The Australian Workers' Union v Orica Australia Pty Ltd

[2015] FWC 3035

[2015] FWC 3035

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

The Australian Workers’ Union
v
Orica Australia Pty Ltd
(C2014/8211)

DEPUTY PRESIDENT LAWRENCE SYDNEY, 5 MAY 2015

Alleged dispute about any matters arising under the enterprise agreement and the NES;[s186(6)].

[1] On 12 December 2014 the Australian Workers’ Union (the AWU) filed an application to deal with a dispute in accordance with a dispute settlement procedure pursuant to s.739 of the Fair Work Act 2009 (the Act)

[2] The employer respondent was Orica Australia Pty Ltd (Orica) which operates a chemical manufacturing facility on Kooragang Island in Newcastle, New South Wales. The factory manufactures ammonium nitrate, amongst other things, which is a dangerous substance. Its main market is the mining industry.

[3] The relevant agreement is the Orica Australia Pty Ltd Kooragang Island Enterprise Agreement 2014 [AE408818] (the Agreement).

[4] The AWU claimed that Orica had breached the Agreement, particularly clause 33.4 “Employment Levels”. On 17 November 2014, Orica sent employees a letter proposing to reduce employment levels from six to five employees per shift in the Ammonium Nitrate operations (AN) commencing 20 December 2014. Discussions took place during December but no agreement was reached. It was also alleged that Orica had failed to consult, in accordance with the Agreement, because the change was announced as a “fait accompli”.

Relevant Agreement Provisions

[5] The Agreement was certified on 27 June 2014 and operates until 4 July 2018. The CEPU and AMWU are also covered by the Agreement but only the AWU participated in the proceedings.

[6] Relevant clauses are:

“8 CONSULTATION

Where the Company has made a decision to introduce major change including to the regular roster or ordinary hours of work of Employees or terminations, before any action is taken for reasons of economic, technological, structural or similar nature, the Company must consult and communicate with the affected Employees.

Employees may be represented for the purposes of this consultation, including by the Union.

In relation to termination the Company must comply with Clause 10 of this Agreement - Termination of Employment.

In relation to introduction of major change, the Company must:

• provide the Employees in good time the relevant information about the nature of the intended major change, the expected effects on Employees and measures to avert or mitigate the adverse effects of such change; and



• give the Employees, as early as possible, an opportunity for consultation on the method and timing of the change as well as giving prompt (and when requested, written) consideration to matters raised by Employees (including any impact in relation to their family or caring responsibilities).

For the purposes of this clause:

• major changes in production, organisation, work allocation, including to the regular roster or ordinary hours of work of Employees, shift arrangements or technology that are likely to have significant effects on Employees.



• Significant effects includes termination of employment, major changes to the Employee group in the composition, operation or size of the workforce or skills level, change in job or promotion opportunities or job tenure, alteration of hours of work or income, including to the regular roster or ordinary hours of work of Employees, needs for retraining, transfer or restructuring of jobs.

9 DISPUTES HANDLING PROCEDURE

Disputes arising from the operation of this Agreement and/or the NES will be dealt with on all occasions in accordance with the following procedure. As soon as is practicable after the dispute has arisen, the Employee, group of Employees concerned and/or a representative, will take the matter up with their immediate Supervisor affording the opportunity to remedy the cause of the dispute.

Where any such attempt at settlement has failed, or where the dispute is of such nature that a direct discussion between the Employee and their immediate Supervisor would be inappropriate or uncomfortable, the Employee/s shall take the matter up with the Company or a representative of the Company. The Employee/s may elect to be accompanied by their representative.

The Company will reply within twenty four (24) hours. If the matter remains unresolved, the dispute may be referred by either party to the FWC for assistance in resolving the matter via conciliation. If conciliation does not resolve the matter, the Company or the Employee/s or their appointed representative to the dispute may:

a) ask the Fair Work Commission to settle the dispute using its powers under the Act as may be amended from time to time including, for example, by expressing an opinion, making a recommendation, mediation or if the FWC is satisfied that all other avenues are exhausted, by arbitration; or

b) by agreement, appoint an independent person to settle the dispute using any of the methods otherwise available to the FWC under the Act.

In relation to any decision of the FWC pursuant to (a), leave is reserved for either party to appeal to a Full Bench of the FWC.

Without prejudice to any party, work will continue as normal while the matter/s in dispute are being dealt with.

