Industrial Relations Commission of New South Wales CITATION : Hunter Water Corporation v Hunter Water Corporation Employees' Association [2000] NSWIRComm 186 PARTIES : Hunter Water Corporation Hunter Water Corporation Employees' Association FILE NUMBER: IRC 2041 OF 1999 IRC 1423 of 2000 CORAM: Harrison DP CATCHWORDS : Job evaluation - salary system - application for award variation - jurisdiction - primacy of agreement over award LEGISLATION CITED : Industrial Relations Act 1996 HEARING DATES: 06/02/2000; 06/05/2000; 06/08/2000; 06/14/2000; 06/21/2000; 06/22/2000; 07/07/2000 DATE OF JUDGMENT: 09/08/2000 APPLICANT Mr R Warren of Counsel LEGAL REPRESENTATIVES: RESPONDENT Mr E Razborsek Hunter Water Corporation Employees' Association JUDGMENT: - 1 - INDUSTRIAL COMMISSION OF NEW SOUTH WALES CORAM: HARRISON DP Friday, 8 September 2000 Matter No IRC 2041 of 1999 Notification under s.130 by Hunter Water Corporation of a dispute with Hunter Water Corporation Employees' Association re salary maintenance conditions Matter No IRC 1423 of 2000 Notification under s.130 by Hunter Water Corporation Employees' Association of a dispute with Hunter Water Corporation re restructure of service centre DECISION 1 These matters arise by notification pursuant to section 130 of the Industrial Relations Act 1996 ('the Act') filed by the Hunter Water Corporation ('the Corporation') on 6 May 1999 (IRC 1999/2041) and by Hunter Water Corporation Employees' Association ('the Association') on 3 April 2000 (IRC 2000/1423). The matters were joined on application and by agreement of the parties on 12 May 2000, those issues raised by IRC2000/1423 being contained within the issues then before the Commission in IRC 1999/2041 2 It is appropriate to restate the terms of the notification in IRC 1999/2041: 1. On 18 December 1998 the "Hunter Water Corporation Employees Enterprise Agreement 1998" was approved by the Industrial Commission of NSW in Matter 6555 of '98. 2. The Agreement provided a commitment by the Hunter Water Corporation and the Hunter Water Corporation Employees Association to finalising a new Salary Classification Structure for salaried employees of the Corporation by 31 May 1999. 3. The Agreement provided that if any difficulties were to arise during the course of negotiations the dispute procedures in the Agreement were to be followed within a timeframe necessary to facilitate finalising the matter by 31 May '99. 4. The parties have co-operated positively in separate and joint working parties and a substantial number of issues have been settled at the working party level. 5. A significant issue is in dispute between the parties and is providing a major obstacle to reaching agreement on the new structure. This issue is the arrangements to apply to existing employees in respect to future salary maintenance conditions in the event of an existing employee being displaced in a management restructure. 6. The dispute procedures of the agreement provides that: "If the matter is not resolved between the representatives of the HWC and the employees, the matter shall be notified to the Industrial Relations Commission of NSW for resolution in accordance with the Act. This notification may be given by either party at any stage of the negotiation process." 7. The Corporation is seeking the assistance of the Commission pursuant to the dispute procedures of the Agreement. 3 Mr Razborsek, appearing for the Association with Mr Williams, took issue with the scope of the notification, submitting that the issues were much broader and more fundamental than that particularised in item 5 of the notification. Mr Razborsek put that there was no agreement to the Hay System of job evaluation preferred by the Corporation. Nor was there agreement concerning the detail of administration of a system of job evaluation, the role of the Association and the issue of existing employees with, in his submission, rights of progression under the existing system putting the issue of displacement in the event of future restructure in broader perspective. 4 The matter was first subject to compulsory conference proceedings on 24 May 1999 and subsequently eight further listings prior to the issue of a certificate of attempted conciliation on 3 December 1999. 5 The formal attempts at resolution by conciliation throughout 1999 were punctuated by extensive discussion between the parties, supplemented by the continuing efforts of the separate and joint working parties referred to in the notification. 6 A significant element of the work undertaken by the parties in seeking resolution by agreement was the sampling of classifications and subsequently the establishment of rates of pay pursuant to the salary administration system sought by the Corporation for all classifications in order that all parties could assess their position in full knowledge of the alternatives. 7 I am led to the observation that the parties came extremely close to settlement in the conciliation process, ultimately not being able to complete resolution of the issues in that manner. 8 During the course of arbitration proceedings it was revealed that the Corporation had complied with a request from the Association that the position evaluations resulting from sampling, and subsequently full evaluation, not be conveyed to employees concerned. This is regrettable. Whether this had the effect of corrupting the conciliation process or would have led to an earlier collapse of conciliation is imponderable. However, the essence of resolution at the workplace is diminished when employees participating in the evaluation process are denied knowledge of the outcome. This lack of communication was resolved on discovery, thus it forms no part of my relevant consideration in the arbitral phase. 9 The matter was subject to proceedings for the purpose of specific directions on 24 February 2000; and again on 10 March 2000 on notice of motion by the Association seeking access to documents and other information. These and other procedural issues between the parties were dealt with, resulting in arbitration proceedings taking place over seven days in June and July, 2000. 10 On arbitration Mr Warren of Counsel appeared for the Corporation and brought evidence from: · Mr John O'Hearn - Manager, Finance · Ms Theresa Turner - Manager, Employee Services. 11 Mr Razborsek of the Labor Council of New South Wales maintained his appearance for the Association with Mr Williams and brought evidence from: · Ms Elizabeth Sherring - Team Leader of Dispatch · Mr Alan Campbell - Environment Trade Waste and Pollution Control Officer · Ms Janice Davis - Technical Support Officer · Mr Peter Nikolic - Technical Co-ordinator · Ms Kerry Short - Services and Operations Officer · Mr Peter Hull - Administrative Officer · Mr Paul Denny - Administrative Officer, Procurement Fleet Group · Mr Peter Alexander - Organiser, Electrical Trades Union of Australia, NSW Branch · Mr Gregory Burke - Technical Officer, Strategic Operations Group · Mr Trevor Naylor - Industrial Officer, Australian Services Union, NSW Branch · Ms Alison Peters - Secretary of Australian Services Union, NSW Branch · Mr Paul Marzato - Manager of Energy, Federated Municipal and Shire Council Employees' Union of Australia, NSW Division · Mr Gary Kennedy - NSW Branch President, Communications, Electrical and Plumbing Union, Communications Division. 12 Mr Warren sought remedy in the terms of a variation to the Hunter Water Corporation Salaried Officer's Award, first put in draft form in the proceedings of 24 February 2000 (exhibit 1); and revised in proceedings of 2 June 2000. 13 The award variation sought is detailed in the prescription of a 40 point salary scale, job evaluation methodology, transition arrangements and consequential amendments. It is not necessary to restate the application here. 14 Mr Razborsek sought alternate remedy (tendered exhibit 53). The basic proposal advanced by Mr Razborsek is set out in exhibit 53 in the following terms: 1. Basic Proposal · Introduce a salary structure which recognises the specialisation requirements of the Corporation for new employees and evolving organisational structure and pays the value of a job. · Establish an agreed new salary structure which will have a consistent process to recognise and pay fair value for jobs. · Existing employees will have an election choice to either transfer voluntarily to the new salary structure or remain on the current structure. · No existing employee electing to transfer to the new structure will have their salary reduced as a result of restructuring or reorganisation except by agreement. · Any existing employee electing to remain on the current salary structure will do so without any fear of disadvantagement in respect to salaries and conditions of any future restructure or re-organisation. · Agreed processes to define and develop job descriptions for all new salary structure positions. · Agreed evaluation process to assess and value positions. · To fit agreed values to a Salary- Point Structure with positions rounded up to the nearest salary point. · Provide resources to facilitate learning and skills development. RATIONALE FOR CHANGE : · The rationale is that new employees and existing employees taking up new positions should be paid a salary level commensurate with the duties and responsibilities attached to the job they are required to perform. · The changed working environment will require the training of existing employees and recruitment of employees with specialised skills. · It is important that employees and the organisation jointly take the necessary steps to introduce a salary remuneration structure which can be embraced to ensure we provide the workforce with a structure and capacity to be competitive in an environment subject to significant change. · It is not proposed to create any uncertainty by requiring existing employees working under the existing structure transfer to the proposed salary points system. Each salaried employee on an incremental scale will have the option to remain as they are or move to the evaluated salary point on the new structure. · The new structure will enable employees to identify the pay associated with a particular job and thus make decisions as to the extent of training and development they will require for future jobs (promotions) they may pursue. OBJECTS: The objects of the new Salary Classification Structure are: 1. To gradually phase out the existing incremental scales and replace it with a new salary structure. 2. To introduce a remuneration structure that maintains a skilled and competitive workforce and is adaptable to ongoing change. 3. To introduce a remuneration structure which will ensure the Corporation's competitive position in an environment of continuous change. 