Fair Work Act 2009

s.739 - Application to deal with a dispute

Construction, Forestry, Maritime, Mining and Energy Union

Application to deal with a dispute in accordance with a dispute resolution procedure in an enterprise agreement - interpretation of an enterprise agreement - whether outsourcing permitted

[1] The Construction, Forestry, Mining, Maritime and Energy Union (CFMMEU) has lodged an application for the Commission to deal with a dispute pursuant to clause 29 of Part A of the DP World Sydney Enterprise Agreement 2015 (Agreement). The dispute concerns whether the employer under the Agreement, DP World Sydney Limited (DP World), is entitled to outsource "rope change" maintenance work on DP World's cranes at its container terminal at Port Botany. The dispute application was lodged at 12.43 pm yesterday, and the matter was subject to a conciliation conference before Deputy President Booth yesterday evening. The dispute remains unresolved, and accordingly the matter has been referred to me for arbitration. There is no dispute that the Commission has the power to arbitrate the dispute pursuant to clause 29.2.6 of Part A of the Agreement. Because, as will become apparent, there is a degree of urgency in the dispute, my reasons for decision in the matter will necessarily be truncated.

[2] Evidence was given before me by Mark Barry, a Grade 6 Mechanical Fitter employed by DP World, and by Mark Hulme, DP World's General Manager, Operations, at the Port Botany terminal, and the parties tendered a number of documents. On the basis of this evidence, I find that the relevant facts are as follows:

(1) The Agreement is past its nominal expiry date, and DP World and the CFMMEU have been engaged in bargaining for a new agreement since last year.

(2) Cranes at DP World's Port Botany terminal require rope changes to be made every 2000 hours of working time. This work has in the past always been performed by appropriately qualified maintenance employees of DP World who are covered by the Agreement.

(3) On about 1 July 2019 maintenance employees became aware that overtime shifts would be available to perform rope changes on Quay Cranes 3, 4 and 5 over the period Monday 8 July 2019 to Wednesday 10 July 2019. This meant that a total of 6 rope changes were required.

(4) On 3 July 2019 the CFMMEU notified DP World that its members employed by DP World intended to take employee claim action, in the form of a complete stoppage of work, commencing at 6.00am on Thursday 11 July 2019 and concluding at 6.00am on Saturday 13 July 2019. There was already a continuing ban on overtime in place.

(5) On 4 July 2019 Mr Hulme became concerned as to whether the rope changes would be completed before the commencement of the industrial action at 6.00 am on 11 July 2019, and contemplated the engagement of a contractor if necessary.

(6) The same day, Mr Hulme communicated his concerns to the CFMMEU maintenance delegates, Mr Phillip Graham and Mr Dean Sampson, by email and at a meeting. In doing so, he specifically adverted to the possible use of a contractor. He was given an assurance by the delegates that the rope changes on the three cranes would be completed by 6.00am on 11 July 2019 provided specified resources were made available. He was also assured by the delegates that the overtime ban would not apply to the rope change work (and this exemption from the overtime ban was officially confirmed by the CFMMEU the following day).

(7) Mr Hulme agreed that the maintenance employees and not a contractor would perform the rope changes on the three cranes on the basis of the assurances given. Mr Hulme agreed to provide the requested resources, and there is no dispute that they were in fact provided.

(8) On the afternoon of Friday 5 July 2019, the CFMMEU delegates modified their assurance, in that Mr Graham sent an email saying that completion by 6.00am Thursday 11 July 2019 was the "best case" and the "worst case" was 6.00am Friday 12 July 2019. In a response email, Mr Hulme said that if the maintenance employees intended to work during the strike action, he required a formal notification of this from the CFMMEU. This was not provided.

(9) Work for the rope change on Crane 4 commenced on Monday 8 July 2019, but was not completed until the evening shift on Tuesday 9 July 2019, at which time work commenced on crane 5. Ultimately only the rope changes on cranes 4 and 5 were completed by 6.00am on Thursday 11 July 2019.