20 HOURS OF WORK

20.1 Hours of work will be determined by the Company following consultation with Employees in each section or plant taking due account of the needs of the business, provided that an average of thirty-eight hours per week will be worked over a fifty-two week period. . . .

20.6 Work pattern and/or shift rosters, including starting and finishing times may be varied to suit the requirements of the plant or sections of the plant. These can be altered following consultation and being guided by Occupational Health and Safety considerations.

32 REDUNDANCY

Where the Company has made a definite decision regarding redundancy, the Company will, as soon as practicable, hold discussions with Employees directly affected and any representative of their choice. The discussions will cover reasons for termination and measures (e.g. retraining) taken to avoid or minimise the termination/s.

The Company will make every effort to give Employees adequate notice of redundancy. During the period of notice, an employee will be allowed up to five (5) days time off without loss of pay, for the purpose of seeking other employment, provided a minimum of four (4) hours is taken on each occasion.

The Company reserves the right to retain those Employees it considers have special skills and/or abilities to satisfy its operating requirements.

33.4 EMPLOYMENT LEVELS

There are no restrictions as to which level a Process Technician can reach within the Grading System, provided they have achieved the required competence. There is one appointed Team Leader per team, provided they have achieved the required competence.

33.4.1 Ammonia Operations

In the Ammonia operating area there are six (6) technicians per team on a five panel roster to fulfil the following shift operating levels:

1 Team Leader or Co-ordinator
1 Control Room Technician
3 Outside Operators (with sufficient skills to cover all outside areas)

There will be two extra Process Technicians per shift to cover work on the plant during start-ups.

33.4.2 AN Operations

In the AN Operations area there are (7) technicians per team on a five panel roster to fulfil the following shift operating levels:

1 Team Leader or Co-ordinator
1 Head Operator (Control Room Technician or Co-ordinator)
1 Control Room Technician
3 Outside Operators (with sufficient skills to cover all outside areas)”

Commission Proceedings

[7] Orica and the AWU reached an agreement before Christmas 2014 to cover the holiday period. At the expiration of that period, Orica proceeded with its proposal to make four positions redundant. Expressions of interest for voluntary redundancies closed on Tuesday, 17 February 2015. The AWU therefore requested its application to be listed. Compulsory redundancies were expected to follow.

[8] The matter was the subject of conciliation proceedings by Commission Stanton in Newcastle on 5 March 2015 and 16 March 2015. No settlement was reached and it was agreed that it would need to be arbitrated.

[9] I conducted a programming teleconference of the parties on 24 March 2015. The matter was set down for hearing in Sydney on 9 and 10 April. Directions were issued for the filing of written submissions and evidence.

[10] Orica had given an undertaking that no redundancy would take effect before the end of the eight week notice period that is, approximately 18 May 2015. In addition, the current staffing levels will be maintained pending the Commission’s decision.

[11] The AWU was represented by Mr A. Gounis and Orica by Mr R. Saunders of counsel.

[12] The AWU relied on oral and written submissions and the witness statement and oral evidence of Mr R. Osland (Exhibit G1), Ammonium Nitrate Process Technician for 12 years at Orica, an AWU delegate.

[13] Orica relied on oral and written submission and the witness statements and oral evidence of:

● Shaun Eltham - Human Resources Operations Manager, Orica (Exhibit S2)

● Paul Hastie - Operations Manager, Orica (Exhibit S3)

The AWU’s Case

[14] The following are the main aspects of the AWU’s case:

● The AWU submits that the employment levels in clause 33.4 for AN must be maintained during the life of the Agreement. The clause has a plain and ordinary meaning which should be relied on. There must be seven technicians per team to fulfil the six shift operating levels, allowing for annual leave.

● Employment levels are not limited to a point in time. There is no mechanism for changing them.

● In addition to the words of the Agreement, the AWU relies on the surrounding circumstances to argue that the shared intention of the parties was to ensure that the employment levels did not change.

● Orica cannot rely on the consultation term in the Agreement to override the clear terms of clause 33.4.

● The result of negotiations for the Agreement in 2013 was to delete the words: “unless mutually agreed between the parties, shift levels will remain as follows:” as the introductory words in clause 33.4. These words had been in the 2010 Agreement. Orica had then proposed to insert “Currently” as the first word in clause 33.4.2. This was removed as one of the final measures to achieve agreement. The AWU submits that this is consistent with the objective intention of the parties to maintain the existing employment levels during the term of the Agreement. This is reinforced by Orica’s alleged statements that the current levels would continue.

