“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers' Union (AMWU) v Paper Australia Pty Ltd T/A Australian Paper

[2016] FWC 9050

[2016] FWC 9050 [Note: An appeal pursuant to s.604 (C2017/291) was lodged against this decision - refer to Full Bench decision dated 12 April 2017 [[2017] FWCFB 1621] for result of appeal.]

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)
v
Paper Australia Pty Ltd T/A Australian Paper
(C2016/5747)

Timber and paper products industry
COMMISSIONER RYAN	MELBOURNE, 30 DECEMBER 2016

Alleged dispute regarding redundancies of boilermakers.

[1] On 23 September 2016 the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) filed an application pursuant to s.739 of the Fair Work Act 2009 (the Act) for the Commission to deal with a dispute in accordance with clause 33 – Grievance and Dispute Settlement Procedure of the Australian Paper (Enterprise) Agreement, 2016-2019 Maryvale Mill Mechanical Maintenance and Engineering Store (the Agreement).

[2] The issue in dispute was described by the AMWU in its application as follows:

“The issue in dispute

4. The Agreement, cl 39, specifies the manning levels for the Work.

5. Since early September 2016, the respondent has engaged in consultation pursuant to the Agreement, cll 35, 39 and 41, aimed at reducing by 3 the complement of boilermakers doing the Work.

6. The applicant contends that it is not operationally feasible to make any such reduction.

7. The respondent now proposes to call for expressions of interest by boilermakers for redundancy.

8. The applicant contends that such a move would be a contravention of the Agreement, cl 39.”

[3] The dispute was subject to conciliation by the Commission but without success. The Comission then arbitrated the dispute.

[4] The central issue in the arbitration was whether clause 39.2 operated to prevent Australian Paper from reducing the number of boilermakers at the Maryvale Mill or whether the exceptions in clause 39.2 existed which allowed Australian Paper to reduce the number of boilermakers at the Maryvale Mill.

[5] The matter in dispute also required consideration of clauses 35 and 41 of the Agreement. The relevant provisions of the Agreement clauses are 35.1 to 35.3, 39 and41.1, as follows:

35. CONSULTATION ABOUT CHANGE

35.1 Purpose of Consultation

Consultation means discussion of an issue(s) between the Company, Employees, their representatives and Union(s) with the intent of providing the employees, representatives and Union(s) with a bona-fide opportunity to influence the Company to make a better informed decision in their final assessment.

35.2 Where the Company has identified a significant workplace change the Company will:

35.2.1 Prior to the implementation of significant workplace change, provide notification about the change to all potentially affected employees.

35.2.2 Consult with employees and their representatives to discuss the nature, extent and rationale of the significant change at the earliest opportunity.

35.2.3 Seek suggestions from employees and/or their representatives on the proposed changes to evaluate all alternatives and make better informed decisions.

35.2.4 After such consultation the Company will implement changes it deems necessary.

35.3 For the purpose of this clause, the following examples could be considered significant workplace change:

35.3.1 Reorganisation of the workforce

35.3.2 Reorganisation of workshops

35.3.3 An increase or reduction of manning numbers

35.3.4 Closure of a section of plant or equipment

35.3.5 The addition of major plant or equipment

39. SECURITY OF EMPLOYMENT

39.1 Protection of Entitlements -the Company agrees to continue to provide for all employee entitlements and to provide employees with a Company briefing on a six monthly basis

39.2 The Company gives a commitment that no employees will be retrenched for the term of this Agreement unless, during the period of operation of this Agreement, should any major operating unit cease production, or a reduction in the number of operating shifts result in reduced output, or any other significant change then manning numbers will be reviewed by the parties to the agreement. This review will also take place when operating units are increased; the outcome of this review will not affect the timing or outcome of any wage increases

39.3 At the commencement of and during this agreement, manning levels will be:

Mechanical 98

Engineering Store 6

The above manning levels indicate the full time permanent employees and for clarity do not include limited term employees or casuals. The consultation clause must be utilised when making any change to the above manning levels.

39.4 This clause does not prevent the Company taking disciplinary action according to this agreement in instances of individual misconduct or failure to perform the duties specified.

