Ergon Energy Corporation Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia

[2014] FWC 6943

[2014] FWC 6943

FAIR WORK COMMISSION

RECOMMENDATION

Fair Work Act 2009
s.739—Dispute resolution

Ergon Energy Corporation Ltd
v
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
(C2014/6277)

COMMISSIONER LEWIN BRISBANE, 3 OCTOBER 2014

Recommendation — application for the Fair Work Commission to deal with a dispute arising under an enterprise agreement — dispute settlement procedure — use of contractors — guidelines for use of contractors — request for recommendation.

Introduction

[1] This recommendation concerns an application by Ergon Energy Corporation Ltd (Ergon) for the Fair Work Commission (the Commission) to deal with a dispute arising under the Ergon Energy Union Collective Agreement 2011 (the Agreement). The Agreement is an enterprise agreement, which includes a term that provides a procedure for dealing with disputes, for the purposes of s.738(b) of the Fair Work Act 2009 (the Act). Accordingly, s.738 requires or allows the Commission to deal with the dispute. The application is made pursuant to s.739 of the Act, which is set out below:

“739 Disputes dealt with by the FWC:

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

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

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

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

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

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

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

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

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

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

Dispute settlement terms

[2] The dispute settlement terms in the Agreement are found in cl.2.1. Those terms are as follows:

“GRIEVANCE AND DISPUTE SETTLEMENT PROCEDURE

General

2.1.1 The matters to be dealt with in this procedure include all grievances or disputes between an employee(s) and Ergon Energy in respect to this Agreement, the National Employment Standards and any other employment matters. This also includes any disputes relating to contested position appointments or issues relating to the composition of the workforce. This procedure applies to a single employee or to any number of employees.

2.1.2 Whilst the procedure in this Clause is being followed, normal work will continue except in the case of a genuine safety issue directly affecting the performance of the work.

2.1.3 The status quo will be maintained whilst the procedure in this Clause is being followed. In this Clause, status quo means the circumstances that prevailed immediately prior to the disputed issue being notified.

2.1.4 Discussions at any stage of the procedure shall not be unreasonably delayed by any party, subject to acceptance that some matters may be of such complexity or importance that it may take a reasonable period of time for the appropriate response to be made. If genuine discussions are unreasonably delayed or hindered, it will be open to any party to the dispute to give notification of a dispute to the Fair Work Australia 2009.

Internal Resolution Process

2.1.5 In the event of an employee having a grievance or dispute the employee will in the first instance attempt to resolve the matter with the immediate supervisor, who will respond to such request as soon as reasonably practicable under the circumstances. Where the dispute concerns alleged actions of the immediate supervisor the employee/s may bypass this level in the procedure.

2.1.6 If the grievance or dispute is not resolved under Clause 2.1.5 the employee or, if the employee so chooses, the employee’s nominated employee representative may refer the matter to the next higher level of management for discussion. Such discussion should, if possible, take place within twenty (24) hours after the request by the employee or the employee’s nominated employee representative.

2.1.7 If the grievance involves allegations of unlawful discrimination by a supervisor the employee may commence the grievance resolution process by reporting the allegations to the next level of management beyond that of the supervisor concerned. If there is no level of management beyond that involved in the allegation the employee may proceed directly to the process outlined at Clause 2.1.9.

2.1.8 If the grievance or dispute is still unresolved after discussions mentioned in Clause 2.1.5 and 2.1.6, the matter will be reported to the relevant Ergon Energy senior management. This should occur as soon as it is evident that discussions under Clause 2.1.5 and 2.1.6 will not likely result in resolution of the dispute.

Referral to Fair Work Australia

2.1.9 If the grievance or dispute remains unresolved after the parties to the dispute have genuinely attempted to reach a resolution in accordance with Clauses 2.1.5 to 2.1.8, either party to the dispute may refer the grievance or dispute to Fair Work Australia (FWA) under the Act for resolution.

2.1.10 In conducting the dispute resolution process Fair Work Australia is empowered to take such action as is appropriate to assist the parties to resolve the matter.

2.1.11 Fair Work Australia must, as far as is practicable, act:

a. Without delay;

b. In a way that avoids unnecessary technicalities and legal forms; and

c. In accordance with this Agreement.

