Notification under s130 by the Broken Hill Town Employees' Union of a dispute with the Barrier Social Democratic Club re rates of pay and Notification under s130 by the Barrier Social Democratic Club of a dispute with the Broken Hill Town Employees' Union re negotiation of enterprise agreement [2002] NSWIRComm 131

BROKEN HILL TOWN EMPLOYEES' UNION Mr B Campbell, President LEGAL REPRESENTATIVES: and Ms R Greenwood, Secretary BARRIER SOCIAL DEMOCRATIC CLUB Ms N Town, McCarthy Associates

JUDGMENT: - 13 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: SAMS DP

Matter No. IRC01/6001 Notification under section 130 by the Broken Hill Town Employees' Union of a dispute with the Barrier Social Democratic Club re rates of pay .

Matter No. IRC02/1223 Notification under section 130 by the Barrier Social Democratic Club of a dispute with the Broken Hill Town Employees' Union re negotiation of an enterprise agreement.

DECISION AND RECOMMENDATION [2002] NSWIRComm 131

1 These proceedings commenced by way of a notification lodged on 7 September 2001 by the Broken Hill Town Employees' Union ("the Union") of a dispute with the Barrier Social Democratic Club ("the Club") regarding an alleged breach of the industrial agreement covering the Club's employees.

2 The Commission listed the dispute for telephone conference on 19 September 2001. Mr B Campbell and Ms R Greenwood represented the Union from Broken Hill and Ms N Town appeared for the Club in Sydney. It soon became apparent that the core of the dispute centred on the breakdown of negotiations for a new collective agreement between the Union and the Club. At the conclusion of the proceedings the Commission said: The Commission has chaired conferences with the parties, on record and off record, and a way forward has been agreed, such as certain information is to be exchanged and discussed between the parties at a telephone conference this Friday. There are two matters to be considered: the arrangements to apply in the short term and the negotiations in respect to a new agreement to cover the wages and working conditions of employees at the Club. The parties are encouraged to quickly develop the interim arrangements to apply and to commence negotiations and, hopefully, conclude negotiations before the Commission's next attendance in Broken Hill. In order for this matter to be appropriately considered, I shall list the matter for hearing and further conference at 10.00am on Wednesday, 5 December 2001. The parties are requested to advise the Commission, in the week before, as to their requirements for time on that day, either in the form of an extended conference or shorter proceedings, should they be in the happy position of reaching an agreement. I will formally adjourn the proceedings on that basis.

(By consent the proceedings listed for 5 December were vacated).

3 On 5 March 2002, the Barrier Social Democratic Club (IRC02/1223) lodged a second dispute. The dispute identified nine issues that remained extant in the negotiations for a new agreement and requested the Commission's assistance to resolve the impasse.

4 The disputes were listed for compulsory telephone conference on 8 March 2002. Both parties outlined their respective positions. Ms Town expressed particular concern with the Club's vulnerable financial position and tendered a corroborative financial opinion by the accounting firm, Deloitte Touche Tohmatsu.

5 By consent the disputes were listed for Broken Hill in April with an expectation that all parties involved in the negotiations would be present to progress the negotiations to conclusion.

6 At a report back on 10 April 2002 in Broken Hill, Mr Campbell informed the Commission that lengthy negotiations had occurred and four issues remained outstanding. The parties intended to continue their negotiations and at Mr Campbell's request, a report back was listed for the next day.

7 On that occasion, three matters remained outstanding. The parties requested the Commission make recommendations on the issues following the receipt of written submissions. Directions were issued accordingly.

8 Next year the Club will celebrate its centenary of operations in Broken Hill. However, in recent times, the Club has experienced considerable financial difficulties reflecting the serious economic downturn in Broken Hill.

9 In April 2001, the Club was placed in voluntary administration. It emerged from administration in June 2001, when the ANZ bank agreed to advance funds to ensure the Club was able to continue to trade. The bank engaged Deloitte Touche Tohmatsu to monitor the Club's ongoing operations and financial arrangements.

10 As a consequence of the Club's financial difficulties, a number of employees, without Union involvement, agreed to alter some of their conditions of employment in order to assist in the Club's survival.

