Gareth Lloyd v Australia Western Railroad Pty Ltd T/A ARG an Aurizon Company

[2016] FWC 5568

[2016] FWC 5568

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Gareth Lloyd
v
Australia Western Railroad Pty Ltd T/A ARG an Aurizon Company
(C2015/6557)

COMMISSIONER WILLIAMS PERTH, 12 AUGUST 2016

Application to deal with a dispute - jurisdiction.

[1] This decision concerns an application made under section 739 of the Fair Work Act 2009 (the Act) by Mr Gareth Lloyd (Mr Lloyd or the applicant) who is represented by the Australian Rail, Tram and Bus Industry Union, West Australian Branch (the Union). The respondent is Australia Western Railroad Pty Ltd T/A ARG an Aurizon Company (Aurizon or the respondent).

Background

[2] The dispute was raised under clause 45−Resolving Differences of the Aurizon (Western Australia) Rail Operations Enterprise Agreement 2014 [AE410544] (the Agreement).

[3] The dispute relates to the disciplinary measure that Aurizon has taken against an employee, Mr Lloyd, following an investigation into an incident. The disciplinary measure was to impose a seven day suspension from duty without pay.

[4] The Union seeks:

(a) a declaration that the disciplinary measure was unfair, unreasonable and harsh in the circumstances;

(b) an order that the applicant [be] reimbursed for his losses arising from the disciplinary measure; and

(c) any other orders the Commission deems appropriate.

[5] The matter was dealt with in conciliation but was not resolved.

[6] The Union has sought for the Commission to arbitrate the dispute.

[7] Aurizon object to the Commission arbitrating the dispute on the ground that what the Union seeks is beyond the Commission’s jurisdiction.

[8] The parties have provided a set of agreed facts and written submissions regarding Aurizon’s jurisdictional objection.

The agreed facts

[9] The applicant is employed by the respondent as a Locomotive Driver.

[10] The applicant has been employed by the respondent since 6 February 2012.

[11] At all times material to this application the Agreement applied to the applicant’s employment.

[12] On 29 August 2015, the applicant was working with Driver Mr Jacob Enslin as a member of the crew of train number 7721.

[13] At approximately 11.13 a.m., train 7721 passed a signal at red (the Incident).

[14] Passing a signal at red is known within the rail industry as a SPAD (signal passed at

danger).

[15] At the time of the Incident, Driver Enslin had charge of the operation of the train and the applicant was the Driver Assisting. The Driver Assisting is also known as the “second

person”.

[16] The applicant is qualified in railway safeworking.

[17] The respondent has a Standard Operating Procedure – SOP13-120 Rev 3 – Observance and Reaction to Signals (SOP13-120), which was in effect at the time of the Incident.

[18] At all material times SOP13-120 applied to the applicant.

[19] The respondent conducted a disciplinary investigation in relation to the Incident.

[20] The outcome of the disciplinary process was that Driver Enslin and the applicant were each suspended from duty without pay for a period of one week. The period of suspension commenced from 4 September 2015. Further, Driver Enslin and the applicant were required to undergo reassessment in the requirements of SOP13-120.

[21] On or about 8 September 2015, the applicant lodged with the respondent a Resolving Differences Notification Form under subclause 45.15 of the Agreement (Resolving Differences Notification).

[22] The dispute raised by the applicant was not resolved at the workplace level.

[23] On or about 19 November 2015, the applicant referred the dispute to the Commission in accordance with subclause 45.4 of the Agreement.

[24] The applicant disputes the disciplinary measure taken against him of suspension from duty without pay for one week.

[25] The applicant seeks a declaration from the Commission that the disciplinary measure was unfair, unreasonable and harsh in the circumstances.

[26] The applicant seeks an order that he be paid wages lost as a result of his suspension from duty without pay.

[27] The applicant does not dispute the factual findings made during the disciplinary process.

The legislation

[28] The relevant sections of the Act are set out below.

“739 Disputes dealt with by the FWC

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

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

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

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

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

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

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

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

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

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

“194 Meaning of unlawful term

A term of an enterprise agreement is an unlawful term if it is:

(a) a discriminatory term; or

(b) an objectionable term; or

(ba) a term that provides a method by which an employee or employer may elect (unilaterally or otherwise) not to be covered by the agreement; or

(c) if a particular employee would be protected from unfair dismissal under Part 3 2 after completing a period of employment of at least the minimum employment period—a term that confers an entitlement or remedy in relation to a termination of the employee’s employment that is unfair (however described) before the employee has completed that period; or

(d) a term that excludes the application to, or in relation to, a person of a provision of Part 3 2 (which deals with unfair dismissal), or modifies the application of such a provision in a way that is detrimental to, or in relation to, a person; ...”

Terms of the Agreement

[29] The relevant terms of the Agreement are set out below.

“14. DISCIPLINARY MATTERS

14.1 Disciplinary measures that Aurizon may take against an employee include:

14.1.1 a caution or reprimand;

14.1.2 a temporary reduction in position, classification and pay for a period of up to six months;

14.1.3 suspension from duty without pay for a period of up to two weeks;

14.1.4 dismissal with or without notice as applicable.

