TASMANIAN INDUSTRIAL COMMISSION

Decision Appealed - See T6371

Industrial Relations Act 1984
s.29 application for hearing of industrial dispute

Australian Liquor, Hospitality and
Miscellaneous Workers Union (Tasmanian Branch)
(T6038 of 1996)

and

Chubb Security Tasmania

Industrial dispute - termination of employment - redundancy payment - arbitrated - order made

REASONS FOR DECISION

This was an application for a dispute hearing made under Section 29 of the Industrial Relations Act 1984 by the Australian Liquor, Hospitality and Miscellaneous Workers Union (Tasmanian Branch) (the Union).

The dispute was between the Union and Chubb Australia Limited (the Company) over claimed redundancy payments for certain employees terminated from their employment by the Company after the Company had lost a contract under which the employees had been working.

The names of the six employees concerned (the six employees) and their years of service with the Company (including Wormald Security) were:

The Commission was advised that within the last year the Company had taken over the running of the Wormald Security business in Tasmania in fulfilment of an arrangement made between the two companies quite some time ago. The six employees had previously been employed by Wormald Security and were transferred over to the Company at the time of the change-over. There was no dispute between the parties as to continuity of employment and the transmission of business, it was all accepted.

At the time of their termination of employment the six employees had been working at the Pasminco EZ Company's works at Risdon under a Company contract. When that contract was not renewed the six employees were terminated from their employment.

Most, if not all the six employees had been employed latterly at the Risdon Works for at least two years.

Before taking evidence from three of the six employees as witnesses, the Union read into transcript a letter1, dated 27 October 1996 from the Director of the Victorian Branch of the Department of Industrial Relations to Mr Justice A Boulton, a Senior Deputy President of the Australian Industrial Relations Commission (AIRC). The Union relied very much on the substance of the letter and two decisions of the AIRC, quoted in the letter.

The letter read as follows:

"I write to you in your capacity as Chairman of the Victorian Security Industry Consultative Council to advise you of an issue of Award construction that affects the security industry at large and to inform you of the approach this Office will be taking on the matter.

As discussed this office has received a number of complaints from (ex)employees of several security companies claiming non-payment of Award severance entitlements following the loss of a security contract. The employer position is that termination of employment as a consequence of a loss of contract is `ordinary and customary turnover of labour' and is therefore specifically excluded from the redundancy provisions of the Award.

The phrase `ordinary and customary turnover of labour' in the Federal context was considered in F W Hercus Pty Ltd v Short 1992 AILR 289. O'Loughlin, J. held that the phrase was intended to cover employees such as seasonal workers or those who, by virtue of the industry in which they work, know that their employment is intended to be of limited duration. [Although the decision of O'Loughlin J. was overturned on appeal (1993 AILR 120), to my knowledge the discussion of the phrase was not reviewed].

In NUW and Queensland Wool Centre (Print J8076), in a decision dated 12 June 1991, Commissioner Merriman determined that the termination of the particular employees concerned was ordinary and customary turnover of labour and, therefore, the workers were not entitled to the redundancy provisions of the relevant award. This view was supported by a Commission Full Bench on appeal in a decision dated 21 February 1992 (Print K1872).

The Commissioner accepted that the terminations of employment were due to seasonal downturn and that the employment history of the employees concerned showed that the `employment pattern has been accepted as normal practice at this establishment'. The test applied by the Commissioner was whether there was `no expectation of continued employment with the consequential rights that accrue with continued employment'.

Following NUW and Queensland Wool Centre, my view is that an employer will only be exempt from the redundancy provisions of the Award on the grounds of ordinary and customary turnover of labour if it can be shown that the employee should have had no expectation of continued employment. This may be by either an express or implied term.

The fact that an employee should have no expectation of continued employment is most easily shown by an express term in a letter of appointment or contract of employment stating that the employment is linked to a particular contract, and that loss of the contract will result in the termination of employment.

Alternatively, a term may be implied where the employee, by virtue of the industry in which they work, knows that their employment is intended to be of limited duration (see Hercus and Short). It is this point that becomes problematic for the industry in the current cases. In my view, it is not sufficient for `the industry' at a peak or company management level to treat loss of employment due to the loss of a business contract as ordinary and customary turnover of labour without having regard to the state of knowledge of the employees involved.

