//
[2011] FWA 5935
General information, not legal advice.
Fair Work Australia
2011-09-07
Original judgment source is linked above.
s 238 - Application for a scope order
Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, known as the Australian Manufacturing Workers' Union (AMWU) and others
Application for a scope order - stalled negotiations and protected action - Unions seek separate negotiations and two agreements - history of negotiations - fair and efficient bargaining - case made out - scope order made.
[1] On 26 July 2011, the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, known as the Australian Manufacturing Workers' Union ('the applicant') filed an application under s 238 of the Fair Work Act 2009 ('the Act') seeking to have Fair Work Australia ('FWA') make a scope order in respect to enterprise agreement negotiations with Shinagawa Refractories Australasia Pty Ltd ('the respondent').
[2] The respondent is engaged in the manufacture of refractory materials for the steel and aluminium industries, such as dry pressed brick precast shapes which come in many sizes, shapes and weights and dry and wet monolithic type products. It employs 64 employees at its factory site at Unanderra, New South Wales, of which 49 employees are engaged in production and 15 employees are engaged in maintenance roles. The employees are members of three Unions: production employees are members of the Construction, Forestry, Mining and Energy Union ('CFMEU') and the maintenance employees are members of the applicant and the Australian Workers' Union ('AWU'). There has been a long history of enterprise agreement negotiations at the site, which I will outline shortly.
[3] The scope order sought by the applicant is as follows:
"Employees of Shinagawa Refractories Australasia Pty Ltd who work at the Unanderra site who are employed as Basic Entry Trade Assistant's, Ironmakers, Riggers, Boilermakers and Fitters."
While not readily apparent from the actual terms of the order sought, the practical effect of the proposed order is to require the respondent to negotiate two agreements for the employees engaged at the site - one for production employees and one for the maintenance employees. The AWU also supports the making of the proposed scope order and the CFMEU does not oppose the making of the order. On the other hand, the respondent opposes the making of the scope order as it wishes to jointly negotiate with the 3 Unions for a single enterprise agreement to cover all its employees at the site. In the alternative, it is submitted that if any scope order is to be made, it should cover employees whose employment is underpinned by the Manufacturing and Associated Industries and Occupations Award 2010 ('the Modern Award'); in effect, all employees.
[4] At this juncture, it is relevant to outline the recent industrial history and coverage at the site. Up to 2002, there had been one collective agreement covering all employees on the site. In 2005 and 2008, two separate collective agreements were negotiated for the two groups of employees. At the present time, the maintenance employees are covered by the Shinagawa Refractories Australasia Pty Ltd Glastonbury Avenue Maintenance Enterprise Agreement 2008 ('the Maintenance Agreement'). There is a separate collective agreement covering production employees, the Shinagawa Refractories Pty Ltd Glastonbury Avenue Operations Enterprise Agreement 2008 ('the Operations Agreement'). Both Agreements' nominal terms expired on 1 July, 2011. Negotiations for new agreements commenced in March 2011 and have not progressed beyond the service of logs of claims and importantly, a dispute as to the respondent's insistence that it will only negotiate with all the Unions together for a single enterprise agreement. Protected action by the employees has, and continues to occur, over the stalemate in negotiations.
[5] The following employees/delegates provided written and oral evidence on behalf of the AMWU and AWU:
Mr John Stewart, the AMWU Union Official for the site, also gave evidence in the proceedings.
[6] The evidence of the four employees was consistent and not seriously put in doubt by the respondent. Their evidence was to the effect of:
[7] Mr Stewart, who has represented his members at the site since 2007, stated that maintenance employees' meetings have always been held separately to production employees. He noted that from his observations and discussions with his members, there is not a good relationship between maintenance and production employees. He outlined the history of the present negotiations, the applicant's log of claims and various exchanges between the Union and the respondent. He believes that bargaining has not been proceeding efficiently and fairly because of the respondent's insistence on merging two agreements into one, despite his members 100 per cent unanimous rejection of this proposal.
[8] In cross examination, all of the Union's witnesses agreed that the Unions' refusal to attend joint meetings with management was consistent with their desire for a separate agreement.
