[2016] FWC 7428 [Note: An appeal pursuant to s.604 (C2016/6493) was lodged against this decision - refer to Full Bench decision dated 23 January 2017 [[2017] FWCFB 338] for result of appeal.]
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
s.739 - Application to deal with a dispute

Peabody Energy Australia Coal Pty Limited T/A Peabody Energy Australia PCI Mine Management Pty Ltd
v
Construction, Forestry, Mining and Energy Union; Mr Michael Collins
(C2015/6037)

Coal industry

DEPUTY PRESIDENT ASBURY

BRISBANE, 13 OCTOBER 2016

Dispute arising under enterprise agreement – Agreement provides for roster changes and review of aggregate salaries –Interpretation of agreement provisions.

[1] Peabody Energy Australia Coal Pty Limited T/A Peabody Energy Australia PCI Mine Management Pty Ltd (Peabody or the Company) applies to the Fair Work Commission (the Commission) to deal with a dispute pursuant to the terms of the Peabody Energy Australia Coppabella Enterprise Agreement 2013 (the 2013 Agreement). The 2013 Agreement provides for aggregated remuneration (termed Total Fixed Remuneration or TFR) based on continuous even time rosters and for a review of remuneration when rosters are amended. The dispute centres on the methodology adopted by the Company to disaggregate the TFR for the purposes of calculating remuneration following changes to rosters. The Respondent is the Construction, Forestry, Mining and Energy Union – Mining Division (CFMEU). An employee of Peabody, Mr Michael Collins, participated in conciliation through Counsel, but withdrew from the proceedings prior to the hearing of the matter.

[2] In summary, the 2013 Agreement provides that full time employees will work 35 ordinary hours plus rostered overtime each week averaged over the roster cycle and will be paid TFR, which incorporates a base rate and a roster allowance that compensates employees for all hours worked including work on rostered shifts, weekends or public holidays. The Agreement has a schedule in which TFR is calculated for day shift roster and day/night shift roster on the basis of employees working a continuous even time roster. The Agreement also contains a rate for non-rostered overtime.

[3] Further, the Agreement provides that rosters may be changed by the Company with specified periods of notice, including to non-continuous rosters and that if a roster is changed, the base salary and/or roster allowance will be reviewed and amended accordingly. Any issues arising out of such changes are to be dealt with in accordance with the dispute settlement process in the Agreement, which, as a final step, empowers the Commission to arbitrate to resolve the dispute.

[4] As a result of the falling commodity price of coal, Peabody has determined to reduce operating costs by introducing a change in rosters/hours of work for production and maintenance employees whereby such employees will work 10 hour shifts with seven days on and seven days off. As a result of the reduction in hours, Peabody has reduced TFR paid to employees according to a methodology by which it has assumed that the rate in the 2013 Agreement for non-rostered overtime is a double time rate and dividing it by 2. The methodology used by Peabody has been tested and validated by KPMG, which has engaged in a process of deconstructing the TFR on the basis of relevant provisions in the Black Coal Industry Mining Award 2010 (the Award) and calculating hours that would be paid to employees if the worked the previous Peabody roster under the Award.

[5] Peabody’s right to change rosters is not disputed by the CFMEU. However, the Union does not accept the methodology adopted by Peabody for the purpose of reviewing and amending the roster allowance and contends that the Agreement prohibits Peabody from adopting a methodology based on the Award and that the outcome of a review on this basis is inappropriate and unfair to employees. The CFMEU further contends that in adopting an Award based methodology, Peabody is making an extra claim, contrary to the term of the Agreement dealing with “No extra claims”.

[6] The Commission convened a number of conferences of the parties to attempt to resolve the dispute by agreement. Positions were advanced at conferences and in writing. At the request of the parties the dispute was held in abeyance by the Commission while they held discussions. Those discussions did not resolve the dispute. Peabody advised the Commission that it intended to implement a further roster change to apply from 1 January 2016, with an associated change to TFR, and sought that the Commission hold further conciliation conferences. 1 When the dispute was not able to be resolved by conciliation, the matter was listed for arbitration. The parties did not object to the Commission as presently constituted arbitrating the dispute and a hearing was conducted for this purpose.

[7] Peabody was granted permission to be legally represented on the basis that it would enable the matter to be dealt with more efficiently taking into account its complexity (s. 596(2)(a)), and no issue of fairness arises given that the CFMEU was represented by Mr Newman, an experienced advocate, and did not object to Peabody being legally represented (s. 596(2)(c)). Peabody was represented by Mr Dan Williams of Minter Ellison. Evidence was given in support of Peabody’s position by Mr Jason Economidis, General Manager of Copabella Mine. 2 Evidence in support of the CFMEU’s position was given by Mr Steven Pierce, District Vice President3 and Mr Daniel Smythe, employee of Peabody and CFMEU representative at the Mine.4

[1] The parties agreed on the following questions for arbitration:

[1] The relevant terms of the 2013 Agreement are as follows:

[1] The evidence establishes that prior to the disputed changes, the roster in place across the Mine for the majority of employees provided for 12.5 hour shifts worked in a pattern where employees work 7 days and have 7 days off. After proposing and discussing a number of options for roster changes with employees, Peabody implemented a roster comprising 10 hour shifts, 7 days on and 7 days off. Peabody reduced TFR by applying its methodology. During the period in which that change was disputed by employees, and after the application subject of these proceedings was filed, Peabody implemented further roster changes and consequential salary reductions in line with the methodology it had previously developed. Currently, the rosters arrangements for employees at the Mine who are covered by the Agreement are:

[2] The CFMEU has not questioned the rationale for the roster change or pressed a submission complaining of failure on the part of Peabody to consult employees (although lack of consultation was alluded to in the evidence of Mr Smythe). I accept the evidence of Mr Economidis that the Peabody (and other employers in the coal industry) have been subjected to sustained low pricing for their product and are facing challenging market and economic conditions. I also accept that Peabody has consulted with affected employees and the CMEU in relation to the changes it has implemented. That Peabody imposed its position following consultation was its right under the Agreement. Peabody then exercised its right to notify a dispute about the matter and sought conciliation and arbitration.

