Rail Corporation New South Wales T/A Railcorp v Australian Rail, Tram and Bus Industry Union-New South Wales Branch
[2012] FWA 4736
•13 JUNE 2012
[2012] FWA 4736 |
|
DECISION |
Fair Work Act 2009
s.739 - Application to deal with a dispute
Rail Corporation New South Wales T/A Railcorp
v
Australian Rail, Tram and Bus Industry Union-New South Wales Branch and others.
(C2012/193)
SENIOR DEPUTY PRESIDENT HAMBERGER | SYDNEY, 13 JUNE 2012 |
Dispute about redundancy package applicable to RailCorp Maintenance Centre Employees.
[1] This dispute relates to the redundancy package that Rail Corporation of New South Wales (‘RailCorp’) is required to provide to a group of 16 employees from three electrical maintenance depots that have been or are to be offered voluntary redundancy as a result of the implementation of reform of RailCorp’s Rolling Stock Division.
[2] RailCorp maintains that the employees are entitled to the redundancy package contained in clause 47 of the Rail Corporation Enterprise Agreement 2010 (‘the 2010 Agreement’). The unions on the other hand assert that the employees are entitled to the redundancy package (sometimes referred to as ‘the enhanced package’) outlined in a letter from Mr John Watkins, the then Minister for Transport, in a letter to Mr Matt Thistlethwaite of Unions NSW, on 13 March 2008.
[3] This dispute has been referred to FWA for arbitration in accordance with the Dispute Settlement Procedure (‘DSP’) in the 2010 Agreement. The 2010 Agreement provides that the DSP, inter alia, applies to any dispute arising about matters pertaining to the relationship between RailCorp and its employees as well as to the operation and application of the 2010 Agreement itself. Step 4 of the DSP specifically provides for disputes which have not been resolved by conciliation to be arbitrated by FWA.
[4] Section 739 of the Fair Work Act 2009 (‘the Act’) empowers FWA to arbitrate disputes where this is provided for by a DSP in an enterprise agreement. However s.739 (5) provides that in so doing FWA must not make a decision that is inconsistent with the enterprise agreement.
[5] The matter was heard on 4 June 2012. Mr A Woods represented RailCorp. Mr A Walkaden represented the respondent unions.
The evidence
[6] Mr A Kececi, Principal Employee Relations Officer, gave evidence on behalf of RailCorp. Mr M Hoban, AMWU official, and Mr R Wardropper, AMWU delegate, gave evidence on behalf of the unions.
[7] The background to this dispute goes back to March and July 2007, when there were two separate rolling stock incidents on the Sydney Harbour Bridge that caused major delays to the rail system during peak hours which affected customers significantly. The cause of these incidents was linked to maintenance work. 1
[8] Following these incidents the Ministry of Transport in August 2007 commissioned an independent review of RailCorp's Rolling Stock maintenance procedures by Mr Keith Clark. Mr Clark, in October 2007, presented his report (the ‘Clark Report’) to the RailCorp Board. The Clark Report made 35 specific recommendations to lift the performance of the maintenance depots to industry best practice. These recommendations were to be implemented over the following 12 months. The Board endorsed the report. 2
[9] It can be inferred from Mr Hoban’s evidence that during this process the Government raised with the unions the option of outsourcing the maintenance yards if reform was not forthcoming, and that this remained as an implicit threat from the middle of 2007 into 2008. 3
[10] The unions did not accept the Clark Report, though they did not oppose reform per se. Lengthy negotiations took place in the New South Wales Industrial Relations Commission on how reform could proceed. Some union members were concerned about job security, particularly as the Clark Report recommended combining the vehicle/car builder stream into a single mechanical stream. 4 While the unions were concerned about the potential for redundancies, RailCorp’s position was that the focus should be on retraining the existing work force and that redundancies would be ‘an absolute last resort.’ The unions accordingly decided to approach the Minister directly, through Unions NSW.5
[11] Discussions were held 6 with the result that on 13 March 2008, the then Minister for Transport, Mr Watkins, wrote a letter to the Deputy Assistant Secretary, Unions NSW, Mr Thistlethwaite in relation to what he described as a ‘suitable voluntary redundancy package to accompany the RailCorp Centre Reform Plan (based on the Clarke Report).’ The Minister wrote:
- 4 weeks pay in lieu of notice (5 weeks if employee over 45 years)
- 4 weeks pay per year of service to the first ten years
- 3 weeks pay per year of service after ten years
- Incentive bonus of 15 weeks for early acceptance
- 4 weeks pay in lieu of notice (5 weeks if employees over 45 years)
- 4 weeks pay per year of service, uncapped.