41. REDUNDANCY

41.1 Redundancy Process

41.1.1 In the event of the closure of equipment or a process which results in a change to the Maintenance workload across the Mill, the following procedure will apply:

a) The principle of employing Australian Paper tradesmen in the first instance for regular work.

b) If however, a review of the requirements of Maintenance work results in a reduction in the need for Australian Paper employee(s) in a particular area, where practicable and at the Company's discretion employee(s) will be transferred to alternate part(s) of the plant pending natural attrition.

c) If there are still excess personnel, then voluntary redundancies will be offered to the directly impacted employee(s).

d) If a directly impacted employee(s) wishes to remain in the Company's employment, the Company will seek voluntary redundancy applicant(s) from wider parts of the Mill.

e) In reference to sub clauses c) and d) above, if there are more volunteers than required, the Company will assess volunteers and either approve or reject their application in the overall interests of the business. Approval will not be unreasonably withheld.

f) In the event that there are no volunteers, then the required number of employee(s) shall be made involuntarily redundant.

[6] Clauses very similar to clauses 35 and 41 are usually found in enterprise agreements (clause 35 meets the requirements of s.205 of the Act). However, clauses such as clause 39 are seldom seen in enterprise agreements. The premise of clause 39 is to prevent Australian Paper from reducing the manning levels of Mechanical employees or Stores employees unless certain specific conditions are met.

[7] For ease of understanding clause 39.2 the Commission has broken the clause into its component parts as follows:

39.2 The Company gives a commitment that no employees will be retrenched for the term of this Agreement unless,
during the period of operation of this Agreement,
should any major operating unit cease production, or
a reduction in the number of operating shifts result in reduced output, or
any other significant change
then manning numbers will be reviewed by the parties to the agreement.
This review will also take place when operating units are increased;
the outcome of this review will not affect the timing or outcome of any wage increases.

Set out this way it becomes clear that there is a general commitment to no retrenchments but that this commitment can be avoided if, during a specific time period, at least one of three possible events occurs. If any one of the three events does occur within the specific time period, then the parties will review the manning levels. As is also clear from the set out of clause 39.2 the clause does not provide for any specific action to occur after the review. Once the review had been completed any further action taken by the parties would have to rely on other provisions of the Agreement such as clauses 35 and 41.

[8] In the present matter the dispute was narrowed by a concession from Australian Paper that it did not seek to rely on the first two of the three trigger events. 1 Australian Paper specifically contended, and led evidence to support its contention, that an “other significant change” had occurred or was occurring within the specified time period and that this operated to set aside the commitment given at the beginning of clause 39.2. The specific “other significant change” was referred to as the Boilermaker Reorganisation which flowed from the Boilermaker Review.

Background to the Dispute

[9] As is always the case, disputes at the workplace never exist in a vacuum but rather exist within a specific context. The Maryvale Mill has been running at a loss in recent years and has been kept running through the financial support of its Japanese owners. Australian Paper had made clear to employees and their bargaining representatives during bargaining for the Agreement (and for the mirror enterprise agreement for the electrical and plumbing employees) that Australian Paper needed to significantly reduce the cost of maintenance labour. The amount of required savings identified by Australian Paper was $3,000,000.00. 2 The Agreement, which was approved by the Commission on 24 March 2016, represented an agreement by the mechanical maintenance and stores employees to a fundamental change in the working hours’ arrangements for those employees. The previous enterprise agreement provided for a 35 hour week for the employees. The current Agreement changed that to a 38 hour week but with employees being paid the weekly rate as for a 35 hour week. Effectively Australian Paper obtained 3 extra hours of work from the employees without having to pay any extra in wages. The Agreement also provided that the first wage increase would only commence on 1 July 2017 thus effectively giving Australian Paper further savings as the last wage increase for the employees employed under the terms of the Agreement had been 1 May 2014. The same changes were replicated in the enterprise agreement for the electrical and plumbing employees. The agreement of employees to work 38 hours for 35 hours pay and the pay freeze delivered to Australian Paper most, but not all, of the $3M reduction in maintenance costs that were being sought by Australian Paper.

[10] During the discussions leading to the making of the Agreement a number of matters were under active consideration by the parties which might lead to cost savings. As the evidence in this matter shows, the Boilermaker Review commenced during the bargaining period and was one of the cost reduction matters considered during the bargaining process.

[11] Once the unions and Australian Paper came to an in principle agreement over the concept of 38 hours’ work for 35 hours’ pay, the text of the current Agreement was quickly settled and put to a vote of employees. Most of the text of the Agreement reflects the wording of the previous enterprise agreement. As the evidence of Mr Farr and Mr Beales show, clause 39 was retained in the same form as it appeared in the previous agreement even though at the time of making the Agreement the numbers referred to in clause 39.3 were not accurate and did not reflect what the unions, employees and Australian Paper understood to be the agreed manning levels. As the evidence of Mr Farr and Mr Beales show, the unions had little or no appetite to agree to other changes to the terms of the previous enterprise agreement given the size and significance of the change to hours of work agreed to by the unions and the employees and that retention of security of employment was important to the unions and to the employees..