2.1.12 Each party to this dispute resolution process commits to require/and or direct the attendance of any person or persons in their respective employ at any proceeding that Fair Work Australia may convene if Fair Work Australia considers that person or persons would be of assistance in the determination of the industrial dispute. Failure to honour such commitment may be taken into account by Fair Work Australia in arbitrating the dispute.

2.1.13 Each party to this dispute resolution process commits to produce to Fair Work Australia any documents, books, records or other items not subject to legal professional privilege as Fair Work Australia may require, to assist it to conciliate and/or arbitrate an industrial dispute. Failure to honour such commitment may be taken into account by Fair Work Australia in arbitrating the dispute.

2.1.14 The parties to this dispute resolution process may be represented by an agent appointed in writing.

2.1.15 During the process of conciliation Fair Work Australia may only permit a party to the dispute or person to be represented by a lawyer, if and only if, all parties to the grievance or dispute consent. However, during arbitration and/or the appeal process either party may seek leave from Fair Work Australia to be legally represented. In considering the granting of such leave Fair Work Australia must be satisfied of the benefits of having legal representation, having regard to the matter the proceedings relate to, that there are special circumstances that make it desirable for the party to the dispute to be legally represented and that the party to the dispute can only be adequately represented by a lawyer.

2.1.16 Where the parties to a dispute are unable to reach agreement, Fair Work Australia may make recommendation/s about the issue/s in dispute.

2.1.17 Within three (3) working days of Fair Work Australia making such recommendation/s, the parties to the dispute are to inform Fair Work Australia whether or not they intend to comply with the recommendation/s.

2.1.18 Where either party to the dispute has either failed to inform Fair Work Australia that they intend to comply with the recommendation/s within three working days or has advised Fair Work Australia that they do not intend to comply with the recommendation/s Fair Work Australia will at the request of either party to the dispute list the matter for arbitration.

Arbitration by Fair Work Australia

2.1.19 In the event the matter is not resolved through conciliation and proceeds to arbitration either party to the dispute may request another member of Fair Work Australia to arbitrate and hand down a binding decision. In arbitrating the matter Fair Work Australia will give the parties an opportunity to be heard formally on the matter(s) in dispute.

2.1.20 In making its decision Fair Work Australia:

a. will have regard to the materials, including witness evidence, and submissions put before it at the hearing and will disregard any admissions, concessions, offers or claims made in conciliation or mediation;

b. will be governed in its decisions by equity, good conscience and the substantial merits of the case;

c. will not be bound by technicalities, legal forms or rules of evidence; and

d. may inform itself on any matter it considers appropriate to resolve the grievance or dispute.

2.1.21 After the hearing, Fair Work Australia will provide the decision in writing to the parties to the dispute as quickly as practicable.

Appeal following Arbitration

2.1.22 Where either party to the dispute is dissatisfied with a decision of Fair Work Australia they may appeal the decision on a question of law to the Full Bench of Fair Work Australia.

2.1.23 The appeal will be subject to any applicable procedures of Fair Work Australia.

2.1.24 An appeal against a decision must be commenced within twenty one (21) days after:

a. If the decision is given at a hearing - the announcement of the decision at the hearing; or

b. If the decision is given through the registrar - the release of the decision.

Fair Work Australia is not to permit any extensions to the twenty one (21) day time limit.

2.1.25 An appeal is by way of rehearing on the record. However, Fair Work Australia may hear evidence afresh, or hear additional evidence, if it considers it appropriate to effectively dispose of the appeal.

2.1.26 The Full Bench may:

a. Dismiss the appeal; or

b. Allow the appeal, set aside the decision and substitute another decision; or

c. Allow the appeal and amend the decision; or

d. Allow the appeal, suspend the operation of the decision and remit the grievance or dispute, with or without directions, to Fair Work Australia,

(i) For report to the Full Bench; or

(ii) To act according to law.

Costs

2.1.27 Each party to the dispute will, at each stage of the procedure outlined in this Clause, bear its own costs.”

The dispute

[3] The parties to the dispute are Ergon and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (the ETU). The subject matter of the dispute is the proper application of the terms of Schedule 8: Use of Contractors — Core Work of the Agreement.

[4] The application was made on 9 September 2014. Accompanying the application was information describing the process of consultation between the parties in relation to the subject matter of the dispute and the application of the Internal Resolution Process described in cls.2.1.5 to 2.1.8 of the Agreement.

