New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union and Blue Mountains City Council [2006] NSWIRComm 127 - NSWIRComm 2006 case summary — Zoe

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New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union and Blue Mountains City Council [2006] NSWIRComm 127

[2006] NSWIRComm 127

Industrial Relations Commission (NSW)|2006-07-01|Before: Sams DP

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Source facts

Court

Industrial Relations Commission (NSW)

Decision date

2006-07-01

Before

Sams DP

Source

Original judgment source is linked above.

Judgment (51 paragraphs)

[1]

CITATION: New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union and Blue Mountains City Council [2006] NSWIRComm 127

[2]

NOTIFIER New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union PARTIES: RESPONDENT Blue Mountains City Council

[3]

Industrial dispute - local government employees - review of Council's vehicle fleet requirements - Council decision to terminate vehicle lease back agreements - cost considerations - 12 months notice of termination of agreements - four affected employees - lease back agreements for a number of years - cost savings - alternatives for reducing costs - recruitment and retention - Council's policies - terms of agreement - letters of offer - whether agreements a benefit or a condition of employment - no consultation with affected employees - mutual trust in employment relationship - implied terms in employment contract - award provision - nature of relief sought - application for award and orders CATCHWORDS: Held, no jurisdictional issue raised - new award unnecessary - employees unlikely to have accepted positions knowing vehicles would be withdrawn - award provision not relevant - renewal of agreements little more than administrative exercise - no distinction between benefit and condition of employment - lease back agreements integral component of remuneration package - implied term of the contract of employment - true nature and purpose of relationship cannot be altered - no genuine attempt to consult employees or Union - poor industrial relations practice - orders warranted to preserve the status quo - orders made.

[22]

27 Mr Brown deposed that when he was approached in late 2003 by Mr Dominic O'Brien, Manager Operations and Mr Dave Allen, Group Manager to take up the new position of Coordinator Plant and Resources, he was assured he would retain his vehicle lease. Mr Brown had sold his own vehicle in 1999 when he was first provided with a leaseback vehicle. When his new letter of offer did not contain reference to his vehicle, he met with Mr Allen again and indicated that he would rather stay in his existing position if there was any possibility he would lose his car. Mr Allen assured him that he wouldn't "lose conditions" and would "gain some". Mr Brown made a diary note of this conversation. 28 On 18 January 2005 Mr Brown was called to a meeting with Mr Allen and Mr Nassif, his supervisor. He was handed a letter terminating his lease agreement with 12 months notice. Mr Brown reminded Mr Allen of his earlier assurances to which Mr Allen agreed, but said it was "out of my hands as it was a corporate decision". 29 Mr Brown met with the General Manager, Mr Willis. Mr Willis stated that Mr Allen had not given him any such assurances. Mr Brown said he would not have accepted the new position if there had been any chance he would lose his vehicle. He also expressed concern about the lack of consultation. 30 Mr Brown sought, but was denied details and documentation concerning how the decision had been arrived at. Mr Brown again confronted Mr Allen who agreed that he had given him assurances about his vehicle. Mr Brown denied Mr Allen mentioned anything about the Fleet Review or the possibility of his lease being withdrawn. Mr Brown strongly disagreed with Council's decision and said it was contrary to the express agreement he had about the new position. He had been given no proper opportunity to respond to the Review findings and was not consulted before any decisions were made. 31 Mr Brown believed his leaseback vehicle was part of his employment salary and a condition of employment. In oral evidence, he said he would have to purchase another vehicle if his leaseback vehicle was withdrawn. He referred to the NRMA's weekly running costs of $217.09 for a Holden Commodore Acclaim (his present vehicle). 32 In cross examination, Mr Brown agreed he was aware that Council's policy was subject to change depending on circumstances, but believed it must be by agreement. He believed employees keep a vehicle for however long they are the present incumbent in the position. Mr Brown accepted that the agreement makes reference to termination with 12 months' notice and that there is no requirement for consultation. 33 In re-examination, Mr Brown deposed that no one from Council had spoken to him about the new policy in 2001. He said that while it could be downloaded, it was difficult to understand. Mr Brown said that there was no opportunity to contrast the conditions of the agreement. He added that, if you didn't sign it, you wouldn't get the vehicle. Mr Rhett Hahn

