"Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) v BlueScope Steel (AIS) Port Kembla

[2017] FWC 335

[2017] FWC 335

FAIR WORK COMMISSION

DECISION

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

The Australian Workers' Union, - New South Wales Branch; "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU)
v
BlueScope Steel (AIS) Port Kembla
(C2016/6680)

COMMISSIONER RIORDAN SYDNEY, 21 FEBRUARY 2017

s.739 - application to deal with a dispute.

[1] This decision is in relation to a dispute application lodged by the Australian Workers’ Union, NSW Branch (AWU) on 10 November 2016 against BlueScope Steel Limited (BlueScope). The Australian Manufacturing Workers’ Union (AMWU) made an application, which was granted, to intervene in the dispute on 22 November 2016. I note that the Communications, Electrical and Plumbing Union (CEPU) did not make an appearance in the proceedings.

[2] BlueScope is injecting a significant amount of capital into the Slabmaking Department at its Steelworks at Port Kembla. As part of this proposal, BlueScope has decided to reduce the number of Operators by 6 in the Steel Treatment Department. This reduction will require tradespersons from the Shift Maintenance Department and shift staff employees to undertake Grade 3 Operator tasks during periods of peak workload in the Steel Treatment Department. BlueScope also intends to install robotics in the ladle turn over area. Currently, the Shift Maintenance Department provides maintenance services to the Steel Treatment Department. Both of these departments sit within the Slabmaking Department.

[3] The AWU was represented by its Industrial Officer Mr Graeme Beard. The AMWU was represented by its Legal Officer, Ms Lucy Saunders. Leave was granted in accordance with section 596(2) of the Fair Work Act, 2009 (the Act), to allow Mr Aaron Dearden and Ms Sonia Chandra from Hall and Wilcox Lawyers to represent BlueScope.

Background

[4] In 2015, BlueScope announced that it would stop producing steel at its Port Kembla Steelworks unless savings of $200million could be identified and implemented. Vice President Hatcher, assisted the parties by way of a series of mediation conferences and the release of a binding Recommendation 1 on 6 October 2015. The BlueScope Steel Port Kembla Steelworks Agreement 20152 (the Agreement) was endorsed by the employees following this mediation process which included the following clause;

“35.2 Introduction of Change Including outsourcing

35.2.1 Principles concerning the management of change

The parties agree to the following key principles concerning the management of change:

(a) The parties recognise and accept that change is an inevitable and
increasingly necessary part of the steel industry.

(b) Change must be ongoing to ensure that the Company remain viable and employee expectation concerning security of employment can be satisfied.

(c) In considering the desirability and business case for any proposed change tests to be applied are requirements for the change to be:
● safe;
● efficient;
● legal; and
● fair

(d) The parties will use their best endeavours to enable early consultation, and to facilitate the timely and efficient implementation of change, where it satisfies the test above.

(e) The parties commit to consult and abide by the dispute settling procedures provided in this Agreement in the event that proposed changes are not agreed. In support of this commitment there will be both detailed communication and strong reinforcement by the Company and Unions in respect of these procedures. Subject to any disagreement being dealt with in accordance with agreed procedures. and in the case of significant change 35.2.3, the change will be able to be implemented.

(f) All parties share an intent that there be "zero industrial action" and to that end will actively ensure that employees, delegates and officials will, on each and every occasion where a dispute arises and is not resolved, follow the applicable dispute settling procedure and not take industrial action.

35.2.2 Processes for introduction of Change

(a) Where changes are "significant in nature", as defined in this subclause, they shall be the subject to the processes set out in 35.2.3.

(b) Changes which are not "significant in nature" shall be introduced in
accordance with the principles set out in subclause 35.2.1 and the provisions of the Agreement. Disputes in relation to such changes shall be dealt with in accordance with Clause 35.1 Procedure for Resolving
Claims, Issues and Disputes.

