Flinders Operating Services Pty Ltd T/A Alinta Energy v Australian Municipal, Administrative, Clerical and Services Union
[2011] FWA 4506
•14 JULY 2011
[2011] FWA 4506 |
|
DECISION |
Fair Work Act 2009
s.418 - Application for an order that industrial action by employees or employers stop etc.
Flinders Operating Services Pty Ltd T/A Alinta Energy
v
Australian Municipal, Administrative, Clerical and Services Union;
And
Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU)(C2011/4760)
DEPUTY PRESIDENT BARTEL | ADELAIDE, 14 JULY 2011 |
Electrical Power Industry
[1] On 15 June 2011, the Australian Municipal, Administrative, Clerical and Services Union, SA and NT Branch (ASU) and the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, Technical, Supervisory and Administrative Division (AMWU, TSA Division) (collectively referred to as “the unions”) notified Flinders Operating Services Pty Ltd T/As Alinta Energy (the employer or the applicant) of industrial action. 1 The notification from the ASU was via a letter while the AMWU provided a formal notice (the letter and notice will be referred to as “the notices”). The notified industrial action was to commence on 21 June 2011.
[2] On 17 June 2011, the employer made application pursuant to s.418 of the Fair Work Act 2009 (the Act) for an order to stop the industrial action.
[3] Section 418 of the Act is in the following terms:
“418 FWA must order that industrial action by employees or employers stop etc.
(1) If it appears to FWA that industrial action by one or more employees or employers that is not, or would not be, protected industrial action:
(a) is happening; or
(b) is threatened, impending or probable; or
(c) is being organised;
FWA must make an order that the industrial action stop, not occur or not be organised (as the case may be) for a period (the stop period) specified in the order.
Note: For interim orders, see section 420.
(2) FWA may make the order:
(a) on its own initiative; or
(b) on application by either of the following:
(i) a person who is affected (whether directly or indirectly), or who is likely to be affected (whether directly or indirectly), by the industrial action;
(ii) an organisation of which a person referred to in subparagraph (i) is a member.
(3) In making the order, FWA does not have to specify the particular industrial action.
(4) If FWA is required to make an order under subsection (1) in relation to industrial action and a protected action ballot authorised the industrial action:
(a) some or all of which has not been taken before the beginning of the stop period specified in the order; or
(b) which has not ended before the beginning of that stop period; or
(c) beyond that stop period;
FWA may state in the order whether or not the industrial action may be engaged in after the end of that stop period without another protected action ballot.”
[4] The letter from the ASU was in the following terms:
“RE: Notice of Protected Industrial Action
This letter is formal notice under section 430 of the Fair Work Act 2009 of an employee claim action for a proposed enterprise agreement.
The nature of the action is as follows:
1. One or more stoppages of four (4) hours duration, taken by members and at times which will have no or minimal effect on generation.
2. A ban on the working of overtime.
3. A ban on performing contractor inductions at Leigh Creek.
4. A ban on operating the Bairnsdale plant from the Augusta Power Station.
5. Wet dumping all ash produced by Augusta Power Station.
6. A ban on flying to or from Port Augusta before 7.00am or after 7.00pm.
7. A ban on Augusta Power Station Production Branch Operators supervising, directing or providing training to contract labour personnel, other than to provide such supervision and direction as is required to ensure their immediate safety.
The day on which the protected action will commence will be Tuesday June 21st 2011.
Please do not hesitate to contact me should you wish to discuss this matter.”
[5] The AMWU, TSA Division notice identified employee claim action as follows:
“Nature of intended industrial action:
• One or more stoppages of four (4) hours duration, taken by members and at times which will have no or minimal effect on generation.
• A ban on all overtime and call back requests
The location of the intended industrial action:
• Augusta Power Stations, Port Augusta
Date on which industrial action will begin:
• Action will commence from Tuesday 21st June at 12.01am.”
[6] The applicant argues that the industrial action as notified by the unions is not protected action on two discrete bases. Firstly, it is argued that the terms of each notice do not meet the notice requirements of s.414(6) of the Act, which requires that the notices must specify the nature of the action and the day on which it will start. It is contended that the lack of specificity of the notices denies the employer the opportunity to take appropriate defensive action.
[7] Secondly, the applicant contends that the action as notified by the unions is in support of claims that are not permitted matters as defined in s.172 of the Act.
The Interim Order
[8] The s.418 application was filed late on Friday afternoon, 17 June 2011. The matter was listed on Monday 20 June and at the conclusion of the proceedings I indicated a preliminary view that an interim order to stop the industrial action was required to be issued in accordance with s.420(2) of the Act. Section 420 of the Act is in the following terms:
“420 Interim orders etc.
Application must be determined within 2 days
(1) As far as practicable, FWA must determine an application for an order under section 418 or 419 within 2 days after the application is made.
Interim orders
(2) If FWA is unable to determine the application within that period, FWA must, within that period, make an interim order that the industrial action to which the application relates stop, not occur or not be organised (as the case may be).
(3) However, FWA must not make the interim order if FWA is satisfied that it would be contrary to the public interest to do so.
(4) In making the interim order, FWA does not have to specify the particular industrial action.
(5) An interim order continues in operation until the application is determined.”
[9] Mr Ats, of counsel, representing the ASU initially and then also the AMWU, TSA Division, opposed the making of the interim order on the basis that it would be contrary to the public interest to do so. In support of this position he argued that the applicant did not have reasonable grounds for the s.418 application. Mr Ats submitted that the notice complied with the requirements of the Act and the employer had sufficient notice to take appropriate defensive action in line with its responsibilities as a participant in the national electricity market (NEM). He argued that the employer had taken no steps to deal with the consequences of the industrial action and had instead filed applications to frustrate the legitimate right of employees to take protected industrial action.