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52 Mr Fausto Sut was formerly the Council's Executive Officer and a member of the Council's Executive Management Team (EMT). He now works at Liverpool Council. Mr Sut referred to the role of the EMT to effectively account for and manage Council's assets. The Council's vehicle fleet was not excluded from these considerations. 53 Mr Sut referred to the various Council policies dealing with motor vehicles and, in particular, highlighted the 2001 policy which had been discussed with the Staff Consultative Committee. The policy made clear that vehicle leaseback agreements are a benefit and not a condition of employment and that Council may terminate an agreement by giving an employee 12 months' written notice. Mr Sut said the policy is available on Council's intranet service and accessible through the Human Resources Branch. 54 Mr Sut believed that it was apparent from the terms of the policy that the provision of leaseback vehicles was never intended to be a permanent arrangement for salaried and wages staff. An employee is invited to participate, he or she must read and acknowledge the policy and contribute a standard weekly fee. 55 Mr Sut referred to the Light Vehicle Review which had been undertaken in 2003/04 as a result of cost pressures on Council. The Council had over 500 full time staff with 150 light fleet vehicles. The Review resulted in a net reduction of nine vehicles. Affected staff had been given 12 months' notice and Council had introduced an online vehicle booking system to enable all employees access to a vehicle for operational reasons. 56 In oral evidence, Mr Sut detailed the nature and purpose of the Vehicle Fleet Review which was based on the type of use, the purpose of use and the recruitment/retention factor based on a ranking system. As the issue was emotive it was decided to engage a consultant to undertake an independent review. The objective was to reduce costs and better utilise the existing fleet. In progressing the matter, a project team of five executives worked with the consultant. The Group Managers were consulted about usage. 57 Mr Sut agreed there was no consultation with the holders of the vehicles because Council wanted an objective test and employees would receive 12 months' notice, in any event, in accordance with the Policy. Mr Sut was not aware of any other employees having been given 12 months' notice prior to January 2005. 58 After determining the number of vehicles to go, the second phase of the review dealt with better utilisation. Mr Sut said a number of employees spoke to him about the outcome. Mr Sut said employees were not asked to submit log books because it wasn't compulsory to keep one. However, other data was available such as FBT records. 59 During Mr Sut's evidence, Council tendered a document relating to the costs and savings associated with the Vehicle Fleet Review. Mr Sut said that in the Review, 18 positions were to lose vehicles and nine were to gain vehicles, leaving a net reduction of nine. There was much discussion about the actual cost savings to Council. In so far as the four employees were concerned, it may be said that the cost savings are between $135,000 and $158,000 on an ongoing basis, with significant other capital cost and recurrent savings.

