The Australian Workers' Union v BlueScope Steel (AIS) Pty Ltd

[2016] FWC 640

[2016] FWC 640

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739 - Application to deal with a dispute

The Australian Workers' Union
v
BlueScope Steel (AIS) Pty Ltd
(C2015/7311)

COMMISSIONER RIORDAN WOLLONGONG, 21 APRIL 2016

Application to deal with a dispute.

[1] This decision relates to an application by the Australian Workers’ Union, Port Kembla Branch (AWU) in relation to a decision by BlueScope Steel (AIS) Pty Ltd (BlueScope) to remove the pre-paid overtime component from the annualised salary of employees covered by the Blast Furnace Departmental Agreement (BFDA). Relevantly, the dispute was notified on 13 November 2015 in accordance with Clause 39.5 of the BlueScope Steel Port Kembla Steel Works Agreement 2012 1 (the Agreement).

[2] The Blast Furnace is a department in the Port Kembla Steelmill. There is currently one furnace in operation, Blast Furnace 5. The employees have been party to a Departmental Agreement since 1996. At the date of the hearing, 28 and 29 January 2016, 51 employees were covered by this Agreement.

[3] Leave was granted for the Australian Workers’ Union (AWU) to be represented by Mr Aron Neilson of Slater and Gordon and for BlueScope to be represented by Mr Ken Brotherson from Hall & Wilcox Lawyers.

[4] On behalf of the AWU witness statements were provided by:

• Mr Wayne Phillips, Secretary of the AWU



• Mr Geoff Martin, Electrician at the Blast Furnace, BlueScope Steel.



• Mr Paul Testa, Operator at the Blast Furnace, BlueScope Steel.



• Mr Robert Kolevski, Operator at the Blast Furnace, BlueScope Steel.

[5] BlueScope relied on witness statements from:

• Ms Jacqueline Fitzgerald, Manager Employee Relations, Compliance and Systems – Manufacturing for BlueScope Steel Australia and New Zealand.



• Mr Andrew Simon Gripton, Number 5 Blast Furnace Operations Manager at the Port Kembla Steelworks.

[6] The 1996 BFDA was the result of an internal review which was commenced in 1993/94. The Blast Furnace had experienced a myriad of industrial and human resources problems. Like a number of industrial “hotspots” throughout NSW in the early 1990’s, annualised salaries were introduced as a means to provide some “ownership” of the department to the employees. The BFDA introduced the concept of “teams” into the department where the “team” had the authority and independence to manage its own work. This small introduction of the theory of “industrial democracy” into BlueScope was an attempt to cure the problems associated with excessive overtime, absenteeism, claims of discrimination and unnecessary industrial unrest.

[7] The relevant sections of the BFDA in 1996 2 were:

“46.1.2 The parties agree that this agreement will have no application to, and will in no way create a claim for, flow on of salaries and conditions provided for in this award to employees in the Company or any other Department or Division unless by agreement.

46.2.1 Purpose – the purpose of this agreement is to represent the values, goals, principles and conditions which have been jointly developed by the parties and will provide the framework for a new team work system at the blast furnaces.

…This agreement specifically sets out principles for people working together in teams. This involves teams and team members having a say in the decisions that affect them and progressively assuming greater levels of accountability and responsibility in his or her place of work. This will facilitate the creation of a work environment in which everyone will contribute to making the blast furnaces a world-class operation.

…Consequently, this agreement will also provide employees with access to rewarding and satisfying jobs and will result in efficient and continuously improving operations.

…The intention is for this agreement to set out principles and not to be prescriptive.

46.8 Classifications and Salaries – The classifications appearing in Item 2 of Table 4 – Annualised Salary Rates of Pay of Part C – Monetary Rates – Restructured Classifications are new classifications which have been established particular to the needs and operations of No. 5 and No. 6 Blast Furnaces at Port Kembla Steelworks. All employees working as part of a team on the blast furnaces, under these classifications will be paid an annualised salary as set out in Tem 2 of Table 4 – Annualised Salary Rates of Pay of Part C – Monetary Rates – Restructured Classifications. All salaries will be paid fortnightly be electronic funds transfer directly into an account nominated by the employee with a bank, building society, credit union or other financial institution recognised by the Company.

