’s abject failure to properly consult with Mr Crozier (as detailed above at paragraphs [19] to [29]) gives weight to his argument that his dismissal was unreasonable. Further, although I am not satisfied that Mr Crozier would have been offered one of the positions advertised by Varley on 12 May 2020, his loss of the opportunity to be considered for placement into one of those positions while still employed by Varley gives weight to his argument that his dismissal was harsh.

[59] Mr Crozier argued that Varley’s decision to terminate his employment was unreasonable on the basis that he, as a boilermaker, was selected for redundancy when another boilermaker had expressed interest in accepting a voluntary redundancy but was rejected by Varley and that an employee described by Mr Crozier as a “contractor” was retained when he was dismissed. Varley submitted that there were sound and defensible reasons for acting as it did. I accept the evidence of Mr Moy that the boilermaker who Mr Crozier says volunteered for redundancy was retained by Varley because of his extensive skillset across the entire MHC Project as opposed to Mr Crozier’s more limited skillset. That is a reasonable basis to select Mr Crozier over the other employee. Further, I accept Ms Dobbie’s evidence that the “contractor” was not a “contractor” but was a fixed term employee engaged on the MHC Project whose contract expired sometime in June 2020. My view is that there is no apparent unreasonableness in selecting Mr Crozier over an employee on a fixed term contract where that fixed term contract was to expire approximately a month in the future, but had yet to do so.

[60] Mr Crozier also submitted that his selection for redundancy was unfair because he was unaware of the underlying selection criteria used to select him for redundancy and therefore he had no opportunity to put forward a case as to why he should not be selected. The Respondent submitted that little weight should be given to Mr Crozier’s contention that the selection process was unfair because the Applicant’s case did not initially proceed on that basis and therefore it was unsurprising that the Respondent filed little material on that point. Further, the Respondent submitted that the evidence of Mr Moy regarding the selection criteria used in deciding which employees to make redundant established that Mr Crozier’s selection was reasonable and fair. I am satisfied on the evidence that Mr Crozier’s selection for redundancy was not unfair. Mr Moy gave unchallenged evidence, which I accept, that the selection process used by Varley involved assessing the skills required by Varley and the employee’s ranking as compared to other employees. He also gave evidence, which I accept, that the rankings relied upon were compiled by Varley as part of a yearly review and were based on, among other things, performance, attendance, willingness to learn, skills and quality of work as demonstrated over the last 12 months. Mr Crozier was ranked at or near the bottom of the list of employees. On the evidence before me, I am satisfied that Varley had a reasonable basis for selecting the employees it chose to make redundant. Hence, Mr Crozier’s inability to challenge, or ask questions about, the basis upon which he was selected for redundancy supports his argument that Varley failed to consult with him in accordance with its obligations under the Agreement, but it does not otherwise persuade me that his dismissal was harsh, unjust or unreasonable.

[61] Finally, Mr Crozier submitted he has had little success in finding new employment and is unlikely to find work given his age (58) and the current job market. Varley submitted the fact that Mr Crozier was aware of but did not apply for the positions advertised on 12 May 2020 should weigh against a conclusion that his inability to find new employment makes his dismissal harsh. In relation to this issue, Mr Crozier gave evidence that he did not apply for the 12 May positions because at the time he saw the advertisement he felt rejected and unwanted by Varley and did not think he would be considered for the positions. He also gave evidence, which I accept, that had he retained his employment with Varley he would have applied for one of the positions advertised in May; in his words “a job is a job”. I am not persuaded by Varley’s submission. Mr Crozier’s decision to not apply for one of the advertised positions was reasonable in the context of his perception that Varley had rejected and did not want him. Mr Crozier’s lack of success in finding new employment supports his contention that his dismissal was harsh, but it must be weighed against the sound and well-founded reason for his dismissal and all other relevant considerations.

Conclusion – harsh, unjust and/or unreasonable dismissal

[62] After considering each of the matters specified in s 387 of the Act, my evaluative assessment is that Varley’s dismissal of Mr Crozier was harsh and unreasonable. Although Varley had a valid reason to make Mr Crozier’s position redundant, Varley’s unreasonable and extensive failure to comply with its consultation obligations in relation to Mr Crozier meant that he had no real opportunity to consider and form a view on his possible redundancy and present those views to Varley prior to being dismissed only 28 hours after first hearing that employees on the MHC Project would be made redundant. In the result, Mr Crozier was dismissed in circumstances where I am satisfied on the balance of probabilities that compliance with Varley’s consultation obligations would have resulted in Mr Crozier working for a further 7 days and being considered for the positions advertised by Varley on 12 May 2020. Although I have not found, on the balance of probabilities, Mr Crozier would have been offered one of those positions, the loss of that opportunity because of Varley’s unreasonable failure to consult rendered his dismissal harsh, particularly in circumstances where he has not been able to obtain alternative employment.

