Notification under section 167 by the Minister for Industrial Relations of a dispute between BHP Billiton and The Australian Workers Union and others re proposed strike action [2002] NSWIRComm 378

APPLICANT Mr J Nolan of counsel SOLICITOR Mr I Hill State Crown Solicitor's Office

RESPONDENTS Mr A Morris Blake Dawson Waldron LEGAL REPRESENTATIVES: BHP Steel

Mr A Gillespie Australian Workers' Union, New South Wales

Mr W Phillips Australian Manufacturing Worker's Union, New South Wales Branch

Mr W Tomlins Electrical Trades Union of Australia, New South Wales Branch

JUDGMENT: - 43 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: Walton J, Vice-President 13 May 2002

NOTIFICATION UNDER SECTION 130 BY THE MINISTER FOR INDUSTRIAL RELATIONS OF A DISPUTE BETWEEN BHP BILLITON AND THE AUSTRALIAN WORKERS UNION, NSW AND OTHERS RE PROPOSED STRIKE ACTION

Introduction 1 This matter concerns the notification of an industrial dispute by the Minister for Industrial Relations pursuant to s130 of the Industrial Relations Act 1996 ("the Act").

2 The industrial dispute emerges from the confluence of two events, both of which significantly affected industrial relations in the steel industry in Port Kembla, namely, the restructuring of the merger corporation BHP Billiton Limited with respect to its steel operations and the expiration of the Port Kembla Steelworks - Steel Industry Agreement 1998 - 2001 ("the Steel Industry Agreement") and the nominal term of awards applying at the Port Kembla Steelworks (resulting in collective bargaining as to the retention or alteration of the arrangements between industrial parties hitherto applying in that industry).

3 That confluence has produced an industrial dispute of substantial dimensions, the resolution of which is of fundamental importance to the steel industry in Port Kembla and ultimately the public interest (most directly reflected in the interests of the Illawarra community).

4 The resolution of the issues in this dispute essentially involves a wholesale reconsideration of long standing industrial and employment relationships in this industry. Those relationships have as their foundation the extensive programme of industry reform brought about by the Steel Industry Plan and subsequent steel industry agreements. The arrangements arising from that plan and those agreements constitute the modern history of the steel industry and were instrumental in the emergence of internationally competitive corporations in the steel industry in Port Kembla. Until more recent times, those arrangements also produced relatively stable industrial relations in the industry. The determination of those issues represents, therefore, no less than a watershed for industrial relations and employment in the steel industry in the Illawarra region.

Background 5 In July 2002, BHP Billiton Limited will spin out its remaining steel assets into a separate company that will be listed on the Australian Stock Exchange as BHP Steel Limited. BHP Steel Limited (being the former BHP Steel (JLA) Pty Ltd) will become the parent company of the BHP Steel Group. At the same time BHP Steel Ltd is listed on the Australian Stock Exchange, persons holding BHP Billiton Limited shares, including employee shareholders, will automatically become BHP Steel Limited shareholders.

6 BHP Steel Limited is expected to be an Australian Stock Exchange top 50 company and Australia's largest manufacturer serving customers in 90 countries (supported by offices and operations in 25 countries). It is expected to have 12,000 employees world-wide (and almost 9,000 in Australia). The 'spin-out' is intended by BHP Billiton Limited to maximise the future prospects for the steel business by creating a separate steel company and to capture new market activities. However, it does so in an extremely volatile steel market with intense global competitive pressures.

7 The reformation of the corporation has coincided with the cessation (at least in nominal terms) of steel industry awards (setting terms and conditions of employment in the steel industry in Port Kembla) and the Steel Industry Agreement (concerning various matters, such as, employment security and the introduction of change in the industry).

8 It is at this juncture that BHP Steel Limited and BHP Steel (AIS) Pty Ltd ("the companies") have sought to establish fundamentally different industrial relations and employment conditions for the steelworks in Port Kembla. In addition to offering improved terms and conditions of employment, the companies have sought fundamental changes with respect to conditions for security of employment, the introduction of change and the management of industrial disputation (in this latter respect, the companies have, in broad terms, sought a guarantee of supply). The companies have contended that the changes are appropriate as a matter of merit and necessary in order to sustain the new corporation and meet the challenges of the market.

9 The Australian Workers' Union, New South Wales ("the AWU"), the Electrical Trades Union of Australia, New South Wales Branch ("the ETU") and the Australian Manufacturing Worker's Union, New South Wales Branch ("the AMWU") (collectively "the unions"), for their part, also point to the significant dimensions of the current industrial dispute. Those unions sought the retention of the Steel Industry Agreement, particularly as to its provisions for security of employment and the management of change. They contended the significant revisions which have been sought by the companies need to be considered in the context of the long history of the operation of the Steel Industry Agreement (and its origins in the Steel Industry Plan) and the significant advancements in the industry brought about by those arrangements. It was further contended the reforms introduced since 1983 (including improvements in productivity brought about by local enterprise bargaining processes) have made the companies highly competitive internationally and extremely low cost producers. They also pointed to the substantially improved industrial relations brought about by those agreements.

10 The unions submitted that the companies' proposals represent a root and branch departure from those industrial precepts without substantial merit. They contended that no proper basis had been established for the alteration of the long history of the regulation of employment. The unions also contended that the proposals represented a significant departure from the conventions as to enterprise bargaining in the industry where negotiations for local enterprise bargains for wages and conditions have been conducted separately to negotiations for the Steel Industry Agreement.

Procedure 11 This recommendation is made in conciliation proceedings. However, it has the effect of resolving the issues in dispute because the parties have indicated their agreement that, where an issue is the subject of a recommendation by the Commission, it will be treated "as being agreed" in the terms of that recommendation.

