The Australian Workers' Union v SGS Australia Pty Ltd

[2014] FWC 8855

[2014] FWC 8855

FAIR WORK COMMISSION

DECISION

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

The Australian Workers' Union
v
SGS Australia Pty Ltd
(C2014/6068)

SENIOR DEPUTY PRESIDENT DRAKE SYDNEY, 15 DECEMBER 2014

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

[1] This decision arises from a notification pursuant to s 739 of the Fair Work Act 2009 (the Act) and the SGS Newcastle Enterprise Agreement 2013 (the Agreement). The dispute notification was lodged by the Australian Workers’ Union (AWU) against SGS Australia Pty Ltd (SGS). The issue in dispute has been long unresolved.

[2] I heard this application in Newcastle on 9 October 2014. The AWU was represented by Mr Crawford and Mr Boyd. SGS was represented by Mr Barkatsas from the Victorian Employers’ Chamber of Commerce and Industry (VECCI). The notification is extracted below:

“4. What is this dispute about?

Background

1. The Respondent performs inspection, verification, testing and certification services.

2. The Respondent has a site in Mayfield West where a number of members of the Applicant are employed, including Mr Charles Cowper. Mr Cowper is employed as a Supervising Sampler.

3. The SGS Newcastle Enterprise Agreement 2013 AE404980 (the Agreement) is expressed to cover coal sampling and laboratory employees, supervisors, administration staff and project specialists in the SGS Energy Minerals division who work at the Mayfield West site.

4. On this basis, the Agreement applies to the Applicant, the Respondent and Mr Cowper.

------

7. Relief sought

1. A determination that the Respondent has acted contrary to clause 21.1 (d) of the Agreement by taking cost factors into account when assessing whether Mr Cowper is a proper candidate for voluntary redundancy.

2. A determination that Mr Cowper is a proper candidate for voluntary redundancy when the criteria in clause 21.1(d) of the Agreement are properly applied.

3. A determination that the Respondent must accept Mr Cowper’s application for voluntary redundancy in these circumstances.”

Jurisdiction

[3] Mr Barkatsas submitted that the Commission was not in a position to question the operational decisions of SGS management. That issue was dealt with in my previous decision and, as I understand the position of the parties, the proposition was not contentious.

[4] SGS have previously sought a determination as to what obligations were imposed by clause 21.1 of the Agreement in relation to voluntary redundancies. It was extensively canvassed in earlier notifications before Commissioner Stanton and, when he considered himself conflicted, a previous notification was referred to me for decision. 1 My conclusion in that decision is set out below:

“11. There is no doubt that redundancies were inevitable at SGS. There was consultation. Reductions as required could not be achieved by natural attrition.

12. In the absence of natural attrition producing the required solution, either in total or in part, SGS is required to apply the designated criteria being relevant skills, attendance, length of service, competence and performance in selecting employees who have applied for voluntary redundancy or those to be selected for forced redundancy.

13. I am satisfied that SGS has an absolute discretion to decide what operational requirements are necessary to enable it to continue to operate as it prefers. Against that background and when deciding which employees are necessary and must be retained to achieve that agenda, it must consider relevant skills, attendance, length of service, competence and performance. It does not have to accept a volunteer if, after considering these factors, accepting that volunteer as a redundant employee would result in it not meeting its operational requirements. Despite this discretion, SGS must make this decision in the context of its operational requirements and on the criteria set out in the Agreement. These criteria must be considered. When these criteria are considered, and an applicant for voluntary redundancy would in all other respects be an appropriate candidate, that outcome cannot be ignored because of the expense of paying his or her entitlements.

14. The AWU allege that, in recent years, Mr Cowper has been required to take extended leave to have a pacemaker fitted. During that leave he was replaced in his role by another employee. Since Mr Cowper has returned to work both he and the replacement employee have continued to perform essentially the same roles. The AWU submitted that this duplication was unnecessary.

15. If Mr Cowper is not a proper candidate for voluntary redundancy on the application of the criteria, taking into account operational requirements, his application for voluntary redundancy does not have to be accepted.

16. I will list this application for further mention and directions.” 2

[5] Mr Barkatsas submitted that I must first be satisfied that the Agreement confers power upon the Fair Work Commission (the Commission) to hear the application brought by the AWU.

