LyondellBasell Australia Pty Ltd

[2015] FWC 1779

[2015] FWC 1779

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.240 - Application to deal with a bargaining dispute

LyondellBasell Australia Pty Ltd
(B2014/1668)

VICE PRESIDENT WATSON MELBOURNE, 15 APRIL 2015

Application by LyondellBasell Australia Pty Ltd - Alleged dispute concerning redundancy - Fair Work Act 2009, ss.240 and 275.

Introduction

[1] In December 2014, LyondellBasell Australia Pty Ltd (LyondellBasell) made an application under s.240 of the Fair Work Act 2009 (the Act) for the Commission to deal with a dispute about the negotiation of a new enterprise agreement to replace the LyondellBasell (Australia) Pty Ltd Geelong Site Agreement 2012. The one outstanding issue concerned the application of the redundancy pay formula to employees employed after 15 August 2014.

[2] A conciliation conference was convened with the parties on 16 December 2014. Following a telephone report back held on 19 December 2014, I issued directions in the matter. The directions were as follows:

“In accordance with the memorandum of agreement made by LyondellBasell, the AWU and the CEPU on 1 October 2014, and the accompanying agreement on arbitration, the parties have sought arbitration on the agreed question:

“What should the redundancy benefit be for employees of LBA who joined the company after 15th August 2014 (and who are/will be covered by an LBA Enterprise Agreement).”

The arbitration will be conducted on the basis of materials filed by the parties and any necessary hearing.

[1] Both parties are directed to file and serve submissions and evidence in relation to the outstanding issue in relation to redundancy by 5:00pm on Thursday, 19 February 2015.

[2] The matter will be listed for a telephone report back at 9:30am on Thursday, 26 February 2015.”

[3] In the further telephone report back held in February 2015, the parties decided that the matter of the agreed question could be determined on the papers.

The context of the dispute

[4] LyondellBasell operates a polypropylene plant at Geelong, Victoria on the site of the Corio Viva Energy Oil Refinery. Until 2014 the refinery was owned and operated by Shell Refining (Australia) Pty Ltd. The polypropylene plant was established in 1979. At the time it was owned and operated by Shell Chemicals and employees of Shell worked across the refinery and the polypropylene plant on the same terms and conditions and industrial instruments.

[5] In approximately 1995 Shell decided to separate its refining operations from other “non-core” operations including the polypropylene plant. A joint venture, known as Montell operated the plant with its own employees recruited from the former Shell workforce. In 2000 another merger led to a change of name to Basell.

[6] In 2007 the name of the operator was changed to LyondellBasell. The owner of the company, Access Industries filed for bankruptcy protection in the United States in 2009. Other then as a customer for refinery products and related commercial contracts LyondellBasell does not have any corporate relationship with Shell or Viva.

[7] LyondellBasell is the sole manufacturer of polypropylene in Australia. It has a domestic market of approximately 80,000 tonnes per annum and an export market of approximately 40,000 tonnes per annum. Its main competitors in the Australian market are importers of product derived from major refineries in Saudi Arabia, India, Thailand, China, South Korea and Singapore.

[8] Due to increased competition from larger and newer oil refineries, LyondellBasell has lost around 10,000 tonnes of orders from its domestic market. Increased demand in Asia is largely being met by manufacturers attached to local Asian refineries.

[9] When Montell was established in 1995 employees were engaged under new contracts of employment. The letter of offer included the following:

“I am pleased to confirm our offer of employment with Montell Australia Pty. Ltd. following the completion of the merger of the polyolefins businesses of the Shell Group and the Montedison Group. This offer of employment with Montell is subject to completion of the merger and will commence on the day after the date on which completion of the merger takes place, namely 1st April 1995. The following terms and conditions relate to your employment with the Montell polypropylene plant situated at Geelong and will be effective from the 1st April 1995.

l. A condition of employment is that you are bound by the Montell Personnel Policy, and Awards negotiated between Montell and the recognised trades union.

