Essential Energy v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia

[2015] FWC 8291

[2015] FWC 8291

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Essential Energy
v
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia;
Australian Municipal, Administrative, Clerical and Services Union;
The Association of Professional Engineers, Scientists and Managers, Australia
(C2015/6236)

SENIOR DEPUTY PRESIDENT HAMBERGER SYDNEY, 15 DECEMBER 2015

Dispute about direction to take accrued annual leave and long service leave.

[1] On 28 September 2015, Essential Energy (the applicant) applied for the Fair Work Commission (the Commission) to deal with a dispute concerning its proposal to direct employees who are classified as redeployees to take accrued annual leave and long service leave. The application was made in accordance with the dispute settling procedure in the Essential Energy Enterprise Agreement 2013 (the enterprise agreement).

[2] The dispute was unable to be resolved by conciliation and was referred for arbitration, in accordance with the terms of the dispute settling procedure. A hearing was conducted in Sydney on 16 November 2015. The applicant was represented by Ms Alice DeBoos (Partner, K & L Gates) and the respondent unions (the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia, the Australian Municipal, Administrative, Clerical and Services Union, and The Association of Professional Engineers, Scientists and Managers, Australia) by Mr Aron Neilson (Principal Lawyer, Slater and Gordon Lawyers).

Background

[3] In April 2015, the Australian Energy Regulator (AER) issued a Final Determination for Essential Energy for the period 2014 to 2019. This determination substantially reduced the maximum amount of revenue the applicant can recover from its customers. As a result the applicant is in the process of making significant reductions to its staffing levels. As part of this process it has identified (and continues to identify) a large number of roles that it no longer requires to be performed. Under the applicant’s ‘Management of Surplus Employees Policy’ (the Policy) affected employees who do not take a voluntary redundancy and cannot be immediately placed into an acceptable alternative permanent position are ‘referred to the Employee Mobility section for redeployment’.

[4] The applicant proposes to direct employees who have thus been referred for redeployment (‘redeployees’) to take accrued annual and/or long service leave. This, it says, is in accordance with the Policy. This proposal has been the subject of a series of consultation meetings with the unions in August and September 2015, as well as being discussed during the conciliation process. The unions assert that the applicant is not permitted to implement the proposal.

[5] The applicant has drafted a set of Redeployment Leave Management Principles which it proposes to apply to the proposal.

[6] Clause 3.7 of the enterprise agreement provides that:

‘The redundancy policy for the term of this Agreement is the Essential Energy Redundancy Policy (Management of Surplus Employees) dated 20 November 2013.

The application of this policy will be subject to Clause 1.13 (Consultation and Communication) of the Essential Energy Enterprise Agreement.’

[7] The Policy relevantly includes the following:

‘The Company is committed to achieving continuous improvement in the performance of its business. From time to time this may include restructuring the Company or changing how work is performed. On occasions this may result in positions being made redundant. However, the Company believes the positions become redundant, people do not become redundant.

The Company at its discretion, after thoroughly analysing all the circumstances, will decide if a position becomes redundant. If the employee in the position falls under the Company’s Enterprise Agreement, the Company may choose in the first instance to provide the employee with an acceptable alternative position within the Company. If an acceptable alternative position is not available or the employee’s skills have become redundant, the Company may make an offer of voluntary redundancy to the employee. Where voluntary redundancy is offered, it is the employee's choice whether to accept or reject this offer.

Employees who are not placed into an acceptable alternative permanent position and who are not taking voluntary redundancy will be referred to the Employee Mobility section for redeployment. While the HR Manager and employee are working towards finding an appropriate permanent position, the employee will be placed into a meaningful work placement.

A redeployee may request to be considered for a voluntary redundancy until they have been placed in a suitable role. Where an employee elects redeployment, at its discretion the company may require an employee to take all accrued leave in lieu, annual and long service leave (excluding pro rata accruals) in accordance with the Enterprise Agreement notice periods (where applicable).

Employees are not able to decide that their position has become redundant. However, where an employee in an existing position wishes to voluntarily give up their current position to a surplus employee and if the surplus employee has the skills and ability to fill that position, then the Company may agree to a “mix and match” process. In these circumstances the person wishing to relinquish their position would be offered voluntary redundancy. The “mix and match” process is entirely at the discretion of the management. An employee is not entitled to determine that they are eligible for a “mix and match” process.’

[8] The Policy states part of its purpose as being:

‘To ensure that employees in positions which are identified as surplus to the Company’s requirements are treated in a fair and equitable manner…

To ensure that employees who have declined an offer of voluntary redundancy (and thereby commit to the redeployment process), are given opportunities and assistance to secure an acceptable alternative position.’

[9] It is not in dispute that the relevant clauses in the main body of the enterprise agreement do not permit the employer unilaterally to direct employees to take accrued annual or long service leave.

