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T9661

 

TASMANIAN INDUSTRIAL COMMISSION

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

Adrian Kelp
(T9661 of 2001)

and

Lloyds North Pty Ltd

 

COMMISSIONER T J ABEY

HOBART, 13 August 2001

Industrial dispute - severance pay in respect of termination as a result of redundancy - consideration of reasonable alternative employment - found that entitlement to severance pay forfeited - employer offer confirmed

REASONS FOR DECISION

On 6 July 2001, Adrian Kelp (the applicant) applied to the President, pursuant to Section 29(1A) of the Industrial Relations Act 1984, for a hearing before a Commissioner in respect of an industrial dispute with Lloyds North Pty Ltd re severance pay in respect of termination as a result of redundancy.

On 9 July 2001 the President convened a hearing before myself at the Supreme Court, Cameron Street, Launceston to commence at 10.30am on Wednesday 11 July 2001.

When this matter came on for hearing Mr S Brown, a solicitor, sought and was granted leave to appear for the applicant. Mr D Durkin, together with Mr P Molineux, appeared for the employer.

Following preliminary submissions the hearing was adjourned into private conference, with the Commission, in an effort to find a resolution to the dispute. This proved to be unsuccessful and as a consequence the matter proceeded to hearing.

When the hearing resumed on 23 July Mr S McElwaine appeared in the place of Mr Brown.

Mr Kelp commenced employment with Lloyds North in January 1988 as an apprentice diesel fitter. He was employed for some 10 years as a diesel mechanic field service person and then had three years looking after industrial services maintenance at the Bell Bay depot.

On 4 December 2000 Mr Kelp was appointed as Fleet Maintenance Co-ordinator. This was a management position attracting a salary of $41000 pa which included a component to cover "... the possible need to work extended hours".1 A vehicle with full private use together with a mobile phone was also provided.

In late June 2001 the employer learned that the Gunns Waverley woodchip mill was to close in nine days' time. According to Lloyds North General Manager, Mr Molineux, this represented 15% of the Company's total business. A direct result of this loss of business was the redundancy of approximately 10 permanent and casual positions.

In an effort to reduce overheads in line with the reduced revenues, Mr Molineux said that the decision was taken to close the maintenance workshop. A direct consequence of this is that the position held by Mr Kelp became redundant, with divisional managers being responsible for their own maintenance.

On 28 June Mr Molineux met with Mr Kelp and advised that his position was redundant and offered him his previous position at Bell Bay. Upon inquiring as to the alternative redundancy package Mr Kelp was provided with a document titled "A Kelp - Potential Termination Package as at 30/06/01"2. Amongst other components this provided for a redundancy payment equivalent to eight weeks' pay. The eight weeks' "cap" was consistent with provisions in the relevant federal award covering truck drivers, a number of whom were also being made redundant. In his management role Mr Kelp was not subject to that award and in all probability was award free.

Mr Kelp advised Mr Molineux that he considered the package to be inadequate and that he would be seeking [legal] advice.

There is some uncertainty as to when the next meeting took place. Mr Kelp was under the impression an answer was required the next day. Mr Molineux said that he had advised Mr Kelp to think about things carefully and, if necessary, take some time off. The meeting took place on either Friday 29 June or Monday 2 July and nothing material turns on which day it was.

At that meeting Mr Kelp said he advised of his position in the following terms:3

"I told him that I would be happy with redundancy but we just needed to look at the amount of the package to make sure that it was okay."

It is common ground that Mr Molineux did not then or at any later stage agree to improve the redundancy offer. Similarly, Mr Kelp did not at any stage indicate acceptance of the eight weeks' cap.

Either at this meeting or later the same day Mr Molineux offered Mr Kelp the position of Transport Manager. This position had suddenly become available as a consequence of an unexpected resignation. This was a management position and would have been a promotion for Mr Kelp.