The annualised salary will:

Provide a stable income, with a standard pay on a fortnightly basis for the individual;

Reduce inefficiencies by building in payment for a set number of additional hours; and

Support the team concept.

The annualised salary is made up of four components:

Base rate – Payment for the award wage, overaward (bonus) payment, tool allowance for tradespersons and electrical licence payments for electrical tradespersons.

Additional payments – Payment for disability allowances for tradespersons, payment for all public holidays (worked and rostered).

Shift work payments and penalties – Payments for all disabilities and disturbances associated with shift work and the working of regularly rostered shifts on weekends and public holidays.

Additional work hours – Payment for work undertaken as required outside normal shift or day hours. This includes payment for all disturbances , recalls and travel time.

46.10 Hours of work – the 12-hour, seven-day continuous shift rosters, to be implemented as part of the team work system, have been agreed to by the parties. This includes provision for a five-shift arrangement.

The standard hours of work will be an average of 38 hour week. At the time of implementation of this agreement, these hours will be worked according to the agreed roster.

The method of working shifts may be carried by agreement to suit the circumstances of the operation.

Under normal operation requirements, a maximum of four 12-hour shifts over four consecutive days may be worked.

Under normal operational requirements, a maximum of four additional hours may be worked immediately following a 12-hour ordinary shift.

The team will be responsible for ensuring that relief at the change of every shift occurs with no disruption to operations.

Where 12-hour shifts are worked, two meal breaks will be taken. The team will determine the timing of such breaks, having regard to work requirements.

All employees will be required to work additional hours to meet operational needs. It is the defined work team’s responsibility to provide cover to meet operational requirements, and each team will establish a system which ensures fair coverage of planned and unplanned absences. This will include ensuring that a full complement is available at the commencement of every shift.

Records will be kept on all hours worked and a review of the Additional Work Hours payment will be made as required. This review will not lead to a reduction in this payment.

In the event of a catastrophe (eg a chilled hearth) employees will be entitled to an additional payment, provided it is within the following guidelines:

Where 80 per cent of employees in a defined work team have each worked more than 78 additional work hours in a quarter, then each individual who has exceeded these hours will be paid at the rate of double time for these additional hours in access of 78 hours. The base rate for his or her classification will be sued for this calculation (refer Item 2 of Table 4 – Annualised Salary Rates of Pay of Part C – Monetary Rates – Restructured Classifications). Any disability allowances due for tradespersons will also be paid for these additional hours.

A review of the extent and reason for additional hours worked will be made every quarter (every 13 weeks from the implementation date of the new work system).”

(my emphasis)

[8] Whilst there have been some changes to the BFDA over the last 20 years, the basic premise of teamwork and incentivisation remain.

[9] Under the BFDA, employees received an annualised salary which contained a pre-paid overtime component of 6.6 hours per week – which equated to an additional 12.8 hours pay. If employees were called in to work overtime, no additional payment was made to them unless the relevant provisions of the Agreement had been satisfied.

[10] In August 2015, the Managing Director of BlueScope announced that $200 million worth of real savings would have to be found over the next few months or he would recommend to the Board of BlueScope to cease production of rolled iron coil at the Port Kembla Steel Mill. This resulted in the immediate need to find $60 million of employee cost savings.

[11] Vice President Hatcher conducted an exhaustive and extensive mediation in relation to these negotiations and made recommendations. These recommendations were accepted by the parties. The $60 million target was achieved as a result of this process. These outcomes resulted in the following Memorandum of Agreement (MOA) 3:

• Of Agreement

BlueScope Steel (AIS) Pty Ltd and BlueScope Steel Limited (BlueScope)

The Australian Workers Union (AMWU)

Communications, Electrical and Plumbing Union CEPU)

Construction, Forestry, Mining and Energy Union (CFMEU)

1. Redundancies

1.1. BlueScope shall proceed with redundancies and associated changes in accordance with the Recommendation of the Fair Work Commission issued on 6 October 2015.

1.2. The criteria and procedures to be followed for selection of persons for compulsory redundancy and for job swaps, and the entitlement in the case of all redundancies to an ex gratia payment, shall be as set out in Annexure A.

2. New Enterprise Agreements

2.1. Two new enterprise agreements (covering the Port Kembla Steelworks and the Springhill Plant respectively) with a nominal term of 3 years, commencing 23 July 2015, shall be made.

