Transport Workers' Union of Australia v Toll Ipec Pty Ltd T/A Toll Ipec

[2017] FWC 5171

[2017] FWC 5171

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Transport Workers’ Union of Australia
v
Toll Ipec Pty Ltd T/A Toll Ipec
(C2016/5931)

COMMISSIONER GREGORY MELBOURNE, 5 OCTOBER 2017

Alleged dispute concerning payment for owner-drivers engaged at Melbourne Airport and Toll Ipec-Victorian Express Dandenong.

Introduction

[1] Toll Ipec Pty Ltd T/A Toll Ipec (“Toll Ipec”) engages the services of owner drivers to carry out deliveries from Melbourne Airport and from its depot in Dandenong. They were previously engaged under the terms and conditions contained in a so-called “Independent Contractor Agreement.” However, during the course of last year Toll Ipec decided to terminate those arrangements and instead offered different arrangements under what was described as a “New Operations Model.” Toll Ipec also provided an explanation to the owner drivers about the cost model which underpinned these new arrangements.

[2] The Transport Workers’ Union of Australia (“the TWU”) subsequently took issue with whether these new arrangements complied with Toll Ipec’s obligations under the Enterprise Agreement that covers the parties and, in particular, clause 17 of the Agreement. The issue was unable to be resolved in the workplace and a dispute was notified to the Commission. The matter was dealt with in conference in October last year but was again unable to be resolved. The TWU subsequently requested it be dealt with by way of arbitration.

[3] Mr Mark Gibian of Counsel appeared on behalf of the TWU. Mr Maurice Baroni from McCabe’s Lawyers appeared on behalf of Toll Ipec. Both were granted permission to appear under s.596(2)(a) as the matter involves a degree of complexity and their involvement might enable it to be dealt with more efficiently.

The Issue to be Determined

[4] The parties are covered by the Toll Group - TWU Enterprise Agreement 2013-2017 (“the Agreement”) 1. One of the objectives in clause 2 of the Agreement is “(a) promoting job security, effective workplace representation and training for Transport Workers …”2

[5] Clause 17 of the Agreement continues to state:

“17. Toll commitment to job security

The Parties recognise that job security is an important issue for Employees. For its part, Toll commits:

(a) to the full-time engagement of its Transport Workers wherever possible;

(b) subject to reasonable practical requirements, such as adequately servicing industry peaks, to promote job security through the full utilisation of full-time permanent Transport Workers/Owner-Drivers before the engagement of part-time Transport Workers/Owner-Drivers, or casual, labour hire or outside hire workers;

(c) to ensure that wages and conditions applicable to third party agency workers and to casual Transport Workers placed in a business by Toll People (or any other agency controlled by Toll) are no less than those of Transport Workers in the same position in that business unit;

(d) to the training of its Transport Workers, in workplace health and safety (including Blue Card) and other professional training as agreed from time to time and the promotion of vocational training and occupational health and safety training;

(e) to consult with the Union and affected Transport Workers if a decision is taken by Toil to outsource work; and

(f) ensure that all Owner-Drivers engaged by it receive a labour rate equal to the applicable wage rate payable for the relevant vehicle utilised by the Owner-Driver at the site at which they are engaged.” 3

[6] The Commission is now required to determine whether in introducing new arrangements for its owner drivers under the so-called “New Operations Model” Toll Ipec has complied with its obligations under clause 17 of the Agreement, and clause 17(f) in particular.

The Evidence and Submissions

The TWU

[7] Mr Shane Crapper has been engaged by Toll Ipec as an owner driver since 2006. Prior to that time he had worked for the business as an employee driver. In August 2016 he was advised that his existing owner driver agreement was to be terminated and a new agreement entered into. He states that this new arrangement is based on an hourly rate, which when all other costs are taken out, leaves an amount that is less than what an employee driving the same vehicle under the relevant Local Agreement 4 would receive. His statement continued to provide further details about these costs. Similar witness evidence was provided in support of the application by Mr Mark Ladgrove and Mr Nirbhai Singh.

[8] Mr Brad Statham is a Chartered Accountant who specialises in providing services to owner drivers. He was commissioned by the TWU to provide a review of the cost model used by Toll Ipec in establishing its new contracts with the owner drivers. He indicated that his report had been compiled on the basis of information provided to him by some owner drivers, and he had not been provided with any information about these arrangements by Toll Ipec. He also indicated that, “[t]he purpose of a cost model is to determine on average, for each class of vehicle, the estimated costs to run that contractor’s business based on a series of assumptions.” 5

[9] The TWU submits that the new arrangements put in place by Toll Ipec with its owner drivers do not comply with the terms of the Agreement because the cost model on which they are based does not ensure the owner drivers receive a labour component as part of those arrangements, which is equal to the applicable wage rate in the Agreement. It notes, firstly, that the model utilised by Toll Ipec calculates the hourly rate by reference to the base rate for the applicable vehicle multiplied by 40 hours and multiplied again by 46 weeks per year. However, an employee employed by Toll Ipec under the terms of the Agreement is remunerated on the basis of a 38 hour week for the full 52 weeks each year.

[10] It submits, in response, that the Agreement must be interpreted in the context of its obvious purpose and intent; to protect the wages and job security of employees by ensuring that the rates provided to owner drivers do not undercut those entitlements. This objective is not met if the owner drivers receive a lesser labour component than an employed driver.

[11] In its submission the current cost model utilised by Toll Ipec under the so-called “New Operations Model” does not ensure this occurs. Compliance with this obligation requires that the other costs incurred by owner drivers in operating their vehicles are taken into account to determine whether they are receiving an appropriate labour rate. It continues to submit that the witness evidence establishes that the hourly rates now being received are insufficient to ensure the owner drivers receiver a labour rate applicable to an employed driver after their fixed and variable costs are taken into account.

