Fair Work Act 2009

s.604 - Appeal of decisions

Appeal against decision ( [2016] FWC 9050) of Commissioner Ryan at Melbourne on 30 December 2016 in matter number C2016/5747.

[1] Paper Australia Pty Ltd t/a Australian Paper has lodged an appeal, for which permission to appeal is required, against a decision of Commissioner Ryan issued on 30 December 2016[1] (Decision). The Decision was made pursuant to s.739 of the Fair Work Act 2009 (FW Act) in the exercise of dispute arbitration powers conferred upon the Commission by clause 33, Grievance and Dispute Settlement Procedure, of the Australian Paper (Enterprise) Agreement, 2016-2019 Maryvale Mill Mechanical - Maintenance and Engineering Store (Agreement). The dispute the subject of the arbitration concerned whether a proposal by Australian Paper to reduce its current complement of boilermakers by three was permissible under clause 39, Security of Employment, of the Agreement. The Commissioner determined that it was not permissible. Australian Paper contends in this appeal that the Commissioner erred in the interpretation and application of clause 39, and consequently that the Decision should be quashed.

[2] The Agreement applies to mechanical, maintenance and engineering storepersons employed at the pulp paper and paper manufacturing mill (Mill) operated by Australian Paper at Maryvale in the Latrobe Valley in Victoria. The commercial viability of the Australian Paper business has been called into question. A report issued in September 2014 identified that it was necessary to reduce Australian Paper's annual operating costs by $58 million. This included $3 million in savings in maintenance labour costs at the Mill.

[3] Included in the maintenance operations at the Mill is a Boilermakers' Workshop. In about September 2015 Australian Paper engaged a consulting firm to undertake a review of the Boilermakers' Workshop. While this was underway, the Agreement was negotiated and made and, on 24 March 2016, was approved by the Commission. An important cost-saving concession made by employees in the Agreement was that they would move from a 35 to a 38-hour week with no corresponding adjustment in pay. The employees also agreed to a pay freeze until 1 July 2017. The other terms of the Agreement, including what is now clause 36, were essentially "rolled over" from the previous agreement.

[4] The review of the Boilermakers' Workshop was completed by about August 2016, and it proposed a reorganisation of the Workshop. Relevantly, the review recommended that the staffing level of the Workshop be reduced by abolishing three boilermaker trade roles (one of which was already vacant because an employee had been seconded elsewhere). The reduction in staff numbers would be facilitated by the outsourcing of non-urgent fabrication work. This work accounted for the roles of about 1.75-2 boilermaker roles. This proposal was estimated to save about $200,000 per year in fixed costs.

[5] After consultation with the affected employees and their union, the Australian Manufacturing Workers' Union (AMWU), Australian Paper decided on 14 September 2016 to implement the recommendations of the review. The AMWU then placed the matter in dispute and, after conciliation by the Commission failed to resolve the dispute, arbitration became necessary.

[6] Clause 39 of the Agreement provides:

39.1 Protection of Entitlements - the Company agrees to continue to provide for all employee entitlements and to provide employees with a Company briefing on a six monthly basis

39.2 The Company gives a commitment that no employees will be retrenched for the term of this Agreement unless, during the period of operation of this Agreement, should any major operating unit cease production, or a reduction in the number of operating shifts result in reduced output, or any other significant change then manning numbers will be reviewed by the parties to the agreement. This review will also take place when operating units are increased; the outcome of this review will not affect the timing or outcome of any wage increases.

39.3 At the commencement of and during this agreement, manning levels will be:

The above manning levels indicate the full time permanent employees and for clarity do not include limited term employees or casuals. The consultation clause must be utilised when making any change to the above manning levels.

39.4 This clause does not prevent the Company taking disciplinary action according to this agreement in instances of individual misconduct or failure to perform the duties specified."

