Industrial Relations Commission of New South Wales CITATION: ETU v Integral Energy [2010] NSWIRComm 80 PARTIES: Electrical Trades Union of Australia, New South Wales Branch Integral Energy FILE NUMBER(S): IRC 178 of 2010 CORAM: Grayson DP CATCHWORDS: Proposed variation of employer's motor vehicle policy - Subsidy arrangements for employees who use private vehicles for business purposes - Basis for calculation of subsidy - Adequacy of subsidy - Member of Full Bench delegated to conduct conciliation - Evidence based conciliation process - Agreement to be bound by recommendation - Recommendation made. LEGISLATION CITED: Industrial Relations Act 1996 Corrections Health Service Nurses' (State) Award [1999] NSWIRComm 123 (30 March 1999) CASES CITED: Crown Employees (Teachers in Schools and Related Employees) Salaries and Conditions Award and crown Employees (Teachers in TAFE and Related Employees) Salaries and Conditions Award [2008] NSWIRComm 209 94 November 2008) Re NSW Education Employees (Non-Continuing Contract Employment) Award (1999) 92 IR 239 HEARING DATES: 7 June 2010, 10 June 2010, 15 June 2010, 22 June 2010 DATE OF JUDGMENT: 24 June 2010 ETU Ms Rebecca Mifsud, Legal Officer LEGAL REPRESENTATIVES: Integral Energy Mr Mark Greenhill, Manager Employer Relations JUDGMENT: - 5 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: Grayson DP on Full Bench delegation 24 June 2010 Matter No IRC 178 of 2010 ETU v Integral Energy Notification under section 146B by Electrical Trades Union of Australia, New South Wales Branch to refer dispute with Integral Energy re vehicle policy STATEMENT AND RECOMMENDATION [2010] NSWIRComm 80 1 In the course of conciliation on 7 June 2010, 10 June 2010 and 15 June 2010 the parties have moved constructively towards a refinement and narrowing of the issues which divide them to the point where the matter proceeded on 22 June 2010 by way of evidence based conciliation leading to a recommendation which the Commission will now make and by which the parties agree to be bound. 2 By way of background the dispute relates to a proposal by Integral Energy (IE) to implement a motor vehicle fleet improvement plan which has or is designed to achieve three main objectives: a fleet that is safe for employees a fleet that is environmentally clean a fleet that is in a business-use sense, good for customers 3 Integral Energy presently operates a fleet of approximately 1,250 vehicles with an estimated replacement value of over $100 million and annual fuel costs in the order of $5.5 million 4 The motor vehicle improvement plan is proposed to be implemented by way of a variation to IE's motor vehicle policy. Such a variation or amendment to the policy is permitted subject to consultation and negotiation with the respondent unions and employees prior to implementation. This requirement is found in a number of enterprise agreements covering Managers/Specialists in one case and Supervisory Employees in another case. The agreements are underpinned by the Integral Energy Award 2008 and they expressly provide among other things that it is not IE's intention that such employees be worse off as a result of policy changes. 5 For present purposes, the dispute may be conveniently divided into three parts: (i) Stage 1 - vehicles over 3.5 tonnes (ii) Stage 2 - light commercial vehicles (iii) Stage 3 - private leaseback arrangements 6 It is the last of those three parts with which the Commission and the parties are presently concerned and as earlier observed to their credit the parties have worked constructively in narrowing the issues between them in relation to private leaseback arrangements to one remaining issue namely, the subsidy afforded by IE to those employees who agree to use their privately owned vehicles for business purposes. 7 Presently that subsidy is calculated on the basis of the cost of a 4 cylinder green passenger vehicle travelling 25,000kms per year. 25,000kms was chosen as the basis for calculation of the motor vehicle subsidy as it was the average kilometres driven per year by IE's employees for business purposes. 8 The subsidy is applied across three usage categories: 100% for high business usage 50% for medium business usage 20% for low business usage 9 The particular category into which individual employees are placed is approved by the Group General Manager Corporate Services and the Chief Financial Officer on the recommendation of the relevant Line Manager. In the current financial year the subsidy is calculated at $12,780 and for the next financial year at $11,400. The proposed reduction in the subsidy derives from longer term (4 years) novated lease arrangements and reduced variable costs (eg fuel etc) and whilst the subsidy is re-calculated each year the amount of the subsidy is fixed for a period of 4 years at the rate applicable at the time an employee enters into the leaseback arrangement. 10 For its part IE argues strongly that the quantum of subsidy deriving as it does from the base rate applicable for a 4 cylinder green vehicle, provides a fair and equitable benefit in the hands of employees and an adequate reimbursement for the business use of the employees vehicle. 11 It is the adequacy of the subsidy which the ETU specifically challenges on the basis that employees who choose for family and/or other personal reasons, to acquire a larger than 4 cylinder vehicle are disadvantaged in that they do not fully recover the costs incurred in using their vehicle for business purposes. Conversely, it is accepted by the ETU that the subsidy arrangement has the virtue of removing from employees any constraints in individual choice of vehicle save only for the requirement that the vehicle chosen by the employee and offered to the employer for business use, be fit for that purpose. 