‘I am pleased to advise that the Government will make the following package available to employees made redundant by the implementation of plan [sic]:
1-17 Years of Service
18 Years or more of Service
It should be noted that this package is identical to the Special Purpose Payment Package previously offered to rail employees from RIC and SRA.
The number of employees to whom this package will apply will need to be negotiated through the Industrial Relations Commission process put in place to implement the RailCorp Maintenance Centre Reform Plan.
The redundancy package is offered on the condition that these reforms will be implemented.
Additionally, I understand that the rail maintenance unions have sought assurance that retraining and redeployment options will be offered to workers whose positions or trades are no longer required by the organization following the restructure. I understand that this forms part of the RailCorp Maintenance Centre Reform Plan currently before the Commission, and I fully support such measures.
I am also committed to the development of a Five Year Business Plan from RailCorp for the future of the Rail Maintenance Yards.’ 7
[12] Mr Kececi indicated that he had no knowledge of this letter until it was tabled during proceedings in the Industrial Relations Commission on 2 April 2008. His evidence is that he is not aware of RailCorp ever having been provided with a copy of the letter by the Minister or any other NSW Government representative. 8 I infer that the Minister’s letter was drafted and sent without the involvement of RailCorp.
[13] Negotiations over reform of the maintenance depots continued slowly. On 17 October 2008 Deputy President Sams of the NSW Industrial Relations Commission issued a statement which included the following:
1. The Commission today resumed conciliation proceedings in the dispute between RailCorp and Rail Unions, represented by Unions NSW, concerning ongoing reform issues in the New South Wales rail maintenance depots. The dispute was re-listed at RailCorp's request. Representatives of the Minister and the Premier’s Department were in attendance. Mr Kececi, for RailCorp, submitted that RailCorp wished to reactivate negotiations on two central issues identified by the Clark Report as fundamental to railway maintenance reform; firstly, the requirement of a new classification structure with appropriate retraining opportunities for existing employees, and secondly, RailCorp's need to have a more flexible arrangement in respect to its use of contractors.
2. Mr Thistlethwaite for Unions NSW, said the Unions had met yesterday and decided that they would continue to work towards maintaining Government ownership of railway maintenance. To this end, the Unions had agreed that they would be willing to enter into negotiations over a reform package, consistent with best practice within the industry, including existing competitors in the private sector, for example EDI, Qld Rail and Maintrain (companies which would presumably be interested if RailCorp's maintenance operations would be privatised). An appropriate redundancy package was still a priority for employees who were unable to be accommodated in any new structure. To progress the matter, the Unions proposed that the parties agree on the engagement of an external consultant to develop skills matrix modelled on best practice in the industry. RailCorp indicated a willingness to move the matter forward on this basis, but with appropriate timeframe is to be put in place...’ 9
[14] This led to the appointment of two independent experts, John McLuckie and Neil Zsoldas, in October 2008, to prepare a further report. They reported in November 2008. While this report did not embrace all aspects of the Clark Report it did incorporate the key elements, including the implementation of a new classification structure to deliver flexibility and cross skilling commensurate with that achieved in the private sector, the abolition of traditional trades-based foremen and greater use of contractors. 10
[15] On 20 November 2008 a meeting was held between the new Minister for Transport, Mr David Campbell, and a number of union delegates and officials representing RailCorp employees. No one from RailCorp management was present. The Minister sought to persuade the unions to embrace the reforms. He repeated the suggestion that failure to do so could lead to the outsourcing of rail maintenance. 11 Towards the end of the meeting, the Minister reaffirmed the commitment in the Watkins letter concerning the level of payments to employees made redundant as a result of the reform process.12
[16] On 25 November 2008, a mass meeting of Rolling Stock Division employees voted to accept implementation of the reforms outlined by Mr McLuckie and Mr Zsoldas, subject to the finalisation of a contractor's protocol and further discussion about the introduction of a new classification structure. 13 At the meeting employees were told by their union officials that any employees made redundant would be paid in accordance with the amounts specified in the Watkins letter.14 On the basis of the evidence, it is reasonable to infer that the statements made by the two Ministers of Transport concerning the level of redundancy pay were a factor in leading the employees to support the proposed reforms. It is also likely that the threat to outsource the maintenance function was also a factor.