[7] Before the Commissioner, the AMWU contended that the implementation of Australian Paper's proposal would contravene clause 39.2 because it infringed the prohibition against retrenchments. Australian Paper contended that its proposal involved a "significant change" and thus fell within one of the exceptions to the retrenchment prohibition in clause 39.2 and was permissible. It was common ground that the manning levels specified in clause 39.3 did not reflect the actual or agreed manning levels at the time the Agreement was made, but had been carried over from the previous agreements. Accordingly the AMWU did not contend that the proposal to re-organise the Boilermakers' Workshop was impermissible because of clause 39.3.

[8] Clause 35 of the Agreement was also relevant to the dispute. It provides:

Consultation means discussion of an issue(s) between the Company, Employees, their representatives and Union(s) with the intent of providing the employees, representatives and Union(s) with a bona-fide opportunity to influence the Company to make a better informed decision in their final assessment.

35.2 Where the Company has identified a significant workplace change the Company will:

35.2.1 Prior to the implementation of significant workplace change, provide notification about the change to all potentially affected employees.

35.2.2 Consult with employees and their representatives to discuss the nature, extent and rationale of the significant change at the earliest opportunity.

35.2.3 Seek suggestions from employees and/or their representatives on the proposed changes to evaluate all alternatives and make better informed decisions.

35.2.4 After such consultation the Company will implement changes it deems necessary.

35.3 For the purpose of this clause, the following examples could be considered significant workplace change:

35.3.3 An increase or reduction of manning numbers

35.3.4 Closure of a section of plant or equipment

35.3.5 The addition of major plant or equipment"

[9] Clause 41 of the Agreement deals with the subject matter of redundancy. Of relevance to the dispute was clause 41.1, which deals with the process by which any redundancies might be affected:

41.1.1 In the event of the closure of equipment or a process which results in a change to the Maintenance workload across the Mill, the following procedure will apply:

a) The principle of employing Australian Paper tradesmen in the first instance for regular work.

b) If however, a review of the requirements of Maintenance work results in a reduction in the need for Australian Paper employee(s) in a particular area, where practicable and at the Company's discretion employee(s) will be transferred to alternate part(s) of the plant pending natural attrition.

c) If there are still excess personnel, then voluntary redundancies will be offered to the directly impacted employee(s).

d) If a directly impacted employee(s) wishes to remain in the Company's employment, the Company will seek voluntary redundancy applicant(s) from wider parts of the Mill.

e) In reference to sub clauses c) and d) above, if there are more volunteers than required, the Company will assess volunteers and either approve or reject their application in the overall interests of the business. Approval will not be unreasonably withheld.

f) In the event that there are no volunteers, then the required number of employee(s) shall be made involuntarily redundant."

[10] Clause 41.2 sets out the severance pay entitlements for any employee who is retrenched in accordance with clause 41.1, and also provides for entitlements for preservation of pay rates for redundancy employees who are transferred to a lower paid job. Clauses 41.3, 41.4 and 41.5 also contain other requirements pertaining to redundancies.

[11] Clause 40 contains a detailed scheme concerning the use of contractors. Relevantly, it provides:

40.1.1 The parties to this Agreement recognise the engagement of contractors at the workplace can be a contentious issue on site.

40.1.2 The parties have established the following guidelines/ requirements to ensure consultation is undertaken regarding the use of contractors.

40.3.1 Prior to Work being let to a contractor, consultation will take place between the employee(s) and the Supervisor/Engineer of the relevant area(s).

40.3.2 As part of the consultation process the company undertakes to optimise the use of Australian Paper employees labour on site as much as possible, however this is depending on the needs of the site in relation to plant integrity, shutdowns, new work, modifications.

40.3.3 For the purpose of the consultation, the Employer must inform in writing the relevant employees and their representatives of:

b) the type of work proposed to be given to the contractor; and

40.3.4 Furthermore, Australian Paper will endeavour no later than 14 days prior to the commencement of a contractor at the Maryvale Mill to advise the relevant employee representative of whether the Contractor will be performing Work. If a disagreement arises over this, the parties will confer to seek to resolve any disagreement about this as quickly as possible.