14.2 Pending the outcome of the disciplinary process employees may be:

14.2.1 withdrawn from the operating roster on guaranteed hours. (Where the employee is subsequently exonerated, the employee will be paid for the rostered hours including, where applicable the allowances at subclauses 27.1, Driver Only Operations Allowance and 27.11, Distributed Power Allowance); or,

14.2.2 placed on alternative duties; or,

14.2.3 re-assessed and returned to normal duties as suitable.

14.3 Any investigation of a matter or incident by Aurizon for the purpose of determining whether or not disciplinary action should be taken must adhere to the principles of natural justice. These principles include:

14.3.1 the employee being made fully aware of the allegations and/or matters that are the subject of an investigation;

14.3.2 the employee being provided with relevant information to enable the provision of an informed response;

14.3.3 the employee being entitled to have a representative of their choice if so requested, present as a witness and to provide support and guidance where necessary at any meetings / interviews.

14.3.4 the employee being given adequate time to prepare a response to any allegations and/or matters which are the subject of the investigation;

14.3.5 the employee being given a reasonable opportunity to put his/her case to those conducting the investigation and those who will make any findings and/or determine the disciplinary measures (if any) to be taken;

14.4 To the extent practicable disciplinary inquiries and investigations will be kept confidential.”

“45. RESOLVING DIFFERENCES

Disputes

45.1 If a dispute relates to:

45.1.1 a matter arising under the agreement; or

45.1.2 the National Employment Standards;

subclauses 45.2 to 45.8 set out procedures to settle the dispute.

45.2 An employee who is a party to the dispute may appoint a representative for the purposes of the procedures in this clause.

45.3 In the first instance, the parties to the dispute must try to resolve the dispute at the workplace level, by discussions between the employee or employees and relevant supervisors and/or management.

45.4 If discussions at the workplace level do not resolve the dispute, a party to the dispute may refer the matter to the Fair Work Commission.

45.5 The Fair Work Commission may deal with the dispute in 2 stages:

45.5.1 the Fair Work Commission will first attempt to resolve the dispute as it considers appropriate, including by mediation, conciliation, expressing an opinion or making a recommendation; and

45.5.2 if the Fair Work Commission is unable to resolve the dispute at the first stage, the Fair Work Commission may then:

a) arbitrate the dispute; and

b) make a determination that is binding on the parties.

Note : If the Fair Work Commission arbitrates the dispute, it may also use the powers that are available to it under the Act.

45.6 A decision that the Fair Work Commission makes when arbitrating a dispute is a decision for the purpose of Division 3 of Part 5.1 of the Act. Therefore, an appeal may be made against the decision.

45.7 While the parties are trying to resolve the dispute using the procedures in this clause:

45.7.1 an employee must continue to perform his or her work as he or she would normally unless he or she has a reasonable concern about an imminent risk to his or her health or safety; and

45.7.2 an employee must comply with a direction given by the employer to perform other available work at the same workplace, or at another workplace, unless:

a) the work is not safe; or

b) applicable occupational health and safety legislation would not permit the work to be performed; or

c) the work is not appropriate for the employee to perform; or

d) there are other reasonable grounds for the employee to refuse to comply with the direction.

45.8 The parties to the dispute agree to be bound by a decision made by the Fair Work Commission in accordance with this clause.

Grievances

45.9 Where an employee has a grievance which is not a dispute in accordance with subclause 45.1 above, subclauses 45.10 to 45.13 set out procedures to settle the grievance.

45.10 An employee who is a party to the grievance may appoint a representative for the purposes of the procedures in this clause.

45.11 In the first instance, the parties to the grievance must try to resolve the grievance at the workplace level, by discussions between the employee or employees and relevant supervisors and/or management.

45.12 If discussions at the workplace level do not resolve the grievance, a party to the grievance may refer the matter to the Fair Work Commission.

45.13 The Fair Work Commission will attempt to resolve the dispute or grievance as it considers appropriate, including by mediation, conciliation, expressing an opinion or making a recommendation.

General

45.14 The parties to a dispute or grievance will endeavour to resolve the issues within a reasonable timeframe.

45.15 An employee who wishes to raise a dispute or grievance under this clause must utilise the Resolving Differences Notification Form (Attachment A to this Agreement).

Representation

45.16 At any stage in the process to resolve differences the parties to the dispute or grievance (ie an employee who has raised the dispute or grievance and Aurizon) may be represented by another person. Where an employee nominates another employee to be the representative (“nominated employee representative”) the provisions of subclauses 45.17 to 45.19 below will apply.

Rights of Nominated Employee Representative

45.17 A nominated employee representative will, subject to operational requirements, be permitted during working hours to represent employees in accordance with this Resolving Differences Procedure.

45.18 Where a representative requested by the employee cannot be released due to operational requirements the discussions referred to in this clause will not proceed until a representative is available. It is noted that in exceptional circumstances the employee representative may not be available. In such circumstances the employee should nominate an alternative representative so as not to unnecessarily hold up the progression of resolving the dispute or grievance.

45.19 A nominated employee representative acting in accordance with this provision is entitled to do so without loss of their normal pay.”

Respondent’s submissions on jurisdiction

[30] The disciplinary action which was taken by the respondent against the applicant was the suspension of the applicant from duty, without pay, for a period of one week.

