[2015] FWC 2851
FAIR WORK COMMISSION

DECISION


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

Vaughn Pettet, Samuel Green, Andrew Davis, Blayden Watson, Kaine McDonald, Scott Carter, Michael Grice, Christopher Spinner, Aidan Pont and Jake Shearman
v
Mt Arthur Coal Pty Ltd
(U2014/9321, U2014/9322, U2014/9323, U2014/9328, U2014/9325, U2014/9326, U2014/9327, U2014/9426, U2014/9526 and U2014/13313)

VICE PRESIDENT HATCHER

SYDNEY, 27 MAY 2015


Application for relief from unfair dismissal - Genuine Redundancies.

[1] The ten applicants in these matters have applied for unfair dismissal remedies under s.394 of the Fair Work Act 2009 (FW Act) in relation to their dismissals from employment with Mt Arthur Coal Pty Ltd (Mt Arthur Coal). Each of the applicants was formerly employed in the Maintenance department at Mt Arthur Coal’s coal mine in the Hunter Valley in New South Wales. Mt Arthur Coal, in the face of the commercial challenge presented by falling coal prices, engaged in a restructure of the Maintenance department in June-July 2014. The number of roles in the Maintenance department was significantly reduced, and this led to the positions filled by the applicants being declared redundant. The applicants were not redeployed to other positions, and were dismissed on the ground of redundancy effective from various dates in September 2014. The applicants, who were represented in the proceedings by their union, the Construction, Forestry, Mining and Energy Union (CFMEU), contended that their dismissals were unfair, and seek the remedy of reinstatement.

[2] Because the dismissals arose from a substantially common substratum of facts, the ten applications were heard together, and evidence in each matter was treated as also being evidence in all the other matters.

[3] Section 396 of the FW Act requires that four specified matters must be decided before the merits of the applications may be considered. There was no contest between the parties about the first three of those matters. I find that:

(a) all the applications were made within the period required by s.394(2);

(b) the applicants were all persons protected from unfair dismissal; and

(c) Mt Arthur Coal was not a “small business employer” as defined in s.23 of the FW Act, so that the Small Business Fair Dismissal Code was inapplicable.

[4] The fourth matter required to be considered initially by s.396(d) is whether the dismissal of each the applicants was a case of “genuine redundancy”. Under s.385(d), a dismissal must be found not to be a case of “genuine redundancy” in order for the dismissal to be found to be unfair. Section 389 defines the meaning of “genuine redundancy” as follows:

[5] The applicants did not contest that the elements of the above definition in s.389(1) were satisfied. However, they contended they could reasonably have been redeployed within the operations of Mt Arthur Coal or those of associated entities of Mt Arthur Coal within the BHP Billiton group of companies, and therefore that their dismissals were not cases of genuine redundancy under s.389(2). They also contended that their dismissals were harsh, unjust and unreasonable for substantially the same reason.

[6] The principles concerning the interpretation and application of s.389(2) have been stated in two Full Bench decisions, Ulan Coal Mines Ltd v Honeysett 1 and Technical and Further Education Commission t/a TAFE NSW v Pykett2. Those principles were summarised in Huang v Forgacs Engineering Pty Limited3 as follows:

(3) In order to conclude that it would have been reasonable to redeploy the dismissed person, the Commission must find, on the balance of probabilities, that there was a job or a position or other work within the employer’s enterprise (or that of an associated entity) to which it would have been reasonable in all the circumstances to redeploy the dismissed employee. 6

(4) A number of matters are capable of being relevant in answering the question, including the nature of any available position, the qualifications required to perform the job, the employee’s skills, qualifications and experience, the location of the job and the remuneration which it offered. 7”

[7] An additional proposition which was stated in Ulan was that, in relation to the reasonableness of redeployment to an associated entity, the degree of managerial integration between the different entities is likely to be a relevant consideration. 8

The Mt Arthur Coal Mine

[8] The Mt Arthur Coal Mine (Mine) is a large open cut mine which produces thermal coal for domestic power production and for export. It operates on a continuous basis, and is staffed by production crews in four separate shift crews. Each crew contains a baseline number of 166 employees, and additional labour hire employees are also used (the extent to which the baseline positions were filled at relevant times, and the usage of labour hire staff, were matters of controversy to which I shall return). The Mine also contains a Coal Handling Preparation Plant (CHPP) and associated infrastructure, which are managed as a separate operation. The Maintenance department at the time of the hearing contained about 410 employees and labour hire staff, and conducted a range of maintenance functions in the Mine including, relevantly, the maintenance of the haul trucks used to transport coal from the mine face to other areas of the Mine. The employees in the Maintenance department are trade qualified and include mechanical tradespersons, boilermakers, auto electricians and HV electricians. Production and engineering employees at the Mine (including employees in the Maintenance department) are covered by the Mt Arthur Coal Enterprise Agreement 2011 (Agreement).

[9] Mt Arthur Coal is part of the BHP Billiton Group. BHP Billiton is divided into a number of “businesses”: Coal; Copper; Aluminium, Manganese & Nickel; Petroleum & Potash; Iron Ore; and Marketing. Each business is made up of a number of “assets”, with each asset typically containing a number of operations. Mt Arthur Coal is part of the NSW Energy Coal (NSWEC) Asset within the Coal Business. It is the only coal mine operation in that asset. The Coal Business’s other assets include Illawarra Coal, which operates three coal underground mines in the Illawarra area; the BHP Billiton Mitsubishi Alliance (50% owned by BHP Billiton), which operates seven coal mines in the Bowen Basin in Queensland; BHP Billiton Mitsui Coal (80% owned by BHP Billiton), which operates two mines in the Bowen Basin; and four other overseas assets in South Africa, Colombia, Indonesia and the United States.

[10] The BHP Billiton Group operates in a devolved fashion. Within the scope of general mandates, strategies and policies established by the management of the Group, each business manages itself, and the management in one business has no authority over the management of any other business.