[10] Ms Smith, of counsel for the employer, stated that Mr Ats had not addressed the public interest only the interest of the workers and his submission ignored the scheme of the Act which contemplated limits on the circumstances in which industrial action was protected.
[11] She submitted that the evidence that had been led to that point supported the making of an interim order because it suggested that the notified industrial action would compromise the employer’s ability to comply with its contractual and regulatory requirements. She stated that the lack of specificity in the notice was significant in light of the employer’s contribution to the State’s power requirements.
[12] It was also contended that the law relating to interim injunctions could be drawn upon as an appropriate approach to determining whether an interim order should be made and the Tribunal should therefore consider whether there is a serious question to be tried and where the balance of convenience lies.
[13] The scheme of s.420 of the Act is that an interim order will be made unless the Tribunal is satisfied that the exception in s.420(3) is made out. As such, the onus is on the party opposing an interim order to make out a case that such would be contrary to the public interest.
[14] The expression “in the public interest”, when used in legislation, is to be determined by making a discretionary value judgement on the relevant facts, constrained only by the subject matter and the scope and purpose of the legislation. 2 While the test in the present matter concerns the expression “contrary to the public interest”, the approach as stated remains apposite. The public interest is distinct from the views of persons directly affected and refers to matters that might affect the public as a whole.3
[15] In this case it is not possible for the Tribunal to form a concluded view on the relevant facts since the hearing had not been completed within the 2 day period specified in s.420(1) of the Act. In these circumstances the concept of an arguable case assumes some importance. Having regard to the wording of the notices and the arguments outlined by the applicant 4 I considered that there was an arguable case.
[16] I have viewed the potential impact of the notified industrial action in the context of the nature of the industry in which the employer operates and its status as the largest contributor of electricity to the grid in South Australia. Having regard to the applicant’s argument that the lack of specificity in the notice posed a serious threat to the safety of employees and the integrity of the plant, I determined that the balance of convenience favoured the making of the interim order. 5
The issues
[17] The issues that fall for determination are whether closing Northern is appropriate defensive action as the unions maintain or whether, as the employer contends, it is not “appropriate” defensive action because it would be forced on the employer by the lack of specificity of the notices. There is a further issue as to whether the plant can be shut down safely in advance of the stoppages commencing and whether it can be properly monitored while in shut down mode.
[18] The determination of whether the claim concerning supplementary labour is a permitted matter requires a resolution of factual disputes as well as the application of case law, a significant volume of which was addressed by counsel in closing submissions. The unions argue that the claim being pursued is permitted content. In the event that the Tribunal is against them on that point, it is argued in the alternative that the unions held a reasonable belief that it was permitted content. A further alternative argument was advanced which will be dealt with as necessary later in the decision.
[19] The evidence in this case was extensive, occupying the best part of 6 days of the hearing. Employer witnesses 6 highlighted the problems that arose as a result of the lack of detail in the notices. Of most concern was the notice relating to four hour stoppages. The witnesses stated that they were unable to determine which shifts would be involved, whether one or more stoppages were planned, which or all locations would be involved, whether the stoppages will be taken by all employees at the same time or at staggered times, whether stoppages will be consecutive and whether the unions will take concurrent action. The evidence was that without this knowledge, the specific action required to be taken by the employer to maintain the safety and integrity of its operations, its ability to fulfil the requirement to provide the Australian Electricity Market Operator (AEMO) with ongoing and accurate information as to its generating capacity and the ability to fulfil its contractual requirement to provide ancillary services to the network, was seriously compromised.
[20] The unions do not challenge the employer’s evidence that it is unable to predict the pattern and impact of the four hour stoppages, but maintain that the employer could take appropriate defensive action to deal with this problem by assuming the worst case scenario contemplated by the notices and implementing a shut down of the Northern Power Station (Northern).
[21] There is no dispute between the parties that the employer needs to maintain the integrity of its assets, the safety of employees and to act in accordance with the rules governing the operation of the NEM. It is also accepted that the requirement on unions to provide notice of intended industrial action is to enable the employer to limit the impact of the industrial action on its business by taking appropriate defensive action. 7
The Evidence
[22] The applicant led evidence from three witnesses. Mark Moran is the General Manager Generations Operations of Alinta Energy’s Australian and New Zealand operations. 8 His evidence addressed the NEM, the importance of the employer to that market, and the problems caused by the lack of specificity of the notices of industrial action.
[23] Andre Kuys 9 is the Plant Manager for Augusta Power Stations (APS). APS is comprised of Northern and Playford Power Station (Playford). Mr Kuys’ evidence addressed the classifications and work undertaken by employees eligible for membership of the ASU and AMWU, TSA Division; the safety requirements at the plant; and the impact of the industrial action.
[24] Joanne Jones 10 is employed in the position of Business Partner, Power Generation Operations by Alinta Servco Pty Ltd trading as Alinta Energy. Ms Jones is responsible for Human Resources and has been the main negotiator for the employer in the current bargaining round. Her evidence addressed the history of negotiations around the issue of supplementary labour and the unions’ current claim.
[25] Austin White, Industrial Officer for the ASU was the only witness for the unions. He has taken a lead role in the negotiations with the employer and gave evidence about the supplementary labour claim being advanced, the development of the claim and his view that the claim was permitted content.
[26] No issue of credibility arises with any of the evidence. All witnesses gave their evidence in a considered and genuine manner. Factual conflicts, where relevant to the issues that fall for determination, are dealt with in later sections of this decision.
Have the notice requirements of the Act been met?
[27] Section 414 of the Act sets out the notice requirements to be met in order for industrial action to be protected industrial action.
“414 Notice requirements for industrial action
Notice requirements—employee claim action
(1) Before a person engages in employee claim action for a proposed enterprise agreement, a bargaining representative of an employee who will be covered by the agreement must give written notice of the action to the employer of the employee.