Unless it can be shown that the employees were expressly told at the time of appointment, or it can be shown that `it goes without saying' that employment ceases with the loss of contract, then it would, in my view, be unreasonable to conclude that the employees should have had no expectation of continued employment and that therefore the redundancy provisions do not apply.

I appreciate that this view represents a change to the current practice of the industry, which has only recently become Federally regulated. I add the caveat that to my knowledge this issue has not been tested in the Federal Courts, and I am open to alternative views should the Council or individual members seek to put them.

I am happy to discuss this matter further.

Yours sincerely

BRIAN TROY
Director"2

The Union submitted that the letter set out a reasonable test and the Commission ought to have regard to it in this case.

"The test being that did the employees have a clear understanding either by an expressed knowledge or by some general knowledge that there was no way their employment could continue if the contract was terminated."3

The Union sought for each of the six employees a severance payment of two weeks pay for each year of service plus an additional two weeks notice, if relevant.

The Union brought forward three of the six employees as witnesses and they all made the following key points:

• They were unaware and had not been informed that their employment was limited to the Company contract under which they were working at any time.

• Based upon their experience, they expected to be transferred to work under another Company contract upon the cessation of one Company contract. They had been employed continuously.

• They agreed that security industry contract tendering was a highly competitive business.

• Two of the employees agreed that it was reasonable for an employer in the security industry to have a policy of `no contract, no job', but, were unaware that such a policy applied to their employment.

The Union produced as an exhibit a copy of a letter4, dated 1 November 1995 from the Company to one of the witnesses advising that he would continue to be employed "as a full-time security officer". The witness had said that he had been a permanent employee of the Company.

Later the Tasmanian Chamber of Commerce and Industry Limited (the Chamber) representing the Company, brought forward the Company's State Manager for guards and patrols, Mr John Alexopoulos, as a witness. Mr Alexopoulos said that, as far as he was concerned, the only difference between a casual employee and a permanent employee was that the permanent employee accrued annual leave and long service leave whereas a casual employee received all benefits in cash. He agreed that, to him, a permanent employee was the same as a full-time employee. He also confirmed that in Tasmania the Company employed 65 casual employees and two permanent employees not counting the six employees.

The Chamber also brought forward as a witness the Company's Group Personnel Manager in Australia, Mr Ian Hawthorn, who said that in the security industry Australia wide, when a contract was lost, one of three alternatives was taken; either the new contractor took up the displaced employees or, if there was alternative work available (which in fact was the Company's policy), that was offered or the displaced employees were terminated from their employment.

The Personnel Manager also said that he had always understood that, the security industry being contract based, the loss of employment as a result of the loss of a contract was a case of `ordinary and customary turnover of labour' and hence redundancy payments were not due. He said that historically the Company had not advised its employees formally that their employment would be terminated when a contract ended; the matter had never before been an issue.

The Personnel Manager said that the Company did not provide for severance payments in its relevant costings nor did the main companies he knew of in the security industry. If such payments were to be required he said costs to the customer would rise significantly.

In its general submissions the Union referred back to the contents of the letter in Exhibit A and quoted it in support of its argument against the claim that no severance payments were due because the termination of the employment of the six employees was part of the ordinary and customary turnover of labour:

"Unless it can be shown that the employees were expressly told at the time of appointment or it can be shown that `it goes without saying', that employment ceases with the loss of contract, then it would, in my view, be unreasonable to conclude that employees should have had no expectation of continued employment and that therefore the redundancy provisions should not apply."5

The Union pointed out that almost all the employees of the Company had been classed as casuals despite the fact that many of them were clearly full-time employees. The Union also submitted that even though there had been a change of ownership or administration in the Company there had been no notice to the employees that the status quo was to change, in fact the Company had sought specifically to reassure the employees that nothing had changed. The Commission was asked by the Union to treat the six employees in the same was as any other workers who had been laid-off because of lack of work and grant them severance pay.

In response to the Union's claims and submissions the Chamber relied primarily on the "fundamental exemption for the payment of redundancy" based upon the term "the ordinary and customary turnover of labour", which was decided in the original Federal Termination, Change and Redundancy Case 1984 decision6 which specifically said:

"Nevertheless it was not our intention that the redundancy provisions should apply to the ordinary and customary turnover of labour."

The Chamber said that the nature of the industry was crucial in testing whether or not there had been "the ordinary and customary turnover of labour". The way a company carried on its business was also a crucial test, the Chamber said.

The Chamber said that the security industry was contract driven and hence what the Company had done in this case was no different to what it did in every other area in Australia and what all other major security firms in Australia did.