[12] It submits, in conclusion, that the Commission should resolve the dispute by “determining the hourly rates paid under the “New Operations Model” are insufficient to ensure that owner drivers engaged by Toll Ipec receive a labour rate equal to the applicable wage rate payable for the relevant vehicle utilised by the owner driver under the Agreement for the purposes of clause 17(f).” 6

[13] It also rejects the submission by Toll Ipec that what is being sought involves an exercise of judicial power, and submits instead that it is well established that it involves an exercise of power by the Commission as a private arbitrator in accordance with clause 15 of the Agreement. This is based on the agreement of the parties to submit disputes about their legal rights and liabilities to the Commission. In acting in this way the Commission is not exercising judicial power, but is instead exercising a power of private arbitration. It follows that as a private arbitrator the Commission is authorised to make decisions about the legal rights and liabilities of the parties to whom the Agreement applies. This can extend to deciding questions of fact and law that might arise, subject to any limitations upon that ability in the relevant dispute resolution clause.

[14] The TWU also submits that the dispute is evidently about the employees’ about job security because the sub clause creates an obligation on Toll Ipec to ensure that the engagement of contractors does not undercut the labour rates provided to its employees. A dispute exists between the TWU and Toll Ipec about whether the new arrangements for owner drivers comply with the obligations under clause 17. It is therefore a legitimate dispute about the interpretation and application of this aspect of the Agreement. The intention of that provision is to provide a disincentive to the engagement of contractors by ensuring that they are not engaged in a manner that threatens the job security of employees. It is of no consequence that this provision, in dealing with the job security of employees, necessarily has an indirect effect upon the rates paid to owner drivers who are engaged by the business. It continues to submit that the evidence of Mr Sloan and Mr Price acknowledges that the dispute is about job security.

[15] It also rejects the claim that there is no dispute about the terms of the Agreement and the matter instead involves “an attempt to “manufacture” a dispute”, 7 which is actually about the remuneration of owner drivers who are not parties to the Agreement. It submits instead that it is well established that an obligation imposed on an employer to ensure third parties, such as sub-contractors or owner drivers, receive the same pay and conditions as direct employees can be a “matter pertaining”8 to the employment relationship, and is capable of being included in an enterprise agreement because it concerns the job security of the employees. The fact that the resolution of the dispute may have an indirect effect upon the third-party owner drivers does not detract from the fact that a dispute exists between the TWU and Toll Ipec.

[16] The TWU also rejects the criticism by Toll Ipec of the evidence of Mr Statham. He is a chartered accountant who has a large number of clients who operate in the transport industry as owner drivers, and as such he has developed considerable expertise in terms of the cost models and other arrangements that apply to owner drivers. He has applied that expertise in sourcing the cost items to be taken into account in considering the arrangements involving the owner drivers engaged by Toll Ipec. It also submits that despite the criticism directed at Mr Statham’s expertise there has been no real criticism of the cost items identified by him as underpinning the cost model that applies to the owner drivers.

[17] It continues to submit that previous Commission decisions, such as that of the Full Bench in Schefenacker, 9 have made clear that provisions in an Agreement, which impose obligations on third parties with a view to protecting job security and the conditions of employment of employees, have been held to be permissible matters.

[18] It also notes that in the decision in National Union of Workers v Phillip Leong Stores Pty Ltd (‘Leong’) 10 Commissioner Bull, as he was then, makes specific reference to an extract from the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), which indicates by way of example that the following terms can potentially be within the scope of permitted matters:

“672. It is intended that the following terms would be within the scope of permitted matters for the purpose of paragraph 172(1)(a):

• terms relating to particular staffing levels (subject to any other applicable legislative requirements or limitations) particularly if those terms are aimed at ensuring the health, safety and well-being of employees …” 11

[19] It continues to submit that this is precisely the type of provision under consideration in the present matter, and it is of no consequence that an indirect effect of that provision has an impact upon other third parties, in this case being a group of owner drivers that Toll Ipec also engages to carry out its delivery functions.

[20] The TWU also emphasises, in conclusion, that it is not asking the Commission in the context of the present application to determine what rates should be paid to owner drivers. It is instead seeking a determination about the application of a particular provision in the Agreement that covers the parties, being that contained in sub clause 17(f). It also rejects the submission that the only obligation imposed on Toll Ipec is to ensure that any amount paid to an owner driver equates to the rate paid to an employee driver. In its submission this ignores the fact that Toll Ipec has transferred the cost of operating a vehicle to the owner driver, and they are in turn required to meet all costs associated with the maintenance and operation of that vehicle. The reference in the clause to “labour rate” in fact acknowledges that there are other costs that must be borne by an owner driver.

Toll Ipec

[21] Mr John Price is the PUD manager at Toll Ipec. It has a “fleet mix” 12 involving a similar number of employees and owner drivers, and at the time of compiling his witness statement Toll Ipec employed 102 employee drivers and engaged the services of another 105 owner drivers. Mr Price was involved in the recent review of contractual arrangements with owner drivers, and the new contracts are based on a costs model developed by Toll Ipec. He also indicated that the actual costs borne by each owner driver are different in each case.

[22] Toll Ipec submits that the only obligation sub clause 17(f) creates is to pay the same labour rate to an owner driver as it is required to pay to an employee driving the same capacity vehicle. In its submission this means “the base rate of pay” 13 an employee covered by the Agreement would receive. It continues to submit that the Commission is also required to consider whether a dispute actually exists under s.739 of the Act, and whether it has jurisdiction to deal with that dispute in the manner proposed by the TWU.

[23] Toll Ipec does acknowledge that the dispute is being dealt with by private arbitration under clause 15. However, in this context, the Commission can only exercise the power given to it by the parties. It submits that if the Commission finds that a dispute exists then it can only be dealt with in one of two ways. Firstly, by finding that Toll Ipec is in breach of sub clause 17(f). Secondly, by fixing a rate of remuneration for an owner driver engaged by Toll Ipec. However, in its submission both of these options would involve an exercise of judicial power because new legal rights and obligations would be created. Therefore, Toll Ipec submits that what is being sought involves an impermissible exercise of judicial power.

