Construction, Forestry, Mining and Energy Union v Port Kembla Coal Terminal Limited [2016] FWC 3852 (23 June 2016) [2016] FWC 3852 [Note: An appeal pursuant to s.604 (C2016/4478) was lodged against this decision - refer to Full Bench decision dated 20 September 2016 [ [2016] FWCFB 6783 ] for result of appeal.] FAIR WORK COMMISSION DECISION Fair Work Act 2009 s.739 - Application to deal with a dispute Construction, Forestry, Mining and Energy Union v Port Kembla Coal Terminal Limited (C2016/3037) VICE PRESIDENT WATSON MELBOURNE, 23 JUNE 2016 Dispute about matters arising under the enterprise agreement – Interpretation of enterprise agreement – Whether obligation to consult has arisen in relation to the initiative to de-man the Rail Shed – Fair Work Act 2009 , s.739. Introduction [1] This decision concerns an application for the Fair Work Commission (the Commission) to deal with a dispute. The application is made by the Construction, Forestry, Mining and Energy Union (CFMEU) under s.739 of the Fair Work Act 2009 (the Act) and concerns employees employed by Port Kembla Coal Terminal Limited (PKCT). The dispute relates to the provisions of the Port Kembla Coal Terminal Limited Enterprise Agreement 2012-2015 regarding consultation about major workplace change. [2] The matter was listed for conference on 28 April 2016 before Deputy President Booth. The parties also participated in a facilitated session before the Deputy President on 5 May 2016. The parties were unable to reach a resolution and the CFMEU requested that the matter be listed for arbitration. [3] The matter was listed for arbitration before me on 14 June 2016. At the hearing of the matter Mr A Walkaden appeared on behalf of the CFMEU and Mr B Rauf, of counsel, appeared on behalf of PKCT. Jurisdiction [4] The dispute comes to the Commission by way of the dispute settlement procedure in the Agreement. The clause relevantly provides: “ 6. Dispute Settlement Procedure 6.1. If a dispute arises about matters arising under this Agreement or the NES, the following procedure will apply and there will be no stoppage of work by the employer or Employee whilst this dispute procedure is being followed. Work will proceed under the conditions prevailing before the dispute. Where those conditions are themselves disputed, work will continue in accordance with the reasonable direction of the employer, the Employee's recognised skills, competence, training and safe working practices. 6.2. The procedure for the resolution of disputes is as follows: a. Discussion between the Employee and the immediate manager involved. b. Referral in writing by the person(s) raising the grievance for discussion with the Employee's department head or their representative. The Employee(s) may appoint another person to act on their behalf. c. Where another person is involved they will be allowed the necessary time during working hours to interview the Employee(s) and the manager and to discuss the dispute. d. Referral by either party to FWA for conciliation in the first instance and, if the matter is not resolved at conciliation, arbitration in accordance with the Act. 6.3. By agreement between the parties, any or all of the above steps may be by-passed in the interest of a speedy resolution of the dispute. …” [5] I am satisfied that the parties have empowered the Commission to arbitrate this dispute under the terms of the Agreement. The Question for Determination [6] The parties have agreed that the dispute is to be determined by answering the following question: “Has the obligation to consult under clause 7 of the Agreement arisen in relation to the initiative to de-man the Rail Shed?” [7] In order to determine this question it is necessary to consider whether the point of time at which consultation is required to commence under the Agreement has been reached. Background Facts and Evidence [8] In a general sense the dispute has arisen after Mr Craig Johnston, Operations Superintendent of PKCT, raised an improvement initiative with his Manager and communicated his intention to undertake a risk assessment in relation to the proposal. The suggestion involves re-allocating some of the duties of the Rail Receival Operator to an existing third party Pacific National Operator and other duties to the inbound Main Control room Operator during the unloading of trains at Rail Receival, thereby obviating the need for a Rail Receival Operator on shift. As this dispute may depend on precisely what events have occurred and what is envisaged in the future I propose to summarise the events and circumstances in more detail. [9] Mr Johnston is the Operations Superintendent of PKCT. He reports to the Operations Manager, Mr John Gorman, who in turn reports to the overall manager of the facility, Mr Green. Four shift operator teams report to Mr Johnston. A Maintenance superintendent also reports to Mr Gorman. Various other planning, engineering and specialist advisory staff also report to Mr Green. [10] In December 2015 Mr Gorman had a discussion with Mr Johnston in which he indicated that the Project Review Council of the PKCT had decided not to allocate funding for a particular efficiency at the Rail Receival area of the operations. Later that month, Mr Johnston, who is responsible for the Rail Receival area informed Mr Gorman that he had an idea for an alternative efficiency of reallocating duties of the Rail Receival Operator during the unloading of trains. Mr Johnston requested further analysis of the idea including a summary of benefits and disadvantages so that he could assess the feasibility of the proposal. [11] Mr Johnston sent an email to the coordinators of the shift work teams on or about 2 March 2016 which read as follows: “Guys, This risk assessment is to assess the risks of de-manning the rail shed during train wagon unloading operations. See below the executive summary that I have taken out of the risk assessment that I have initiated for this proposed change: If needed we can walk up to the Tower to determine what risks or improvements that would need to occur in order to facilitate this change. EXECUTIVE SUMMARY: This risk assessment will identify the potential risk issues and potential controls that could occur as a result of this proposed change. The purpose of this risk assessment is to identify the major risks associated with changing the unloading manning arrangements that we currently have. Suitable controls are to be identified and an action plan for implementation is to be developed based on this Risk Assessment for consideration by the Management team. The purpose of this Change would be to free up a resource for efficiency gains within the team for example: HOW this would work: - MCR Inbound will perform the Rail Unloading monitoring process from the Main Control Room. (MCR Outbound to manage Road unloading during Train unloading process) - MCR Operator will notify PN examiner of part or fully loaded wagons that have failed to empty and stop the train when such occur. - PN Examiner will perform the following ○ Wagon Vibrator Operations when required (to remove hung-up coal) ○ Cleaning grids post unloading of coal and for contamination. ○ All Other current PN duties - PKCT Trades will attend equipment fault issues as per normal Breakdown response - System will be automated to allow the MCR operator to activate the system to gain the proceed light for the train from the Main Control Room.” [12] The question that needs to be determined relates to the relevance of consultation obligations in the Agreement to the circumstances described above. The Relevant Clauses of the Agreement [13] The dispute relates to clause 7 of the Agreement, which provides as follows: “ 7. Workplace Change and Consultation 7.1. Consultation over significant change or effect will occur where: a. the Company is considering introducing a major change to production, program, organisation, structure, technology, shift arrangements, work organisation or the level of outsourcing in relation to its enterprise; and b. the change, if implemented, is likely to have a detrimental or significant effect on employees. 7.2. The purpose of consultation is to: a. Resolve issues, where possible, at the workplace and avoid unnecessary problems by identifying and discussing matters of actual or potential concern as close to the workplace as possible; b. Improve the level of understanding between management, Employees and Employee Representatives by exchanging relevant information on a timely basis and c. Deliver an efficient decision-making process by ensuring Employees are aware of a review of their work area that could lead to significant change or effect on working arrangements and allowing Employees and Employee Representatives inputs to be taken into consideration through a process of consultation, prior to a final decision being taken by management. 7.3. The Company will give prompt and genuine consideration to matters raised by the relevant Employees and their Employee Representatives. 7.4. The Company will notify the relevant Employees and their Employee Representatives of the proposed change as soon as a decision has been made. 7.5. The consultation process may be modified by agreement between the parties. 7.6. Significant change or effect may include but is not limited to: a. major changes in the composition, operation or size of the Company's workforce; or b. the skills required; or c. the significant restructuring of work organisation; or d. proposals by the Company to outsource services or contract out services currently provided by Company Employees. 7.7. The above definition seeks to illustrate that the changes requiring extensive consultation generally need to have broad impacts and be likely to affect a significant part of the Company's operations or affects Employees' working arrangements. 7.8. The consultations will be conducted within a context which acknowledges the statutory obligations and responsibilities of the Company and where the Employees and Employee Representatives do not have a power of veto over the Company's final decision. This does not affect the right of the Employees or their representatives to notify a dispute through the agreed Dispute Settlement Procedure.” [14] This clause has been the subject of litigation in the Federal Court. In the course of the Court’s consideration Murphy J said the following in relation to the obligation to consult: 1 “PKCT’s contention that it was only obliged to consult after a “decision” had been made 1. PKCT contended that its obligation to consult pursuant to the Agreement only arose after it had made a “decision” to propose the forced redundancies of Mr Giddings, Mr Rosewarn and Ms Arber. In this regard it relied on cl. 7.4 which provides that “[t]he Company will notify the relevant Employees and their Employee Representatives of the proposed change as soon as a decision has been made. ” (Emphasis added.) 1. PKCT argued that because cl. 7 refers to notification arising after the making of a “decision”, it followed as a matter of logic that any consultation could only occur once the relevant notification had occurred. On PKCT’s argument, until Mr Green made the decision to abolish the affected positions it was under no obligation to consult. It argued that the obligation in the present case was to consult about the way in which the decision to abolish positions was to be implemented . 