FONTERRA COOPERATIVE GROUP LTD V VAN HEERDEN AK AC 61/07 13 December 2007

IN THE EMPLOYMENT COURT AUCKLAND

AC 61/07 ARC 56/07

IN THE MATTER OF de novo challenge to a determination of the Employment Relations Authority

BETWEEN FONTERRA COOPERATIVE GROUP LIMITED Plaintiff

AND JEANETTE VAN HEERDEN First Defendant

AND DONNA ROPATA Second Defendant

Hearing: 5 and 6 November 2007 (Heard at Auckland)

Appearances: Garry Pollak, counsel for plaintiff Helen White and Simon Mitchell, counsel for first defendant Second defendant in person Penny Swarbrick counsel as amicus curiae

Judgment: 13 December 2007

JUDGMENT OF JUDGE B S TRAVIS

[1] The Court must determine whether and in what manner particular contractual

provisions will affect the way in which the plaintiff employer deals with the

competing interests of two of its employees in a restructuring situation. In broad

terms the Court is required to make findings as to whether the redeployment

provisions contained in a collective agreement confer upon the employees covered

by that agreement enhanced rights of redeployment over those employees governed

by other contractual arrangements.

[2] The plaintiff employer (Fonterra), has challenged a determination of the

Employment Relations Authority, dated 29 August 2007, which found that Fonterra

had not dealt correctly with the redeployment of the first defendant, Jeanette van

Heerden, under the provisions of the Fonterra Dairy Workers Collective Agreement

2006/2007 (the CA). The CA was entered into between the New Zealand Dairy

Workers Union Inc (DWU) and Fonterra. Ms van Heerden was at all times a

member of, and represented by, the DWU and was covered by the terms of the CA.

[3] The matter initially came before the Authority in the form of several

employment relationship problems which had arisen out of the restructuring which

affected Ms van Heerden. Ms van Heerden raised a personal grievance as well as a

dispute and also a claim for arrears of wages. The Authority determined only the

dispute, reserving leave for the personal grievance of Ms van Heerden to be

determined by it in the future, if necessary, along with the arrears claim. The

challenge brought by Fonterra relates only to the dispute.

[4] Donna Ropata, who may be affected by the outcome of this dispute, was

served with a copy of these proceedings and was joined as second defendant during

the course of the hearing. She filed an affidavit, prepared with the assistance of Mr

Pollak, counsel for Fonterra, who called her as a witness in support of Fonterra’s

case. Ms Ropata is not a member of the DWU but has an individual employment

agreement with Fonterra (the IEA). Ms Ropata elected not to be heard or

represented at the hearing and made no submissions although it appeared clear that

the position argued by Fonterra did protect her interests.

[5] By a minute of the Chief Judge, issued on 15 October 2007, Ms Swarbrick, of

counsel was appointed to act as amicus curiae to ensure that full argument was given

to the Court, in particular in relation to the position of Fonterra’s non-union

employees, given that counsel had agreed this challenge potentially has widespread

application within Fonterra.

Background facts

[6] Ms van Heerden has been employed as a panel leader of laboratory

technicians at Fonterra’s Waitoa plant for some 5 years. Ms Ropata is deemed to

have had continuous service with Fonterra for some 10 years and, since November

2006, has been in a salaried role as sensory panel leader in Fonterra’s laboratory at

its Te Rapa site. That was a position that was not covered by the CA and, when she

was appointed, she ceased being a member of the DWU.

[7] In early 2007 Fonterra embarked on an extensive restructuring of the

laboratory services at both Waitoa and Te Rapa, affecting some 100 employees at Te

Rapa and approximately 70 at Waitoa. Tania Watt, Fonterra’s regional laboratory

manager, was responsible for approximately 250 laboratory employees in 10 dairy

factory sites north of Taupo. All except 15 were covered by the CA, and there were

a further 15 holding salaried managerial positions not covered by the CA. Ms Watt’s

intention was to amalgamate the Waitoa and Te Rapa laboratories into one at

Waitoa.

[8] Fonterra commenced a consultation process involving the DWU and held

meetings with laboratory staff. Mark Hope, a union organiser for the DWU, was

involved in the consultation process and sat on a site consultative committee (the

“SCC”) which was formed under the CA with two union and two management

representatives. Affected employees were invited to fill out preference forms to

indicate what roles they would be interested in.

[9] It is to the credit of both Fonterra and DWU and, in particular, to the work of

the SCC, that the restructuring of the two laboratories was carried out without any

compulsory redundancies or any dissatisfied employees bringing personal

grievances, with the exception of the situation that has arisen involving Ms van

Heerden and Ms Ropata.