40.3.5 Following such consultation, Management will allocate Work and work that is not Work as required to meet the needs of the business.

40.4.1 It is the Company's intention to utilise its employees to carry out Work and to drive area ownership.

40.4.2 It is not the preference of the company to use contractors to perform Work at the expense of the employees.

40.4.3 Contractors will not be used to replace positions of the agreed permanent workforce.

40.4.4 In accordance with this clause, the Company may engage a contractor to meet its business objectives.

40.5 The company will require contractors to ensure that they will

(d) Have all relevant permits, licenses and certificates

(e) Have appropriate training for the task to be performed.

40.6 Standard amenities will be provided for a contractor.

40.7 All contractors must complete a safety induction program prior to working at

40.8 The Company shall only engage, and continue to utilise, a contractor to do Work, who:

(b) receive payments to itself (in the case of a sole trader/self-employed contractor); and

that are no less favourable than that provided for in this Agreement for equivalent or similar work.

40.9 Where the Company engages a contractor to perform work that is not Work, they may be engaged by competitive tender.

[12] The Commissioner identified the issue to be determined as being whether the proposal for the re-organisation of the Boilermakers' Workshop constituted "any other significant change" within the meaning of clause 39.2 of the Agreement, and was thus exempted from the general prohibition on retrenchments in that provision. The Commissioner firstly rejected the proposition that the 25% increase in the amount of work completed in the Workshop over the period 2012-2015 could constitute the requisite significant change, since this did not occur "during the period of operation of this Agreement" as required by clause 39.2.[2] He then turned to the proposition that the decision to outsource the fabrication work, and the consequential reduction in manning levels, could constitute a significant change. The Commissioner said that this would be inconsistent with the purpose of clause 39[3], which he approached in the following way:

"[27] In the present matter it is relevant to look at the context in which the phrase "any other significant change" is used in clause 39.2. It is one of the three specific exceptions which when in existence permits Australian Paper to avoid the commitment not to retrench maintenance employees. The first two mentioned exceptions are very specific and are matters which would have a real and substantial impact on production employees as well as maintenance employees. The use in the third exception of the word "other" suggests that the nature of the significant change should have a similar impact on Australian Paper and its production and maintenance employees. The context in which clause 39.2 operates to severely limit management decision making in relation to retrenching maintenance employees strongly suggests that, like the first and second exceptions which enable Australian Paper to avoid its commitment not to retrench maintenance employees, the third trigger must also operate as a significant hurdle. Having regard to this context it would appear that the intention of Australian Paper to take some existing work away from the boilermakers and give it to an external provider is simply not a significant change for the purpose of clause 39.2."

[13] The Commissioner then proceeded to deal with an argument advanced by Australian Paper that a significant change under clause 39.2 bore the same meaning as it did in clause 35, and was therefore to be interpreted expansively. The Commissioner said (footnotes omitted):

"[31] In the present matter the purpose of each of clause 35 and clause 39 must be considered. Clause 35, which meets the requirement of s.205 of the Act, is intended to provide a specific benefit to employees by requiring Australian Paper to consult with the employees about major workplace changes that are likely to have a significant effect on the employees. Clause 35.3 does not attempt to give an exhaustive definition of the term "significant workplace change" but rather gives examples of matters which would be "significant workplace change". The term "significant workplace change" in clause 35 should be given as wide a meaning as the words used could have, provided that it is not 'a construction that is unreasonable or unnatural". As clause 35 is a beneficial term conferring a benefit on employees it should be interpreted broadly. Clause 39 is also a beneficial term for employees in that it operates to significantly limit the ability of Australian Paper to retrench employees or even to allow natural attrition to reduce manning levels. The use of the term "other significant change" is intended to operate as an exception to the rule that no employees will be retrenched for the term of the Agreement. Clause 39.2 is clearly trying to provide a balance between the competing interests of employees and Australian paper. It is consistent with the rules of statutory interpretation to interpret an exception to a beneficial provision so as to limit the exception in order to preserve the scope of the benefit whilst at the same time not destroying the balance intended by the clause.