[3] It is common ground between the parties that:

[4] Where the parties disagree is in relation to the methodology by which the Base Salary and Roster Allowances should be deconstructed and converted to an hourly rate. Mr Economidis’ evidence in relation to the methodology adopted by the Company to calculate wages associated with roster changes can be summarised as follows. In order to undertake this task, the Company broke down the TFR into various components. The first step was to extrapolate the base ordinary hourly rate which could then be applied across the various components. The only hourly rates in the Agreement relate to non-rostered overtime and on-call work. The Agreement otherwise breaks TFR down into three components – base salary, superannuation and roster allowance.

[5] The Award requires overtime beyond rostered hours for six/seven day roster employees to be paid at double time. Therefore, if the Award applied directly, rostered and non-rostered overtime would be paid at double time. The Award also provides for remuneration based on 35 ordinary hours per week, with additional hours paid at an overtime rate, plus shift allowances and weekend penalties. Similarly, the 2013 Agreement distinguishes between ordinary hours of work per week and overtime in excess of or outside the rostered hours of any shift and attributes a higher hourly rate for non-rostered overtime hours. In relation to compensation for shift work and weekend work, these are included in the TFR.

[6] Accordingly, the Company believes that it is reasonable to have regard to the number of ordinary hours versus the number of overtime hours in the new roster arrangement with reference to the Award prescriptions relating to ordinary hours of work, shift allowances and penalty rates in the review of remuneration associated with roster changes made under the Agreement. The model developed by the Company allocates higher rates of pay for hours which would ordinarily attract penalty rates under the Award (eg. weekend work and shift work) in line the structure of remuneration in the Award and with industry practice. The 2013 Agreement has one roster allowance for all levels of employees. On the basis that the Level 2 roster allowance rate (which is 25% of the Base Salary for a rotating roster and 20% of the base salary for a day only roster) was used as the base amount for all roster allowance rates when it was first negotiated for inclusion in the Agreement, it should therefore be applied to other levels. Mr Economidis also said that in order to ensure that no employees were disadvantaged by the change, any shortfall between the salaries as calculated by the model and those contained in the Agreement, has been rectified by a reconciliation payment.

[7] Mr Economidis outlined the following assumptions about hours upon which the model for calculating the “Base Salary” component of the TFR is based:

[8] In relation to the Roster Allowance component of the TFR, the model is based on the following assumptions:

[9] Mr Economidis states that the roster allowance calculated in accordance with the model is different to the allowance in the 2013 Agreement because it provides for a variable roster allowance across the three levels of employees as opposed to a flat allowance for all three levels. The reason for this differential allowance is that the Company believes it makes sense to have a different level of roster allowance for each level of employee rather than one allowance that is applied across the board. Any shortfall associated with the differential between the Roster Allowance as calculated by the model and the flat allowance in the Agreement has been addressed by a reconciliation payment to employees. According to Mr Economidis, the way the model is structured appropriately takes into account assumptions that:

[10] Mr Economidis also said that the primary input into the model developed by Peabody is the base ordinary hourly rate. The Company calculated that rate by reference to the non-rostered overtime hourly rate in the 2013 Agreement. Given that the non-rostered overtime hourly rate in the 2013 Agreement was the only relevant hourly rate in the 2013 Agreement, and it is reasonable to presume that the intention was to provide for non-rostered overtime on a seven day continuous roster at double time, it follows that half of the hourly non-rostered overtime rate would be the ordinary time rate (ie. the base ordinary hourly rate). Advice from KPMG (appended to Mr Economidis’ witness statement) confirmed that when using half of the non-rostered overtime rate as the primary input to the model, the final result is very close to that in the 2013 Agreement, and it seems highly likely that the original salary rates were constructed in a very similar way to the model Peabody has used to calculate salaries for other rosters.

[11] Mr Economidis asserted that prior to the roster changes implemented from 12 August 2015, employees covered by the 2013 Agreement worked shifts of 12.5 hours duration comprising a shift length of 12 hours and a shift changeover/hot seat of 30 minutes. The 2013 Agreement provides that the TFR includes compensation for all hours worked and provides for all rostered overtime, weekend, public holiday and shift work, and all other payments or allowances excluding the additional allowances outlined in Appendix 1 to the 2013 Agreement. There is no reference to the shift changeover/hot seat in Appendix A.

[12] According to Mr Economidis, it is clear that employees were always compensated for shift changes/hot seat changes and that the base remuneration rates in the 2013 Agreement were set on the basis of 12.5 hour shift lengths with all time being paid. This has been the case since at least 2007 when the mine was operated by a contractor, Peter Champion Mining, and has continued to be the case for enterprise agreements negotiated in 2004, 2007, 2010 and the present 2013 Agreement. In support of this assertion, Mr Economidis referred to a dispute about shift lengths at the mine, which arose in 2012 under the previous 2010 Agreement, where employees claimed that they were working 12.5 hours and only being paid for 12 hours and that they should be paid at overtime rates for the shift changeover/hot seat hours.

[13] Confusion arose because of the fact that pay slips contain a reference to an 84 hour fortnight and aggregated salary rate. The Company provided an explanation to the Union and its members that the reference to hours was a nominal one for the purpose of calculating annual leave payments. The Company sent letters to the CFMEU explaining its position that compensation for shift changeover/hot seat is compensated for as part of the roster allowance and not part of the base salary under the Agreement and is accordingly not set out in the employees’ payslips. Employees are nonetheless compensated for these hours albeit they are but one part of the roster allowance. This dispute was discontinued by the CFMEU in April 2013 and the 2013 Agreement was approved in December 2013 some eight months after the dispute was discontinued. The words in the 2010 Agreement that led to the dispute – the base salary is based on working an average of 42 hours per week – were removed and do not appear in the 2013 Agreement. Employees have continued to work 12.5 hour shifts and to be paid for all time worked including the half hour portion of those shifts, which was allocated as a shift changeover/hot seat.