● Mr Osland gave detailed evidence as to the conduct of the negotiations for the Agreement which consisted of over 50 negotiation meetings. He said that Orica representatives had not stated the employment levels might change during the life of the Agreement. Indeed, assurances to the contrary had been given. His statement attaches relevant bargaining documents and communications (Exhibit G1). It is clear that the AWU’s claim was to increase the staffing levels from those contained in clause 33.4.2

● The AWU submits that Orica would need to vary the Agreement in order to change the staffing levels during its term.

● The AWU, further relies on the fact that there is no mechanism in the Agreement to change the staffing levels.

● The AWU seeks an order that the staffing levels in AN be maintained and that the redundancy notices be rescinded.

Orica’s Case

[15] The following are the main aspects of Orica’s case:

● Orica submits that in the absence of some prohibition in the Agreement, it has a right to restructure its workforce in response to a change in operational requirements, provided it consults with relevant employees.

● Unlike the 2010 Agreement, there is no term of the 2014 Agreement which prevents changes to the number and level of employees in AN. The agreement to remove the veto that the AWU and employees previously had, which occurred relatively early in the negotiations, was the crucial factor.

● Clause 33.4, in Orica’s submission, describes the number of employees in the AN area at the time the Agreement was made. It sits within a clause that describes in detail the duties, training and skill development of employees in the AN area. There are similar clauses in respect of other sections of the plant.

● Orica relies on clauses 8, 20.1, 20.6 and 32 which have been set out above, in support of its ability to make the changes sought.

● In Orica’s submission, the evidence of the negotiations does not reveal a common intention of the parties. It is clear, however, that the Agreement was negotiated as the mining industry was turning down. This created considerable uncertainty for the Kooragang Island plant. Orica wanted to keep its options open so that it could respond to changes in circumstances.

● Orica rejects the AWU’s argument that the use of the word “are” in clause 33.4.2 means that the staffing levels cannot change in the future.

● Orica further submits that the word “level” in clause 33.4 does not refer to the number of employees but rather the grade/skill level of employees.

● Removal of the proposed word “Currently” during the negotiations did not alter the fact that the previous veto had been removed and that the Agreement simply stated the staffing levels as at the making of the Agreement.

● Mr Eltham gave detailed evidence of the conduct of the negotiations from Orica’s viewpoint. His priority was to maintain flexibility into the future. Eventually, Orica agreed to remove “Currently” from the draft agreement because it was not necessary, given that the removal of the veto as contained in the 2010 Agreement achieved the desired result.

● In October there was a transformation directive from senior management. This was designed to respond to changes in the mining industry. This led to the decision to downsize the “AN2 Dry Section” of the plant which had become under-utilised. The interim agreement for January 2015 involved the reduction of annual leave balances. Mr Eltham summarised the extensive process of negotiation that occurred during January. The net result of the reduction of staffing from six to five on each shift, following transfers, is to be two employees to be made redundant.

● Finally, Orica submits that even if the AWU’s construction of the Agreement is correct, it maintains its right to make jobs redundant for operational reasons pursuant to the other terms of the Agreement.

Arbitration of Disputes under Agreements

[16] There was no major issue, in this case, about the Commission’s power to arbitrate to settle this dispute. That power arises from a combination of clause 9 of the Agreement and s.738(b) and s.739(4) of the Act. Following are the relevant sections of the Act:

“738 Application of this Division

This Division applies if:
. . .

(b) an enterprise agreement includes a term that provides a procedure for dealing with disputes, including a term referred to in subsection 186(6);”

“739 Disputes dealt with by the FWC

. . .

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

[17] The Commission can only arbitrate to settle a dispute if the enterprise agreement contains a dispute settlement clause which provides for arbitration by the Commission to settle disputes. Clause 9 of the Agreement is drafted in broad terms and provides, on its face, the Commission with the power to arbitrate to settle disputes between the parties.

[18] Section 595 further relevantly provides:

“595 FWC’s power to deal with disputes

(1) The FWC may deal with a dispute only if the FWC is expresslyauthorised to do so under or in accordance with another provision of this Act.

(2) The FWC may deal with a dispute (other than by arbitration) as it considers appropriate, including in the following ways:

(a) by mediation or conciliation;
(b) by making a recommendation or expressing an opinion.

(3) The FWC may deal with a dispute by arbitration (including by making any orders it considers appropriate) only if the FWC is expresslyauthorised to do so under or in accordance with another provision of this Act.

Example: Parties may consent to the FWC arbitrating a bargaining dispute (see subsection 240(4)).

