Australian Rail, Tram and Bus Industry Union v Aurizon Operations Limited

[2014] FWC 240

FAIR WORK COMMISSION

DECISION

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

Australian Rail, Tram and Bus Industry Union
v
Aurizon Operations Limited
(C2013/6349)

"Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU)
v
Aurizon Operations Limited
(C2013/6673)

Australian Rail, Tram and Bus Industry Union
v
Aurizon Operations Limited
(C2013/6807)

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
v
Aurizon Operations Limited
(C2013/6817)

Rail industry
COMMISSIONER SPENCER	BRISBANE, 10 OCTOBER 2014

Alleged dispute regarding Clause 12 - Maximising Employment Security; Clause 37 - Job Security; Clause 47 - Contractors

[1] This decision relates to four separate applications made by the Australian Rail, Tram and Bus Industry Union (the ARTBIU), “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (the AMWU) and Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (the CEPU/ETU) (collectively the Unions/Applicants) pursuant to s.739 of the Fair Work Act 2009 (Cth) (the Act). The dispute the subject of this decision, relates to the application of clauses 12, 37 and 47 of the QR National Rollingstock and Component Services Enterprise Agreement 2010 (the Agreement).

[2] The first application filed (C2013/6349) by the ARTBIU, was brought before the Commission in conference; the dispute was unable to be resolved. The three further disputes were subsequently filed. By consent of the parties, the matters were joined and it was agreed by the parties that it was not necessary to list the further three applications for conference, as it was unlikely to resolve the matters in dispute. Consequently, by consent of the parties, the matter was listed for arbitration. Directions were issued for the Applicants and Aurizon Operations Limited (the Respondent), to confer and file an agreed Question for Arbitration. By agreement between the parties, the final Question for Arbitration is as follows:

Question: Is the Respondent in breach of clause 12 of the QR National Rollingstock and Component Services Enterprise Agreement 2010 (“the Agreement”) by declaring a number of positions surplus and having the work ordinarily undertaken by those employees in those positions performed by labour hire and/ or contractors, taking into account clauses 12, 37 and 47 of the agreement?

The parties agree that either party may submit that a consideration of other matters, such as consultation, is relevant to the question to be arbitrated, however, the Applicants do not allege that there has been a breach of clause 38 of the agreement.

[3] The ARTBIU was represented by Ms Carla Jones, Industrial Officer. The AMWU was represented by Ms Lisa Butler, Industrial Officer. The CEPU/ETU was represented by Ms Pat Rogers, Industrial Officer. The Respondent was represented by Mr Mitch Patterson, Principal Employee Relations Officer and later by Mr Dan Williams of Minter Ellison solicitors. There was an objection raised by the Applicants to the legal representation of the Respondent. Permission was granted pursuant to s.596(2)(a) and (c) with reasons to follow in this decision, set out as follows.

Legal Representation

[4] The relevant provisions of the Act are set out in s.596(1) and (2):

“596 Representation by lawyers and paid agents

(1) Except as provided by subsection (3) or the procedural rules, a person may be represented in a matter before the FWC (including by making an application or submission to the FWC on behalf of the person) by a lawyer or paid agent only with the permission of the FWC.

(2) The FWC may grant permission for a person to be represented by a lawyer or paid agent in a matter before the FWC only if:

(a) it would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter; or

(b) it would be unfair not to allow the person to be represented because the person is unable to represent himself, herself or itself effectively; or

(c) it would be unfair not to allow the person to be represented taking into account fairness between the person and other persons in the same matter.

Note: Circumstances in which the FWC might grant permission for a person to be represented by a lawyer or paid agent include the following:

(a) where a person is from a non English speaking background or has difficulty reading or writing;

(b) where a small business is a party to a matter and has no specialist human resources staff while the other party is represented by an officer or employee of an industrial association or another person with experience in workplace relations advocacy.

...”

[5] The Federal Court in Warrell v Walton 1 considered the matter of permission to appear, pursuant to s.596 of the Act. Justice Flick stated:

“A decision to grant or refuse “permission” for a party to be represented by “a lawyer” pursuant to s 596 cannot be properly characterised as a mere procedural decision. It is a decision which may fundamentally change the dynamics and manner in which a hearing is conducted. It is apparent from the very terms of s 596 that a party “in a matter before FWA” must normally appear on his own behalf. That normal position may only be departed from where an application for permission has been made and resolved in accordance with law, namely where only one or other of the requirements imposed by s 596(2) have been taken into account and considered. The constraints imposed by s 596(2) upon the discretionary power to grant permission reinforce the legislative intent that the granting of permission is far from a mere “formal” act to be acceded to upon the mere making of a request. Even if a request for representation is made, permission may be granted “only if” one or other of the requirements in s 596(2) is satisfied. Even if one or other of those requirements is satisfied, the satisfaction of any requirement is but the condition precedent to the subsequence exercise of the discretion conferred by s 596(2): i.e., “FWA may grant permission...”. The satisfaction of any of the requirements set forth in s 596(2)(a) to (c) thus need not of itself dictate that the discretion is automatically to be exercised in favour of granting “permission”.

The appearance of lawyers to represent the interests of parties to a hearing runs the very real risk that what was intended by the legislature to be an informal procedure will be burdened by unnecessary formality. The legislative desire for informality and a predisposition to parties not being represented by lawyers emerges, if not from the terms of s 596, from the terms of the Explanatory Memorandum to the Fair Work Bill 2008...” 2

[6] The application of s.596 of the Act allows the Commission to exercise a discretion to grant permission in formal proceedings, however, as set out, this is not automatic. The discretion afforded to the Commission will be exercised on the facts and circumstances of the particular case, against the legislative tests. 3

[7] The matter is of significance to the future operation of the Respondent’s business but also the continuing employment of those affected by these decisions in question. There is also some complexity to the matter and there are four separate matters with three Applicants and a series of witnesses and submissions and therefore the efficient handling by legal representatives would assist.

[8] With respect to fairness between the parties, if representation of the Respondent is granted, the union representatives of the Applicants are experienced industrial advocates and the Applicants will not be disadvantaged or prejudiced if permission to appear was granted.

[9] Accordingly, on the specific facts and circumstances of this matter, to allow for an efficient, fair and effective hearing of matters of some potential complexity, the Respondent was granted permission to be represented by a lawyer at the hearing in this matter.

[10] While not all of the submissions and evidence in this matter are referred to in this decision, all of such have been taken into account, excepting as follows. An objection was raised to a bundle of documents filed by the Respondent. It was agreed in the hearing that if the document is not specifically referred to or relied on, that is, it remains outstanding at the end of the evidence, and if the Respondent had not taken the Commission particularly to that document in the submissions, then the Commission would not consider it as part of the Respondent’s materials 4.

Background

[11] A brief background to the matter was agreed between the parties and was set out above at [2].

[12] The four disputes relate to a restructure undertaken by the Respondent in relation to its “Facilities Management” and “Rollingstock Maintenance Workshops”.

[13] In relation to the Facilities Management restructure (which relates to matters C2013/6349 and C2013/6673), the Respondent, by notice of 3 October 2013, notified the affected employees and the ARTBIU and AMWU, of its final decision to declare 45 positions surplus and further, to outsource some of that work in relation to 40 of those positions. 5

[14] In relation to the Rollingstock Maintenance Workshops (which relates to matter C2013/6807 and C2013/6817), the Respondent, by notice of 5 November 2013, notified the affected employees and the ARTBIU and the CEPU/ETU of its final decision to declare 13 positions surplus and further, to outsource some of the work in relation to all 13 of those positions.

[15] The Question for Arbitration (as set out in [2] above) has been drafted by the parties to refer to the circumstances relating to the Facilitates Management restructure only. It was agreed between the parties that the Question for Arbitration, for resolution by this Commission, related to the facts and circumstances of both the Facilities Management and Rollingstock Maintenance Workshops restructures. However, the parties are in agreement that there is no material difference between the two that affects the outcome of the matters collectively and a decision can be determined on that basis.

Relevant provisions of legislation and the Agreement

[16] The dispute was brought pursuant to s.739 of the Act. Section 739 provides:

“739 Disputes dealt with by the FWC

(1) This section applies if a term referred to in section 738 requires or allows the FWC to deal with a dispute.