12 The Commission has adopted this procedure with some trepidation, having regard to its unusual features. The procedure effectively involves adjudication of serious disputed issues by reference, in part, to the positions adopted by the parties during the course of conciliation. This approach would normally be impermissible in any arbitral proceedings as to such issues. However, there are a number of factors which warrant the adoption of such a procedure in this matter: 1. There is consent of the parties (including acceptance of the procedure by a mass meeting of the members of the unions) to the procedure. Indeed, it may be said that the parties actively encouraged the use of the procedure. 2. Notwithstanding its consequences, the recommendation will be issued in conciliation proceedings. 3. The matter has special features. It involves, inter alia , a reconsideration of the Steel Industry Agreement which has a number of terms which are unfamiliar to awards and enterprise agreements. 4. There has been a sharp deterioration in industrial relations in the industry which, for its ultimate correction, requires a resolution of all relevant issues (including issues concerning the terms of the Steel Industry Agreement). 5. There is a significant imperative for an expeditious and effective solution in light of the 'spin-out' and that deterioration of relationships.

13 It should also be noted that this unusual procedure was borne partly out of history (there being a similar procedure employed successfully in relation to an industrial dispute concerning the outsourcing of maintenance) and, perhaps, out of necessity (from the viewpoint of the parties) given that some of the issues sought to be ventilated may have transcended those areas normally the subject of determinations by the Commission in industrial dispute proceedings.

14 There is another aspect of the informal and unusual procedure adopted in this matter that warrants particular attention. The parties have agreed that the Commission will take into account concessions made by parties during the course of the conciliation process in making any recommendation. The companies described the process, in their written submissions, as the Commission taking into "account the EBA negotiations and conciliation proceedings".

15 This is not to suggest that the Commission has not taken into account the formal submissions made by the parties in the proceedings, both orally and in writing, and evidence led in the proceedings. The Commission has examined these matters in considerable detail. Rather, the procedure entails the Commission also taking into account concessions made during the course of conciliation which, in some cases, represent the starting point for any process of deliberation.

16 It should also be noted that, with the concurrence of the parties, the witnesses in the proceedings were examined by the Commission, in the presence of the parties, during the course of the conciliation process itself (although, in some cases, formal statements of evidence had been prepared prior to such process being undertaken by the Commission).

17 During the conciliation proceedings, the proposals advanced by the companies became the focal point for discussion. This approach was adopted as a matter of convenience and resulted in no additional or special onus falling upon the companies. Nor was any priority being afforded to their position.

18 However, towards the close of the proceedings, the focus of the parties' attention shifted to the log of claims, known as the 2001 BHP Model Log of Claims ("the model log of claims"). Part of this shift in position resulted in a number of claims only being the subject of debate for the first time near the close of the proceedings.

19 Whilst I would agree with the companies that some of these later claims agitated by the unions (which the companies described as 'residual claims') were supported by considerably less submissions and supporting materials than the core claims (which had been the subject of extensive earlier proceedings), it nonetheless will be necessary to deal with the merits of each such matter. In the result, the balance of convenience shifts in favour of making recommendations by reference to each item appearing in the uniform log of claims (and then such other claims by either party as arises separately). In approaching the matter in that way, the Commission has not rendered any advantage to the position of the unions, but has simply examined the competing positions of each party with respect of each claim in the order that the claim appears in the model log of claims.

20 It should be noted that I have, from time to time, slightly modified the titles appearing in the model log of claims in order to give greater similarity to the headings which became the focal point of the conciliation proceedings.

Reasons 21 Where reasons are given for the making of a recommendation during conciliation proceedings (arising out of a notification of industrial dispute pursuant to s130 of the Act) they will often be only brief in nature and may be quite insubstantial when compared to the reasons for decision given in arbitral proceedings (particularly where the Commission is dealing with a preliminary stage of the proceedings or urgent matters).

22 However, in this matter, there is even less scope for the giving of reasons than might be afforded in the making of recommendations in conciliation proceedings. That limitation arises because the recommendations made in this matter derive, as I have earlier noted, partly from concessions made by the parties during the course of the conciliation proceedings over a long period (the parties having substantially adjusted their respective negotiating positions during those proceedings). Put slightly differently, there are aspects of the recommendations made in this matter which are conditioned by the approach adopted by the parties during conciliation.

23 It is undesirable to give any substantial reasons in these circumstances as: 1. Such a course may reveal the negotiation positions adopted by the parties both during and at the end of the conciliation, including those concessions which became the 'starting point' for the Commission's deliberations as to the recommendations now made. This would be undesirable as a matter of general policy and particularly so in this matter where neither party has sought that such communication be openly revealed. 2. In the absence of the Commission revealing the parties' negotiating positions, the Commission could not properly distinguish in any reasoning process between those aspects of any recommendation which arose purely as a matter of merit (having regard to the parties' competing contentions) and those aspects resulting directly or indirectly from the negotiation process.

24 In the circumstances, the Commission will confine any reasons accompanying these recommendations to some broad observations which will appear in the following section of this recommendation, excepting for those issues which require some particular discussion (such as, the issues which arose later in the proceedings and were not thereby the subject of the detailed conciliation processes otherwise undertaken).

General Observations 25 The Steel Industry Plan had, as its primary aim, the provision of assistance to the steel industry to "regain international competitiveness and provide job security for the workforce". That plan arose in circumstances where, according to the Steel Industry Advisory Council Report of 1983, there existed a marked decline in steel demand, excess world steel capacity and declining productivity in the local industry, together with upward labour cost pressures. BHP (referring in this sense to the then national corporate entity), at the time of the council report, saw its major problem as being the loss of competitiveness, resulting in a need to upgrade and modernise facilities and reverse the productivity decline.

26 The Steel Industry Plan required contributions by the federal government, BHP and unions (at a National and State level). For present purposes, it is relevant to note that, in addition to the plan requiring a substantial investment from BHP, it would provide job security (on the proviso that the plan was successful). The unions were required to provide wage restraint, assist in the re-establishment of productivity levels (to the extent that it fell within their province) and strictly adhere to dispute settlement procedures.

