SPI Electricity Pty Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia

[2012] FWA 5889

[2012] FWA 5889

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.739—Dispute resolution

SPI Power Net Pty Ltd; SPI Electricity Pty Ltd
v
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
(C2012/3287)

COMMISSIONER BISSETT MELBOURNE, 20 JULY 2012

Alleged dispute concerning the introduction of change and workforce size in accordance with the provisions of the Agreement.

[1] This is an application under s.739 of the Fair Work Act 2009 (the Act) for Fair Work Australia (FWA) to deal with a dispute pursuant to the dispute resolution procedure in the SPI PowerNet & SPI Electricity - ETU Enterprise Agreement 2010-2103 (the Agreement). The application was made by SPI PowerNet Pty Ltd and SPI Electricity Pty Ltd (hereinafter referred to as SP AusNet or the Applicant).

[2] The matters in dispute (discussed further below) have been subject to discussions between the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU), as the representative of employees, and SP AusNet. They have also been subject to a number of conferences before me. These meetings and conferences have failed to settle the matter and directions were subsequently issued in relation to arbitration of the matter in accordance with the dispute settling procedures of the Agreement.

The dispute

[3] On 23 May 2012 I issued a decision 1 and order2 with respect to an application by the CEPU for an order to produce documents. In that decision I indicated a preliminary view as to the scope of the dispute necessary to enable me to dispense with that application. In doing so I indicated that my final view as to the matters in dispute would not be settled until I had heard full arguments from the parties.

[4] SP AusNet has made a decision to outsource the primary maintenance work in the Eastern Region (ERPM). The decision affects approximately 16 employees currently employed to undertake the maintenance work. Having made the decision SP AusNet sought to consult with the employees affected by the decision and with the CEPU representing the employees.

[5] The CEPU does not agree with the decision by SP AusNet to outsource the work.

[6] Whilst both SP AusNet and the CEPU agree that the matters in dispute relate to clauses 62 and 68 of the Agreement, they do not agree as to how the clauses should be interpreted or the extent of FWA’s power to deal with the matter.

[7] Clauses 62 and 68 of the Agreement state:

62. WORKFORCE SIZE

62.1 The parties agree that any reduction in workforce size will be achieved by natural attrition and or voluntary departures. Any departure from this approach will require prior negotiations and agreement between the parties.

62.2 In the event that this clause becomes unenforceable for any reason and an employee is forcibly made redundant during the life of this agreement, then the parties will negotiate a redundancy package of no less than the prevailing industry standard. If the parties are unable to agree on the redundancy package, the matter will be dealt with under the dispute resolution procedure.

68. INTRODUCTION OF CHANGE

68.1 It is recognised that from time to time the technology, business structures and processes of the companies will be changed to allow the companies to operate in a changed environment, which requires it to remain an efficient and cost effective business.

68.2 When the companies have made a decision to introduce changes in production, workplace location, program, outsourcing, organisational structure or technology, or any other change that will have an effect on employees or that will impact on employees, the companies will notify the employees who may be affected and the Unions.

68.3 The companies shall discuss with the employees affected and the Unions, the effects the changes are likely to have on employees and measures to minimise their impact on employees and shall give prompt consideration to matters raised by employees and the Unions. Implementation of the proposed changes will not be effected until agreement is reached between the parties.

68.4 If agreement is not reached, either party may refer the matter in accordance with the Disputes Resolution Procedure of this Agreement.

[8] SP AusNet submits that clause 68 of the Agreement recognises that from time to time structures and process of the company will be changed to enable the company to remain efficient and cost effective. When such a decision is made employees will be notified. Discussion will occur with employees and the union on measures to minimise the impact of change. It is at this point that SP AusNet says clause 62 of the Agreement is relevant. It says that the ‘permissible purpose of introducing outsourcing is for the Applicant to remain an efficient and cost effective business. Outsourcing can only achieve that permissible objective under clause 68 if the Applicant is able to exercise a concomitant workforce downsizing under clause 62.’ 3

[9] SP AusNet submits that in resolving the dispute it is not the role of FWA to determine whether the company is able to outsource or able to reduce the size of the workforce, but is rather to resolve how the workforce reduction subsequent to the introduction of the change is to be effected. 4 In determining what is a reasonable approach to implementing the change, SP AusNet says that FWA should determine what packages or benefits are to be granted to employees with respect to the options available to them (employment with the contractor or compulsory redundancy).5

[10] SP AusNet submits that FWA should resolve the dispute between the parties by arbitration to determine:

(a) the measures which are reasonably necessary to mitigate the effects of the change upon employees; including

(b) the arrangements to apply regarding the departure from the approach of reducing the number of the Applicant’s employees by attrition and/or voluntary departures and implementing the approach of forced redundancies... 6

[11] The CEPU submits that the effect of sub-clause 68.3 of the Agreement is that if agreement on the proposed change is not reached between the company and its employees and the union, then implementation of the change is prohibited by the operation of sub-clause 68.3. Sub-clause 68.4 then enables the matter to be referred to FWA in accordance with the Dispute Resolution Procedure (DRP) (clause 7) of the Agreement.