4. To use an agreed job evaluation process as the objective basis for ensuring equitable remuneration and relativities. 5. To ensure the election options of existing employees are retained in the transition to the new structure. STRUCTURE AND RULES 1. Overview. (a) The proposed salary structure consists of two (2) salary systems. (b) An arrangement will be put in place to give effect to the parties agreed transitional arrangements. (c) The parties will assess and agree to a job evaluation methodology/process. (d) All new positions will be assessed and allocated a fixed salary point. (e) The relevant salary points will be determined by an agreed job evaluation process. (f) Job evaluations will be undertaken - i) On all jobs currently undertaken in the Corporation. ii) On all new jobs prior to calling applications. iii) Re-evaluation will be undertaken for positions where there has been changes to positions which would warrant a regrading or an employee may request that his/her position be re-evaluated. Employees, other than scale positions, will retain their existing appointments and salary levels in the transition to the new structure. These salary levels will be specified in the proposed new salary points structure. (g) An implementation Committee shall be established to assist and advise employees on any matters of the implementation of a new salary structure, for example: · making an election option · completing the evaluation position questionnaire · assist where the evaluation process may be deficient · any disputes arising in relation to the implementation of a new salary structure 2. Job Evaluation Process (a) Job Evaluation Methodology. The parties will assess the Hay Evaluation Methodology and if required, any other Universal Evaluation Methodologies and reach agreement on a job evaluation methodology applicable to Hunter Water Corporation. Job evaluation will be the basis for assessing the value of jobs. It will be the process used for identifying and assessing differences in value between jobs. (b) Process To undertake the evaluation - Position Profile Questionnaire (PPQ) (See example Annexure 1) is completed by position occupant/s and/or jointly with the relevant Supervisor. - PPQ is completed and agreed by both the position occupant/s and the relevant Supervisor/Manager involved acknowledging that the completed document is an accurate description of the position. - The Executive Manager will sign off the PPQ. - The position occupant is consulted on any changes, then agreement is reached by the parties to PPQ. The position holder signs acknowledging the PPQ is an accurate description of the position. - PPQ is forwarded to Employee Services for co-ordination of the evaluation. - Job Evaluations will be undertaken by a panel of trained evaluators. This committee will comprise relevant Managers, Employee Services Staff and Association representatives. - Internal/external benchmarking and relativities agreed between the parties. - Dispute settlement procedures will be adopted to resolve any disputed positions i.e. size and value of jobs. TRAINING AND DEVELOPMENT The parties agree that in order to raise the levels of competency, increase efficiency, productivity, competitiveness and job security for employees, a greater commitment to education, training and skill development is required. Accordingly the parties commit to: (a) developing more highly skilled and flexible employees (b) provide employees with career opportunities through appropriate training to acquire additional skills (c) remove barriers to the utilisation of skills acquired and required (d) through consultation with employee develop a training programme consistent with the size, structure and nature of the current and future skill needs of the Corporation (e) provide information of training programmes to employees and advise them on the specific training needs (f) all employees will be given equal access and reasonable opportunity to progress through a career structure. It is recognised that training and development will not be limited to internal and external training courses and may include exchange programmes, secondments, attendance at Conferences, Seminars or short term study courses. Any costs associated with fees and prescribed text books incurred in connection with undertaking approved training will be reimbursed by HWC. RELIEFS 1. Relief is when an employee is required to work in a higher classification. 2. Any employee may be directed to carry out the duties of any position as defined by sub-clause (vii) of Clause G2 in the Hunter Water Corporation Employees' State Award 1999. 3. An employee directed to relieve at a higher grade will be paid as defined by Clause S2 in the HWC Employees' State Award 1999. There will be two (2) salary systems in operation for relief purposes, all employees in either system will be eligible for, relief purposes. Movement between one system to another for relief purposes may: a) relieve the position with the most suitable competent person from a lower salary level with the employee receiving the higher salary as per three (3) above or, relieve the position with the most suitable competent person from a higher salary without loss of salary. b) relieve the position with a person of the same classification, without variation in salary, in order to provide skills development of the employee concerned. c) relieve the position on a rotational basis using any combination of the provisions of (a) and (b) above. d) leave the position unoccupied. EXISTING EMPLOYEES. 1. Incremental Scale Positions. a) All employees on scales will have the option of electing to retain their appointments and incremental entitlements on implementation of the new structure. Each employee will receive a letter which will outline the agreed description of their job (duty statement), their current salary and the value the job they occupy has been evaluated at. The employee will elect their option and advise the Corporation. b) An employee on one of the incremental scales whose job is evaluated at a higher salary level will have the option of accepting appointment at the higher salary level immediately (with no further increments) or continuing on their elected entitlements. Once an employee has made an election that election will be retained and follow the employee to any job where they are transferred, rotated, directed or exchanged, including any future reorganisations and restructures. The election option will only be changed if the employee agrees to do so. In either situation employees will retain their employment conditions and entitlements provided by the Hunter Water Corporation Employees' State Award. c) An employee appointed to one of the incremental scale classifications who has elected to retain their salary increments will (subject to the usual performance review) progress by annual increments. d) Employees who elect to remain on the existing salary system will maintain their existing salary and incremental entitlements unless at some future date they agree to change it by transferring or applying for a position on the salary point system. Such salary and incremental entitlements will be indexed to any global increases applicable generally to employees of the Corporation. e) The following hypothetical examples are offered for clarification purposes. · An employee in a Customer Centre is exchanged with an employee in the Administrative Support Group for development/ rotation purposes or an experienced employee in Records/Secretariat is transferred at managements request to the Customer Services area due to the workload needs in that area. In both these circumstances the employee would retain their salary and incremental entitlements working under the existing structure · An employee in Urban Development applies for and is offered a position in the Contracts Administration. In these circumstances, the, evaluated rate for the new positions would apply immediately. · Due to a management instigated restructure an employee on the AO incremental scale is displaced from his/her job in the OBU at Boolaroo Office. The employee declines an offer of the voluntary redundancy and accepts the offer of a position in the Call Centre at Head Office. The employee retains their election option, the job in the Call Centre still falls within the scope and definition of an AO as provided by the HWC Employees State Award. Personal Allowances Personal Allowances, which are not paid in consideration of "job value", will not be affected merely as a consequence of the introduction of the new salary classification structure. EVIDENCE 15 The evidence brought by Mr Warren is in two parts. 16 The evidence of Mr O'Hearn deals with the issues of organisational development, corporatisation of the Hunter District Water Board to the Hunter Water Corporation, and associated market and commercial considerations. 17 The evidence of Ms Turner deals with the application of the Hay system of job evaluation by the Corporation. 18 Mr O'Hearn described the need for a revised salary structure as being driven by two interrelated factors, which he described as: (i) business and cultural, and (ii) Government and market pressures. 19 Mr O'Hearn deposed that the Corporation had made some good progress in cultural change from what he described as "the typical public sector job for life" to a more commercial and customer focused outlook. Mr O'Hearn described the cultural imperative as a need for: "A salary structure which provides an incentive to perform rather than the expectation of automatic incremental salary increases." 20 Mr O'Hearn further deposed that: "A salary structure which recognises and pays the value of the job being undertaken also allows employees to identify skills required … … and to make informed decisions about their individual skill development for ongoing employability." 21 Mr O'Hearn further testified that: "A salary structure which recognises and pays the value of the job undertaken is more equitable for employees, as it allows employees to be paid the value of the job … … and not have to wait for years of service to accrue." 22 Mr O'Hearn put that the Corporation's business objectives are essentially identified in its charter, which states: "To be commercially successful whilst delivering value for money water, waste water, and associated services in an environmentally responsible manner. 23 Mr O'Hearn deposed that the need to address commercialism and competition are not unique to the Corporation, and that where this is encountered a greater level of job specialisation invariably results. It is Mr O'Hearn's evidence that the increased job specialisation is appearing within the Corporation and is incompatible with the type of incremental salary scale currently operating. 