Fonterra Brands (Australia) Pty Ltd v AMWU
[2015] FWCFB 3912
•22 JUNE 2015
| [2015] FWCFB 3912 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604 - Appeal of decisions
v
"Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU)
(C2015/839)
VICE PRESIDENT WATSON | MELBOURNE, 22 JUNE 2015 |
Appeal against decision [[2015] FWC 1959] of Commissioner Ryan at Melbourne on 31 March 2015 in matter number C2014/1548 - Classification of Line Operators under the Enterprise Agreement - Interpretation of Enterprise Agreement - Correct classification of employees - Permission to appeal - Fair Work Act 2009, ss. 739 and 604.
Introduction
[1] On 31 March 2015, Commissioner Ryan issued a decision pursuant to s.739 of the Fair Work Act 2009 (the Act). The decision dealt with a number of matters arising from a reorganisation of the Echuca operations of Fonterra Brands (Australia) Pty Ltd (Fonterra). On 21 April 2015, Fonterra lodged a Notice of Appeal against the decision.
[2] In a separate decision the Commissioner handed down a decision regarding the calculation of severance pay for the redundant employees. A decision arising from an appeal against that decision was handed down by a Full Bench on 27 May 2015. 1
[3] At the hearing of the appeal on 10 June 2015, Mr C. O’Grady appeared for Fonterra and Mr D. Vroland appeared for the Australian Manufacturing Workers’ Union (the AMWU).
Decision under Appeal
[4] The decision of the Commissioner relates to an application made by the AMWU pursuant to s.739 of the Act for the Fair Work Commission (the Commission) to deal with a dispute in accordance with clause 6.5 of the Fonterra (Echuca) Agreement 2013 Part II (the Agreement).
[5] The application was made in relation to a restructure that was undertaken by Fonterra in which it sought to introduce a number of changes that would significantly reduce production and staffing levels arising from lower demand for the products produced at the Echuca plant. As part of this restructure Fonterra sought to:
- Rearrange its production schedule from 4 shifts to 3 shifts;
- Make a number of employees redundant;
- Put in place a new management position (Assistant Shift Manager) with responsibility for supervising production employees;
- Eliminate the position of Team Coordinator, and
- Reallocate the duties of Team Coordinators to either the Assistant Shift Manager or Line Operators.
[6] The issues raised in the AMWU’s application related to Appendix 2 - Classification Structure of the Agreement and Clause 28 - Wage Maintenance.
[7] The Commissioner held a conciliation conference on 4 September 2014 and the parties discussed issues relating to whether the Assistant Shift Manager position was covered by the Agreement and what was the appropriate classification and wage rate of Line Operators under the new structure. The parties were unable to reach a resolution and the dispute was subsequently listed for arbitration before the Commissioner.
[8] During the progress of the dispute, but not as part of the original dispute application, the AMWU raised two further issues which concerned:
- The application of Clause 5 - Consultation and Productivity to the changes which Fonterra sought to put in place; and
- The obligations imposed by Clause 5 in respect of the changes which Fonterra sought to put in place in respect of consultation, wage maintenance, trialling of changes and employee agreement to change.
[9] The Commissioner found that he had jurisdiction to arbitrate a dispute over the interpretation, application and process of implementation of Clause 5 of the Agreement and that the clause may apply to the various changes which Fonterra sought to put in place as part of the restructure. The parties submitted questions for resolution by the Commission in the arbitration although the issues and the wording of the questions submitted by the parties were not identical. The failure to identify agreed questions which legitimately fell for determination complicated the hearing process and the resolution of the dispute.
[10] The Commissioner’s conclusions are expressed in the following passage from his decision:
“[144] Each of the questions posed by the parties is to be answered as follows:
Question 1. What part of the current team coordinators’ role as set out in the current relevant position description will be performed by the newly proposed assistant managers?
Answer: Exhibit R5 identifies the specific Role Accountabilities currently forming part of the Position Description of the position Production Operator (TC) which will be performed by the Assistant Shift Manager. A differently expressed list of functions currently performed by the Team Co-ordinator but which will be performed by the Assistant Shift Manger was identified in Attachment DW5 to ExhibitR3. The answer to the question lies in both Exhibit R5 and Attachment DW5 to Exhibit R3.
Question 2. Which class of employees, if any, will perform the residual part of the current team coordinators’ roles and to what extent?
