AGL Torrens Island Pty Ltd v Australian Municipal, Administrative, Clerical and Services Union

Case •

[2014] FWC 4193

•

25 JUNE 2014

No judgment structure available for this case.

[2014] FWC 4193

FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
s.739 - Application to deal with a dispute

AGL Torrens Island Pty Ltd
v
Australian Municipal, Administrative, Clerical and Services Union

(C2014/4654)

and

Australian Municipal, Administrative, Clerical and Services Union
v
AGL Torrens Island Pty Ltd
(C2014/4675)

DEPUTY PRESIDENT BARTEL

ADELAIDE, 25 JUNE 2014

Introduction and Background

[1] AGL Torrens Island Pty Ltd (the employer or AGL) and the Australian Municipal, Administrative, Clerical and Services Union (the ASU) have each filed applications pursuant to s.739 of the Fair Work Act 2009 (the Act).

[2] AGL operates a natural gas fired power station at Torrens Island. It consists of two plants known as “A Station” and “B Station”, each with four generating Units. It has taken a decision to shut down the four A Station Units from 1 July 2014 for approximately three months (hereafter referred to as “the shutdown”). The plan is that two A Station Units will resume operation by 15 September 2014 and the other two Units will resume by 1 October 2014. The impact of the shutdown directly affects approximately 15 A Station continuous shift Operators, who have been directed to take annual leave during the period of the shutdown.

[3] The parties are covered by the AGL Torrens Island Pty Ltd Enterprise Agreement 2011 (the Agreement) 1 and the Electrical Power Industry Award 2010 (the Award).2

[4] In general terms, the application filed by AGL (the AGL application) and the application filed by the ASU (the ASU application) were prompted by a dispute over whether AGL could direct the A Station Operators take annual leave in accordance with the relevant industrial instruments and the Act. A further issue between the parties is the level of staffing of A Station required during the shutdown.

[5] The AGL application sets out information in relation to:

    n The steps taken to communicate the shutdown to employees;
    n Meetings with the ASU to discuss concerns they had raised, most significantly, that the direction that employees take annual leave is a breach of the annual leave provisions of the Agreement; and
    n The steps taken by AGL to mitigate the adverse affect on employees.

[6] This information was subsequently supported by documentation and oral evidence and is not challenged by the ASU.

[7] The ASU application seeks an order preventing the employer from directing employees to take annual leave unless in accordance with clause 9.6.2 of the Agreement and seeks an urgent interim order in these same terms.

[8] The parties have identified four issues that need to be determined to resolve the dispute, as follows: 3

    ● Whether AGL has the power to direct leave to be taken on not less than 4 weeks’ notice pursuant to clause 9.6.2(d) of the Agreement and, if so, whether such a requirement is reasonable, in accordance with s 93(3) of the Fair Work Act 2009.

    ● Whether AGL has the power to require employees to take annual leave during a shut-down, in accordance with the Agreement and clause 27.6 of the Award and, if so, whether such a requirement is reasonable, in accordance with s 93(3) of the Fair Work Act 2009.

    ● Whether the notified shut-down of generation of electricity from A Station constitutes a ‘shutdown’ in accordance with clause 27.6 of the Award.

    ● Whether the Heads of Agreement on Operator Staffing Arrangements (“the Heads of Agreement”) applies to this situation.

[9] It is common ground that the Heads of Agreement is incorporated as a term of the Agreement, 4 and that the intention of the Heads of Agreement is to provide legally enforceable minimum Operations staffing arrangements at AGL Torrens Island.

[10] The cases put by the parties conveniently addressed these issues as “the annual leave issue”, incorporating the first three dot points and “the Heads of Agreement issue”, incorporating the fourth dot point. That terminology is adopted in this decision.

[11] The referral of the dispute for arbitration is consistent with the terms of the Dispute Resolution procedure in clause 12, Appendix 3 of the Agreement and therefore complies with the relevant requirements of s.739 of the Act. The matter was heard on 18 June 2014. Mr Alex Manos and Mr Will Snow, of counsel, represented AGL and Ms Anne Purdy, Director, Industrial & Legal, represented the ASU.

[12] AGL called evidence from Mr Ian Brooksbank, Head of AGL Torrens Island Pty Ltd and Mr Stephen Green, AGL’s Manager, Strategy Risk & Governance. The ASU called Mr Brenton Medlin, Senior Unit Controller (A Station Group 5 Team Leader) and Production Branch Master Process Owner. I am satisfied that all three witnesses were genuine in the evidence each provided.