27 The Steel Industry Plan operated in the period 1984 to 1988. At the end of the year 1988, the parties to the plan introduced alternative arrangements to ensure that "the success achieved during the five years' life of the plan would be maintained and built upon". In the result, there was developed a "National Steel Industry Development Programme Agreement" between "BHP Steel" and "Steel Industry Unions". That agreement had as its aim "achieving the inter-related objectives of the business goals of BHP Steel, the continued viability of its operations into the 1990's and the satisfaction of the aspirations of employees". Those objectives were particularised as constituting, for employees, inter alia, security of employment and improvements in conditions of employment and remuneration and, for BHP and "investors", "confidence in investments in a highly productive industry offering attractive returns in a stable industrial relations environment". Customers were to receive a reliable delivery of high quality steel products at a competitive price.

28 The National Steel Industry Development Programme Agreement had within it a number of clauses which were similar to those later found in the steel industry agreements. In particular, the agreement provided a security of employment clause, a consultation clause and a resolution of disputes provision. It is noted that the resolution of disputes provision identified that during the five years of the Steel Industry Plan industrial relations had improved and that this was essential for the achievement of the objectives of the agreement. The agreement required strict observance to dispute settling procedures which were agreed at a divisional level. The agreement operated with respect to the BHP Steel Group which included operations at Port Kembla, Whyalla and Western Port. It operated for three years.

29 The National Steel Industry Development Programme Agreement was proceeded by a series of agreements of a similar character, some of which were directed specifically to the Port Kembla steelworks. One such agreement came into operation in 1989. There were similar agreements made throughout the 1990's until the most recent Steel Industry Agreement applying at the Port Kembla steelworks which operated for the period 1998 to 2001. There was some dispute in the proceedings as to whether this agreement continued to operate beyond its nominated date of operation, namely, 30 September 2001. I have found it unnecessary to resolve this issue in order to formulate the recommendations made herein.

30 There are a number of features of the terms of the Steel Industry Plan and subsequent steel industry agreements which are significant in the current context: 1. The agreements were designed to make the steelmaking operations in Port Kembla efficient, internationally competitive and give a good business return to investors. 2. In order to achieve this outcome, the plans and agreements sought to bring about a number of important changes, including improvements in labour productivity, reductions in the costs of operations (matched with a process of managed wage and conditions changes for employees) and a stable and benign industrial environment. The agreements provided for a continuous process of change, subject to requirements for consultation and dispute resolution mechanisms. 3. For their commitment to these arrangements, the unions and their members received a number of benefits. Paramount amongst these benefits was the provision of security of employment. 4. Employment security was provided in the plan and the subsequent steel industry agreements in various forms. In substance, these arrangements had two main elements: (i) subject to various conditions, an employee displaced as a result of changes in the companies' operations and workplace would be retained in employment by the companies, unless that employee elected to leave employment voluntarily; (ii) employment security was linked to the fulfilment of certain objectives. In the plan, job security was granted provided the plan was successful. In the most recent agreement, employment security was made subject to the particular provisions of the employment security clause (cl10) and "the implementation of actions and undertakings outlined in [the] agreement". Neither the plan, nor the agreements, specified how a failure to meet a term attached to the provision of employment security would be remedied. It is not clear whether such a failure would give rise to a right to terminate the agreement or the plan.

31 It would appear that the plan and the agreements were broadly successful in meeting their stated objectives. This is not merely ascertained by reference to the desire of the parties to continue the plan in the form of various agreements and the renewal and improvement of the agreements over a substantial period of time. The material before the Commission would suggest that significant improvements for both the companies and their employees were afforded by the operation of those agreements (and the collateral processes of award making with the Commission).

32 The companies are now one of the world's most efficient producers of steel and have experienced substantial improvements in labour productivity during the period of the operation of the plan or the agreements. There has been a 72% reduction in the employees of the company. Production levels have steadily increased from 1988 and by the 1990's reached levels commensurate with any earlier production levels since 1977 (although, it should be noted that many different factors have contributed to this trend). Further, BHP is at the low end of the international steel industry comparative cost curve as a result of the restructuring of its operations.

33 Those improvements have been made in circumstances where job security requirements have operated. It should be noted that 83% of the employees in the current workforce of the companies have ten years or greater service and 63% of those employees are aged 40 years and over. This description of the workforce also has implications for the recommendations made by the Commission in this matter.

34 There existed concurrently with the Steel Industry Agreements, awards governing employment at the Port Kembla steelworks. Enterprise bargaining between the industrial parties at the Port Kembla steelworks has related generally to those awards, with the Commission, from time to time, arbitrating upon particular claims for improved terms and conditions of employment. Indeed, significant changes have been introduced in the terms and conditions of employment of the companies' employees during the 18 year period of operation of the plan and the steel industry agreements (including a restructuring of classifications of employment) under the superintendence of this Commission.

35 The Steel Industry Plan ushered in a substantial reduction of industrial action in the steel industry, save for some particular periods which would appear to relate to the renewal of the agreements from time to time. The year 2001 marked, however, a sharp departure from this historical trend at the Port Kembla steelworks. There occurred a sharp rise in industrial disputation and disputes over the introduction of change in the operations and at the workplace. Indeed, the percentage of employee hours lost through strikes had, by the year 2002, exceeded industrial action at any prior time since 1978. The loss of product through the dumping of hot metal in an 18 month period extending from late 2000 exceeded the amount of such dumpings due to industrial action over the previous seven years by about 30%.

