[2014] FWC 5586

The attached document replaces the document previously issued with the above code on 18 August 2014.

The document has been edited to correct error in paragraph 7 by replacing “Mr Mead” with “Mr Barkatsas.

Christine Gambrill

Associate to Senior Deputy President Drake

Dated 18 August 2014

Fair Work Act 2009
s.739 - Application to deal with a dispute

SGS Australia Pty Ltd
v
The Australian Workers' Union
(C2014/4507)

Application to deal with a dispute.

[1] The subject of this dispute was previously listed before Commissioner Stanton by way of a different application which was first listed before the Fair Work Commission (Commission) on 15 April 2014. That notification did not resolve the dispute and it was eventually discontinued. Commissioner Stanton indicated that the subject of this dispute could not be determined by him.

[2] This application pursuant to s739 of the Fair Work Act 2009 (the Act) was lodged by SGS Australia Pty Ltd (SGS). SGS sought an arbitration in accordance with clause 11.2 of the SGS Newcastle Enterprise Agreement 2013 (the Agreement) in the following, somewhat opaque, terms:

"The applicant seeks a determination or declaration of the interpretation and application of the objectively and correctly construed clause 21.1 of the Agreement insofar as what constitutes and satisfies the obligation to "consider" voluntary redundancies; and/or the extent to which (if at all) an employee’s nomination for a voluntary redundancy must be granted by the clause."

[3] The application was listed before me in Sydney on 2 July 2014. Mr Barkatsas appeared for SGS. He provided an Outline of Submissions. 1 The Australian Workers’ Union (AWU) represented the interests of Mr Cowper. Ms Kate Thompson appeared as Industrial Advocate for the AWU. She provided an Outline of Submissions.2

[4] SGS submitted that the pre-requisite steps required by clause 11.1 of the Agreement had been met, that the dispute related to a matter arising under the Agreement and that the arbitration of the dispute by the Commission is contemplated by clauses 11.3 and 11.4 of the Agreement. The AWU agreed with the submissions of SGS regarding the Commission's power to arbitrate the dispute and the principles of construction of enterprise agreements terms. 3

[5] The subject of dispute is the application of Clause 21.1 of the Agreement or, more precisely, the obligations of SGS towards employees who respond to a request for voluntary redundancies. The dispute arose because of the refusal of SGS to accept the application of Mr Cowper, a supervising sampler employed by SGS. Clause 21.1 is set out below:

“21.1 The employer will explore all reasonable options available to avoid or reduce redundancies. However if redundancies are inevitable the following must be considered:

(a) In the first instance, the employer will consult with employees as per Clause 10.2

(b) If the reduction can be achieved by natural attrition

(c) Voluntary redundancies

(d) The criteria to apply in the selection of employees to be made redundant where natural attrition is not the solution or not the total solution, will include relevant skills, attendance, length of service, competence and performance.

(e) In the event redundancies are required, the company shall notify employees and the Union as soon as possible.

If, after exhausting all alternatives, redundancies are implemented, the redundancy pay equals the total amount payable to the employee for their period of continuous service, worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:

Employee’s period of continuous services on termination	Redundancy entitlement: Employee less than 45 years of age	Redundancy entitlement: Employee 45 or more years of age
Up to 1 year	0 weeks	0 weeks
1 up to 2 years	4 weeks	5 weeks
2 up to 3 years	6 weeks	7.5 weeks
3 up to 4 years	7 weeks	8.75 weeks
4 up to 5 years	8 weeks	10 weeks
5 years +	2 weeks for each year of services	2.5 weeks for each year of service

[6] SGS provided a detailed background to the dispute.

“4. The Applicant employees (sic) approximately 60 employees at the site in Mayfield West, NSW, in various sections, including management, project, exploration, shipping, laboratory & sample preparation positions. As such, the site is heavily impacted by the activity and product of the coal market (both nationally and internationally) and the value of the commodities.

5. In approximately November 2013, the Applicant commenced the consultation process in relation to a planned restructure at the site. The Respondent disputed the process as they felt that the Applicant should have accepted a nomination for a voluntary redundancy from Mr Billy Cowper, a Supervising Sampler employed at the site.

6. The applicant assessed the situation and only one position at this time was made redundant, which was the laboratory manager position.

7. On 28 March 2014, the Applicant’s business Manager for the Newcastle site notified site employees (via internal memo, Appendix 1) that a review of the team structure and allocation of resources at the site would be undertaken due to difficult economic circumstances.

8. The correspondence called for ‘expressions of interest’ and provided employees with an opportunity to put forward ideas or suggestions, including but not limited to:

a. redeployment,

b. relocation,

c. variation of working hours/days, or

d. voluntary redundancies.