[10] Ms van Heerden attended a management meeting in April 2007 where the

nature of the restructuring was outlined. To her surprise it included a proposal for

the creation of a new position at Waitoa described as “panel leader”. She considered

that she currently held that position and that the managers responsible for delivering

the proposal, including Ms Watt, seemed unaware of this. Ms van Heerden and her

delegate approached Ms Watt and at that point Ms Watt explained that the proposed

panel leader role was significantly enhanced in a number of areas and had clear

managerial functions including budgetary and strategic roles and the ability to hire

and fire. It is common ground that the new position was not covered by the CA

because clause 2.4.1 provides that the CA does not apply to managers who are

responsible for the employment and dismissal of workers.

[11] Ms van Heerden very much wished to be directly appointed into the role, and

the DWU on her behalf contended this was her entitlement under the CA.

[12] Ms Watt continually refined the role and reached a final position as to its

requirements, just prior to the selection process. The title was changed to “panel co-

ordinator” to reflect the evolving status of the responsibilities. There remained an

issue between the parties whether Ms van Heerden’s panel leader role and the new

role of panel co-ordinator, were essentially the same, save for the budgetary

responsibilities and the ability to hire and fire.

[13] On 8 May 2007 the management decided on the new structure and informed

the affected employees and the DWU. From this point on Ms van Heerden’s current

position as panel leader was disestablished.

[14] In the meantime, with the pending closure of the laboratories at Te Rapa, Ms

Ropata had been identified by Ms Watt and Alle Worner, of Fonterra’s human

resources department, as having a similar but somewhat enhanced salaried role to

that of Ms van Heerden. Ms Ropata’s role at Te Rapa was disestablished and she

was very interested in the new role at Waitoa and applied for it. Ms Watt agreed at

the consultative committee stage that the new panel co-ordinator role would be open

to a closed pool of two “affected” applicants, namely Ms van Heerden and Ms

Ropata. I accept Ms Watt’s evidence that this was done in good faith because she

was trying to accommodate the affected people as far as possible.

[15] Ms Ropata attended an interview with Ms Watt on 6 August but, because of

the view that the DWU took concerning Ms van Heerden’s rights under the CA, Ms

van Heerden has declined to attend a job interview. The situation has now been

held over by Fonterra pending the outcome of the present dispute.

[16] Since the Authority’s determination there has been some unpleasantness

which has caused distress but counsel agreed that these matters are not presently

before the Court on the challenge. That unpleasantness occurred is most unfortunate

because Fonterra and the DWU have worked together cooperatively to minimise the

effects of the restructuring on the affected employees. I shall refer later to the

processes the SCC has used in this and other restructuring exercises initiated by

Fonterra.

The CA

[17] Fonterra and DWU both agree that the dispute is to be determined under

clause 10 which provides, insofar as it is relevant, as follows:

10. REDEPLOYMENT AND REDUNDANCY 10.1 Introduction 10.1.1 The parties recognise the need for the Company to continually

upgrade plant and machinery and employ the most efficient means and methods of production in order to maximise competitiveness.

10.1.2 The parties also recognise that from time to time the

consequences of such upgrading will effect the jobs and terms and conditions of employment of workers.

10.1.3 Therefore, whenever such changes occur that displace the jobs

or substantially affect the terms and conditions of employment of any workers to the worker’s detriment, then every endeavour must be made to redeploy the workers to an alternative position in accordance with the redeployment clause set out below.

10.1.4 Furthermore, a consultative committee (consisting of two

management representatives plus the Union’s regional organiser and the site delegate or deputy) shall be formed to oversee the implementation of all redeployment, relocation and/or redundancy issues on any site where displacement of workers seems likely to occur. Meetings of the committee can be

instigated by either management or Union representatives. The committee will:

10.1.4.1 ensure the spirit and intent of the Collective

Agreement is observed; and 10.1.4.2 oversee any trial periods and oversee the

redeployment of workers to any other positions. 10.2 Redeployment 10.2.1 Providing the worker’s terms and conditions of employment are

not substantially changed to the worker’s detriment and providing, where necessary, sufficient training is provided by the Company to enable the worker to upgrade his/her skills to safely perform any new duties, and further providing any alternative position is on the same site or factory complex, then the Company at its discretion may:

10.2.1.1 alter a worker’s duties in line with that required for the

worker to operate the upgraded version of the plant or machinery they were employed on;

10.2.1.2 redeploy a worker to a position in keeping with the

worker’s level of skill;

10.2.1.3 redeploy a worker to an upgraded position, while providing sufficient training to enable the worker to upgrade his/her skills to safely perform the new duties as required.

10.2.2 When redeployment to an upgraded position occurs the worker’s

terms of employment will be adjusted immediately.

10.2.2.1 After one month actively in the new position the Consultative Committee will review all redeployed workers in positions as defined in clauses 10.2.1.1; 10.2.1.2 and 10.2.1.3. If in the opinion of the Committee a worker is performing satisfactorily, the worker will be confirmed in their position. In this case the option of redundancy expires.