[12] Immediately after the Agreement had been approved by the Commission a significant dispute arose between the unions and employees on one side and Australian Paper on the other in relation to the implementation of the 38 hours’ work for 35 hours pay. That dispute could not be resolved through conciliation and was determined by the Commission through arbitration. 3

The Boilermaker Review

[13] Detailed evidence about the Boilermaker Review was given by witnesses for Australian Paper. There is no challenge from the AMWU that the Boilermaker Review occurred, as it was conceded that AMWU members and delegates were actively involved in discussions with Australian Paper’s management and consultants over the review of the utilisation of boilermakers at the Maryvale Mill.

[14] The details of the Boilermakers Review and its place in the broader exercise undertaken at the Maryvale Mill to reduce maintenance costs was explained through the evidence of Mr Paul Mcloughlin, Senior Management Consultant at KM&T and of
Mr Stephen Price, Central Engineering Manager at the Maryvale Mill and of Mr Rod Beales, HR Manager – Australian Paper Manufacturing. Relevantly Mr Mcloughlin said:

“20. The Boilermakers Review commenced in September 2015 and concluded in or around August 2016. The Boilermakers Review was conducted primarily by me, with the assistance of Stephen Price, Central Engineering Manager.

21. Following the completion of the Boilermakers Review, Matthew Magat, a Business Analyst at KM&T, put together a document which summarised the findings of the Boilermakers Review and the proposed efficiencies and improvements that could be made within the Boilermakers Department. Annexed hereto and marked PM-1 is a copy of this document, which is titled the 'Boilermakers Improvement Plan'.

22. Before explaining the Boilermakers Improvement Plan, I will provide some background detail to the Boilermakers Workshop and its operations and the terminology used within the Boilermakers Workshop.

Work within the Boilermakers Workshop

23. All maintenance work that is required to be performed at the Maryvale Mill first originates as a request and then as a work order.

24. Work orders are captured electronically in a computerised maintenance management system known at Australian Paper as PBS4. PBS4 essentially controls and captures all the work orders and associated information for the maintenance jobs that need to be completed.

28. Any work that the Boilermakers perform in the Boilermakers Workshop, as opposed to on the 'site floor' is referred to as fabrication work. Fabrication works could include making brackets to hold pipes, making bins or welding panels together.

Boilermakers Review and Boilermakers Improvement Plan

Work Order Status

30. The first part of the Boilermakers Review required determining whether the amount of work completed by the Boilermakers had declined or stayed stable. This involved analysing work orders from 2012 - 2015. In summary, we found a 23% decrease in the amount of completed work orders going through the Boilermakers Workshop between 2012 -2015.

Labour Analysis

32. The next area we focused on in the Boilermakers Review was labour. In particular, we were looking to assess whether the structure of the Boilermakers Department was right given the amount of work that goes through the Department.

33. The analysis found that in 2015, the Boilermakers Department completed more work than the man hours available for only two months of the year, being May and October (i.e when Australian Paper conducted its shuts). For eight months of the year, Australian Paper had more labour available in the Boilermakers Department than it effectively required.

Cost Analysis

34. We then conducted a cost analysis which involved looking at expenditure within the Boilermakers Department.

36. The key issues resulting from our analysis were that:

(a) the utilisation of resources had reduced by 19% from 2012 – 2015 yet during 2015, we still had more available labour hours than work hours completed;
(b) 54% of total costs within the Boilermakers Department were attributable to labour; and
(c) there were significant costs associated with Australian Paper's engagement of an external Superintendent to oversee the Boilermakers Department.

37. Once we had conducted the above analysis, we focussed attention on various ways that we could look to reorganise the structure and reduce fixed costs within the Boilermakers Department.

Internal improvement

38. First, we looked at ways to reduce costs without fully outsourcing the boilermakers function.

The options canvassed included:

(a) replacing the external Superintendent with a Superintendent to be employed by Australian Paper; and
(b) implementing better planning and scheduling of works to be performed to effect a reduction in overtime by at least 8%.