(c) A change is "significant in nature" for the purposes of this clause if the change will have substantial effects on:

(i) the composition, operation or size of the workforce in a section
or department of the operations of the Company;

(ii) the skills required of employees;

(iii) the opportunities for promotions of employees;

(iv) the security of employment of employees;

(v) the hours of work of employees;

(vi) the location of work of employees;

(vii) shift pattern changes; and

(viii) outsourcing of work (meaning the engagement on a permanent basis of another organisation to perform work which has previously been performed by employees of the Company. In this respect outsourcing differs from the use of contractors to meet intermittent work load requirements or to provide specialist skills on a short tern or as needs basis).

(d) Where a change is otherwise provided for in this Agreement it will not be regarded as significant in nature for the purposes of this clause.

35.2.3 Processes for introducing change which is significant in nature and for resolving associated issues and disputes

(a) The provisions of this subclause set out the terms and order of the
procedure which shall govern the introduction and management of change which is significant in nature.

(b) A change will be determined to be significant where it meets the definition as set out in clause 35.2.2(c).

(c) Where a problem is identified that is likely to lead to a significant change, line management will communicate the dimensions of the problem to the relevant employees.

(d) A work team will be created to investigate the problem and to seek
solutions using problem solving techniques.

(e) The work teams will include representatives nominated by the relevant employees. The provisions of clause 35.2.3(i) will also operate for the purposes of this sub-clause.

(f) Taking into account the contribution of the work teams, if line management intends to develop an idea regarding significant change,
notification will be made in writing to employees and their union ("Letter1 "). This will outline the broad objectives of the change and the possible effects that the change is likely to have on employees, to enable further Consultation.

(g) The Company is not under any obligation to disclose commercially
sensitive information at any stage. The Company may proceed directly to Consultation in the event that the problem involves commercially sensitive information.

(h) Consultation is the process through which employees contribute to
problem-solving and decision making. It provides for employee and union input before Company management finally decides on action affecting its employees.

(i) Employees and their unions will be provided with the opportunity to
comment and input into the proposed change. This will not limit any party from proposing alternative ideas that may result in the objectives of the business being achieved.

(j) The consultation process must be fair, comprehensive and genuine.

(k) Following consideration of all aspects of the change, including consultation with employees, the Company will advise employees and the relevant unions in writing (letter 2) as to whether or not the Company will proceed with the introduction of the change. The advice will include:

(i) confirmation on the introduction of the change (as finally
determined) and the nature of that change;

(ii) the date of the introduction of the change;

(iii) the impact the change will have on employees; and

(iv) what steps are to be put in place to manage the impact that the changes will have on employees.

(l) A decision by employees or the unions not to participate in such
discussions brings to an end the consultation process.

(m) Where agreement is reached as to a change, the change may be
implemented immediately and the parties are to promptly record the terms of the agreement in writing.

(n) Where there is disagreement as to the change to be implemented, a party to the consultation process must give written notice to the other parties that it disputes the implementation of the change and must follow the Procedure for Resolving Disputes as per clause 35.1.7.

(o) Where a matter is referred to FWC as part of the disputes procedure, FWC shall make such procedural directions for the conciliation, and, if
necessary, arbitration of the matter as may be necessary to ensure that, so far is as practicable, the matter is determined within a period of 35
business days (Monday to Friday) from the date of the issue of Letter 2. The parties shall ensure strict compliance with such directions.

(p) Once a matter is referred to FWC, implementation of the change will not be implemented by the Company until either:

(i) The resolution of the FWC proceedings m accordance with
clause 35.1.7; or

(ii) A period of 35 business days has elapsed from the issuing of
Letter 2 (unless either party has sought and been granted by
FWC an interim order to reduce or extend this period); whichever occurs first.

(q) Notwithstanding clause 35.2.3(p), a union may apply to FWC for an
interim order restraining the implementation of the change. Such an interim order will be made only if FWC is satisfied that:

(i) The matter cannot be determined within the period of 35
business days from the date of the issue of Letter 2;

(ii) There is an arguable case that the change is not safe, legal,
efficient and fair; and

(iii) The balance of convenience favours the grant of the interim
order.

(r) An interim order restraining the final implementation of the change may also be made by the FWC if the parties agree or FWC considers that a trial of the change should take place before the matter is arbitrated.