On 4 July Mr Kelp advised Mr Molineux that on the basis of legal advice, he was seeking a redundancy payment of two weeks for each year of service as well as the four weeks' notice.

On 5 July Mr Molineux sent a facsimile to Mr Kelp expressed in the following terms:4

"Subject: Employment options

Further to our telephone conversation Wednesday afternoon 4/07/01 the following is my recollection of the issues discussed and your response.

LN's first offer of alternative employment was returning to the mechanics position at Industrial services Bell Bay. You indicated that you would not want to return to a mechanics position at LN.

The second employment position was the Transport Managers position being vacated by Robbie Maher. Your knowledge of LN's equipment and operations would be an asset in this position. You indicated that this position was not acceptable as you would be called upon by others for mechanical advice and therefore be performing two positions. I am sure that this can be managed and is only a matter of people adjusting to the new structure.

You stated that as the "ball was rolling" with other opportunities through lots of positive phone calls making offers of employment including one agency that contacted you this week asking what package you would like? You also indicated that you would like to take a holiday before commencing another job.

I commend you on your initiative and no doubt your reputation holds you in good stead.

The offer of redundancy was made in good faith however given the fact that we have attempted to mitigate the redundancy by offering the above positions the offer of redundancy will be withdrawn on Monday if not accepted.

Should you wish to discuss the offers made please contact me on 6344 7344.

Yours sincerely,
Philip Molineux
General Manager"

At approximately 1.00pm on 6 July Mr Kelp telephoned Mr Molineux to further discuss the redundancy issue and certain housekeeping matters prior to Mr Kelp's cessation of work later that day. Mr Kelp finished work at approximately 4.30pm. He did not receive a redundancy payment.

It is clear from the evidence that Mr Kelp was well regarded by Mr Molineux who was anxious to keep him within the Company.

This matter raises a number of questions which need to be determined. They are:

1. Does the offer of reasonable alternative employment remove or modify an obligation which might otherwise exist on an employer to make redundancy payments?

2. If the answer to 1 above is 'Yes', did either of the two positions offered to Mr Kelp constitute a "reasonable offer of alternative employment"?

3. Depending on the answers to 1 and 2 above, should the Commission interfere with the redundancy package offered?

I now turn to deal with each of these issues.

Alternative Employment and Redundancy Payments

Mr McElwaine referred to Article 12 of ILO Convention 158 which states:

"1. A worker whose employment has been terminated shall be entitled, in accordance with national law and practice, to:

(a) a severance allowance or other separation benefits, the amount of which shall be based inter alia on length of service and the level of wages, and paid directly by the employer or by a fund constituted by employers' contributions; or"

He submitted that there is nothing in the Convention which says that employees are obligated to mitigate their loss in a redundancy situation or accept some alternative form of employment.

There is of course no longer any reference to the Convention in the Act and the relevance of this Article in the instant matter is at least questionable. Leaving that question aside, the preamble to the Article refers to a "worker who has been terminated". In this matter Mr Kelp was offered two alternative positions, both of which were declined. In effect he chose to terminate his own contract of employment. Whether or not he had a realistic alternative is another question, but suffice to say I find the Convention unhelpful on this issue. I consider the contemporary decisions of the Commonwealth and State Industrial Tribunals to be far more persuasive.

The basis for most federal award prescriptions on redundancy is the Full Bench decision in the Termination, Change and Redundancy Case5. In this decision the Full Bench quite deliberately adopted a prescriptive general standard as distinct from the ad hoc approach which had hitherto applied. Nonetheless the Bench did recognise that the efforts of employers in finding alternative employment was a relevant consideration. In the Supplementary Decision6 the Full Bench inserted the following provision in the general standard.

"An employer, in a particular redundancy case, may make application to the Commission to have the general severance pay varied if he/she obtains acceptable alternative employment for an employee."

In contrast to the prescriptive approach of the AIRC, this Commission has, as a consequence of the Full Bench decision in T125 of 1985, consistently looked at each case on its merits.