11 Traditionally, the industrial regulation between the Club and its employees (represented by the Union) has been by unregistered collective agreement. Union membership at the Club is said to be about 50 per cent. The last agreement expired seven years ago in May 1995.

12 The Club Employees (State) Award (319 IG 589) has an exclusion for the County of Yancowinna. Consequently the state common rule award does not apply in Broken Hill.

13 Since November 1999 the parties have unsuccessfully sought to negotiate a new collective industrial agreement. In mid 2000, employees received wage increases in line with movements in the Club Employees (State) Award. These increases were 4 per cent in July 2000 and 4 per cent in July 2001.

14 On 28 August 2001, the Union served a log of claims and a claim of back payment for alleged breaches of the expired common law agreement. The log of claims sought State Wage Case increases for wages and allowances and the retention of all of the conditions of the expired agreement.

15 Three issues remain to be considered by the Commission in this decision - various shift penalty rates, payments for work on public holidays and the retention of existing long service leave arrangements.

16 The cost of the Union's claims was very much in dispute. I shall refer later to the general arguments put on this material. In respect to the specific arguments on the disputed claims, I summarise the parties' submissions as follows:

17 The Union put no specific submission on the claim for retaining the current penalty rates for broken shifts (20 per cent), afternoon shifts (15 per cent) or the $50 make up allowance for weekly employees. Rather, the Union argued that including all shift penalties in the calculations resulted in a cost saving of 4.27 per cent. When no shift penalties are calculated the saving is 16.09 per cent.

18 The Club put that the calculations for the agreed arrangements to this point result in no cost savings. These calculations do not include broken shift and afternoon penalties as demanded by the Union. The Club could therefore not agree to these penalties. The Club said the Union's costing was incorrect in that casual employees, who do not receive shift penalties, were included. The cost to the Club would be 9.74 per cent, not a saving of 16.09 per cent as contended for by the Union.

19 The Union sought to retain the existing arrangements. These provide for work on a public holiday to be at double time with an additional day's pay. Employees who do not work on a public holiday receive an additional day's pay. In addition, whether working public holidays or not, all employees receive a further ten extra days (known as "stat" days) at the base rate, plus 15 per cent.

20 The Union later offered to concede the 15 per cent loading on the ten "stat" days a year. It proposed work on a public holiday be paid at a rate of 300 per cent and employees not rostered on a public holiday be paid one day's pay. It was said these concessions would result in a saving of 0.13 per cent.

21 The Club proposed the public holiday provisions of the Club Employees (State) Award. These provide for work on a public holiday to be at 2.5 times the ordinary rate of pay. The Club submitted that its proposal was standard for the club industry in New South Wales and consistent with the provisions found in the Broken Hill Commerce and Industry Consent Award [2002] NSWIRComm 105. It said the Union's claim effectively provided eight weeks and two days' leave per year. This was unreasonable and unsustainable.

22 The Union sought to retain the existing arrangements which provide twenty weeks for ten years' service and 17.5 per cent loading on the first five weeks of leave. Pro rata long service leave is available after five years' service. The Union claimed that locally negotiated agreements in the health sector, ambulance service and local government provide long service leave in excess of thirteen weeks for ten years' service. It said the Club's proposal was a minimum standard.

23 The Club proposed thirteen weeks for ten years' service and pro rata leave according to the New South Wales Long Service Leave Act 1955. The Club rejected the Union's submission that pro rata long service leave is available after five years' service on termination of employment for any reason.

24 It was submitted by the Union that it had made significant concessions during the negotiations, including agreeing to an increase in the hours of work from thirty-five to thirty-eight. However, the Club had made no concessions. The Club had failed to quantify the cost savings offered by the Union and the Club's calculations contained several discrepancies. The Club had increased wages for five employees under the Club Managers' (State) Award (317 IG 583), but expected the remaining twenty-three employees to make all the cost savings.

25 The Union was confident that consumer spending would improve in Broken Hill with the purchase of the Pasminco mine by Perilya Pty Ltd and that local businesses would benefit. The Union referred to a statement by Mr Jim Hickey of LJ Hooker Real Estate. Mr Hickey said the local real estate market was as strong as it has been over the last twenty years. The Union also pointed to the bidding for local air services and newspaper reports that the decline in the City population was slowing.

