Residual Business Management Corporation and New South Wales Local Government, Clerical, Administrative, Energy, Airlines & Utilities Union [2005] NSWIRComm 304

Industrial Relations Act 1996 LEGISLATION CITED: Pacific Power (Dissolution) Act 2003

Crown Employees (Land Surveyors) Conciliation Committee, Re [1930] AR 278 D & R Commercial Pty Ltd v Flood (2002) 113 IR 344 King v State Bank of New South Wales (No 2) (2002) 126 IR 407 Knowles v Anglican Church Property Trust (No.2) (1999) 95 IR 380 Operational Ambulance Officers (State) Award, Re (2001 113 IR 384 CASES CITED: Pacific Power Employees Consent Award 2002 [2002] NSWIRComm 329 Residual Business Management Corporation Employees Award 2003, Re [2005] NSWIRComm 165 State Wage Case (2003) 121 IR 446 State Wage Case 2004 (2004) 132 IR 190 Weisser v Spur Group Pty Limited (2003) 121 IR 89 WorkCover Authority of New South Wales (Inspector Moore) v Blacktown City Council (2003) 124 IR 59

APPELLANT Mr J W Fernan of counsel Solicitor: Mr P Brown Baker & McKenzie LEGAL REPRESENTATIVES:

RESPONDENT Mr P M Kite, SC Solicitor: Mr M Barnes White Barnes

• 30 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES FULL BENCH

RESIDUAL BUSINESS MANAGEMENT CORPORATION v THE NEW SOUTH WALES LOCAL GOVERNMENT, CLERICAL, ADMINISTRATIVE, ENERGY, AIRLINE & UTILITIES UNION

Application by Residual Business Management Corporation for leave to appeal and appeal against the extempore decision of Deputy President Harrison given on 17 March 2005, an award made by his Honour on 21 March 2005 and reasons for decision given on 31 May 2005 in matter no. IRC 6483 of 2003

1 This is an application by Residual Business Management Corporation for leave to appeal and, if leave is granted, an appeal pursuant to ss 187 and 188 of the Industrial Relations Act 1996 from decisions and orders and an award of Harrison DP made on 17 and 21 March 2005 and 31 May 2005. 2 The appeal involves a challenge to the making of an award by his Honour whereby he granted significant retrospective wage increases to employees of the appellant, a corporation that may fairly be described as a special purpose, State Owned Corporation ("SOC") whose primary function was to wind up the State Government's involvement in the operation and ownership of power stations in the State and, in the process, to facilitate the redeployment of employees who had not taken a voluntary redundancy package. The appellant had no commercial or productive purpose as those objectives are commonly understood in business and commerce. BACKGROUND

3 The background to the proceedings at first instance and on appeal is conveniently and accurately set out in the appellant's written submissions. Since 1950, electricity generation in New South Wales was provided by the Electricity Commission of New South Wales, which became Pacific Power. Pacific Power was exclusively, until 1996, involved in the operation and ownership of all power stations throughout New South Wales. Pacific Power, until 1995, also operated the electricity transmission network and various coalmines that provided coal for the generation of power. Restructuring of Pacific Power 4 In 1995, the New South Wales State Government decided to restructure Pacific Power through the transfer of many of its assets to other SOCs to comply with federal competition requirements. From 1995, Pacific Power was progressively restructured until 1 July 2003 at which time the appellant succeeded Pacific Power. The restructuring occurred as follows: (a) In 1995, the transmission assets of Pacific Power, namely the power lines and substations were transferred to TransGrid, an SOC that primarily transmitted electricity between the power station and the on-seller (e.g., EnergyAustralia). (b) In 1996, Delta Electricity and Macquarie Generation were formed as SOCs to take-over Pacific Power activities, and to participate in the new electricity market for electricity. (c) As at 1 July 2000, Pacific Power's business consisted of: (i) power generation assets (including coal, wind, gas and hydro generation plants); (ii) power station operations & maintenance (Pacific Western); (iii) an energy consulting business, Pacific Power International ("PPI"); (iv) coal mining (Powercoal); and (v) research & development (Pacific Solar). (d) On 2 August 2000, the power generation and power station operations maintenance businesses within Pacific Power were transferred to an SOC, Eraring Energy. The coal mining was sold on 6 August 2002. (e) In December 2002, a Memorandum of Understanding was negotiated between the Labor Council, unions affiliated with the Labor Council and the State Government. The MOU dealt with the entitlements and benefits that would be available to employees of Pacific Power, arising out of the sale of PPI and the closure of Pacific Power. (f) As at February 2003 Pacific Power's workforce was approximately 335. In February 2003, the energy consulting business, PPI, was sold to Connell Wagner and all assets and contracts of PPI were transferred to Connell Wagner. As part of the divestiture, approximately 122 employees accepted the Pacific Power voluntary redundancy package and obtained permanent positions with Connell Wagner. Furthermore, the employees who obtained employment with Connell Wagner obtained membership with a mirror superannuation scheme (the EISS) to that they had previously been entitled to. Some ninety other employees accepted the Pacific Power Voluntary Redundancy Package and exited the organisation on 11 February 2003. Some 51 other employees elected to take voluntary redundancy at a later date. Creation of appellant 5 As we have noted, the appellant was a special purpose corporation. It was created by virtue of the Pacific Power (Dissolution) Act 2003. Pursuant to s 6 of that Act the objectives of the appellant were as follows: (a) to manage its assets, rights and liabilities effectively and responsibly; (b) to operate at least as efficiently as any comparable business; (c) to minimise the risk of exposure of the State arising from its activities; and (d) to achieve the efficient and timely winding up of residual business activities.

