National Union of Workers v Hospira Australia Pty Ltd

[2014] FWC 1836

[2014] FWC 1836

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.437 - Application for a protected action ballot order

National Union of Workers
v
Hospira Australia Pty Ltd
(B2014/598)

DEPUTY PRESIDENT KOVACIC MELBOURNE, 28 APRIL 2014

Proposed protected action ballot by employees of Hospira Australia Pty Ltd.

[1] The National Union of Workers (NUW — the Applicant) made an application on 14 March 2014 pursuant to section 443 of the Fair Work Act 2009 (the FW Act) for a protected action ballot order in respect of those employees of Hospira Australia Pty Ltd (Hospira — the Respondent) who are members of the NUW and who would be covered by a proposed enterprise agreement to replace the Hospira Australia Pty Ltd & NUW Enterprise Agreement 2011 (the Agreement). 1 The Agreement has a nominal expiry date of 28 February 2014. As at 1 April 2014, the parties had met on five occasions but had been unable to reach agreement, remaining substantively apart on the issues of wages and union rights.2

[2] The application was heard on 19 March and 1 April 2014, with the NUW’s closing submissions filed on 9 April 2014 and Hospira’s closing submissions filed on 11 April 2014. Mr Duncan Pegg appeared for the NUW, while Mr Chris Gardner appeared with permission for Hospira. Mr Andrew Riley, an organiser with the NUW in Victoria, and Ms Cianna Turovetz, an NUW delegate at Hospira’s Mulgrave facility, gave evidence for the Applicant, while Mr David McClure, Hospira’s Materials Manager, gave evidence for the Respondent.

[3] By way of background, Hospira manufactures a range of drugs for the Australian and overseas markets. Hospira’s products are used by health service providers, primarily hospitals, and fall into three broad categories: specialty injectable pharmaceuticals, other pharmaceuticals and medication management. Hospira holds about eighty per cent of the Australian market in relation to its injectable pharmaceuticals, with the Mulgrave facility producing pharmaceutical products used in the treatment of various types of cancer and of patients with compromised immune functions. 3

[4] With regard to the statutory requirements set out in s.443(1) of the FW Act, Hospira did not challenge that the application had been made under s.437 of the FW Act or that the NUW has been and is genuinely trying to reach an agreement. Based on the material before me I am satisfied that the requirements of s.443(1) have been met. Accordingly, the FW Act requires that the Fair Work Commission (the Commission) make a protected action ballot order.

[5] However, Hospira submitted that pursuant to s.443(5) of the FW Act there are exceptional circumstances justifying the period of written notice referred to in s.414(2)(a) of the FW Act being longer than three working days. Hospira proposed that seven working days notice be required. The NUW argued that there were no exceptional circumstances warranting a longer period of notice. In short, the key issue which the Commission needs to determine is whether there are such exceptional circumstances in this case.

[6] For the reasons set out below I have decided to make a protected ballot action order which requires the provision of seven working days written notice.

Hospira’s submissions and evidence

[7] Hospira relied on a number of factors as giving rise to the “exceptional circumstances” warranting a notice period of seven working days, including:

(a) the products produced by Hospira are primarily directed towards life saving cancer treatment;
(b) Hospira operates as part of a worldwide network for particular life-saving products;
(c) Hospira is a sole or primary provider of certain products and stock shortages can occur;
(d) if supply is interrupted, patients who have commenced a particular course of treatment may be unable to complete that course of treatment, and patients who are yet to commence treatment will be unable to do so until supply is met; and
(e) production (and indeed stopping production) is highly regulated. 4

[8] Hospira submitted that an analysis of various Commission decisions indicates a tendency towards granting extra time where it is in the public interest. To that end, Hospira further submitted that the public interest considerations in this matter were strong and as follows:

(a) every additional day’s notice improves the potential for customer needs to be met either through a redistribution of production or supply within the Hospira network or, alternately, through other potential suppliers;
(b) the provision of seven days notice reduces the risk by over half of not otherwise being able to meet supply where possible as Hospira will have double the amount of time to reschedule the order of production in respect of multiple products; and
(c) in order to reduce the potential for harming a patient’s condition or prognosis, Hospira can rearrange its production schedule to prioritise a particular product to ensure that the supply of a product to individual patients is not interrupted. 5

[9] On the basis that each type of industrial action contemplated in the NUW’s application could result in an interruption to the supply of Hospira’s products, Hospira submitted that its proposed seven working days notice should apply in respect of each type of industrial action specified in the application. 6

