DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr Neal Maxwell
v
Bardrill Corporation Ltd
(U2015/2755)

Summary: unfair dismissal - objection under s.389 - objection not made out - no consultation in compliance with modern award - whether dismissal harsh, unjust or unreasonable - s.387 - consultation would not have changed result - application under s.394 dismissed.

[1] This decision concerns an application by Mr Neal Samuel Maxwell under s.394 of the Fair Work Act 2009 (“the Act”) by which he seeks an unfair dismissal remedy in respect of his termination from Bardrill Corporation Ltd (“the employer”) on 14 January 2015. The employer carries out earthwork related civil constructing contractor services, and operates principally in the oil and gas fields around northern South Australia and south-western Queensland as well as in eastern Queensland (in the vicinity of Roma).

[2] Mr Maxwell was employed for a period of some nine years by the employer, during which time he performed duties as a full-time Field Administrator. He performed these duties in Ballera until, in September 2011, he was transferred to Roma in a similar capacity, on a fly in fly out two-on-two-off roster.

[3] Mr Maxwell claims that on 14 January 2015 he received a telephone call from Mr Reid Toogood, who is the CEO for the employer.

[4] Mr Toogood explained to Mr Maxwell that the administrative position performed by him was no longer required and that his duties would be performed from Adelaide in the future. Mr Maxwell was informed that he was to be made redundant immediately.

[5] Mr Brett Ryan, who appeared as a witness for Mr Maxwell, gave evidence that he received a telephone call from Mr Toogood on the same day and for the same purpose.

[6] The employer’s notification of redundancy relevantly provides as follows:

“As discussed today unfortunately the oil and gas industry is experiencing a significant downturn. The advice given to us by our client is that this is likely to continue for the foreseeable future. This has forced the Company to review all areas of cost and to restructure certain functions of the business to ensure that it can continue to maintain its presence in eastern Queensland (EQ) and the Cooper basin (CB). This week the decision has been taken to change the way that administration in EQ will be completed. As a result the position that you currently fill of fly in/fly out Administration Officer has been made redundant and your employment with Bardrill is terminated with immediate effect. [...]”

[7] The employer took the view that Mr Maxwell was unable to agitate his application for relief for reasons that Mr Maxwell was made genuinely redundant for the purposes of s.389 of the Act, and as such could not make an application (given the operative effect of s.385(d) of the Act). That is, Mr Maxwell had not been dismissed in accordance with the Act, and could not make an application under s.394 of the Act.

[8] Section 389 of the Act provides as follows:

389 Meaning of genuine redundancy

(1) A person’s dismissal was a case of genuine redundancy if:

(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer’s enterprise; or

(b) the enterprise of an associated entity of the employer.

[9] The onus to make out the grounds under s.389 of the Act falls upon the employer.

[10] The Explanatory Memorandum to the Fair Work Bill 2008 provides some insight into the scope of meaning of a redundancy as contemplated under the Act:

Clause 389 – Meaning of genuine redundancy

1546. This clause sets out what will and will not constitute a genuine redundancy. If a dismissal is a genuine redundancy it will not be an unfair dismissal.

1547. Paragraph 389(1)(a) provides that a person’s dismissal will be a case of genuine redundancy if his or her job was no longer required to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. Enterprise is defined in clause 12 to mean a business, activity, project or undertaking.

1548. The following are possible examples of a change in the operational requirements of an enterprise:

a machine is now available to do the job performed by the employee;
the employer’s business is experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five; or
the employer is restructuring their business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore the person’s job no longer exists.

1549. It is intended that a dismissal will be a case of genuine redundancy even if the changes in the employer’s operational requirements relate only to a part of the employer’s enterprise, as this will still constitute a change to the employer’s enterprise.

1550. Paragraph 389(1)(b) provides that it will not be a case of genuine redundancy if an employer does not comply with any relevant obligation in a modern award or enterprise agreement to consult about the redundancy. This does not impose an absolute obligation on an employer to consult about the redundancy but requires the employer to fulfil obligations under an award or agreement if the dismissal is to be considered a genuine redundancy.

1551. Subclause 389(2) provides that a dismissal is not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise, or within the enterprise of an associated entity of the employer (as defined in clause 12).

