DECISION

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

Maritime Union of Australia, The-Western Australian Branch
v
Farstad Shipping (Indian Pacific) Pty Ltd
(C2017/1574)

Alleged dispute about any matters arising under the enterprise agreement and the NES;[s186(6)].

[1] On 23 March 2017, the Maritime Union of Australia (MUA) filed an application (Application) with the Fair Work Commission (FWC) pursuant to section 739 of the Fair Work Act 2009 (Cth) (FW Act) to deal with a dispute with Farstad Shipping (Indian Pacific) Pty Ltd (Farstad) pursuant to the dispute settlement procedure contained in clause 13 of the Farstad (Indian Pacific) Pty Ltd (Integrated Ratings, Cooks and Caterers) Offshore Oil and Gas Enterprise Agreement 2015 (Agreement).

[2] On 5 and 18 April 2017, the parties attended conferences before me with a view to resolving the dispute. The Application was not able to be resolved at these conferences.

[3] On 21 April 2017, the MUA requested that the Application be referred for arbitration.

[4] Farstad initially objected to the Application being arbitrated, asserting that the MUA had not complied with the dispute settlement procedure contained in clause 13 of the Agreement. Farstad subsequently withdrew their jurisdictional objection.

[5] The Application was listed for hearing on 15 May 2017 for determination of the dispute between the parties (Hearing). Directions were issued to the parties on 27 April 2017 (Directions) in which the parties were directed to file with the FWC and serve on each other their outlines of submissions, witness statements, copies of authorities and any documents on which they relied.

[6] The Directions required any party who sought to be represented by a lawyer or paid agent at the Hearing to file written submissions to this effect addressing the provisions of section 596(2) of the FW Act. On 1 May 2017, Farstad sought permission for Mr Nico Burmeister of Counsel to appear on behalf of Farstad at the Hearing. No opposition to this request was made by the MUA. As a matter of fairness between the parties and to enable the matter to be dealt with more efficiently, having regard to section 596(2) of the FW Act, Farstad was granted leave to be represented by Mr Burmeister. The MUA were represented at the Hearing by Ms Elyane Palmer.

[7] Mr Daniel Cain, Assistant Branch Secretary of the Western Australian Branch of the MUA (Mr Cain) and Mr William Tracey, National Deputy Secretary of the MUA (Mr Tracey), gave evidence on behalf of the MUA. Ms Amanda Mancini, Director of Workplace Relations at the Australian Mines and Metals Association (Ms Mancini), gave evidence on behalf of Farstad.

Background

[8] The dispute concerns the meaning and application of clauses 23.1 and 23.5(c)(iii) of the Agreement (Dispute).

[9] The Dispute arose when Farstad advised its seafaring employees on 31 March 2017 that it had decided to make a series of changes, including terminating existing job share arrangements for classifications covered by the MUA, which would likely result in around 80 employees being retrenched. 1

[10] On 2 May 2017, affected employees were given notice of termination of employment. These terminations are scheduled take effect from 9 June 2017. It has therefore been necessary to hear and determine this matter expeditiously.

[11] Clauses 23 of the Agreement states that:

“23.1 Prior to any redundancies Farstad will first exhaust the following provisions in order to assist the employment of all Employees where possible:

(a) Job share arrangements;

(b) Excess leave balances will be taken;

(c) Employees will be encouraged to take long service leave;

(d) Study leave;

(e) Part paid leave by mutual agreement; and

(f) Unpaid leave by mutual agreement.

23.2 Prior to any redundancies, casual Employees will be replaced by permanent Employees of the same classification where practicable. Casual Employees and Trainees are not entitled to any redundancy benefits under this provision.

Redundancy Process

23.3 Redundancy arises where the number of positions is insufficient to sustain all permanent Employees.

23.4 For the purpose of redundancy, continuous service commences when the Employee is made permanent.

23.5 If after taking the steps in clause 23.1, redundancy still arises, the following process will be applied:

(a) Farstad will determine the number of redundancies to apply based on operational requirements and classifications required.