Answer: Where the work performed requires the skill level of a level 8 employee then an existing level 8 employee can continue performing that work. Additionally where the work performed requires the skill level of a level 8 employee then where existing level 6 employees are required to exercise skills currently at level 8 then such employees would have to be paid at the level 8 rate. Where the existing work of a current level 8 employee only requires a skill level of a level 6 employee then either an existing level 8 employee or an existing level 6 employee would be capable of performing the work.
Question 3. Are the new Assistant Shift Manager positions covered by the classification levels in the 2013 Agreement?
Answer: No
Question 4. What is the appropriate classification of the remaining Line Operators under the new structure?
Answer: After the introduction of the new Assistant Shift Manager positions the appropriate classifications for Line Operators will be both Level 8 and Level 6. The actual classification of each Line Operator will depend on whether the Line Operator is only performing the duties/jobs described in the Position Description for a Production Operator - Grade 6 as at the time the Agreement was signed or whether the Line Operator is performing duties/jobs which are additional to those duties/jobs described in the Position Description for a Production Operator - Grade 6 as at the time the Agreement was signed and which additional duties/jobs were identified in the Role Accountabilities in the Position Description for a Production Operator (TC).
Question 5. Has Fonterra failed to properly consult with the AMWU in accordance with subclause 5.1.1?
Answer: This question is meaningless given that the requirement to consult under clause 5 of the Agreement is to be found in sub-clause 5.1. As paragraph 5.1.1 is but a sub-set of the requirements for consultation to occur under sub-clause 5.1 the only meaningful question could be: Has Fonterra failed to properly consult with the AMWU in accordance with sub-clause 5.1? The answer to this broader question is: Yes
Question 6. Is Fonterra barred from implementing the proposed restructure changes by virtue of clause 5.4?
Answer: No. Clause 5.4 ceased to have any effect once an “issue” was taken to theFWC by the AMWU under sub-clause 5.5 of the Agreement.
Question 7. Is Fonterra required to maintain change-affected employees’ ‘average ordinary weekly
Answer: The requirement to maintain an employee’s average weekly earnings onlyarises from the language of paragraph 5.1.4 which operates to constrain the matters that can be subject of consultation under sub-clause 5.1 of the Agreement. Clause 5.1 ceased to have any effect once Fonterra made a definite decision to introduce a major change which required the reduction in pay of persons currently employed as Team Leaders. Furthermore the answers given to questions 1, 2 and 4 above appropriately deal with the subject matter of the appropriate wage to be paid to productionemployees.”
Appeal Grounds
[11] The grounds of appeal allege that the Commissioner adopted an erroneous construction of various provisions of the Agreement and that he did not have regard to the arguments and evidence advanced by Fonterra. More specifically Fonterra contends that the Commissioner erred in finding that:
- Line Operators should be reclassified to Team Coordinators;
- Working on different production lines attracts reclassification;
- He had jurisdiction to arbitrate over the application of Clause 5;
- Clause 5 applied to the changes being introduced as a result of the restructure; and
- Fonterra failed to consult/comply with Clause 5.
[12] In reality a number of aspects of the decision are challenged on grounds that were developed in submissions in the appeal. It is convenient that we identify the parts of the decision that are now subject to challenge and consider the appeal grounds that relate to those parts of the decision.
[13] The dispute before the Commissioner required an interpretation of the terms of the Agreement. In our view, none of the parts of the decision subject to appeal involved the exercise of a discretion. Therefore we need to consider whether there is a basis for granting permission to appeal, whether the Commissioner was correct in the conclusions he reached and whether the appeal should be allowed. If the appeal is allowed we need to consider how the dispute should be resolved.
Appropriate Classification of Line Operators
[14] The classification structure of the Agreement is as follows:
“APPENDIX 2- CLASSIFICATION STRUCTURE
1.1 The classification structure for Food Award employees is as follows:-
Classification | % of C10 Base Trades Rate | Positions |
Level 8 | 100% | Team Co-ordinator, In-line Quality Control, Despatch Co-ordinator |
Level 7 | 95.88% | Yoghurt Makers |
Level 6 | 92.4% | All Operators, Line Cleaner |
Level 5 | 89.9% | Material Handler I Fork Lift Driver, Production Clerk |
Level 4 | 87.4% | Yard Cleaner |
Level 3 | 84.7 | Packer I Stacker |
1.2 Other duties/jobs not included in the above classification structure, at the time of signing this Agreement, which may arise in the future will be classified in consultation with, and agreement between the company its employees and their representatives.
