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

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

[13]

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.

[14]

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

[24]

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:

[58]

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.

[59]

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.

[61]

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

[62]

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.

[63]

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.

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