DECISION

Fair Work Act 2009
s.604 - Appeal of decisions

Construction, Forestry, Mining and Energy Union
v
AGL Loy Yang Pty Ltd t/a AGL Loy Yang
(C2017/272)

VICE PRESIDENT HATCHER

SYDNEY, 24 JANUARY 2017

Appeal against decision [[2017] FWCA 226] and Order PR589311 of Deputy President Clancy at Melbourne on 12 January 2017 in matter number AG2016/4580.

Introduction

[1] On 12 January 2017 Deputy President Clancy issued a decision 1 (Decision) and order2 (Order) granting an application by AGL Loy Yang Pty Ltd (AGL Loy Yang) to terminate the Loy Yang Power Enterprise Agreement 2012 (Agreement) under s.226 of the Fair Work Act 2009 (FW Act). On 17 January 2017 the Construction, Forestry, Mining and Energy Union (CFMEU) lodged a notice of appeal in which it sought permission to appeal and appealed the Decision and the Order. The notice of appeal also sought a stay of the Decision and Order pending the hearing and determination of the appeal. This decision is concerned with the application for a stay order.

[2] The principles applied to the determination of stay applications in this jurisdiction are those stated in the decision of Edghill v Kellow-Falkiner Motors Pty Ltd 3 as follows:

“[5] In determining whether to grant a stay application the Commission must be satisfied that there is an arguable case with some reasonable prospects of success, in respect of both the question of leave to appeal and the substantive merits of the appeal. In addition, the balance of convenience must weigh in favour of the order subject to appeal being stayed. Each of the two elements referred to must be established before a stay order will be granted.”

[3] The required assessment of an appeal’s prospects of success for the purposes of determining a stay application is necessarily of a preliminary nature only, since the Commission will not have had the benefit of hearing the appellant’s full argument and may not have had the opportunity to comprehensively peruse the case materials. 4

Relevant background matters

[4] The Agreement currently applies to 578 employees at the Loy Yang A Power Station and an adjacent open cut brown coal mine operated by AGL Loy Yang at Traralgon in Victoria. The CFMEU is one four unions covered by the Agreement. The Agreement reached its nominal expiry date on 31 December 2015. Negotiations for a replacement agreement commenced in mid-2015, but have been unsuccessful to date. There have been a number of applications to the Commission in relation to the negotiations, including an application by AGL Loy Yang under s.240 for the Commission to assist in resolving the negotiations, an application by the CFMEU under s.229 for good faith bargaining orders and applications by the CFMEU under s.437 for protected action ballot orders. AGL Loy Yang lodged its application for the termination of the Agreement on 21 July 2016.

[5] Three current provisions of the Agreement have loomed large in the negotiations, were the subject of consideration in the Decision, and are significant in the consideration of the CFMEU’s stay application. First, clause 4 of the Agreement provides:

“This Agreement shall come into operation seven days after the Agreement is approved by Fair Work Australia ('FWA') and shall remain in force until the nominal expiry date of 31 December 2015.

It is the intention of the bargaining parties that this Agreement shall continue to apply after its nominal expiry date until replaced by a new Agreement. In the event that the Company seeks to terminate the Agreement after its nominal expiry date, the following conditions will be maintained by the Company until a replacement agreement is made:

c) Wages and classification rates;
d) Hours of work;
e) Allowances;
f) Penalty rates and overtime;
g) Payment for public holidays;
h) Accident pay;
i) Salary packaging arrangements;
j) Shift-work arrangements and rosters;
k) Leave;
l) Superannuation; and
m) Dispute resolution process.”

[6] In the proceedings before the Deputy President, the CFMEU contended among other things that it was not appropriate for the Agreement to be terminated because AGL Loy Yang did not intend to comply with the requirements of clause 4. AGL Loy Yang had submitted that clause 4 was legally ineffective, and had stated its commitment, if the Agreement was terminated, to maintain the entitlements referred to in clause 4 for a three month period only. In the Decision, the Deputy President determined that clause 4 did not weigh in favour of a finding that it was not appropriate to terminate the Agreement 5, and in deciding to terminate the Agreement he relied upon the three-month commitment given by AGL Loy Yang as well as the further commitment after that period to “provide market-competitive terms and conditions” to its employees.6

[7] The second was that clause 67 provides for fixed staffing levels, including for AGL Loy Yang’s four power generation units. A failure by AGL Loy Yang to staff any unit in accordance with the requirements of clause 67 may mean that it has to be shut down. It is necessary for employees to be allocated overtime in order that the mandated staffing levels can be maintained, and this forms an element of the employee’s total remuneration. The Deputy President considered that this was one of a number of provisions in the Agreement which appeared restrictive and prone to inefficiency, compromised the capacity to effect operational changes to enhance productivity and flexibility 7, and took this into account as a matter favouring the termination of the Agreement.8

[8] The third was that clause 8 of the Agreement prohibited forced redundancies. The Deputy President took this into account in the Decision in the same way as he did the fixed manning levels.