Equipment used at the Mine

[11] Some explanation of the heavy equipment used at the Mine is necessary for the purpose of this decision. The Mine uses coal diggers or excavators to actually dig the coal from the mining wall in the pit. Loaders are then used to load the excavated coal into haul trucks, which then transport the coal to dumps located at various places in the Mine area. The drivers of the haul trucks perform the haulage work in a repeating cycle, whereby the trucks enter the pit empty, are loaded in the pit, drive loaded to dump and unload, and then return to the pit empty. This is known as operating the truck in production mode.

[12] The operation of the trucks, which are very large, involves considerable risk, especially at the loading and unloading points. Interacting with other trucks and items of heavy equipment, manoeuvring the truck when fully loaded, and operating the truck throughout the day and night and in various types of weather conditions requires competence and experience on the part of the driver. The current position is that any driver of a truck in production mode must have a production mode competency, which is currently competency RIIMPO338D - Conduct Rigid Haul Truck Operations. There are two main types of trucks used at the Mine - the Liebherr T282, which may carry about 320 tonnes, and the Caterpillar (Cat) 789s and 793s, which hold about 170 tonnes and 220 tonnes respectively.

[13] Maintenance on the Liebherr and Cat trucks is carried out internally by employees in the Maintenance department. For the purposes of the maintenance work, some of the maintenance employees hold a “test and move” competency for one or both types of trucks. A “test and move” competency will permit the employee to test the vehicle for maintenance purposes, and to move the vehicle in or out of the workshop. It may also, on occasion, involve the employee driving the truck unloaded on haul roads in the Mine to test its functioning or to return it to a certain point. However the “test and move” competency does not qualify an employee to operate the truck in production mode. Thus an employee who holds only a “test and move” competency would never drive the truck in the working areas of the pit or in a loaded state.

[14] There was some dispute between the parties as to the extent to which the skills necessary to obtain a “test and move” competency on a given type of truck would also count towards a production mode competency for that truck. I consider that the competency assessment documents placed in evidence for the production mode competency (for RIIMP0311 Conduct Haul Truck Operations - the predecessor to RIIMPO338D) and the “test and move” competency (for the Cat 789 trucks) give the best and most objective indication of the degree of overlap between the two competencies. A perusal of those documents shows that over half the matters assessed for the production mode competency are also assessed for the “test and move” competency. That demonstrates that the amount of training required to complete the production mode competency would be significantly less for an employee who already held a “test and move” competency than an employee who did not.

The applicants

[15] The relevant circumstances of the ten applicants prior to dismissal were as follows:

The Mine restructure

[16] In the face of declining coal export prices, Mt Arthur Coal has since 2013 been restructuring its operations at the Mine in order to optimise its production processes and reduce its operating costs. One of the steps it took in late 2013 and early 2014 was to reduce the number of labour hire staff from about 130 “full-time equivalents” (FTEs) to about 80 FTEs. In May 2014, Mt Arthur Coal announced that that it would be implementing a “transformation program” known as “T1”, as well as introducing a number of immediate measures to reduce costs.

[17] Part of Phase One of the T1 program was to reduce the workforce in the Maintenance department from about 540 employees and labour hire staff to about 411. By July 2014 a revised organisational structure for the Maintenance department was developed which identified 51 positions which could be made redundant. On 3 July 2014 Ms Deidre Roos-Korf, the then Head of Human Resources in the NSWEC Asset, wrote to Mr Jeffery Drayton, the Vice President of Northern Mining & NSW Energy District of the Mining and Energy Division of the CFMEU, to inform him that it was anticipated that 47 positions in the Maintenance department might be made redundant effective from August and September 2014 (as well as 8 positions in the CHPP and 89 staff employees). Ms Roos-Korf’s letter invited the CFMEU to enter into discussions and consult with Mt Arthur Coal in relation to the introduction of the changes, the effects the changes would be likely to have on employees, and measures that might be taken to avert or mitigate the adverse effects on employees (the reason for the discrepancy between the original figure of 51 redundancies and the 47 referred to in the letter is not clear).

[18] The senior management of Mt Arthur Coal met with representatives of the CFMEU on 8 July 2014. In the course of this meeting:

[19] Following the meeting, Mt Arthur Coal management considered whether it would be reasonable to redeploy redundant maintenance employees into truck driver positions in production which could be created by reducing the number of labour hire staff performing that work. The conclusion was reached that this proposal would not be reasonable because:

[20] A second meeting with the CFMEU occurred on 14 July 2014. At this meeting, Mt Arthur Coal management rejected the proposition that maintenance employees marked for redundancy could be moved to truck driving roles, and gave the reasons for this, namely the high training costs involved, the duration of the training, the delay that this would cause in effecting changes required in maintenance, the potential loss of productivity that would result and the potential safety risks. It is apparent that Mt Arthur Coal’s assessment of the training cost and duration was based on the assumption that the CFMEU’s proposition was that all the remaining 45 maintenance employees earmarked for redundancy would be moved to truck driving roles. The Mt Arthur Coal representatives also explained the specific work functions performed by the remaining contractors in the Maintenance department, which included Monadelphous and Chandler McLeod.

[21] At the meeting, the CFMEU pressed its proposal that maintenance employees be redeployed to truck driving roles, and suggested among other things that the necessary training could be carried out in less than a week if all 52 trainers at the Mine were used for that purpose and ten employees were trained at a time. This was rejected by Mt Arthur Coal because the existing training commitments of the trainers could not be placed on hold. The issue did not progress any further at the meeting.

[22] The following day the CFMEU lodged an application in the Commission for it to deal with a dispute in accordance with the dispute settlement procedure in the Agreement. The application identified the subject matter of the dispute as follows:

[23] The application went on to identify that the 240 were employed as truck drivers, that “Each of the employees to be retrenched could easily be trained in these production roles”, and that “Each maintenance employee is already required to be able to operate a truck for move and test purposes and the only additional training required would be to operate the truck under a loading unit and on a dump.”

[24] On 29 July 2014 Mt Arthur Coal announced to employees that 17 pieces of equipment would be stood down effective from 1 August 2014, and that as a result a further 87 production roles and 8 staff roles would become redundant. It was anticipated that most of the employees could be redeployed in the Production department based on their skills and competencies.