The Chamber would not accept as relevant the Union's submissions that certain of the employees concerned had been continuously employed and had moved from place to place when contracts had been lost. The point was that their employment had ceased with each loss of contract and they were then offered other employment which had been accepted.

A number of previous cases were quoted by the Chamber as authorities in support of its contention that when a contract ended so did the employment. The Chamber canvassed 14 assertions which it claimed were upheld by the authorities quoted.

The Chamber dismissed the letter relied on by the Union as of little weight and said that the two cases quoted in it were not comparable to this case.

Decision

It is my decision on balance in this particular case that the six employees ought to receive redundancy payments.

The primary reason is the fact that the six employees were employed by the Company, in particular Wormald Security, over a significant number of years and on the evidence of three of the six employees, which I have accepted, they were transferred from one job to the other without reference or notice to the effect that, on the loss of the relevant contract, their employment had been terminated and they were being offered the opportunity of taking up another appointment. There was no evidence to show that the six employees were employed for the term of any particular contract. The Company's letter of 1 November 1995, advising one of the applicant employees that he was employed "as a full-time Security Officer" serves to confirm my assessment.

This is not to say that I do not accept the concept of the ordinary and customary turnover of labour: had the Company properly notified each of the six employees from the beginning that their jobs were contingent upon the retention of the relevant contract I would have upheld the Company's submissions.

I do not accept that the precedent cases relied on by the Company are apposite to the circumstances of this case. All except one were New South Wales cases prosecuted under the detailed provisions of the Employment Protection Act 1982 of that State whereas this case is to be judged primarily on the standards set by a full bench of this Commission in Tasmanian Trades and Labor Council to vary the Retail Trades Award re job protection, termination and change7 (the 1985 State case).

In any event a close reading of each of the NSW cases quoted by the Company makes it clear that this matter needs to be assessed on its own facts and merits which was precisely the dictum arrived at in the 1985 State case.

The first case, Shop, Distributive & Allied Employees' Assn (NSW) & Ors -v- Countdown Stores & Ors.8 The Company, relying on that decision made the following submission:

"Some of the facts; the Industrial Commission of New South Wales specified categories of cases of redundancy which attract severance pay as those arising from adverse economic circumstances, particularly economic recession, technological change and company restructuring and takeover. Excluded from these categories was the case of a termination arising from a general turnover of labour which does not normally attract severance pay.

The Commission observed that even in times of economic prosperity, employees have been dismissed because of seasonal shifts in markets, loss of contracts or changes in contracts not relating to recession. It further observed that if redundancy or severance payments applied generally to them, a significant change would apply to the turnover of labour generally. The hearing said this would involve a major shift in the principles normally applied by this and other industrial tribunals to entrenchment situations."9

I think it is advisable to quote directly from that decision which will confirm the Company's submission, but, I believe it still does not cover the circumstances of the present matter:

"There is of course in industry and always has been a general turnover of labour. It has been customary for employees' services to be dispensed with because it is the view of management that they are in some way less than satisfactory employees, not appropriately skilled, not appropriately motivated, unreliable or exhibiting other forms of unhelpful conduct in an industrial context, but not amounting to misconduct. Many employees, particularly in the building construction, contracting and sub-contracting industries are employed on terms which contemplate intermittency in employment. Provisions for compensating for holidays and annual leave by making an allowance in the calculation of hourly or weekly rates of pay are often made. Many awards contain a specific factor to compensate for `following the job', ie., for intermittency in employment when one job cuts out and another has to be obtained. Payments on severance would appear to be inappropriate to these circumstances and may contain an element of double counting. (See Australian Workers' Union -v-. Victorian Employers Federation (Print D6429).)

Similarly employees have at the height of economic prosperity been dismissed because of seasonal shifts in markets, loss of contracts or changes in contracts not relating to recession, changes in model or product, shifts in marketing emphasis and many other day to day causes removed from the present recession and its mounting toll of unemployment. All these employees are dismissed, almost invariably upon notice. If redundancy or severance payments applied generally to them a significant charge would apply to the turnover of labour generally. This would involve a major shift in the principles normally applied by this and other industrial tribunals to retrenchment situations. These types of dismissals contrast with dismissals which do not arise in any way from the behaviour of the employee or from ordinary changes in the incidents of employment, but where the employee is dismissed on a collective basis along with others and where the reason for the dismissals lies in the force of adverse economic circumstances, restricting employment opportunities and resulting in collective redundancies. Dismissals arising out of technological change or out of major company restructuring have similar characteristics.