[31] Clause 14 of the Agreement deals with disciplinary matters and is divided into four subclauses each of which deals with a different aspect of the disciplinary process. Subclause 14.3 deals with how the respondent shall conduct a disciplinary investigation; subclause 14.2 deals with how the respondent may deal with employees while they are subject to a disciplinary investigation; subclause 14.4 establishes a level of confidentiality that must apply to disciplinary inquiries and investigations and subclause 14.1 lists four disciplinary measures that the respondent may take against an employee.

[32] No dispute has been raised about the treatment of the applicant by the respondent during the period that he was subject to disciplinary investigation, and no dispute has been raised about the conduct of the disciplinary process. Neither does the applicant dispute the factual findings made during the disciplinary process.

[33] Subclauses 45.1 to 45.8 of the Agreement pertain to disputes relating to a) a matter arising under the Agreement; or b) the National Employment Standards. It is submitted the current dispute cannot be characterised as a grievance under subclauses 45.9 to 45.13 as such matters may not be arbitrated.

[34] The dispute must, therefore, relate to a matter arising under the Agreement. As such, it must arise under subclause 14.1 of the Agreement.

[35] Subclause 14.1 of the Agreement provides as follows:

“14. DISCIPLINARY MATTERS

14.1 Disciplinary measures that Aurizon may take against an employee include:

14.1.1 a caution or reprimand;

14.1.2 a temporary reduction in position, classification and pay for a period of up to six months;

14.1.3 suspension from duty without pay for a period of up to two weeks;

14.1.4 dismissal with or without notice as applicable.”

[36] The language of subclause 14.1 is permissive, denoting disciplinary measures that the respondent may (has permission to) take against an employee.

[37] The granting of permission implies a discretion to act on that permission.

[38] In Alcoa of Australia Limited t/a Alcoa World Alumina Australia v The Australian Workers’ Union 1 SDP Lacy dealt with a dispute arising under the Alcoa World Alumina Australia Pinjarra Refinery Agreement 2005 [AG842547] (Alcoa 2005 Agreement) concerning the suspension from duty for a period of two months, as a matter of discipline, of an employee involved in a breach of safety requirements.

[39] The Alcoa 2005 Agreement contained a dispute resolution process that allowed that any grievance or other matter in dispute could, ultimately, be referred to the Australian Industrial Relations Commission for prevention and settlement of the dispute.

[40] The Alcoa 2005 Agreement also contained a provision on disciplinary action which allowed that:

“Disciplinary action may be either a written reprimand, suspension without pay or dismissal. Other forms of disciplinary action may be applied by agreement between the parties.”

[41] The union contended that the penalty proposed by Alcoa was excessive and sought that the Commission vary its terms.

[42] In considering the power of the Commission to vary the penalty imposed by Alcoa His Honour said at [5]:

“It does appear from the agreement of the parties to accept any decision of the Commission that there is a very wide discretion vested in it to resolve differences between the parties over matters of discipline. However, I accept that the Commission cannot put itself in the place of the employer and determine for itself the penalty that is to be imposed. So much is made clear from the terms of the Agreement itself. Alcoa may impose a penalty of written reprimand or suspension without pay. The parties may, by agreement, determine to apply some other form of penalty. There is not provision in the Agreement that allows the Commission to determine some penalty other than that which is specified in the Agreement or agreed by the parties.”

and further at [21]:

“...It is not within my power under the terms of the [Alcoa 2005] Agreement to modify any penalty that the employer deems fit to impose. Accordingly, I find that Alcoa is acting within the terms of the Agreement in imposing the penalty that it has proposed.”

[43] While it is true that the disciplinary provision in the Alcoa 2005 Agreement differs from subclause 14.1 of the Agreement in that it provides for sanctions, outside of the three

specifically identified in the clause, to be applied “by agreement between the parties”, SDP

Lacy’s decision above addresses disjunctively both those sanctions which the employer (Alcoa) may impose and those sanctions which may be imposed by agreement of the parties.

[44] In subclause 14.1 of the Agreement, the specified sanctions at 14.1.1 to 14.1.4 are included within the unspecified range of disciplinary measures which the respondent may take against an employee. In other words, the Agreement permits the respondent to take any disciplinary measures which might be available within the context in which the agreement is made.

[45] In his decision, SDP Lacy does not give detailed reasons for the position he came to in the passages quoted above, but, the respondent submkits, his conclusion, as it applies to the Agreement, may be argued thus:

(a) The Agreement confers on the respondent a right to impose the disciplinary measures set out in subclause 14.1. This right, which is conferred under the Agreement, is distinct from any common law right the respondent might have to impose discipline under the contract of employment.

(b) The right to impose the disciplinary measures in subclause 14.1 is not different to other rights conferred on the respondent or upon its employees under the Agreement.

(c) By way of example, the Agreement, at subclause 35.2 confers an entitlement, or a right, on a full time employee to whom the Agreement applies, to paid personal leave of up to 96 hours for each completed year of service. This right is conferred under the Agreement and is distinguishable from the statutory right to a lesser quantum of personal leave under the Act.

