Fair Work Commission Orders Employer to Make Workers Redundant

15 July 2016
The decision of 23 May 2016 by Senior Deputy President (SDP) Hamberger in Construction, Forestry, Mining and Energy Union v Essential Energy concerned two workers, Mr Baker and Mr Millman. SDP Hamberger ordered that Essential Energy (‘Essential’) accept both workers applications for voluntary redundancy, effectively ordering that they be made redundant.

In making the decision, SDP Hamberger applied the principle in the XPT Case [1] and held that Essentials failure to accept the workers’ applications for redundancy was unreasonable as it was irrational, absurd and ridiculous and therefore not a valid exercise of managerial prerogative. [2] How did this unusual case come before the Fair Work Commission?

The Redeployee Process

The CFMEU represented both workers who were long term employees of Essential. The workers had had their substantive positions made redundant, however, had been told that they would be redeployed. Mr Baker ceased work in his substantive role from 5 May 2014 and Mr Millman, officially, from 19 December 2013. Both workers were deemed to be “redeployees”.  The workers were provided with no meaningful work from about the time they were deemed redeployees. Both workers stated that they spent their time at work reading books, watching tv and movies.

Both workers applied for voluntary redundancies after being deemed redeployees. If they were made redundant, Mr Baker was entitled to redundancy payment of 93 weeks and Mr Millman a redundancy payment of 78.75 weeks. Essential had introduced a policy that it would not make employees redundant if a worker was entitled to a redundancy payment of more than 52 weeks.

Essential indicated that it had a policy not to grant redundancies to workers that would receive more than 52 weeks as it was under significant financial pressure.

Both workers had lodged a grievance pursuant to the industrial instruments that applied to them. Mr Baker was covered by the Essential Energy Far West Electricity Enterprise Agreement 2011 and Mr Millman by the Essential Energy Far West (Electricity) Enterprise Agreement 2013 (‘The Enterprise Agreements’).

On 23 September 2015, as the matter remained unresolved, the CFMEU made an application to the Fair Work Commission to deal with a dispute pursuant to the dispute resolution procedures in the relevant Enterprise Agreements.  An application for orders to stop bullying was also made on the same day. Both applications were heard together. 

Did actions by Essential constitute bullying?

The application for the order to stop bullying named the Acting Chief Executive Officer, Mr Gary Humphries, as the perpetrator of the bullying.

The allegations of bullying pivoted upon the assertion by the applicants that management action in relation to the redundancy and redeployment process towards the workers had not been carried out in a reasonable way, and, that the poor and minimal communication from Essential to them constituted bullying. [3]

Essential argued that the management action was not unreasonable, and, that the action was not taken by a group of people or persons, but instead, was a company policy or directive.[4] For both of these reasons Essential submitted that the allegations of bullying did not meet the required statutory definition. [5]

SDP Hamberger agreed with Essential’s position that the statutory definition of bullying did not apply, and, relevantly stated at paragraph 87 that:

“…there is simply no basis on which to infer that the decision to adopt this policy was directed to or at either of them personally.”

The Arbitration of the Dispute

Both workers grievances in relation to the redundancy were arbitrated. In relation to redundancy entitlements, both Enterprise Agreements contained an identical redundancy clause. [6] The CFMEU submitted that the employment of the workers had terminated by way of redundancy notwithstanding that the employment relationship had continued. [7] In the alternative, the CFMEU submitted that Essential’s refusal to accept the voluntary redundancy applications was not a valid exercise of managerial prerogative as the decision was unreasonable.

SDP Hamberger held that the employment had not terminated and also that:

“There is, as is well recognised, no contractual obligation for an employer to provide work to its employees.” [8]

However, SDP Hamberger held that the decision to refuse to accept the voluntary redundancies was an unreasonable exercise of managerial prerogative:

“However generous their redundancy entitlements, there will clearly come a time – probably in the near future – when it will have cost Essential Energy more to keep them on its payroll than it would have had it let them take voluntary redundancy. Yet they are making no meaningful contribution to the work of Essential Energy. Moreover, the cost of keeping them on, in all probability while they continue to do virtually no meaningful work, will continue to mount, month by month and in all probability year by year. Such a situation is objectively irrational, absurd and ridiculous. It easily fits the definition of ‘unreasonable’.” [9]

SDP Hamberger ordered Essential to accept the applications for voluntary redundancy from both workers.

Significance

This is an interesting case as it shows how dispute resolution processes contained in industrial instruments can lead to effective outcomes for workers.  This case also highlights the broad orders that the Fair Work Commission can make when arbitrating a grievance.  It also reinforces the proposition that as it stands, an employer has no obligation to provide an employee work. 

It is important to note that, albeit in exceptional circumstances, managerial prerogative can be analysed and assessed as unreasonable. In those circumstances, the Fair Work Commission can order that an employer make a decision that the Fair Work Commission considers reasonable. 

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[1] Australian Federated Union of Locomotive Enginemen v State Rail Authority of New South Wales (1984) 295 CAR 188

[2] Construction, Forestry, Mining and Energy Union v Essential Energy [2016] FWC 2653

[3] Construction, Forestry, Mining and Energy Union v Essential Energy [2016] FWC 2653 at 81

[4] Construction, Forestry, Mining and Energy Union v Essential Energy [2016] FWC 2653 at 83

[5] Ibid [82 – 83]

[6] Ibid at 92

[7] Ibid at 98

[8] Ibid at 102

[9] Ibid at 110