...

9. Your immediate past contract period with Shell will be recognised by Montell for the purpose of calculating your long service leave and sick leave entitlements and for the purpose of calculating length of service for redundancy payments

10. Redundancy treatment will be in line with that of other major petrochemical companies. However during the first three years after the merger completion, redundancy treatment for any employees who had transferred from Shell will be on the same basis as that which Shell would have applied (at the time of the redundancy) if the employee had remained a Shell employee.”

[10] It appears that there was no written redundancy policy established by Montell following its establishment and no employees were made redundant in the first three years of its operation. There have since been redundancies at the Clyde Plant in New South Wales (2000 and 2013) and at the Geelong Plant (two employees in 2009). Redundancy payments in line with the approach of Shell were made.

[11] There are currently equal numbers of operators at the Geelong Plant who were employed at the time of the establishment of Montell (16) and those who have been employed subsequently (16). Five of the latter group were employed after August 2014.

[12] In 2002 the General Manager of Basell (as Montell had then been renamed) wrote to employees indicating that the arrangements in place at the time of the establishment of Montell, whereby it proposed to apply the Shell redundancy policy to any redundancies in the first three years of Montell’s operations, still applied. The General Manager stated that until a process of consultation occurred with employees, those redundancy pay arrangements would continue to apply.

[13] In enterprise bargaining negotiations the redundancy entitlements of employees has been the subject of claims by the AWU and a stated desire of the company to move away from the Shell redundancy formula. Apart from the agreement to submit this outstanding issue to arbitration there is nothing in the recent enterprise agreement reached by the parties dealing with redundancy.

[14] However, LyondellBasell formulated a policy in August 2014 which it has stated it intends to apply to employees engaged after August 2014. Five employees have since been engaged. They have each been employed on the terms of a letter of offer which includes a statement that their entitlements on termination on account of redundancy will be as required by applicable legislation or as set out in company policy from time to time. The letter attached the newly established redundancy policy.

[15] The company has also indicated its intention to write a letter to all employees in its employ as at August 2014 confirming that in the event of redundancy, redundancy payments would be in accordance with the Shell formula.

[16] A comparison between the two policies and the NES statutory redundancy entitlements is as follows:

NES	Pre August 2014 employees 1	Post August 2014 employees 2
Notice	Between 1 week and 4 weeks	Not specified	5 weeks
Less than 12 months (service)	None	20 weeks (salary)	None
1 year	4 weeks (salary)	24 weeks	8 weeks (salary)
2 years	6 weeks	28 weeks	11 weeks
3 years	7 weeks	32 weeks	14 weeks
4 years	8 weeks	36 weeks	17 weeks
5 years	10 weeks	40 weeks	20 weeks
6 years	11 weeks	44 weeks	23 weeks
7 years	13 weeks	48 weeks	26 weeks
8 years	14 weeks	52 weeks	29 weeks
9 years	16 weeks	56 weeks	32 weeks
10 years	12 weeks	60 weeks	35 weeks
11 years	12 weeks	66 weeks	38 weeks
12 years	12 weeks	72 weeks	41 weeks
13 years	12 weeks	78 weeks	41 weeks
14 years	12 weeks	84 weeks	41 weeks
15 years	12 weeks	90 weeks	41 weeks
16 years	12 weeks	96 weeks	41 weeks
17 years	12 weeks	102 weeks	41 weeks
18 years	12 weeks	108 weeks	41 weeks
19 years	12 weeks	114 weeks	41 weeks
20 years	12 weeks	120 weeks	41 weeks
Redundancy cap	12 weeks	120 weeks	41 weeks

[17] Redundancy pay has been a contentious issue in the oil industry for many years. No formal prescription on redundancy payments has been contained in awards. But oil companies have adopted policies that contain very generous redundancy entitlements. The existence of the policies has been known, although the details of particular formula have not necessarily been publicised until relevantly recently. Oil companies have been reluctant to make the generous benefits legal entitlements and to preclude variation in the future.