(b) Farstad will inform the Union of the redundancy situation.

(c) Farstad will consult with the Union and take into consideration the following aspects for applying redundancies:

(i) Selection for redundancy will be non-discriminatory.

(ii) Applications for voluntary redundancy, which will not be unreasonably withheld.

(iii) For involuntary redundancies, the following criteria:

(A) Skills (maximum 38 points) – based on equal points for each skill in the Farstad position description,

(B) Experience (maximum 38 points) – based on 2 points for each year of service with Farstad, and

(C) Performance and Behaviour (in accordance with current custom and practice) (maximum 24 points).

(D) Where two or more Employees receive the same amount of points, the Employee with the longest service will be given preference.

Redundancy Payment

23.6 Where employment is terminated because of redundancy, an Employee will be entitled to redundancy pay in accordance with the NES for the first two years of service and then, three weeks per year of service thereafter, at the Permanent Employee’s current annualised salary and pro rata for completed months.

23.7 A redundancy payment will not exceed 78 weeks.”

[12] The principles regarding the construction of enterprise agreements were considered and summarised by the Full Bench of the FWC in Australasian Meat Industry Employees Union v Golden Cockerel Pty Ltd (2014) 245 IR 394. The resolution of a dispute about the meaning of an enterprise agreement will turn on the language the parties have used to express their agreement, having regard to its context and purpose. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity. While reference may be had to surrounding circumstances to determine if an ambiguity exists, no reference may be made to extrinsic evidence if the language of the agreement is not ambiguous. 2 Except to the extent discussed below, I am satisfied that the clauses in question are not ambiguous.

[13] The Agreement defines redundancy in clause 23.3 as ‘… where the number of positions is insufficient to sustain all permanent employees’.

[14] The sub-paragraphs of clause 23.1 (a) to (f) list activities which are intended to preserve or prolong the employment of employees in circumstances where the employer has insufficient work for the employees to perform.

[15] They are not activities which increase the number of positions available. Instead, they increase the number of employees required to perform the work of the positions which are available. The effect of the provisions is to prevent or reduce the need for retrenchments even if the number of positions needs to be reduced due to operational requirements.

[16] The use of the word ‘will’ in clause 23.1 imposes a mandatory obligation on Farstad to undertake these activities.

[17] The phrases ‘prior to any redundancies’ and ‘will first’ in clause 23.1 and the phrase ‘[i]f after taking the steps in clause 23.1, redundancy still arises …’ requires Farstad to undertake these activities before determining how many, if any, redundancies might be necessary (or subsequently the identity of any employee to be retrenched).

[18] The use of the phrase ‘all Employees’ in clause 23.1 and the subsequent obligation in clause 23.2 to replace casual employees with permanent employers makes it clear that the activities set out in clause 23.1 need be explored with all employees, including casual employees, and not just permanent employees.

[19] The use of the phrase ‘all Employees’ does not mean that Farstad is excused from the obligation to exhaust the activities in clause 23.1 merely because at a minimum, even if fully exhausted, at least one employee would need to be retrenched. The use of the temporal language in clause 23 (‘first’, ‘prior’, ‘if after’) make it very clear that the activities contained in clause 23.2 need to be fully exhausted to preserve the on-going employment of as many employees as possible before an assessment can be made by Farstad as to whether the number of available positions is capable of sustaining the employment of the permanent workforce.

[20] The use of the word ‘exhaust’ in clause 23.1 requires that each and every one of these activities must be fully explored before a decision is made determining the number of redundancies, if any, which are necessary. This is because each of these activities has the potential to reduce the number of positions necessary to sustain the employment of employees and consequently the need to make retrenchments.

[21] The use of the phrase ‘where possible’ recognises that some of the listed activities can not be unilaterally implemented by Farstad and require the consent of employees. For example, employees can only be required to take part paid leave and unpaid leave by mutual agreement.

