Merged company's offer of alternative employment not harsh, unreasonable or unjust

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Merged company's offer of alternative employment not harsh, unreasonable or unjust

In instances where companies merge, employees who refuse to accept reasonable offers of alternative employment will find that the Industrial Relations Commission of New South Wales will give no comfort to claims for redundancy benefits.

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In instances where companies merge, employees who refuse to accept reasonable offers of alternative employment will find that the Industrial Relations Commission of New South Wales will give no comfort to claims for redundancy benefits. The decision of Deputy President Sams in Shop, Distributive and Allied Employees' Association, New South Wales v W D & H O Wills Holdings Ltd, [2000] NSWIRComm 98, (9 June 2000), found that: there had been a transmission of business as a result of the merger; the termination was not at the initiative of the employer; and the refusal of the employees to accept alternative employment that was equivalent to their previous positions - meant that their dismissal was not harsh, unreasonable or unjust.

Background

On 29 June 2000, the Shop, Distributive and Allied Employees' Association (the union) lodged a notification of a dispute pursuant to s130of the Industrial Relations Act 1996. At that stage the dispute with W D & H O Wills Holdings Ltd (Wills) related to matters arising from the company's proposed transfer of business. Associated with the transfer of the business was the termination of two long-standing employees on 3 September 1999. These proceedings then became applications for relief for their alleged unfair dismissal.

The two employees, a Mr. R and a Ms. C had both been employed since February 1987 as Trade Marketing Representatives. They gave evidence that on 6 May 1999, the merger between Rothmans Holdings Ltd and Wills was announced, at which time it was also revealed that those employees who would work for the merged entity would be selected on merit.

In mid May, Rothmans and Wills announced a 17 per cent market share sale to Imperial. On 3 June 2000 staff were told that no positions in the merged entity existed and that all employees would be offered employment with Imperial. A failure to accept the employment would be deemed a resignation. The employees received offers of employment with Imperial on 21 July 1999. This was prior to Wills becoming a fully owned subsidiary of Rothmans on 23 August 1999. R & C chose not to accept employment with Imperial because they claimed that they were not afforded a detailed contract of employment. On 30 August they were advised that their employment would cease on 3 September 1999 and no redundancy package would apply.

Submissions

The union argued that the change from taking on employees based on merit to commence with the new merged entity to then offering all employees employment with Imperial, was little more than a ploy by Wills to deprive employees of generous and legitimate redundancy payments. As such the union submitted that the terminations were at the initiative of the employer and were harsh, unreasonable and unjust. Wills on the other hand submitted that the employment relationship came to an end because the employees had resigned. Wills were at a loss to identify what more could have been done beyond offering all employees alternative employment with Imperial with full continuity of service on their existing terms and conditions.

Consideration

The Deputy President's decision canvassed a broad range of issues that included, but were in no way limited to issues such as: the obligation of employees to accept alternative employment; whether a transmission of business had occurred; whether the termination of the employees was at the initiative of the employer; and whether it was reasonable of the employees to refuse the alternative offer of employment.

Obligations of employees

The Deputy President commenced his consideration of this matter with a discussion of the obligation of both employers and employees in circumstances where redundancies are necessary. The decision in Clothing & Alied Trades Union of Australia v Algray Pty Ltd, (Print H7232), [1989] 145 IRCommA and the decision in Speers v St. George Private Hospital, [1999] NSWIRComm 442presented a strong body of case law that led the Deputy President to conclude that there are certain reciprocal obligations on employees in redundancy situations. One such obligation is not to refuse reasonable retraining, alternative employment, redeployment or relocation.

Was there a transmission of business?

In terms of whether there was a transmission of business, Sams DP adhered to the principles identified recent Federal Court deicions (PP Consultnats and North Western) in finding that strict legal tests as to the successor arrangements between two employers should not stand in the way of logical focus on the work performed. In this instance the Deputy President held that the merger of Wills and Rothmans and the subsequent market share sale to Imperial was a transfer of business. The importance of the transmission of business question lay in the fact that were it held otherwise, the employees would have ground to argue that their employment with Wills had been brought to an end as a result of a redundancy arising because of a company restructure.

Whether termination was at the initiative of the employer

Given that a transmission of business had been effected and the entitlements of the employees were protected by s101of the Act, the Commission was then required to consider whether the termination of employment was at the initiative of the employer. In this instance the refusal of the two employees to comply with a reasonable request to transfer to Imperial characterised the termination as a refusal to accept a reasonable offer of alternative employment . In the scheme of things however, little turned on whether the termination was a resignation or not. What was important was whether it was at the initiative of the employer or employee. In this case the refusal to accept a reasonable offer of alternative employment was according to the Deputy President analogous to the termination of employment at the initiative of the employee.

At this point of time the Deputy President made it clear that had these proceedings been by way of an application under the Unfair Dismissal provisions (Pt 6 ch 2) of the Industrial Relations Act 1996, then the matter would have ended there for want of the Commission's jurisdiction.

Was it reasonable to refuse the offers of alternate employment?

In deliberating this question the Commission took into the consideration the fact that both employees had over twelve years service with Wills and that they were the only two Wills employees out of over a hundred employees who did not accept Imperial's offer. In light of those factors the Deputy President arrived at the view that the claim that the two employees did not know the precise details of their future conditions with Imperial was extraordinary and without any logical basis. The employees were offered alternative employment that was equivalent to their previous employment. In such circumstances, they could not expect the Commission to regard their terminations of employment as harsh, unreasonable or unjust. In terms of the process, the Deputy President was of the view that it was difficult to conceive of what more Wills could have done to cushion the impact of the transfer.

Conclusion

According to the Deputy President there was only one unfortunate and unstated reason as to why the two employees refused the offers of employment with Imperial. That being to pursue the generous redundancy packages that were originally being offered by Wills at the time when it was envisaged that some employees would not be selected for employment in the new merged entity. In this regard Sams DP was emphatic in his claim that: 

This Commission will give no comfort to claims of redundancy benefits where there is no lawful redundancy.

As such there was no basis for finding the terminations of employment to be harsh, unreasonable or unjust, either substantively or procedurally. Accordingly, the Commission declined to make orders under s136 of the Act.

 
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