(4) In dealing with a dispute, the FWC may exercise any powers it has under this Subdivision.
Example: The FWC could direct a person to attend a conference under section 592.

(5) To avoid doubt, the FWC must not exercise the power referred to in subsection (3) in relation to a matter before the FWC except as authorised by this section.”

[19] The FW Act, being based on the legislative foundation of the Corporations Power, continues the restriction of the Commission’s arbitral function to where the parties have agreed to provide for it as a term of their agreement.

[20] In Construction Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2000) 203 CLR 645 the High Court stated:

“Where parties agree to submit their differences the decision by a third party, the decision maker does not exercise of judicial power, but a power of private arbitration. Of its nature, judicial power is a power that is exercised independently of the consent of the person against whom the proceedings are brought and results in the judgement or order that is binding of its own force. In the case of private arbitration, however, the arbitrator’s powers depend on the agreement of the parties, usually embodied in a contract, and the arbitrators award is not binding of its own force. Rather, its effect, if any, depends on the law which operates with respect to it.”

[21] Section 170WL of the Workplace Relations Act 1996 (the WR Act) provided for the Commission to exercise powers under an agreement “to settle disputes over the application of the agreement”. The Commission has made it clear that it must properly characterise the nature of the dispute in arbitrating. See Maritime Union of Australia v Australian Plant Service Pty Ltd (PR908236). However, the Commission also took the view that the expression should not be narrowly construed. See Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Holden Limited (PR944673).

[22] Sections 738, 739 and 595 of the FW Act do not contain the words quoted above. The reference is to “disputes” only. It is true that many, perhaps, most agreements contain words of limitation. Analysis of the terms of the agreement is necessary. See, for example, a recent decision of Lee C in Australian Workers’ Union v Barminco Pty Ltd[2014] FWC 1954.”

[23] The nature of the Commission’s power to determine a dispute by arbitration derives from the terms of the dispute settlement clause. However, in the exercise of that power it has a broad power, pursuant to s.595, to settle the dispute by making orders that it considers appropriate.

[24] The task for the Commission is to make a finding as to how the relevant clauses in the Agreement are to be applied in the future. It is not a declaration about past rights or past compliance with the agreement by the employer. That would be a matter to be considered by a competent court.

[25] The Agreement in this case provides for arbitration about disputes that arise out of the operation of the Agreement or the National Employment Standards (NES). There is no doubt that the operation of the Employment Levels, clause 33.4, is such an issue.

The Commission’s Approach to the Construction of Agreements

[26] The 2014 Full Bench decision in Australian Meat Industry Employees Union v Golden Cockerel Pty Ltd (2014) FWCFB 7447 (Golden Cockerel) sets out the Commission’s approach to the interpretation of agreements. I set out below the relevant passages which refer to the relevant authorities:

“General Approach

19. The general approach to the construction of instruments of the kind at issue here is set out in the judgment of French J, as he then was, in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (2006) 153 IR 426 (Wanneroo):

“The construction of an award, like that of a statute, begins with a consideration of the ordinary meaning of its words. As with the task of statutory construction regard must be paid to the context and purpose of the provision or expression being construed. Context may appear from the text of the instrument taken as a whole, its arrangement and the place in it of the provision under construction. It is not confined to the words of the relevant Act or instrument surrounding the expression to be construed. It may extend to ‘...the entire document of which it is a part or to other documents with which there is an association’. It may also include ‘... ideas that gave rise to an expression in a document from which it has been taken’ - Short v FW Hercus Pty Ltd (1993) 40 FCR 511 at 518 (Burchett J); Australian Municipal, Clerical and Services union v Treasurer of the Commonwealth of Australia (1998)80 IR 345 (Marshall J). ” (Wanneroo)

20. To this we add the oft-quoted observations of Madgwick J in Kucks v CSR Limited (1996) 66 IR 182 (Kucks) that a narrow pedantic approach to interpretation should be avoided, a search of the evident purpose is permissible and meanings which avoid inconvenience or injustice may reasonably be strained for, but:

“. . . the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.”    (Kucks)

21. Although their Honours were each dealing with the proper interpretation of an award, the same principles are apt to apply to the interpretation of enterprise agreements. See: Swire Cold Storage Pty Ltd v TWU [2008] AIRCFB 397 at [29] and AMWU v Silcar Pty Ltd[2011] FWAFB 2555 at [11] For example, similar observations were made in Amcor Limited v CFMEU.(2005) 222 CLR 241 (Amcor):