Remedy

[63] Having found that Mr Crozier was protected from unfair dismissal, and that his dismissal was harsh and unreasonable, it is necessary to consider what, if any, remedy should be granted to him. Mr Crozier sought the remedy of reinstatement. The Respondent submitted that would be inappropriate because no position currently exists for which Mr Crozier could be employed.

[64] During the hearing, the Applicant put to Ms Dobbie a screenshot of an advertisement which currently appears on Varley’s public website titled “Quick Hire” which provides:

“PLEASE do not click on this role unless a member of the Varley team has instructed you to do so. THANKS!

Job type: Casual

Location: Tomago NSW, Carrington NSW, West Gosford NSW, Yennora / Sydney NSW, Wendouree / Ballarat VIC, Mentone / Melbourne VIC, Narangba / Brisbane QLD, Maddington / Perth WA Show less

Closing date: Thursday, 31 December 2020

APPLY NOW MORE INFO”

[65] I accept Ms Dobbie’s unchallenged evidence that this advertisement is not in relation to any existing position. Ms Dobbie explained that the advertisement is in place to be used by individuals in the event that they are recruited directly by Varley for positions that have not been advertised. The link to apply is used to provide the individual a link into Varley’s job portal so that they can submit the relevant documents. I am satisfied that the “Quick Hire” advertisement does not evidence any currently existing position into which Mr Crozier could be employed. Further, Mr Crozier’s position is redundant, and I accept Ms Dobbie’s and Mr Moy’s evidence that there is currently no job at Varley for which Mr Crozier could be employed. I am satisfied that it would be inappropriate to reinstate Mr Crozier in all the circumstances.

[66] Section 390(3)(b) of the Act provides the Commission may only issue an order for compensation if it is appropriate in all the circumstances. A compensation remedy is designed to compensate an unfairly dismissed employee in lieu of reinstatement for losses reasonably attributable to the unfair dismissal within the bounds of the statutory cap on compensation that is to be applied. 49

[67] Having regard to all the circumstances of the case, including the fact that Mr Crozier has suffered financial loss as a result of his unfair dismissal, I consider that an order for payment of compensation to him is appropriate.

[68] It is necessary therefore for me to assess the amount of compensation that should be ordered to be paid to Mr Crozier. In assessing compensation, I am required by s 392(2) of the Act to take into account all the circumstances of the case including the specific matters identified in paragraphs (a) to (g) of this subsection.

[69] I will use the established methodology for assessing compensation in unfair dismissal cases which was set out in Sprigg v Paul Licensed Festival Supermarket 50 and applied and elaborated upon in the context of the current Act by Full Benches of the Commission in a number of cases.51 The approach to calculating compensation in accordance with these authorities is as follows:

Step 1: Estimate the remuneration the employee would have received, or have been likely to have received, if the employer had not terminated the employment (remuneration lost).

Step 2: Deduct monies earned since termination.

Step 3: Discount the remaining amount for contingencies.

Step 4: Calculate the impact of taxation to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.

Step 5: Apply the legislative cap on compensation.

Remuneration Mr Crozier would have received, or would have been likely to receive, if he had not been dismissed (s 392(2)(c))

[70] Like all calculations of damages or compensation, there is an element of speculation in determining an employee’s anticipated period of employment because the task involves an assessment of what would have been likely to happen in the future had the employee not been dismissed. 52

[71] I am satisfied on the balance of probabilities that if Mr Crozier had not been dismissed on the grounds of redundancy on 7 May 2020 because consultation in accordance with the Agreement was still being undertaken, his employment would have terminated at the conclusion of a proper consultation process, which would have lasted one further week. That is, Mr Crozier would have been made redundant on 14 May 2020. My reasons are as follows. First, for the reasons provided at paragraph [55], I am satisfied that if Varley had complied with its consultation obligations Mr Crozier would have remained working for Varley until 14 May 2020 while that consultation took place. Second, for the reasons provided at paragraphs [56] – [57] above, I am satisfied that the longer consultation period would not have resulted in any further period of employment beyond the consultation period.