The annual leave issue

Relevant terms of the Award, the Agreement and the Act

[13] Clause 27 of the Award deals with annual leave, and includes the following provisions:

    “27. Annual leave

    27.1 Annual leave is provided for in the NES. This clause supplements or deals with matters incidental to the NES.

    27.2 Definition of shiftworker for NES purposes

    ...

    27.5 Annual leave may be directed on excessive accrual

      (a) An employer may direct an employee to take paid annual leave if the employee has accrued more than eight weeks’ paid annual leave or, in the case of a shiftworker who works a 12 hour roster, a three-shift roster or other shift roster where the employee is regularly rostered on Sundays and public holidays and has accrued 10 weeks’ paid annual leave.

      (b) An employer must give an employee at least one month’s notice of the requirement to take annual leave prior to the date the employee is required to commence the annual leave.

    27.6 Taking of annual leave during shut-down

    An employer may direct an employee to take paid annual leave during all or part of a period where the employer shuts down the business or part of the business where the employee works. If an employee does not have sufficient accrued annual leave for the period of the shut-down then the employee may be required to take leave without pay.

    27.7 Payment on termination of employment

    ...”

[14] The relevant provisions of the Agreement are clause 3 and Appendix 3, clauses 9.6 and 8.1:

    “3. RELATIONSHIP OF THIS AGREEMENT TO OTHER ENTERPRISE AGREEMENTS AND NATIONAL EMPLOYMENT

      This Agreement shall be read and interpreted wholly and in conjunction with the:

    • Torrens Island Power Station Local Enterprise Agreement 1994


    • Torrens Island Power Station Local Enterprise Agreement 1995


    • Torrens Island Power Station Local Enterprise Agreement 1997/99


    • Torrens Island Power Station Local Enterprise Agreement 2001


    • Torrens Island Power Station Local Enterprise Agreement 2004


    • Torrens Island Power Station Local Enterprise Agreement 2008


    • Electrical Power Industry Award 2010


      in so far as they relate to the Employer/employee relationship.

      3.1 No term of this Agreement will operate to exclude the National Employment Standards or any provision of the National Employment Standards.

      3.2 The parties to this Enterprise Agreement agree that provisions contained within the agreements listed above shall remain in force during the period of this Agreement unless a conflict exists with this Agreement. Where a conflict occurs, provisions contained within this Agreement will take precedence over provisions contained within the earlier Agreements.”

    “9.6 ANNUAL LEAVE

    9.6.1 Entitlements and Accrual

      9.6.1.1 Continuous Shift Operators

      All continuous shift Operators are entitled to 192 hours annual leave per year of service.

      Annual leave shall accrue on a four-weekly basis and be credited on the employee’s commencement anniversary date.

      Excluding time spent on worker’s compensation, continuous unpaid absences in excess of one calendar month are not counted towards the accrual of annual leave entitlements.

      9.6.1.2 Maintainer/Operators

      Maintainer/Operators shall accrue an additional 4 hours annual leave for each complete period of 28 days engaged on continuous shift work per year (this period to be calculated by aggregating all periods allocated to shift work).

    9.6.2 Taking Annual Leave

      a) Employees will generally take their annual leave entitlement within twelve months of their commencement anniversary date unless agreed otherwise with the Employer.

      b) It is intended that the timing of taking annual leave entitlements will be agreed between the Employer and the employee.

      c) Where an Operator or MOP has an annual leave accrual credit of more than 2 years’ annual leave entitlement, the employee and Leader will develop a plan to take the leave. If the leave is still not taken, the Employer may direct that employee to take a period of leave. The leave that the Employer directs the employee to take will not be more than one quarter of the annual leave accrued at the time the direction is given.

      d) Where the Employer directs leave to be taken, not less than four weeks notice will be given to the employee.

      e) One annual leave position per shift group (i.e. Groups 1 to 9) to be available at all times.

    9.6.3 Annual Leave in Advance

    ...

    9.6.6 ...”

    “8.1 ANNUAL LEAVE

    This sub clause covers all employees other than rostered shift employees (refer paragraph 9.6) and casual employees.

    8.1.1 Annual Leave Entitlement

      a) All fulltime day work employees are entitled to 152 hours annual leave per year of service prior to 13112/2008 and 144 hours annual leave per year of service after the 13/1212008.

      b) Where a full time employee has an annual leave credit of more than 2 years entitlement (i.e. 8 weeks’/288 hours annual leave), the employee and leader will develop a plan to take the leave. If the leave is still not taken, the Employer may direct that employee to take a period of leave. The leave that the Employer directs the employee to take will not he more than one quarter of the annual leave credit at the time the direction is given.

      Upon agreement with the Employer, an employee may opt to take twice the leave entitlement by accepting a corresponding reduction in their leave entitlement at half annualised salary rates of pay.

