Australian Workers' Union, The v BlueScope Steel Pty Ltd [2016] FWC 2970 (19 May 2016) [2016] FWC 2970 FAIR WORK COMMISSION DECISION Fair Work Act 2009 s.739 - Application to deal with a dispute The Australian Workers' Union v BlueScope Steel (AIS) Pty Ltd (C2015/5636) COMMISSIONER RIORDAN SYDNEY, 19 MAY 2016 s.739 Application to deal with a dispute [1] This decision relates to an application by the Australian Workers’ Union, Port Kembla Branch (AWU) against a decision by BlueScope Steel (AIS) Pty Ltd (BlueScope) to remove an entitlement of an additional 0.875 hours pay per week that has been paid in accordance with “The Slab Yard – 12 Hour Shift Agreement” (Slab Yard Agreement). [2] The AWU was represented by its Legal Officer, Mr James Blaxland. BlueScope was represented by its Manager Employee Relations, Ms Jacqueline Fitzgerald. Witness Statements were sworn by: ● Mr Dragi Dimitrievski – Plate Controller/Crane Driver; and ● Ms Victoria Collins – Slab Yard Manager [3] The parties agree that the Slab Yard Agreement is an “Existing Departmental Agreement” as defined in the BlueScope Steel Port Kembla Steelworks Agreement 2012 1 (the Agreement). Background [4] The Slab Yard Agreement was introduced in 2010 following extensive discussion between the parties. The core issue of the Slab Yard Agreement was BlueScope’s desire for employees to move from working an 8 hour shift system to a 12 hour shift system. This modification resulted in a number of positions being made redundant, thereby delivering a cost efficiency to BlueScope. [5] The 8 hour shift pattern meant that Slab Yard employees were paid 9 hours of weekend penalty payment in their aggregate salary. The transfer to the 12 hour shift pattern resulted in only 8.125 hours being required to be worked on weekends, averaged over the whole year. To resolve this long running impasse, BlueScope agreed to pay the additional 0.875 hours so no employee was worse off by the new shift pattern. Relevantly, the Slab Yard Agreement was agreed to by the employees on this basis. [6] One of the major customers of the Slab Yard is the Plate Mill. BlueScope sought to restructure the Plate Mill in 2014 due to the projected and actual decrease in demand for its product. Following a lengthy industrial process, the hours of work at the Plate Mill were reduced to basically a Tuesday – Thursday operation. The restructuring of the Plate Mill resulted in a modified demand of product from the Slab Yard to the Plate Mill. This resulted in some employees in the Slab Yard being underutilised on weekends. [7] Prior to BlueScope’s announcement to the ASX re the future of the Port Kembla Plant, BlueScope had embarked on a campaign to improve costs efficiencies through its “Strive to Thrive” initiative in late 2014. As part of this process, Ms Victoria Collins, the Slab Yard Manager, identified a possible cost efficiency by fixing the 38 hour Rostered Day Off (RDO) of employees to only fall in the Friday to Monday cycle. This change resulted in employees only being required to work 6.8 hours per weekend rather than 8.125 hours. Following a number of conferences before the Fair Work Commission (FWC), as presently constituted, the parties agreed that 6.8 hours is an accurate assessment of the averaged weekend hours that were required to be worked. [8] Following briefings with all employees, BlueScope implemented the new system for RDO’s on 10 August 2015. Employees were only paid for the hours that they worked ie 6.8 hours. The AWU met with BlueScope to discuss this change. It is fair to say that the employees accepted the fixing of the RDO’s to cover the weekend but objected to losing the additional 0.875 hours of penalty pay each week that had been agreed to in the Slab Yard Agreement. The Slab Yard – 12 Hour Shift Agreement [9] The relevant provisions of the Slab Yard Agreement are: “ 3.1 Purpose This document is to be read in conjunction with the current Award at the time. The purpose of this agreement is to represent the values, goals, principles and conditions which have been jointly developed by the parties and will provide the framework for a new 12-hour shift work system at the Slab Yard Department. It describes the terms and conditions specific to 12hour shift work operations. This agreement specifically sets out principles for people working under the Slab Yard 12-hour shift system. This necessitates teams and team members being involved in the decisions that affect them and progressively assuming greater levels of accountability and responsibility in their place of work. Similarly, increasing the level of accountability and responsibility for their own role and actions. This will facilitate the creation of a work environment in which everyone will contribute to making the Slab Yard a high performance, world-class operation. Consequently, this agreement will also provide employees with access to rewarding and satisfying jobs and will result in efficient and continuously improving operations. The intention is for this agreement to set out principles and not to be prescriptive. 3.2 Direction The new 12-hour shift system of work has been developed to create a more efficient system of working shift and support the business directions of the Slab Yard Department. The new system is known as the ‘12-hour Aggregated Salary System’. The underlying principles of this change are as follows: i.) To provide a fair and equitable pay system, i.e pay the people what they work; ii.) Provide employees of the Slab Yard Department with a better way to work shift. 