24 Mr O'Hearn deposed that, whilst the current incremental scales were compatible with public sector salary system at the time of introduction, this is no longer the case. Mr O'Hearn further deposed that the business, organisational, and commercially driven changes to the operations of the Corporation made the provision of entry level positions more difficult. This is described by Mr O'Hearn at point 47 of exhibit 2 in the following terms: 47. New technologies have automated many routine tasks previously considered as entry level duties. The complex business, regulatory, assets and contract management environment in which we now operate requires the selective recruitment of employees with specialised skills. This means that organisations such as the Corporation cannot provide work of increasing value to employees on scales in line with incrementally increasing pay levels as was envisaged when these incremental scales were introduced. The concept of a generalist office employee does not best serve the Corporation's emerging needs where technical specialists in fields such as accounting, human resources and customer services are required. 25 The evidence of Mr O'Hearn in respect to Government and market pressures commences at point 20 of his affidavit of evidence (exhibit 2). At point 21 Mr O'Hearn describes the historical position in the following terms: 21. Prior to this period the Corporation was a typical bureaucracy and relied on the government for funding through the form of borrowing to undertake its Capital works program. There was little scrutiny placed over the justification and necessity to undertake these programs. We were seen in those days as a community service organisation with no great pressures to operate efficiently or effectively or to turn a profit. The employment levels were relatively high. 26 The evidence of Mr O'Hearn then details changes in Government policy, associated commissions of enquiry, reports and recommendations which instituted and maintained various organisational or ongoing processes of change in the water industry and for the Corporation over the past 20 years leading to the present circumstances. 27 In particular, Mr O'Hearn referred to: · 1977 - Wilenski Report into New South Wales Government administration which recommended movement away from seniority based salary structures toward merit based structures. · 1981 - A report by Binnie and Partners, an international consulting firm which set guidelines and programmes in engineering management and finance to the year 2000 · 1982 - Internal review of management practices commissioned by the then President of Hunter Water Board, Dr Paterson, which concluded that: "… before classification and grading systems can be effectively applied within the organisation there are certain basic concepts which must be accepted and understood. These concepts are: · the value of the work performed determines the grading of the position · the gradings and salaries are attached to positions not people · classification and grading may change and should be reviewed periodically" · 1987- The first business plan published by Hunter Water which included an objective to achieve constant productivity improvements. · 1988 - Passage of the Hunter Water Board Act 1988 which, among other things, restructured the governing body from a board comprising community representatives to one appointed with clear responsibilities in managing the organisation and its resources. · 1991 - Passage of the Hunter Water Board (Corporatisation) Act 1991, resulting in Hunter Water becoming a State owned corporation and subject to the requirements of the State Owned Corporation Act 1989. · The Hilmer report on competition and the associated National Competition Policy agreement. This is described by Mr O'Hearn at point 40 of exhibit 2 in the following terms: "… the National Competition Policy agreement between the Commonwealth, State and Territories, has resulted in the States agreeing to reform the utility industry in line with the National Competition Policy agenda. The principles of the National Competition Policy were developed by an independent Committee of Inquiry chaired by Professor Hilmer and commissioned in October 1992 by the then Prime Minister. These principles are: · reform structure and regulation of public monopolies to facilitate competition · review anti competitive practices · provide third party access to infrastructure · transparent price regulation · foster competitive neutrality between government and private businesses. The protection of the Crown from prosecution for government owned enterprises has also been removed. Accordingly, the Australian Consumer and Competition Commission (ACCC) has acquired jurisdiction over the Corporation's operations. The Corporation is now subject to such legislative requirements as contained in the Trade Practices Act. " 28 Mr O'Hearn deposed that these developments had brought private corporations into the water industry which pursue market share, particularly in the civil maintenance sector. 29 Mr O'Hearn's evidence is that the proposed salary structure would apply to around 56% of the current workforce of 450 employees. Mr O'Hearn deposed that the blue collar and trades work force of the Corporation have had a competency based salary structure in place for many years. 30 Mr O'Hearn deposed that the concept of salary structure which recognises and pays the value of the job is not a new idea with the Corporation. Mr O'Hearn described the history of this concept at point 7 of exhibit 2 in the following terms: 7. There is a history at the Corporation in terms of industrial relations negotiations dating back to the early 70's where it was recognised that a system of recruiting and remunerating based on years of service is inappropriate. In fact since 1990 each of the various pay negotiations have talked about addressing the anomalies of the current salary classification structure. The current enterprise agreement which commenced on 31 May 1998 provided for the introduction of a new salary classification structure by 31 May 1999. This new structure is to ensure that employees have a remuneration structure which matches the value of the job. This would replace the current remuneration structure which provides, for many employees, salary progression based on years of service. 31 The evidence of Ms Turner was provided by affidavit (exhibit 4) and supported by detailed documentation of assessments in accordance with the Hay Job Evaluation Methodology ('Hay') of some 239 positions within the salaried staff of the Corporation. 32 Ms Turner deposed that she has been employed by the Corporation for some 23 years, the past five years as Manager, Employee Services. 33 Ms Turner's evidence is that she was trained in the administration and application of Hay evaluation in the early 1990's and has been involved in it's application to some 170 positions in addition to those subject to these proceedings within the Corporation over the past five years. Ms Turner deposed that the Corporation used the Hay system in the early 1990's to evaluate positions consequent upon restructuring, changes in job functions, and the creation of new positions. Ms Turner deposed that some positions have been re-evaluated a number of times. 34 It is Ms Turner's evidence that the Corporation selected the Hay system following consideration of a number of systems and has found it to be an effective measure of job value. Ms Turner deposed at page 2 of exhibit 4: "The process ensures a consistent method to size jobs, so that we can be confident that jobs, no matter how varied or different across the Corporation, are paid equitably. … … While it is perhaps best known for its application to management, professional and technical jobs, it is also extensively used for clerical and manual jobs." 35 The evidence of Ms Turner then details the Hay methodology as applied within the Corporation to salaried staff and the transition arrangements proposed, which are described as "red circling" for those positions for which the Hay evaluation falls more than five percent below the current rate of pay. 36 Ms Turner's evidence in this regard is found at items 38 to 41 of exhibit 4 in the following terms: 38. It is proposed that all employees who are currently paid less than the salary point specified for the position they occupy in the Corporation's application as detailed in Exhibit 1, will have their salary increased to the new salary point value. Employees who are currently paid more than the value of salary point for the position they occupy specified in Exhibit 1 will:- (a) if they are within 5% of the salary point value for the position they occupy they will continue to receive their rate of pay and any further award adjustments that may occur; or (b) if they are paid more than 5% above the salary point value for the position they occupy they will continue to receive their current rate of pay but will receive no further award rises beyond the 2.5% due 31/5/2000 until the salary point value of their job is within 5% of the current rate of pay. 39. This has the effect of moving everybody onto the new structure and sets the path forward. The selection of this 5% margin is based on the Corporation not considering it desirable to freeze a persons pay where the salary paid is close to the job value that has been determined. Beyond this 5% is seen as more significant and in order to achieve equities of the new structure it has been necessary to act and introduce red circling until the salary paid is within this acceptable tolerance. … … 41. In analysing the impact of these transition arrangements the Corporation has identified that half of the salaried workforce will receive an immediate increase in their salary as a result of the proposed salary structure. 15% will be unaffected as the salary level determined is the same as a salary point or within 5% of the evaluated salary. This means that approximately two thirds of the workforce is either unaffected or will receive an increase in pay on implementation of this proposal. A third of the Salaried workforce remain on their current salary under the proposed structure as the salary paid does not fall within 5% of the proposed salary point. Approximately 60% of these employees' positions fall between the 5-10% bracket in difference between current salary and the proposed salary point. (Emphasis added) 37 Ms Turner was subject to extensive cross examination by Mr Razborsek on the Hay methodology and its application within the Corporation. 38 The evidence brought by Mr Razborsek also falls clearly into two categories. The first is that brought by employees of the Corporation, which was consistent in its lack of confidence in the Hay system of salary administration, questioning the detail and method of the pay evaluation process and critical of the absence of any mechanism to recognise individual performance as compared to job evaluation. This group of witnesses further complained that whilst they had completed job evaluation forms and participated in the process, they had not been informed of the outcome of that process. 