10.2.2.2 If the Consultative Committee believes a redeployed

worker is not coping with the redeployment, the Committee will develop a plan to try and rectify the problem. The plan may include further training or redeployment. The Consultative Committee will review such cases again after 2 months from the date of the initial redeployment.

10.2.2.3 If, after a reasonable period of time (approximately 3

months from the date of the initial redeployment), a worker is still not coping with the redeployment, the worker shall be made redundant as provided for in the redundancy clause set out below.

Note: It is agreed that for the purposes of this clause,

redundancy is to be a last option and is only to be resorted to when all other options have been exhausted.

10.2.3 Where the Company is unable to place any redundant workers in

an alternative position by use of the redeployment provisions as set out above, then the Company shall offer them the choice of: 10.2.3.1 any alternative employment that may be available in the

same factory or on the same site complex which the worker is competent to perform (or could perform after suitable training) but the terms and conditions of employment of which are substantially different to the worker’s original terms and conditions of employment; or

10.2.3.2 any alternative employment that the Company may have available on a different site complex and which the worker is competent to perform (or could perform after suitable training); or

10.2.3.3 redundancy compensation as set out in the redundancy clause below.

10.2.3.4 A worker being redeployed or relocated to a position

having a lower pay classification will be paid a one off buy out equal to 3 times the annual difference between the pay classification specified in the attached schedule 1. Provided in no case shall the buy-out be higher than the redundancy compensation that the worker would have received under the redundancy clause herein.

10.2.3.5 Note: The buy out for part time workers shall be as

above except that it shall be pro-rated to their new position.

10.2.4 The alternative employment procedures referred to above shall

require the Company to advertise any job vacancies they have available, or are aware of becoming available, on all the notice boards of the factories where the workers to be displaced are employed.

10.2.4.1 Redundant workers are to be given first opportunities at

any vacancies that arise, if no suitable applicants apply then the Company may open the vacancy up to external candidates. The Company shall set the criteria for such positions and where practical assist applicants to meet that criteria.

10.2.4.2 In cases where more than one worker applies for the

position, the worker with the longest service with the Company shall, all other things being equal, be successful.

10.2.4 Where a worker accepts alternative employment as provided for

above in clause 10.2.4 there will be a trial period of up to three

months on manufacturing. During the trial period a worker may elect to be made redundant at which time all moneys owing to them shall be paid, less any redeployment or relocation payments already made.

… 10.4 Redundancy 10.4.1 Definitions

“Redundancy” means a situation where a worker’s employment is terminated by reason of the sale or closing down of the whole or part of the Company operations, or by the re-organisation of a factory or site complex where the worker cannot be placed in alternative employment by the Company under either the redeployment provisions or relocation provisions set out above. Alternatively, “redundancy” means a situation where a worker’s terms and conditions of employment are substantially changed to their detriment as a consequence of the need to continually upgrade plant and equipment.

10.4.2 Exclusions

A worker shall be deemed not to be redundant if: 10.4.2.1 the worker is employed on a casual or temporary basis; 10.4.2.2 the worker is provided with an alternative position on

the same site or factory complex in accordance with the redeployment clause;

10.4.2.3 the worker accepts relocation to alternative

employment on a different site or factory complex within the Company;

10.4.2.4 the closure is attributable to war, civil disturbance,

stoppage, go slow or other industrial action.

Submissions

[18] Fonterra takes the view that the CA, which is comprehensive and has a

significant history, applies only to the work referred to in the coverage clause and

therefore does not apply to the new position. Fonterra considers it is contractually

free to appoint the best person out of Ms Ropata and Ms van Heerden to that new

role.

[19] It contends that to do otherwise would be to discriminate against an employee

on the basis of their employment agreement, status or membership or non-

membership of a union. It intends to treat all its employees equally. It claims it has

not breached the requirements of clause 10 because all it has done is to offer both Ms

van Heerden and Ms Ropata, in a closed pool, the opportunity to apply for a more

senior salaried position that is not covered by the CA. Fonterra argues that if Ms van

Heerden is successful and is appointed to the new role this would not be a

redeployment under the CA because the CA would have no application. If she was

not successful, then, and only then, would Fonterra have to consider her

redeployment under clause 10.2 but this point has not yet been reached.

[20] Notwithstanding the absence of a corresponding provision to clause 10 in Ms

Ropata’s IEA, Mr Pollak has stated that Fonterra has promised her that she will be

treated the same way as Ms van Heerden and, in particular, will have the same status

in terms of employment prospects, as clause 10 conferred on Ms van Heerden. He

stated that Fonterra’s obligations to both employees equally are to use its best

endeavours to redeploy if possible. He said that both had been promised potential

voluntary redundancy, the closed pool, despite other DWU members and non-

members expressing an interest in the new role, and an undertaking that both would

be treated in the same way, with the best applicant for the role being appointed and

any affected employee being redeployed in terms of clause 10. He argued there was

nothing in the CA that compelled Fonterra to appoint Ms van Heerden to the role she

seeks.

