Australian Workers' Union v UGL Operations and Maintenance Pty Limited
[2024] FWC 3026
•31 OCTOBER 2024
| [2024] FWC 3026 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.739—Dispute resolution
Australian Workers’ Union
v
UGL Operations and Maintenance Pty Limited
(C2024/5330)
| DEPUTY PRESIDENT COLMAN | MELBOURNE, 31 OCTOBER 2024 |
Dispute arising under enterprise agreement – dispute determined
The Australian Workers’ Union (AWU) has lodged an application under s 739 of the Fair Work Act 2009 (Act) and the dispute resolution procedure in clause 1.7 of the UGL Operations and Maintenance Pty Ltd Geelong Refinery Maintenance Services Enterprise Agreement 2023 (Agreement). The application refers to the Commission for determination a dispute between the AWU and UGL Operations and Maintenance Pty Limited (UGL) concerning the manner in which UGL proposes to implement the outcome of a classification review that was conducted pursuant to clause 5.1.2 of the Agreement. The review concluded that some employees should be reclassified at higher levels, but that others did not meet the competency requirements of the corresponding classifications under the Manufacturing and Associated Industries and Occupations Award 2020 (Award). UGL proposes now to reclassify those employees to lower classifications that match their assessed competency, but to maintain (or as the AWU says, ‘freeze’) their current rates of pay until the rates for their new, lower classifications overtake their current rates as a result of annual wage increases. The AWU contends that the Agreement does not permit UGL to reclassify employees to lower classifications or to freeze their pay.
The dispute settlement provision in clause 1.7.1 applies to disputes arising under the Agreement and about matters relating to work under the Agreement. It was common ground that the present dispute is such a matter, that the relevant steps in the procedure have been taken, and that the Commission is authorised by the Agreement to resolve the dispute by arbitration.
Clause 5.1.2 reads as follows:
‘New classifications []
a. A review and assessment of all existing Employees’ skills and classifications will be finalised by 31 March 2024.
b. The review is to ensure that Employees are classified appropriately.
c. The classification, pay and wage relativities of employees covered under this Agreement will be determined according to the provisions of the Manufacturing and Engineering Training Package (MEM) as amended from time to time by the Manufacturing and Engineering Industry Reference Group or its successors in conjunction with the Metal and Engineering Industry Competency Standards Implementation Guide (the Guide) as amended from time to time. The Guide is incorporated into this Agreement.
d. The AMWU’s Manufacturing Industry Skills Training and Apprenticeship Service (MISTAS) will be used to conduct this review, either jointly with an organisation nominated by the Company, or separately.
e. Prior to the conduct of any reclassification review, the Company will notify Employees covered by the Agreement of their current classification and pay rate.
f. The costs associated with the review shall be paid by the Company.
g. The date of effect of any pay adjustment arising from reclassification will be the date of application for reclassification, whether the application is made by an individual Employee, or as a result of an agreement between the parties to this Agreement to conduct a review of all Employees classifications in accordance with this clause.
h. For the avoidance of doubt, rights and obligations under this clause are in addition to rights and obligations about classification and reclassification in the Manufacturing and Associated Industries and Occupations Award 2020.
i. Once the review is finalised, the Company will undertake a review of each Employee to ensure they are classified correctly against the new classification structure.
[3] This subclause 5.1.2 is expressly included for the purposes of the review and assessment that will occur during the life of the UGL Operations and Maintenance Pty Ltd Geelong Refinery Maintenance Services Enterprise Agreement 2023.’
The AWU submitted that clause 5.1.2 is clear that classifications and pay will be determined according to the provisions of the Manufacturing and Engineering Training Package (MEM), in conjunction with the Metal and Engineering Industry Competency Standards Implementation Guide (Guide), and that the Guide is expressly incorporated as a term of the Agreement. Critically, section 3.17 of the Guide states in bold text: ‘The employee cannot be reclassified to a lower classification level, or have their wages reduced. They continue to receive all Award increases and entitlements for their classification level’. The AWU said that it was clear therefore that employees who do not meet the competency requirements for their current classification could not be reclassified to a lower classification level, and that they must continue to receive all wage increases and entitlements for their current classification level. Although the Guide refers in this regard to ‘Award’ increases and entitlements, this could only sensibly be read as a reference to the Agreement, given that the document has been incorporated as a term of the Agreement.