(d) It is no more feasible for an employee covered by the Agreement to have the Commission interfere with the right of the respondent to apply discipline as allowed by subclause 14.1 than it is for the respondent to have the Commission reduce the entitlement of an employee’s personal leave to (say) the amount prescribed in the National Employment Standards.

(e) In each case, an alteration to the rights bestowed by the Agreement would be a variation of the terms of the Agreement.

(f) In the absence of a clear provision in the Agreement allowing the Commission to review disciplinary outcomes imposed by the respondent under subclause 14.1 of the Agreement the Commission has no power to vary a sanction imposed by right, by the respondent under the Agreement.

(g) The dispute settlement provisions at paragraph 45.5.2 of the Agreement cannot be read so broadly as to permit the Commission to impinge on rights established under the Agreement.

(h) Sections 207 to 218 of the Act provide for the variation of enterprise agreements. There is no provision for variation of an enterprise agreement from an application made pursuant to section 739.

(i) Section 739 of the Act prohibits the Commission from making a decision in settlement of a dispute that is inconsistent with the Act.

[46] In The Australian Workers’ Union v Alcoa World Alumina Australia Limited 2 the Commission. dealt with a dispute arising under the Alcoa World Alumina Australia WA Operations AWU Enterprise Agreement 2011 [AE883477](the Alcoa 2011 Agreement). The dispute concerned an employee covered by the Alcoa 2011 Agreement who, as a disciplinary measure, was to receive a first and final warning and a two week suspension without pay. The applicant in the matter sought a determination by the Commission that the proposed disciplinary penalty was excessive and that the penalty be set aside.

[47] The Alcoa 2011 Agreement contained a disciplinary procedures clause which, relevantly provided:

“Disciplinary action up to and including suspension without pay or termination may be applied at times at the discretion of the Company.”

[48] Like the Alcoa 2005 Agreement the Alcoa 2011 Agreement contained a dispute resolution procedure that allowed “all disputes”, ultimately, to be arbitrated by Fair Work Australia (as the Commission was then known).

[49] In this decision the Commission found that the provisions of the disciplinary procedures clause which conferred particular rights to put disciplinary matters in dispute expressly overrode the general provisions of the dispute resolution procedure in that regard.

[50] In finding that the jurisdiction of the Commission did not extend to interfering with the disciplinary decisions of the employer made in accordance with the Alcoa 2011 Agreement the Commission said at:

“[98] If the Tribunal was empowered under the terms of the Agreement to arbitrate on all disputes regarding disciplinary action there would be no need for the express provisions of clause 18−Disciplinary Procedures to detail the various rights an employee and/or the union has in particular situations. Many disputes quite different in character from this matter may be bought by the union under clause 19−Dispute Resolution Procedure to do with disciplinary issues. Such disputes might involve the company’s decision to stand aside an employee, or the companies alleged failure to comply with its obligations under the clause to have discussions with employees and union representatives, or to involve them at various points or to notify them at particular stages of its actions. I accept that there is no limitation on the powers of the Tribunal to deal with disputes regarding such matters.

[99] However with regard to a dispute over the reasonableness of particular disciplinary action in my view the proper construction of clause 18−Disciplinary Procedures is that the company has the discretion to apply disciplinary action and so the Tribunal is not empowered to interfere with this. This construction gives meaning to the words “...the discretion of the Company”. (Original emphasis)

[51] The respondent submits there is no material difference in meaning between the words “[d]isciplinary action up to and including…may be applied at times at the discretion of the Company” in the Alcoa 2011 Agreement and the words “Disciplinary measures that Aurizon may take against an employee include…” which appear in subclause 14.1 of the Agreement.

[52] Were the Alcoa 2011 Agreement to read “disciplinary action up to and including…may be applied at times by the Company”, or, “disciplinary action up to and including…may be taken at times by the Company” the import and meaning of the provision would be unaltered.

[53] The words “at the discretion of the Company” are tautologous. The concept of discretion is contained within the word “may”.

[54] Further, as with the Alcoa 2011 Agreement, the respondent submits that there are matters in clause 14 of the Agreement which may properly be the subject of dispute under the procedure in clause 45 of the Agreement and, if necessary, be arbitrated by the Commission. Such matters include payments due to an employee under paragraph 14.2.1; the extent to which an employee was made aware of allegations and/or matters that are the subject of an investigation under paragraph 14.3.1; the time allowed to an employee to provide a response to an allegation etc. under paragraph 14.3.4 and the opportunity provided to an employee to put her or his case under paragraph 14.3.5, to name a few.

[55] However, it is submitted that it is not necessary that the disciplinary clause contain its own avenues of dispute resolution in order to exclude the operation of the dispute resolution processes in clause 45 of the Agreement in relation to actions taken under subclause 14.1.

[56] It is argued it is the conferral of a right under the terms of the Agreement which can be exercised at the discretion of the respondent that ousts the jurisdiction of the Commission to vary the disciplinary action taken by the respondent. This argument, in our view, can equally be applied to disciplinary powers of the employer under the Alcoa 2011 Agreement.

Unlawful terms

[57] The respondent submits subclause 14.1 permits the it to dismiss an employee with or without notice.