[12] The CEPU submits that the matter referred in accordance with the DRP is the proposed change and FWA has a wide discretion to determine if the change proposed by SP AusNet should go ahead and, if it does, under what conditions. 7

[13] Should FWA find that the change should proceed, the CEPU submits that any reduction in staffing can only be achieved by virtue of the operation of clause 62. The CEPU submits that this clause allows staff reductions by natural attrition and/or voluntary departure only, or some other mechanism where agreed by the parties. The CEPU submits that sub-clause 62.2 only becomes operative if sub-clause 62.1 is unenforceable. That is, if it is no longer enforceable that forced redundancies must be agreed to by the union, 8 then clause 62.2 becomes operative and the parties will negotiate an appropriate package to attach to such forced redundancies. It is in this latter circumstance that FWA has a role in resolving any dispute over the benefits available to employees made forcibly redundant. The CEPU maintains that, in the current circumstances, workforce reduction can only be dealt with in accordance with sub-clause 62.1.

Jurisdiction

[14] The dispute resolution procedure in the Agreement relevantly states:

7. DISPUTE RESOLUTION PROCEDURE

7.1 This procedure applies with respect to the following matters:

(a) the terms of this agreement;

(b) a matter that would fall within the scope of “permitted matters” as defined by the Fair Work Act 2009 (excluding “unlawful content” as defined by the Fair Work Act 2009); and

(c) the National Employment Standards.

7.2 ...

7.7 If still unresolved or the parties don’t agree to go to mediation, the matter may be referred to Fair Work Australia (FWA) by either party for resolution, which includes conciliation, and arbitration, if necessary, and the parties shall abide by any outcome.

If arbitration is necessary, the FWA may exercise its procedural powers in relation to hearings, witnesses, evidence and submissions which are necessary to make the arbitration effective.

Note: Any or all of the steps in 7.4 and 7.5 may be by-passed in the interests of a speedy resolution to the matter.

7.8 ...

[15] The matter in dispute relates to a decision by SP AusNet to outsource the primary maintenance work of the Eastern Region. In particular the dispute goes to the application of clauses 62 and 68 of the Agreement in the circumstances of the decision taken by SP AusNet.

[16] I am satisfied that the matters in dispute between the parties relate to terms of the Agreement. Further, I am satisfied that the parties have met the requirements of the Dispute Resolution Procedure (DRP) prior to referring the matter to FWA.

[17] I find I have the necessary jurisdiction to arbitrate the matters in dispute in accordance with the terms of the Agreement and, in particular, the DRP.

Legal principles

[18] The matter in dispute between the parties rests on the interpretation of the Agreement, including the extent to which the mutual intention of the parties in negotiating the specific provisions of the agreement should be accorded weight in such an interpretation.

[19] The principles relevant to the interpretation of agreements are well established. Relevant authority on this point was canvassed extensively by Lawler VP in Watson & Ors v ACT Department of Disability Housing and Community Services. 9

[20] After considering a range of authorities his Honour concluded:

In summary, the general principles governing the construction of contracts laid down by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales apply to the construction of industrial agreements. However, consistent with the approach in Kucks and Short v FW Hercus Pty Ltd, an industrial agreement must always be construed in context: the context of particular provisions within the agreement as a whole and the context in which the agreement was made including any relevant statutory or historical context. Extrinsic evidence as to the context in which the agreement was made, including the statutory and historical context, will be admissible to demonstrate the existence of ambiguity and or to resolve ambiguity. 10

[Footnotes omitted]

[21] Particularly relevant to the matter before me is the decision in CPSU v Telstra Corporation Ltd, 11where a Full Bench of the AIRC summarised the principles relevant to the resolution of ambiguity in an agreement:

[33] The judgment of the High Court in Codelfa Construction Pty Ltd v State Rail Authority of NSWestablished widely accepted principles for resolving ambiguity in contracts. In that case Mason J stated the rule thus:

The true rule is that evidence of surrounding circumstance is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

[34] In BP Australia Pty Ltd v Nyran Pty Ltd, Nicholson J distilled, by reference to Codelfa, the following points of principle for resolving ambiguity in contracts:

• it is necessary firstly to determine whether the contract has a plain meaning or contains an ambiguity;



• if the contract has a plain meaning, evidence of surrounding circumstances will not be admissible to contradict the language of the contract;



• if the language of the contract is ambiguous or susceptible of more than one meaning evidence of surrounding circumstances is admissible to assist in the interpretation of the contract;



• the concept of surrounding circumstances is to be understood to be a reference to the objective framework of facts. It will include:

• evidence of prior negotiations so far as they tend to establish objective background facts known to both parties and the subject matter of the contract;



• facts so notorious that knowledge of them is to be presumed; evidence of a matter in common contemplation and constituting a common assumption.