(10) Mr Barry said that the rope changes took longer due to a combination of factors including that the cranes were new and had not had their ropes changed before, there needed to be risk assessments because cranes 4 and 5 were next to each other and because of formal improvements notices issued by Safework NSW, there were interruptions caused by the need to stop when any vessel came alongside the wharf, and a number of other mechanical issues which occurred including problems with the hoist. It is not clear to me why these were not reasonably predictable matters which would have been taken into account in the estimate of the time it would take to complete the rope changes on the three cranes given by Mr Graham and Mr Sampson on 4 July 2019. However that is not a matter which requires any final conclusion for the determination of this dispute.

(11) By the afternoon of Tuesday 9 July 2019, Mr Hulme became concerned that the rope changes would not be completed by 6.00am on Thursday 11 July 2019, when the strike was due to start. At 10.27pm that evening, Mr Graham sent him an email which discussed the progress of the work and stated: "There will be no work during the stoppages on Thursday and Friday". Mr Hulme concluded that the work on the three cranes would not be completed by the time the strike action commenced, and the work would stop while the strike action was underway. He also considered that there would be insufficient maintenance personnel rostered to work on Saturday 13 July 2019 to complete the work then unless employees volunteered to perform overtime.

(12) In the early morning of Wednesday 10 July 2019, Mr Hulme engaged a contractor to perform the rope change on Crane 3 on Saturday 13 July 2019 on a fixed price basis.

(13) At about 10.30am on Wednesday 10 July 2019, Mr Hulme informed the Employee Representative Committee (ERC) of the outsourcing arrangement.

(14) At about midday, the CFMMEU delegates proposed that the maintenance employees would be exempt from the stoppage so that they could complete the rope changes on the three cranes and avoid the engagement of the contractor. DP World considered this, but communicated that evening by email that it declined to change its decision to engage the contractor.

[3] Clause 32 of Part A of the Agreement deals with the subject matter of outsourcing. It provides:

32.1 It is not the intention of the Company to engage any additional contractors to supply personnel to fill any jobs, duties, functions or related tasks covered by the Agreement.

32.2 Core equipment and tasks (e.g. QC, ACS, Straddle, RTG, lashing, etc) shall continue to be maintained/performed/operated by employees covered by this agreement.

32.3 Specialist maintenance tasks may be outsourced after consultation, if the maintenance employees lack the appropriate skills or qualifications.

32.4 It is not the intent of the Company to reduce the number of Permanent Maintenance employees conducting existing work.

32.5 The parties recognise the following tasks are currently outsourced:

32.6 It is the intention of the Parties to continue to have core equipment maintained through the engagement of in house permanent Tradesmen (Electrical and Mechanical), other than specialist tasks which may/will continue to be handled by suppliers, contractors and other parties.

32.7 The Company is committed to maintaining and after assessment, providing additional skills and experience to the existing Maintenance staff to deliver optimised maintenance outcomes and opportunities.

32.8 If Employees covered by this agreement are appropriately skilled, have the capability and capacity to perform the work they will be the first considered to perform the task, prior to engaging contractors.

32.9 Maintenance tasks may be outsourced if they are unable to be satisfactorily handled by the Company's permanent Tradesmen, after consultation.

32.10 Maintenance tasks may be outsourced if they are unable to be satisfactorily handled for whatever reason within the rostered time available, by the Company's permanent Tradesmen, after consultation. Where rostered hours have been reduced as a temporary measure, consideration should be given to increasing hours where the workload can be sustained.

32.11 Where the use of contractors exists within the classifications covered by this agreement, the parties shall discuss where training and skills development could be considered for existing maintenance staff with the aim of removing or reducing the need for outsourcing or contracting out. These discussions shall be directed at ensuring the achievement of cost effective, efficient and optimised maintenance outcomes for the Company. Discussions will include consideration of the merits of training and skills development against the ad hoc requirement to use contractors or outsourcing arrangements including the cost of training against the frequency/currency of skills use.

32.12 Where existing and/or contractual arrangements are in place, these shall continue. This does not prevent the parties discussing the arrangements currently in place, as outlined in the paragraph above.

32.13 Where tasks are outsourced or contractors engaged the Company will provide the ERC/Site Committee updates on forecasted length of engagement and reasons for continued use.

32.14 Notwithstanding the above, any Employee (Permanent or casually engaged) may be required to carry out any normally outsourced task as directed by management.

