Automotive, Metals, Engineering, Printing and Kindred Industries Industrial Union of Employees, Queensland v James Engineering Pty Limited [2000] QIRC 122 (2000) 165 QGIG 279

24 November, 2000 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 279 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, W142 and W144 of 2000) COMMISSIONER ASBURY 14 November 2000 Wages Claim – Termination Change and Redundancy Decision – Severance payments – Ordinary and customary turnover of labour – Application granted. DECISION These are applications by the Automotive, Metal, Engineering, Printing and Kindred Industries Industrial Union of Employees, Queensland (AMEPKU) for orders for payment of outstanding wages to Mr Evan Browne, Mr James Donnelly and Mr Elizier Golder. The AMEPKU did not tender affidavits or call evidence from either Mr Browne or Mr Golder. Further the AMEPKU submitted that the Commission should determine these applications on the basis of an affidavit and evidence of Mr Dodrill, an employee of James Engineering Pty Limited, and Shop Steward for the AMEPKU. The Commission does not accept this submission, and is unable to make any findings in relation to the applications dealing with Mr Browne and Mr Golder. This decision deals with the application made by the AMEPKU on behalf of Mr Donnelly, who provided an affidavit for the proceedings and was available at the hearing to give evidence and be cross-examined. The AMEPKU contends that Mr Donnelly was a “permanent employee” employed by James Engineering Pty Limited under the terms of the Building Products, Manufacture and Minor Maintenance Award – State. The AMEPKU further claims that Mr Donnelly was terminated due to lack of work, and was not paid severance payments pursuant to clause 2.4(2) of the said Award, which 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). 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 Mr Donnelly, on the basis of the following considerations:– • the termination of Mr Donnelly had occurred due to the loss of a contract which had been held by the Company; • no definite decision had been made by the company that it no longer wished the job that Mr Donnelly was doing to be done by anyone; • the job of carpenter in the transportable division of the company, which had been performed by Mr Donnelly, still exists, and is being done by other employees; • the numbers of employees doing this work had “fluctuated” and while being reduced at the time of the termination of Mr Donnelly had now been increased and the position previously held by Mr Donnelly had now been filled; • the termination of Mr Donnelly was due to ordinary and customary turnover of labour; • labour turnover in the transportable division of the company is “dictated by external factors outside of the company’s control resulting in a fluctuating work load without any form or consistency”; • the characteristics of the industry in which the company operates, and fluctuations in the general economy are matters which are also significant in determining that the termination of Mr Donnelly was due to ordinary and customary turnover of labour; • the company would be happy to re-employ Mr Donnelly when work picked up, but had no knowledge of when it may have been able to do so at the point when Mr Donnelly was terminated; and • the Commission is not bound by technicalities, legal forms or rules of evidence and is to be governed in its decisions by equity, good conscience and the substantial merits of the case. The evidence called by the AMEPKU may be summarised as follows:– • Mr Donnelly was employed by James Engineering Pty Limited from 25 September 1998 until 1 March 2000; • at the point of engagement, Mr Donnelly had been advised by Mr Wayne Amos on behalf of the company that he was to be employed on a “full time permanent basis”; • Mr Donnelly had accepted employment with the company on the basis that it was “permanent employment” and would not have accepted employment otherwise; • Mr Donnelly had accepted employment with James Engineering at a lower rate of pay than he had been earning with his previous employer, on the basis that he was being offered “permanent employment”; • at the point of termination, Mr Donnelly had been told that the reason for the termination was that there was not enough work to keep his position employed; • four employees, including Mr Donnelly, were terminated at the time; and • the Employment Separation Certificate completed by the company in relation to the termination of Mr Donnelly’s employment, indicated that the reason for the termination was “shortage of work or redundancy”. The AMEPKU also called evidence from Mr Michael Dodrill, Shop Steward who stated that the company had changed the status of his employment (and that of a number of other employees) from casual to permanent just before Christmas 1998. Mr Dodrill said in his evidence that he was told at this time that while he would lose his casual loading, he would now be employed on a “permanent basis”, and would