[35] After referring to the foregoing points of principle Nicholson J continued as follows:

From the evidence of that setting the parties' presumed intention may be taken into account in determining which of two or more possible meanings is to be given to a contractual provision. What cannot be taken into account is evidence of statements and actions of the parties which are reflective of their actual intentions and expectations. Objective background facts can include statements and actions of the parties which reflect their mutual actual intentions. That is, evidence of the mutual subjective intention of the parties to a contract may be part of the objective framework of facts within which the contract came into existence. It is the mutuality which makes the evidence admissible.

[footnotes omitted]

[22] I adopt these principles in determining the matter before me.

Evidence

[23] Evidence was given in these proceedings by Mr Gallo for the Applicant and Mr Warner and Ms Kershaw for the CEPU.

[24] Mr Gallo is the Manager, Station Services for SP AusNet. Mr Gallo gave evidence on the reasons for going to tender for the ERPM work, issues associated with dealing with the peaks and troughs in workload in ERPM, past attempts to find improvements in efficiencies in the existing workforce and a general reluctance of the existing ERPM workgroup to work with the company to improve efficiencies in this area.

[25] Mr Gallo gave evidence that the successful tenderer, whilst not necessarily offering a faster time for the completion of scheduled maintenance when compared to the existing workforce, could deal more efficiently with the peaks and troughs in the workload in ways that were not available within the existing workforce.

[26] Mr Gallo said that, while the business case documentation did not detail an analysis of ‘option 2’ (option 1 being to do nothing, option 2 being to restructure the existing workforce to find the required efficiencies and option 3 being to outsource), such an analysis was undertaken and was subject to detailed discussion with senior management. That analysis showed that option 2 would not deliver the efficiencies required.

[27] I found Mr Gallo to be a credible witness. He gave his evidence clearly, was not evasive in his answers and did not alter his evidence. Overall I accept the evidence of Mr Gallo.

[28] Mr Warner is an employee of the Applicant who works in the ERPM crew. His evidence covered matters associated with existing working arrangements of the ERPM crew and his view as to how the work is organised. Whilst I accept the honesty of Mr Warner’s held views, I do not accept his evidence as to the truthfulness of what motivated management in deciding as they did to outsource ERPM. Whilst Mr Warner suggested in his evidence that management deliberately made the work inefficient to assist in its case for outsourcing, there was no direct evidence that this was the case.

[29] Mr Warner also gave evidence that he believed the company was outsourcing ERPM because it did not like the number of industrial disputes that occurred on the site. Whilst this may be Mr Warner’s belief, there was no objective evidence to support his view.

[30] Overall the evidence of Mr Warner adds little to the case.

[31] Ms Kershaw is a consultant. She has had previous experience working for the Victorian Government as a Senior Advisor and Project Manager in the Department of Treasury and Finance. There is nothing in Ms Kershaw’s training or experience that suggests she is a particular expert in the area of tender processes or evaluation such that her evidence should be accorded some special weight. This is not to say that she may not have relevant insights into the process utilised by SP AusNet that may be of assistance to the tribunal, but these must be weighed against other evidence given in the proceedings.

[32] Ms Kershaw’s evidence went to the efficacy of the tender process undertaken by the company. Whilst Ms Kershaw sought to undertake a ‘not partial’ analysis of the tender process, the report provided by her did, at times, attribute motives to management for which she had no evidence. Ms Kershaw’s evidence moved between a theoretical analysis of outsourcing decisions and the specific circumstances of this case. Ms Kershaw’s analysis, whilst providing some insights, was at times confused and of little value to the decisions I am required to make.

[33] Where there is conflict between the opinion of Ms Kershaw and the evidence of Mr Gallo, I accept the evidence of Mr Gallo.

The facts

[34] Arising from the evidence and submissions of the parties, the following facts are relevant to the matters under consideration:

• SP AusNet employees in ERPM perform both scheduled and unscheduled maintenance. The group consists of 16 employees, including two apprentices. 12



• The workload of ERPM fluctuates due to the need for maintenance work to be carried out in particular ‘windows’ through the year. 13



• SP AusNet advised employees and the CEPU in early September 2011 that it was going to market with an invitation to tender for ERPM. 14



• The business case to outsource the work to the successful tenderer was signed in late March 2012. 15



• The business case did not include an analysis of ‘option 2’ - to review and restructure the internal workforce to increase productivity and efficiency, although this had been subject to internal discussions with senior management. 16



• Outsourcing of the ERPM work will result in a concomitant reduction in workforce.



• There have been a number of industrial disputes between the ERPM workgroup and SP AusNet. These have been resolved in the main by agreement between the parties. 17



• The terms of the Agreement at sub-clause 68.3 have not changed in substance since 2002. In 2004 the equivalent of sub-clause 68.4 was included in the introduction of change clause. The equivalent of sub-clause 62.1 has been included in agreements between the parties since 2002 with the equivalent of sub-clause 62.2 included from 2007. 18



• Negotiations have occurred between the CEPU and SP AusNet pursuant to sub-clause 62.1 of the Agreement but no agreement was reached.



