BlueScope Steel Limited v The Australian Workers' Union

[2013] FWC 1557

[2013] FWC 1557

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.240 - Application to deal with a bargaining dispute

BlueScope Steel (AIS) Pty Ltd; BlueScope Steel Limited
v
The Australian Workers' Union; "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU); Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia; Construction, Forestry, Mining and Energy Union
(B2012/2125)

COMMISSIONER BULL SYDNEY, 31 MAY 2013

Application to deal with a bargaining dispute - arbitration on outstanding issues - nominal expiry date of agreements - operative date of second and third wage increases.

[1] This matter concerns an application by BlueScope Steel (AIS) Pty Ltd and BlueScope Steel Limited (BlueScope) pursuant to s.240 of the Fair Work Act 2009 (the Act).

[2] The application seeks the assistance of the Fair Work Commission (the Commission) to resolve a bargaining dispute that has arisen in the context of negotiation for two proposed new enterprise agreements (the Agreements).

[3] BlueScope have been negotiating with the Australian Workers' Union (AWU); the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers' Union (AMWU); the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) and the Construction, Forestry, Mining and Energy Union (CFMEU) − (the Unions).

[4] During the enterprise agreement negotiations the Unions adopted a common log of claims.

[5] The parties have consented to have the Commission arbitrate the following two issues to finally resolve all matters for the making of two new Agreements:

• The nominal expiry date of the new Agreements 1; and

• The operative date of the agreed, second and third wage increases in the new Agreements.

[6] The Agreements provide for three wage increases during the life of the Agreements. The quantum of these increases is agreed between the parties. The operative date of the first wage increase of 23 October 2012 is also agreed, being the date on which the parties reached an “in-principle” agreement.

[7] BlueScope submits that the Agreements should have a nominal expiry date of 23 October 2015. This date being three years from when the “in-principle” agreement was reached. The second and third wage increases are to be payable on the second and third anniversary of the first wage increase being 23 October 2013 and 23 October 2014.

[8] The Unions’ claim is that the Agreements should have a nominal expiry date of 27 February 2015. This date being three years from the nominal expiry date of the existing agreements. The agreed second and third wage increases should operate from 27 February 2013 and 27 February 2014 respectively.

[9] The matter was listed for mention and directions on 21 December 2012, following which directions were issued to the parties. In accordance with these directions the parties have provided background information, outlines of submissions and a number of witness statements to the Commission.

[10] The matter was listed for hearing on 1 March 2013, and closing submissions were heard on 12 March 2013, in Sydney.

[11] It is submitted, that following the arbitration of the outstanding matters, the parties will have fully resolved all matters concerning the new Agreements and an application will be made to the Commission for the Agreements to be approved. 2

Background

[12] BlueScope Steel Limited and BlueScope Steel (AIS) Pty Ltd are related bodies corporate. BlueScope Steel Limited is a publicly listed company on the Australian Security Exchange. BlueScope Steel (AIS) Pty Ltd is a 100% owned subsidiary of BlueScope Steel Limited. For the purposes of this decision both companies will be referred to as the Applicants or BlueScope.

[13] BlueScope Steel (AIS) Pty Ltd operates the Port Kembla Steelworks and its employees are employed under four separate industrial instruments. The nominal expiry date of all these instruments is said to be 27 February 2012. 3 The four industrial instruments are:

• BlueScope Steel (AIS) Pty Ltd - Port Kembla Steelworks Employees Award 2006 (the Steelworks Award);
• BlueScope Steel Welded Products Enterprise Agreement 2006;
• BlueScope Steel (AIS) Pty Ltd - Logistics “One Workforce” Enterprise Agreement 2008; and
• BlueScope Steel (AIS) Pty Ltd - Port Kembla - Bulk Operations Enterprise Agreement 2005.

[14] The last three agreements listed above reflect the core terms and conditions from the Steelworks Award.

[15] BlueScope Steel Limited operates the Springhill Works at Port Kembla and its employees are engaged under the following industrial instrument, the nominal term of which is also 27 February 2012:

• BlueScope Steel Limited - Springhill and CRM Employees Award 2006 (the Springhill Award).

(Note: the Steelworks Award and the Springhill Award became Preserved Collective State Agreements under the Workplace Relations Amendment (Work Choices) Act 2005 and remained as such under the Fair Work Act 2009.)

[16] The BlueScope employees are engaged as steel production workers and tradespersons at the Port Kembla Steelworks and Springhill Works. The majority of the 1,600 employees are production employees eligible to be members of the AWU. There are approximately 360 trades employees and a small number of refractory brick layers.

[17] The parties have been in the process of negotiating two new enterprise agreements that will replace all of the above mentioned instruments. One of the new enterprise agreements will cover the employees of BlueScope Steel (AIS) Pty Ltd and the other will cover the employees of BlueScope Steel Limited at the Springhill Works at Port Kembla.

[18] The negotiations for the two new enterprise Agreements commenced on 3 February 2012, following notices of representational rights which were given to employees on 19 January 2012, by BlueScope.

BlueScope’s Case

[19] Mr Brotherson, solicitor on behalf of BlueScope advised the Commission that the position of the Applicant’s was:

• The two proposed Agreements should have a nominal expiry date of 23 October 2015;
• The second wage increase should be payable on the first pay period on or after 23 October 2013; and
• The third wage increase should be payable on the first pay period on or after 23 October 2014.