[14] Mr Economidis provided analysis of the CFMEU’s proposed methodology and said that it is illogical to divide the total salary for each classification by the number of hours that the Union asserts employees are compensated for in a year – 2184 hours, comprising 52 weeks of 42 hours. This is because the result will be that employees will receive different hourly rates depending on which roster they work and the base hourly rates calculated in the manner proposed by the CFMEU are significantly inflated because they incorporate payment for rostered overtime, penalty rates and allowances. Mr Economidis also said that the CFMEU’s proposed model should not be adopted because:

[15] Under cross-examination, Mr Economidis agreed that if employees were paid for 12 hour shifts rather than 12.5 hour shifts, they would be worse off by an amount in excess of $7,000.00 per year under the Company’s model. Mr Economidis also agreed that the request to KPMG in undertaking the analysis in its Report was to assume that the Award could be read in conjunction with the 2013 Agreement and that a methodology based on the Award was used to build up hours. The effect was that where the 2013 Agreement is silent the Award was used. In response to the proposition that there are certain rosters with which the methodology does not work, Mr Economidis said that there are rosters where minor manual changes have to be made to the model.

[16] Mr Economidis confirmed that Rosters A and G are the most prominent rosters on the mine site. Roster B is worked by the Pump Crew of approximately 16 employees. Roster C is worked by dragline crew and emergency response captains – a total of 16 employees. Rosters D and F are not worked on the mine site. Roster E is worked by 12 leading hands. Roster G is worked by 70 – 80 employees who operate shovels and excavators.

[17] In relation to Mr Pierce’s statement, Mr Economidis said that he was not involved in any of the negotiations for earlier versions of the 2013 Agreement and that other than some statements made by Mr Pierce during conciliation conferences, he had no reason to question Mr Pierce’s evidence about how the rates in the 2013 Agreement were built up.

[18] With respect to Mr Smythe’s statement, Mr Economidis said that there was no record that there had ever been eight training days per year, or that this number had been reduced to four. In response to the proposition that he would not know whether Mr Smythe’s evidence was correct or not because he was not involved in the negotiations, Mr Economidis said that the number of training days per annum is stipulated in the 2013 Agreement and that earlier versions of the 2013 Agreement made no reference to eight training days. Mr Economidis also agreed that his knowledge was based on the various Agreements and was not first hand.

[19] Mr Pierce has been involved in assisting members at the Coppabella Mine in his role as District Vice President of the CFMEU for a number of years. In the past ten years the Mine has had two owners and a number of managers. The first Agreement at the Mine containing TFR was implemented in 2007. At the time, the Mine was run by a manager named Paul Smallbone. Employees were being offered individual contracts. An example of such a contract was attached to Mr Pierce’s statement. Mr Pierce’s recollection is that the wage rates in the contracts were taken from an industry report – the McDonald Report – and were not based on the relevant award at that time. These wage rates were used as the basis for the TFR in the 2007 Agreement.

[20] Mr Pierce was also part of the negotiations for the next agreement at the Copabella Mine in 2010. At this time, the mine was managed by Brian Spencer. According to Mr Pierce, there was a broad agreement between the parties that the base rate and roster allowance should be broken down so that the hours of work and roster payments could be quantified for the hours and rosters worked. After several attempts by both parties to undertake this task, it was determined that it was too hard as the Company could not find any information about how the TFR rates were calculated to determine an appropriate hourly rate, overtime rate and allowances for weekend/shift work. In order to reach agreement the company offered to add a percentage increase on to the components, which was agreed. This was incorporated into the 2010 Agreement.

[21] Mr Pierce was not involved in the negotiations for the 2013 Agreement but is aware of the 2013 Agreement and believes that the TFR rate has remained the same and has still not been quantified. On the basis of Mr Pierce’s knowledge of how the TFR was implemented, it is his belief that the rates of pay in the 2013 Agreement were formed with no reference to the Award provisions. Mr Pierce also believes that because the TFR was not calculated with reference to the Award, if one was to use the current Black Coal Mining Industry Award 2010 provisions to break down the TFR rates as proposed by Peabody, the result would be a distortion of the employees’ current TFR rate which would not favour them.

[22] Mr Pierce tendered earlier agreements that had applied prior to Peabody operating the mine. The MCCM Coppabella Workplace Agreement 2007 (the 2007 Agreement) 5, which was in effect when Macarthur Coal Mine Management Pty Ltd operated the mine, had an annualised salary termed Total Fixed Remuneration and a package of benefits that compensated employees for overtime, public holidays, shift penalties and penalty rates. The total salary under the 2007 Agreement was comprised of a base salary, market allowance and roster allowance. Clause 9.1 of the 2007 Agreement provided that employee would be required to work the hours necessary to perform their role and roster, being the maximum ordinary hours averaged over 12 months plus reasonable additional hours as permitted by the then Workplace Relations Act 1996.

[23] The 2007 Agreement also provided for 12.5 hour shifts and included a requirement that employees change over for shifts on the job, for communication and work continuity. The indicative hours to be worked by full time employees for the purpose of roster allowance, was set out in Appendix 1 as 42.5 hours for Monday to Friday day shift and 45 hours for 7 day continuous day/night shift. An example of a written contract of employment dated 21 November 2006, between Macarthur Coal Mine Management Pty Ltd and an employee, also appended to Mr Pierce’s statement, indicates that shift lengths are 12 hours. 6

[24] The MCMM Coppabella Agreement 2010 (the 2010 Agreement) 7 provided for an annualised salary termed Total Fixed Remuneration, which included compensation for rostered overtime, weekend, public holiday and shift work. By virtue of clause 8.8 of the 2010 Agreement, employees were required to work 35 ordinary hours per week plus rostered overtime, averaged over the roster cycle with shifts being up to 12.5 hours duration. The remuneration structure in Appendix 1 of the 2010 Agreement contained notes that the TFR is based on working a continuous event time roster and that the Base Salary is based on working an average of 42 hours per week.