[58] Allowing such decisions made under subclause 14.1 to be reviewed by the Commission under the terms of clause 45 of the Agreement potentially falls foul of the strictures in section 194(c) and (d) of the Act against interference with Part 3-2 of the Act.

Declaration

[59] It might be argued that even if the Commission does not have the power to vary the decision of the respondent under subclause 14.1, it can, nevertheless, make a declaration that the disciplinary action taken was unfair, unreasonable and harsh in the circumstances.

[60] The respondent submits such an argument must fail. Firstly, the wording of subclause 14.1 does not support a contention that the Commission may review the appropriateness, or reasonableness of disciplinary action; at least action taken under 14.1.1, 14.1.2 or 14.1.3. The wording of 14.1.4 raises the possibility of a dispute arising over the applicability or otherwise of notice in conjunction with a dismissal.

[61] Within the Agreement the parties have agreed, on several occasions, that the actions of the respondent have to be reasonable. At subclause 7.1 the directions of the respondent which employees are obliged to follow must be “reasonable”; at subclause 11.8, the efforts to be made by the respondent to contact an absent employee must be “reasonable”; at subclause 12.6 the granting of paid leave by the respondent to an employee has to be “reasonable”; at paragraph 24.6.2 in making a request of an employee to work on a rostered day off the respondent must first have exhausted all other “reasonable” avenues; at clause 43 the respondent is charged, on four occasions with the requirement to act reasonably (or not unreasonably) and in paragraph 44.13.2 the respondent is required to be reasonable in its beliefs on certain matters.

[62] While the requirement to act reasonably in the matters outlined above would enliven the provisions of clause 45 of the Agreement where an employee was of the view that the respondent had not acted reasonably, the parties have not chosen to impose the criterion of reasonableness on the permitted actions of the respondent under subclause 14.1, other than the requirement of reasonableness is inserted into paragraph 14.3.5.

[63] The omission of the specific requirement of reasonableness in subclause 14.1 should be taken to signify that the parties to the Agreement have not agreed that the actions of the respondent under that provision should be subject to review on the ground of reasonableness.

[64] It must be noted that the subclause itself acts to curb the actions of the respondent. A reduction in position, classification and pay under 14.1.2 is restricted to a period of six months, while a suspension from duty without pay is limited to a maximum period of two weeks.

[65] The parties to the Agreement have clearly contemplated, in granting the respondent the right to take certain forms of disciplinary action, the limits to be imposed on such action. It might be assumed that the parties had in mind that the imposition of penalties beyond those limits might be harsh, unfair or unreasonable, and we would concede that action taken by the respondent, beyond those limits, could properly be the subject of a dispute under clause 45 of the Agreement. However, the parties have not inserted into clause 14 of the Agreement a requirement that certain disciplinary actions should be taken, or refrained from, in relation to particular breaches of discipline.

[66] Secondly, a declaration by the Commission of the nature sought by the applicant would have no utility and would not be “a determination that is binding on the parties” in accordance with the requirements of paragraph 45.5.2 of the Agreement.

[67] Further, the procedures in clause 45, subclauses 45.2 to 45.8, which include the arbitration of the dispute by the Commission, are procedures “to settle the dispute” (45.1). A declaration by the Commission of the type sought by the applicant would be inconsistent with the requirements of the Agreement, in that it would not “settle the dispute”, and contrary to section 739(5) of the Act.

[68] The respondent submits the application is beyond the Commission’s power and should be dismissed.

Applicant’s submission on jurisdiction

Discipline under the Agreement

[69] Clause 14 of the Agreement outlines:

(a) the disciplinary measures the respondent may take against its employees;

(b) the duties an employee may perform whilst the outcome of a disciplinary process is pending;

(c) the principles of natural justice which the respondent must follow when conducting an investigation to determine whether or not disciplinary action should be taken against an employee; and

(d) the requirement that disciplinary inquires and investigations remain confidential to the extent practicable.

[70] The respondent is able to impose disciplinary penalties as set out in clause 14.1 of the Agreement. As the respondent correctly accepts, this right under the Agreement is distinct from its common law right to discipline under the contract of employment.

Resolving differences under the Agreement

[71] The scope of the dispute resolution procedure under the Agreement is if a dispute relates to:

(a) a matter arising under the Agreement; or

(b) the National Employment Standards;

[72] Subclauses 45.2 to 45.8 of the Agreement set out procedures to settle the dispute.

[73] If a matter has been referred to the Commission, the terms of the Agreement empower the Commission to deal with the dispute in the following way:

(a) Step one: By mediation, conciliation, expressing an opinion or making a recommendation; or

(b) Step two: If the dispute remains unresolved after step one, the Commission may arbitrate the dispute and make a determination binding on the parties.

[74] Clause 45 of the Agreement is a term in an enterprise agreement which provides a procedure for dealing with disputes. Consequently, Division 2of Part 6-2 of the Act applies.

The dispute identified in this application

[75] The dispute identified in this application is the disciplinary penalty applied by the respondent under clause 14.1 of the Agreement.