(s) For workplace change, (including the number or composition of
employees engaged on any task), the consultation process may provide for the change to be introduced on a trial basis by agreement. There should be discussion between the parties as to how the trial arrangements should be implemented. An appropriate monitoring system will be established to ensure that the proposed changes are safe, efficient, legal and fair. The period of the trial will be determined in advance, with a return to the status quo in the event that it is shown that the trial fails the safe, efficient, legal and fair test.

(t) Definition:

For the purposes of clause 35.2, the term Workplace Change does not
include:
Matters that involve the requirement for employees to work in accordance with the reasonable direction of the Company; normal day to day operations and work within the employee's recognised skills, competence, training and safe working practices.

Company decisions regarding significant capital investment, business
growth etc. In these circumstance the Company is to provide the information in writing to employees and their unions as referred to in points (i) to (iv) of clause 35.2.3(k).

35.2.4 Nature of Consultation

Consultation involves:

(a) All parties being prepared to put forward considered views in respect of desired improvements and alternatives as to how such improvements could be achieved;

(b) An opportunity being given to all affected parties to fully understand the nature and impact of those views before any final decision on implementation of changes is made by the Company;

(c) Fair consideration being given to the issues and concerns raised by the parties before any final decision on implementation of change is made.”

[5] In mid July 2016, Ms Sam Gerovasilis (Slabmaking Manager) made a presentation to all employees of the Department. This presentation has become known as a “state of the nation” presentation and laid out of the future direction of the Department.

[6] Work teams were established in the Steel Treatment Department to discuss the proposed changes and to ascertain if there were any ideas or propositions for cost savings emanating from the employees. These work team discussions involved the production operators and the AWU. No employees from the Shift Maintenance Department or their unions were invited to these meetings. BlueScope advised the Steel Treatment work team of its desire to introduce the Trade Operator Model and Staff Operators in Slabmaking.

[7] In late July 2016, Mr Kerr conducted meetings with the shift maintenance crews and advised them that BlueScope planned to introduce the Trade Operator Model (TOM) into the Steel Treatment Department and that the Fair Work Commission (FWC), as presently constituted, had previously approved the implementation of the TOM in the Plate Mill, Hot Strip Mill and Hot Coil Processing and Despatch Department of BlueScope. Mr Kerr produced a slide containing selected extracts from the decision in AWU, CEPU & AMWU v BlueScope Steel (AIS) Port Kembla. 3

[8] In mid-October 2016, Mr Kerr again met with the maintenance crews. Mr Kerr reiterated that BlueScope intended to implement the TOM into the Steel Treatment Department and repeated his assertion that the FWC had previously approved its implementation.

[9] BlueScope continued to meet with the Operator work team on a regular basis (13 meetings in total). BlueScope held firm to its position on the need to implement the TOM and introduce staff operators.

[10] The FWC, as presently constituted, convened a Conference on 16 November 2016 in an attempt to conciliate the dispute following a notification by the AWU. The AMWU participated in this conference and raised its concerns about the introduction of the TOM and the lack of consultation with the maintenance employees.

Submissions

[11] The AMWU raised a relevant threshold issue in relation to the lack of consultation with maintenance employees. The AMWU argued that the introduction of the TOM was a “significant change” as defined by clause 35.2.2(c) of the Agreement. As a result, the consultation provisions contained in clause 35.2.3 of the Agreement must be followed.

[12] In The Australian Workers’ Union v BlueScope Steel Limited 4, Vice President Hatcher, made the following comments in relation to these provisions;

“[57] In a number of respects, clause 35.2.3 of the 2015 Agreement strongly indicates that it was not intended that proposals for significant change could be implemented without the prior consultation processes required by the clause having been engaged in. Firstly, the clause is, in general, detailed and prescriptive as to the processes for consultation required such as to make it unlikely to have been intended that BlueScope could simply bypass those processes and still be permitted to introduce any significant change which it proposed. Secondly, clause 35.2.3(a) specifically provides that the procedures set out in clause 35.2.3 “govern the introduction and management of change which is significant in nature” (underlining added). The use of the word “govern”, which read in its context bears its ordinary meaning of “control” or “regulate”, indicates that compliance with the consultation processes in the clause was intended to condition the introduction of significant change. Thirdly, the provisions which permit agreed changes to be implemented immediately (clause 35.2.3(m)) and prohibit the implementation of disputed changes for a defined period, subject to the making of a further restraining order by the Commission (clause 35.2.3(p)) could only have a useful operation if significant changes could not be introduced other than by following the prescribed consultation processes in the provision. The equivalent provisions of clause 35.2.3 of the 2012 Agreement would dictate that the same conclusion applies to it.

