Re Viterra Operations Pty Ltd
[2018] FWCA 1161
•19 MARCH 2018
| [2018] FWCA 1161 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.225 - Application for termination of an enterprise agreement after its nominal expiry date
Viterra Operations Pty Ltd
(AG2017/5970)
VITERRA LTD - PORT LINCOLN ENTERPRISE AGREEMENT 2012
Grain handling industry | |
COMMISSIONER HAMPTON | ADELAIDE, 19 MARCH 2018 |
Application for termination of the Viterra Ltd - Port Lincoln Enterprise Agreement 2012 – employee organisation opposed but declined to provide submissions and evidence in support of that position – long standing bargaining impasse – significant potential difference between enterprise agreement and modern enterprise award for all parties – no undertakings provided by applicant employer – whether termination contrary to the public interest – whether termination appropriate in light of considerations established under the Act – bargaining impact assessed and not sufficient in its own right to meet requirements given impact upon employees and their bargaining position – uncontested productivity and related benefits from termination – mixed employee views about application with considerable apparent support for reversion to the modern enterprise award - on balance, termination of enterprise agreement not contrary to public interest and appropriate – relatively long delay appropriate in all of the circumstances – termination made.
1. The application and the process leading to the hearing of the matter
[1] This decision concerns an application by Viterra Operations Pty Ltd 1 (Viterra) under s.225 of the Fair Work Act 2009 (the FW Act). The application seeks to terminate the Viterra Ltd - Port Lincoln Enterprise Agreement 2012 (the Enterprise Agreement).
[2] The Enterprise Agreement was approved 2 under the terms of the FW Act and passed its nominal expiry date on 2 July 2015. Both prior to, and since that time, the relevant parties have unsuccessfully attempted to negotiate a replacement agreement. These parties include the Australian Workers’ Union (AWU), which is covered by the Enterprise Agreement and represent some, and potentially many, of the employees at the Port Lincoln terminal where that instrument applies.
[3] The AWU opposes the application and in the lead up to the hearing, with the support of both parties, another Member of the Commission 3 conducted further facilitated discussions between them with a view to achieving an agreed proposed new agreement that could be put to the employees for approval. Despite the best endeavours of all concerned, this outcome was not achieved and Viterra subsequently provided comprehensive written submissions and evidence in support of its case to terminate the Enterprise Agreement.
[4] Viterra seeks the termination of the Enterprise Agreement on a number of grounds and relies upon various propositions, including the following:
• The employer is seeking a replacement enterprise agreement with three key changes to hours of work arrangements including removal of the established Hours of Work provision (subclause 6.1.1.1) and the shipping provision (clause 6.5), and changes to the annualised salary hours (ASH) bank;
• Despite numerous bargaining meetings conducted over three years, changes to the proposed agreements to respond to employee concerns, and three different votes of employees, no new enterprise agreement had been made and there is little prospect of that outcome in the current environment;
• Termination of the Enterprise Agreement would increase the likelihood that the new enterprise agreement would be made (agreed to by a majority of the employees) and this will promote flexibility and productivity in the workplace;
• There was increased competition facing Viterra and increased flexibility in its operations and changes in the existing Enterprise Agreement were necessary; and
• Updating the ASH bank and related arrangements would assist to reduce the potential for disputation in relation to its operation.
[5] It is common ground that the work in question is covered by the Viterra Bulk Handling and Storage of Grains, Pulses and Minerals Award 2015 (the Enterprise Award), which is a modern enterprise award 4 made by the Commission under the FW Act. In the absence of the Enterprise Agreement, or any replacement instrument of that kind, the Enterprise Award would apply.
[6] The AWU originally outlined its position on the application in written submissions to the Commission, which included the following:
“3. The AWU opposes the application.
…
5. The Applicant says that this application is not motivated by a desire to have the relevant employment governed by the Viterra Bulk Handling and Storage of Grains, Pulses and Minerals Award 2015 (the Award) indefinitely.
6. Rather, the Applicant seeks the termination of the Agreement to inflict economic harm on its employees (and consequentially, harm to the families of its employees) to break the deadlock in negotiations for a new enterprise agreement.
7. The Applicant’s approach demonstrates that it has been unable to persuade its employees of the merits of its proposal and, having failed to persuade its employees, it seeks to impose economic hardship to force employees to acquiesce to a significant deterioration in their economic well-being.
8. The proposed new enterprise agreement (in particular the removal of clauses 6.1.1.1 and 6.5.5) is detrimental to the interests of AWU members and is a significant erosion of the 38-hour working week. The proposed agreement, if implemented, would allow AWU members to be rostered for up to 15 hours a day, 7 days a week.
9. The cumulative effect of the proposed changes creates a significant risk that rosters imposed by Viterra under the new enterprise agreement will contravene the maximum weekly hours protection in the National Employment Standards.
10. Termination of the Agreement and transition to the Award would result in a significant reduction in employee ordinary time wages of up to 24%
…
12. There can be no certainty that agreement will be reached on a new enterprise agreement if the Applicant’s termination application is successful. A significant number of employees have lost trust in the applicant (not least as a result of the Applicant’s conduct of the bargaining process to date) and some would prefer to remain on the Award indefinitely.
13. If the Agreement is terminated the Applicant may find itself stuck on the Award for a significant period of time. The Award does not provide the flexibility that the Applicant seeks in its proposed enterprise agreement (and has substantially obtained in the current Agreement). The extended operation of the Award (as compared to the existing Agreement) would harm both the Applicant and its employees.
Effect of authorities cited by the Applicant
14. The AWU respectfully submits that authorities identified in the Applicant’s outline of submissions (including Full Bench authorities) are wrongly decided. In particular, the AWU respectfully dissents from the conclusion of the Full Bench in Aurizon Operations Ltd insomuch as it overturned earlier authority that termination of an enterprise agreement is generally not appropriate while collective bargaining is occurring.