39. On our modelling, these options would have provided a saving of approximately $104,000 per annum.

40. A further option we considered was the outsourcing of certain fabrication work.

41. Our analysis during the Boilermakers Review, determined that (non-urgent) fabrication work made up approximately 15% of the maintenance works performed by the Boilermakers Department. This figure is the equivalent of approximately 2,400 to 2,800 hours of work per year. Or, put another way, the equivalent of 1.75 to 2 FTE per year.

42. Implementing the above options, we then simulated a new labour model comprising seven FTE Trade Roles, two apprentices, a Team Leader and a Superintendent employed by Australian Paper (AP New Model). Our modelling suggested the AP New Model would result in fixed cost savings of approximately $200,000 per annum.

…

Boilermakers Reorganisation

47. We discussed the findings of the Boilermakers Review and the various options to reorganise the Boilermakers Department with Rod Beales, Human Resources Manager – AP Manufacturing, Adrian Berton, Maryvale Mill Manager, Peter Williams, Chief Operating Officer and Executives from NPI.

48. The recommended reorganisation of the Boilermakers Department that was put to the business as a result of the Boilermakers Review was essentially the New AP Model as follows.

(a) The Boilermaker Workshop would remain under the control of Australian Paper.

(b) The external contractor Superintendent would be replaced with a Superintendent employed by Australian Paper.

(c) The FTE Trade Role headcount within the Boilermakers Department would be reduced by a total of three. Accordingly, this meant we would:

(i) not seek to replace a boilermaker (i.e Mr Leatham) who had been seconded to a Planner role in the Centralised Planning and Scheduling Department as the labour and work order analysis showed that the Boilermakers Department was able to function without this additional manpower; and

(ii) proceed with outsourcing certain fabrication work orders (an estimated 2,820 hours or the equivalent of 1.75 - 2 FTE Trade Roles per year) and call for an expression of interest for voluntary redundancies,

(Boilermakers Reorganisation)
…
52. In my view the Boilermakers Reorganisation is a significant change. The proposal to prepackage appropriate fabrication works and outsource the work delivers a reorganisation to the Boilermakers Department from a resource perspective and moves what has predominantly been work completed within the Maryvale Mill to a service provider offsite who may not currently be associated with the Maryvale Mill.”

Relevant Authorities

[15] Both parties agree that the Full Bench decision in AMIEU v Golden Cockerel P/L 4 sets out the proper approach to the interpretation of enterprise agreements. In that decision the Full bench identified a number of principles to be applied by the Commission when interpreting enterprise agreements:

“[41] From the foregoing, the following principles may be distilled:

1. The AI Act does not apply to the construction of an enterprise agreement made under the Act.

2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.

3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

5. If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.

6. Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include:

(a) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;

(b) notorious facts of which knowledge is to be presumed;

(c) evidence of matters in common contemplation and constituting a common assumption.

7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.

8. Context might appear from:

(a) the text of the agreement viewed as a whole;

(b) the disputed provision’s place and arrangement in the agreement;

(c) the legislative context under which the agreement was made and in which it operates.

9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement.

10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.”

[16] Clause 39 of the Agreement has previously been the subject of consideration by the Commission. In AMWU and others v Australian Paper, 5 Lacy SDP considered the proper operation of clause 39 (which in the 2006-2009 agreement was numbered as clause 38) in circumstances where the number of mechanical employees had fallen below the number specified in clause 39.3. The operation of clause 39.2 was not considered by Lacy SDP as it was not relevant to the dispute before him. The issue before Lacy SDP was described by him as follows:

“[10] It is common ground that clause 38 of the agreements obliges the company to maintain the prescribed manning levels at the commencement of and during the life of the agreements. The real issue is how the company is to fulfil its obligations where manning levels fall below the prescribed level because of retirement, resignation, termination of employment or promotion. Clause 38 is silent on the issue. How then is clause 38 intended to operate?”

Lacy SDP went on to consider the purpose of clause 38:

“[12] …The company contended that that the purpose of clause 38 is to ensure that workload is managed at agreed levels through the direct employment of employees. It accepted that maintenance of the manning levels was its obligation, notwithstanding that it was not the company’s action or initiative that brought about the reduction in the prescribed manning levels.

[13] ….I am inclined to the view posited by the company that the purpose is to ensure that workload is managed at agreed levels through direct employment. That is a purpose that is harmonious with the terms of clause 38 read as a whole and in the context of the agreements generally.”