9. The correspondence expressly stated any suggestions would be duly considered and reviewed, however the Applicant “cannot guarantee that it [sic] would be granted”.

10. The Respondent thereafter notified a dispute regarding its member and an employee at the site, Mr Billy Cowper, who had expressed interest in a voluntary redundancy, which was not granted by the Applicant.

11. Mr Cowper has been an employee for 31 years, and is a valued and highly-experienced Supervising Sampler within the team. Owing to his vast experience, Mr Cowper also has a pivotal informal ‘guidance’ role to newer employees and possesses a wealth of knowledge on all aspects of sample preparation for exploration for shipping and production analysis and a number of other tasks.

12. The Applicant duly considered Mr Cowper’s request for a voluntary redundancy, however concluded an employee of his experience and skills would not be a candidate for redundancy (either voluntarily or otherwise). Additionally and as outlined above, the difficult decision to restructure operations at the site is in response to growing financial and economic concerns.

13. If Mr Cowper’s nomination was granted, the financial impact of this decision to the business would likely cause the Applicant to consider more cost-saving measures such as further restructuring and redundancies at the site.

14. After carefully considering Mr Cowper’s request, he was advised on Thursday 3 April 2014 that his request for voluntary redundancy would not be granted.” 4

(my emphasis)

[7] SGS submitted that its obligation was to consider a voluntary redundancy, "if redundancies are inevitable," and that it had done so. It considered Mr Cowper's application and rejected it for operational reasons. These operational requirements were appropriate matters for SGS to take into account when making a decision which was, on the proper construction of the clause, entirely within its discretion. Mr Barkatsas took me to a recent decision of Deputy President Asbury Construction, Forestry, Mining and Energy Union v Anglo Coal (Dawson Services) Pty Ltd (Anglo Coal) 5 considering, what he submitted, was an apposite clause. In that application it was determined that the employer had “....the right to determine its requirements. The term ‘determine’ means that Dawson can settle or decide those requirements by authoritative decision."

[8] The AWU submitted that Mr Cowper was an appropriate candidate for voluntary redundancy. The AWU rejected SGS’s interpretation of clause 21 of the Agreement. It submitted that clause 21 required SGS to accept volunteers for redundancy in preference of, and prior to, making any employees forcibly redundant. The clause becomes enlivened when redundancies are "inevitable".

[9] The AWU rejected SGS’s reliance on Anglo Coal and distinguished it because of the different wording of the redundancy clause in that agreement and the absence of a clause specifically dealing with the process of selection for voluntary redundancy. In clause 4.2.2 of that agreement it was specified that Dawson would make its decision "...in line with business needs".

[10] The AWU submitted that, on a proper application of clause 21 of the agreement, Mr Cowper’s application for voluntary redundancy should have been accepted, even if the interpretation of the application of the Agreement relied on by SGS is accepted.

Conclusion

[11] There is no doubt that redundancies were inevitable at SGS. There was consultation. Reductions as required could not be achieved by natural attrition.

[12] In the absence of natural attrition producing the required solution, either in total or in part, SGS is required to apply the designated criteria being relevant skills, attendance, length of service, competence and performance in selecting employees who have applied for voluntary redundancy or those to be selected for forced redundancy.

[13] I am satisfied that SGS has an absolute discretion to decide what operational requirements are necessary to enable it to continue to operate as it prefers. Against that background and when deciding which employees are necessary and must be retained to achieve that agenda, it must consider relevant skills, attendance, length of service, competence and performance. It does not have to accept a volunteer if, after considering these factors, accepting that volunteer as a redundant employee would result in it not meeting its operational requirements. Despite this discretion, SGS must make this decision in the context of its operational requirements and on the criteria set out in the Agreement. These criteria must be considered. When these criteria are considered, and an applicant for voluntary redundancy would in all other respects be an appropriate candidate, that outcome cannot be ignored because of the expense of paying his or her entitlements.

[14] The AWU allege that, in recent years, Mr Cowper has been required to take extended leave to have a pacemaker fitted. During that leave he was replaced in his role by another employee. Since Mr Cowper has returned to work both he and the replacement employee have continued to perform essentially the same roles. The AWU submitted that this duplication was unnecessary.

[15] If Mr Cowper is not a proper candidate for voluntary redundancy on the application of the criteria, taking into account operational requirements, his application for voluntary redundancy does not have to be accepted.

[16] I will list this application for further mention and directions.

SENIOR DEPUTY PRESIDENT

 1   Exhibit SGS 1

 2   Exhibit AWU 1

 3   Exhibit SGS 1 paras 24 - 51 inclusive

 4   Exhibit SGS 1 paras 4 - 14 inclusive

 5   [2013]FWC 10241 (30 December 2013)

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