[5] The dispute was referred to the Commission by Ergon. The parties agreed that the dispute could not be resolved under the Internal Resolution Process and that they had made genuine attempts to resolve the dispute, as between themselves. Therefore, the matter falls to be dealt with under the provisions of cl.2.1 of the Agreement, which allows the matter to be referred to the Commission and prescribes the role of the Commission. The dispute was the subject of a Conciliation Conference conducted by the Commission on Thursday, 2 October 2014 at Brisbane.

[6] It is now convenient to set out the terms of Schedule 8 of the Agreement, as follows:

“Use of Contractors - Core Work

1.1 General

(a) Ergon Energy will require and continue to use contractors when carrying out core work activities (as defined in this schedule) on Ergon Energy’s network assets.

(b) The Parties recognise and accept that circumstances arise where the use of contractors is both desirable and/or essential.

(c) This clause does not apply to, or require Ergon Energy to cease the use of contractors from whom services were already in place prior to the commencement of this Agreement.

(d) Consultation in relation to use of contractors will take place in accordance with clause 2.7 of this schedule.

(e) For the avoidance of doubt the term contractors includes Labour Hire employees and Group Training Scheme employees

1.2 Guidelines

The use of contractors will continue subject to the following guidelines:

(a) The work volume is beyond the capacity of the resources or staff of Ergon Energy: or

(b) The type of work or specialisation required is beyond the capacity of the resources or staff of Ergon Energy :or

(c) It is in the public interest to undertake such work. Public interest includes issues of cost effectiveness: or

(d) The security and tenure of employment of additional staff required to meet work peaks cannot be guaranteed.

Ergon Energy does not intend to utilise contractors to reduce its commitment to training of permanent employees, or merely to avoid increases in, the permanent workforce (subject to 2.2 (d) of this schedule).

1.3 Prior notice of Contractor use

(a) Ergon Energy will consult with the relevant unions if it decides to enter into any new contracts in relation to core work and where requested will provide appropriate details about the proposed use of such contractors.

(b) Every effort will be made to give prior notice when urgent contract work is required.

(c) Wherever practicable, consultation will occur at the preliminary stage of the tender process i.e. prior to going to public tender.

1.4 Training

Where the use of contractors is the result of an ongoing need for a particular skill, which employees could be reasonably expected to acquire and use, Ergon Energy will provide training to develop a level of in house capacity.

1.5 Contractor Documents and Requirements

(a) Standard contract provisions will require all contractors and their employees to comply with:

(i) All relevant safety, workers’ compensation, superannuation and workplace relations legislation and applicable statutory instruments (i.e.: statutory agreements or award(s));

(ii) Safe working practices and associated PPE and test equipment equivalent to that used by (Ergon Energy) employees;

(iii) Relevant training requirements;

(iv) All relevant licensing and registration requirements;

(v) All relevant Codes of Practice and Standards established or promulgated by the appropriate industry regulator or standard setting entity including those prescribed under relevant legislation; and

(vi) All occupational health and safety, workers’ compensation and applicable quality assurance standards, including reporting on compliance at intervals prescribed in the contract and not less than 3 monthly or as mutually agreed by the Parties.

(b) The terms and conditions of employment for employees of Contractors shall be those contained in the relevant Federal or Certified Agreement.

(c) When employees of contractors perform work as defined in the core work provisions of this schedule, they shall be entitled to the rates of pay and allowances which in aggregate shall be no less favourable than those that apply to the same or similar classifications of employees engaged under this Agreement.

1.6 Core Work Definitions

(a) Generation activities means operation, construction and routine maintenance work (other than major overhauls) currently performed by employees on the following power station plant, directly associated with the generation of electricity:

(i) Boilers;

(ii) Turbo Generations;

(iii) Renewable Energy;

(iv) Unit Auxiliary Plant; and

(v) Chemical Plant.

(b) Transmission activities means work which is directly associated with the operation, construction and routine maintenance work (other than major overhauls) of substation plant, control systems and associated in house communications and electronics, lines and cables and trimming and removal of trees within minimum approach distances to energised conductors currently performed by employees.