2.2. There shall be no increases to wages and allowances in the new entperise agreements provided that inflation (as measured by the National CPI) remains below an annual rate of 3% in each financial year. The agreements shall provide for a mechanism for a review of wages and salaries if inflation exceeds 3%. That mechanism shall be as set out in Annexure B.

2.3. The personal/carer’s leave provisions of the new enterprise agreements shall provide that personal/carer’s leave days taken on weekends or public holidays shall be paid at ordinary time rates.

2.4. The new enterprise agreements shall contain the provision contained in Annexure C concerning resolution of disputes and introduction of change.

2.5. The new enterprise agreements shall, other than as provided in this Agreement, contain the same provisions as the current enterprise agreements.

3. LSPS Bonus suspension program

3.1. The LSPS Bonus program will be suspended for the financial year 2015/2016 and then replaces by a new program consistent with clause 3.2.

3.2. During 2015/2016 consultations in accordance with clause 41.3.1 if the Steelworks Agreement and clause 42.4.1 of the Springhill Agreement (or the equivalent) provisions in the new enterprise agreements) shall take place concerning revised incentive measures that promote future productivity and flexibility and take into account BlueScope’s capacity to pay.

4. Prepaid Overtime

4.1. Subject to clause 4.2, all existing arrangements including arrangements contained in departmental agreements, involving pre-payment of overtime are abolished. Annualised pay arrangements will cease.

4.2. The departmental agreement concerning the pay entitlements of operations in the Blast Furnace department shall remain in place until such time as it is terminated in accordance with clause 39 of the current Steelworks enterprise agreement (or the equivalent clause in the new enterprise agreement to replace it). BlueScope has given notice that it intends to seek to have the prepaid overtime (annualised salary arrangements) of this departmental agreement terminated under that clause.

(my emphasis)

5. Departmental Agreements

BlueScope shall send to the unions the letter attached as Annexure D.

6. Future reform process

During the term of the new enterprise agreements, BlueScope and the unions shall engage in the reform process set out in Annexure E.

7. Cost savings

It is agreed that the matters contained in this Agreement satisfy BlueScope’s target of employee cost savings (within an overall target of $200 Million in business cost savings) necessary to support the survival of the Port Kembla Steelworks.”

[12] I note that, despite the extensive intervention by the Vice President on the issue of the BFDA, agreement could not be reached, thereby creating clause 4.2 of the above MOA. Relevantly, all other Agreements that contained provisions relating to pre-paid overtime and annualised salaries were abolished.

[13] The MOA was signed by Mr Phillips on 9 October 2016 and was subsequently endorsed by the employees. The MOA formed the cornerstone of the 2015 Enterprise Agreement which was approved by the employees.

[14] Prior to the 2015 Enterprise Agreement coming into effect, the AWU notified a dispute. The parties agreed that this dispute would be determined in accordance with the provisions of the 2012 Agreement. The relevant provisions of the Agreement in relation to this dispute are;

“39. Department Work Agreements

39.1 The Company has, and may at any time during the operation of this Agreement make agreements with relevant employees in a department or work area in relation to work arrangements for that specific department or work area. The matters dealt with by such agreements may include the method of implementation of hours of work, shift and rostering arrangements to accommodate the operations of that department or work area.

39.4 Should the Company or relevant employees in a specific department or work area wish to vary or end an Existing Department Arrangement, this may occur:

39.4.1 at any time by agreement between the Company and a majority of affected employees and their union; or

39.4.2 in accordance with clause 35.2 Introduction of Change, Including Outsourcing, provided that any va1iation or termination must ensure that the minimum entitlements of employees under this Agreement are satisfied.

39.5 Any dispute between the parties in relation to these arrangements (including to their introduction or variation), will be dealt with in accordance with clause 35 of this Agreement, Procedure of Resolving Claims, Issues and Disputes, including as applicable clause 35.2, Introduction of Change Including Outsourcing.

35.2 Introduction of Change Including Outsourcing

35.2.1 Principles concerning the management of change

The parties agree to the following key principles concerning the management of change:

(a) The parties recognise and accept that change is an inevitable and increasingly necessary part of the steel industry.

(b) Change must be on-going to ensure that the Company remain viable and employee expectation concerning security of employment can be satisfied.