39 The second category of evidence brought by Mr Razborsek is that of Union officials with experience in the introduction of job evaluation methods within local government, telecommunications, and energy sectors. 40 This evidence established that the introduction of job evaluation procedures was widespread and exclusively introduced by agreement between the parties, with high levels of protection of rights for existing employees. This evidence further establishes that Hunter Water Corporation is up to a decade behind those other sectors in the introduction of job evaluation processes and the abandonment of incremental scales. 41 Given the nature of the findings and observations made in this matter, I have decided not to canvass the evidence brought by Mr Razborsek in further detail. 42 The evidence of employees is, in my view, distorted by the withholding of information of outcomes of the job evaluation process and, in many respects, amounts to hearsay and assumptions which did not withstand cross examination. 43 The evidence brought from officials of registered industrial organisations of introduction of job evaluation methodology in various industry sectors is an area I recommend the parties further explore. That process, and the ongoing discussions between the parties, is in my view best served by absence of detailed analysis which the parties should pursue with the assistance of the Commission in conciliation proceedings if so required. SUBMISSIONS 44 Mr Warren noted that an incremental salary scale has been prescribed for administrative and technical staff of the Corporation, then known as the Hunter District Water Supply and Sewerage Board, since 1922 (21 IG 23). Mr Warren followed the line of industrial regulation to the current enterprise agreement and Award, submitting that the change in circumstances over that time required a change in the salary structure. 45 Mr Warren noted that a savings provision is found in the 1922 agreement under the heading Existing Privileges in the following terms: Except so far as altered expressly or by necessary implication this agreement is made on the understanding that all existing privileges and conditions shall continue during the currency of the agreement. No rate of pay existing at the date of the coming into operation of the agreement shall be reduced merely as a consequence of the agreement. and further: Any increments under this agreement may be withheld if the Board is of the opinion that through misconduct or inefficiency such increment shall not be paid. 46 Mr Warren put that the savings provision proposed by the Corporation in the current application is strikingly similar to the 1922 version. Current Industrial Regulation 47 The Hunter Water Corporation Employees' (State) Award 1999 ('the Award') ( 315 IG 1362) was made by consent of the parties with effect for 12 months from 13 May 1999. 48 The Hunter Water Corporation Employees' Enterprise Agreement 1998 ('the 1998 E.A.') was approved by the Commission as presently constituted to apply from the date of approval to 31 May 2001. 49 The nominal term of the Award has expired and it remains in force pursuant to s.16(1) of the Act as neither party have moved the Commission to rescind it. 50 The 1998 E.A. is at the time of proceedings within its prescribed term. 51 The award prescribes core general conditions of employment applicable to all wages and salaried staff of the Corporation. The award contains a wages section and salaried section, which set out wages and other matters unique to each group. 52 Section S1 of the Salaried section (applicable to salaried employees only) prescribes the salaries subject to these proceedings. This provision states: S1 SALARIES (i) Full-time employees shall be paid the Annual Salaries prescribed for their classification in the Scale of Salaries specified in Schedule A attached, on a fortnightly basis. The fortnightly equivalent of annual salary shall be ascertained by multiplying the annual salary by the number of days in the period (being 14) and dividing that product by 365.25. The weekly equivalent of annual salary shall be determined by dividing the fortnightly equivalent by two (2(. For the purpose of computing the daily rate, the following formula should apply: Weekly equivalent of Annual Salary x Ordinary Daily Hours Ordinary Weekly Hours 53 The salaries specified in Annexure A at item (iii) are in the form of an incremental scale and subject to the position range for a single salary point; for example, Salary Grade 6C Technical Officer, Architectural Survey and/or Engineer Drafters and Engineering Surveyor Special Grade to a 14 year scale for Salary Grade 4, Administrative Officer. 54 The salaries provided by the Award are overtaken by those prescribed by the 1998 E.A. in quantum but not in form. Schedule C2 to the 1998 E.A. is in the same terms as Annexure A(iii) to the Award in all respects other than the specific salary levels which are increased in accordance with the percentage movement forming part of the 1998 E.A. 55 Mr Warren referred to a decision of his Honour Mr Justice Macken, as he then was, in matter no 601 of 1974 resulting in an award titled Hunter District Water Board (Salaried Employees) Award (251 IG 601) with effect from 20 May 1987 which introduced the current salary structure, in particular the classification of Administrative Officer to embrace various clerical employees. 56 Mr Warren submitted that the introduction of the Administrative Officer classification and the associated elimination of individual clerical scales eased certain demarcation lines, removing difficulty then encountered with interchangeability of employees. 57 Mr Warren submitted that whilst these arrangements were appropriate for their time, the Hunter Water Corporation and the business environment in which it functions have moved on and industrial regulations should move accordingly. 58 Mr Warren submitted that in the contemporary circumstances, employees should be remunerated in line with the work required of them, not merely because they have continued to be employed by the Corporation. 59 Mr Warren particularised the specific award changes sought by the Corporation to allow introduction of the proposed job evaluation system as set out in the proposed award variation. 60 Mr Warren emphasised that the present application arises from commitments made in the current enterprise agreement (the 1998 E.A.), which also provides a series of wage increases, i.e. · 4 percent from 31 May 1998 · 4.5 percent from 31 May 1999 · 2 percent from 31 May 2000 61 The 1998 E.A. records a commitment in respect to a new standard classification structure by the parties at clause 7(b) and a proposal for discussion at Schedule B in the following terms: (b) New Salaried Classification Structure The HWC and the HWCEA commit themselves to finalising a new classification structure for salaried employees of HWC to be included in an instrument binding on HWC and HWCEA. Those two parties agree to implement a new Salary Classification Structure by 31 May 1999. A draft proposal is attached in Schedule B as the basis for discussion. The process to progress the finalisation of the new Salary Classification Structure shall be by Working Parties consisting of representatives from HWCEA and representatives of HWC. Should any difficulties arise during the course of negotiations the Dispute Procedures shall be followed within a time frame necessary to facilitate finalising the matter by the nominated date, viz 31 May 1999. Schedule B New Salaried Classification Structure • All appointments to be made to a fixed salary point. • Each position will be allocated to a salary point with a base salary level which matches the value of the job. • The Salary Structure will provide for grading criteria based on generic descriptions and indicative tasks up to a specified level with positions above that level to be determined by Job Evaluation methodology. Salary Points $PA SP 1 17,500 SP 2 20,000 SP 3 22,500 SP 4 25,000 SP 5 27,500 SP 6 30,000 SP 7 32,500 SP 8 35,000 SP 9 37,500 SP 10 40,000 SP 11 42,500 SP 12 45,000 SP 13 47,500 SP 14 50,000 SP 15 52,500 SP 16 55,000 SP 17 57,500 SP 18 60,000 SP 19 62,500 SP 20 65,000 62 Mr Warren noted that the 1998 E.A. provides for the introduction of a revised salary administration system from 31 May 1999 in accordance with clause 7 of the agreement. Mr Warren, referring to the submissions of Mr Millington of the Corporation in the proceedings for approval of the 1998 E.A., noted that the revised salary classification structure was described by Mr Millington as the third stage of salary adjustment pursuant to the agreement. 63 Mr Warren further noted the acceptance of the 1998 E.A. by the employees and unions, relying on the submissions of Mr Razborsek, Mr Williams and Mr Nichols for Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union in that matter, who jointly supported approval of the agreement, informing the Commission that "the agreement had been put to a mass meeting of employees which had voted to accept its terms." 64 Mr Warren then went to schedule B of 1998 E.A. which states: All appointments will be made to a fixed salary point. Each position will be allocated to a salary point with a base salary level, which matches the value of the job. The salary structure will be provided for grading criteria, based on generic descriptions and indicative tasks up to a specified level with positions above that level to be determined by job evaluation methodology. 65 Mr Warren put that schedule B to the 1998 E.A. was plain, transparent and binding. Mr Warren put that the Association was well aware of the Corporation's intention as the salary structure proposed was part of the pre-agreement negotiations. Mr Warren put that the issue of a revised classification system could not be agreed at this time and accordingly was put aside to be completed on an agreed timetable. 66 Mr Warren conceded that the proposal had changed somewhat in the process, moving from a 20 point to a 40 point salary scale, submitting that the parameters of the scale, top and bottom, remained largely intact. 67 Mr Warren submitted that in these circumstances the Association could not claim to be surprised or unaware of the commitment made on entering into the 1998 E.A. 68 Mr Warren then turned to the effect of the salary classification system sought by the Corporation in these proceedings. 