[6] Clause 21, the Redundancy Clause of the Agreement, is as follows:

"21.1 The employer will explore all reasonable options available to avoid or reduce redundancies. However if redundancies are inevitable the following must be considered:

(a) In the first instance, the employer will consult with employees as per clause 10.2
(b) If the reduction can be achieved by natural attrition
(c) Voluntary redundancies
(d) The criteria to apply in the selection of employees to be made redundant where natural attrition is not the solution, or not the total solution, will include relevant skills, attendance, length of service, competence and performance
(e) In the event that redundancies are required, the company shall notify employees and the Union as soon as possible ------”

[7] Clause 11, the Dispute Resolution Clause of the Agreement, is as follows:

“11.1 In the event of a dispute in relation to a matter arising under this agreement, or a dispute in relation to the NES, or any other work related matter (including a dispute about whether a workplace right has been breached) in the first instance the parties will attempt to resolve the matter at the workplace by discussions between the employee or employees concerned and the relevant supervisor. If such discussions do not resolve the dispute, the parties will endeavour to resolve the dispute in a timely manner by discussions between the employee or employees concerned and human resources together with more senior levels of management as appropriate.

11.2 If a dispute about a matter arising under this agreement or a dispute in relation to the NES is unable to be resolved at the workplace, and all appropriate steps under clause 11.1 have been taken, a party to the dispute may refer the dispute to the Fair Work Commission.” 3

(my emphasis)

[8] Mr Barkatsas submitted that the Agreement did not authorise the Commission to resolve the dispute notified by the AWU;

“10. The power to ‘refer’ a dispute to the Commission, we respectfully submit, is not as broad as the above scope. Clause 11.2 intentionally uses different words to characterise the nature of the dispute which can be referred to the Commission to resolve - namely and impliedly - only those disputes which ‘aris[e] under [the] agreement or a dispute in relation to the NES...

11. The Applicant (Sic) respectfully submits the Commission must be satisfied the current dispute, properly characterised, is a ‘matter arising’ under the Agreement.” 4

(my emphasis)

[9] In summary, Mr Barkatsas submitted that because clause 11.2 does not repeat the words "...any other work related matter (including a dispute about whether a workplace right has been breached)" which were used in clause 11.1, the Commission is not authorised to arbitrate in relation to matters within that description. (My emphasis)

[10] I am not persuaded by Mr Barkatsas’ argument that a correct reading of clause 11.2 of the Agreement precludes the Commission from hearing this notification. I am satisfied that the language of clause 11.1 and 11.2 is inclusive and that clause 11.2 is intended to refer to all matters set out in clause 11.1. The matters referred to in clause 11.1 are intended to be the subject of clause 11.2.

[11] However, I do not have to resolve this issue because I am persuaded that the notification lodged by the AWU pertains to a ‘matter arising’ under the Agreement and the Commission has jurisdiction to hear this notification. I am satisfied and find that the application of clause 21 of the Agreement is a matter arising under the Agreement.

Background

[12] In this notification the AWU allege that SGS has not appropriately applied clause 21.1 of the Agreement, thereby repeatedly denying an SGS employee, Mr Cowper, voluntary redundancy.

[13] Mr Cowper is 65 years old. He is employed at the SGS Newcastle Mayfield West site as a senior sampling supervisor. The SGS Newcastle site carries out a variety of activities concerning the sampling, preparation and analysis of coal. Mr Cowper’s employment with SGS, and its predecessor, has spanned 31 years.

[14] In November 2013 SGS began one of three restructuring processes. These processes sought to reduce staff numbers by identifying employees suitable for redundancy. These restructures occurred in November 2013, March/April 2014 and August/September 2014.

[15] Mr Cowper volunteered for redundancy on all three occasions and on all three occasions his request was rejected by SGS management.

[16] In refusing Mr Cowper’s redundancy SGS submitted that it relied upon the application of the criteria in clause 21.1 of the Agreement. SGS asserted that Mr Cowper had achieved a very high “skills matrix” score after the criteria stipulated within clause 21.1 of the Agreement were applied and that made him an unsuitable candidate for redundancy. It submitted that there were valid operational reasons for refusing to allow Mr Cowper’s redundancy. It denied that cost considerations were any part of its deliberations.