6 When the appellant was formally incorporated on 1 July 2003 it had approximately 122 employees. These employees were persons remaining after the divestiture of PPI and who had not obtained jobs with the purchaser of PPI, Connell Wagner or had not taken voluntary redundancy. The appellant was used as a vehicle to employ employees who had been declared "surplus to requirements". The primary objective of the appellant was to assist these employees in finding employment with other organisations, such as SOCs or departments within the public sector. As at 1 September 2004, 42 employees remained in the appellant's redeployment pool. We understand that at the time of the hearing of the appeal there were five employees left in the redeployment pool. 7 When the appellant ceases to function, which is envisaged to be Christmas 2005, it will transfer ownership and responsibility for assets, rights and liabilities to other appropriate public sector entities. Any remaining employees will be made redundant. Salary maintenance 8 The terms and conditions of employment of the appellant's employees were regulated by the Pacific Power Employees Consent Award 2002 [2002] NSWIRComm 329. That Award provided for a 40-point salary scale. When employees were "declared surplus to requirement", and transferred to the appellant's Redeployment Pool they continued on "Salary Maintenance". That is, they were paid at the salary point relevant to the position to which they had previously been appointed when they were employees of Pacific Power, without the requirement to undertake the relevant work duties for that position. Pursuant to the MOU, if salary maintenance were to cease for a particular employee his salary would be adjusted to reflect the appropriate rate of pay, determined through job evaluation, for the work being done. 9 The salary maintenance provision in the MOU was in the following terms: Staff covered by this MoU who are seeking redeployment and whose positions are declared surplus under the terms of this MoU will be guaranteed salary maintenance for 12 months from the date of being declared surplus. Employees in PPI will be declared surplus on the date of the sale of the PPI business. 10 Further salary maintenance was to continue after 12 months if employees were able to demonstrate a commitment to seeking opportunities for alternative employment. Redundancy benefits and superannuation 11 The MOU gave former Pacific Power employees the opportunity to accept voluntary redundancy on the following terms: (a) 3 weeks' severance pay per year of service; (b) 4 weeks' pay in lieu of notice (with an additional 2 weeks' pay for employees aged 45 years and over where they had been employed for more than 5 years); and (c) where employees had agreed to being made redundant voluntarily, they were entitled to an additional lump sum payment. The quantum depends on the years of service in accordance with the following table: Years of Service Lump sum 1 - 12 years $14,000 13 - 19 years $16,000 20 - 24 years $18,000 25 - 29 years $20,000 30 - 34 years $22,000 35 years $24,000

(d) This package was available for up to 12 months after the employee was declared surplus. 12 The MOU also provided that former Pacific Power employees were not disadvantaged with respect to their superannuation entitlements as a result of the dissolution of Pacific Power. Redeployment pool

13 The redeployment pool comprised employees who were "declared surplus to requirements". This group was engaged at Sydney, Newcastle and at Wallerawang Power Station, near Lithgow. The employees in the redeployment pool attended their offices each day, for the primary purpose of using the facilities at the office to look for alternative employment. Whilst engaged in the redeployment pool they were provided with professional services that involved career coaching, interview skills, résumé writing and job application assistance. They were also provided with counselling and instruction in obtaining alternative employment. They were also free to attend outside training institutions the cost of which was met by the appellant.

14 In these respects the appellant submitted: RBMC [the appellant] employees did not carry out duties pursuant to their previous positions descriptions which they had worked under, prior to being " declared surplus to requirements " on a daily basis. Their main daily task was to obtain alternative jobs with other employers. That actual task did not relate to their previous position descriptions for work performed prior to July 2003. There is no basis, to hold that this task related to a position description within the classifications found in the Pacific Power Award, which could be aligned on a proper job evaluation to a salary point on the 40 Point Salary Scale on a "like with like" comparison. The only time employees carried out any ("non work search") duties subsequent to " being declared surplus to requirements " was when they were on secondment. The principle underlying a secondment was a means to obtain a job with another employer, to provide maintenance of the work ethic and to maintain skills. There is no arguable comparison to be made between the operation of RBMC and the work performed by its employees and the duties of employees engaged in the electrical power generation industry. Workplace Management Centre

15 Assistance was provided to the appellant's employees, in obtaining other employment, through the Workforce Management Centre ("WMC"). Employees "declared surplus to requirements" were advised to register with the WMC. Employees were required to fill out a Redeployment Registration Form and attach a skills summary, of about 10 lines, outlining the employee's relevant and current skills and experience. That information was used to match staff with vacant positions. 16 The WMC reviewed position advertisements on a daily basis. The WMC would then attempt to match staff to potential positions based on an employee's skills summary, substantive salary and geographic location. If a match was made, the employee was referred by WMC for a priority assessment. Unless staff consented, they could not be redeployed to a position with a salary lower than their actual current superable salary. Staff transferring to a new public sector employer maintained their current membership of the superannuation schemes. Vacancy Notification Scheme