(c) Distribution activities means work which is directly associated with the operation, construction and routine maintenance (other than major overhauls) of substation plant, overhead mains, underground cabling and jointing, pole inspection and street lighting, customer emergency services (eg loss of supply, voltage complaints) and trimming and removal of trees within minimum approach distances to energised conductors currently performed by employees.

The definition of core work does not apply to work that is ancillary to the contract or work of a specialist nature.

1.7 Consultation Process

(a) Contractors will continue to be a normal part of Ergon Energy operations.

(b) As Ergon Energy responds to the competitive electricity market, the need to operate in a commercially sound and economically sustainable manner will continue to determine the way Ergon Energy conducts its business.

(c) Ergon Energy will consult on the use of contractors and outsourcing arrangements with the relevant unions as part of a work planning process.

(d) Consultation will occur prior to the calling of tenders and will provide the relevant union with a formal mechanism in which they can discuss matters arising from the engagement of a contractor or the awarding of a contract defined under core work definitions

(e) Ongoing consultation on the use of contractors will occur on a quarterly basis, or as otherwise agreed by the Parties involved.

1.8 Contract Compliance and Supervision

(a) Ergon Energy will continue to maintain internal contract management functions to ensure contractors comply with the relevant standards including safety, statutory and contractual requirements.

(b) A similar management approach will be taken in relation to the standards specified for developers and others involved in either extensions of the current network, major projects or asset enhancements in accordance with relevant legislation or Ergon Energy policy in place at the time.”

Characterisation of the dispute

[7] At the Conciliation Conference, Ergon explained that the nature of the dispute was whether a current proposal for the use of contractors to provide 392,000 hours of work for the construction and maintenance of electricity network assets in the period 2014/2015 was incompatible with the guidelines in cl.1.2 of Schedule 8 the Agreement. The ETU agreed that the dispute could be broadly characterised that way.

[8] It became apparent that the ETU disputes the compatibility of Ergon’s proposal for the use of contractors with cls.1.2 (c) and (d) of Schedule 8 of the Agreement.

The proposal by Ergon and the opposition of the ETU

[9] In relation to the 2014/2015 period and the type of work to which the dispute relates, Ergon proposes to use contractors to perform 392,000 hours of work out of a total of 2.87 million hours of work. Ergon submitted that the use of contractors for this proportion of the total work to be performed is compatible with the guidelines in Schedule 8 of the Agreement.

[10] At the conciliation conference, Ergon submitted information on the proposal and a written submission addressing each of the relevant guidelines of Schedule 8 of the Agreement.

[11] The ETU said the proportion of the amount of work to be performed by contractors, or at least a significant part of that work, could be performed by the employment of up to 80 additional full-time equivalent staff, whose security and tenure of employment could be guaranteed. Moreover, the ETU submitted that the use of contractors is likely to be more expensive than the use of additional staff and would result in pressure for higher electricity prices, contrary to the public interest. The ETU submitted that Ergon’s proposal avoids increases in the permanent workforce contrary to cl.1.2 (d) of the relevant guidelines.

[12] Ergon responded to the ETU’s submissions noting, in particular, the following:

• the use of contractors by Ergon has been declining and is scheduled to continue to decline;



• the proposal has been the subject of extensive consultation with the ETU during which modifications reducing an original gap between the proposed use of internal resources and contractors to perform the 2014/2015 workload by 312,000 hours has been determined;



• this includes provision for 17,000 hours of overtime work by Ergon employees that would otherwise have been performed by contractors;



• the work is for completion in the 2014/15 year;



• under the status quo provisions of cl.2.1, the work has not been commenced;



• there is a strong public interest in the work being performed for the safety and efficiency of the electricity network and the proposal should be expedited for this reason;



• Ergon is experiencing falling demand for electricity supply. The future of the employment of any additional staff would be dependent upon decisions for capital allocation to Ergon by the Australian Energy Regulator (AER), which will be not be determined until early 2015;



• Ergon currently has a number of employees whose positions have been made redundant and are seeking redeployment;



• existing Ergon employees may be required to perform work available after the 2015 determination of the AER, some of which would potentially be performed by contractors;



• any reduction in capital allocation below Ergon’s submission to the AER in 2015 would result in pressure on the security of tenure of the employment of existing Ergon employees.