[25] On 31 July 2014 the Commission (Hamberger SDP) conducted a conciliation conference in relation to the dispute application lodged by the CFMEU. During the conference, the CFMEU requested further information concerning, among other things, the cost involved in training maintenance employees to fill truck driver roles. The issue was not resolved, but the parties committed to consult further about the issue. Pursuant to this commitment, the parties met on 7 August 2014. During this meeting the CFMEU representatives were handed a letter under the signature of Ms Roos-Dorf which provided a response to various issues raised by the CFMEU at the conciliation conference. The letter elaborated upon the reasons why Mt Arthur Coal did not accept “the proposal to train and redeploy 45 tradesmen to operate rear dump trucks”. The letter included the following:

[26] The letter also estimated that the anticipated total cost of retraining 45 tradesmen for truck driving roles would be $4.5 million. The letter said in relation to this figure:

[27] The letter contained a breakdown of the costs. The largest element identified was the “Wait cost” of $3,085,534.69. It was explained that the wait cost was:

[28] Mt Arthur Coal advised during the meeting that the redundancy of the 14 boilermakers was to be postponed, and that one of the fitters had resigned (reducing the affected maintenance employees to 30). It was further advised that affected employees would be given notice of their termination the following day and that during the 5 week notice period Mt Arthur Coal would continue to try to find redeployment opportunities for them. Mr Drayton requested that Mt Arthur Coal further consider whether the affected employees could be redeployed to perform maintenance work currently performed by contractors or to any tradesperson roles in the CHPP/Infrastructure department. Mt Arthur Coal agreed to consider this.

[29] From 8 to 11 August 2014, notices of termination were issued to 29 maintenance employees including the applicants. The persons to be made redundant were selected on the basis of the seniority list applicable to the Maintenance department. The number of persons to be made redundant had been reduced by one because a second fitter had resigned.

[30] On 12 August 2014 there was another meeting between representatives of Mt Arthur Coal and the CFMEU, and on 15 August 2014 there was another conciliation conference in the Commission. The dispute was not resolved, and the conciliation conference concluded on the basis that the CFMEU was to advise the Commission whether it wished the Commission to arbitrate the dispute. In relation to the issue of the redeployment of maintenance employees, the CFMEU in a letter dated 18 August 2014 advised:

[31] After the notices of termination were issued, the issue of redeployment of the 29 maintenance employees remained under consideration. Prior to the expiry of their notice periods, 9 fitters were redeployed into other roles in the Mine (some of which roles were created by the removal of labour hire from the site). Three other maintenance employees were offered redeployment to other positions in the Mine but declined the offers. Their employment terminated in accordance with the notice provided to them.

[32] Mt Arthur Coal carried out a revised assessment of the cost of training the other 17 maintenance employees to perform truck driving work. The revised assessment was that the training would cost a total of $1,187,864 if 5 employees were trained at a time and $988,640 if 10 employees were trained at a time. On the basis of this estimate, Mt Arthur Coal decided that it would not be reasonable to redeploy the 17 maintenance employees to truck driving roles. It was also decided that it was not reasonable to redeploy the maintenance employees to perform work done by maintenance contractors which was specialist in nature and performed pursuant to existing contractual arrangements or which was performed flexibly according to operational need, or to redeploy them to perform non-trades work which required a lower and different skill base.

[33] Mt Arthur Coal made some arrangements for the employees to be retrenched to apply for other positions in the BHP Billiton Group prior to dismissal. The employees were issued with a “redeployment form” which asked them to indicate whether they wished to be redeployed and, if so, whether they were prepared to consider an alternative role and whether they were prepared to relocate to some or all of the identified BHP Billiton Group assets in Australia. Those who filled in the form and returned it with an indication of a desire to be redeployed were sent the BHP Billiton “job board”, which was a list of all BHP Billiton jobs that were available across Australia. There was no attempt by Mt Arthur Coal to match the positions on the job board to each employee’s skills or the preferences they had expressed on their redeployment forms. They were simply given the entire list on the basis that it was up to each employee to select a position which the employee thought was suitable and to make their own application for it. The employees were placed on a 5 week period of paid “gardening leave” prior to their dismissal date to give them the opportunity to apply for alternative positions. The employees were informed that they should advise Mt Arthur Coal’s human resources personnel of any application they had made, so that the human resources personnel could contact the recruiter at the relevant asset to inform them that the applicant was a redundant employee from within the BHP Billiton Group who was looking for redeployment. However, there was never any suggestion that Mt Arthur Coal could favourably influence the selection process at any other BHP Billiton asset.

[34] Six of the 10 applicants applied for positions on the job board. Those who did not were Andrew Davis, Kaine McDonald, Scott Carter and Michael Grice. Mr Davis was absent on annual leave during part of the period leading up to his dismissal and did not receive the job board until a few days before his dismissal took effect, when it was too late to apply for anything. Mr Carter was in a similar position, and in any event could not identify any suitable position on the job board. Mr McDonald and Mr Grice likewise could not identify any suitable positions on the job board.

[35] None of the 6 who applied for positions was successful. As earlier stated, the employment of the applicants terminated on various dates from 11 to 16 September 2014.

Applicants’ case on genuine redundancy

[36] The applicants’ case that the dismissals were not cases of genuine redundancy was advanced on 3 bases. The first and primary basis was that it would have been reasonable for the applicants to have been redeployed, after a short period of training, to positions driving haul trucks in production mode in replacement of labour hire staff who were currently performing that work. The second was that all the applicants except Mr McDonald 9 could reasonably have been redeployed to perform work in the Maintenance department, namely the parts interpreter role that was at the relevant time being performed by an employee of Chandler McLeod, a labour hire provider, and the trades assistant roles being performed by employees of Monadelphous, a specialist contractor.

[37] The third basis was that the following applicants could reasonably have been redeployed to the following positions in associated entities of Mt Arthur Coal:

[38] I shall deal with each limb of the applicants’ case in turn.