(2) The period of notice must be at least:
(a) 3 working days; or
(b) if a protected action ballot order for the employee claim action specifies a longer period of notice for the purposes of this paragraph—that period of notice.
Notice of employee claim action not to be given until ballot results declared
(3) A notice under subsection (1) must not be given until after the results of the protected action ballot for the employee claim action have been declared.
Notice requirements—employee response action
(4) Before a person engages in employee response action for a proposed enterprise agreement, a bargaining representative of an employee who will be covered by the agreement must give written notice of the action to the employer of the employee.
Notice requirements—employer response action
(5) Before an employer engages in employer response action for a proposed enterprise agreement, the employer must:
(a) give written notice of the action to each bargaining representative of an employee who will be covered by the agreement; and
(b) take all reasonable steps to notify the employees who will be covered by the agreement of the action.
Notice requirements—content
(6) A notice given under this section must specify the nature of the action and the day on which it will start.”
[28] Other than s.414(6) concerning the content of the notice, there is no issue as to compliance with the other requirements of s.416 of the Act.
[29] There is a body of case law concerning the specificity required in a notice of industrial action, much of which relates to the s.170MO(5) of the Workplace Relations Act 1996 and later s.441(6) of the Workplace Relations Act 1996, as amended, which was in identical terms. Section 170MO(5) provided that “A written notice or other notification under this section must state the nature of the intended action and the day when it will begin.”
[30] In Telstra Corporation v CEPU 11, the Full Bench considered the construction of s.414 and stated:
“... The first point to note is that the obligations in ss.414(1) and (6) are not cast in terms of an intention to take industrial action but in more positive terms. This is a point of contrast with the language of s.170MO of the WR Act, exemplified by s.170MO(5) which we have set out above. The second point is that in considering whether the notice meets the requirement to specify the industrial action, it is necessary to have regard to the purpose of the notice requirement and the relevant circumstances, in particular the nature of the employer’s undertaking. As to purpose, there is little doubt that the purpose of the notice requirement is to give the employer the opportunity to respond to the action by making relevant preparations. The response may involve making arrangements to deal with unavailability of labour, including making appropriate arrangements in relation to customers, suppliers and other contractors. Whether the notice is adequate may depend on the nature of the employer’s operations including their size, the number of employees, the number of locations, the time at which the action is to occur and the employees potentially taking the industrial action.”
[31] The Bench then cited with approval the following passage from the reasons for decision in Davids Distribution Pty Ltd v National Union of Workers 12:
“[87] We think s 170MO(5) was designed to ensure that industrial disputants who are to become affected by protected action, in relation to which their usual legal rights are significantly diminished, are at least able to take appropriate defensive action. For example, an employer may operate a sophisticated item of equipment that will be damaged if precipitately shutdown. If warned in advance of a ban that might affect the continued operation of that plant, the employer might choose a controlled shutdown during the period of the notice. More commonly, perhaps, an employer might use the notice time to communicate with suppliers and customers, and thereby reduce the consequences for them of the notified industrial action. Very often, the recipient of the notice will respond in a way that has a legal dimension. For example, a union might react to a notice by an employer of intent to lock out some employees by giving notice that all employees will strike indefinitely as from the commencement of the lockout. Similarly, an employer might respond to an employees' notice of bans by giving notice of a lockout of some or all employees.”
[32] An appropriate starting point for a consideration as to whether the unions’ notices meet the requirements in s.414(6) of the Act is therefore to consider the nature of the employer’s undertaking, which includes the way that it operates. 13
[33] The employer operates and maintains the assets of Flinders Power Partners, which includes Northern consisting of two units of 272MW, Playford with a generating capacity of 240MW and which is currently in a period of planned maintenance, and the Leigh Creek Coal Mine. Northern and Playford are physically separate but co-located at APS. Bairnsdale Power Station, located in Victoria, is operated by a third party under contract. Bairnsdale and Playford are monitored from the Control Room at Northern.
[34] The NEM consists of physical assets, such as the generating equipment and transmission lines, and a commercial or trading function (the bidding and trading of energy into and out of the market). AEMO balances the network demand with supply by dispatching the appropriate amount of generation into the market to meet demand. It does this on the basis of information provided by NEM participants as to generating capacity and intentions.
[35] Energy demand that cannot be met at any point in time by one generator must be supplied by another generator if power is to be continually supplied. AEMO operates under a set of Rules 14 and has Connection Agreements with NEM participants including the applicant, which prescribe how assets will be physically connected to the transmission network, the state in which they should be maintained and the manner in which they are operated.
[36] All NEM participants are required to immediately report any actual or potential risks to generation to AEMO, including those arising from industrial action. A key aspect of AEMO’s ‘balancing’ role is the management of the Short Term Projected Assessment of System Adequacy (ST PASA). The ST PASA is developed from the information provided by the NEM participants and is published to participants at least once per day but can be as often as every two hours. These notifications allow the participants to understand the overall market position in terms of immediate and forecast availability of the connected generators.
[37] At APS, the employees eligible to be members of the ASU cover the four ‘streams’ of Production, Maintenance, Engineering and Administration. The classifications include Operator, Production Superintendent, Chemical/Laboratory Technician, Specialist Technical Services and Instrumentation and Control Project Team. Employees eligible to be members of the AMWU, TSA Division occupy the positions of Chemical/Laboratory Technician and Specialist Technical Service. Operators in particular are critical to the generation of electricity, the safety of plant, equipment and personnel on site, the operation of shut down and start up procedures for the plant and fulfilling the requirement to advise AEMO of relevant information about generating capacity.