Mr Durkin referred me to the Fosseys7 case as an example of the Commission examining the particular circumstances on a case-by-case basis. In that particular case the efforts made by the employer to secure alternative employment was a relevant consideration. The President did, after a consideration of all the circumstances, go on to award a severance allowance. He did however make the following observation:8

"Accordingly I consider the commitment made by the company to assist in finding alternative employment, whilst commendable, is not sufficient to replace the act of providing reasonable alternative employment. It does however influence me not to apply the rate of redundancy payment determined, for example, by Commissioner Imlach in the matter referred to earlier where the company had made little or no effort to assist the employee who had been retrenched."

In this same decision Westwood P referred to a number of decisions whereby the efforts, or alternatively, lack of effort, on the part of an employer in finding alternative employment had been a relevant consideration in determining the question of severance payments. These decisions included T2410 of 1990, TWU and Cascade Brewery Ltd; T1218 of 1988, SDAEA and Fotheringhams; T4204 and T4223 of 1993, SDAEA and Fosseys; T4613 of 1993, AWU-FIME and AMASCU and Pasminco Metals-EZ; and T1676 of 1988, FCU and Tasmaid Foods Pty Ltd.

The President concluded:9

"It is clear that where reasonable efforts have been made to ameliorate the impact of redundancy the Commission has taken that into consideration."

Mr McElwaine referred to the decision of the Industrial Relations Court of Australia in Hawkins v Commonwealth Bank of Australia10. Whilst this decision lends some support for Mr McElwaine's contention, on careful reading it can be distinguished on the facts. The successful appellant in this case had been redeployed into a management position of significantly lower status and through his own volition had secured alternative employment outside the bank at the time he submitted his resignation. Importantly, the judgement involved a tight legal construction of a specific provision in the relevant Agreement which, it was found, effectively gave either side the unilateral right to declare, following a trial period, the alternative position to be unsuitable.

Mr McElwaine also referred to the decision of the NSW Industrial Commission in De Lisle v Rose Bay Private Hospital11. I am not sure how this authority assists Mr McElwaine's position in that both at first instance, and on appeal, the Commission declined to award a severance payment on the grounds that the applicant had, of her own volition, sought and obtained an alternative position within the same corporate group.

Having regard for these authorities, I am satisfied that industrial tribunals have consistently found that the efforts of an employer in finding alternative employment is a relevant consideration in determining severance pay questions. The question of whether an offer is reasonable can of course only be determined on the facts on a case-by-case basis. It naturally follows that an employee cannot be compelled to accept an alternative position, however "reasonable" the offer might be. In doing so, however, it would be wrong for the employee to assume that a severance payment which might otherwise be available would continue to be accessible in the absence of agreement from the employer. The over-arching objective should be to maintain employment wherever possible rather than the creation of financial windfalls.

Did Either of the Positions Offered Constitute a Reasonable Offer of Alternative Employment?

I turn firstly to the maintenance position at Bell Bay.

This position was "on the tools" and certainly could not be considered a management role. According to Mr Molineux, Mr Kelp had earned $37500 in this role in 1998/99 and $41500 in 1999/00. These amounts included a considerable amount of overtime although the actual hours involved were probably not significantly different from Mr Kelp's fleet maintenance role. A van was provided and, within reason, was available for private use.

Mr Kelp indicated that the principle reason for not accepting the position was "I felt that it was a demotion - a step down from what I was doing".12 Mr Molineux agreed that it could be seen as such [a demotion].

In financial terms the position at Bell Bay was not significantly different from the fleet maintenance role. It did, however, represent a significant step backwards in terms of status. Mr Kelp had recently been appointed to a management role and his career was ahead of him. In the circumstances his reluctance to "go back on the tools" is understandable.