[32] Having regard to the purpose of each of clause 35 and 39 it is appropriate to give an expansive meaning to the term "significant workplace change" in clause 35 whilst giving a less expansive meaning to the term "other significant change" in clause 39.2. Whilst the terms are clearly similar they each have a different meaning and that meaning must have regard to the context in which each of those terms is used and the purpose intended by those terms and by the clauses in which they appear.

[33] The proposal by Australian Paper to reorganize the work of boilermakers by taking away some of their existing work and outsourcing that work is most certainly a workplace change which would trigger consultation under clause 35 but at the same time it is not an "other significant change" which would enable Australian Paper to avoid the commitment not to retrench any boilermakers during the term of the Agreement."

[14] The Commissioner also rejected the proposition that clause 41 bore upon the interpretation of clause 39 insofar as it acknowledged that Australian Paper had the capacity to involuntarily retrench employees. He concluded that there had been no significant change for the purpose of clause 39.2 and, consequently, Australian Paper was required to maintain manning levels as they were at the commencement of the Agreement. Having expressed this conclusion, the Commissioner also expressed the following "Final Observation" at the conclusion of the Decision:

"[36] I make an observation for the benefit of the parties. Whilst I cannot see the employees agreeing to remove or significantly amend clause 39.2 of the Agreement, the security of employment provided by clause 39.2 may be illusory if the very operation of clause 39.2 leads to Australian Paper carrying manning levels which are unsustainable and which impact on the financial viability of the Maryvale Mill. Equally, the very presence of clause 39.2 and 39.3 almost invite Australian Paper to devote resources to creating the necessary circumstances which would satisfy one of the exceptions in clause 39.2 so as to enable Australian Paper to avoid the commitment given in clause 39.2. Clause 39 can be varied at any time during the life of the Agreement but only if Australian Paper, the unions and the employees agree. The focus of everyone's attention at the Maryvale Mill should be on genuine job security through maintaining a viable operation at the Maryvale Mill. This may best be achieved if the parties talk to each other rather than at each other. The parties have proven that they have the maturity and capacity to engage in meaningful dialogue around complex issues and the Commission fervently hopes that the parties continue to do so. The Agreement provides more than enough mechanisms to assist the parties to progress such dialogue, including by involving members of the Commission in any process."

[15] In the appeal, Australian Paper submitted that:

• the Commissioner erred reading clause 39.2 as if it operated to "severely limit management decision making", when there was nothing in the language of the provision to support a limitation of this nature; the requirement was only that a change had to be "significant" in order for Australian Paper to be able to retrench employees;

• nor was there anything in the language of clause 39.2 which excluded the removal of existing work from boilermakers and giving it to an external provider from being a significant change;

• the Commissioner also erred in concluding that the expression "significant change" in clause 39.2 did not bear the same meaning as it did in clause 35, where it was defined in clause 35.2.1 and 35.2.2 to include reorganisation of the workforce or of a workshop;

• further, the Commissioner erred in applying principles of statutory construction in treating clause 39.2 as a provision to be read beneficially in favour of employees, so that the exclusions from the retrenchment prohibition were to be read narrowly;

• the word "significant" in clause 39.2 was to be given its ordinary dictionary meaning, that is, something that was noteworthy, worthy of attention, substantial, consequential or noticeable;

• in this case, the relevant change was the decision of Australian Paper to outsource the non-urgent fabrication work, and that change met the description of a "significant change";

• the change was significant because it involved a significant increase in the amount of fabrication work that was outsourced and a significant reduction in boilermaker numbers; and

• the interpretation advanced by Australian Paper should be favoured having regard to the object of the FW Act in s.3(a).

