Linfox Australia Pty Ltd v Transport Workers' Union of Australia

[2015] FWC 8325

[2015] FWC 8325 [Note: An appeal pursuant to s.604 (C2015/8270) was lodged against this decision - refer to Full Bench decision dated 12 February 2016 [[2016] FWCFB 443] for result of appeal.]

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Linfox Australia Pty Ltd
v
Transport Workers’ Union of Australia
(C2015/5783)

COMMISSIONER ROBERTS SYDNEY, 4 DECEMBER 2015

Application to deal with a dispute, whether unregistered agreements between Linfox and the TWU are held to be incorporated into an enterprise agreement.

[1] This decision concerns an application made by Linfox Australia Pty Ltd (Linfox or the Company) on 21 August 2015 pursuant to s.739 of the Fair Work Act 2009 (the Act) for the Fair Work Commission (the Commission) to deal with a dispute between it and the Transport Workers’ Union of Australia (the TWU).

[2] The dispute was referred to the Commission pursuant to clause 33 (Settlement of Disputes Procedure) of the Linfox and Transport Workers Union Road Transport and Distribution Centres Agreement 2014 (the 2014 Agreement). That Agreement was approved on 14 February 2014 and has a nominal expiry date of 31 December 2017.

[3] Clause 33 of the 2014 Agreement sets out the steps to be followed when there is "any dispute or grievance that arises at the workplace between an employee and Linfox and/or Linfox and the TWU about the Agreement or the employment relationship…” Clause 33 further provides at subclauses (d) and (e) that where a dispute cannot be resolved between the parties then conciliation is to be conducted by the Commission, and if this fails, the Commission “may proceed to arbitrate the dispute and/or otherwise determine the rights and/or obligations of the parties to the dispute.” The parties to the Agreement are Linfox and the TWU. There is no dispute between the parties that the Commission has jurisdiction to deal with and determine the application.

[4] In its Form F10 – application for the Commission to deal with a dispute in accordance with a dispute settlement procedure, Linfox characterised the dispute between itself and the TWU in the following terms:

1. The affected employees are employed as drivers who deliver keg and package Carlton United Breweries (CUB) products;

2. The drivers are currently paid in accordance with an expired unsigned agreement – Linfox New South Wales (Foster’s Rosehill – Keg) Alternative Payment Method and Linfox New South Wales (Foster’s Rosehill – Packaged) Alternative Payment Method;

3. These expired unsigned agreements provide for additional payments over and above the provisions contained within the Linfox and Transport Workers’ Union Road Transport and Distribution Centres Agreement 2014;

4. The current contract between Linfox Australia Pty Ltd (Linfox) and CUB ends in 31 March 2016;

5. Linfox submitted a first round tender in an attempt to secure a renewed contract based on the current labour rates;

6. CUB has formally advised Linfox that Linfox’s labour rates are 25 to 50% in excess of Linfox’s labour rates on CUB contracts in Victoria and Queensland and when compared to other creditable tenderers;

7. CUB further advised, if Linfox was not the incumbent contract holder, Linfox would not be successful in progressing to the second round of tender evaluation;

8. Linfox has identified that the continued payment of drivers in accordance with the Alternative Payment Methods attribute to the excessive labour rates;

9. Linfox has consulted with the driver delegates and union officials to revert to the terms and conditions provided for in the Linfox and Transport Workers’ Union Road Transport and Distribution Centres Agreement 2014;

10. Failure to make the change outlined at point 9 above, will result in Linfox being unsuccessful in the tender process and the loss of approximately 121 jobs covering drivers, offsiders, loaders, storepersons and other management, supervisory and administrative support staff;

11. This consequence is unacceptable to Linfox.

[5] The relief sought by Linfox in its application of 21 August 2015 was:

“An order:
1. That sets aside the expired unsigned agreements – Linfox New South Wales (Foster’s Rosehill – Keg) Alternative Payment Method and Linfox New South Wales (Foster’s Rosehill – Packaged) Alternative Payment Method.”

[6] In its outline of submissions 1, the Company altered the relief sought to the following:

“Linfox seeks an order from the Commission that answers the question ‘Does Linfox have the legal and industrial right to apply the hourly rate of pay arising from Clause 88.2(a) of the Agreement?’ in the affirmative.”

[7] The relevant modern award is the Road Transport and Distribution Award 2010 (the Award). Unsuccessful conciliation was conducted before me on 16 September 2015 and the case then came to me for arbitration at the request of Linfox. Directions were issued and the parties complied with those directions as to the filing and service of outlines of submissions, witness statements and other materials. The matter then proceeded to hearing in Sydney on 25 November 2015. At the hearing, Linfox was represented by Mr D Jones with Mr R Dalton and the TWU was represented by Mr T Warnes with Mr R Shortill.

