Automotive, Metals, Engineering, Printing and Kindred Industries Industrial Union of Employees, Queensland v James Engineering Pty Limited [2001] QIRC 23 (2001) 166 QGIG 281

16 March, 2001 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 281 S:\QIRCDEV-BASE\QGIG\2001\166\NO.11 16.03.01.DOC ########################################################################################################################### QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 – s. 278 – unpaid wages Automotive, Metals, Engineering, Printing and Kindred Industries Industrial Union of Employees, Queensland AND James Engineering Pty Limited (Nos. W141 and W144 of 2000) COMMISSIONER ASBURY 6 March 2001 Wages Claim – Termination Change and Redundancy Decision – Case Law – Severance payments – Ordinary and customary turnover of labour – Application granted. -- 1 of 5 -- 282 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 16 March, 2001 DECISION In August 2000, the Automotive, Metal, Engineering, Printing and Kindred Industries Industrial Union of Employees, Queensland (AMEPKU) filed a number of applications seeking orders for payment of outstanding wages against James Engineering Pty Limited. An earlier decision in relation to W142 of 2000, was handed down on 14 November 2000. This decision deals with applications on behalf of Mr Evan Browne (W141 of 2000) and Mr Elizier Golder (W144 of 2000). The Case for the Applicants The case for both applicants is substantially identical. Witness statements filed on behalf of both Mr Browne and Mr Golder said that the applicants:– • were employed as carpenters by James Engineering from November 2000, on a casual basis; • were advised after the Christmas shutdown period in 1998/1999, by Mr Wayne Amos, then the Production Manager for James Engineering, that they were to be employed on a “permanent” basis; • were not advised at any time by any representative of James Engineering that the company was reliant on contracts to survive, and that they would be employed only until work ran out; • understood that their “permanent” employment was to be regular and ongoing; • did not work exclusively on any one contract, but swapped around between the various contracts that may have been current at the time. Mr Golder said in his statement, that around October 1999, he had attended a meeting with the Chief Executive Officer Mr James, together with fellow workers. The purpose of the meeting was to clarify the role of contractors on site. Mr Golder said that Mr James had told the employees at that meeting that the engagement of contractors would not impact on the security of their employment, and had said words to the effect that “we are always going to need a permanent crew.” Mr Golder also said in evidence, that when work on various contracts was quiet, he, and other employees undertook cleaning or maintenance work, in the workshop. On some occasions, Mr Golder said that he was required to undertake work on site. The AMEPKU contends that the applicants were employed by James Engineering Pty Limited under the terms of the Building Products, Manufacture and Minor Maintenance Award – State, (the Award) for a period of fourteen months. The employment of both applicants was terminated at the beginning of March 1999, and the employment separation certificates completed by the employer indicated that the reason for the terminations was shortage of work or redundancy. Clause 2.4(2) of the Award, requires the employer to observe the terms and conditions of the Statement of Policy of this Commission in relation to Termination of Employment, Introduction of Changes, Redundancy (125 QGIG 1119 –1121) (the Queensland TCR decision). It was contended by Ms Nadj for the AMEPKU that on the basis of the evidence before me, the respondent could not rely on the exclusion from an entitlement to severance payments, for employees terminated due to the ordinary and customary turnover of labour, as provided in clause C1.(a) of the TCR decision. Ms Nadj said that the respondent had not adduced any evidence which could support a finding that the employment of the applicants was subject to any seasonal fluctuation, nor was there any evidence that the work levels of the respondent were subject to fluctuations of a predictable or normal kind. Further, Ms Nadj said that there was no evidence of any distinction made between employees of the respondent who had been designated as “permanent”, so that core “permanent” employees could be distinguished from those considered to be non-core employees. The Case for the Respondent James Engineering Pty Limited was represented by the Managing Director Mr R.F. James, who argued that there was no requirement to make severance payments to the applicants, on the basis that their employment had been terminated, due to the ordinary and customary turnover of labour. Mr James called evidence from himself and Mr Buttner, the General Manager of James Engineering Pty Ltd. The evidence for the respondent can be summarised as follows:– • work performed by James Engineering Pty Ltd is done under contracts, which range in size from $10,000 to $1,000 000; • time taken to complete contracts ranges from one week to three