1552. There may be many reasons why it would not be reasonable for a person to be redeployed. For instance, the employer could be a small business employer where there is no opportunity for redeployment or there may be no positions available for which the employee has suitable qualifications or experience.

1553. Whether a dismissal is a genuine redundancy does not go to the process for selecting individual employees for redundancy. However, if the reason a person is selected for redundancy is one of the prohibited reasons covered by the general protections in Part 3-1 then the person will be able to bring an action under that Part in relation to the dismissal. [...] [My emphasis]

[11] The employer contends that the business conditions in 2014/2015 were such that it was required to reduce its operating costs.

[12] On 23 December 2014, Mr Toogood (as he explained through his own evidence) required managers and supervisors to communicate a statement at the toolbox sessions that day.

[13] The substance of that statement was as follows:

• The collapse of oil prices had led to a rapid diminution in demand from its key client, Santos;



• Road crews had ceased and there had been a reduction in lease builds planned as the number of exploration rigs was reduced in the Cooper Basin and there had been a similar collapse in demand in the East Queensland region; and



• This difficulty in the business cycle would persist through 2015, but would likely correct itself to some measure in 2016.

[14] On 10 February 2015 a further statement was conveyed at the toolbox meetings. It provided as follows, in summary:

• The business environment had worsened since December 2014;



• Oil prices had not improved;



• Santos had cut its operating budget significantly;



• There was no work in Moomba past March 2015;



• There would be a 50% cut to normal activity in South Australia and up to 80% in East Queensland (and this might persist for a period of between six months and two years);



• The employer had restructured the administrative, project management and supervision roles in both Moomba and East Queensland to “try and get our overhead costs under control”;



• “A lot of operators that finished their roster have elected to take severance or went home to wait for a call to return”.

[15] On 11 March 2015, Mr Toogood issued a further statement through the toolbox process. Its message was blunt:

• The global price for oil remained low and producer share prices were down;



• Job losses are occurring throughout the industry, with Santos announcing a further 200 redundancies bringing the total to 720 so far;



• “Our eastern Queensland business has hit bottom and we need to desperately bring our overhead costs there under control”;



• Voluntary redundancies will be sought in eastern Queensland and efforts will be made to “reshuffle people between locations and keep everyone who wants a job in a job”;



• Staff will be asked to take annual leave or long service leave in the hope that things will improve in time;



• The business is seeking work in areas in which it had not previously sought to tender; and



• Various salaried roles have been restructured.

[16] These communiqués require further context.

[17] To this end, Mr Toogood further explained that in May 2014 the employer lost a contract for approximately half of the work it was performing for Santos located in the Queensland sector of the Cooper basin (in south-western Queensland).

[18] As a consequence, numerous positions were made redundant in that area.

[19] Mr Toogood contended that Mr Maxwell was engaged to perform administrative duties in respect of the activities based around Roma, in eastern Queensland. Following the collapse of the oil price in late 2014 the share price for Santos was effectively halved and it reduced its capital budget significantly (which had a consequent knock-on effect for the employer’s business).

[20] It was these circumstances that gave rise to the 23 December 2014 communication referred to above.

[21] Following Mr Toogood meeting with a Santos representative on 7 January 2015, he was advised that at least half of the work that the employer was performing on behalf of Santos would no longer be available (with Santos reducing its subcontractors’ staff by 1200 and making 720 of its direct employees redundant).

[22] Because of this information, and the collapse in the demand for its services from its principal client, Mr Toogood estimated that 50 to 60 employees would need to leave the business immediately.

[23] The first round of redundancies were implemented by Mr Toogood on 14 January 2015 (about one week following his meeting with the Santos representative). It was at this time that Mr Toogood telephoned Mr Maxwell, amongst others, to advise of the necessity for the position to be declared redundant. Mr Maxwell was advised of this situation whilst he was at home and before he had to recommence his swing in Roma. Mr Maxwell was paid his entitlements in respect of redundancy and accrued a gross termination payment of almost $79,000 (including 16 weeks redundancy pay).

[24] Mr Toogood explained that Mr Maxwell’s role and functions as they were performed in Roma were absorbed into existing administrative functions located in the employer’s head office in Adelaide.

[25] Mr Toogood also gave evidence that prior to Christmas 2014 there had been 50 employees engaged in the employer’s business in or about Roma. At the present time there is only one employee engaged in the Roma area, and there is no sign of any upturn in Santos activities (either in that area or in the Cooper basin in northern South Australia).