[20] The basis for this position is that the 23 October 2012, is the date that an “in-principle” agreement was reached with the Respondent Unions on the terms of the two replacement Agreements excluding the two outstanding items.

[21] This is in contrast to the Unions’ position that the new agreements should have a nominal expiry date of 27 February 2015, being three years from the date of nominal expiry of the previous agreements with the second and third wage increases operating from 27 February 2013 and 27 February 2014 respectively.

[22] As the new enterprise Agreements are still not finally agreed with an “in-principle” agreement only, and with protected industrial action occurring after this date, BlueScope submits that its position of three years from 23 October 2012 is “generous” 4.

[23] Further, notwithstanding the purported “in-principal” agreement, a number of issues were outstanding and/or were raised by the Unions following 23 October 2012. These issues included the raising of a superannuation claim which was not withdrawn until 12 December 2012, and the ongoing pursuit of the graded trades issue which was not withdrawn until 19 December 2012.

[24] More relevantly, BlueScope submit that it was not until 19 October 2012, that the Unions made a specific claim that the three year period of the new enterprise agreements should commence from the expiry date of the previous agreement, that is, 27 February 2012. This was immediately rejected by BlueScope when raised.

Enterprise Bargaining

[25] On 19 January 2012, BlueScope sent a notice to the Unions advising of their intent to commence bargaining and forwarded a notice of representational rights to employees as per s.173 of the Act.

[26] Pursuant to s.176(1)(b) of the Act the Unions are default bargaining representatives.

[27] Negotiations commenced on 3 February 2012, and the AWU, AMWU and CEPU forwarded a log of claims containing 30 matters, one of which referred to the Agreements being three years in length.

[28] BlueScope state that negotiations have involved numerous discussions and correspondence between the parties and 20 formal meetings. BlueScope submit that on the initiative of the Unions, the enterprise agreement negotiations were put on hold for a three month period between March 2012 and June 2012. Negotiations recommenced on 25 June 2012, with the Unions proposing amongst other things:

• Agreements to expire on 30 June 2013;
• 3% wage increase from 1 July 2012; and
• A $600 payment to all employees.

[29] The BlueScope response was provided on 29 June 2013, which included:

• Three year terms from the date of final approval by employees; and
• A total wage increase of 8% comprised of 3%, 2.5% and 2.5% each anniversary from date of final approval by the employees.

[30] This offer was rejected by the Unions.

[31] In support of their claims, members of the AWU, AMWU and CEPU commenced to take protected industrial action from 9 August 2012. On 13 August 2012, BlueScope were provided with a document titled Combined Unions EBA. However no reference was made to the date of operation of the Agreements.

[32] On 16 August 2012, BlueScope provided the Unions with another written offer of settlement and repeated their position previously put on 29 June 2012, being that the Agreements operate for a three year period from final date of approval by employees with the same wage increases and added the words “This means there will be no back pay.”

[33] On 19 October 2012, BlueScope state that for the first time during the negotiations the Unions argued that the Agreements should expire in March 2015, being three years since the nominal expiry of the existing agreements as opposed to three years from the date of final agreement on the replacement Agreements. This claim was rejected by BlueScope.

[34] BlueScope submit that following a mass meeting of employees held on 23 October 2012, the Unions reported back that there was an “in-principle” agreement subject to the Agreements having a nominal expiry date of March 2015, and the second and third wage increases being operative from March 2013 and March 2014 respectively. Further, that the agreed wage increases be increased to reflect the consumer price index (CPI) should this figure be greater than nominated wage increases. This resolution was not acceptable to BlueScope.

[35] BlueScope in an attempt to finally resolve the operative date impasse, decided to amend their offer by agreeing to pay the first wage increase from 23 October 2012, being the date of the “in-principle” agreement and the two further wage increases 12 months and 24 months from this date, in effect withdrawing from their position that the wage increase can only take effect from the date of final approval by employees. This proposition was not acceptable to the Unions.

[36] On 6 November 2012, the Unions issued notices of further protected industrial action commencing. Following a conference before the Commission, the Commission’s recommendation that protected industrial action cease by midday 12 November 2012, was complied with, limiting the industrial action to four hours.

[37] BlueScope submit that on 12 November 2012, despite the “in-principle” agreement, the Unions raised additional claims and in particular, claims relating to employer superannuation contributions and graded trades classifications. A further conference was held before the Commission on 12 December 2012, where the superannuation claim was agreed not to be pursued.

[38] On 18 December 2012, the Unions advised that the graded trades issue would also not be pursued. This left the nominal expiry date of the Agreements and the timing of the wage increases as the only outstanding issues.

[39] The outcome sought by BlueScope is based on a number of propositions:

• The Unions adjourned the enterprise agreement negotiations of their own volition for a period three months from late March 2012.

• During the enterprise negotiations the Unions introduced new claims, resurrected old claims and other than members of the CFMEU, undertook extensive protected industrial action.

• It was not until 18 December 2012, that agreement was reached to allow the Commission to arbitrate the outstanding issues.

Financial Position

[40] BlueScope’s financial position was relied upon in arguing for its preferred outcome as it would result in a lower cost to BlueScope than acceptance of the Unions’ position.

[41] In addition to the global financial crisis of 2008-09, BlueScope argued that further unfavourable economic conditions have impacted on the profitability of their operations. In the 2011 financial year, BlueScope reported a net loss after tax of $1.054 billion which resulted in a restructure of their Australian operations.