15. However, the AWU acknowledges that, notwithstanding its position on the correctness of those authorities, they are binding on a single member of FWC. FWC might consider itself compelled by those authorities to find that termination of the Agreement is appropriate in the circumstances.” 5
[7] The AWU also proposed that the Commission deal with the application on the basis of written submissions without conducting a hearing. Despite the clear implications of the AWU’s submissions, I considered that there were a series of issues that required some clarification. In that light, I wrote to the parties setting out those issues and indicated that a hearing, where the parties could rely upon their written materials and deal with the further matters raised by the Commission, would be the appropriate and most efficient approach to enable me to make an informed decision. The issues raised with the parties included:
• The likely foreseeable impact of the loss of the hours of work and related provisions provided by the Enterprise Agreement but not replicated in the Enterprise Award:
• Loss of flexibility to bank and use hours when required?
• Increased incidence of overtime and other penalty payments; albeit based upon a lower rate of pay?
• Reduced requirement for full-time employees?
• Greater predictability in scheduling of ordinary hours for (Core) employees?
• Less constraints on the scheduling of labour for shipping movements?
• Other consequences?
• Depending upon the above factors:
• Is there an imperative to remove the present constrains/parameters around the annualised salary system, hours of work and related provisions whilst negotiations continue; and
• Does that matter in terms of the application to terminate the Enterprise Agreement given the Full Bench authorities?
• What are the implications of the apparently mixed views amongst the employees about the prospect of the application of the Enterprise Award and the desirability of remaining on that award for the longer term?
• Is there any prospect of redundancies occurring at the Port Lincoln terminal in the foreseeable future?
• The likely foreseeable impact of the termination of the Enterprise Agreement on the prospect of a new enterprise agreement:
• What processes are expected to occur to advance the prospect of a new enterprise agreement following any termination?
• Why would the termination of theEnterprise Agreement increase the prospect of a new enterprise agreement and does that matter?
• Will the fact that the Enterprise Award apparently does not fully suit the operational requirements of Viterra, mean that it will also have an incentive to ultimately reach a new enterprise agreement?
• If the Enterprise Agreement is not terminated, what will change the bargaining dynamics so as to facilitate a new enterprise agreement?
• If the Enterprise Agreement is terminated as sought, what are the considerations that should be assessed as to when such takes effect and what are the views of the parties about those matters?
[8] In response, the AWU proposed that the Commission explore the issues through an informal process and Viterra responded with concerns that its application should be heard and determined.
[9] On 21 February 2018, Solicitors for the AWU wrote to the Commission as presently constituted in the following terms:
“We are instructed as follows.
1. The Australian Workers Union holds you in the highest esteem.
2. The AWU draws a sharp distinction between its position on the present proceedings and its very respectful views about you. Nothing in this letter is intended to reflect adversely on you.
3. As may be apparent from its outline, the AWU has no confidence in the s226 process (under prevailing authorities) of determining employer s225 applications brought to bolster employer bargaining positions by inflicting economic harm on employees.
4. The existing regime, when used in support of employers’ bargaining agendas (as in this application), works tremendous unfairness on AWU members and workers generally, by unfairly bolstering the bargaining position of employers such as Viterra.
5. It is extraordinarily corrosive of trust and confidence in the industrial relations system.
6. It is an example of a broken system. The rules must be changed, which is of course a matter for the Parliament. The AWU will campaign for a fairer system, rather than unduly devoting members’ resources to the failed agreement termination system.
7. Notwithstanding the AWU’s lack of confidence in this system, if termination of an enterprise agreement is in AWU members’ interests, the AWU will seek to fully participate in such proceedings (typically where a long outdated agreement has been overtaken by modern award). There may other be occasions when the AWU will seek to fully participate in such proceedings.
8. In the context of a collaborative problem-solving approach, the AWU would be grateful for the opportunity to assist you in relation to the issues raised in your Associate’s email of 19 February 2018 at 12:49 PM.
9. However, should the applicant not wish to engage in a collaborative and meaningful conciliation, the AWU reserves its position as to appearance at trial, because of the AWU’s total lack of confidence in the existing regime, as outlined above. Accordingly, notwithstanding that the AWU rejects claims made in Viterra’s witness statements and submissions and considers Viterra’s application unconscionable, we are instructed not to seek to tender any evidence or to cross examine the applicant’s witnesses.
10. We reiterate that the AWU’s position is a reflection on the prevailing interpretation of the legislation, and is in no way a reflection on you. The AWU has always been grateful for your very valuable assistance over many years.
Please let us know if you would be assisted by any further information.” 6
[10] At the hearing of the matter on 22 February 2018, the AWU sought confirmation as to whether Viterra was willing to participate in an informal (conciliation) process to explore the issues raised by the Commission. Viterra indicated that given the history of the matter and the fact that all parties, including representatives beyond the AWU would need to be involved and were not present given that the present parties had attended for a hearing of the s.225 application, the exercise would not be productive and pressed for their application to heard and determined.
[11] The AWU’s representatives then sought leave to withdraw from the proceedings 7, noting earlier that the hearing may proceed in their absence and that no natural justice complaints could arise in the circumstances including the process followed by the Commission to put all parties on notice about the issues requiring further submissions.8
[12] The hearing then proceeded in the absence of the AWU, who did not seek to make further submissions, tender any evidence, or challenge any of the evidence provided by Viterra.