26 The Club emphasised the relevance and significance of the advice of its accountant. This advice disclosed that urgent attention was necessary in order to make further cost savings.

27 Two letters from Deloitte Touche Tohmatsu were tendered in the proceedings. The first, dated 6 March 2002, calculated the percentage of the Club's wages bill to revenue as 28.5 per cent; whereas the New South Wales club average was 24 per cent. Deloitte stressed the importance of reducing this cost to more "commercially realistic" levels.

28 The second letter verified the Club's calculations of the costs associated with the terms and conditions negotiated up to that point (April 2002), excluding the outstanding matters. These calculations were said to show a 30 per cent wages to revenue ratio. Indeed, the wages cost was marginally higher than if the old arrangements were maintained. The calculations, confirmed by Deloitte, demonstrated that no cost savings would result if the Union's claims were met.

29 The Club had consistently provided detailed calculations of the cost of the claims and had these calculations verified by Deloitte. The Club did not accept that the Union was in a better position to assess the accuracy of the claims over its own advice.

30 The Club submitted that the existing conditions proposed by the Unions were unsustainable and unreasonable. The concessions it had made were above general and club industry standards.

31 The Club rejected the assertion that the Union had made significant concessions. The agreement on hours of work was equivalent to 35.5 hours a week, not an increase from thirty-five to thirty-eight hours. In any event, the increase only related to six full time employees and the cost saving was 0.365 per cent.

32 The Club's original position was the terms of the State award. However, during the negotiations, the Club had agreed to alter twenty-three of the thirty-one clauses in the agreement. The majority of employees will receive a wage increase.

33 The Club submitted that the economic future of Broken Hill was not as bright as that portrayed by the Union. Even with the sale of the Broken Hill mine there would be a 30 per cent reduction in the current workforce. The Union's claims as to the real estate market in no way indicate that property values have increased. Broken Hill maintains the second highest decline in population of any region in Australia.

34 In considering the merits of the respective claims of the parties it is essential to appreciate the prevailing economic circumstances of Broken Hill. It is against this background that a proper consideration of the claims being sought by the Union can be assessed.

35 The Commission had recent occasion to comment on Broken Hill's difficult economic circumstances in the context of the wind down and the closure of the last remaining mine and largest employer in the area. In Construction, Forestry, Mining, and Energy Union (New South Wales) and Pasminco Broken Hill Mine [2001] NSWIRComm 215, I awarded improved redundancy benefits to mine employees, inter alia, because of the unique difficulties unemployed mine workers and their families would experience in Broken Hill. I said at para 252 of the decision: 5) There is little opportunity for any of the employees to transfer their skills and experience as mine workers to an alternative mine operation in, or near Broken Hill. 6) There are limited alternative job opportunities. Four hundred redundant employees being added to the employment pool in Broken Hill will only exacerbate this situation. 7) The state of the housing market in Broken Hill has slumped in recent times. This effectively locks most employees financially to remaining in Broken Hill. In this regard I note that this problem was recognised as far back as the early 1970s when, in the 1971 Broken Hill Mining Industrial Agreement, provision was made for compensation for the loss of equity in a home owned by a redundant employee (s46.7).

36 There is a peculiar irony with the position advanced by the Union in this dispute. In effect, the Union points to a perceived improvement in the region's economic circumstances to justify its claims. Notwithstanding that I see very little indication of such an improvement, it is precisely the reverse of the argument the Construction, Forestry, Mining and Energy Union pressed on the Commission only a few months ago, in seeking higher redundancy payments for its members.

37 Since my findings in the above proceedings, it cannot seriously be suggested that there has been any significant turnaround in the region's economic circumstances. However, two observations can be made on recent developments.

38 Firstly, the purchase of the Broken Hill Mine by Perilya Pty Ltd will ensure ongoing employment at the mine for a longer than anticipated mine life (now estimated to be at least 2011). However, Perilya has announced that it will operate the mine with 30 per cent less of the workforce.