[10] Clause 4.1.3 (entitled ‘Notice Periods’) provides that:

‘Employees must submit their application for annual leave no less than two (2) weeks prior to the proposed commencement date. Managers must approve, reject or discuss the annual leave request within five (5) working days of the employee submitting the request.

The above notice periods may be waived in exceptional circumstances and by agreement.’

[11] Clause 4.6.5 (entitled ‘Notice of Leave’) states that:

‘An employee shall give Essential Energy at least one (1) months’ notice of the taking of Long Service Leave. However, a shorter period of notice may be given in cases of unforeseen events which necessitate an employee taking leave.’

Submissions

[12] The applicant submits that the words of the Policy are clear and plain in their meaning and that their ordinary meaning cannot be disputed. Accordingly, the words should be given their ordinary meaning and extrinsic evidence should not be permitted.

[13] While the applicant acknowledges that the clauses in the enterprise agreement dealing with annual leave and long service leave do not permit the employer unilaterally to direct employees to take excessive leave accruals, the Policy amends or varies these clauses for those employees who are redeployees.

[14] There is nothing in the enterprise agreement to the effect that, should the terms of the enterprise agreement and the Policy be contradictory, then the terms of the enterprise agreement would prevail. On the contrary, the reference to the Policy in the enterprise agreement creates a set of rights both for the applicant and redeployees which are different to and distinct from the ordinary terms and conditions of employment detailed in the enterprise agreement. That is, once employees are redeployees, the effect of clauses 3.6 and 3.7 of the enterprise agreement is that their ongoing employment is subject to the terms of the Policy.

[15] The applicant submits that:

a) In order for the relevant provision of the Policy to have any work to do, the requirement in the Policy for the direction to take leave to be in accordance with the enterprise agreement notice periods (where applicable), is a clear reference to the notice periods contained in clauses 4.1.3 and 4.6.5 of the enterprise agreement.

b) In the context of the Policy, the effect of clause 4.1.3 is that the applicant can direct an employee (who is a redeployee) to take all accrued annual leave (excluding pro rata accruals) on the provision of two weeks’ notice.

c) In the context of the Policy, the effect of clause 4.6.5 is that the applicant can direct an employee (who is a redeployee) to take all accrued long service leave (with the exception of pro rata accruals) on the provision of one month’s notice.

[16] The unions, by contrast, submit that the Policy mandates that whatever is proposed to be done must be done in accordance with the enterprise agreement notice provisions. Both clause 4.1.3 and 4.6.5 of the enterprise agreement do not permit the applicant to give notice of the requirement to take leave. There is nothing consistent with the term ‘in accordance with the Enterprise Agreement notice periods’ within the terms of the enterprise agreement.

[17] The unions submit that because there is nothing in the enterprise agreement which could facilitate the relevant provision of the Policy being acted upon, there exists an ambiguity. In circumstances where the language of a provision in an enterprise agreement is ambiguous, evidence of the surrounding circumstances will be admissible to aid the interpretation of the provision. Admissible evidence of the surrounding circumstances would include evidence of prior negotiations, notorious facts of which knowledge is to be presumed and evidence of matters in common contemplation and constituting a common assumption. 1

[18] The unions submit that the enterprise agreement and the Policy were the subject of detailed negotiation and correspondence between the parties in 2013. On 25 November 2013 the General Secretary of the ASU, Mr Graham Kelly wrote to the Chief Executive Officer of the applicant (Mr Vince Graham) about the relevant provision of the proposed Policy, which he said was inconsistent with the provisions of the enterprise agreement.

[19] On 26 November 2013, Mr Graham wrote back:

‘Where the Essential Energy Enterprise Agreement makes provision for notice periods to taking accrued leave, the terms of the Enterprise Agreement will apply.’

[20] According to the unions, the effect of Mr Graham’s response (which they dub ‘the Graham Representation’), is to the effect that, unless the enterprise agreement contains a provision about notice periods for the taking of leave, the relevant provision of the Policy would not apply. It follows, the unions submit, that as the enterprise agreement makes no provision for the giving of notice for the taking of accrued leave in the manner sought by the applicant, the relevant provision of the Policy does not apply.

[21] The unions submit that the ‘Graham Representation’ was accepted by the ASU in its correspondence of 27 November 2013:

‘We note Essential Energy’s confirmation that the Enterprise Agreement provisions will apply with respect to notice periods for leave and as such the proposed policy provisions which would allow Essential Energy to force redeployees to take leave do not apply.’