[25] In response to Mr Economidis’ evidence, Mr Pierce said that he recalled the dispute notified by the CFMEU in 2012 in relation to 12 and 12.5 hour shift payments and disagreed with Mr Economidis’ view about why the CFMEU withdrew the dispute. Mr Pierce said that he participated in a series of meetings with Company representatives and the then Lodge President, Mr McKenzie, which were held in the later part of 2012. The position of the then Mine Manager, Mr Scheepers, was that employees were paid for a 12.5 hour shift and 43.75 hours per week. The Union did not agree with that position because the payslips and previous agreements were based on a 42 hour week. Mr Pierce also said that his understanding of the 2010 Agreement, reached by his participation in negotiations, is that the base salary provides for working a 12 hour day and not a 12.5 hour day

[26] At the time, the CFMEU took the view that the terms of the 2010 Agreement were too vague to support either argument conclusively and that as the 2010 Agreement was due to be renegotiated, the Union would be better off not pursuing the dispute and negotiating a better outcome. It was on this basis that the CFMEU agreed to withdraw the dispute. Mr Pierce also appended a document to his statement setting out the CFMEU’s position about what a Level 2 employee’s TFR should be for a roster with 7 x 10 hour rotating shifts as follows:

Coppabella Wage 12 hr Total Fixed remuneration

Based on Mine worker 2

CURRENT

[27] Under cross-examination, Mr Pierce agreed that the 2010 Agreement provided for rosters whereby employees worked 12.5 hour shifts and that hours worked by employees were broken up into ordinary and overtime hours. Mr Pierce also agreed that remuneration in the 2010 Agreement was expressed to include compensation for all hours worked and provide for rostered overtime, weekend, public holiday and shift work and all other payments or allowances and that the base salary was based on working an average of 42 hours per week.

[28] Mr Pierce agreed that this provision of the Agreement and the payslips provided to employees were the impetus for the dispute in 2010. Mr Pierce said that he did not recall the Company’s explanation about how employees were compensated for the .5 of an hour hotseat change. In relation to the Award, Mr Pierce said that he understands that it differentiates between ordinary and overtime hours; day and night work; and between hours worked Monday to Friday and hours worked on weekends. Mr Pierce agreed that the CFMEU expected that overtime hours would be paid for at a rate greater than ordinary hours and would be concerned if overtime, weekend and night shift loadings were removed. Mr Pierce also agreed that if the roster under the 2010 and 2013 Agreements was worked under the Award, overtime would attract a loading of double time on the basis that employees would be working a 6 or 7 day roster.

[29] In relation to the present dispute, Mr Pierce accepted that in negotiations with the Company in an attempt to reach resolution, the Award was a reasonable starting point. Mr Pierce confirmed that he had not been prepared to accept that the proper divisor to determine an hourly rate was 12.5 hours or that the non-rostered overtime rate under the Agreement was to be regarded as a double time rate. Mr Pierce agreed that CFMEU members would accept that if they worked less hours they should earn less money and if they worked more hours they should earn more money, and said that the role of the CFMEU is to ensure that the method of calculating remuneration under the roster is fair.

[30] In relation to the CFMEU’s proposed model, Mr Pierce agreed that it is based on the total of TFR being divided by the hours worked to come up with an hourly rate of pay which applies to each hour worked. In response to the proposition that this is not how the Award works, Mr Pierce said that the rate was not developed from the Award. Mr Pierce agreed that the CFMEU’s formula resulted in a situation where every hour an employee works in a year is paid at the same rate regardless of whether it is a weekend, weekday, day, night or whether the hour would ordinarily be classified as an overtime hour or an ordinary hour.

[31] Mr Pierce said that he did not find it concerning to put forward a model where every hour was paid the same. In response to a question about whether he would be comfortable if the Company implemented five day rosters with some employees working Monday to Friday and some working Wednesday to Sunday and paid all employees the same hourly rate, Mr Pierce said that he could be comfortable provided employees were not financially disadvantaged. Mr Pierce also said that the reality is there would be a different rate of pay and that under the structure at Coppabella Mine this could not be done.

[32] Further, Mr Pierce said if an aggregated rate cannot be broken down or worked backwards there would be no mechanism to pay employees any other way. In response to the proposition that his members at Coppabella probably would not have contemplated working on every day and at any time for a single flat rate, Mr Pierce said:

[33] In response to the proposition that it is improbable that the Agreement would allow for such an arrangement, Mr Pierce said that he accepted that suggestion but did not necessarily agree with it.

[34] Mr Smythe tendered pay slips indicating that his normal hours are 84 per fortnight. According to Mr Smythe, during his time at Coppabella, there has been give and take between management and employees that would change the TFR. Sometimes these changes were made as part of enterprise bargaining. An example of this was training days. In the previous Agreement, as part of TFR, employees were paid for four training days per year. This had been reduced from eight per year in negotiations for the 2010 Agreement. It was the Company’s position in negotiations for the 2013 Agreement that these days should be removed altogether. As part of the justification for this claim, the Company provided a breakdown of the TFR to employees showing the estimated savings if the training days were removed. That document – tendered by Mr Smyth – shows that the pay for a training day for each level of employee ranges from $594 for a trainee to $823 for a Mine Employee Level 3. 9

[35] The Company’s position was that employees could agree to remove the training days and have a reduction in TFR of 2.15% or keep the training days and the Company would enforce them every year. An agreement was subsequently reached between the parties that in lieu of a pay rise in the first year, the training days would be reduced from four to two but that the TFR would remain constant. This provided the Company with a percentage wages decrease in the first year of the 2013 Agreement while ensuring the TFR of employees was not reduced.