“Crucially, the respondent’s evidence is that Mr Cowper’s position is required to be performed, and should Mr Cowper be made redundant, the position would need to be backfilled by another staff member.”  5

[17] The AWU rejected the SGS evidence that it had retained Mr Cowper for operational reasons. It submitted that there was no factual basis for that submission. The AWU’s evidence was that Mr Cowper’s role within SGS was not integral. In reply to the operational reasons provided by SGS for the retention the AWU submissions were:

“Mr Cowper is one of the least skilled employees in the prep shed section;
-
Mr Cowper does not perform a formal or informal guidance role for new employees; and
-
All of Mr Cowper’s current duties could be performed by other samplers working in the prep shed.” 6

AWU evidence and submissions

[18] Mr Turnbull gave evidence. Mr Turnbull was the witness with the most direct experience of Mr Cowper, having worked with Mr Cowper since he came over to SGS from Casco, a period of approximately eight years. His evidence was that Mr Cowper had the lowest skill level of all the permanent samplers who work in the prep shed.

“Background

1. I have worked for SGS for the last 23 years.

2. Eight years ago I was appointed supervisor for the prep shed.

3. The prep shed is divided into shipping and bore core sections. I mainly work in the bore core section but also have supervisory responsibilities for the shipping section such as rostering.

Billy Cowper

4. I have worked with Billy Cowper for the last 8 years or so. This is since the time Billy came over to SGS from Casco.

5. Billy has always been a good worker and I get on well with him.

6. However, Billy has the lowest skill level out of all the permanent samplers who work in the prep shed.

7. This is because Billy can only work in the shipping section. He is not qualified to perform the testing work in the bore core section and is not inducted to go out onto ships to collect samples.

8. I estimate that shipping work accounts for only around 20 to 30% of the workload in the prep shed. The majority of work is in the bore core section.

9. All the other permanent samplers are trained to work in the shipping and bore core sections.

10. Out of the roughly 40 tests which we undertake in the prep shed, Billy is only able to perform 6 or 7 of them. The rest of the permanent samplers can perform all 40 tests.

11. The two samplers who were recently made forcibly redundant, Ross Threadgate and Alan Hadfield, could perform all 40 tests in the prep shed and would have better career prospects with SGS given they are much younger than Billy.

12. I am concerned about the decision to let these younger more skilled workers go when they want to keep working for SGS when Billy is there happy to take a redundancy. This decision does not make much operational sense to me.

13. Billy is currently just assisting Max with the supervisor role in the shipping section. Any of the other samplers could perform this role.

14. We have a specialised trainer in the prep shed, Clint Gilby. Clint would generally have responsibility for training new employees.

15. However, there have not been many new employees starting in recent times given the downturn in workload.

16. Billy does not have currently have (sic) any more responsibility for training or mentoring other workers than any of the other samplers in the prep shed.” 7

[19] Mr Stephens gave evidence. He has worked with Mr Cowper since February 2010.

“2. I am employed as a leading hand in prep shed and have been an AWU delegate for the last 3 years.

3. SGS does testing work mostly for coal but also some copper concentrates.

4. The prep shed is divided into two sections: shipping and bore core.

5. We do mostly manual work in the prep shed. This mainly involves loading and unloading coal for crushing and testing processes.

6. The results are then taken to the lab for analysis.

Billy Cowper

7. I have known Billy Cowper throughout my employment with SGS.

8. Billy was the shipping supervisor until he had heart issues a few years ago.

9. Max was promoted to replace Billy as supervisor in the shipping section while he was recovering.

10. When Billy returned to work a few months later, Max remained the shipping supervisor and Billy basically assisted him.

11. Max does not really need an assistant. This is part of the role of a leading hand.

......

32. I’m not aware of Billy training anyone since when I started. I spent a couple of weeks getting trained by Billy.

33. Leading hands have generally done the training since but there have been no permanent new starters for around 4 years.

......

36. Billy can only work in the shipping section of the prep shed.” 8

[20] Mr Cowper’s evidence as to his duties at SGS was as follows:

“5. SGS perform testing services mainly for the coal industry.

6. The Mayfield West site has a prep shed and lab.

7. In the prep shed we basically feed coal and other materials into machinery for crushing, dividing and testing processes.

8. The results from these tests are then analysed in the lab and reports for customers are prepared.

9. I have only ever worked in the prep shed. There are currently around 16 employees in the prep shed.

10. The prep shed is divided into shipping and bore core sections.

11. The shipping section performs testing for ships receiving coal from coal loaders located in Newcastle.

12. The bore core section does testing of materials for mine sites.

13. I have only ever worked in the shipping section. I can only perform four or five of the tests in the bore core section.

14. I currently have the title of supervisor in the shipping section and have had this for a number of years. However, my duties have changed significantly in the last few years.” 9

[21] In 2010 Mr Cowper experienced heart issues whilst at work and subsequently had a pacemaker inserted. His evidence as to the change in his duties following the development of these health issues is as follows:

“15. In 2010 I experienced some heart issues at work and subsequently had a pacemaker inserted.

