Transfers should be finalised prior to retrenchment taking effect


Transfers should be finalised prior to retrenchment taking effect

In a recent Federal Court case, it was held that an employee who was retrenched, but then offered a position in anther division, was not permitted to claim the retrenchment entitlements as well as the new position.


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HRLink Issue No: 91/00

In a recent Federal Court case, it was held that an employee who was retrenched, but then offered a position in anther division, was not permitted to claim the retrenchment entitlements as well as the new position.

The decision in Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd, [2000] FCA 1008, 27 July 2000, was also significant in that Wilcox J held that these proceedings would have been avoided had the transfer taken place prior to the termination. In that regard it was important to consider not only the company's intent but also the sequence of events as a whole.

If an organisation wishes to ameliorate the consequences of its decision to reduce a part of its workforce, by transferring them to another division, it is preferable that such transfers occur prior to the terminations taking place.


The union applied to the Federal Court for orders against BHP. It was alleged that the company contravened s298K(1)(d) of the Workplace Relations Act 1996, in that it refused to employ a union member because of his entitlement to the Coal Mining Industry (Production and Engineering) Consolidated Award 1997 (the coal mining award).

BHP Steel operated two enterprises. One being a colliery, known as Tower Colliery and the other being the steelworks at Port Kembla. The employee at the centre of this matter was employed at the colliery as an electrical fitter and mechanic. The terms and conditions of the employee's employment were governed by the coal-mining award, which included a redundancy clause.

In November 1999, it became apparent that there would be some redundancies at Tower Colliery. On 15 November 1999, the Principal Human Resources Consultant at the steelworks outlined the possibility of what he referred to as VR swaps, so as to alleviate the situation of the expected retrenchments at the colliery. The VR swap system essentially involved providing steelwork employees with the opportunity to take voluntary redundancies. The system was intended to allow suitable colliery employees, who would otherwise be retrenched, to exchange positions with steelworkers taking a voluntary redundancy. The only provision in relation to the VR swap system was that colliery employees who got a job at the steelworks would have to repay any redundancy or sick leave payment received from Tower Colliery.

The employee finished up at Tower Colliery on 19 November 1999, whereupon he was paid all the monies owing including pro rata annual and long service leave. It was not until 2 December 1999 that the employee was interviewed for a position at the steelworks, and the 9 December 1999 that a formal offer was made. Part of the contract of employment that outlined offer was a clause relating to the repayment to BHP collieries of all severance and retrenchment monies. The employee responded by claiming that as a whole he accepted employment with BHP steel but believed that the provision relating to the paying back of monies interfered with his entitlements under the coal-mining award. The company made the repayment of the money a condition of further employment.

The purported withdrawal of the offer of employment was the background against which the union made an application to the Federal Court alleging that BHP had breached s298K of the Act. Section 298K(1)(d) of the Workplace Relations Act 1996 provides that an employer must not, for a prohibited reason, refuse to employ another person. The prohibited reasons are outlined in s298L(1) of the Act. Section 298L(1)(h) provides that the fact that an employee is entitled to the benefit of an industrial instrument is in itself a prohibited reason.


The union submitted that the effect of the way in which BHP conducted this matter was such that the employee was terminated on 19 November 1999 and the offer of employment was not made until 9 December 1999. The union conceded that it was open to BHP to transfer the employee from the collieries to the steelworks prior to his retrenchment taking effect. If that had been done, there would have been no termination of employment giving rise to entitlements under the coal mining award. The offer of employment made on 9 December 1999, was according to the union, an offer made to a person who was not an employee, thereby, refusing to employ him unless he gave up a benefit of the award was in breach of the freedom of association provisions of the Act.

In response, BHP noted that the offer of employment at the steelworks was made possible due to a swap. BHP steel were not advertising or expanding, and the employee was at all times made aware that he would not be entitled to the retrenchment package if alternate employment was offered. If anything the company thought that it had endeavoured to ameliorate the plight of employees who were otherwise subject to involuntary retrenchments.


The Court concurred with the company in finding that in this instance, given the timing of events, it was necessary to consider the whole sequence of events and not focus on each chronological piece of the puzzle as it unfolded. To this end, Wilcox J determined that there was no suggestion on BHP's part that it wished to add to its steelworks workforce, the possibility of employment only arose in the context of VR swaps.

His Honour agreed with the union submission that if the company had moved earlier, in inviting employees to transfer to the steelworks, then it would have been more efficient than waiting till the terminations took place. In that instance there would have been no question about refusing to employ the employee.

However, if the employee had been an applicant for a vacancy at the steelworks, it may have been possible that the refusal to employ him constituted an offence of s298K. There was in truth, never a vacancy, there was only an opportunity to exchange positions with a steelworks employee who wished to take voluntary redundancy. Unless and until an exchange was arranged there was no position for the collieries employee. Implementation of the exchange depended upon the employee agreeing to revert to the pre-termination position by refunding his entitlements. In declining to do so, the employee in effect prevent the exchange arising.

His Honour concluded by noting that this was not a case of an exploitative employer. BHP were willing to pay the employee's entitlements under the coal mining award. In fact the Court congratulate BHP for endeavouring to ameliorate the consequences of its decision to reduce the colliery workforce. In this regard it was held that it would be wrong to allow the employee ' take advantage of the circumstances that the retrenchment took effect before the determination of his transfer application; to give him both the money and the box'.

The application was dismissed.

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