[24] It continues to submit that no evidence has been provided from any employee of Toll Ipec in regard to the alleged dispute, emphasising that it is in reality one between Toll Ipec and its owner drivers concerning an industrial instrument to which they are not a party. It does acknowledge that provisions in an Agreement, such as sub clause 17(f), can be permissible under s.172 in some circumstances. However, in this case the proper characterisation of the sub clause is one concerned with the relationship between the employer and a third party.

[25] It also submits that the “common understanding” 14 of the term “labour rate”15 in clause 17(f) is intended to mean “wage rate.”16

[26] In dealing with the evidence Toll Ipec submits that Mr Statham’s evidence does not establish he as an expert in dealing with the arrangements and costs models that exist in regard to owner drivers, given the limited number of owner drivers he has contact with in his practice. In reality he is actually providing little more than a budget, based on various assumptions about what should be included, given his views about what he believes is fair and reasonable.

[27] It also submits that the evidence of the two owner drivers does not establish that the provisions in sub clause 17(f) are not being complied with. Their evidence instead makes clear that the dispute is a contractual one, involving the owner drivers and Toll Ipec, rather than being a dispute about the employment relationship between Toll Ipec and its employee drivers. This is emphasised by the wording of the original dispute notification filed by the TWU. It also points to the evidence of Mr Price which makes clear that any reference to the labour component is a “reference to the relevant grade rate of pay for the vehicle driven by the owner driver, the award is a 38 hour a week award.” 17 It continues to submit that what needs to be established is the existence of a dispute between the TWU and Toll Ipec pertaining to the employment relationship. In this context the definition of dispute needs to be considered in the light of ss.172 and 172(1)(b) of the Act, in particular. It requires that there be a dispute between the employees and the employer, and not simply a dispute between the Union and the employer. Against this background it submits it is open to the Commission to find there is no dispute, and to dismiss the application on that basis.

[28] However, it continues to submit that if the Commission is not prepared to accept this outcome then its task is to discern the ordinary meaning of the words in sub clause 17(f), based on the principles established by the relevant authorities. This approach simply results in a requirement to ensure that the labour component payable for the relevant vehicle utilised by the owner driver is the same as that for the relevant Grade Classification in the Road Transport and Distribution Award 2010, 18 given that each Grade in the Award refers to a relevant vehicle. Once that obligation is satisfied then that is all that the clause contemplates.

[29] It continues to submit that if the Union’s approach was adopted it would require that a reconciliation be done for every owner driver to ensure they receive the same rate as an employee for the hours worked after taking away all of the other relevant costs incurred by the owner driver. In its submission this cannot be the correct interpretation of the sub clause. All that is required instead is for Toll Ipec to deliver a dollar amount to the owner driver, based on the vehicle they are driving, that is equal to or more than the relevant rate for the appropriate Grade in the Road Transport and Distribution Award 2010.

[30] It continues to submit that the dispute is entirely concerned with the owner drivers and there is no evidence of any dispute involving Toll Ipec and its employees. In any consideration of a dispute involving the job security of employees there is a requirement to determine where the line needs to be drawn in terms of whether the dispute actually involves the employees’ job security, and in all the circumstances of this matter, it is clear that the line has been crossed to a point where it is evident that the dispute is entirely about the concerns the owner drivers have about their new contracts with Toll Ipec.

[31] It also refers to the decision in Leong. It accepts that the Commissioner acknowledged in that decision that measures to protect the job security of employees can extend to ensuring parity with the conditions provided to external contractors. However, any such provisions cannot be only about the relationship between the employer and those third parties. They must instead be about the relationship between the employer and its employees. Against this background Toll Ipec submits that in the present matter the dispute in reality touches upon the owner drivers “in totality.” 19 It continues to submit that the line referred to in Schefenacker has been crossed in this case because the focus is in reality all about the concerns of the owner drivers.

[32] It continues to submit that to apply the clause in the way suggested by the TWU would require an assessment to be made on a daily basis about the time involved for each owner driver on that day, because each will have some differences in their relative cost models on that particular day. Such an onerous and unrealistic obligation should not be imposed upon the business. It submits, in conclusion, that the highest that can be said about the clause is that it creates an obligation to ensure that site rates are paid to the owner drivers, but nothing more.

[33] In regard to the issue of the Commission’s jurisdiction it acknowledges that, in exercising powers of private arbitration, the Commission’s powers are referable to what powers have been given to it by the parties, and if those are the powers that the Commission is exercising, then that does not represent an exercise of judicial power. However, based on the decision in Construction, Forestry, Mining and Energy Union v Wagstaff Piling Pty Ltd (‘Wagstaff’) 20 it submits that it is not sufficient for the Commission to simply come to the view that Toll Ipec is in breach of the provisions; there needs instead to be some further step. In this case that would require the Commission to direct that the owner drivers be paid a labour rate equivalent to the applicable wage rate of an employee. It continues to submit that this is a step that is not permissible for the Commission to take because it concerns an outcome that does not pertain to the employment relationship.

[34] Toll Ipec submits, in summary, that the dispute is in essence one involving it and the owner drivers, and that is the true light in which the dispute should be categorised. Therefore, the outcome now sought involves either an exercise of judicial power or, if not viewed in that way, it is a dispute that does not involve a permitted matter.

Consideration

[35] The TWU has made clear in its application what it seeks, and what it submits the Commission can do in response. It seeks a determination that the hourly rates paid to owner drivers under the so-called “New Operations Model” are insufficient to ensure they receive a labour rate equal to the applicable wage rate payable for the relevant vehicle utilised by the owner driver, as required by clause 17(f) of the Agreement that covers the parties.