1.3 Employees will be classified at the wage rate for the work performed under the above classification structure whether training has been completed or not.”
[15] There is no explanation of the classification levels and no classification definitions in the Agreement. Question 4 of the Commissioner’s summary raised the question of the appropriate classification under the Agreement of Line Operators consequent upon the reallocation of duties from the discontinued Team Coordinator role. The resolution of this dispute called for an interpretation of the Agreement and the determination of the correct classification of Line Operators having regard to the modified requirements of the role and the requirements of the classifications in the Agreement.
[16] The task of determining the appropriate classification involves making findings of fact as to the requirements of the roles and applying those facts to the proper scope of the Agreement classifications. Often this is a difficult task, especially when the agreement operates on notions implied by practice and local understandings. Further, duties may be comprehended by more than one classification or be outside the scope of all classifications. In such circumstances it is necessary to determine the substantial character of the role by reference to the level of responsibilities and the duties of the position to determine the most appropriate classification from the range of classifications in the agreement.
[17] If a role does not substantially fall within the scope of any classification the consequence is that the agreement is silent on the rate of pay for that role, and depending on the scope of the agreement, the role may fall outside the agreement entirely. The Commissioner found as much in relation to the Assistant Shift Manager position. That part of his decision is not subject to appeal.
[18] The issue regarding Line Operators was of a different nature. The evidence led by Fonterra concerning the reallocation of Team Coordinator duties included the following summary:
[19] It is clear from the evidence that Team Coordinators were equivalent to what are often termed leading hands. They were part of the team of Line Operators and performed line operator duties. In addition to those duties, they performed certain leadership, administrative and coordination tasks. The elimination of the position led to the transfer of coordination and leadership functions to the Assistant Shift Manager. Data entry functions that were previously performed by the Team Coordinators, and to a lesser extent by Line Operators, were devolved to Line Operators.
[20] The Commissioner’s decision on this matter is contained in the answer to Question 4 set out above. In the Commissioner’s decision the matter is considered as Issue 2. The Commissioner’s reasoning is to be found in the following passages of his decision:
“[71] Exhibit R5 notes that the existing Line Operator Position Description requires that a Line Operator “maintains FAST recording system for downtime.” Exhibit R5 further notes that with the removal of the Team Co-ordinator position the Line Operator will be required to perform a “New task (which) is to enter data into SAP - consumption of raw materials and running of variance report and closing off FAST at end of shift”. The duty/job which Line Operators will be required to perform in the future is a duty/job which has been assessed under the current classification structure at Level 8 and which is not part of Level 6. Whilst clause 1.2 of Appendix 2 provides for a mechanism to have Level 6 include the new task being required of Line Operators until such time as the new task is made part of Level 6 then any Line Operator performing the new task will be performing a duty/job which is part of Level 8 and which will attract Level 8 rates of pay.
...
[82] As can be seen from the three role accountabilities examined the role accountability of the Team Co-ordinator has a level of responsibility which is not present in the similar role accountability of the Line Operator. Therefore if Fonterra requires the Line Operators to carry out the role accountabilities of the Team Co-ordinator which are similar but not the same as the role accountabilities of the Line Operator then it would appear to be obvious that Fonterra want the Level 6 Line Operators to perform work which is classified at Level 8.
[83] Once again the logic of the operation of clause 1.3 of Appendix 2 of the Agreement would require that Fonterra pay such Line Operators at the Level 8 rate of pay.”
[21] The effect of the Commissioner’s decision appears to Fonterra to be that consequent upon the elimination of the 12 Team Coordinator positions and the requirement that Line Operators perform the additional duties summarised above, it is now required to pay the 49 Line Operators at the Level 8 of the classification structure ($1,389.63 per week) rather than the Level 6 amount ($1,284.01 per week).
[22] The second ground of appeal appears to overlap with ground one and similarly challenges the conclusion that the 49 Line Operators should be reclassified to Level 8. The aspects of the Commissioner’s decision challenged are paragraphs [84]-[87]. As we read those aspects of the Commissioner’s decision however, and paragraph [88], the Commissioner is not determining any current dispute in relation to these issues. We do not consider it necessary to deal further with these passages beyond what we intend to say regarding the Commissioner’s answer to Question 4.
