CPSU, the Community and Public Sector Union v Airservices Australia & Murphy and Another [2015] FWC 990 (16 February 2015) [2015] FWC 990 FAIR WORK COMMISSION DECISION Fair Work Act 2009 s.739 —Applications to deal with a dispute CPSU, the Community and Public Sector Union v Airservices Australia (C2014/1110) The Association of Professional Engineers, Scientists and Managers, Australia v Airservices Australia (C2014/5128) DEPUTY PRESIDENT SMITH MELBOURNE, 16 FEBRUARY 2015 Work performance framework and salary advancement. Introduction [1] The Airservices Australia Enterprise Agreement 2013—2017 [AE403519] (the Agreement) contains the following provision: 5.6 WORK PERFORMANCE SYSTEM / PERFORMANCE REVIEW AND PERFORMANCE BASED SALARY ADVANCEMENT COMMENCING 1 JULY 2014 5.6.1 A working party, involving Airservices, employees and their representatives will be established to facilitate consultation regarding a new Work Performance System. Airservices will develop a new Work Performance System to be implemented commencing on 1 July 2014, in time for the start of the 2014/2015 Work Performance System cycle. 5.6.2 The new Work Performance System will be consistent with the following principles, being a system which: (a) facilitates meaningful discussions between staff and their first line manager on issues relating to performance; (b) supports a culture where collaborative performance and development discussions are a regular day-to-day activity, and are a shared responsibility between staff and their manager; (c) reflects a clear link between genuine performance and consistency with Airservices' values on the one hand and improved remuneration outcomes on the other; (d) supports a culture where two-way feedback, which is designed to enable staff and managers to recognise individual strengths and opportunities for improvement, is actively encouraged; (e) recognises and appropriately rewards high performing employees progressing through their band and at the top of their band; (f) recognises that performance is assessed on what and how an employee has achieved their objectives throughout the assessment period, and provides flexibility relating to the rate at which an employee progresses through a band; (g) ensures performance agreements include: (i) agreed and realistic performance objectives, being clear expectations of staff, in the knowledge, skills and behaviours required to perform their roles; and (ii) clear statements on how performance will be assessed and measured and how the manager will support the employee to achieve their objectives; (h) links performance agreements and development plans to current roles and career planning, ensuring clarity for employees on areas of performance focus and potential capability gaps; (i) ensures performance is easily and consistently measured and accessible to all relevant parties; (j) ensures alignment of performance management with business planning objectives and integration with relevant policies; (k) ensures that the process is designed to support all aspects of the framework and incorporates the principles of transparency and fairness; (1) ensures that the process offers portability to support staff moves; (m) is based on a five (5) point rating scale. The descriptions of each ranking of the five point scale and the mechanism for assessment will be determined in consultation with the working party. [2] It is apparent that the parties agreed that Airservices Australia (Airservices) will develop a new Work Performance System (WPS) to be implemented commencing on 1 July 2014, in time for the start of the 2014/2015 Work Performance System cycle. Airservices did develop a WPS in consultation with the relevant unions and there was no obligation upon Airservices to reach any further agreement on the content of that work performance system. So much is clear from the clause 5.6.1; however the WPS must be consistent with the principles contained in clause 5.6.2. [3] The parties to the Agreement co-operated and sought to reach agreement on the new system. One issue divided them. Historically, when an employee met the expectations of the employer in performing the role after a performance review, that employee moved to the next pay point in the scale. The approach to setting the expectations of the job is for the employee and the supervisor to agree on what is expected and then at the end of that cycle to test expectations against performance. Airservices decided that salary progression would not occur when the employee met the expectations of the employer but only when the employee exceeds, or is outstanding in relation to those expectations. [4] When this divide became apparent the CPSU, Community and Public Sector Union (CPSU) and The Association of Professional Engineers, Scientists and Managers, Australia (APESMA) made application for the Commission to deal with a dispute in accordance with the dispute settlement procedure. Conciliation occurred, but regrettably, this did not produce an agreement. [5] The parties agreed that the matter to be determined was: Is the Work Performance Framework proposed by Airservices, including not providing incremental advancement for employees who are rated “meets expectations”, consistent with the correct interpretation