[18] The AWU and other unions coordinated under the auspices of the ACTU have sought to formalise agreements on the redundancy payments. The result has been more in the nature of understandings of what is expected to happen in the case of redundancy rather than formal written agreements on such matters. It is fair to say also that the actual incidence of redundancies has been low until several Australian refineries closed in recent years. Viva Energy has agreed to apply the oil industry formula to any redundancies of employees at Geelong engaged at the time of its 2014 enterprise bargaining negotiations. By virtue of a private arbitration conducted by me and incorporated into the enterprise agreement this approach is to be extended to any new employees engaged.

[19] The AWU contends that the answer to the agreed question in this arbitration should be that the company should apply the oil industry formula to all employees made redundant and provide a letter in the same terms to all employees and any future employees in line with the letter intended to be given to pre-August 2014 employees.

[20] LyondellBasell submits that the redundancy entitlements should be as per the published policies and those advised to employees in their respective letters of offer. This would mean that the letter regarding intention to pay the oil industry formula would only be provided to employees engaged before August 2014.

Legal principles to be applied

[21] The parties have agreed that the Commission should arbitrate this matter by reference to the criteria for arbitrating a workplace determination specified in s.275 of the Act. LyondellBasell submits that the approach of a number of Full Benches in making a workplace determination should be adopted. That approach is summarised in one of those Full Bench decisions as follows: 3

“[28] The factors in s.275 have a general bearing on the package of terms to be contained in the Workplace Determination and a more specific bearing on many of the particular claims. Both parties contended that the approach of a Full Bench of the Australian Industrial Relations Commission under predecessor legislation in CFMEU v Curragh Queensland Mining Ltd (the Curragh Case) should be adopted. We agree that this is a leading case dealing with the approach to similar legislation in the same context as the present case and deals with many of the same factors we are required to take into account. When amending legislation adopts wording or tests from predecessor legislation it is inferred that the legislature intended that authorities dealing with the predecessor legislation will continue to apply. While there are some changes to the wording of the factors to which regard must be given, the provisions are substantially the same.

[29] In particular we note the consideration by the Full Bench of the earlier authorities and the endorsement of the approach that the task of the tribunal in a matter such as this is to assess the respective positions of the parties in relation to the matters at issue and, by reference to the statutory factors, arrive at a conclusion that would be regarded as appropriate in the context of the bargaining had the bargaining concluded successfully. The Full Bench in the Curragh Case noted that this did not involve a form of subjective prognostication as to the outcome of the negotiations. Rather, the task involves an objective assessment of the statutory factors and an overall judgment as to an appropriate workplace determination to apply to the operations concerned until the parties replace the determination with a new enterprise agreement.
[30] In relation to specific criteria in the Act the Full Bench said:

“(a) The matters that were at issue during the bargaining period
Since it is clear that our decision is principally concerned with the matters that were at issue during the bargaining period, there is little more to be said on this topic.
(b) The merits of the case
The merits are intrinsic to the consideration of each of the issues which we have decided to deal with.
(c) The interests of the negotiating parties and the public interest
The Commission must exercise broad judgment to produce an outcome which is a fair compromise between the legitimate expectations of the respective parties and which also takes the public interest into account. .....
There is a range of factors affecting profitability and productivity. Our ability to influence the profitability and productivity of the Curragh mine, however, is limited to the area of direct labour costs and some work practices which are founded on award conditions. It is a truism that unless the mine is profitable its future, and the welfare of its employees, will be in jeopardy.
(d) How productivity might be improved in the business or part of the business concerned
We do not intend to approach the issue of productivity in a technical way. There was a great deal of material before us directed at measuring the cost of production at the mine, at other Queensland and Australian mines and at mines in the United States of America. To the extent that this evidence invites us to draw conclusions about labour productivity at Curragh compared with elsewhere, we think it is an invitation to error. Productivity measurement involves a multi-factor approach which assesses all relevant inputs on a comparable basis. We are not satisfied that we have sufficient evidence to draw valid comparisons even on labour productivity at the mine, much less on productivity overall. Whilst the material might contain useful broad indications of labour productivity, we do not think it conduces to any certain conclusions. We are required to consider how productivity might be improved. One way in which the Commission can contribute to productivity improvement is to give attention to unreasonable restraints on productivity and to eliminate them wherever that can be done consistently with the maintenance of fair standards of treatment for employees. We think it is preferable to focus directly on the elimination of unreasonable restraints on productivity rather than on the measurement of productivity in absolute terms or on inter-mine comparisons of productivity levels.
(e) The extent to which the conduct of the negotiating parties during the bargaining period was reasonable
.....
In all of the circumstances we do not agree with the CFMEU's submission that CQML's conduct during the bargaining period was manifestly unreasonable. Rather we see this case as one where both sides took a very strong stand on the issues of principle which they held dear and fought tenaciously to maintain their positions. By no means was this a model negotiation, but we are not prepared to attribute blame to one side or the other by labelling their conduct as unreasonable.
In the circumstances it is not strictly necessary that we rule on CQML's submission that the word "conduct", where it appears in s.170MX(5)(e), should be construed so as to exclude any consideration of the negotiating positions of the parties. Whilst we do not believe that exploration of the strategies, tactics and motivation of the parties is likely to be relevant there could be occasions where the position taken by parties and the objective justification for that position, or the lack of it, could be properly taken into account pursuant to s.170MX(5)(e). We do not need to explore the matter further in this case, although we point out that the Commission is given a broad discretion to take any relevant matters into account pursuant to s.170MX(6).
CQML asked us to give a firm indication, for guidance in future cases, that:

"[the Commission] will not allow its processes to be used for some generalised exploration of another parties (sic) internal documents nor find persuasive the speculative views of documents which do nothing more than reveal a process of internal discussion and deliberation about a range of possible future options."

We agree with the sentiments contained in this passage. Much of the material produced by CQML at the CFMEU's request and tendered in evidence (subject to objection) was unhelpful and irrelevant to our task. To that extent additional time was wasted in that the tender of that material provoked the tender of further material by CQML in rebuttal. Parties must be free, within reasonable bounds of relevance, to conduct their cases as they see fit. Nevertheless, there is much to be said in cases of this kind for preserving, as far as it can be preserved, the traditional distinction between negotiation and arbitration so that the task of arbitration can take place without any need to examine the relative correctness of the parties' negotiating positions or tactics unless such an examination contributes in an objective way to an evaluation of the merits of the claim. Such an approach is not inconsistent with the requirement upon the Commission to have regard to the extent to which the conduct of the negotiating parties during the bargaining period was reasonable.”

What should the redundancy benefit be for employees engaged after August 2014?

[22] The AWU contends that it is undesirable that employees engaged at the same site would be entitled to different conditions. It relies heavily on the oil industry background of the polypropylene plant and the long standing policies of redundancy pay at Shell and in the oil industry. It states that redundancies may well occur in the next 5-10 years by way of a closure of the Geelong refinery and that all employees on the site, including the employees of LyondellBasell would need to be made redundant at the time. It says that it is fundamentally inequitable that five employees of approximately 500 employees on the site would be entitled to different redundancy benefits in that case. It states the additional cost of paying the higher benefits to the five employees would be minor in the scheme of such a large scale closure by international companies.

[23] LyondellBasell submits that it is not in the oil industry and the polypropylene plant has not been considered to be in the oil industry since 1995 when Shell ceased to operate it. It submits that it has been transparent in its intention regarding redundancy payments for the employees engaged after August 2014 and they have accepted employment with knowledge of the new policy, and that the policy is reasonable.

[24] In terms of the merits of the matter, there are a number of relevant considerations. The first is the reasonableness of the company policy. The second is the question of equity between employees. The policy involves benefits well in excess of the NES as the above table makes clear. In my view, it is entirely fair and reasonable in the context of the manufacturing industry.