[72] Mr Crozier was employed for 38 hours per week and was paid, at the time of his dismissal, $39.59 per hour: 38 hours x $39.59 = $1,504.42. Hence, I am satisfied that if Mr Crozier had remained employed from 8 May 2020 until 14 May 2020 (inclusive) he would have received $1,504.42.

Remuneration earned (s 392(2)(e)) and income reasonably likely to be earned (s 392(2)(f))

[73] In the period from 8 May 2020 until 14 May 2020 (inclusive), Mr Crozier did not receive any remuneration.

[74] Thus, my view is that $1,504.42 is the gross amount of remuneration Mr Crozier would likely have earned had he not been dismissed by Varley and instead continued to be employed until the conclusion of a further one week period commencing on 8 May 2020 and concluding on 14 May 2020. This calculation is intended to put Mr Crozier in the position he would have been in but for the termination of his employment. 53

Viability (s 392(2)(a))

[75] No submission was made on behalf of Varley that any particular amount of compensation would affect the viability of Varley’s enterprise.

[76] My view is that no adjustment is required on this account.

Length of service (s 392(2)(b))

[77] My view is that Mr Crozier’s period of service with Varley (about 3 years) does not justify any adjustment to the amount of compensation.

Mitigation efforts (s 392(2)(d))

[78] The evidence establishes that Mr Crozier has made reasonable efforts to obtain alternative employment following his dismissal on 7 May 2020. But, unsurprisingly in the current environment, Mr Crozier has not been able to obtain alternative employment.

[79] In all the circumstances, my view is that Mr Crozier acted reasonably to mitigate the loss suffered by him because of the dismissal and I do not consider it appropriate to reduce the compensation on this account.

Any other relevant matter (s 392(2)(g))

[80] It is necessary to consider whether to discount the remaining amount ($1,504.42) for “contingencies”. This step is a means of taking into account the possibility that the occurrence of contingencies to which Mr Crozier was subject might have brought about some change in earning capacity or earnings. 54 Positive considerations which might have resulted in advancement and increased earnings are also taken into account.

[81] The discount for contingencies should only be applied in respect to an “anticipated period of employment” that is not actually known, that is a period that is prospective to the date of the decision. 55

[82] Because I am looking in this matter at an anticipated period of employment which has already passed (8 May 2020 until 14 May 2020), there is no uncertainty about Mr Crozier’s earnings, capacity or any other matters during that period of time. In all the circumstances, my view is that it is not appropriate to discount or increase the figure of $1,504.42 for contingencies.

[83] Save for the matters referred to in this decision, my view is that there are no other matters which I consider relevant to the task of determining an amount for the purposes of an order under s 392(1) of the Act.

[84] I have considered the impact of taxation, but my view is that I prefer to determine compensation as a gross amount and leave taxation for determination.

Misconduct (s 392(3))

[85] Mr Crozier did not commit any misconduct, so my view is that this has no relevance to the assessment of compensation.

Shock, distress or humiliation, or other analogous hurt (s 392(4))

[86] I note that in accordance with s 392(4) of the Act, the amount of compensation calculated does not include a component for shock, humiliation or distress.

Compensation cap (s 392(5)-(6))

[87] The amount of $1,504.42 is less than half the amount of the high income threshold immediately before the dismissal. It is also less than the total amount of remuneration to which Mr Crozier was entitled in his employment with Varley during the 26 weeks immediately before his dismissal. In those circumstances, my view is that there is no basis to reduce the amount of $1,504.42 by reason of s 392(5) of the Act.

Instalments (s 393)

[88] No application has been made to date by Varley for any amount of compensation awarded to be paid in the form of instalments.

Conclusion on compensation

[89] In my view, the application of the Sprigg formula does not, in this case, yield an amount that is clearly excessive or clearly inadequate. Accordingly, my view is that there is no basis for me to reassess the assumptions made in reaching the amount of $1,504.42. 56

[90] For the reasons I have given, my view is that a remedy of compensation in the sum of $1,504.42 (less taxation as required by law) in favour of Mr Crozier is appropriate in the circumstances of this case. An order will be made to that effect [PR723485].”

Crozier v G H Varley Pty Ltd (2020) FWC 5432 delivered 12 October 2020 per Saunders DP