Industrial Relations Commission New South Wales Medium Neutral Citation: Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v BlueScope Steel (AIS) Pty Limited [2011] NSWIRComm 1049 Hearing dates: 29 September, 2011 Decision date: 14 October 2011 Before: Connor C Decision: Claim for entitlement for payment of production bonus to employees acting in breach of grievance settling procedure rejected Catchwords: INDUSTRIAL DISPUTE - steelworks - referral agreement - jurisdiction - question of interpretation of an industrial instrument - declaratory relief - bonus payment scheme - whether industrial action in breach of a dispute settling procedure deprived employees of receipt of the bonus payment Legislation Cited: Industrial Relations Act 1996 Cases Cited: Bryce v Apperley (1998) 82 IR 448 Cepus v. Heggies Transport Pty Limited (1994) 52 IR 123 Codelfa Construction Pty Limited v. State Rail Authority of New South Wales (1982) 149 CLR 337 George A Bond and Company Limited v McKenzie (1929) AR 498 Kellogg (Australia) Pty Limited v National Union of Workers (1998) 89 IR 391 Kingmill Australia Pty Limited v Federated Clerks' Union of Australia (2001) 106 IR 217 New England Area Health Services Case - unreported Perisher Blue v Australian Workers Union (1999) 91 IR 274 South Eastern Sydney and Illawarra Area Health Service v Health Services Union (2007) 165 IR 43 State of New South Wales v Commonwealth of Australia (2006) 156 IR 1 Category: Principal judgment Parties: Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (applicant) BlueScope Steel (AIS) Pty Limited (respondent) Representation: Adam Walkaden Atuomotive, Food, Metals, Engineering, Printing and Kindred Industries Union (Applicant and iuntervenors) Ken Brotherson Duncan Cotterill layers (Respondent) File Number(s): IRC 139 of 2011 DECISION INTRODUCTION 1Pursuant to the provisions of s.146B of the Industrial Relations Act 1996 , the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (referred to as the Australian Manufacturing Workers Union) has lodged a notification of an industrial dispute with BlueScope Steel (AIS) Pty Limited. At issue is the scheme for the payment of the bonus - the performance recognition payment [PRP] - provided quarterly to employees of BlueScope Steel and the appropriate criteria to be used for such payment. The PRP is contained in Clause 44, Lump Sum Payment Scheme, of the BlueScope Steel (AIS) Pty Limited - Port Kembla Steelworks Award which is in the following terms: "44.1. Purpose of the Agreement - This clause provides for quarterly performance recognition payments directly related to business performance improvement measured against performance indicators. The purpose of the agreement is to: 44.1.1 reinforce commitment to the understandings set out in Port Kembla Steelworks Steel Industry Agreements to work to ensure a viable steelmaking industry at Port Kembla; 44.1.2 in achieving the company's critical business objectives: in this regard the parties commit themselves to co-operating in measures to achieve and maintain a world class steelworks; and 44.1.3 recognise the contribution of employees to improved performance when this has occurred. 2. Payment - Performance recognition payments at the end of each quarter will be made to all employees of the company on the payroll at the end of that quarter for which the payment is made, except: employees covered by the Port Kembla Product Berth Enterprise Development Agreement 2002 and the Port Kembla Bulk Operations Enterprise Agreement 2002, or any replacement agreement or award; employees off work on non-accident pay workers' compensation. This performance recognition payment will be calculated as a percentage of total gross earnings, as defined. Employees who leave the company during the period will not be eligible for payment. 3. Principles of Payment System - The terms of the performance improvement recognition payments system are: 44.3.1 In addition to other payments, there will be a quarterly performance recognition payment directly related to reasonably achievable business performance improvements measured against the agreed performance indicator. The agreed performance indicator at Port Kembla Steelworks will be determined by the company following consultation with unions who are a party to this award. 44.3.2 The performance recognition payments will be paid at the end of each quarter and will be calculated as a percentage of total gross earnings. For this purpose, total gross earnings does not include payments in respect of absences on workers' compensation by employees not in receipt of accident pay or termination payments or performance recognition payments paid during the quarter but related to a previous quarter. 44.3.3 The percentage of total gross earnings to be paid will be determined by reference to actual performance measured against the 4.5% target performance indicator. 44.3.4 On achievement of the agreed performance targets, 4.5% of total gross earnings, as defined for the purpose of the Scheme, with payments varying above and below this amount possible, depending upon performance. The maximum quarterly payment to be made under this Scheme will not exceed 5.5% of gross earnings. 44.3.5 Payments will be included in the direct deposit and (itemised separately) on the pay docket of the first administratively convenient pay fortnight following the end of the quarter. Payments will be taxed at the individual's appropriate marginal rate in the pay fortnight in which the payment is made. The payments, including tax deductions, will be included in each employee's group certificate. 