• Employees affected by the decision to outsource the ERPM work have not been offered voluntary redundancy.



• Employees offered employment with the successful tenderer will not have their service with SP AusNet recognised for any purpose. 19



• Voluntary redundancies have not been put to employees as an option. 20

Clause 68 - Introduction of change

Submissions

[35] Clause 68 of the Agreement refers generally to the process to be followed where the Applicant seeks to introduce changes into the workplace.

[36] Sub-clause 68.1 recognises that changes due to technology, structures or processes within the company may be necessary to enable the company to remain efficient and cost effective (this much can be discerned from the words used and the accepted general approach of any company). Sub-clause 68.2 requires the company to notify affected employees and unions where it has made a decision to introduce change that will have an effect or impact on the employees and sub-clause 68.3 requires the company to discuss with employees and unions the effect of the change, measures to minimise the impact of the change and give consideration to matters raised by employees and the unions. There is little controversy in the provisions so far. The process outlined is not dissimilar to that seen in many awards and agreements.

[37] Sub-clause 68.3 then provides that implementation of the proposed change (that has been subject to discussion with the employees and the unions) will not be effected until agreement is reached between the parties.

[38] Sub-clause 68.4 allows the matter to be referred to FWA to deal with in accordance with the DRP in the Agreement if agreement (as referred to in sub-clause 68.3) is not reached.

[39] It is the contention of SP AusNet that it is not within my remit to determine if the change can or should occur but rather, in contemplation of the operation of clause 62, how the reduction in staff numbers associated with the change should occur. The CEPU argues that I have total discretion to determine if the change should occur, to what extent and on what conditions.

[40] SP AusNet referred me to the decision in Australian Federated Union of Locomotive Enginemen and State Rail Authority (NSW) 21 (XPT Case)in support of the proposition that FWA should be reluctant to interfere with the right of an employer to manage a business unless the employer is seeking something which is unjust or unreasonable. It also submits that the purpose of consultation in clause 68 with respect to the introduction of change is ‘not to tell the employer what it must or must not decide in respect to the introduction of change and decisions in respect of redundancies.’22

[41] The CEPU referred me to a decision of Lewin C in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v SPI PowerNet Pty Ltd; SPI Electricity Pty Ltd 23 in support of its argument that, having been referred to FWA in accordance with sub-clause 68.4, the matter subject to arbitration pursuant to the DRP is the proposed change. In his decision, after considering the terms of clause 68, Lewin C said:

I am satisfied that clause 7 of the agreement has been complied with up to the point of the provisions of clause 7.7 of the agreement, which provide that Fair Work Australia may, if necessary, arbitrate the dispute over the changes and the parties shall abide by any outcome. The tribunal has, pursuant to clause 7.7 as set out above, exercised its procedural powers in relation to hearing of witnesses' evidence and submissions as necessary to make the appropriate arbitration effective. 24

[underlining added]

[42] The CEPU also referred me to transcript from applications made pursuant to s.170MW 25 of the Workplace Relations Act 1996 where evidence was given with respect to a similarly worded clause in a proposed agreement. In that matter Mr Drew for the employer (then TXU which is now part of SP AusNet) gave evidence that:

on any matters that fall under the category of introduction of change we are prepared to, if the parties can’t agree and deal with the matter with our employees, we take on board the views of the employees and the unions, we moderate our position, if at the end of the day we can’t achieve agreement we want a pathway so that proposals can be dealt with and put aside and we see the Commission as offering that pathway through arbitration. 26

[43] The provision referred to by Mr Drew in this statement is identical to sub-clause 68.3 in the Agreement subject to these proceedings. 27

Consideration

[44] I find the reasoning in Re XPT is not relevant in the circumstances of this case. The question of managerial prerogative was considered by Lawler VP in RMIT University v National Tertiary Education Industry Union 28 where he found:

[38] However, managerial prerogative in relation to employees (including the employer’s right to make and vary policies that employees are required to observe) is subject to legal constraints. It may be constrained by statute or the terms of an award. It may also be constrained by the terms of the contract of employment or a statutory agreement that the employer chooses to make. For example, an enterprise agreement might provide that all work must be carried out in accordance with a roster pattern specified in the agreement. In that example, unless the agreement also confers a right on the employer to vary the roster pattern, the employer has bound itself not to require employees to work a different roster pattern. In particular, an employer can bind itself in a statutory collective agreement not to change a policy or policies without, for example, the agreement of a relevant union or a majority of employees.