and application of the terms of the Airservices Australia Enterprise Agreement 2013—2017? [6] The disputes avoidance and settlement procedures empower the Commission to settle disputes about matters arising under the Agreement, 1 without forgetting of course the need to comply with s.739(5) of the Fair Work Act 2009 (the Act). [7] Airservices was represented (with permission) by Mr Y. Shariff of counsel; the CPSU was represented by Mr K. Barlow; APESMA was represented by Mr D. Smith and The Civil Air Operations Officers’ Association of Australia (Civil Air) by Ms S. Berenyi. The submissions and evidence [8] I note to begin that none of the unions opposed a more rigorous WPS. Indeed, there was no opposition to supervisors looking closely at what performance was required to meet expectations. There was a genuine consensus on building a productive capacity at the workplace. [9] The CPSU argued that the proposed work performance framework was inconsistent with the meaning and application of the Agreement and with the intention of the parties when reaching agreement. To this end the CPSU relied upon the principles identified in clause 5.6.2 of the Agreement referred to earlier. In particular the CPSU submitted that: Airservices proposed Work Performance Framework is inconsistent with these principles because it fails to: i. Include principle 5.6.2(f) which requires performance include performance by employees who are rated as ‘Meets Expectations’, as they have achieved their agreed objectives. ii. Include principle 5.6.2(c) which requires genuine performance include being rated as “Meets Expectations”. iii. Include principle 5.6.2(c) which requires genuine performance, including that of “Meets Expectations”, to have an improved remuneration outcome, being incremental advancement. iv. Include principles 5.6.2(e)(f) which require appropriate differential recognition of high performing employees rated “Outstanding” and “Exceeds” to be recognised through flexibility in the rate at which those employees progress through the band. v. Include principles 5.6.2(i)(k) which do not permit salary advancement to be subject to discretionary or potentially subjective assessments by management, as it would be for employees rated “Outstanding” and “Exceeds” who would receive salary advancement under the proposed Framework. vi. Include principle 5.6.2(i) which requires performance based increments to be accessible to all employees, including those in technical or regulatory roles where it is difficult to surpass the set objectives. [10] In short, the CPSU submitted that the principles focussed on productivity and performance improvements being directed towards a more structured and realistic performance objectives to achieve a “meet expectations” assessment. It was argued that if only “exceeds expectations” and “outstanding” were to generate a wage increase then downward pressure would be put on agreed performance targets to “meet expectations”. The CPSU submitted that the principles allowed for faster movement through the structure where employees exceeded expectations and/or were characterised as outstanding. It argued that the principles, which were the basis for the structure, did not comprehend a position where an employee remained stationary in the salary structure in circumstances where that employee met the expectations of their supervisor. [11] It was also argued by the CPSU that the approach adopted by Airservices did not give rise to objectively enforceable rights. It was put that the subjective view of the supervisor in relation to performance was an inappropriate method of determining rights. Airservices noted that the current approach to “meeting expectations” may suffer from the same vice. [12] In then turning to deal with the mutual intentions of the parties, if the Commission accepted the view that the language of the clause could give rise to differing interpretations, the CPSU called Mr M. Taylor who participated in the negotiations. It was the view of Mr Taylor that: ● The review of the WPS was to improve staff performance management and to facilitate career development. ● Airservices considered that its current WPS did not provide an accurate performance rating and that the line manager was not always the best person to provide the performance assessment. ● Airservices was looking at rewarding high performers by putting them on the maximum pay point of the classification. ● The new WPS was designed to more accurately identify employees who needed assistance and to remove any restrictions on recognising high performing employees. He drew attention to a management bargaining agenda document [Exhibit CPSU 1, Annexure MT1] which, under the subject of the WPS system said: “ Review of the work performance system and implementation of new system during the life of the agreement. This is to improve staff performance management and facilitate an improved career development process ”. ● The principles to be adopted should include a capacity to provide for accelerated advancement through a classification having regard to high levels of performance. ● The intent of the parties was not to change the WPS so that a person who met expectations would be denied advancement. In this connection Mr Taylor