69 Mr Warren submitted that 49 percent of employees would receive an immediate increase in salary as a result of the new structure. Mr Warren submitted that 16 percent of employees are unaffected by the proposal, leaving 35 percent fully within the category described as "red circling". Mr Warren submitted that this group were protected by the guarantees associated with the "red circling" status. 70 Mr Warren relied upon the evidence of Mr O'Hearn to press the desirability and need for change in the salary structure. In particular, Mr Warren went to paragraph 12 of Mr O'Hearn's affidavit of evidence where he states: "What is necessary is for there to be a salary structure which provides an incentive to perform, rather than expectation of automatic incremental salary increases. This benefits both the employees and the employer in providing job satisfaction and productivity gains respectively. A salary structure which recognises and pays the value of the job being undertaken, also allows employees to identify skills required for particular jobs and to therefore make informed decisions about their individual skill development for ongoing employability". "A salary structure which recognises and pays the value of the job being undertaken is more equitable for employees. It allows employees to be paid the value of their job now and not have to wait years of service to accrue. Further, at pages 388 and 389 of transcript Mr Warren put: Your Honour, Mr O'Hearn gave detailed evidence of government and market pressures, and the need for the Corporation, it now being a separate Corporate entity, to provide an efficient proper service to the public. Indeed, in paragraph 21 of his statement, Mr O'Hearn said: "Prior to this period - And he was speaking of the last 20 years: "...the Corporation was a typical bureaucracy and relied on the government for fundings with a form of borrowing to undertake its capital works program. There was little scrutiny placed over the justification and necessity to undertake these programs. We, being the Corporation, were seen in those days as a community service organisation, with no great pressures to operate efficiently or effectively, or to turn a profit, the employment levels were relatively high". In paragraph 34 of Mr O'Hearn's statement, he extracted parts from the Hansard of the second reading speech of the Premier on 2 August 1989, when the State Owned Corporation's Bill was introduced to parliament, and that set up the framework for the corporatisation of selected government business enterprises and the need for those enterprises to perform competitively with the outside world. Mr O'Hearn indicated to the Commission in his evidence that the Corporation has a clear legislative and regulative framework in which it operates. In paragraph 37 Mr O'Hearn indicated, and I quote: "These frameworks clearly set out the expectations of the major stakeholders, such as the owners and various regulators, Environment Protection Authority, the Department of Land and Water Conservation, Independent Pricing and Regulatory Tribunal and Licensed Regulator. The responsibility to the Board, management and staff of the Corporation, I insert, are therefore to operate and manage the Corporation to deliver the requirements of all stakeholders". In paragraph 43 Mr O'Hearn indicated that the change had not been isolated to salary employees, that indeed, significant changes had occurred to their operations area, in particular in the civil and maintenance groups, where indeed, there were active opposition or competition, one could perhaps better put it, such as Circo and Transfield, to the very operation of the Corporation's civil maintenance area, and Mr O'Hearn detailed the need therefore for the salary area to move to keep pace with the needs and requirements of the Corporation in its new entity. Mr O'Hearn, in paragraphs 47 through to 51 gave evidence of: "The concept of a generalist office employee does not best serve the Corporation's emerging needs, where technical specialists in fields such as accounting, human resources and Customer services are required". He spoke of the evolution, the evolution of the type of work that is now required and the evolution away from an administrative officer's scale or technical officer's scale, for example, to the need to have a particular job valued, a particular type of job that is required, and the way that then employees best matched into those particular value jobs, and he spoke of the increasing emphasis that is now placed on an organisation such as the Corporation to perform in such a climate. Indeed, he summed it up by saying,: "It is important for remuneration to match the value of the job and be commensurate with the skill levels of the job, and the fact that this sends the proper signals, appropriate signals to the employees. 71 Mr Warren relied upon the evidence of Ms Turner that of 135 positions identified in the organisation, all objections had been met. Mr Warren put that the objections were limited to an assertion in the evidence of Mr Denny that the position of Procurement Fleet Officer and Supply Officer, operations regarded as different by the Corporation, were in fact the same position. Mr Warren submitted that an objection advanced by Mr Burke in respect to another employee's position was advanced on a flawed foundation of hearsay information which proved to be incorrect as the employee concerned had in fact signed off in agreement with the position description. 72 Mr Warren submitted that of the 135 positions, 130 position descriptions and salary evaluations were unchallenged. Mr Warren submitted that the lack of challenge is an acceptance that the process was applied correctly and produced the correct result. 73 Ms Turner's evidence is that it was the Corporation's proposal to use the grading structure from the Clerical and Administrative Employees (State) Award (296 IG 619) ('the Clerks' Award') to evaluate positions within the existing salary scales, and the Hay evaluation method for positions falling outside the parameters of the Clerks' Award. This approach was abandoned following objections by the Association, resulting in all positions being evaluated in accordance with Hay methodology. 74 Mr Warren further relied upon the evidence of Ms Turner in respect to transitional arrangements to support his submission that the Corporation's proposal be endorsed in full by the Commission. 75 Mr Warren submitted that the evidence brought by the Association did not mitigate against the proposals advanced by the Corporation. Mr Warren categorised the Association's evidence as being of general change by officials of various unions and by employees of the Corporation, both of which he put went to process rather than outcome. 76 Mr Warren went to the evidence of Mr Naylor to support a proposition that there is nothing in government policy or practice that, where on restructure a person's salary is "red circled", the salary so identified continues to be increased in accordance with general wage movements. Mr Warren relied upon the evidence of Mr Naylor that the nearest thing to the "red circling" proposition advanced here is a government policy affording 12 months salary maintenance at the substantive rate of pay where persons are redeployed to a position attracting a lower rate of pay. 77 Mr Warren sought further support for this proposition from his cross examination of Ms Peters who had given evidence of significant structural change within Sydney Water. 78 The changes in Sydney Water were implemented by an award of the Commission by Fisher P (as he then was) in matters 1007 of 1987 and 2625 of 1980, 2012 of 1976 and 5240 of 1987. The judgement delivered in these matters details the agreement between the parties at page 30 thereof in the following manner: "the model as agreed removes automatic or semi-automatic or incremental progressions based on service as provided by the existing agreements and awards and substitutes progression based on work performance and skills development." 79 The evidence of Ms Peters is that a subsequent agreement, tendered in these proceedings as exhibit 40, restored availability of an automatic progression on the assumption of satisfactory service, circumventing the arrangements described in the award. This, Mr Warren argued, demonstrated that there is no decision of this Commission which affords general salary increases to employees who have been "red circled". 80 Mr Warren submitted that this is reinforced by the evidence of Mr Mazarto that in transition from an incremental scale to a job evaluation process at Newcastle City Council the saving provision that "no employee shall receive a reduction in pay as a result of transfer to a council salary system" does not afford continuing general increases or CPI adjustments. 81 Mr Warren submitted that the evidence of Mr Kennedy dealing with the introduction of the Hay system within Telstra delivered similar results to that of Sydney Water, where the award is amended by subsequent agreement or administrative anomaly. 82 Mr Warren put that the Association is unable to bring any award made by consent or otherwise which delivers the preservation of entitlement as sought by it in this matter. 83 In dealing with the cross application put by the Association (exhibit 53) Mr Warren submitted that it is partially an abrogation of the 1998 E.A. made between the parties. Mr Warren put that the cross application by the Association is predicated on agreement between the parties. Mr Warren noted the lack of success in achieving agreement over the past two years, submitting that the Commission could have no confidence that the Association's proposal, so heavily reliant upon agreement, is in any way a practical or achievable solution. Mr Warren submitted that the Association's proposal could not be regarded as an application for an award variation but simply a process of unending discussion. 84 Mr Razborsek submitted that the weight of evidence brought from Corporation staff demonstrated that the Corporation's proposal is unfair and unjust. 85 Mr Razborsek put that the manner in which this matter has been progressed by the Corporation is contrary to the objects of the Act, government policy and procedure on organisational change, and associated change to the contract/s of employment effected and, in his submission, contrary to the custom and practice and fair bargaining ethics. 86 Mr Razborsek submitted that the evidence of the Association's officials brought demonstrates and proves that all of the public and semi-public organisations undertaking a change in salary structure from an incremental service based scale to a job evaluation process have achieved transition by agreement without disadvantage to existing employees. 