      By agreement leave may be granted in two or more periods.

    ...

    8.1.3 Taking Annual Leave

      a) Employees will generally take their annual leave within twelve months of accrual unless agreed otherwise with the Employer.

      It is the intention that the timing of taking annual leave entitlements will be agreed between the Employer and the employee.

      b) Where the Employer requires and employee to take leave to be taken, not less than four weeks notice will be given to the employee.

    8.1.4 Annual Leave In Advance

    ...

    8.1.6 ...”

[15] Section 93 of the Act deals with terms in awards and enterprise agreements about the cashing out, and taking of, paid annual leave. Section 93(3) is relevant for the present purposes:

    “93 Modern awards and enterprise agreements may include terms relating to cashing out and taking paid annual leave

    Terms about cashing out paid annual leave

      (1)

      (2) ....

    Terms about requirements to take paid annual leave

      (3) A modern award or enterprise agreement may include terms requiring an employee, or allowing for an employee to be required, to take paid annual leave in particular circumstances, but only if the requirement is reasonable.

    Terms about taking paid annual leave

      (4) A modern award or enterprise agreement may include terms otherwise dealing with the taking of paid annual leave.”

The case for AGL

[16] Mr Manos submitted that there were three sources from which AGL has the right to direct employees to take annual leave. The first is in relation to extended accrued leave entitlements under paragraph (c) of clause 9.6.2. The second is in relation to the right of AGL to issue a direction that an employee take annual leave by the giving of notice, in accordance with paragraph (d). The third is the right to direct employees to take annual leave during a shutdown. AGL relies on its rights under paragraph (d) of clause 9.6.2 of the Agreement and clause 27.6 of the Award.

[17] In relation to paragraph (d), Mr Manos submitted that it stands alone from the extended annual leave provision in paragraph (c) and grants an unqualified right for the employer to direct that annual leave be taken on the giving of the prescribed notice. In support of this position he referred to the three previous enterprise agreements that covered the Torrens Island Power Station and the Operators: TXU Torrens Island Pty Ltd Enterprise Agreement 2001, (“the 2001 Agreement”) PR910876; SPI Torrens Island Pty Ltd Enterprise Agreement 2004, (“the 2004 Agreement”) PR957826; SPI Torrens Island Pty Ltd Enterprise Agreement 2008 (“the 2008 Agreement”). 5

[18] In the 2001 and 2004 Agreements, the corresponding provision to clause 9.6.2 of the Agreement did not contain a reference to excessive annual leave accruals, but contained equivalent provisions to paragraphs (a), (b) and (d). By way of example, the 2004 Agreement contained the following provision:

    “9.8.3 Taking Annual Leave

      a) Employees will generally take their annual leave within twelve months of accrual unless agreed otherwise with SPI Torrens Island.

      b) It is intended that the timing of taking annual leave entitlements will be agreed between SPI Torrens Island and the employee.

      c) Where SPI Torrens Island requires leave to be taken, not less than four weeks notice will be given to the employee.”

[19] The 2008 Agreement relevantly introduced the provision dealing with extended annual leave accruals.

[20] Mr Manos submitted that the Commission was entitled to take into account the history of the provision when interpreting the Agreement.

[21] It was argued that clause 3 of the Agreement incorporated the terms of the Award into the Agreement, but that the Agreement terms would prevail to the extent of any inconsistency. In this regard he submitted that as clause 9.6.2 was silent on the issue of annual leave during a shutdown, there was no inconsistency with clause 27.6 of the Award and the employer was entitled to exercise its rights pursuant to the Award provision. AGL was directing its employees to take annual leave during all or part of a period where the employer shuts down part of the business where the employee works, consistent with the terms of clause 27.6 of the Award.

[22] In relation to s.93(3) of the Act, Mr Manos submitted that AGL’s actions in directing leave to be taken were reasonable having regard to steps it has taken to mitigate the adverse effects of its decision on employees, as follows:

    n Employees will not be required to exhaust their leave accruals and can maintain a balance of 48 hours; 6
    n Employees will not be required to cancel any leave plans in place in order to take leave during the shutdown;
    n If employees have insufficient leave to cover the period of the shutdown they will be redeployed to other work and will not be required to take unpaid leave;
    n Employees will retain full shift penalties even if they are redeployed to day work for the duration of the shutdown;
    n Employees who are redeployed to other work because of insufficient leave accruals will have the opportunity to gain training at B Station, (which requires different skills);
    n Extended advice of the requirement to take leave was provided to employees.

[23] He submitted that the direction to take annual leave was for genuine operational reasons and that reasonable notice was provided to the employees.

