Genuine redundancies; when must an employer consult?

One of the grounds which an employer must make out when seeking to establish the jurisdictional defence to an unfair dismissal claim of genuine redundancy is that the employer complied with the consultation obligations of any applicable modern award or enterprise agreement.

Many of these instruments are vague and reasonably unclear as to when the consultation obligation about a termination of employment in fact applies. For example some impose the consultation obligation upon employers about to embark upon “major change” but what does this mean? Here is the answer.

“[12] In his decision, the Commissioner first considered WorkPac’s contention that the dismissals of the applicants were cases of genuine redundancy within the meaning of s 389. The Commissioner accepted that s 389(1)(a) applied to the dismissals. 3 In respect of s 389(1)(b), WorkPac contended that there was no relevant consultation obligation because the requisite “major change” referred to in the preamble to the clause had not occurred. The Commissioner rejected this contention:

“[50] Clause 22.7.1 and 22.7.2 of the Agreement clearly identify that a major change for an employee is identified as one that results in the termination of their employment or the size of the workforce.

[51] I do not accept the arguments that the Respondent did not have an obligation to consult with the Applicants in relation to their pending redundancy. Having found that the Applicants’ ‘job’ was associated with their allocation to the PIMs Development Contract at Appin, the making of 25 employees redundant out of a workforce of 85 (some 31%) is quite clearly a major change which requires consultation under the Agreement.

[52] Having been involved in thousands of enterprise agreement bargaining meetings in my previous role, I have never heard of an employer or an employee who has suggested that the loss of an employee’s job is not a major change that enlivens the consultation obligations of an enterprise agreement. Precedent which may suggest otherwise, in my view, is clearly wrong and in this case, irrelevant. The consultation provisions of the Agreement are specific and concise.”

[13] The Commissioner next found that the consultation obligations in clause 22 of the Agreement had not been complied with by WorkPac in respect of the applicants:

“[48] However, I do not accept that the brief telephone conversation or the pro forma letter that was sent to the Applicants satisfies the Respondent’s consultation obligations under the Agreement. At the very least, a virtual meeting of the 23 employees should have been conducted. Alternatives to the 23 redundancies may have been proposed or canvassed. I am aware that at a different mine on the South Coast of NSW, all contractor employees have gone part time to “share the burden” amongst all employees rather than have a few carry the entire ramifications of the downturn due to COVID-19.

[49] I am also of the view that the Respondent should have advised its employees of the possibility of upcoming redundancies in late April 2020 when they were first advised of this distinct possibility by PIMS. At this point in time the Respondent must have been in negotiations with South 32 in relation to the Supplementary Labour Contact. There were clearly opportunities for the excess employees of the Respondent working on the Development Contract to transfer to the Supplementary Labour Contact.

. . .

[54] In this matter, the Respondent communicated with the Applicants regarding the redundancies on two occasions. Firstly, when the Respondent called each of the Applicants and notified them of their redundancies. Secondly, when the redundancies were confirmed via a letter sent to the Applicants. On neither occasion were the Applicants given an opportunity to provide meaningful input on issues such as selection, redeployment, payments and alternatives to redundancy. It is well accepted that section 389(1)(b) of the Act requires an employer to meaningfully consult with their employees regarding a proposed redundancy. As was found in Wang ([2011] FWA 6872, 213 IR 203), I find that the Respondent has not complied with section 389(1)(b) of the Act.” (footnote omitted)

[14] The Commissioner then considered whether the exclusion in s 389(2) applied. He first accepted the applicants’ submission that WorkPac was “in the business of labour hire”, and found that it provided “labour to clients, not a specific set of skills, functions and tasks like an electrical contractor” and that its enterprise was as “a contractor of labour”. 4 The Commissioner then said:

“[59] The test for the Respondent in relation to section 389(2) of the Act was whether it was reasonable for the Applicant to be redeployed within its enterprise at the time of their termination.