[21] Mr Pollak submitted the Authority was wrong to have relied in its

determination on the absence of clause 10 from Ms Ropata’s IEA because it is the

policy of Fonterra to deal with her as though she was a DWU member covered by

the CA for the purpose of finding alternate positions in the restructuring. He

contended the Authority was also wrong to determine that their respective terms and

conditions of employment were not reconcilable, and contended that they were

reconcilable in fact and in law.

[22] Mr Pollak relied on Fonterra’s general human resources policy regarding

non-DWU members which, where relevant, states:

Where organisational structural changes are required, consideration will

be given to alternatives such as retraining, reduced hours and

redeployment or transfer of employees within or between business units or

work groups… Where redeployment is feasible, permanent employees will

be offered suitable alternative employment with appropriate training.

Where redeployment and other options are not feasible, permanent

employees concerned will be made redundant due to their position being

redundant.

[23] Mr Pollak submitted that the new role could not be an “upgraded position” in

terms of clause 10.2.1.3 as it was not covered by the CA and cannot therefore be

contractually part of redeployment or upgrading. Although Fonterra could promote

or redeploy Ms van Heerden to the role, he submitted this would not be a contractual

redeployment in terms of clause 10.2. He submitted that what was being

contemplated in clause 10.2, was redeployment to an upgraded position within the

job classification system contained in the CA, which has a compilation of virtually

every job within a dairy factory and, because the new role was outside of the CA, the

SCC could have no continuing overseeing role, as contemplated in clause 10.2.2. He

accepted that salaried roles outside of the CA have been found for DWU members

by the SCC in other restructurings, with Fonterra’s agreement. Mr Pollak submitted

that if Ms van Heerden was successful in obtaining the new role, then she would

forfeit the rights provided in clause 10.2.2 to call on the assistance of the SCC if she

was not coping, and, after three months, to seek to be made redundant in terms of

clause 10.2.2.3. This was because the new position falls outside the CA and will

have entirely different terms and conditions and job performance and review systems

which have nothing to do with the SCC.

[24] Mr Pollak supported his arguments by referring to clause 10.1.3 and

submitted that no changes had actually occurred to Ms van Heerden’s position

because she was still performing her existing role. It was only once the issue of the

promotion to the new role had been disposed of that the disestablishment of her

existing role would occur and at that point, as the word “then” in clause 10.1.3

demonstrates, Fonterra must make every endeavour to redeploy her to an alternative

position in accordance with clause 10.2. Fonterra will then have a discretion as to

how it deals with redeployment, because of the words in clause 10.2.1, but that

position, he contended, has not yet been reached. For that reason he distinguished

Smith v Sovereign Ltd (owned and operated by the ASB Bank) [2005] ERNZ 832 and

Westpac Banking Corporation v Money [2004] 1 ERNZ 576, cases relied on by Ms

White.

[25] Ms White submitted Fonterra is in breach of the CA in denying Ms van

Heerden the contractual rights provided under the redeployment clause by failing to

consider her for the alternative position as the panel co-ordinator, simply because

that position is salaried. Ms White contended that the coverage clause of the CA did

not prevent redeployment to positions that were not covered by it. She relied on the

note after clause 10.2.2.3, which states that the purposes of the redeployment clause

was that redundancy was to be a last option resorted to only when all other options

have been exhausted. She also stressed the requirement in clause 10.1.3 for Fonterra

to make “every endeavour” to redeploy.

[26] Ms White submitted that the process commenced by Fonterra had reached the

point where clause 10.2 did apply and that Fonterra had to take one of the options

described in clauses 10.2.1.2 and 10.2.1.3, if it was able to, and it had a discretion as

to which option to adopt. She argued that the opening words of clause 10.2.1

compelled Fonterra to redeploy in situations where there was no detriment to the

worker, where appropriate training is provided, and where the alternative position is

on the “same site or factory complex”.

[27] Ms White submitted that Fonterra was not free to redeploy if one of the

options in clause 10.2.1 was open, because of its obligation to use every endeavour

to redeploy. She cited Smith v Sovereign Ltd where the contract required the

employer to make every effort to place an affected employee into an appropriate

vacancy and only to use redundancy as a last resort. Two employees were qualified

to seek the new position; one resigned, leaving the plaintiff able to take what was an

appropriate vacancy. This would have avoided the need to pursue redeployment to

any other position and her subsequent dismissal. The plaintiff was found to have

been unjustifiably dismissed.