36 This reversal of the favourable trend and the reinstatement of higher rates of industrial action was, no doubt, symptomatic of the significant changes which were occurring in the industry at that time. Competitive pressures were increasing. Whilst the companies were better placed to meet economic pressures than in 1983, many similar pressures emerged as were encountered at the time of the introduction of the Steel Industry Plan. The companies sought to introduce cost reduction and productivity measures, such as the contracting out of maintenance. Whilst this issue was resolved in proceedings before the Commission, it brought into sharp focus questions as to the retention of the terms of the Steel Industry Agreement (and, in particular, the security of employment provisions which would expire in 2001), as did the unions' substantially unrestrained resort to industrial action over the proposed changes.

37 By the time of negotiations for a renewal of the Steel Industry Agreement and claims for improved wages and conditions and, no doubt, with this background and the prospect of a new corporate entity firmly in mind, the parties adopted unusually trenchant positions as to the future of employment conditions and industrial relations.

38 It serves no real purpose to apportion blame for this deterioration in industrial relations at the steelworks at Port Kembla. It is sufficient to say that the previous consensus as to the fundamental objectives for the industry (as was apparent in the Steel Industry Plan and steel industry agreements) had been eroded. Indeed, the very approach of the parties to resolving issues has changed and shifted onto a confrontationalist footing. The ordinary processes of conciliation under the Act have not been sufficient to fully penetrate the entrenched positions of the parties as to core elements of disagreement.

39 Further, whilst it is clear that the companies are experiencing significant competitive pressures, they are nonetheless sound businesses. No less financial standing is expected for the company arising from the 'spin out'. The maintenance of the companies' viability will, in the Commission's view, be enhanced by drawing upon successful elements of past industrial relations practices rather than by experimentation with new management strategies in the industrial relations context.

40 The unions submitted that the Commission should recognise a right to take industrial action in the terms of its recommendation. This submission may well have some substantial foundation by reference to the various international covenants and conventions governing the right to strike or otherwise engage in industrial action or protest. However, the invocation of these general 'rights' must be judged against other submissions which crave the retention of the benefit of pre-existing industrial arrangements, all of which restrained, either directly or indirectly, industrial action. In a similar fashion, awards of this Commission have, often in conjunction with the improvement of benefits afforded employees at the steelworks, required restraint in the taking of industrial action. I would merely add that, on no account, could it be said that the current practices leading to the substantial dumping of hot metal were appropriate or justified. Further, the level of industrial action engaged in by the unions in recent times placed at risk the very conditions they were anxious to preserve, namely, security of employment provisions.

41 Nevertheless, both the companies and the unions should be commended for their strenuous efforts to reach a settlement of their respective claims during the conciliation proceedings. Further, the significant concessions they did give in that process laid the foundation for the procedure now applied by the Commission. The embracing of this procedure by the parties indicates a willingness to find a sensible and mature industrial relations solution to the present industrial dispute. This augers well for the future.

42 It is essential that arrangements be put in place to maintain the viability of this important industry. However, it must also be said that in order for the industry to remain viable, it will be necessary for management and the unions, by their officers and members, to once again establish common goals for the industry and implement those objectives for the benefit of the companies and their employees and for the public interest (most immediately found in the welfare of the people of the Illawarra community). These recommendations are intended to strike a balance between the economic interests of the companies and the basic and reasonable rights and interests of employees and their unions.

43 The Commission will now make some brief observations as to particular aspects of the claims advanced by the parties. As earlier mentioned, the conciliation process tended to focus upon some core areas of dispute. The companies sought a reduction of the employment security provisions of the Steel Industry Agreement and claimed new arrangements for what they described as 'continuity of supply' and the 'management of change'. The companies offered wage increases but those offers varied depending upon the duration of the proposed enterprise bargain and whether improved long service leave benefits would be obtained (the grant of such improvements was said to discount the wage offer by 1%). It appears that the foundation for these wage proposals was the negotiations for wage improvements at a federal level (the final outcome of which was two wage increases of 4% over a 27 month period).

44 The unions sought wage improvements in excess of the companies' offer and the outcomes ultimately reached at a federal level. By the close of these proceedings, they sought these gains in recompense for any change in industrial arrangements deriving from the grant (in part or in whole) of "continuity of supply" arrangements.

45 The companies contended that no additional reward should be granted for the introduction of any provisions for the 'continuity of supply' because the conduct giving rise to the need for such provisions should not have occurred in the first place and was generally unacceptable.

46 The Commission does not entirely accept this submission by the companies. It is appropriate that some modest improvements over the companies' offer and thereby the outcomes at a federal level should be afforded the members of the unions in this matter. There are aspects of these recommendations which are unique to the Port Kembla steelworks. More significantly, the concessions agreed by the unions (whether by agreement per se or by their acquiescence in this process) will produce substantially improved industrial relations and improved productivity. It is beyond doubt that the companies attached considerable value to their claim for 'continuity of supply'. It is appropriate that such adjustments as are made in favour of those claims should be taken into account beneficially for the members of the unions (although, the improvement, as the Commission has noted, should only be modest). This moderation is required because the Commission has, upon the unions' submission, only granted part of the companies' claim and, it must be said, some aspects of the prior industrial conduct should simply not have occurred at the workplace.

47 Finally, the Commission has had regard to the outcome of federal negotiations concerning other BHP operations. In particular, the Commission has had regard to the BHP Coated Steel Australia Western Port Certified Agreement ("the Western Port Agreement"), which was derived, in part, from conciliation proceedings conducted in the Australian Industrial Relations Commission. However, both parties strongly contended that departures were warranted from the Western Port Agreement, having regard to different operating and employment circumstances and differences in pre-existing arrangements. Bearing in mind these limitations, the federal negotiations and proceedings do have some bearing on the present matter.

48 With these general considerations in mind, I now turn to make the recommendations as to each issue raised for adjudication by the parties in these proceedings.