(c) In considering the desirability and business case for any proposed change the tests to be applied are requirements for the change to be:

• safe;
• efficient;
• legal; and
• fair.

(d) The parties conm1it to consult and abide by the dispute settling procedures provided in this Agreement in the event that proposed changes are not agreed. In support of this commitment there will be both detailed communication and strong reinforcement by the Company and Un ions in respect of these procedures. Subject to any disagreement being dealt within accordance with agreed procedures, and in be case of significant change 35.2.3, the change will be able to be implemented.

(e) All parties share an intent that there be "zero industrial action" and to that end will actively ensure that employees, delegates and officials will, on each and every occasion where a dispute arises and is not resolved, follow the applicable dispute settling procedure and not take industrial action.

35.2.2 Processes for introduction of Change

(a) Where changes are "significant in nature", as defined in this subclause, they shall be the subject to the processes set out in 35.2.3.

(b) Changes which are not "significant in nature" shall be introduced in accordance with the principles set out in subclause 35.2.1 and the provisions of the Agreement. Disputes in relation to such changes shall be dealt with in accordance with Clause 35.1 Procedure for Resolving Claims, Issues and Disputes.

(c) A change is "significant in nature" for the purposes of this clause if the change will have substantial effects on:

(i) the composition, operation or size of the workforce in a section or department of the operations of the Company

(ii) the skills required of employees;

(iii) the opportunities for promotions of employees;

(iv) the security of employment of employees;

(v) the hours of work of employees;

(vi) the location of work of employees;

(vii) shift pattern changes; and

(viii) outsourcing of work (meaning the engagement on a permanent basis of another organisation to perform work which has previously been performed by employees of the Company. In this respect outsourcing differs from the use of contractors to meet intermittent work load requirements or to provide specialist skills on a short term or as needs basis).

(d) Where a change is otherwise provided for in this Agreement i t will not be regarded as significant in nature for the purposes of this clause.

35.2.3 Processes for introducing change which is significant in nature and for resolving associated issues and disputes

(a) The provisions of this subclause set out the terms and order of the procedure which shall govern the introduction and management of change which is significant in nature.

(b) A change will be determined to be significant where it meets the definition as set out in clause 35.2.2(c).

(c) Consultation will commence in relation to workplace change as defined when:

(i) the Company has developed an idea regarding a workplace change that, if implemented, would result in a change which is significant in nature, and

(ii) the idea has been developed sufficiently as to justify the time and effort required to allocate resources and to develop a working proposal, and

(iii) a "Task Brief" bas been prepared in at least broad terms that includes the:

• objectives of the change;

• issues that may arise if the change was progressed to implementation;

• criteria for appraisal of the idea;

impact the idea may have on employees, customers and the business; and

• milestones in the review process.

(d) Consultation will commence with a notification in writing to employees and their unions (letter 1) as to the broad objectives of the change and the possible effect the change is likely to have on employees.

(e) Consultation is the process through which employees contribute to problem-solving and decision making. It provides for employee and union input before Company management finally decides on action affecting its employees.

(f) Employees and their unions will be provided with the opportunity to comment and input into the proposed change. This will not limit any party from proposing alternative ideas that may result in the objectives of the business being achieved.

(g) The consultation process must be fair, comprehensive and genu i ne.

(h) Following consideration of all aspects of the change, including consultation with employees, the Company will advise employees and the relevant unions in writing (letter 2) as to whether or not the Company will proceed with the introduction of the change. The advice will include:

(i) confirmation on the introduction of the change (as finally determined) and the nature of that change;

(ii) the date of the introduction of the change;

(iii) the impact the change will have on employees; and

(iv) what steps are to be put in place to manage the impact that the changes will have on employees.

(i) A decision by employees or the unions not to participate in such discussions brings to an end the consultation process.

(j) Where agreement is reached as to a change, the change may be implemented immediately and the parties are to promptly record the terms of the agreement in writing.

(k) Where there is disagreement as to the change to be implemented, a party to the consultation process must give written notice to the other parties that it disputes the implementation of the change and must follow the Procedure for Resolving Disputes as per clause 35.1.7. Where a matter is referred to FWC as part of the disputes procedure, implementation of the change will be subject to the outcome of such proceedings, during which time the status quo will remain.

