BHP Steel (AIS) Pty Limited v Australian Workers' Union, New South Wales

APPLICANT Mr A Morris Blake Dawson Waldron Solicitors

RESPONDENTS LEGAL REPRESENTATIVES: Mr A Gillespie The Australian Workers' Union, New South Wales Mr W Phillips Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, New South Wales Branch Mr W Tomlins Electrical Trades Union of Australia, New South Wales Branch

JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES FULL BENCH CORAM: Wright J, President Walton J, Vice-President Connor C Wednesday 30 April 2003

Notification under section 130 by BHP Steel (AIS) Pty Ltd of a dispute with The Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, New South Wales Branch and another re application of clause in enterprise agreement

DECISION OF THE COMMISSION [2003] NSWIRComm 124

1 On 14 October 2002, BHP Steel (AIS) Pty Limited ("the applicant") filed a notification of an industrial dispute pursuant to s130 of the Industrial Relations Act 1996 ("the Act") indicating that the applicant was in dispute with the Australian Workers' Union, New South Wales ("the AWU") as to the operation of cl9.4 of the BHP Steel Port Kembla Operations Enterprise Agreement 2000 ("the enterprise agreement").

2 After conciliation failed, and by Notice of Motion filed on 1 November 2002, the applicant sought the following relief: The Applicant will at a time & date to be fixed move the Commission at 50 Phillip Street, Sydney, NSW for: 1. The determination of questions concerning the interpretation, application or operation of the BHP Steel Port Kembla Operations Enterprise Agreement 2002 (the "Agreement") in the terms set out in Schedule 1 to this Notice of Motion, for the purpose of resolving a dispute concerning those questions pursuant to section 136 of the Industrial Relations Act 1996 (the "Act"), clause 12 of the Agreement and clause 36 of the BHP Steel (AIS) Pty Ltd - Port Kembla Steel Works Employees Award 2000 (the "Award") and in accordance with section 175 of the Act. 2. The making of dispute orders in the terms set out in Schedule 2 to this Notice of Motion pursuant to sections 136, 137 and 138 of the Act.

3 Schedule 1 referred to in paragraph 1 of the Notice of Motion was in the following terms: SCHEDULE 1 The Industrial Relations Commission of New South Wales makes the following determinations pursuant to the Industrial Relations Act 1996: 1. On the true meaning and intent of the BHP Steel Port Kembla Operations Enterprise Agreement 2002 (the "Agreement") subclause 9.4 Meeting Urgent Customer Needs applies according to its terms to all products produced by BHP Steel (AIS) Pty Limited (the "Company") at its Port Kembla Steel Works including, without limitation: (a) Packaging Products; (b) Hot Rolled Coil; (c) Slitted Steel Products; (d) Steel Flat Products and; (e) Plate 2. On the true meaning and intent of the Agreement there is no exclusion of any product or any source department from the application according to its terms of subclause 9.4 Meeting Urgent Customer Needs of the Agreement. 3. On its true meaning and intent the Agreement requires that in the event of a strike or other industrial action by employees of BHP Steel (AIS) Pty Limited (the "Company") in any department of its Steel Works at Port Kembla, the Company may lawfully and reasonably require employees to perform such work as is necessary to achieve the effective dispatch of product pursuant to subclause 9.4.5 of the Agreement without employees or any of the Respondents first or in addition verifying by separate communication with the customer to whom such product is to be dispatched, or communication with some person employed by or associated with the customer, that the product requires dispatch in compliance with clause 9 of the Agreement.

4 It should be noted that there was no issue as to paragraph 1(a) of Schedule 1. That matter was the subject of an agreement between the parties which agreement will be given effect to in conjunction with a similar settlement reached in Matter No IRC4516 of 2003. We also note that the applicant did not pursue paragraph 3 of the Schedule (the issue associated with that paragraph was resolved by arrangement reached by the parties collateral to the enterprise agreement).