(2) The FWC must not deal with a dispute to the extent that the dispute is about whether an employer had reasonable business grounds under subsection 65(5) or 76(4), unless:

(a) the parties have agreed in a contract of employment, enterprise agreement or other written agreement to the FWC dealing with the matter; or

(b) a determination under the Public Service Act 1999 authorises the FWC to deal with the matter.

Note: This does not prevent the FWC from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effect as subsection 65(5) or 76(4) (see also subsection 55(5)).

(3) In dealing with a dispute, the FWC must not exercise any powers limited by the term.

(4) If, in accordance with the term, the parties have agreed that the FWC may arbitrate (however described) the dispute, the FWC may do so.

Note: The FWC may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).

(5) Despite subsection (4), the FWC must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.

(6) The FWC may deal with a dispute only on application by a party to the dispute.”

[17] Section 738 provides:

“738 Application of this Division

This Division applies if:

(a) a modern award includes a term that provides a procedure for dealing with disputes, including a term in accordance with section 146; or

(b) an enterprise agreement includes a term that provides a procedure for dealing with disputes, including a term referred to in subsection 186(6); or

(c) a contract of employment or other written agreement includes a term that provides a procedure for dealing with disputes between the employer and the employee, to the extent that the dispute is about any matters in relation to the National Employment Standards or a safety net contractual entitlement; or

(d) a determination under the Public Service Act 1999 includes a term that provides a procedure for dealing with disputes arising under the determination or in relation to the National Employment Standards.”

[18] The dispute was brought pursuant to the terms of the Agreement that commenced operation on 17 September 2010. 6 Clause 42, Disputes Procedure, of the Agreement provides:

“42. DISPUTES PROCEDURE

...

42.15 Where the dispute pertains to the application or interpretation of this Agreement or an alleged breach of this Agreement and, where the dispute remains unresolved following conciliation FWA is authorised to resolve the dispute by private arbitration.”

[19] Clause 12 (the Maximising Security Clause), of the Agreement, provides:

“12. MAXIMISING EMPLOYMENT SECURITY

12.1 The Company is committed to maximising permanent employees’ security of employment, but it operates in a rapidly changing, competitive environment where security of employment is increasingly linked to winning and retaining work.

12.2 This requires a continuous review and re-alignment of how we deliver products and services to our customers. The objective is to maximise the application of available resources including staffing and infrastructure, while considering changing customer needs or organisational priorities.

12.3 This may mean changes to employment arrangements. Where this occurs it is the parties’ intent to pursue security of employment for permanent employees through re-skilling and/or retraining and/or redeployment opportunities. The intent is to provide long-term sustainable employment for employees whilst acknowledging that the flexibility the Company requires may often require changes to people’s jobs.

12.4 There will be no forced redundancies and no forced relocation. This provision does not apply to an employee who has been converted from fixed term to permanent employment with the condition that the employee will be subject to involuntary redundancy.

12.5 This clause does not apply to any termination of employment for poor performance, incapacity or misconduct.

12.6 An employee shall not unreasonably reject retraining, transfer and/or redeployment. Transfer shall apply as defined in the relevant Company policies as amended from time to time.”

[20] Clause 37 (the Security Clause), of the Agreement provides:

“37. JOB SECURITY

37.1 RACS is committed to maximising the security of employment for permanent employees within an environment which is rapidly changing, competitive and where security of employment is increasingly linked to winning and retaining work. The performance of the organisation is the major contributor to ensuring job security. To this end, the parties commit to ensuring that the agreement and its application serve this purpose.

37.2 Job security, within the confines of this agreement, can be enhanced by the application of the clauses within this agreement. These clauses include job redesign. Ultimately the productivity and performance of the business plays a part in ensuring job security for permanent employees.”

[21] Clause 47 (the Contractors Clause), of the Agreement provides:

“47. CONTRACTORS

47.1 The application of this clause is limited to work that is ordinarily undertaken by employees covered by this agreement.

47.2 Prior to the final decision to use contractors/labour hire to perform such work, the Company:

47.2.1 Will explain the basis for the decision to consider using utilising contractors/labour hire to Union/Workplace Representatives at the relevant work area; or

47.2.2 Will, where the contracting out/ labour hire proposal impacts on more than one site, provide the state office of the relevant unions with the explanation and in those circumstances the Company is not required to advise the Union/Workplace Representatives at the relevant work area ; and

47.2.3 Will following the above explanation allow those Union/Workplace Representatives or the state office of the relevant unions (depending on who was notified in accordance with 1 and 2 above) a reasonable period (with a minimum of 48 hours) to present any alternatives or options for the performance of the work that is being considered to be contracted out.

47.3 At the conclusion of the reasonable period in point 3 above, the Company will make a final decision and may proceed with the use of the contractors/labour hire for the work in question if no suitable alternative has been adopted.

47.4 In the event of an operational emergency need the Company is relieved of its obligation under point 3 above.”

Summary of Applicants’ submissions and evidence

[22] Given the interplay between various clauses of the Agreement, and the associated positions of the parties, it is appropriate to consider a summary of the submissions and evidence in relation to the provisions relevant to the Question for Arbitration.

The Maximising Security Clause

[23] The ARTBIU provided submissions in relation to the matter. Those submissions were supported by the AMWU. The ETU made further additional submissions but otherwise supported the ARTBIU’s submissions.

[24] The Applicants submitted that the Maximising Security Clause was an “important” item for the Unions during negotiations for the Agreement. The Applicants referred to clause 12.4 where it provided “[T]here will be no forced redundancies and no forced relocation”. This, in the Applicants’ submissions, demonstrated the importance of the Respondent’s obligation to provide long term sustainability of employment.

[25] The Applicants submitted that clause 12 gives rise to two distinct obligations on the Respondent. First, arising under clause 12.1 (and subject to an exception discussed below), to “maximise the security of permanent employees’ employment”. 7 . Second, arising under clause 12.4, an obligation that “[T]here will be no forced redundancies and no forced relocation”.

[26] The Applicants take issue with the Respondent’s contention, in relation to the first of the obligations arising under clause 12, that as long as affected employees remain employed, then the Respondent is compliant with the obligation in clause 12.1 of the Agreement. The Applicants acknowledged that the obligation in clause 12.4 (that no forced redundancies will occur) is complied with if the employment of affected employees is retained. However, the Applicants contrasted the two distinct obligations.

[27] The Applicants conceded that the obligation arising under clause 12.1 was subject to an exception. The exception arising from the following words in clause 12.1:

“...but [the Respondent] operates in a rapidly changing, competitive environment where security of employment is increasingly linked to winning and retaining work.”

[28] The Applicants interpreted this as: “the obligation to make the employment of the identified employees as secure as possible only where the Respondent is winning and retaining work” 8 (emphasis in original). The concession continued that where the Respondent is not winning and maintaining work, the obligation does not operate, so as to require the employment of the identified employees to be made as secure as possible.9

[29] The Applicants submitted that there is no evidence in this matter that gives rise to the exception to the obligation, that is, that the Respondent is not winning and retaining work.

[30] Mr Brad Crofts, a qualified Economist, gave evidence in the Applicants’ case. Mr Crofts’ qualifications were outlined; his experience includes market and business analysis (including trade policy for the Federal Government) and economic and corporate research in private enterprise.

[31] Mr Crofts stated that he had reviewed several documents in relation to Aurizon’s operations including the 2012-2013 Annual Report, July 2013 Investor Briefing, FY2013 results presentation, FY2013 full year profit results announced to the ASX and Energy Economics - Central Queensland Coal Railings Forecast, July 2013. These documents were annexed to Mr Crofts’ statement.

[32] Mr Crofts stated that, as a result of reviewing these documents, he had reached the conclusion that the Respondent is “winning and maintaining contracts for work”. Specifically, Mr Crofts referred to a table of coal railings forecasts and his statements in support of these conclusions were as follows:

“In support of this, I would draw attention specifically to the following points:

a. The 2012-2013 Annual Report (pp 2-3) indicates that the tonnage being hauled by Aurizon has increased by 6% from FY2012 and total revenues increased by 7% over the same period. (Also see FY2013 results presentation, slide 7).
b. Aurizon state in their FY2013 results presentation that they have signed new long term haulage contracts worth 120 million tonnes per annum (MTPA) (slide 4).
c. The [Revenue Quality] shows customers with whom contracts were signed and the MTPA of each contract. I would draw attention to the column entitled “Description” in which it is spelled out whether the contract is a new or renewed contract. There is a fair mix of renewed and new contracts of extended duration.