The Commission’s jurisdiction to deal with this application

[76] As the Full Bench of the Commisison observed in United Firefighters’ Union of Australia v Metropolitan Fire and Emergency Services Board 3:

“Under s.739 of the Fair Work Act 2009 (FW Act), the Commission may only deal with a dispute arising under the dispute resolution procedure of an enterprise agreement to the extent that it is authorised to do so by the terms of that procedure.”

[77] The applicant submits this dispute:

(a) related to a matter arising under the Agreement;

(b) fell into the scope of clause 45 of the Agreement;

(c) was lodged in accordance with the Agreement;

(d) remained unresolved at the workplace level;

(e) was referred to the Commission by the applicant; and

(f) remained unresolved despite mediation by the Commission.

[78] Given the above, it is submitted the Commission has jurisdiction to deal with this application. This is because this application deals with a valid dispute under clause 45 of the Agreement and the terms of the Agreement authorise the Commission to arbitrate the dispute and make a binding determination on the parties.

Managerial prerogative

[79] The primary issue raised in the respondent’s submissions on jurisdiction was that discretionary decisions of the respondent ousted the jurisdiction of the Commission. It is submitted this is wrong.

[80] In Australian Federated Union of Locomotive Enginemen v State Rail Authority of New South Wales 4 (XPT case) the Full Bench of the Australian Industrial Relation Commission held that:

“It seems to us the proper test to be applied and which has been applied for many years by the Commission is for the Commission to examine all the facts and not to interfere with the right of an employer to manage his own business unless he is seeking from the employees something which is unjust or unreasonable.”

[81] This principle was affirmed by the Commission in Construction, Forestry, Mining and Energy Union v HWE Mining. 5

[82] Further, the principle enunciated in the XPT case has been frequently considered and applied by the Commission.

[83] The principle in the XPT case extends to all decisions of managerial prerogative. This includes discretionary decisions on discipline.

[84] The decision of the Commission in The Australian Workers’ Union v Alcoa World Alumina Australia Limited 6 did not consider the principle in the XPT case. It is submitted it should not be followed.

[85] What can be distilled from the above authorities, the applicant submits, is that the Commission can interfere with managerial prerogative if something unjust or unreasonable can be demonstrated. However, there is nothing to say that managerial prerogative can oust the Commission’s jurisdiction.

Powers of the Commission in determining a dispute

[86] The Agreement allows the Commission to “make a determination that is binding on the parties”.

[87] Section 739(4) of the Act authorises the Commission to exercise this power of determination.

[88] Further, where the Commission is authorised to arbitrate a dispute, it can make any orders it considers appropriate.

[89] Therefore, the Commission is authorised by the Act and parties to make a binding determination on the parties in relation to the dispute which is the subject of this application.

[90] Recently, in an application to deal with a dispute, the Commission found that a disciplinary decision imposed by an employer should be varied and proposed issuing orders if necessary. 7

[91] Given the above reasons, the applicant submits this application is within the Commission’s jurisdiction. It should be listed for hearing and determination.

Consideration

[92] It is not disputed that clause 45−Resolving Differences of the Agreement allows a dispute relating to a matter arising under the Agreement to be referred to the Commission. The Agreement provides that the Commission can then deal with the dispute in the first stage involving mediation or conciliation and if the Commission is unable to resolve the dispute at the first stage the Commission may then arbitrate the dispute and make a determination that is binding on the parties.

[93] It is however section 739 of the Act that empowers the Commission to arbitrate as provided for in the clause 45 of the Agreement.

[94] In the recent decision of Metropolitan Fire and Emergency Services Board v Garth Duggan and the United Firefighters’ Union of Australia 8 Commissioner Wilson considered the approach to dealing with disputes under section 739 and adopted a recent summary by Commissioner Saunders of the considerations and the power to be exercised by the Commission and their boundaries and continued on to consider issues raised by the recent decision of the Full Court of the Federal Court.

“The Commission’s approach to dealing with the dispute

[44] When the Commission deals with disputes under s.739, it does not undertake an exercise of judicial power but instead exercises a power of private arbitration, with that power deriving from the parties’ agreement to submit their differences for decision by a third-party. The resultant arbitrator’s award is not binding of its own force, but instead its effect depends on the law which operates with respect to it. It is accepted that while not exercising judicial power, the Commission “may legitimately form and act upon opinions about legal rights and obligations as a step in the exercise of its own functions and powers”.

[45] A useful summary of the applicable considerations in matters of this kind, and of the powers to be exercised by the Commission and their boundaries, was articulated by Commissioner Saunders in Construction, Forestry, Mining and Energy Union v Mt Arthur Coal Pty Ltd;

“Legal principles concerning the proper characterisation of the dispute

[6] The test under s.739 of the FW Act is whether the dispute settlement procedure in the enterprise agreement “requires or allows” the Commission to deal with the dispute. It is therefore necessary to look at the text of the dispute settlement procedure, understood in light of its industrial context and purpose, to determine whether the dispute, properly characterised, falls within it.

[7] The scope of a dispute settlement procedure in an enterprise agreement should not be narrowly construed; “to do so would be contrary to the notion that certified agreements are intended to facilitate the harmonious working relationship of the parties during the operation of the agreement.”