With the possible exception of the 5 July fax13, the evidence suggests that Mr Kelp at all material times had the choice between the Bell Bay position or accepting redundancy. In any event, I am satisfied that Mr Kelp advised Mr Molineux that he would be taking the redundancy option [albeit with the quantum unresolved] well prior to the 5 July fax.

In all the circumstances I conclude that it would be quite unreasonable for Mr Kelp to forfeit a redundancy entitlement by reason only of the fact that he declined the Bell Bay option.

The offer of the Transport Manager arose as a consequence of the unexpected resignation of the previous incumbent. It was made almost immediately after Mr Kelp had indicated that he would not be accepting the Bell Bay position. Shortly after making the offer Mr Molineux prepared an advertisement for internal and external use. It read as follows:14

"POSITION VACANT

Position Vacant Transport Manager - NE & Sthn Region
   
Location Launceston
   
Reporting to General Manager
   
Operations Nth East and Southern Transport Fleet including
  • Woodchip transport

  • Log transport

  • Castrol distribution (Launceston)

Responsibilities Effective management of the transport and warehouse operations, including efficient work practices, customer relations, fleet maintenance, business development, risk management and personnel.

Qualifications Minimum 5 years experience in a supervisory or management position in the transport industry.

      Computer experience is preferred.
      Good communication skills are essential.
      Good mechanical knowledge.

Remuneration Negotiable dependent upon qualifications and experience.

      Fully maintained Company vehicle.

Applications should be made in writing enclosing a copy of your resume. Applications close 15 July, 2001.

Please sent your application to:

The General Manager
Lloyds North Pty Ltd
PO Box 357
Prospect Tas 7250"

The evidence of Mr Molineux was that the position would be seen as a promotion with a salary in "a range of $45000 base upwards"15.

In his evidence Mr Kelp expressed a number of concerns and apprehensions about his suitability for the position. These concerns and Mr Molineux's response can be summarised as follows:

Mr Kelp was concerned that other staff would continue to approach him on maintenance issues. Mr Molineux believed that this could be managed "... and this is only a matter of people adjusting to the new structure".16

Mr Kelp said that he did not have any experience with risk management. Mr Molineux said that Mr Kelp had recently completed a Responsible Officer training course as one facet of an overall management training program.

It was common ground that Mr Kelp did not have experience with warehouse operations. Mr Molineux indicated that they were not so sophisticated that they couldn't be learned.

Mr Kelp said that his computer experience was very limited. This was acknowledged by Mr Molineux who said that was also an issue with the current manager. He said:17

"We're going through a program at the moment with all our mangers to train them with computers, so it's just another competence for the guys to learn."

Mr Kelp said that he did not have the minimum 5 years' experience in a supervisory or management position in the transport industry. The evidence of Mr Molineux on this question was as follows:18

"But when you did advertise the job, put it on paper, do you feel that that set of criteria would have filled Mr Kelp's abilities?............ Yes, certainly. In fact, what we're looking for now, because we have advertised internally and externally with that role, the sort of background of people that I'm looking for from outside the same sort of things, good mechanical knowledge, good organisational skills, preferably they've had some supervisory or management experience.

Wasn't that five years?............ That's right.

Mr Kelp wouldn't have that?............ No, he wouldn't have had but I think given the fact that he had been with the company for 13 years and does know the jobs in great detail - a lot of learning experience that other people coming from outside without that, he already would have an advantage."

At the time the offer was made Mr Kelp had not set in train any alternative arrangements which might have been prejudiced by his acceptance of the position. According to Mr Kelp there had been some unsolicited indications of external job offers which might be forthcoming, but nothing had materialised. Mr Kelp had not taken any steps of his own volition to find alternative work.

Mr McElwaine submitted that "the severance payment is to compensate the employee for the length of loyal service that they had with the employer"19. This in a sense is likening redundancy to an accrued entitlement such as long service leave. This, in my view, is a misconstruction or, at best, an over simplification of the intended purpose of redundancy payments. The leading authority on this question is the Termination Change and Redundancy case which said:20

"We prefer the view that the payment of severance pay is justifiable as compensation for non- transferable credits and the inconvenience and hardship imposed on employees."