5 Schedule 2, which is referred to in paragraph 2 of the Notice of Motion, is in the following terms: SCHEDULE 2 The Industrial Relations Commission of New South Wales makes the following dispute orders under sections 136, 137 and 138 of the Industrial Relations Act 1996: 1. From the time these orders take effect as specified in Order 4: (a) In the event of a strike or other industrial action in any department of the Steel Works of BHP Steel (AIS) Pty Limited (the "Company") at Port Kembla, employees of the Company who are nominated by the Company as being required to perform work to ensure dispatch of product in order to ensure compliance with clause 9 of the BHP Steel Port Kembla Operations Agreement 2002 (EA 02/259) (the "Agreement") must cease and refrain from engaging in any strike or other industrial action. (b) The Company may nominate the employees it requires for the purposes of order 1(a) in respect of each and every shift during which such strike or other industrial action occurs. Where a nominated employee is or becomes unavailable for work due to any cause other than industrial action (eg illness) the Company may nominate a replacement employee for the purposes of order 1(a). 2. The Australian Workers' Union, New South Wales ("AWU"), Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, New South Wales Branch ("AMWU") and Electrical Trades Union of Australia, New South Wales Branch ("ETU") and their respective officials, employees and delegates must take all necessary steps to ensure that these orders are complied with, including but not limited to advising the members of the AWU, AMWU and ETU employed by the Company at the Port Kembla Steel Works of these orders by [insert date 3 days after the date of decision of the Commission]. 3. The Company and the AWU, AMWU and ETU, and their respective officials, employees, delegates and members shall further comply with the applicable procedures set out in the annexures A ,B and C to this order. 4. Subject to further order of the Commission, these orders will take effect on and from [insert date of decision of Commission] and shall remain in force until the termination of the Agreement.

6 It is unnecessary, having regard to the directions we propose to make in this matter, to set out Annexures A, B and C to Schedule 2.

7 The history of the enterprise agreement, circumstances relating to it and principles relevant to its interpretation are set out by the Full Bench in its decision in BHP Steel (AIS) Pty Limited v Australian Workers' Union, New South Wales [2003] NSWIRComm 125 (which will be delivered concurrently with our decision in this matter). It is therefore unnecessary to repeat those matters. We also note that the Full Bench set out the terms of clauses 9.1 to 9.3 of the enterprise agreement. We do not repeat those provisions in this decision but note that they are generally relevant to the consideration of this matter.

8 The clause which is the subject of dispute in this matter is cl9.4. It is in the following terms: 9.4 Meeting Urgent Customer Needs 9.4.1 To satisfy the requirements of the customers of the Companies, the parties are committed to ensuring that the urgent needs of customers are met throughout the period of any industrial dispute. 9.4.2 In recognising that the Companies' customers are a key foundation of the Companies' business, the parties commit to the principle that all disputes and issues will be resolved in accordance with the applicable dispute resolution procedures and without recourse to industrial action that would adversely impact on those customers. 9.4.3 In the unlikely event of industrial action occurring, the parties will, before such action commences, and on an ongoing basis as necessary during such action, hold discussions in relation to production or maintenance work that is necessary to enable genuinely urgent customer requirements to be met. So far as practicable, prior to the taking of industrial action and (on all occasions) progressively, as necessary, during such action the relevant union delegate(s) and the relevant Company representatives will meet and confer immediately and on an ongoing basis to manage the supply of product to avoid stocking out of customers. 9.4.4 The Company's customer service or logistics representative will identify product that is required to maintain a customer's business and is packed and waiting dispatch. 9.4.5 Where, in accordance with subclause 9.4.6 and 9.4.7, product is identified as requiring dispatch to avoid a stock out or potential stock out and that product or part of that product is packed and awaiting dispatch, it will be dispatched as required by the Company. 9.4.6. The Company will become aware, either through its dispatch management systems or by way of other direct communication with a customer that the customer is in need of urgent delivery of product to avoid a stock out. This will occur each and every day during a period of industrial action. 9.4.7. Where the Company becomes aware of a stock out or a potential stock out for a customer, then the company will provide to the relevant union delegate a written report containing the following particulars of the stock out or potential stock out: s the name of the customer