[16] Australian Paper submitted that permission to appeal should be granted because it had demonstrated an arguable case of error, there was a public interest in correcting any error in the approach taken by the Commissioner to interpreting enterprise agreements, and the Commission had applied principles of statutory interpretation to the interpretation of the Agreement in a manner contrary to the decision of the Full Bench in AMIEU v Golden Cockerel Pty Limited.[4]

[17] The AMWU submitted that broad construction of the expression "any other significant change" in clause 39.2 advanced by Australian Paper was, as the Commissioner found, incorrect for four reasons:

(1) Such an approach would render the prohibition upon retrenchments under clause 39.2 ineffective and otiose, because it would allow employees to be retrenched whenever manning levels had been reduced and retrenchments were to occur as a consequence.

(2) This approach was inconsistent with the wider context, which included that clause 39 was entitled "Job Security" and clause 40.4 stated the intention that "contractors will not be used to replace positions of the agreed permanent workforce".

(3) The expression "significant workplace change" used in clause 35 was a different one, and the definition assigned to it in clause 35.3 was expressly stated to be for the purpose of clause 35 only.

(4) Clause 39 was concerned with a subject matter that was different to clause 35, namely operational circumstances that potentially impact upon employees, and operates before clause 35, which was concerned with the actual effect of change. Different definitions of "workplace change" therefore applied.

[18] The AMWU further submitted that the expression "other significant change" in clause 39.2 was to be read as having a meaning similar to the two specific examples of change earlier given, that is, it was concerned with broad change to the production operations of the business which would likely lead to an actual reduction in the amount of maintenance work required by Australian Paper. The exception therefore only operated, the AMWU submitted, where the work no longer existed at all, not where Australian Paper considered it should be performed in a different manner such as by contract labour. The restrictions on the use of contract labour in clause 40 supported this change.

[19] We consider that permission to appeal should be granted. The subject matter of the dispute concerns the future employment of two persons and attempts by an unprofitable business to reduce its costs in a regional area facing difficult economic circumstances. In that context, appellate review of the Decision to ensure that the Agreement was correctly interpreted and applied would be in the public interest.

General approach to the interpretation of the Agreement

[20] Consideration of Australian Paper's appeal requires, firstly, the identification of the proper construction of clause 39.2 and, secondly, the correct application of clause 39.2, so construed, to the facts of this case. In relation to the first task, there was no disagreement between the parties that the principles of interpretation of agreements summarised in AMIEU v Golden Cockerel Pty Limited[5] are applicable. Neither party relied upon any extrinsic material to aid the resolution of any ambiguity in clause 39.2 - indeed, Australian Paper contended that it was not ambiguous at all - and accordingly the following propositions drawn from Golden Cockerel are relevant:

• The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.

• Context might appear from:

  • (a) the text of the agreement viewed as a whole;

  • (b) the disputed provision's place and arrangement in the agreement;

  • (c) the legislative context under which the agreement was made and in which it operates.

• A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement.

• The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.[6]

[21] Australian Paper made the submission that no principle of statutory construction has any application to the interpretation of enterprise agreements, and relied upon the proposition stated in Golden Cockerel[7] that the Acts Interpretation Act 1901 (Cth) does not apply to the construction of enterprise agreements in support of that submission. The submission is rejected. It does not follow from the fact that enterprise agreements are not instruments to which the Acts Interpretation Act applies that modes of textual analysis developed in the general law in the context of the interpretation of statutes are incapable of application to enterprise agreements. While it undoubtedly remains necessary in interpreting a particular instrument to pay attention to the peculiar characteristics of that instrument, it is equally the case that there has been a convergence in the approach taken to the interpretation of statutes, agreements and other types of instruments - in particular, in the emphasis on the objective ascertainment of the instrument's purpose and the move from textual to contextual interpretation.[8] Additionally, many of the grammatical aides to the interpretation of statutes are equally applicable to other types of instruments. In the High Court decision in Royal Botanic Gardens and Domain Trust v South Sydney City Council, Kirby J said "... it would be indefensible for this Court, without good reason, to adopt a different approach in the ascertainment of the meaning of contested language in a contract from the approach observed in respect of legislation".[9] We therefore do not consider that Golden Cockerel should be taken as an exhaustive statement of the means by which the text of an enterprise agreement might be construed.