[8] In characterising the nature of a dispute the Commission is not confined to the application filed to deal with the dispute. 45 The entire factual background is relevant, and may be ascertained from the submissions advanced by the parties on the question of jurisdiction.46 Further, a dispute may evolve during proceedings in the Commission. It may therefore be necessary in some cases when ascertaining the character of a dispute to have regard to both the nature of the dispute alleged in an originating application and the factual circumstances as they evolve.

[9] It is also important to note that the character of the dispute is distinguishable from any relief which may be sought, or granted, following an arbitration of the dispute. 48 However, the relief sought may cast light on the true nature of the dispute in some cases.

[10] If the Commission has jurisdiction to deal with the dispute, the nature of the relief that the Commission may grant in such circumstances will depend on the limitation in s.739(5) of the FW Act 50 and the agreement of the parties as recorded in their enterprise agreement, provided that such relief is reasonably incidental to the application of the Enterprise Agreement to which the dispute relates.”

[46] The same matter considered the Commission’s role as a private arbitrator;

“[18] When the Commission is arbitrating a dispute pursuant to a dispute settlement clause in an enterprise agreement it is not exercising judicial power, but is instead exercising a power of private arbitration. As a private arbitrator, the Commission is authorised to make decisions as to the legal rights and liabilities of parties to whom the enterprise agreement applies. That involves deciding “all questions both of law and of fact” that arise in the dispute, subject to any limitation on power in the dispute settlement clause and a requirement not to make a decision that is inconsistent with the FW Act, or a fair work instrument that applies to the parties.” (Original references)

[47] In Endeavour Energy v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia, decided shortly after Commissioner Saunders’ analysis in CFMEU v Mt Arthur Coal, the Full Court of the Federal Court of Australia considered in detail the Commission’s role under s.739. The Full Court’s judgment in that matter held the following matters of relevance;

“29. Turning to s 739 of the FW Act, it would be a mistake to seek to identify its purpose solely through the prism of s 186(6): the section applies to other situations as well. But s 739 is concerned with the role of the Commission under a dispute-settling term in an enterprise agreement. Although the grammatical reading of subs (3) presents difficulties, the Explanatory Memorandum to the relevant Bill makes the meaning clear:

Where such a term requires or allows [the Commission] to deal with a dispute, it can exercise all of its powers under Subdivision B of Division 3 of Part 5-1 (see subclause 595(4)), unless those powers are limited by the term (subclause 739(3)).

That is to say, if the term places limits on the powers that may be exercised by the Commission in settling disputes, the Commission must remain within those limits.

30. Critical to the significance of subs (3) and (4) of s 739 is the circumstance that, under the FW Act, the Commission has no general power of arbitration. By s 595(1), the Commission may deal with a dispute only if it is expressly authorised to do so under or in accordance with another provision of the FW Act. Then s 595(2) does provide such an express authorisation in relation to disputes, but arbitration is excluded. To put the matter completely beyond doubt, s 595(3) provides that the Commission may deal with a dispute by arbitration only if it is expressly authorised to do so under or in accordance with another provision of the FW Act.

31. Section 739(4) is such a provision. But it is limited in two ways. First, the parties must, by the relevant term in the agreement, have agreed that the Commission may arbitrate. And secondly, by subs (5), in the arbitration the Commission must not make a decision that is inconsistent with the FW Act or a fair work instrument that applies to the parties.

32. In the light of this understanding of the relevant provisions of the FW Act in the context of the history of broadly corresponding provisions since 1992, does the introduction of s 739(5) into the analysis warrant the conclusion that the Full Court in ALS 58 was plainly wrong in its characterisation of the Commission’s relevant role as that of private arbitration?

33. We would hold not. Section 739(5) does not alter the character of the arbitration which the Commission undertakes under an enterprise agreement in the terms of the Agreement. It merely places a limit on the range of arbitrated (but not conciliated, it may be noted) outcomes available to the Commission in those cases in which the parties have agreed that the Commission may arbitrate (using, in this respect, the same formula as appears as subs (4) of s 740, on any view a private arbitration provision). In our view, the more likely explanation of the absence of any reference to s 739(5) in the reasoning of the Full Court in ALS is that their Honours considered it to make no more than an inconsequential contribution to the disposition of the issue on which they ruled. With respect, we would agree with that assessment of the situation.

34. There may be a question as to how a party to an arbitrated outcome in a dispute-setting process of the kind contemplated in s 739 of the FW Act might go about alleging that the Commission had overstepped the limitations for which subs (5) provides. In the present case, the applicant does allege that the Full Bench decision was inconsistent with a fair work instrument, namely, the Agreement. But the inconsistency is said to reside wholly in the circumstance that the decision was wrong; that is to say, the Full Bench reached the wrong conclusion on the very matter which was given to it for arbitration. Whatever else s 739(5) means, it does not, in our view, produce an outcome of the kind sought by the applicant. Otherwise, we had the benefit of no more than the most tangential of references to the matter in the submissions made in the present case.” (References omitted and underlining added)

[95] Separately a Full Bench of the Commission in Lend Lease Project Management and Construction (Australia) Pty Limited v Construction, Forestry, Mining and Energy Union 9 considered the limitation on the Commission’s arbitration power under section 739 and explained as follows:

“Arbitration power under the Agreement

[19] It is convenient to commence our consideration of Lend Lease’s appeal by ascertaining the nature and scope of the arbitration power that was exercised by the Deputy President under cl.19 of the Agreement.