[58] However I consider what is required (under both the 2015 Agreement and the 2012 Agreement) is substantial compliance, not strict compliance, in that the information sharing and consultation required by the clause must in substance occur before any final decision is made to introduce the proposed significant changes. For example, the “Letter 1” referred to in clause 35.2.3(f) of the 2015 Agreement is required to “outline the broad objectives of the change and the possible effects that the change is likely to have on employees, to enable further Consultation”. The substantive purpose of the requirement is to provide affected employees with relevant information in writing so as to permit meaningful consultation to occur. Provided that the relevant information is provided, it does not seem to me that it was intended that the subsequent implementation of a proposed change can be regarded as not “legal” because, even though there was meaningful consultation, the information was not contained in a single document, or the document containing the information was not described as being the Letter 1 for the purposes of clause 35.2.3(f). An overly technical approach would defeat the intention of clause 35.2 overall to “facilitate the timely and efficient implementation of change” (clause 35.2.1(d)) without adding anything of substance to the benefits of consultation conferred by the clause.

[59] For these reasons I will approach the matter on the basis that a proposed significant change will not be “legal” if there has not been substantial compliance with the consultation processes of clause 35.2.3 of the applicable agreement.”

(my emphasis).

[13] It is not in dispute that the maintenance employees and their Unions have not been consulted in accordance with clause 35.2.3 of the Agreement. No work team was established in the Shift Maintenance Department to enable consultation to occur between BlueScope and their maintenance employees. Letter 1 was not sent to any maintenance employee or their respective unions (the AMWU or the CEPU) to advise them of BlueScope’s intention to develop the idea of the TOM 5 in the Slabmaking Department.

[14] As a result, maintenance employees and their Unions’ were not given an opportunity to comment or provide input into the proposed change. 6

[15] Letter 2 was not sent to the maintenance employees, the AMWU or the CEPU. 7

[16] BlueScope submitted that the introduction of the TOM does not result in a significant change for maintenance employees;

“50 The changes proposed in relation to the Trades Workers are not changes that are significant in nature. They do not have a substantial effect on the Trades Workers because the changes do not:

(a) change the composition, operation or size of the workforce. The Shift Maintenance Department’s composition, operation or size is not being changed;

(b) have a substantial effect on the skills required of the employees. The Company’s evidence is that Trades Workers already have the skills required;

(c) have a substantial effect on the promotions of employees as no employee is being promoted;

(d) have a substantial effect on the security of employment. No Trades Workers will lose their job and the changes do not impact security of their employment;

(e) have a substantial effect on the hours of work. The Trades Workers’ hours of work do not change;

(f) have a substantial effect on the employees location of work. The Trades Workers go to all locations in the Slabmaking business;

(g) have a substantial effect on shift pattern changes. The changes do not change the shift pattern; and

(h) have a substantial effect on outsourcing of work. The changes do not include outsourcing.” 8

[17] BlueScope argued that they have complied with the requirements of clause 35.2.3 of the Agreement. All employees in the Slabmaking Business had been informed of its Survive – Strive – Thrive Plan. Also, when BlueScope issued Letter 1 to the Operators, BlueScope advised the maintenance employees that the Company was developing the idea of introducing the TOM.

[18] Further, BlueScope posited that they have consulted with its maintenance employees in accordance with clause 35.2.4 of the Agreement.

[19] BlueScope argued that the AMWU’s opposition to the TOM is purely philosophical and not reflective of the views of their members. BlueScope highlighted that no maintenance employee had been called to give direct evidence in this matter.