The AWU contended that clause 5.1.2 has a clear meaning and that other provisions of the Guide provided context which confirmed this meaning. It said that the concepts that had led to the introduction and implementation of the competency standards are addressed in sections 1.4 and 1.6 of the Guide, and that these include encouraging workers to acquire a wider range of skills, identifying any gaps between the skills that employees have and those that they need for a job within their classification, and providing additional training that employees need to close any skills gaps. The AWU said that the purpose of the Guide was to ensure that employees are appropriately trained for their classification, not to lower their classification or reduce their pay. A training-based approach to ensuring the correct classification of employees was also consistent with clause 2.1.2 of the Agreement, which emphasises the need for trained, skilled and competent employees, and imposes obligations on employees to undertake training to enhance their work performance as required by UGL, and to perform work that is within their skills, qualifications, training and competency.
The AWU contended that because clause 5.1.2 was not ambiguous, there was no need to consider the circumstances in which the Agreement was made, but that these circumstances would in any event confirm the plain meaning of the clause. The AWU said that UGL had distributed documents to employees that described the classification review as a beneficial term of the proposed enterprise agreement and referred to anticipated classification and wage increases. It said that UGL had given employees an explanatory document stating that one of the ‘key benefits’ of the Agreement would be the commitment to review all classifications by 31 March 2024 and that this was ‘likely to result in further increases as skills are recognised as per the award.’ The AWU contended that this explanatory material was consistent with there having been a common intention that clause 5.1.2 would be a term that was beneficial to employees and that it would not operate to their disadvantage.
UGL submitted that clause 5.1.2 requires the outcome of the classification review to be implemented, and that this permits employees to be reclassified either up or down with corresponding adjustments to their rate of pay under the Agreement. Clause 5.1.2(b) states that the review is ‘to ensure that Employees are classified appropriately’. UGL said that this could only mean that if employees do not have the skills and competencies for their existing classification, they should be reclassified to the appropriate lower classification. It pointed to clause 5.1.2(g), which states that the ‘date of effect of any pay adjustment arising from reclassification will be the date of application for reclassification’. UGL said that the reference to adjustments, rather than increases, must be understood as reflecting the possibility of either increases or decreases in pay. It submitted that clause 5.1.2(i) requires that, once the review is finalised, the company must undertake a review of each employee ‘to ensure they are classified correctly against the new classification structure’. This was said to be a further indication that employees who did not have the required competencies for their existing classifications could be reclassified to the lower classification; otherwise, they would not be ‘classified correctly’.
UGL said that clause 5.1.2 was clear in requiring UGL to reclassify employees in accordance with the outcomes of the classifications review and to implement them. The clause did not state that changes to classification and rates of pay could only be ones favourable to employees. The classification review had determined that some of the employees were classified at too high a level. Therefore, in accordance with clause 5.1.2, UGL proposed now to reclassify them to a lower classification with a corresponding ‘pay adjustment’. This adjustment would be to pay the affected employees in accordance with their new lower classification, but to maintain their existing rates of pay until such time as the wage increases under the Agreement result in the pay rate for their new lower classification surpassing their current rate of pay.
As to the highlighted passage in clause 3.17 of the Guide, UGL submitted that, because the Guide is an incorporated document, it is subject to the same ‘principles’ as other incorporated documents, such as the Award. In this regard, clause 1.5.1 states that the Award is incorporated into the Agreement (certain terms are excluded), and clause 1.5.2 provides that where there is inconsistency between an express term of the Agreement and a term of the incorporated award, the former will prevail to the extent of any inconsistency. UGL submitted that the highlighted passage of section 3.17 of the Guide was inconsistent with the requirement of clause 5.1.2 that UGL reclassify employees in accordance with the review and that pay adjustments be implemented, and that the express terms of clause 5.1.2 therefore prevail over section 3.17 of the Guide.
Consideration
Were one to read the text of clause 5.1.2 of the Agreement without reference to the Guide, UGL would be correct to say that the provision requires the company to ensure that employees are properly classified and paid, and that this would mean that employees could be reclassified up or down with corresponding adjustments to their pay. But clause 5.1.2 incorporates the Guide into the Agreement and states that classification and pay will be determined in accordance with the Guide. Section 3.17 of the Guide clearly states that employees cannot be reclassified to a lower classification. I reject UGL’s contention that the Guide is to be treated in the same manner as the incorporated Award so as to be read subject to the express terms of the Agreement. There is no textual basis for such a contention. The interaction rule in clause 1.5.2 applies only to the incorporated Award, not to other documents that are incorporated into the Agreement.