[39] If an employer’s exercise of managerial prerogative is not prevented by statute, an award, a statutory agreement or the contract of employment, the basis for a tribunal such as Fair Work Australia, acting as arbitrator of a dispute, interfering with what would otherwise be a lawful exercise of managerial prerogative (such as the making or varying of a policy which employees are required to observe) was laid down in the XPT case:

“It seems to us that the proper test to be applied and which has been applied for many years by the Commission is for the Commission to examine all the facts and not to interfere with the right of an employer to manage his own business unless he is seeking from the employees something which is unjust or unreasonable. The test of injustice or unreasonableness would embrace matters of safety and health because a requirement by an employer for an employee to perform work which was unsafe or might damage the health of the employee would be both unjust and unreasonable. The ACTU submitted to us that we should apply the test as to whether the demand of the employer was just and equitable having regard to all the circumstances. It is our view that under any given set of facts the test suggested by the ACTU would not lead to a different decision from the test which the Commission has applied over time. Accordingly in reaching our decision we have approached the matter from the point of view of making a judgement whether the request of the SRA that the XPT be manned by one man is unjust or unreasonable.”

[Footnotes omitted]

[45] The Agreement under consideration by me clearly specifies the circumstances under which change may be implemented - when there is agreement between the parties. There can be no interference by FWA in management’s right to manage the company when management’s ‘right’ to do so in this respect is constrained by a legally binding agreement it has entered into with its employees. The terms of the Agreement cannot be discarded at whim by the Applicant in this case just because it does not like the response it has received from its employees or the union.

[46] The Applicant’s reliance on the TCR Case is also misplaced. The issue in dispute here is not if consultation has occurred or if consultation means agreement. It may well be that consultation has come to an end. Nothing has been put to suggest that it is or is not exhausted. Sub-clause 68.3 does not say or even imply that implementation may or shall proceed when consultation is concluded. If that were the intent it could be reasonably expected that the clause would say that once consultation is concluded implementation will be effected. But it does not. The clause places a condition precedent on implementation and that is the agreement of the parties.

[47] In my opinion the wording of clause 68 of the Agreement is clear. If a decision to introduce change is made the company will consult the employees and union. The company will give prompt consideration to matters raised by the employees and union. Implementation of the change will not be effected until there is agreement between the parties.

[48] To implement means to put (a plan, proposal etc) into effect. 29 Sub-clause 68.3 (whilst tautological) is clear that the change will not be put into effect until agreement is reached. That agreement must be reached by the parties.

[49] There is no ambiguity or uncertainty in the sentence subject to scrutiny or when that sentence is read in any relevant context. The change proposed by SP AusNet cannot be implemented without agreement. There is simply no other meaning that can be attributed to the words in the clause.

[50] Even if there was some ambiguity, I find that I could take into account the transcript referred to me by the CEPU arising from applications in 2004 as part of the objective framework of facts accessible to assist in the interpretation of the agreement. 30 The material provided on the history of the clause in previous agreements dating from 2002 shows that there has been no material change in the wording of this clause since 2002, whether the clause was contained in an agreement made pursuant to the relevant legislation of the day or in a common law contract between the parties. The transcript evidences background facts known to both parties relevant to this matter at least from 2004. Should I take this into account I find that it supports my conclusion above as to the meaning of the clause.

[51] Where no agreement is reached under sub-clause 68.3, sub-clause 68.4 provides that the matter may be referred to Fair Work Australia in accordance with the DRP. Prior to such a referral, the clause places a prohibition on implementation of change unless there is agreement. Clause 68.4 is a deliberate circuit breaker to that prohibition. It operates to remove any doubt as to the power of FWA to arbitrate a dispute arising from the operation of clause 68.

[52] The matter referred in sub-clause 68.4 is that matter on which there is no agreement between the parties. Implementation of the change is the matter subject to discussion between the parties under sub-clause 68.3. It is therefore the implementation of the change that is not agreed and is now referred to FWA under sub-clause 68.4 to be dealt with in accordance with the DRP.

[53] It is not for FWA to determine whether or not the change is justified, but whether that change identified by SP AusNet should be implemented. This is the matter in dispute, slightly narrower than as put by the CEPU but not as narrow as suggested by SP AusNet. I do not consider such a conclusion to be contrary to the decision of Lewin C set out above. Whether the change should be implemented is however intrinsically tied to a consideration of whether or not the change is appropriate and/or is based on sound business principles. Whilst these are matters for the Applicant it is inevitable they may come into consideration in FWA deciding if implementation should occur.

Clause 62 - Workforce size

Submissions

[54] Clause 62 is generally concerned with how any reduction in workforce size might be achieved.

[55] The parties are also in dispute as to the effect of clause 62. Both agree that if the change outlined above is implemented, it will result in a requirement for a reduced workforce (of those currently working in ERPM).

[56] SP AusNet submits that if the reductions in workforce cannot be achieved through voluntary reduction or natural attrition and there is no agreement to an alternative approach (by which I take it to mean compulsory departures) then sub-clause 62.1 has become unenforceable as provided in sub-clause 62.2. SP AusNet submits that

the words ‘unenforceable for any reason’, when read in conjunction with clause 62.1 mean that, should the approach of natural attrition and/or voluntary departures not achieve the required reduction for any reason, then employees may be forcibly made redundant. 31

[57] The matter subject to dispute therefore is the redundancy package that should be afforded to employees under sub-clause 62.2 and this is what FWA should determine in this matter.