[24] Mr Green was involved in the negotiation of the 2001, 2004 and 2008 Agreements and the Agreement. He stated that the introduction of the extended annual leave provision in the 2008 Agreement was as a consequence of amendments to the Workplace Relations Act 1996 (the WRA). 7 He stated that it was his recollection that there was no discussion that the introduction of this provision would limit the right of the employer to direct that leave be taken in other circumstances. He further stated that it was his recollection that the 2008 provision was carried over to the Agreement without discussion.8

The case for the ASU

[25] The position of the ASU is that firstly, clause 9.6.2 of the Agreement “covers the field” in relation to taking annual leave. It was argued that the shutdown provision in clause 27.6 of the Award has no application because it is inconsistent with clause 9.6.2 of the Agreement. Ms Purdy submitted that clause 3.2 of the Agreement should be read as including a reference to the Award, so that the effect of this sub-clause is that the Agreement will prevail to the extent of any inconsistency with the Award. She submitted that the absence of a reference to the Award in clause 3.2 of the Agreement was a drafting oversight. I note that Ms Purdy’s view as to the correct reading of clause 3.2 is supported by AGL.

[26] Secondly it was submitted that the employer’s right to direct that annual leave be taken by the giving of not less than four weeks’ notice as per paragraph (d) of clause 9.6.2, directly and solely relates to paragraph (c) dealing with extended annual leave accruals. It was contended that paragraph (b), setting out the intention of the parties that the taking of annual leave be by agreement, applied to the circumstances in paragraph (a) concerning employees taking their annual leave entitlement within 12 months of their commencement anniversary.

[27] Mr Purdy referred to various authorities in relation to the principles of interpretation, which are canvassed later in the decision.

[28] Thirdly, and in the alternative, it was argued that if the Commission formed the view that clause 27.6 of the Award was not precluded by the Agreement, then the proposed shutdown did not fall within the compass of that sub-clause. Ms Purdy noted that ‘shutdown’ is not defined in the Award however, relying on the evidence of Mr Medlin, she submitted that a shutdown would essentially involve a decommissioning of the plant where all potential hazards were removed. In the proposed shutdown, A Station remained ‘operational’ even though it was not generating power.

[29] Finally, it was submitted that the direction of the employer that the employees take annual leave during the shutdown period contravened s.93(3) of the Act, because it was not reasonable. Ms Purdy referred to the Explanatory Memorandum to the Fair Work Bill 2009 (the EM), which specifies the types of matters that are relevant to assessing the reasonableness of the requirement, as follows:

    “382. In assessing the reasonableness of a requirement or direction under this subclause it is envisaged that the following are all relevant considerations:

    • the needs of both the employee and the employer’s business;


    • any agreed arrangement with the employee;


    • the custom and practice in the business;


    • the timing of the requirement or direction to take leave; and


    • the reasonableness of the period of notice given to the employee to take leave.”


[30] Ms Purdy argued that the direction by AGL was unreasonable because:

    • The shutdown was undertaken to increase AGL’s profits rather than for any operational reason;


    • The timing of the shutdown is such that workers would not normally take leave at this time of year;


    • The extent of the leave required to be taken by workers with extensive annual leave accruals is significant;


    • The employer has failed to manage excess annual leave accruals in accordance with the Agreement;


    • The shutdown will take place in the context of ongoing enterprise bargaining negotiations;


    • In the past when Units were not generating power AGL has not directed workers to take annual leave; and


    • The decision to direct workers to take annual leave was not the subject of any discussion or consultation prior to AGL’s announcement to the Operators on 1 April 2014.


[31] Mr Medlin gave evidence that AGL’s direction that he take annual leave was in opposition to a plan he had developed with management, pursuant to paragraph (c) of clause 9.6.2, to gradually reduce his 548 hours of annual leave accrual to 308 by 30 June 2015. He has been directed to take 130 hours leave (approximately one quarter of his accruals) commencing 3 July 2014, with the possibility of further directions to take annual leave in the shutdown period. 9

Consideration

[32] I have considered the cases on interpretation referred to by the parties. The decision of Vice President Lawler in Watson & Ors v ACT Department of Disability Housing and Community Services (Watson) 10 provides a comprehensive summary of key decisions on the approach to interpretation, including the decisions referred to by the parties. Watson concerned a dispute notified pursuant to s.170LW of the Workplace Relations Act 1996, but the decision remains apposite. After considering key decisions, Lawler VP concluded:

    “[15] In summary, the general principles governing the construction of contracts laid down by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales apply to the construction of industrial agreements. However, consistent with the approach in Kucks and Short v FW Hercus Pty Ltd, an industrial agreement must always be construed in context: the context of particular provisions within the agreement as a whole and the context in which the agreement was made including any relevant statutory or historical context. Extrinsic evidence as to the context in which the agreement was made, including the statutory and historical context, will be admissible to demonstrate the existence of ambiguity and or to resolve ambiguity.” 11

Does clause 27.6 of the Award have application?