be eligible for sick leave and annual leave. Mr Dodrill also told the Commission that when he and a number of other employees, including Mr Donnelly, had joined the AMEPKU in mid 1999, they had been called into a meeting with Mr James. At that meeting, Mr James had asked the employees concerned why they had joined the union, and queried whether this had anything to do with contractors that the company was bringing into the workplace to work on projects. Mr Dodrill’s evidence was that Mr James had gone into a detailed explanation about the need for contractors. This had included a statement that Mr James needed the contractors for periods of peak demand, but that the contractors would not impact on the job security of his core permanent staff. Mr Donnelly had also been present at this meeting. Other evidence called by the AMEPKU from both Mr Dodrill and Mr Donnelly was that James Engineering Pty Limited is engaged in the assembly of prefabricated buildings for use in police stations, schools and for Telstra. This work for Telstra was said to be regular and ongoing. Mr Dodrill also said that there was a core crew of about 14 people in the particular shed where Mr Donnelly had worked. -- 1 of 3 -- 280 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 24 November, 2000 The evidence called by the AMEPKU was substantially uncontradicted by the company, and in many cases Mr James explicitly agreed with that evidence. For the company, Mr James led evidence from Mr Kadon Glasby, Production Manager, which went to the following points:– • Mr Donnelly had been employed on two occasions by James Engineering, from April 1997 for a period of three months and then from 28 September 1998 to 1 March 2000; • Mr Donnelly had been terminated on 1 March 2000, on the basis of “last on first off”; • when asked whether he would be interested in further employment with James Engineering, Mr Donnelly had said that there was no way he would ever work for the company again; • the company would not hesitate to re-employ Mr Donnelly if workload increased as he had proved himself to be a valuable employee; and • as a general rule, all employees are told that the company relies on contracts to survive and that they are employed until the work runs out. Mr Glasby had not been present when Mr Donnelly had been offered employment and could not confirm whether this statement had been made to Mr Donnelly. Mr James also made the following submission:– “Whilst we do everything in our power to retain our permanent and valued employees by various strategies in slack times by one (sic) performing maintenance work on buildings and plant, cleaning up work places, fabricating aids to manufacture, using up any unused RDOs or leave to tide over until future work is available . . . voluntary unpaid leave by agreement with employees. From time to time downturns in the general economy and our particular industry affect our business so badly these measures are not enough and we reluctantly have to terminate the employment of some of our employees.”. The respondent company, did not call evidence which satisfied me that the termination of Mr Donnelly was due to the ordinary and customary turnover of labour. Indeed, Mr James the Chief Executive Officer of the respondent company advised the Commission that he did not intend to call any evidence and simply proposed to have the company’s Production Manager Mr Kadon Glasby read a statement from the bar table. At the request of the Commission, Mr Glasby gave sworn evidence. There was no evidence before me in relation to issues such as the nature and composition of the workforce; the history of fluctuations in that workforce; the types of work performed; the contracts under which that work is performed; the loss of any of those contracts and whether those contracts are ongoing or short term. Further, no evidence was put by the company in relation to the work which was being performed by Mr Donnelly and whether or not Mr Donnelly had worked on a particular contract which had been lost. This was despite the Commission granting an adjournment to Mr James to enable him to further consider the evidence and submissions put by the AMEPKU on behalf of the applicant, and to formulate a response. This failure to call evidence meant that the Commission was unable to be satisfied that termination of employees in times of down turn is ordinary and customary for James Engineering Pty Limited. In support of the application, the AMEPKU referred the Commission to a number of cases decided by the Australian Industrial Relations Commission which dealt with the issue of what constitutes “ordinary and customary turnover of labour”. The Commission was also referred to aspects of these decisions which suggest that where employees have an expectation of continuing employment, and a lengthy period of service, the Commission should find that termination of such employees is not due to the ordinary and customary turnover of labour. After hearing the evidence and submissions of