In another decision involving the Clermont coal mine, the Fair Work Commission has found that the mine did not need to terminate labour hire workers in order to make room for employees who were made redundant. The Commission found that the employer’s reliance on contractors was a legitimate business strategy therefore it would not have been reasonable in the circumstances to terminate them and redeploy the redundant employees to take their positions.
Implications for employers
When making employees redundant, it may not be necessary to remove existing labour hire contractors to create redeployment opportunities. In such circumstances, redundancies may be considered genuine under section 389 of the Fair Work Act 2009 (FW Act) so long as employers can point to a legitimate business strategy justifying their use of contractors. When employers are considering implementing redundancies they should review their current labour hire arrangements to ensure there is a continuing need for contractors based on factors such as maintaining flexibility, cost and specialised skill requirements.
Clermont Coal Operations Pty Ltd (trading as Clermont Open Cut), operated an open cut coal mine in Clermont, central Queensland. The employer was under high operating cost pressure due to the downturn in the coal price, a weak tonnage market and the strong Australian dollar. A restructure was therefore announced.
The restructure saw one department discontinued with the duties subsumed by another department. 101 employees, staff and contractors were terminated as these jobs were no longer required to be performed by anyone. 25 contractors were terminated, 26 employees were made redundant through voluntary redundancies, and 50 were removed by compulsory redundancies – 30 subject to an enterprise agreement. Of those employees who were not subject to an enterprise agreement, six applied to the Commission arguing they were unfairly dismissed under section 389(2) of the FW Act. They argued that under section 389(2), it would have been reasonable in all circumstances to be redeployed within the employer’s enterprise or within the enterprise of an associated entity of the employer.
Both parties accepted it was the employer’s responsibility to make reasonable efforts to redeploy the applicants. The applicants argued this responsibility extended to considering positions currently filled by labour hire workers and replacing them with the redundant employees. The applicants claimed there was an arbitrary quota system operating at Clermont Mine in respect of using labour hire and there was little effort on behalf of the employer in addressing the high level of contractors used at the mine. The applicants further submitted that they had the necessary skills to be effectively redeployed into work currently performed by labour hire workers.
The employer did not disagree with the skill sets of the applicants and agreed they could have effectively worked in the roles suggested. However, Mr Pretorius (the General Manager of the Clermont Mine) gave evidence that the employer’s business model relied upon the flexibility provided by labour hire. Workers employed directly by the employer were entitled to up to 35 days of leave per year; Mr Pretorius gave evidence that the contractors were therefore necessary to fill those gaps as the nature of the mine was such that it could not afford interruptions in its operations.
The employer also gave evidence that it had already removed some contractors and redeployed 14 employees into those roles and could not shed any more contractors as it needed that flexibility. Further, the employer offered the applicants positions at associated entities located in Mt Isa and Abbott Point which the applicants turned down.
The Commission found the applicants’ dismissals were cases of genuine redundancy and the terminations could therefore not be unfair.
The Commission accepted the employer’s evidence and found that its use of labour hire was part of a legitimate business model that had been in place some time before the redundancies were contemplated. The Commission stated:
Requiring the Respondent to alter its business model in circumstances where there was a legitimate operational strategy in place requiring a certain ratio of labour hire is not appropriate and cannot be characterised as a reasonable requirement to impose upon the Respondent.
The Commission also found that there was no evidence of any arbitrary quota designed to deliberately minimise direct employment. The Commission noted that it is not “charged with the task of criticising the legitimate business models of companies in exercising its discretion pursuant to section 389(2) of the Act.”
The Commission acknowledged that the strategy of maintaining some labour hire workers provided the employer enough flexibility to allow the business to respond to changes in its labour requirements and to perform specialised work. It accepted that the operations of a mine involved each task being “interdependent and part of a complex programme so that if one unit is unable to complete a task in the sequence, the operational processes will be significantly affected.”
The Commission also found that the employer made reasonable efforts to redeploy the applicants, the applicants were not targeted and their redundancies were part of some 101 redundancies at the Clermont mine during the downturn of the coal industry in Australia.
Brown and Ors v Clermont Coal Operations Pty Ltd T/A Clermont Open Cut  FWC 3862