[38] The Operators work 12 hour shifts on a four on - four off basis. Their work is classified as a high risk occupation by SafeWork SA. The plant operates at high pressure and high temperatures and consequently the operators are required to have the appropriate training and accreditation to perform the work. The work of an Operator includes assisting with the control, coordination and monitoring of the day to day operations of steam and electrical plant and ensuring the safe and efficient operation of the power plant. Operators are required to isolate plant in the correct sequence to allow for maintenance work to be carried out safely and to respond to directives from AEMO in relation to increasing or reducing generation capacity.
[39] I accept the employer’s evidence that the threat to take action by employees who are members of the unions in the terms stated in the notices does not allow the employer to determine the degree to which generating capacity will be affected; who will be working at any given time, for how long the action will be taken, what the action will involve, which shifts will be affected and whether remaining employees will be affected. I also accept that the plant is not able to be operated without at least some Operators on duty.
[40] Mr Ats cross-examined the employer witnesses on the unions’ contention that the employer could take appropriate defensive action by placing Northern and Playford in safe shut down mode. He elicited detailed evidence as to the employees required, the sequence of steps involved, the time taken to implement the shut down process and the requirements for monitoring the plant when shut down. My findings on this evidence are as follows.
[41] Playford is not currently generating and placing that plant in safe shut down mode would take 24 hours. On the best case scenario, Northern could be safely shut down prior to the industrial action commencing if the shut down process started on receipt of the notices. The best case scenario assumes that no problems arise during the shut down process - if problems do arise there is a risk that the shut down may not be completed before the action commences. If the employer immediately advised AEMO that it was shutting down the plant for reasons beyond its control I am satisfied that no penalties would be imposed by the industry regulator.
[42] There is likely to be sufficient reserve capacity from other NEM participants to cover the loss of generation from Northern at this time of year. However I also find that the loss of Northern, as a significant contributor to supply, does increase the risk of what Mr Moran described as “low probability - high consequence events”, that is, where a series of minor events occur in sequence that increases the risk of a major problem occurring. This risk increases exponentially the longer that Northern remains in shut down mode.
[43] Once in safe shut down mode, two Operators would be required to monitor alarms for Northern, Playford and Bairnsdale from the control room and another two Operators would be required to physically attend any issues with Northern and Playford. The chance of an alarm occurring with the plant in shut down mode is significantly reduced but not eliminated.
[44] Attendance by Operators is required 24 hours per day 7 days per week. 12 persons would be required to implement a workable roster for monitoring the plant in shut down mode - 4 for each of two 12 hour shifts per day plus reasonable time off. The availability of 12 suitably qualified replacement staff, available to commence at short notice, cannot be guaranteed. If this contingency of replacement staff is not available, the integrity of the plant and the safety of the remaining employees could be seriously compromised.
[45] The ‘capability’ of Northern refers to ancillary services it provides, under contract with AEMO, that are directed to maintaining network stability under steady and transient conditions. Northern’s generating units are particularly suited to the supply of these services as a result of their physical network location, their size, asset type and base load operation. The loss of this capability in shut down mode is one of the events that would increase the risk of a low probability high consequence event occurring.
Submissions
[46] Ms Smith submitted that the approach advanced by the unions is an incorrect basis on which to assess the adequacy of the notices. She submitted that the notices did not allow the employer to take appropriate defensive action because the timing, duration, nature and location of the action were not discernable from the notices. This left the employer guessing as to the when the action would take place, the configuration of the four hour stoppages and the circumstances or times or days which will produce “minimal or no effect on generation” as stated in the notices. It was suggested that that the notices conceal more than they reveal about the action to be taken. 15
[47] Ms Smith argued that the approach supported by the unions requires the employer to ‘overcompensate’ by responding to action that is not intended to be taken. 16 She highlighted the context in which the employer operates, submitting that a shutdown of the plant has consequences for other classifications of employee who may be stood down; for AEMO, other NEM participants and the security of the network; and for the safety of the employees and plant.
[48] It was submitted that in these circumstances the notice requirements of s.414(6) of the Act cannot be said to have been met; the industrial action is not protected; and the Tribunal is required to order that the industrial action not occur in accordance with s.418(1) of the Act.
[49] Mr Ats agreed that the adequacy of the notice is to be assessed in the context of the employer’s undertaking and having regard to the ability of the employer to take appropriate defensive measures. He submitted that the employer understood the consequences of the notices - that generation could not occur if actions 1. and 2. in the notices took place. Further he submitted that there is no evidence that the employer could not take appropriate defensive measures in response to items 3.- 7. of the ASU notice.
[50] Mr Ats highlighted that a number of the cases cited by the applicant concerned applications for interlocutory injunctions in the Federal Court and were decided on the basis of whether there was “a serious question to be tried” rather than having been finally determined by the Court.
[51] A number of propositions were advanced by Mr Ats that were said to arise from the case law as follows:
- If the employer was able to take defensive measures in response to a notice of industrial action, the only consequence of which is economic harm to the employer, then the defensive action is “appropriate defensive action”;
- In determining whether notice of industrial action is adequate, it may be possible to have regard to previous advices from a union; 17
- Davids Distribution Pty Ltd, supra, did not overturn the decision of North J at first instance as to the adequacy of the notice. His Honour had held that the level of specificity required in the notice was no more than to identify which specific element of industrial action, as defined in the Workplace Relations Act, 1996, was being taken; 18
- Giving effect to a plain reading of the words of s.414(6) of the Act, there is no general requirement to specify an end date of the notified industrial action, however a particular context may require an end date to be specified; 19 and
- Part of the employer’s consideration as the defensive action to take will include an assessment of the likelihood of the action being taken, and this might cover issues such as the possibility of agreement being reached, the likelihood that some or all employees will not participate in the action and the past practice between the parties as to bargaining and taking industrial action. 20
[52] Mr Ats was critical of the employer for not taking steps to secure replacement staff to enable the plant to be monitored in shut down mode, and submitted that on the evidence, the Tribunal can not be satisfied that replacement staff are not available. As such, no safety issues arise, the plant could be safely shut down in the notice period and the employer could fulfil its obligations to AEMO. The only consequence to the employer of taking the defensive action suggested by the unions is economic harm, and Mr Ats submitted that this does not constitute a ground to frustrate the taking of industrial action, since economic harm and inconvenience are often a consequence of protected industrial action.