The AMWU Case

[17] The essence of the AMWU case is that none of the three exceptions referred to in clause 39.2 has occurred. The AMWU relied on the evidence of Mr Warne, an AMWU shop steward at the Maryvale Mill, who said:

“13. Since about early September 2016, the company has engaged with the Mill’s boilermakers and shop stewards about reducing the number of boilermakers on site. Currently, there are 11 full time boilermakers working at the Mill and the company has proposed a reduction of 3, so the number would go to 8. However, there is currently a boilermaker doing planning work, so if he is included, the numbers are 12 to 9.

14. As part of the company’s consultation process a question and answer session was held in September. On 16 September 2016, the company emailed to me and others a written account of the question and answer session…..

15. The boilermakers on site consider the company’s proposal to be ill-conceived. They have told me that they are already overloaded and a reduction of 3 boilermakers will put excessive strain on the 7 who remain. …..

16. The Agreement at cl 39.2 sets out circumstances where the prescribed manning numbers can be altered. Below I name the circumstances and give my knowledge as to whether such circumstance has occurred:

(a) Major operating unit ceasing production – this has not occurred.

(b) A reduction in the number of operating shifts resulting in reduced output – this has not occurred.

(c) Any other significant change – there has not been anything happen recently that amounts to a significant change.

17. The union has said to the company that it cannot see any merit in a reduction in boiler-making numbers and we also contend that the company would be in breach of cl 39 if it pressed ahead with boilermaker redundancies. Despite this, the company persists in its plans to reduce boilermaker numbers: …..”

The Australian Paper Case

[18] Australian Paper’s case has two key elements to it. Firstly, Australian Paper contends that the Boilermakers Reorganisation, which is described at paras 47 and 48 of the witness statement of Mr Mcloughlin (see [14] above), constitutes a significant change for the purpose of the third exception in clause 39.2. Secondly, Australian Paper contends that having regard to the operation of clauses 35, 39 and 41, the Boilermakers Reorganisation would be a “significant workplace change” for the purpose of clause 35.3 and would be a process which enlivened clause 41. Australian Paper contends that if the Boilermakers Reorganisation is a significant workplace change for the purpose of clause 35.3 then it would also be a significant change for the purpose of clause 39.2.

Consideration

[19] The detailed submission of Australian Paper that the Boilermakers Reorganisation was a significant change for the purpose of clause 39.2 was put in their written Respondent’s Outline of Submissions as follows:

“Respondent's position - the Boilermakers Reorganisation is a "significant change"

14. The Respondent submits that on a plain reading, the Boilermakers Reorganisation is a "significant change" for the purposes of clause 39.2. The proposed retrenchments which are a consequence of the Boilermakers Reorganisation are therefore not retrenchments which would fall foul of clause 39.2.

15. The term "significant change" is not defined in the Agreement, so the term should be given their ordinary meaning.

16. "Significant" means "sufficiently great or important to be worthy of attention; noteworthy; consequential, influential, or in a weakened sense, noticeable, substantial, considerable, large".

17. To "change" is "[t]o make (a thing) other than it was; to render different, alter, modify, or transmute".7

18. The Respondent's evidence demonstrates that:

(a) the Boilermakers Reorganisation has come about due to a decrease in the amount of work completed within the Boilermakers Department by almost 25% between 2012 and 2015 inclusive; and

(b) outsourcing suitable fabrication works is likely to lead to a reduction in the workload of the Boilermakers Department by at least 15%.

19. In the Respondent's submission, the decrease in work completed within the Boilermakers Department is "significant" on an ordinary meaning, as is the "change" to be brought about by the outsourcing of suitable fabrication works.”

[20] It is clear from the submissions of Australian Paper and from the evidence it led that it relies on its evidence that there has been a decrease in the amount of work completed within the Boilermakers Department by almost 25% between 2012 and 2015 inclusive. The Commission asked the parties to address the issue as to whether clause 39.2 required that the significant change occur after the commencement of the Agreement.

[21] In its oral submissions, Australian Paper contended as follows:

“PN426. Now returning, Commissioner, to your question about the temporal element, does this significant change need to occur after the agreement commences? In my respectful submission, Commissioner, I'd say that we need not make any finding, the Commission need not make a finding on this because the boilermakers' review will clearly occur after the enterprise agreement has come into operation.  That is not to say however, in my submission, that things that occurred prior to the enterprise agreement can't be taken into account in the decision.  Businesses don't exist in a vacuum and business decisions can enliven clause 39.2.  That's an important point, Commissioner, because in my submission we know that business decisions can enliven 39.2, a decision of Australian Paper because of the other two limbs, if you like, of 39.2, which are an operating unit ceasing production, or a reduction in operating shifts.  Invariably they require a decision of the company, just as here the company is making a decision for the boilermakers' reorganisation, which is a significant change.