A term that is incorporated into an enterprise agreement has the same prima facie status as any other provision in the agreement. There is no assumed hierarchy that places express terms above incorporated ones. The task of interpretation is always to ascertain the objective meaning of the words of the relevant text or texts, read in context, with due regard to any objectively manifested purpose or common intention. In the context of clause 5.1.2, the Guide has a prominent role. The classification, pay and wage relativities of employees will be determined according to the MEM and the Guide. Clause 3.17 of the Guide states that employees cannot be reclassified to a lower level. It also states that they are to receive all their Award increases and entitlements for their classification level. I reject UGL’s contention that this has no work to do in respect of pay increases and entitlements under the Agreement. Clause 5.2.1 has expressly incorporated the Guide and made it one of the determinants of the reclassification process. References to the Award in the Guide can only sensibly be read as references to the Agreement, otherwise the incorporated Guide would not be a functional document, as it was plainly intended to be. I note that such an approach was explicitly adopted by the parties in respect of the incorporation of the Award into the Agreement (see clause 1.5.4). Where one document incorporates another, it is only logical to read the incorporated document in a manner that is consistent with the fact of incorporation, such that relevant grammatical and terminological adaptations are to be read into the incorporated document, as encapsulated by the expression ‘mutatis mutandis’.
In my opinion, the highlighted passage of section 3.17 of the Guide can be read consistently with the text of clause 5.1.2. Employees are to be classified correctly and with adjustments to pay, but not to lower levels. Further, or alternatively, the ‘express’ provisions of clause 5.1.2 concerning ‘adjustments’ and employees being classified ‘properly’ are general words, which are to be read subject to the more specific terms of section 3.17 of the Guide that prohibit a particular kind of reclassification and adjustment.
That employees cannot be reclassified to a lower level is in keeping with explanatory material that was provided to employees by UGL in respect of the proposed agreement. A week before the Agreement was approved by vote of employees, an earlier version of the Agreement was put to employees and rejected. A notice sent to employees on 23 March 2023 stated that one of the ‘key benefits’ of the agreement was this: ‘Commitment to review all classifications by 31 March 2024 – this is likely to result in further increases as skills are recognised as per the award.’ A reclassification process would not be a key benefit for all employees if some employees could be reclassified to lower levels. After this agreement was voted down, the document was revised and put to vote again. A notice given to employees by UGL on 29 March 2023 noted the amendments that had been made to the earlier document. Under a heading of ‘administration changes’, the notice stated that a reclassification clause had been supplied by the union and was included in the revised agreement. Employees would have reasonably understood that the previous representation concerning the classification review in the notice of 23 March 2023 remained valid.
Julia Swift, UGL’s national industrial relations manager, gave evidence to the effect that UGL’s understanding or expectation was that the outcome of the classification review could and would be implemented, and that this included the possibility of employees being reclassified to lower levels if that formed part of the outcome of the review. But the subjective understanding or expectation of one party to the Agreement is of no assistance in ascertaining the objective meaning of the instrument. Evidence of a common intention of the parties as to the meaning of a provision that is to be included in an enterprise agreement can be relevant to the interpretation of an enterprise agreement, but there is no such evidence in this case.
UGL suggested that employees who were reclassified to a lower level would not in fact incur any financial detriment because their existing rate of pay would be maintained. But this ignores the fact that UGL proposes not to pass on wage increases to employees until such time as the rate of pay for their new lower classification catches up to their existing rate of pay through wage increases over time. This is a financial disadvantage. There is nothing in the Agreement that would allow UGL not to pass on wage increases to employees on the relevant dates in accordance with the wage table that appears below clause 5.1.1.
UGL might ask what the point would be of including in an enterprise agreement a classification review that could only see employees reclassified to higher levels. But the parties to enterprise bargaining often agree to provisions that are substantially or entirely for the benefit of only one party. Further, in my view there is in fact a benefit to the company from the classification review, namely the diagnostic benefit that accrues from ascertaining that certain employees have a competency gap and addressing that gap through training. There may also be a financial benefit insofar as the diagnostic benefit may inform how the company assigns new employees to classifications under the Agreement upon the commencement of their employment.
Conclusion
The parties to the dispute framed their questions for determination somewhat differently but in substance they were the same. The question is whether the Agreement allows UGL, when implementing the classification review, to reclassify employees to lower classifications and freeze their pay until the rate for their new lower classification overtakes their current rate. The answer to that question is that the Agreement does not permit UGL to do either of these things. The dispute is determined accordingly.
DEPUTY PRESIDENT
Appearances:
P. Reilly for the AWU
L. O’Brien for UGL
Hearing details:
2024
Melbourne
25 October
Printed by authority of the Commonwealth Government Printer
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