s when the product is required. A copy of the written report will be faxed to the relevant union offices. 9.4.8 In the event that there is a residual amount of an order to be processed to enable dispatch of it to occur and there are special or urgent considerations applying to the order, these circumstances will be raised and discussed between the relevant company representative and the relevant employee representative with a view to reaching agreement. In the absence of agreement either party may seek the assistance of the Commission by notification under s130 of the Act. The parties agree that if the operation of this subclause creates substantially adverse consequences then any party may apply to the Commission after 13 November 2002 to recommend other arrangements in relation to residual amounts of orders and the parties will comply with the terms of such recommendation in lieu of the provisions of this sub-clause. 9.4.9 In the event that there is a breakdown of a crane, forklift, or other dispatch related equipment that would otherwise prevent the urgent dispatch of product provided for in this sub-clause then maintenance employees or contractors as appropriate will work to repair the equipment and facilitate the dispatch of product. 9.4.10 No employee or Union will direct or encourage any employee or contractor in an associated area to take action that may have the effect of circumventing the intent and operation of these arrangements. 9.4.11 In subclause 9.4: "relevant union delegate" means the delegate of the employees whose industrial action is preventing or hindering the normal dispatch of product. In the absence of that delegate the relevant union delegate shall be the employee who, in the ordinary course, would be regarded by the employees as acting in the place of the delegate. "relevant company representative" means the customer service officer nominated by the company for the purpose of the arrangements in this subclause. "Stock out" and "stocking out" mean a situation where the customer is unable, because of its lack of the Company product which the customer requires, to maintain its normal operations.

9 Clause 9.4 of the enterprise agreement establishes a set of conditions by which the applicant may meet the urgent needs of customers during the course of an industrial dispute involving a stoppage of work through industrial action. The clause provides a set of stringent conditions controlling the circumstances under which product may be supplied to customers during the course of industrial action including the circumstances which may properly require the supply of product (that is, a 'stock out', as defined) and a limitation on the obligations of employees to perform work. The broad operation of the clause is not the subject of any real dispute in this matter, particularly as the parties have, as earlier mentioned, settled collateral arrangements as to its operation in the settlement that they have reached in relation to the 'packaging products' area. The remaining and central issue is whether the urgent customer dispatch arrangements in cl9.4 apply to those parts of the applicant's operations which are described in paragraph 1(b), (c), (d) and (e) of Schedule 1 of the Notice of Motion. Put simply, the AWU (supported by the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, New South Wales ("the AMWU") and the Electrical Trades Union, New South Wales ("the ETU")) contended that the urgent dispatch provisions of the enterprise agreement do not, on their face, nor were they ever intended to, operate with respect to the Hot Strip Mill ('hot rolled coil'), the Plate Mill ('plate') or the Unanderra Coil Processing Plant ('slitted steel products and steel flat products') ("the disputed areas").

10 Before determining that question it is necessary to identify the modification to the company's application which was introduced by Mr Morris, solicitor for the applicant, during the course of his reply to certain contentions raised by the union parties. Mr Morris conceded that the provisions of cl9.4 did not operate with respect to the transfer of product between departments or entities within the operations of the applicant or BHP Steel Limited, even though those departments or entities may from time to time be described as customers for the purposes of the vertical management structure of the companies.

11 It was further conceded by Mr Morris that the provisions of cl9.4 were subject to the provisions of cl9.1 and in particular cl9.1.8 of the enterprise agreement so that an operation such as plate laying could not require the use of slabs stored during industrial dispute for the purposes of meeting an urgent customer supply.

12 We should also note that, whilst there was some minor disagreement between the parties, it is clear that each of the areas described in paragraph 1 of Schedule 1 of the Notice of Motion supplies and dispatches product to customers of the applicant, that is, to customers of the applicant as opposed to internal transfers between departments of the applicant. For example, it was disclosed that the Hot Strip Mill produces a number of varieties of hot rolled coil including pipe and tube feed, mill edge coil, feed for tin plate ('packaging products'), steel flats, coil plate and export hot rolled coil. Most of the applicants' major customers of hot rolled coil supply the building, construction and manufacturing markets and are involved in further processing the applicant's product prior to distribution to their own customers. One such customer is One Steel.