[36] It submits that the Commission can deliver this outcome by exercising the powers of private arbitration conferred on it by the disputes resolution procedure contained in clause 15 of the Agreement. It rejects the suggestion that the outcome sought involves an exercise of judicial power. It also submits that simply because the outcome might have an impact on a third party, in this case the owner drivers, is not fatal to the application. However, it does acknowledge that the Commission’s powers are not unfettered, and the dispute must ultimately be about the parties covered by the Agreement, being Toll Ipec and its employees. It submits that this is the case in the present matter, and the dispute is evidently about the job security of the employees, given the new arrangements that the business has entered into with its owner drivers.

[37] Toll Ipec submits in response that what is being sought in the present application requires an exercise of judicial power in that the TWU seeks to have the Commission determine rights and entitlements in respect of a group of owner drivers. However, it submits in the alternative that if the Commission is found to be exercising powers of private arbitration conferred on it by the parties then there are necessarily limits to those powers, and if the dispute is in essence about the entitlements of the owner drivers then a line has been crossed in terms of the limits of those powers. It continues to submit that in this case the line has been well and truly crossed, given that the “totality of the dispute” 21 concerns the owner drivers.

[38] Both parties made reference to various authorities in support of their submissions. In the decision in Schefenacker the Full Bench was relevantly considering various provisions in an Agreement which dealt with employees of labour hire agencies. Deputy President O’Callaghan found at first instance that the following sub clause in the Agreement did not pertain to the employment relationship because it concerned an obligation on Schefenacker related to “its labour hire contracting companies”. 22

“17.6 The company will instruct the labour hire agencies to increase the wage rate of their employees working at Schefenacker Vision Systems Australia by the same percentage that is listed in this Agreement.” 23

[39] The decision was taken on appeal and the Full Bench concluded in upholding the appeal:

“[81] This leaves for consideration cl.17.6. The effect of the clause is to oblige the employer to instruct the labour hire agencies with whom it contracts to increase the wages they pay to their employees working at Schefenacker by the same percentage listed in the agreement.

[82] In Re National Transport Operations Pty Ltd Certified Agreement 200258 a Full Bench decided that a term in an agreement expressing the agreement to be binding on "all contract carriers engaged by the company whose engagement is subject to this agreement at any time during the period of operation" did not pertain to the relevant relationship. The following passage explains the Full Bench's reasons:

“We are not persuaded by Mr Murdoch's submission that the contract carrier provisions are justified by the interest employees of National Transport have about job security and accordingly an interest in the terms upon which contractors are engaged. There is nothing in the contract carrier provisions that suggest any linkage with the provisions regulating the wages or conditions of employment of the employees of National Transport. The contract carrier provisions are entirely discrete. The wages appendix for employees is expressed by reference to six grades and a weekly or cents per kilometre scale. The rates for contract carriers, provided for in a separate appendix, are referable to pay loads and are expressed as daily rates. Each appendix is entirely separate to the other; they are not interrelated. The methodology in calculating wages to be paid to contract carriers on the one hand and employees on the other is not similar. Each is independent of the other. Nowhere in the Agreement (or in any evidence or submissions) is there any suggestion payments to contract carriers or their conditions of engagement were struck having regard to employees' pay rates, conditions of employment or job security or vice-a-versa.”

[83] It can be seen from this passage that the situation before the Full Bench was very different to that here. The intent of cl.17.6 is that employees of labour hire agencies working at Schefenacker should receive the same increase as the Schefenacker employees will receive under the agreement. This is sought to be achieved by obliging Schenefacker to give that directive to the agencies. Whether that means will be effective or not, the intent is that the relationship between the cost of labour supplied by the agencies and the cost of the labour of Schefenacker's employees will be relevantly the same after the agreement as it was before. For that reason we think that the sub-clause pertains to the relationship between Schefenacker and its employees. It directly concerns the security of employment of the employees covered by the agreement.” 24

[40] The decision of the Federal Court in Wagstaff is also relied on by Toll Ipec. It refers, in particular, to the extracts at [21] and [22]:

“[21] The issue between the parties which required attention was an industrial one, arising in connection with an industrial dispute. The question formulated for the attention of the Commissioner was, perhaps, capable of raising an issue appropriate for the exercise of its conciliation and/or arbitration power as cl 10 of the agreement contemplated, even though it may have required the Commissioner to form his own view about the legal meaning and effect of the agreement. Although FWA cannot exercise the judicial power of the Commonwealth, it is well established that a federal industrial tribunal, exercising powers of conciliation and arbitration, may legitimately form and act upon opinions about legal rights and obligations as a step in the exercise of its own functions and powers (see Re Cram; Ex parte The Newcastle Wallsend Coal Company Pty Ltd (1987) 163 CLR 140 at 149).

[22] However, the decision of the Commissioner did not observe this fundamental distinction. The Commissioner expressed an opinion about a legal matter, but did not do so for the purpose of taking some further step within his own power. We agree with the Full Bench that the Commissioner’s opinion was erroneous, a matter we address in more detail later. As a result, it is not surprising that the Full Bench first corrected that error. With its reference to disagreeing with the recommendation of the Panel the Full Bench then seems to have moved appropriately back into the area of its own jurisdiction, having formed its own opinion as a foundation for doing so, as it was permitted to do.” 25

[41] Toll Ipec submits, in response, that it is not open to the Commission in this matter to simply conclude in exercising powers of private arbitration that the relevant sub clause in the Agreement is not being observed as intended, without also then taking the next step and indicating what is required to achieve compliance.