Redeployment to truck driving roles

The issues

[39] Mt Arthur Coal did not have any opposition in principle to the concept of redundant employees being redeployed to roles created by removing labour hire employees currently being utilised from the Mine. Indeed, as has earlier been outlined in relation to the 2014 restructure, a number of the jobs of redundant Maintenance department employees were saved by Mt Arthur Coal redeploying them in this way. Rather, it contended that it was not reasonable in the particular circumstances for it to have redeployed the applicants to positions as truck drivers, in substitution for existing labour hire staff. The reasons for this position which it communicated to the CFMEU during the course of the 2014 restructure have earlier been set out. The major propositions advanced at the hearing as to why it was not reasonable for the applicants to be redeployed to truck driving roles were as follows:

[40] Because the first two issues involve interrelated propositions concerning Mt Arthur Coal’s future requirements for labour hire truck drivers, I will consider them together. The fourth issue, which concerned a potential loss of productivity, was brought to account as a cost to the business in Mt Arthur Coal’s analysis of the cost of retraining the redundant maintenance employees as truck drivers. Accordingly the fourth issue may be considered as a subset of the third issue.

[41] There were also some subsidiary propositions advanced by Mt Arthur Coal, including that any maintenance employees retrained as truck drivers would in all likelihood leave as soon as they found another trades position, and that if redeployed as truck drivers they would bring their seniority with them with the result that if there were any future redundancies, more experienced truck drivers might have to be made redundant ahead of them. Because of the hypothetical and contingent nature of these propositions, I do not consider these to have been decisive considerations which could tip the balance of reasonableness one way or the other, and therefore it is not necessary to give them separate consideration.

Future use of labour hire in truck driving

[42] I do not accept Mt Arthur Coal’s first proposition that it had, at the time of the dismissals, a business need to retain labour hire in order to be able to flexibly respond to fluctuating requirements for labour. This is because the evidence demonstrated that Mt Arthur Coal did not intend to use labour hire in this way to any significant degree. Evidence adduced by Mt Arthur Coal itself demonstrated that, both at the time the employees were dismissed and at the time of the hearing, labour hire employees performing truck driving work fell into 2 categories. The first was labour hire employees who were permanently rostered to work 12-hour shifts as part of the shift crew for each shift. As at August 2014, when the applicants were given notice of termination, there were 24 labour hire employees rostered to perform 12 hour shifts on each shift crew. Insofar as this first category was concerned, Mt Arthur Coal’s stated intention was not to retain that labour hire for operational flexibility, but rather to remove it from the business altogether by April 2015 as it reduced the number of trucks which it operated. The second category consisted of labour hire employees who were permanently rostered to work 8-hour shifts for crib relief purposes. As at August 2014, 19 labour hire employees per shift crew were engaged for this purpose. In relation to the second category, Mt Arthur Coal’s own November 2014 business projections showed that it intended to maintain into the foreseeable future the fixed number of 19 employees per shift for crib relief, and certainly no decision had been made to alter this. This was therefore not a fluctuating requirement but, on the evidence a permanent one. On the evidence, the use of labour hire to cover genuine fluctuations in demand for labour caused by unexpected absences, training requirements and the like was minimal.

[43] Mt Arthur Coal’s proposition that the maintenance employees could not reasonably be redeployed to replace labour hire in truck driving roles because of its intention to substantially reduce or remove labour hire had substance in respect of the first category of labour hire just identified, namely those rostered on shift crews for 12-hour shifts. The evidence of Mr Xavier Wagner, the General Manager Operations at the Mine, was that the business strategy adopted in mid-2014 was to improve productivity and reduce unit costs by, among other things, “parking” a number of haul trucks currently in operation. This would require a reduced demand for labour which would be accommodated by the removal of labour hire from the shift crews. The business projection as at November 2014 was that, by April 2015, there would be no labour hire employees remaining who were rostered to perform 12-hour shifts on the shift crews.

[44] The applicants challenged this evidence in two respects. Firstly they pointed to the evidence that, as at February 2015 (shortly before the hearing), not only had there been no significant reduction in the use of labour hire actually achieved but, compared to August and September 2014, the number of labour hire employees used on 12-hour shifts had significantly increased. Mr Wagner conceded that this occurred, but explained that it had been the result of unanticipated extended periods of heavy rainfall, which had reduced operating hours and required the use of more trucks to make up production, and the loss of skills in the Maintenance department, which had adversely affected truck availability and had also required more trucks to be used. Notwithstanding this, Mr Wagner said, it had been Mt Arthur Coal’s intention at August-September 2014 to park trucks and remove the 12-hour labour hire employees by April 2015, and this remained the business’s intention.

[45] The second aspect of the applicants’ challenge was that an internal NSWEC document dated September 2014 and entitled “NSWEC Labour Strategy” indicated that, for the next two years, “the minimum number of permanent staff and the maximum flexibility around utilisation of labour hire and outsourcing would be the preferred model”. On the basis of this document, the applicants submitted that in fact Mt Arthur Coal intended to increase and not reduce the amount of labour hire it was using, which meant that there was ample scope for the replacement of labour hire by redeployed and retrained maintenance employees. Mr Wagner rejected this. He said the document was a draft which had been prepared by the NSWEC’s former Head of HR, Ms Roos-Korf, pursuant to a BHP Billiton requirement that the asset have a labour strategy document, and that it did not reflect the actual business plan of the Mine. Mr Wagner’s evidence was that, contrary to the labour strategy document, Mt Arthur Coal had in fact informed its labour hire provider of its intention to reduce labour hire numbers, and that this had led to a loss of morale and high turnover amongst labour hire employees. Mt Arthur Coal had had to pay a retention bonus to its labour hire staff in order to rectify this problem, Mr Wagner said.

[46] I accept Mr Wagner’s evidence in this respect. I consider that he gave frank and honest evidence about Mt Arthur Coal’s business strategy, including as to the shortcomings in its execution, and his evidence was supported by the November 2014 business projections which showed that it was anticipated that 12-hour labour hire employees would reduce to zero by April 2014.