[60] As stated earlier, whether South 32 was receiving names or numbers from the Respondent is not relevant. The Respondent should have advised South 32 that there were 4 employees that it was legally obligated to place into the Supplementary Labour Contract. It should have had these 4 employees ‘on boarded’ before submitting any other names. It is beyond the realm of credibility that an experienced industrial participant like South 32 would not have understood the requirements of the Respondent to comply with the Act. However, the Respondent appears to have just grouped the 4 employees in with the other employment seeking aspirants in sending a list to South 32. In real terms, the Applicants were forced to compete for a role, when section 389(2) does not require such competition. There can be no argument that these employees were competent to perform underground coal work because they were all experienced mineworkers who had been performing underground coal work at the Mine for the last 10 months, without complaint or discipline, in the Development Contract for PIMS.

[61] It is not in dispute that Mr Botiki did not have the necessary qualifications or experience to be considered for the Supplementary Labour Contract.

[62] I find that it was reasonable for the Applicants, except for Mr Botiki, to have been redeployed into the Supplementary Labour Contract. The Applicants had the skills and competencies to perform the work, they had been working at the Mine for at least the last 10 months and the rate of pay would have been similar if not the same (which was also regulated by an enterprise agreement with the CFMMEU).

[63] As a result, I find that the Respondent has not satisfied section 389(2) of the Act.”

[15] Having found that the dismissals were not cases of genuine redundancy, the Commissioner turned to whether the dismissals were unfair having regard to the considerations specified in s 387 of the FW Act. In respect of s 387(a), the Commissioner found that there was not a valid reason for the applicants’ dismissal based on their capacity or conduct. 5 The Commissioner made findings in relation to s 387(b)-(g) to which it is not necessary to refer. In relation to s 387(h), the Commissioner took into account that WorkPac did not redeploy the applicants other than Mr Botiki “in accordance with s 389(2)”.6 The Commissioner then stated the following overall conclusions:

“[78] The Respondent is in the business of hiring out skilled labour. It is a labour contractor. When the Respondent assigns an employee to a client, the client is not the legal employer of the worker, the legal employer of the worker is the Respondent.

[79] The Respondent was of the view that the employment relationship with the Applicants basically concluded when PIMS decided that they had no further work for the Applicants. This was not the case. The Respondent does not gain an exemption from section 389(2) of the Act simply because it is a labour hire company. If that was the case, then every employer in Australia would outsource its workforce to a labour hire company in order to avoid its obligations under the Act.

[80] Therefore, when PIMS sent back the 23 employees from the Mine, those 23 employees, were still employed by the Respondent. The Respondent was then required to deal with the on-going employment status of the employees. Redeployment was an option, but not in the manner conducted by the Respondent. These employees were entitled to be placed into the Supplementary Labour Contract, free from competition from any other aspirant. The Respondent failed to honour their statutory obligation to these employees in accordance with section 389(2) of the Act.

[81] Following the obiter in Kim Star, the Respondent is not exempt from the provisions of section 389 of the Act. To allow the Respondent to sustain an argument that there was no need for an appropriate standard of consultation or for redeployment, based on the fact that the Respondent is a labour hire company, would be creating a second-class standard of employee under the Act.

[82] It is plainly obvious that both South 32 and the Respondent should have been aware of the potential redeployment of the Applicants into the Supplementary Labour Contract. The Respondent knew in late April that there was every likelihood that PIMS would be reducing its workforce due to a decision by South 32. At the same time the Respondent was in negotiation to supply labour to South 32 for the Supplementary Labour Contract. It is difficult to believe that an experienced industrial participant such as the Respondent would not have been aware of its statutory obligations or, at the very least, the opportunity to place the Applicants with South 32 through the Supplementary Labour Contract.

[83] Having found that the Respondent did not have a valid reason to terminate the Applicants on the basis that the Applicants were not genuinely redundant, common-sense dictates that the Applicants termination must be harsh and unfair.”