[26] Mr Maxwell complained that he was not consulted with about the change in the organisation of the business and there was no discussion with him about ways in which the impact of the changes might be mitigated short of redundancy. Mr Ryan made similar claims.

[27] It appears that the only consultation Mr Maxwell received in relation to the effects of the collapse in oil prices upon his position prior to 14 January 2015 was by way of the December 2014 toolbox communiqué from Mr Toogood, to which I have referred above. But even here, Mr Maxwell contends he must have inadvertently missed reading the communiqué on his email.

[28] Mr Maxwell also contends that his employer was looking for an administrative employee only a week or so after his own position was made redundant. An advertisement on SEEK was brought to Mr Maxwell’s attention on 3 February 2015 and had allegedly been posted on the site on 21 January 2015, which was one week after Mr Maxwell’s position was made redundant. Mr Maxwell also claims that he was unaware of any downturn affecting the business and that an email purportedly sent to all staff in respect of such circumstances was not received by him.

[29] Insofar as Mr Maxwell so argued, he was contending that the redundancy was not real or authentic and that his position was still required.

Consideration of “whether genuine redundancy”

[30] In order to attract the defence under s.389 of the Act, the employer must firstly demonstrate that there was a real or authentic redundancy for operational reasons.

[31] Mr Toogood’s evidence in this regard is compelling. It is set out above and does not require me to restate it. In essence, changes in the international oil price lead to a collapse in capital expenditure from its principal client and this had a consequent knock-on effect on the demand for the employer’s subcontracting services in south-west Queensland, eastern Queensland, and northern South Australia.

[32] There is no reason for me not to accept Mr Toogood’s evidence as being truthful in respect of the circumstances the employer’s business faced and the necessity to respond in the manner that it did in order to rapidly reduce its operational costs. Redundancies were one device for managing its costs.

[33] Mr Maxwell’s position was made redundant and the surviving elements of the duties and tasks that fell within that role were absorbed within other roles and administrative positions in Adelaide.

[34] There appears to be no merit to Mr Maxwell’s claim that his position was still required regardless of the business circumstances because there was evidence that another administrative role had been created some two weeks following his redundancy taking effect.

[35] Mr Toogood acknowledged that the advertisement for an administrative role - not the same as that previously held by Mr Maxwell - was placed on SEEK. He contended that following the restructure in January 2015, he was effectively uncertain as to whether the decision to integrate the administrative functions from Roma into the remaining Adelaide administrative roles would work, so he initiated the recruitment action (as an “insurance policy” it was said).

[36] But a short time after so doing Mr Toogood was satisfied the restructure would yield the result he anticipated, and as such the SEEK advertisement was not actioned. That is, no person was recruited to fill the position advertised on SEEK.

[37] Given this, it cannot be said Mr Maxwell’s position was not redundant at the relevant time (that being January 2015). Mr Maxwell’s position was not resurrected upon his termination and performed by a new employee, and there is no evidence that the position was continuously required beyond the date of Mr Maxwell’s termination.

[38] In respect of the requirements of s.389(1)(b) of the Act, the employer is obligated to comply with the requirements of a modern award or enterprise agreement that applied to the employer’s enterprise.

[39] The consultation provisions relevant to the employer’s business are clause 8.1 of the Clerks—Private Sector Award 2010 (“the modern award”), which provides as follows:

8. Consultation

8.1 Consultation regarding major workplace change

(a) Employer to notify

(i) Where an employer has made a definite decision to introduce major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the employer must notify the employees who may be affected by the proposed changes and their representatives, if any.

(ii) Significant effects include termination of employment; major changes in the composition, operation or size of the employer’s workforce or in the skills required; the elimination or diminution of job opportunities, promotion opportunities or job tenure; the alteration of hours of work; the need for retraining or transfer of employees to other work or locations; and the restructuring of jobs. Provided that where this award makes provision for alteration of any of these matters an alteration is deemed not to have significant effect.

(b) Employer to discuss change

(i) The employer must discuss with the employees affected and their representatives, if any, the introduction of the changes referred to in clause 8.1(a), the effects the changes are likely to have on employees and measures to avert or mitigate the adverse effects of such changes on employees and must give prompt consideration to matters raised by the employees and/or their representatives in relation to the changes.