16. I was off work for around 4 months.

17. Before I had this time off, I was supervisor in the shipping section and Grant Turnbull for the bore core section.

18. However, Grant was above me because he had responsibility for some higher level tasks across both sections such as rostering.

19. When I returned to work I found out that another worker Max had taken over my supervisor role.

20. I was still paid at my supervisor rate but was basically just an assistant for Max from this time.

21. Max and I work together on some tasks and I act as supervisor when Max has to attend meetings or is on leave.

22. Max doesn’t really need an assistant and can handle the supervisor role by himself.” 10

[22] Mr Cowper rejected SGS’s evidence that he has an important role in mentoring new employees. He said this was rubbish. His evidence was that he does not teach any other employees at present. There had been no new recruits to SGS for 18 months and there is therefore nobody to teach. All current workers know their job. In any event, his evidence was that Mr Clint Gilby is the appointed trainer for the prep shop and would provide training to employees if necessary.

[23] The AWU also submitted that SGS had, contrary to its submission, taken into consideration the financial implications of Mr Cowper’s redundancy and, in doing so, had inappropriately ventured outside the proper operation and application of clause 21.1 of the Agreement.

SGS evidence and submissions

[24] SGS denied that it had considered cost as a factor when determining the eligibility of Mr Cowper for redundancy. It submitted that it had exclusively applied the criteria set out in clause 21.1 of the Agreement and it was upon that basis only that Mr Cowper’s application for voluntary redundancy was rejected. His overall ranking in the skills matrix was high, higher than a Mr Judd (who had been allowed a voluntary redundancy) and higher than most others in the preparation area. SGS pointed out that it had incurred the substantial cost of making other employees redundant who had had significant periods of service.

Conclusion

[25] Mr Crane, the Business Manager of the Mayfield West site, gave evidence regarding the criteria used to evaluate individuals for redundancy.

“21. All roles identified as redundant were not unique and as such a matrix was used to evaluate each individual occupying a like role. The following criteria were assessed with supervisors and other available data:

• The value of the role



• Skills of the individual



• Areas the employee could work/flexibility to work across departments



• Shift availability



• Performance including initiatives, disciplinary actions, unauthorised absenteeism



• Experience



• Other Factors - work ethics, attitude” 11

[26] Mr Crane’s evidence was that Mr Cowper was too valuable and experienced to be granted a voluntary redundancy on these criteria. He did not agree with Mr Turnbull's assessment that Mr Cowper had the lowest skill set of all employees in the prep shed. He suggested that the skills matrix contradicted that evidence.

[27] I have considered the AWU submission that the cost involved in an offer of voluntary redundancy to Mr Cowper was not only a factor, but a decisive factor, in SGS's decision to not offer Mr Cowper a voluntary redundancy when he sought one.

[28] In support of its submission that it had not considered pecuniary factors in deciding the eligibility of Mr Cowper for voluntary redundancy, SGS relied upon statements made by SGS managers in support of Mr Cowper’s good character and work ethic including those of Darienne Carraro, National Operations Manager. Her evidence was:

● ,“... His work is ‘impeccable’; 12
● He is a ‘very well respected member of our team’; 13
● He is ‘reliable, honest and has a great work ethic’; 14
● ‘wish[es] we had more people like Billy Working for us’; and 15
● Mr Cowper has ‘never been performance managed’.” 16

[29] There is no doubt that Mr Cowper is a “great bloke”, a dedicated and trustworthy employee and well regarded by both employees and management alike. That is not in dispute. I have to decide whether the skills matrix 17 was applied to Mr Cowper in accordance with the Agreement at the time he sought a voluntary redundancy.

[30] Without wishing to offend Mr Cowper, I am satisfied and find that Mr Cowper‘s assessment was exaggerated, and that he was not properly placed at the high end of the skills matrix score. In making this finding I do not intend to replace SGS management’s assessment with my own. Having reviewed the evidence of the witnesses I am satisfied that Mr Crane was not in a position to best know and assess Mr Cowper because of his recent commencement of employment with SGS. Ms Carraro was long gone from any position from which she could accurately assess Mr Cowper’s position on the skills matrix compared with other employees. Mr Turnbull was, and is, the person in the best position to most accurately assess Mr Cowper’s skills, and his evidence directly contradicted that of Mr Crane and Ms Carraro. I prefer Mr Turnbull's evidence and, having accepted it, I am satisfied that, on a proper application of the skills matrix, Mr Cowper was inappropriately and inaccurately placed at the high end of the skills matrix for the purpose of assessing his suitability for a voluntary redundancy.