PN427. In any case, Commissioner, I would say that the temporal issue is only relevant to part of the boilermakers' reorganisation. The reduction in headcount is in some part because of the reduction in work that Mr McLoughlin has spoken about earlier today, but it is not at all, for example, part of the proposed outsourcing of fabrication works. So the outsourcing of fabrication works is potentially of itself a significant change, a significant change that would occur during the life of the agreement, and again, would already have occurred if we did not find ourselves here in a dispute pursuant to section 739.

[22] The contention of Australian Paper that the almost 25% decrease in the amount of work completed in the Boilermakers Department between 2012 and 2015 can be used to establish the existence of significant change for the purpose of clause 39.2 is simply not consistent with the plain language of clause 39.2. Clause 39.2 specifically requires that one or more of the three exceptions must occur “during the period of operation of this Agreement”. The decrease in the workload of the Boilermakers Department by almost 25% between 2012 and 2015 is not a change that has occurred “during the period of operation of this Agreement”. The change that Australian Paper intends to introduce during the life of the Agreement is the outsourcing of fabrication work currently performed by boilermakers and Australian Paper contends that this will likely lead to at least a 15% reduction in the work of boilermakers. However as a result of the total reduction in the workload of the Boilermakers Department by about 40% Australian Paper intends to reduce the manning level in the Boilermakers Department by three and consequently retrenching 2 boilermakers.

[23] The contention of Australian Paper that the outsourcing of fabrication works is a significant change and of itself would be sufficient to trigger one of the exceptions in clause 39.2 appears to be inconsistent with the purpose of clause 39.

[24] The observation of Lacy SDP in 2008 as to the purpose of clause 39 still has merit. There appears to be no reason why the purpose of clause 39 is anything other than “to ensure that workload is managed at agreed levels through direct employment.” If this is so then it would appear that the concept of “other significant change” must be something other than a decision by Australian Paper to take work currently performed by boilermakers away from them.

[25] It is important to keep going back to the Full Bench decision in Golden Cockerel and principles 7 and 8:

“7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.

8. Context might appear from:

(a) the text of the agreement viewed as a whole;

(b) the disputed provision’s place and arrangement in the agreement;

(c) the legislative context under which the agreement was made and in which it operates.”

[26] Recourse to the dictionary definitions of “significant” and “change” diverts attention away from the purpose and context of clause 39.2.

[27] In the present matter it is relevant to look at the context in which the phrase “any other significant change” is used in clause 39.2. It is one of the three specific exceptions which when in existence permits Australian Paper to avoid the commitment not to retrench maintenance employees. The first two mentioned exceptions are very specific and are matters which would have a real and substantial impact on production employees as well as maintenance employees. The use in the third exception of the word “other” suggests that the nature of the significant change should have a similar impact on Australian Paper and its production and maintenance employees. The context in which clause 39.2 operates to severely limit management decision making in relation to retrenching maintenance employees strongly suggests that, like the first and second exceptions which enable Australian Paper to avoid its commitment not to retrench maintenance employees, the third trigger must also operate as a significant hurdle. Having regard to this context it would appear that the intention of Australian Paper to take some existing work away from the boilermakers and give it to an external provider is simply not a significant change for the purpose of clause 39.2.

[28] The second contention of Australian Paper was expressed in its Respondent’s Outline of Submissions as follows:

“23. Here, the context is that clause 39 of the Agreement is only but one of the provisions of the Agreement dealing with manning and/or the circumstances where the Respondent can make reductions to manning numbers. Such matters are also dealt with in clauses 35 and 41 of the Agreement.

Clause 35

24. Clause 35 of the Agreement imposes obligations on the Respondent to consult in circumstances where a "significant workplace change" has been identified.9

25. Pursuant to clause 35.3, "significant workplace change" for the purposes of clause 35 relevantly includes a:

(a) reorganisation of the workforce;
(b) reorganisation of the workshops; and/or
(c) an increase or reduction of manning numbers."

26. The Respondent can implement the 'significant workplace change' once the consultation process has been complied with.10 The agreement of affected employees is not required. The evidence of Rod Beales, Human Resources Manager – AP Manufacturing, will show that the custom and practice on the site to effect the reduction of manning numbers is to do so pursuant to a business case supporting the reduction.