[53] In reply, Ms Smith submitted that the unions’ case was based around one particular interpretation of the notices. Moreover, that ‘worst case scenario’ interpretation of industrial action urged on the employer by the unions is inconsistent with the notices pertaining to four hour stoppages, which state that the stoppages are to be taken “... at times which will have no or minimal effect on generation.” Finally, Ms Smith submitted that the Tribunal could not ignore the safety issues associated with the shut down and monitoring of the plant.
Consideration
[54] The case law relating to “appropriate defensive action” concerns defensive action that is appropriate to the notified action, and it is for this reason that a level of specificity is required in the s.414 notices. The level of specificity will depend on the nature of the undertaking and the context in which it operates.
[55] The employer is a major generator of electricity in South Australia. APS operates at high pressure and high temperatures and unless totally decommissioned requires the presence of suitably qualified Operators to operate, control the shut down and start up processes and to monitor the plant, whether generating or in safe shut down mode.
[56] To suggest, as the unions have in this case, that the employer should adopt the worse case scenario contemplated by the notices is problematic for a number of reasons. Firstly, the worst case scenario suggested by the unions is not consistent with the notices. Secondly, I have found on the evidence that there is potential for the safety of plant and employees to be compromised if suitably qualified replacement staff are not able to commence at short notice to monitor the control room and attend to any issues once the plant has been shut down. Thirdly, assuming the worst case scenario because the particulars of the industrial action are not apparent from the notices, gives rise to the likelihood that the employer will over-compensate by responding to action that is not intended to be taken. 21 Finally, Mr Ats’ proposition that if the only consequence of the defensive action is economic harm and inconvenience then it is appropriate defensive action, is not supported by any decisions.
[57] Some of the propositions advanced by Mr Ats with reference to various authorities, also requires comment. It is correct, as he submitted, that the decision of North J in so far as it related to a consideration of the specificity of notices, was not ‘over turned’ by the Full Bench in Davids Distribution Pty Ltd, since this was a point that was not required to determined on appeal. However, it is clear that that the Full Court rejected his Honour’s approach. 22 Without going to the detail of the other cases referred to by Mr Ats, I note that they were decided on the particular factual circumstances of the cases, including the nature of the industry and the particular alleged defect/s in the notices of industrial action.
[58] The interconnectedness of all participants in the NEM, the management by AEMO of supply to the network and the potential risks associated with a loss of capability if Northern is not generating, means that notices of industrial action require a level of specificity that the current notices lack. In the circumstances of this industry, the extent of the permutations and combinations of the four hour stoppages contemplated by the notices is too broad to enable the employer to take appropriate defensive action. I determine that the notices do not comply with the requirements of s.414(6) of the Act.
[59] I also adopt the reasoning in Alcoa, that the circumstances of particular cases may require that an end date of the industrial action be specified in the notice given to the employer. I consider that this is such a case for the reasons outlined above.
Is the industrial action taken in support of claims that are not permitted content?
[60] As noted at the commencement of this decision, the second leg of the employer’s argument in support of the s.418 order is that the action notified by the unions is in support of claims which do not pertain to the relationship between the employer and its employees. The employer argues that the unions’ claim (generally but unhelpfully referred to by the parties as the “supplementary labour claim”), impermissibly restricts the employer’s ability to engage outside labour to meet its operational needs and is therefore not a permitted matter.
[61] There was some argument between the parties about the actual claim being pursued by the unions, but the evidence is clear 23 that the claim currently being pursued is that annexed to Ms Jones’ witness Statement and marked JJ5 in these proceedings. I accept that in pursuing this claim the unions do not rule out the possibility for it to be amended in the context of the overall negotiations for a new agreement, but this claim is nonetheless one of the claims in support of which the unions notified the industrial action.
[62] The supplementary labour claim, headed Employment Security, Staffing Labour Levels, Mode of Recruitment and Replacement, is extensive. While not defined in the clause, I understand “supplementary labour” to refer to employees of labour hire companies; “contractors” refers to firms engaged by the employer to provide services under a contract for service arrangement; and “independent contractor” refers to individuals engaged under a common law contract for service. I will refer these categories in combination as “external labour”.
[63] The claim commences with a statement confirming the parties’ commitment to maximise permanent direct employment. It is convenient to identify the various provisions of the supplementary labour claim as follows:
(a) The current workforce will not be outsourced to a labour hire company during the life of the agreement;
(b) The Company agrees that it will not use contractors/labour hire companies or supplementary labour as a means of pursuing a reduction in wages and conditions of its employees or altering its commitment to maximising permanent employment wherever possible and maintaining a permanent workforce of full time and part time employees;
(c) The Company may from time to time use supplementary labour for the absence of direct employees on extended leave, temporary vacancies and peak workloads in areas normally staffed by direct employees;
(d) Direct employees will be given the option of working of overtime and/or being called back to work before external personnel are engaged;
(e) All supplementary labour will be engaged with a planned scope of work, commencement and departure dates;
(f) Where there is a need to engage supplementary labour for peak workload periods it will be accessed from ‘bona fide’ labour hire companies after consultation with the local enterprise agreement committee and relevant union/s. The Company will ensure such labour receives the same wages allowances and conditions as that provided in the agreement;
(g) The commitment to ‘parity’ of terms and conditions does not apply to contractors engaged under a contract for service arrangement;
(h) Where the Company chooses to let or re-let work to contract the Company will review its legislative obligations and the employee relations practices and policies of the contractor; it will consult with any potentially affected employees and their union prior to engagement of contractors; and it will engage contractors under the same terms and conditions of engagement as direct employees under the agreement;
(i) Where the Company seeks to engage independent contractors to perform work that may be undertaken by current or future direct employees under the agreement the Company must first consult with potentially affected employees and their union;
(j) The introduction of labour hire companies shall only occur after consultation with the appropriate union/s, where possible, at least 2 months beforehand. The parties will endeavour to resolve any concerns and as far as possible new labour hire companies will be introduced by agreement; and
(k) An annual review of outside labour will take place at all sites through the site consultative committee and any disputes will be dealt with in accordance with the dispute settling process of the agreement.