[17] A Working Steering Group (WSG) for Maintenance Reform was established, composed of 10 union delegates and a number of management representatives. This group met regularly from early 2009 and acted as a consultative body overseeing the detailed implementation of the reforms. 15
[18] Part of the reforms involved changes to the line management structure. A new position of Line Manager was created and the trades-based Supervisor positions were abolished. Employees formerly holding the position of Supervisor could apply for appointment as Line Managers. 16 14 Supervisors were made redundant as part of the process and were paid the amounts specified in the Watkins letter.
[19] At this time, clause 48 of the applicable enterprise agreement (the Rail Corporation New South Wales Union Collective Agreement 2008 - ‘the 2008 Agreement’) stated as follows:
‘Except where the Employer offers a voluntary redundancy/severance package whose total value is greater than any package provided for in the Rail Corporation NSW (Compilation) Agreement 2005, the packages available to those Employees covered under Sections 2, 3, and 4 of the Compilation shall apply to those Employees.’ 17
[20] The level of redundancy pay in the Watkins letter was significantly higher than that provided for in the ‘Compilation Agreement’. The ‘Compilation Agreement’ prescribed ‘standard benefits’ of four weeks notice or pay in lieu, plus two weeks severance pay for each year of continuous service up to a maximum of 26 weeks pay. 18
[21] RailCorp issued a draft Redundancy Procedure to the unions for consultation in March 2009. This procedure was approved by the RailCorp Executive Management Committee in December 2009. 19 It makes no provision for compulsory redundancy. It states that ‘any employee whose substantive position is no longer required will be redeployed within RailCorp or participating organisations. Employees may be provided with the option of redundancy where appropriate.’ In other words, redundancies can only take place on a voluntary basis. The policy states that:
- 1 year of service - 20 weeks
- 2 years of service - 21 weeks
- 3 years of service - 22 weeks
- 4 years of service - 23 weeks
- 5 or more years of service - 24 weeks
- Additional week available for employees over 45 years of age
- Redundancy component - 3 weeks every year of continuous service (capped at 13 years/39 weeks), with pro-rata payment is the incomplete years of service to be a quarterly basis
- Maximum total available - 64 weeks.’
‘Employees covered by this Procedure are entitled to the following after they have accepted an offer of redundancy:
[22] During mid-2009, a presentation was held at the XPT Depot (as part of a series held at the various maintenance depots) where management updated the workforce on the rolling stock maintenance reforms. The presentations described the nature of the reforms that were proposed to be implemented and gave some information in relation to how people might be affected and managed. 20 Mr Brian Hartmann (the then Human Resources Director of RailCorp) and Mr Kececi were amongst the presenters. A series of slides were shown. Extracts from the presentation were tabled as Exhibit R2. One slide was headed ‘Impact on Staffing Levels’. This showed actual staffing levels as at 2009 and compared them to the level of staffing that would be required under the reform process by 2012. It also included an estimate of natural attrition over that period. The slide indicated that there would be a need for 451 staff by the end of 2012 and that natural attrition over the reform period would have brought staffing levels down to 461, that is, there would be a surplus of only 10 employees. The slide included the following dot points:
- ‘In practical terms it means no current RSD staff need to be forced out of the business if everyone steps up and participates in the reform.
- We can manage this over time through natural attrition.
- NO RSD employee will have to take forced redundancy due to the reform
- Capacity Planning will confirm numbers of staff required - based on new working arrangements.
- If any individual is unable to transition into the new structure they be offered retraining and/or redeployment (limited voluntary redundancy may also be offered in accordance with RailCorp Policy and Procedures).’