[22] In the case of long service leave, Farstad has a higher burden to explore its use than that of part paid leave or unpaid leave. Clause 23.1(c), by virtue of the phrase ‘will be encouraged’, imposes on Farstad a proactive obligation to persuade employees with long service leave balances to take long service leave. The ordinary meaning of the word ‘encourage’ is to persuade (someone) to do or continue to do something by giving support and advice. 3 Merely inviting employees to access their long service leave would not be sufficient to discharge this obligation.

[23] Contrary to the submissions of Farstad, clause 23.1(b), via the use of the phrase ‘will be taken’, clearly authorises Farstad to direct employees to take excess leave balances in the same way that: clause 50.3 authorises Farstad to direct employees with more than 105 days of accrued leave to take leave, clause 51.1 authorises Farstad to direct employees to take more than 14 days leave in advance and clause 61.4 authorises Farstad to direct employees to take accrued long service leave.

[24] The scope or ‘possibility’ of job share is limited by the positions which are required to be performed, any parameters agreed by the parties 4 and (given there is no mandatory requirement for participation) the employees prepared to participate. Given the nature of the rosters provided for in the Agreement, job sharing arrangements should not result in continued accrual of leave thereby creating an excess leave balance to be utilised in accordance with clasue 23.1(b). Instead, it should work alongside clause 23.1(b) to reduce excess leave balances.

[25] The scope of study leave (given that it too has no mandatory requirement for participation) is limited by the number of willing participants and the provisions in the agreement which grant Farstad the discretion to approve or refuse applications for study leave.

[26] The use of the phrase ‘where possible’ also recognises that in certain circumstances the implementation, continued or excessive implementation of an activity will jeopardise the employment of more employees than it preserves. For example, if all employees took part paid leave then Farstad would have no employees to perform the work and no income to sustain the payment of part wages.

[27] Farstad seek to apply the phrase ‘where possible’ to the obligation to first exhaust the activities contained in clause 23.1 rather than to the activities themselves. I do not believe that this construction is open to Farstad.

[28] In my view, the meaning and application of clause 23.1 is clear. The obligation to undertake the activities listed in clause 23.1 is not an obligation which can be discharged in the hypothetical. Farstad cannot simply decide that the activities enumerated in clause 23.1 will not prevent the need for any retrenchments and therefore progress immediately to the stages set out in clause 23.5. Farstad cannot know what employee appetite is to take unpaid leave, or undertake further study, or take advantage of any of the other options contained in clause 23.1 without actually actively exploring those options with employees.

[29] Clause 23.1, unlike a standard redundancy provision, does not contemplate Farstad making a business decision that it intends to reduce the number of positions by a certain number and then exploring the means by which the impact of redundancy might be mitigated, such as by redeployment. The activities enumerated in clause 23.1 must be exhausted before a decision is made that a certain number of redundancies must occur. The purpose of the clause is to prolong employment with the hope that the commercial prospects of the business improve, rather than to mitigate the impact of the loss of a specified number of positions predetermined by the employer.

[30] Farstad also seek to introduce qualifications on the scope of what is possible by implying into the clause concepts of reasonableness and practicability as assessed by Farstad.

[31] The Full Bench made it clear in AMIEU v Golden Cockerel 5 that the task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always of interpreting the agreement produced by the parties.

[32] The parties chose to use the word ‘possible’ rather than the commonly used words of limitation such as reasonable or practicable in clause 23.1 when they could, and have used, the term practicable and reasonable elsewhere in the Agreement. In fact, the term ‘where practicable’ is used within clause 23 at clause 23.2. See also, clause 11.5, which uses the phrase ‘to the extent that it is reasonably practicable’, clauses 12.4 and 36.12 which use the phrase ‘as soon as is practicable’, clause 43.7 which uses the phrase ‘where it is practicable’, clause 56.4 which uses the phrase ‘as soon as is reasonably practicable’, clause 13.1 which uses the phrases ‘all reasonable efforts’ and ‘all reasonable steps’ and clause 16.11 which uses the phrase ‘will make every reasonable endeavour’.

