T9551
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TASMANIAN INDUSTRIAL COMMISSION Industrial Relations Act 1984 Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union and Incat Tasmania Pty Ltd
Industrial dispute - redundancies, short working time and other related issues - notice - severance payments - order issuedREASONS FOR DECISION (1) On 16 May 2001, the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU) applied to the President, pursuant to Section 29(1) of the Industrial Relations Act 1984, for a hearing before a Commissioner in respect of an industrial dispute with Incat Tasmania Pty Ltd re redundancies, short working time and other related issues. (2) This application was first listed for hearing on 31 May 2001. Mr S Carter, together with Mr J Noakes, who, at the time, were both practising solicitors, sought and were granted leave to appear for the employer. In subsequent proceedings, Mr G Geason appeared in place of Mr Noakes. (3) Mr G Cooper appeared on behalf of the AMWU. Mr B White and Mr K Harkens, CFMEU and CEPU Electrical Division respectively, sought leave to intervene. Leave was granted in both cases. (4) This application concerns a decision taken by the employer to implement what was at the time up to 100 involuntary redundancies. The applicant union and Incat are parties to the "Incat Tasmania Pty Ltd Agreement No. 1 of 1997"1 [the Agreement}. This Agreement is silent on the question of redundancy. Mr Cooper contended that the State Shipbuilders Award underpins the Agreement and on this basis the Commission has jurisdiction to hear the dispute. The employer did not contest this contention. (5) Mr Cooper submitted that the redundancy package offered by Incat was inadequate and attempts to enhance the package through negotiation had been unsuccessful. (6) Following preliminary submissions the hearing was adjourned into a private conference, with the Commission, in an effort to find a resolution to the dispute. Following further private meetings between the parties and a number of short hearings, it became apparent that the matter would need to proceed to a hearing. The substantive hearing took place on 19 November and 10 December 2001. By agreement between the parties, the hearing was brought to a conclusion through written submissions, the last of which was lodged with the Commission on 8 March 2002.This has resulted in a significant delay in the release of this decision. Chronology of Events (7) In January 2001 senior management conducted a series of "tool box" meetings with all Incat employees, attended by union delegates. Employees were advised of difficulties with sales and that cost saving measures, including a cut to overtime, would be implemented. (8) On 9 April the Chairman of Incat issued a memorandum to all employees in the following terms:2
(9) On 9 May there was a meeting between the company and AMWU officials. The AMWU were advised that Incat's bankers required a 20 per cent reduction in wage costs. This translated to 20 per cent of the workforce being made redundant, or in the alternative, implementation of a 32-hour, four-day working week. Incat's preference was the latter, as confirmed in a memorandum dated 10 May to all employees.3 (10) The 32-hour week proposal was put to a secret ballot and apparently supported by a majority of employees. It would appear that the unions initially supported the four-day week proposal, although it was made clear that it could only be implemented if the existing agreement was either varied, or alternatively, replaced by a new agreement.4 (11) For reasons known to the parties, this did not occur, and the 32-hour week proposal was effectively abandoned. (12) On 21 May a memorandum was sent to all employees offering a voluntary redundancy package.5 The offer was expressed in the following terms:
(13) It would appear that approximately 90 employees accepted this offer. (14) Throughout this period the union representatives continued to meet with Incat management. These discussions embraced, inter alia, a proposed redundancy agreement together with a range of alternative cost saving measures. (15) By memorandum dated 30 May the company advised that additional compulsory redundancies were necessary. The memorandum said in part:6
(16) The notice period and redundancy payments were in the same terms as the voluntary scheme referred to above. (17) By letter of same date the company advised the AMWU as follows:7
(18) It transpired that 92 employees were compulsorily made redundant, of which 42 were members of the AMWU. No information was provided as to whether any of the balance were members of the intervening unions. Mr Cooper suggested that the combination of the voluntary and compulsory schemes had resulted in a net reduction of approximately 250 from the workforce. (19) On 6 June Robert and Craig Clifford sent a memorandum to all staff expressed as follows:8
(20) At the time of hearing, there had been no further redundancies. The Claim (21) Mr Cooper submitted that the following be substituted for the payments made by the Company:
(22) Initially the claim was advanced on behalf of all employees made redundant on an involuntary basis. Mr Geason challenged the capacity of the union to represent former employees who were not members of the AMWU. In Mr Cooper's written right of reply, he indicated that the claim was only being pursued on behalf of AMWU members. The Tasmanian Economy (23) Mr Cooper submitted a considerable amount of material relating to the Tasmanian economy and the availability of alternative job opportunities for redundant Incat workers. This material and submissions can be summarised as follows:
(24) In rebuttal Mr Geason contended that the applicant had not called evidence from any of the redundant workers and, as a consequence, the Commission was being asked to draw inferences from the economic material presented, as to the impact on the individual workers made redundant. (25) This is a fair point and one that I have taken into account. On the other hand, where a large number of employees are involved [as in this case] it is questionable whether evidence from a small number of individuals adds a great deal of value. Such evidence is highly unlikely to be representative of the total as each individual's circumstances will almost certainly be different. Similarly, it is clearly not feasible to call evidence from all the workers involved. Whilst this Commission has very clearly opted to treat each redundancy case on its merits, it is quite impracticable to tailor outcomes to address each worker made redundant on an individual basis. (26) The only conclusion I draw from the above material is that the Incat employees were made redundant at a time when the Tasmanian economy was subdued, but a considerable way short of a basket case. This position is perhaps well summarised by the following extracts from Treasurer Crean's May 2001 Budget Speech:9
(27) Within this framework it is a reasonable assumption that some of the retrenched workers may have found alternative employment quite quickly. It is equally likely that others may have found alternative employment extremely difficult to find, and indeed may even remain unemployed as of today. There would of course be a range of outcomes between these two extremes. The Authorities (28) The leading decision in this jurisdiction on this subject is unquestionably the Full Bench decision in the Retail Trades Award [T125}.10 In this matter the Full Bench was asked to flow on an earlier decision of the Australian Commission [the TCR case],11 the effect of which was to insert uniform Termination, Change and Redundancy provisions in most federal awards. In terms of structure the claim sought at the time was similar to that paid by Incat, albeit, more generous at the lower end. (29) The Full Bench declined to adopt the Commonwealth approach and instead determined that each case should be determined on its merits. The Bench said:12
(30) And later:
(31) This Commission has consistently applied this approach in subsequent redundancy cases. (32) In terms of required notice, Mr Cooper referred to a number of decisions of various tribunals and courts.13 The common thread of these decisions is that tribunals will require extended periods of notice of varying lengths depending on the circumstances of each case. (33) Mr Geason submitted that under the case-by-case approach determined by T125, precedent has no part in the process. In particular, he dismissed the decisions referred to immediately above, in that they largely relate to unfair dismissal cases, in circumstances far removed from the Incat situation. I largely accept this latter submission. This group of decisions is of limited value to instant matter for the reasons outlined by Mr Geason. (34) I do not, however, accept that precedent has no part in the process. I readily acknowledge that under the case-by-case approach, no other decisions should be viewed as binding, but this does not necessarily mean that they should be ignored. The relevance of other decisions will of course depend upon a range of factors including geographic proximity, the degree of similarity in circumstances and the rigor of the arguments presented. (35) In this context there are two decisions relied on by Mr Cooper which I consider to be of some persuasive relevance to this case. These decisions are AWU-FIME and AMACSU v Pasminco Metals-EZ 14 together with ALHMWU and SDAEA v Fosseys [Australia] Pty Ltd.15 Both these decisions were confirmed on appeal. (36) In Fosseys, the employer had offered redundancy payments based on the NSW Retail Industry Redundancy Award. This award provided for a severance payment ranging from four weeks' pay for an employee with between one and two years' service up to 16 weeks' pay for an employee with six or more years' service. For employees over the age of 45 years, the payments ranged from five weeks' to 20 weeks' pay. (37) Much of the evidence in Fosseys related to efforts by the employer to find alternative employment and ameliorate the impact of redundancy. In reviewing earlier cases, Westwood P observed:16
(38) And later:
(39) In this case the President noted that five weeks' specific notice was given in addition to general notice and observed that this was "reasonable". (40) The President concluded with the following comments:17
(41) The President went on to award a severance payment of two weeks' pay for each year of service without upper limit. (42) In the Pasminco case, Gozzi C dealt with applications concerning the loss of 300 to 350 jobs at the Risdon smelter. Pasminco had in place an earlier agreement, which provided for redundancy payments in accordance with the following scale:
(43) Commenting on efforts made by Pasminco to ameliorate the impact, Gozzi C observed:18
(44) On the question of notice, the Commissioner said:19
Incat Submissions (45) Mr Geason's submissions, apart from those already referred to, can be summarised as follows:
(46) In relation to the T125 case-by-case approach, Mr Geason said:20
(47) The Commission does not sit in the managerial chair and tell companies how they must run their business. Rather, the commission has a supervisory role, and should only intervene if it considers the package to be harsh and unreasonable. Further, the union has failed to satisfy the onus falling to the applicant to substantiate their case. (48) The package paid was considered by the company to be firstly, fair and reasonable, and secondly, served the equally important commercial objective of not burdening the company with additional costs not faced by its major competitor, Austal Ships. (49) The package paid by Incat was precisely in line with that Austal workplace agreement. (50) According to the Proof of Evidence of Mr Roger Mabbott21, in 1998, Incat had built 26 of the 55 strong world fleet of fast catamarans. Leaving aside the two major monohull yards, three catamaran yards had survived the ebb and flow of the industry during the nineties. One of those, Kvaener in Norway, could be disregarded as a competitor in light of its company structure and product line. It follows that the major competitor to Incat was [and by inference, still is] Austal Ships. (51) According to Mabbott, the most significant component in the cost of construction of a ferry is man-hours utilised. The scale of demand for ferries is relatively small, perhaps 10 vessels per year, with a total capacity of builders of between 12 and 15 ships per year. Ferry operators are looking to cut costs and this has led to a trend towards chartering rather than outright purchase. (52) In this very difficult and competitive market, Incat needs every advantage it can, and it would be counterproductive to burden Incat with costs which are not borne by its major competitor. (53) The Commission should have regard to national practice in the assessment of redundancy payments. The impact of uncapped payments is to impose a higher cost burden and operate as a disincentive to the establishment of industry, and the retention of industry, and employment of Tasmanians. Tasmania risks becoming non-competitive unless redundancy payments in this state reflect national practice. (54) The package offered adequately compensates for the loss of non-transferable credits. (55) In relation to notice, regard must be had for all that went before the final step of actually implementing the redundancies. There had been a "partnering process" between the unions and the company, which had explored all alternatives to redundancies. That process had commenced in January 2001. (56) Mr Geason said: 22
Findings (57) Article 12 of ILO Convention 158 states:23
(58) It is therefore clear that, in the case of redundancy, there is a prima facie entitlement to a severance payment, notwithstanding that an award or agreement may be silent on the subject. In the instant matter, the question for the Commission is not one of whether a severance allowance should be paid, but rather, whether the package implemented by Incat was fair, reasonable and appropriate for the circumstances. (59) It is equally clear that this Commission, unlike the Australian Commission, has consistently pursued a case-by-case approach rather than a uniform award prescription. (60) A considerable amount of material and argument went to the question of the relevance of redundancy prescriptions in other areas. Mr Cooper referred to a number of presumably consent arrangements with a range of Tasmanian employers [see Exhibit A44]. I consider these agreements to be part of the industrial wallpaper. They are useful to have knowledge of, provide an indication of prevailing "market place" benchmarks, but are of limited persuasive value in the instant matter. I do not however, accept Mr Geason's contention that these arrangements be dismissed out of hand. (61) Mr Geason submitted that a primary consideration was the prescription applicable at Austal Ships, being Incat's main competitor. There is force in this argument and it carries some weight in the balance of all the considerations I have taken into account. This Commission should not lightly impose significant additional costs, which may result in a competitive disadvantage on one employer, unless there is very good reason to do so. (62) Against this, there was no evidence before me as to whether the Austal provision was one of genuine consent or whether the company applied it unilaterally. Similarly there was no evidence as to the comparability of the other labour cost structures applicable to the two companies. As such, the isolation of just one component has inherent shortcomings. Indeed, with industrial regulation now largely decentralised and enterprise specific, the relevance of events elsewhere has been significantly diminished. (63) I turn now to the question of notice. (64) The Incat package provided for a sliding