[10] Mr McClure’s witness statement provided an overview of Hospira’s business, 7 the operation of its supply chain from production to customer and the typical movement of Hospira’s products both domestically and internationally. Key aspects of Mr McClure’s evidence were that:

(a) no products leave the Mulgrave facility without the hardcopy documentation required by regulators such as Australia’s Therapeutic Goods Administration being properly completed;

(b) particular employees, including employees who will take industrial action, handle that documentation;

(c) generally there is a one week lead time before production of a particular product can commence;

(d) Hospira needs a minimum of three clear days in order to rearrange a particular aspect of its production schedule;

(e) when there is a shortfall in supply, Hospira works with customers to identify to what extent the shortfall can be met from elsewhere in the Hospira network;

(f) an analysis of potential shortfalls in supply is undertaken by Hospira’s global planning group which is based in the USA, with it taking about 48 hours to complete the analysis and determine whether there is a way to reallocate supply to meet customer needs;

(g) each of the forms of industrial action contemplated in the NUW’s application could bring an interruption to the supply chain;

(h) Hospira holds either total or very high market share in respect of some of its products, meaning that disruptions to supply may impact more significantly in those markets relative to markets where Hospira is less dominant;

(i) providing seven days notice of industrial action greatly increases the prospect of being able to implement a revised production schedule and increases the opportunity to identify alternative sources of supply;

(j) interruptions to supply may impact on the treatment of patients; and

(k) providing extended notice does not mollify the impact of industrial action on Hospira.

[11] Key aspects of Mr McClure’s evidence under cross examination were that:

(a) while the majority of Hospira’s products are generic, not all are generic - two proprietary products identified by Mr McClure were Tomudex and Aztreonam; 8

(b) while there may be multiple manufacturers within any one market, regulatory authorities need to approve the product within that market - as a result there may be generic products where Hospira may be the sole or main supplier in particular markets. For instance, Hospira is the sole supplier of Ketalar to the Australian market and of Amikacin, a cancer treatment, in the UK; and supplies about 90 per cent of the US market for Vinorelbine, another cancer treatment; 9

(c) while Hospira manufactures 37 products from a molecule perspective, it manufactures over 360 individual finished products, e.g. different sized vials and different strength of product which may be packed for different markets; 10

(d) from a supply chain perspective, Hospira plans to keep all items in stock; 11

(e) Hospira does not have the capacity to manufacture a product from ‘go to whoa’ in less than 23 or 24 days; 12 and

(f) the analysis undertaken by Hospira’s global planning group not only looks at current shortages but also potential shortages, i.e. potential impacts several weeks after any disruption to supply. 13

The NUW’s submissions and evidence

[12] The NUW contended that the Commission should not exercise its discretion to extend the notice period as there were no exceptional circumstances as required by s.443(5) of the FW Act. In support of its contention, the NUW highlighted that:

(a) Hospira primarily manufactures generic products;

(b) the general period for manufacturing any given product is around 6 weeks and no less than 23 days;

(c) critical supply items are generally kept in stock;

(d) Hospira only requires a minimum of three clear days to alter a particular aspect of production; and

(e) Hospira only requires 48 hours to complete an assessment of whether there is a way of reallocating supply to meet customer needs. 14

[13] Mr Riley’s evidence went to the progress to date in seeking to negotiate a replacement enterprise agreement and was not challenged by Hospira. Mr Riley’s evidence supports a finding that the NUW has been and is genuinely trying to reach an agreement.

[14] Ms Turovetz’s witness statement supported key elements of the NUW’s submission. 15 Under cross examination, Ms Turovetz:

(a) indicated that she had only a general awareness of the level of demand for Hospira’s products, with that understanding based on information provided to employees by Hospira;

(b) considered she possessed a general understanding of the requirements of regulatory authorities such as the USA’s Federal Drugs Administration in respect of particular products; 16

(c) conceded that not all of the products produced by Hospira were generic; 17

(d) acknowledged that Hospira’s weekly production schedule can be re-jigged; 18

(e) accepted that the various forms of industrial action contemplated by the draft protected action ballot order may cause an interruption to supply; 19

(f) conceded that she was unable to make anything other than general statements about the state of supply for specific products; 20

(g) disagreed that the period of notice needed to be extended beyond three working days on the basis that she considered that period to provide sufficient lead time for Hospira to adjust its production, packing and distribution schedules; 21 and

(h) indicated that there are a number of employees who would not be covered by the proposed enterprise agreement who are capable of performing the auditing functions regarding product batches which, for regulatory purposes, are required before those batches can be released. 22

Relevant statutory provisions

[15] The relevant provisions of s.443 of the FW Act are as set out below:

“443 When the FWC must make a protected action ballot order

(1) The FWC must make a protected action ballot order in relation to a proposed enterprise agreement if:

(a) an application has been made under section 437; and
(b) the FWC is satisfied that each applicant has been, and is, genuinely trying to reach an agreement with the employer of the employees who are to be balloted.