87 Mr Razborsek noted that, while the evidence of Mr O'Hearn and Ms Turner identified "winners", ie employees who would receive a wage increase, there were also "losers", ie employees who would not enjoy an advance in salary in accordance with the current expectations arising from the existing salary system. 88 Mr Razborsek undertook an analysis of the 239 positions subject to restructure, submitting that some 80 of these evaluations (approximately one third) fell within five percent of their existing rates of pay and on the Corporation's proposal would be denied further increases of a global or organisational nature. 89 Mr Razborsek supported this submission by example from exhibit 3, which is a schedule of all affected employees setting out their current classification, rate of pay, position on the incremental scale and the proposed Hay evaluation. Mr Razborsek submitted that this schedule revealed some 20 employees for whom the Hay evaluation of their position is 27.36 percent below their current salary. Mr Razborsek postulated that at an unlikely level of six percent salary increase, it would be five years before the Hay evaluation caught up with the current salary, and at two and a half percent, the level of recent increases, a period of 10 years would elapse before catch up to the five percent zone is achieved. This, Mr Razborsek put, meant that these employees faced the prospect of a period of five to ten years without any cost of living, state wage or enterprise bargaining increases enjoyed by the majority of the Corporation's employees and the New South Wales work force at large. 90 Mr Razborsek identified a second group which he defined as those who would pick up modest increases, thought would be worse off in the medium term. Mr Razborsek noted that six employees would receive an increase of one thousand, nine hundred and ninety nine dollars ($1,999) on adoption of the Hay evaluation, however, all are employed as Administrative Officer Year 5 with reasonable expectation of an increase of one thousand and fifty four dollars ($1,054) per annum on moving from Year 5 to Year 6; six hundred and eighty four dollars ($684) per annum on moving from Year 6 to Year 7; and one thousand three hundred and seventy eight dollars ($1,378) per annum in moving from Year 7 to Year 8. A total of three thousand, one hundred and sixteen dollars ($3,116) over three years, effectively one thousand one hundred and seventeen dollars ($1,117) per annum worse off. 91 Mr Razborsek identified a third group as those for whom the Hay evaluation falls within five percent of their current salary. Mr Razborsek submitted that the assertion by the Corporation that these employees neither gain nor lose from the transition proposed is erroneous. Mr Razborsek put that, dependant upon where the individual was on the incremental scale at time of transition and subject to the size of further salary increases by state wage or enterprise bargaining, these people would float in and out of the five percent band and be subject to one, or a combination, of the effects occurring in the other two groups identified. 92 Mr Razborsek submitted that the summation of the three groups meant that over 50 percent of the relevant employees would suffer a negative salary effect on introduction of the revised salary structure as advanced by the Corporation. 93 Mr Razborsek submitted that the proposals advanced by the Corporation must fail on the basis that it is inequitous and unfair for even one person to suffer the detrimental salary restraint identified by him. 94 In referring to the 1998 E.A. Mr Razborsek submitted that it contains three unrelated segments; the first being the agreed wage and salary increases; the second being amalgamation of all awards into a single document; and the third the introduction of a new salary structure. 95 Mr Razborsek submitted that the absence of an interdependency was acknowledged and accepted by the Corporation in proceedings for approval of the 1998 E.A. Mr Razborsek relied upon submissions by Mr Millington in those proceedings (IRC 1998/6555) when Mr Millington put: "The parties envisage a three stage process … … This stage a target date of 31 December for finalising amalgamation and …. … The third stage would be the inclusion in the award of a revised salary classification structure and again the target date for implementing this inclusion is 31 May." 96 Mr Razborsek further submitted that the target date for award amalgamation of 31 December 1999 and for introduction of a new salary structure of 31 May 2000 were no more than target dates to be met if at all possible. 97 Mr Razborsek put that the wage increases were negotiated and applied to all employees, independent of award amalgamation or revised salary structure for salaried staff. 98 Mr Razborsek submitted that, following approval of the 1998 E.A., the parties worked diligently to meet the target dates and, while not meeting the date for award amalgamation, reached a mutually satisfactory conclusion. However, in this the third stage they have been unable to achieve success. 99 Mr Razborsek noted that commitments given during the award amalgamation process were that conditions of employment would not be diminished for any employee as a result of the award amalgamation process. 100 Mr Razborsek then undertook an analysis of the processes of discussion and negotiation around the issue of a revised salary structure for staff, commencing with correspondence dated 13 February 1996 (exhibit 19) from Mr Barry Tobin, then secretary of the Association, to the Corporation which identifies an objection to the then proposal of the Corporation in that it does not provide a protection to existing employees. Mr Razborsek then moved to subsequent items of correspondence found in exhibit 19 which seek "unequivocal guarantees that no existing employee will be disadvantaged". 101 Mr Razborsek then moved to consideration of the definition of Administrative Officer found in the award made by Macken J (251 IG 601) which states: Administrative Officer A person employed in any clerical capacity excepting other classifications referred to in the award and shall include telephonists, receptionists, typists, word processors, stenographers, clerks, meter readers, disconnection officers, plan room attendance, and persons employed on machines including keyboards and SBE designed to perform or assist in performing any clerical work whatsoever. 102 This definition has not been repeated in contemporary industrial regulations however, the classification of Administrative Officer (AO) is carried through salary schedules and organisational practice in accord with this definition. 103 Mr Razborsek submitted that the definition of AO was broad, facilitating a flexibility of work practices and redeployment of staff in circumstances of re-organisation of restructure. Mr Razborsek criticised the current salary proposal by the Corporation on the basis that it involved a return to specific job identification with inherent inflexibility. 104 Mr Razborsek submitted that the lack of flexibility of placement in the event of re-organisation or redundancy leading to redeployment disadvantaged employees as it increased the prospect that displaced employees would be moved to a position of lower salary rather than continuing as an AO on their scale rate whilst carrying out a different range of duties within the scope of the AO classification. 105 In dealing with the process of negotiation undertaken by the parties on the issue of a revised salary structure, Mr Razborsek acknowledged that the working party established had worked diligently, though in his submission the process was frustrated and failed because the Corporation did not acknowledge or adequately comprehend the fundamental position of the employees expressed through their Association that there should be no disadvantage to existing employees on transition. Mr Razborsek put that unilateral changes of position by the Corporation, such as movement from a 20 point scale to a 40 point scale, further hindered progress, resulting in the goal of resolution by 31 May 1999 being unachievable. 106 It was Mr Razborsek's submission that on 12 May 1999 the Corporation took a tactical position to withdraw from the working party and initiate these proceedings which he contended was an abrogation of their commitment to conciliation and a failure to bargain in good faith. 107 Mr Razborsek relied upon the evidence of Mr Edwards which described the successful negotiations within Telstra, resulting in application of the Hay system in that organisation contending that the Corporation, a much smaller organisation, should and could have achieved success by similar means. 108 Mr Razborsek described the transition from incremental scales to a job evaluation salary structure with the organisation subject to evidence in this matter, Newcastle City Council, Electricity Commission of New South Wales, Maritime Services Board, Sydney Water, as a seamless transition from one to the other without loss to employees, postulating that it would be patiently unfair for less to be achieved within the Corporation. Mr Razborsek submitted that such transition had been achieved on movement to the incremental scale with the Corporation and a similar result in further salary restructure should not be beyond the parties. 109 In dealing with the Hay method Mr Razborsek acknowledged that it has been applied with the Corporation for some ten years, noting that the Association first notified a dispute concerning the issue which became matter No 1092 of 1990. Mr Razborsek referred to a recommendation issuing from those proceedings, by myself as a Conciliation Commissioner as I then was, on 31 July 1990. Mr Razborsek quoted from page 4 and 5 of that recommendation: … Any method of job evaluation can be no more than a technique to arrive at a view as to the value of a particular position within an organisational structure. If the parties are able to agree on a method, and the result of that method, such is often more advantageous than their own independent assessments, though neither party is denied their right of an independent assessment of the value of any particular position; in any event, whether the parties agree or disagree, the circumstances must meet the test of the Wage Fixation Principles (30 IR 107) and compliance with No Extra Claims commitments before valuation can be converted to an award prescription. and from specific recommendation made at pages 7 and 8: 2) The Association take up discussions offered with * Mr Gorton. 3) The Association nominate an officer for familiarisation with the "Hay Point" Job Evaluation system. 4) All employees co-operate with the Board as directed in the trial of the "Hay Point" evaluation system on the understanding that it is only a trial and that the results will be subject to consideration by the Association and the Board. 