2. The immediate statutory parameters for the application
[13] Without overlooking the objects of the FW Act in s.3 and s.171, and other provisions that set the context for this application, the immediately relevantly provisions are as follows:
“225 Application for termination of an enterprise agreement after its nominal expiry date
If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:
(a) one or more of the employers covered by the agreement;
(b) an employee covered by the agreement;
(c) an employee organisation covered by the agreement.
226 When the FWC must terminate an enterprise agreement
If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:
(a) the FWC is satisfied that it is not contrary to the public interest to do so; and
(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:
(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and
(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.
227 When termination comes into operation
If an enterprise agreement is terminated under section 226, the termination operates from the day specified in the decision to terminate the agreement.”
[14] Viterra has made a valid application under s.225 of the FW Act.
3. The positions and circumstances of the parties
[15] Viterra has made the application and I have set out its contentions, at least in general terms, earlier in this decision. In support of its application, it provided witness statements from the following:
• Alyson Gilbey, Human Resources Manager – Viterra Operations; 9
• James Murray, Operations Manager, Western Region; 10
Jarrod Russel, Operations Co-ordinator; 11
Travis Hay, Operations Co-ordinator; 12 and
• Joshua Wilson-Smith, Senior Legal Counsel. 13
[16] In the circumstances, these statements were admitted without being contested and form the evidence that is before the Commission. In addition, in response to some of the issues raised by the Commission prior to the proceedings, Viterra led additional evidence from Mr Murray going to the process of informing the employees about the consequences of the termination of the Enterprise Agreement and the views of employees as communicated to him. In that latter regard, the evidence, whilst genuine and not contested, was largely indirect (hearsay) and I have taken this into account when assessing the weight to be given to that material.
[17] As a result of the material that is before the Commission, the following general findings about the positions and circumstances of the parties can be made.
3.1 The Operations
[18] Viterra currently employs full-time, part-time and casual operators to perform work at its Port Lincoln terminal. The core operation of the Port Lincoln terminal is to provide services for growers and customer “recevials” via road and rail, as well as shipping services for exporting bulk grain. 14
[19] There are approximately 55 employees covered by the Enterprise Agreement, who work at the Port Lincoln terminal, with that number increasing during the harvest period. The harvest period is set out in the agreement and is between 1 October of one year and 15 January of the following year.
3.2 The Enterprise Agreement
[20] The existing Enterprise Agreement is a detailed instrument containing various provisions and entitlements. For present purposes it is sufficient to concentrate on the hours of work and associated annualised salary arrangements within the agreement as these play an important role in the workplace and in the bargaining process leading to this point.
[21] Under the Enterprise Agreement, those employees who are employed on a permanent full-time basis are considered “core employees”. 15 These employees are paid on an annualised salary based on 2476 hours of work. All allowances, overtime rates and leave loadings are absorbed within that annualised salary, unless otherwise specified in the agreement.16
[22] The annualised salary is calculated by multiplying 38 hours per week by 52 weeks per year and then adding 500 hours of overtime. This produces the 2476 annualised salaried hours. Any additional hours are to be paid at the Core Actual Hourly Rate for all hours worked or can be taken as time off in lieu by mutual agreement. 17 Under the Enterprise Agreement, the ASH bank of hours reduces based on the number of hours worked by an employee, whether those are ordinary hours of work or overtime hours.
[23] Under the Enterprise Agreement, the ASH bank of hours “erodes” (reduces) by 8 hours per day for each annual leave day, which means that employees are, in effect, required to work additional hours during the year to make up the time. Viterra has not proposed to change the way that annual leave entitlements erode the ASH bank of hours. This has been an issue raised by the workforce throughout the bargaining process.
[24] Subclause 6.1.1.1 of the Enterprise Agreement sets out the established hours of work which, unless otherwise varied under subclause 6.1.1.2, are between 7:00 am to 3:30 pm Monday to Friday. 18 This subclause, and the removal or variation of it, has been one of the matters subject to the bargaining disputes between the parties. Viterra have sought to remove this subclause as it says that it imposes unnecessary and outdated restrictions on its business operations in Port Lincoln. In short, Viterra contends that it is not able to effectively utilise the extent of hours contemplated in the ASH bank and related provisions and that this is a significant factor given the extensive and variable demand for its operations. It further contends that a number of potential competitors are planning to build ports on the Eyre Peninsula19 and that in order to remain competitive it now needs to have additional operational flexibility in relation to its staffing of the facility.
[25] Viterra has also sought, through the bargaining negotiations, to remove clause 6.5, and in particular subclause 6.5.5 of the Enterprise Agreement, due to what it says is its restrictive nature. In broad terms, clause 6.5 requires the Company to notify employees of their requirement to work, perform overtime (including cancellation of overtime) or where a shift is to be extended. Subclause 6.5.5 sets out the Established Shipping Hours as 7:30 am to 10:30 pm, based on day and evening shipping shifts, 7 days per week. Viterra contends that the particular parameters placed around the shipping hours further reduces its flexibility to operate competitively and that the proposed provisions applying to other work would be appropriate.
[26] I note that the ASH bank structure and the application of the provision has previously been the subject of dispute before the Commission. In 2014, the AWU lodged a dispute in relation to the ASH bank structure and the way in which it had been implemented by Viterra. The dispute was conciliated in the Commission and was resolved confidentially between the parties after a period of around 12 months. Viterra contends that a significant benefit of an updated ASH bank structure would be the reduction in disputation over the provision. I accept that there remains a strongly held difference of view about the proper application of the present provisions and that any attempt by Viterra to revisit its earlier approach to utilise those provisions in the manner considered in 2014 would be disputed by the AWU.
[27] The Enterprise Agreement has more conventional hours of work and related provisions applying to casuals and other non-core employees.