…

(5) If the FWC is satisfied, in relation to the proposed industrial action that is the subject of the protected action ballot, that there are exceptional circumstances justifying the period of written notice referred to in paragraph 414(2)(a) being longer than 3 working days, the protected action ballot order may specify a longer period of up to 7 working days.

Note: Under subsection 414(1), before a person engages in employee claim action for a proposed enterprise agreement, a bargaining representative of an employee who will be covered by the agreement must give written notice of the action to the employer of the employee.” (Underlining added)

Exceptional circumstances

[16] The meaning of exceptional circumstances was summarised, as set out below, by Vice President Lawler in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Postal Corporation (Australia Post). 23 That matter concerned a similar provision in earlier legislation to the current s.443(5) in the FW Act and has been cited on a number of occasions by members of the Commission in decisions relating to s.443(5) of the FW Act. Hospira relied upon the decision in its submissions.

“[10] ....... In summary, the expression “exceptional circumstances” requires consideration of all the circumstances. To be exceptional, circumstances must be out of the ordinary course, or unusual, or special, or uncommon but need not be unique, or unprecedented, or very rare. Circumstances will not be exceptional if they are regularly, or routinely, or normally encountered. Exceptional circumstances can include a single exceptional matter, a combination of exceptional factors or a combination of ordinary factors which, although individually of no particular significance, when taken together are seen as exceptional. It is not correct to construe “exceptional circumstances” as being only some unexpected occurrence, although frequently it will be. Nor is it correct to construe the plural “circumstances” as if it were only a singular occurrence, even though it can be a one off situation. The ordinary and natural meaning of “exceptional circumstances” includes a combination of factors which, when viewed together, may reasonably be seen as producing a situation which is out of the ordinary course, unusual, special or uncommon.

[11] However, it is important to note that when considering whether to make an order pursuant to s.463(5) the Commission is not simply concerned with determining whether there are exceptional circumstances. There must be exceptional circumstances “justifying” the specification of a longer notice period. The notion of justification is critical and calls for a consideration of the purpose of the notice required by s.441.” (Underlining added)

[17] Vice President Lawler further said:

“[21] Essentially, what is required in determining whether exceptional circumstances justify an extension of the required notices period is a weighing of the interests of the employer and third parties in the employer having a greater opportunity to take appropriate defensive action as against the diminution in the effectiveness of the employees’ bargaining power that results from such an extension. The fact that the legislature has seen fit to condition the ordering of an extension of the required notice period on the presence of exceptional circumstances justifying it, as distinct from merely conferring a simple discretion to extend the required notice period, indicates that ordinarily there should be no extension.” (Underlining added)

[18] I have adopted the approach taken by Vice President Lawler.

Consideration of the issues

[19] Hospira’s submissions were to the effect that the nature of the products that it produces, its sole or major supplier status in a number of markets both in Australia and overseas and the potential for supply disruption as a result of industrial action to impact on patients suffering from illnesses such as cancer, constituted exceptional circumstances. As previously noted, Ms Turovetz accepted that the forms of industrial action contemplated by the NUW’s application may cause an interruption to supply (refer paragraph [14](e) above).

[20] Drawing on the Vice President Lawler’s summary of what constitutes exceptional circumstances, the abovementioned considerations identified by Hospira support a finding that exceptional circumstances do exist in this case. In particular, I consider the potential impact on patients as a key consideration in this regard. While industrial action invariably has an impact on the employer and sometimes on the employer’s customers and/or other third parties, the potential in this case for industrial action to impact on patients with potentially life threatening diseases in my view is out of the ordinary, unusual, special or uncommon to use Vice President Lawler’s terminology in Australia Post.