[64] It was argued that the claim prohibits or restricts the employer from engaging a labour hire company to perform the work, or part of it, of the current workforce and restricts the ability of the employer to engage or use supplementary labour other than in prescribed circumstances. In addition to the content of these specific provisions, Ms Smith argued that the claim should be assessed in its totality to understand the extent of the restriction on the employer’s ability to manage its business.
[65] Ms Smith contended that, based on the authorities, the requirements in order for a belief to be held to be reasonable are:
- It must be objectively verifiable and not a subjective assertion;
- There must be in existence facts which are sufficient to induce the state of mind in a reasonable person;
- The person forming the belief must act according to the rules of reason, applied objectively to verifiable facts; and
- A minimum standard of reasonableness or rationality requires the decision maker to be satisfied in good faith, and the decision maker cannot act arbitrarily, irrationally, capriciously or fancifully.
[66] In the circumstances of this matter, according to Ms Smith, the unions could not reasonably believe that the claim was a permitted matter. In this regard she referred to Mr White’s significant experience as an industrial officer; his experience of a conference before the Australian Industrial Relations Commission in 2004 where a supplementary labour claim was required to be modified; and the practice of unions to enter into deeds with employers to prescribe matters, including supplementary labour provisions, that would otherwise fail to be approved in an enterprise agreement.
[67] Mr Ats argued that a claim which restricts the actions of the employer, in the sense that the employer may not have the latitude to act as it may otherwise wish, is not of itself impermissible. He provided a comparison document 24 which showed the provisions of the supplementary labour claim (JJ5) against a clause of a similar nature approved by the Tribunal in the SPI Torrens Island Pty Ltd Agreement 2008 (the Torrens Island Agreement). He submitted that while JJ5 was a more extensive clause, the key elements of it had either been previously approved by the Tribunal, are matters that related to the job security of employees and/or do not impermissibly restrict the employer’s use of external labour.
[68] Also in relation to the issue of a reasonable belief, Mr Ats referred to Mr White’s evidence that the process of developing JJ5 involved incorporating clauses from the Torrens Island Agreement and clauses provided by other unions (involved in the current bargaining round with the employer) that had been approved by the Tribunal or that Mr White understood had not been challenged by employers. Mr Ats contended that there was no evidence that Mr White did not hold a reasonable belief that the clause was a permitted matter.
Consideration
[69] The relevant sections of the Act in determining this matter are as follows:
“172 Making an enterprise agreement
Enterprise agreements may be made about permitted matters
(1) An agreement (an enterprise agreement) that is about one or more of the following matters (the permitted matters) may be made in accordance with this Part:
(a) matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement;
(b) matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement;
(c) deductions from wages for any purpose authorised by an employee who will be covered by the agreement;
(d) how the agreement will operate.
Note 1: For when an enterprise agreement covers an employer, employee or employee organisation, see section 53.
Note 2: An employee organisation that was a bargaining representative for a proposed enterprise agreement will be covered by the agreement if the organisation notifies FWA under section 183 that it wants to be covered.”
“408 Protected industrial action
Industrial action is protected industrial action for a proposed enterprise agreement if it is one of the following:
(a) employee claim action for the agreement (see section 409);
(b) employee response action for the agreement (see section 410);
(c) employer response action for the agreement (see section 411).”
“409 Employee claim action
Employee claim action
(1) Employee claim action for a proposed enterprise agreement is industrial action that:
(a) is organised or engaged in for the purpose of supporting or advancing claims in relation to the agreement that are only about, or are reasonably believed to only be about, permitted matters; and
(b) is organised or engaged in, against an employer that will be covered by the agreement, by:
(i) a bargaining representative of an employee who will be covered by the agreement; or
(ii) an employee who is included in a group or groups of employees specified in a protected action ballot order for the industrial action; and
(c) meets the common requirements set out in Subdivision B; and
(d) meets the additional requirements set out in this section.”
[70] Action in support of claims that are not permitted content under s.172(1)(a) is not employee claim action under s.409(1)(a) and as such the action is not protected industrial action under s.408 of the Act.
[71] In Airport Fuel Services Pty Limited v Transport Workers’ Union of Australia, 25 a Full Bench considered various case law concerning permitted matters and the provisions of the Explanatory Memorandum to the Fair Work Bill 2008 (the Explanatory Memorandum) in respect to s.172(1)(a) and (b) of the Act. The Full Bench stated, in relation to permitted matters in the context of matters pertaining to the relationship between the employer and employees:
“[22] In summary, from the legislation, the jurisprudence and the Explanatory Memorandum to the Fair Work Bill 2008 it can be concluded that:
• “Permitted matters” are “matters pertaining to the relationship between an employer that will be covered by the (enterprise) agreement and that employer’s employees who will be covered by the agreement”, “matters pertaining to the relationship between the employer … and the employee organisation … that will be covered by the agreement”, matters concerning employee authorised deductions from wages and matters concerning how the agreement will operate.