(Source: Investor Briefing - July 2013, slide 10)

d. For 2013-14, Aurizon’s current expectations are: ... “for coal haulage volumes to increase around 5% to a range of approximately 200 – 205 million tonnes”. (2012-13 Annual Report, p7).
e. The company has forecast growth in coal railings in Central Queensland for the next four fiscal years. Growth in Queensland coal railings is expected to be 26% or an annual average 8% over the forecast period (see chart below).

In addition to rising haulage volumes (and implied revenue quality noted above), Aurizon state that “revenue protection will be enhanced through an increase in fixed capacity charges…This improvement is a result of the re-contracting of legacy contracts to new form contracts.” (Note new form contracts have a higher fixed rather than variable charge). Aurizon states that: “70% of above rail coal revenue will be fixed in FY2018 compared to 45% in FY2013”. Coal revenue is projected to rise in aggregate over the period. (See FY2013 results presentation, slide 11).” 10

[33] Mr Jason Young, Organiser of the ETU, also gave evidence in this matter. Mr Young stated that he has had discussions with affected employees who are members of the ETU. Mr Young conveyed that these members’ opinions were that the specific workshop, the subject of the restructure, has not lost work in recent times.

[34] Mr Young stated that he is aware, through discussions with members, that when Queensland Rail became aware of the proposal by the Respondent to restructure the workshop, Queensland Rail ordered a further amount of overhauls “as they were concerned they would not be able to get these machines overhauled anywhere else”. 11

[35] The Applicants submitted that this was evidence that the Respondent is, in fact, “winning and maintaining work”.

[36] Further, the Applicants submitted that this exception was not relied upon by the Respondent during the consultation phase of the proposed restructure. Rather, the Applicants’ submitted that the purported reason was the desire, in the Respondent, to reach a 75% operating ratio (the ratio of operating costs to revenue). This desire to be more profitable, it was submitted, is not an “agreed exception” to the obligation arising under the Maximising Employment Security Clause.

[37] As to the scope of the obligation in the clause, the Applicants considered the relevant terms as follows. They submitted that the Collins English Dictionary defines “maximise” as “to make as high or great as possible; increase to a maximum”. Giving the words of the Maximising Security Clause their ordinary and plain meaning therefore, the Applicants submitted that the Respondent is obligated to make the “security of the employment of permanent employees as secure as possible; to increase that security to a maximum”. 12

[38] The Applicants submitted that the alleged breach of this obligation arises in the context of the discrete options provided to affected employees. The ARTBIU stated that affected employees were given the option to: redeploy or transfer; retrain or re-skill; accept voluntary redundancy; become an employee in transit; or job-swap. These options, it was said, do not amount to “maximising employment security”.

[39] The Applicants stated that the positions the subject of the restructure, are, for the most part, low-skilled and modestly remunerated. The positions offered as available under the proposal for redeployment or transfer, are positions of Co-ordinators and Supervisors. The probability of the actual affected employees, being able to easily transfer or be redeployed into these positions was low or non-existent.

[40] In this regard Mr Matthew O’Brien gave evidence; Mr O’Brien is an affected employee. Mr O’Brien stated that he had worked for the Respondent (and its predecessors) for 14 years. He is presently an Engineering Production worker at the Respondent’s workshop at Redbank Plains. The position includes tasks such as pollution control, yard work and gate-keeping.

[41] Specifically, Mr O’Brien stated that, after being advised of the proposed changes by the Respondent’s representatives, he reviewed the jobs created as a result of the restructure available for redeployment or transfer. Mr O’Brien stated that he considered he would not be successful in attaining those positions, as they required more experience than he had. Mr O’Brien gave evidence, in this regard, about other employee’s views. I have given no weight to this evidence, as this evidence is considered to be hearsay and has not been subject to cross-examination.

[42] Further to this, Mr O’Brien stated that no information was provided about specific opportunities for re-skilling or retraining which would enable him to consider the redeployment opportunities. This leads Mr O’Brien to consider that these jobs were not a “genuine” option for him.

[43] The Applicants submitted that the genuineness of the Respondent’s intention to facilitate redeployment or the transfer of affected employees to maximise employment security was questionable. In this regard, the Applicants relied upon the evidence of Ms Jayne Carter and Mr Adrian Ranford.

[44] Ms Carter has been employed by the Respondent (and its predecessors) for 21 years. Ms Carter gave evidence regarding her past experience of being an employee whose position was declared surplus. Any weight to be attributed to Ms Carter’s evidence is on the basis that it is recognised that Ms Carter is not an employee specifically affected by the events of this dispute. Ms Carter’s evidence, as I understand it, is given as evidence of prior conduct of the Respondent where they have not acted to maximise employment security, in relation to employees in a similar situation to the affected employees in relation to this matter.

[45] Mr Radford has been employed by the Respondent (and its predecessors) since 1998. Mr Radford’s evidence is approached on the same basis as the evidence of Ms Carter.

[46] The two employees provided evidence that they each considered that the actions of the Respondent, in dealing with them as employees who were declared surplus, and employees in transit, was to the effect of causing them to resign or otherwise leave their employment with the Respondent. 13

[47] With regards to retraining and re-skilling, the Applicants submitted that the Respondent’s consultation documents do not provide specific information on the retraining or re-skilling that would be available to affected employees. The Applicants submitted that the consultation documents fail to provide information on these aspects or guidance on how employees could find relevant information for applicable training or re-skilling.

[48] Mr O’Brien gave evidence, specifically in relation to the circumstances of this dispute, that no re-skilling or retraining has been offered to him, beyond assistance with resume preparation or job-seekers’ assistance. 14 The Applicants also relied upon the evidence of Ms Carter and Mr Ranford in this regard.

[49] The Applicant submitted that this is evidence that the Respondent, (despite the clear terms of clause 12.3, that re-skilling and retraining form part of the parties’ agreed intent to pursue security of employment), is not meeting these obligations.

[50] In relation to voluntary redundancies, the Applicant submitted that given their submissions as to the Respondent’s obligation to maximise employment security, it is not the primary relevant consideration in the matter. As a voluntary redundancy brings the employment relationship to an end, it cannot be said to be maximising the employment security of employees. The Applicants relied upon the evidence of Ms Carter, Mr Ranford, and Mr O’Brien to establish that voluntary redundancies are the preferred option of the Respondent.

[51] Notwithstanding that the Applicants broadly accept that voluntary redundancies may be the preferred option for some employees, the CEPU relied upon a further witness statement of Mr Ian Turner, filed on 4 April 2014, in relation to the issue of the Respondent offering voluntary redundancy. The evidence of Mr Turner is that the employee in transit program in use by the Respondents, as an alternative to a voluntary redundancy, had a negative reputation among his colleagues in the workshop and was viewed as a process geared at “helping people to leave the organisation”. In so far as these statements constitute hearsay, I afford them the commensurate weight attributed to such evidence. However, the emphasis of Mr Turner’s evidence is that due to the negative perception of programs such as the employee in transit program, in addition to the general uncertainty as to job security, his decision to apply for a voluntary redundancy was based on the limited alternatives.

[52] As to the option in relation to job-swap, the Applicants asserted that this option is not contained within the Agreement or the relevant policy (discussed below) and is a new feature, peculiar to the consultation that has occurred in relation to the two proposed restructures of this matter.

[53] The Applicants submitted that the consequence of the admissions, contained in the consultation documentation of the Respondent, was that the Respondent admits that the proposed changes are not maximising employment security.

[54] The Applicants stated that the admission as to the basis of the restructures arises because the consultation documentation discloses that the aim of the restructure is to make the company more profitable; effectively decreasing the operating ratio of the company to achieve this. However, the Applicants stated that given that forced redundancies are not open to the Respondent under the Agreement, and the means of retaining employees only, are open to them, then the Respondent would still be subject to the costs of these employees, as well as the contractual costs associated with outsourcing the surplus work to external providers.

