IN THE EMPLOYMENT COURT AUCKLAND AC 61/07 ARC 56/07. JEANETTE VAN HEERDEN First Defendant. DONNA ROPATA Second Defendant

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1 IN THE EMPLOYMENT COURT AUCKLAND AC 61/07 ARC 56/07 IN THE MATTER OF BETWEEN AND AND de novo challenge to a determination of the Employment Relations Authority FONTERRA COOPERATIVE GROUP LIMITED Plaintiff JEANETTE VAN HEERDEN First Defendant 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. FONTERRA COOPERATIVE GROUP LTD V VAN HEERDEN AK AC 61/07 13 December 2007

2 [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.

3 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

4 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 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 coordinator 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.

5 [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 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 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 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 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

6 instigated by either management or Union representatives. The committee will: ensure the spirit and intent of the Collective Agreement is observed; and oversee any trial periods and oversee the redeployment of workers to any other positions Redeployment 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: 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; redeploy a worker to a position in keeping with the worker s level of skill; 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 When redeployment to an upgraded position occurs the worker s terms of employment will be adjusted immediately After one month actively in the new position the Consultative Committee will review all redeployed workers in positions as defined in clauses ; and 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 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 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.

7 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 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: 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 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 redundancy compensation as set out in the redundancy clause below 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 Note: The buy out for part time workers shall be as above except that it shall be pro-rated to their new position 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 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 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 Where a worker accepts alternative employment as provided for above in clause there will be a trial period of up to three

8 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. Submissions 10.4 Redundancy 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 Exclusions A worker shall be deemed not to be redundant if: the worker is employed on a casual or temporary basis; the worker is provided with an alternative position on the same site or factory complex in accordance with the redeployment clause; the worker accepts relocation to alternative employment on a different site or factory complex within the Company; the closure is attributable to war, civil disturbance, stoppage, go slow or other industrial action. [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-

9 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 nonmembers 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:

10 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 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 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 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 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 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 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 demonstrates, Fonterra must make every endeavour to redeploy her to an alternative position in accordance with clause Fonterra will then have a discretion as to

11 how it deals with redeployment, because of the words in clause , 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 , 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 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 and , if it was able to, and it had a discretion as to which option to adopt. She argued that the opening words of clause 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 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.

12 [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 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 compels Fonterra to redeploy the defendant unless it is not able to in the sense that not one of the options in clause can apply. She cited Unkovich v Air New

13 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 of the CA, the site specific provision would favour Ms van Heerden. Ms Ropata would have a right, under clause , 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 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 , 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 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.

14 [33] Ms Swarbrick then dealt with the exercise of the discretion by Fonterra, under clause , submitting that the employer must have regard to both the CA and the obligations of good faith in s4 of the Employment Relations Act 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.

15 [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

16 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 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.

17 Discussion [42] It is common ground that the redeployment clause is intended to avoid compulsory redundancies. That is clear from the note to clause 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 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 , 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 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 and 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 required Fonterra to then make every endeavour to redeploy Ms van Heerden to an alternative position in accordance with 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 is to exercise one of the three options in clauses , or It is only where Fonterra is unable, as the word is used in , as opposed to unwilling, to exercise one of those three options in

18 clause that clause comes into operation in relation to any redundant workers. The obligation to exercise one of the options in comes partly from the opening words of clause 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 that completely new choices must be offered. [46] Although Fonterra has a discretion as to which of the three options it exercises, under the combined effect of clauses , the qualification and limitation in and the word unable in , mean that Fonterra s discretion in clause 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 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 ( ) has no relevant application. The second option ( ) 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 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 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.

19 [48] Further, clause requires, where necessary, sufficient training to enable her to upgrade her skills to safely perform the new role. The final pre-condition in clause is that any alternative position is on the same site or factory complex. [49] Even if the new role did not come within I find it is an upgraded position, in terms of the third option in I do not interpret , in its context, as being limited to positions described in the CA. The wording in clauses , and 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 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 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 , Ms van Heerden would have no rights, if she was not coping with the redeployment, to be made redundant in terms of clause This would disqualify her from being offered the choices in 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.

20 [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 , , and 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 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 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 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 It would need to use best endeavours under because it would be unable to meet the site specific condition in clause

21 [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 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 compel Fonterra to appoint Ms van Heerden to the new role under either the second or third options contained in clause [58] Ms Ropata will then have the right to the choices provided in , if clause 10 is deemed to be part of her IEA. Those choices do not include the new panel coordinator 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. Judgment signed at 4.50pm on 13 December 2007 B S Travis Judge