[28] In Westpac the Court of Appeal considered a redeployment provision which

stated that the bank would “make every reasonable endeavour to identify” and offer

at least one job option which was substantially similar to the position being made

redundant. Ms White observed that this was a less stringent requirement than the

clause in the present case which did not include the word “reasonable” and required

“every endeavour” to be made. In Westpac the Court of Appeal held that the

position should have been made available only to Mr Money and the other managers

who had been made redundant during the restructuring process and should not have

been made available to any candidates who were not so affected. The Court did note

that where a number of employees had been made redundant, and only one

substantially similar position was available, that Westpac would have complied with

its obligation to make every reasonable endeavour to identify a job option, if it had

given all the redundant employees the opportunity to apply for the position and then

awarded it to the person it considered to be the best applicant. Ms White submitted

that in the present case Ms van Heerden was the only employee with the right to

redeployment and the only one who should have been considered for the new

position.

[29] Ms White submitted that the obligation to redeploy in clause 10.2.1 is limited

to positions that candidates are potentially capable of performing and which are on

the same site. She submitted the new position was simply an enhancement and

therefore well within Ms van Heerden’s capability and it did not matter that the

position was salaried. She relied on Ms Watt’s evidence that both Ms van Heerden

and Ms Ropata are “potentially suitable” and “able and competent candidates”.

There is a safeguard for Fonterra because the worker must be able to “safely perform

any new duties”, given training. She also noted that the two women had been

assessed because they were “very similar when their selection process forms were

compared”. Had the DWU not objected, Fonterra would have appointed Ms Ropata

on the strength of the suitability assessment forms it designed and which were filled

in by both women.

[30] Ms White submitted that the use of the word “unable” in clause 10.2.3

compels Fonterra to redeploy the defendant unless it is not able to in the sense that

not one of the options in clause 10.2.1 can apply. She cited Unkovich v Air New

Zealand Ltd [1995] 1 ERNZ 336 to the effect that the word “unable” does not mean

“reluctant” or “not disposed”.

[31] Ms White also addressed Ms Ropata’s rights, noting that even if both

applicants were equally entitled to rely on clause 10.1.3 of the CA, the site specific

provision would favour Ms van Heerden. Ms Ropata would have a right, under

clause 10.2.3.2, to alternative employment that Fonterra may have available on a

different site. Ms White also contended that the rights and obligations contained in

the CA, in comparison to those that Ms Ropata may have had in her IEA, did not

amount to an illegal preference in terms of s9 of the Employment Relations Act

2000. This issue was not addressed by Mr Pollak in his final submissions for

Fonterra and I therefore do not need to deal with it.

[32] Ms Swarbrick, as amicus curiae, examined the provisions in the CA and

observed that one issue is whether the appointment of the defendants to the position

of panel co-ordinator can properly be regarded as redeployment. After referring to

dictionary definitions she submitted that redeployment in the workplace context can

be regarded as an action taken by an employer to utilise an employee as the

employer sees fit, providing such action does not conflict with any applicable

contractual obligations. She submitted that it was for Fonterra to make the decision

whether the employee is redeployed. She submitted that the only category of

redeployment affected is clause 10.2.1.3, namely “redeploy a worker to an upgraded

position”. This, she submitted, referred to the job classification and grading system

contained in the CA, where “grade” and “level” are synonymous. Ms Swarbrick

also pointed to practical difficulties that would arise if the CA applied to individual

employment salaried positions. The continuing role of the SCC, which has equal

numbers of union and management representatives, would not, she submitted, be

appropriate to supervise a position which does not fall within the ambit of the CA.

She accepted, as an alternative, but less compelling view, the words in clause

10.2.1.3 could be regarded as sufficiently broad to include redeployment to a salaried

role outside the CA, but there would need to be training to enable the employee to

“safely” perform the new duties. She accepted that the word “safely” is not generally

applicable to the conduct of managerial duties but, in the broadest sense, does not

necessarily exclude managerial or other salaried roles.

[33] Ms Swarbrick then dealt with the exercise of the discretion by Fonterra,

under clause 10.2.1, submitting that the employer must have regard to both the CA

and the obligations of good faith in s4 of the Employment Relations Act 2000. She

raised an issue whether the term “every endeavour” confers on Fonterra an absolute

obligation to redeploy, provided the criteria in clause 10.2 are met. She referred to

dictionary definitions which showed that “endeavour” connotes that attempts will be

made to achieve a certain objective but that objective will not necessarily be

achieved. She therefore contended that the CA cannot properly be interpreted as

conferring an absolute obligation on Fonterra to redeploy an employee to a job that is

available. She accepted, however, that it was a serious obligation to a high standard.