[42] The 2011 restructure saw approximately 1,000 employees let go including approximately 800 from the Port Kembla operations. This followed the closure of a number of significant pieces of operating infrastructure including a blast furnace, coke making battery and hot strip mill.

[43] In the 2012 financial year a net loss after tax of $1.044 billion was recorded. A high Australian dollar, increased raw material costs combined with low steel prices and low demand continue to put financial pressure on its operations.

[44] BlueScope did however report to the market in February 2013 that there had been improvement from the substantial losses of the past two years, albeit a loss was still incurred. 5

[45] BlueScope submitted that the average earnings of employees at Port Kembla in the 2012 financial year including shift penalties, overtime and earnings from the lump sum payment scheme was approximately $100,200 per annum. 6

[46] It was submitted that it is essential to the future viability of BlueScope’s operations that a period of three years from the date of the “in-principle” agreement is allowed before the Agreements reach their nominal expiry date.

[47] It is put that the Unions’ claim would expose BlueScope to further wage increases and protected industrial action sooner than their proposed outcome which provides three years of certainty as opposed to just over two with the Unions claim, with protected industrial action having occurred as late as November 2012.

[48] Since 3 August 2012, the Unions have served over 500 notices of intention to take protected industrial action. Not all protected industrial action notified was undertaken. In total there were around 320 occasions where protected industrial action was undertaken. The protected industrial action was said to be substantial and caused considerable disruption.

[49] In essence, BlueScope submit that the conduct of the Unions should not be rewarded with retrospective operation of the Agreements. This would result in the term of the Agreements including a period where substantial industrial action was taken which caused disruption to the operations of BlueScope.

[50] BlueScope argue that the history of agreement making between the parties does not establish that new agreements and awards always operate from the previous nominal expiry dates. 7 The comments of the High Court regarding custom and practice in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986)8 at p236 in citing with approval comments in Nelson v Dahl (1879)9 are relied upon to demonstrate that no such custom and practice can be implied.10

[51] BlueScope state that the elimination of a time gap between the nominal expiration of one agreement and the commencement of its replacement has historically only occurred where agreement negotiations have been concluded before the nominal expiry date of the previous agreement and there has been no industrial action during the negotiations. 11 Neither of these two preconditions exists in this round of negotiations.

[52] It is submitted that a nominal expiry date of 23 October 2012, is generous in that the final Agreements have not yet been approved and that substantial protected industrial action was taken up until 11 October 2012, with a further four hour stoppage on 12 November 2012, well after the “in-principle” agreement date of 23 October 2012.

[53] Also relied on is the history of wage movements for BlueScope employees in comparison with average annualised wage increases for enterprise agreements in metals manufacturing and CPI increases in arguing that their offer is fair and reasonable.

[54] BlueScope submit that at all times they have maintained that the nominal expiry date of the new enterprise Agreements should be three years from the date the final agreements are approved by employees.

Applicants’ evidence

[55] The following persons were called to give evidence on behalf of BlueScope:

• Ms Peta Renkin - General Manager People; and
• Mr David Bell - Manager Iron Making.

[56] A written statement by Mr Lawrence McDonald, Manager Finance Commercial, was also tendered as evidence.

[57] Ms Renkin is employed by BlueScope Steel Limited as the General Manager People Australia and New Zealand. During the enterprise negotiations Ms Renkin was the Manager of Human Resources Manufacturing, for the Port Kembla operations.

[58] Ms Renkin’s evidence was that BlueScope started to plan for the negotiations in December 2011 12 and initiated the enterprise negotiations by issuing a notice of representational rights to all employees on 19 January 2012. Formal negotiations with the Unions commenced on 3 February 2012.

[59] A combined unions’ log of claims was received on 16 February 2012, on behalf of the AWU, AMWU and CEPU. Following a number of enterprise negotiation meetings, a log of claims was also received from the CFMEU which reflected the claims made by the other three unions plus some additional claims. The enterprise agreement negotiations continued throughout March 2012.

[60] Ms Renkin stated that at a meeting on 2 March 2012, there was some discussion about the Agreements being three years in length with the Unions saying that if the wage offer was “lousy” they would argue for a shorter term.

[61] On 28 March 2012, Ms Renkin had a telephone conversation with Mr Phillips (AWU Branch Secretary) who suggested suspending the enterprise negotiations until July 2012. This was confirmed in a meeting held with Mr Phillips later that day and on 30 March 2012 Ms Renkin received written confirmation from Mr Phillips that the Unions wanted to adjourn the negotiations. Ms Renkin deposed that the request for a suspension in the negotiations was only ever put on the basis that the Unions needed to consider their position and consult with their members.

[62] The enterprise agreement negotiations did not resume again until 25 June 2012, where the Unions proposed:

• A rollover of existing terms and conditions;
• New agreements to expire on 30 June 2013;
• Wage increase of 3% from 1 July 2012; and
• A $600 payment on the approval of the new Agreements.

[63] BlueScope rejected this offer in writing on 29 June 2012, and proposed in respect of the wage increases and term of the Agreements:

“ - 3 year Agreements from the date final Agreements approved by employees;

- Wage increases over 3 years being 3%, 2.5%, 2.5% (effective from the date final Agreements approved by employees (this could be as soon as July 2012 and then on each anniversary of the Agreement).” 13

[64] This offer was rejected and the Unions applied to the Commission for protected action ballot orders.