[42] It also referred to the decision in Linfox Australia Pty Ltd v Transport Workers’ Union of Australia [2013] FCA 659. That decision makes clear that the Commission, acting as a private arbitrator with powers conferred on it by the parties, has the power to finally determine questions of both fact and law. This extends to the construction of “fair work instruments such as an enterprise agreement” in a way that binds the parties in the resolution of that dispute. However, Rares J also expressed the following conclusion at [29]:

“[29] In this case, the decision of the Full Bench necessarily involved the construction of the enterprise agreement and so much of the fair work instruments (being the Federal Award and the State Award) that it incorporated expressly by reference. The Commission’s private arbitral function was to resolve the dispute that had arisen between the parties. Linfox initiated the proceedings by its application to the Commission for the purpose of arriving at a binding resolution of that dispute. Such a resolution was consistent with both the fair work instruments that applied to the parties (i.e. the Federal and State Awards) and the Act. Indeed, it was the very thing the Act contemplated would occur in the régime of dispute resolution that s 186(6) of the Act required the parties to include in their enterprise agreement. Each of s 739(4) and its cognate provision, s 740(3), contemplated that the Commission or a third person could arbitrate a dispute as a private arbitrator if the parties had agreed to confer such arbitral functions on the Commission or that person. Nonetheless, such a private arbitrator was not capable of making a decision that was inconsistent with the Act, or a fair work instrument that applied to the parties.” 26

[43] The decision of Commissioner Bull in Leong has also been referred to. It concerned an application under section 437 of the Act, and whether the proposed ballot order dealt with permitted matters under s.172. While the circumstances are different from those in the present matter, the Commissioner was required to consider whether the ballot order dealt with matters pertaining to the employer/employee relationship, or whether it extended beyond that to regulate the relationship between the employer and other third parties, being employees supplied by a labour hire business. After reviewing various authorities, including the decision in Schefenacker, Commissioner Bull concluded at [97]:

“[97] In examining whether the NUW have been and are continuing to pursue non-permitted matters via their log of claims, I have applied the following principles gleaned from the FW Act, the relevant case law and the Explanatory Memorandum.

• Terms relating to conditions or requirements which sufficiently relate to an employee’s security of employment and maintenance of wages and conditions, such as a requirement that contractors must not be engaged on terms and conditions that would undercut the enterprise agreement, are permitted matters as they pertain to the employment relationship.



• Terms that contain a prohibition on the employer engaging contractors or labour hire employees or the employer’s right to use independent contractors are not matters pertaining to the employment relationship, as opposed to those which may relate to the regulation of conditions to be afforded to contractor employees.



• A bargaining representative pursuing an agreement that contains non-permitted matters as substantive terms cannot be genuinely trying to reach an agreement under the FW Act.



• The legislation requires that an applicant for a PABO is genuinely trying to reach an agreement at the time of the making the application for the order.” 27

[44] He again made reference to the Explanatory Memorandum when he stated at [121]:

“[121] In this instance it is necessary to draw a link between the provisions of the clause and how the term affects the respondent’s employees, such as the amount of work available to the respondent’s employees or issues of job security. As stated in the Explanatory Memorandum:

• terms relating to conditions or requirements about employing casual employees or engaging labour hire or contractors if those terms sufficiently relate to employees’ job security – e.g. a term which provided that contractors must not be engaged on terms and conditions that would undercut the enterprise agreement;” 28

[45] He continued to state at [122] and [123]:

“[122] The Full Bench in Schefenacker described the extent to which an agreement can regulate the contractual relationship between an employer and labour hire agencies yet still pertain to the relevant relationship, as a question of degree.

[123] It is not enough in my view, to simply refer to a similar provision having been approved elsewhere without establishing the requisite connection to the respondent’s workforce. While some terms are self evident in how they may impact on the respondent’s own employees, insufficient information has been provided about the consequences of this claim on the respondent’s employees.” 29

[46] He concluded by indicating at [128]:

“[128] The respondent also argued that the NUW claim that agency casuals receive the benefit of the terms and conditions of the agreement was a non permitted matter. As a general proposition, it is well established that claims of this nature relate to the employer/employee relationship because they are concerned with protecting the employer’s employees. 96While the respondent sought to argue why its case was distinguishable from the relevant authorities in view of the above conclusions already reached I do not need to address this question, suffice to say on any reconsideration of the same claim in a further PABO application, the protection of the respondent’s employees’ conditions and security of employment and would need to be addressed.” 30

[47] I now turn to deal with the application having regard to the submissions and evidence relied upon by the parties, and the authorities I consider relevant to the determination of the matter. I turn, firstly, to deal with the submission by Toll Ipec that what is being sought by the TWU involves an exercise of judicial power.

[48] The dispute is brought to the Commission in accordance with the terms of the dispute resolution procedure in clause 15 of the Agreement that covers the parties. Clause 15 is included pursuant to s.186(6) of the Act, which relevantly provides that an enterprise agreement made and approved by the Commission must include a term:

“(a) that provides a procedure that requires or allows the FWC, or another person who is independent of the employers, employees or employee organisations covered by the agreement, to settle disputes:

(i) about any matters arising under the agreement; and

(ii) in relation to the National Employment Standards …” 31

[49] Section 595 is also relevant in this context. It relevantly provides:

“595 FWC's power to deal with disputes

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

…

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

(4) In dealing with a dispute, the FWC may exercise any powers it has under this Subdivision.

(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.” 32

[50] Section 739 is also relevant in terms of the scheme of the Act and how it intends that the Commission exercise its dispute resolution powers. It relevantly provides:

“739 Disputes dealt with by the FWC

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

…

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

(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.

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

(6) The FWC may deal with a dispute only on application by a party to the dispute.” 33

[51] The Dispute Resolution Procedure in the Agreement in clause 15 is in the following terms:

“15. Dispute Resolution Procedure

The Parties agree that any Dispute must be dealt with in the following manner:

(a) The matter must first be discussed by the aggrieved Transport Worker(s) directly with his or her or their immediate supervisor.