She observed that it might not be able to be achieved where it would be unlawful

because it is in breach of a contractual obligation to others or where there are more

employees available for redeployment than available positions, as occurred in the

Westpac case, or where the employee does not have the necessary skills, even with

training. She observed that the Court has previously dealt with the issue of whether

an employer has exercised its discretion lawfully by regarding it as part of the

employer’s duty of reasonableness and fairness, citing Bates v BP Oil New Zealand

Ltd [1996] 1 ERNZ 657.

[34] Ms Swarbrick then dealt with the position of Ms Ropata, noting that her IEA

did not refer to arrangements for redeployment but these were contained in

Fonterra’s redundancy policy. This policy emphasised the transparency of process,

consultation and gave Fonterra the right to select for redeployment. It does not

require “every endeavour” to be made. It requires the redeployment to be “feasible”,

that is to say, in terms of the dictionary definitions, practicable, possible or able to be

achieved. Again legal or contractual obligations might affect the situation.

[35] Ms Swarbrick submitted there was no conflict between the provisions of the

CA and the IEA and the two could co-exist, noting that the redundancy policy is

applicable to all employees, including those covered by the CA. She referred to

Westpac and the confirmation of the “closed pool” approach to selection and

submitted this was no bar to a selection process being undertaken by Fonterra.

[36] I record the Court’s appreciation for the clarity and helpfulness of Ms

Swarbrick’s submissions.

Operation of the clause in practice

[37] Mr Hope gave evidence, substantially unchallenged, as to the way the SCC

had operated in a number of redundancy situations. No objection was taken to this

evidence. That appears to be in accordance with the recent decision of the Supreme

Court in Wholesale Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37 in

which a majority accepted that the subsequent actions of the parties can be taken into

account in the interpretation of a disputed contractual provision. The Employment

Court had reached that position in two cases I cited in Hansells (NZ) Ltd v Ma

AC 53/07, 14 September 2007, where I also found an interpretation to be consistent

with the subsequent conduct of the parties.

[38] Mr Hope explained that the SCCs that he has been involved in throughout the

Waikato and Bay of Plenty region have always attempted to take a pragmatic

approach. The SCC commences its work very early, even before the proposals are

given to the workers, and an attempt is made to achieve some agreement to achieve

the best outcome for all the parties. The SCC looks for all vacancies available

throughout Fonterra. There has been agreement with Fonterra in the past for it to

employ temporary employees to occupy positions which could then be made

available to employees who might later be affected in the restructuring.

Alternatively, appointments can be made into vacant positions, even before the

redundancies are formally announced. The redeployment provisions in the CA are

applied from the earliest time that the SCC can identify those who are liable to be

affected, to ensure that all vacancies actual or pending within Fonterra can be made

available to them.

[39] Mr Hope also gave an example, although there was some issue over this, of

an employee holding a high level position covered by the CA being redeployed into

a salaried position as an Operations Team Leader. He produced a document showing

that there was agreement with Fonterra to a closed pool, which, he said, is quite

commonly used in restructuring situations, even though it is not expressly found

within the CA.

[40] Mr Hope accepted in cross-examination that, as a result of this process, there

has never been any forced redundancies within Fonterra. He accepted that that was

in accordance with the note to clause 10.2.2.3 of the CA that redundancy is to be a

last option resorted to only when all other options have been exhausted. He accepted

that the agreed process works very efficiently and is based on the preference forms

which assist the SCC to redeploy workers, with the understanding that they would

not necessarily get either their first or second preference, but normally would receive

at least their third preference. He also agreed that it was very common for DWU

diary workers to be promoted to salaried positions and to eventually rise up the ranks

to senior management roles. He had no doubt that redeployment in terms of the CA

extended to a salary role that was outside the CA, provided that it was a job that

could be performed by the affected employee, if necessary after appropriate training.

As to the continued involvement of the SCC after an appointment to a salaried

position, Mr Hope’s understanding was that once it became clear that the employee

could not do the job, even after training, the parties were referred back to the terms

of the CA. Mr Hope asserted that although the salary of a redeployed employee

would go up on the appointment to the salaried position, it was a secondment

arrangement which would still be subject to the terms of the CA during the trial

period. He considered the CA and the IEA would sit alongside each other during the

trial period of 3 months. He was cross-examined closely as to whether or not that

fitted within the terms of the CA. He contended it was but that is an issue the Court

must determine.

[41] He was also cross-examined as to whether or not he considered the

provisions of clause 10.2 had yet operated, in the sense that both defendants had not

been displaced or substantially affected and had not suffered any detrimental action

on the part of Fonterra. He did not agree because he considered their positions had

clearly been disestablished when the final proposal was released by Fonterra. Each

of the workers so affected would be treated as though the proposal was having

immediate effect even though, in this case, Fonterra was staying its hand until the

matter could be disposed of by the Court.

