Genuine redundancy and the need to consult

This extract from an unfair dismissal appeal decision of the Fair Work Commission contains a very useful analysis of the forensic principles which are involved when determining whether an employer has complied with the consultation obligations of an applicable enterprise agreement or modern award.

 

“Obligation to consult

[88] It was common ground between the parties that the Electrical, Electronic and

Communications Contracting Award 2020 (the Award) applied to the Appellant in relation to

his employment with the Respondent. There was a dispute as to whether the Respondent

consulted the Appellant in relation to his position being made redundant. In the Decision the

Deputy President acknowledged the extensive submissions the Appellant made asserting a

failure in this regard. The Deputy President then considered the consultation obligation under

the Award noting that clause 27 of the Award requires consultation after an employer “makes

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a definite decision to make major changes in production, program, organisation, structure or

technology that are likely to have significant effects on employees”. Clause 27.5 of the Award

provides that:

“27.5 In clause 27 significant effects, on employees, includes any of the following:

  1. a) termination of employment; or
  2. b) major changes in the composition, operation or size of the employer’s workforce or in

the skills required; or

  1. c) loss of, or reduction in, job or promotion opportunities; or
  2. d) loss of, or reduction in, job tenure; or
  3. e) alteration of hours of work; or
  4. f) the need for employees to be retrained or transferred to other work or locations; or
  5. g) job restructuring.”

[89] In relation to whether there had been a “major change” in the present case, the Deputy

President found as follows:

“[26] It has been said that reference to the plural “employees” rather than “employee” in similarly

worded clauses does not capture individual redundancies on the basis that individual redundancies do not

constitute a “major change” to the Respondent’s operations that impact upon a collective of employees.

[27] In this case, there was only one redundancy (i.e. the Applicant’s role) in a small business of less

than 10 employees. I do not accept, on the evidence before me, in the circumstances of this case, that

s.389(1)(b) of the Act is enlivened for consideration in these proceedings. In this regard, I find that, on

the terms of clause 27 of the Award, by reference to the case law set out in this decision:

  1. a) The redundancy of the Applicant’s role in the Respondent’s business:
  • was not a “major change” (i.e. the Respondent’s Director picked up work allocated to

the warranty repair work division (albeit with assistance from other employees from

time to time)); and

  • did not have “significant effects” upon the Respondent’s remaining employees on an

individual or collective basis (i.e. there is no evidence of any effects let alone significant

effects flowing to any of the Respondent’s employees arising from the redundancy of

the Applicant’s role with the Respondent).

  1. b) The Respondent has satisfied its Award obligations as to consultation concerning the

Applicant’s redundancy in that no Award consultations obligations arise for determination in

these proceedings.”

[90] Although there was no specific ground of appeal concerning the Respondent’s

obligation to consult as provided in s. 389(1)(b), the Appellant raised an alleged failure by the

Respondent to consult in his submissions at first instance and in the appeal. The Appellant

also took issue in his submissions in the appeal, with the approach the Deputy President took

to answering the question posed by s. 389(1)(b).

[91] Notwithstanding the failure of the Appellant to advance a ground of appeal on this point,

it was dealt with in oral submissions in the appeal and Counsel for the Respondent accepted

that the approach taken by the Deputy President was not advanced by either party during the

hearing and that the Deputy President did not place the parties on notice that it was under

contemplation.64 In our view the approach taken by the Deputy President to s. 389(1)(b)

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constitutes a further failure to accord either party procedural fairness. The question of whether

the Respondent complied with an obligation to consult with the Appellant about the redundancy

was a significant matter in the Deputy President’s decision to uphold the Respondent’s

objection to the Appellant’s unfair dismissal application.

[92] We observe, without deciding, that the approach taken by the Deputy President was

arguably erroneous, in circumstances where the Respondent did not adduce sufficient evidence

to establish the basis for its objection generally, much less an argument that it did not advance.