months; • employees do not work on one contract but move between a number of contracts; • subcontractors are engaged from time to time by the company; • there is a core workforce, which fluctuates depending on the work load which the company has; • the term “core workforce” is used to distinguish those persons who are subcontractors; • all members of the core workforce work in the same way; • casual employees are also employed from time to time; • after six months, casual employees are made permanent because of pressure from the employees themselves, as well as the fact that casual wages are a higher cost to the company than wages for permanent employees. In his evidence, Mr Buttner presented graphs which purported to depict sales figures from 1997 to 2001; monthly wage cost from 1997 to 2001 and figures comparing the program for a particular contract with the actual work on that contract. Mr Buttner agreed that the figures did not show a pattern or fluctuate according to seasons. Rather the situation for the company was “totally fluctuating”. Further, Mr Buttner agreed that the figures showing total monthly wage cost would include casuals, had any been employed during the periods depicted in the graph. Mr Buttner was unsure as to the exact number of casual employees employed during the periods depicted in the graph. Mr Buttner had held his position with the respondent for only twelve months, and had not been employed at the time the applicants were offered “permanent” employment. In submissions, Mr James stated that all employees of James Engineering Pty Ltd knew that they were only guaranteed employment while the company had work for them to perform. Mr James said that employees knew that the fluctuation in employee numbers is a characteristic of the company’s business, and “have no reason to have any expectation that their job will last forever”. Mr James said that the term “ordinary and customary turnover of labour” with respect to the operations of one company, will not necessarily apply to those of another company. The facts in each case needed to be considered separately. Mr James said that the employment of Mr Golder and Mr Browne, was terminated due to the ordinary and customary turnover of labour, in circumstances particular to James Engineering Pty Ltd. After being provided with copies of affidavits setting out the evidence of Mr Golder and Mr Browne, prior to the commencement of the hearing, Mr James indicated that he did not wish to cross-examine either of the applicants in relation to their evidence. Following the evidence of each of the applicants, I gave Mr James an opportunity to cross-examine, and advised him that if he did not avail himself of this opportunity, then the evidence would be uncontested, and could be relied upon in the determination of the applications. Mr James maintained his position and did not cross-examine either of the applicants. Further, Mr James did not call any evidence to contradict the evidence of the applicants, as set out in their affidavits, but instead, made statements from the bar table, that sought to call that evidence into question. Mr James also utilised his time in the witness box, to advise me of his view that I should take into account the TCR decision in determining this matter. -- 2 of 5 -- 16 March, 2001 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 283 Mr James said that the aspect of that decision dealing with ordinary and customary turnover of labour, appeared to be given no weight, in cases dealing with payments for redundancy. Case Law The starting point for the determination of this matter, is the decision of a full bench of this Commission in Termination of Employment, Introduction of Changes, Redundancy (125 QGIG 1119 –1121) (the Queensland TCR decision). In that decision, a Full Bench of the Queensland Industrial Relations Commission adopted the reasons and decisions of the then Australian Conciliation and Arbitration Commission in the Termination, Change and Redundancy Case (1984) 8 IR 34 (the Federal TCR decision) and the Termination, Change and Redundancy Case Supplementary decision (1984) 9 IR 115 (the Federal TCR Supplementary decision). Clause 2.4 of the Building Products Manufacture and Minor Maintenance Award – State provides at subclause (2) that employers and employees shall observe the terms and conditions of the statement of policy set out in the Queensland TCR decision. Clause C of the Declaration of Policy set out in the Queensland TCR decision, which deals with redundancy, provides as follows, at subclause 1.