“Clause 55.1.1 must be read in context. It is necessary, therefore, to have regard not only to the text of cl 55.1.1, but also to a number of other matters: first, the other provisions made by cl 55; secondly, the text and operation of the Agreement both as a whole and by reference to other particular provisions made by it; and, thirdly, the legislative background against which the Agreement was made and in which it was to operate.” (Amcor) at 253 per Gummow, Hayne and Heydon JJ

22. The fact that the instrument being construed is an enterprise agreement is itself an important contextual consideration. As French J observed in Wanneroo:

“It is of course necessary, in the construction of an award, to remember, as a contextual consideration, that it is an award under consideration. Its words must not be interpreted in a vacuum divorced from industrial realities - City of Wanneroo v Holmes (1989) 30 IR 362 at 378-379 and cases there cited. There is a long tradition of generous construction over a strictly literal approach where industrial awards are concerned - see eg GeorgeA Bond and Co Ltd (in liq) v McKenzie [1929] AR (NSW) 498 at 503-504 (Street J). It may be that this means no more than that courts and tribunals will not make too much of infelicitous expression in the drafting of an award nor be astute to discern absurdity or illogicality or apparent inconsistencies. But while fractured and illogical prose may be met by a generous and liberal approach to construction, I repeat what I said in City of Wanneroo v Holmes (at 380):

“Awards, whether made by consent or otherwise, should make sense according to the basic conventions of the English language. They bind the parties on pain of pecuniary penalties.” (2006) 153 IR 426 at 440

Use of extrinsic material as an aide to interpretation

23. As is often the case in disputes that involve the construction of an enterprise agreement, parties will seek to place reliance of a variety of extrinsic material as an aide to interpreting the provisions of an agreement in issue. The use to which extrinsic material of the surrounding circumstances may be put to assist in the interpretation of an instrument is set out in the judgement of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337(Codelfa). In Codelfa his Honour said:

“The true rule is that evidence of surrounding circumstances 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.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.” (Codelfa) at 352

[27] The Full Bench then dealt in some detail with subsequent cases which took varying approaches to the determination of an ambiguity. It went on to conclude as follows:

“30. Regard may therefore be had to evidence of the surrounding circumstances before the existence of ambiguity in an agreement is identified as an aide to interpreting the agreement for the purposes of determining whether an ambiguity exists. If thereafter ambiguity is not identified extrinsic material cannot be used to contradict the language of the instrument. If ambiguity is identified the material may be used as contextual material to aide in the interpretation of the instrument. In this context we would make the observation that the law in relation to the interpretation of commercial contracts (Codelfa; Metcash and Stratton) has now aligned with the approach to the construction of awards and enterprise agreements as espoused by Burchett J in Short v FW Hercus Pty Ltd (1993) 40 FCR 511 at 518 and confirmed by French J, as he then was, in Wanneroo.

Application of the Acts Interpretation Act 1901 to enterprise agreements approved under the Act

31. Both at first instance and before us the Appellant maintained that the Agreement must be interpreted in accordance with the Acts Interpretation Act 1901 (AI Act). (AB268-AB271 and Transcript PN271-PN280) That proposition is made on the basis that an enterprise agreement is an agreement that is made by the Commission pursuant to a power conferred by the Act to make the agreement. (See Section 46 of the AI Act) To make good the proposition the Appellant at first instance relied on the following passage from the judgement of French J in Wanneroo:

“The interpretation of legislative instruments is dealt with in the Legislative Instruments Act 2003 (Cth). Awards and agreements made under the Act are declared, by s 7(1) of the Legislative Instruments Act, not to be legislative instruments – see Item 18 in the table set out in s 7(1). This leaves such awards and agreements within s 46 of the Acts Interpretation Act 1901 (Cth) which provides, inter alia:

‘(1) If a provision confers on an authority the power to make an instrument that is neither a legislative instrument within the meaning of the Legislative Instruments Act 2003 nor a rule of court, then, unless the contrary intention appears:

(a) this Act applies to any instrument so made as if it were an Act and as if each provision of the instrument were a section of an Act; and

(b) expressions used in any instrument so made have the same meaning as in the enabling legislation; and

(c) any instrument so made is to be read and construed subject to the enabling legislation, and so as not to exceed the power of the authority.