17 Employees were also assisted to obtain employment with SOCs through the Vacancy Notification System ("VNS"). The system worked by SOCs forwarding emails in respect to vacant position descriptions to the appellant. Those vacant positions would then be circulated to all of the appellant's staff. The staff were then provided with 5 days to apply for those positions and their applications would be assessed on merit. DECISIONS AT FIRST INSTANCE

18 The matter that came before Harrison DP, and which is the subject of this appeal, was an application by the respondent, the New South Wales Local Government, Clerical, Administrative, Energy, Airlines & Utilities Union ("USU") for a new award to be titled the Residual Business Management Corporation Employees Award 2003 ("the Award"). The claim sought to have any award apply to all employees of the appellant from the first pay period to commence on or after 15 November 2003, irrespective of whether any employee or employees had ceased employment with the appellant. 19 The application sought an increase in salaries of 10 per cent from 15 November 2003 and a further 10 per cent from 15 November 2004. The grounds and reasons relied upon for the application were that: 1. The nominal term for the Pacific Power Consent Award 2002 expires on 15 November 2003.

2. To make provisions for the appropriate award coverage for employees and new employer entity Residual Business Management Corporation (RBMC).

3. To provide an appropriate means of regulating rates of pay and conditions for employees with RBMC.

4. To provide for appropriate conditions of employment for employees with RBMC.

5. Such further grounds as the Commission may deem appropriate. 20 The appellant at first instance opposed the application on the basis that employees were not required to undertake any productive work and were entitled to substantive overaward benefits in the form of extensive outplacement services, financial and psychological counselling and training. 21 On 17 March 2005, after having heard the evidence and submissions of the parties, Harrison DP delivered an extempore decision and indicated he would provide "a complete judgment dealing with all aspects in fulsome detail in due course". In his extempore decision his Honour found that a special case had been made out. His Honour considered the terms of the MOU and the Award and, in particular, the need to maintain the contemporary value of the 40-point salary scale. Harrison DP also gave significant weight to what he regarded as undertakings given by the State Government regarding no redundancies and no reduction of entitlements. His Honour considered the Government had benefited greatly from the reforms in which unions and employees had cooperated. Harrison DP stated: A failure to maintain contemporary values of the 40 point salary scale would in my opinion amount to a loss of entitlement, would constitute industrial injustice and be contrary to the objectives of the Industrial Relations Act which provides for the facilitation of appropriate industrial regulation through award. It would also fail to meet the tenets of equity, good conscience and the substantial merits of this case. Having regard to all of those circumstances it is appropriate that an award be made with effect from the first full pay period to commence on or after 15 November 2003 and apply in the way in which the application seeks in exhibit 62 to all of those persons at that time employed by RBMC up until their departure. In respect to quantum I believe it is appropriate to maintain parity with Eraring Energy from 15 November 2003 for 12 months. To that end I determine an increase of 9.2 per cent to apply on and from 15 November 2003 which will for example move salary point 1 of the 40 point salary scale from $303.40 per week to $331.40 per week. A further increase will apply from 15 November 2004 of 4 per cent. 22 On 23 March 2005, solicitors for the respondent filed "Orders and Award" reflecting his Honour's decision. 23 Parenthetically, we refer here to the notice of appeal and stay application filed on 29 March 2005. The stay application was heard by the President on 31 March and 4 April 2005 and an extempore decision was delivered on the latter date: Residual Business Management Corporation v NSW Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union [2005] NSWIRComm 120; (2005) 139 IR 465. His Honour granted the stay application on terms: see paras [39] and [40]. Relevantly, the stay orders made included the following:

The Commission orders the stay of the orders and award of Harrison DP until further order of the Commission, such stay to be granted on the term that, to the extent to which the appeal is unsuccessful, the gross amount of moneys due to employees affected shall be paid with interest in terms of Supreme Court Practice Direction No 92, such interest to be calculated from 17 March 2005. 24 On 31 May 2005 Harrison DP published his reasons for decision: Residual Business Management Corporation Employees Award 2003 [2005] NSWIRComm 165. In his reasons his Honour considered: the extensive background history to the application; the terms of the MOU; and, the history of award coverage of employees of the appellant, noting that: 59 The current application seeks to increase RBMC employees' rates of pay by increasing the 40 point salary scale in line with movement in the 40 point salary scale with TransGrid, Macquarie Generation, Delta Electricity and Eraring Energy.

60 The 2002 Award was made by consent of the parties in proceedings which took place on 15 November 2002 and 2 December 2002 before the Commission as presently constituted.

61 Clause 2 of the 2002 Award, Intent, Commitment, Scope and Duration, specifies that the award will be effective from the first pay period to commence on or after 15 November 2002 for a period of one year. Wages as described by the 40 point salary scale found in cl 5 are operative from 26 November 2001. There is no further increase in rates during the course of the award.