[58] The CEPU says that the phrase ‘in the event that this clause becomes unenforceable for any reason’ in sub-clause 62.2 is a condition precedent to sub-clause 62.2 operating. That is, sub-clause 62.2 does not operate unless sub-clause 62.1 is unenforceable. If sub-clause 62.1 is enforceable, sub-clause 62.2 has no work to do as negotiations over a departure from the natural attrition and/or voluntary process occur pursuant to sub-clause 62.1 and would (presumably) include the package to be afforded to employees. It is only if sub-clause 62.1 becomes unenforceable that sub-clause 62.2 provides the means for negotiations 32 and intervention, if necessary and in accordance with the sub-clause, by FWA.

[59] The CEPU does not agree that the inability to reach agreement under sub-clause 62.1 makes the clause ‘unenforceable for any reason.’

Consideration

[60] Sub-clause 62.1 states that any reduction in workforce size will be achieved by natural attrition or voluntary departures. Any other mechanism will require negotiation and agreement of the parties. No such agreement has been reached.

[61] This clause is clear - reductions in workforce size will be achieved voluntarily or as otherwise agreed between the parties. If SP AusNet wants, for example, to use compulsory redundancies as a mechanism for reducing the size of the workforce this must be negotiated and agreed in accordance with sub-clause 62.1.

[62] Sub-clause 62.2 does no more than provide an additional process if ‘the clause’ becomes unenforceable. (I accept, and it was not disputed, that the reference to ‘the clause’ in sub-clause 62.2 is a reference to sub-clause 62.1.)

[63] There is also disagreement as to sub-clause 62.2, what the phrase ‘has become unenforceable for any reason’ means and how this may impact on sub-clause 62.1.

[64] The Macquarie Dictionary defines unenforceable as ‘unable to put into effect’ or ‘valid but not enforceable by action in courts.’ 33

[65] Sub-clause 62.2, it is clear, becomes operational only in circumstances where sub-clause 62.1 is unable to be put into effect or is not enforceable by action in courts. Until this occurs, sub-clause 62.2 has no work to do. That no agreement between the parties is able to be reached as to a departure from the natural attrition and/or voluntary departure process under sub-clause 62.1 does not mean the clause is unenforceable for any reason. The Applicant in this case may not be satisfied with the course the negotiations have taken or the ability to reach agreement to depart from the natural attrition and/or voluntary departure but this does not make the clause ‘unenforceable for any reason.’ There is nothing to stop the full extent of sub-clause 62.1 being available except, perhaps, the positions of the respective parties.

[66] SP AusNet would have me substitute ‘unachievable’ for ‘unenforceable’ in sub-clause 62.4. Such a substitution changes the effect of the clause. Unachievable or not able to be achieved means not able to bring (the matter) to a successful end or not able to carry through or accomplish. This imports a much broader range of matters to consider, where sub-clause 62.1 may be said to not be able to do its work, than if the sub-clause is only unenforceable. No cogent argument was put to me as to why such a meaning should be imported into the clause and I reject the propositions put to me by SP AusNet that suggest such a meaning for the clause as a whole.

[67] If the inability to reach agreement under a clause that requires agreement to be reached renders the clause unenforceable, then the mandate to reach agreement, as exists here, would be nugatory. Such a construction would hand an advantage to the party withholding agreement. This would make the concept of ‘doing by agreement’ worthless. Such a construction would not be one that ‘contributes to a sensible industrial outcome as should be attributed to the parties.’ 34

[68] When the Agreement is considered as a whole it is clear that the parties have, in particular circumstances, determined that some provisions could operate but only by agreement of the parties. Included in this is the implementation of change under clause 68 and reductions in workforce size by other than voluntary process under clause 62.

[69] In both clause 68 and sub-clause 62.2 the parties have agreed that where they could not agree FWA would have the power under the DRP to arbitrate on the non-agreed issue.

[70] Such a concession is not to be found in sub-clause 62.1. The power to arbitrate under clause 62 only comes about if sub-clause 62.1 is unenforceable ‘for any reason.’

[71] Whether the clause is, in fact, unenforceable is not a matter of interpretation of the agreement (beyond my comments above) but of determination of the facts surrounding the case. I have given my opinion above on what ‘unenforceable for any reason’ means. I consider below if the circumstances exist such that the clause is, in fact, unenforceable and therefore I can, under the DRP, arbitrate with respect to a redundancy package for employees made forcibly redundant.

[72] Clause 62 of the Agreement establishes a process for managing reductions in workforce size - this process involves natural attrition and/or voluntary departures unless there is some agreement to depart from this. It is only in circumstances (which will depend on the facts) where the provisions of sub-clause 62.1 become unenforceable for any reason and an employee is made involuntarily redundant that the parties will negotiate an appropriate package. It is only if they are unable to reach agreement on that package that the matter will come to FWA under the DRP in clause 7 of the Agreement.