[47] However, it does not follow from that conclusion that there were no long term labour hire truck driving positions which could be filled by retrained and redeployed maintenance employees. There are two reasons for this. First, as earlier stated, the evidence did not indicate that any decision had been made to entirely remove crib relief labour hire employees on 8-hour shifts from the truck driving operations. The November 2014 projection showed that there would remain 19 such employees per shift crew through to June 2016 (the end of the projection period). Mr Wagner’s evidence in his witness statement was that “at this stage” (presumably meaning at the time he made his statement on 10 February 2015) it was anticipated that the number would be reduced to 11 per shift, and that no decision beyond that had yet been made. These were positions which could have been filled by redeployed maintenance employees. Second, Mt Arthur Coal had in mid-2014 placed a freeze on the external recruitment of permanent employees to replace those who left employment at the Mine, and that any vacancies in that respect would be filled by labour hire employees until the freeze was lifted. I consider that it could reasonably have been anticipated in August-September 2014 that this would shortly lead to vacancies in permanent positions being filled by labour hire, and this has in fact turned out to be the case with there being 5 permanent vacancies at the time of hearing. These are also positions which could have been filled by maintenance employees.

[48] Accordingly I reject Mt Arthur Coal’s first two propositions. I consider that, all other things being equal, there were long term truck driving roles being performed by labour hire employees to which retrained maintenance employees could have been redeployed.

Cost of training

[49] It may be accepted that, in considering whether it would have been reasonable to redeploy an employee to a particular role, the cost of any retraining required to allow that redeployment to occur is a relevant consideration. In particular, the cost of any such retraining as compared to the cost of retrenching the relevant employees will in my view be a significant factor in the consideration of the reasonableness of redeployment. If, for example, redundant employees could have been trained to fill available alternative roles at a cost which was less than, or perhaps the same as, the cost of retrenching them, then it may be open to conclude that redeployment was reasonable. However if the cost of such training would have been significantly more than the cost of retrenchment, then that is likely to make it difficult to conclude that redeployment was reasonable.

[50] The second training cost analysis produced by Mt Arthur Coal in August 2014, based on a cohort of 17 maintenance employees being trained with 9 of them holding one “test and move” competency and the other 8 none, showed that the total training cost would be $988,640 (assuming that 10 persons were trained at a time). That analysis was developed by Ms Georgia Maw, the Operations Superintendent at the Mine.

[51] The total cost of termination payments made to the 17 retrenched employees the subject of the analysis was $338.967. 10 This figure included the cost of paying out accrued leave entitlements, which presumably would have to have been paid at some future time if the employees had been redeployed. The total cost of the severance payments made to the employees was $114,030. That represents, I consider, the true cost of the retrenchments.

[52] If the cost of training the redundant employees to perform truck driving work would have been as calculated in Mt Arthur Coal’s August 2014 analysis, then plainly it would not have been reasonable to redeploy those employees to do that work. In circumstances where Mt Arthur Coal was under significant commercial pressure, it clearly would not have been reasonable for it to have spent $988,640 to train the employees to perform work which was already being performed by qualified and experienced labour hire staff when the actual cost of retrenching the employees was only $114,030. However the applicants mounted a significant challenge to the accuracy of Mt Arthur Coal’s training cost calculation, and submitted that on a more realistic assessment of the training cost it would have been reasonable for Mt Arthur Coal to redeploy the applicants. That means it is necessary to give consideration in some detail to Mt Arthur Coal’s cost calculations.

[53] On one view, given that there are 10 applicants, the comparison should be made between the cost of training those 10 and the cost of retrenching them. However, I consider that this would involve a retrospective and unfair recasting of the position which applied in August and September of 2014. The position at that time, which has earlier been outlined, was that there were 17 redundant employees for whom redeployment was sought. The CFMEU’s position was that all 17 should be trained to perform truck driving work. It was in that context that Mt Arthur Coal carried out its second cost analysis. There was never any suggestion that a smaller number should be trained and then redeployed. It would doubtless have been the case that had Mt Arthur Coal suggested that a smaller number be trained and redeployed, that would have been met with an objection on the part of the CFMEU that there was no reason why all of them could not be trained and that to select only some of them would be unfair to the others. There was of course no way for anyone to know at that time that only 10 of the 17 would ultimately press unfair dismissal remedy claims. Therefore, in considering under s.389(2) whether it would have been reasonable to redeploy the 10 applicants, I will approach the issue of the cost of training on the basis that if the 10 applicants had undergone training to perform truck driving work, they would have done so as part of a larger cohort of 17.

[54] The $988,640 total was the sum of the following constituent elements:

[55] The “cost to maintain contractors” was said to be the cost of the labour hire staff that would have to be used to fill in for the trainers working on the training programs. “Lost production” represented the loss of productivity that would occur when the newly trained truck drivers commenced work in replacement of experienced labour hire staff. The “administrative costs” consisted of the costs to have an external organisation prepare the training programs and then train the trainers. “Wait costs” arose from the fact that no more than 10 employees could be trained as a time, so that at least 7 of the 17 would have to be paid with no work to do while waiting for the first 10 to finish their training courses.

[56] The applicants challenged every component of the $988,640. Their first challenge was in respect of the assumption that the cost of the training programs, and the waiting cost, would have to include the cost of paying the 17 employees while undergoing or waiting for their training. The applicants pointed out that the 17 employees had been sent on paid “gardening leave” for the 5 weeks prior to their dismissals taking effect. They submitted that if the training had been conducted during this 5 week period, the cost of their wages would have effectively been a sunk cost which could be excluded from the analysis. Ms Maw accepted the conceptual validity of this proposition, and said it had not been considered when the costs analysis was prepared. I consider that this submission has considerable force. Had the decision been made to train the 17 employees to perform truck driving work, it would have been open to Mt Arthur Coal to use most or all of this period to commence the training. That would have the result that the wages cost of the 17 employees during that period can be eliminated from the analysis. It is necessary to consider some further aspects of the applicants’ challenge to the costing analysis before the full effect of this can be determined.