[55] The Applicants referred the Commission to a statement in the Respondent’s annual report for the 2012-2013 financial year, where it is stated that the Respondent has experienced an 11% decrease in employees in that period. The Applicants submitted that this indicated a disregard for the Maximising Security Clause.Ms Jones of the ARTBIU stated:

“...The employer has very openly admitted that the shedding of employee numbers is something to celebrate and I'd refer you to the 2012-2013 financial year annual report on page 7 where they talk about the loss of 921 employees from the company as being a positive thing. Obviously that's aimed at shareholders and not at unions. 15

[56] The Applicants’ submissions went to matters beyond the specific factual circumstances of the dispute in this matter (being the “Facilities Management” and “Rollingstock Maintenance Workshops” restructures). 16 These submissions are taken to be introduced as background/informative submissions generally, to demonstrate their submissions and members’ experiences regarding the context of the clause in question. The matter in dispute, to which this decision relates, is only in relation to the two restructures identified and whether those restructures have been undertaken in accordance with the specific clauses in the Agreement identified in the Question for Arbitration.

The Security Clause

[57] The Applicants submitted that this clause, being the second clause specifically relating to security of employment, does not appear in any other Agreement from the group of “QR National 2010 Agreements”. This clause demonstrated, it was submitted, an intention of the parties to give effect to the security of employment obligation and this intention should be reflected in the interpretation of the Agreement. Specifically the Applicants referred to clause 37.2 which is extracted again, for ease, as follows:

“37.2 Job security, within the confines of this agreement, can be enhanced by the application of the clauses within this agreement. These clauses include job redesign. Ultimately the productivity and performance of the business plays a part in ensuring job security for permanent employees.”

[58] Mr Young gave evidence that during negotiations for the Agreement, the Unions were aware of the “need to improve, rather than just maintain, job security”. 17 The Maximising Security, Security and Contractors clauses reflects this need.

The Contractors Clause

[59] Clause 47 is repeated here for convenience.

“47. CONTRACTORS

47.1 The application of this clause is limited to work that is ordinarily undertaken by employees covered by this agreement.

47.2 Prior to the final decision to use contractors/labour hire to perform such work, the Company:

47.2.1 Will explain the basis for the decision to consider using utilising contractors/labour hire to Union/Workplace Representatives at the relevant work area; or

47.4 In the event of an operational emergency need the Company is relieved of its obligation under point 3 above.”

[60] The Applicants submitted that this clause applies when work that is ordinarily undertaken by employees, covered by the Agreement, is sought to be outsourced through the use of contractors/labour hire.

[61] The Applicants submitted that clause 47.3, in isolation, appears to give a right to the Respondent to utilise contractors or labour hire, after complying with the consultation provisions specified in clause 47.2. However, the Applicants submitted that clause 47.3, when read in this way, is inconsistent with clause 12 and further, with clause 37. It was submitted that the ability to utilise contractors or labour hire only arises after the Respondent has sought to maximise the security of employment of the affected employees.

[62] The Applicant accepts that there is an apparent inconsistency between the two sets of clauses - clauses 12 and 37 on the one hand, and clause 47 on the other but maintained the two sets of clauses can be read concurrently and harmoniously with the agreed common intention of maximising security of employment.

[63] The Applicants confirmed that job security was a significant live issue during the negotiation of the Agreement provisions.

[64] The ETU filed submissions in reply in this matter. The submissions in reply were supported by the ARTBIU and the AMWU. Mr Young of the ETU gave evidence that the clauses were “only intended to apply to specialist work”. 18

[65] The ETU put the obligations contained in the clauses in question as follows:

“...employees must recognise that security of employment is linked to winning work, employees need to consider changing customer need, employees recognise that jobs may change and that “productivity and performance...plays a part in ensuring job security.” 19

[66] In their reply submissions, the ETU criticised the Respondent’s reply, submitting that the Respondent’s submissions do not evidence consultation in compliance with clause 38 of the Agreement. The ETU relied upon a further witness statement of Mr Young in this regard.

[67] Clause 38 of the Agreement states as follows:

“38. COMMUNICATION AND CONSULTATION

Company to notify

38.1 Where the Company has developed a proposal to introduce major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the Company must notify the employees who may be affected by the proposed changes and any union covered by this agreement and which is able to represent the industrial interests of one or more employees likely to be affected. Nothing in this clause limits the discretion of an employee to be represented by whomever the employee chooses.

38.2 For the purposes of this clause “proposal” or “proposed change” means a proposal that has been developed by the Company which is capable of implementation, subject to changes (if any) arising from the consultation.

38.3 Significant effects include termination of employment, major changes in the composition, operation or size of the Company's workforce or in the skills required; the elimination or diminution of job opportunities, promotion opportunities or job tenure; the alteration of hours of work; the need for retraining or transfer of employees to other work or locations and the restructuring of jobs. Provided that where this agreement makes provision for alteration of any of these matters an alteration is deemed not to have significant effect.

Company to discuss proposed change

38.4 The Company must hold discussions with the employees affected and the relevant union/s (or other employee nominated representatives, if any). These discussions must involve or include:

38.4.1 The timely provision in writing of all relevant information, including details of the change, the likely effects on employees, the reasons for the proposed change and, where relevant, a proposed implementation date;

38.4.2 Measures to avert or mitigate any adverse effects on employees

38.4.3 Provision of reasonable resources, including work time, for employees to fully participate in the consultation process;

38.4.4 Genuine consideration of the parties suggestions, ideas and contributions;

38.4.5 Genuine opportunity for the parties to affect the outcome.

38.5 The discussions must commence as early as practicable after a relevant proposal has been developed by the Company.

38.6 The Company is not required to disclose confidential information the disclosure of which would be contrary to the company’s interests.

38.7 Company will notify the parties in writing. This notification will include final details of the proposed change and an implementation date. The implementation date will not be earlier than 5 working days from the date of the notification, unless safety concerns demand otherwise. In such cases, the notification will be signed by senior management.

38.8 Where a notification under the above subclause has been issued, the parties will have 5 working days in which to issue a notice of dispute. This notice of dispute will be made pursuant to Step 3 of the Dispute Procedure. For the purposes of this clause working day has the same meaning as in the Disputes Procedure.”

[68] In this respect Mr Young stated that he, the ETU generally and members have not been provided with any information, during the consultation process, by the Respondent that would suggest that outsourcing will reduce operating costs of the Respondent. 20 Mr Young further stated that during the consultation meetings in this matter, he specifically requested information about savings.

[69] The Applicants submitted that the restructure of “Facilities Management” and “Rollingstock Maintenance Workshops”, in the present circumstances, does not comply with the obligation to maximise employment security.

Summary of Respondent’s submissions and evidence

[70] The Respondent submitted that a finding in the affirmative in this matter is potentially very serious (possibly involving a breach of the Act, subject to civil penalties) 21 and should, accordingly, be approached in a cautious matter.

[71] However, properly construed, the Respondent submitted that the Maximising Security Clause does not give rise to a specific obligation, capable of breach by the proposed action of the Respondent.

[72] In this regard, in terms of the interpretation of that clause, the Respondent referred the Commission to a passage of Gummow, Hayne and Heydon JJ in Amcor Limited v Construction, Forestry, Mining and Energy Union as follows:

“[The clause] must be read in context. It is necessary, therefore, to have regard not only to the text of [the clause] but also to a number of other matters: first, the other provisions made by [the clause]; secondly the text and operation of the Agreement both as a whole and by reference to other particular provisions made by it; and, thirdly, the legislative background against which the Agreement was made and in which it was to operate.” 22

[73] The Respondent submitted that, rather than imposing an obligation, the Maximising Security Clause “records a commitment” 23 to “maximising permanent employees’ security of employment”. This commitment was, in the Respondent’s submission, immediately clarified by reference to the competitive environment, within which the Respondent operates.

[74] The Respondent submitted that the reference to winning and retaining work is not an exception that must be satisfied prior to the Respondent being able to take action. The only specific obligation, to which the Respondent is bound in the Maximising Security Clause, was submitted to be that contained in clause 12.4, the obligation that no forced redundancies or relocations will occur.

[75] The Contractors Clause, it was submitted, provided the Respondent with an “unambiguous right” in relation to the use of contractors or labour hire, the only requirement being, the specific consultation obligations set out therein.

[76] The overall effect of the operation of the Agreement was said to be that whilst the Respondent has “committed” to job security, in that it has agreed to no forced redundancies, the Respondent has explicitly reserved their “normal flexibilities and managerial prerogatives”. It was submitted that the Agreement recognises this through explicit recognition of the environment in which the Respondent operates. The Respondent argued that this restructuring of the business, currently the focus of these proceedings, is both contemplated and facilitated by the operation of clause 12.