(my emphasis)

(l) For workplace change, (including the number or composition of employees engaged on any task), the consultation process may provide for the change to be introduced on a trial basis by agreement. There should be discussion between the parties as to how the trial arrangements should be implemented. An appropriate monitoring system will be established to ensure that the proposed changes are safe, efficient, legal and fair. The period of the trial will be determined in advance, with a return to the status quo in the event that it is shown that the trial fails the safe, efficient, legal and fair test.

(m) Definition:

For the purposes of clause 35.2, the term Workplace Change does not include:

Matters that involve the requirement for employees to work in accordance with the reasonable direction of the Company; normal day to day operations and work within the employee's recognised skills, competence, training and safe working practices.

Company decisions regarding significant capital investment, business growth etc. In these circumstance the Company is to provide the information in writing to employees and their unions as referred to in points (i) to (i v) of clause 35.2.3(h).”

Evidence

[15] Mr Phillips testified that the BFDA was different to the both the Blower Station Work Redesign Agreement and the Raw Materials Handling Work Redesign Agreement. Mr Phillips claimed that because of this difference, agreement could not be reached during the MOA process. Mr Phillips re-affirmed the critical nature of the Blast Furnace to the operation of the Steel Mill.

[16] Mr Brotherson took Mr Phillips through the various provisions of the three Department Agreements to show that the wording was basically the same.

[17] It is acknowledged by Mr Testa and Mr Martin that they understood when they voted for the MOA and the Agreement that they knew that BlueScope would proceed with the process to remove the pre-paid overtime component of their salary.

[18] The AWU argued that the BFDA has been in operation for 20 years. During this period, BlueScope has received the benefits of the Agreement via the increased flexibility and the improved efficiency emanating from the teamwork concept. Further, for BlueScope to now remove the financial incentive to the employees but require employees to continue to work in the same flexible manner is unfair.

[19] The AWU submitted that the pre-paid overtime has become part of the employees “ordinary” wages. On this understanding the employees have based their lifestyle on these payments continuing. To now remove them is unfair.
[20] Mr Gripton provided forthright evidence. Mr Gripton was working in the Blast Furnace when the BFDA was implemented in 1996. Mr Gripton acknowledged that overtime in 1996 was being used by employees to maximise their earnings in a disingenuous manner. Mr Gripton believed that one of the real benefits of the BFDA was that the pre-paid overtime component of the annualised salary eradicated this practice by “incentivising” employees to perform their work in a timely, efficient and skilful manner. Mr Gripton’s preference would be for the annualised salary in its original form to continue but accepted that the current financial constraints of the business made such an outcome impossible.

[21] Mr Gripton gave evidence that BlueScope currently spend $978,000 on pre-paid overtime in the Plate Mill. Based on his analysis, Mr Gripton believes that by moving to the situation of paying employees for time actually worked in accordance with the overtime provisions of the Agreement, that this overtime bill can be reduced by a conservative 50 percent.

[22] The AWU argued that commitments were given by Mr Gripton during the “Strive to Thrive” initiative in 2014/2015, where initial cost cutting was undertaken across the Steelworks. Mr Gripton agreed that he did not raise the removal of pre-paid overtime during those discussions. It is widely accepted that the decision to remove pre-paid overtime was made at a corporate rather than a departmental level after the “Strive to Thrive” negotiations had concluded.

[23] There was contested evidence in relation to the removal of pre-paid overtime for staff employees. BlueScope have removed this payment from the lower level of staff employee, namely Supervisors. This matter is the subject of a dispute before Vice President Hatcher. Relevantly, the Vice President has issued a Recommendation 4 in those proceedings which in part said:

“[7] …it must equally be accepted that there can be no going back on the major changes negotiated as part of the rescue package. The pay freeze, suspension of bonuses, abolition of pre-paid overtime and loss of penalties on weekend sick days were all important elements of the $200 million in savings that were necessary to avoid the imminent closure of the Steelworks…

[8] Third, in circumstances where employees have made major financial sacrifices in order to save the Steelworks, it must be recognised by BlueScope that any perceptions of inequality of treatments amongst staff employees will be significantly damaging to morale. It will therefore be necessary to provide transparency as to pay arrangements at all levels of the BlueScope staff structure in order to ensure that false perceptions that some employees have received favoured treatment are dispelled.”