[9] Mr Hart and Mr Curtain said that protected action has been taken, in part, over the scope issue, as it was the major issue. However, the members were also concerned over the respondent's proposals to remove certain conditions, such as redundancy, meal breaks and picnic day. Mr Hart said that there was also a concern that production employees would take over some of the work of maintenance employees, with a consequent loss of jobs. Mr Hart said that despite a clause in the 2009 agreement for discussions about production employees to undertake certain overtime before external contractors are used, that clause had never been invoked.
[10] In oral evidence, Mr Stewart deposed that the issue of scope raised two fears for his members - the protection of their jobs and work and the poor relationship between the maintenance and production employees. These views had been constantly expressed to him by his members. Mr Stewart believed the respondent's reference to demarcation concerned its wish to have brick workers doing the work of Trades Assistants in the maintenance area. This was strongly opposed by his members. Mr Stewart said that following a recent conciliation conference before Connor C, the Union had met separately with the Company on three occasions; but the position was stalemated and protected action had been taken. In cross examination, Mr Stewart said that despite some similarities between the two separate agreements, the issue goes deeper than just the terms of the agreements. He believed having separate agreements would produce a sensible outcome as had occurred in recent years.
[11] Mr O'Leary recalled that in 2002, the management had no problem whatsoever with having two separate agreements. Infighting between the Unions still existed and he believed that the current negotiations were not proceeding efficiently or fairly. Both Mr O'Leary and Mr Strinc said that the Union had never refused to talk to the respondent, but had only refused to do so jointly with the CFMEU.
[12] Mr Robert Laven is the respondent's Operations Manager. In outlining his duties and responsibilities, he said he had been involved in enterprise negotiations at the site for over 7 years. He said the 2002 Agreement was negotiated with the three Unions and having one agreement worked well. In any event, Mr Laven believed that the two 2005 Agreements were identical; save, obviously, for the job descriptions. He claimed that the request for two agreements came about because of a personality dispute between members of different Unions. At the time, it did not mean too much for the respondent as the agreements were to support two underpinning awards. However, now there is one award - the Manufacturing and Associated Industries and Occupations Award 2010. Mr Laven said that the two 2008 Agreements were identical, except for job descriptions, wages, tool allowance, shift loading and overtime.
[13] Mr Laven added that in previous negotiations with the Unions the respondent had received two logs of claims, which had many similarities. In describing the respondent's operations, Mr Laven noted that maintenance and operational staff work on the same equipment, but obviously in a different capacity. Mr Laven believed it was important to have one agreement "to prevent issues of demarcation, inefficiency and confusions in interpretation" and to be more flexible. Two agreements reinforce the "us and them" mentality and there needed to be common outcomes for working hours and rostering.
[14] Mr Laven emphasised that the respondent is presently under a great deal of financial stress and it was inefficient to have negotiations on the same issues with different parties. In any event, the respondent had offered, and had had four separate meetings, with the AMWU and AWU about their log of claims.
[15] Mr Laven said that he had observed all of the Organisers and delegates meeting together in the car park; yet they would not come together for a meeting with management. He believed the request for two agreements was a negotiating tactic, rather than a legitimate issue. Mr Laven claimed that the respondent had always offered separate meetings, if there were specific issues to one group. Mr Laven believed that negotiations were not proceeding "efficiently or fairly" because of the Unions' refusal to attend meetings. He rejected the applicant's claims that conditions were to be cut, as overtime and shift allowances are determined by the Award. Further, he rejected claims that maintenance employees are operationally distinct (to production employees) or that their agreements are different or that they have separate break areas.
[16] In cross examination, Mr Laven agreed that there was more than one difference between the two separate 2005 and 2008 Agreements, including differences in work groups, shift allowances, targets, overtime, wage rates, job descriptions and underpinning awards. Mr Laven did not believe maintenance employees would be disadvantaged if the shift and tool allowances are brought up to the conditions in the Modern Award for production employees, even though they are presently higher for maintenance employees. Although it was intended the outcome of negotiations would be a package, he could not say how the package might end up. Mr Laven conceded the possibility of the two groups being affected differently by a single agreement. He accepted that the production group had a higher number of employees.