62 Clause 2.5, Leave Reserved of the 2002 Award provides: Leave is reserved for the parties during the term of this award to apply to the Industrial Relations Commission of NSW seeking a further variation to Clause 5, Salaries and subclause 6.1 Location Allowances. 25 His Honour also summarised and assessed the USU's evidence including the evidence given by individual employees and former employees of the appellant. Those persons were: Mr Geoffrey Brands; Mr Colin Brann; Mr Harinderpal Chawla; Mr Stephen Fisher; Mr Roman Migocki; Mr Nicholas Sollazzo; Mr Ian Turnbull; Mr Howard Bates; Mr Eric Legge; and, Mr Mark Gill. His Honour also heard evidence from Mr Gordon Brock, Senior Industrial Officer for the Association of Professional Engineers, Scientists and Managers Australia. Mr Sam La Spina, the appellant's Human Resources Manager, gave the principal evidence for the appellant. 26 A matter considered significant by Harrison DP was the financial effect of the restructuring of Pacific Power and its value to the New South Wales economy. In this respect his Honour noted: 192 It is appropriate to note at this point that the achievements of a decade of reform detailed above have been achieved in consultation with the Trade Union movement and as a matter of record in this Commission. Reform has been attended by differences between the parties, at times substantial, resolved by application of the disputes procedures mandated by s 14 of the Industrial Relations Act 1996 .

193 The resolution of issues, at times vigorously pursued, has been attended by negligible industrial action, and characterised by patient and responsible behaviour on behalf of all parties.

194 The pursuit of efficiency and productivity has proceeded smoothly within the framework of the Act and the awards made pursuant to that legislation.

195 The effect of undertakings by Government of no forced redundancy, which underpinned the behaviour of the parties and supported the level of cooperation and positive debate in formal and informal proceedings contributing to the results reported above, cannot and should not be underestimated or diminished in value. 27 After considering the relevant authorities regarding the criteria for the establishment of a special case under the Commission's Wage Fixing Principles (State Wage Case 2004 (2004) 132 IR 190) and whether the criteria had been met in the case before him, his Honour found that a special case existed. His Honour stated: 230 It is not contested that RBMC is an entity specifically formed as a vehicle for conclusion of an important phase in the reorganisation of the New South Wales electricity industry.

231 This in itself is out of the ordinary. The fact that RBMC does not produce or create any saleable item or service is further, to remain with the language of the Special Case Principle and Re Crown Employees (State) Award No 2 , "out of the ordinary"; and in my opinion so far out of the ordinary to make it a special case.

232 An argument advanced by RBMC that the Wage Fixing Principles are directed at ongoing, viable businesses, further supports a finding of a Special Case. If it were to be held that the Principles do not apply to RBMC as it is a "wind up" organisation, that would in my opinion be inconsistent with the Principles as it is not possible to read anywhere in the State Wage Case determinations an exclusion or exception for a particular type or class of employer. However, by separating RBMC from the usual and ordinary, it must become unusual, out of the ordinary, and consequently a special case. … 236 The 2002 Award applied from the first pay period to commence on or after 15 November 2002. It was made by consent of the parties in November 2002 and must be taken to have been considered by them and the Commission as prescribing fair and reasonable conditions of employment at that time. The existence of a leave reserved position in respect to wages must equally be taken as a recognition by all parties that the question of wages required further consideration in 2003 in order to ensure that the criteria of "fair and reasonable", to use the language of s 10 of the Act, continued to be met.

237 There are further issues of industrial justice, behaviour and conduct of the parties and the unique circumstances of industry restructure which contribute to a conclusion that the present matter is appropriately considered as a special case pursuant to the Wage Fixing Principles. 28 Under the heading "MERIT", Harrison DP made the following observations and findings: 238 The central argument advanced by RBMC is that the employees were not required to undertake any production duties and accordingly, on a work value basis, there is no justification for an increase in award wages.

239 The nil work value argument ignores the work done on secondment at lower than the applicable award rate, and devalues the efforts of the individuals concerned in redeployment programs.

240 There is an unsettling tone to the argument of the respondent which directs blame and consequent economic sanction upon the persons remaining in RBMC for not taking up employment with Connell Wagner or voluntary redundancy. This is grossly unfair, particularly given the evidence that the redeployment process recognised as the most productive form of redeployment was one of self-referral. This unfairness is further exacerbated by the failure of the respondent to initiate a personal placement plant for the remaining employees rather than leave them to their own devices, ad hoc counselling and peer support.

241 The evidence of the witnesses detailed above, who have minimum service of 18 years and maximum service of 35 years in the industry, reveals a substantial contribution and commitment to the industry. The eleven persons giving evidence in this matter have a combined service history approaching 300 years. All employees of RBMC have service in excess of 10 years.

242 The circumstances and structure of RBMC led to a vulnerable group of employees who, through no fault of their own, found themselves surplus to an industry to which they had made significant contributions.

243 I accept the evidence of the applicant's witnesses that employees were substantially underpaid on secondment and that the capacity to be paid at the appropriate rate was negligible.

244 The evidence of Mr La Spina could only identify two employees, engaged by Sydney Water, who were subject to job evaluation in the position of secondment and paid additional wages by that organisation. In other cases the host employer had the benefit of the expertise of the secondee at no cost. The fact that RBMC chose not to charge for those services is a policy decision available to it, not the employees. 29 Another matter that his Honour obviously regarded as important was what his Honour described as an "undertaking" by the Treasurer and Minister for Energy, Mr Egan, to all employees on 24 October 1995 that stated in part: In discussions with Pacific Power Unions I have guaranteed that the restructuring will take place with no forced redundancies, no forced transfers and no reduction of entitlements. Implementation will be co-ordinated with a high level consultative committee established with the Unions. 30 In relation to the foregoing "undertaking" Harrison DP stated: 249 The undertakings were real, reiterated many times at many levels, and resulted in substantial benefit to the NSW Government and through it, the citizens of the State.