[93] The “case law set out in this decision” to support the conclusion reached by the Deputy

President is a footnoted reference to the decision of a Full Bench of the Commission in

Tsiftelidis v Crown Melbourne Limited (Tsiftelidis)

65 and a quote from the judgment of White J

in Port Kembla Coal Terminal v CFMMEU66

. Those cases do not establish a decision rule to

the effect that in any case where there is a single redundancy, or a proportionately small number

of redundancies, the consultation term in a modern award or an enterprise agreement dealing

with major change will not apply.

[94] Tsiftelidis, concerned an appeal against a decision of a member of the Commission

which determined that the dismissal of an employee from his position as Sports Consultant was

a case of genuine redundancy. The Full Bench in that case considered whether the employer

had complied with its obligation under an enterprise agreement to consult about the redundancy

pursuant to s. 389(2)(b) of the FW Act. Clauses 24 and 33 of the relevant enterprise agreement

in that case imposed obligations on the Respondent to consult in relation to certain matters and

it was noted by the Full Bench that those clauses of the agreement, and the consultation

obligations that they imposed on the Respondent, were at the heart of the appeal.

[95] In short compass, clause 33 of the relevant agreement provided for specific consultation

obligations with respect to redundancy and required that the Company consult with a relevant

union prior to redundancies taking effect. The Full Bench accepted that the consultation

pursuant to that clause occurred. Clause 24 dealt with “Change Consultation” and required the

establishment of a consultative committee to discuss matters of a “collective nature” which

were defined as matters affecting a group of employees covered by the Agreement. The clause

also contained provisions for the introduction of major change, which was defined in similar

terms to those contained in the relevant Award in the present case.

[96] The Full Bench applied established principles relevant to the construction of the terms

of enterprise agreements and concluded that in the context of the provisions of clause 24 relating

to the consultative committee having a purpose of discussing collective matters and the use of

the plural “employees” throughout the clause, the additional consultation requirements in clause

24 did not apply to individual redundancies on the basis that they “do not constitute a major

change to the Respondent’s operations that impact on a collective of employees.”

67

[97] In Port Kembla, three employees, who were dismissed by Port Kembla Coal Terminal

Ltd (Port Kembla) by way of forced redundancies, sought relief in the Federal Court alleging

Port Kembla had contravened s. 50 of the FW Act by failing to consult the Union and the

affected employees in relation to a major change and redundancies as required by clauses 7 and

13.5 of the Port Kembla Coal Terminal Limited Enterprise Agreement 2012-2015. One of the

employees further alleged that the Employer had contravened ss. 340 and 346 of the FW Act

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on the basis that adverse action was taken because he was an officer or member of a Union and

organised and promoted a lawful activity for and on behalf of the Union.

[98] The consultation provision of the enterprise agreement in that case, required

consultation with employees where the employer was “considering introducing a major change

in production, program, organisation, structure, technology, shift arrangements, work

organisation or the level of outsourcing in relation to its enterprise” where the change was

likely to have a detrimental or significant impact on employees. The relevant clause went on

to provide that:

“7.6. Significant change or effect may include but is not limited to:

  1. major changes in the composition, operation or size of the Company’s workforce; or
  2. the skills required; or
  3. the significant restructuring of work organisation; or
  4. proposals by the Company to outsource services or contract out services currently provided

by Company Employees.

7.7. The above definition seeks to illustrate that the changes requiring extensive consultation generally

need to have broad impacts and be likely to affect a significant part of the Company’s operations or affect

Employees’ working arrangements.”

[99] The agreement also required a further consultative process for forced redundancies. It

was argued before the Full Court of the Federal Court that the consultation term was not

engaged in the circumstances because the “change” that involved the abolition of the positions

of the 3 employees was not a major change within the meaning of that provision. It was noted

by Jessup J that this argument was put at first instance but was rejected. At [182], Jessup J

noted that the primary Judge characterised the change as a major one for two reasons:

“The first (in the first and second reasons) would have it that the “change” was a change in the Company’s

approach to a situation which required a reduction in manning levels. Here the change could be described

as major because of the importance of the change in approach, however many employees may have been

involved. The second (in the third, fourth and fifth reasons) would look to the fact that one or more forced

redundancies was involved in what the Company did, his Honour taking the view, it seems, that even one

forced redundancy was to be regarded as a “major change”.