4.3 Cancellation of roster system following implementation The 12-hour shift roster may be cancelled if either management or a majority of at least 67% of the employees in a department or area of plant submit to the other party, one months notice in writing of their desire to terminate the roster. The basis for cancellation is that the general principles as set out in the Preamble (Section 3) of this document are not being fulfilled. Management reserves the right to change or cancel this agreement but would comply with the award conditions existing at the time of the change. 10.3.1 Weekend penalties With reference to the current 8hr roster pattern, employees work on average nine penalty hours a week as a result of rostered weekend work. Penalties are based on an extra six hours pay on Saturday and an extra twelve hours pay on Sunday. Calculation is therefore: Weekend payment = Hourly rate x 9.00 hours x 52 weeks. ” BlueScope Steel Port Kembla Steelworks Agreement 2012 (the Agreement): [10] The relevant provisions of the Agreement are: “ 35.2 Introduction of Change Including Outsourcing 35.2.1 Principles concerning the management of change The parties agree to the following key principles concerning the management of change: (a) The parties recognise and accept that change is an inevitable and increasingly necessary part of the steel industry. (b) Change must be ongoing to ensure that the Company remain viable and employee expectation concerning security of employment can be satisfied. (c) In considering the desirability and business case for any proposed change the tests to be applied are requirements for the change to be: • safe; • efficient; • legal; and • fair. (d) The parties commit to consult and abide by the dispute settling procedures provided in this Agreement in the event that proposed changes are not agreed. In support of this commitment there will be both detailed communication and strong reinforcement by the Company and Un ions in respect of these procedures. Subject to any disagreement being dealt within accordance with agreed procedures, and in the case of significant change 35.2.3, the change will be able to be implemented. (e) All parties share an intent that there be "zero industrial action" and to that end will actively ensure that employees, delegates and officials will, on each and every occasion where a dispute arises and is not resolved, follow the applicable dispute settling procedure and not take industrial action. “ 39. Department Work Agreements 39.1 The Company has, and may at any time during the operation of this Agreement make agreements with relevant employees in a department or work area in relation to work arrangements for that specific department or work area. The matters dealt with by such agreements may include the method of implementation of hours of work, shift and rostering arrangements to accommodate the operations of that department or work area. 39.2 It is acknowledged that current work practices in a specific department or work area may arise from a Departmental Work Agreements made before the making of this Agreement. Nothing in this Agreement is intended to affect or displace a current practice arising from such Department Work Agreement and they will continue to apply in accordance with this clause (Existing Department Arrangement/s). 39.3 Such arrangements where developed, or which are in operation at the time of making this Agreement, must ensure that the minimum entitlements of employees under this Agreement are satisfied and must operate in a manner which is overall no less favourable to employees than these minimum entitlements. 39.4 Should the Company or relevant employees in a specific department or work area wish to vary or end an Existing Department Arrangement, this may occur: 39.4.1 at any time by agreement between the Company and a majority of affected employees and their union; or 39.4.2 in accordance with clause 35.2 Introduction of Change, Including Outsourcing. provided that any va1iation or termination must ensure that the minimum entitlements of employees under this Agreement are satisfied. 39.5 Any dispute between the parties in relation to these arrangements (including to their introduction or variation), will be dealt with in accordance with clause 35 of this Agreement, Procedure of Resolving Claims, Issues and Disputes, including as applicable clause 35.2, Introduction of Change Including Outsourcing. 39.6 This clause also applies to departmental arrangements previously contained in the Bluescope Steel (AIS) Pty Ltd -Port Kembla Steelworks Employees Award 2006. 