27. "Significant change", as used in clause 39.2, is a term of broader compass than "significant workplace change", as is used in clause 35. It includes more than just the examples set out in clause 35.3 as "significant change" extends to changes that are external to the workplace, such as the loss of a major client contract leading to reductions in production levels.

28. In any event, there is no need for the Commission to be satisfied that "significant change" is a term broader than "significant workplace change". All the Commission need be satisfied of is that "significant change" encompasses at least everything that is "significant workplace change".

29. As a reorganisation of a workshop is an example of "significant workplace change", it follows that a reorganisation such as the Boilermakers Reorganisation is also a "significant change" for the purposes of clause 39.2 of the Agreement.

Clause 41

30. The process which the Respondent must follow in circumstances of a position being identified as redundant is set out in clause 41 of the Agreement. In the first instance voluntary redundancy must be offered. The Respondent may then make 'involuntary redundancies' (ie retrenchments) where there are no volunteers.11

31. This redundancy process is enlivened "[i]n the event of the closure of equipment or a process which results in a change to the Maintenance workload across the Mill".

32. A change in process which results in a change to the workload of the maintenance employees covered by the Agreement must constitute a "significant change" for the purposes of clause 39.2 of the Agreement.

33. A construction to the contrary would inhibit the capacity of clauses 41 and 39.2 to coexist in a manner which entitles the Respondent to make involuntary redundancies, which it is clearly intended to be able to do under the terms of the Agreement.12 A construction which gives efficacy to both clauses 41 and 39.2 of the Agreement should be preferred.13

34. Part of the Boilermakers Reorganisation involves the outsourcing of fabrications works. Such works are currently performed by Maintenance Employees covered by the Agreement. This is a process that will reduce the workload for Maintenance Employees. It is therefore a process which enlivens clause 41.

35. In the Respondent's submission, that the Boilermakers Reorganisation involves a process which enlivens clause 41 is relevant to the assessment of whether the Boilermakers Reorganisation is a "significant change" for the purposes of clause 39.2.

36. From an analysis of clauses 35, 39 and 41 combined, the following principles can be adduced:

(a) Retrenchments can be made in circumstances of "significant change".
(b) In order to enforce reductions in manning numbers, the Respondent must comply with its consultation obligations under the Agreement.
(c) Absent clause 39.2, or clause 39.2 being enlivened, the Boilermakers Reorganisation would provide a justification for involuntary redundancy under clause 41 due to it involving a process which results in a change to the workload of maintenance employees.
(d) A reorganisation of a workshop is a "significant workplace change" for the purposes of clause 35 of the Agreement.
(e) If "significant change" for the purposes of clause 39.2 encompasses everything that is a "significant workplace change", it follows that the Boilermakers Reorganisation is a "significant change" of the sort which enlivens the Respondent's capacity to make retrenchments.

[29] Australian Paper in its oral submissions added to this argument. It further contended in relation to clauses 35 and 39 and the respective terms “significant workplace change” and “other significant change” that:

“PN444. MR MOONEY: In my submission, Commissioner, they are different but they are different in that significant change is a broader concept and I think the similarity between the terminology should be given priority, if you like, over what the purpose of the wording is in that relevant clause.

PN450. MR MOONEY:…... What we are looking to do in using – we are seeking to find some meaning for "significant change" in the context of the agreement as a whole, and the context is that we have a very, very similar term that is used and that examples of that term are provided.  So it is completely consistent with statutory interpretation principles that we consider what the agreement itself in other provisions guides us to in relation to the manner in which "significant change" should be interpreted. And in my submission "significant change" must be a broader concept than "significant workplace change" because the insertion of the word, "workplace" can only operate to narrow what is a significant change. It can have no other purpose. It could not go the other way, in my submission, Commissioner. A significant workplace change could not be a broader concept than significant change. Significant change must be everything that is significant, workplace change and more, but need not be more, need only be the same for the purposes of this case because the example in 35.3.2 has the effect that the boilermakers' reorganisation is a significant workplace change.”

[30] The contention of Australian Paper that “the similarity between the terminology should be given priority, if you like, over what the purpose of the wording is in that relevant clause” is a contention that runs counter to the clear statement in Golden Cockerel at principle 7 that “the resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose”.