[36] Mr Smythe also recalls that in the 2013 negotiations both the Company and the CFMEU wanted to include an hourly rate of pay and an overtime rate of pay in the Agreement that was based on the base rate at the time. However, after reviewing the previous agreements and changes to the base rate and TFR it was impossible to calculate what these rates were and neither party could agree on a base rate or overtime rate of pay. As a result, both parties dropped their claims regarding this rate and maintained the current wage structure.

[37] Mr Smythe states that he has reviewed the model structure the Company proposes and his belief is that the base rate and TFR in the 2013 Agreement cannot be broken down in a manner suggested in the model as the model does not take into account the “give and take” that has previously gone into the TFR rate and the outcome of the model would disadvantage employees. An example of this give and take provided in oral evidence by Mr Smythe was an agreement reached at the time that Macarthur Coal operated the Mine that employees would defer being paid a bonus to which they were entitled under the then agreement because Macarthur Coal was not doing well at the time.

[38] In oral evidence, Mr Smythe also said that in order to implement hot seat changeovers, operators had agreed to a 30 minute handover without a corresponding increase in pay and that this was just something that had been worked out between employees and management. Mr Smythe said it was unfair for the Company to turn around in the present dispute and say that the 30 minute handover was valued at $7,000. According to Mr Smythe changes in the 2013 Agreement of the scope sought by Peabody should be negotiated and not imposed on employees.

[39] Under cross-examination, Mr Smythe was shown the dispute notification signed by him in relation to these proceedings and agreed that although there were other issues in dispute, the primary one is the financial impact of reduced income as a result of moving from 12.5 to 10 hour rosters. Mr Smythe also agreed that there was consultation in relation to the change and that CFMEU members had a chance to put forward their views about the change and matters they would have considered. However, Mr Smythe maintained that Mr Economidis told employees that this is how it would be, there would be no negotiation and if the Company was wrong it would back pay employees. Mr Smythe maintained that the 2013 Agreement needs to “allow us to do what we have to do” and if the 2013 Agreement is amended, and the workforce will agree to it, then they will move on. Mr Smyth agreed that the financial reduction was an issue for employees and said that if there had been negotiation, employees would have tried to work for the best outcome for both sides as they had in the past.

[40] In response to the proposition that the Coppabella workers would accept that if you are going from 12.5 hour shifts to 10 hour shifts and nothing else changes, there would have to be a reduction in remuneration, Mr Smythe said: “If our EB allowed it.” Mr Smythe also maintained that the Company could not increase or reduce the remuneration without varying the 2013 Agreement and if the 2013 Agreement did not allow for a change in remuneration it could not occur. In response to the proposition that the Company has the right under the 2013 Agreement to work whatever roster it likes, Mr Smythe said that the 2013 Agreement does not give the Company the right to use the Black Coal Award as a basis for its methodology to recalculate the wages in the Agreement. 10

[41] Mr Smythe maintained that if the 2013 Agreement allows an increase or reduction in remuneration then “we do it” and if the 2013 Agreement does not allow this “we don’t do it” but agreed that the 2013 Agreement does specifically allow for a review of remuneration. In response to the proposition that it was the Company’s view that it was paying for 12.5 hour shifts, Mr Smythe said that the Company’s view was 12.5 hour shifts were part of the employees’ remuneration. Mr Smythe said that this was different because the .5 of an hour changeover time was given by employees without cost to the Company and their remuneration was not increased by $7000 to include compensation for the additional time that the Company now sought to deduct from employees because they are no longer working 12.5 hours. Mr Smythe agreed that the 2010 Agreement did not allow for 12.5 hour shifts and provided remuneration to cover all of the work done by employees. In response to the proposition that it was not a silly assumption for the Company to take a position that it was paying employees for all of those hours, Mr Smythe said he agreed that employees were paid for those hours, but posed the question: “at what cost?” 11.

[42] Mr Smythe accepted the proposition that to finalise the 2013 Agreement the parties agreed to go forward with the same remuneration structure as was contained in the 2010 Agreement on the basis that: the Company would not insist on two of the four training days being worked; there was no pay increase in the first year of the 2013 Agreement; a 2% increase in the second year; and a 2.5% increase in the third year. Mr Smythe was shown the 2010 Agreement and accepted that it contained a reference to a 42 hour week in Appendix 1, which was not found in the 2013 Agreement. Mr Smythe said that the Union had not agreed to remove that clause but that employees had voted to do so.

[1] Mr Williams on behalf of Peabody submitted that an appropriate way to look at the question for arbitration is that the Company’s position should prevail unless there is a sound and persuasive reason why it should not because that is the way the 2013 Agreement drives the debate. There is no relevant fetter on the Company’s right to put in place whatever roster or combination of rosters it wants. In relation to base salary, clause 10.12 gives the Company unlimited flexibility subject to the requirement that in conducting a review under the paragraph, the Company is required to do so in a way that is not inconsistent with the 2013 Agreement. Any challenge to the outcome of such a review can be disputed through the dispute resolution process in the 2013 Agreement. It is only if the Commission found that the Company had failed to act in accordance with the 2013 Agreement or there was some manifest injustice that needed to be corrected, that the Commission would disturb the Company’s position.

[2] Clause 10.10 of the 2013 Agreement requires that employees work 35 ordinary hours plus rostered overtime per week averaged over the roster cycle. In the context of the terms of the 2013 Agreement it is logical to conclude that the salaries are based on a continuous even time roster with a shift length of up to 12.5 hours. In reviewing the TFR, the appropriate question to ask is: what has changed? The remuneration should then be set to reflect the change. In the present case, shift lengths have changed so that employees are working 2.5 hours less each shift. Further, employees are not working on weekends.