12 Integral Energy argued that the method of calculation of the subsidy using among other things fuel costs which are inflated against present day actual fuel costs goes at least some way towards bridging any gap in that regard. It further argued that a possible means of resolving the existing dispute, if the Commission were so disposed, might be to preserve the existing rate of $12,780 rather than reduce that rate on and from the commencement of the next financial year as planned. That proposition has been taken into account by the Commission in formulating this recommendation. 13 For its part the ETU strongly relies upon the industrial circumstances giving rise to the motor vehicle subsidy arrangements in the context of enterprise bargaining some years ago. In that regard it can be taken without dispute that each of the bargaining parties at that time adopted a give and take approach in achieving the consent outcome which among other things gave rise to the motor vehicle subsidy arrangement. In doing so it was agreed between the parties at the time and it is the fundamental basis upon which the ETU builds its case, that no employee would be intentionally adversely affected by the arrangement and in formulating its recommendation here, the Commission would have regard to the material received in private conference purporting to demonstrate adverse effect on certain employees if IE implements the revised policy around motor vehicle subsidy. I note in that regard that the status quo applies by agreement. 14 I further note that in the course of receiving material in private conference, the Commission was taken to perceived deficiencies in the way in which the private leaseback arrangements apply beyond the actual quantum of the subsidy. These perceived deficiencies included but were not limited to the way in which the subsidy fell unevenly as between low business mileage vehicles and high business mileage vehicles and the way in which the latter group may be unfairly treated simply because their private use forms a smaller proportion of overall use and thus entitles them to less than 100% of the subsidy (see [8] above). 15 Integral Energy further argued that the Commission would as a contextual matter have regard to the industrial circumstances in which the parties agreed to a no extra claims provision within the enterprise award and would also have regard to the authorities relied upon by IE as to the operation of no extra claims clauses generally (Corrections Health Service Nurses' (State) Award [1999] NSWIRComm 123 (30 March 1999), Crown Employees (Teachers in Schools and Related Employees) Salaries and Conditions Award and crown Employees (Teachers in TAFE and Related Employees) Salaries and Conditions Award [2008] NSWIRComm 209 94 November 2008), Re NSW Education Employees (Non-Continuing Contract Employment) Award (1999) 92 IR 239). Importantly IE emphasised that its argument as to the context in which the no extra claims clause should be considered by the Commission in no way derogates from and is not intended to be a challenge to the Commission's power to make a recommendation as sought by the parties and by which the parties agree to be bound. 16 There is no precise mathematical formula which may be applied to the resolution of this particular dispute and the formulation of the Commission's recommendation necessarily involves consideration of the intrinsic value of dispute resolution per se and in that way calls for a judgment which takes account not only of the cogent arguments of the respective parties but also of the desirability, consistent with the primary objects of the Industrial Relations Act 1996 (s 3) of avoiding and settling industrial disputes. 17 In all the circumstances and after careful consideration of the evidence and arguments presented I make the following recommendation: 1. For the financial year 2010/11 only, the maximum motor vehicle subsidy should increase from $11,400 to $13,780 per annum, an increase of $2,380 or 21% over the rate which would otherwise apply. Arrangements entered into on this basis should apply for the same duration as presently applies (viz 4 years). 2. For those employees whose vehicles fall due for replacement in financial year 2011/12 an opportunity should be provided for them to bring forward their replacement to financial year 2010/11 and thus attract a maximum subsidy of $13,780 throughout the usual 4 year period. 3. Those employees who already have an approved motor vehicle subsidy during financial year 2009/10 should have their subsidy increased to a maximum of $13,780 from their date of approval. 4. From 1 July 2011 according to company policy Integral Energy should re-assess the amount of the subsidy in consultation with the unions (consistent with the consultative processes in the Award). Any dispute in relation to the re-calculated rate should be referred by either party to this Commission for assistance. 5. The function of approval for the purposes of the motor vehicle subsidy should continue to with the Group General Manager Corporate Services and the Chief Financial Officer based as presently, on a business case assessment. 18 Upon publication of this recommendation these proceedings are adjourned until 6 September 2010 at which time in accordance with the programme fixed by the Commission in consultation with the parties, the proceedings will resume at Integral Energy's premises at Huntingwood. The parties are directed in the usual way to provide my chambers with material to be relied upon in the resumed proceedings as well as directions as to the on-site venue where the proceedings will be convened. That information should be received not later than Wednesday 1 September 2010. 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