[28] Another clause, which Viterra has not proposed to vary through its proposed agreement, but which represents a significant entitlement under the Enterprise Agreement, relates to the existing redundancy provisions. The Enterprise Agreement contains redundancy provisions in excess of those provided for by the Enterprise Award. Under the agreement, entitlements to redundancy and severance payments for core employees are provided for by clause 5.9. A core employee with more than 12 months continuous service will be entitled to four weeks’ ordinary pay (in addition to 1 week where the employee is over 45 years old). In addition to this entitlement, subclause 5.9.2 provides an employee with payment of three weeks’ ordinary pay for each completed year of service as a severance payment. There is no cap on this entitlement and a core employee with an extended period of service would be entitled to a significant entitlement in the event they were to be made redundant.
3.3 The Bargaining Process
[29] Bargaining to replace the Enterprise Agreement commenced in February 2015. At the outset, bargaining was conducted through a bargaining group which was made up of Viterra management, Union representatives and Viterra employees. Due to changes in staffing arrangements, both at Viterra and at the Union, the bargaining group varied over the three year period. Viterra contends that these changes, amongst other factors, have led to the slowing of negotiations.
[30] There have been 11 official meetings of the bargaining group since February 2015 as well as numerous informal meetings between Viterra management, employees and Union representatives.
[31] A proposed agreement was first put to employees for approval on 18 December 2015. That agreement included, amongst other changes, an ASH bank structure which had an “erosion rate” for hours worked outside ordinary hours and a reduction in the ASH bank by 2.5% in the first and third years in lieu of a pay increase. The agreement was not approved with 43 employees voting against the approval, and only one voting in favour.
[32] As a result of the lack of progress in discussions at the workforce level, an application was made to the Commission in December 2016 to deal with the bargaining dispute. The dispute was conciliated by Deputy President Bartel on 20 January 2017. The primary issue in that dispute related to the ASH bank erosion rate for work outside of ordinary hours. A confidential without prejudice statement was issued to the parties following the conference.
[33] A further revised agreement was subsequently put out to vote for the second time on 7 November 2017. The proposed agreement included a 2.5% sign-on bonus and the removal of the Level 1 and Level 2 classifications. Those full-time employees previously classified under Level 1 or Level 2 would be re-classified to Level 3 under the proposed agreement, which would see a relatively substantial increase in their wages. The agreement was not approved by a valid majority of the employees; albeit with 15 employees voting against the approval and 15 employees voting for the agreement.
[34] A third vote for the proposed agreement was held on 16 November 2017 and this draft included the same 2.5% sign-on bonus. The vote was again unsuccessful with 14 employees voting in favour and 23 employees voting against the proposed agreement.
[35] The changes to the “erosion rate” outlined above are a reference to the fact that Viterra has proposed that the rate at which the hours worked are taken off the ASH hours bank would increase to reflect that some of these hours are worked outside of ordinary hours. This would have the effect that less hours would be required each year, depending upon the extent of work that would otherwise be considered to be outside of ordinary hours.
[36] This application was lodged in the Commission by Viterra on 5 December 2017.
[37] The key changes proposed by Viterra through the bargaining process, which have been subject to dispute between the present parties, are the removal of subclause 6.1.1.1 and clause 6.5 of the present Enterprise Agreement, along with the changes proposed to the ASH bank structure.
[38] By consent of the parties, on 16 and 17 January 2018, Commissioner Platt conducted a two day conciliation in Port Lincoln. There was no resolution reached and no new proposed agreement has been put to a vote of employees.
3.4 The Enterprise Award and its likely impact
[39] The Enterprise Award, which would apply to the relevant employees in the event the Enterprise Agreement is terminated, does not operate on the basis of a bank of hours. The Enterprise Award operates on a comparatively standard hours of work model, where a minimum weekly wage is set with other entitlements such as allowances and overtime being paid in addition to that minimum weekly wage for all employees. The ordinary hours of work are set between 8.00 am to 5.00 pm Monday to Friday, inclusive. Accordingly, if the Enterprise Agreement is terminated, those core employees currently performing work from a bank of hours, and being paid an annualised salary, would convert to being paid in a more traditional arrangement under the Enterprise Award.
[40] I observe that some of the restrictions to the scheduling of ordinary hours of work, which Viterra contends are currently present under the Enterprise Agreement, are present in the Enterprise Award. However, Viterra has indicated that there is the potential for a reduction in full-time, or core employees, under the Enterprise Award, as well as changes to the way shifts are scheduled available under that instrument. I will return to this theme in due course.
[41] The reduction in the rate of pay 20 for core employees transferring from the Enterprise Agreement, where the rate of pay absorbs the majority of entitlements, to the Enterprise Award ranges from between $4.41 per hour (for core employees at Level 2) to $6.48 (for core employees at Level 3).
[42] There would also be a reduction in the ordinary rate of pay for casual employees transferring from the Enterprise Agreement to the Enterprise Award, although to a lesser extent. The ordinary rate of pay for casual employees will fall by an amount between 30 cents per hour (for a casual employee at Level 2) to $2.32 per hour (for a casual employee at Level 3).
[43] Under the Enterprise Award, a full-time employee’s ordinary hours of work are 38 hours per week. By comparison, under the Enterprise Agreement, the ASH bank of hours when averaged out equates to working approximately 47 hours per week. The conversion of a full-time, or core employee, to the Enterprise Award, where there is no requirement for Viterra to roster or pay more than 38 hours per week, could lead to a significant reduction in wages if those hours are not allocated to the employees concerned.