[23] Mr Kececi gave evidence that the focus was on retraining and redeployment and that while there might be some limited targeted redundancies offered there ‘ wasn't a guarantee and in his jovial way [Mr Hartmann] sort of indicated that people shouldn't go and purchase caravans and plasmas and those sorts of things because there would be no guarantees.’ He said that he did not recall Mr Hartmann making any statement in relation to what the particular redundancy package might be one if was ever offered. 21
[24] Mr Wardropper gave evidence about what I infer was the same meeting. According to Mr Wardropper, after the presentation was complete, words to the following effect were said:
‘Employee: What is happening with the reforms at the diesel depots, are redundancies still on the cards and if so will we get the enhanced package?
Brian Hartmann: There will be some redundancies, but they will be specifically targeted at some workgroups. As you know, the enhanced package is a good one and you will get it. So don't rush out to buy your caravans and plasma televisions just yet.’ 22
[25] I am satisfied on the evidence that no one from RailCorp gave the employees an undertaking that they would be offered redundancy pay in line with that contained in the Watkins letter. This conclusion is primarily based on the inclusion in the written presentation (Exhibit R2) of a specific reference to RailCorp Policy and Procedures. Moreover the gist of Mr Hartmann's comments about ‘caravans and plasmas’ was clearly to downplay expectations concerning the level of redundancy pay. Consistent with this, I accept Mr Kececi’s evidence about what Mr Hartmann said at the meeting.
[26] The 2010 Agreement became operational in December 2010. Clause 47 is entitled ‘Voluntary Redundancy/Management of Excess Employees’. The clause provides as follows:
‘During the life of this Agreement, reduction in staffing levels will be achieved through natural attrition, redeployment or voluntary redundancy in accordance with RailCorp's Redeployment and Separation Policy and Procedure applying at the date of certification of this Agreement.’
[27] The Redeployment and Separation Policy and Procedure referred to in Clause 47 incorporate the Redundancy Procedure approved in December 2009 and contain the same entitlements.
[28] Mr Kececi said in his statement:
‘I was involved in the negotiations regarding the 2010 Enterprise Agreement. In the negotiation the Unions sought a voluntary redundancy package that was more generous than both that contained in section 3 of the Compilation Agreement 2005 and the Watkins Letter. RailCorp refused that request and sought the NSW Government standard. Clause 47 is the agreed negotiated position.
At no point during the negotiation process was any reference made to affirming or preserving the redundancy package in the Watkins Letter for any staff.’ 23
[29] Mr Hoban gave evidence that there were two significant items concerning redundancy during the negotiations for the 2010 Agreement. ‘The first was the claim of the unions that there would be no forced redundancies for the life of the Agreement. The second was the claim of RailCorp to place all redundancy entitlements into policy.’ 24 Mr Hoban did not however contradict Mr Kececi’s evidence that the unions sought an increase in the quantum of redundancy entitlements during the negotiations for the 2010 Agreement.25 It is clear from what Mr Hoban said during his cross examination that the unions made a conscious decision not to seek the incorporation into the 2010 Agreement of higher redundancy entitlements for those employees affected by the reforms in the Rolling Stock Division, choosing instead to rely on what they consider to have been the undertakings already given by the Minister.26
[30] As part of the reforms a new classification structure was developed to support cross skilling across different trades. In 2009/2010 an internal program of training for cross/multi-skilling of maintenance staff commenced. This program allowed for translation to the new classification structure. Participation was voluntary. In 2010/11, a program was run to retrain RailCorp trade employees affected by the new classification system. Non-trade employees were also able to participate if they passed an examination. Again, participation was voluntary. Employees were given several opportunities to participate in the retraining schemes. It was explained to employees that if they did not participate they would not be able to transition to the new classification structure and would remain in their current position, which eventually would not exist under the new structure. Employees were encouraged to participate. Some employees chose not to do so and therefore remained in their original positions. Letters were sent to employees who took his position, explaining the consequences of non-participation and encouraging them to reconsider. 27 The letters advised employees that failure to participate would mean that they would become part of a project pool where they would continue to undertake duties in their current capacity until such time as they were managed in accordance with RailCorp's redeployment policy and procedures.28
[31] In late 2011 a review was carried out which identified a number of positions as not being required from June 2012. In February 2012 briefings were held with staff and the unions which outlined how affected employees would be dealt with. This would include an assessment of whether the employee was eligible for voluntary redundancy. It was indicated that any offer of voluntary redundancy would be in accordance with RailCorp's Redundancy Procedure. In a letter to Mr Hoban it was clarified that redundancy payments would be in line with the RailCorp Redeployment and Separation Policy and Procedure as referred to by clause 47 of the 2010 Agreement. 29
Consideration
[32] The unions acknowledge that clause 47 of the 2010 Agreement incorporates the RailCorp Redeployment and Separation Policy and Procedure. They also acknowledge that this policy prescribes redundancy entitlements ‘with respect to relevant employees.’ However, they contend that the redundancy entitlements set out in the policy ‘...are the minimum entitlements that are owed to relevant employees. An employer is not prevented from making payment to relevant employees in excess of such minimum entitlements.’ The employees affected by the Rolling Stock Division reform process should receive ‘the enhanced package’ referred to in the Watkins Letter.