[3] The 2013 Agreement does not require that each hour is treated as if it is the same as another hour regardless of when it is worked. It is also submitted that while the 2013 Agreement does not state that the rate for non-rostered overtime is double time that is effectively what the rate for non-rostered overtime is. The rosters under the 2013 Agreement, if worked under the Award, would entitle employees to be paid double time for overtime. This assumption is validated by the KPMG analysis and by the Company’s calculations, which indicate that the rate for non-rostered overtime in the 2013 Agreement is very similar to a double time rate, if the rate is calculated using the Company’s model, based on the Award. This does not seem an improbable outcome when the Black Coal Mining Industry Award is the underpinning award for the 2013 Agreement and provides for a model in relation to rosters and hours of work that has been well understood in the industry.

[4] Peabody submits that the model proposed by the CFMEU should not be accepted, because it assumes that employees are compensated for 42 hours per week based on being paid for a 12 hour shift, and that employees are effectively donating the 30 minute changeover period. Further, the CFMEU model results in rostered hours being paid for at the rate of $61.90 per hour regardless of when those hours are worked and non-rostered overtime being paid at the rate of $75.77 per hour. This would be a very small escalation for overtime hours, and is indicative that the CFMEU method of calculating the rate for rostered hours should not be accepted. In relation to the 12.5 hour shift issue, Peabody submitted that the 2013 Agreement allows for shifts of 12.5 hours to be worked and makes it explicit that the TFR includes compensation for all hours worked. One way or another, all hours worked are paid, because this is what the 2013 Agreement provides for.

[5] The CFMEU accepts that clause 10.12 of the 2013 Agreement gives the employer the right to change rosters. It is also accepted that if rosters change there is an ability to review the base salary and/or roster allowance and amend it accordingly. The CFMEU does not agree that the employer has the right to review and amend the base salary and roster allowance unilaterally. Any amendment to the remuneration must be in accordance with the terms of the 2013 Agreement as agreed between the parties. There is nothing in the 2013 Agreement requiring that there be a difference between ordinary and overtime hours or between hours worked on week days and hours worked on weekends. There is no indication in the 2013 Agreement that the TFR can be broken down or how this should be done. The fact that the hourly rate derived using the formula advanced by the CFMEU is similar to the rate for non-rostered overtime, does not mean that there is some manifest unfairness.

[6] Mr Newman for the CFMEU submitted that the task of the Commission in interpreting an agreement – as set out in AMIEU v Golden Cockerel 12 - does not involve rewriting the agreement to achieve what might be regarded as a just and fair outcome. The task is interpreting an agreement produced by the parties. If the 2013 Agreement is interpreted such that the rate for all hours worked – whether overtime or ordinary time – is $62 per hour and the non-rostered overtime rate is $75 per hour, that is what the parties agreed and it is not the role of the Commission to decide whether that outcome is fair or just. The role of the Commission is to decide what the parties intended and there is no mechanism in the 2013 Agreement to determine what the rate should be, other than the method suggested by the CFMEU.

[7] The only person who could give evidence about what the parties intended is Mr Smythe who said that during the negotiations for the 2013 Agreement there was an attempt by the parties to reach agreement about an hourly rate and they could not do so because it was impossible to calculate such a rate. The CFMEU also submitted that to use the Black Coal Award as a basis for calculating an hourly rate is inconsistent with clause 7 of the 2013 Agreement.

[8] Mr Newman submitted that nowhere does the 2013 Agreement indicate that the Award can be used as a basis for reviewing TFR. Peabody’s evidence makes it clear that it has used the Award to interpret the Agreement. According to the CFMEU, for Peabody to use the Award in the manner it proposes, to determine TFR, is an extra claim and not permitted by clause 5 of the 2013 Agreement. It is further submitted that the basis of the rate is a 42 hour week because of the history as stated by Mr Smythe in his evidence. It is inappropriate to use a 12.5 hour divisor and to include $7000 for the hot seat change which underpins Peabody’s model.

[9] The terms of the 2013 Agreement do not allow for the application of the Award to review TFR and to undertake a review in this way would bring about a manifest injustice for employees because the rates in the 2013 Agreement were built up without any reference to the Award. The fact that the Award was used when the 2013 Agreement was approved for the purposes of determining whether it passed the BOOT does not change this fact.

[1] To the extent this case requires interpretation of the 2013 Agreement, the approach is as set out in the Decision of a Full Bench of the Commission in AMIEU v Golden Cockerel 13 as follows:

[1] It is not in dispute that clause 10.12 of the 2013 Agreement allows Peabody to implement roster systems and review the base salary and/or roster allowances as a result of any roster system that may be implemented. In implementing roster systems, the Company must take into account the health and safety needs of employees. Employees may dispute a roster change on the basis that it is harsh, unjust or unreasonable. The right to implement a roster change is also subject to consultation and specified periods of notice depending on the scope of the roster change.

[2] The CFMEU has not pressed an argument that the rosters proposed by Peabody do not take into account the health and safety needs of employees or that the rosters are harsh, unjust or unreasonable. While some complaint is made by Mr Smythe about the consultation process, the CFMEU has not pressed an argument that Peabody has failed to consult in relation to the review of Base Salary and/or Roster Allowances or that the Company has not provided the required notice of the changes. Clause 10.12 of the 2013 Agreement also provides that Peabody, through its General Manager, must genuinely consider any roster type proposed by an employee or work group. The CFMEU does not assert that another type of roster has been proposed by employees and not genuinely considered by the Company.

[3] As previously noted, the 2013 Agreement does not provide a methodology by which a review of the base salary and/or roster allowances is to be conducted. Peabody has developed a methodology and the question of whether that methodology is appropriate is in dispute.

[4] The 2013 Agreement provides that where the parties are in dispute about the outcome of a review of the Base Salary and/or Roster Allowance, either party may notify the Commission of a dispute under the Dispute Resolution Procedure. That procedure empowers the Commission to arbitrate the dispute where conciliation has not resolved it. There is no explicit fetter on the exercise of the power of the Commission. However, the parties have proceeded on the basis that it is implicit that the outcome of the review process and the arbitration should be consistent with the terms of the 2013 Agreement. I accept that this is an appropriate basis for the arbitration of the dispute.