(ii) The discussions must commence as early as practicable after a definite decision has been made by the employer to make the changes referred to in clause 8.1(a).

(iii) For the purposes of such discussion, the employer must provide in writing to the employees concerned and their representatives, if any, all relevant information about the changes including the nature of the changes proposed, the expected effects of the changes on employees and any other matters likely to affect employees provided that no employer is required to disclose confidential information the disclosure of which would be contrary to the employer’s interests.

8.2 Consultation about changes to rosters or hours of work

(a) Where an employer proposes to change an employee’s regular roster or ordinary hours of work, the employer must consult with the employee or employees affected and their representatives, if any, about the proposed change.

(b) The employer must:

(i) provide to the employee or employees affected and their representatives, if any, information about the proposed change (for example, information about the nature of the change to the employee’s regular roster or ordinary hours of work and when that change is proposed to commence);

(ii) invite the employee or employees affected and their representatives, if any, to give their views about the impact of the proposed change (including any impact in relation to their family or caring responsibilities); and

(iii) give consideration to any views about the impact of the proposed change that are given by the employee or employees concerned and/or their representatives.

(c) The requirement to consult under this clause does not apply where an employee has irregular, sporadic or unpredictable working hours.

(d) These provisions are to be read in conjunction with other award provisions concerning the scheduling of work and notice requirements.

[40] This statutory requirement under s.389(1)(b) of the Act requires a finding of fact. The subsection is not predicated upon a finding based on the Commission reaching a requisite degree of satisfaction on the basis of the reasonableness and practicality of the circumstances facing the employer (see by contrast Commissioner Cambridge in McDonald v Central Coast Commercial Properties & Projects Pty Ltd [2010] FWA 6626 (PNS 28-29)).

[41] Section 389(1)(b) of the Act is not made out unless the various requirements of the relevant consultation clause (as set out above) are demonstrably discharged by the employer.

[42] In this case, the employer had not completed the consultation requirements. The employer contends that its effort to consult with Mr Maxwell was affected by his fly in-fly out arrangements. The fact Mr Maxwell’s arrangements were so affected does not mean that Mr Maxwell was at all times un-contactable in a prior period (that is, between 7 January and 14 January 2015), and before such time as his dismissal was given effect.

[43] There was no notification in advance of the decision to make Mr Maxwell’s position redundant for the purposes of clause 8.1(a)(i) of the modern award, upon the Company making the definite decision to introduce the major change.

[44] There was no discussion prior to the dismissal taking effect as to the potential for there to be mitigating courses of action open to the employer.

[45] Mr Toogood provided no explanation as to why he could not have acted earlier to at least give some opportunity for consultation to occur prior to the dismissal taking effect for the purposes of clause 8.1(b)(ii) of the modern award.

[46] Further, there appears to be no document to which I was referred for the purposes of satisfying the requirements of clause 8.1(b)(iii) of the modern award, either.

[47] The toolbox communiqué of 23 December 2014 does not constitute consultation. It is a broad sketch of the business environment but provides no particularised information about redundancies as such, or what parts of the business may be affected (let alone which employees may be affected).

[48] The consultation requirements regarding major workplace change as set out in the modern award were not discharged by the employer and the employer, as a consequence, cannot claim the defence under s.389 of the Act.

[49] Because I have so found, there is no requirement for me to give consideration to whether or not the employer complied with s.389(2) of the Act. Though I add notwithstanding, that given the seriousness of the business and operational circumstances the employer faced, the scope for redeployment would have been limited indeed.

[50] Because of my findings above, I must now turn to consider the substantive application in the context of the requirements of s.387 of the Act.

LEGISLATIVE REQUIREMENTS

[51] The relevant legislative provisions arise under s.387 of the Act, which reads as follows:

387 Criteria for considering harshness etc.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant.

CONSIDERATION

Whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees)

[52] The Full Bench in UES (Intl) Pty Ltd v Leevan Harvey [2012] FWAFB 5241 (“Re: UES”) found that a dismissal for operational reasons was not a dismissal related to an employee’s capacity or conduct. That is, a dismissal for an operational reason could not be a valid reason for a dismissal under s.387(a) of the Act.