[33] The unions submit that both they and the workforce have supported and cooperated with the reforms, which have delivered significant benefits to RailCorp. The unions and the workforce understood that any employee made redundant arising from the implementation of the reforms would receive the enhanced package, and this understanding was critical in ensuring their cooperation with those reforms.
[34] The unions characterise the dispute as one concerning the obligations of RailCorp with respect to its employees that are made redundant. The issue in their view is whether the approach taken by RailCorp is a valid exercise of its managerial prerogative. The tribunal should apply the principles of the XPT case, 30 and should interfere with an exercise of managerial prerogative which, as in the present case, ‘is patently unjust and unreasonable.’ This is primarily because of the commitment given by Minister Watkins which was then reaffirmed by Minister Campbell. The unions and the workforce relied on that commitment in deciding to support and cooperate with the reforms. The reforms would not have been as successful as they have been without this support and cooperation.
[35] In my view, the commitments given by the Ministers can best be described as ‘political promises’. They had no legally binding effect. They were not given by RailCorp, and indeed appear to have been given without consulting RailCorp management. Mr Walkaden submitted that the distinction between RailCorp and the Government is ‘semantic’. That is not correct. RailCorp is a NSW Government agency. At the time the Ministers made their ‘promises’ RailCorp had its own Board, and Chief Executive Officer (CEO). Under the Transport Administration Act 1988, as it applied at the time, the Board was appointed by the Minister. The Board was responsible for determining the policies of RailCorp. The CEO was appointed by the Governor. He was responsible for managing and controlling the affairs of RailCorp in accordance with the policies of the Board. The Act specifically provided that:
‘Any act, matter or thing done in the name of, or on behalf of, RailCorp by the Chief Executive Officer is taken to have been done by RailCorp.’
[36] No such provision existed in relation to the Minister for Transport. Instead the Minister could give the RailCorp Board written directions in relation to the exercise of RailCorp’s functions. The Board and the CEO were required to give effect to such directions, except in certain circumstances. RailCorp was also required to keep the Minister informed about its activities and present him with a draft corporate plan. RailCorp was required to consider any comments on the draft corporate plan made by the Minister.
[37] There is no evidence that the Minister ever gave the RailCorp Board any written directions under the Transport Administration Act 1988 in relation to redundancy pay for employees displaced as part of the Rolling Stock Division reform process. I find that RailCorp is not bound by the promises made by Minsters Watkins or Campbell.
[38] Is there any other basis for me to find that it would be unjust or unreasonable for RailCorp to make redundancy payments to the employees other than in accordance with the 2010 Agreement? I think not. Clearly they would not be receiving any less than other employees who might be offered voluntary redundancy by RailCorp in similar circumstances that might arise during the life of the 2010 Agreement. Moreover, while no evidence was put to me about this, based on my own knowledge I am able to observe that the redundancy provisions in the 2010 Agreement are generous both by community and public sector standards. Finally I have taken into account that the employees in question have been offered every opportunity to retrain and take up new positions at RailCorp. It is only because they have refused to do so that the issue of their being offered voluntary redundancy has arisen. In practice, they have largely chosen to opt out of the reform process. In all the circumstances I do not consider that offering the employees in question voluntary redundancy entitlements in line with those set out in the 2010 Agreement would be unjust or unreasonable.