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60 Mr Bentley is the Council's Manager, Corporate Human Resources. Mr Bentley's affidavit dealt with each of the leaseback agreements with the four employees. 61 In respect to Mr Odgers, Mr Bentley noted that the original offer of employment in April 2000 did not include access to the leaseback vehicle scheme. His subsequent access to the scheme was subject to agreed terms. This arrangement was far from a fixed term and when he sought to extend the agreement, Mr Bentley believed Mr Odgers understood the leaseback vehicle was not a fixed condition of employment. Mr Bentley said that all the leaseback agreements signed by Mr Odgers indicated that he must abide by Council's policy and the terms and conditions - one of which stated that the leaseback scheme was a benefit and not a condition of employment. 62 In respect to Mr Lees, Mr Bentley believed that because he had been introduced to the restricted leaseback scheme when he was acting up for one month in 1997, this rendered the termination provisions of the agreement redundant. 63 Mr Bentley deposed that the use of a restricted leaseback vehicle is subject to an agreement made pursuant to the terms and conditions of Council's policy. Mr Lees' signature on his agreements in 1999 and 2002 indicate his acceptance that the vehicle is a benefit and not a condition of employment. 64 In cross examination, Mr Bentley could not say why Council had not signed Mr Lees' agreements of April 1999 and 2002. He presumed this was because they were renewals of an earlier agreement. Mr Bentley believed that supervisors would discuss the terms of the agreement with the employee. 65 With Mr Hahn's arrangements, Mr Bentley said he first signed a leaseback vehicle agreement in 2001 and then for a fixed period of time from January 2002. The agreement continued beyond the identified period without change to the terms and conditions. 66 Mr Hahn was offered employment in the position of Business Development and Systems Officer on 2 February 2004. Prior to this offer, Mr Bentley received a memo concerning discussions held between Mr Hahn and Mr Allen and the agreed outcomes. Mr Bentley believed that it was resolved that Mr Hahn's leaseback vehicle would be carried over to the new position, but subject to decisions arising from Council's Light Vehicle Review. 67 In respect to Mr Brown, Mr Bentley believed that when he signed four leaseback agreements in 1999 and 2001 the documents indicated Mr Brown had full knowledge the vehicle was a benefit and not a condition of employment and Council had the right to terminate the agreement with 12 months' notice. 68 Mr Bentley believed that Council's policy was couched in clear and express terms and that vehicles are provided on contingent grounds. The preamble to the agreement states that the ongoing provision of the vehicles is subject to change. Council's policy and the terms and conditions were appropriately communicated to employees in unambiguous terms and 12 months' notice is fair and reasonable. Mr Bentley believed that the notice provision is not uncommon in local government and is consistent with the terms of the Local Government (State) Award. 69 In oral evidence Mr Bentley said that when Council's policy was changed in 2001, there was a consultation with staff for some three months in which there was an opportunity to comment. 70 Mr Bentley gave evidence of his involvement in the Vehicle Fleet Review in which he was called upon to consider issues of recruitment and retention of staff. Mr Bentley said that the Review did not consult with the individual employees as the Council wanted an objective view. Employees had not been asked to fill out a log book. 71 Mr Bentley agreed that job advertisements for some positions, such as planners included provision of a vehicle. It was necessary for such positions as this was what the market expected. However, there was a clear distinction between planners and the persons involved in this dispute. 72 Mr Bentley denied that letters of offer to employees which included reference to leaseback vehicles formed part of the contract of employment. Acceptance of the vehicle was optional and employees were asked to discuss the arrangement with their supervisor or manager. Mr Bentley agreed there was no specific training for supervisors about communicating Council's policies. However, he didn't believe it was necessary, as most supervisors would have signed agreements themselves. Mr David John Allen

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73 Mr Allen is the Council's Group Manager Blue Mountains City Services. Mr Allen responded to the evidence by disputing Mr Brown's version of the conversations in 2003 and 2004 between them concerning Mr Brown's retention of his vehicle. 74 Mr Allen recalled that he stressed to Mr Brown that Council was undertaking a vehicle review and he could not guarantee any outcomes and vehicles may, indeed be withdrawn. 75 Mr Allen deposed that when he handed Mr Brown the letter terminating his agreement, Mr Brown challenged him and said he had been assured his vehicle would remain with his position. Mr Allen told him that he had not given such a guarantee beyond the review of the fleet and his own agreement with the Council. Mr Allen further said the review findings were a corporate decision and he had no authority to reverse any decision. 76 Mr Allen denied lying about any assurance and had explained to the General Manager that no such assurance would, or could have been given by him. He believed Mr Brown had a selective memory or chose only to hear what he wanted to hear. 77 Mr Allen said he made it abundantly clear to Mr Hahn that he could not guarantee the continued provision of a vehicle for his position as all vehicles would be subject to review. Mr Hahn acknowledged this during the negotiations for his position and the vehicle did not form part of his total remuneration. Salary negotiations were distinct and separate from the leaseback vehicle agreement. Mr Allen had indicated to Mr Hahn that if he wished to be compensated for the loss of his vehicle he should make a formal submission to the General Manager. 78 In oral evidence, Mr Allen said the information on vehicle usage came from managers. Log books were not required, because they were a "hassle". Council made a deliberate decision to deem the split of private and business usage at 40/60 per cent. Mr Allen estimated the saving to Council if the four employees have their vehicles withdrawn as $158,000 in year one and $45,000 each year thereafter. SUBMISSIONS