[9] Shortly after the Decision was issued, AGL Loy Yang experienced a significant increase in the taking of sick leave by employees, which caused it difficulty in meeting the minimum staffing requirements for its power generation units and meant that one unit which had “tripped” could not be brought back online and another had to be shut down. It considered this to be a covert form of industrial action. On 18 January 2017 AGL Loy Yang was successful in obtaining an order under s.418 of the FW Act in respect of this industrial action. 9 The order, made by Commissioner Roe, required the cessation of the organisation of industrial action in the following terms:

“3.1 The CFMEU and Mr Hardy 10 must not organise any industrial action involving any of the Employees including without limitation:

(a) Giving any direction, advice or authorisation to the Employees who are members of the CFMEU to implement a ban limitation or restriction on the performance of overtime contrary to clause 15.2 or 73 of the Loy Yang Power Enterprise Agreement 2012 (Agreement), or contrary to custom and practice regarding availability for and the performance of overtime.

(b) Giving, any direction, advice or authorisation to the Employees who are members of the CFMEU to implement a practice in relation to the taking of personal/carer’s leave under clause 18 of the Agreement, or under the Fair Work Act 2009, the result of which is a restriction or limitation on the performance of work.

3.2 For the purposes of this Order, the expression “industrial action” means:

(a) a ban, limitation or restriction on the performance of overtime contrary to clause 15.2 of the Loy Yang Power Enterprise Agreement 2012 (Agreement), clause 73 of the Agreement, or contrary to custom and practice regarding availability for and the performance of overtime; or

(b) the adoption of a practice in relation to the taking of personal/carer’s leave under clause 18 of the Agreement, or under Division 7 of Part 2-2 of the Fair Work Act 2009, the result of which is a restriction or limitation on the performance of work

but does not include the following:

(d) action by an Employee if:

(i) the action was based on a reasonable concern by the Employee about an imminent risk to his or her health or safety; and

(ii) the Employee did not unreasonably fail to comply with a direction of his or her employer to perform other available work, whether at the same or another workplace, that was safe and appropriate for the employee to perform.”

[10] Clause 5 of the order states that it takes effect immediately and remains in effect for a period of one month.

Whether an arguable case with some reasonable prospects of success

[11] I consider that at least grounds 5 and 7 of the CFMEU’s appeal are sufficiently arguable to satisfy the first limb of the test in Edghill. Ground 5 contends that the Deputy President erred in his construction of clause 4 of the Agreement, and ground 7 further contends that the Deputy President erred in accepting the undertaking by AGL Loy Yang in circumstances where AGL Loy Yang had not honoured clause 4.

[12] The Deputy President dealt with the issue of AGL Loy Yang’s clause 4 commitment in the Decision in the following way:

“[160] Further, although the undertaking does not cover “job security” or redundancy provisions from the Agreement, neither does the undertaking in Clause 4 of the Agreement, the terms of which it reflects. Finally, I am cautious about the proposition of the unions that it would be inappropriate to terminate the agreement because it would allow AGL Loy Yang to avoid the undertaking it previously agreed to in Clause 4 of the Agreement. This is because it could be concluded that Clause 4 is of no effect and should be given no weight (see paragraph [134] above). Ultimately, I am not persuaded that the undertaking weighs in favour of a finding that it is not appropriate to terminate the Agreement. As was said in Aurizon:

‘Ultimately, it cannot be expected that terms and conditions of employment contained in an enterprise agreement with continue unaltered in perpetuity after the agreement has passed its nominal expiry date. Terms and conditions may be altered by making a new agreement or by terminating the existing agreement. The statute guarantees the continuation of the safety net, not the terms and conditions contained in a nominally expired enterprise agreement.’ (Aurizon Operations Limited; Aurizon Network Pty Ltd; Australian Eastern Railroad Pty Ltd [2015] FWCFB 540 at [176])”

[13] The CFMEU submitted at the stay hearing that because clause 4 was directed at the obligation of AGL Loy Yang prior to termination, namely not to seek termination without giving the guarantees therein, and on any view was still in force and relevant at the time the Decision was being considered, it could not be discarded as irrelevant on the basis that after the Agreement was terminated it could no longer apply. I consider, on a preliminary assessment only, that such a proposition is reasonably arguable given the obvious significance of the commitment given in clause 4 of the Agreement and the declared intention of AGL Loy Yang not to continue it beyond a three month period if the Agreement was terminated. I also consider that the proposition is of such a nature that there would be reasonable prospects that permission to appeal would be granted. It is not appropriate or necessary in the circumstances to engage in any further analysis of the merits of the proposition. Nor is it necessary for me to give consideration to the merits of the other grounds of appeal for present purposes.