Recommendations 49 The Commission will not, at this stage, deal with the final form of the instrument which will emerge from these recommendations, but rather will make recommendations resolving, in order, the claims arising from the model log of claims and then the additional claims advanced by the companies. In some limited cases, the parties will be required to confer, not merely as to the form of any instrument, but as to the substance of a provision (albeit within the strictures of the guidelines laid down by the Commission). For example, the Commission has required the parties to confer so as to formulate a definition of 'change' for the purposes of a new 'introduction of change' provision (see paragraph 76 of these recommendations).

50 The parties shall produce a draft form of the instrument (that is, award, enterprise agreement or other appropriate instrument) to reflect this recommendation within 21 days hereof. If there remains any dispute as to the form of a provision, then the parties shall file their respective versions as to the form of any proposed instrument which conforms with these recommendations. Where the Commission has, in these recommendations, directed the parties to confer as to a particular matter (without determining the final outcome at this stage), then the parties shall file, within the same timeframe, a document reflecting their respective positions as to those matters.

51 If a dispute remains as to the form of any provision, the Commission will then resolve that issue. In cases where the parties have been directed to confer, and where no agreement has been reached, then short submissions may be filed as to their respective positions (consistent with the guidelines given by the Commission as to those matters).

52 The Commission continues its recommendation of 5 March 2002, restraining industrial action, until it renders a final recommendation as to the form of any instrument pursuant to paragraph 49 - 51 above. As to the 'communications recommendations' of the same date, the Commission continues those recommendations, except that the parties will be at liberty to communicate and discuss these recommendations. They are not at liberty to reveal the contents of any discussions in the conciliation proceedings per se until that matter is further considered by the Commission.

Model Log of Claims 1 Date of Operation 54 There shall be a retrospective operation of any instrument arising out of these recommendations, which instrument shall operate for a period of 24 months. The new instrument shall operate on and from 6 December 2001, unless otherwise specified in these recommendations. Thus, the first wage increase recommended in this matter shall operate on and from 6 December 2001. The second wage increase shall commence 12 months later.

2 Wages 55 There shall be two wage increases of four percent applying from the operative dates earlier specified.

3 Coverage 56 This matter does not arise for consideration in this matter.

4 Allowances (other than electrical licence allowance) 57 Allowances which are ordinarily increased in line with general wage increases shall be increased in conformity with the wage increases in this recommendation. Other allowances shall be adjusted in conformity with existing relativities. Any site-specific allowances which are adjusted without reference to external relativities shall be discussed between the parties and an agreement reached as to the process for the subsequent adjustment of these allowances. The Commission refers in this latter respect to the companies' proposal in MFI 8, Tab 2, page 9.

5 Income Protection 58 Having regard to the federal agreements and the proposal advanced by the companies in MFI 8 (Tab 2, page 9, attachment 2) there is a sound foundation for the establishment of an income protection scheme. The Commission, however, rejects the proposal from the unions in this respect. On the material presently available to the Commission, and in the light of the history of arrangements in this respect, the income protection policy should be a discretionary policy managed by the companies. The policy should be ultimately incorporated within any instrument made and should be trialled by the parties. The discussions as to these matters should be completed within three months of the date of this recommendation, with the final form of the provision presented to the Commission within that time. Any disputed areas will then be resolved by the Commission.

59 As to the terms of the policy, the companies' existing policy should represent the starting point for such discussions. It should be noted, for present purposes, that whilst the policy will be discretionary in nature, it should not operate upon the basis of whether an employee has "good standing" (as contemplated in the existing corporate policy). Further, the clause of the instrument should provide that the companies may not exercise the discretion unreasonably and that any adjudication of an issue arising out of the clause may be resolved in proceedings before the Commission.

6 Bargaining Agent Fee 60 Without stating any general principle as to this matter, the claim is rejected, essentially on the basis that the unions' submission indicates there is no present need for the provision.

7 Casual and Contract Labour 61 This issue does not arise in the present proceedings.

8 Paid Maternity and Paternity Leave 62 The unions have established an insufficient basis to improve the current benefits afforded by the companies for paid maternity and paternity leave. The claim is rejected.

9 Over-Award Conditions 63 This issue does not arise in the present proceedings.

10-13 Manusafe Benefit Trust Fund 64 As a general proposition, there is, no doubt, considerable merit in the establishment of such a scheme. However, the Commission agrees with the companies' submission that nothing has been advanced to show a need or justification for this claim for the businesses operating the steelworks. The mere fact of the 'spin out' does not alter this conclusion as there is no suggestion that the entitlements of employees would be affected by these arrangements. Further, the Commission has recommended the retention of the security of employment provisions of the Steel Industry Agreement (which will thereby offer considerable protection for employees). The claim is rejected, although it will be appropriate for the companies to provide information to the unions as to any provision made by them for the accrued entitlements of employees after 1 July 2002.

14 Long Service Leave 65 Having regard to the aforementioned general observations, and the long service leave provisions applying in the federal arena (see MFI 17), there should be improved long service leave with the provision of 13 weeks long service leave after ten years service. This variation as to existing entitlements shall operate from the first pay period on or after the date of this recommendation. The provisions of cl17.4 of the Western Port agreement are also recommended.

15 Union Officials and Delegates Rights 66 There has not historically been a difficulty in relation to this matter at the Port Kembla steelworks. The current claim rises in the context of one particular incident and suspicions about changed management practices in the light of deteriorating industrial relations. There is not, in the Commission's view, sufficient basis to establish the new provision sought by the unions. There is every reason to assume that the historical conventions as to access by union officials and delegates to union members without victimisation of any kind will continue at the steelworks. Individual difficulties can be dealt with in dispute proceedings before the Commission. However, in the event that there is a significant deterioration in this respect, leave is reserved to the unions to re-agitate this issue after 6 months operation of the recommended instrument. The Commission notes, in this respect, the companies' undertakings and suggestions in its letter of 14 November 2001 (MFI 8, Tab 2).