[22] According to the unions, this exchange of correspondence informed the further correspondence from the applicant’s Chief Operating Officer, Mr Gary Humphreys, dated 28 November 2013, which agreed to incorporate the current provision in the Policy. The unions contend that neither the ‘Graham Representation’ nor its acceptance by the ASU was withdrawn. Nor was either the subject of clarification from any party associated with the applicant. In these circumstances, the unions submit that this correspondence can inform the Commission when it comes to construing the relevant provision of the Policy.

[23] The applicant’s primary submission is that there is no ambiguity in the relevant terms of the Policy and as a consequence, the words should be given their ordinary meaning and extrinsic evidence should not be admitted. However it submits that, in the alternative, if the Commission decides that the admission of extrinsic evidence would assist in determining whether there is an ambiguity then the evidence cannot be admitted to contradict the plain meaning of the words. That is, the Commission cannot make a finding which is contrary to the term itself.

[24] Even if the Commission were to decide that there was ambiguity, the evidence:

a) does not establish objective background facts to support an alternate interpretation;

b) does not establish a common understanding; and

c) having regard to the context and purpose of the language the meaning asserted by the applicant is the only logical interpretation available.

Consideration

[25] I am satisfied that the relevant provision in the Policy unambiguously provides the applicant with the discretion to require employees who have elected ‘redeployment’ (i.e. their position has been declared redundant, and they have neither accepted a voluntary redundancy nor immediately been placed into an acceptable alternative permanent position) to take all accrued leave in lieu, annual and long service leave (excluding pro rata accruals).

[26] This is in effect an exception to the general rule provided in the enterprise agreement that it is up to employees whether to take accrued annual or long service leave. The provision is clearly designed to enable the applicant to reduce the cost of having to continue to employ redeployees (particularly in the context where there is no scope for compulsory redundancy). It does not, however, take away the obligation on the applicant to try and assist ‘surplus employees’ to obtain acceptable alternative positions.

[27] If there is any ambiguity, it is in relation to the relevance of the notice periods contained in the annual and long service leave provisions in the enterprise agreement. The Policy stipulates that the applicant may require employees to take accrued leave ‘in accordance with the Enterprise Agreement notice periods (where applicable)’.

[28] It is arguable that no such notice periods are applicable as the only notice periods referred to in the enterprise agreement relate to the requirement on employees to give notice to the employer prior to taking leave. On this interpretation, the applicant could require a redeployee to take accrued leave without giving him or her any notice at all. A better interpretation, however, is that adopted by the applicant, which is that the notice periods referred to in clauses 4.1.3 and 4.6.5, act as a limitation on the applicant’s discretion. On this basis, the applicant must give redeployees the same amount of notice before requiring them to take accrued leave that an employee would normally be required to give the applicant before the employee took leave. I prefer this interpretation because the drafter of the Policy would have been aware that these notice periods were in the enterprise agreement (and its immediate predecessor) – and were the only notice periods there were in relation to the taking of leave.

[29] This is the context in which one should understand Mr Graham’s letter of 26 November 2013. The full quote (so far as the letter is relevant to this issue) is as follows:

‘In relation to your concerns around potential inconsistencies in the wording of the new Redundancy Policy (Management of Surplus Employees) and the existing Redeployment Policy (CEC1083), I offer the following clarification.

Your first question is whether an employee will be forced to take accumulated leave and if so in what circumstances. As you are aware, The Management of Surplus Employees Policy states that Essential Energy may require an employee to take accrued leave in accordance with the enterprise agreement notice periods (where applicable). Where the Essential Energy Enterprise Agreement makes provision for notice periods for taking accrued leave, the terms of the Enterprise Agreement will apply’.

[30] This cannot reasonably be read as Mr Graham agreeing that the provision in the Policy giving the applicant the discretion to require an employee to take accrued leave has no effect and would not be implemented. The fact that Mr Kelly in his letter of 27 November 2013 conveniently chose to read Mr Graham’s letter this way does not alter that fact. Rather, Mr Graham is indicating that the notice periods contained in the relevant provisions of the enterprise agreement will apply.

Conclusion

[31] Essential Energy is permitted to require redeployees (that is, employees whose positions have been declared redundant and who have not accepted a voluntary redundancy or been placed into an acceptable alternative permanent position) to take accrued annual and long service leave (excluding pro rata accruals) provided that it gives such redeployees the following notice:

● for annual leave – two weeks; and
● for long service leave – one month.

[32] Essential Energy is at liberty to implement the direction to take accrued leave contained in the Leave Principles.

SENIOR DEPUTY PRESIDENT

Appearances:

A Neilson, solicitor, for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia, the Australian Municipal, Administrative, Clerical and Services Union and The Association of Professional Engineers, Scientists and Managers, Australia.

A DeBoos and R Bevan, solicitors, for Essential Energy.

Hearing details:

Sydney.

2015.

November 16.

 1   AMIEU v Golden Cockerel Pty Limited [2014] FWCB 7447, [41].

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