39.7 Provided that nothing in this clause limits the introduction of change otherwise provided for in this Agreement. Retention of Earnings 2 : “ Extended Notice of Shift Changes Where due to technological change or workplace restructuring, an employee is required to transfer from one shift basis to another or to day work such that the employee incurs a reduction in average earnings (excluding overtime) for greater than $20 per fortnight (eg. From 7 day shift work to 5 day work). a) The Company will, as far as practical, in the case of changes due to workplace restructuring or technological change, give a sex (6) months notice of intention to change shift. The purpose of this notice period is to allow employees to re-adjust their financial commitments in line with their reduced earnings. b) An employee may be required to transfer with less than the notice period mentioned in (a). However, in such circumstances they will be paid a make-up for the balance of the nominal shift earnings (excluding overtime) and that of their new roster (excluding overtime). c) The period of required notice and potential make-up pay will not exceed the period that an employee has been on shift work should they have been working shift work less than the notice period in (a). d) For the purpose of this provision, the notice period will be deemed to commence from the date that the individual is given formal advice of their change of roster. This provision will not apply to shift changes resulting solely from market change.” Evidence and Submissions [11] Mr Dimitrievski testified that the extra 0.875 hours of weekend penalties was a “sweetner” to incentivise employees to accept the 12 hour shifts. Mr Dimitrievski claimed that the then Manager of the Slab Yard promised that the employees “would not lose a cent”. Further, Mr Dimitrievski stated that he thought it was unfair for BlueScope to remove the employee benefit from the Slab Yard Agreement whilst maintaining the efficiencies of the 12 hour roster. Mr Dimitrievski confirmed that his 12 hour shift pattern has not changed since August 2015. [12] In response to a question from me, Mr Dimitrievski accepted that there was a provision in the Slab Yard Agreement that allows the employees to cancel the Slab Yard Agreement. Mr Dimitrievski advised that this course of action had been discussed by the employees but the majority wanted to maintain their existing lifestyle which has been moulded by the current 12 hour shift pattern. [13] Ms Collins advised that she participated in the mediation process that was conducted by Vice President Hatcher but only in relation to the issues pertaining to the Slab Yard. Ms Collins confirmed that the $200,000 savings gained from this proposal formed part of the $200 million of savings that were found to allow the Steelworks to remain operational. [14] Ms Collins denied that she had not undertaken appropriate consultation with the affected employees. “PN407 Mr Blaxland: You never told them that they were going to lose that extra 0.875 hours that was included in the departmental agreement though, did you? Ms Collins: I made it clear to them that they would be paid for the hours that they worked. PN408 Mr Blaxland: You never specifically referenced the slab yard agreement and you never specifically told them that the actual reduction in hours by this change was only 1.325, and yet you were going to take 2.2 hours away from them? Ms Collins: I clearly explained to them that they were currently paid nine weekend penalty hours and that I would be paying them 6.8 weekend penalty hours to reflect the hours that they worked.” 3 [15] In relation to BlueScope’s Retention of Earning’s Policy, Ms Collins denied that her proposal could be identified as a “transfer from one shift basis to another” purely on the fact that the 12 hour shift pattern of day, day, night, night, 4 off continues to apply to all employees. Ms Collins claimed that the provisions of the Policy do not apply in this circumstance. [16] Mr Blaxland advised that the relevant test for this proposal is that it must be safe, efficient, legal and fair. Mr Blaxland accepted that the proposal satisfies that the tests of safe, efficient and legal. [17] Mr Blaxland claims that the proposal is not fair because it removes a fundamental provision of the 2010 Slab Yard Agreement by the removal of the additional 0.875 hours penalty hours paid each week. Mr Blaxland referred me to the evidence of Mr Dimitrievski who stated that without this additional payment the Slab Yard Agreement would never have been agreed. [18] Further, Mr Blaxland submitted that BlueScope has provided employees in similar circumstances with the benefits of the Retention of Earnings policy. Mr Blaxland argued that to not do so for the Slab Yard employees was simply unfair. [19] Mr Blaxland also argued that the level of consultation from BlueScope in relation to the proposal has been deficient. Mr Blaxland submitted that employees were unaware throughout the process that they would lose the 0.875 hours “sweetner” of the Slab Yard Agreement. [20] Ms Fitzgerald referred me to the decision of His Honour, Hatcher VP in a not dissimilar matter of BlueScope Steel (AIS) Pty Ltd v Australian Workers’ Union 4 . This case involved the Cokemaking Department at BlueScope. Relevantly His Honour held: “[11] That leaves the question of fairness. The major issue in this respect raised by the AWU was that it would be unfair for Bluescope to retain all the savings and efficiencies achieved by the Coke Agreement but for employees to lose what they gained from it in return. Whilst in normal circumstances that submission might have some weight, the extremely difficult commercial situation which currently exists and is likely to exist for some time means that the submission cannot be accepted. To the extent that the current payment arrangement for hot