[77] The Respondent relied upon the concept of “managerial prerogative” as being a limit upon the exercise of the Commission’s powers to interfere with the right of management to manage its business. The Respondent specifically relied upon the decision of Federated Union of Locomotive Enginemen v State Rail Authority of New South Wales 24in support of this and the general approach adopted by industrial tribunals, not to interfere with the right of management to manage its business, unless some unfairness to employees is demonstrated. Consequently, the Respondent submitted that the Commission ought not, in this matter, interfere with the Respondent’s ability to manage its business.

The Maximising Security Clause

[78] The Respondent submitted that the Maximising Security Clause “entitles” the Respondent to continuously review and re-align the operations of its enterprise. It also contemplates changes to employees’ employment arrangements as a result.

[79] The Respondent recognised the factual proposition that it is “winning and retaining work”, but stated that, in doing so, the Respondent recognised a necessity and right to continuously review operations for efficiency.

[80] The Respondent submitted that this continuous review of operations was also explicitly acknowledged in the Maximising Security Clause, through clause 12.2. The Respondent submitted that it had undertaken a review of the Facilities Management team, the result of which was that benefits could be achieved through the intended changes.

[81] In this regard the Respondent generally referred to the witness statement of Mr Philip Hancock, Manager Facilities. Mr Hancock has been employed by the Respondent since November 2010. Mr Hancock reviewed the provision of services, within the maintenance services, of the Respondent.

[82] Mr Hancock stated the resulting benefits of the review that he has determined include:

a. Enhanced capability to deliver maintenance services through external service providers across the portfolio by increasing the number of Maintenance Supervisor and Works Co-ordinator positions in those locations.

b. Increased consistency of maintenance services across the Respondent’s national portfolio of sites;

i. The FM team of the Respondent is responsible for maintenance services across a national portfolio of 955 sites.

ii. External service providers are already utilised at all 955 of these sites on an as required basis.

iii. External service providers perform a varying degree of maintenance services ranging from all of the maintenance services at some sites to only some of the maintenance services at other sites.

iv. By extending the existing service contracts under which the external service providers perform maintenance services to incorporate the services currently provided by the 40 affected employees, consistent services will be provided across the Respondent’s entire national portfolio of 955 sites.

c. Increased consistency of service standards across the Respondent’s national portfolio of geographically dispersed sites by utilising single points of contact at the relevant external service provider.

d. A reduction in operating expenses via the cost savings generally achieved by the removal of employment on-costs but also by increasing the volume of work under existing service contracts, which will allow the Respondent to derive a lower per unit cost in relation to the services already provided under those contracts across the Respondent’s 955 sites. 25

[83] Similarly, in relation to the Rollingstock Maintenance Workshops, the Respondent stated the benefits as follows:

“...the cost savings generally achieved by the removal of employment on-costs but also by increasing the volume of work under existing service contracts, which will allow the Respondent to derive a lower per unit cost in relation to the services already provided under those contracts across the Respondent’s numerous workshops across Australia.”

[84] In this regard, the Respondent generally referred to the witness statement of Mr Louis Caruana, General Manager Workshops. Mr Caruana has been employed with the Respondent since 27 July 2011. Mr Caruana undertook the review of the Electrical Components team and stated that he has determined that the proposal to outsource the work will reduce the Respondent’s operating expenses in that it will no longer have to pay the “on costs” associated with direct employment. 26 There was limited scrutiny by the Applicants of this evidence as to what particular “on costs” this evidence was referring to.

[85] Mr Caruana also stated that the process of outsourcing, under existing service contracts, allowed that some economies of scale could be gained, resulting in lower per unit cost in relation to similar services already received by the Respondent in other states.

[86] Mr Caruana provided evidence that of the 13 employees declared surplus, 8 have expressed interest in a voluntary redundancy. Mr Caruana anticipates that the remaining 5 will be able to undertake a job-swap (discussed below). The impact of this on the affected employees, currently in the electrical stream, is that no employee will become an “employee-in-transit” and will either be made voluntarily redundant, or maintain their employment, albeit in an alternate position.

[87] The Respondent referred the Commission to what it said was consultation, commencing some 18 months prior, where it was submitted that the Respondent began communicating, to employees its intention to improve the operating ratio and referred to a letter to all Respondent employees, dated 5 June 2012. 27

[88] The Respondent submitted that the process of consultation, undertaken in respect of the proposed changes, included “a range of measures” as it was recognised that the Maximising Security Clause included a mutual intention in relation to re-skilling, retraining and redeployment.

[89] Part of this proposal was the job-swap option provided to employees. The Respondent stated that this involved an affected employee moving into an occupied position and the employee, currently holding that position, accepting a voluntary redundancy.

[90] The Respondent submitted that a number of positions had been created as a result of the review, and affected employees have been given the opportunity to express an interest in those positions. The Respondent accepts however that this does require the employee to “have the skills and knowledge or with a reasonable amount of re-skilling or retraining acquire the skills and knowledge to perform one of these new positions”. 28

[91] The Respondent did not make any specific submissions, or lead evidence in relation to the opportunity or process for employees to undertake re-skilling or retraining. This was, however, a specific matter of concern raised by the Applicants in their materials as to how the process is being undertaken.

[92] In terms of the specific outcomes of the matters at hand, as pertains to voluntary redundancy, the Respondent submitted that 27 of 53 of the total number of affected employees (across the two teams) have expressed an interest in receiving a voluntary redundancy.

[93] The Respondent argued that the obligation under the Maximising Security Clause, (if indeed there is a specific obligation resulting from the wording of the clause, other than an overall reference to this being the intent of a process), was submitted to not include an express obligation to utilise permanent employees to perform work that the Respondent has determined would be better performed via outsourcing.

[94] Further to this, any such obligation acting to limit this ability, express or implied, would be contradictory to what the Respondent says is the express term of the Agreement provided for by the Contractors Clause. A term cannot be implied where to do so is contradictory to an express term. 29

Contractors Clause

[95] The Respondent contended that the Applicants’ interpretation of this clause involved a requirement that the Respondent only outsource work if it employs no employees already performing that work. The Respondent submitted that the Contractors Clause contains no such provisions or obligation.

[96] The Respondent has stated that it has previously outsourced work in similar circumstances, where identical terms existed in other prior applications of the provisions of the Agreement. The Respondent contends that the Applicants in this matter were also involved in those instances. Historical instances of outsourcing, under previous contractors clauses, where the facts and circumstances and outcomes have not been accepted by the parties as agreed, do not assist the Commission in construing the provisions, in the current circumstances. I have approached these submissions and evidence on that basis. Evidence of past conduct, including any alleged lack of disputation between the parties, whereby the circumstances are not recognised by the parties, does not assist the Commission in the construction exercise. The past conduct may have been incorrect or viewed differently by the parties.

[97] The Respondent, on the interpretation of this clause, submitted that the question should be answered in the negative.

Clause 38 - Communication and Consultation

[98] The Respondent has made various references and submissions in relation to clause 38 - Communication and Consultation. The Respondent relies on the evidence of Mr Lance Edwards and Ms Leonie Archer, in terms of outlining the consultation that was undertaken at the first instance; the processes involved in accepting and assessing expressions of interest for redeployment or redundancy; the general process for employees in transition; and the resulting number of employees who have put forward expressions of interest for one of the about alternative offers. Clause 38 does not directly form part of the question for arbitration.

[99] An interpretation of clause 38 does not directly form part of the task of the Commission in this particular matter. The question that has been drafted by the parties does not require a consideration of whether the Respondent has specifically complied with clause 38 and the obligations imposed by that clause, nor does the question provide for a scrutiny of the consultation process. This provides limits of the nature of the inquiry in relation to the determination of this dispute, given the links between clause 38 and those in question.

Consideration

[100] The first consideration in relation to the Question for Arbitration is, does an obligation arise under the clauses, or are the references merely aspirational? Secondly, if there is an obligation, has it or will it be breached? These questions will be addressed further in the considerations.

[101] The Respondent’s contention is that the Applicants are improperly seeking to prevent Aurizon from proceeding with the change proposal that involves outsourcing and the creation of surplus positions. The Respondent argued that the Question for Arbitration was a question as to whether or not there has been a breach of the clauses in question in the enterprise agreement.