[8] The 2014 Agreement is the successor to the Linfox Road Transport and Distribution Centres National Enterprise Agreement 2011 (the 2011 Agreement). The 2011 Agreement was the successor to the Linfox NSW (Transport, Distribution Centres & Waste) Agreement 2007 (the 2007 Agreement) which had a nominal expiry date of 1 January 2011. The 2011 Agreement was approved on 9 May 2011 and had a nominal expiry date of 31 December 2013.

[9] The 2011 Agreement provided at clause 25 (Facilitative Clause for Further Agreements and Local Matters):

“25.1 After the Commencement Date, the parties are at liberty to reach separate agreement with Employees collectively about matters of concern at the workplace level. Any agreements reached must be recorded in writing and the TWU must be invited to participate in the discussion and become a party to any formal agreement reached. Any such agreement must be executed by the appropriate Linfox manager, Branch Secretaries and the Federal office of the TWU or their nominees.

25.2 In the event that it is proposed that a local workplace agreement depart from or effectively vary a term of this Agreement, the parties will comply with the requirements of the Act in relation to variation of agreements. The agreement will not come into effect until such compliance is complete and the variation commences operation.

[10] Clause 6 (Relationship With Other Agreements) of the 2011 Agreement stated:

“This Agreement operates in place of any other award (including a modern award) or agreement (whether certified, or approved, or not).”

[11] Clause 4.4 (Operation of Agreement) in the 2014 Agreement states:

“The Terms of this Agreement operate as follows:

(a) Incorporated Terms from enterprise agreements, memoranda of understanding, common law agreements and State awards prevail, to the extent of any inconsistency, over Common Terms and Incorporated Terms from the Modern Awards;
(b) Common Terms prevail, to the extent of any inconsistency, over Incorporated Terms from the Modern Awards;”

[12] Clause 5 (Custom and Practice) of the 2014 Agreement states:

“5.1 This Agreement is not intended to, nor shall it, alter a custom and practice applicable to the parties.

5.2 It is the intention of the parties to this Agreement to, during the Term, attempt to reduce to writing any custom and practice applicable to Linfox and the Employees.

5.3 The parties will review and where agreed create a local agreement arising from the custom and practice in accordance with clause 34.

5.4 Any dispute about the operation of this clause is to be dealt with in accordance with the disputes procedure in this Agreement.”

[13] Clause 8 (Relationship with Other Agreements) of the 2014 Agreement states:

“This Agreement operates in place of any other award (including a modern award) or agreement (whether certified, or approved, or not).”

[14] Clause 19 (Full and Final Settlement) of the 2014 Agreement states:

“This Agreement is in full and final settlement of all TWU and Employee claims relating to Employee rights and entitlements. Accordingly, the TWU or Employees shall not pursue any extra claims, nor take any illegal industrial action or protest action concerning any matter dealt with in this Agreement.”

[15] Clause 34 (Facilitative Clause for Further Agreements and Local Matters) of the 2014 Agreement states:

“34.1 If, during the life of this Agreement, a new local matters agreement is made or changes are required in respect of existing local agreements made under this clause, the new local agreement or changes to existing local agreements must be agreed between the parties. The new agreement or changes must be agreed to by:

(a) a majority of Employees at the specific worksite; and
(b) the TWU (agreement is to be indicated by the signature of the relevant branch secretary).

34.2 In the event that it is proposed that a local workplace agreement depart from or effectively vary a term of this Agreement, the parties will comply with the requirements of the Act in relation to variation of agreements.

[16] Clause 45.2 (Payment of Wages) of the 2014 Agreement states:

“45.2 Linfox may, at its sole discretion, implement or discontinue any productivity or performance based payment arrangements applicable at a local level. Any payments will be supplementary to the weekly wage rates applicable under the terms of this Agreement.”

The Unregistered Agreements

[17] The two unregistered Agreements mentioned above are the Linfox New South Wales (Foster’s Rosehill – Keg) Alternative Payment Method and the Linfox New South Wales (Foster’s Rosehill – Packaged) Alternative Payment Method (the Keg APM and the Packaged APM respectively). 2 The Keg APM operated from 5 July 2010 until 30 June 2013. The Packaged APM was to operate from 7 March 2011 until 31 December 2013.

[18] Clause 1.4 (Relationship to Other Agreements) of the Keg APM, and Clause 1.3 of the Packaged APM, state:

“The APM is read and interpreted wholly incorporated into the Linfox New South Wales (Transport, Distribution Centres and Waste) Agreement 2007 (“the Agreement”) and any agreement which supercedes it.