[20] The AMWU advised that the maintenance tradespersons are being asked to perform level 3 Operator tasks for 20% of their hours of work, that these tasks do not form part of their current work and form no part of the manufacturing qualification package.

[21] The AMWU also raised the issue of staff operators and identified that there is very little detail known about the introduction of this classification.

[22] The AMWU highlighted the decision of the FWC, as presently constituted, in AWU, CEPU & AMWU v BlueScope 9. The AMWU noted that, in that matter, BlueScope submitted that the introduction of the TOM was a significant change. The AMWU argued that BlueScope’s submissions on this issue in relation to Slabmaking are disingenuous and unsustainable.

Consideration

[23] I have taken into account all of the submissions and evidence that have been provided by the parties. The fact that every issue has not been mentioned in this decision does not mean that I have not taken it into account in reaching my decision.

[24] I have taken into account that the parties reconfirmed their recognition and acceptance that change is an inevitable and increasingly necessary part of the steel industry by maintaining this clause in the 2015 Agreement. 10

[25] I have taken into account the decision of the FWC, as presently constituted, in AWU, CEPU & AMWU v BlueScope [2015] FWC 6512. This decision has become known as the Trade Operator Decision.

[26] I have taken into account that BlueScope submitted that the introduction of the TOM in those departments was a significant change and consulted all unions in accordance with section 35.2.3 of the Agreement.

[27] I have taken into account that Mr Kerr agreed that his summary of the Trade Operator Decision that he provided to maintenance employees provided a restricted view of that Decision. 11

[28] I have taken into account that BlueScope have argued that the introduction of the TOM is not a significant change when one looks at the defining provisions of Clause 35.2.2(c) of the Agreement.

[29] I have taken into account that the AMWU, the CEPU nor any maintenance employees were invited to participate in any work team consultation process.

[30] I have taken into account clause 35.2.3(t) of the Agreement which defines what “workplace change” does not include, namely;

“Matters that involve the requirement for employees to work in accordance with the reasonable direction of the Company; normal day to day operations and work within the employee’s recognised skills, competence, training and safe working practices.”

[31] I have taken into account that maintenance employees will be required to perform a variety of level 3 Operator tasks for at least 20% of their hours of work.

[32] I have taken into account that the CEPU has never been invited to a meeting to discuss the introduction of the TOM at the Slabmaking Department.

[33] I note the comments of Vice President Hatcher in his Recommendation 12 as part of the BlueScope Mediation in 2015;

“[7] An associated question which has arisen in relation to a number of the proposals

concern whether particular work functions are best carried out by staff members, or by

operators or tradespersons under either of the Agreements. The answer to this question may necessarily affect who is made redundant under particular proposals. The underlying issue here is the strict demarcation which has long existed in the Bluescope workforce between staff and operators/tradespersons. Supervisory and advanced operational functions exist as the preserve of staff, and all other operations and trades-related tasks are the preserve of operators and tradespersons. Both Bluescope and the unions appear to accept that employees in one group cannot do the work of the other.

[8] In my view this demarcation inhibits workplace flexibility and operational efficiency. It means, for example, that staff team leaders generally cannot assist with operational or trades tasks in peak periods where they have the capacity to do so. It means that staff relief team leader positions are usually required to cover for team leaders who are on leave, rather than having appropriately qualified operators acting up in the position of team leaders. It also generally prevents the introduction of self-managed teams in appropriate circumstances, such as where the relevant team is of relatively small size.

[9] In the medium term, and obviously contingent upon the survival of the Steelworks in the short term, I would recommend that Bluescope and the unions undertake a review of this demarcation with the objective of removing or at least ameliorating it. However I accept that this would be a significant and complex change which would have to be dealt with in a coordinated way across the Steelworks, and that the current timeframe does not allow it to be dealt with as part of this process. For that reason, to the extent that any proposals involve piecemeal changes to the existing structure in individual departments and are disputed, it will not be possible to prefer such proposals at this time.”

[34] I also note that these site wide discussions have not yet occurred.