Discussion

[42] It is common ground that the redeployment clause is intended to avoid

compulsory redundancies. That is clear from the note to clause 10.2.2.3 but also

from clause 10.1, headed “Introduction”. The actual operation of clause 10 has been

very successful in avoiding compulsory redundancies. This appears to have been

largely as a result of the co-operative way in which the parties have worked together

on SCCs, from the first indication of a proposal which might affect employees.

[43] Under clause 10.1.4 the SCCs are formed to oversee the implementation of

all redeployment, relocation and/or redundancy issues on any site where

displacement of workers seems likely to occur. That clause, when read in

conjunction with clause 10.1.3, provides the contractual authority for the actual

practice of the SCC to be formed and to start dealing with issues of redeployment as

soon as there is a proposal under consideration and the displacement of workers

seems likely to occur. I therefore reject Fonterra’s contention that clause 10.1.3 and

the formation of the SCC only become operational when the affected workers

actually have their jobs displaced or their terms detrimentally affected. When

clauses 10.1.3 and 10.1.4 are read together they authorise the parties to start working

together on the SCC, which is formed to deal with redeployment or relocation once

there is any issue that is likely to lead to displacement of workers. That is not only

the plain meaning of the clause, but the way the parties have operated it in practice.

[44] Even if I was wrong in that interpretation, as a matter of fact, the positions

previously occupied by the two defendants have been announced by Fonterra as

being disestablished in May this year and thus they are affected to their detriment.

Clause 10.1.3 required Fonterra to then make every endeavour to redeploy Ms van

Heerden to an alternative position in accordance with 10.2. I shall deal with Ms

Ropata’s rights later.

[45] I accept Ms White’s submissions as to how clause 10.2 is to operate.

Fonterra’s discretion in clause 10.2.1 is to exercise one of the three options in clauses

10.2.1.1, 10.2.1.2 or 10.2.1.3. It is only where Fonterra is unable, as the word is

used in 10.2.3, as opposed to unwilling, to exercise one of those three options in

clause 10.2.1 that clause 10.2.3 comes into operation in relation to “any redundant

workers”. The obligation to exercise one of the options in 10.2.1 comes partly from

the opening words of clause 10.2.3 which states that it is “Where the Company is

unable to place any redundant workers in an alternative position by use of the

redeployment provisions”, which must be those in 10.2.1 that completely new

choices must be offered.

[46] Although Fonterra has a discretion as to which of the three options it

exercises, under 10.2.1 the combined effect of clauses 10.1.3, the qualification and

limitation in 10.2.1 and the word “unable” in 10.2.3, mean that Fonterra’s discretion

in clause 10.2.1 is limited to choosing between one of the three options. Fonterra

does not have the discretion to decline to place an affected worker in one of those

three optional positions, if it is able to, and if the worker’s situation fits the

description in clause 10.2.1. Having fulfilled all the preconditions for the options to

be exercised, it is now necessary to consider which option, at Fonterra’s discretion, is

to be accepted. The first option (10.2.1.1) has no relevant application. The second

option (10.2.1.2) could arguably apply as Fonterra had concluded Ms van Heerden

had the necessary ability and therefore the new position might be said to be a

position in keeping with her level of skill with sufficient training as contemplated in

10.2.1. However the second option may have been intended to deal with situations

where the worker already has the necessary levels of skill without training. The

evidence did not clarify this aspect and I am unable to say whether this option is

therefore open to Fonterra for Ms van Heerden.

[47] Ms van Heerden’s situation does fit the description in 10.2.1. The new role

does not substantially change her terms and conditions of employment to her

detriment. To the contrary, they benefit Ms van Heerden, whose disestablished role

formed a substantial part of the duties of the new role but without budgetary

requirements and the ability to hire and fire. As Ms White pointed out, Ms Watt’s

evidence was that both Ms van Heerden and Ms Ropata were potentially suitable,

able and competent candidates for the new role and both had been assessed from

their suitability assessment forms as being very similar for selection to that role.

[48] Further, clause 10.2.1 requires, where necessary, sufficient training to enable

her to upgrade her skills to safely perform the new role. The final pre-condition in

clause 10.2.1 is that any alternative position is on the same site or factory complex.

[49] Even if the new role did not come within 10.2.1.2 I find it is an upgraded

position, in terms of the third option in 10.2.1.3. I do not interpret 10.2.1.3, in its

context, as being limited to positions described in the CA. The wording in clauses

10.1.3, 10.2.1 and 10.2.3 do not carry that limitation.

[50] It may be necessary to provide sufficient training to enable her to upgrade her

skills to safely perform the new duties as required. This might include training in

hiring and firing of staff as well as budgetary and other management skills.