[31] In the present matter the purpose of each of clause 35 and clause 39 must be considered. Clause 35, which meets the requirement of s.205 of the Act, is intended to provide a specific benefit to employees by requiring Australian Paper to consult with the employees about major workplace changes that are likely to have a significant effect on the employees. Clause 35.3 does not attempt to give an exhaustive definition of the term “significant workplace change” but rather gives examples of matters which would be “significant workplace change”. The term “significant workplace change” in clause 35 should be given as wide a meaning as the words used could have, provided that it is not ‘a construction that is unreasonable or unnatural”. 6 As clause 35 is a beneficial term conferring a benefit on employees it should be interpreted broadly. Clause 39 is also a beneficial term for employees in that it operates to significantly limit the ability of Australian Paper to retrench employees or even to allow natural attrition to reduce manning levels. The use of the term “other significant change” is intended to operate as an exception to the rule that no employees will be retrenched for the term of the Agreement. Clause 39.2 is clearly trying to provide a balance between the competing interests of employees and Australian paper. It is consistent with the rules of statutory interpretation to interpret an exception to a beneficial provision so as to limit the exception in order to preserve the scope of the benefit whilst at the same time not destroying the balance intended by the clause.7

[32] Having regard to the purpose of each of clause 35 and 39 it is appropriate to give an expansive meaning to the term “significant workplace change” in clause 35 whilst giving a less expansive meaning to the term “other significant change” in clause 39.2. Whilst the terms are clearly similar they each have a different meaning and that meaning must have regard to the context in which each of those terms is used and the purpose intended by those terms and by the clauses in which they appear.

[33] The proposal by Australian Paper to reorganize the work of boilermakers by taking away some of their existing work and outsourcing that work is most certainly a workplace change which would trigger consultation under clause 35 but at the same time it is not an “other significant change” which would enable Australian Paper to avoid the commitment not to retrench any boilermakers during the term of the Agreement.

[34] Australian Paper also raised the interrelationship between clause 39 and clause 41. The specific contention of Australian Paper that:

“39.2 and 41.1 need to be read in the context of each other, which is that clearly there is an acknowledgement here that the respondent does have the capacity to involuntarily retrench employees provided that 39.2 is enlivened” 8

is undoubtedly correct, but in the present matter is somewhat an irrelevant observation. The critical issue is whether the exceptions in clause 39.2 exist so as to permit Australian Paper to avoid the commitment not to retrench any employees during the term of the Agreement.

[35] The Commission is satisfied and so finds that there has not been an “other significant change” within the meaning of that term in clause 39.2 which would permit Australian Paper to avoid the commitment not to retrench any of the boilermakers. Equally given that there has not been any “other significant change” within the meaning of that term in clause 39.2 then, consistent with the decision of Lacy SDP in 2008 Australian Paper is required to maintain the manning levels as at the commencement of the Agreement.

A Final Observation

[36] I make an observation for the benefit of the parties. Whilst I cannot see the employees agreeing to remove or significantly amend clause 39.2 of the Agreement, the security of employment provided by clause 39.2 may be illusory if the very operation of clause 39.2 leads to Australian Paper carrying manning levels which are unsustainable and which impact on the financial viability of the Maryvale Mill. Equally, the very presence of clause 39.2 and 39.3 almost invite Australian Paper to devote resources to creating the necessary circumstances which would satisfy one of the exceptions in clause 39.2 so as to enable Australian Paper to avoid the commitment given in clause 39.2. Clause 39 can be varied at any time during the life of the Agreement but only if Australian Paper, the unions and the employees agree. The focus of everyone’s attention at the Maryvale Mill should be on genuine job security through maintaining a viable operation at the Maryvale Mill. This may best be achieved if the parties talk to each other rather than at each other. The parties have proven that they have the maturity and capacity to engage in meaningful dialogue around complex issues and the Commission fervently hopes that the parties continue to do so. The Agreement provides more than enough mechanisms to assist the parties to progress such dialogue, including by involving members of the Commission in any process.

COMMISSIONER

Appearances:

Mr B. Terzic for “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)

Mr C. Mooney for Paper Australia Pty Ltd

Hearing details:

2016.

Melbourne:

December 15

 1   Respondent’s outline of submissions at para 9.

 2   Exhibit R1 at 20 and Exhibit R2 at 32 and 34.

 3   [2016] FWC 4661.

 4   [2014] FWCFB 7447.

 5   [2008] AIRC 1167.

 6   IW Applicant v The City of Perth (1997) 191 CLR 1 at 11 as cited in Statutory Interpretation in Australia, 7th ed. Pearce and Geddes at 291.

 7   Statutory Interpretation in Australia, 7^th ed. Pearce and Geddes at 295.

 8   Transcript at PN509.

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