Conclusion

[35] I do not accept the submission that the introduction of the TOM into the Slabmaking Department is not a significant change. There is no argument that maintenance employees will have to be trained in a variety of level 3 Operator tasks, including the interesting requirement for maintenance electricians to use a jackhammer. Requiring maintenance employees to learn and utilize these new skills for at least 20% of their hours of work creates a substantial change to the skills of a tradesperson working in the Slabmaking Department.

[36] Further, this change will substantially alter the composition and operation of the Slabmaking Department. Tradespersons performing tasks which are not incidental and peripheral to their existing roles and not within their existing skill set, competence or training is a significant change 13. Tradespersons from the Shift Maintenance Department performing operator tasks alongside Operators from the Steel Treatment Department during peak workloads of the Steel Treatment Department, changes the composition of the Operator work crew and the way that the Slabmaking Department will operate. This change will also change the way that the Shift Maintenance Department operates.

[37] I find that it is disingenuous of BlueScope to make a contrary submission to the one that it made in the earlier Trade Operator Case. Such a submission lacks credibility. It is simply not plausible for the introduction of the TOM to be a significant change in the Plate Mill but not be a significant change in the Slabmaking Department.

[38] I reject the argument that the AMWU’s objection to the TOM is nothing more than philosophical. From my experience, employees join unions to represent their industrial interests. On occasions, members of unions wish to remain anonymous and use their representatives to argue and pursue their claims and respective positions. This is not uncommon when an employer is undertaking continuous change and forced redundancies are possible in the near future. I am aware from previous matters before the FWC of at least 3 employees whom have been declared surplus to requirements after appearing in the FWC against a BlueScope restructuring proposal. Whilst I draw no negative inference as a result of these employees being declared surplus, it is not surprising that current employees may be circumspect and apprehensive in relation to giving evidence.

[39] I find that BlueScope’s requirement for maintenance employees from the Shift Maintenance Department to learn new skills, in order to perform 20% of their on-going role as Operators in the Steel Treatment Department is a substantial and significant change. As such, the maintenance employees and their unions were entitled to be consulted in accordance with clause 35.2.3 of the Agreement. It is not in dispute that this did not occur. In this regard I concur with the cited decision above of Vice President Hatcher;

“[59] For these reasons I will approach the matter on the basis that a proposed significant change will not be “legal” if there has not been substantial compliance with the consultation processes of clause 35.2.3 of the applicable agreement.” 14

[40] As a result, BlueScope’s proposal to introduce the TOM into the Slab Making Department has failed to satisfy the threshold question raised by the AMWU. It is therefore not necessary for me to deal with the remaining criteria of whether the proposal was safe, efficient, legal or fair.

[41] It is also unnecessary for me to make any determination in relation to the introduction of the Staff Operator proposition. However, I would encourage the parties to discuss the implementation of this proposition in accordance with the Recommendation of Vice President Hatcher.

[42] For the reasons stated above, BlueScope has not complied with the introduction of change processes contained in clause 35.2.3 of the Agreement. The consultation process for the maintenance employees was not fair, comprehensive or genuine. Maintenance employees and their unions were entitled to participate in the work team process, to enable them to voice their concerns or support for the proposal. This did not occur. As a result, it will be necessary for BlueScope to recommence consultation in relation to this proposal.

COMMISSIONER

 1   [2015] FWC 6871

 2   [2015] FWCA 7954

 3   [2015] FWC 6512

 4   [2016] FWC 3848

 5   Clause 35.2.3(f) of the BlueScope Steel Port Kembla Steelworks Agreement 2015

 6   Clause 35.2.3(i) of the BlueScope Steel Port Kembla Steelworks Agreement 2015

 7   Clause 35.2.3(k) of the BlueScope Steel Port Kembla Steelworks Agreement 2015

 8   Respondents Updated Outline of Submissions dated 22 December 2016

 9   [2015] FWC 6512

 10   Clause 35.2.1(a) of the BlueScope Steel Port Kembla Steelworks Agreement 2015

 11   PN539 Transcript 22 December 2016

 12   [2015] FWC 6871

 13   Clause 35.2.3(t) of the BlueScope Steel Port Kembla Steelworks Agreement 2015

 14   [2016] FWC 3848 at [59]

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