[57] Mt Arthur Coal’s analysis assumed that the training program for employees who had no “test and move” competency would take a total of 6 weeks, the first 4 of which primarily involved classroom training (3 days) and one-on-one training with a trainer (14 days), and the last 2 of which consisted of solo driving (with an additional assessment day to occur after 12 weeks). In relation to those who had one “test and move” competency, the assumption was that the training would take a total of 5 weeks, with the first 3½ weeks primarily involving classroom training (3 days) and one-on-one training with a trainer (12 days), and the last 1½ involving solo driving (plus the additional assessment day to occur after 12 weeks 11).

[58] The applicants contended that this assumption concerning the length of training was significantly inflated, and adduced evidence to the effect that it had previously taken much less time than this to train persons in truck driving. Mr Ian Ayre, an experienced trainer employed by Mt Arthur Coal at the Mine, described in detail what was involved in training a person to drive a truck in production mode. He said that the average time to train a person with no prior experience to drive a CAT truck in production mode to the point where they could drive solo was two weeks, and that it took less than that for persons who already held a “test and move” competency. His evidence in this respect was supported by Mr Howard, a production operator employed at the Mine. He said that he had commenced employment at the Mine in 2008 with no previous work experience in driving trucks, although he did hold a Heavy Rigid Vehicle Licence, and that the training he had been provided permitted him to be operating CAT trucks solo in production mode in under 2 weeks. Mr Drayton similarly said that when he commenced work at the Mine in 2003, he was operating trucks solo within 2 weeks (noting that he had held for the preceding 10 years a Public Transport Heavy Rigid Vehicle Licence).

[59] Mr Almeroe de Nysschen, who was called to give evidence by Mt Arthur Coal, also gave evidence on this subject. Mr de Nysschen held the position of Manager Statutory Compliance & Standards at the Mine, and had done so since January 2014. He appeared to broadly confirm the evidence of Mr Ayre, Mr Howard and Mr Drayton as to the time it historically took to train a person to drive trucks solo in production mode, but estimated that under the current competency-based training arrangements it would take about 4 weeks before a person with no prior experience could be signed off to operate a truck solo in production mode with minimal supervision. Mr de Nysschen also emphasised the safety risks associated with the operation of heavy mine equipment by inexperienced drivers.

[60] Having regard to that evidence, I consider Mt Arthur Coal’s costing assumption that, for those of the employees who had no “test and move” competency, it would take 4 weeks of training before they could operate solo with minimal supervision to be reasonable. However, I consider that the assumption of 3½ weeks training before going solo for employees with a “test and move” competency was inflated. The “test and move” competency allowed those employees to drive one type of truck, unloaded, on the haul roads in the Mine but not in the operational pit areas. As earlier stated, the competency assessment documents demonstrate that employees with a “test and move” competency would already have been assessed as competent in over half the areas that were necessary in order to be assessed as competent to drive a truck in production mode. I consider that Mt Arthur Coal, in preparing its training costs analysis, took too conservative an approach in recognising the prior learning of employees with a “test and move” competency. I consider a reasonable assumption to be, for the purpose of the cost analysis, that it would only take two week’s training before an employee with a “test and move” competency could drive one truck type solo in production mode with minimal supervision.

[61] On the basis of the conclusions I have reached so far, I consider that Mt Arthur Coal could have at least conducted the first 5 weeks of the training of the employees with no “test and move” competency within the period of gardening leave that occurred prior to the dates of their dismissal. If that had been done, then for the purpose of the analysis the wages of the 8 employees could be regarded as a sunk cost and excluded as a cost of training. The costing of the training program for employees without a “test and move” competency included 17 days in the first 4 weeks in which the cost of the trainee employee was included at $962.35 per day. The exclusion of that cost would reduce the cost per person of the training program from $34,837 to $18,477. 12

[62] Because of the maximum of 10 persons who can be trained at a time, the training program for employees with a “test and move” competency would have to have been held after the training program for those employees without any such competency, and therefore outside the period in which gardening leave was taken. The wages of the trainee employees during the training period cannot therefore be excluded from the analysis. However, because I have concluded that the training could have occurred in a shorter period of time, that reduces the number of days for which wages for the trainee employees needs to be accounted for. The costing of the training program for employees with a “test and move” competency included 15 days in which the cost of the trainee employee was included at $962.35 per day. On my estimate of two weeks, the 15 days should be reduced to 10 days. That would reduce the cost of the training program per person from $28,486 to $23,674.

[63] The next element of the applicants’ challenge to the cost analysis concerned the inclusion of the trainers’ wages in the cost of the training programs. The trainers are, of course, persons already on Mt Arthur Coal’s payroll. The applicants submitted, in effect, that the trainers could only be legitimately included as an additional cost where they were taken out of a production role, in which case the additional cost was only the cost of engaging a labour hire employee to replace them. The only time when a trainer was, properly speaking, taken out of production was when the trainer was conducting classroom training. During the other periods in the training program when the trainer was giving one-on-one training in a truck, the truck was operating in production mode. Ms Maw accepted that this was the case, albeit with the qualification that the truck would be operating at a lower productivity level, and that therefore the cost of the trainer should be excluded.