• It is intended that terms relating to conditions or requirements about employing casual employees or engaging labour hire or contractors, which sufficiently relate to employees’ job security such as a term which provided that contractors must not be engaged on terms and conditions that would undercut the enterprise agreement, would be within the scope of permitted matters which are matters pertaining to the employment relationship.
• It is not intended that “terms that would contain a general prohibition on the employer engaging labour hire employees or contactors” or “terms that would require an employer to engage or not engage particular clients, customers or suppliers who had agreed to commit to certain employment, environmental or ethical standards (unless, e.g., such a terms [sic] was directly related to employees’ health and safety)” would be within the scope of permitted matters which are matters pertaining to the employment relationship.
• Terms restricting or qualifying the employer’s right to use independent contractors are not matters pertaining to the employment relationship.
...” (footnotes deleted)
[72] In Re Schefenacker Vision Systems Australia Pty Ltd, AWU, AMWU Certified Agreement 2004 26 (Schefenacker) a Full Bench of the AIRC reviewed, among other clauses in the relevant agreement, a provision dealing with employees of labour hire agencies to determine whether it was a matter pertaining to the relationship between employers and employees. Schefenacker concerned an appeal against the decision at first instance that refused the certification of the agreement on the basis that one or more terms did not pertain to the relationship between the employer and its employees. A number of the provisions of the labour hire clause in Schefenacker deal with issues similar to those which arise in JJ5.
[73] The relevant clause considered in Schefenacker is in the following terms:
“17.0 EMPLOYEES OF LABOUR HIRE AGENCIES
17.1 The employer and unions confirm commitment to permanent direct employment, but also recognise that labour flexibility is an ongoing requirement to achieve job security and productivity requirements. The parties agree to the following criteria regarding the engagement of employees of labour hire agencies.
17.2 The agreed maximum level of employees of labour hire agencies will be 20% of total weekly paid employees. The company agrees to consult with shop stewards when the percentage is in excess of 20% as to the reasons the additional labour hire agency employees are required.
17.3 There will be a formal quarterly review of labour hire agency employees through the consultative committee. This meeting will review both the total number of labour hire agency employees and their length of service.
17.4 Employees of labour hire agencies will not be considered for permanent employment until the total percentage of labour hire agency employees exceeds 20% of total weekly paid employees. When the 20% threshold is exceeded, employees of labour hire agencies will be offered permanent employment based on specific positions and shifts identified as being needed by the company.
17.5 Employees of labour hire agencies who are offered permanent employment will be required to serve a maximum of 3 months probationary period before permanency is confirmed. Offers of employment will be prioritised based on length of service.
17.6 The company will instruct the labour hire agencies to increase the wage rate of their employees working at Schefenacker Vision Systems Australia by the same percentage that is listed in this Agreement.”
[74] At first instance it was held that sub-clauses 17.1-17.5 inc, were matters pertaining, but 17.6 did not pertain to the relationship between the employer and its employees because its effect on employees was indirect and the sub-clause went to the contractual relationship between the company and its contractors. 27 On appeal, sub-clauses 17.1-17.5 were confirmed as matters pertaining. The Full Bench stated:
“We agree with the Senior Deputy President, for the reasons he gave, that the first four sub-clauses pertain to the relationship between Schefenacker and its employees. The number of labour hire employees engaged, it is to be inferred, is likely to have a direct effect upon the amount of work available to Schefenacker’s employees and, ultimately, upon the number of employees Schefenacker engages directly. While it is true that cl.17.2 and cl.17.4 may be construed as a partial prohibition on the use of labour hire employees, they are also designed to increase permanent employment by placing obligations upon the employer to engage more permanent employees in the circumstances specified.
Clause 17.5 imposes obligations on Schefenacker in relation to its own employees and clearly pertains to the relevant relationship.” 28
[75] Overturning the decision at first instance in relation to sub-clause 17.6, the Full Bench stated:
“... The intent of cl.17.6 is that employees of labour hire agencies working at Schefenacker should receive the same increase as the Schefenacker employees will receive under the agreement. This is sought to be achieved by obliging Schenefacker to give that directive to the agencies. Whether that means will be effective or not, the intent is that the relationship between the cost of labour supplied by the agencies and the cost of the labour of Schefenacker’s employees will be relevantly the same after the agreement as it was before. For that reason we think that the sub-clause pertains to the relationship between Schefenacker and its employees. It directly concerns the security of employment of the employees covered by the agreement.” 29
[76] Turning to the particular provisions of JJ5, it is apparent that paragraph (a) refers to the current employees of the employer, and a claim that such employees are not ‘outsourced’. This clause is clearly directed to the job security of the existing employees and therefore concerns the relationship between the employer, in its capacity as an employer and the employees, in their capacity as employees.
[77] Paragraph (b) contains two broad stipulations. The first is that the company will not use external labour as a means of reducing wages and conditions of existing employees. This is a permitted matter as it is directed to protecting the wages and conditions of employees. The second stipulation places certain requirements on the employer to maintain its commitments to a permanent workforce and not to use external labour to undermine these commitments. In this regard it is not an impermissible restriction. It does not restrict or qualify the employer’s right to use external labour and is directed to the job security of employees.
[78] Paragraph (c) sets out the circumstances in which supplementary labour may be utilised. Mr Ats compared this particular provision with the equivalent wording in the Torrens Island Agreement 30 which states that:
“SPI Torrens Island may from time to time decide at their discretion to utilise supplementary labour for:
• The absence of SPI Torrens Island employees on leave;
• Work temporary vacancies; and
• Peak workloads in areas normally satisfied by SPI Torrens Island employees.”