[65] Ms Renkin stated the issues identified by the Unions as still in dispute did not include the nominal expiry date of the proposed Agreements.

[66] On the 9 August 2012, a campaign of protected industrial action commenced. There were no formal bargaining meetings held between 23 August 2012 and 8 October 2012. 14

[67] On 13 August 2012, Ms Renkin received a further document from the Unions confirming the issues in dispute. As the issues identified did not include the amount of the wage increases, their timing or the nominal expiry date of the Agreements, Ms Renkin took this to mean the BlueScope proposal on these issues was accepted by the Unions.

[68] BlueScope wrote to the Unions and all employees on 16 August 2012, confirming their updated offer.

[69] On the 19 October 2012, at a meeting at which Mr Phillips and Mr Hattenfels (AMWU Official) attended, Ms Renkin stated that Mr Hattenfels raised for the first time that the second and third wage increases should be brought forward to March 2013 and March 2014 respectively and that the Agreements should have a nominal expiry date of March 2015. Mr Hattenfels explained that this would give the “true value” of the wage increases. This claim was rejected by BlueScope.

[70] Following further discussions, a meeting between the parties was held on 23 October 2012. Mr Phillips advised that there was an agreement in-principle, however, the wage increases were to be increased to the CPI levels if it eventuated they were lower than the CPI. Mr Hattenfels raised the issue of the nominal expiry date of the Agreements and the dates for the second and third wage increases. There was no agreement on this aspect, and Ms Renkin stated that in an attempt to resolve the impasse, the offer to pay the first wage increase on final employee approval of the Agreements was amended to pay the increase from 23 October 2012, being the date of the “in-principle” agreement and subsequent wage increases on the anniversary of this date.

[71] Ms Renkin stated that on 2 November 2012, it was put to Mr Phillips, Mr Hattenfels and Mr Thornton (CEPU Official) that despite a proposed nominal expiry date for the Agreements of 23 October 2015, BlueScope would undertake to commence negotiations for a new agreement in March 2015, with the prospect of an incentive payment if an agreement was reached in advance of 23 October 2015. No response was received to this proposal, and on 6 November 2012, 49 notices of further protected industrial action were received from the AWU, AMWU and CEPU.

[72] On 8 November 2012, BlueScope made an application to the Commission to suspend protected industrial action under s.425 (cooling off order) of the Act. At a conference held before the Commission on 9 November 2012, the parties agreed that the remaining matters in dispute would be dealt with by consent arbitration before the Commission, subject to all protected industrial action ceasing and the Unions providing BlueScope with a list of all outstanding matters.

[73] Any notion that BlueScope ever agreed or suggested the new Agreements would have a nominal expiry date of three years from the nominal expiry of the existing agreements was categorically rejected by Ms Renkin.

[74] Ms Renkin deposed that the protected industrial action has caused considerable disruption to the operations of BlueScope particularly in the operating areas of the steelworks.

[75] An attempt by the AWU to take protected industrial action which would have resulted in the dumping of hot metal was the subject of Federal Court proceedings where an interlocutory injunction was granted, preventing the taking of protected industrial action in these circumstances.

[76] Ms Renkin advised that the cost of meeting the Unions’ claim in full would result in an additional expense to BlueScope totalling $6.88 million. 15

[77] Mr David Bell who is employed by BlueScope Steel Limited as the Manager Iron Making was part of the BlueScope negotiating team and also gave evidence and was cross examined.

[78] Mr Lawrence McDonald, Manager Finance Commercial for BlueScope Steel Limited provided a witness statement addressing BlueScope’s financial position and the need for the 2011 restructure. Mr Lawrence was not cross examined.

Unions’ Case

[79] The AWU and the AMWU on behalf of the Unions made submissions and called witnesses to support their position. I have considered their submissions jointly below. The CEPU and CFMEU adopted and supported the submissions of the AWU and AMWU.

[80] The position of the Unions put at the hearing was as follows:

• The new Agreements should have nominal a expiry date of 27 February 2015;
• The second wage increase should commence from the first full pay period on or after 27 February 2013; and
• The third wage increase should commence from the first full pay period on or after 27 February 2014.

[81] The Unions submit that the Commission should be guided by the requirements of ss.577 and 578 of the Act which refer to the Commission acting in a manner which is fair and just and taking into account equity, good conscience and the merits of the matter.

[82] The Unions’ case cited the Full Bench decision of Schweppes Australia Pty Ltd v United Voice - Victoria Branch 16 wherein the Full Bench stated in respect of determining a wage increase which remained in dispute:

“[130] ... Determining the level of wage increases in this context does not lend itself to the adoption of a decision rule or a mathematical formula. Fundamentally the Tribunal is seeking to arrive at an outcome which is fair in all the circumstances and that appropriately balances the interests of the parties. The factors in s.275 and ss.557 and 578 of the Act are also relevant and must be taken into account.

...

[133] The bargaining process can be protracted, particularly where a party is advocating significant changes to existing practices. The time taken in bargaining is not necessarily a function of unreasonable behaviour by a particular party. Absent unreasonable behaviour there is no reason in principle why a party should be disadvantaged by the time taken in the bargaining process.”