[73] I therefore find that clause 62 of the Agreement is clear and unambiguous. The words used should be given their ordinary meaning. Sub-clause 62.2 is not operational unless sub-clause 62.1 is not able to be put into effect or found to be valid but not able to be enforced by action in the courts.

Can SP AusNet implement the change?

[74] The next matter for me to determine is if SP AusNet can implement the proposed changes pursuant to the operation of clause 68.

[75] I have found above that it is not my role to determine if the change is warranted. The terms of the Agreement place an obligation on FWA to determine if the change proposed should be implemented. This responsibility must be exercised with due care. It is not a trivial matter and the consequences are real.

[76] I reject the arguments of the Applicant that my role is solely to determine how the changes they propose should be implemented in terms of how redundancies should occur. This suggests no determinative role of FWA under clause 68. The burden under clause 68 is higher than this.

[77] The evidence before me has been extensive with respect to the rationale for the change, the tender process and evaluation of the tender, subjective views on what is driving the change and the history of attempts to achieve efficiencies in the workforce.

[78] I appreciate that the implementation of the change will affect the jobs of approximately 16 employees of the company. That this effect exists is not grounds to reject implementation of the proposal. Implementation of most change has an effect on the workforce in some way or another. At times this effect will be through a reduction in staffing levels.

[79] I have considered all of the evidence before me. From that evidence I note that there is no suggestion that the Applicant has failed to give prompt consideration to matters raised by the union or employees. Nor is there evidence to suggest that the union or employees put forward alternative proposals to achieve the efficiencies sought by the company and these were not considered or were rejected without proper consideration. The union and employees have had fair notice that outsourcing was a possibility (since September 2011), providing them with adequate opportunities to discuss alternatives with management. It is apparent that at the time of a dispute over contractors working with the maintenance crew, Mr Gallo advised Mr Warner that continued opposition by the crew to working with contractors would force the company to consider alternatives 35 (to using contractors to manage peaks and troughs in workload). Whilst the lack of documentary evidence to show that the Applicant considered option 2 (internal restructuring) as part of the business case is disappointing, in the circumstances surrounding this issue I do not consider this a fatal omission, although in different circumstances I may find it to be so.

[80] The motivation of management in considering outsourcing is to find efficiencies and reduce costs. That SP AusNet has outsourced similar work in another region of Victoria suggests a continued drive to find such efficiencies and mitigates against the argument of the CEPU that the motivation relates to the industrial disputes within ERPM.

[81] Having considered all of these matters and the full extent of the evidence before me I find that the company can proceed to implement the changes proposed - that is to outsource the ERPM.

Can I arbitrate with respect to involuntary redundancies?

[82] Having found as I have with respect to clause 62 of the Agreement I must reject the proposition put to me by SP AusNet that:

Clause 62 contemplates first of all that the parties’ first approach achieving any required reduction in workforce size by natural attrition and/or voluntary redundancy...Second, in circumstances where the approach of natural attrition and/or voluntary redundancy is not able to achieve the required reduction a departure from that approach may occur in accordance with a process that is to be negotiated and agreed. Third, in the absence of agreement, the process of implementing forced redundancies, including the package that goes with the forced redundancy and any associated matters, is to be resolved in accordance with the dispute resolution procedure... 36

[83] The Agreement establishes a process for reducing workforce size and this is essentially a voluntary process. This process can only be replaced by something else (an involuntary process) by agreement or, where sub-clause 62.1 is unenforceable, by arbitration by FWA. I do not accept that the inability to reach agreement renders sub-clause 62.1 unenforceable.

[84] I find that there is no evidentiary or other basis on which I could conclude that sub-clause 62.1 of the Agreement is unenforceable ‘for any reason.’

[85] Even if SP AusNet was correct and I could deal with the dispute over the package that goes with forced redundancies, I agree with the submissions of the CEPU that the operation of s.739(5) of the Act would preclude me from determining an outcome that allows forced redundancies, as such an outcome would be inconsistent with the Agreement.

[86] Section 739 of the Act states

739 Disputes dealt with by FWA

(1) This section applies if a term referred to in section 738 requires or allows FWA to deal with a dispute.

(2) FWA must not deal with a dispute to the extent that the dispute is about whether an employer had reasonable business grounds under subsection 65(5) or 76(4), unless:

(a) the parties have agreed in a contract of employment, enterprise agreement or other written agreement to FWA dealing with the matter; or

(b) a determination under the Public Service Act 1999 authorises FWA to deal with the matter.

Note: This does not prevent FWA from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effectas subsection 65(5) or 76(4) (see also subsection 55(5)).

(3) In dealing with a dispute, FWA must not exercise any powers limited by the term.

(4) If, in accordance with the term, the parties have agreed that FWA may arbitrate (however described) the dispute, FWA may do so.

Note: FWA may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).

(5) Despite subsection (4), FWA must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.

(6) FWA may deal with a dispute only on application by a party to the dispute.