[33] The ordinary meaning of the word ‘possible’ is ‘able to be done or achieved’. 6 The ordinary meaning of the word ‘practicable’ is ‘able to be done or put into practice successfully’.7 The ordinary meaning of the word ‘reasonable’ is ‘fair and sensible’.8 The word ‘possible’ carries with it no qualifier other than it is able to be done or achieve. It is not qualified by a measure of success or concepts of equity or rationality.

[34] The parties did not agree that Farstad’s obligations extended only as far as what Farstad determined was reasonable or practicable. Instead, the clause contemplates that Farstad must do what is ‘possible’ to preserve employment. Obviously this obligation does not extend to Farstad, for example, agreeing to all employees undertaking study leave in circumstances where Farstad has no work to be performed, as this would lead to Farstad becoming financial unviable and the employment of employees not in fact being preserved.

[35] To this extent, the use of the word ‘possible’ used in the context of this Agreement can be distinguish from the meaning White J (and Bromberg J) attached to it in NTEU v La Trobe University [2015] FCAFC 142 at [128] and relied upon by Farstad to introduce concepts of reasonableness and practicability not expressly included in clause 23.1. The NTEU case involved a clause which contained ‘motherhood’ statements and provided no parameters as to what the employer might be required to do to satisfy the obligation to avoid redundancies and use compulsory retrenchment as a last resort. In those circumstances White J found that:

“The University’s obligation [in cl 74] is to avoid, whenever possible, redundancies and to use compulsory retrenchment as a last resort. It would be natural to read in a word such as “reasonably” or “practically” into cl 74 so that the obligation imposed on the University applies whenever it is “reasonably possible” or “practically possible”. That is because it is appropriate to regard cl 74 as operating in a practical environment so that mere theoretical or impractical possibilities may be ignored.”

[36] In this case, clearly delineated parameters exist. The activities which the employer is required to explore are specifically listed, and the boundary of those activities specified. For example, Farstad is required to invite employees to take paid leave but can not force them to do so. The listed activities are not limitless, theoretical or impractical. They are all activities which could reasonably and practicably preserve the employment of employees who would otherwise be excess to requirements.

[37] Clause 23.5 sets out a mandatory process to be applied if, after taking the steps in clause 23.1, the number of positions is still insufficient to sustain all permanent employees in accordance with clause 23.3.

[38] Clause 23.5(a) requires Farstad to determine the number of redundancies to apply based on operational requirements and classifications required. Pursuant to clause 23.5(b), Farstad must then inform the MUA of the number of redundancies and the classifications required. Clause 23.5(c) requires Farstad to then consult with the MUA prior to selecting individual employees for retrenchment in accordance with the selection process set out in clause 23.5(c).

[39] Clause 23.5(c) sets out various criteria for selecting employees for retrenchment. It is clear from the use of the phrase ‘the following process will be applied’ that the process set out in clause 23.5 is mandatory.

[40] Farstad submit that the use of the phrase ‘take into consideration the following aspects for applying redundancies’ means that the principles enumerated below clause 23.5(c) at (i) –(iii), provided they are considered by Farstad, need not necessarily be complied with. This is inconsistent with the mandatory nature of the language used in these clauses, such as “will be” and “will not be”.

[41] Subparagraph (iii) of clause 23.5(c) does not contain the same mandatory language as sub paragraphs (i) and (ii) of clause 23.5(c), but is expressed in a mandatory tone (albeit in a passive voice) as follows ‘For involuntary redundancies, the following criteria:…”. 9

[42] Subparagraph (iii) of clause 23.5(c) contains no words such as ‘may’ which might suggest a discretion. More compellingly, the criteria contained in sub-paragraph (iii) of clause 23.5(c) are highly prescriptive, specifying both particular attributes as well as a score to be attached to each of these attributes. Sub-paragraph (D) of 23.5(c)(iii) provides for a mechanism to deal with a situation where the scoring of the attributes listed in (A) to (C) produce the same score for two employees. The allocation of points to a particular attribute and a mechanism to resolve equal point scores would be entirely unnecessary if the parties contemplated that Farsad could apply different criteria and/or attach a different value to the chosen criterion.

