Express law No. 17

11 March 2005

Redundancy entitlements

These matters were on appeal from
a decision of the Full Bench of the Federal Court, Amcor
Ltd v Construction,
Forestry, Mining and Energy Union [2003] FCAFC 57, in
which the Minister for Employment and Workplace Relations
intervened.

Amcor Ltd v Construction, Forestry, Mining
and Energy Union; Minister for Employment and Workplace
Relations
v Construction,
Forestry, Mining and Energy Union

High Court of Australia,
9 March 2005, [2005] HCA 10

Background

The appellant, Amcor Ltd (Amcor), owned and
operated four paper manufacturing mills, in New South Wales,
Queensland
and Tasmania. Employment conditions were subject to a federal
certified agreement between Amcor and two unions, one being
the CFMEU. The agreement was certified on 9 June 1998.
Clause 55 of the agreement contained specific rights in
relation to redundancy, including the requirement that
Amcor consult with employees and unions at the earliest
possible opportunity, and pay severance pay in cases of
retrenchment.

In June 1998 Amcor underwent a corporate restructure,
selling two paper mills to Paper Australia Pty Ltd ('Paper
Australia'), a wholly owned subsidiary of Amcor.
Paper Australia leased the plant and assets of the two
remaining mills until Amcor sold the mills to Paper Australia
in March 2000. Paper Australia operated all four mills
from June 1998 but the employees remained employed by Amcor,
pursuant to an agreement between Amcor and Paper Australia
which was effective from 1 July 1998.

In February 2000,
Amcor transferred its shares in Paper Australia to PaperlinX
Ltd (PaperlinX), another of its
wholly owned subsidiaries. The result was that Paper Australia
was then owned by PaperlinX, which was subsequently floated
as a public company. This process was described by the
High Court as a 'demerger'.

As a consequence
of the demerger, Amcor wrote to the employees at the paper
mills, terminating their employment with Amcor.
The letter also enclosed an offer of employment from PaperlinX
under the same terms and conditions as the employees had
been subject to in their employment with Amcor. Employment
with Amcor was to cease on 31 March 2000 and to commence
with PaperlinX on 1 April 2000.

In June 2000, the CFMEU
filed an application in the Federal Court for an order
under s.178 of the Workplace Relations
Act 1996 (the WR Act) imposing penalties on Amcor for breaching
cl.55 of the agreement. The CFMEU argued that the positions
of employees whose employment was terminated by Amcor had
become 'redundant' under the terms of the agreement,
enlivening the operation of cl.55 of the agreement. The
CFMEU also sought orders that Amcor pay employees severance
pay, on the grounds that the termination of 'redundant' employees
by Amcor had resulted in the 'retrenchment' of
the employees, triggering an entitlement to severance pay
under the agreement.

At first instance, in Construction,
Forestry, Mining and Energy Union v Amcor Ltd [2002] FCA
610, Finkelstein J
found that as Amcor no longer required the work previously
carried out by the employees to be performed, the employees
had become 'redundant'. Further, the Court
held that in deciding whether or not an employee had become
redundant, the fact that the employee had a new employer
was 'irrelevant' as redundancy involved loss
of the employee's position with his or her employer,
rather than the loss of the employee's position generally.
Finally, the Court held that the employees had been 'retrenched' as
they had been dismissed for reasons of redundancy, therefore
satisfying the two requirements of the agreement for the
operation of cl.55.

Amcor appealed this decision, with the
Minister for Employment and Workplace Relations intervening
pursuant to s.471 of
the WR Act. In Amcor Ltd v Construction, Forestry, Mining
and Energy Union [2003] FCAFC 57, the Full Court of the
Federal Court, comprising Moore, Marshall and Merkel JJ,
affirmed the decision of the primary judge.

Decision of
the High Court

The appeal was heard by the Full Court of
the High Court. Judgment was delivered on 9 March 2005.
All members of
the Court were unanimous in allowing the appeal and setting
aside the orders of the Federal Court on the ground that
no redundancies had arisen. The case turned on the interpretation
of cl.55 of the agreement.

Gleeson CJ and McHugh J found
that the interpretation of 'redundant' by
the primary judge was too narrow and inflexible to accommodate
industrial and commercial realities. Gummow, Hayne and
Heydon JJ held that the positions to which cl.55 referred
were positions in a 'business of making and selling
paper'. The sale of the business to Paper Australia
did not affect the existence of the positions, and therefore
no positions became redundant. Kirby J, after considering
the contextual issues, also found that the better view
of cl.55 was that the positions continued to exist but
were taken over by another company. Callinan J held that
the positions had not become redundant because the persons
filling them continued to fill them, but with a different
employer. Callinan J looked to previous statements by industrial
tribunals to support that construction, briefly considering
the law around the transmission of businesses under the
WR Act for the purposes of certified agreements.

The case
suggests that redundancy will not generally arise where
there has been a transmission of business and employees
have continued to do the same job. But the case sheds
little light on general transmission of business questions.

Text
of the decision is available at:
http://www.austlii.edu.au/au/cases/cth/high_ct/2005/10.html

For
further information please contact:

Richard Harding
Senior General Counsel
T 02 6253 7026 F 02 6253 7304
richard.harding@ags.gov.au

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