[51] That the new role is not covered by the CA is not an impediment to the

exercise of either the second or third options or the temporary continued involvement

of the SCC. I accept Mr Hope’s evidence that the SCC has previously appointed an

affected employee to a salaried position outside of the CA. That, again, is in accord

with the words used in clauses 10.1.3 and 10.2 and the need for Fonterra to make

every endeavour to redeploy the workers to alternative positions.

[52] Mr Pollak and Ms Swarbrick raised the difficulty of the continued

involvement of the SCC for the three month period contemplated in clause 10.2.2 as

this is in the CA and the new role is not covered by it. They contend the SCC could

not have any further involvement. Further, Fonterra contend that if the new position

does not work out after a reasonable period of time, being approximately three

months from the initial redeployment in terms of clause 10.2.3, Ms van Heerden

would have no rights, if she was not coping with the redeployment, to be made

redundant in terms of clause 10.2.2.3. This would disqualify her from being offered

the choices in 10.2.3 which include employment on a different site or compensation.

[53] The Authority, in its determination saw nothing to prevent the work of the

SCC being carried out after the appointment to the new role, by the same group of

people carrying out the same function “extra the Collective Agreement, especially if

that is done with the consent of Fonterra and Ms van Heerden”.

[54] I entirely agree with this approach. The CA remains binding upon the parties

until Ms van Heerden enters into an individual employment agreement. There is no

impediment to the individual employment agreement including all the terms set out

in clauses 10.2.2, 10.2.3, 10.2.4 and 10.2.5. These would become contractual terms

embodying the operation of the SCC in precisely the same way Fonterra has claimed

clause 10 in its entirety are part of Ms Ropata’s individual employment agreement.

The only difference is that this would be by express agreement of the parties.

Conclusion

[55] As will have been seen I differ somewhat from the Authority on whether the

new position must be given to Ms van Heerden as of right. The Authority found that

Fonterra had a discretion as to how it may redeploy her, although clause 10.1.3

required it to make every endeavour to so redeploy her. It therefore concluded that

Fonterra would need to start afresh and consider Ms van Heerden as a potential

appointee taking the requirements of clause 10 fully into account. I have reached the

view that the discretion in 10.2.1 means that Fonterra must exercise one of the three

options, unless it is unable to. In view of its acceptance of Ms van Heerden’s

suitability for the role, the only reason it might not be able to do so, is as Ms

Swarbrick warned, if Fonterra is contractually obliged to another person.

[56] This brings me to consider the situation of Ms Ropata. As is common ground

her IEA does not contain redeployment provisions. Instead, Mr Pollak submitted she

could rely upon the policy document and the undertaking of Fonterra to treat her as

though she had the benefit of clause 10. However, even if clause 10 is deemed to

form part of her IEA, and I make no ruling on this, clause 10 carries the detriment to

Ms Ropata of being site specific in clause 10.2.1. The new role is not on the same

site or factory complex. If clause 10 was part of her contractual arrangements, Ms

Ropata could not require Fonterra to use its best endeavours to exercise its discretion

in electing one of the three options at Waitoa under clause 10.2.1. It would need to

use “best endeavours” under 10.2.3 because it would be unable to meet the site

specific condition in clause 10.2.1.

[57] For this reason, putting the argument on behalf of Ms Ropata on the highest

plane by assuming both defendants have identical redeployment rights, I consider it

is not open to Fonterra to include Ms Ropata in the closed pool. Only another

affected worker on the same site could have been included in terms of clause 10.2.1

and the evidence appears to establish there was no such employee. Therefore there

is no basis to find Fonterra is unable, in its discretion, to chose one of the two

applicable options. It therefore follows that the requirements of clause 10.2.1

compel Fonterra to appoint Ms van Heerden to the new role under either the second

or third options contained in clause 10.2.1.

[58] Ms Ropata will then have the right to the choices provided in 10.2.3, if clause

10 is deemed to be part of her IEA. Those choices do not include the new panel co-

ordinator role at Waitoa because Ms van Heerden will have been redeployed to that

role. The challenge is therefore dismissed and I confirm the Authority’s

determination with the amendments I have made.

[59] Because of the previous co-operative arrangement between the parties when

dealing with redundancies through the SCC, I do not consider it appropriate to make

a compliance order at this stage. If, however, there are any difficulties with

implementing the terms of this decision, then I reserve leave to the parties to refer

the matter back to the Court.

[60] Costs are reserved but if they cannot be agreed between the parties may be

the subject of an exchange of memoranda, the first of which is to be filed and served

within 30 days of the date of this judgment with a further 21 days for a reply. I do,

however, invite the parties to consider that as this matter was a dispute and its

resolution will have effect throughout Fonterra’s operations, consideration should be

given as to whether it is a test case where costs should lie where they fall.

B S Travis Judge Judgment signed at 4.50pm on 13 December 2007