Corrs In Brief: “Court backs workplace shakeup” (AFR) – or does it?

11 March 2005

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In Amcor Ltd v Construction Forestry Mining and Energy Union; Minister for Employment and Workplace Relations v Construction Forestry Mining and Energy Union, the High Court has determined that a number of former employees were not entitled to redundancy packages after a corporate reorganisation left them working in the same positions with the same conditions and benefits but with a new employer.

Background

Amcor sold several of its businesses and machinery to a subsidiary, Paper Australia. Employees in those businesses remained employees of Amcor. Some time after that sale, a "demerger" was announced. Paper Australia was to be floated publicly as PaperlinX Ltd.

Before the demerger occurred, Amcor gave notice of termination of employment to all of its Paper Australia employees. At the same time, Paper Australia made a written offer of employment to each employee on the same terms and conditions as they presently enjoyed as Amcor employees. All benefits were to be preserved. The employees worked in the same jobs, under the same terms and conditions after the demerger. All that had changed was the identity of their employer.

The Union which represented the employees claimed that the terminations of employment were by reason of redundancy, and sought severance payments in reliance upon clause 55.1.1 of the Australian Paper/Amcor Fibre Packaging Agreement 1997. Both a single judge and the Full Court of the Federal Court upheld the union’s claim.

Clause 55.1.1 – The Proper Construction of "Position."

Clause 55.1.1 provided that "[s]hould a position become redundant and an employee subsequently become retrenched" the employee would be entitled to redundancy payments.

The Union argued that clause 55.1.1 came into effect if, "because the employer no longer had a need for the work that the employee was performing, the employee was no longer required by that employer to do work or perform duties..." They submitted that the proper construction of "position" was "position with Amcor."

Amcor argued that clause 55.1.1 was not engaged unless a "position in business" was abolished. The identity of the employer was irrelevant.

The High Court’s Decision

The Court unanimously accepted Amcor’s construction - albeit for differing reasons.

Gleeson CJ and McHugh J commented that to treat "position" as meaning "position in the employment of Amcor" is too narrow and allows insufficient flexibility to allow for commercial and industrial realties.

To treat "position" as meaning "position in business" on the other hand, allows for sensible adaptation to the circumstances of each case. In these circumstances, according to Gummow, Hayne and Heydon JJ, the positions in business were those of making and selling paper, and these did not become redundant.

Kirby J came to the conclusion that the agreement was designed to provide remedies for redundancy as it is ordinarily understood. This is clearly not the case here - the employees continued to work as before, but with a new employer.

Kirby J also commented on a legislative bar to reading "position" as "position with Amcor". Under the Workplace Relations Act 1996 (Cth), a certified agreement will bind a new employer who is a successor, transmittee or assignee of the business of a former employer. This provision makes it difficult, if not impossible, to confine the definition of "position" to "worked performed with Amcor."

"Position" then, must be read as "position in business": that is, the positions available in the business of making and selling paper, regardless of the identity of the employer. These positions never became redundant, and therefore no severance pay was payable.

Conclusion

The impact of decision will depend upon the extent to which the principles enunciated by the Court can be said to extend beyond the wording of clause 55.1.1 read in its commercial and legislative context.

It would be unwise to assume that the decision in Amcor means that employers could never find themselves required to make redundancy payments in the context of a business restructure. Much will depend upon the wording of the agreement concerned, and upon the commercial context within which that agreement was negotiated, and operates.

It remains the case, therefore, that the most effective protection against redundancy claims in Amcor is to ensure that any entitlement to redundancy payments is subject to an express qualifier to the effect that the employer can be relieved of the obligation to pay where the employees have been offered "suitable" or "adequate" alternative employment.

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