[64] I accept the applicants’ submission to this effect, supported as it was by the appropriate concessions made by Ms Maw. The cost of engaging labour hire staff to replace trainers was separately accounted for (see below), so that the effect of the submission is that the cost of the trainers’ wages can entirely be excluded from the cost analysis. In respect of the training program for employees with no “test and move” competency (assuming a class of 8), this reduces the cost to $962 (representing only the trainee employee’s wage cost for the assessment day in week 12). 13 For the training program for employees with one “test and move” competency, the training cost is reduced by a further $14,050 to $9,701.14

[65] In relation to the next component of the costs analysis, being the “cost to maintain contractors until program is finished”, the analysis document placed into evidence does not make it clear how, mathematically, the total of $123,260 was arrived at. The rationale is said to be as follows:

[66] It is difficult to make sense of this rationale. The wages of the trainee employees were accounted for in the cost analyses of the training programs in the way earlier discussed. The cost of labour hire staff performing production work during the period before the trainees are permitted to work solo in production mode is a cost which Mt Arthur Coal would have incurred whether the training had occurred or not. It is not therefore a legitimate cost of the training. As stated above, the only legitimate contractor cost is the cost of engaging labour hire staff to replace trainers when they are performing classroom training. Each program requires two trainers in total to perform three days of classroom training. 15 This represents 12 shifts for which labour hire needs to be engaged to cover for these trainers, making a total cost of $7,624.16

[67] The applicants also challenged the “lost production” component of $73,906. The calculation for this component assumed that, once the employees were trained, their productivity would be lower than that of other drivers for the first 10 shifts of their work. That appears to me to be a reasonable, and perhaps conservative, assumption. The loss of productivity was estimated by reference to the difference between the average time it took drivers at the Mine to perform the cycle of being loaded, travelling, dumping, and returning, and the time it took drivers at the slowest end of the range (as recorded in the Mine’s records). The applicants pointed out that this method of calculation was not based on any actual records of the time it took newly-trained employees to perform a cycle of work. This may be accepted, but I consider that it constitutes a reasonable proxy for the longer time that it would likely take an inexperienced employee to perform the work. Therefore I consider that the cost component of $73,906 is a reasonable one.

[68] The administrative cost of $32,661 I consider to be inflated. It was calculated on the assumption that an external contractor would be needed to prepare the training materials (taking 2 persons a week to do so), and then would need to train the trainers in the material. It also contains other unspecified administrative costs. The evidence demonstrated that there are a number of existing trainers who have trained persons to drive trucks in the past; I do not consider that there would have been any need to retrain any trainers in those circumstances. There were likewise existing training materials which only required updating. I consider that this could have been done in-house by Mt Arthur Coal’s training staff. There might be some minor additional administrative costs, such as photocopying of documents. I would estimate that only $1000 is reasonable for this component.

[69] The last component was waiting time of $223,746. The precise manner in which this was calculated mathematically is unclear, but it appears to represent the cost of 7 employees having to be paid with no work to do waiting to be trained during the 6 week period in which the first cohort of 10 were trained. However if, as earlier discussed, the training was carried out during the 5 weeks of gardening leave which Mt Arthur Coal had to pay wages for in any event, then the 6 week waiting period may properly be reduced to one week. I have assumed that the 8 employees with no “test and move” competency would be trained first, and the 9 employees with one such competency would be trained second and would therefore have to wait. The cost of wages for the 9 employees for one week would be $43,306. 17

[70] I would therefore reconstruct the cost analysis of training the 17 maintenance employees who were ultimately retrenched as follows:

[71] The apparent exactness of the above calculations may give the false impression that the total training cost can be identified with precision. The process of making assumptions necessarily involves a significant degree of estimation, so that the total figure can likewise be regarded only as an estimate. However, I consider it to be the most accurate estimate that can be derived on the material before me.

[72] It can be seen that the applicants have very substantially succeeded in their challenge to the accuracy of Mt Arthur Coal’s training cost analysis. My conclusion is that that cost analysis inflated the total cost by a factor of over 4.

[73] However, unfortunately for the applicants, “the struggle naught availeth”. 18 That much reduced training cost estimate is still significantly more than the severance payment cost of $114,030. I cannot conclude that it would have been reasonable for Mt Arthur Coal to pay approximately $220,841 to retrain the 17 maintenance employees to be redeployed into truck driving work in circumstances where it would only cost $114,030 to retrench them (excluding leave entitlements), and where the retrained maintenance employees would be replacing qualified and experienced labour hire staff who cost significantly less to employ (because they did not receive the rates of pay in the Agreement) and who, if not needed at any time in the future, could be removed from the Mine operation without the need for Mt Arthur Coal to make any severance payments.

[74] The fact that the cost of the retraining would have significantly exceeded the severance payment cost of the retrenched employees is a result of the fact that the 17 employees, including the applicants, all had relatively short periods of service (generally 1-2 years). Had they been longer serving employees who would have cost significantly more to retrench, a different conclusion as to the reasonableness of retraining and redeployment would have been reached.

[75] Accordingly, I am not satisfied that it would have been reasonable for Mt Arthur Coal to redeploy the applicants into truck driving roles at the Mine.

Redeployment in the Maintenance department

[76] In relation to redeployment within the Maintenance department, the applicants identified 3 positions to which it would have been reasonable to redeploy them (except for Mr McDonald) - that of Parts Interpreter, and two trades assistant positions. At the outset, it must be observed that it was not satisfactorily explained by the applicants how it could have been reasonable to redeploy 9 persons into 3 positions. At best for the applicants, it may have been reasonable for 3 of them to be redeployed to these positions, with the 3 to be redeployed being selected on the basis of seniority in accordance with the Agreement. In any event, I am not satisfied that it would have been reasonable for any of the applicants to be redeployed to these positions.

[77] The evidence of Mr Wagner and Mr Kelly in relation to the Parts Interpreter role was that:

[78] I consider that it would not have been reasonable to redeploy any of the applicants to a role which did not have anything beyond a short term future.

[79] The two trades assistants employed by Monadelphous are used to assist with maintenance days by setting up equipment, moving parts and equipment and escorting service providers on the Mine site. They occupy permanent full-time positions on the Mine site. They work under a flexible roster arrangement whereby a combination of dayshifts and nightshifts are worked in accordance with the operational needs of Mt Arthur Coal. There was no dispute that all of the applicants would have been able to perform the duties of these roles. However, there was also no dispute that, if any of the applicants were redeployed to perform that work, they would remain covered by the Agreement. The Agreement makes no provision for the flexible rosters currently worked by the Monadelphous employees. Further, the pay rates in the Agreement which, in respect of maintenance employees, are paid in respect of trade-qualified personnel would then have to be paid to the redeployed employees performing trades assistant work, with an associated additional expense to Mt Arthur Coal. In those circumstances, I do not consider that it would have been reasonable to redeploy any of the applicants to those positions.

