McArdle Legal has been closely following the predicament of the Tristar Steering and Suspension Australia Limited (‘Tristar’) employees in both our 8th and 10th edition newsletters.
Tristar is a car parts manufacturing company which had a manufacturing facility in inner City Sydney (Marrickville). In 2007, it lost the last of its contracts to supply steering gear to a major car manufacturer.
In June of 2007, a number of employees had been denied their redundancy entitlements because Tristar was ordering them to turn up to work when there was no work for them to do. Essentially, the company maintained the longest-serving employees on the payroll, despite the fact it had little work for them to do. They maintained that they were actively seeking business to continue the facility.
The reason for this was because it was cheaper to keep the employees at work, rather than pay out their generous redundancy entitlements. The severance provisions in the redundancy clause of the company’s 2003-2006 enterprise agreement, Clause 21.5, provided four weeks pay for every year the employee had worked for Tristar. This group of approximately 31 employees had an average length of service of 30 years, and the longest serving of the group had worked at Tristar for 44 years. This person would be entitled to 176 weeks severance pay plus five
weeks notice.
The workers were entitled all together to $3.6 million (AUD) in uncapped severance benefits under their agreement, whereas Tristar opted to keep them in employment for 12 months, spending only $1.9 million (AUD). Hence it was cheaper to keep the workers employed on the basis that the manufacturing facility needed to remain operating.
The Australian Manufacturers Workers Union (AMWU) and the Australian Workers Union (AWU) also maintained that it was cheaper to keep the workers in employment rather then paying them their redundancy benefits. On 31 August 2007, 13 employees won a settlement with Tristar to receive their entitlements under their employment agreement.
On 4 September 2007, Tristar agreed to a further 11 employees being paid their entitlements. This will leave only 7 employees on the payroll. These employees were allegedly entitled to the same redundancy package due to an exchange of letters.
On Thursday 15 November 2007, after 18 months, the primary dispute over the redundancy payments was resolved. Tristar agreed to pay the final 3 employees from the Marrickville plant their redundancy entitlements. The last of 31 manufacturing employees left Tristar on November 30 2007.
In spite of these arrangements, the Workplace Ombudsman continued to prosecute Tristar in the Federal Court of Australia (Federal Court), for breaching workplace laws and deliberately attempting to avoid paying termination entitlements to the workers by keeping them idle at work in the hope that they would resign. They faced a maximum fine of $33 000 per breach.
On 13 August 2008, the Federal Court dismissed the Workplace Ombudsman’s attempt to prosecute Tristar.
The Workplace Ombudsman argued that Tristar breached the Freedom of Association provisions of the Workplace Relations Act 1996 (Cth), by discriminating against or victimising the workers when it refused to make them redundant. In their view, any forced redundancies would have triggered the severance provisions in the aforementioned redundancy clause of the company’s 2003-2006 enterprise agreement. Because they were covered by an Agreement,
they were discriminated against.
However, Gyles J, believed that the Workplace Ombudsman was arguing that Tristar owed a duty to agreement covered employees to dismiss them when “major manufacturing ceased.” His Honour then noted that manufacturing and re-manufacturing work continued beyond that time and Tristar had made genuine efforts to obtain new business to keep the workers occupied.
Hence, in spite of the fact that the workers had been “seriously underemployed,” it was entitled to retain employees to carryout that actual and potential work. In the Courts view, once the employer has that choice, then no individual employee could claim that there was any
obligation upon Tristar to dismiss that employee in order to trigger the generous severance provisions. To do so, would be tantamount to reading the provision as a conditional contractual benefit for an affected employee, such as long service leave or superannuation.
Finally, Gyles J stated that section 792, taken in context, could have no sensible operation unless it involves discrimination against, or victimisation of, an employee on some basis connected with union membership, no matter how broadly. That could not be shown here.
Consequently, the Federal Court ruled that Tristar did not have a “duty” to dismiss the workers. They found that Tristar did not breach the Workplace Relations Act 1996 (Cth) and acted lawfully when it failed to make redundant, the remaining employees.
Interestingly, he criticised unions for using the workers as “foot soldiers,” “who were the victims of the wider campaign being conducted by the [union] generals.” The Workplace Ombudsman, Nicholas Wilson, stated that his office was disappointed by the courts decision and
would be considering the judgment. McArdle Legal will be sure to alert readers, should any other events occur.
Implications
It is surprisingly frequent for an employer to be reluctant to retrench the beneficiary of a generous redundancy scheme. Such employees can take little encouragement from this case. This judgment shows that the Tri Star case did not produce a “right to be sacked” principle.
The onus remains be on the employee to show that the employment relationship had effectively ended in order to obtain disputed redundancy benefits, where the employer maintains that they are being continued in their employment.
We are no closer to the development of an “obligation to provide work” in the employment relationship. As previously, for the most part the employer obligation is to provide income, and the employee obligation is to provide availability.
There is no sign that the Ombudsman will appeal.