drew upon a circular from Airservices [Exhibit CPSU 1, Annexure MT6] where it referred to enhancements to the WPS whereas the proposed new WPS would be a reduction to employee conditions. [13] CPSU also called Ms M. Baker-Goldsmith who is a Senior Aviation and Environment Specialist employed by Airservices. It was her evidence that she did not understand the communications from Airservices to mean that her performance reviews would not result in salary advancement if she met expectations. In addition, it was her evidence that her role was determined by legislative obligations and she could not speculate how she would “exceed expectations” in such a role. [14] APESMA expressed similar concerns and expressed the view that it was prepared to work with the employer to “provide greater grunt if necessary to that meeting expectations criteria”. 2 APESMA called Mr T. Richards a Professional Engineer who was a lead negotiator in the Agreement. His evidence was that the Agreement was to meet some of the expectations of those he represented in providing greater access to salary progression for outstanding performers. His evidence was that he didn’t understand the position of Airservices to be one where an employee would stand still if they met the expectations of their supervisor. [15] Civil Air supported the submission of the CPSU and APESMA. [16] Airservices called Mr A. Marcelja, the Manager of Government and International Relations for Airservices. Mr Marcelja was a participant in the bargaining meetings. It was his evidence that: ● All parties agreed that the existing WPS was not effective and needed review. ● At the meetings the parties discussed the need for productivity gains to fund any pay rise. ● Airservices would decide the WPS having regard to certain principles but that it would not agree to remove its discretion in favour of only implementing an agreed WPS outcome as that risked not making the productivity gains needed for the agreement. ● In his opinion, the unions must have expected that the new WPS would be something significantly different from the existing system. ● He agreed with accelerating high performers through the band but that also meant decelerating low performers. In his view this meant no increase. This later point caused some discussion as to the meaning of decelerate where Airservices expressed the view that it could mean no increase whereas APESMA stated that it did not mean standing still. ● The offer of the increase in wage outcomes was dependent upon the new structure achieving productivity improvements. Approach to construction [17] This is a well trodden path which was summarised by Airservices drawing upon the decision of the Full Bench in DP World Brisbane Pty Ltd and Others v Maritime Union of Australia 3 : ‘Full Bench held can be distilled from these authorities regarding the construction or interpretations of agreements are: a) the construction task begins with considering the ordinary meaning of the words having regard to their context and purpose—ordinary or well-understood words should generally be accorded their ordinary or usual meaning: Amcor Limited v CFMEU [2005] HCA 10 ; (2005) 222 CLR 241 at [30] per Gummow, Hayne and Heydon JJ; b) where the language is ambiguous or open to differing interpretations it is permissible to have regard to surrounding circumstances or context to assist in the interpretation of an agreement: Code/fa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352; c) regard should not be had to the subjective beliefs or understandings of the parties about their rights and liabilities: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40]; d) the meaning of the provision is to be determined with regard to what a reasonable person would have understood it to mean, with this usually requiring consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd 219 CLR 165 at 179 [ 40]: BP Australia Pty Limited v Nyran Pty Limited [2003] FCA 520 ; 198 ALR 442 at [34] ; and e) a court or tribunal 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 industrial instrument: Kucks v CSR Limited [1996] IRCA 166 ; (1996) 66 IR 182 at 184.” 4 [18] There was no controversy in relation to the relevant tests and I propose to apply those in the matter at hand. Conclusion [19] In this matter it is important to distinguish what was agreed by the parties and not what the outcome might be from that agreement. What was agreed is clear and unambiguous given the language of clause 5.6.1, followed by the principles contained in clause 5.6.2. [20] There is no doubt that the employee bargaining parties do not support the outcome of Airservices consideration of the new WPS. From the submissions it appears that this is so because: ● The change is so far-reaching in public sector employment and as such came as a surprise. Whilst Airservices did not openly advocate the conclusion it has now reached, it did not positively disagree with the outcome sought by the employee bargaining representative. Indeed they argue that it’s communication with staff did not disclose that its agenda was to alter progression based upon “meeting expectations”. I note that there is some force to this last observation. ● It is at odds with the historical approach to wage determination