[44] For example, an employee currently being paid an annualised salary as a Level 3 core employee of $1,397.08 per week could potentially see a reduction in pay to $785.00 per week (being 38 hours per week paid at the base rate of pay for a Level 3 under the Enterprise Award). This represents a potential difference in an employee’s pay of $612.08 per week and demonstrates the potential significance of any termination. Of course, under this scenario employees would also work considerably less hours per week, and over the year, than under the current Enterprise Agreement. I observe that it is a reasonable inference from the evidence that some existing employees do not want to work the extent and nature of hours contemplated by the present Enterprise Agreement for the core employees. In any event, the above is also an extreme example and given the nature of the industry and the skills mix required for the workforce, it is unlikely to apply as some, and potentially many, additional hours of work are likely.
[45] Further, core employees (and many casuals) under the Enterprise Award would be entitled to receive additional payments for overtime, allowances, shift loading and annual leave loading (where applicable); albeit at the lower award rate. For example, under the Enterprise Award, a shift worker will be entitled to an additional 15% above the base rate of pay for work performed on afternoon shift and an additional 30% for work performed on night shift. Similarly, an employee who performs overtime will be entitled to time and a half for the first two hours of work and double time thereafter. In addition, on Sundays and Public Holidays an employee will be entitled to double time and a half of the base rate for all hours worked. It is currently unclear what the exact practical net effect of any termination would have for an employee’s take home pay and this would depend upon the extent that work outside of the defined ordinary hours is actually required from time to time under any new arrangements. However, given the evidence before the Commission, it appears likely that there will be some reduction in overall wages for employees and that it could represent a substantial reduction for some employees.
[46] One further area where the Enterprise Award departs from the Enterprise Agreement is in its redundancy entitlements. Redundancy payments under the Enterprise Award are provided for in the National Employment Standards (NES). The maximum entitlement an employee is entitled to receive under the NES is 12 weeks’ wages (plus notice). As outlined earlier, the redundancy entitlements under the Enterprise Agreement have the potential to far exceed the 12 weeks’ maximum provided for by the NES.
3.5 Other changes likely to result from the termination of the Enterprise Agreement
[47] During the course of the hearing Viterra indicated that the loss of access to the ASH bank of hours would likely increase the use of part-time and casual employees.
[48] Viterra contends that, in the event the Enterprise Agreement is terminated, it would have the flexibility to restructure the workforce in the most efficient manner practicable. The changes it said may include a restructure of the way in which shifts are scheduled. In response to questioning from the Commission, Viterra indicated that redundancies of core employees were a foreseeable consequence of the termination of the Enterprise Agreement. It said that there was already a reduction in core employees, which under the Enterprise Award, was a trend that could potentially escalate.
[49] Given the difference in redundancy benefits under the two instruments, the potential for redundancies of core employees in the event that the Enterprise Agreement is terminated is therefore a significant potential consequence.
[50] Viterra did not make any undertakings to the employees or to the Commission about the maintenance of any existing conditions or entitlements. This included the absence of any undertaking about the redundancy pay entitlements.
[51] Viterra proposes to engage in some further brief negotiations and to put a version of recently rejected proposed agreement back to the employees for approval, should the Enterprise Agreement be terminated by the Commission. I observe that it is difficult to predict the outcome of any such ballot and whilst that proposal may become more attractive in comparative terms, without the current Enterprise Agreement as a fall-back, no assumptions about the response to the termination of the agreement should be made. Further, good faith bargaining obligations 21 continue to apply and the AWU may seek to utilise protected industrial action and these possibilities, which are consistent with the scheme of the FW Act, must also be taken into account.
4. Consideration
4.1 The proper approach to the application
[52] Section 226(a) of the FW Act requires that the Commission must be satisfied that the termination of the enterprise agreement is not contrary to the public interest.
[53] Under s.226(b) of the FW Act, the Commission must consider and take into account the positions and circumstances of the parties, including the effect that the termination will have. This involves the Commission treating those considerations as a matter of significance in the decision making process. 22
[54] Where the Commission is satisfied that the termination of the enterprise agreement is not contrary to the public interest (s.226(a)), and having regard to the considerations provided in s.226(b) that the termination of the Enterprise Agreement is appropriate, it is obliged to terminate the agreement.
[55] As set out above, s.226(a) of the FW Act requires consideration of the public interest. In the present context this means that:
• The notion of public interest refers to matters that might affect the public as a whole such as the achievement or otherwise of the various objects of the Act, employment levels, inflation, and the maintenance of proper industrial standards and the ascertainment of the public interest may involve balancing countervailing public interests;
• While the content of the notion of public interest cannot be precisely defined, it is distinct in nature from the interests of the parties and although the public interest and the interests of the parties may be simultaneously affected, that fact does not lessen the distinction between them; and
• The Commission's consideration of the public interest for present purposes is directed to the consequences of terminating the agreement. In a given case, some consequences will be clearly predictable, others will be less so. For the most part the Commission should be guided by the likely foreseeable consequences of termination rather than speculation about possible consequences. 23
[56] Section 226 is placed within Part 2-4 of the FW Act, and these provisions are part of a scheme designed to enable bargaining for, making of, approving, varying and the termination of enterprise agreements. The object of Part 2-4 are set out in s.171 in the following terms:
“171 Objects of this Part
The objects of this Part are:
(a) to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and
(b) to enable FWA to facilitate good faith bargaining and the making of enterprise agreements, including through:
(i) making bargaining orders; and
(ii) dealing with disputes where the bargaining representatives request assistance; and
(iii) ensuring that applications to FWA for approval of enterprise agreements are dealt with without delay.”
[57] The Object of the FW Act is contained in s.3 and provides as follows:
“3 Object of this Act
The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians . . .”
[58] The means by which this object is to be achieved is set out in the various paragraphs enumerated in s. 3 as follows:
“(a) providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and
(b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and
(c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and
(d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and
(e) enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and
(f) achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and
(g) acknowledging the special circumstances of small and medium-sized businesses.”