[33] There are two arguments raised by the ASU in relation to this issue. The first is that the operation of clause 27.6 of the Award is ‘ousted’ by clauses 3.2 and 9.6.2 of the Agreement. The second and alternative argument is that the proposed action of AGL is not a shutdown within the meaning of clause 27.6 of the Award.

[34] I consider that clause 27.6 of the Award does have application for the following reasons. Clause 3 of the Agreement preserves the operation of the Award by the statement that, “This Agreement will be read and interpreted wholly and in conjunction with the: ... Electrical Power Industry Award 2010”. This reflects an intention that the parties to the Agreement have not only preserved the operation of the Award but intend that the Award be taken into account when interpreting the Agreement. I also accept that, whether it arises under clause 3.2 or not, the parties intend that the Award will not apply where it is inconsistent with the terms of the Agreement. 12

[35] In Transport Workers’ Union of Australia v Linfox Australia Pty Ltd, 13 the issue of inconsistency between an award and in that case, a certified agreement made pursuant to the WRA, was considered by Senior Deputy President Lacy of the Australian Industrial Relations Commission. His Honour stated:

    “[30].... The starting point for determining whether an inconsistency exists lies in an identification of the intended scope and operation of the prevailing instrument [the certified agreement]. If the prevailing instrument speaks in terms which convey an intent that its operation is not to be confined or constrained in any way by the subordinate instrument [the relevant award] then the prevailing instrument will, to the extent of that inconsistency, render ineffective or inoperative the subordinate instrument. However, if the terms of the prevailing instrument convey an intention that it should operate conformably with obligations or requirements of the subordinate instrument then the operation of the prevailing instrument will, to that extent, be confined in its operation so as to avoid any inconsistency.”

[36] In the present case, clause 3 of the Agreement conveys an intention that it should “sit comfortably” with the obligations and requirements of the Award. In the absence of any provision within the Agreement addressing the issue of shutdown, there is no inconsistency such that the Agreement should prevail to the exclusion of clause 27.6 of the Award.

[37] In relation to the interpretation of clause 9.6.2, the history of the provision is relevant as is the context of the provision within the Agreement.

[38] The right of an employer to direct an employee to take annual leave on the giving of not less than 4 weeks’ notice has existed at Torrens Island Power Station since the 2001 Agreement and the changes that have occurred since this time have not in my view impacted or altered that right. The introduction of the provision dealing with extended annual leave accruals had the effect of extending the right of the employer to direct that leave be taken on the giving of not less than 4 weeks’ notice to this circumstance.

[39] In the context of the Agreement itself, the structure of the equivalent provision applying to employees other than rostered shift employees is consistent with the view that the right of the employer to direct that annual leave be taken is not limited to circumstances where an employee has accrued an extended annual leave entitlement. For employees other than rostered shift employees, the provision dealing with extended annual leave accruals is found within clause 8.1.1. The ability of an employer to direct that annual leave be taken is contained in a separate sub-clause which is directed to the circumstance of employees taking annual leave within 12 months of accrual.

[40] The ability of the employer to direct an employee to take annual leave for the purposes of a shutdown is not reliant on clause 9.6.2 of the Agreement but emanates from clause 27.6 of the Award. A direction that the employee takes annual leave for the period, or part of the period of the shutdown, is subject to the test of reasonableness in s.93(3) of the Act.

[41] As to the ASU’s second argument, it is common ground that AGL has withdrawn four A Station Units from the market for three months by advice to the market regulator, the Australian Electricity Market Operator (AEMO). In these circumstances, there is no ability for AGL to generate power into the national grid from A Station, absent some statutory directive from the Government or the regulator.

[42] There is scant case law in relation to shutdowns. Annual close downs have been the subject of some discussion, most recently in a background paper published by the Commission as part of the 4 Yearly Review of modern awards. 14 While this is a discussion paper and not a document reflecting the concluded view of the Full Commission, it nonetheless contains some useful background on annual close-downs:

    “History of the provision

    [53] The annual close-down provision was introduced into Commonwealth legislation by the Work Choices Act in 2005. Under this legislation, it was referred to as a ‘shut down’ and an employee had to take an amount of annual leave during a particular period if:

      (a) directed to do so by the employee’s employer because, during that period, the employer shuts down the business, or any part of the business, in which the employee works; and

      (b) at least that amount of annual leave is credited to the employee.