(a):– “Where an employer has made a definite decision that he/she no longer wishes the job the employee has been doing to be done by anyone, and this is not due to the ordinary and customary turnover of labour, and that decision may lead to termination of employment…”. Clause C goes on at subclause 6, to provide for severance payments to redundant employees, which are in addition to periods of notice provided for “ordinary termination”. Employees whose employment is terminated due to the ordinary and customary turnover of labour, are not entitled to severance payments. In the Federal TCR Supplementary decision (9 IR 115 at 128) the Full Bench of the then Australian Conciliation and Arbitration Commission explained the reasons for including the expression “ordinary and customary turnover of labour” in the original Federal TCR decision. It is clear from this explanation, that the expression “ordinary and customary turnover of labour” was adopted from the decision of Fisher J., the President of the Industrial Commission of New South Wales, in SDEA (NSW) v Countdown Stores (1983) 7 IR 273 at 277-278 (the Countdown Stores decision). In that decision, Fisher J distinguished terminations of employees during periods of economic prosperity, on the basis of seasonal shifts in markets, or loss of contracts not relating to recession, from terminations on a collective basis, arising from adverse economic circumstances, technological change or major company restructuring. The latter types of terminations were said by Fisher J., to attract the provisions of the Employment Protection Act 1982 (NSW), while the former did not. Notwithstanding the distinction drawn in the Countdown Stores decision, the Full Bench of the then Australian Conciliation and Arbitration Commission, noted that it had decided in the Federal TCR decision that there should be no distinction in principle, based on the causes of redundancy. In deciding this point the Full Bench had expressly rejected submissions made on behalf of employers, that a distinction should be made between cases of technological change, and cases where redundancy occurred because of the employers’ financial difficulties, caused by circumstances over which the employer had little or no control, such as a downturn in business. As previously stated, the reasons and decisions of the Full Bench of the Australian Conciliation and Arbitration Commission, in both Federal TCR decisions were adopted by this Commission. In Metals and Engineering Workers Union v Cockburn Engineering WAIRC (1071 of 1993) 21/04/98, George C. of the Western Australian Commission, considered in detail, case law in relation to the meaning of the expression “ordinary and customary turnover of labour”. George C. referred specifically to the decision of a Full Bench of the Western Australian Commission in Forest Products, Furnishing and Allied Industries Industrial Union of Workers, W.A. v Dancroft Holdings Pty Ltd t/a Concept Contract Interiors (1994) 74 WAIG 1885 (the Dancroft decision), which had extensively reviewed the legislative history of the Federal TCR decision. In the Dancroft decision, the Full Bench of the Western Australian Commission quoted with approval, the decision of Parsons SM of the Industrial Court of South Australia, in Short v F.W. Hercus Pty Ltd (1991) 58 SAIR 868, which held that:– “…in using the expression ‘the ordinary and customary turnover of labour’ in the redundancy provision of the Metal Industry Award, the Full Bench intended to limit to (sic) the right to severance pay to those employees whose jobs are no longer required by the employer to be done by anyone and this occurrence is not a normal feature of the business of the employer. Thus seasonal employees or intermittent employees such as building workers would be excluded from the operation of the redundancy provision as would other employees on fixed contracts or engaged for the duration of a specific contractual commitment of the employer. The redundancy provision seeks to distinguish between those particular employees and another category of employee who has an expectation of continuity of service. The redundancy compensates the latter category for the loss of non- transferable credits and the hardship and inconvenience of termination.”. In an earlier case involving the respondent in this matter, I referred to the decision of the then President of the Queensland Industrial Relations Commission, now Chief Justice de Jersey, in Albert Smith and Sons Pty Ltd v Michael Logan 155 QGIG (1997) 236-7, which considered the expression “ordinary and customary turnover of labour”. In reaching his decision in this matter the then President declined to take into account decisions of the Australian Industrial Relations Commission about the meaning of that expression, and was of the view that it should simply be given its natural meaning. In setting aside the decision of the Industrial Magistrate, the President found that the termination of a particular employee was due to ordinary and customary turnover of labour, notwithstanding the fact that the employee concerned had over eleven years service. It was stated at, folio 237 that:– “At best, termination after long term employment would be a pointer to redundancy. But all the circumstances of the case need to be considered, with short as well as long term employees, in deciding whether the exception provided for by the award applies. It is fair to say, as was submitted by Mr Herbert who appeared for the appellant, that the uncontradicted evidence and the findings by the magistrate established that it was a regular and common feature of the business for contracts to be won and lost, and for the business to rise and fall on a regular ‘seasonal’ basis throughout the year. (See especially exhibits 4 and 5.) This movement in levels of business was accompanied by the termination and subsequent hiring of staff, generally at process worker level. This pattern was ‘ordinary’ and ‘customary’ for the appellant. It generated a turnover of labour. The respondent was working at the process worker level at the time of his termination. I was referred to what I consider telling evidence in which a witness for the appellant described the respondent, notwithstanding the length of his employment, as part of the ‘floating’ group of workers, by contrast with the ‘core’. As the witness added: ‘Traditionally our core would remain intact and we would dispense with the floating trades assistants.’