In the instant case, had the position been accepted, there would of course have been no loss of accrued entitlements. Nor, indeed, was there any evidence of potential hardship or inconvenience.

The issue therefore is whether or not the offer of alternative employment was reasonable.

I accept that there are some gaps in the position description outlined in Exhibit A3 and the experience and skill set of Mr Kelp. That, of course, is not unusual in the normal run of matching job applicants with available positions. At the relevant time Mr Kelp was in a management role and the offer was that of another management role at the same location. Mr Molineux's explanations as to how he envisaged these "gaps" would be addressed through additional training was entirely plausible and reasonable. On the question of the minimum requirement of five years' management or supervisory experience, Mr Molineux explained that Mr Kelp's extensive experience with the Company would give him an advantage over an outside applicant.

In an environment whereby redundancy was not an issue, an offer such as this could only fairly be seen as a promotion opportunity.

I am quite satisfied that the offer was genuine and not a device to avoid redundancy obligations. On this point my view is strengthened by the fact that Mr Molineux indicated that the offer was still open at the time he gave evidence to the Commission.

Mr Kelp was perfectly entitled to pursue the matter of the redundancy quantum. Based on the decision of Fellows and Lloyds North21 whereby a redundancy payment of two weeks for each year of service had been offered to a management employee, Mr Kelp's expectation of an improved package was not without foundation.

The quantum of a redundancy package is of course only one part of the equation. I have already found that the offer of reasonable alternative employment will generally negate or reduce an obligation to make redundancy payments. Each case will of course turn on its own facts and in this matter I have no hesitation in concluding that the offer of the Transport Manager position was not only reasonable, but indeed attractive.

Mr Kelp was of course under no obligation to accept the offer. However, in declining the position Mr Kelp, in my view, forfeits any entitlement to a redundancy payment of any quantum.

During his evidence Mr Molineux indicated that the earlier offer of eight weeks' redundancy pay was "still on the table".22 Mr Molineux was probably motivated by a genuine high regard he held for Mr Kelp coupled with moving feast nature of events during the last two weeks of Mr Kelp's employment. In the circumstances I am prepared to convert this offer to an order, but stress that, but for Mr Molineux's gesture, I would not have felt obliged to do so.

ORDER

Pursuant to Section 31[1C] of the Act I hereby order that Lloyds North Pty Ltd pay to Mr Adrian Kelp, 57 North Lilydale Road, Lilydale, Tasmania 7268 an amount of six thousand three hundred and seven dollars [$6307] by way of a redundancy payment, such payment to be made within 21 days of the date of this decision.

 

Tim Abey
COMMISSIONER

Appearances:
Mr S Brown (11/7/2001) and Mr S McElwaine (23/7/2001) for Mr A Kelp.
Mr D Durkin, with Mr P Molineux, for Lloyds North Pty Ltd.

Date and Place of Hearing:
2001
July 11, 23
Launceston

1 Exhibit A1
2 Exhibit A2
3 Transcript, para 175
4 Exhibit A4
5 Print F6230 2/8/1984
6 (1984) 9 IR 115
7 T6674 and others Westwood P 18/7/1997, p. 20
8 Supra, p. 22
9 Supra, p. 20
10 Decision No. 556/96 Lee, Von Doussa & Madgwick JJ 18/11/96
11 1197, 75 Industrial Reports at p. 93
12 Transcript para 400
13 Exhibit A4
14 Exhibit A3
15 Transcript para 1055
16 Exhibit A4
17 Transcript para 1010
18 Transcript paras 905 to 915
19 Transcript para 1460
20 Print F6230 p. 46
21 T8150 of 1998 Johnson DP 7/6/1999
22 Transcript para 1005