[24] Relevantly, Mr Phillips submitted documentation that provided information which clearly identified that monthly salary staff (whom are usually Managers, Department Heads etc) do have an overtime component built into their salary:

“…As outlines in the Issue Paper on Career Paths, there is presently an inconsistency in salaries between the following:

• Monthly salary staff who have an allowance for overtime already built into their rates of pay v’s actual overtime worked.



• Shift salary staff who will be moving to an annualised salary based on present overtime worked.” 5

[25] Ms Fitzgerald testified that “monthly staff aren’t generally entitled to overtime on the basis that their contracts are all inclusive.” 6

[26] Ms Fitzgerald advised that some monthly staff employees have a capacity to claim an additional hours allowance after they have worked “reasonable additional hours”. Ms Fitzgerald mentioned the quantum of 45 hours per week as being the normal weekly hours for this type of employee.

[27] Ms Fitzgerald provided evidence about the perilous financial position of BlueScope as well as detailed information in relation to the MOA negotiations.

[28] Mr Brotherson submitted that the FWC must apply a plain and ordinary meaning when interpreting the terms of the Agreement and referred me to the Fair Work Commission Full Bench decision in The Australasian Meat Industry Employees Union v Golden Cockerel Pty Limited 7. Relevantly, the Full Bench summarised and identified the following principles in relation to the interpretation of Agreements:

“[41] From the foregoing, the following principles may be distilled:

1. The AI Act does not apply to the construction of an enterprise agreement made under the Act.

2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.

3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

5. If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.

6. Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include:

(a) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;
(b) notorious facts of which knowledge is to be presumed;
(c) evidence of matters in common contemplation and constituting a common assumption.

7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.

8. Context might appear from:

(a) the text of the agreement viewed as a whole;
(b) the disputed provision’s place and arrangement in the agreement;
(c) the legislative context under which the agreement was made and in which it operates.

9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement.

10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.”

Consideration

[29] I will now consider the applicable tests identified in Clause 35.2.1(c) of the Agreement.

Safe

[30] Neither party has raised any real issue in relation to safety. If this change results in the return to the excessive overtime levels that existed pre 1996 then an argument in relation to safety may be countenanced. However, BlueScope is appropriately seeking that employees continue to work in the same manner and with the same aptitude with which they have worked for the past two decades. As a result, no safety issues should arise. I have taken this into account.

Efficient

[31] In considering the test in relation to efficiency, it is well established and accepted that the managerial prerogative of BlueScope determines the efficiency of efficiency of any proposal, unless it can be shown to be unfair or unsafe. I note that the Union has not sought to table an alternate proposal in this circumstance. I have taken this into account.

[32] BlueScope claim that this proposal will provide efficiency savings in the vicinity of $500,000. Mr Gripton calculated this figure by looking at the total expenditure on pre-paid overtime, some $978,000 and applying worst case scenario figures in relation to sick leave, maintenance and plant unavailability. As a result, a conservating cost saving between $450,000 and $500,000 per annum is expected. For a company that is struggling to maintain its operational existence at Port Kembla, this figure is a considerable on-going saving. I have taken this into account.

[33] The AWU argued that this proposal may prove to be inefficient if, in the future, the actual overtime hours worked exceed the previously allocated and paid hours. This submission may prove to be true, however, it is currently hypothetical. I accept the submission from BlueScope that moving to a paid overtime arrangement allows the company to manage its overtime costs if they are getting out of control. Such a scenario would enable the company to assess the reason why the efficiency and productivity of the furnace may be at a certain level and to implement measures to remedy the situation. I have taken this into account.

Legal

[34] I have taken into account the provisions of the Blast Furnace Agreement, the MOA and the Agreement (as mentioned above).

[35] Mr Brotherson referred me to a decision of a Full Bench of the FWC in the Trade Operator Case, where it was held that:

“The existence of a provision in a statutory industrial instrument which establishes a specific procedure to facilitate the implementation of significant workplace change (including to the “…operation… of the workforce” and “the skills required of employees” as contemplated by clause 35.2.2(c)) cannot be read as constrained by the scope of the existing contracts of employment of existing employees, since to do so would substantially deprive it of utility.”

“The criteria that legality has, in relation to industrial instruments preceding the Agreement which applied to BlueScope and contained a provision equivalent to the current clause 35.2, then applied on the basis that a change would be “legal” if it is not illegal – that is, if it is not positively prohibited by any enforceable legal requirement…”

I have taken this into account.