[43] Given the lack of ambiguity, I do not believe that it is appropriate to refer to extrinsic materials to determine the meaning of clause 23.5. The parties did, however, tender evidence of the negotiations between the parties which pre-dated the approval of the Agreement. In my view, this evidence largely only revealed the subjective intentions or expectations of the parties. To the extent that I am wrong, and it is appropriate to rely on this material, I am satisfied that it is consistent with the interpretation of the clause set out above.

[44] It is clear from the correspondence exchanged between the parties, tendered as evidence of the negotiations between the parties, that the MUA sought to have weighted selection criteria included in the redundancy clause and Farstad did not want this to occur. By at least July 2014, the parties had agreed that the preamble to the clause included the phrase ‘taking into consideration’ but disagreed over the inclusion of the weighted criteria. 10 Even with the words ‘taking into consideration’ agreed by the parties, the minutes to the bargaining meeting of Friday 3 October 2014 reveal that Farstad believed that the inclusion of the MUA weighted criteria imposed restrictions on Farstad and didn’t allow Farstad to take into account other relevant criteria.

“BV explained the points are too restrictive, don’t allow for proper selection process having regard to the whole picture of the business, skills etc at the time the decision is being made” 11

[45] For this reason, in the 24 October 2014 correspondence, Farstad sought to have the MUA weighted criteria described in the Agreement as an ‘indicative guide’. 12

[46] MUA refused to agree to this and, on 22 May 2015, proposed the following wording:

“(c) Farstad will consult with the Union and take into consideration the following aspects for applying redundancies:

i. Casuals will be laid off first (this is as per current agreement and agreed position)

i. ii. Voluntary redundancy, which will not be unreasonably withheld.

iii. Selection for forced redundancy will be based on the following criteria:

a. Skills (maximum 38 points) – based on equal points for each skill in the position description

b. Experience (maximum 38 points) – based on 2 points for each year of service with Farstad

c. Performance and Behaviour (maximum 24 points) – need to establish criteria

d. When 2 wmployees [sic] are on the same points the longest serving employee will be retained

will be non-discriminatory and taking into consideration on the Employee’s Skills, Experience and Performance and Behaviour.” 13

[47] Subsequently, on Thursday 28 May 2017, Farstad agreed to the inclusion of the weighted criteria but with the following wording:

“Selection for redundancy will be non-discriminatory and is based on the following criteria:

a. Skills (maximum 38 points) – based on equal points for each skill in the position description’

b. Experience (maximium 38 points) – based on 2 points for each year of service with Farstad; and

c. Performance and behaviour (maximum 24 points).” 14

[48] Then on Tuesday 21 July 2015, after further negotiations, Farstad agreed to the removal of the word ‘based on’ but agreed to the retention of the weighted criteria. The words ‘based on’, if anything, potentially left open an argument that the criteria needed to include those specified in clause 23.5 but could include additional criteria.

[49] The removal of the words ‘based on’ removed any scope for Farstad to argue that it was permitted to take into account any additional considerations not contained in the clause. The evidence that, despite the words ‘taking into consideration’, Farstad believed that the inclusion of the weighted criteria limited their capacity to take into account other relevant considerations and the lack of agreement by the parties to describe the weighted criteria as indicative guide, all support the MUA assertion that the parties intended to, and in fact agreed, that the weighted criteria would form a mandatory and exhaustive list of criteria for selection for retrenchment. 15

[50] The clear words of the clause and the extrinsic materials tendered by the parties are all consistent with the criteria contained in clause 23.5 being mandatory and exhaustive.

[51] The selection criteria are comprised of three criterion in relation to which employees are allocated points to achieve a total score out of 100. The criteria in clause 23.5(c)(iii)(A) and (B) are weighted more heavily than the more subjective criterion contained in clause 23.5(c)(iii)(C).