1. I do not accept PKCT’s contentions in this regard. Again, in my view they are based upon a misconstruction and misapplication of cl. 7. 1. First , cl. 7.1 requires PKCT to consult with employees and the Union when it is considering introducing a major change which, if implemented, is likely to have a detrimental or significant effect on employees. The use of the word “considering” means that the obligation to consult is enlivened when PKCT is examining or giving consideration to a “major change” which, if implemented, is likely to have a detrimental or significant effect on employees. 1. There is nothing in cl. 7.1 to indicate that the obligation to consult commences not when PKCT is considering a change, but rather when its consideration has concluded by it making a decision. While it may be accepted that an embryonic or relatively unformed proposal might not, at that stage, attract the obligation to consult under the Agreement, those are not the facts before me. 1. Second , PKCT’s argument that cl. 7.4 is the only provision in cl. 7 that has a timeframe is misconceived. The matters dealt with in subcll. 7.1 to 7.8 arise sequentially and the clause should be construed in that way. Read sequentially, cl. 7.1 requires PKCT to consult with its employees when it is considering a major change, cl. 7.2 explains the purpose of consultation and provides that it is to occur prior to a final decision, and cl. 7.3 requires PKCT to give prompt and genuine consideration to the matters raised by employees in that consultation. It is only then that cl. 7.4 refers to notification to employees of the proposed change “as soon as a decision has been made”. This is a reference to the decision made by PKCT after consultation. It requires no more than that PKCT promptly notify employees of the decision it has made once the consultation is complete. On a proper construction, cl. 7.4 describes when the consultation obligation in the Agreement comes to an end rather than, as PKCT contended, describing when that obligation commences. 1. Third , PKCT’s construction is inconsistent with cl. 7’s stated purpose. Clause 7.2(a) and (b) provide that the purpose of consultation includes to: (a) “[r]esolve issues, where possible, at the workplace and avoid unnecessary problems by identifying and discussing matters of actual or potential concern...”; and (b) “to improve the level of understanding between management, employees and employee representatives by exchanging relevant information on a timely basis”. 1. Clause 7.2(c) provides that the purpose of consultation includes to ensure that employees are aware of a review of their work area that could lead to a significant change or effect on working arrangements, so as to allow employees and the Union to provide input for PKCT’s consideration through a process of consultation. The purpose of a timely exchange of information, identification and discussion of matters of concern, and allowing employees and the Union to have “inputs” for PKCT’s consideration must include ensuring that there is a genuine opportunity for them to convey views and information to PKCT while it is considering a change, so as to potentially affect the result of that consideration. That is, they must be given a real opportunity to influence the outcome. 1. The purposes stated in cl. 7.1(a) and (b) are incompatible with PKCT’s construction which only requires it to consult when it has made the relevant decision, and then only to consult about implementation of that decision. In my view cl. 7 requires PKCT to consult when it is giving substantive consideration to a major change. 1. Fourth , the requirement in cl. 7.2(c) “allowing Employees and Employee representatives inputs to be taken into consideration through a process of consultation, prior to a final decision being taken by management” is significant. It requires PKCT to provide employees an opportunity to present their points of view and/or state their objections for management’s consideration before a decision is made. It confirms that the decision by PKCT is something which follows consultation, not something which precedes it. In my view it shows that the obligation to consult is enlivened at a time when there is a genuine opportunity to influence the outcome rather than after the decision is made. 1. Fifth , PKCT’s construction is inconsistent with the context in which the parties entered the Agreement. There can be no real question that the consultation obligation in cl. 7 finds its roots in the Termination, Change and Redundancy Case (1984) 294 CAR 175 and the Termination, Change and Redundancy Case (No 2 ) (1984) 295 CAR 673 (“ TCR Cases ”) . Over time those decisions led to the introduction of termination, change and redundancy clauses (“TCR clauses”) in industrial awards and agreements around Australia. In Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v QR Limited [2010] FCA 591 ; (2010) 268 ALR 514 (“ CEPU v QR ”) at [47]-[63] Logan J usefully set out some of the history of the development of TCR clauses. 1. The decisions of the Australian Industrial Relations Commission and its successors (“the Commission”) which preceded the Agreement assist in understanding the meaning of “consultation” within such clauses. In CEPU v QR Logan J gathered some decisions in which the Commission discuss the meaning of “consultation”: see Construction, Forestry, Mining and Energy Union v Newcastle Wallsend Coal Company Ltd (C2758 Dec 1533/98 S Print R0234) (Full Bench); Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Vodafone Network Pty Ltd (C2001/5770 PR911257 ) (Cmr Smith); Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Optus Administration Pty Ltd AW791910 Print L4596) (Cmr Smith). 