[83] It was submitted that as the last wage increase under the existing agreements occurred on 27 February 2011, that employees would ordinarily expect a further wage increase 12 months from their last wage increase. It was further submitted that in adopting BlueScope’s operative date for the replacement Agreements employees would be unjustly denied the opportunity of recouping the lost eight months during the life of the Agreements.

[84] The Unions rely on the custom and practice of the parties in previous enterprise agreements in arguing that the nominal expiry date of the new Agreements should be three years from the nominal expiry date of the previous agreements.

[85] While the negotiations have taken a considerable period of time it is submitted that this is not unusual and that the delay should not prejudice the employees. It was submitted that BlueScope benefit from not having to pay the first wage increase until 23 October 2012, some eight months after the nominal expiry date of the existing agreements and therefore fairness dictates that the agreed delay in the first wage increase should not continue to apply to the second and third wage increases.

[86] It was submitted that the protected industrial action undertaken by employees during the negotiations is not a relevant matter for the Commission to consider.

[87] In respect to the hiatus that occurred during the negotiations, the Unions argue that this was initiated by the Unions in an attempt to assist BlueScope and allow it to deal with the business challenges that it was faced with in early 2012.

[88] The Unions put that negotiations are by their nature a fluid exercise where claims are added, amended and withdrawn. Reference was made to Commission authority on this point. 17

[89] Also relied on, is a payment of $600 made to employees at BlueScope’s Western Port operations (subject to separate enterprise agreement negotiations) where a similar delay in negotiations occurred.

[90] The Unions acknowledged the poor financial position of BlueScope but submit that this has already been accounted for in the modest wage increases agreed to for the life of the Agreements.

Unions’ evidence

[91] Mr Wayne Phillips, Branch Secretary of the AWU, gave evidence on behalf of the AWU and Mr Brad Hattenfels, an AMWU Official, gave evidence on behalf of the AMWU.

[92] Mr Phillips stated that the AWU has approximately 1,000 members as employees of BlueScope who work in production. In Mr Phillips’s experience, negotiations for a replacement agreement normally begin at least three months prior to the nominal expiry date of the existing agreement or award. In this instance due to the restructuring of BlueScope’s operations in late 2011, negotiations did not commence until January 2012. During the restructuring exercise the Unions were focussed on retaining as many jobs as possible. BlueScope did not seek to commence negotiations any earlier. Mr Phillips’s evidence was that the Unions’ claims were adjusted to reflect the poor financial position of BlueScope.

[93] Mr Phillips recalled at a meeting held on 17 February 2012, Mr Hattenfels advising BlueScope that the new Agreements should commence from the nominal expiry date of the existing agreements. He stated that BlueScope were constantly raising the difficulties they were experiencing due to the restructure and their decision to exit the export market.

[94] With the background of a large number of employees being made redundant and new structures and processes being introduced, in Mr Phillips’s opinion, this made the early negotiations difficult. He concluded that BlueScope were not focussed on the negotiations. As a consequence he formed the view that a suspension in negotiations would be of benefit to both parties. During this period no protected industrial action would be undertaken by employees. He floated the idea of a suspension in negotiations with representatives from the other unions and received approval to request a suspension of negotiations from BlueScope at a delegates meeting held on 29/30 March 2012.

[95] Mr Phillips says he approached Ms Renkin and Mr Bell, the BlueScope negotiating representatives on or around 29 March 2012, commenting that BlueScope was struggling with the restructure and the uncertainty with customer contracts. He then went on to propose that the parties take a break in the negotiations until the end of the financial year when BlueScope’s commercial issues would be clearer.

[96] On 30 March 2102, Mr Phillips wrote to Ms Renkin in the following terms:

“The combined Steel Industry Unions have decided to adjourn discussions and negotiations for the new EBA.

This adjournment will allow the Unions to consult with their members on the issues that have been raised thus far in these negotiations.

Once we have clearer direction from our members we will resume negotiations with the company.

It is envisaged that discussions should resume in early July 2012.

It is acknowledged by the combined Steel Unions that the FWA Act does not allow for a back pay claim in wages. However if the company wished to make an offer of back pay I’m sure that such an offer would be accepted.

Please contact me if you wish to discuss further.”

[97] Mr Phillips’s understanding was, that while any wage increase would not commence until ultimate approval of the Agreement, he believed that the Agreements would still start in February 2012. 18 Mr Phillips did not believe the offer of a suspension would be used to defer the commencement of the Agreements. Mr Phillips was also aware of the suspension of negotiations at Western Port where a $600 payment was paid as compensation. As a result he made a similar claim on 25 June 2012, which BlueScope rejected on 29 June 2012.

[98] On 23 October 2012, a mass meeting of employees passed a resolution approving “in-principle” the Agreement subject to the CPI caveat and that the second and third wage increases would operate from 27 February 2013 and 27 February 2014.

[99] Mr Hattenfels an AMWU official represented the AMWU members during the enterprise negotiations and gave evidence before the Commission.

[100] Mr Hattenfels evidence was that at a bargaining meeting held on 17 February 2012, when the log of claims was explained to BlueScope, he specifically advised BlueScope that the final Agreement must have a nominal expiry date of 15 February 2015, being three years from the date of the nominal expiry date of the existing agreements.

[101] The Unions’ log of claims included at claim 2:

“Length of Agreement 3 years.”

[102] The BlueScope response received on 24 February 2012, at point 33 states:

“33. Expiry date: We agreed that the new agreement can have an expiry date.” 19

[103] Mr Hattenfels stated that he read the BlueScope response as meaning the Agreements would have an expiry date in February/March 2015. The issue was not raised again until 23 October 2012.