seat changeovers involves payment for time that is not actually worked, that is a cost inefficiency which cannot be allowed to continue. Such cost inefficiencies were removed from all other parts of the steelworks as a result of the MOA, and were earlier substantially removed from the Cokemaking Department by the agreed changes to the Coke Agreement in 2010. It will not be fair to anyone in the longer term if inefficiencies in the steelworks’ cost structure prevent it from being as commercially competitive as it might otherwise be, with a consequent elevated risk to jobs.” [21] Ms Fitzgerald referred me to the announcement from the Managing Director of BlueScope in August 2015 where he stated that BlueScope needed to achieve on-going annual cost savings of $200 million in order to keep the Port Kembla Steelworks operational. [22] Ms Fitzgerald contended that there was no basis in the current financial situation for BlueScope to pay employees for hours that they do not work. [23] Ms Fitzgerald argued that the Agreement allows for and recognises the need for on-going change in order for BlueScope to be able to maintain its operation at Port Kembla. Ms Fitzgerald submitted that it would be unfair to BlueScope if it was unable to implement change in order to improve its viability. [24] Ms Fitzgerald concluded by arguing that the Retention of Earnings issue is outside the jurisdiction of the FWC. Putting that aside, Ms Fitzgerald argued that this matter does not meet any of the criteria which would enliven the policy anyway. Consideration [25] I have taken into account all of the submissions and evidence that have been provided by the parties. [26] I have taken into account that the employees believe that the removal of the 0.875 hours of weekly weekend penalty payments from the Slab Yard Agreement is unfair. [27] I have taken into account the difficult and on-going financial position of BlueScope and the efficiency measures that have been agreed to by the parties to keep the Port Kembla Steelworks operational. [28] I was impressed by the evidence of Ms Collins. Ms Collins provided honest and informative evidence in relation to this operation of the Slab Yard and the state of the global steelmarket. I regard Ms Collins as a witness of credit. I accept her evidence that she consulted with the employees at the Slab Yard in relation to the proposed change, including the decision to only pay employees for the weekend overtime hours that they actually work. I have taken this into account. [29] I have taken into account the provisions of the Slab Yard Agreement and the BlueScope Enterprise Agreement. I am sympathetic to the employee positions that BlueScope appears to be removing a fundamental provision of the Slab Yard Agreement whilst maintaining an expectation that the remainder of the Agreement will continue to apply. Determination [30] I accept and find that the proposal is safe. There is no change to the shift roster as a result of the fixing of the RDO’s to weekend shifts. [31] I accept and find that the proposal is efficient. Budgeted cost savings of more than $200,000 have not been challenged by the AWU. These on-going annual savings are significant. [32] I accept and find that the proposal is legal. Clause 39 of the Agreement allows for the parties to seek changes through the Disputes Procedure provisions. I am satisfied that BlueScope has complied with all of the consultation requirements of this provision. [33] I accept and find that the proposal is fair. I agree with the comments of Vice President Hatcher in the Cokemaking decision. I expressed similar sentiments in the Blast Furnace decision 5 a few weeks ago. Whilst in a perfect world BlueScope would be able to continue to provide “overaward” or “special payments” to select groups within the Steelworks, the current economic climate and fiscal position of BlueScope make such a scenario untenable. It would be unfair if every other BlueScope employee was only paid for the hours that they actually worked by the Slab Yard employees continued their arrangement. Whilst the Slab Yard Agreement allows for the employees to terminate this Agreement, I would hope, as a matter of good faith, such action will not be forthcoming. [34] The AWU asked me to make a comment in relation to the retention of earnings issue. I fail to see how this proposal can satisfy the basic precondition of this policy entitlement. I do not agree that the fixing of RDO’s to weekend shifts can be described, in any context, as a “transfer from one shift basis to another.” The shifts of the employees remain the same. They continue to work 12 hour shifts on a 7 x 2 roster, 4 on 4 off. The only change is the fixing of the RDO’s to the weekend shifts – a change that will provide greater social and family engagement and participation for employees. This change has not been brought about by technological change or workplace change at the Slab Yard. It has been caused by the necessary drive to lower the cost of producing steel at Port Kembla and the change in demand from the Plate Mill. [35] For the reasons outlined above, the application is dismissed. COMMISSIONER 1 [2013] FWCA 5308 2 AWU3 attachment 1 3 PN407 – 408 Transcript – 14 April 2016 4 [2016] FWC 1345 5 [2016] FWC 640 Printed by authority of the Commonwealth Government Printer <Price code C, PR580266>