16 Paid Union Meetings 67 The Commission notes the companies' undertaking contained in its letter of 14 November 2001 (MFI 8, Tab 2). It is sufficient that this undertaking be set out in the correspondence between the parties. In that event, it is unnecessary for the Commission to make a recommendation in relation to that matter. The Commission rejects the claim, save that it will be appropriate for one paid meeting of union members to be held in order to receive the terms of this recommendation and an explanation of same. The meeting will not concern, of course, the acceptance or otherwise of these recommendations.

17 Leave to attend Industrial Relations Commission of New South Wales Proceedings

68 This matter did not receive any substantial attention in the unions' submissions. The Commission notes the companies' proposal to the Australian Worker's Union of 14 November 2001 in this respect.

18 Australian Workplace Agreements 69 The companies offered to include in an exchange of letters a statement to the following effect: "Given what we see as a constructive relationship between BHP Steel and the Combined Unions going forward we confirm that we have no intention to introduce individual employment contracts or offer Australian Workplace Agreements."

70 That undertaking is noted and should be confirmed in writing to the unions. The claim is otherwise rejected.

19 Payment of Union Dues 71 The companies offered to include in an exchange of letters a statement to the following effect: "BHP Steel has provided the pay role deduction of union dues as a way of recognising the value of ongoing co-operation between the parties. We confirm our intention to continue providing this service."

72 The Commission notes the undertaking of the companies, which should be committed to writing by way of correspondence to the unions. The claim is otherwise rejected.

20 Bank Arrangements 73 There is insufficient basis established for this claim. The claim is rejected.

21 Superannuation 74 Noting the Companies' position, as set out in its letter of 9 October 2001 (MFI 8, Tab 2), and, noting the submissions of the unions, there is insufficient basis to support this claim. This conclusion is reached upon the basis that the existing scheme will be retained after the 'spin out'. In the companies' correspondence of 9 October, it indicates that the scheme will be "basically retained after listing". If there is any significant departure from the existing scheme after the spin out, then the unions have liberty to apply with respect to this matter (which liberty should be exercised before 6 December 2002).

22 No Outsourcing without agreement 75 This matter is appropriately dealt with in the context of introduction of change provisions.

23 Introduction of Change. 76 The parties did not define precisely the areas of change that were intended to be caught by this provision. They should further confer as to that matter. However, it is intended that this recommendation will concern the full panoply of the changes affecting employees at the workplace (including proposals for outsourcing) where those changes are substantial in nature. The provision of cl11 of the Western Port Agreement shall act as a guide to those discussions as to the definition of 'change'.

77 The companies identified a number of key principles concerning the management of change which are set out on page 7 of MFI 2. Those principles should be incorporated in the clause in the new instrument arising from this recommendation as the principles underpinning the operation of the clause, although the fourth dot point (in the third such principle) should simply read 'fair' (that is, the change should be, in all the circumstances, fair).

78 Much attention was paid during the conciliation process to the process for managing change and resolving disputes over change. The issue was intense as both parties felt aggrieved by the circumstances currently applying in relation to change at the workplace. The companies complained that change was unreasonably impeded and often accompanied by industrial action. The unions complained that there was inadequate consultation.

79 The Commission makes the following recommendation as to the introduction of change: 1. The following provisions set out the terms and order of the procedure which shall govern the introduction and management of change (as defined). 2. Where a decision is taken by the companies to make a change they shall convey, in writing, the elements of the change proposed, the intended date of commencement for the change and its likely consequences for the unions and the employees affected. This step shall occur before the introduction of any change.

3. There shall be consultation with unions as to the change consistent with consultative provisions in the steel industry agreements over time and the Western Port Agreement (the precise requirements shall be the subject of conferences between the parties). That consultation shall occur before the introduction of any change. 4. The consultation process will conclude by any party to the consultation so declaring the process exhausted, the making of an agreement or the notification of an industrial dispute as to the change under the Act. The consultation process should be comprehensive and genuine and may be reconvened by direction of the Commission in dispute resolution proceedings, if it has been shown to be prematurely concluded. 5. An agreement as to change should result in immediate implementation with appropriate documentation recording the terms of the agreement produced shortly thereafter by the parties. 6. At the end of the consultation process (that is, upon a declaration being made to that effect) and, in the event of a disagreement as to the change proposed, the change may be implemented forthwith unless a party to the consultation process notifies the other parties, in writing, that it seeks a 'cooling off period'. In order to be effective, the notice must be issued by 5pm on the next day after any declaration that the consultative process is at an end. If such notice is delivered, the cooling off period shall operate from the date of the notice for a period of 14 days. There shall be no industrial action during the cooling off period. Further, the status quo (prior to the proposed change) shall apply during the cooling off period. Any implementation of the change shall cease upon the giving of the notice (and any change made by that time will be reversed).

7. The proposed change may be put into effect after the conclusion of the cooling off period, subject to any decision by the Commission in proceedings pursuant to s130 of the Act varying the duration of the cooling off period. A party to the consultation process may seek an extension or reduction of the cooling off period in such proceedings. The onus shall fall upon that party to establish a basis for varying the cooling off period. 8. The existing dispute settlement procedures shall apply to disputes concerning the management of change except to the extent affected by this recommendation. 9. The existing dispute settlement procedures shall also apply to all industrial disputes which do not concern 'change'. 10. Where the issue concerns the interpretation or application of an existing provision of an award or the instrument arising from these recommendations, the status quo shall prevail until the matter is agreed or the subject of interpretation by the Commission. No industrial action shall occur in relation to such a dispute. 11. The Commission's recommendations as to the dumping of hot metal and urgent dispatches shall apply to any dispute as to the management of change. 12. Nothing in this recommendation detracts from the operation of the Act with respect to the settlement of industrial disputes.