[53] I found above that the decision to bring about the dismissal of Mr Maxwell was because of an operational reason. This is not a matter relevant to s.387 of the Act. As a consequence, the circumstances bear in neutral terms upon the ultimate finding as to whether or not Mr Maxwell was dismissed harshly, unjustly or unreasonably.

Whether the person was notified of that reason

[54] Given the circumstances referred to immediately above, Mr Maxwell cannot be said to have been notified of the valid reason in respect of his capacity or conduct.

[55] As Mr Maxwell was dismissed because of an operational reason, the absence of notification in the terms of s.387(b) of the Act is a neutral consideration for purposes of my ultimate finding.

Whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person

[56] For the reasons referred to above, the failure to be notified of the “reason” for the dismissal (which is a reason for the purposes of s.387(a) of the Act) is a neutral consideration in this case as to whether or not the dismissal was harsh, unjust or unreasonable. This is because there is no valid reason for the dismissal as the dismissal was for reasons unrelated to Mr Maxwell’s capacity or conduct.

Any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal

[57] The Company did not unreasonably refuse to allow Mr Maxwell to have a support person present to assist in any discussions relating to dismissal. The circumstances in which the communication was conveyed did not allow for such a situation to emerge in which Mr Toogood might have been placed in a position to determine the status of a support person. This is a neutral matter in respect of whether or not the dismissal was harsh, unjust or unreasonable.

If the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal

[58] This is a neutral matter in respect of whether or not the dismissal was harsh, unjust or unreasonable, given the circumstances referred to above.

The degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal

The degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal

[59] The size of the employer’s enterprise is not a relevant consideration, and nothing was pressed upon me in that regard as mitigating the manner in which the redundancy decision was communicated.

[60] However, the employer’s enterprise was without any dedicated human resource expertise, and this deficiency, reasonably was relevant to the manner in which Mr Toogood effected the dismissal, where expedition (to reduce operating costs quickly) trumped consultation pursuant to the modern award clause.

Any other matters that the FWC considers relevant

[61] I have found earlier that I consider the reason for Mr Maxwell’s dismissal to have been because of the operational circumstances facing the employer’s business. These circumstances caused Mr Toogood to decide that the business no longer required the administrative role performed by Mr Maxwell.

[62] Because Mr Maxwell’s dismissal arose from his position being made redundant, the employer’s reasons for so acting towards Mr Maxwell were sound, defensible and well founded.

[63] Mr Maxwell was not provided with a process of consultation as envisaged in the modern award. He was informed his position was redundant and was dismissed in one telephone conversation on 14 January 2015. In this regard, Mr Maxwell’s dismissal was effected in a harsh manner.

Conclusion

[64] Mr Maxwell was dismissed for operational reasons and these reasons were sound, defensible and well founded. True it is that Mr Maxwell was not afforded any consultation in relation to the definite decision as made by his employer to introduce a major change. He may well have understood through the communiqué of 23 December 2014 that his employer was in an operationally and commercially stressful phase of the business cycle (should he have read it).

[65] But beyond that there had been no personalised communication with Mr Maxwell about the threat to his own position in the context of the need for the employer to reduce its overheads. Mr Maxwell was understandably aggrieved at the lack of notice and time to digest the circumstances that had befallen him.

[66] But for all of that, given the specificity of the information conveyed to Mr Toogood by the Santos representative on 7 January 2015 about the scale of the winding back of demand for the employer’s services (and the consequential effect on the workforce in and around Roma), any measure of consultation - even with the assistance of dedicated human resource specialists - reasonably would have not affected the employer’s planning and the imperative to reduce its overheads.

[67] Realistically, the absence of consultation with Mr Maxwell, while discomforting and disconcerting after such a long period of employment, would have not changed the ultimate outcome whatsoever: the employer was faced with dire forecasts about its business and it had to act. The evidence as led in the proceedings makes out the fact that the forecasts have been realised.

[68] In light of these findings, Mr Maxwell’s application under s.394 of the Act is therefore dismissed.

SENIOR DEPUTY PRESIDENT

Appearances:

Mr N. Maxwell, Applicant

Mr I. Colgrave, of Counsel, for the Respondent

Hearing details:

Brisbane (and Adelaide by video)

2015

15 June

Printed by authority of the Commonwealth Government Printer

<Price code C, PR568355>