in public sector employment where progression within a structure was based upon performance outcomes agreed between the employer and the employee. In this case any agreement about what the employer requires the employee to achieve in the review period is of no financial benefit to the employee. In most cases employers expected employees to improve and grow the job. These were agreed objectives between the employee and the supervisor which were designed to increase skill and responsibility leading to work value growth. ● In the past, not meeting the expectations of the employer could lead to a performance improvement plan and a failure to progress, whereas this would not be the case under the system determined by Airservices as meeting expectations would also mean a failure to progress. ● There was an objective consideration of whether or not the performance agreement was met. ● It would lead to employees seeking to lower the expectations of supervisors so that performance beyond “meeting expectations” would be rewarded. ● There are some functions where the scope for exceeding expectations was limited given the nature of the tasks assigned. ● It could lead to inconsistent treatment resulting from the views of supervisors. [21] I highlight for completeness that none of the employee bargaining representatives opposed greater rigour and enhanced expectations for the criteria of “meeting expectations”. If the problem was that it was too difficult to manage an expectation that another year’s service demanded incremental advancement, it appeared to me that the employee bargaining representatives were open to assisting with attitudinal and real change. Although, as with such structures, top of the band problems highlighted the constant expectation of salary advancement independent of any other bargained increase. [22] For Airservices, it is clear that it needed productivity improvement. It must follow that its current management approach to setting performance targets for employees through its supervisors was not sufficiently rigorous to achieve growth in job performance even though a cooperative approach existed between employees and supervisors. It was also clear that the focus was on increased productivity rather than cost saving as Airservices was not adopting a bell-curve distribution approach to the cost associated with the progression through the wage structure. [23] However, what the parties expected from the review can only be relevant if the principles for the review favoured or militated against a particular conclusion. It is on this basis that the employee bargaining representatives turned attention to the principles in clause 5.6.2 of the Agreement. [24] It appears obvious that the principles adopted by the parties, which formed the basis of the new WPS, meet their respective subjective intentions. For the employee bargaining representatives, the strongest principle in support of their argument is principle (f), which states: recognises that performance is assessed on what and how an employee has achieved their objectives throughout the assessment period, and provides flexibility relating to the rate at which an employee progresses through a band. [25] Implicit in this principle, from the submission of the employee bargaining representatives, is the concept that progression will occur, but there will be flexibility for more rapid progress through the band. However this is but one principle and read in context with the other principles, it could give rise to a conclusion favoured by Airservices. [26] In examining the principles underpinning the new WPS addressed by the employee bargaining representatives, I am not satisfied that they can only lead to the conclusion urged upon me. It appears to me that the principles can be read in a way which supports the conclusion of Airservices when it decided, following consultation, the structure of the new system. [27] What is clear is that the mutual intention of the parties was to have a clause which required Airservices to consult and then decide a new WPS consistent with a set of principles. It is also clear that the subjective intention of the parties did not meet, but that is not determinative of this case. In case it is relevant, I observe that I am satisfied that proper consultation occurred, although I regret that subsequent conciliation failed. [28] To reiterate, the question put to me: Is the Work Performance Framework proposed by Airservices, including not providing incremental advancement for employees who are rated “meets expectations”, consistent with the correct interpretation and application of the terms of the Airservices Australia Enterprise Agreement 2013—2017? [29] The answer is Yes. DEPUTY PRESIDENT Appearances : K. Barlow for the CPSU, the Community and Public Sector Union. D. Smith for The Association of Professional Engineers, Scientists and Managers, Australia. S. Berenyi on behalf of The Civil Air Operations Officers’ Association of Australia. Y. Shariff of Counsel on behalf of Airservices Australia. Hearing details: 2014. Canberra: November, 26. 1 Clause 3.3. 2 Transcript PN490. 3 [2014] FWCFB 7889 . 4 Respondents submission, page 5. Printed by authority of the Commonwealth Government Printer <Price code C, PR560927>