An award is an instrument made by an authority, in this case the Australian Industrial Relations Commission, and so attracts the application of the Acts Interpretation Act for the purposes of its interpretation.” (2006) 153 IR 426 at 438 [52]

32. The decision in Wanneroo does not support the proposition contended by the Appellant. In Wanneroo Justice French was concerned with the construction of an award under the Workplace Relations Act 1996 (WR Act) and not an enterprise agreement made under the Act. Relevantly, the award in question was an instrument that was not a legislative instrument but was an instrument made by the Australian Industrial Relations Commission pursuant to a power under the WR Act to make the instrument. Consequently French J concluded that the award was “an instrument made by an authority, in this case the Australian Industrial Relations Commission, and so attracts the application of the Acts Interpretation Act (AI Act) for the purposes of its interpretation.”

[28] The Full Bench, having dealt with s.172 of the Act, which contains the requirement for an agreement to be made about permitted matters (pertaining to the relationship between the employer and the employer’s employees) summarised its conclusions as follows:

“Summary

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 aid 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.”

[29] I have applied the principles summarised above in this decision.

Conclusion

[30] Applying the Golden Cockerel principles, it appears to me that there is an ambiguity in clause 33.4. The ambiguity arises not just from the wording of the clause but the fact that the sections of the Agreement, which deal with specific areas of the plant, contained in clauses 33 to 36, are not internally related, in their drafting, to the rest of the Agreement.

[31] Nevertheless, evidence of the surrounding circumstances will assist in the interpretation of the Agreement. This is particularly the case in relation to the negotiation of the Agreement and the change in wording from the 2010 Agreement.

[32] The difference is made clear from the following extracts from Mr Osland’s evidence:

“[PN163] I want to suggest to you that at no time during the bargaining meetings did anyone from Orica say words to the effect of:  “The manning levels would not change in the nitrates department.”  What do you say to that?---Disagree.

[164] Do you have a clear recollection of someone saying that?---Yes, it has come up several different times and it was brought up by Paul Edwards.  It was brought up by Shaun.  It was brought up by Scott Reid in different meetings at different times and they guaranteed us.  They gave us assurances and that is why we were sort of looking at “currently” and I think that is why eventually they took “currently” out because they did not want to take - affect our manning levels.  They gave us assurances to that.  The only thing they wanted to change and where they were going to make all their money and make all their adjustments and streamline their processes and whatever, was through us changing roster.

[PN165] So you say you have got a good recollection, do you, that Orica bargaining representatives said words to the effect that the manning levels would not change in the nitrates department?---Yes, yes, it’s - I never, ever, walked out of a meeting thinking they were going to change our manning levels; not once.

[PN166] I want to suggest to you, you walked out of the meeting with that understanding because you were told by the Orica bargaining representatives that they had no intention at that time of changing manning levels?---No, I tend to disagree.  They never said that.

. . .

[PN177] So what they have said to you is they had no intention of changing manning levels.  That is what you have just told us, haven’t you?---Yes, I suppose that is what I just told you if that is what I just said, yes.

[PN178] You understand the difference between saying, “We have got no intention of changing manning levels on the one hand,” and saying on the other hand, “Manning levels will never be changed or will not be changed during the term of the agreement”?---I understand what you are saying there now, but the intent of how it was delivered to me at the time and delivered to us as a bargaining group was:  “We are not attacking your manning levels.  All we want youse to do for us is to change rosters.”

[PN179] Your understanding of that intent is based on the fact that the Orica bargaining representatives said to you that they had no intention of changing manning levels?---Well, yes.

[PN180] Did you take a note of any of these statements by any of these Orica representatives about changing manning levels?---I don’t know if we ever wrote it down as such.  But, I mean, as I say, I never walked out of a meeting thinking I had to go back to the people who I represented and tell them that basically they want us to change our manning levels.  So if that would have - if that would have come up, that would have been a major issue and I would have took that back to our guys.  So obviously it never ever came up as a concern that this was going to happen, otherwise it would have been something major that I would have had to take back to the shop floor, as they say.”

[33] Mr Osland also gave the following evidence about the implications of the removal of the 2010 Agreement veto provision from the drafts of the Agreement during 2013 in response to questions from me:

“[PN248] Just one final question just about the negotiations.  It seems to be uncontested that the company proposed removing the veto really that employees had to change the manning levels; is that right?---To have any common say in it, is that what - is that what you are asking, sorry?

[PN249] The previous agreement seemed to say that these things couldn’t be changed without the agreement of employees?---Through mutual agreement, yes.