[52] Clause 3 of the Agreement defines ‘skills’ as the ‘… formal training and qualifications to fulfil the Farstad job description’. The inclusion of this definition and the specific reference to a ‘Farstad job description’ in both clause 3 and in clause 23.5(c)(iii)(A) suggests that a document setting out the formal training and qualifications required for each job existed at least at the time of the approval of the Agreement, if not since, which would serve as the matrix against which the maximum 38 points for skills may be allocated. Clause 23.5(c)(iii)(A) contemplates each skill in the job description being allocated an equal value and the employee being awarded a score no greater than 38 points.

[53] Subparagraph (D) of Clause 23.5(c)(iii) awards points for each year of service with Farstad up to a maximum for 19 or more years’ service with Farstad. Clause 23.4 provides that continuous service commences when an employee is made permanent.

[54] Farstad seek to interpret the clause in a manner inconsistent with the plain meaning of the words contained in this clause. According to Farstad, the words cannot mean what the plain meaning of those words suggest because, they assert, the clause unlawfully discriminates against employees aged under 40 years of age and is therefore an unlawful term within the meaning of sections 194(a) and 195 of the FW Act.

[55] The Agreement containing the clause was approved by the FWC who was satisfied that the Agreement did not contain any unlawful term.

[56] The question of the lawfulness of a weighted selection criteria based on length of service was considered by Commissioner Johns in Maritime Union of Australia v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FWC 4546. Commissioner Johns identified three criteria upon which an assessment may be made as to whether a weighted selection criteria indirectly discriminates on the basis of age or not:

a. Is there sought to be imposed a requirement or condition based on length of service?

b. Is the requirement or condition more easily satisfied by older workers than younger workers?

c. Is the requirement unjustified or unreasonable in the circumstances?

[57] The first criterion identified by Commissioner Johns is satisfied in this case because points are allocated according to length of service to a maximum of 38 points. I do not believe that the second or third criteria are satisfied. The relevant service for the purpose of the clause is service with Farstad, not in the industry generally. Depending on the work history of employees, younger employees may just as commonly have longer periods of service with Farstad than older employees. Length of service is directly related to experience, which is a reasonable and justifiable basis upon which to select employees. It is combined with other weighted criteria which are not dependent on age. On this basis, I do not believe the clause is unlawful or that the parties intended for it to apply in a manner other than that Farstad must award two points for each year of continuous service by the employee with Farstad (and not other types of service) up to a maximum of 38 points.

[58] If I am wrong and the weighted selection criteria based on service does, due to the particular demographics of the workforce, indirectly discriminate against employees based on age then this can only be assessed at the time the clause is applied based on the relevant demographic information, which is currently not available to me.

[59] At hearing the parties requested the matter be listed for an urgent conference to be held on or before 9 June 2017. A notice of listing will be issued shortly to this effect.

DEPUTY PRESIDENT

Appearances:

Ms E Palmer for the Maritime Union of Australia

Mr N Burmeister for Farstad Shipping (Indian Pacific) Pty Ltd

Hearing details:

Perth

2017

15 May

Final written submissions:

Ms E Palmer, 17 May 2017.

Mr N Burmeister, 17 May 2017.

 1   Agreed Statement of Facts filed on 5 May 2017, see Attachment 1.

 2   Australasian Meat Industry Employees Union v Golden Cockerel Pty Ltd [2014] FWCFB 7447, at [41].

 3   https:en.oxforddictionaries.com/definition/encourage

 4   I note that none are contained in the Agreement. However, the parties have agreed to parameters in a separate Memorandum of Understanding.

 5   Australasian Meat Industry Employees Union v Golden Cockerel Pty Ltd [2014] FWCFB 7447, at [41].

 6   https:en.oxforddictionaries.com/definition/possible.

 7   https:en.oxforddictionaries.com/definition/practicable.

 8   https:en.oxforddictionaries.com/definition/reasonable.

 9   National Tertiary Education Union v La Trobe University [2015] FCAFC 142, at [70].

 10   Exhibit R2 at AM8.

 11   Exhibit R2 at AM9.

 12   Exhibit R2 at AM10.

 13   Exhibit R2 at AM12.

 14   Exhibit A3 at WT4.

 15   Exhibit A3 at WT6.

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