[59] After considering this context and other provisions of the FW Act, the Full Bench in Aurizon Operations Limited; Aurizon Network Pty Ltd; Australian Eastern Railroad Pty Ltd 24 (Aurizon) stated:
“[126] The legislative scheme therefore enables and facilitates good faith bargaining for an enterprise agreement. It also facilitates the making of enterprise agreements but does not mandate that result. Once an enterprise agreement is made and approved by the Commission, it seems clear that the legislative scheme does not intend that such agreements operate in perpetuity. Agreements have a finite nominal life. At the end of the nominal life of an agreement, bargaining parties may bargain for a new agreement utilising all of the tools available under the Act; or a person to whom an agreement applies may take steps to bring the agreement to an end in accordance with the provisions of the Act; or both may occur.”
[60] The Full Bench in Aurizon also noted and relied upon other aspects of the bargaining scheme of the FW Act, including the good faith bargaining requirements of the legislation and the Commission’s capacity to make bargaining orders, the capacity for employees to organise and engage in protected industrial action and an employer’s right to respond through employer response action; and the processes available under a s.240 application. 25
[61] In dealing with a ground of appeal which sought to challenge Aurizon on the basis that the pursuit of enterprise agreements as the means for productivity improvements was a priority in the scheme of the FW Act, the Full Federal Court observed as follows:
“[23] First, both s 3 and s 171 of the FW Act set out the objects of the provisions to which they refer (the FW Act as a whole and Pt 2-4 respectively). While the Commission would undoubtedly be required to exercise any otherwise unconfined discretion in a way that was not antagonistic to these objects, it must be remembered that the primary means by which the legislature sought to achieve them was to enact the detailed provisions of the FW Act itself. It will be the section, or group of sections, that applies directly that will most usefully indicate what it was the legislature was seeking to achieve in a particular situation. What the Full Court said about s 208 of the FW Act in Toyota Motor Corporation Australia Ltd v Marmara (2014) 222 FCR 152, 178-179 [86] was an instance of this approach.
[24] Secondly, the importance of enterprise agreements in the regulation of terms and conditions of employment under the FW Act cannot be gainsaid. Neither can the central role of collective bargaining in that arena. But we would agree with the Commission insofar as it observed that there is no indication in the FW Act that the existence of a previously-negotiated enterprise agreement should, a priori, be regarded as providing particular encouragement to collective bargaining. Indeed, the legislation contemplates that, at least generally, once a new enterprise agreement has been made, it will apply to those covered by it at least until its nominal expiry date. Under such an environment of stable industrial regulation, what need there would be for further collective bargaining is not immediately obvious. This perception of the scheme of the FW Act is, of course, consistent with the terms of s 417 – and its companion provision, s 413(6) – which proscribe industrial action until the nominal expiry date of the applicable enterprise agreement.
[25] Thirdly, and relatedly, the period after the nominal expiry date of an enterprise agreement is likely to be the very time that the parties concerned are engaged in serious, if not disputatious, collective bargaining. There is, of course, no suggestion in the FW Act that the relevant employer and its employees would not commence to bargain before, even well before, that date (as happened in the present case), but, if they do so and conclude the terms of a new agreement, the existing agreement will cease to apply immediately it passes its nominal expiry date (s 58(2)(d)(ii)). Alternatively, if there is no new agreement until after the existing agreement has passed its nominal expiry date, the existing agreement will cease to apply when the new one comes into operation (s 58(2)(e)). In the context of an ongoing, single-enterprise, business, the most obvious situation in which recourse might be had to s 226 of the FW Act would be where an existing agreement had passed its nominal expiry date (a jurisdictional fact under the section) but where no new agreement had been made. This is the very situation in which collective bargaining is likely to be proceeding; and it is the only time in which industrial action associated with such bargaining might be – subject to compliance with other statutory requirements – protected under Div 2 of Pt 3-3 of the FW Act. The proposition that, as a matter of statutory policy, there should be a predisposition towards regarding it as contrary to the public interest to terminate an enterprise agreement during a period when collective bargaining is taking place must, in the circumstances, be regarded as a most unlikely one.” 26
[62] Amongst other implications of these and other authorities, is that the object of the FW Act in s.3 may be achieved by means including enterprise level collective bargaining and potentially by other means, such as the termination of an expired agreement and the continuation of collective bargaining that has commenced in good faith at an enterprise level for an enterprise agreement that delivers productivity benefits.
[63] In relation to this aspect, I note that the Full Bench of the Commission in Aurizon placed particular weight on the impact of the restrictive provisions of the enterprise agreements concerned upon the productivity and efficiency of the applicant employer’s business. 27 This is also evident in the decision of the Full Bench in “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) v Griffin Coal Mining Company Pty Ltd28 including the financial and trading position of the employer in that matter.29
[64] Further, there is no presumption under the FW Act that an enterprise agreement will continue unaltered in perpetuity after it has passed its nominal expiry date. The legislation guarantees the continuation of the relevant modern award and NES safety net, not the terms and conditions of employment contained in a nominally expired agreement.
[65] However, there is also no legislative presumption that the termination of an enterprise agreement upon reaching its nominal expiry date is appropriate. 30 In addition, the impact of any termination upon the bargaining dynamic, including the impact upon the bargaining positions and options then available to the parties, is a relevant consideration.31 Further, the impact of any termination upon the employees by way of diminished terms and conditions of employment is an important matter and any proper undertakings about those matters by an employer would be relevant to that assessment and the exercise of the discretion more generally.32
4.2 Is the termination of the Enterprise Agreement contrary to the public interest – s.226(a)?
[66] In all of the circumstances evident here, I am on balance satisfied that the termination of the Enterprise Agreement is not contrary to the public interest.