[22] In accordance with the principles earlier stated, it is necessary to interpret clause 39.2 in the immediate context of clause 39 as a whole and in the wider context of the Agreement as a whole having regard in particular to those provisions which have a relationship to the subject matter of clause 39.2.

[23] The heading of clause 39 is entitled "Security of Employment". That is indicative of a purpose to protect the employment of those employees to whom the Agreement applies. Clause 39.1 may be characterised as protective of employees' entitlements. Clause 39.3 sets out manning levels to apply at the commencement and during the operation of the Agreement, subject to the capacity for them to be changed by use of the consultation procedure in clause 35. Although neither party relied on clause 39.3 to support its case (because the manning numbers contained in the provision did not accurately reflect those in place at the commencement of the Agreement), clause 39.3 is nonetheless significant because it, first, establishes a prima facie position that manning levels are not to change during the operation of the Agreement and, second, it confers on employees a right to be consulted about any proposed change in manning levels in accordance with clause 35. That constitutes a significant limitation on the capacity of Australian Paper to change manning levels in a way which might affect employees' job security.

[24] The immediate context therefore suggests that clause 39.2 is likewise intended to establish a meaningful protection pertaining to the security of employment of the employees covered by the Agreement. The opening words of clause 39.2, "The Company gives a commitment that no employees will be retrenched for the term of this Agreement..." ostensibly establish in unambiguous terms a significant job security protection for the term of the Agreement. Whilst it is then subject to exceptions which are undoubtedly intended to place limitations upon the breadth of the ostensible protection established by the opening words, those exceptions would not be interpreted as rendering that protection wholly or substantially ineffective unless the language used permitted no other outcome.

[25] Three exceptions are listed, the first two in specific terms ("should any major operating unit cease production, or a reduction in the number of operating shifts result in reduced output") and the third in general terms ("any other significant change"). It is apparent that the first two exceptions concern circumstances arising externally to the maintenance section of the Mill since, as Australian Paper accepted, they must involve changes to the operations sections of the Mill. The Agreement, as earlier stated, only covers maintenance and storage personnel, and does not cover the operations staff of the Mill. In essence, these exceptions are intended to cover circumstances where specified changes in operations at the Mill may have a flow-on effect upon maintenance, and do not involve business decisions directly bearing upon the maintenance section. There was no real dispute between the parties about the meaning of these first two exceptions; it was the third, generally expressed exception which was the source of the controversy.

[26] However the third exception is to be interpreted, neither it nor the other two exceptions leads directly to a right to retrench, but merely to a review of manning numbers by the "parties to the agreement" (presumably those persons and entities identified as being covered by the Agreement in clause 3.2). Although the nature and process of the review is not described, it was accepted, properly, by the AMWU that if the outcome of the review was that manning numbers needed to be reduced, then the redundancy process in clause 41.1.1 would be activated. Under that process, any need for a reduction in the need for maintenance personnel is to be met in the first instance by transfers and natural attrition, if practicable, then by voluntary redundancies, and as the last resort by involuntary redundancies. Thus, the sequence established by clause 39.2 in order for the prohibition on retrenchments not to apply is as follows: first, a circumstance falling within one of three exceptions needs to be established; second, a review of manning numbers then needs to occur; third, the outcome of the review needs to be that manning numbers must be reduced; and fourth, the redundancy process in clause 41.1 must be followed under which compulsory retrenchments are the last resort.

[27] An important conclusion necessarily arises from the above analysis, namely that a decision to retrench personnel in the maintenance section could not itself be an "other significant change" for the purpose of clause 39.2. That is because it renders otiose both the ostensible protection established by the opening words of the provision and the sequential process required to be followed if the exception applied. In the first case, a prohibition against retrenching staff during the term of the Agreement would be rendered entirely meaningless if the prohibition did not apply to a "significant change" constituted by a decision to retrench staff. In the latter case, the process of reviewing manning levels to see if redundancies were necessary as a result of a "significant change" would be otiose if the change was a decision that retrenchments must occur. That means that the expression "other significant change" cannot be assigned the breadth of meaning contended for by Australian Paper.