Where there is inconsistency between the terms and conditions of the APM and the Agreement, the Agreement shall prevail.”

[19] It is fair to characterise both the Keg APM and the Packaged APM as incentive schemes for drivers. Neither Agreement was ever registered or explicitly incorporated into either the 2011 or 2014 Agreements. Neither APM appears to have been signed by the parties and Linfox sought to portray this as being of some significance. I am satisfied that the two unregistered Agreements were entered into freely between the parties and governed, in part, the relationship of the parties. The conduct of the parties in that regard is clear on the evidence and materials before me.

The Respective Arguments

[20] In short, Linfox argues that the Keg and Packaged APMs have both expired in accordance with their terms. Neither agreement was ever incorporated into the Agreement. In that regard, the Company relies on Clause 34.2 of (Facilitative Clause for Further Agreements and Local Matters) of the 2014 Agreement which states at sub-clause 34.2:

“In the event that it is proposed that a local workplace agreement depart from or effectively vary a term of this Agreement, the parties will comply with the requirements of the Act in relation to variation of agreements. The agreement will not come into effect until such compliance is complete and the variation commences operation.”

[21] Linfox further relies sub-clause 45.2 (Payment of Wages) that states:

“Linfox may, at its sole discretion, implement or discontinue any productivity or performance based payment arrangements applicable at a local level. Any payments will be supplementary to the weekly wage rates applicable under the terms of this Agreement.”

[22] In short, the TWU argues that the two unregistered agreements are matters of custom and practice and are ‘an enforceable local matters agreement’. 3

[23] The TWU went on to argue:

“If Linfox wishes to rescind a local matter or custom and practice, it must reach agreement with the affected employees. There can be no unilateral change to conditions of employment that make up part of the Agreement.” 4

[24] In relation to the question to be determined, Mr Warnes said:

“I would say the dispute really is just about the status of the APMS, so whether they - as you said - are effectively enforceable under the terms of the enterprise agreement or whether they're not.  I think it's as simple as that, really.” 5

Evidence

Linfox

Mr R Bayley

[25] Mr Bayley gave sworn evidence and adopted both a primary witness statement 6 and a supplementary statement in reply to the evidence of the TWU.7 Mr Bayley is the Group Manager for Carlton & United Breweries (CUB) and Packaging for Linfox. He has worked for Linfox in that position since June 2015 and previously held a variety of other managerial positions with the Company. He is responsible for the overall management of the CUB business nationally, including some 55 drivers and offsiders who service the NSW CUB contract. He is also responsible for the packaging business dealing with other customers such as AMCOR.

[26] Mr Bayley said that Linfox secured the NSW CUB contract in 1998 and has serviced it since that date. The contract employs approximately 120 persons (including the 55 drivers and offsiders mentioned above) and warehousing and support staff. CUB has now put the contract out for tender and Linfox is a tenderer.

[27] Mr Bayley went on to say that the current wage costs make Linfox uncompetitive unless it is permitted to pay employees pursuant to the 2014 Agreement. His statement goes on to set out current payment arrangements in some detail together with an analysis of the history of this matter. I have paid regard to that material. The statement provides further detail as to consultation with the TWU and affected employees and again I have paid regard to that material.

[28] In his reply statement, Mr Bayley deals with aspects of the evidence of the TWU’s witnesses and again I have paid regard to that material.

TWU

Mr T Finn

[29] Mr Finn gave sworn evidence for the TWU and adopted a witness statement. 8 He is a TWU co-delegate and has worked for Linfox since February 1994. Since 1998, he has worked on the CUB contract in CUB’s Packaged Section at Rosehill NSW as a driver.

[30] Mr Finn’s statement went on to deal with the CUB – APM. After dealing with the history of the APM, Mr Finn said that he was aware that the APM had an expiry date of 31 December 2013. He further said that before the agreement expired a Manager had approached employees to discuss the APM and was told by employees that they did not wish it changed. No further contact from the manager was made.

[31] Mr Finn’s statement went on to deal with how the APM worked in practice and the personal impact on him if he was to revert to an hourly rate pursuant to the 2014 agreement.

Mr C Hartin

[32] Mr Hartin gave sworn evidence and adopted a witness statement. 9 Mr Hartin is a TWU co-delegate at the CUB site at Rosehill and has worked for Linfox since 2006. He currently works as a driver and Allocater. In his Allocater role, Mr Hartin delegates driving routes to drivers based at Rosehill. His statement went on to deal with his duties at the site and then dealt with the APM.