[102] The Applicants’ submissions, in addressing the provisions of the agreement, recognised that these provisions had inherently competing goals. The Applicants generally agreed that the stated motivation of the Respondent to cut the operating ratio to 75% of income, was in direct contradiction to maximising security of employment through the implementation of investment in retraining and re-skilling employees. The Applicants emphasised that these were competing obligations and to that end, the Respondent had simply given perfunctory reference to affected employees via the consultation process. That is, they stated, the consultation process was deficient in that the Consultation Pack contained a lack of specific information in relation to the manner in which it would achieve a maximisation of the security of employment.

[103] The ARTBIU argued that "it's absolutely impossible for an employer to reduce the operating costs while giving effect to a clause in the Enterprise Agreement which requires them to spend money" 30. Ms Jones submitted as follows:

“The Respondent has through its consultation documents clearly stated that the reason for this move is to cut its operating ratio to 75 per cent of its income and those cuts are coming from, in this instance, savings and labour costs. When they have clearly stated that that is the case, they can't turn around then and state that they are maximising the security of the employment because the ways in which the employer has agreed to give effect to its obligation to maximise the security of employment is by way of retraining and re-skilling and redevelopment and these things cost money.

Retraining people to carry out jobs that they're not yet qualified for costs money. Re-skilling people who don't yet have the skills to work elsewhere in the organisation costs money. So maximising the security of employment is expensive. It is obviously from the Union's point of view an investment in Aurizon's future but it does cost money and spending money does not drive down the operating ratio of Aurizon and that's very clearly what they have said they wanted to do. It's included in the consultation documents themselves.” 31

[104] The contradiction and the tension between the agreement provisions is evident, as acknowledged by the Applicants. However, it must be noted that these are the agreed provisions reached between the parties.

[105] The Applicant stated that the premise for outsourcing the positions was not clear. Furthermore, the underlying reasons had not been clearly conveyed in the consultation material. In addition, they submitted that this outsourcing of positions is contrary to the maximising of security of employment provisions. Ms Jones submitted, in this regard, as follows:

“Generally, yes, they're required to continue – if they were to keep them employed in the positions they're in now, they would be required to spend at least the same amount of money that they're spending now and we know that they're not at an operating ratio of 75 per cent. That is because it's in the consultation documents that they're not at that operating ratio or they will be required to spend further money by (a) keeping those people employed and (b) retraining and re-skilling them, as they say that they're going to in the maximising employment security clause.

So to put it bluntly, the Respondent has two competing obligations... They've got an obligation to their shareholders to maximise their financial return and clearly they've determined that the way to do that is to reduce the labour costs and in this particular area that looks like contracting out the work the permanent employees are currently performing. That obligation to their shareholders is obviously in direct conflict with the obligation that we're here talking about today. This is an obligation to maximise security of employment that they knowingly and willingly entered into as a legitimate party to an enterprise agreement. That obligation has the force of law and it can't be allowed to be displaced by the fact that they prefer their obligation to shareholders overall.

While I'm on that, let's not lose sight of what the purpose of this hearing is. The purpose is to determine whether the respondent has breached its obligations in terms of the agreement. It's not to determine whether the Respondent's competing obligation to each shareholder is a better obligation to uphold. It's to ask the very narrow question: has the Respondent breached its obligation to maximise the security of employment of its permanent employees? We say very clearly that they can't do both. The employer has very openly admitted that the shedding of employee numbers is something to celebrate and I'd refer you to the 2012-2013 financial year annual report on page 7 where they talk about the loss of 921 employees from the company as being a positive thing. Obviously that's aimed at shareholders and not at unions.” 32

[106] Ms Jones noted that the Consultation Pack provided insufficient information to employees about retraining and re-skilling and further, a redundancy payout does not comply with their obligation to maximise security of employment. She submitted as follows:

“... The evidence that we have been presented by the Respondent has been put in a way that they would have you believe that mitigating the effects of redundancies on the impacted employees would be sufficient to comply with their obligation, but that's not what the clause requires of them. Mr Edwards, in his witness statement at paragraph 14, tells us that the affected employees were given the Consultation Pack and gives us that pack as part of his evidence and I would ask you to note the distinct lack of any information in that pack about what retraining and re-skilling might be available to these employees.

It is not sufficient for them to say that because an employee is getting a redundancy payout that they have complied with their obligation to maximise security of employment. A redundancy payout obviously ends the working relationship. How can that be said to maximise security of employment? It's simple; it can't. The majority of these people have expressed an interest in voluntary redundancy but the witness evidence that we've tendered demonstrates that they were left in a position where they felt that they had little or no choice to put their hand up for it.

... If they'd been given some hope that they would be retrained, re-skilled and redeployed, they may well have decided otherwise. It is possible then that they would have had their security of employment maximised but they weren't given any information on how that would look. In that case the unions could confidently believe that those who put their hand up for voluntary redundancy were those who genuinely wanted to leave the company and not those who were left with no real option.

Maximising the security of employment looks like what the agreement says it would look like. It looks like investing in retraining, re-skilling and redeploying where necessary. It looks like EIT's are getting trained for what they've asked for. It looks like EIT's - employees in transit – are getting redeployed back into the company but that's not what these employees were told. They were told that they would be given some assistance with preparing the resumes and they would be given some assistance with interview skills.

The evidence of what the Respondent intends to do in terms of re-skilling and retraining of the affected employees is completely non-existent. How then can they say that they're complicit with their obligation to maximum security of employment when the agreement says that that is the way that they will give effect to that clause? The lack of evidence of what retraining and re-skilling looks like speaks volumes about whether they have complied with their obligations.

If you intend to re-skill and retrain people, you tell them what that will look like. You tell them what their options are throughout the consultation process and if you don't do it through the consultation process, you most certainly do it when the unions challenge you about what your intentions are in relation to them. Even through this disputes process they still haven't shown us what re-skilling and retraining they would intend to give these employees to give effect to their obligation to maximise the security of employment. The proposed move by the respondent is the very antithesis of maximising the security of employment and, frankly, I'm surprised that they're here defending it because they are defending the indefensible. You can't have both. You cannot reduce your operating costs to 75 per cent and give effect to this clause. Thank you.” 33

[107] Clause 12 provides for the process of review by the Respondent as to how it delivers its products and services. The Respondent’s justification for the outsourcing provided limited material to assess the requirement for such. However, it is via the consultation clause (clause 38) whereby such relevant information ought to be provided. Despite raising, at a threshold stage of the dispute, that a critique of the communication and consultation clause was a relevant matter, the requirements of the Respondent in line with the consultation clause were not included or referenced in the agreed Question for Arbitration.

[108] The Applicants identified deficiencies in the conduct of the Respondent, particularly in regard to the provision of information and the retraining and/or re-skilling for affected employees.

[109] The CEPU emphasised that the job security clause in the agreement is a very important issue for their members. The Union emphasised also that the series of clauses relevant to the question to be arbitrated need to be read together.

[110] Ms Rogers stated, in relation to the context of the maximising employment security clause:

... “I guess the concession that was made to the employer was that maximising employment security had to be done in a context of Aurizon continuing to win and retain work. Again we say we've brought evidence from Mr Young that that is in fact what's been happening. Aurizon have been winning work and they've been retaining work. Aurizon have failed to bring any evidence that would suggest that they're not winning or retaining work and I think the evidence brought by Mr Young indicates not only Aurizon winning and retaining but in some instances are in fact turning work away. So we say that the context in which you need to consider the clauses in relation to employment security are clearly met in the context that we're seeing today.

Clause 12.3 says, "The intent is to provide long-term sustainable vessel for employees whilst acknowledging the flexibility the company requires may often require changes to people's jobs." Again that was a concession made by the unions that said, "You can't just stay in the same job for the rest of your life without there being any changes. There might need to be some changes in the way you do your work. There might need to be some changes in the way the workshop is put together," but the clear intent of the parties – and it's spelt out – was to provide long-term sustainable employment.