(b) If the matter remains in dispute, it must next be discussed with the supervisor’s immediate superior or another representative of Toll appointed for the purpose of this procedure. The Union delegate for the worksite has the right to attend at, and participate in, this discussion as the representative of a Transport Worker, provided that the Union delegate is the representative of the Transport Worker’s choice.

(c) If the matter remains in dispute, it must next be discussed with the relevant manager of Toll. The relevant Union State Secretary (or his/her nominee) has the right to attend at and participate in this discussion as the representative of a Transport Worker, provided that the relevant Union State Secretary is the representative of the Transport Worker’s choice.

(d) If the matter remains in dispute, it must next be submitted to the FWC for conciliation. For this purpose, it is agreed that the action the FWC may take includes:

(i) arranging conferences of the parties or their representatives at which the FWC is present; and

(ii) arranging for the parties or their representatives to confer among themselves at conferences at which the FWC is not present.

(e) If the matter is not resolved in conciliation conducted by the FWC, the Parties agree that the FWC will proceed to arbitrate the Dispute and/or otherwise determine the rights and/or obligations of the parties to the Dispute. In relation to such an arbitration, the Parties agree that:

(i) The FWC may give all such directions and do all such things as are necessary for the just resolution of the Dispute. The FWC may exercise powers of conciliation, arbitration and declaratory relief in relation to the Dispute, including all related procedural powers such as those in relation to hearings, witnesses, evidence and submissions.

(ii) The FWC should apply the rules of evidence that would ordinarily apply to a hearing before the FWC under the Act.

(iii) Before making a determination, the FWC will give the parties an opportunity to be heard formally on the matter(s) in dispute.

(iv) In making its determination, the FWC will only have regard to the materials, including witness evidence, and submissions put before it at the hearing and will disregard any admissions, concessions, offers or claims made in conciliation.

(f) The decision of the FWC will be binding on the Parties subject to the following agreed matters:

(i) There will be a right of appeal to a Full Bench of the FWC against the decision, which must be exercised within 21 days of the decision being issued or within such further time as the Full Bench may allow.

(ii) The appeal will be conducted in accordance with the legal principles applying to an appeal in the strict sense.

(iii) The Full Bench, or a single member on delegation, will have the power to stay the decision pending the hearing and determination of the appeal.

(iv) The decision of the Full Bench in the appeal will be binding upon the parties.

(g) Until the matter is resolved by agreement, conciliation or arbitration, the status quo before the Dispute arose will be maintained and work will continue without disruption. No party is to be prejudiced as to the final settlement by the continuance of work in accordance with this procedure.” 34

[52] The process contemplated by the Act involving the exercise of powers of private arbitration by the Commission was considered at length by the High Court in Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2001) 203 CLR 645 (“Gordonstone”). It is not necessary to go to the decision in detail but their Honours stated at [31]:

“[31] Where parties agree to submit their differences for decision by a third party, the decision maker does not exercise 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 a judgment 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 arbitrator's award is not binding of its own force. Rather, its effect, if any, depends on the law which operates with respect to it.” 35

[53] They concluded at [34]:

“[34] The parties to an industrial situation are free to agree between themselves as to the terms on which they will conduct their affairs. Their agreement has effect according to the general law. If their agreement is certified, it also has effect as an award. To the extent that an agreement provides in a manner that exceeds what is permitted either by the Constitution or by the legislation which gives the agreement effect as an award, it cannot operate with that effect. But the underlying agreement remains and the validity of that agreement depends on the general law, not the legislative provisions which give it effect as an award.” 36

[54] I am satisfied, in conclusion, that the scheme of the Act and the relevant provisions in clause 15 of the Agreement make clear that in dealing with this application the Commission is not exercising judicial power, but is instead exercising powers of private arbitration conferred on it by the parties. However, I also accept that in exercising powers of private arbitration the decision in Gordonstone also makes clear that any decision made by the Commission cannot operate in a way that is inconsistent with the Act or the Agreement.

[55] I now turn to consider whether the dispute, and the outcome sought by the TWU, can be said to come within the scope of the Act and/or the Agreement that covers the parties. The first issue that arises in this context is whether the dispute and the outcome sought pertain to the relationship between Toll Ipec and its employees or is it in reality, as Toll Ipec contends, a dispute between the business and its owner drivers.

[56] Section 172 of the Act is relevant in this context. It relevantly provides:

“172 Making an enterprise agreement

Enterprise agreements may be made about permitted matters

(1) An agreement (an enterprise agreement ) that is about one or more of the following matters (the permitted matters ) may be made in accordance with this Part:

(a) matters pertaining to the relationship between an employer that will be covered by the agreement and that employer's employees who will be covered by the agreement;

(b) matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement …” 37

[57] I am satisfied, in response, that the terms of the Explanatory Memorandum and the authorities referred to have established that terms like that contained in clause 17(f) of the Agreement can be matters pertaining to the relationship between Toll Ipec and its employees in that they concern the employees’ job security. This conclusion is supported by the content of the Explanatory Memorandum which makes explicit reference to terms about “engaging …. contractors if those terms sufficiently relate to employees job security.” 38 The relevant extract goes on to provide an example of such a term, which is expressed in a manner not dissimilar to sub clause 17(f) when the Explanatory Memorandum refers to, “e.g. a term which provided that contractors must not be engaged on terms and conditions that would undercut the enterprise agreement”.39

[58] However, this is clearly not the end of the matters to be considered in this context. While I am satisfied that clause 17(f) deals with a “matter pertaining,” Toll Ipec submits that the Commission must also be satisfied that the essence of the present application is about a dispute pertaining to the employment relationship between Toll Ipec and its employees. It continues to submit that despite the existence of sub clause 17(f) the present dispute is, in reality, a dispute between it and the owner drivers it engages. It notes in this context that there was no evidence in the proceedings from any employee going to a dispute between Toll Ipec and the employees. It continues to submit that in dealing with a clause in an Agreement concerning job security there is a line that needs to be drawn that limits the extent to which any dispute can be said to be about the job security of the employees and when, by contrast, it can be said to deal with the circumstances involving a third party. It submits that in this case the TWU is asking the Commission to step over that line and deal with a dispute that in essence is entirely about the concerns of the owner drivers.