[67] The focus of the public interest considerations has been outlined earlier in this decision. Given the approach taken in the relevant authorities, the uncontested evidence about the productivity and competitive issues relied upon by Viterra and the other likely consequences of the termination of the Enterprise Agreement, and the bargaining context in which the termination takes place, that action would not be contrary to the public interest.
4.3 Is the termination of the Enterprise Agreement appropriate – s.226(b)?
[68] Turning to the considerations of s.226(b)(i) of the FW Act, Viterra has made the application and seeks the termination of the Enterprise Agreement. The AWU is covered by the Enterprise Agreement and opposes the termination but has chosen not to contest the evidence, lead its own testimony, or participate in the hearing. There are mixed views amongst the employees. The uncontested evidence of Mr Murray is that, amongst other processes, the consequences of the termination were explained to employees by way of a group meeting where the differences in the wage structure and other entitlements were outlined. 33 Mr Murray also indicated that he understood that there was support by the majority of employees for the termination of the Enterprise Agreement.34
[69] The evidence supports the notion that through the efforts of the AWU, other employee bargaining representatives, Viterra, and the conciliation conducted in January 2018 by the Commission, the employees have been provided with a basis upon which they could make an informed decision. It is clear that Mr Murray has primarily formed his understanding about the employees’ views based upon indirect feedback and some more direct reporting, rather than through any form of survey or vote. In the circumstances, I treat this with some caution. However, I am satisfied that many, if not the majority, of employees may support the application and the consequential reversion to the Enterprise Award.
[70] I have had regard to all of the above views and the basis provided for them in reaching my decision.
[71] In relation to the considerations established by s.226(b)(ii) of the FW Act, the circumstances of the parties and the effect of any termination of the Enterprise Agreement have been set out in general terms earlier in this decision.
[72] It is evident that there is a long-standing bargaining impasse leading to this application. Viterra has sought a limited number of changes, which could potentially have a significant impact upon the operations of its Port Lincoln business and the employees concerned. Those changes have apparently been resisted by a majority of the employees who have voted on the proposed agreements. The termination of the Enterprise Agreement will have some impact upon the bargaining dynamics. That is, the proposed new agreement might well appear to be more attractive to the employees in the absence of the existing “safety net” provided by the Enterprise Agreement and could be more favourably considered. The evidence provided by Viterra gives some reasonable basis for that proposition and it is conceivable that a new agreement will be made with the support of a majority of the employees. However, the response to the termination of the Enterprise Agreement may also harden the resolve of the workforce and those core employees seeking to limit their out of normal business hours work may find the more traditional approach of the Enterprise Award attractive, at least in that respect.
[73] I note also that Viterra does not consider the Enterprise Award to be ideal, and seeks in fact to continue with a modified version of the annualised hours concept. Viterra also acknowledges that a version of the present Enterprise Agreement, which has the support of a majority of the employees, is the preferred option, both commercially and industrially. 35 As a result, there is also a continuing incentive upon it to bargain for a new enterprise agreement.
[74] Importantly, and for reasons more fully outlined in 4.1 above, I do not consider that the present authorities of the Commission mandate the use of a s.225 termination application simply as a means to pressure employees to accept a previously rejected proposed agreement. That is, each of the cases discussed earlier dealt with circumstances where there were important matters arising from the considerations established under s.226(b) which supported the termination of the relevant enterprise agreement beyond the impact upon the bargaining dynamic and bargaining positions of the parties. In my view, in most cases, something more than simply applying additional leverage will be required to warrant the termination of an Enterprise Agreement during a bargaining process. As is also clear, each case must be determined in its own circumstances having regard to the relevant statutory considerations and there are no presumptions as to the outcome to be made by the Commission in approaching that task.
[75] In this case, the uncontested evidence of Viterra is that the existing provisions of the Enterprise Agreement are having an impact upon its productivity and competitive position and that changes are important given the trading environment and other factors. Despite the fact that the Enterprise Award is not ideal, the combination of provisions and the capacity to change the operations of the Port Lincoln facility under those terms is such that its productivity and competitiveness can be improved. Under the scheme of the FW Act as applied by the relevant authorities, the preferred means to pursue these objectives rests with the parties, subject to the operation of the relevant provisions, including s.226.
[76] The largely positive views of the employees in relation to the application and the reversion to the Enterprise Award must also be taken into account. However, the reduction in some important conditions for the employees and the absence of any undertakings from Viterra in that regard are significant contrary considerations.
[77] It would be clear that there are strongly competing considerations and matters of this kind require the applicant to satisfy the Commission that the termination of an enterprise agreement is appropriate in all the relevant circumstances. Notwithstanding the absence of the AWU from the hearing, the Commission has, as would be expected, required Viterra to demonstrate its case. The factual material provided by Viterra is ultimately important in the determination of this matter. This is particularly so in relation to the claimed productivity and related benefits arising from the proposed termination, the views of the employees, and the prospect of a new enterprise agreement being reached. Ultimately as the hearing unfolded, this material was not contested.
[78] I am required in the present circumstances to determine the application based upon the material that is properly before the Commission.
[79] On balance, I am satisfied that the termination of the Enterprise Agreement is appropriate.
4.4 Conclusions
[80] For reasons outlined earlier, in all of the circumstances I am on balance satisfied that the termination of the Enterprise Agreement would not be contrary to the public interest. I am also satisfied, on balance, that the termination is appropriate having regard to the likely effect of that action and the views and circumstances of the parties.
[81] As a result of these findings, the Commission is obliged by the operation of s.226 of the FW Act to terminate the Enterprise Agreement.
5. The date of effect
[82] Under s.227 of the FW Act, the termination operates from the day specified in the decision to terminate the agreement. This means that there is a general discretion given to the Commission to determine when the termination takes effect.