[100] At [186] – [190], Jessup J considered that the primary Judge erred in his reasoning as

follows:

“186 Commencing with the first of the two ways in which his Honour characterised those

circumstances, I do not agree that a “change” of this kind would amount to a change to “production,

program, organisation, structure, technology, shift arrangements, work organisation or the level of

outsourcing”. Only by a very strained reading of the words could the change identified by his Honour be

so described. On appeal, counsel for the respondents submitted that the change was to ‘organisation’,

but, save to propound the point, they really advanced no focussed argument as to how it was so. The

change identified by his Honour was not, in my view, a change in organisation.

187 As to the second of the two ways in which his Honour characterised the circumstances leading

to the termination of the employments of these three employees, again I do not, with respect, agree that

the occurrence of a ‘forced redundancy’ makes the underlying, or corresponding, change a ‘major’ one.

If many employees were to be made redundant, there may well have been a major change with which

[2023] FWCFB 194

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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.

190 …The primary Judge made no findings of the kind or detail that would be necessary to justify

the conclusion that the impact upon other employees of the redistribution of the duties formerly performed

by Mr Giddings and Mr Rosewarn, to the extent that there was, or was to be, any such redistribution,

amounted to a “major change” within the meaning of clause 7.1 of the Agreement. On appeal, counsel

for the respondents undertook no analysis of the evidence at trial sufficient for the Full Court to make its

own findings on this subject.”

[emphasis added]

[101] White J agreed with the analysis of Jessup J in respect of the construction of clause 7,

subject to 2 qualifications as follows:

“498 The first qualification concerns the meaning of the term ‘work organisation’ in cl 7.1(a). That

is a term of variable meaning. At its widest, it could mean something like “the way in which things are

done” in PKCT’s terminal operations, including its employee allocations. On that construction, the

change implemented by PKCT may have amounted to a change in ‘work organisation’ because there was

some change in the way it would conduct its operations. However, it is not necessary to express a

concluded view about this because, even if that be an appropriate construction, it is difficult to

characterise the change in the way in which PKCT organised the way things were done in its operations

in the present case as ‘major’. This is especially so taking into account the elaboration of the term

‘significant change’ (which seems to be regarded as a synonym for ‘major change’) in cll 7.6 and 7.7.

499 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. In the present case, the primary Judge did not rest his conclusion

on an analysis of this kind. Nor did the applicants contend, in the manner of a notice of contention and

with references to the evidence, that the Judge should have made findings on these matters in relation to

their redundancies.”

[emphasis added]

[102] In his submissions in the appeal the Appellant said that there was no consultation or

discussion with him about redeployment before the decision to terminate his employment was

made and no real consideration of options for redeployment. The Appellant also took issue

with the Deputy President’s conclusion that the consultation term in clause 27 of the Award did

not apply to the dismissal of a single employee. It is the Appellant’s submission that the

Respondent failed to meet the consultation requirement under the Award as there was no

notification or meeting conducted by the Respondent when it decided to make his position

redundant and restructure the business.

[103] Further, the Appellant submitted that the Deputy President was factually wrong in his

analysis as the Award does not state that a major change needs to affect the employer’s business

but rather it is the effect the change has on employees that matters. The Appellant contends that

his termination had a major effect on him and, in his view, affected other employees relying on

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the Deputy President’s statement that other employees “assisted” in the Appellant’s duties after

his dismissal. The Appellant also contended that this shows that multiple people were required

to perform his role and that the Respondent has not stopped doing warranty repair work and as

a result, his position was not redundant. Further, the Appellant contended that there was no

evidence submitted to the Commission to demonstrate that the Respondent had on-going poor

cash flow and made a decision to limit warranty repair work, as was indicated by the footnote

in relation to the Respondent’s evidence.