[39] Even if this were not so, I am prohibited by s.739 of the Act from making a decision that is inconsistent with the 2010 Agreement. Mr Walkaden accepted that the 2010 Agreement provides for certain redundancy entitlements - those contained in the RailCorp Redeployment and Separation Policy and Procedure. However he submitted that these were in effect minimum standards - it would not he argued be ‘inconsistent’ with the 2010 Agreement if RailCorp were to pay more. I do not agree. Clause 14.1 of the 2010 Agreement includes the following:
‘14.1 This Agreement covers the field. During the life of this Agreement the parties:
(a) will continue to recognise the Employer’s managerial prerogative to propose and implement change in compliance with this Agreement;
(b) shall make no extra claims for any changes in remuneration or conditions of employment except in relation to the terms of this clause...’
[40] Moreover, the wording of clause 47 in the 2010 Agreement is significantly different than the equivalent provision in the previous enterprise agreement - which was in effect at the time the supervisors were made redundant. Clause 48 of the 2008 agreement (set out earlier) explicitly envisaged that the employer might offer a voluntary redundancy/severance package with a value higher than the entitlements set out in the earlier ‘Compilation Agreement’. By contrast, clause 47 of the 2010 Agreement explicitly states that reduction in staffing levels ‘will’ be achieved in accordance with the Redeployment and Separation Policy and Procedure. The Procedure states quite specifically what employees who have accepted an offer of redundancy ‘are entitled to’.
[41] A proper construction of the 2010 Agreement, in contrast to the 2008 Agreement, is that it provides a specific set of redundancy entitlements - they are not minimum entitlements with scope for the parties to negotiate more generous arrangements. It would be inconsistent with the 2010 Agreement for RailCorp to offer more generous voluntary redundancy entitlements to the employees than those set out in the redundancy policy - and therefore I am prohibited by s.739 from requiring RailCorp to do so.
Conclusion
[42] For all the above reasons I find that the maintenance employees are only entitled to the receive redundancy payments in line with those referred to by clause 47 of the 2010 Agreement, rather than those contained in the Watkins letter.
SENIOR DEPUTY PRESIDENT
Appearances:
A Woods for the Rail Corporation of New South Wales
A Walkaden for "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU); Australian Rail, Tram and Bus Industry Union-New South Wales Branch; Association of Professional Engineers, Scientists and Managers, Australia; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia - Electrical, Energy and Services Division - New South Wales Divisional Branch; and Unions NSW.
Hearing details:
2012.
SYDNEY
4 June
1 Exhibit R1, paragraph 3
2 Ibid, paragraphs 6-8, and Attachment A
3 PN272 & 309
4 Exhibit AMWU1, paragraph 8
5 PN284-304
6 PN324, PN409-10
7 Ibid, Attachment M-H1
8 Exhibit R1, paragraph 15
9 Ibid, Attachment E
10 Ibid, Attachment F
11 PN420
12 Exhibit AMWU2, paragraph 19, PN?
13 Ibid, paragraph 21
14 Exhibit AMWU 2, paragraph 12
15 Ibid paragraphs 4, 13-14
16 Exhibit R1, paragraph 30-1
17 Ibid paragraph 27; Attachment I
18 Ibid, Attachment H
19 Exhibit AMWU1, Attachment MH-4
20 PN27
21 PN44-46
22 Exhibit AMWU2, paragraph 17
23 Exhibit R1, paragraphs 38-9
24 Exhibit AMWU1, paragraph 19
25 PN352
26 PN363
27 Exhibit R1, paragraphs 40-4
28 Ibid, Attachment N
29 Ibid, paragraphs 45-49; Attachments P, R
30 Australian Federated Union of Locomotive Enginemen v State Rail Authority of New South Wales (1984) 295 CAR 188
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