[17] When asked to compare the recent logs of claims from the two groups, Mr Laven firstly accepted that they contained differences and similarities, and then conceded that there were more differences, than similarities. Mr Laven agreed that in attempting to resolve all issues affecting both groups, it was going to take some time. However, he believed it would be less efficient than negotiating for one agreement. He noted that wage outcomes in the recent agreements have been the same. Mr Laven did not agree that there was the potential for the production employees to out vote the maintenance employees and the respondent's intention was "to keep everyone happy."
[18] Mr Laven further agreed that maintenance employees have different experience, skills, and trades and perform different functions to production employees and have separate work areas. When asked about demarcation, Mr Laven replied:
"Currently with the two agreements it's like an "us and them" sort of mentality that I see. I would like everyone to get on together as a group of employees. I am not a big fan of "us and them". I see that having two agreements just keeps those sides apart. If we can combine it into one moving forward I think the company will be in a better position to work together."
Mr Laven agreed that the issues of demarcation, redundancy and seniority will still remain, whether there are one or two agreements, but he hoped the current bargaining process would resolve the issues. Mr Laven accepted that the maintenance employees were worried about their job security if production employees perform trades assistants' work. He acknowledged that if the production employees supported this, they could out vote the maintenance employees. However, he disagreed that this would be unfair (for the maintenance employees).
[19] Mr Laven emphasised that the respondent was under a great deal of financial stress and that rationalising and cutting conditions to save money was up for negotiation. Nevertheless, he believed that however it was achieved, it would be fair to all parties, and he did not agree that having one agreement would promote unfairness.
[20] After outlining the background to the application and the relevant provisions of the Act, Mr Kennedy relied on the decision of the Full Bench in United Firefighters' Union of Australia v Metropolitan Fire & Emergency Services Board [2010] FWAFB 3009 ('United Firefighters'). He submitted that the AMWU need only establish that bargaining will at least be fairer or more efficient if the scope order is made. He said, it was not contested that the applicant had met the requirements of ss 238(1)(2)(3) and 4(a) of the Act. However, in respect to subclause (4)(b), Mr Kennedy put that the evidence had clearly established that bargaining for the agreement was not currently proceeding "fairly or efficiently", because of the respondent's insistence on a single agreement. The negotiations are at a stalemate and protected action had occurred.
[21] Mr Kennedy developed his submissions further by putting:
• The scope order in the terms sought by the applicant will promote fair and efficient bargaining. It will ensure the bargaining process is in accordance with the wishes of the employees. It will confine the matters in dispute between the parties, and make it more likely that the parties will be able to reach agreement.
• The scope order sought merely aims to continue the coverage of the existing agreements. The evidence established that past bargaining for those agreements, with their coverage, has proceeded fairly and efficiently. In his statement, AMWU delegate Mr Hart stated that he cannot recall any protected industrial action being taken in previous negotiations (when the agreements were separate).
• The evidence filed by the applicant established that there have been ongoing disagreements between the maintenance and production workers surrounding work at the site. This has the ability to negatively impact on the bargaining process, and compromise the fairness and efficiency of that process.
• As stated by the Full Bench in UFUA v MFESB at [67], any conflict of interest between two groups of employees is a relevant consideration by the Tribunal in determining this matter.
• It is also a matter of fairness that in any approval ballot for a proposed agreement, the maintenance employees will be drastically outnumbered by the production employees. This could conceivably lead to a situation where, absent the scope order the applicant seeks, the respondent could put an agreement to ballot that deliberately cuts conditions of maintenance workers, but not production workers.
• In such a situation, there would be a clear conflict of interest, the wishes of the maintenance employees would be redundant, and their democratic right to have a real say in their own working conditions compromised. This would undoubtedly be unfair, and arguably inefficient.
• As to the requirements under s238(4)(c), Mr Kennedy said that the applicant merely seeks to continue the coverage of the existing agreements and the agreement scope that is sought separates the employees on operational and organisational lines.
• The evidence in the matter filed by the applicant supports this contention. The maintenance employees do work that is clear and distinct from that of the production employees.