[16] The Commissioner went on to find that the dismissal of Mr Botiki was harsh and unjust because there was no valid reason for his dismissal and he was not consulted in accordance with clause 22 of the Agreement. 7 In respect of each of the other four applicants, the Commissioner found that their dismissal was harsh and unjust because there was no valid reason for their dismissal, they were not consulted in accordance with clause 22 of the Agreement and they were not “redeployed at the time of … dismissal within the Respondent’s enterprise in accordance with section 389(2) of the Act”.8

……………………………………………………………

Consideration

[24] This appeal is one to which s 400(1) of the FW Act applies. Accordingly, we must be satisfied that the grant of permission to appeal would be in the public interest, otherwise, we are required to refuse permission. The s 400(1) test is a stringent one, 12 and it would rarely be satisfied unless an arguable case of appealable error is demonstrated,13 although this may not by itself be a sufficient basis for the grant of permission to appeal.14 The public interest may be attracted where the appeal raises issues of importance and general application, or where there is a diversity of decisions at first instance so that appellate guidance is required, or the decision under appeal manifests an injustice, provides for a counter-intuitive outcome, or applies legal principles that appear disharmonious compared to other recent decisions dealing with similar matters.15 The public interest will rarely be attracted in respect of an interlocutory procedural decision16 or in circumstances where the appeal lacks practical utility.17

[25] We are not satisfied that it would be in the public interest to grant permission to appeal for the following reasons.

[26] First, the decision is an interlocutory one concerning whether the applicants were unfairly dismissed, and does not deal with the ultimate issue of whether they should be awarded an unfair dismissal remedy and what that remedy should be if one is ordered. That makes it difficult to assess the significance of the decision vis-à-vis WorkPac’s direct interests. We have been advised that the applicants are not expected to seek the remedy of reinstatement and, in addition, the position at the time of the hearing before the Commissioner was that four of the five employees had obtained alternative employment and the fifth, Mr Powell, remained unfit for work as a result of a back injury received prior to being made redundant by WorkPac. Taking into account the redundancy payments they received upon termination (three weeks’ pay per year of service) pursuant to clause 12.2 of the Agreement and the part notice payments pursuant to clause 6.5.1, they may limit the maximum amount of compensation that might properly be awarded pursuant to s 392 of the FW Act. Accordingly, we cannot be persuaded at this stage that the ultimate outcome of the proceedings in terms of remedy is likely to be significantly prejudicial to a business of WorkPac’s size. WorkPac will, of course, have the right to lodge an appeal pursuant to s 604 against any final order for the payment of compensation (subject to the need to obtain permission to appeal), and any such appeal may challenge the unfair dismissal finding which underpins the order.

[27] Second, we do not consider that the contentions of error advanced by WorkPac in respect of the Commissioner’s findings under s 389(1) are reasonably arguable. The proposition that WorkPac did not make any “definite decision” for the purpose of clause 22 cannot be sustained, since it necessarily had to make a decision to terminate the employment of the 23 employees at the Appin Mine on the ground of redundancy (as distinct from continuing to employ them in some alternative capacity). Alternatively, WorkPac made a “definite decision” of the requisite kind when it decided to direct 23 of its employees (including the five applicants) to no longer work at the Appin Mine on the development contract. The evidence of Mr Mikutowski makes it clear that the termination of the 23 employees (including the five applicants) did not automatically follow from the advice from PIMS that the employees were no longer required at the mine site, but occurred only after WorkPac had attempted but failed to find redeployment opportunities for them, thus demonstrating that a separate and further decision on the part of WorkPac was required. In any event, there is nothing unusual about major changes in a business occurring in response to a decision made by an external client affecting the demand for the business’ services; this may occur in a range of industry contexts, not just the labour hire industry, and it has never been taken to mean so far as we are aware that the major change has occurred absent any decision being taken by the business.

[28] We are also satisfied that the Commissioner’s finding that in this case there was a “major change” which enlivened WorkPac’s consultation obligations under clause 22 of the Agreement was clearly correct given that WorkPac directed 23 of its employees to no longer work at the Appin Mine and then made them redundant, thereby removing 23 employees from the total workforce of about 60 which it assigned to the development contract at the Appin Mine. We do not consider that any other finding was reasonably available. This was a change, by virtue of its scale, to the production, program, organisation and structure of WorkPac’s enterprise in supplying labour to the Appin Mine. We note in this connection that WorkPac submitted before the Commissioner, and he accepted, that s 389(1)(a) was satisfied – that is, that the applicants’ jobs were no longer required to be performed by anyone because of changes in the operational requirements of WorkPac’s enterprise, and we also note that the redundancies were connected with major shift roster changes for WorkPac’s remaining employees on the development contract. Insofar as the Commissioner may arguably have separately conflated the requirement for a “major change” in the preamble to clause 22 with the requirement for such a change to be “likely to have a significant effect on CMWs” in clause 22.7, that is not a matter of importance given the finding made by the Commissioner in paragraph [51] of the decision, which we have earlier set out.