    [54] Annual close-down provisions had appeared in awards prior to appearing in the Work Choices Act in 2005. An example of this is the Metal Industry Award 1971 that was varied in 1977 to include such a provision.

    [55] The FW Act does not contain a specific provision in relation to shut downs/close-downs, however it does grant some flexibility via its inclusion of section 93(3) in the National Employment Standards ...”

[43] In United Voice v Valspar (WPC) Pty Ltd the Full Federal Court heard an appeal by United Voice against a decision of the Federal Circuit Court of Australia. One of the matters that was in issue at first instance and on appeal was whether the respondent wrongly required employees to take annual leave at specified times, contrary to the requirements of clause 34 of the relevant enterprise agreement. While not directly relating to the annual leave issue in the present case, the following passage of the Full Federal Court is useful. 15 The reference to clause 26 of the 1975 Award16 in the passage below is a reference to the genesis of the disputed provision in the enterprise agreement:

    “Clauses of the type represented by cl 26 of the 1975 Award were generally concerned with facilitating an annual shutdown, often over the Christmas/New Year period. ....

    An annual shutdown provided a convenient period for plant maintenance. Annual shutdown provisions (when most employees took annual leave at the same time) also had the advantage for employers that difficulties arising from under-staffing as a result of employees taking annual leave, or the need to supplement with casual (and perhaps inexperienced) labour were more easily avoided.”

[44] In addition to the circumstances cited in the above passage, I note that clause 26 of the 1975 Award identified that the reason for a shutdown may be “... for the purpose of allowing annual leave to the employees concerned or a majority of them”. 17 This decision serves to underline that there is no singular meaning of shutdown or single purpose for which it may be used by an employer.

[45] I can discern no other provisions of the Award that shed light on the meaning to be attributed to the phrase “shuts down the business or part of the business” in clause 27.6. In the absence of any authority for the proposition that, in the present context, a shutdown requires more than what is proposed by AGL, I consider that the withdrawal of Station A from the electricity market for a period of three months constitutes a shutdown of part of the business for the purposes of clause 27.6 of the Award.

Is the requirement to take annual leave reasonable?

[46] I have taken into account the particular measures adopted by AGL to mitigate the adverse effects on employees and the ASU’s arguments as to why the requirement to take annual leave is unreasonable.

[47] I consider that the requirement to take annual leave as directed by AGL is not unreasonable per se. Based on the expression used in item 382 of the EM it is at the individual employee level that the test of reasonableness is to be assessed. In this matter there was no evidence from individual Operators that the requirement to take annual leave was unreasonable in their particular circumstances, save some suggestion by Mr Medlin that it was inconsistent with the plan he had agreed with management to reduce his annual leave accruals.

[48] On the evidence before the Commission I am unable to determine whether the direction given by AGL to Mr Medlin to take annual leave commencing 3 July, is consistent with the plan developed with the employer to take annual leave over the forthcoming 12 months. Further directions to take annual leave in the shutdown period may require some consideration. I note that “any agreed arrangement” for the taking of annual leave is one of the matters identified in the EM as relevant in assessing the reasonableness of a direction to take annual leave, but of itself may not be determinative. The test of reasonableness needs to weigh competing interests.

[49] Several of the matters raised by Ms Purdy, including workers’ preferences as to when leave is taken; the amount of leave that may be required to be used; and the loss of the ability to have leave paid out on termination are matters on which employees may feel understandably aggrieved. However these matters are a consequence of the prima facie right given to the employer to direct employees to take annual leave and some additional evidence of prejudice would be required in the circumstances of this case.

The Heads of Agreement issue

[50] The Heads of Agreement is an agreement between the ASU, AGL and employees of AGL employed as Operators and Maintainer Operators. The objectives of the Heads of Agreement are as follows:

    “(a) The Parties have entered into this ‘Heads of Agreement’ because they wish to set out in a legally enforceable agreement, the matters affecting the minimum Operations staffing at AGL Torrens Island and intent to create a framework for improving these arrangements, to benefit both the business and employees at AGL Torrens Island.

    (b) To ensure the shift staffing arrangements described below are preserved subject only to any agreed changes as contained in, or provided for by, this Heads of Agreement.

    (c) To provide for a binding dispute resolution procedure to deal with any industrial disputes arising from matters contained within this Heads of Agreement.

    (d) To ensure that in the event of a change in ownership of the Torrens Island power station the terms of this Heads of Agreement continue to apply to those employees covered by this Heads of Agreement.”