[59] I agree with the broad thrust of this submissions and accept that a dispute ostensibly pursued in the interests of the employees’ job security will not pertain to the employer/employee relationship if, in reality, it is a dispute about something different. For example, if the dispute concerned a claim by the owner drivers under clause 17(f) to have Toll Ipec supply them with new vehicles then such a claim, on its own, would undoubtedly cross the line and be “out of bounds” in terms of the Commission’s jurisdiction, because it related only to the circumstances of the owner drivers and had nothing to do with the job security of the employees. However, that is not the case in this matter. The evidence instead establishes that Toll Ipec has made changes to the contractual arrangements that apply to its owner drivers. It has done so in circumstances where it also has an obligation under sub clause 17(f) to ensure that all owner drivers engaged by it receive a labour rate equal to the applicable wage rate payable for the relevant vehicle utilised by the owner driver. I am satisfied in response that the TWU, on behalf of its employee members, is entitled to lodge a dispute in regard to whether sub clause 17(f) is being complied with, and the Commission is empowered to deal with that dispute because it pertains to the employer/employee relationship, given the potential impact of the changes upon the employees’ job security.

[60] I am also satisfied that this conclusion is consistent with the decision of the Full Bench in Schefenacker. The sub clause under consideration in that matter was intended to ensure that the employees of a labour hire agency, working alongside Schefenacker’s direct employees, received the same wage increases as the directly employed employees. The Full Bench concluded that this was intended to ensure the cost of labour supplied by the agency and the cost of its direct employees would be the same. It concluded that the sub clause therefore concerned the job security of the employees and accordingly pertained to the relationship between Schefenacker and its employees. Similar circumstances exist in the present matter. The intent of the sub clause in the Agreement is that the cost of the labour component provided by its owner drivers will be the same as that of its direct employees. I am satisfied that this confirms that the sub clause concerns the employees’ job security and therefore pertains to the relationship between the employer and the employee. Indeed, the present circumstances are the more compelling in regard to this conclusion than those in Schefenacker, given that Toll Ipec is both the direct employer of the employees and the direct party to the contracts entered into with the owner drivers. It therefore has the ability to ensure the same labour rates are applied in each case, making it more able to deliver on the obligations contained in the Agreement. As the Full Bench indicated in Schefenacker it was not entirely clear how the employer could deliver on the commitment made, given it was not the direct employer of the agency employees. Nevertheless the Full Bench was still of the view that sub clause was concerned with the employees’ job security.

[61] Once it is accepted that sub clause 17(f) pertains to the job security of the employees, and is therefore dealing with a matter pertaining to the employment relationship, then it follows that Toll Ipec is obliged to do what the clause intends; to ensure that the owner drivers receive a labour rate equal to the applicable wage rate payable for the relevant vehicle utilised by the owner driver at the site at which they are engaged. In circumstances where it is acknowledged that Toll Ipec has made changes to those arrangements I am satisfied that the Commission is able to deal with a dispute about whether the obligation created is being complied with.

[62] It is also acknowledged that the tangible effect of any determination of the dispute will be upon the owner drivers. The less direct, although perhaps equally important effect, will be the protection afforded to the employees’ ongoing job security. However, as the previous authorities have emphasised, this does not mean that the dispute does not involve the relationship between Toll Ipec and its employees. When a provision in an Agreement seeks to impact on the relationship between the employer and another third party, in the interests of the job security of the direct employees of that employer, then it is inevitable that the operation of that provision will have an impact on that third party. That is what the sub clause intends. However, as the decision of the Full Bench in Schefenacker makes clear this does not prevent the dispute from pertaining to the relationship between the employer and its employees.

[63] I turn now to consider what sub clause 17(f) requires. The TWU submits that it has a plain and ordinary meaning and its obvious purpose and intent in protecting the job security of Toll Ipec’s employee drivers is to ensure that the “labour rate” provided to the owner drivers it engages is equal to the wage rate payable for the relevant vehicle utilised by the owner driver. However, Toll Ipec submits in response that this only requires it to be able to demonstrate that it is providing to each owner driver an amount equivalent to the relevant rate for the Grade in the relevant industrial instrument for the corresponding vehicle driven by the owner driver. It submits that the amounts now being provided to the owner drivers establish that this obligation under sub clause 17(f) has been discharged.

[64] The Full Bench decision in The Australasian Meat Industry Employees’ Union v Golden Cockerel Pty Ltd[2014] FWCFB 7447 reviewed in detail the principles to be applied to the construction of enterprise agreements. It then continued to set out those principles at [41]. It is not necessary to set them out in full detail now. However, the second of these principles relevantly states:

“2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity. 40

[65] I am satisfied, in response, that sub clause 17 has a plain and unambiguous meaning and should be interpreted in that way. I am not satisfied that when this approach is followed the sub clause should be interpreted in the way that Toll Ipec contends. Sub clause 17(f) is contained within a series of provisions that deals with Toll Ipec’s commitment to job security, and the recognition by the parties that job security is an important issue for employees. Against this background the sub clause is essentially concerned to ensure that owner drivers engaged by Toll Ipec receive a labour rate that is equal to the wage rate that would be payable to an employee who was driving the same vehicle driven or “utilised” by the owner driver. The obvious intent is to prevent Toll Ipec from engaging owner drivers on a lower cost basis to the cost of employing employee drivers, because of the obvious implications for the job security of those employees.