250 The essence of equity, fairness and industrial stability is that undertakings made by any party are to be met in substance and form.

To discard the undertakings would be to abandon the integrity demonstrated by the parties in their industrial relations throughout the reform process; it would be unjust and unfair (objective (a)); would fail to promote efficiency and productivity in the economy of the state; and would deny the participation of employers and employees at the enterprise level.

253 The undertakings were made to unions acting on behalf of members. To discard the undertakings would discourage participation of representative bodies and would discourage responsible management and democratic control of those organisations.

254 If an arrangement openly and honestly made with a representative body is abandoned, the effectiveness of that body as a representative is diminished and the confidence of members undermined with potential for anarchy.

255 The evidence in this matter is one of cooperative workplace reform and equitable, innovative and productive workplace relations. If the undertakings were discarded such outcomes would be discouraged and accordingly achievement of mutual benefit made more difficult. 31 In relation to the MOU and the work of employees on secondment, his Honour stated: 259 The MoU prescribes means of salary maintenance and salary adjustment downwards in the circumstances of an individual that so warranted. This mechanism, described by Mr La Spina in his evidence, was not used; leading to the conclusion that all employees met the requirements of actively seeking alternative employment and in that context pursued and achieved results sought by their employer.

260 The existence of this mechanism and the underpayment of employees on secondment are two further elements which support an increase in the 40 point salary scale.

261 The evidence of Mr Brown in particular reveals that he was paid approximately ten percent less than the rate determined for the work he was undertaking on secondment for EnergyAustralia. Messrs Migocki, Turnbull, Chawla and Fisher all found themselves in these circumstances. Mr Bates, from his evidence, undertook real and substantial duties within RBMC which would justify a consideration of an increase in the rate of pay, both on special case and work value principles. Mr Turnbull was not eligible for employment by Connell Wagner. Mr Legge was held back from a secondment with TAFE for 12 months because human resources personnel at the time found it "too hard" and Mr Sollazzo was restrained from taking up positions with electricity generators because his expertise was required by the respondent.

262 The arguments advanced by the respondent seek to direct attention from those employees carrying out project work now in Queensland and previously in other states as well. It is not appropriate, fair or reasonable to do so. 263 These circumstances represent an injustice which is further compounded by the multiplier effect on superannuation. 32 On the question of operative date Harrison DP decided as follows: 267 Further, having regard to the fact that the last effective increase in rates of pay for the employees covered by this application was in 2001, it is appropriate in my view that an award be made to follow on from the nominal expiry date of the 2002 Award, 15 November 2003. I prefer this course to the operative dates of the 2003 and 2004 SWC increases of May 2003 and May 2004 respectively on the basis that the leave reserved clause of the 2002 Award contemplated that wages be advanced during the life of the Award. In all the circumstances of this matter a date at the end of the award achieves appropriate fairness and equity. 33 Finally, as to the quantum of the wage increases his Honour determined as follows: 268 It is appropriate in my view to consider the quantum of increase against wage movements within the power generation sector and, in particular, Eraring Energy.

270 The proposition advanced by the respondent in the alternative, that the 2003 and 2004 SWC decisions be applied, results in an increase in salary point 1 of $17 per week from $303.40 to $320.40 pw or 5.6 percent from May 2003; and a further increase of $19 per week to $339.40 pw effective May 2004, resulting in an overall increase of $36 per week or 11.86 percent. 271 The Eraring Energy Award moved from March 2002 and March 2003. It is appropriate in my view, having regard to the timing of award movements, to bring the 2002 Award to equate with the 2003 Eraring Award rate. Accordingly, I delivered an increase of 9.2 percent, moving salary point 1 for RBMC employees to $ 331.40 pw from 15 November 2003, recognising that they had not had an effective wage increase since September 2001 compared to Eraring employees who had enjoyed increases from November 2001 and March 2002 prior to March 2003.

272 It is appropriate in my view to maintain the nexus with Eraring Energy to November 2003 as the history of RBMC is more closely aligned to Eraring Energy and Eraring Power Station.

274 From 2003 the sectors of the former Pacific Power engaged in productivity bargaining more independently and on an ever diverging basis, having regard to the particular circumstances of each business.

275 It is appropriate that RBMC employees receive an increase of four percent from 15 November 2004 which will set rates to apply for the ensuing 12 months, thus meeting the principles of wage justice and equity through the closure of the organisation.

276 The evidence presented by the applicant here demonstrates all sectors of the electricity industry produced increases in excess of 4 percent.

277 The experience of wage negotiations during 2004 was that four percent represented the benchmark figure for general productivity bargaining, with increases below or above that amount depending upon a range of factors relevant to the negotiations.

278 Employees of RBMC continued on secondment to varying extents in all sectors of the energy industry. It is not possible to correct an under-valuation of the services provided in a precise manner, however, having regard to the undertakings referred to and the outcomes in the Energy sector in which the employees of RBMC were deployed I determine an increase of four percent to be appropriate and necessary to discharge the obligations of s10 of the Act to set fair and reasonable rates of pay.

34 The appellant relied on seven grounds of appeal: (1) His Honour has erred in law in applying the Principles relevant to determining whether a particular case would warrant the Commission's intervention as a "Special Case". (2) His Honour has erred in law in applying the Award retrospectively to persons who are not employees of RBMC.