Conclusion

[104] In this matter I have had regard to all the submissions made, including those touching on whether either party has bargained in good faith, community wage movements, the real value of the wage movements and the cost pressures faced by BlueScope.

The legislation

[105] Both parties in support of their positions relied on various sections of the Act. While the Applicant’s in this matter is BlueScope, the matter proceeds by consent and I accept the proposition put forward by BlueScope that no one party bears an onus of proof. Each of the parties views are to be considered on their merits.

[106] Section 240 of the Act which allows the Commission to arbitrate (by consent) outstanding matters in enterprise agreement negotiations is contained in Part 2-4 of the Act and its objects are set out in s.171 in the following terms:

“171 Objects of this Part

The objects of this Part are:

(a) to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and

(b) to enable the FWC to facilitate good faith bargaining and the making of enterprise agreements, including through:

(i) making bargaining orders; and

(ii) dealing with disputes where the bargaining representatives request assistance; and

(iii) ensuring that applications to the FWC for approval of enterprise agreements are dealt with without delay.”

(My emphasis)

[107] The Commission was not advised of any productivity benefits arising from the Agreements or the need to remove any productivity restraints within BlueScope’s operations.

[108] Section 240 of the Act relevantly provides:

“240 Application for the FWC to deal with a bargaining dispute

Bargaining representative may apply for the FWC to deal with a dispute

(1) A bargaining representative for a proposed enterprise agreement may apply to the FWC for the FWC to deal with a dispute about the agreement if the bargaining representatives for the agreement are unable to resolve the dispute.

(2) If the proposed enterprise agreement is:

(a) a single-enterprise agreement; or

(b) a multi-enterprise agreement in relation to which a low-paid authorisation is in operation;

the application may be made by one bargaining representative, whether or not the other bargaining representatives for the agreement have agreed to the making of the application.

(3) If subsection (2) does not apply, a bargaining representative may only make the application if all of the bargaining representatives for the agreement have agreed to the making of the application.

(4) If the bargaining representatives have agreed that the FWC may arbitrate (however described) the dispute, the FWC may do so.”

(My emphasis)

[109] The Applicant is a bargaining representative and the proposed new enterprise Agreements are both single enterprise agreements, thus satisfying the requirements of s.240(2) of the Act.

[110] In resolving the s.240 dispute the Commission is exercising a statutory power, and must have regard to the relevant provisions of the Act under which the consent arbitration is exercised. Section 577 of the Act states:

“577 Performance of functions etc. by the FWC

The FWC must perform its functions and exercise its powers in a manner that:

(a) is fair and just; and

...

(d) promotes harmonious and cooperative workplace relations.”

[111] Section 578 of the Act states that in performing its functions under a part of the Act, FWC must take into account:

“578 Matters the FWC must take into account in performing functions etc.

...

(a) the objects of this Act, and any objects of the part of this Act; and

(b) equity, good conscience and the merits of the matter; and

(c) the need to respect and value the diversity of the work force by helping to prevent and eliminate discrimination on the basis of race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction or social origin.”

[112] Unlike s.275 of the Act, when the Commission is making a workplace determination, there are no stipulated factors that the Commission must take into account other than the very generalised factors referred to above at ss.577 and 578 of the Act. There is no rule or formula that the Commission must apply in the circumstances of a s.240 arbitration.

[113] The task of the Commission in my view is to arrive at a conclusion which would be regarded as appropriate taking into consideration ss.577 and 578 of the Act, which would include arriving at an outcome that may have resulted, had the bargaining concluded successfully. 20

[114] The Unions drew the Commission’s attention to a number of Full Bench decisions where the time between the nominal expiry date of a previous agreement and the operative date of wage increases was a factor to be considered in determining the amount of a wage increase. For example, in Parks Victoria v The Australian Workers’ Union and others 21 the Full Bench stated:

“[161] We are of the view that the time between the nominal expiry date of a previous agreement (in this case 31 May 2011) and the operative date of a workplace determination is a factor to be taken into account in deciding the wage increases to be included in the workplace determination.”

[115] In Schweppes Australia Pty Ltd v United Voice - Victoria Branch 22 a similar view was expressed.

[116] Both these decisions involved the determination of a wage increase as opposed to the nominal expiry of the enterprise agreement following the termination of all protected industrial action in relation to a proposed agreement. In this case, the amount of the wage increases and the date of operation for the first wage increase have been agreed. The above decisions took into account the time spent during bargaining in determining the wage increase. However, neither workplace determination provided for a nominal expiry date linked to the nominal expiry date of the previous agreement. 23

[117] An examination of the Commission’s workplace determinations as highlighted in Annexure A of the BlueScope’s Outline of Submissions 24 shows varying and extensive lapses of time between the operative date of the workplace determination and the nominal expiry date of the previous agreement, although the awarding of retrospective wage increases was not uncommon.

[118] The evidence also indicted that between the period 2000 to 2009 the parties have negotiated or had arbitrated replacement industrial instruments which have not always seamlessly operated from the nominal expiry date of the existing industrial instrument.

[119] BlueScope submit that the benefit to the employer of a nominal expiry date of 23 October 2015 is that it will receive the benefit of three years from 23 October 2012 of certainty of wages and no protected industrial action.