• Mr Kennedy added that it was reasonable in all the circumstances (s238(4)(d)) for FWA to make the order, as the intervention of the Tribunal is required to ensure that bargaining can begin to proceed efficiently and fairly. Absent such intervention in the form of the order sought, the bargaining process will remain at a stalemate, with the issue of scope remaining an impediment to discussions about other areas of the agreement that are outstanding.
[22] In written and oral submissions, Ms L McCrohen for the AWU supported the making of the scope order. Ms Raju for the CFMEU did not oppose the making of the proposed scope order.
[23] Mr D Bray, from the Australian Industry Group ('AIG'), for the respondent, submitted that the proposed order would exacerbate inefficiency and delay. He said there is no real distinction between maintenance and production employees warranting separate agreements incorporating identical conditions. He said that while previously the two groups were underpinned by two different awards, that is no longer the case. Further, there is no difference in the machinery worked on by both groups. Moreover, they work in the same place, side by side, under the same conditions. Mr Bray said that reducing demarcation issues is important to the business. He emphasised that the negotiations had slowed and had been inefficient because of a refusal by the Unions to sit in the same room with the respondent, despite being observed meeting together in the carpark. Mr Bray put that the order sought by the applicant would run counter to efficiency and in any event, the history of agreement negotiations had shown that outcomes have been the same for both groups.
[24] It is necessary to outline the provisions of the Act which ground this application and the powers of FWA to make scope orders. These provisions are found at s 238 as follows:
Bargaining representatives may apply for scope orders
(1) A bargaining representative for a proposed single-enterprise agreement may apply to FWA for an order (a scope order) under this section if:
(a) the bargaining representative has concerns that bargaining for the agreement is not proceeding efficiently or fairly; and
(b) the reason for this is that the bargaining representative considers that the agreement will not cover appropriate employees, or will cover employees that it is not appropriate for the agreement to cover.
No scope order if a single interest employer authorisation is in operation
(2) Despite subsection (1), the bargaining representative must not apply for the scope order if a single interest employer authorisation is in operation in relation to the agreement.
Bargaining representative must have given notice of concerns
(3) The bargaining representative may only apply for the scope order if the bargaining representative:
(a) has given a written notice setting out the concerns referred to in subsection (1) to the relevant bargaining representatives for the agreement; and
(b) has given the relevant bargaining representatives a reasonable time within which to respond to those concerns; and
(c) considers that the relevant bargaining representatives have not responded appropriately.
(4) FWA may make the scope order if FWA is satisfied:
(a) that the bargaining representative who made the application has met, or is meeting, the good faith bargaining requirements; and
(b) that making the order will promote the fair and efficient conduct of bargaining; and
(c) that the group of employees who will be covered by the agreement proposed to be specified in the scope order was fairly chosen; and
(d) it is reasonable in all the circumstances to make the order.
(4A) If the agreement proposed to be specified in the scope order will not cover all of the employees of the employer or employers covered by the agreement, FWA must, in deciding for the purposes of paragraph (4)(c) whether the group of employees who will be covered was fairly chosen, take into account whether the group is geographically, operationally or organisationally distinct.
Scope order must specify employer and employees to be covered
(5) The scope order must specify, in relation to a proposed single-enterprise agreement:
(a) the employer, or employers, that will be covered by the agreement; and
(b) the employees who will be covered by the agreement.
Scope order must be in accordance with this section etc.
(b) may relate to more than one proposed single-enterprise agreement.
(b) make or vary such other orders (such as protected action ballot orders), determinations or other instruments made by FWA, or take such other actions, as FWA considers appropriate
[25] Mr Kennedy correctly drew my attention to the Full Bench authority in United Firefighters'. I am bound to apply that authority in determining this application. Even so, I respectfully agree with it. Plainly the first question to be answered in this case is whether the making of the proposed scope order will promote the fair and efficient conduct of bargaining. The second question is whether the specified group of employees was fairly chosen. In these respects, the Full Bench in United Firefighters' said at para 55:
The relevant consideration under s.238(4)(b) is whether the order will promote the fair and efficient conduct of bargaining. The implication is that the tribunal should be satisfied that if an order is made the bargaining will at least be fairer or more efficient or both than it would be if no order were to be made. The relevant consideration under s.238(4)(c) is whether the specified group is fairly chosen. It may be that a number of groupings might be fair - what this criterion requires is that the group which is included in the scope order is fairly chosen. This issue is also dealt with in s.238(4A), which we discuss shortly.