32.15 For the avoidance of doubt, this clause is not intended to act as a probation or limitation on the use of contractors or outsourcing (whether referred to or not in this clause).

[4] In relation to clause 32, the parties agree that:

• the acronym "QC" in clause 32 refers to quay cranes, and that cranes 3, 4 and 5 are quay cranes;

• rope changes on quay cranes are "core equipment and tasks" for the purpose of clause 32.2; and

• "probation" in clause 32.15 is an error and should be read as "prohibition".

[5] The CFMMEU submitted that:

(1) The effect of clause 32.2 was to require all rope changes on quay cranes to be performed by DP World's employees under the Agreement, and thus constituted an absolute prohibition on the outsourcing of such work.

(2) The only work permitted to be outsourced was "specialist maintenance tasks" pursuant to clause 32.3, and clauses 32.9 and 32.10 were to be read as applying to specialist maintenance tasks only. Ropes changes were not specialist maintenance tasks and could not be outsourced pursuant to those provisions.

(3) In the alternative, if clauses 32.9 and 32.10 permitted the outsourcing of rope change work, the preconditions for such outsourcing for which those clauses provided were not satisfied. There had been no prior consultation concerning the decision to outsource taken by Mr Hulme on Wednesday 10 July 2019. Further, because the relevant maintenance employees had offered to work through the strike action on Thursday 11 July and Friday 12 July 2019 in order to complete the ropes changes, there was no basis to conclude that they could not satisfactorily handle the required maintenance tasks.

[6] The CFMMEU's first two propositions raise issues concerning the proper construction of clause 32 which it is necessary for me to address.

[7] Clause 32 must be read as a whole in order for its component parts to be properly construed. In general, it constitutes a scheme which contains assurances about the continuation of work being performed by directly-engaged employees whilst allowing for the use of contractors in specified circumstances. Each provision must be read in the context of that scheme.

[8] I do not accept the CFMMEU's submissions that clause 32.2 constitutes an absolute prohibition upon the outsourcing of core equipment and tasks, including rope changes in relation to quay cranes. To read the provision in that way would bring it into collision with clause 32.15, which makes it clear that clause 32 is not to be read as constituting a prohibition on the use of contractors or outsourcing. Read with clause 32.15 in mind, and also having regard to the statements of intention in clause 32.1 (which the CFMMEU accepted was aspirational in nature) and clause 32.4, clause 32.3 must be regarded as being in the nature of a general assurance that the directly-engaged workforce will continue to be allocated the work of maintaining, performing and operating core equipment and tasks. This would serve what is usually the underlying purpose of clauses of this nature in industrial instruments, namely to protect the job security of the workforce. The other provisions of the clause (clauses 32.3- 32.14) allow for outsourcing in specified circumstances in a way that qualifies but does not vitiate this general assurance.

[9] Clauses 32.3 and 32.6 concern the outsourcing of "specialised maintenance tasks", which may occur after consultation and where DP World's own maintenance staff do not have the appropriate skills or qualifications to perform the work. As earlier stated, the CFMMEU submitted that clauses 32.8, 32.9 and 32.10 were also concerned with specialist maintenance tasks (and not core work such as rope changes), but I do not accept this for the following reasons:

(1) clauses 32.8, 32.9 and 32.10 do not use the word "specialist" to describe the maintenance tasks to which the provisions apply, unlike clauses 32.3 and 32.6, which are in close proximity and part of the same scheme of provisions;

(2) the circumstances in which specialist maintenance tasks may be outsourced are set out comprehensively in clause 32.3, and clauses 32.8, 32.9 and 32.10 would be otiose or duplicatory if they were to be read as dealing again with the same subject matter; and

(3) clause 32.10 contemplates that DP World's "permanent Tradesmen" may be able to perform the relevant maintenance tasks but not in a manner which is satisfactory within the "rostered time available"; this is distinguishable from the specialist maintenance tasks that are the subject matter of clause 32.3, where the maintenance employees are unable to do the work at all because they lack the skills or qualifications to do so.