Balance of convenience

[14] AGL Loy Yang proposes to give an undertaking in lieu of the grant of a stay of the Decision and Order which in substance would:

(1) require it to continue the three-month commitment to maintain the clause 4 entitlements, which was relied upon in the Decision, until the appeal decision was issued; and

(2) prevent forced redundancies (but not voluntary redundancies or early retirements);

subject to the undertaking ceasing to have effect if a new enterprise agreement came into operation.

[15] The CFMEU did not accept that this proposed undertaking would protect employees from all the detriments which would ensue if the termination of the Agreement came into effect prior to the determination of its appeal. In support of that submission, it took me to a tabular analysis it had prepared and submitted at first instance which compared the conditions under the Agreement to those in the modern award which covered the workforce and identified various detriments.

[16] For the most part, I consider that the detriments identified which are not addressed by AGL Loy Yang’s proposed undertaking are minor or hypothetical in nature. However there is one matter of significance which is not addressed by the proposed undertaking, namely the issue of the minimum staffing levels. AGL Loy Yang has made it clear that it will not continue the minimum staffing levels once the termination of the Agreement takes effect. This will result in reduced overtime for employees, and thereby reduce their overall remuneration (although this detriment does not appear to have been quantified in the hearing before the Deputy President). This cannot be retroactively corrected if the appeal is successful because, the overtime previously required by the minimum staffing levels not having been worked, no back-payment obligation will arise.

[17] AGL Loy Yang submitted that this did not weigh the balance of convenience in favour of the grant of a stay. It pointed to the very recent history of industrial action found to have been organised by the CFMEU, where the existence of the minimum staffing levels meant that AGL Loy Yang was rendered vulnerable to a campaign of absenteeism. If a stay was granted, the continuation of the minimum staffing levels would mean that AGL Loy Yang would remain vulnerable to industrial action of this sort, and this could affect its capacity to supply electricity to the community.

[18] I accept the force of these submissions, and note that the s.418 order currently in place does not directly bind individual members of the CFMEU (apart from Mr Hardy) and only remains in effect for a further three weeks. The balance of convenience does not favour the grant of an unconditional stay under which there could be a continuation of further industrial action, notwithstanding that the Commission would be in a position to deal promptly with any s.418 application made by AGL Loy Yang.

[19] However I consider that the balance of convenience would favour the grant of a stay on the basis that the CFMEU and its members did not organise or engage in any industrial action prior to the issue of the appeal decision. In that respect, I note that the CFMEU offered an undertaking in the following terms (as stated in a letter to the Commission of today’s date):

“This letter is to confirm the undertakings given by Mr Crawshaw SC on behalf of the CFMEU on transcript to the effect that the CFMEU will not organise any industrial action of its members employed by AGL Loy Yang Pty Ltd at the Loy Yang A Power Station until the Full Bench in this matter delivers its Decision on the basis that an unconditional stay is otherwise granted.

Further, the CFMEU undertakes to hold a meeting of its members employed by AGL Loy Yang Pty Ltd at the Loy Yang A Power Station before 7 February 2017 and recommend to its members that they not engage in any industrial action until the Full Bench in this matter delivers its Decision on the basis that an unconditional stay is otherwise granted.”

[20] While, in relation to the position of individual members of the CFMEU, the terms of the above undertaking are commendably democratic in spirit, they do not provide a sufficient assurance that there will be no industrial action. However I consider that the issue could be dealt with in a different way, namely that a stay could be issued simply on the basis that it was conditional upon there being no industrial action.

[21] AGL Loy Yang raised an additional reason why a stay should not be granted, namely that the continuation of the Agreement would prevent it from laterally recruiting employees rendered redundant by the imminent closure of the Hazelwood power station in March 2017. The CFMEU disputed this and submitted that there was no impediment in the Agreement to such recruitment taking place. I have not heard sufficient argument on this question to be able to reach a conclusion that AGL Loy Yang’s contention is correct.

[22] Moreover, I proposed to expedite the hearing of the appeal, and have the matter listed for hearing on 21 February 2017. That will minimise the term of operation of any stay order.

[23] In conclusion therefore, I consider that the balance of convenience favours the grant of a stay that is conditional upon the CFMEU not organising, and the CFMEU’s members not engaging in, any industrial action prior to the issue of the decision in respect of the appeal.

Conclusion

[24] A stay order subject to the identified condition will separately be issued. Liberty is granted to AGL Loy Yang to apply to have the stay order revoked on short notice should there be any non-compliance with the condition. Directions and a notice of listing for the expedited hearing of the appeal will also separately be issued.

al of the Fair Work Commission with the memeber's signature.