[21] The question then arises as to whether these exceptional circumstances justify an extension of the notice period beyond the three days written notice specified in s.414(2)(a) of the FW Act. For the reasons set out at paragraph [12], above, the NUW submitted that the circumstances did not justify the Commission exercising its discretion to extend the notice period. Further, and as previously mentioned, under cross examination Ms Turovetz disagreed that the period of notice needed to be extended beyond three working days on the basis that she considered that period provided Hospira with sufficient lead time to adjust its production, packing and distribution schedules (refer paragraph [14](g) above). On the other hand, Hospira submitted that the public interest considerations involved in this case justified extending the notice period. This was reinforced by Mr McClure’s evidence that it takes about 48 hours for Hospira to determine whether it is possible to reallocate supply to meet customer needs and that Hospira needs a minimum of three clear days in order to rearrange a particular aspect of its production schedule. However Mr McClure’s evidence that from a supply chain perspective, Hospira plans to keep all items in stock somewhat undermines that argument.

[22] Being provided with written notice of the intention to take industrial action provides an employer with an opportunity to take steps to mitigate the impact of that industrial action. In this case the evidence supports a finding that in such circumstances a key consideration for Hospira is on steps to mitigate the impact of disruptions to supply on patients. To that end, Mr McClure’s evidence that it takes 48 hours for Hospira’s global planning group in the USA to determine whether it is possible to reallocate supply to meet customer needs suggests that in the absence of the period of notice being extended beyond three working days, Hospira’s capacity to mitigate the impact on patients is potentially significantly constrained. That potential constraint is further magnified if one also takes into account the three clear days lead time required to adjust the production schedule. On the other hand, extending the period of notice has the potential to diminish the impact of any protected industrial action taken by the NUW. On this point, I accept Mr McClure’s evidence that providing extended notice does not mollify the impact of industrial action on Hospira. Having to undertake the required analysis as to how to meet demand and to consider and implement any adjustments to the production process within constrained timeframes would in my view undoubtedly impact on Hospira and its management. Together these considerations support a finding that the exceptional circumstances in this case justify an extension of the notice period beyond the three days written notice.

[23] As to what extended period of notice should be required, Hospira proposes seven working days. The NUW did not proffer a view on this issue other than to submit that no extension was warranted. Hospira relied on a number of decisions where the Commission had extended the period of notice to seven working days. A number of those decisions, such as Commissioner Gooley’s (as she then was) decision in Australian Nursing Federation v Victorian Hospitals’ Industrial Association, 24 and Commissioner Gregory’s decision in Health Services Union v Victorian Institute of Forensic Mental Health,25were in the broader public health area. Mr McClure’s evidence as to the timeframes involved in identifying alternative supply sources and adjusting production schedules suggests a minimum of five working days may be necessary. However, that timeframe does not allow for the despatch and delivery of product. Together these factors support extending the period of notice to seven working days.

[24] In view of Mr McClure’s and Ms Turovetz’s evidence that all of the forms of industrial action contemplated by the NUW’s application have the potential to disrupt supply, I am satisfied that the extended period of notice should apply to all the forms of industrial action proposed by the NUW.

Conclusion

[25] As previously indicated, based on the material before me I am satisfied that the requirements of s.443(1) have been satisfied and accordingly must make a protected action ballot order. Further, for the reasons set out above, I am satisfied that there are exceptional circumstances justifying the period of written notice being extended to seven working days. An order that effect will be issued separately to this decision.

DEPUTY PRESIDENT

Appearances:

Mr D Pegg for the Applicant.

Mr C Gardner for the Respondent.

Hearing details:

2014.

Melbourne:

March 19

April 1.

 1   PR510240.

 2   Affidavit of Andrew Laurence Riley at paragraphs [5] and [7] and Transcript at PN216.

 3   Exhibit G1 at paragraphs [3]-[8].

 4 Respondent’s Closing Submissions at paragraph [11].

 5 Ibid, paragraph [13].

 6 Ibid, paragraph [15].

 7   Exhibit G1.

 8   Transcript at PN31 and PN130.

 9   Ibid, PN40-50.

 10   Ibid, PN54-55.

 11   Ibid, PN129.

 12   Ibid, PN148-150.

 13   Ibid, PN178.

 14 Final Submissions of the National Union of Workers at paragraph [13].

 15   Exhibit P2.

 16   Transcript at PN253-270.

 17   Ibid, PN276-278.

 18   Ibid, PN298.

 19   Ibid, PN350-361.

 20   Ibid, PN375-377.

 21   Ibid, PN394.

 22   Ibid, PN420-423.

 23 (2007) 167 IR 4; [2007] AIRC 848.

 24 (2011) 214 IR 131; [2011] FWA 7198.

 25 (2012) 222 IR 8; [2012] FWA 4633.

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