I am not aware of any system which loads an ordinary and customary turnover of labour with a significant costs burden in relation to severance as such, or where the object of remedial legislation cannot be fairly described within the three classifications of retrenchment to which I have referred. I would therefore require to be affirmatively persuaded by clear language that it is the intention of this statute to impose upon almost all dismissals, regardless of cause, a costs burden in the midst of the worst economic recession in the last 50 years."10

There was one other short reference from that case which sheds light on the present matter, at the bottom of page 278, which is one of a number of exemptions (from liability) specified in the NSW Act as available to employers:

"(viii) An employer does not have to file a s. 7 or s. 8 notice where under reg. 5(b) of the Employment Protection Regulation 1983, an employee was at the time of his engagement notified that the engagement was for a specified period of time or for specified task or tasks."

Significantly, in the present matter the six employees were not notified that their engagements were for a specified period of time.

The second case, Linde (Australia) Pty Ltd v. Winkler11, related to the building industry and inter alia the following points were made:

• "... (iii) Where the award or agreement contains a specific provision for compensation for lost time because of the intermittent pattern of employment characteristic of the industry so as to raise a presumption of some double counting may occur, it is unlikely that severance pay will be appropriate. ..."12
• "... (iv) Where there is no such provision for lost time compensation identifiable, where the employment is for more than one year and does not fall within reg. 5, [see below] then severance pay may be payable if the dismissal is shown to arise out of the economic recession.

  As most dismissals will in any event take place at the termination of a contract, care should be taken to distinguish between dismissals arising because of such contract termination and dismissals co-incident in time but in the nature of retrenchment because of a downturn in the industry consequent upon economic recession.

  (vi) The longer an employee who has been employed on successive sites without any break in employment continues in that employment, the stronger will be the inference that his dismissal, occurring at a time of economic recession, results from the economic recession and downturn in the industry so as to entitle him to severance pay and not mere job termination. ..."13

• "... Regulation 5 of the Employment Protection Act 1983 provides that-

  Sections 7 and 8 of the Act do not apply in relation to the termination or proposed termination of employment of-

  (b)   an employee-

  (i) who, by the terms of the employee's engagement that were notified to the employee at the time of his engagement is engaged for a specific period of time or for a specified task or specified tasks; and

  (ii) whose employment is not terminated before the expiry of that period or the completion of that task or those tasks. ..."14

Importantly, it was found in that case that Winkler had only been employed for one contract after which he was terminated and therefore a redundancy payment was not due. The circumstances were quite different in the matter before me.

The third case, Lawrence Burnett Pty Limited -and- Robinson and Ors15, related to a group of employees who had been put off work because the contract upon which they had been working had not been renewed. There was no evidence that they had worked on other contracts nor was it reported whether or not they had been notified as to the length of their engagement and for these two reasons I do not accept that case as apposite to the present matter.

The fourth case, Brown Gouge Laundry and Dry Cleaning -and- Rogers & Ors16, was also not `on all fours' with the present matter in that the employees had not been transferred around a number of contract sites, there had been only one site and further the whole business (in Wagga) had been closed down which also was not the case in the present matter.

The fifth case, Spotless Catering Services Limited v Daley & Ors17, was also different in that the employer, Spotless Catering, decided to quit the contract because a loss was being incurred at the site. Prior to that, the employees concerned had declined to take an offered transfer, although little significance was seen in that. In the decision in the case statements by Fisher P in Crocker's case were quoted and are repeated here, in part, as relevant:

"In Crocker's case (at 277, 290, Fisher P Stated:

...

It is clear that not everybody in employment has a reasonably based expectation of continued employment. It tends to be something that grows with time. While any decision about time must be arbitrary it seems to me that a reasonable provision would exempt from the provision of severance pay any conventional employment which had not continued for at least one year.

...

My conclusions based on evidence and argument are as follows-

(i) the primary intention of the Employment Protection Act is to provide machinery to compensate for hardship whereby severance payments can be directed to employees being dismissed because of circumstances beyond their control, predominantly the present economic recession, but including technological change and company reconstruction and takeover.

(ii) it is not acceptable that employees in New South Wales should be dismissed in these circumstances with little notice and no severance payments.

..."18

Again it is significant that, in the present matter, the six employees, in each case, were employed for well in excess of one year.