5) The Association and the Board identify and discuss alternative methods of job evaluation. … … 7) The Association and the Board confer on an appropriate classification structure and in particular pay attention to the concerns expressed by the Association over the introduction of Senior Executive Service (SES) arrangements in some positions. (*The Board officer responsible for ongoing consultancy on job evaluation). 110 Mr Razborsek submitted that there is no agreement on the use of the Hay methodology with the Corporation. 111 Mr Razborsek was particularly critical of the Hay system in his submission at page 408 of transcript where he put: … … It is an evaluation system that is, in Mr Kennedy's evidence, "Flawed throughout the wheel because of its complexity which gives rise to, or in any case, can be manipulated. The particular design of this systems enables employers to manipulate outcomes the company wishes. It is seen by the union and its members that the Corporation uses this system to manipulate outcomes to a stage that it satisfies a senior executive that they are getting the results they are looking for, as shown by the union employee witness statements. This is achieved by the Corporation re-evaluating positions, constantly changing salary points, changing the values, as exampled in exhibit 6(31) and (32), downgrading positions, ignoring current employee competencies, sore thumbing, massaging to get the right result, excluding employee involvement, maintaining confidentiality of results and no recognition of individual skills, yet they are required for each position valued. 112 Mr Razborsek submitted what he put were inconsistencies in the structure and application of the hay system. In particular Mr Razborsek put: · employees were given differing levels of information concerning the Hay system with the majority unaware of how it should be applied although they were required to participate in job description questionnaires; · employees were given differing time frames and differing levels of assistance to complete the Hay questionnaires, some addressing the task as individual job holders, others in groups; · many employees were intimidated by the process but went along anyway to attempt to get the best result; · the evidence of Ms Turner that the Hay system requires managers to determine the job content is inconsistent with the process of agreement or job content signed off by employees and allows the design of a job to suit the salary managers are prepared to pay; · the Hay systems evaluates jobs as new positions with no recognition of employee attributes; · the evidence of Ms Turner that the Hay methodology was chosen as it provides a method of consistent evaluation of a range of complex positions is contradicted by further evidence of Ms Turner on page 4 of exhibit 4 at point 3 where she puts: The positions have been assessed either by Hay job evaluation methodology, benchmarking and/or market comparison or a combination of some or all to determine an appropriate salary level. 113 Mr Razborsek was critical of the "benchmarking" provision within the Hay system, submitting that the organisations relied upon for the "benchmark" were not comparable, whilst Sydney Water, an organisation with similar functional roles, is excluded. 114 Mr Razborsek submitted that the proposals advanced by the Corporation were inconsistent with the practice of salary structure change demonstrated by the evidence of union officials brought by him, who all described arrangements to protect employees by present occupant only arrangements, sunset or grandfather provisions, which can not be found in the Corporation's proposals. Mr Razborsek put that there these arrangements are consistently found in the agreements referred to as opposed to award regulation, which he submitted negated the proposition advanced by Mr Warren that the Commission has never awarded such arrangements. 115 Mr Razborsek submitted that the Corporation has failed to apply the Hay system in a consistent and equitable manner and accordingly should not expect agreement. 116 Mr Razborsek submitted that all current arrangements have been approved by this Commission as being consistent with the legislation of relevant state wage case decisions. Mr Razborsek put that these arrangements form part of the contract of employment between each employee and the Corporation and can not be altered without agreement. 117 Mr Razborsek relied upon " page 412" as authority for this submission. 118 Mr Razborsek submitted that the only avenue open to the Corproation was a special case pursuant to Principle 6, Work Value Changes, of the State Wage Case 2000 (316 IG 1105). 119 Mr Razborsek submitted that in seeking an award pursuant to s.11 and Chapter 3 of the Act, principle 13 of the Wage Fixing Principles became relevant. Principle 13 states: 13 First Award and Extension to an Existing Award (a) In the making of a first award, the long established principles shall apply, ie prima facie the main consideration is the exiting rates and conditions. (b) In the extension of an existing award to new work or to award-free work the rates applicable to such work will be assessed by reference to the value of work already covered by the award. (c) Where a first award (other than a paid rates award) is made it may contain a minimum rate for each classification of employees covered by it. The total minimum rate determined for each classification may be expressed as a minimum classification rate and a supplementary payment which bear a proper relationship to the rates for relevant classifications in other minimum rates awards. 120 Mr Razborsek submitted that Principle 13(b) relates to Principle 6, as does Principle 2. 121 Mr Razborsek submitted that the application by the Corporation must be seen as an ambit claim which, if successful, will solve nothing and create disharmony and unhappiness. Mr Razborsek compared this to the Association's cross application which he put was fair and workable, noting that the principle difference is in the transition and safety net features, not so much the substance of job evaluation. Mr Razborsek submitted that had the Corporation not withdrawn from discussion concerning the transition arrangements these issues were capable of resolution some 14 to 15 months ago. 122 Mr Warren noted the submissions of Mr Razborsek in respect to the consistent attitude toward transition arrangements by the Corporation and acknowledged that this had been the case up to the time of the mass meeting of the Corporation voting to accept the enterprise agreement. Mr Warren submitted that the vote to accept the enterprise agreement changed this position as it was a vote to accept the change in salary structure made plain in the enterprise agreement. 123 Mr Warren refuted the submission made by Mr Razborsek concerning the application of the Hay system and alleged inconsistencies in the evidence of Ms Turner, which he put are developed by taking the evidence out of context. 124 Mr Warren noted that the successful transition to a job evaluation methodology from incremental scale within Telstra involved a move to the Hay system. 125 The issues falling for decision are: 1. Should the Hunter Water Corporation be restrained from the introduction of job evaluation? 2. Should Hunter Water Corporation be constrained from the use of the Hay Job Evaluation System? 3. Should the existing incremental scales be totally abandoned in preference to a job evaluation approach? 4. Should a procedure for evaluation and reward to individual performance be applied? 5. What protection, if any, should be afforded existing employees in transition to a job evaluation structure? 6. Jurisdiction of Commission to provide remedy sought. CONSIDERATION 126 The issue of dispute notified in this matter was confined to: "arrangements to apply to existing employees in respect to future salary maintenance conditions in the event of an existing employee being displaced in a management restructure" 127 During the course of proceedings this issue was expanded to firstly a dispute concerning the transition arrangements from one salary system to the other and then to a dispute over the salary methodology proposed, i.e. the Hay system and the administration of it. 128 I formed the view that management's perception of the dispute reflected in the scope of the notification was optimistically narrow. The Association have proven that their concern has always been to achieve a transition to a new salary system without disadvantage to existing employees. 129 An examination of the mechanics of the Hay system and its administration within the Corporation has been, I am certain, necessary to appropriate comprehension of the transition issue and I trust instructive to both parties. Jurisdiction 130 The disputes settlement procedure required notification "to the Industrial Relations Commission of New South Wales for resolution in accordance with the Act". It is necessary to consider the remedy available pursuant to the Act. 131 The application seeks a variation to an award which has passed its nominal term. 132 Section 17 of the Act makes provision for the variation or rescission of an award and in particular, s.17(3) states: (3) An award may be varied or rescinded in any of the following circumstances only: (a) at any time with the mutual consent of all the parties to the making of the original award, (b) at any time to give effect to a decision of the Full Bench of the Commission under section 50 or 51 (National and State decisions), (c) during its nominal term if the Commission considers that it is not contrary to the public interest to do so and that there is a substantial reason to do so, (d) after its nominal term if the Commission considers that it is not contrary to the public interest to do so. (4) This section extends to a variation or rescission of an award in the course of an arbitration by the Commission under Chapter 3 to resolve an industrial dispute. 133 Whilst the award carries a salaries section the actual salaries paid are prescribed by an enterprise agreement with a nominal term to conclude on 31 May 2001. 134 The enterprise agreement will continue to apply in accordance with s.42 of the Act which states: 42 Term of enterprise agreement (1) An enterprise agreement applies for the period specified in it as its nominal term and, after that period, until terminated in accordance with this Part. (2) The nominal term of an enterprise agreement must not be less than 12 months nor more than 3 years. (3) However, an enterprise agreement made for a project may have a specified nominal term not exceeding the expected duration of the project. (4) An enterprise agreement varying an earlier agreement applies for the residue of the term of the agreement it varies. 