Request for recommendation by the Commission

[13] Ergon requested that the Commission make a recommendation that the proposal proceed on the basis that it is compliant with the relevant guidelines. The ETU opposed that request and submitted that the Commission should recommend that the parties continue to consult and that Ergon should employ fixed-term employees pursuant to cl.3.5 of the Agreement.

Consideration

[14] I have carefully considered the different positions of the parties and the relevant provisions of cl.1.2 of Schedule 8 to the Agreement. In particular, I consider it is appropriate to make a recommendation in these circumstances under cl.2.1.10 of the Agreement. I consider that as the relevant provisions of Schedule 8 of the Agreement engage with public interest considerations in respect of the subject matter of the dispute, the public interest is best served by steps being taken to ensure the dispute is resolved as quickly as possible, to enable the work on the electricity network to be performed as expeditiously as required.

[15] The provisions of Schedule 8 of the Agreement clearly contemplate that Ergon will continue to use contractors when carrying out what is referred to as core work. There is no doubt that Ergon’s contractor proposal is for the use of contractors to perform core work.

[16] Consultation is mandated in relation to the Ergon’s proposal by cl.1.1(d) of Schedule 8 of the Agreement. There is no dispute that Ergon has consulted with the ETU and, on the evidence before me; this mandatory requirement has been fulfilled in the relation to the specific details of Ergon’s proposal, in accordance with cls.1.3 and 1.7 of Schedule 8 of the Agreement.

[17] Clause 1.2 of Schedule 8 of the Agreement lists the particular considerations relevant to this dispute, of particular relevance are cls.1.2 (c), the public interest consideration, and (d), the security and tenure of any additional staff.

[18] I deal first with the public interest consideration. The dispute in this respect concerns two identifiable interests which may be properly identified as public in nature.

[19] The first is the necessity for expeditious completion of the work for the safe and efficient performance of the electricity assets of Ergon, which has a large customer base of electricity consumers in Queensland. The public interest nature of this consideration is inherently self-evident.

[20] The second is the submission of the ETU that the cost of the work to be done by contactors will be greater than if performed by Ergon employees, which will put pressure on higher electricity prices. There is no evidence before me to sustain this assertion or, if it is true, what the cost difference would be. Moreover, the work is already budgeted within Ergon’s overall capital expenditure budget. Additionally, the price of electricity is publicly regulated and cannot be predicted by me.

[21] On balance, I consider the public interest is best served by the prompt initiation of the process for the conduct and the completion of the relevant work to be performed by contactors, as proposed by Ergon, in the interests of network maintenance, construction and safety, and in a timely manner. My view is reinforced by the fact that Ergon is well into the relevant period for which the work is scheduled and the work in dispute is yet to commence.

[22] I turn now to consider the guidelines expressed in cl.1.2(d) of the Schedule 8 of the Agreement.

[23] On what is before me I cannot be satisfied that Ergon is proposing to use contractors to perform the 392,000 hours of work in order to avoid increases in the permanent workforce. Nor am I satisfied that the security and tenure of additional staff engaged to perform the electrical work could be “guaranteed”.

[24] My reason for the above two findings are as follows:

• demand for electricity is falling;



• Ergon’s use of contractors is diminishing;



• future capital expenditure cannot be predicted with sufficient certainty to guarantee the employment security and tenure of additional staff;



• the ongoing use of contractors is a recognised aspect of the performance of Ergon’s core work;



• Ergon already has a number of employees whose positions have become redundant and are seeking re-deployment;



• the risk of diminishing allocation of resources by the AER for the performance of network construction and maintenance.

[25] In my view, the relevance of the above considerations are implicitly recognised by the proposal for settlement of the dispute put by the ETU. Namely, the engagement of additional staff on contracts of employment for a fixed-term or a specified task under cl.3.5 of the Agreement. It seems to me that the engagement of additional staff on such contracts recognises that the security of employment and tenure of such additional staff cannot be guaranteed. This is because such engagements are by default characterised by cl.3.5 of the Agreement as being for a fixed-term period or for a specified task, for a maximum of 24 months.

[26] Weighing all of these considerations, I recommend that the dispute is settled by allowing Ergon’s proposal to proceed on the basis it has put to the Commission, which is a result of consultation and consequential modification under the terms of the Agreement.

COMMISSIONER

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