[83] I consider that this determination should have regard to all of the relevant circumstances including those assessed in determining whether the agreement should be terminated. That is, the determination of the date of effect must be an overall assessment having regard to all of the relevant circumstances taking into account the needs and particular circumstances of the parties. This would include practical considerations associated with a change to a fundamentally different instrument (a modern award) where relevant. Further, public interest considerations may also have a role to play and each matter must be determined in its own circumstances.
[84] I observe that should a new enterprise agreement be made and approved by the Commission, that instrument would apply to the parties in lieu of any expired Enterprise Agreement otherwise applicable. 36
[85] Viterra sought a period of six weeks before the termination of the Enterprise Agreement took effect. This is designed to permit the proposed new enterprise agreement to be subject to some further brief negotiations and to be put (again) to the employees for approval. Although I accept that this time period may be sufficient for that purpose, I do not consider that this is the only relevant consideration.
[86] Whilst it is certainly conceivable that a new enterprise agreement might be made in the above circumstances, it cannot be assumed that this will be the result. Further, some opportunity for further genuine negotiations between the parties is appropriate given the significant change in circumstances, including the potential for additional Commission Member assisted discussions. 37 In addition, the AWU may wish to explore protected industrial action if negotiations cannot be advanced in this context and some allowance should be taken for the process required by the FW Act.38
[87] For reasons outlined earlier, if there is not a new enterprise agreement, there is likely to be significant changes in employment conditions and operational practices and some reasonable delay is appropriate to give all parties an opportunity to properly deal with those consequences. These include the impact of the significant loss or reduction in a number of employee benefits; about which no undertakings have been given by Viterra. These aspects are an important consideration given the scheme of the Act, the relevant authorities, and the circumstances of the parties.
[88] Accordingly, a more extensive period than the proposed 6 weeks is appropriate in this matter. I contrast this case with the relatively short delay in the operation of the terminations in Aurizon 39and AGL,40 where those matters involved extensive undertakings (or equivalent commitments) given by the applicant employers.
[89] I do accept that given the seasonal nature of the business of Viterra, and the differences between the nature of the instruments, it would not be desirable for the transition from the Enterprise Agreement to the Enterprise Award to take place during the harvest period. This is defined in the present Enterprise Agreement as being between 1st October of one year and inclusive of the 15th January of the following year. 41
[90] In all of the particular circumstances evident in this matter, a delay in the operation of the termination of the Enterprise Agreement until mid-August 2018 is appropriate and reasonable.
[91] The termination of the Viterra Ltd - Port Lincoln Enterprise Agreement 2012 will take effect at 11.59 pm on Friday 17 August 2018.
[92] For reasons outlined above, should a new enterprise agreement be made and approved within that timeframe, the new instrument would apply and the timing of the termination would become inconsequential. In pursuit of that objective, should the relevant parties seek some additional Commission Member assisted discussions, the Commission should be advised.
COMMISSIONER
Hearing details:
Adelaide
2017
December 21 (conference).
2018
Adelaide
February 22.
Appearances:
A Short from Minter Ellison, with permission, for Viterra Operations Pty Ltd.
M Ats with A Oehme from Lieschke and Weatherill, both with permission, for the Australian Workers’ Union – prior to being given leave to withdraw from the proceedings.
1 Viterra Operations Pty Ltd is the successor of Viterra Ltd.
2 [2012] FWAA 2511, on 23 March 2012.
3 Platt C conducted conciliation on 16 and 17 January 2018 in Port Lincoln.
4 MA000136.
5 Respondent’s Outline of Submissions.
6 AWU Correspondence dated 21 February 2018.
7 Transcript PN71.
8 Transcript PN19.
9 Exhibit A2.
10 Exhibit A3.
11 Exhibit A4.
12 Exhibit A5.
13 Exhibit A6.
14 Exhibit A3.
15 Clause 4.1 of the Enterprise Agreement.
16 For example, see clause 5.3.3 and 5.3.4 of the Enterprise Agreement.
17 Clause 5.2.1 of the Enterprise Agreement
18 Clause 6.1.1.1 of the Enterprise Agreement.
19 Witness Statement of James Murray at paragraph. 23.
20 This calculation is made on the presumption that the classifications under the Enterprise Agreement and the Enterprise Award are relatively comparable.
21 Section 228 of the FW Act.
22 See Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 and Nestle Australia Ltd v Federal Commissioner of Taxation (1987) 16 FCR 167 at 184.
23 The application of the public interest test was canvassed by the then AIRC in Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 and by the Full Federal Court in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd [2015] FCAFC 126.
24 [2015] FWCFB 540.
25 Ibid at [125].
26 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd [2015] FCAFC 126 at [23] – [25].
27 Ibid at [171], [172] and [178].
28 [2016] FWCFB 4620.
29 Ibid at [43], [75] and [93].
30 Construction, Forestry, Mining and Energy Union v AGL Loy Yang Pty Ltd T/a AGL Loy Yang[2017] FWCFB 1019 at [31].
31 Ibid at [33].
32 Ibid.
33 Transcript PN299.
34 Transcript PN312, PN313.
35 Transcript PN216.
36 Section 58 of the FW Act.
37 Section 240 of the FW Act.
38 Part 3-3 – Divisions 2 and 8.
39 Aurizon at [100] and [181].
40 Construction, Forestry, Mining and Energy Union v AGL Loy Yang Pty Ltd t/a AGL Loy Yang[2017] FWCFB 1019 at [33] and [37] referring to AGL Loy Yang Pty Ltd t/a AGL Loy Yang v Construction, Forestry, Mining and Energy Union [2017] FWC 226 at [157] and [162].
41 Clause 1.5 of the Enterprise Agreement.
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