[25] I am not persuaded that a history of policies in the oil industry should be determinative for future redundancies at the polypropylene plant operated by a chemicals manufacturer. On one view there was never a sound basis for adopting an oil industry approach - except that there was interchange of activities between employees working for Shell on refinery and chemicals plants within an integrated operation. However the polypropylene plant has been operated by a discrete chemicals company longer than it was operated by Shell. The relevance of a legacy arrangement has reduced over the years. It is far more relevant to consider benefits in the same industry - chemicals manufacturing. It has not been shown that there is any departure from an established pattern in the manufacturing sector.

[26] The question of equity is an important consideration. The history of representations since the establishment of Montell illustrates a desire to move away from the oil industry approach, with appropriate notice, consultation and phasing. Indeed an indication of continuation of the approach for three years has ended up being maintained for 20 years and beyond for employees engaged prior to 2014. If the equity argument carries sway there can never be a departure from a previous policy unless a departure is applied to all. That in itself could be said to be inequitable because the employees had expectations of a particular benefit in the future and this expectation would be materially altered.

[27] Further, it must be kept in mind that the application of a redundancy formula differentiates on the basis of service in any event. An employee engaged in 1995 would be entitled to 120 weeks redundancy pay if made redundant at the end of 2022. An employee engaged in September 2014 would be entitled to 52 weeks pay if made redundant at the end of 2022 under the Shell formula and 29 weeks pay under the new redundancy formula. Any formula based on length of service leads to differential payments to employees.

[28] I am not satisfied that the AWU has established a merit case for applying the oil industry formula, or a case to apply anything more than the formula contained in the 2014 policy.

[29] Beyond the merit and equity considerations raised by the parties I do not consider that public interest considerations are a significant factor in this case. Whatever approach is adopted I do not consider that the public interest will be affected in any way. Nor do I consider that productivity improvement is relevant to this question. Redundancy pay is a cost item that arises on the particular event of a redundancy.

[30] I do not consider that the conduct of any of the bargaining parties lends support for one approach or another. The issue of redundancy pay led to an impasse in the negotiations. The company has made a concession for pre-August 2014 employees. It has engaged employees subsequently on a clear and different basis. This does not lend support for one approach or the other. There is no allegation of a failure to comply with good faith bargaining orders. The determination of this dispute will resolve the last remaining issue in the 2014 enterprise agreement negotiations. Redundancy pay can be negotiated when the agreement comes up for renewal regardless of the outcome adopted. It is not anticipated that there will be major redundancies before then. The same incentive for bargaining would exist for one side or the other for each of the outcomes proposed.

[31] In an overall sense it appears to me that the merit considerations are the most important to the determination of the matter. As the AWU has not established a merit case for the application of the oil industry approach to LyondellBasell I do not consider that the oil industry approach should be adopted. Further, as the AWU has not established that the LyondellBasell policy is unreasonable, I do not consider that it is appropriate to adopt any variation to what is proposed.

Conclusions

[32] The question I have been requested to answer is:

“What should the redundancy benefit be for employees of LBA who joined the company after 15th August 2014 (and who are/will be covered by an LBA Enterprise Agreement).”

[33] The answer I provide to the question is:

“The level of benefits contained in the LyondellBasell redundancy policy published in August 2014.”

[34] This determination should operate for the life of the 2014 Agreement, namely to 30 June 2017.

VICE PRESIDENT WATSON

Final written submissions:

Australian Workers’ Union on 17 February 2015.

LyondellBasell Australia Pty Ltd on 19 February 2015.

LyondellBasell Australia Pty Ltd on 13 March 2015.

 1   Includes a base entitlement of 20 weeks’ salary.

 2   Includes a base entitlement of 5 weeks’ salary.

 3   Transport Workers’ Union v Qantas Airways Ltd[2012] FWAFB 6612. See also Parks Victoria v Australian Workers’ Union[2013] FWCFB 950.

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