. The same witness spoke of the termination as part of a ‘seasonal adjustment’. . .”. Although the President declined to consider the decisions of other tribunals, reasoning in the decisions referred to above, is consistent with that in the Albert Smith case. Conclusions In my view, there are a number of matters the Commission may consider in deciding whether a dismissal is due to the ordinary and customary turnover of labour, which can be identified from the decisions referred to above. -- 3 of 5 -- 284 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 16 March, 2001 • is the business in question subject to an identifiable factor or factors which directly cause a fluctuation in its work load? • are those fluctuations a regular and ongoing feature of the business in question? • does the employer have a practice of terminating the employment of employees during periods where work is not available, due to the factor or factors, so that it can be said that this practice is ordinary and customary? • where an employer has different categories of employees, such as those employed on a fixed term, casual or weekly basis, are the employees who are dismissed employed in a category which is ordinarily and customarily subject to dismissal, in the event of a shortage of work? • what are the views of the employees who are dismissed, about the security of their employment, or their inclusion in a category of employees subject to dismissal, in the event of a fluctuation of the employer’s work load; • are the views of those employees reasonable in light of the employer’s business and the basis upon which they were employed? Factors which may cause such a fluctuation in an employer’s work load could include seasonal considerations; contractual considerations; the fact that work is performed on a project by project basis or a relationship with other industries or industry sectors which impacts on the operations of the employer in question. It is not sufficient for an employer claiming that redundancy payments do not apply, because a dismissal is due to the ordinary and customary turnover of labour, to simply provide evidence to the Commission of a fluctuating work load. Fluctuations in work load are a regular feature of many businesses, which nonetheless, maintain a stable work force. Rather, the critical issue is whether, as a result of fluctuations in an employer’s work load, it is ordinary and customary for certain categories of employees to be dismissed. In the matter before me, it was contended that the business of the respondent employer was based on contracts, and that the work load fluctuated when contracts were won or lost or completed. It was further contended that it was ordinary and customary for employees to be dismissed during periods of reduced workload, and that the dismissals of the applicants were due to the ordinary and customary turnover of labour. However, the evidence called by the respondent, which was represented by the Managing Director, Mr James, did not establish any of these contentions, and was not relevant to the argument which the respondent was seeking to advance. It was not contended for the respondent that it was ordinary and customary for employees to be dismissed during a period where sales decline. Rather, the respondent had contended that the operative factor was loss of contracts. The monthly sales information tendered through Mr Buttner, did not demonstrate that there was any relationship between sales and contracts. There was no evidence to demonstrate that the fact that sales had dropped at a particular time, was due to the loss or completion of a contract, or a number of contracts. As a result of the failure by the respondent to call evidence relevant to this matter, I am unable to be reasonably satisfied that the business of the respondent is subject to an identifiable factor (ie. winning and losing contracts) which directly causes a fluctuation in work load, or that the factor is a regular or ongoing feature of the respondent’s business. All that can be said, is that the sales levels of the respondent fluctuate. This is a feature of many businesses, and, by itself, is not sufficient to make out an argument that the applicants were dismissed due to the ordinary and customary turnover of labour. There was evidence before me, largely from the applicants, that the respondent had a number of categories of employment, including casual and “permanent”. There was also evidence that from time to time, work required to be performed by the respondent, was done by subcontractors. The evidence indicates that