[28] Clause 40 of the Agreement provides contextual support for this conclusion, and indeed supports a further necessary limitation upon the meaning of the expression "other significant change" in clause 39.2. Clauses 40.4.1 and 40.4.2 indicate a clear policy intention that direct employees of Australian Paper are to be used to perform the maintenance and storage work to which the Agreement applies in preference to contractors. Clause 40.4.3 gives effect to that policy intention by providing that "Contractors will not be used to replace positions of the agreed permanent workforce". Australian Paper submitted that clause 40.4.3 was of no effect under s.253(1)(a), because it was not about any of the "permitted matters" identified in s.172(1). In particular it submitted that the clause did not pertain to the employment relationship because it constituted a prohibition on the use of contractors, and referred to a number of authorities, most notably the decision of the Federal Court (French J, as he then was) in Wesfarmers Premier Coal Limited v AMWU[10], to support that proposition.

[29] If clause 40.4.3 is read as constituting a prohibition upon the use of contractors, it would appear on the basis of decided authority that it does not pertain to the employment relationship and is of no effect. However there are two contextual indicators that clause 40.4.3 does not operate as a prohibition. Firstly, insofar as clause 40.4.3 refers to the positions of the "agreed" permanent workforce, we consider that it is referring to the number of positions identified in clause 39.3 of the Agreement, which may be altered by use of the mechanism provided for in that clause. Secondly, clause 40.4.4 specifically enables Australian Paper "to engage a contractor to meet its business objectives" and clauses 40.5-40.9 set out procedures to facilitate the appropriate use of contractors. Reading clause 40.4.3 in a way which allows it to operate harmoniously with clause 39.3 and the other parts of clause 40 and ensures its validity, we consider that rather than prohibiting the engagement of contractors, it prohibits Australian Paper from reducing the agreed number of positions for permanent employees covered by the Agreement as a consequence of the use of contractors other than in accordance with clause 39.3.

[30] That being the case, to read clause 39.2 as permitting, as an exception to the prohibition on retrenchments, the retrenchment of employees in maintenance in connection with the outsourcing of their work would not only render the prohibition in clause 39.2 and the process it provides for nugatory, it would also place the provision in conflict with clause 40.4.3 since it would allow a reduction in the agreed number of positions other than in accordance with clause 39.3.

[31] We do not accept Australian Paper's submission that the definition of the expression "significant workplace change" in clause 35.3 is applicable to the expression "other significant change" in clause 39.2. First, the expression is a different one. Second, clause 35.3 expressly provides that the definition applied only "[f]or the purpose of this clause". Third, Australian Paper conceded that at least the example given of a "significant workplace change" in clause 35.3.3, namely "An increase or reduction of manning numbers", could not be applicable to clause 39.2 because it would render the prohibition against retrenchments ineffective and the intended process of a review of manning numbers otiose. That being so, there is no basis to consider that, contrary to its terms, clause 35.3.3 was intended to have a partial application to clause 39.2.

[32] Bearing all these matters in mind, we consider that the exception for any "other significant change" in clause 39.2 must be read as referring to a change of the same character as the first two specifically-identified exceptions - that is, a change external to the maintenance and stores sections which might have consequences for the amount of work and the number of positions in those sections. The expression cannot be read in its ordinary expansive sense because, for the reasons explained, this would render the provision nugatory. The approach we prefer (and which the Commissioner took) is analogous to the eiusdem generis principle of statutory construction, under which a general term that is last in a list of otherwise specific terms with a common character is read as having the same character.