(3) His Honour has erred in law in that he has misdirected himself in relation to the Application of Section(s) 15(3), 10, 12 & Section 17 of the said [Industrial Relations] Act. (4) That His Honour failed to properly apply Section 15(3), 10, 12 & Section 17 of the said [Industrial Relations] Act to the facts of this case. (5) That His Honour erred in his factual findings concerning the issue of secondments and the level of assistance provided to employees by the Appellant. (6) His Honour was in error in excluding evidence sought to be tendered by the Appellant in respect to the Application of the Mercer Job Evaluation System to the remaining employees of the Appellant. (7) His Honour was in error in excluding evidence from the Appellant, dealing with issue of redundancy. LEAVE TO APPEAL

35 The appellant submitted that the Full Bench should grant leave to appeal for the following reasons: (1) The Appeal raises important questions as to the Principles relevant to determining whether a particular case will warrant the Commission's "Special Case" intervention. (2) The Appeal raises important jurisdictional and/or discretionary questions as to whether an Award can or ought apply retrospectively to persons who are not employees at the time of the making of the Award. (3) The Appeal raises important jurisdictional and/or discretionary questions concerning the Award making powers of the Commission in respect to non-employees. (4) The Appeal raises important questions on the Application of a "Special Case" extending to employees, who are declared, "surplus to requirements" and not engaged in productive work. (5) The Appeal raises important jurisdictional and discretionary questions in that the Judgment is contrary to the objective Objects of the Act, and in particular Section 3(b) "to promote efficiency and productivity in the economy of the state". (6) The Judgment is contrary to the Public Interest, in that His Honour has awarded substantial award increases to employees that have been declared, "surplus to requirements", and their primary focus whilst engaged by the Respondent was to find appropriate redeployment with other State-Owned Corporations and/or alternatively placement within the Public Service of NSW. At the time the case was heard most of the employees had already terminated their employment with the Appellant. (7) The Judgment is contrary to the Public Interest, in that a person who is declared "surplus to requirements", and remains within an organisation as part of a managed displacement policy and not engaged in productive work is entitled to structural efficiency award increases contrary to the Preamble and the State Wage Fixing Principles of the Industrial Relations Commission of New South Wales. 36 It was submitted that the appeal went to the core of the Wage Fixing Principles, in particular, what constitutes a Special Case. The issue(s), it was submitted, were of such importance, and in the public interest, that leave should be granted: Knowles v Anglican Church Property Trust (No.2) (1999) 95 IR 380 at 381-382; King v State Bank of New South Wales (No 2) 126 IR 407 at [52-55]; D & R Commercial Pty Ltd v Flood (2002) 113 IR 344 at 351; Weisser v Spur Group Pty Limited (2003) 121 IR 89 at 92; WorkCover Authority of New South Wales (Inspector Moore) v Blacktown City Council (2003) 124 IR 59 at 65-66 and 73-78. Respondent's submissions 37 The respondent opposed leave being granted. It was submitted that the principles relevant to determining whether an application constitutes a special case were well established and that the present application did not provide an opportunity to vary or develop those principles. 38 The respondent further submitted that the jurisdiction to make an award was clear, as was the power to make an award apply retrospectively. The respondent submitted that the Commission had the power to make an award in respect of persons who were employees of the appellant, but who were no longer employed at the date of Harrison DP's decision. Pursuant to the principle in Re Crown Employees (Land Surveyors) Conciliation Committee [1930] AR 278, there was no demonstrable issue of jurisdiction.

39 The respondent also submitted that there was no jurisdictional question raised in relation to the Objects of the Act, which were intended as a guide to the exercise of the Commission's jurisdiction (including the exercise of discretion). The respondent submitted that there was nothing to suggest the Commission had misunderstood the concept or acted in a manner causing the discretion to miscarry. 40 Mr Kite SC, for the respondent, submitted the "public interest" did not require the Commission to confine its consideration as to what constituted a fair and reasonable condition of employment to employees whose employment was of indefinite duration. The fact that employees have been declared "surplus to requirements" did not deprive them of their status as employees or disentitle them from asking the Commission to consider their claim. 41 As a general comment, the respondent submitted that the appellant's complaints did not pertain to jurisdiction or principle, but was simple disagreement with the outcome. 42 Mr Kite observed that the application affected at most 122 employees for some part of the duration of the Award. When the evidence closed, there were approximately fourteen people remaining in the redeployment pool. Given that the appellant was expected to conclude its operations by Christmas 2005, the Award would operate for a closed period and for a relatively small number of employees in a unique situation. Consequently, there was nothing raised by the appellant to suggest that the appeal would have wider practical application or wider implications for the Commission's jurisdiction. 43 Finally, the respondent contended that his Honour's decision was not attended by significant doubt and that it was a routine application of well-established principles to facts open on the evidence. Decision on leave 44 Although we consider the circumstances here are unique and any decision we make will not have a wider practical application, there are important public interest considerations arising. Accordingly, we grant leave to appeal.

45 Principle 10 of the Commission's wage fixing principles enables a party to pursue a claim for increases in wages and salaries or changes in conditions in awards as a special case. The Principle is in the following terms: Except for the flow on of test case provisions, any claim for increases in wages and salaries, or changes in conditions in awards, other than those allowed elsewhere in the principles, will be processed as a special case before a Full Bench of the Commission, unless otherwise allocated by the President.