What Aurizon have done is said, "We want to cut costs and the only way of doing that is by contracting out work," and we say that's in direct contravention of clause 12 of the agreement. We also say that if Aurizon wants to cut their costs, they are entitled to do that but it needs to be done within the framework of the agreement and that means considering options other than contracting out. There is no evidence that Aurizon have ever considered anything other than the contracting out of this work and it may be that had they consulted with the unions with out members, there may have been alternative ways of reducing their costs. We don't know because they've never given that any consideration. They have gone straight to the position that says, "We're going to contract out," completely ignored their obligations under employment security and we say that is clearly a breach of the agreement and they are not entitled to do it.” 34

[111] The Union specifically brought evidence in relation to the importance of the security of employment issue in relation to their member, Mr Turner, who had worked “on the tools” throughout his employment. In summary terms, they stated that he did not want to retire but had accepted voluntary redundancy given that being an employee in transit, he considered, was such a negative alternative. Ms Rogers submitted as follows:

...“He says that the person from Aurizon who came and spoke about the employee-in-transition program which is the program, as Ms Jones rightly pointed out, that's designed to retrain and re-allocate people to work – the person who came out and spoke about that was very negative about it. She made it sound like it was – and I'll use his words. She made out that "Becoming an EIT would be an embarrassment on your character". So the person from Aurizon who was charged with the responsibility of talking to employees about their options, were their positions to be made redundant, clearly had a preference for people to leave the organisation rather than stay in the organisation and be retrained. She put a particular spin on it that made it sound not very attractive to our member.

He also says that one of his colleagues became very angry because the colleague had in fact intended to become an EIT but after the discussion by the representative of Aurizon the colleague felt that that wasn't necessarily a good thing for him. He also says at paragraph 17 that the impression that he had was that the EIT process was actually about helping people leave the organisation rather than helping them retrain and redeploy into other roles. So we say that the evidence brought by Mr Turner clearly indicates that Aurizon have failed in their obligation to maximise employment security.” 35

[112] Ms Rogers suggested that the employer had failed to maximise the security of employment and simply proceeded on the basis that they wanted to reduce costs therefore the operating premise was to reduce jobs. The clear submission is that that was a breach of clause 12 (maximising employment security) and the associated clauses related to that. That is, the conduct of Aurizon, in seeking to contract out jobs rather than provide genuine retraining and redeployment opportunities to the members, was a breach of the agreement. 36

[113] In response to the Applicants’ submissions, the Respondent, in introduction, stepped through the agreed statement of facts and five attachments. Mr Williams, on behalf of the Respondent stated that the Applicant unions are seeking to prevent the employer from proceeding with a change proposal, which involves outsourcing and the creation of surplus positions. Accordingly, Mr Williams stated that given the Question for Arbitration, that is, whether or not there has been a breach of the enterprise agreement, his submissions focus specifically around the terms and obligations in this enterprise agreement.

[114] Mr Williams submitted that the Applicants’ case was to entirely injunct the outsourcing process and to that effect, it was an unusual application. Mr Williams stated that outside and before the Commission there have been history of disputes which have resulted in numerous positions within the business being displaced as a consequence of outsourcing proposals, and as a result of these previous proposals, there have been many employees in transition. He specifically referred to two employees in transition who have provided witness statements in the matter. He stated that this process of outsourcing has occurred previously without the current challenge that is now underway. With reference to the Unions’ case, Mr Williams stated:

...“They don't say that and an assertion of that kind would most certainly be inconsistent with the plain terms of the enterprise agreement and also with the considerable history of restructuring under these enterprise agreements, but what they appear to say is that there is to be found in the wording of the enterprise agreement, read, as they say, in a practical, non-technical manner, a prohibition against outsourcing and the creation of surplus positions unless Aurizon can demonstrate that it's not winning or maintaining work. That's what they say to be the effect of clause 12.1.” 37

[115] Mr Williams stated that clause 47 provided a right to the Respondent to outsource, taking into account clause 12.1. That is, Mr Williams summarised the Unions’ case that despite the considerable history of restructuring under these enterprise agreements, the position of the Unions was that the ability to outsource not be undertaken unless it could be demonstrated that the employer was not winning or maintaining work. Mr Williams explained the employers circumstances, in relation to maximise employment security, as follows:

...“Commissioner, Aurizon is a public company. It operates in a competitive environment. All its work is contestable. None of its work is guaranteed and when work is lost, as in any business environment, job losses are also likely and they're perhaps inevitable. Nothing is more destructive to the maintenance of job security than the loss of work or the failure to win work and the winning of maintenance of work is – and this would be a simplistic approach perhaps but it's a factor of two things and if you break it down into its simplest components, it includes the capability of the organisation to carry out the work and no doubt the price.

Capability is a function of assets and asset management but it also must be at least determined by having the right organisational structure with the right skills to meet the requirements of a business and as those requirements are, of course, constantly changing. So what's the right capability and the right skills yesterday will not be the right capability and skills today and what's the right capability and skills today will not be the right capability and skills for the business of tomorrow, including, of course, the winning and maintaining of work.

We've heard something about price ratios and other things. Price is a complex issue but it must depend in part on having an appropriate cost base. A company with a lower cost base than its competitors for the same work can obviously pitch for that work at a lower price while maintaining a better profitability component and an organisation who doesn't compete in that area will eventually not compete for the work.

So therefore any organisation, but certainly Aurizon, in a competitive and dynamic environment must pay very careful attention on a continuous basis; not just in times of crisis but on a continuous basis to its capability and its cost structure, not just for its survival but so that it can in fact maintain and win work, so therefore it does have to constantly challenge its organisational structure, as it has, and it has to challenge that structure in terms of factors of cost and capability and, as I've said, nothing is more destructive to job security than the failure to win or maintain existing work.” 38

[116] The Respondent stated that the outsourcing of work to contractors and labour hire providers is specifically authorised by clause 47. Mr Williams submitted as follows:

“In any event, clause 47.1 could not be plainer. It applies to work ordinarily undertaken by employees covered by this agreement; in other words, work which has being carried out by Aurizon employees. Clause 47.2 provides for a consultation process. Clause 47.3 allows the company to make a final decision and may proceed with the use of the contractors/labour hire for the work in question if no suitable alternative has been adopted; not identified but adopted by the company. There is no suggestion, as I said, of a breach of clause 47.

Now, this still leaves the issue – and much has been said about this – of surplus employees. If work is outsourced, those roles by definition will not exist. That's the effect of clause 47. It's the purpose outsourcing. They will not exist within Aurizon. That, of course, may or may not mean they exist in an outsource provider but they certainly don't exist within Aurizon and therefore those employees will be surplus to requirements. That's been the case in outsourcing proposals, but it can't be a breach of the enterprise agreement or any provision of it for the change proposal to have the effect that roles are surplus because by definition that's what occurs when you outsource work ordinarily undertaking by employees covered by the agreement.” 39

[117] In connection with these provisions, Mr Williams emphasised that there are no forced redundancies, and accordingly their mutual obligation is to pursue strategies to assist affected employees to pursue successful placement in another role within the organisation. He stated that these mutual obligations occur in other clauses throughout the agreement; the consultation clause 38.3 makes reference to retraining, the transfer of employees and the restructuring of jobs.

[118] Mr Williams pointed the attention of the Commission and parties to the preamble in clause 12.1, in the terms of recording a commitment to maximising permanent employees as a collective. The Respondent emphasised that they considered they had met the consultation obligations but also recognised that the employee in transit process could be a frustrating one for an employee. Mr Williams stated:

“The EIT process is almost by definition likely to be productive of anxiety, uncertainty and difficulty for employees because they're in a situation where their roles have been taken away from them, they haven't found a transition to a new role and essentially they're marking time in their careers and in their lives while one of those two things occurs and, of course, that's a difficult time. If it be the case that Mr Hancock or the HR person or anybody else gave employees the impression that maybe that wasn't a future that they should be heading towards if they had any reasonable alternative, that was good advice.” 40

[119] The Applicant took issue with the Respondent’s characterisation of the employee in transit process and submitted that this had become a negative process as a result of the lack of appropriate information provided to the employees in line with the Respondent’s intended aims of reducing the numbers in the workforce.

[120] It is important to note here again that, despite directly raising the relevance and interplay of clause 38 with the parties, the clauses directly referred to in the Question for Arbitration omit a reference to this clause. A more detailed assessment, via the communication and consultation clause, as to whether the Respondent was genuinely trying to maximise employment and meet operational efficiencies, would have been warranted. However, the failure to pursue the consultation clause (or include the related evidence in the case) in the Question for Arbitration has precluded the formal task by the Commission of identifying deficiencies in the consultation phase, as to the provision of additional information, which appears a reasonable expectation on the basis of the operation of the other clauses in question.

Conclusion

[121] Clauses 12, 37 and 47 of the Agreement have been assessed in terms of the Question for Arbitration and against the circumstances of this dispute and the submissions and evidence of the parties. As summarised, there is a clear disparity between the positions taken by the Applicants and the Respondent in relation to the operation of these three clauses.