[33] The application of clause 39.2, properly construed, to the facts of this case is straightforward. The proposal which the external consultant recommended and which Australian Paper decided to implement was described in the evidence as follows:

"41. Our analysis during the Boilermakers Review, determined that (non-urgent) fabrication work made up approximately 15% of the maintenance works performed by the Boilermakers Department. This figure is the equivalent of approximately 2,400 to 2,800 hours of work per year. Or, put another way, the equivalent of 1.75 to 2 FTE per year.

42. Implementing the above options, we then simulated a new labour model comprising seven FTE Trade Roles, two apprentices, a Team Leader and a Superintendent employed by Australian Paper (AP New Model). Our modelling suggested the AP New Model would result in fixed cost savings of approximately $200,000 per annum.

48. The recommended reorganisation of the Boilermakers Department that was put to the business as a result of the Boilermakers Review was essentially the New AP Model as follows.

(a) The Boilermaker Workshop would remain under the control of Australian Paper.

(b) The external contractor Superintendent would be replaced with a Superintendent employed by Australian Paper.

(c) The FTE Trade Role headcount within the Boilermakers Department would be reduced by a total of three. Accordingly, this meant we would:

(i) not seek to replace a boilermaker (i.e Mr Leatham) who had been seconded to a Planner role in the Centralised Planning and Scheduling Department as the labour and work order analysis showed that the Boilermakers Department was able to function without this additional manpower; and

(ii) proceed with outsourcing certain fabrication work orders (an estimated 2,820 hours or the equivalent of 1.75 - 2 FTE Trade Roles per year) and call for an expression of interest for voluntary redundancies..."[11]

[34] There was no change external to the Maintenance and Stores sections which had an impact on the work of those sections. The decision by Australian Paper to implement the above proposal was, in substance, a decision to reduce manning levels by three, retrench two employees, and outsource the non-urgent fabrication work. The savings which were the raison d'être of the proposal were generated by the reduction in positions and the associated retrenchments. This was not an "other significant change" of the type contemplated by clause 39.2.

[35] We reject Australian Paper's submission that the change was to be characterised as one to outsource work which would then lead to the review of manning levels contemplated by clause 39.2. That submission did not accord with the facts. The decision to outsource was inextricably linked to the reduction of three positions and the retrenchment of two employees. There was no meaningful capacity to review manning levels in light of the outsourcing decision, since the whole purpose of the outsourcing was to allow the size of the workforce to be reduced. To treat Australian Paper's proposal as falling within the third exception in clause 39.2 would be tantamount to saying that clause 39.2 prohibited retrenchments from occurring during the term of the Agreement except where Australian Paper decided that retrenchments should occur. That is obviously an unsustainable proposition.

[36] For the reasons stated we consider that the Decision was correct in its interpretation of clause 39.2 and its application to the facts of the case.

[37] We emphasise that the outcome of the Decision, and this appeal, were reached on the basis of the proper application of the terms of the Agreement as required by s.739(5) of the FW Act, and not on the basis of a merits assessment of the parties' respective positions. Having reached the conclusion that we have, we would add that we endorse the Commissioner's "Final Observation" in paragraph [36] of the Decision. It is clear that the perilous commercial position of Australian Paper requires that further cost efficiencies be identified. It would be a Pyrrhic victory for the AMWU and its members if the outcome of this case is simply that more drastic steps leading to greater job losses are taken at some later point.

[38] We order as follows:

M. Felman of counsel for Paper Australia Pty Ltd.

[1] [2016] FWC 9050

[4] [2014] FWCFB 7447; 245 IR 394

[8] See M.D. Kirby, "Towards A Grand Theory of Interpretation: The Case of Statutes and Contracts" (2003) 24 Statute Law Review 95

[9] [2002] HCA 5; (2002) 186 ALR 289; (2002) 76 ALJR 436 at [101]

[10] [2004] FCA 1737, (2004) 138 IR 362

[11] Witness statement of Mr Paul Mcloughlin, Senior Management Consultant at KM&T, quoted at paragraph [14] of the Decision.

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