both of the applicants were included in the category of employees referred to by the respondent as “permanent”. None of this evidence was contested by the respondent. Instead, evidence was tendered for the respondent, through Mr Buttner, that purported to show fluctuations in the respondent’s work force, by reference to monthly wages cost. The difficulty I have with this evidence, is that it did not differentiate between casual employees and those considered by the respondent to be “permanent”. There was no evidence before me about the numbers of employees in either of these categories. Mr Buttner was unable to assist in this regard, and could not provide any evidence about the number of casual employees included in the figures. In any event, Mr Buttner was not employed by the respondent during a significant period of the time during which the applicants were employed. Mr Buttner also sought to put into evidence, figures in relation to a particular contract, where a significant variation had occurred between the planned and actual work programs. However, there was no connection made by Mr Buttner, in his evidence, between the information in relation to the fluctuations in the contract in question, and the dismissal of the applicants. Indeed, there was no evidence that either of the applicants had worked on that contract at all, or that it had played any part in the decision to dismiss the applicants. On the evidence before me, I am unable to be reasonably satisfied that it was ordinary and customary for the respondent to terminate the employment of employees in the category referred to by the respondent as “permanent”, during periods when there was a down turn in work, due to the loss or completion of a contract. I am also unable to be reasonably satisfied that the applicants knew, or were told by the representatives of the respondent, that their ongoing employment would be subject to contracts being won or retained by the respondent. The uncontested evidence of the applicants, was that in January 2000, they were advised that the basis of their employment was to be changed from casual to “permanent”, and that they formed a view that their employment was to be regular and ongoing. In the face of direct evidence from the applicants, I am unable to accept statements made by Mr James from the bar table, that all employees, knew that they could be dismissed at any time when work was not available, and could “have no expectation that their job will last forever”. The relevant consideration in my view, is whether the applicants had a reasonable expectation that they would have ongoing employment. On the basis of the evidence before me, I am satisfied that the applicants did have such an expectation, and that in the circumstances, it was reasonable. I have based this view on the uncontested evidence of the applicants as summarised above. Further, Mr James said in his evidence that it was his understanding that casual employees were required to be offered “permanent” employment after six months and in any event, there was generally pressure from casual employees seeking to become “permanent” after a six month period. Notwithstanding this, both applicants were offered such employment after less than two months as casual employees. Mr James said in his evidence that the applicants were offered “permanent” employment for a number of reasons, including the higher cost of casual rates and because they were good employees who deserved to become “permanent”. Clearly, the respondent placed a value on what it terms “permanent” as distinct from casual employment, and it is reasonable that the applicants formed a view that they were being offered ongoing employment, with all of the associated benefits. As previously stated, severance payments compensate employees for the loss of these benefits. Overall, I am unable to be reasonably satisfied, on the basis of the evidence before me, that the dismissals of Mr Golder or Mr Browne were due to the ordinary and customary turnover of labour. Accordingly I find that Mr Golder and Mr Browne were entitled to severance payments due under the terms of the Building Products, Manufacture and Minor Maintenance Award – State, at the time of their dismissal by the respondent. I order that James Engineering Pty Limited pay the amounts of $2,204.00 to Mr Golder and $2,067.20 to Mr Browne. These amounts are to be paid within three weeks of the date of release of this decision. An appropriate order will be released in conjunction with this decision. Mr James was offered and declined the opportunity to argue capacity to pay, in the event that I found for the applicant, in the earlier matter decided by me in November 2000. Mr James again did not put this argument to me in the event that I found for the applicants, or seek to reserve the position of the respondent in relation to such an argument. -- 4 of 5 -- 16 March, 2001 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 285 I.C. ASBURY, Commissioner. Released: 5 March 2001 Appearances:– Ms L. Nadj for the Automotive, Metals, Engineering, Printing and Kindred Industries Industrial Union of Employees, Queensland. Mr R. James for James Engineering Pty Limited. -- 5 of 5 --