[120] The certainty of no protected industrial action was delivered during the three month suspension of negotiations when the Unions undertook not to take protected industrial action during this period and that the first wage increase would not attract any retrospectivity. Both these commitments have been honoured by the Unions.

[121] The inability of the parties to reach a complete agreement has consequences for both parties. Protected industrial action was taken by employees which has impacted on BlueScope’s operations, and the anticipated timely wage increases for employees has not occurred.

[122] When asked to arbitrate on operative dates of wage increases, there is no principle that the Commission must ensure minimal disturbance to the awarding of synchronised annual wage increases in line with a previous agreement. To a certain extent, this is recognised by the Unions with their agreement that the first wage increase will not commence until 23 October 2012, when the existing agreements nominal expiry date is 27 February 2012.

[123] While the period between the last wage increase on 27 February 2011 and 23 October 2012 is considerable, employees have continued to receive the benefits of the lump sum payment scheme. In 2012, these payments averaged 3.6% and 3.13% of gross earnings at the Port Kembla Steelworks and Springhill Works respectively. 25 These payments are not related to BlueScope’s profitability.26

[124] Having regard to all the circumstances surrounding the negotiations, I am not prepared to truncate the operation of the proposed Agreements on the basis that the Unions believed that agreement had been reached on a nominal expiry date of 27 February 2013.

[125] While it may have been Mr Hattenfels view that the parties had agreed to a nominal expiry date three years from that of the existing agreements, there was no evidence to support this view and in fact the BlueScope documentation provided to the Unions indicates this was not the case. 27

Late commencement of negotiations

[126] The late commencement of the negotiations has contributed to the issues that remain outstanding. The evidence did not make it abundantly clear why negotiations commenced in January 2012 for the replacement of agreements expiring in February 2012. It would appear however, that the restructure and concomitant redundancies in late 2011 were a contributing factor.

[127] On behalf of the Unions it was put by Mr Phillips during his cross examination commencing at paragraph 751 of the transcript:

“What, if any, request did you make to the company prior to that that negotiations for new agreements should start?---I don't know whether there was a formal discussion from me with anybody from the company. I think we sort of generally agreed that we just needed to kick off our EBA. The main restructuring document or the main restructuring thing that we'd had had finished and it was time to get on and get the new award.

So it was an agreed process?---Yes.

And the restructuring you're referring to, that's the Project Eagle that people talk about---?---Yes.

- - - which had been announced back in August of the previous year?---That's correct.”

[128] No party suggested that the late start in negotiations was due to any deliberate delay by either side. However, I would have thought it optimistic that the parties would have finalised replacement Agreements by 27 February 2012, the nominal expiry date of the existing agreements. I note the Western Port enterprise agreement provides that discussions for a replacement agreement are to commence six months prior to the nominal expiry date. 28

Suspension of negotiations

[129] In addition to the late commencement of the enterprise agreement negotiations there was a suspension of negotiations of approximately three months. The background to the basis for the agreed suspension was the subject of some dispute.

[130] Mr Phillips stated that the suspension of negotiations would enable BlueScope’s commercial issues to become clearer by the end of the 2011-2012 financial year. Mr Phillips’s correspondence to BlueScope regarding the suspension of negotiations however makes no reference to BlueScope’s needs, only referring to the Unions having an opportunity to consult their members during the suspension period.

[131] Ms Renkin stated in her evidence that she agreed to a suspension of negotiations to assist Mr Phillips. Commencing at paragraph 210 of the transcript Ms Renkin states in cross examination:

“Did you object to that adjournment?---I did not.

Why didn't you object to it?---I - I thought Mr Phillips - he was, in my view, struggling with everything that was going on, on a number of fronts, I guess - this is just my view - Mr Gillespie had just retired from the AWU, Mr Phillips had just picked everything up. The AWU in Port Kembla was down one organiser. Mr Phillips seemed really, really, really busy. I know he was heavily involved in a Boral matter. He was late to every single meeting by sometimes quite a significant amount. I felt that he needed time to sort things out with the delegates.”

[132] Mr Bell on behalf of BlueScope in his cross examination appeared to hold a different understanding as to the basis for the suspension of the negotiations. In his cross examination commencing at paragraph 603 of the transcript Mr Bell’s evidence is:

“So Mr Phillips approached you on 29 March. Do you recall that?---Yes.

And Mr Phillips said to you that it would be an idea to have an adjournment of the negotiations?---Yes.

Part of the reasoning for the adjournment was that the company was exiting the export markets?---Part of the reason was the company was in trouble, you know, financial difficulty.

And the company would have a better idea of where it was when it posted its financial results in June or July?---Yes.

So you accept that Mr Phillips said those words to you or words to that effect?

---The company, you know, was in financial difficulty, yes.

So the fact that genuine offer, as you understood, was perhaps an olive branch from Mr Phillips to say, "You get your house in order and then we'll come back and see if we can wrap this up"?---I wouldn't go so far as that, no.

But you didn't object to the request for the adjournment?---No, we took it away and responded that we were happy with it.

And why were you happy with it?---It allowed time for things to evolve.

So it was beneficial at that particular time?---Yes.

So it wasn't a bad idea by Mr Phillips, was it?---I wouldn't think so, no.

In fact, I think Mr Phillips said in the discussions that he had with you and Ms Franken, (sic)

I'm concerned about what the company is saying about its financial position". Do you recall that?---I recall him saying that if what we were saying were true.”