13 The applicant contended that subclause 9.4 of the agreement applied to all products produced by the employer parties to the agreement that is, the applicant and BHP Steel Limited, without regard to the department in which or from which those products were dispatched. In summary, it put the following contentions in support of the interpretation of subclause 9.4: 1. Such a construction was consistent with the plain and ordinary meaning and intent of subclause 9.4 construed in the light of the agreement as a whole;

2. The interpretation of the enterprise agreement contended by it was consistent with the Recommendation of the Commission preceding the making of the enterprise agreement;

3. That interpretation was consistent with the history of the negotiations between the parties as disclosed by relevant extraneous materials;

4. At no time during the extensive proceedings before Walton , J Vice-President, giving rise to the Recommendations as to the form of the enterprise agreement, did the AWU or any other union advance a proposition that there should be an express or implied restriction or limitation upon the application of any provision of the enterprise agreement concerning urgent dispatch which subsequently became embodied in subclause 9.4.

14 The AWU resisted the construction proposed by the applicant. In summary, it was submitted: 1. There is a very substantial dispute between the parties as to this matter and the unions rigorously oppose the interpretation proposed by the applicant. 2. At no time during the negotiations proceeding the making of the enterprise agreement did the applicant identify that cl9 of the enterprise agreement was intended to apply to the disputed areas. There is no proper basis for concluding that the negotiations between the parties resolved themselves in such a way that the ultimate agreement was intended to apply to the disputed areas. It was also contended that there had been no evidence before the Commission which would enable the Commission to make recommendations with respect to the disputed areas.

3. The interpretation proposed by the company is neither consistent with the actual terms of the enterprise agreement nor the purpose of the agreement. The Recommendation of the Commission giving rise to the enterprise agreement does not refer specifically to any of the disputed areas and, therefore, it should be construed as not containing any intention to apply to those areas.

4. Submissions were also put as to the discussion between the parties after the agreement was approved. However, these submissions were not pressed in the light of the corresponding submissions of the applicant.

15 We would first observe that the disputed provisions of cl9.4 were, with some minor exceptions, which are not presently relevant, reached by a negotiated settlement between the parties. Whilst the Commission in Matter No IRC8095 of 2001 was required to make recommendations in order to resolve other aspects of the form of the enterprise agreement, the clauses presently in dispute were arrived at by consent. Putting aside general principles of interpretation for one moment, in these circumstances we consider that considerable weight should be placed upon the construction of the enterprise agreement by reference to the words and expressions used in the agreement by the parties in resolving the question to be decided. This does not mean that we would adopt a too narrow or literal interpretation of the enterprise agreement. The enterprise agreement should be considered in its entirety. Its provisions must be considered in their context and having regard to their true purpose. However, the Commission should also, in these circumstances, be careful to ensure that the sanctity of good faith bargains is adhered to and, therefore, considerable weight should be placed upon the actual terms of the agreements reached where those words are capable of a clear and unambiguous meaning.

16 When this approach is adopted it is plain, in our view, that the interpretation proposed by the applicant is correct. There are a number of reasons for coming to this conclusion; 1. Neither sub-cl9.4.5 or any other subclause within cl9.4 either expressly or impliedly limits the scope of the agreement to the packaging products aspect of the applicants' operations. Both the particular substantive provisions of cl9 and the objects within it bespeak of provisions that have general application to the applicant's operations as they are directed to the meeting of urgent customer demands during a period of industrial dispute. There are considerable limitations as to the operation of the provisions, no doubt intended to protect the integrity of both the applicant's and the unions' positions during the course of an industrial dispute. However, none of the provisions are directed to, or even hint at, a limitation as to the scope of the provisions akin to that sought by the unions in this matter. That is, there are no restrictions based on geographic factors or the applicant's structure in terms of departments or functional areas.

2. Nor does recourse to the general provisions of cl9 relating to the regulation of disturbances to production and supply assist the respondent unions. Those provisions make plain that the purpose of the provisions is to support the ability of the companies to have an effective and efficient business. The parties recognise in cl9.1.2 that there is a close linkage between customer satisfaction, business performance and employment security. Commitment to, and compliance with the obligations of the enterprise agreement, are recognised as being of paramount importance to satisfying the companies' customers. These provisions identify with clarity that the purpose of the enterprise agreement is to enhance the integrity of the business by meeting urgent customer needs. The business is, of course, the entire business of the applicant and includes the products that it supplies to its customers. It would be entirely antithetical to these purposes to constrain the operation of the enterprise agreement in such a way that only part of the applicant's operations would be placed in a position to adequately meet urgent customer demands.