This principle does not apply to applications for awards consented to by the parties, which will be dealt with in the terms of the Act, or to enterprise arrangements, which will be dealt with in accordance with the Enterprise Arrangements principle. 46 In order to be successful in a special case application the applicant would need to satisfy the Commission, most usually a Full Bench, that the case being brought is exceptional in character; that it is "of such a kind as to exceed or excel in some way that which is usual or common": Oxford English Dictionary, second edition, 1989. But there is also the obligation on the applicant to show that granting the claim is necessary to establish fair and reasonable conditions of employment: Re Operational Ambulance Officers (State) Award (2001) 113 IR 384 at 420. 47 Of course, that the case might have special attributes or characteristics that take it out of the ordinary will not guarantee success for the applicant in prosecuting the case but unless it does, there is no chance of success. 48 The present case was, we consider, special. It involved a claim for significant wage increases to be awarded to a group of persons employed in highly unusual circumstances. That is, they were employed by a statutory corporation whose objective was to achieve the efficient and timely winding up of residual business activities of Pacific Power. In the course of that winding up process the appellant was required to facilitate and assist the employees in finding new, permanent employment. Whilst that was occurring, apart from the work being done by some employees on secondment, the employees were not required to undertake any productive work in their usual vocation because there was none. 49 The employees had not received any wage increases, including wage increases flowing from State Wage Cases, since November 2002. At first instance, the appellant contended wage increases were not justified. However, the respondent raised a number of serious issues including the nature and meaning of commitments given to the employees in relation to the maintenance of the contemporary value of their entitlements and the reliance on those commitments by employees, the cooperation of employees in the reform process and the value that might be placed on that process in achieving fundamental reform, industrial justice, erosion of purchasing power and declining value of superannuation. 50 Thus, a serious issue was presented to Harrison DP for arbitration; were these employees, given the unique circumstances, entitled to a wage increase and, if so, what should that increase be? The matter before his Honour clearly warranted the appellation of "special case" and his Honour was perfectly correct to proceed on that basis. Bases for granting increases

51 His Honour's reasoning at first instance reveals a number of bases upon which he concluded wage increases were warranted: (1) That the employees had made a substantial contribution and commitment to the industry: [241]. (2) That employees were substantially underpaid on secondment: [243]. This represented an injustice: [263]. This underpayment supported a wage increase: [260]. (3) That the employees were guaranteed that the restructuring would take place with no forced redundancies, no forced transfers and no reduction of entitlements: [245]. (4) The essence of equity, fairness and industrial stability is that undertakings made by any party are to be met in substance and form: [250]. It would be unconscionable to ignore the undertakings: [251]. (5) That to discard the undertakings would be to abandon the integrity demonstrated by the parties in their industrial relations throughout the reform process; it would be unjust and unfair … would fail to promote efficiency and productivity in the economy of the state; and would deny the participation of employers and employees at the enterprise level: [252]. (6) That to discard the undertakings would discourage participation of representative bodies and would discourage responsible management and democratic control of those organisations: [253]. (7) That the evidence was one of cooperative workplace reform and equitable, innovative and productive workplace relations. If the undertakings were discarded such outcomes would be discouraged and accordingly achievement of mutual benefit made more difficult: [255]. (8) That the employees contributed to the reform process in a cooperative and responsible manner: [247]. (9) That the reforms resulted in substantial benefit to the NSW Government and through it, the citizens of the State: [249]. (10) That the MOU provided a mechanism for salary maintenance. The existence of this mechanism supported a wage increase: [259]; [260]. 52 In determining what his Honour considered to be the appropriate quantum of increase, the Deputy President relied on movements within the power generation sector and, in particular, Eraring Energy. It appears his Honour considered there was a nexus with the Eraring Energy Award. Whether approach to wage increases correct at first instance 53 It may be seen that the considerations leading Harrison DP to award the increases that he did were essentially that the employees and their unions had kept their part of the bargain of cooperating with the reform process in a responsible manner; that the reforms delivered significant benefits to New South Wales; that employees on secondment were underpaid for their work; and, most importantly, that the employees were given undertakings that his Honour interpreted as guarantees the employees would not be disadvantaged. 54 We consider his Honour's interpretation of the undertakings given to the employees regarding their salaries and conditions of employment overstated what was in fact the case. His Honour appears to have considered that the undertakings, coupled with the salary maintenance provisions of the MOU, meant that the appellant was required to maintain the contemporary value of the salary applicable to an individual employee according to the 40-point salary scale of the Award because not to do so would mean a reduction in entitlements. 55 In our opinion, neither the undertakings nor the salary maintenance provisions of the MOU went as far as Harrison DP found they did. The undertaking not to reduce entitlements must be taken as referring to those entitlements existing at the time the agreement was made. The salary maintenance provisions of the MOU were simply an undertaking to maintain the employee's salary as provided by the 40-point salary scale for 12 months after an employee was declared surplus and to continue salary maintenance after the initial 12 months if the employee was able to demonstrate a commitment to seeking opportunities for alternative employment using the criteria as set out in Attachment 6 of the MOU. Salary was maintained according to the 40-point scale notwithstanding the employee was not undertaking the work required in order to be classified at the relevant point on the scale. If salary maintenance came to an end, an employee might have their work properly evaluated on the basis of what they were actually doing, which in the majority of cases was limited to job searching. This constituted a built-in incentive for employees to maintain their effort to seek and take up other employment. 56 The undertakings referred to by Harrison DP and the MOU have to be seen in their proper context. The objective of the appellant was to wind up the business of Pacific Power. It could not have been reasonably expected that the appellant would continue indefinitely and provide ongoing employment for employees. The emphasis was on following a fair, structured and orderly procedure of assisting employees to find alternative permanent employment noting, of course, the alternative could have been involuntary redundancy for many Pacific Power employees. Maintaining the contemporary value of wages and employment conditions on the basis of movements in the power generation industry, whilst assisting and encouraging employees to find other employment, would have undermined the very purpose of the appellant and removed an incentive for employees to take up other employment at the earliest available opportunity. 57 In so far as the Deputy President relied on the cooperation of employees in the reform process, the benefits delivered to the State by the reforms and matters of equity and industrial justice, we do not consider his Honour gave weight, or sufficient weight, to the fact that the winding up of Pacific Power, a major statutory corporation employing nearly 1,000 personnel in mid 2000, was to be achieved without any forced redundancies. It would be rare indeed to find such an approach in other industry sectors where such a major restructuring was to occur involving winding up of the business.