[29] We do not consider that there is any basis to conclude that the Commissioner’s decision as to the occurrence of the requisite “major change” was contrary to any authority binding upon him. WorkPac principally relied on the judgment of Jessup J in Port Kembla Coal Terminal Ltd v CFMMEU 18 (PKCT) to support its contention in that respect. The decision in PKCT was, for relevant purposes, concerned with whether the forced redundancy of three employees out of a total workforce of about 98 constituted “a major change to production, program, organisation, structure, technology, shift arrangements, work organisation or the level of outsourcing in relation to [the employer’s] enterprise” such as to enliven the operation of the consultation provision in the applicable enterprise agreement. Justice Jessup said that he did not agree with the primary judge’s conclusion that this constituted a major change of the requisite type because, firstly, the redundancies did not amount to a change to production, program, organisation, structure, technology, shift arrangements, work organisation or the level of outsourcing, and, secondly, the small number of employees concerned in proportion to the total workforce meant that any change was not a “major” one.19 Importantly, Jessup J went on to say in relation to the second matter:

“If many employees were to be made redundant, there may well have been a major change with which those redundancies were associated, but the size and importance of the change would have to be assessed by reference to facts which went beyond, although they may include, the facts of the redundancies. In the present case, it is enough to reiterate that the forced redundancy of three employees out of a workforce of about 98 did not of itself constitute a major change within the meaning of cl 7.1.” (underlining added)

[30] We do not consider that the conclusions stated by Jessup J are at all inconsistent with a finding that a reduction by WorkPac of 23 out of a workforce of 60 on the development contract as a consequence of a reduction in production levels and an associated change in the shift roster for the remaining employees constituted a major change of the requisite type under clause 22 of the Agreement. It is also important to note that, in relation to this issue, the conclusions of Jessup J cannot be taken as necessarily representing the ratio decidendi of the Full Court. Justice Rangiah agreed with the primary judge that the redundancies constituted a major change to the employer’s organisation, and said that the impact of the change involved could not be measured merely by the fact of the small number of employees directly affected. 20 Justice White said he agreed with Jessup J in relation to the “major change” issue, subject to two qualifications. The first qualification was that, without expressing a concluded view, White J considered that the relevant change could have on one view constituted a change in “work organisation”.21 Second, although he considered that the change in this case was not major, White J said:

“The second qualification is that I do not regard a simple comparison between the number of employees to be terminated, and the number of the employees in its workforce overall, for which PKCT contended, as being necessarily conclusive of the question of whether a change is ‘major’. Much may depend on the circumstances of a given case including, for example, the seniority and importance of the employees in PKCT’s operations, the extent to which PKCT’s employees work in an integrated or disconnected manner; the consequences for the continuing employees of the redundancies and consequent terminations, as well as other matters.” 22

[31] WorkPac deployed this passage to support an argument that the approach taken by the Commissioner in paragraph [51] was wrong in principle. We disagree. The passage, read in the context of the facts of PKCT, is to be understood as meaning that merely because only a relatively small number of employees have been made redundant does not necessarily mean that the associated change is incapable of being characterised as “major”. It certainly cannot be read as meaning that a change cannot be characterised as “major” on the basis that it involves the forced redundancies of about a third of the workforce at the relevant enterprise in conjunction with reduced production and shift roster changes.