[122] Overall, in terms of the obligations to be discharged by the employer that arise from the relevant clauses, when read together, the Applicants’ case was that the Respondent had not met their obligations. They argued that the Respondent was in breach of clause 12 of the Agreement in terms of terms of maximising security of employment. In relation to clause 12, the Applicants criticised the employer’s conduct by failing to bring evidence that they were not winning and retaining work, as is the commencing premise of clause 12.1.

[123] It was agreed between the parties that the clauses included in the Question for Arbitration should be read together. The decision in Kucks v CSR Limited (1996) 66 IR 182 was referred to as providing guidance to the task of construing an agreement. I adopt the reasoning in this decision. Justice Madgwick observed as follows 41:

“But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.”

[124] The passage above was cited in the Full Bench decision of DP World Brisbane Pty Ltd v the Maritime Union of Australia [2013] FWCFB 8557 at [31], where it was observed:

“Importantly, the task of interpreting an enterprise agreement does not involve rewriting a provision in order to give effect to the Commission’s view of what would be fair and just, without regard to the terms of the agreement.”

[125] In undertaking the interpretation exercise in relation to the clauses that form part of the Question for Arbitration, it is clear that there is a tension between these clauses; between progressive outsourcing for greater efficiency of operations and maximising employment. That is, if the Respondent considers it can outsource work to external companies, as currently done via a process of review to optimise the commercial operations, how can this then in turn be maximising employment security? The Applicants posed, what was the point of providing a commitment to maximise employment security if this is the case? However, in terms of the actual obligations under the agreed clauses, that review to achieve flexibility allows for changes to jobs as long as there are no forced redundancies.

[126] Whilst the evidence demonstrates that there were no forced redundancies, the evidence also demonstrated that there was a lack of definitive information on alternate jobs, retraining or re-skilling information relevant to the employees removed from their positions via the restructuring process in question. In contrast, there was no real challenge to the Applicant’s evidence on the information provided by the Respondent to the affected employees or the discussions held with affected employees regarding the practical circumstances of an employee in transit (which were conveyed in a very negative manner, emphasising the limited options). The “employee in transit” events referred to were that the discussions with employees indicated that they would be given limited information, generally in relation to resume writing and job searching.

[127] The parties have conceded an inconsistency between these relevant clauses in the question, however, the Commission is not at liberty to replace or reconstruct the agreed wording of the parties. The Respondent has made a commitment in clause 12 to “maximising permanent employees’ security of employment”, in the context of Aurizon’s operating environment, as acknowledged by the parties in clause 12.1. The parties further detailed this commitment in clause 12.3. Clauses 12.1 and 12.2 allow for the Respondent to review and optimise its business operations; a commercial prerogative, that the clauses don’t enable any interference with, as long as clause 12.4 is not contravened.

[128] That is, the Respondent does have a clear obligation as per clause 12.4 that “there will be no forced redundancies and no forced relocation”. There was no evidence that the employer had breached this obligation.

[129] The Respondent’s continual review of its operations as has occurred in the current circumstances was contemplated by the parties. This was recognised by the parties to be a necessary function as agreed by the parties in clauses 37.1 and 37.2, as follows:

“37. JOB SECURITY

[130] In re-stating this, the exchange of detailed and relevant information, pursuant to clause 38, is an imperative part of the agreed process which allows for the employees and their unions to be appraised of the circumstances of the restructure, and specifically, what are the re-training, re-skilling or redeployment options proposed by the employer in the circumstances of the restructure. The testing of this information did not form part of the current Question for Arbitration.

[131] It is unclear why the Applicants did not allege a breach of the consultation provisions in clause 38 of the Agreement. There is some ambiguity in the wording of clause 38. Given that clause 47 is a specific contractor clause with an associated process, the Applicants may have deferred to the precursor requirements for using contractors as per the clause. In any event, the Question for Arbitration did not seek as assessment of whether there was a breach of clause 37, 47 or 38, only clause 12. As stated, the provision of information in relation to the proposed restructure has not been comprehensive as to the reasoning for the outsourcing. However, this does not constitute a breach of clause 12, as, prima facie, there has been no evidence of forced redundancies or relocations.

[132] Given the Applicants have argued that the Respondents have not provided the relevant communication and consultation materials that flow from clause 38, and that this has undermined the process, it is therefore anticipated that any further restructuring proposal would allow for a focus on information as provided by clause 38.

[133] In terms of the Question for Arbitration, the Respondent is entitled to review its operations, taking into account clauses 12, 37 and 47, as long as no forced redundancies or forced relocations occur. However, in doing so, the affected employees of any such restructure and any union covered by this agreement should be provided with the appropriate restructuring detail. Again, I note that the examination of this material relevant to clause 38 did not form part of the scope of the Question for Arbitration. However, it should be stated that enhanced consultation and communication information provided in accordance with clause 38 may avert employees forming the negative view of the “employee in transit” program, as was a feature in the evidence of the current arbitration. Whilst the omission of this information does not represent a breach of clauses 12, 37 or 47, there is a definite question as to whether sufficient material was provided to employees and the Unions (as required in clause 38), but this was not a point pursued for determination in the current proceedings.

[134] The Question for Arbitration is re-stated here as follows:

[135] Accordingly, for the aforementioned reasons, the Question for Arbitration is answered in the negative. The Application is therefore dismissed. I Order Accordingly.

COMMISSIONER

1 [2013] FCA 291.

2 Ibid at [24]-[25].

3 Rodgers v Hunter Valley Earthmoving Company Pty Ltd [2009] FWA 572.

4 Transcript PN20, 16 May 2014

5 Respondent’s outline of submissions, at MP4.

6 QR Limited [2010] FWAA 7148 at [5].

7 ARTBIU Outline of Submissions at paragraph 7.

8 ARTBIU Outline of Submissions at paragraph 13; ETU Outline of Submissions at 11.

9 ARTBIU Outline of Submissions at paragraph 14; ETU Outline of Submissions at 12.

10 Statement of Bradley Scott Crofts at paragraph 6 to 7.

11 Statement of Jason Young at paragraph 14.

12 ARTBIU Outline of Submissions at paragraph 18.

13 Statement of Mr Adrian Randford at paragraphs 6, 7, 34, 35, 42; Statement of Jayne Carter at paragraphs 12, 14, 21, 35.

14 Statement of Matthew O’Brien at paragraphs 9 to 11.

15 Submissions of Ms Jones, 16 May 2014, Transcript PN103

16 For example ARTBIU outline of submissions at paragraph 55.

17 Statement of Jason Young at paragraph 20.

18 Statement of Jason Young at paragraph 23.

19 ETU Submissions in reply at paragraph 11.

20 Witness statement in response of Mr Jason Young at paragraph 3.

21 Fair Work Act 2009 (Cth) s.50.

22 Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [30].

23 Respondent’s outline of submissions at paragraph 19.

24 (1984) 295 CAR 188.

25 Statement of Philip Hancock at paragraph 9.

26 Statement of Louis Caruana at paragraph 4.

27 The Respondent’s outline of submissions referred to attachment MP9 in this regard, the actual document appears at attachment MP12.

28 Respondent’s outline of submissions at paragraph 62.

29 In this regard the Respondent referred to The Australia Licensed Aircraft Engineers Association v Qantas Airways Limited [2009] AIRC 268.

30 Submissions of Ms Jones, 16 May 2014, Transcript PN93

31 Submissions of Ms Jones, 16 May 2014, Transcript PN94 - PN95

32 Submissions of Ms Jones, 16 May 2014, Transcript PN102- PN103

33 Submissions of Ms Jones, 16 May 2014, Transcript PN106-PN106, PN 108-PN111

34 Submissions of Ms Rogers, 16 May 2014, Transcript PN165 - PN167

35 Submissions of Ms Rogers, 16 May 2014, Transcript PN169 - PN170

36 Submissions of Ms Rogers, 16 May 2014, Transcript PN175

37 Submissions of Mr Williams, 16 May 2014, Transcript PN263

38 Submissions of Mr Williams, 16 May 2014, Transcript PN271-PN274

39 Submissions of Mr Williams, 16 May 2014, Transcript PN294-PN295

40 Submissions of Mr Williams, 16 May 2014, Transcript PN317

41 Kucks v CSR Limited (1996) 66 IR 182 at [184]

Printed by authority of the Commonwealth Government Printer

[2014] FWC 240

10 OCTOBER 2014