[36] Mr Neilson argued that the provisions of the BFA are enforceable due to Clause 39 of the Agreement (see above). Mr Neilson relied on the provisions of Clause 46.10 of the BFA which I will repeat again:

“Records will be kept on all hours worked and a review of the Additional Work Hours payment will be made as required. This review will not lead to a reduction in this payment.”

[37] Mr Neilson referred me to the decision of the Full Bench of the FWC in the Hours of Work Case, where it was held:

“Importantly, where an enterprise agreement provides the power for the Commission to arbitrate a dispute “the Commission must not make a decision that is inconsistent with the Enterprise Agreement itself” (s739(5)); AWU & Ors v BlueScope Steel (AIS) Pty Ltd [2015] FWCFB1798).

I have taken this into account.

[38] Mr Neilson submitted that BlueScope has acted arbitrarily, therefore illegally, by implementing the decision to stop the payment of prepaid overtime before the matter has been dealt with in accordance with the provisions of the BFA, the MOA and the Agreement. I have taken this into account.

[39] Mr Brotherson denied that BlueScope has breached the Agreement because the change from an annualised salary to an aggregate salary is not “significant in nature”, therefore the status quo provisions of the Agreement do not apply. However, Mr Brotherson concedes that if BlueScope have breached the Agreement by implementing the proposed change early, then the issue can be fixed by this decision in relation to the operative date of the new arrangements and an order for backpay.

Fair

[40] Both parties accepted that this issue was the main factor to be considered.

[41] When assessing the issue of fairness, the FWC must undertake, by definition, a comparison between different employees that are effected as a result of the proposed change;

a) Prior to the MOA, 434 employees enjoyed the benefit of prepaid overtime via the provisions of a variety of Departmental Agreement’s. 90% of those employees lost this payment as a result of the mediation process and the approval of the 2015 Agreement. The 45 employees at the Blast Furnace are the only employees who are seeking to maintain this payment. I have taken this into account.

b) Staff employees, such as Supervisors, have also had this prepaid overtime component of their salaries removed by BlueScope. Whilst I acknowledge that this matter is currently in dispute before Vice President Hatcher (NA2015/5) where the Vice President has issued a Recommendation 8), the obvious issue is that if the employees covered by the BFDA were to keep their current annualised salary then they would be paid at a higher rate than their Supervisors. This scenario would create an unusual, absurd and difficult situation in relation to relativities. I have taken this into account.

c) Monthly Staff employees, such as Managers like Mr Gripton, have not suffered a reduction in their pay. The AWU argued that it was unfair for this to be the case. Ms Fitzgerald testified that Monthly Employees are not employed based on a minimum hours of week but on a “whole of job” concept. There is limited capacity for these employees to be paid any additional money through the working of overtime. Monthly Employees are entitled to receive an annual bonus as part of their salary package. Ms Fitzgerald and Mr Gripton both advised me that the annual bonus scheme had been frozen. I have taken this into account.

d) The workforce covered by the Agreement all get paid overtime based on the hours that they work in accordance with the provisions of the Agreement. The question remains as to whether the work undertaken, or the workforce employed, at the Blast Furnace are so unique that they should be shielded from this cost cutting exercise. I have taken this into account.

[42] Traditionally and logically, monthly staff employees receive a pre-paid overtime payment as part of their total salary. From my experience, such a component is common place in the Australian workplace for employees at this level of seniority. I have taken into account that Ms Fitzgerald identified 45 hours per week to be considered “reasonable hours” for monthly employees.

[43] I have taken into account that both parties have enjoyed the benefits of the Agreement for two decades. The employees have enjoyed an inflated annualised salary whilst BlueScope has had the benefits of a smarter, more efficient and more productive workforce.

[44] BlueScope want to maintain the productivity improvements that have emanated from this Departmental Agreement. Employees have asked how it is fair that the systems of work that have developed over the last two decades as a result of the Departmental Agreement are maintained whilst the compensation for working in this flexible and co-operative manner is removed. I have taken this into account.

[45] Mr Gripton provided a compelling argument based on the principle of social justice ie, at a time when fellow BlueScope employees are losing their jobs, it is hard to sustain an argument to be paid for time which is not worked. I have taken this into account.