58 The employees had the benefit of an agreement that maintained their salaries and other employment conditions during the transition to new employment, extensive and meaningful assistance in finding other employment including training opportunities and the protection of their superannuation and other leave entitlements. It was a matter for most employees of continuing in secure employment whilst they concentrated, almost exclusively, on finding other acceptable employment. In the case of those that took up employment with Connell Wagner, the employment was effectively found for them. 59 Harrison DP relied on the extent to which employees of the appellant were on secondment and were underpaid for the work they performed. His Honour found that seven of the appellant's employees (remaining in the redeployment pool at the date of hearing) had been on secondment in excess of 50 per cent of the time they were in the redeployment pool. We are satisfied his Honour erred in making this factual finding. We accept what the appellant put to us on the appeal that: (a) 7 out of the 17 remaining RBMC employees never went on secondment; (b) no employees spent over 50% of their time on secondment; (c) only 2 of the 17 employees spent over 40% of their time on secondment; and (d) the average amount of time on secondment was 25% of the time the employees were in the redeployment pool; and (e) 80% of these employees' cumulative time in the redeployment pool was sent seeking alternative employment, attending training or availing themselves of the other forms of assistance provided by RBMC. 60 Even if it were correct that there was underpayment whilst employees were on secondment, and we are not convinced that was so, there was a dispute resolution mechanism of which the employees were aware that could have been used in the event of a discrepancy between the salary provided by the appellant and the requirements of their seconded role. An across the board, retrospective wage increase was not an appropriate means of redressing any underpayment of an individual employee or employees.

61 We consider also, it was inappropriate for the Deputy President to rely on the wage movements and the timing of those increases in other power generators, particularly Eraring Energy, to fix increases for employees of the appellant. There was no proper basis for comparison given the other enterprises such as Delta Electricity, TransGrid, Macquarie Generation and Eraring Energy were ongoing enterprises where wage increases were the result of individual workplace bargaining which involved, variously, commitments by employees to increased productivity, efficiency, flexibility, technological change and commercial success. None of these considerations were relevant in the case of the appellant and it would be a most unusual case for the Commission to endorse an approach whereby wage increases negotiated through enterprise bargaining constituted a proper benchmark for increases claimed in respect of another enterprise in arbitration proceedings. This is not such an unusual case. 62 We find that his Honour erred in his reasons for granting wage increases on special case grounds and his Honour erred in granting increases of 9.2 per cent from 15 November 2003 and 4 per cent from 15 November 2004. Substitution of State Wage increases

63 We note at first instance the appellant proffered an alternative approach to outright opposition to any wage increases and that was the Commission should apply the increases flowing from the 2003 and 2004 State Wage Cases. That alternative position was maintained on appeal. 64 The increases granted in the 2003 State Wage Case (2003) 121 IR 446 were a $17.00 per week increase in award rates up to and including $731.80 per week and a $15.00 per week increase in award rates above $731.80 per week. In the 2004 State Wage Case (2004) 132 IR 190 the increase granted was $19.00 per week. 65 We consider the requirement of s 10 of the Act to set fair and reasonable conditions of employment which, of course, includes rates of pay, will be satisfied by adopting the appellant's alternative of applying the amount of increases flowing from the 2003 and 2004 State Wage Cases. The increases are to apply from the same operative dates determined by his Honour at first instance, namely, the 2003 adjustment shall apply from the first full pay period to commence on or after 15 November 2003 and the 2004 adjustment shall apply from the first full pay period to commence on or after 15 November 2004. ORDERS

66 We make the following orders: (1) Leave to appeal is granted. (2) The decision of Harrison DP given on 17 March 2005 and his Honour's reasons for decision given on 31 May 2005 are set aside. (3) Clause 5 of the Orders and Award issued by Harrison DP on 21 March 2005 is set aside and is to be replaced by a schedule increasing rates of pay in accordance with this decision. (4) The order of 4 April 2005 made by the President which imposed a term on the stay granted of the award of Harrison DP referrable to Supreme Court Practice Direction No 92 shall be reflected in the above schedule. (5) Within 14 days the appellant shall file and serve short minutes of order reflecting this decision. __________________________________

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