[PN250] So that was proposed to be removed, is that right?---Yes, and that had to - right from very early in the piece, your Honour, it was stated that the company said that it had to be removed from the whole document, everywhere that “mutual agreement” was removed and it was removed from common areas and that first and then slowly, as the negotiations went along, it eventually got removed from everywhere.

[PN251] So what was your understanding of the significance of that and what did that mean?---I didn’t - the significance probably didn’t hit me as much as what it is hitting me today, to be totally honest, because I was always under the impression that it wasn’t removed from the fact that they wanted to change the manning levels.  It was just removed because the new people in charge of the company now basically said that they didn’t want “mutually agreed” in the document and that is the way it was sort of put to us in the start.”

[34] On the other hand, Mr Eltham gave the following evidence:

“[PN421] MR GOUNIS:  You agree, don’t you, that the employer bargaining representative statements that it did not intend to change manning levels was in response to employee concerns that the employer could change the manning levels based on the draft with the word “currently” in it.  That is right, isn’t it?---My recollection is that the employees were concerned about the removal of “mutual agreement” and that was what their concern was about.  From my perspective, the word “currently” was put into the document to ensure clarity around what is expected.
. . .

[PN426]  Continue?---So from our perspective that word “currently” at this particular point of the negotiation towards the very end didn’t reference or didn’t play a role in the significance of the removal of “mutual agreement.”  The removal of “mutual agreement” was the key element to enable us to do these things at some point in time, albeit the intent at the time of the negotiation was to not change the numbers.

[PN427] But the change to include the word “currently” happened in exactly the same draft, didn’t it, that “mutual agreement” was removed?---That is correct and that was to ensure the clarity around what that particular element of that clause meant.  I think I used the words “abundantly clear.”  We needed to make everyone aware of what it meant.

[PN428] But you didn’t state, did you, that another employer bargaining representative states that Orica could change the manning levels in nitrates during the agreement that was being negotiated, did you?---I did not.

[PN429] You don’t recall other employer bargaining representatives making statements to this effect, do you?---I do not recall.

[PN430] Your evidence is that you attended every bargaining meeting for the agreement.  That is right, isn’t it?---That is correct.

[PN431] In relation to “mutual agreement” under the 2010 agreement, it was your understanding that either the employees or Orica could seek changes to the employment levels.  That is right, isn’t it?---Under the 2010 agreement.

[PN432] That is right; the prior agreement?---So using “mutual agreement” you could change numbers.

[PN433] That is correct, and the employees could make a claim to change employment levels which Orica couldn’t unreasonably refuse.  That is right, isn’t it?---That is correct.

[PN434] During negotiations for the agreement, Orica knew that employees wanted an additional employee on each shift in nitrates.  That is right, isn’t it?---The claim was for seven employees and an additional POC operator, from my recollection.

[PN435] If “mutual agreement” had remained in the 2014 agreement, the employees could have made a claim for an additional POC employee or indeed other employee and Orica couldn’t unreasonably refuse that request.  That is right, isn’t it?---That sounds about right.

[PN436] I referred earlier to the draft agreement with comments dated 24 March 2014.  Do you agree that the bargaining for the agreement was close to being agreed principle at this stage, wasn’t it?---Correct.  We were down to drafting meetings or predominantly drafting meetings at this stage.

[PN437] You and other bargaining representatives knew from employee statements during the negotiations about the concerns of the employer being able to change employment levels in nitrates, didn’t you?---It wasn’t - for me it wasn’t a specific - specific concern.

[438] But you understood that it was a concern for the employees, didn’t you?---I can interpret from this particular document, which is the draft I understand we are referring to, that that was a concern.

[PN439] It wasn’t just from that draft, was it?  The employees repeatedly during bargaining meetings raised the issue that they were concerned that the word “currently” meant that the employer could change the manning levels during the agreement.  That is right, isn’t it?---I recall on a number of occasions discussions about it were not going anywhere and the item was parked.

[PN440] During those discussions, the employees identified their concerns about the word “currently” and the draft clause, didn’t they?---Well, they have in this particular document that we are referring to.

[PN441] I am referring to negotiations prior to this document.  So between 14 June 2013 and 24 March 2014.  Employees raised their concerns that the word “currently” might mean that the company could change the manning levels in the agreement and they sought to have that issue resolved, didn’t they?---I do not recall it being a significant discussion point, discussion topic at the time.  A lot of our focus around that time was on the nitrates rostering arrangements.  Yes, I don’t recall it being a significant issue that warranted a significant discussion at the time.

[PN442] Is it your recollection that in response to employees raising these concerns employer bargaining representatives stated that the manning levels wouldn’t change.  That is right, isn’t it?---No, that is not right.

