Application for FWA to deal with a Bargaining Dispute between North Goonyella Coal Mines Pty Limited and Construction, Forestry, Mining and Energy Union.

[1] In this matter I am acting as a private arbitrator under an agreement between the CFMEU and North Goonyella Coal Mines Pty Ltd (Company). That agreement was made in the context of an application under s.240 of the Fair Work Act 2009 (FW Act) seeking the assistance of Fair Work Australia (FWA) in relation to a bargaining dispute. The agreement relevantly provides:

"13. Arbitration will be conducted informally in a conference style hearing. Commissioner Harrison will determine an outcome by reference to the objects of the Fair Work Act and those matters referred to at section 275 of the Fair Work Act (factors FWA must take into account in deciding terms of a workplace determination) plus any other matter Commissioner Harrison believes is fair and just to take into account.

14. Commissioner Harrison shall publish his decision in the form of a final agreement. Detailed reasons need not be published."

[2] Commissioner Harrison became unavailable to undertake the conciliation and arbitration in this matter within the timeframe required by the parties and the parties subsequently agreed that I would discharge that role in accordance with the agreement. Conciliation occurred over a number of days and the parties reached agreement on most matters. However, there were two matters on which the parties were unable to agree and in respect of which arbitration was conducted in accordance with the agreement. Those two matters were seniority (and the redundancy and recruitment clauses to which the issue of seniority related) and the flexibility term required by s.202 of the FW Act. On Friday 12 February 2010 I published to the parties a copy of the North Goonyella Underground Mine Collective Enterprise Agreement 2010 in the terms agreed by the parties together with the clauses relating to redundancy and recruitment as arbitrated by me. These are the short reasons for coming to the conclusion that I did in relation to those arbitrated terms.

[3] The objects of the FW Act are as follows:

The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:

(a) providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia's future economic prosperity and take into account Australia's international labour obligations; and

(b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and

(c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and

(d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and

(e) enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(f) 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; and

(g) acknowledging the special circumstances of small and medium-sized businesses."

"275 Factors FWA must take into account in deciding terms of a workplace determination

The factors that FWA must take into account in deciding which terms to include in a workplace determination include the following:

(b) for a low-paid workplace determination - the interests of the employers and employees who will be covered by the determination, including ensuring that the employers are able to remain competitive;

(c) for a workplace determination other than a low-paid workplace determination - the interests of the employers and employees who will be covered by the determination;

(e) how productivity might be improved in the enterprise or enterprises concerned;

(f) the extent to which the conduct of the bargaining representatives for the proposed enterprise agreement concerned was reasonable during bargaining for the agreement;

(g) the extent to which the bargaining representatives for the proposed enterprise agreement concerned have complied with the good faith bargaining requirements;

(h) incentives to continue to bargain at a later time."

[5] The parties have been in negotiation for a prolonged period without reaching an agreement on the terms of an enterprise agreement to replace the existing collective agreement which has long since past its nominal expiry date. Both parties feel very strongly about the issue of seniority and both were prepared to utilise industrial action to support their position in bargaining.

[6] The CFMEU sought clauses that would have retained seniority as the primary determinant of those selected for involuntary redundancy and for the filling of internal vacancies above ground. The Company objected to any role for seniority in the enterprise agreement other than as a basis for distinguishing between employees to be selected for involuntary redundancy where all other factors were equal.

[7] At one time seniority in the form of the 'last on, first off' rule was pervasive in the coal industry. In the last couple of decades there has been a move away from the use of seniority in this fashion. Pure seniority remains entrenched at some coal mines although these are a distinct minority and notably include several mines that are close to the end of their life. Others, still a minority, allow some role for seniority.

[8] While almost impossible to quantify, I accept that there is some adverse linkage between productivity and seniority rules of the sort that have been in place at the mine. Such a linkage is supported by a report of the Productivity Commission in to the coal mining industry which was relied on by the Company. It is also consistent with an analysis from first principles: employees chosen by merit will generally be more productive that employees chosen solely according to length of service.