135 An enterprise agreement may be varied by the parties as prescribed by s.43 of the Act. There is no legislative capacity for variation of an enterprise agreement by the Commission. The jurisdiction of the Commission is limited to approval of the agreement between the parties. 136 Section 41 of the Act prescribes that agreements prevail over awards. S.41 states: 41 Enterprise Agreements prevail over awards (1) The provisions of an enterprise agreement prevail over the provisions of any award of the Commission that deal with the same matters in so far as the provisions of the award apply to a person bound by the enterprise agreement. This subsection is subject to the terms of the enterprise agreement. (2) Nothing in this Part limits the application to an employee bound by an enterprise agreement of any conditions of employment that apply to employees generally under this Act or any other Act. (3) In this section, award includes: (a) any order of the Commission, other than a dispute order, an order under Part 6 (Unfair Dismissals), a stand-down order under section 126 or any other order that does not set conditions of employment, and (b) a determination under section 63 of the Public Sector Management Act 1988 , or any similar determination relating to employment in the public sector (including employment with an area heal service or a public hospital), and (c) a public sector industrial agreement, and (d) a former industrial agreement, and (e) any other instrument made under this Act, or made under any other Act, relating to conditions of employment that is declared by the regulations to be an award for the purposes of this section. 137 Consideration of the above noted legislation prescription leads to the conclusion that should the award be varied in the terms sought by the Corporation, such variation would be futile as it would be immediately negated by the terms of the enterprise agreement. 138 This cannot, however, be the end of these proceedings. The parties seek assistance from the Commission in meeting a mutual commitment to transition from one salary system to another. I find that neither party have resiled from that commitment. The target date set in the 1998 E.A. has proven to be an ambition beyond the capacity of the parties, however the objective and commitment to it remain. In these circumstances it is appropriate to consider issues of merit raised in the proceedings. MERIT 139 The Corporation is an important public utility with corresponding public interest in its efficiency and effectiveness. I am satisfied on the evidence of Mr O'Hearn that a case for change has been made out. The evidence of Ms Turner establishes that the Hay system is that preferred and applied by the Corporation. 140 Employee witnesses gave evidence of concern with the administration of the Hay system and outcomes reported. There is I think a remedy to this in greater familiarity and experience with the system and scope for resolution of particular disputes concerning evaluated outcomes by processing these disputes in accordance with the disputes settlement procedure. I note that this is not an uncommon feature of job evaluation systems in the industry sectors subject to evidence brought by Mr Razborsek. 141 Of more significant concern to employee witnesses is the lack of any method to recognise individual performance. 142 The evidence of employee witnesses brought by Mr Razborsek went tangentially to an irregular system of performance bonus or personal payments. Those giving evidence able to go no further than attesting that such a system existed but they were not part of it. 143 The evidence brought by Mr Razborsek of job evaluation systems applied in various industry sectors is that it is unusual to encounter a single point job evaluation system without an individual performance appraisal system to support it. 144 The red circling proposal contained within the Corporation's proposal, which differentiates job evaluations falling within five percent of the current salary, is an arbitrary distinction which is not supported by any other logic than cost containment. The rationale advanced by the Corporation ignores the existing contracts of employment, rights and legitimate expectation of employees party to those contracts of employment detailed in the current award and enterprise agreement. The disadvantage to employees advanced by Mr Razborsek is made out on the evidence. 145 I find this aspect of the proposal inequitable and contrary to the public interest, which holds sanctity of contract and the public good arising from compliance with commitment at a high level. 146 There is an important distinction to be made between those employees transferring to a system of job evaluation and those remaining on the incremental scale. The evidence supports a conclusion that where employees move to a job evaluation method, future wage increases arise only from performance appraisal and general movements emanating from enterprise bargaining or state wage case decisions. Where employees remain on the incremental scale future increases come from movement through the scale or adjustment of the scale from enterprise bargaining and/or state wage case decisions. 147 It is neither logical, fair, nor equitable to conclude that the Corporation's employees voting to accept this enterprise agreement, a significant factor being a series of wage increases over the life of the agreement, would at the same time accept exclusion from those or future negotiated wage increases by the introduction of a salary administration system. 148 Mr Warren submitted that the Commission has never awarded or approved an agreement which provided for continuation of rights to former incremental scales. 149 This is not supported by the evidence. On the contrary the parties were unable to provide precedent where the Commission has removed an incremental scale over objection, the body of experience being that the transition has occurred by agreement between the parties, the role of the Commission being that of mediator and conciliator and to approve the outcome by enterprise agreement or an award by consent of the parties. 150 I find the proposal advanced by Mr Razborsek (exhibit 53), with some qualification, to be an appropriate and equitable way forward. I do not regard it as an abrogation of the commitment given in the 1998 E.A. This proposal acknowledges the need for change and is consistent with the commitment found in the 1998 E.A. The parties should pursue further negotiation on the basis of this proposal, with a view to achieving agreement. 151 It must be recognised that there is an inevitable transition cost. A cost is incurred for both employees and management from remaining in the present system. There are also costs to both in transition. The challenge to the parties is to contain those costs to reasonable and equitable levels. Their mutual advantage is in embracing the transition costs which take them forward. 152 The recommended discussions should proceed on the basis of the issues of jurisdiction and effective remedy set out above and the following observations in respect to the remaining key issues identified at page 43 of this decision. 1. Should the Hunter Water Corporation be restrained from the introduction of job evaluation? No. There is agreement to change. Such change should not unilaterally extinguish existing rights of employees pursuant to the existing contracts of employment. 2. Should Hunter Water Corporation be constrained from the use of the Hay Job Evaluation System? No. The Hay job evaluation methodology is the preferred and established procedure with the Corporation. As noted by the parties to these proceedings, the Hay methodology is one of many available. It is not appropriate, in my view, for this Commission to endorse or preclude any particular system. Where the use of whatever methodology chosen results in agreement, there is no issue. As a registered industrial organisation the Association has rights of representation of its members. Whether the Association chooses to exercise those rights as a participant in the job evaluation process or remain apart from the process and exercise its rights of representation in circumstances of dispute in accordance with the disputes settlement procedure, or both, is a matter for it. There are many examples of mature and responsible involvement of registered industrial organisations and representatives thereof in the salary administration process to be found in the industry sectors subject to evidence brought by Mr Razborsek in these proceedings. The wage and salary fixing role of the Commission arises in dispute resolution or award application. That function of the Commission is exercised in accordance with the wage fixation principles as determined by the relevant state wage case. There is a substantial body of case law with which the parties are familiar, but not referred to in these proceedings, which sets out the wage fixation principles applied by the Commission. 3. Should the existing incremental scales be totally abandoned in preference to a job evaluation approach? No. These scales will fall into obsolescence as a consequence of an orderly and equitable transition to the alternate system over time, or sooner by agreement of the parties. 4. Should a procedure for evaluation and reward to individual performance be applied? This is a matter for consideration by the Corporation. I strongly recommend that attention be afforded to the matter. 5. What protection, if any, should be afforded existing employees in transition to a job evaluation structure? Persons transferring to a job value salary system do so by alteration to their contract of employment. A unilateral change to a contract of employment is not open. The parties come to agreement or in fact one party repudiates the contract. Whilst transition rules or policies may be able to be developed, implementation is by offer and acceptance. 153 Application for variation of the Award by the corporation is refused. The parties are directed to further confer in accordance with their obligations pursuant to the relevant disputes settlement procedure and their commitment to revision of the current salary system. 154 There is much to be gained from an examination of the systems employed and methods of communication applied in the industry sectors subject to evidence in this matter and accordingly I recommend the parties jointly investigate the utility of these examples within the Corporation. 155 The Commission remains available to assist the parties as required by the disputes settlement procedures and the Act. 156 Pursuant to s.135(9) of the Act this matter is listed for report and further compulsory conference proceedings at 10.30am on 10 October 2000. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.