1. I respectfully agree with Logan J’s observation in CEPU v QR at [43], that the Commission decisions show that: ... A key element of [the content of consultation] is that the party to be consulted be given notice of the subject upon which that party’s views are being sought before any final decision is made or course of action embarked upon. Another is that while the word always carries with it a consequential requirement for the affording of a meaningful opportunity to that party to present those views. What will constitute such an opportunity will vary according the nature and circumstances of the case. In other words, what will amount to “consultation” has about it an inherent flexibility. Finally, a right to be consulted, though a valuable right, is not a right of veto. (Emphasis added.) 1. Nor has there been any real change in the Commission’s approach over the years. Recently in Livingstones Australia v ICF (Australia) Pty Ltd T/A IC Frith & Associates [2014] FWCFB 1276 at [35] the Full Bench of the Fair Work Commission held: Consultation does not mean joint decision making, it does involve a genuine opportunity to persuade ( CPSU, the Community and Public Sector Union v Vodafone Network Pty Ltd [ PR911257 ] per Smith C (as he then was); Modern Award Consultation Clause case [2013] FWCFB 10165 at [31] - [32]). The terms of the FW Act demonstrate that the legislature has intended to attach significance to the right to consultation in redundancy situations. 1. The history of the development of TCR clauses, and the Commission decisions which predate the Agreement, show a context in which the obligation to consult under industrial awards and agreements is generally aimed at providing employees an opportunity to have input into proposed major workplace changes. I have little doubt that this is in recognition of the fact that genuine consultation is likely to facilitate proposed changes and because the exchange of views between employers and employees is accepted as good management practice. This context points away from construing the obligation to consult in the Agreement as being limited to the period after PKCT had made the relevant decision and only to questions around the implementation of that decision. 1. Fifth , (sic) construing the consultation obligation as arising when management is considering a change rather than when a final decision is made is consistent with the meaning given to consultation in other settings. As Logan J noted in CEPU v QR (at [43]): Thus, in Port Louis Corporation v Attorney-General of Mauritius [1965] AC 1111 at 1124 the Judicial Committee observed of a consultation obligation in an ordinance in respect of measures to alter local government boundaries that: “[t]he nature and object of consultation must be related to the circumstances which call for it” and “The requirement of consultation is never to be treated perfunctorily or as a mere formality. The local authority must know what is proposed; they must be given a reasonably ample and sufficient opportunity to express their views or to point to problems or difficulties; they must be free to say what they think.” These observations as to what was entailed in a requirement to consult commended themselves, in the different context of their use in broadcasting legislation, to Toohey J when a judge of this Court in TVW Enterprises Ltd v Duffy (No 2) [1985] FCA 251 ; (1985) 7 FCR 172. His Honour pithily remarked (at 178), “Consultation is no empty term.” That same sentiment is evident in the following passage from the judgement of Sachs LJ in Sinfield v London Transport Executive [1970] 1 Ch the at 558 concerning a consultation obligation which attended a power to alter bus routes: It is apposite first to mention that Mr Francis emphasised not once but several times that whatever be the true construction of section 22(3) [which contained the consultation requirement] and whatever order this court might make, it was in the end the executive and no one else who made the decision. If that was intended to intimate that the executive merely looked on consultations as being an opportunity for those consulted to make ineffective representations, it would represent an approach that, to put it mildly, cannot be supported. Consultations can be of very real value in enabling points of view to be put forward which can be met by modifications of a scheme and sometimes even by its withdrawal. I start from the viewpoint that any right to be consulted is something that is indeed valuable and should be implemented by giving those who have the right an opportunity to be heard at a formative stage of proposals – before the mind of the executive becomes unduly fixed. [15] In my view the question that arises in this case is not answered by the above analysis. PKCT contends that any proposal is at an embryonic and relatively unformed stage – different facts to those that were before His Honour. Nevertheless the decision acknowledges that there is a category of circumstances that do not trigger the consultation obligations. The question posed by the parties requires a determination of whether the facts that have now arisen fall within that category. Principles of Interpretation [1] The principles for interpreting terms of enterprise agreements are well established by various High Court and Federal Court decisions. They have been summarised by a Full Bench of the Commission as follows 2 : “1. The AI Act does not apply to the construction of an enterprise agreement made under the Act. 2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity. 3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists. 4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement. 5. If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement. 6. Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include: (a) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement; (b) notorious facts of which knowledge is to be presumed; (c) evidence of matters in common contemplation and constituting a common assumption. 7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose. 8. Context might appear from: (a) the text of the agreement viewed as a whole; (b) the disputed provision’s place and arrangement in the agreement; (c) the legislative context under which the agreement was made and in which it operates. 9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement. 10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.” [2] I will apply these principles to the interpretation of the Agreement. Has the Obligation to Consult under clause 7 arisen? [3] It is not disputed that any proposal by the Company to reduce the number of operators employed at the rail shed would require consultation with the workforce in accordance with clause 7. The dispute in this case relates to the time when that obligation might arise. [4] In essence, the CFMEU submits that the obligation arises when a management representative, in the course of exercising management responsibilities, is considering a change. The CFMEU submits that this point has been reached by virtue of Mr Johnston initiating a risk assessment with the knowledge of Mr Gorman. [5] PKCT submits that the obligation only arises when the Company is considering a proposal, and this occurs when the manager responsible for considering changes, in this case Mr Gorman, adopts a proposal for consideration by the Company, in this case by the management team. PKCT submits that the initiative is still in an embryonic stage of a Superintendent considering the feasibility of the change. If Mr Johnston considers that the idea is feasible and advantageous, and Mr Gorman agrees, then the idea will move to being a proposal under consideration by the Company. In such circumstances consultation under clause 7 will occur and the management team will be involved in the consideration of the matter with the benefit of views and perspectives arising from consultation with the workforce. [6] In accordance with the principles of interpretation outlined above it is first necessary to consider the words of the relevant provision. In my view the words of the Agreement are clear. There is no ambiguity in the words used in clause 7. Rather it is a matter of determining whether the test established by the parties in clause 7 is satisfied in given circumstances. The obligation to consult arises “where the Company is considering introducing a major change” of the specified kind. The dispute involves a consideration of the factual circumstances to determine whether that trigger point in clause 7.1 has been reached. This essentially requires the determination of the meaning of the term “the company” in clause 7.1 in relation to the factual circumstances which are not relevantly in dispute. [7] In my view the terms of the agreement need to be considered in a common sense practical manner – and not a strict technical way. Consideration of a possible option by a superintendent, who does not have the power to decide on a change, does not constitute consideration by the Company in a legal sense. For a company to consider a proposal the relevant decision-makers would need to be involved. [8] In my view it would be wrong to consider the question by reference to whether the consideration by a member of staff is in the course of performing the staff member’s duties. Any preliminary consideration would fall into that category. Such a notion does not assist in identifying the trigger point. [9] The purpose of the clause is helpfully set out in the clause itself. That is a relevant consideration. In my view the purposes of the clause can be met by adopting either of the interpretations contended for. Hence regard to that purpose is not necessarily determinative of the question before the Commission. Nevertheless it is significant that the purposes of the clause can be met without adopting the broad notion contended for by the CFMEU. [10] In my view, when parties in an industrial agreement talk of matters under consideration by “the Company”, they can be presumed to intend that the consideration concerned be by the employees with relevant authority to decide on such matters. In my view they would not intend that a preliminary investigation of feasibility by a member of management, a supervisor or an operational employee with no authority to make the decision, is consideration “by the Company”. [11] If the consideration is undertaken with a view to advising senior management, who do have authority to make the decision, whether such a proposal is feasible, it suggests that consideration by the Company will come at a later point in time. If the manager with authority to decide receives a proposal and commences a consideration of the proposal then in my view the consultation obligation is clearly triggered at or around that point. On the facts of the present case that point has not been reached. Determination [12] For the above reasons I determine the dispute as follows: Q: “Has the obligation to consult under clause 7 of the Agreement arisen in relation to the initiative to de-man the Rail Shed?” A: No. VICE PRESIDENT Appearances : Mr Walkaden, A on behalf of the CFMEU. Mr Rauf, B of counsel with Ms Linton, A on behalf of PKCT. Hearing details: 2016. Sydney. 14 June. Final written submissions: CFMEU on 31 May 2016. PKCT on 9 June 2016. 1 [2015] FCA 1088. 2 [2014] FWCFB 7447 . Printed by authority of the Commonwealth Government Printer <Price code C, PR581556>