[104] In relation to the consultation provision under clause 27 of the Award the Respondent

submitted that the Deputy President was correct in identifying that the Appellant’s redundancy

was not a major change and that it did not have significant effects upon employees. The

Respondent noted the Deputy President’s factual findings at [27] of the Decision that there was

only one position affected by redundancy (i.e. the Appellant’s role) and that this was neither a

“major change” nor had “significant effects” upon the Respondent’s employees. As such, in the

Respondent’s view, clause 27 of the Award was not enlivened and there was no consultation

obligation to comply with for the purposes of s. 389(1)(b) of the Act.

[105] The Respondent submitted, in line with the Deputy President’s finding, that the

Respondent’s Director, Mr Hussein, decided to reduce the amount of warranty repair work the

Respondent performed. This meant that the Appellant’s position was no longer required and to

the extent the Respondent was going to continue to perform the warranty repair work that the

Appellant performed, Mr Hussein would largely absorb this himself. In the Respondent’s view

that is the “change” that it implemented that affected the Appellant’s position. The Respondent

also submitted that Mr Ross electing to leave is not an effect that is a result of the change in the

way warranty repair work is done; it is a change that occurred because of Mr Ross’ decision to

leave. It is the Respondent’s submission that there was no factual error, let alone a significant

one, in the Deputy President’s approach to determining whether there was a major change with

significant effects.

[106] The Respondent also submitted that the Appellant’s assertions regarding the meaning

of “employee” versus “employees” are similarly misguided. As in Tsiftelidis68 to which the

Deputy President referred to at [26], clause 27 of the Award refers throughout to the effects that

major changes may have upon “employees”; that is, more than one employee. Clause 27 does

not capture the Appellant’s individual redundancy as it was not a “major change” to the

Respondent’s organisation, structure or technology likely to have significant effects on

employees. The Deputy President’s determination of whether there was a major change and

whether it had significant effects were questions of fact and degree. The Respondent contended

that the Appellant has not demonstrated that there was any significant error in the Deputy

President’s factual findings at [27] of the Decision.

[107] For present purposes we make the following observations. Firstly, both Tsiftelidis and

Port Kembla involved consultation terms that were unique and the agreements in those cases

contained other related obligations to consult employees that provided context for the

construction of consultation obligations in those terms. Secondly, while the terms in those cases

bear similarities to the term in the Award in the present case, there is no Full Bench authority

in relation to the applicability of the approach or the construction of the relevant consultation

terms in Port Kembla and Tsiftelidis in the context of the consultation term in modern awards

or agreements including the model consultation term. Thirdly, both cases involved

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consideration of the particular facts and circumstances in the enterprises concerned, which went

beyond the redundancies.

[108] We note that at [21] the Deputy President acknowledged that the Applicant made

extensive submissions asserting a failure by the Respondent to consult with him about the

redundancies. In our view, contrary to the Respondent’s submissions, it is arguable that there

was insufficient evidence for the Deputy President to make the findings in [27] and it appears

that the finding is based on a numerical analysis of the number of persons the Respondent

employed and the fact that the Appellant’s role was the only one made redundant without

considering whether there was evidence to establish that any changes in the organisation of

work were, or were not, significant. For present purposes it is sufficient to note that the cases

cited by the Deputy President do not establish a decision rule to the effect that, where there is a

single redundancy or a relatively small number of redundancies, a major change that is the

subject of an obligation under a modern award or enterprise agreement will not arise. For

example, it may be that a single redundancy in a relatively small business does bring about a

significant change in the operation of that business with respect to remaining employees.

[109] We are also of the view that the failure of the Deputy President to place the parties on

notice that he was considering answering the question posed by s. 389(1)(b) by reference to the

approach in Port Kembla and Tsiftelidis deprived the Appellant of an opportunity to put his

case in opposition to that position, and the Respondent to advance arguments as to why the facts

in the case should result in the same finding being made. Given the fact that there is no specific

appeal ground in relation to this matter and the lack of properly informed submissions on the

point, it is neither necessary nor desirable that we consider this matter further.”

 

Williams v KTC Refrigeration & Air Conditioning Pty Ltd [2023] FWCFB 194 delivered 25 October 2023 per Asbury VP, Masson DP and Bissett C