The sixth case, Federation of Industrial, Manufacturing and Engineering Employees, Tasmania Branch -v- Nipper Cleaning Service Pty Ltd19 the only non-NSW case, was a decision by this Commission, as presently constituted. It was clearly different from the matter presently before the Commission for a number of reasons:

• The employees always worked on the same site doing the same duties, but, at times under different employers. In the present case there was only one employer and the employees were transferred from job to job.

• The Commission was satisfied in that case that "... the employment of the cleaners at Comalco by the company, or any other similar or replacement company, ceased at the end of each contract ...." In the present case I am not satisfied that the employment ceased at the end of each contract under which the six employees had worked.

• It was found in that case also that the expectation of on-going employment (a key element in redundancy matters) did not exist. In the present case I am satisfied that a clear expectation of continued employment by the six employees did exist.

In the context of the cases quoted in this case, the Director's letter20 (with which I do not disagree) and the facts of this case, it seems to me that the parties and their interstate counterparts ought to review their general attitudes and policies towards the standards which apply (or ought to apply) to the tenure of employment in the security industry.

Accepting that a full-time worker is one who works around 38-40 hours per week, it is now well established that an employee who is not a casual or a temporary employee, may not have his or her employment terminated by the employer unless there is a specific, fair and reasonable basis for doing so: this includes a part-time employee*.

In this context it is difficult to accept that an employee specifically employed for a contract exceeding twelve months in duration is a temporary employee. It is also difficult to accept that a reputable company would not, as a matter of policy, seek to foster the continued employment of a reliable and efficient worker, albeit on the basis of the availability of contracts successfully tendered for. It seems to me that the remarks of Fisher, P in the Linde (Australia) Pty Ltd v Winkler Case, previously quoted, are pertinent in this situation and that the security industry is more alike in nature in this respect to the building industry than seasonal or intermittent industries.

On the basis of these immediately preceding remarks, if redundancy provisions were prescribed in an award of the Commission it is not hard to imagine that employees covered by that award would be entitled to redundancy payments and the only exceptions would be casual employees and those employed for less than twelve months. Generally speaking the "ordinary and customary turnover of labour" factor would only apply to those whose periods of employment were for less than twelve months duration on each occasion.

I accept the Union's request that the redundancy payment be based upon two weeks pay for each year of service or part thereof, but, not a payment for notice.

Order

In accordance with the powers vested in me under Section 31(1) of the Act and so as to settle this dispute I hereby order that, within 21 days from the date hereof, Chubb Australia Limited (the Company) pay to each of the employees listed hereunder the amount of wages the employee would have received had he been employed from the date of termination of his employment for a period calculated by multiplying the length of his employment with the Company in years and part thereof (to the nearest fraction in twelfths) by two weeks:

P A Imlach
COMMISSIONER

Appearances:
Mr K O'Brien, with Mr D O'Byrne (31 January 1996), on behalf of the Australian Liquor, Hospitality and Miscellaneous Workers Union (Tasmanian Branch)
Mr S Gates from the Tasmanian Chamber of Commerce and Industry Limited, with Mr N Hunt, on behalf of Chubb Australia Limited.

Date and place of hearing:
1996
January 31
February 22
March 11
Hobart

1 Exhibit A.
2 Ibid.
3 From transcript, O'Brien, p6, lines 8-10.
4 Exhibit A2.
5 From transcript, O'Brien, p79, lines 41-45.
6 8 Industrial Reporter 34 [AILR 256].
7 T125 of 1985.
8 7 Industrial Reporter 273 [29 July 1983].
9 From transcript, Gates, p90, lines 21-32.
10 From Shop, Distributive & Allied Employees' Assn (NSW) & Ors v. Countdown Stores & Ors, [IR 7, pp 277-278], July 1983.
11 1984 AILR 137, Vol.26, No.8.
12 From ibid.
13 Ibid.
14 Ibid.
15 1984 AILR 216, Vol.26, No.12.
16 1987 AILR 418, Vol.29, No.22.
17 49 Industrial Reporter 434 [6 May 1993].
18 From ibid.
19 T4044 of 1992 [11 January 1993].
20 Exhibit A.

*Apart from the full-time reference, the terms casual, temporary and part-time used in this paragraph are not terms specific to a particular award, they are used in the strict context of their literal or dictionary meaning, but, I believe that in no way lessens their industrial significance or meaning.