[23] In our view, the evidence in the matter does not establish a basis for the Commissioner’s conclusion regarding Question 4. If the task of considering the revised requirements of the Line Operator role is considered against the classification titles and previous position descriptions, it is clear in our view that the appropriate classification for the Line Operator in the Agreement is Level 6. The devolution of additional duties, as described in the evidence does not, in our view, lead to a finding that any different classification level is more appropriate or more accurately applies to the revised role.
[24] That is not to say that some future revision to the classification structure may not be appropriate. A net addition to work value of a position may give rise to a case for change in the level of wages or relativities between classifications. However this is a matter for the parties to consider by way of a variation of the Agreement at the time of renewal or otherwise. That is a different role to the task of determining the dispute before the Commission by interpreting the proper classification under the existing terms.
[25] For these reasons we grant permission to appeal, allow the appeal, quash the Commissioner’s decision in relation to this issue and determine the dispute over the correct classification of Line Operators by concluding that consequent upon the reorganisation, the appropriate classification for Line Operators under the Agreement continues to be Level 6.
Application of Clause 5
[26] The remaining grounds of appeal relate to Clause 5 of the Agreement. Clause 5 contains procedures in relation to continuous productivity improvement. Fonterra contends that the Commissioner erred in arbitrating over this clause, erred in finding that it applied to the significant reorganisation involved at Echuca, and erred in finding that Fonterra had failed to consult in accordance with Clause 5. It contends that the reorganisation was a major change and is covered by alternative consultation procedures in Clause 21 of the Agreement. Fonterra contends that the answers to questions 5, 6 and 7 arise from these errors.
[27] We note the following passages from the Commissioner’s decision:
“[140] Clause 5.1.4 cannot operate to prevent Fonterra from proposing a change which will achieve continuous productivity improvement but which is explicitly predicated upon there being a cut in the wages of employees. The outcome of such a proposed change means that the change would have significant effects on the relevant employees and would be a matter best dealt with under clause 21.
[141] Clause 21 clearly comprehends the possibility of an employees’ wage being reduced. The requirement that an employer consider measures to mitigate the consequences of change may mean that instead of terminating employees the wages of employees might be reduced.
[142] The interesting crossover of clause 5 and clause 21 is found in the wording of each clause. Clause 5 clearly permits Fonterra to propose a change which will achieve continuous productivity improvement and which may include a proposed cut in the average ordinary weekly wages exclusive of any shift allowance. Clause 5 would apply in relation to consultation about such a proposed change but clause 5 would not allow the implementation of a change which will reduce an employee’s average ordinary weekly wages exclusive of any shift allowance. As soon as Fonterra make a decision to introduce a change which results in a reduction to an employee’s average ordinary weekly wages exclusive of any shift allowance, then clause 21 applies.
[143] In the present matter Fonterra have made a definite decision to remove the Team Co-ordinator positions from each production line and to replace the Team Co-ordinator with a Line Operator. Even though the changes have not yet been implemented the making of the definite decision triggers the operation of clause 21 and in relation to the application in this matter and the parties agreement to bypass conciliation and proceed to arbitration then the Commission does have the power under clause 6 of the Agreement to arbitrate the matter in dispute including determining the questions as to the classifications (and correspondingly the rates of pay) of employees to be employed on the production lines after the change is implemented.”
[28] It appears to us that in this passage, and the answers to questions 5-7, the Commissioner was acknowledging that Clause 21 applies to the reorganisation and Clause 5 does not. We agree with such a construction. The concerns of Fonterra are therefore misplaced and do not give rise to any basis for permission to appeal being granted in relation to these aspects of the decision.
Conclusion
[29] As stated above, we grant permission to appeal in relation to grounds 1 and 2 of the appeal, allow the appeal, quash the relevant parts of the decision of the Commissioner and determine the dispute about the appropriate classification for Line Operators under the Agreement by determining that the appropriate classification is Level 6.
VICE PRESIDENT
Appearances:
Mr C. O’Grady, of counsel, with Mr T. Pick for Fonterra Brands.
Mr D. Vroland with Mr J. Hefford for the Australian Manufacturing Workers’ Union.
Hearing details:
2015.
Melbourne.
10 June.
Final written submissions:
Fonterra Brands on 15 May 2015.
Australian Manufacturing Workers’ Union on 4 June 2015.
1 [2015] FWCFB 3423.
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