39 Secondly, the redundancy of the entire Pasminco workforce might well result in an injection of employee spending into the local economy. However, this is, at best, only likely to have a short-term effect. Having regard for an uncertain future with few alternative job prospects, I would expect most redundant employees to carefully and prudently manage their financial affairs, and not engage in a wild spending spree.

40 The central argument in this matter concerns the costing of the Union's claims. Not surprisingly, the Union disputes the calculations verified by the Club's accountant, Deloitte Touche Tohmatsu.

41 Deloitte is a well-known and respected financial adviser. Its reputation and expertise cannot seriously be in question. I do not accept that its methodology and calculations are erroneous. Nor can I accept that the Union's expertise in financial advice is comparable to Deloitte's; let alone superior to it.

42 In the result, I prefer to rely on the Club's calculations of the costs of the claims and the implications arising there from. CONCLUSIONS

43 In the exercise of its functions and responsibilities, the Commission has an obligation and duty to carefully consider the impact on employment of its decisions, whether at the micro or macro level. I have no doubt that this imperative is the earnest desire of both parties to this dispute.

44 There can be no doubt that the Club, like all clubs and businesses in Broken Hill, has undergone significant economic pain and difficulties in recent times. Unlike some, the Club was on the brink of closing its doors and only emerged from voluntary administration in June last year following financial advances secured from the Club's bank.

45 In my view, the Club's precarious position remains unchanged. Drastic action was, and remains necessary. The history of the recent negotiations reveals, I think, a lack of appreciation by the Union, of the seriousness of the Club's plight. Much of what I have heard in this dispute has an air of unreality about it.

46 I note however, Mr Campbell acknowledged the Club's financial difficulties on the 19 September 2001. He said "we are now prepared to negotiate a new agreement with the Club mindful of the financial difficulties the club is in." (T.p3)

47 Being acutely conscious of the Club's vulnerable long-term future, I am astounded that negotiations are still dominated by talk of maintaining conditions which were negotiated many years ago in periods of relative prosperity. It is extraordinary, for example that there continues to be a claim of $50 for not working on a public holiday. In other words, an allowance for not being at work! No matter what the origins or basis for the introduction of such an allowance, it cannot possibly be sustainable in 2002 - a fortiori, in a region such as Broken Hill.

48 Another longstanding condition of employment serves to make the same point. I was informed that since the 1920's, employees at the Club have been working thirty-five hours with a paid half hour meal break - effectively working a 32.5-hour week. Only recently, the parties agreed to a 35.5-hour week (it is not a thirty-eight hour week as suggested by the Union). It is difficult to imagine how a 32.5-hour week survived for as long as it did.

49 On any view of it, the Union seeks to retain conditions of employment in excess of the standards applying in industry generally and the club industry in particular.

50 However, I do not wish my comments to be seen as critical of the Union in its desire to retain long standing benefits and good conditions for its members. But there comes a point when doing so threatens the very jobs of those who the Union is charged to defend.

51 In determining this matter, I remind the parties of the objects of the Industrial Relations Act 1996 ("the Act"), in particular objects (a) and (b) a) To provide a framework for the conduct of industrial relations that is fair and just,

b) To promote efficiency and productivity in the economy of the State,

and the general obligations on the Commission under s146 to "take into account the public interest in the exercise of its functions" under the Act.

52 I have also had regard for the two 4 per cent increases in 2000 and 2001 and a further 4 per cent wage increase to take effect on the approval of the current agreement.

53 In my opinion the Union's claims must be rejected; save for a modification to the claim in respect to long service leave.

54 I recommend that: 1) The agreement should not provide for penalty payments for broken shifts, afternoon shifts or the make up allowance of $50.

2. The public holiday provisions of the Club Employees (State) Award should be included in the agreement.

3. I do not believe that existing employees should lose their existing accruals to long service leave. However, the accruals of future long service leave for existing employees and all new employees should be calculated under the proposal put forward by the Club. 55 I direct that within twenty-eight (28) days a draft agreement be prepared incorporating those matters as agreed in Attachment A to the Club's submission and the Commission's recommendations in this decision.

56 The agreement should then be formally submitted to the Commission for approval pursuant to s35 of the Act.

57 Dispute proceedings 6001/01 and 1223/02 are concluded.

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