the parties in this matter, I have reached the following conclusions:– Functions of the Commission As pointed out by Mr James, the Commission must perform its functions in a way that avoids unnecessary technicalities and facilitates the fair and practical conduct of proceedings under this Act. However, this cannot be grounds for me to depart from or fail to apply the statement of policy handed down by a Full Bench in relation to Termination of Employment, Introduction of Changes and Redundancy, dated 16 June 1987 and published in the Queensland Government Industrial Gazette Vol. 125 folios 1119-1121 as amended by 125 QGIG 1377 and 126 QGIG 188. Accordingly, the submissions of Mr James that this decision should be departed from are rejected. Definite Decision by Employer to Terminate Employee I do not accept the submission of the company that loss of a contract operated to bring about the termination of Mr Donnelly. The evidence clearly demonstrates that James Engineering Pty Limited lost a contract, and as a result of a downturn in work requirements of the company, a decision was made by the company to terminate the employment of a number of employees, including Mr Donnelly. Ordinary and Customary Turnover of Labour I do not accept the submission of the company that the termination of Mr Donnelly was due to the ordinary and customary turnover of labour. 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 of Termination of Employment, Introduction of Changes and Redundancy contained in the decision of the Full Bench of the Commission. In that decision, a Full Bench of the Queensland Industrial Relations Commission adopted the reasons and decision of the Australian Industrial Relations Commission in the equivalent Test Case heard in that jurisdiction. In the Supplementary Test Case decision (9 IR 115 at 128) a Full Bench of the Australian Industrial Relations Commission explains the reasons for including the expression “ordinary and customary turnover of labour” in the original Test Case decision. In so doing, they expressly adopted the words of the Fisher J., the President of the Industrial Commission of New South Wales, which were formulated and explained in SDEA (NSW) v Countdown Stores (1983) 7 IR 273 at 277-278, as follows:– “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).) -- 2 of 3 -- 24 November, 2000 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 281 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 or 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 dismissal 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 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.”. In Albert Smith and Sons Pty Ltd v Michael Logan 155 QGIG (1997) 236-7, the then President of the Queensland Industrial Relations Commission considered the expression “ordinary and customary turnover of labour”. In reaching his decision in this matter the 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’. . .”. It should be noted that in the Albert Smith case, there were a number of exhibits before the Industrial Magistrate and the President during the appeal, which showed historical trends in employee numbers over several years, and details of the contracts won and lost during that period. No such evidence was before the Commission in relation to the argument by James Engineering Pty Limited that the termination of Mr Donnelly was due to ordinary and customary turnover of labour. The evidence before me in this case does not demonstrate that it was a regular and common feature of the business for James Engineering Pty Limited to terminate staff on the basis of winning and losing contracts or for the business to rise and fall on a seasonal basis. There is no evidence before me about the loss of any contracts by James Engineering Pty Limited. Further, the uncontradicted evidence of Mr Donnelly indicates that he was considered by the Company to be a “permanent” employee with security of employment, as distinct from the company’s casual employees and subcontractors. Mr Dodrill’s evidence, which was also uncontradicted, supports this finding. Accordingly there is no basis for considering that Mr Donnelly was other than a core employee of the company, and consistent with the approach in the Albert Smith decision, his employment was not terminated due to ordinary and customary turnover of labour. Mr Donnelly’s termination was not due to the ordinary and customary turnover of labour. I order that James Engineering Pty Limited pay to Mr Donnelly the amount of $2,135.60 for severance payments due under the terms of the Building Products, Manufacture and Minor Maintenance Award – State. This amount should be paid to Mr Donnelly within three weeks from 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. I.C. ASBURY, Commissioner. Released: 14 November 2000 Appearances:– Mr N. Frost for the Automotive, Metals, Engineering, Printing and Kindred Industries Industrial Union of Employees, Queensland. Mr R. James for James Engineering Pty Limited. -- 3 of 3 --