[26] In one sense, it seems to me that it will be necessary for FWA to consider the current state of the negotiations and the reasons why the making of the proposed order would promote fair and efficient bargaining. Answering this question, of course, might implicitly require a judgment call that the present state of the negotiations may not be proceeding fairly and efficiently, or at all. All parties are ad idem on this point, albeit, as noted from the evidence, blame each other for the current stalemate in the negotiations. In my view, the legislature plainly intended that FWA should take steps to rectify such a stalemate through the making of a scope order upon application by a party/s to the negotiations.
[27] In assessing the Unions' evidence, which I earlier said was largely uncontested by the respondent, I intend to make the following observations. Accepting that the maintenance employees have obviously different interests and perform different functions, I consider that their concern regarding the potential for their interests to be overwhelmed by a larger majority of production employees, to be real, legitimate and understandable. This is not to impute any criticism of the future motives of production employees or to suggest any improper advantage to be taken by them, but merely demonstrates a practical fact of life. The evidence in this case disclosed that bargaining has stalled and the negotiations are primarily deadlocked over the issue of scope, although some preliminary skirmishing in respect to the merit of the competing claims of the parties was in issue. Protected industrial action has, and continues to take place, centred on the issue of the respondent's refusal to negotiate separately with the Unions. Such a situation is plainly unsatisfactory and, to my mind, is contrary to the spirit and intent of s 238(1) of the Act. Indeed, I note the evidence that industrial action has not accompanied earlier agreement negotiations at the site.
[28] Mr Stewart deposed, and it was not disputed, that the negotiations for the 2008 agreements were conventional, without any disputation or angst over the outcome of two separate agreements. Moreover, the respondent's management in 2005 had made no complaint when the two agreements concept was proposed. In my view, this history relevantly demonstrates that any perceived difficulties arising from two agreements on site, is largely speculative and is probably little more than an inconvenience, rather than a real impediment to securing appropriate and fair industrial outcomes.
[29] Mr Laven's evidence that one agreement would present issues of "demarcation, inefficiency and confusion in interpretation" was not only a bald statement with little evidentiary or historic foundation, but is to be contrasted to the present situation which has resulted in industrial action over the very issue which had been willingly accepted by the respondent for six years previously. Four employees/delegates and the AMWU Official gave evidence as to the friction and animosity between the Unions and their members' desire to have separate negotiations for separate agreements. This evidence was not rebutted. Accordingly, I accept this evidence as demonstrating the views of the Unions' membership. In my opinion, it is persuasive as to the determination of this application. In this regard, I rely on the following passage cited by Mr Kennedy in United Firefighters' at [53]:
As recorded above, it was submitted by the UFUA and the ACTU that particular weight should be given to the views of employees because of, for example, legislative policy imperatives concerning freedom of association. While we generally agree with that submission it requires some qualification. The power to make a scope order is predicated on disagreement between bargaining representatives. The discretion to resolve that disagreement is to be exercised as provided for in ss.238(4) and (4A). While those provisions do not assign priority to the views of employees, in applying the provisions it is necessary to have regard to the overall context. The legislative scheme supports collective bargaining principles and the Fair Work Act encourages freedom of association and collective bargaining. It may be implied from the legislative scheme that the collective choice of employees is significant. It must be said, however, that while weight should be given to the views of the employees potentially affected, it may be that a proper consideration of the matters specified in ss.238(4) and (4A) in a particular case may make it appropriate to make a scope order contrary to the views of the employees potentially affected.