[5] Applying the principles relevant to construction of the 2013 Agreement, and starting with the ordinary meaning of its words, clause 10.1 of the 2013 Agreement states that – subject to consultation and notice, and that the roster change is not harsh, unjust or unreasonable, and that it takes into account the health and safety needs of employees – the Company may implement roster systems that meet the needs of the site. The Dispute Resolution Procedure in clause 24 of the 2013 Agreement empowers the Commission to conciliate and arbitrate with respect to any dispute about the implementation of rosters.

[6] The provisions of the 2013 Agreement relating to remuneration make it clear that remuneration is based on working a continuous even-time roster. Clause 10.1 of the 2013 Agreement provides that employees will be paid an annualised salary termed “Total Fixed Remuneration” (TFR). TFR comprises base salary, roster allowance and superannuation. Clause 10.1 provides that TFR includes compensation for all hours worked and includes all rostered overtime, weekend, public holiday and all other payments and allowances excluding the additional allowances in Appendix 1. The additional allowance in Appendix 1 is the roster allowance, which is stated to be paid in recognition of social disruption factors with the requirements of the role and all disabilities associated with the working environment including work on rostered shifts, weekends or public holidays. The TFR also includes compensation for employees participating in up to 2 additional training days per annum.

[7] In respect of all hours worked, clause 10.10 provides that employees are required to work 35 ordinary hours plus “rostered overtime” per week averaged over the roster cycle. Clause 10.10 further provides that shifts are up to 12.5 hours duration, which includes a shift length of 12 hours plus a shift changeover/hot seat of 30 minutes. Shift changeover is also referred to in clause 10.12 which states that employees are required to attend to shift change responsibilities for communication and work continuity and that recognition for this requirement is included in TFR.

[8] The 2013 Agreement does not prescribe any additional payments for rostered overtime, work on weekends, public holidays or other payments and allowances besides those in Appendix 1 which prescribes that TFR is made up of Base Salary, Roster Allowance and Superannuation. It is implicit that rostered overtime is time that employees are rostered to work in excess of 35 ordinary hours per week or in excess of an average of 35 ordinary hours per week. It is also implicit that the additional payments are prescribed in a source other than the 2013 Agreement, and that parties developed the rates in the 2013 Agreement to compensate for the fact that those additional payments would not apply because of the operation of the 2013 Agreement. The most logical source of those additional payments is the Black Coal Industry Award 2010 (the Award).

[9] On the ordinary words of the 2013 Agreement, TFR includes compensation for 35 ordinary hours per week, rostered hours in excess of 35 per week (termed “rostered overtime”), weekend work, public holiday work, disabilities associated with when work is performed and other disabilities associated with the environment in which it is performed. Implicitly, there is a source of additional payments for weekend work, public holidays and other disabilities, which the terms of the 2013 Agreement acknowledge would otherwise apply but for the 2013 Agreement and for which the TFR compensates employees. It is also the case that ordinary hours under the 2013 Agreement are stated to be 35 per week which is consistent with the ordinary hours of work prescribed by the Award. The obvious basis of a limit of 35 ordinary hours per week and of the other payments said to be included in TFR is the Award.

[10] It is also the case that the rosters which were in place prior to the changes are rosters that if worked under the Award, would attract the rate of double time. I agree that it is reasonable to assume that the rate for non-rostered overtime is a double time rate and was set on that basis. The CFMEU does not assert that in agreeing to that rate it accepted that it was less than a double time rate.

[11] The context and purpose of the provisions relating to hours of work, rosters and TFR is also relevant. The 2013 Agreement was negotiated under the auspices of the Fair Work Act 2009. By virtue of ss.47 and 48 of the Act, the Award covers employees to whom the 2013 Agreement applies. By virtue of s. 57 of the Act, if the 2013 Agreement did not apply to employees the Award would apply. Further, in order for the 2013 Agreement to be approved, it was necessary that it pass the better off overall test (BOOT). For the purposes of the BOOT the relevant award was the Black Coal Industry Award 2010. A declaration to that effect was made in the Form F17 Employer’s Declaration in Support of the Application for Approval of Enterprise Agreement, completed by Mr Paterson on behalf of Peabody and filed with the application for approval of the 2013 Agreement. The CFMEU filed a Form F18 Declaration of Employee Organisation in relation to an Application for Approval of an Enterprise Agreement with respect to the approval process for the Agreement in which Mr Hughes, Senior Vice President of the CFMEU – Mining and Energy Division, declared that he agreed with the statutory declaration filed by Peabody and that the Union wanted to be covered by the Agreement.

[12] I do not accept the CFMEU submission that the fact that the Award was the reference instrument for the 2013 Agreement is irrelevant to the present dispute. That Award, and its status under the Act, is part of the context in which the 2013 Agreement was negotiated. The CFMEU would not have agreed to the 2013 Agreement if it provided for less than what the employees would have earned under the Award for working the same hours, and the Commission could not have approved the 2013 Agreement if this was the case. The objective background facts establish an intent on the part of Peabody and the CFMEU that employees working rosters at the point the 2013 Agreement was approved, would be better off overall by being paid the TFR than they would have been had they worked the same rosters under the Award.

[13] In order to review the TFR it is necessary to deconstruct it. The fact that the parties have been unable to agree in the past on how this should occur does not support a finding that the only appropriate method is to divide the TFR by the number of rostered hours that it covers. To adopt such a formula is contrary to the clear terms of the 2013 Agreement and the objective background facts. Even if the Award is not considered, the terms of the 2013 Agreement make it clear that the TFR is based on an even time roster comprising 35 ordinary hours per week and includes additional amounts for rostered overtime, weekend work, public holiday work disabilities associated with when work is performed and other disabilities associated with the environment in which it is performed. To find that rostered overtime hours should be given the same value as hours that are part of the 35 ordinary hours in a week, is inconsistent with the terms of the 2013 Agreement considered without reference to the Award.

