Industrial Relations Commission of New South Wales CITATION: AWU v Bluescope Steel (AIS) Pty Ltd [2006] NSWIRComm 318 APPELLANT The Australian Workers' Union, New South Wales PARTIES: RESPONDENT BlueScope Steel (AIS) Pty Ltd FILE NUMBER(S): IRC 2999 of 2006 CORAM: Wright J President; Walton J Vice-President; McLeay C CATCHWORDS: Appeal - Industrial dispute - Hearing at first instance pursuant to Referral Agreement made under s 146A of the Industrial Relations Act - Scope of appeal provided under Referral Agreement - Construction of agreement - Leave to appeal - Issues of merit - Award provisions concerning management of change - Leave to appeal as to issues of principle and errors of law - Leave otherwise refused - Appeal dismissed. LEGISLATION CITED: Industrial Relations Act 1996 ss 130, 146A, 188, 191, 192 CASES CITED: BlueScope Steel (AIS) Pty Ltd v AWU [2006] NSWIRComm 248 Knowles v Anglican Church Property Trust (No. 2) (1999) 95 IR 380 HEARING DATES: 28/09/2006 EXTEMPORE JUDGMENT DATE: 09/28/2006 APPELLANT Mr A A Hatcher of counsel The Australian Workers' Union, New South Wales LEGAL REPRESENTATIVES: RESPONDENT Mr K Brotherson Solicitor Blake Dawson Waldron, Lawyers JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: WRIGHT J, President WALTON J, Vice-President McLEAY C Thursday 28 September 2006 Matter No IRC 2999 of 2006 THE AUSTRALIAN WORKERS' UNION, NEW SOUTH WALES AND BLUESCOPE STEEL (AIS) PTY LTD Application by The Australian Workers' Union, New South Wales for leave to appeal and appeal against a decision of Deputy President Grayson given on 4 August 2006 in Matter Nos IRC 2281 of 2006 and 2282 of 2006 DECISION OF THE COMMISSION [2005] NSWIRComm 318 (Ex tempore) 1 On 15 December 2005, BlueScope Steel (AIS) Pty Limited (the Company) commenced a formal consultation process with its employees in the Dispatch and Processing Departments of its Plate Mill operation at Port Kembla and with the Australian Workers' Union, New South Wales (the Union) pursuant to the terms of the BlueScope Steel (AIS) Pty Limited - Port Kembla Steelworks Employees Award 2006 (the Award) as to changes it proposed to make in those departments. The subject matter of these appeal proceedings concerns the Company's proposal in this respect to introduce a senior operator position and to reduce the allocated breaks per shift from 90 minutes to 60 minutes by the removal of a paid 30 minute shower break. 2 The consultation process was unsuccessful. The Union then invoked the status quo provisions of clause 36.4.3 (j) of the Award in a letter dated 10 April 2006. These statute quo provisions had the effect of preventing the Company from implementing the changes it had announced until the dispute resolution provisions of the award had been exhausted (which may have confined, altered or prohibited the changes). 3 In accordance with those provisions, on 1 May 2006, the Company notified the existence of an industrial dispute in the form of a notification under s130 of the Industrial Relations Act 1996 (the Act) as to its proposal to make the subject changes in the Plate Mill. Strictly speaking, however, the matter came before the Commission in consequence of a Referral Agreement entered into between the Company and the Union pursuant to s146A of the Act. That agreement was entered into on 10 May 2006 and provided that the Commission might make a binding determination in resolution of the dispute concerning the two aforementioned changes sought to be made by the Company by the exercise of specified functions and powers of conciliation, arbitration and, ultimately, by the hearing of an appeal (the scope of which was again regulated by the Referral Agreement). 4 We would note, at this point, that the Company, in fact, filed two dispute notifications and two Referral Agreements; one notification and agreement concerning the Plate Mill Dispatch Department and the other notification and agreement the Plate Mill Processing Department. Nothing turns on this, although it would seem to involve some unnecessary duplication of the process. 5 On 4 August 2006, Grayson DP gave his decision in relation to the matters referred. In essence, he determined that the changes proposed by the Company should be permitted and that the status quo restrictions should thereby be removed: BlueScope Steel (AIS) Pty Ltd v AWU [2006] NSWIRComm 248. 6 By an application for leave to appeal and appeal filed on 24 August 2006, the Union invoked the provisions of this Referral Agreement permitting an appeal from the Deputy President's decision. This decision concerns that application and appeal. Nature of the appeal 7 The appeal before us is therefore confined (as the parties to the proceedings recognised) by the terms of the Referral Agreement and the jurisdiction of the Commission is derived from s146A (9) of the Act. The relevant clause of the agreement, in this respect, is as follows: 2. Either party may appeal any binding determination of the Commission arising from the operation of clause 1 of this Referral Agreement to a Full Bench of the Commission in accordance with Part 7, Ch 4 of the Industrial Relations Act 1996. Where such an appeal is made, the Full Bench shall have the same powers as contained in section 192 of the Industrial Relations Act 1996. 8 The parties agreed that the provisions of s188 of the Act concerning leave to appeal operate in relation to this matter. However, there was contest as to whether s191 of the Act was excluded by the operation of cl 2 of the Referral Agreement; the Union submitting that the appeal should proceed by way of re-hearing. 