[79] The deletion of the words “at their discretion” in JJ5 does not substantively distinguish this provision to that set out above. The employer’s discretion in the Torrens Island Agreement is directed to whether they utilise supplementary labour for the three circumstances identified, it is not a discretion, at large, to utilise supplementary labour. The identification of the circumstances in which the employer can utilise supplementary labour is a corollary to the provision that commits the employer to maximise its permanent workforce.
[80] I respectfully adopt the reasoning of the Full Bench in Schefenacker, that while these provisions may be construed as a partial restriction on the use of labour hire employees, the overall intent is to maximise permanent employment. I interpose that the provision in Schefenacker imposed limits on the percentage of labour hire employees that could be engaged, and is arguably more restrictive than the equivalent provision in JJ5.
[81] Paragraph (d) is directed to the income of the employer’s direct employees. Paragraph (e) concerns the parameters under which supplementary labour is engaged, and does not restrict either the scope of the work or the period of engagement.
[82] Paragraphs (f), (g), (h), (i) and (j) place the following requirements on the employer:
- To consult site committees, affected employees and/or the relevant unions prior to the introduction of supplementary labour; contractors, independent contractors or new labour hire companies;
- To ensure that supplementary labour and contractors 31 receive the same terms and conditions as direct employees;
- An obligation to ensure labour hire companies are “bona fide” and to review the employee relations practices and policies of contractors; and
- To review its own legislative obligations in respect to the engagement of contractors.
[83] The first requirement concerns the process to be adopted by the employer in introducing external labour. It is directed to ensuring the integrity of the commitments to maximise permanent employment and the provision of job security for employees. The second requirement is also a matter concerning the job security of employees. 32
[84] The third requirement may give rise to issues associated with the employer’s legal capacity and ability to “ensure” labour hire companies are “bona fide” and to review the employment practices of contractors, but this does not of itself mean that the matters are not permitted content. The extent to which a provision that appears to regulate the contractual relationship between the employer and external providers of labour pertains to the employment relationship, is a question of degree. 33 Read in the context of the provision (JJ5) as a whole, this is a matter that addresses job security of employees. This is a provision that seeks to prevent the engagement of external labour that has gained a competitive advantage through applying lesser terms and conditions than that of the direct employees.
[85] The final requirement, above, that the employer review its own legislative obligations in relation to the engagement of contractors, is somewhat nebulous in its terms. To the extent that the legislative obligations go to matters such as health and safety requirements, this has a direct relationship to the health, safety and welfare of the direct employees who work with contractors or who are dependent on the work of contractors to complete their own work and is a permitted matter.
[86] Paragraph (k) deals with a site by site “annual review” of external labour “in order to keep up with any changes in the employment situation” and any disputes are to be dealt with in accordance with the dispute settling provision. 34 The nature of the disputes that are elevated to the dispute settling procedure are not specified, however, as the provision concerns a review of the changes that have taken place it follows that disputes would be limited to actions taken by the company in the past. It does not seek to impermissibly restrict or limit the engagement of external labour in the future.
[87] Having reached this view in relation to JJ5 it is unnecessary to make a determination on whether the unions reasonably believed JJ5 to be about permitted matters or the other alternative argument advanced by the unions.
Conclusion
[88] The employer’s argument that the notified industrial action is in support of claims that are not permitted content, is rejected. For the reasons set out earlier in the decision, I conclude that the notices issued by the ASU and the AMWU, TSA Division, do not comply with the notice requirements of s.414(6) of the Act and that the action is therefore not protected industrial action. As required by s.418(1) of the Act I will make an order that the industrial action must not occur. As requested by the unions, I will hear from the parties as to the form of the order.
DEPUTY PRESIDENT
Appearances
Kaye Smith on behalf of Flinders Operating Services Pty Ltd T/A Alinta Energy
Michael Ats on behalf of Australian Municipal, Administrative, Clerical and Services Union & Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU)
1 Ex A1.
2 O’Sullivan v Farrel (1989) 168 CLR at 216
3 Re Kellog Brown and Root Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005)139 IR 34 at pp40-41
4 Applicant’s Outline of Submissions, 20 June 2011
5 PR510708
6 Messes Moran and Kuys
7 Davids Distribution Pty Ltd v National Union of Workers, (1998-99) 91 FCR 463 at 495.
8 Witness Statement Ex A2
9 Witness Statement Ex A3
10 Witness Statement Ex A4
11 Telstra Corporation Limited v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union, [2009] FWAFB 1698 at para [12]
12 (1998-99) 91 FCR 463 at para 87
13 Adelaide Brighton Cement v Australian Workers Union (2002) 113 IR 104 at para 18
14 National Electricity Rules made under National Electricity Law
15 Telstra v CEPU, supra, at PN [16]
16 CSBP Ltd v Liquor Hospitality and Miscellaneous Union, (2007) 162 IR 81 at para 94
17 CFMEU and CEPU v Curragh Queensland Mining Ltd, [1998] FCR 1231 at p19
18 At para 82
19 Alcoa Australia v Australian Workers Union, (2010) 196 IR 103 at paras 33, 34
20 Re: Boral Resources (NSW) Pty Ltd, [2010] FWAFB 2010 at PN [14]
21 CSBP v LHMU, supra
22 At para 86. The Full Bench, per Wilcox and Cooper JJ, commence this paragraph with, “Another reason for rejecting North J’s approach is .....”
23 White XXN, PN [4350], [4351]
24 Ex R6
25 [2010] FWAFB 4457
26 (2005) 142 IR 289
27 Schefenacker, supra, at para 73
28 Ibid, at paras 79, 80
29 Ibid, at para 83
30 At clause 13.1
31 I understand that this is a reference to independent contractors since JJ5 specifically excludes any notions of parity for contractors.
32 Item 672 of the Explanatory Memorandum, see also Liquor Hospitality and Miscellaneous Union, [2009] FWA 920 at para [36]
33 Schefenacker at para 78
34 Final paragraph, JJ5
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