[51] Clause 4 of the Heads of Agreement sets out the Shift Staffing arrangements for A and B Station and includes the following:

      “The following core shift composition applies to “A” Station only

      For 1 Unit Operation

      1 Production Technician 6 Team Leader
      1 Production Technician 5
      1 Production Technician 4 or 5

      For 0 Unit Operation – care-taking of 4 Units and core operational duties only

      1 Production Technician 6 Team Leader
      1 Production Technician 4 or 5”

[52] It is common ground that the Heads of Agreement is incorporated as a term of the Agreement. 18 The dispute between the parties concerns the application of the Heads of Agreement to the circumstances of the shutdown that will commence on 1 July 2014.

The case for AGL

[53] Mr Brooksbank and Mr Green gave evidence that the circumstances commencing 1 July have not occurred before and are not contemplated by the Heads of Agreement. They disputed Mr Medlin’s evidence that all four Units had been placed in cold storage for three-month periods in previous years.

[54] Mr Green stated that for the first time, AGL will be removing all four Units from the market and all Units will be in “cold storage” for the period of the shutdown. This means that none of the boilers, turbines or generating Units will be operational. Turbines are debarred, there is no pressure in the boiler system and water is removed from the feed pumps.

[55] It is proposed to implement staffing of a single dedicated A Station Operator (Level 5 or above); a B Station Operator who is dual trained to assist in A Station if required (and who forms part of the B Station minimum staffing levels).

[56] The evidence indicates that the reasons for the shutdown are enable AGL to make cost savings; to maintain the integrity of the A Station plant, which has been in continuous operation for many years; and to enable maintenance of the Units. The maintenance that will be undertaken is no different from maintenance generally undertaken in the lead up to the summer peak period, where Units are taken off line. However the extended shutdown will enable the maintenance to be staggered over the period of the shutdown and will avoid the pressure of having to complete the maintenance within a short period of time.

[57] Mr Manos submitted that a requirement to staff in accordance with the Heads of Agreement will be an inefficient use of resources because there is insufficient work available to justify two Operators and it will reduce the level of savings that can be made.

[58] He submitted that the Heads of Agreement reference to “0 Unit Operation” was a reference to the Units being in “warm standby” where the Units are not generating but the turbines are rotating and there is pressure in the boiler system. It was put that the notification to AEMO meant that the staff required for the shutdown was known in advance and the work required to be undertaken was significantly reduced compared to the Units being in warm standby. Mr Manos argued that interpreting the Heads of Agreement as advocated by the ASU would be onerous, unnecessary and would undermine AGL’s managerial prerogative. He pointed out that there was no evidence that AGL’s staffing proposal poses a health and safety risk.

The case for the ASU

[59] Mr Medlin gave evidence that:

    ● When the Heads of Agreement was negotiated in 2009, the circumstances that will exist during the shutdown were contemplated;

    ● In previous years the Units had been placed in cold storage for up to two three-month periods and for lesser periods in recent years;

    ● A range of duties were still required to be performed by Operators such that the minimum staffing level of two Operators was required. He stated that there will be a number of hazards in the system which require monitoring; auxiliary plant will still be operating; and the maintenance work to be undertaken gives rise to additional work;

    ● Unless all Units were effectively decommissioned they were ‘operational’ and caretaking of the four Units was required in accordance of the Heads of Agreement;

    ● While this was the first time the Units had been removed from the market for an extended period via AEMO notification, this did not change the status of the plant or the duties required.

[60] Ms Purdy submitted that the Heads of Agreement applies based on the natural meaning of the words contained within it. She contended that arguments around managerial prerogative and the desire to make cost savings can’t be used by AGL to evade its legal obligations.

Consideration

[61] I have had regard to the evidence and submissions and make the following findings:

    ● A situation where the four A Station Units have been withdrawn from the market for a three-month period via an AEMO notification has not previously occurred;

    ● One of the effects of the AEMO notification is to provide certainty as to the staffing requirements throughout the period of the shutdown, that is, the A Station will not be subject to market demands;

    ● It has been a common occurrence in the past to have one or more A Station Units placed in cold storage for an extended period of time. The relative generating inefficiency and higher cost of A Station compared to B Station has meant that A Station has become a “peaking Station” to meet periods of high demand while B Station is operated as a base load station;

    ● Placing A Station Units in cold storage and/or warm standby has been a response to market demand;

    ● All four Units have previously been placed in cold storage at the same time for short periods of one or two weeks for maintenance purposes or in the case of an outage;

    ● A level of caretaking duties are required to be undertaken when the Units are in cold storage. 19 Auxiliary plant will be operating; the maintenance work to be undertaken involves additional work and a range of duties usually performed by Operators will still be required, albeit at a reduced level.