9 We do not agree with the Union's contentions in this respect. In our view the final sentence of cl 2 of the Referral Agreement provides that the powers which may be exercised by the Commission on the appeal are those provided in s192 of the Act but does not otherwise exclude the provisions of Part 7 of Chapter 4 of the Act. In other words, it does not confine the general scope of the appeal referred to in the first sentence of the clause. The words used in the second sentence do not expressly convey that it is to be read so as to confine the general reference of powers in the first sentence. A clear expression of such limitation would be expected where the plain purpose of the first sentence is to refer the Commission's ordinary appeal functions and powers. 10 This conclusion also follows from a proper recognition of the nature of s146A of the Act. The section enables the Commission to resolve disputes by the making of determinations which are binding on the parties, not because of the exercise of a power under the Act, but because of the referral. If the powers referred in an agreement made under s146A of the Act merely provide a power to the Commission to hear an appeal, without more, then the Commission would be relatively at large in the determination of the appeal and the relief it may give, subject to its decision being relevantly and logically connected to the subject matter of the dispute referred. In our view, the purpose of the second sentence of the provision is to make clear that the Commission's powers on appeal and the scope of the appeal are those ordinarily applying under the Act. 11 Further, where parties have referred to the Commission powers and functions under a particular Chapter, Part or section of the Act, we consider that the matter should be determined in accordance with the jurisprudence of the Commission in relation to those legislative provisions, subject to any express limitation or extension identified in the Referral Agreement. Here, the powers to determine this appeal are referred to as those generally under Part 7 of Chapter 4. In relation to the requirement for the grant of leave, we consider that the principles adopted by this Commission in that respect should be applied. The classic statement of those principles is in Knowles v Anglican Church Property Trust (No. 2) (1999) 95 IR 380. Scope of the appeal 12 Despite the application for leave to appeal challenging the whole of the Deputy President's decision, the Union did not make submissions challenging the Deputy President's decision in relation to the senior operator position. This decision is, therefore, confined to a consideration of the Deputy President's decision in relation to the elimination of the paid 30 minute shower break. Leave to appeal 13 We consider that leave to appeal should be granted in this matter with respect to the issues of law and principle. This is the first occasion in which the Commission has had the opportunity to consider an appeal brought in relation to a Referral Agreement. The matter raises an issue of general importance to industrial jurisprudence, as it concerns the appropriate principles to be applied in the case of disputes over workplace changes where an award provides specific principles and prescriptions regulating that process of change. This latter matter is of particular significance to the Port Kembla Steelworks where much of the award is designed to regulate such matters in considerable detail. 14 However, leave to appeal should be otherwise refused. This is primarily because the grounds of appeal almost entirely rely upon contentions not advanced at first instance: Knowles at 381-382. Those omissions are significant, as the development of arguments now advanced may have materially altered the course of the proceedings at first instance if properly advanced (and in this regard we make due allowance that the Union was not legally represented at first instance). We would add that, even if the correct tests had been applied, then there is real doubt as to their success, again because of the nature of the case run at first instance. For example, it may have been argued that the criterion of "fairness" required an assessment of fair compensation, but as no aspect of compensation was raised at first instance, the issue is simply moot. Further, whilst issues of efficiency were raised at first instance (and not adequately resolved by his Honour), it is difficult to see on the economic evidence and evidence as to the likelihood of efficiency gains arising from the change, that any different result would follow a further review at first instance. Errors of law and principle 15 His Honour determined the matter in accordance with what is described as a "fundamental principle". That principle was stated as the right of an employer to manage its operations as it deemed appropriate provided the consequences of exercising such a right did not place an unjust or unreasonable burden on employees. In adopting this approach, his Honour, in essence, adopted the contentions of the Company at first instance. That constituted an error of both law and principle to which we now turn. 16 His Honour also dismissed that part of the Union's case in which, as his Honour referred to it, the Union contended that "the changes proposed by the Company have the capacity or are likely to deliver the projected gains" sought to be achieved by the Company. His Honour erroneously found that "it is not to point that the efficiency and productivity gains projected by the Company may not be achieved by the changes proposed". This also involved error because the finding failed to address the requirements of cl 36.4.1 (c) of the award as we discuss below. 