[31] I am satisfied and find that Mr Cowper would have been a suitable candidate for an offer of voluntary redundancy on the ordinary application of the criteria in clause 21 of the Agreement if he had not had his assessment inappropriately and inaccurately placed at the high end.

[32] In the course of listing this application for hearing there was considerable argument about the production of the skills matrix documents by which SGS determined who would be made redundant. SGS opposed production. After hearing argument I ordered the production of the skills matrix documents. Eventually SGS produced the spreadsheet which had been prepared and used by Mr Crane to assess the suitability of SGS employees for redundancy. In the row assigned to Mr Cowper’s assessment, under the section labelled ‘Comments from Business Manager’, the following annotation was made by Mr Crane:

“Nominated Vol redundancy last time - too expensive. Has put his hand up again!” 18

(my emphasis)

[33] In the previous notification heard by me the SGS submission contained the following paragraph:

“If Mr Cowper’s nomination was granted, the financial impact of this decision to the business would likely cause the Applicant to consider more cost-saving measures such as further restructuring and redundancies at the site.” 19

(my emphasis)

[34] In some circumstances cost to the business can be a relevant factor. However, this is a matter that depends on the particular circumstances of each case. The witnesses for SGS denied that cost was a factor at all when assessing Mr Cowper’s application for voluntary redundancy. This evidence is inconsistent with the documents produced before me and the submissions of SGS in the previous application.

[35] The criteria in clause 21(d) include relevant skills, attendance, length of service, competence and performance. SGS cannot have properly applied the redundancy provisions of the Agreement if those criteria and other possible relevant matters were not the criteria by which a candidate has been selected for or refused voluntary redundancy; if they were inappropriately or dishonestly applied; if another inappropriate consideration has been taken into account and had outweighed the other named considerations or if an appropriate consideration has been taken into account that had been given an inappropriate weight for an improper reason.

[36] I am satisfied that SGS inappropriately assessed Mr Cowper and in addition, contrary to their submission, took into consideration the cost of accepting Mr Cowper’s application for redundancy when assessing his application’s eligibility for voluntary redundancy and, to the extent that it did so, gave it an inappropriate weight. In doing so, SGS did not properly apply clause 21.1 of the Agreement.

Remedy

[37] Mr Barkatsas submitted that the remedy sought by the AWU was outside the jurisdiction of the Commission.

“Additionally and in the alternative to the submissions regarding the ‘merits’ of the Commission exercising its discretion to grant the remedy sought by the Applicant, the Respondent submits an order to dismiss an employee is respectfully, ultra vires.

The Applicant has not, to date, referred to any authority, precedent or example where the Commission has entertained the premise of issuing an Order dismissing an employee.” 20

[38] The AWU sought that:

“In these circumstances, the Commission should intervene and determine that the Respondent should make Mr Cowper redundant.” 21

[39] I determine that:

● SGS did not properly apply clause 21.1(d) of the Agreement by inaccurately and inappropriately weighting Mr Cowper’s skills and performance at the high end of the skills matrix for the purpose of assessing him as a candidate for voluntary redundancy.

● SGS did not properly apply clause 21.1(d) of the Agreement by inappropriately taking cost into account and giving it an inappropriate weight when assessing Mr Cowper as a candidate for voluntary redundancy.

● Mr Cowper was an eligible candidate for voluntary redundancy on all occasions when he applied.

SENIOR DEPUTY PRESIDENT

 1   [2014] FWC 5586

 2   Ibid

 3   SGS Newcastle Enterprise Agreement 2013.

 4   Exhibit SGS 3 para 10 and 11

 5   Exhibit SGS 3 para 51

 6   Exhibit AWU 6 para 10

 7   Exhibit AWU 2

 8   Exhibit AWU 5

 9   Exhibit AWU 3

 10   Exhibit AWU 3

 11   Exhibit SGS 2

 12   Exhibit SGS 1 para 36

 13   Ibid para 38

 14   Ibid

 15   Ibid para 39

 16   Ibid para 41

 17   Exhibit AWU 7 - extract of documents produced pursuant to Summons to Produce Documents - 1 October 2014

 18   Exhibit AWU 7.

 19 Applicant’s outline of submissions C2014/4507 at [13].

 20   Exhibit SGS 3 paras 64 and 68

 21   Exhibit AWU 6 para 17

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