[133] On any view it is clear there was no objection taken by BlueScope to the Unions’ proposal to suspend the enterprise agreement negotiations. The above exchange indicates that the suspension of negotiations was of benefit to both parties.

[134] The suspension of negotiations proceeded on the basis as understood by both parties that there would be no back pay claim and during the suspension period no protected industrial action would occur.

[135] Whether by a misunderstanding or otherwise, both parties had different understandings as to what the suspension of the negotiations would mean to the term of the agreement. In my view, it was incumbent on BlueScope to have in addition to making its position clear on no back pay, to have enunciated its understanding that the suspension would also push out the nominal expiry date of the final Agreements, this did not occur.

Determination

[136] BlueScope was a beneficiary of the suspension of negotiations through no protected industrial action occurring during this period.

[137] Having regard to what is fair and just, including the promotion of harmonious and cooperative workplace relations between the parties, it is my view that it would be appropriate to excise the parties agreed suspension period from BlueScope’s proposed nominal expiry date of three years from the date the parties had an “in-principle” agreement.

[138] The enterprise negotiations were suspended from 30 March 2012 until 25 June 2012 being approximately a period of three months. Without the agreed suspension period having been invoked, it is probable that negotiations would have concluded sooner than the date the “in-principle” agreement was reached.

[139] My decision will result in a further cost impost on BlueScope but not to the extent if the Unions’ claim was granted in full. I note that in June 2012, during the negotiations a July 2012 commencement date with two subsequent annual wage increases was contemplated by BlueScope.

[140] In correspondence to the AWU dated 29 June 2012, 29 Ms Renkin states in BlueScope’s accompanying offer:

“Wage increases over 3 years being 3%, 2.5% 2.5% (effective from the date final Agreements approved by employees (this could be as soon as July 2012 and then on each anniversary of the Agreement)”

(My emphasis)

[141] The matters for determination will be resolved by the excision of a three month period from BlueScope’s proposed nominal expiry date of the Agreements with a corresponding three month earlier adjustment to the second and third wage increases in the following manner:

• The nominal expiry date of the new Agreements will be 23 July 2015.
• The operative date of the agreed second and third wage increases in the new Agreements will be 23 July 2013 and 23 July 2014 respectively.

[142] This determination is reflected in the tables below.

Agreed Wage Increase	Unions’ Claim Operative Date:	BlueScope Offer Operative Date:	FWC Decision
3%	23 October 2012	23 October 2012	23 October 2012
2.5%	27 February 2013	23 October 2013	23 July 2013
2.5%	27 February 2014	23 October 2014	23 July 2014

(Note the operative dates are to be read as the first pay period on or after)

Nominal expiry date	Unions’ Claim	BlueScope Offer	FWC Decision
	27 February 2015	23 October 2015	23 July 2015

[143] Consistent with the submissions made to the Commission, the parties are required to give effect to this decision by incorporating the above dates into the draft Agreements and take the necessary steps to obtain employee approval of the Agreements in accordance with the Act prior to lodgement with the Commission for approval.

COMMISSIONER

Appearances:

K Brotherson solicitor for BlueScope

A Neilson solicitor for the AWU

A Walkaden for the AMWU

R De La Cuadra for the CEPU

D Kelly for the CFMEU

Hearing details:

2013.

Sydney:

March 1, 12.

 1   It is a mandatory requirement that enterprise agreements approved by the Commission have a specified nominal expiry date (s.186(5)(a))

 2   Transcript at PN1092

 3   The BlueScope Steel (AIS) Pty Ltd - Port Kembla - Bulk Operations Enterprise Agreement 2005 by AIRC Order PR985475 would appear to have a nominal expiry date of 17 February 2012

 4   Transcript at PN1704 and PN2167

 5   Witness Statement of Lawrence McDonald Exhibit A4 at LM 6

 6   Witness Statement of Peta Renkin Exhibit A1

 7   See history of 2004 awards where a gap between the nominal expiry date of the previous industrial instrument was established following industrial action being taken by the respondent unions

 8 160 CLR 226

 9 12 Ch. D 568

 10   BlueScope Outline of Submissions in Reply at paragraph 16

 11   BlueScope Outline of Submissions at paragraph 105

 12   Transcript at PN124

 13   Witness Statement Peta Renkin Exhibit A1 at PR-6

 14   Witness Statement of Wayne Phillips Exhibit R1 paragraph 76

 15   Peta Renkin Statement in Reply Exhibit A2 at paragraph 52

 16   [2012] FWAFB 8599 at 130

 17   LHMU v CSBP Limited [2007] AIRC 112 at 38

 18   Witness Statement of Wayne Phillips at paragraph 58

 19   Witness Statement Peta Renkin Exhibit A1 at PR-3

 20   TWU v Qantas[2012] FWAFB 6612 at 29 in respect of a workplace determination

 21   [2013] FWCFB 950 at 161

 22   [2012] FWAFB 8599

 23   Workplace determinations can only operate from the day on which they are made (s.276(1))

 24   Exhibit A5

 25   Peta Renkin Statement in Reply Exhibit A2 at paragraph 44

 26   Transcript at PN105

 27   Witness Statement Peta Renkin Exhibit A1 at paragraphs 6,10,12, 13and 21

 28   Transcript at PN105

 29   Witness Statement of Peta Renkin Exhibit A1 at PR6

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