[9] The Company sought the complete removal of a role for seniority other than as a criterion of last resort for the selection between employees when all other factors were equal. I have not embraced that position. Rather, I have come to the view that, in circumstances where employees have had the benefit of the protection afforded by a fairly strict seniority rule, the objects in s.3 and the criteria in s.275, and an outcome that is fair and just, is best served by removing seniority as the primary criterion for selecting employees for involuntary redundancy while retaining a substantive role for it in an involuntary redundancy selection process. In my view, at the end of the day, merit should be the key criterion but with material weight given to seniority. Clause 39.6 has been designed to ensure that "material" weight is given to seniority. What is "material" will depend on the circumstances but is intended to mean that a weight is attached to length of service that is qualitatively greater than simply using seniority as a way of splitting people, all other things being equal. The weight attached to seniority will vary depending upon the periods of service among the affected group. Greater weight must be given to a long period of service when measured against an employee with a short period of service. Where two employees each have similar periods of service, the weight to be attached to length of service as a criterion for distinguishing between the two employees will be relatively small.

[10] The Company has given an undertaking that the round of redundancies that is presently underway will be completed in accordance with the previous agreement. The revised provisions reducing the role of seniority in any selection process for involuntary redundancies will only apply in relation to any future round of redundancies. Mr Hedges, who struck me throughout the process as being completely honest and 'fair dinkum', has stated unequivocally that there are no plans for a further round of redundancies at the mine. However, circumstances can change. The sort of changes that may occur include not only a change of economic conditions necessitating a reduction in the workforce, but also a change of management personnel where the new managers do not approach these issues in the same way as Mr Hedges. I consider it fair and just to include some additional protections against the (remote) possibility that the Company does decided to embark on a further round of redundancies including for the real purpose of getting rid of long serving employees who are perceived as being 'troublemakers' or a drag on productivity. Clause 39.6(c) is designed to ensure that employees cannot be treated adversely in a redundancy process on the basis of poor attitude and/or performance unless that issue has been raised squarely with them. That is, employees should have an opportunity to address perceptions of poor attitude and/or performance. Clauses 40.3 and 40.4 are designed to act as a disincentive against such a process and, in the unlikely event that a new manager decided to embark on such a strategy, provide an additional avenue of redress above and beyond other avenues through the agreement, unfair dismissal proceedings, a breach of the general protections or the like.

[11] I can see no proper justification to retaining a role for seniority in relation to internal transfers. Such transfers should be based on merit.

[12] The FW Act mandates that an enterprise agreement must contain a flexibility term complying with the requirements of s.202 and 203 of the FW Act. The CFMEU proposed a clause that would have allowed individual flexibility around the taking of single days of annual leave. The clause proposed by the CFMEU was an attempt to provide for an absolute minimum of individual flexibility whilst still technically complying with the requirements of the FW Ac: for practical purposes: the individual flexibility clause that you have when you are not having an individual flexibility clause.

[13] With a minor modification to which I will return, I have adopted the clause proposed by the Company. That clause is the model individual flexibility clause specified in the regulations.

[14] The flexibility term proposed by the company is the model flexibility term specified in the regulations. That model term mirrors the model individual flexibility clause determined by a seven member full bench of the Australian Industrial Relations Commission for the purposes of award modernisation. That clause was crafted to balance the interests of both employers and employees. It was substantially narrower in its scope than what had been sought by employer interests.

[15] I do not regard the clause proposed by the Company as in any way inappropriate. An employee cannot be compelled to enter a flexibility agreement. A flexibility agreement can be terminated unilaterally by an employee on the giving of the specified notice. Further, it should be appreciated individual flexibility agreements are not simply for the benefit of the employer: such an agreement may be entered to meet the special needs of a particular employee.

[16] It seems that the scope for the use of flexibility agreements at the mine is limited. Nevertheless, I cannot see any proper basis in the objects in s.3 or the criteria s.275 to take the limited approach urged by the CFMEU in relation to the content of a flexibility term.

[17] The one change that I did make requires a copy of an individual flexibility agreement made pursuant to the flexibility term to be served of the Lodge albeit with identifying information redacted. It seems to me that, in the context of circumstances at this mine, the union has a legitimate interest in monitoring the way in which individual flexibility agreements are used by the Company.

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