Determination

[46] In determining this matter, I have taken into account all of the evidence and submissions that have been provided by the parties.

[47] I find that the decision to remove pre-paid overtime from the BFDA is both safe and efficient.

[48] I concur with Mr Neilson’s interpretation that clause 46.10 of the BFDA states that the review of Additional Work Hours payment will not lead to a reduction in this payment. However, I cannot characterise the decision to remove pre paid overtime has any correlation to the departmental and narrow review identified in the BFDA. This decision was taken at the corporate level of BlueScope and has been implemented across the entire organisation – not just in the Plate Mill. I find that clause 46.10 does not apply in this situation.

[49] I find that the consultation in relation to this change has been more than adequate. Ms Fitzgerald testified that this issue was the subject of lengthy and vigorous debate before Vice President Hatcher in the MOA process. BlueScope then discussed the proposal again in mid- October 2015 before its implementation on 10 January 2016.

[50] The fact that the AWU notified a dispute to the FWC on 13 November 2015 is proof that they believed that consultation between the parties had been exhausted but remained unresolved.

[51] In applying the principles of “Golden Cockerel”, I find that BlueScope has sufficiently followed the procedures of the Agreement to overcome any argument of illegality.

[52] The question of fairness is complex in relation to determining the appropriate comparison for assessment.

[53] The proposal to remove the pre-paid overtime component of the annualised salary from the BFDA would be unfair if:

a) staff employees employed in the Blast Furnace continued to receive a pre-paid overtime payment;

b) employees covered by the other departmental agreements continued to receive pre-paid overtime;


c) the BFDA and the Agreement did not allow for any modification of the BFDA except by consent; or

d) BlueScope was proposing to introduce an overtime system that was not in accordance with the provisions of the Agreement.

[54] I agree with the sentiment of the Recommendation of Vice President Hatcher in two respects, namely, that the rescue package of the Port Kembla Steelworks is an emergency situation which has required the implementation of significant financial impediment for employees in order to avoid the closure of the Steelworks and secondly, the need for transparency across all pay levels of the BlueScope staff salary structure in order to dispel the possible perceptions of favourable treatment. To this end, monthly employees should take note of Ms Fitzgerald’s evidence and to work at least a 45 hour week to overcome any possible negative perception.

[55] BlueScope provided the employees with approximately 3 months’ notice of the change. This notice provided employees with more than ample time to re-arrange their financial affairs. The implementation date of 10 January 2016 is appropriate in this circumstance.

[56] Based on the reasoning above, I find that it would be unfair to isolate employees covered by the BFDA from this efficiency proposal. The estimated cost saving of $500,000 per annum provides sufficient justification for its implementation. I cannot find any logical or legal reason why employees who work in the Blast Furnace should be treated any differently to every other BlueScope employee who works at the Port Kembla Steelmill. Employees being paid penalty rates for the actual overtime hours that are worked, in accordance with the Agreement, is a pragmatic and appropriate operational outcome.

[57] The final issue for determination is whether the status quo provisions of clause 35.2.3(k) apply because the proposed change is “significant in nature.”

[58] Whilst I accept that the removal of pre-paid overtime is a change to the way that the Blast Furnace has operated for 20 years (see 35.2.2(c)(i)), I do not accept that defining the term “operation” in this way was the intent of the authors of the Agreement or appropriate in this circumstance. In my view, the term “operation” in this clause refers to the skills and competencies of the employees rather than an incentive payment to eradicate excessive overtime.

[59] I find that the proposed removal of prepaid overtime from the annualised salary calculation in the BFDA is not “significant in nature” as defined by the Agreement.

Conclusion

[60] I find that BlueScope’s removal of the pre-paid overtime component of the annualised salary for employees covered by the BFDA to be safe, efficient, legal and fair and in accordance with the provisions of the Agreement.

[61] The application by the AWU is dismissed.

COMMISSIONER

 1   BlueScope Steel Port Kembla Steel Works Agreement 2012

 2   BlueScope Steel (AIS) Pty Ltd – Port Kembla Steelworks Employees Award 2006

 3   Exhibit JF5

 4   [2015] FWC 527

 5   Exhibit WP1, page 371

 6   PN984 of Transcript

 7   [2014] FWCFB 7447

 8   [2015] FWC 6871

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<Price code C, PR576592>