[14] There is no reference to the Base Salary being based on employees working an average of 42 hours per week in Appendix 1 of the 2013 Agreement or anywhere in the body of that Agreement. That reference was found in earlier versions but was not included in the 2013 Agreement. I can see no basis for dividing the TFR by 42 hours and then applying that hourly amount to any and all hours worked under the new rosters to calculate a new TFR. To adopt that formula would be inconsistent with the terms of the 2013 Agreement. Such an approach would also inflate the hourly rate by amounts that were included in it to compensate employees for working longer hours or on weekends or at other times which would have attracted a penalty payment under the Award, and/or hours in excess of 35 ordinary hours in the 2013 Agreement, in circumstances where they are no longer required to work excess hours or the same number of excess hours or to work on weekends and at other times that are encompassed in the Base Salary and Roster Allowance.

[15] Further, to adopt the methodology proposed by the CFMEU would result in a situation where all hours, regardless of when they were worked, would be paid at the same hourly rate. Such an approach is inconsistent with the manner in which the TFR was originally constructed and with the contextual background in which it was developed. In my view, the appropriate base ordinary hourly rate for the purposes of the review methodology is the non-rostered overtime rate divided by two. This is confirmed by the KPMG review based on calculating the hours that employees would have been paid for working the roster prior to the changes including ordinary time, overtime, and all other penalty loadings for weekend work, public holidays and the like that would apply under the Award.

[16] I do not accept that Peabody has made an extra claim contrary to clause 5 of the 2013 Agreement. Peabody has changed the roster and reviewed TFR as provided for in the 2013 Agreement. When agreement was not reached on the methodology, the Company made an application to the Commission under the Dispute Resolution Procedure in the 2013 Agreement. The Company has complied with the terms of the 2013 Agreement and its review methodology is, in my view, appropriate.

[17] The methodology adopted by Peabody is consistent with the terms of the 2013 Agreement and with the intent of the parties as ascertained from the objective background facts. This is evidenced by the fact that the testing of the model by KPMG results in a rate very close to the rate derived by Peabody based on the non-rostered overtime rate being a double time rate.

[18] I do not accept the submission of the CFMEU that to endorse the methodology proposed by Peabody would involve giving effect to an anteriorly derived notion of fairness regardless of what is written into the 2013 Agreement. The conclusions I have reached are consistent with the terms of the 2013 Agreement. Further, they avoid injustice or inconvenience which would result from the methodology proposed by the CFMEU.

[19] I am also of the view that employees are paid for 12.5 hours per shift. I have reached this conclusion on the basis that clause 10.12 of the 2013 Agreement provides that employees are required to attend to “shift change responsibilities for communication and work continuity” and that “recognition for this requirement is included in the Total Fixed Remuneration”. Further, clause 10.10 of the 2013 Agreement provides that shifts are up to 12.5 hours duration which includes a shift length of 12 hours and a shift changeover/hot seat of 30 minutes.

[20] The fact that at some point in past negotiations, employees agreed that they would undertake a shift changeover/hot seat without additional remuneration, does not establish that the remuneration excludes this time. A shift changeover/hot seat is undertaken on the job and in working time. The terms of the 2013 Agreement provide that such time is included in TFR and it follows that it must be brought into the calculation when the TFR is deconstructed. The methodology proposed by Peabody does this.

[21] It is also the case that the determination of the issues in dispute is not simply an interpretation of the 2013 Agreement. Rather, it requires the exercise of a broad discretion, which the parties have given the Commission to determine a dispute about the review of TFR. This necessarily requires consideration of fairness. I have approached the consideration of the issues in dispute on the basis that it is not the role of the Commission to place itself in the shoes of the parties. Instead the Commission must objectively consider these matters. In doing so the Commission must have regard to the rights of employers to manage their businesses in a manner that promotes productivity and flexibility and the rights of employees to resist having an unfair, unreasonable, inflexible or unsafe outcome imposed on them.” 23 The methodology advanced by Peabody is consistent with these objectives.

[1] For the reasons set out above, I answer the questions for arbitration as follows:

C seal- Asbury DP.jpg

DEPUTY PRESIDENT

Appearances:

Mr D. Williams of Minter Ellison for the Applicant.

Mr C. Newman for the Construction, Forestry, Mining and Energy Union.

Hearing details:

2016.

18 July.

Brisbane.

Final written submissions:

16 May 2016.

 1   Correspondence of Ms Leyla Sandeman, Tuesday, 22 December 2015.

 2   Exhibit 1 – Statement of Jason Economidis.

 3   Exhibit 3 – Statement of Steven Pierce.

 4   Exhibit 4 – Statement of Daniel Smythe.

 5   Exhibit 3 – Statement of Steven Pierce “SP-1”.

 6   Exhibit 3 – Statement of Steven Pierce “SP-2”.

 7   Exhibit 3 – Statement of Steven Pierce “SP-3”.

 8   Transcript of proceedings PN260.

 9   Exhibit 4 – “DS-2”.

 10   Transcript of proceedings PN307-312.

 11   Transcript of proceedings PN325-328.

 12   [2014] FWCFB 7447.

 13   Ibid.

 14   City of Wanneroo v Australian Administrative Clerical and Services Union (2006) 153 IR 426.

 15   Amcor Limited v CFMEU and Ors [2005] HCA 10.

 16   Short v Hercus (1993) 40 FCR 511 at 518.

 17   Ibid.

 18   Bond & Co Ltd (in liquidation) v McKenzie (1929) 28 AR 499.

 19   Toll FGCT Pty Limited v Alphapham Pty Ltd (2004) 219 CLR 165 (at 179).

 20   Kucks v CSR (1996) 66 IR 182.

 21   [2014] FWCFB 7447 at [30].

 22   [2015] FWCFB 1981 at [23].

 23   Bundaberg Sugar v The Australian Workers’ Union and Ors [2016] FWC 4524 at [51] to [56].

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