3. The AWU did seek to draw a distinction between the nature of the applicant's operations in the disputed areas and other aspects of the applicant's operations where it conceded the urgent dispatch provisions would apply. There is no evidence to support any distinction. Nor is it clear from the AWU's submissions why such a distinction should be drawn.

4. It is true, as contended by the AWU, that there is no determination expressly in the Recommendation given by Walton J, Vice-President, in Matter No. IRC 8095 of 2001 going to the disputed areas. However, this fact, when properly understood, does not support the AWU's case. This is so for two reasons. Firstly, the absence of express reference is merely illustrative of the fact that the subject provisions went forward by agreement without separate consideration being required to be given to them by the Commission. Secondly, this omission thus plainly represents a failure by the union parties to expressly raise this limitation during the course of the proceedings.

5. Whilst it is unnecessary to have regard to the conciliation processes before Walton J, in deference to the AWU's vigorous contentions in this respect, we would note that we do not accept its contention that the applicant failed to identify its intention during those processes, to have the enterprise agreement apply in the disputed areas. The materials which have been placed before us from the conciliation processes make it absolutely clear that the applicant identified in those documents its intention to have the enterprise agreement apply to the disputed areas. The AWU does not assist its case by contending that the matter was not the subject of active discussion in those conciliation processes. The parties and, indeed, the Commission were entitled to proceed on the basis that, where issues existed as to proposals being exchanged, the parties would, in their own interests, identify the areas of dispute and robustly pursue their respective interests. This reflected the approach adopted by the parties in every other aspect of the conciliation processes. We do not see why any different approach should be adopted with respect to the current issues, even if the AWU may have had 'afterthoughts' as to the disputed areas when later considering the enterprise agreement.

17 In these circumstances, we grant the application in Schedule 1(1) and (2), subject to the modifications and concessions given by the applicant during the course of the proceedings which we have earlier described in this decision. In the result, the applicant should bring in amended form of Schedule 1 to reflect our determination in this respect.

18 We have some hesitation in making the dispute orders sought in Schedule 2 because, unlike Matter No. IRC4413 of 2002, there is an absence of active disputation in relation to the disputed areas. However, after due reflection, we consider that those orders should be made in part for the following reasons: 1. The AWU (with support of the two other respondent unions) proposes an interpretation of the agreement which is simply not available on its face. This raises real questions as to whether the AWU will properly adhere to the agreement and thus the need for remedial steps to make plain the Commission's determination not to countenance direct or indirect attempts to depart from its terms.

2. It is plain from various submissions made by Mr Gillespie for the AWU during the course of the proceedings that refuge may be sought in industrial action to attempt to give affect to the unwarranted interpretations which are proposed.

19 However, we are not content with the form of the dispute orders proposed. We are concerned that the orders may exceed the provisions which operate elsewhere in relation to urgent dispatch (namely, in the packaging product area) and may not sufficiently recognise any genuine and reasonable variations to those conditions which may be necessary in the disputed areas.

20 In the result we propose that the parties will confer so as to settle the appropriate urgent dispatch procedures for the disputed areas. Those procedures will replicate the agreed procedures in Matter No IRC 4516 of 2002 but may be varied where a genuine and reasonable departure is required in the disputed areas. That agreed position should be set out in a document to be filed within 14 days. In the absence of the agreement the parties should file, within the same time frame, their respective versions of the proposed provisions together with short written submissions as to the terms proposed.

21 We propose to settle the form of the orders in Chambers by having regard to any submissions filed by any party within that period. We should also indicate that we shall make dispute orders giving effect to those terms. In the result, the parties should settle the appropriate form of dispute orders and file the draft orders within 14 days. Again, in the absence of agreement, the draft order proposed and any submission in support of it should be filed within 14 days. Any submissions or draft orders filed after the 14 day period with respect to either the urgent dispatch procedures or the dispute orders will not be considered.

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