24 Shift Penalties 80 There is insufficient basis established for this claim. The claim is thereby rejected.

25 Overtime and Double time 81 There is insufficient basis established for this claim. It is thereby rejected.

26 Saturday Rates at Double time 82 There is insufficient basis established for this claim. It is thereby rejected.

27 36 Hour Week 83 The Commission did not call upon the company in relation to this claim. There was insufficient basis to establish the claim and it is inconsistent with wage fixing principles.

28 Employment Security - 'No Forced Redundancy'. 84 Clause 10 of the Steel Industry Agreement shall be retained with some modifications as follows: 1. A provision in similar terms to cl9.1 of the Western Port Agreement should be inserted immediately following cl10.1. 2. Clause 10.3 should be varied so as to make the provision subject to the terms of any instrument arising from the recommendation. 3. The clause should contain a provision concerning long term surplus employees which provides that, where the provisions of clauses 10.3 have been met and an employee remains unplaced in the long term, the parties shall confer as to the future employment options for that employee. In the event of any dispute, then the matter shall be referred to the Commission. It is not intended that the expression "long term" would be defined in the instrument. A decision as to whether an employee may be classified as a long term surplus employee will depend on a variety of factors, including the history of that persons engagement with the company and any special difficulties occasioned in the finding of a placement. As a general rule, however, it would not be expected that employees would normally be treated as long term surplus until the expiration of 12 months. 4. Clause 10.5 will be amended so as to provide for the resolution of any dispute to be dealt with in accordance with the relevant disputes settlement procedure. 5. A new sub-clause will be added which provides that the terms of cl10 restricts the rights of the companies to terminate an employee who becomes surplus within the scope of that clause, but does not otherwise affect the rights of the employer to terminate an employee lawfully for misconduct or other circumstances unrelated to an employee's position becoming redundant. The residual rights of an employer to terminate an employee outside the scope of cl10 will, of course, be affected by any rights residing in the employee under the Act. 6. The Commission does not consider that the additional parts of cl9.2 of the Western Port Agreement require a separate recognition in the clause as cl10.6 of the Steel Industry Agreement sufficiently comprehends and deals with special circumstances.

29. Increase in Redundancy Benefits 85 This claim is rejected.

30 Electrical Licence Allowance 86 This claim was not pursued.

31 Sick Leave Payment on Termination 87 The Commission did not call on the companies in relation to this matter. There is insufficient basis for the claim. It gives rise to some issues under the Act. The claim is rejected.

32 No extra claims extended to bind parties 88 The companies' position in this respect is accepted and adopted for this recommendation.

33 Renegotiated and proposed new words 89 The wording proposed for this clause by the companies should be incorporated in any instrument arising from these recommendations.

Other Claims Continuity of Supply - Regulation of Disturbances to Production and Supply

90 This matter essentially concerns claims advanced by the companies to prohibit the dumping of hot metal and to permit urgent customer orders to be met, notwithstanding the existence of industrial action. Thus, the claim itself is not a proposal for continuity of supply per se. To that extent, the title given to the companies' claims is a misnomer. The alternative formulation of a heading is that suggested in the latter aspect of the heading appearing in this recommendation. It was the subject of considerable conciliation and concessions by the parties. The claim is granted, in part, in accordance with the following recommendations.

91 The Commission will firstly deal with the general aspects of the clause sought in the companies' claims (including the question of a linkage to the employment security clause) and then make a recommendation as to the particular elements concerning hot metal dumping and urgent customer needs.

92 The clause providing for these arrangements should contain a sub-clause specifying the objects of the clause. This sub-clause should be based upon the opening four paragraphs of the proposal advanced by the companies under the heading "continuity of supply" (see pages 4 and 5 of MFI 2). However, it will require modification both in order to modify the language for its accommodation in a relevant instrument and to recognise an additional feature. That additional feature arises from the concessions made by the parties, namely, that the special arrangements sought as to 'hot metal' and 'urgent customer needs' do not restrain, or seek to restrain, the taking of industrial action per se. Further, in the case of hot metal arrangements, the proposal preserves the interests of those engaged in the taking of industrial action by requiring that the companies not deal with slabs produced (in the sense of further processing or dispatching the slabs) until the industrial action ceases. Similarly, the proposal for the meeting of urgent customer needs does not require all product to be distributed, but rather only that part of it attracting special requirements and, in that respect, after the provision of information and undertaking appropriate consultation. These features should be recognised in the objectives.

93 The industrial action and issues arising relating to it will be dealt with either under the existing dispute settling procedures or special procedures governing 'change' and, in any event, by the Commission in any proceedings commenced under the Act. Thus, the provisions of the recommended clause are directed solely at the protection of product and meeting customer demands.

94 A good deal of the negotiations between the parties concerned the connection between the provisions for "hot metal arrangements" and "meeting urgent customer needs" and their relationship to the provisions governing employee security. The issue remaining for resolution in that respect after conciliation was the nature and extent of any such connection (which was described during the proceedings as a "linkage").

95 The Commission considers that the "linkage" issue should be resolved as follows: 1. The Commission will recommend the arrangements for the processing of "hot metal" and "urgent customer needs" during the course of industrial action. This recommendation for a linkage is confined to those matters. A distinction will be drawn in the "linkage" arrangements between "hot metal" and "urgent customer needs." 2. Any new instrument should expressly reflect two important principles: (a) Strict compliance is required by all parties to the recommended arrangements for dealing with "hot metal" and "urgent customer needs" during the course of industrial action. It is expected there will be no breaches of the provisions. (b) The taking of steps during the course of industrial action in breach of these requirements would be a most serious matter and one requiring significant and urgent attention in any dispute resolution processes. Any breach would, no doubt, be a paramount consideration for the Commission in the exercise of its powers under the Act as to industrial disputes.