scale of notice based on years of service, with an additional component for employees over the age of 45 years. It is a prescription consistent with s.170CM of the Commonwealth Act. Given the limited length of service of the majority of employees made redundant, the practical impact of this prescription was the payment of one or two weeks' pay in lieu of notice. (65) This Commission has consistently stated that, in redundancy situations, employers should give as much notice as possible. The Fosseys and Pasminco decisions confirm this position. (66) Taken in isolation of any other background factors, I would consider the notice given to the Incat employees to be quite inadequate. As a guide, I consider that where redundancies are predictable, an employer should endeavour to give at least four weeks' specific notice of termination. (67) There are, however, other factors to consider in the instant matter. So far as the Commission is aware, this is the first occasion whereby Incat has had to implement large-scale redundancies. The communication process between the company, the employees and the unions as to Incat's emerging difficulties began in January 2001. I am satisfied that this communication process continued at a high level over the ensuing months. I am equally satisfied that the unions played a particularly constructive role in communicating with the workforce and actively exploring alternatives to redundancy. (68) Of particular significance was the question of the four-day week as an alternative to redundancies. This was actively and constructively pursued by Incat, the unions and the employees. I accept that when this fell over Incat was faced with a crisis position and had to act quickly. In the absence of agreement, I am prepared to accept that the prescription adopted by the company was one that was open to it. (69) I would observe that the purpose of extended notice is to allow time for employees to adjust, both emotionally and otherwise, to the harsh realities of being made redundant. It should not be considered as simply another component of the financial severance payments. To retrospectively impose a prescription, which cannot be complied with [other than by payment in lieu] is, in my view, an inappropriate approach in the given circumstances. (70) I do not propose to disturb the notice arrangements applied by Incat. This, however, should not be viewed as a futuristic endorsement of the prescription. (71) The severance payment prescription adopted by Incat was similar in structure, though less generous at the lower end, to that which applies in many federal awards as a consequence the TCR case. It is of course, the TCR prescription that the Full Bench of this Commission declined to accept in T125 of 1985. (72) The approach of this Commission can best be summarised by reference to the Fosseys case. I am satisfied that this Commission has endorsed a general standard of two weeks' pay for each year of service. This general standard has been adjusted both upwards and downwards, based on the circumstances of each particular case. Indeed Mr Geason appeared to acknowledge this standard and the relevance of Fosseys.24 (73) Incat further submitted that, given the service profile of those made redundant, this standard had been met and the application should therefore be dismissed. Why then was it necessary in this instance to apply a cap which had no practical application? The justification for the eight-week cap in terms of case precedent can only come from the TCR case. Had the TCR standard been applied in this case, virtually all workers who received a severance payment would have been entitled to an additional two weeks' pay. (74) In the instant Incat matter, is there a case for a modification of this general standard? I accept that, given the company's limited previous exposure to circumstances of this gravity, Incat management did make every effort to find alternatives to large-scale redundancies. I also accept that, given the unique market in which Incat operates, the position of Austal Ships does carry significant, but not binding weight. (75) Having regard for all the circumstances, I propose to modify the general standard or two weeks' pay for each year of service by applying an upper cap of 20 weeks, such payment to be in addition to the notice period. (76) Given the relatively short length of service of most of the employees affected, I acknowledge that this decision will have little or no practical effect to the actual payments made. I have been asked however, to consider whether the scale of severance payments implemented by Incat, was fair and appropriate in the circumstances. I am unable to conclude that it was and the formula should be modified in the terms of the following order. Order Pursuant to s.31 of the Industrial Relations Act 1984, I hereby order that Incat Tasmania Pty Ltd, pay to the former employees named in Schedule 1, a severance payment calculated on the basis of two weeks' ordinary time pay for each completed year of service, less any redundancy payment already paid as a consequence of the company memorandum to all employees dated 30 May 2001. Provided that such payment shall not exceed a maximum of 20 weeks' ordinary time pay.
Tim Abey Appearances: Date and Place of Hearing:
1 P9795 |