[33] In relation to the expiry of the APM on 30 June 2013, Mr Hartin said:

“We did not agitate a renegotiation after that as we were content with the APM simply rolling on until Linfox was ready to talk about updating it. Linfox agreed to continue rolling over the APN and continued to do so. At no time since 30 June 2013 has there been any interruption to the implementation of the rates or arrangements in the APM. Everything has continued to operate as if the APM was still in place. Linfox has at all times continued to conduct itself under the terms of the APM.”

[34] Mr Hartin also replied to elements of the witness statement of Mr Bayley and I have paid regard to that material.

Mr T Warnes

[35] Mr Warnes gave sworn evidence and adopted a witness statement. 10 He is a legal officer of the TWU (NSW Branch) and is a qualified solicitor.

[36] Mr Warnes said that he was involved in the negotiations leading up to the making of the 2014 Agreement. That involvement led him to enquire into the origins of the 2011 Agreement. Mr Warnes went on to say:

“In September 2013, the TWU and Linfox commenced negotiations for a replacement agreement to the 2011 Agreement. In doing so, the TWU sought to remedy what it perceived to be some of the issues which had arisen with the operation of the 2011 Agreement.

One issue that had arisen was the enforcement of local arrangements which existed prior to the nationalisation of the enterprise agreement and also those that existed only at a local level but were inadvertently left out of the national Agreement. Accordingly, the TWU sought to include a term that had the effect of protecting the rights of those workers at the local level who enjoyed benefits under local agreements.

The clause that the TWU sought was a clause protecting customs and practices applicable at particular sites.” 11

[37] Mr Warnes included with his statement details of several local matters agreements applying to yards in NSW. I have paid regard to that material.

Witness Cross Examination

[38] Due to the urgency in the making of this decision, I will not set out the cross examination of each witness but have paid regard to the relevant sections of transcript.

Conclusions and Determination

[39] At the conclusion of the hearing on 25 November 2015, Linfox advised me that it requested an early decision as the determination of this matter could impact significantly on contract negotiations currently underway. I advised the parties that I understood the urgency of the situation and would produce an early decision.

[40] It is clear to me that the Keg APM and the Packaged APM were designed as incentive/productivity tools. They have each provided significant financial benefits to employees and increased efficiencies (at least in the past) for Linfox. They have a long history, having been in place for some nine and fifteen years respectively. They are far more than local custom and practice arrangements. Neither party to this dispute has ever sought to incorporate the terms of the APMs into the Enterprise Agreement. They have taken that course for reasons unknown to me.

[41] It is my role to determine whether the terms of the APMs were in any event incorporated into the Agreement and therefore have the force of the Agreement.

[42] In the light of the history of the APMs and the history of relevant enterprise agreements between the parties, I am satisfied that neither the Keg nor the Packaged APM was ever intended to form part of the 2014 Agreement. By the time the 2014 Agreement came into operation, the two APMs had reached their respective expiry dates. In that context, I note that both of the APMs provide a date of commencement and state that they “shall remain in force” until 30 June 2013 for the Keg APM, and 31 December 2013 for the Packaged APM. This is in contrast to the nominal expiry dates provided in both the 2011 and 2014 Agreements. Therefore even if the APMs were incorporated into the 2011 Agreement, their respective ‘sunset clauses’ would have caused them to cease having effect prior to the making of the 2014 Agreement. The fact that Linfox continued to apply the two APMs beyond their expiry dates does not act to extend their operation as is the case when an enterprise agreement is effectively extended until a new Agreement is made or it is terminated.

[43] Accordingly I determine that the two APMs have expired and are not incorporated or otherwise subsumed into the 2014 Agreement and therefore Linfox is entitled to apply the totality of the 2014 Agreement to the relevant employees, including the hourly rates of pay arising from clause 88.2(a).

[44] Here I wish to note that in making my decision and determination, I have not paid regard to what would be an equitable outcome between the parties. In particular, the financial effects of my determination have not been a consideration in my deliberations nor has the contract tendering process in which Linfox is currently involved. That being said, I would urge Linfox to enter into further negotiations with the TWU with the aim of reducing any financial impact on the relevant employees who will be affected by my determination.

COMMISSIONER

Appearances:

D Jones with R Dalton for the Applicant

T. Warnes with R Shortill for the Respondent

Hearing details:

2015

Sydney:

25 November

 1   Exhibit Linfox1.

 2   See Attachments RB-4 and RB-5 to Exhibit Linfox3.

 3   Exhibit TWU1.

 4   Exhibit TWU1, paragraph 30.

 5   PN874.

 6   Exhibit Linfox3.

 7   Exhibit Linfox4.

 8   Exhibit TWU2.

 9   Exhibit TWU3.

 10   Exhibit TWU4.

 11   Ibid at paragraphs 7-9.

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