3. A breach of the recommended arrangements concerning "hot metal" or "urgent customer needs" may result in the elimination (in part or whole) of the employment security provisions here recommended by the Commission. Where such security arrangements are removed (in whole or in part), the minimum 13 week provision proposed by the company in MFI 2 will apply to that part of the workforce whose benefit has been thereby removed by the Commission.

4. The Commission does not accept, however, that the withdrawal of the recommended employment security arrangements (or the substitution of the 13 week minimum alternative) should occur automatically upon a breach of the recommended arrangements. It is appropriate that any failure be considered through a case by case approach with the Commission determining whether, in any particular circumstance, the recommended employment security benefits should be removed or reduced benefits substituted in their place. It will be necessary to determine whether the failure has occurred, its extent and the circumstances giving rise to the occurrence (including the conduct of both parties), together with any other relevant considerations bearing upon the question of the removal of the benefit. This approach will prevent outcomes which are unfair, harsh or unreasonable in all the circumstances. It will also enable the Commission to fashion any relief commensurate with the industrial relations considerations applying at a particular time. The Commission does not presently propose to define all of the circumstances that may be taken into account, but plainly the Commission will have regard to the aforementioned considerations and will also consider the section of the workplace where the breach occurs, alternative remedies that might be available and the overall question of fairness.

5. However, it should be made plain that this approach is designed to ensure proper process and a fair application of the provisions and does not represent a general exception to the linkage between "hot metal" and "urgent customer needs" and employment security which was paramount in the conciliation process. It should be noted, in this respect, that a failure to adhere to hot metal arrangements (particularly where provision is made to store slabs until the cessation of industrial action) would represent a most serious failure and one most likely to attract a forfeiture of benefits (in part or whole) (principally because, unlike some urgent dispatch issues, the loss occasioned cannot be properly rectified or ameliorated by any later recommendations, directions or orders made by the Commission, even where urgent dispute resolution proceedings are convened). 6. These provisions do not apply to employees who are already engaged under security of employment arrangements. 7. Applications to remove employment security provisions shall be made by the notification of an industrial dispute. The companies shall bear the onus of making out a case for such removals.

Hot Metal Arrangements 96 The hot metal arrangements shall be those proposed by the company on pages 5 and 6 of MFI 2, modified in the following respects: 1. Having regard to the safety issues involved, the Commission considers that the slabs produced during the course of industrial action should be stored at locations selected by the companies. However, the relevant aspect of the clause proposed by the companies will be amended in this respect, as follows: (i) The unions shall be given a daily list of the location of all slabs stored during the course of an industrial dispute; (ii) The clause shall make plain that the slab will not be further handled, dispatched or processed until the actual cessation of the industrial action, that is, an actual return to normal production for any reason. 2. The provision that slabs may be dispatched where there is an urgent customer delivery required is rejected.

Meeting Urgent Customer Needs 97 There has been no case established for any significant departure from the Western Port model with respect to the issue of managing urgent customer supply. It is the view of the Commission, therefore, that cl12 of the Western Port agreement should constitute the foundation for any clause dealing with this matter. It is plain, however, that any provision recommended in this matter will not make an exception for protected action (as is contemplated in the Western Port agreement). In the result, other adjustments will be made to the clause so as to counterbalance this factor.

98 The Commission recommends the adoption of the Western Port Agreement as to "Managing Customer Supply" with the following modifications. 1. Clauses 12.1 and 12.2 should be amended so as to produce an "objectives" provision commensurate with the Port Kembla operations.

2. Clause 12.3 may need modification in the terminology used, for example, the reference to a 'site delegate' and 'HR representative'. It should be noted that the recommended subclause does not make any reference to a 'nominated employee' as suggested in the companies' proposal. It is implicit in the adoption of cl12.3 that the provision is intended only to apply to genuinely urgent requirements (that is, to avoid stock outs) and that where product is packed and awaiting dispatch it will be dispatched as required by the companies.

3. The Commission rejects that aspect of the companies' proposal as to the dispatch of 'residual amounts'. It is anticipated that ongoing discussion contemplated within the proposed clause will provide the prospect for some residual amount of an order to be processed where there is a minor amount of additional work to be performed and there is special and urgent considerations applying to the order. Such issues should be able to be resolved by agreement or, if required, by the dispute resolution procedure under the Act. If the provision, so drafted, creates substantially adverse consequences then there is liberty to apply to revisit the recommendation in relation to the residual amounts of orders six months after the making of this recommendation.

4. There will be modifications to clauses 12.4 to 12.7 in order to adjust the terminology to meet the Port Kembla steelwork's arrangements. Dot points 5 and 6 in paragraph 2B of MFI 2 (see page 6 of MFI 2) will also be incorporated in the instrument.

5. The shipping proposal advanced by the company does not seem to have any relationship to negotiations at a national level. Nor are there any current or unusual difficulties which have been identified in relation to such matters. In the result, that aspect of the claim is rejected, although disputes as to that nature will be dealt with in the ordinary way.

Business Improvement Incentive 99 The Commission rejects the companies' proposal for a new incentive scheme and recommends the continuation of the quarterly lump sum payment scheme. However, the new incentive scheme should be examined against the companies' performance and other relevant considerations over a 12 month period. The parties should further visit the companies' proposal (to the extent that the companies hold the matter open) at the end of the 12 month period after the making of the recommendation. There is liberty to apply in the event of any dispute arising at that time.

Residual Matters Dispute Settlement Procedure 100 The existing dispute settlement procedure shall continue to operate except to the extent varied by these recommendations and, in every case, shall be varied by these recommendations in relation to the 'dumping of hot metal' and 'urgent customer deliveries'.

Balance of Steel Industry Agreement 101 The parties did not address whether or not the provisions of the Steel Industry Agreement not considered in this recommendation would be retained. That matter should be discussed during the course of preparing a draft instrument to reflect this recommendation. If there be any dispute as to this matter, submissions should be filed stating the parties' respective views at the time of filing any draft instrument.

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