[62] The fact that the particular circumstances of the shutdown commencing 1 July may not have been contemplated when the Heads of Agreement was negotiated, is not determinative. The objectives of the Heads of Agreement make it clear that it is a comprehensive and complete agreement regulating minimum Operations staffing and that changes to the staffing arrangements are to be pursued in the context of the Heads of Agreement, by agreement between the parties.

[63] Mr Manos’ arguments around managerial prerogative to set appropriate staffing levels is not persuasive in the context of AGL having entered into a binding agreement with the ASU and employees as to the staffing arrangements that will apply.

[64] I note that there is insufficient evidence before the Commission to form a view as to the nature of all duties that will be undertaken by Operators during the shutdown however, the period of the shutdown and the currency of the enterprise bargaining negotiations provide an opportunity for the parties to consider whether any further refinements of the “0 Unit Operation” staffing arrangements are required.

Conclusion

[65] I have determined that there is no inconsistency between the Award and Agreement on the issue of shutdown. The Agreement is silent on the issue. I am also satisfied that clause 27.6 of the Award is applicable to the proposed shutdown at AGL.

[66] I conclude that the ability of the employer to direct that annual leave be taken on giving not less than 4 weeks’ notice is not limited to situations involving extended annual leave accruals. This is supported by the provisions of clause 8.1.3 of the Agreement and the evolution of the current provision as evidenced by the equivalent provisions in past agreements.

[67] However, I have concluded that the right of the employer to direct annual leave to be taken in the period of a shutdown exists independently of clause 9.6.2, and is limited only by the requirement of reasonableness in s.93(3) of the Act.

[68] The requirement for reasonableness in s.93(3) of the Act is directed to the circumstances of an individual employee and this requires that AGL give consideration to the personal circumstances of a particular employee if representations are made by or on behalf of that employee.

[69] The answers to the first and second annual leave questions posed by the parties for determination by the Commission should be read in this context:

    Whether AGL has the power to direct leave to be taken on not less than 4 weeks’ notice pursuant to clause 9.6.2(d) of the Agreement and, if so, whether such a requirement is reasonable, in accordance with s 93(3) of the Fair Work Act 2009.

    Yes and Yes.

    Whether AGL has the power to require employees to take annual leave during a shut-down in accordance with the Agreement and clause 27.6 of the Award and, if so, whether such a requirement is reasonable, in accordance with s 93(3) of the Fair Work Act 2009.

    Yes and yes.

    Whether the notified shut-down of generation of electricity from A Station constitutes a ‘shut-down’, in accordance with clause 27.6 of the Award.

    Yes.

[70] In relation to the question “Whether the Heads of Agreement on Operator Staffing Arrangements (“the Heads of Agreement”) applies to this situation”, for the reasons outlined in the decision, I determine that the answer is “Yes”.

DEPUTY PRESIDENT

Appearances:

Mr A Manos and Mr Will Snow, of counsel for AGL Torrens Island Pty Ltd

Ms A Purdy for the Australian Municipal, Administrative, Clerical and Services Union

Hearing details:

2014.

Adelaide,

June 18.

 1   PR524542.

 2   MA000088.

 3   Email correspondence dated 16 June 2014.

 4   Clause 9.11.1 of Appendix 3.

 5   Ex AGL 2 Attachment SG-1.

 6  AGL indicated that, based on the roster pattern of the relevant employees this equates to two weeks’ leave. This is disputed by the ASU but was not a matter that the parties sought to be determined by the Commission.

 7   Ex AGL 2 at paras 37 - 39. This was a reference to the introduction of the Australian Fair Pay and Conditions Standard (AFPCS) which included a provision dealing with the taking of “extensive accumulated annual leave” in s.236(6) of the WRA.

 8   Ex AGL 2 at paras 40 and 42.

 9   Ex ASU 1 at paras 35 - 40 and attachment BM4.

 10   [2008] AIRC 291.

 11   Codelfa (1982) 149 CLR 337 at 352 per Mason J; Kucks v CSR Limited (1996) 66 IR 182; Short (1993) 40 FCR 511.

 12   The terms and intent of s.57 and Part 2-4 of the Act would appear to prohibit a construction where bargained terms could be ousted by an inconsistent term of an award, regardless of whether the award ‘applies’ to, or ‘covers’ the employees, or is incorporated into an enterprise agreement.

 13   PR955742.

 14   Background Paper 4 Yearly Review of modern awards - Annual leave, common issue; MA 2014/47; Fair Work Commission, May 2014. [2014] FCAFC 34 at paras 37 and 38.

 16   The Australian Paint Industry (Manufacturing) Agreement 1975

 17   At clause 26(c) of the 1975 Award.

 18   Clause 9.11.1 of the Agreement.

 19   Mr Green referred to minimal caretaking being required at PN122.

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