[66] However, as indicated already I am not satisfied that a plain meaning of the words in the sub clause leads to a conclusion that the obligation created can be discharged in the way that Toll Ipec now contends. It is commonly understood that arrangements applying to owner drivers are based on a cost model which includes various components. It is not necessary to go into the detail of any such model in the context of this decision, suffice to say that a component in respect of the labour provided by the owner driver is a commonly understood component of that overall cost model. It is this amount that the sub clause intends be provided to the owner drivers. It is an amount that is readily ascertainable. While the Agreement that covers the parties does not contain wage rates relevant to the vehicle being driven clause 6 of the Agreement incorporates the Awards referred to in clause 3. It also indicates that any Local Agreements at a particular site “will prevail over the Award to the extent of any inconsistency.” 41 The witness statement of Mr Crapper also attaches the relevant Local Agreement, being the Toll IPEC (Victorian Metro) Local Agreement. It is also acknowledged that ensuring the owner drivers receive the applicable labour rate in the manner intended requires that some regard be had to the other costs incurred by the owner drivers, so that when these costs are accounted for they are left with “a labour rate equal to the applicable wage rate payable for the relevant vehicle utilised by the Owner-Driver at the site at which they are engaged.”42

Conclusion

[67] I simply indicate, in conclusion, that to suggest that the obligation in the sub clause can be discharged in the way that Toll Ipec now contends is to ignore the plain meaning of what is intended when the words in the sub clause are considered on the basis of what a reasonable person would understand them to mean in terms of how such arrangements apply to owner drivers. It ignores the common understanding that an owner driver is required to maintain a vehicle and to pay the running and fixed costs associated with the operation of that vehicle. Indeed, the reference to “a labour rate” in the sub clause clearly acknowledges that there are other costs involved. Having agreed upon the sub clause the parties are now required to ensure that the obligation created is discharged.

[68] The TWU seeks a determination from the Commission that the hourly rates paid to the owner drivers engaged by Toll Ipec under the current cost model are sufficient to ensure that they receive a labour rate equal to the applicable wage rate for the relevant vehicle utilised by the owner driver under the Agreement for the purposes of clause 17(f). The Commission is clearly not being asked at this point to determine what should be the total amount that is paid to the owner drivers. As indicated, it is instead being asked to determine the application of a particular provision in the Agreement that covers the parties. I am satisfied, in conclusion, that at this point the Commission should simply determine the dispute by deciding that as a consequence of the changes introduced by Toll Ipec in regard to its owner drivers, as part of its “New Operations Model,” the Commission is not satisfied that the owner drivers are now receiving a labour rate equal to the applicable wage rate payable for the relevant vehicle utilised by the owner driver at the site at which they are engaged, as required by sub clause 17(f). The Commission remains prepared to offer any further assistance to the parties in any matter that arises as a consequence of this decision.

COMMISSIONER

Appearances:

M Gibian of Counsel and W Carr for the Transport Workers’ Union of Australia.

M Baroni on behalf of Toll Ipec Pty Ltd.

Hearing details:

2017.

Melbourne:

June 22, 23.

 1   AE405183.

 2   Ibid at cl 2(a).

 3   Ibid at cl 17.

 4   Toll IPEC (Victorian Metro) Local Agreement.

 5 Exhibit TWU3 at [4].

 6 Outline of Submissions of the Transport Workers’ Union of Australia, dated 7 April 2017, at [27].

 7 Reply Submissions of the Transport Workers’ Union of Australia, dated 20 June 2017, at [14].

 8   Fair Work Act 2009 (Cth) s 172(1)(a).

 9   Re Schefenacker Vision Systems Australia Pty Ltd, AWU, AMWU Certified Agreement 2004, (Unreported, AIRC, O’Callaghan SDP, PR952801, 28 October 2004) (‘Schefenacker’).

 10   [2014] FWC 6459.

 11 Explanatory Memorandum, Fair Work Bill 2008 (Cth) 108 at [672].

 12 Exhibit Toll4 at [5].

 13 Submissions of Toll Ipec, dated 6 June 2017, at [7].

 14 Ibid at [40].

 15 Ibid at [47].

 16   Ibid.

 17   Transcript at PN1704.

 18   MA000038.

 19   Transcript at PN1724.

 20 [2012] FCAFC 87.

 21   Transcript at PN1724.

 22   Schefenacker, (Unreported, AIRC, O’Callaghan SDP, PR952801, 28 October 2004) at [32].

 23 Ibid at [26].

 24   Re Rural City of Murray Bridge Nursing Employees, ANF (Aged Care) — Enterprise Agreement 2004; Re Schefenacker Vision Systems Australia Pty Ltd, AWU, AMWU Certified Agreement 2004 (Unreported, AIRC, Giudice J, Lawler VP and Simmonds C, [PR956575], 20, 21 December 2004; 18 March 2005).

 25   Wagstaff [2012] FCAFC 87 at [21]-[22].

 26   Linfox Australia Pty Ltd v Transport Workers’ Union of Australia [2013] FCA 659 at [29].

 27   Leong [2014] FWC 6459 at [97].

 28 Ibid at [121].

 29   Ibid at [122]-[123].

 30 Ibid at [128].

 31   Fair Work Act 2009 (Cth) s 186(6)(a).

 32   Fair Work Act 2009 (Cth) s 595.

 33   Fair Work Act 2009 (Cth) s 739.

 34   Toll Group - TWU Enterprise Agreement 2013-2017 at cl 15.

 35   Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2001) 203 CLR 645 at [31].

 36 Ibid at [34].

 37   Fair Work Act 2009 (Cth) s 172.

 38 Explanatory Memorandum, Fair Work Bill 2008 (Cth) 108 at [672].

 39   Ibid.

 40   The Australasian Meat Industry Employees’ Union v Golden Cockerel Pty Ltd[2014] FWCFB 7447 at [41].

 41   Toll Group - TWU Enterprise Agreement 2013-2017 at cl 6(a).

 42   Ibid at cl 17(f).

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