[20] Section 595(3) of the FW Act provides that the Commission “may deal with a dispute by arbitration (including by making any orders it considers appropriate) only if the FWC is expressly authorised to do so under or in accordance with another provision of this Act”. One express source of such an arbitration power is contained in Div.2 of Pt.6-2 of the FW Act. Section 738(b) provides (relevantly) that the Division applies if “an enterprise agreement includes a term that provides a procedure for dealing with disputes, including a term referred to in subsection 186(6)”. In relation to such a term, s.739(4) provides: “If, in accordance with the term, the parties have agreed that the FWC may arbitrate (however described) the dispute, the FWC may do so”. However, s.739(5) imposes a limitation upon this power of arbitration by providing: “Despite subsection (4), the FWC must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties”. One effect of the limitation in s.739(5) is that, in arbitrating a dispute in accordance with the disputes resolution procedure in an enterprise agreement, the Commission may not make a decision which is inconsistent with any provision of the enterprise agreement. Further, s.739(3) provides that “In dealing with a dispute, the FWC must not exercise any powers limited by the term”, so that if, for example, any arbitration power in the disputes resolution procedure of an enterprise agreement may be exercised only in relation to certain specified categories of dispute (such as disputes about the application of the agreement or the NES), the Commission is not permitted to arbitrate any dispute falling outside these categories.” (Underlining added)

[96] Considering these principles then it is necessary to look at the text of the dispute settlement procedure, understood in light of its industrial context and purpose, to determine whether the dispute, properly characterised, falls within it.

[97] In this case the application filed says the Union is seeking that “the penalty” imposed by Aurizon on Mr Lloyd of a seven day suspension without pay be declared unfair, unreasonable and harsh and that Mr Lloyd be reimbursed for his losses arising from the penalty.

[98] The agreed statement of facts says that the applicant disputes the disciplinary measure taken against him of suspension from duty without pay for one week.

[99] The dispute between the parties can be properly be characterised as whether the disciplinary measure of a one week unpaid suspension imposed on Mr Lloyd by Aurizon under clause 14.1.3 of the Agreement should stand or be reversed.

[100] On its face the dispute, characterised in this way, does relate to a matter arising under the Agreement.

[101] In this case section 739(4) of the Act, as the Full Court of the Federal Court explained above, allows the Commission to arbitrate because the dispute falls within the procedure for dealing with disputes provided in the Agreement which is clause 45−Resolving Differences. The parties, as the Full Court explained, have by this term in their agreement agreed the Commission may generally arbitrate matters that arise under the Agreement.

[102] However there is a condition imposed on this power for the Commission to arbitrate which is contained in 739(5) of the Act. This condition is that the Commission “:..must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.”

[103] Section 12 of the Act provides that a “fair work instrument” means amongst other things an enterprise agreement. Consequently the Agreement is a fair work instrument.

[104] The question is whether in this case the applicant is asking the Commission to make a decision that would be inconsistent with the Agreement?

[105] I agree with the submission of the respondent that subclause 14.1 of the Agreement confers on the respondent the right to take disciplinary measures at its discretion against an employee including, at 14.1.3, suspension from duty without pay for a period of up to two weeks.

[106] Aurizon submit that the conferral of this right under the terms of the Agreement which may be exercised by the respondent ousts the jurisdiction of the Commission to reverse the disciplinary action taken by Aurizon.

[107] Clearly this is not a case of managerial prerogative at large having been exercised which is now being challenged by the applicant. Rather in this instance there is an express right the employer has under the Agreement which it has chosen to exercise and the applicant now asks the Commission to override this. Consequently this is not a case where the answer to Aurizon’s jurisdictional objection is that the Commission must simply apply the general principles on tribunals reviewing management decisions as enunciated in the XPT case to which the Union referred.

[108] If the Commission arbitrated this matter and upheld the applicant’s case the Commission would be making a decision to reverse Aurizon’s suspension of Mr Lloyd. Such a decision by the Commission would be inconsistent with paragraph 14.1.3 of the Agreement which entitles Aurizon to take the disciplinary measure of suspending Mr Lloyd without pay for a period up to two weeks. Such a decision of the Commission would deprive Aurizon of its rights under the Agreement. Subsection 739(5) of the Act expressly prohibits the Commission from making a decision such as this which would be inconsistent with the Agreement. Consequently I am satisfied that the Commission has no power to arbitrate this matter.

[109] The respondent’s jurisdictional objection is upheld and the application will be dismissed. An order to that effect will be issued.

COMMISSIONER

Final written submissions:

Respondent, 5 May 2016.

Applicant, 19 May 2016.

 1   PR966345.

 2   [2012] FWA 9222.

 3   [2016] FWCFB 2894 at [7].

 4 (1984) 295 CAR 188.

 5 (2011) 214 IR 194.

 6   [2012] FWA 9222.

 7   Australian Rail, Tram and Bus Industry Union v NSW Trains[2016] FWC 1553.

 8   [2016] FWC 5028.

 9   [2015] FWCFB 1889.

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