Redeployment to positions in associated entities

[80] The positions in associated entities in the BHP Billiton Group to which, in respect of each applicant, it is contended they could reasonably have been redeployed, have earlier been set out. It may be noted that each position is outside New South Wales, and outside BHP Billiton’s Coal Business.

[81] There was much focus by the parties during the hearing upon the reasonableness of the steps which Mt Arthur Coal took after giving the applicants notice of termination to allow them to pursue job opportunities within associated entities within the BHP Billiton Group in Australia. The evidence, to which reference has earlier been made, demonstrated that in substance Mt Arthur Coal did no more than provide the employees, if they indicated an interest in redeployment, with a copy of the jobs board, and allowed them to use their notice period to look for and apply for positions rather than continue working. With one exception, there was no suggestion that in applying for jobs on the jobs board the applicants would receive any form of preference over any other applicant. The exception was the position of Auto Electrician at Mount Keith in Western Australia where apparently there was some preference given to applicants from Mt Arthur Coal, although it is far from clear that this was the result of anything done by Mt Arthur Coal. However, this preference did not lead to anyone from Mt Arthur Coal being appointed; one of the 17 retrenched employees (who was not one of the applicants) was the successful applicant for the position but subsequently withdrew after the applicants’ dismissals had taken effect.

[82] The limited nature of the steps taken by Mt Arthur Coal in respect of redeployment to associated entities reflected its lack of any control or influence over any associated entity outside the Coal Business. As has earlier been stated, the BHP Billiton Group is structured so that each business manages itself, and within each business each asset operates autonomously and independently. This structure reflects a business philosophy that control should be devolved to the lowest level possible in the Group. Nothing in the evidence suggested that the management of Mt Arthur Coal had any capacity to require or even persuade the management of another asset in another business to select one any of its employees to a particular position, either directly or via the management of the NSWEC Asset, the Coal Business or the BHP Billiton Group. There was no policy requirement or guideline issued by the management of the Group that any asset in any business should select or give preference to retrenched employees from a different asset in a different business. Indeed Mr Wagner’s evidence was that the Group policy was that each business and each asset make its own recruitment decisions. There was no commercial incentive for any asset to select or give preference to a retrenched employee from another business because they are financially entirely separate. Because the evidence did not demonstrate any practicable way in which the putative redeployments could have been effected, it cannot be concluded that they would have been reasonable.

[83] The fact that associated entities are not managerially integrated will not necessarily mean in every case that redeployment to an associated entity would not be reasonable. It will depend on all the circumstances, including the overall size and structure of the business group as a whole, the nature of the business activities conducted by the relevant associated entities, their geographic proximity and the characteristics of the putative redeployment position. In relation to the BHP Billiton Group, those circumstances might be such as to permit the conclusion that redeployment with the NSWEC Asset or even within the Coal Business would have been reasonable. But in the circumstances of this case, I do not consider that it would have been reasonable for the applicants to have been redeployed to positions in different businesses in different states within the BHP Billiton Group, for the reasons I have given.

Conclusion

[84] I am not satisfied that it would have been reasonable in all the circumstances for any of the applicants to have been redeployed within the enterprise of Mt Arthur Coal or that of any associated entity of Mt Arthur Coal. The applicants’ dismissals were therefore cases of genuine redundancy and therefore cannot have been unfair under s.385 of the FW Act. Accordingly the applications must be dismissed.

al of the Fair Work Commission with the memeber's signature.

VICE PRESIDENT

Appearances:

K. Endacott and I. Drayton from the Construction, Forestry, Mining and Energy Union for the Applicants.

R. Warren and B. Rauf of counsel for the Respondent.

Hearing details:

2015.

Sydney:

2-6 March

Final written submissions:

30 March 2015 - Respondent’s submissions

2 April 2015 - Applicants’ submissions

<Price code C, PR563458>

 1   [2010] FWAFB 7578, 199 IR 363

 2   [2014] FWCFB 714, 240 IR 130

 3   [2014] FWC 2264 at [34]

 4   Ulan Coal Mines Ltd v Honeysett [2010] FWAFB 7578, 199 IR 363 at [26]

 5   Ibid at [28]; Technical and Further Education Commission t/a TAFE NSW v Pykett [2014] FWCFB 714, 240 IR 130

at [24]

 6   Pykett at [36]

 7   Ulan at [28]

 8   Ulan at [27]

 9   See Exhibit A11

 10   Twenty maintenance employees in total were retrenched but, as explained in paragraph [31], 3 of them had been offered but had refused redeployment within the Mine. For that reason they were not included in the retraining cost analysis.

 11   The cost of this assessment day appears to have been excluded from the total cost of the training program for employees with a “test and move” competency, and therefore will not be taken into account in any further calculations.

 12   Ms Maw’s cost analysis assumed that the cost of a trainer or a trainee employee would be $962.35 per day. That figure seems very high, but it was not challenged by the applicants. Accordingly it will be used for the purpose of calculations in this decision.

 13   This is calculated by deleting the entirety of the trainer costs in Ms Maw’s analysis (Exhibit R4, Annexure GM-5, slide 4). This amounts to 91 trainer days x $962.35 ÷ 5 = $17,515. $18,477 - $17,515 = $962. The challenge test cost does not appear to have been included in the total and has therefore not been deducted.

 14   Again, calculated by deleting the entirety of the trainer costs in Ms Maw’s analysis (Exhibit R4, Annexure GM-5, slide 5). This amounts to 73 trainer days x $962.35 ÷ 5 = $14,050. Because the costs for the challenge test and, as earlier stated, the final assessment do not appear to have been included in the total, the trainer cost of these has not been deducted.

 15   Assuming, as Ms Maw did, a class size of no more than 5.

 16   12 x $635.36 (Ms Maw’s assumed contractor cost per day, which was not challenged).

 17   $962.35 x 5 days x 9 persons.

 18   Arthur Hugh Clough, Say Not the Struggle Naught Availeth

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