[87] The primary proposition in this Agreement is that any reduction in workforce size should be through a voluntary process. In the context of clause 62 I am faced with a clause that only allows departure from the voluntary process where there is agreement. For me to impose through arbitration some involuntary process for departure would, in my opinion, be inconsistent with the Agreement and therefore world be ultra vires.

[88] Absent an agreement to do otherwise, and given the continued enforceability of sub-clause 62.1, natural attrition and/or voluntary departure is the only procedure open to the Applicant to achieve the reduction in workforce size that they seek.

[89] I note that the Applicant has not offered employees the option of accepting a voluntary redundancy package as a means of achieving the desired workforce reduction. The plain words of sub-clause 62.1 suggest that this is a step that should be taken. It is clear that all of the options available under sub-clause 62.1 have not been utilised to determine if this will achieve a workforce reduction. In circumstances where there has been no agreement to the change proposed by the company it may not be surprising. Given this circumstance I am not convinced that the implementation of sub-clause 62.1 would not achieve any reductions in staff that flow from the proposed outsourcing.

Conclusion

[90] This dispute relates to the ability of SP AusNet to implement a decision to outsource the ERPM work and the conditions associated with any workforce reduction flowing from implementation (should this occur). The determination of this matter has required a consideration of the intent of clauses 62 and 68 of the Agreement and then, given this interpretation, a determination by FWA, pursuant to the DRP, of what should occur next.

[91] The role of FWA is not as limited as the Applicant proposed and perhaps not as broad as put by the CEPU. In summary I find that clause 68 gives the power to FWA to determine if the change proposed by SP AusNet should be implemented. I also find that the inability to reach agreement under sub-clause 62.1 on a departure from the natural attrition and/or voluntary departure method of achieving workforce reductions does not make that provision unenforceable. I therefore do not have the power to arbitrate on a forced departure package under sub-clause 62.2 of the Agreement. Even if I did, I find that to arbitrate on such a package would result in an outcome inconsistent with the Agreement and hence be in breach of s.739(5) of the Act.

[92] In summary I find that SP AusNet can implement the proposed change with respect to ERPM. Any change in workforce size necessary as a result of such implementation must be dealt with by natural attrition and/or voluntary departures unless SP AusNet and the CEPU (and employees) agree otherwise. I note that voluntary departures have not been offered to the employees likely to be affected by the change and that it is not yet known if this will achieve the reduction in workforce size required.

COMMISSIONER

Appearances:

B. Murray, solicitor, for SPI Power Net Pty Ltd and SPI Electricity Pty Ltd with M. Butler.

G. Borenstein of the CEPU.

Hearing details:

2012
Melbourne:
June 19, 20.

 1   [2012] FWA 4350.

 2   PR524295.

 3   Exhibit SPI5, paragraph 16(d).

 4   Exhibit SPI5, paragraphs 19 and 26.

 5   Exhibit SPI5, paragraph 27.

 6   Exhibit SPI5, paragraph 31.

 7   Exhibit CEPU10, paragraph 7.

 8   For example through some legislative or regulatory change or decision of the courts.

 9   [2008] AIRC 291.

 10   [2008] AIRC 291, 15.

 11 (2005) 139 IR 141.

 12   Exhibit SPI2, paragraph 6.

 13   Evidence of Mr Gallo, transcript PN351.

 14   Exhibit SPI2, paragraphs 10-11.

 15   Exhibit CEPU 5, pages 43-55.

 16   Evidence of Mr Gallo, transcript PN647-55.

 17   Exhibits SPI3, paragraph 13; CEPU6, paragraphs 10-11.

 18   Copies of the Introduction of Change and Workforce Size clauses from the 2002, 2004, 2007-10 and 2010-13 Agreement and the 2007 common law contract between the parties were provided, at my request, following the hearing date.

 19   Transcript PN 1540-2.

 20   Transcript PN1581-2.

 21 (1984) 295 CAR 188.

 22   See Termination, Change and Redundancy Case (1984) 8 IR 34 at 51 and 62.

 23   [2011] FWA 5825.

 24   [2011] FWA 5825, [13].

 25   See BP2001/2755, B2004/2756 and B2004/2757.

 26   BP2001/2755, B2004/2756 and B2004/2757 transcript PN3098. See exhibit CEPU10, paragraph 9.

 27   Copies of the Introduction of Change and Workforce Size clauses from the 2002, 2004, 2007-10 and 2010-13 Agreement and the 2007 common law contract between the parties were provided to me, at my request, following the hearing date.

 28   [2012] FWA 2208.

 29   Macquarie Dictionary (5th ed.).

 30   See CPSU v Telstra (2005) 139 IR 141.

 31   Exhibit SPI5, paragraph 16(h)-(i).

 32   Exhibit CEPU10, paragraphs 16-17.

 33   The Macquarie Dictionary Online.

 34   Amcor v Construction, Forestry, Mining and Energy Union and ors [2005] 222 CLR 241, 270 per Kirby J.

 35   Exhibit SPI3, paragraph 12.

 36   Transcript PN1530-1.

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