[32] In the decision in HSU v Healthscope Operations Pty Ltd, 23 the Federal Circuit Court determined that the outsourcing of the entire laundry function of a hospital was not a major change because of the small number of employees involved relative to the number of employees of the employer as a whole. There is room for debate as to whether that approach was consistent with that of Rangiah and White JJ in PKCT. In any event, that decision turned on its own facts and was not binding on the Commissioner, nor is it binding on us. As for CEPU v Jemena Asset Management Pty Ltd,24 we do not consider that there is any relevant inconsistency between that decision and the approach taken by the Commissioner.

[33] WorkPac’s contention that, in any event, it complied with its obligations under clause 22 of the Agreement was not advanced with much conviction and is without merit. Mr Mikutowski’s own evidence makes it clear that his telephone calls to the five employees (of 2-10 minutes duration each), and the follow-up letters, involved no more than him advising the employees of what WorkPac intended to do. There is no indication in his evidence that the function of the calls involved receiving “meaningful input” (as the Commissioner put it) from the employees. The obligation to “discuss” the relevant matters in clause 22.3.1 connotes a dialogue in which there is an exchange by which the employee is given a real opportunity to influence the outcome which will pertain. Further, clause 22.3.2 requires that the requisite information be put in writing “[f]or the purposes of the discussion” – which will usually mean before or at the time of the discussion except perhaps where further information is provided in response to a matter raised or a request made at an earlier discussion (which was not the situation here). 25 This did not occur, since the letters followed the telephone calls. Any telephone discussions which followed the letters were initiated by individual applicants and did not deal with the matters required in clause 22.3.1. We accept that clause 22 does not, in terms, require a collective discussion of affected employees, but any conclusion to the contrary by the Commissioner does not vitiate the validity of his finding in paragraph [54] of the decision.

[34] Third, insofar as WorkPac’s appeal challenges the Commissioner’s conclusions in respect of s 389(2), it is lacking in practical utility. The Commissioner’s findings in respect of s 389(1) were sufficient to found the conclusion that the dismissal of the applicants did not constitute genuine redundancy, and it was strictly unnecessary for him to proceed to give consideration to s 389(2). WorkPac’s third and fourth grounds of appeal, even if they were to be entertained and ultimately upheld, would not operate to disturb the result reached in the decision.

[35] Fourth, the third appeal ground, which is said to raise an issue of general importance concerning whether a labour hire employer conducts an “enterprise” for the purpose of s 389(2), is not reasonably arguable. The term “enterprise” is defined in s 12 of the FW Act to mean “a business, activity, project or undertaking”. They are words of the widest import, and would readily encompass the business activity of a labour hire company in hiring labour to a client or “host employer”. The proposition that WorkPac does not engage in a business, activity, project or undertaking when, for profit, it hires labour to clients pursuant to commercial contractual arrangements is completely without merit. WorkPac’s submission that “enterprise” in s 389(2) applies only in respect of an employer which has the legal and practical ability to transfer a redundant employee places an unjustifiable gloss on the text of the subsection and the applicable definition. Whether it is practically feasible for an employer to redeploy a particular redundant employee will obviously be relevant to whether redeployment is “reasonable in all of the circumstances”, 26 but there is no basis for the proposition that labour hire employers are immune from consideration under s 389(2) in respect of redeployment from one labour hire role to another.

[36] Fifth, WorkPac’s contention that the decision was jurisdictional in nature because it concerned whether the applicants’ dismissals were cases of genuine redundancy is incorrect, for the reasons explained in the Full Bench decision in McKerlie v RateIt Australia Pty Ltd t/a RateIt. 27 Accordingly, the grant of permission to appeal would not be in the public interest on the basis of this contention.

[37] Sixth, given the lack of merit in the appeal grounds, we are not persuaded that the decision manifests any injustice to WorkPac or denied it “a fair assessment” under s 389. We emphasise again in this connection that the appeal grounds did not challenge the Commissioner’s conclusion that the dismissals of the applicants were harsh and unjust.

Conclusion

[38] Because we are not satisfied that the grant of permission would be in the public interest, we must refuse permission in accordance with s 400(1). We so order.”

Passages from WorkPac Mining Pty Ltd v Botiki and others (2021) FWCFB delivered 11 June 2021 per Hatcher VP, Bull DP and Saunders DP