[30] In addition, I do not accept that it is a fair characterisation of the Union's position, that it is they who have frustrated and stalled the negotiations because of their insistence on separate negotiations for separate agreements. The AMWU and AWU's position, and inferentially accepted by the CFMEU, is that they are more than willing to have the negotiations with the respondent, but on the proviso of separate negotiations. The fact that the work of employees is now underpinned by one modern award, does not, in my view, go anywhere near tipping the balance in favour of the respondent's position. It was a weak argument. Of course, it is not uncommon for employers to have separate negotiations with, and separate enterprise agreements for, discrete groups of employees at the same site, working side by side. While it may, on its face, be generally preferable to have a single bargaining unit and a single enterprise agreement for all employees, this will not always be appropriate, practical or reasonable. I consider the evidence demonstrates that this case is an exception to the general preference. Moreover, the respondent's insistence on a single agreement has little to commend it as far as encouraging workplace harmony is concerned, as it has created the very discontent it says will occur if there was a single agreement.
[31] Importantly, given the animosity and differences in work and conditions between production and maintenance employees, I am not satisfied that harmonious and cooperative workplace relations would be promoted by perpetuating the respondent's insistence that it will only negotiate with all Unions for a single enterprise agreement. Again I rely on the following passage from United Firefighters' at par 67:
The MFESB relied in particular on what it alleged to be a conflict of interest between management employees and those whom they manage. Speaking generally there can be no doubt that such a conflict exists. To some extent the workplace relations system is based on the potential for conflict between employers and employees. In a world of corporations the employee manager stands in the shoes of the employer for many purposes including dispute prevention and resolution and the negotiation of terms and conditions of employment. We accept the potential for an entrenched conflict of interest to arise based on managerial responsibility if agreement coverage of operational employees extends into the senior management ranks. We recognise the potential for such conflict to arise even at the lower levels of management but we have in mind conflicts of interest of a more substantial character arising at senior management levels. We also have no doubt that conflict of interest considerations may be relevant in deciding whether the making of an order would promote the fair and efficient conduct of bargaining, whether the group was fairly chosen and whether it is reasonable to make an order.
[32] I am fortified to this conclusion by Mr Laven's evidence, which I must say, with respect, I found to be of little assistance. In cross examination, Mr Laven was not even prepared to accept self evident propositions, such as the two Union's log of claims containing more differences than similarities or that the two agreements in 2005 and 2008 contained a number of differences, or that if production employees were happy to vote for an agreement and maintenance employees were not, then the latter could be outvoted by the majority. In addition, I do not accept that working through two different logs of claims, simultaneously, is likely to be more complex and difficult. Of course, the historic evidence is quite to the contrary. Moreover, I do not understand how issues of demarcation, inefficiency and confusion of interpretation will be resolved by having one agreement. On the contrary, in my opinion, these issues are likely to be exacerbated, rather than resolved, by the respondent's present position.
[33] In my respectful opinion, the respondent's evidence and submissions in this case demonstrated a perplexing naivety as to the reality of the current industrial environment. This was no better illustrated by comments in the evidence about demarcation and efficiency and a desire for "everyone being on the same page". Unfortunately, a single agreement is not the panacea to resolving the long standing antipathy between the Unions, and in my assessment, is more likely to entrench this antipathy and discontent, rather than reverse it.
[34] For all the aforementioned reasons, I am satisfied that the applicant has discharged the onus it bears, under s 238 of the Act, in satisfying FWA that:
(i) the making the proposed order will promote the fair and efficient conduct of bargaining; and
(ii) the group of employees who will be covered by the agreement proposed to be specified in the scope order was fairly chosen; and
(iii) it is reasonable in all the circumstances to make the order.
More broadly, I consider that the making of the scope order will achieve Object 3(f) of the Act which states:
'achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action;'
[35] Accordingly, I propose to make the order as sought by the applicant. However, it is redrafted to reflect, not just the identification of the employees concerned, but to make it clear what I apprehend the effect of the order is to be. The order will be issued contemporaneously with this decision.
Mr J Kennedy Legal Officer of the AMWU for the applicant
Mr D Bray of the Australian Industry Group for the respondent
Printed by authority of the Commonwealth Government Printer
Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, known as the Australian Manufacturing Workers' Union (AMWU) and others
Shinagawa Refractories Australasia Pty Ltd [2011] FWA 5935