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79 Ms Wilson submitted that while the Union accepted the Council had a discretion to terminate the vehicle leaseback agreements, to do so without consultation or an investigation into alternative solutions to Council's financial problems, amounted to a breach of trust between the employer and employee. 80 Ms Wilson put that the employees' contract of employment included a number of elements; the Award, the leaseback agreements, Council's policies and implied terms such as procedural fairness and mutual trust and confidence. The provision of a motor vehicle is part of the contract of employment. It was used as an incentive to recruit the employees and to withdraw it constitutes a reduction in remuneration. 81 She said Mr Odgers had submitted a business case for a vehicle which had been accepted and no changes to operational requirements had been evidenced such as to warrant its removal. 82 Ms Wilson noted that it was not disputed that Council had not consulted with employees until August 2005; well after they had received their notices of withdrawal of their vehicles. In addition, Council had made the decision before examining other means of reducing the fleet costs. 83 Ms Wilson questioned the accuracy of Council's cost savings, by submitting that no account was taken of the fee contributions of employees and certain operational costs had not been achieved because some vehicles were not to be sold. 84 Ms Wilson put that employees were given no explanation of Council's policies and were simply told to sign the agreement or forego the vehicle. The procedures for renewal were haphazard and all employees signed the same agreement, whether it was a condition of employment or a so called benefit. Employees signed the agreements by relying on the mutual trust in the employment relationship. 85 The evidence of Mr Brown and Mr Hahn was not seriously challenged, in that they would not have accepted alternative positions in Council if they had known their vehicles would be withdrawn. Council's policies and agreements don't excuse Council from its obligation to deal with employees in good faith. See Gambotta v John Fairfax Publications Pty Ltd [2001] NSWIRComm 87; Whitehead v Hillier Hewitt Elsley Pty Ltd [2003] NSWIRComm 382; Local Government Engineers' Association of New South Wales and Wollongong City Council [1995] NSWIRComm 31.

[31]

86 Mr Smith submitted that the leaseback agreements were clear and unambiguous. The employees were aware of the policy and the terms of their agreements and had not questioned them when signing the agreements. The fact that this situation may not have happened before, doesn't mean it wasn't provided for, as it was clearly in the documentation. 87 Mr Smith noted that the decision to terminate the agreements had been preceded by an extensive, independent review of Council fleet requirements and the necessity to have regard for financial pressures and the significant savings which would be made. 88 Mr Smith noted that the offer of a leaseback vehicle was an invitation which an employee could accept or refuse. It is a benefit which is subject to change; not a condition of employment. 89 Mr Smith dealt with what constitutes reasonable notice. He said that 12 months' notice was entirely reasonable in these circumstances. He relied on Pacific Power v Electrical Trades Union of Australia, New South Wales Branch [1997] NSWIRComm 70 and the Local Government (State) Award itself. Mr Smith accepted that the Award clause post-dated the employees' agreements, but argued that the Commission should take it as a guide to industry standards. 90 In responding to the Union's submissions on implied terms of the contract of employment, Mr Smith relied on Codelfa Construction Pty Ltd v State Rail Auithority of New South Wales 149 CLR 337 and Network Ten Pty Ltd v Rowe [2005] NSWSC 1356. He said that it was not reasonable or equitable to imply a term into the leaseback agreement which prevents the Council from bringing the agreement to an end. To do so would not give business efficiency to the arrangement. 91 As to consultation, Mr Smith said the emphasis was on consultation at the "front end"; that is when the policy was being developed in 2001 with the employees and the Consultative Committee. No objections had been raised at that time. 92 Mr Smith submitted that there was no evidentiary basis for the employees to assert an ongoing entitlement to leaseback vehicles. Further, it was wrong to suggest there had been no consultation with employees. All the employees had accepted the Council's policy and the terms and conditions of their agreements. 93 Mr Smith said that Council has taken measures to ensure that employees who require a Council vehicle to fulfil their duties will be able to access vehicles through an online pooled arrangement. 94 Mr Smith submitted that the Commission would not convert an extra award benefit into an award prescription by the reasoning found in Ellisons Bulk Haulage Coal Allowance Award (unreported) Full Bench IRC433 of 1995. 95 Mr Smith summarised Council's case as follows:

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108 Mr Smith primarily relied on the description of the leaseback agreements as a benefit and drew a clear distinction between the provision of a benefit and a condition of employment. In my view, this is a distinction without a difference. Moreover, the Council itself does not appear to have made such a distinction. This is so because Council required employees to sign the same document, whether their vehicle was a condition of their contract of employment or able to be withdrawn any time as a so called "benefit". 109 In light of the manner in which the four employees were provided with their leaseback vehicles, I have no doubt that these arrangements were an integral component of their remuneration packages such as to constitute, if not an actual condition of employment, then an implied term of their contracts of employment. In this regard, Mr Smith's reliance on Network Ten Pty Ltd v Rowe in respect to the characteristics of an implied term of a contract of employment does not, in my opinion, assist his case at all; rather the reverse. In Network Ten Pty Ltd v Rowe, Simpson, J said: 48 The next position argued on behalf of the defendant was that a term, limiting the duration of the contract to two years, ought to be implied in order to give business efficacy to the agreement. The circumstances in which an unexpressed term might be implied into a written contract were stated by the Privy Council in BP Refinery (Westernport) Pty Ltd v President, Councillors and Rate Payers of the Shire of Hastings (1977) 180 CLR 266, and cited with approval by Mason J (as he then was), with whom Stephen J and Wilson J agreed, in Codelfa. The conditions were stated as follows: "(1) It must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

[44]

See also Byrne v Australian Airlines Ltd 185 CLR 410. 110 In my view, the leaseback agreements were entirely consistent with the five conditions cited in the above passage. 111 Firstly, I have little doubt that the ongoing provision of a leaseback vehicle is reasonable in the circumstances. It would be unfair and inequitable for it to be withdrawn. Secondly, the agreements provide business efficacy to the contracts of employment in that they encouraged the recruitment and retention of the employees and maintained industrial harmony. Thirdly, I have no doubt that it was obvious to the employees (and more than likely to the Council) that the ongoing provision of a vehicle was a condition of their employment. Fourthly, the provision of the vehicle was given clear expression by the letters of offer to the employees, the conduct of the parties at the time and their ongoing conduct towards each other. Fifthly, the provision of the vehicle does not contradict any of the express terms of the employees' contracts of employment. On the contrary, it reflects the clear intent and purpose of the relationship between the employee and employer. 112 I would wish to add that to describe these arrangements as a benefit that can be so readily disposed of, as some form of gratuity, able to be unilaterally withdrawn in the Council's absolute discretion, completely misstates the true nature and purpose of the benefit. At this point, it is apposite to refer to what Staff, J recently said in Australian Medical Officers' Federation (New South Wales) (on behalf of Bruce Hall) v South Western Sydney Area Health Service [2006] NSWIRComm 101 at para 150: 150 In Abdalla v Viewdaze Pty Ltd (2003) 53 ATR 30, a decision of the Full Bench of the Australian Industrial Relations Commission, it was observed the terms and terminology of the contract are always important and must be considered. However, in doing so, it should be borne in mind that parties cannot alter the true nature of their relationship by putting a different label on it. In particular, an express term that the worker is an independent contractor cannot take effect according to its terms if it contradicts the effect of the terms of the contract as a whole: that is, the parties cannot deem the relationship between themselves to be something it is not. Similarly, subsequent conduct of the parties may demonstrate that the relationship has a character contrary to the terms of the contract. If, after considering all other matters, the relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity by the very agreement itself which they are making with one another. 113 To my mind, the Council's decision to terminate the employees' leaseback agreements has the effect of altering "the true nature of their relationship by putting a different label on it" and should not be condoned.