[10] Accordingly, and contrary to the CFMMEU's first two propositions, I conclude that while it is not open for DP World to simply outsource maintenance work, including rope change work, on a permanent basis on the basis of commercial considerations because this would contravene the general assurance in clause 32.2 and the statement of intention in clause 32.1, DP World is permitted to outsource specific maintenance tasks (including specific rope change tasks) under clauses 32.8, 32.9 and 32.10 where the preconditions in those provisions are satisfied. I consider that clauses 32.8, 32.9 and 32.10 establish three preconditions:

(1) DP World must give first consideration to assigning the task to its own employees provided that they have the skills, capability and capacity to perform the relevant work;

(2) there must be consultation prior to the outsourcing of any maintenance tasks; and

(3) maintenance tasks may only be outsourced if they are unable to be satisfactorily handled by DP World's "permanent Tradesmen", including because they cannot be completed within the rostered time available.

[11] I am satisfied that each of these preconditions was satisfied in this case. In relation to the first precondition, the evidence establishes that DP World did give first consideration to its maintenance employees performing the maintenance tasks of making the rope changes on cranes 3, 4 and 5 (there being no dispute that they had the skills, capability and capacity to undertake those tasks). Mr Hulme held discussions with the maintenance delegates, Mr Graham and Mr Sampson, on 4 July 2019 concerning the maintenance employees performing these tasks in preference to the use of contractors, and not only considered but agreed to their proposal that the maintenance employees would undertake the tasks provided that the necessary resources to do so would be made available. This was of course agreed to by Mr Hulme on the basis of an assurance communicated by the delegates that the tasks would be completed by 6.00am on Thursday 11 July 2019. I do not consider that clause 32.8 required Mr Hulme to again consider using the maintenance employees once it became clear by Tuesday 9 July 2019 that their assurance would not be fulfilled. In any event it is clear that he did consider, but rejected, their use to complete the rope change on Crane 3.

[12] In relation to the second precondition, the requirement to consult applies prior to the actual outsourcing occurring. The evidence discloses that Mr Hulme on behalf of DP World entered into an arrangement with the contractor to change the ropes of Crane 3 in the early morning of Wednesday 10 July 2019 prior to the meeting with the ERC, so the relevant requirement was to consult prior to that time. Whether DP World consulted with the workforce or the CFMMEU after that time is irrelevant. The evidence demonstrates that DP World consulted with employees (via the CFMMEU delegates) on 4 July 2019 and continuously thereafter until the evening of Tuesday 9 July 2019 about the possible use of contractors.

[13] As to the third precondition, the position that Mr Hulme faced at the time he made the decision to outsource early on Wednesday 10 July 2019 was as follows:

• the rope change on only one crane had been completed, and it was obvious that the three cranes would not be completed by 6.00am on Thursday 11 July 2019, contrary to the assurance given on 4 July 2019;

• the maintenance employees intended to participate in the strike which was to commence at 6.00am on Thursday 11 July 2019 and continue until 6.00am on Saturday 13 July 2019;

• there was not enough maintenance staff rostered to work on Saturday 13 July 2019 to permit the rope change on Crane 3 to be completed on that day; and

• it would have required maintenance staff to volunteer to perform overtime at overtime rates for the work to have been done by them on Saturday 13 July 2019; and

• the contractor was able to do the work on a fixed-price basis and guarantee its completion.

[14] The fact that the maintenance employees and the CFMMEU changed their mind after the outsourcing arrangement had already been made and announced to the ERC, and indicated a preparedness to conduct the rope change work while the strike action was underway, is irrelevant. The question is whether the preconditions were satisfied at the time the outsourcing arrangement was made. I consider that it is clear on the evidence that they were satisfied at the relevant time, in that the position which then applied was that the required maintenance work would not be completed satisfactorily or at all by DP World's own workforce within the contemplated timeframe.

[15] For the above reasons, I determine that the outsourcing of the rope change work on Crane 3 the subject of the CFMMEU's application is not in contravention of clause 32 of Part A of the Agreement. The dispute is resolved on this basis.

Mr A Slevin of Counsel on behalf of Construction, Forestry, Maritime, Mining and Energy Union

Mr D Perry, solicitor, on behalf of DP World Sydney Ltd

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