[PN443] Is the position that the employer bargaining representatives didn’t make any statements in response, is that correct?---They may have made statements but not a statement that said it would not change.  That is absolutely incorrect.”

[35] Generally speaking, employers covered by agreements, have a right to implement change in staffing levels, hours and rosters etc to deal with the demands of changed economic circumstances provided that they consult and there are no express provisions in the relevant agreement which prohibits them making the change.

[36] The Full Bench in “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) v Silcar Pty Ltd[2011] FWAFB 2555 expressed this proposition as follows:

“[13] The opening words of clause 10(b) of the 2004 Agreement suggest that the parties intended to achieve continuity in the operation of shift work for maintenance personnel when the maintenance function was outsourced from BlueScope to Silcar. This draws attention to the prior shift arrangements for maintenance personnel at the Western Port site when the maintenance function was still performed by BlueScope employees. There was no evidence before the Senior Deputy President suggesting that BlueScope was constrained by any agreement or other binding instrument in relation to its capacity to move employees between crews. That is what may be described as the ‘usual’ state of affairs. That is, in the absence of any term of a binding industrial instrument that prevents an employer from making changes to shift arrangements, an employer has a managerial prerogative to alter both the pattern and structure of shifts and the particular shift worked by an employee. It is more likely than not that BlueScope had retained the capacity to move employees to a different crew/shift on the roster. Mr Terzic, to his credit, took instructions and acknowledged during the hearing of the appeal that while most such changes had been done by agreement with the consultative committee there were some such changes that were effected by BlueScope at its own initiative and without the agreement of the committee. If, as we are satisfied, it was the intention of the parties, objectively determined, that the 2004 Agreement effect a continuation of the roster arrangements that obtained when the relevant work was done by direct employees of BlueScope, Silcar would have retained a capacity to move employees between crews/shifts without the approval of the consultative committee.”

[37] The evidence is clear that Orica approached the negotiations with the aim of removing the provision from the 2010 Agreement whereby changes in staffing levels in AN could be vetoed by the AWU and employees. The Union objected to that and, indeed, wanted to increase the staffing levels. This was but one issue in contested negotiations involving many meetings, protected industrial action and one failed vote before the Agreement was finally approved by employees at the end of April 2014.

[38] It was agreed, fairly early in the negotiations, that the veto words would be removed. The AWU and the employees did not appreciate the significance of this change. Orica had inserted “Currently” into the draft of clause 33.4.2 to give support to its position that its options needed to be kept open. The focus from the AWU’s negotiators came onto that word. It was removed as one of the final steps necessary to have the Agreement approved.

[39] I accept that Orica sought the removal of the veto words because it was aware that it may need to implement change as a result of the downturn in the mining industry. It could have been more forthright in negotiations. However, it is a common approach for a party to say that it has “no intention/plan” to do something whilst reserving the right to do it if circumstances require. Such a position is different to an absolute commitment not to do something.

[40] I cannot accept the AWU’s argument that the word “are” in clause 33.4.2 means that the staffing levels can never be changed during the terms of the Agreement. The Agreement must be read as a whole. Orica has a right to implement change in accordance with clauses 8, 9, 20 and 32.

[41] In short, once the veto words were removed, Orica could implement changes provided that it complied with the other provisions of the Agreement.

[42] I find that it did consult on the restructuring in accordance with clause 8 of the Agreement extensively in late 2014 and early 2015. The final decision to restructure was made in January 2015.

[43] Orica argued that the word “levels” in clause 33.4 referred to grades/skill levels. I am not convinced that this is the case. The heading, in my view, deals with both numbers and grades/skill levels. The clause itself certainly deals with numbers. In any event, the question is whether those numbers can be changed in accordance with the other provisions of the Agreement. I am satisfied that they can be changed and Orica has acted in accordance with the Agreement to do so.

Summary

[44] I am satisfied that the Agreement, interpreted as a whole, in accordance with the principles summarised by the Full Bench in Golden Cockerel, allows Orica to restructure provided it complies with the consultation and other provisions of the Agreement. I am satisfied it has done so.

[45] Accordingly, the application by the AWU is dismissed.

DEPUTY PRESIDENT

Appearances:

A. Gounis with J. Boyd for the AWU;

T. Saunders of counsel with A. Mansini for the Respondent.

Hearing details:

2015

Sydney:

March 24 (Telephone conference);

April 9, 10.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR566967>