17 The award contains a detailed prescription for resolving "Claims, Issues and Disputes" (Clause 36). It provides for a particular and detailed regime for resolving such claims and disputes where the employer proposed to introduce change (Clause 36.4). There was no dispute at first instance or in this appeal that Clause 36.4, "Introduction of Change including Outsourcing", applied to the present proceedings. Clause 36.4.1 was described as "Principles concerning the management of change" and specified that the parties were to observe certain key principles concerning the "management of change". 18 The award was thus very clear as to what principles were to govern the present matter. They were not those stated or applied by the Deputy President. It was not open to his Honour to substitute the general principle referred to in his decision for the specific requirements of the award, including the tests laid down in Clause 36.4.1 (c) even if there may have been some overlap between the award principle and those applying generally in industrial jurisprudence. Clause 36.4.1 appears below: 36.4.1 Principles concerning the management of change: The parties agree to the following key principles concerning the management of change (a) The parties recognise and accept that change is an inevitable and increasingly necessary part of the steel industry; (b) Change must be ongoing to ensure that the Company remain viable and employee expectation concerning security of employment can be satisfied; (c) In considering the desirability and business case for any proposed change the tests to be applied are requirements for the changes to be: safe; efficient; legal; and fair. (d) The parties commit to consult and abide by the dispute settling procedures provided in this Award in the event that proposed changes are not agreed. In support of this commitment there will be both detailed communication and strong reinforcement by the Company and Unions in respect of these procedures. Subject to any disagreement being dealt with in accordance with agreed procedures, and in the case of significant change 36.4.3, the change will be able to be implemented. (e) All parties share an intent that there be "zero industrial action" and to that end will actively ensure that employees, delegates and officials will, on each and every occasion where a dispute arises and is not resolved, follow the applicable dispute settling procedure and not take industrial action. 19 We do not agree with the submissions advanced by Mr Brotherson, solicitor for the Company, that the provisions of cl 36.4.1 of the award are confined to the Company's decision making process and have no application to later processes of consultation or dispute resolution in the balance of cl 36.4. Apart from being contrary to ordinary principles of construction (given the context in which cl 36.4.1 appears in cl 36) the contention also denies the plain intention of the provision which is to allow change to be advanced by the Company within the principles set out in cl 36.4.1. The contrary proposition is nonsensical, as it would involve the decision making process being governed by such principles but later stages directly bearing upon the change process (such as consultation) excluding such principles. 20 As a result of this error of principle, his Honour did not attend to the relevant questions arising from the terms of that sub-clause in the present matter, namely, whether the change met the test of efficiency, legality and fairness. His Honour was required to make findings concerning "fairness" and not apply the more restrictive notions arising from the earlier jurisprudence of the Commission as to manning disputes. He was also required to resolve the Union's case as to "efficiency" in accordance with the award clause (and if a case had been mounted, as such, whether changes proposed were lawful). 21 Our decision should not be taken as suggesting that the onus of making out a case for the retention of the status quo or resisting changes on grounds which rely on the principles in clause 36.4.1 (c) falls on the Company. Such an approach would constitute error. The onus in such cases falls upon the Union to make out a case that the changes proposed by management should not be made or should be offset by some compensation or other adjustment in conditions of employment. This approach gives full recognition to the requirements of cl 36.4.1 (b) of the award which provides: (b) Change must be ongoing to ensure that the Company remain viable and employee expectation concerning security of employment can be satisfied. Conclusion 22 As we earlier observed, we do not consider these findings of error of principle should result in the grant of leave beyond their immediate correction. Even those issues of principle were not fully ventilated below, and the merit issues sought to be raised by them were not, thereby, properly ventilated before Grayson DP. 23 Further, a number of his Honour's factual findings which were open to him and, largely unchallenged in this appeal, create real doubts as to the merits of the challenge made to the proposed change. The situation may have been different if fair compensation was argued below, but it was not and thus the merits of such a contention have never been considered. 24 The orders we make in this matter are that leave to appeal is granted to the extent referred to in this decision, but otherwise refused; the appeal is dismissed. ________________ 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.