44.4 Required Actions - The parties acknowledge that the continued viability of the Port Kembla Steelworks is dependent upon taking continual steps to reduce total costs and increase prime product tonnes invoiced. Typical measures which the parties agree to work towards to reduce total cost of sales, increased prime product tonnes invoiced and promote adherence to agreed dispute settling procedures." 2Initially, this dispute emerged in the metal coating line [MCL] of BlueScope Steel Limited: the BlueScope Steel Limited Springhill and CRM Employees Award has a comparable provision to that of Clause 44 of the AIS Award. The AMWU lodged a notification of a dispute under s.146B with respect to that matter. The dispute involving the MCL was the subject of conference proceedings on Tuesday, 26 October, 2010, Tuesday, 9 November, 2010, Monday, 31 January, 2011 and Wednesday, 16 February, 2011. The Electrical Trades Union of Australia and the Australian Workers Union intervened in the proceedings in support of the AMWU position. 3The issue insofar as it affects the MCL employees has been resolved by conciliation and I granted the AMWU leave to discontinue that matter pursuant to Rule 12.1 of the Uniform Civil Procedure Rules. The issue in dispute over the interpretation of the entitlements for lump sum payments remains unresolved, however, prompting the AMWU to lodge its current s.146B notification seeking essentially a declaration of the issue in dispute. 4I set the matter down for a conference on Wednesday, 2 March, 2011 and Monday, 28 March, 2011. Ultimately, the matter was to proceed to hearing and I held further proceedings on Monday, 6 June, 2011 and Thursday, 16 June, 2011 for directions to be issued for the matter to be arbitrated. The hearing scheduled initially for Monday, 29 August, 2011 was vacated at the request of the parties and rescheduled for Wednesday, 28 September, 2011. The parties were content to rely on the written submissions they had provided at my direction. The proceedings (in chambers) were conducted in the Commission's premises at 90 Crown Street, Wollongong. In the proceedings Mr Walkaden has represented the AMWU and Mr Brotherson has represented BlueScope Steel. JURISDICTION 5Essentially, the parties are seeking a determination of the criteria flowing from clause 44 of the BlueScope Steel Award for the payment of the PRP and, in particular, whether industrial action in breach of the established dispute settlement procedure by any employees would automatically disqualify them from receipt of the PRP during the relevant quarter in which that industrial action took place. 6Whilst, of course, BlueScope Steel is a trading corporation within the meaning of S.51(xx) of the Commonwealth Constitution and, as such, primarily falling under the Federal industrial regime [ State of New South Wales v Commonwealth of Australia (2006) 156 IR 1], s.146B authorises an application to be made for the resolution of any dispute before a member of the State Commission where the Federal industrial instrument - in this case the AIS Award - to conciliate and/or arbitrate such a matter. 7Ultimately, as Mr Walkaden indicated in his written submissions, this is a hearing to determine the correct meaning given to a provision in an industrial instrument as it is to be read, ie a question of interpretation of the instrument. And jurisdictional issues arise with such a question. Originally, my jurisdiction to arbitrate to resolve industrial disputes referred to me was dictated essentially by the terms of s.136(1), viz: "The Commission may, in arbitration proceedings, do any one or more of the following: (a) make a recommendation or give a direction to the parties to the industrial dispute, (b) make or vary an award under Part 1 of Chapter 2, (c) make a dispute order under Part 2, (d) make any other kind of order it is authorised to make (including an order made on an interim basis)." 8What is being sought in these proceedings is declaratory relief which I accept to be strictly beyond the scope of s.136(1). The interpretation of documents remains primarily a judicial function and the subject of declaratory relief, something which, by virtue of s.154, is reserved in the State IR Act to the Commission in Court Session, viz: "(1) The Commission in Court Session may make binding declarations of right in relation to a matter in which the Commission (however constituted) has jurisdiction. The Commission in Court Session may do so, whether or not any consequential relief is or could be claimed. (2) Proceedings before the Commission in Court Session are not open to objection on the ground that a declaration of right only is sought." 9Originally, therefore declaratory relief, independent of any particular industrial dispute, would fall outside the scope of s.130 proceedings. That was certainly the position taken by Hungerford J in Kellogg (Australia) Pty Limited v National Union of Workers (1998) 89 IR 391 when he stated (at p.392): "...Although the arbitration was before the Commission, moved by Kellogg pursuant to s.136(1)(d) of the Act to '...make any other kind of order it is authorised to make...' in relation to the dispute, it was clear that the relief sought arose in the dispute proceedings but was in the nature of a declaration as to the right of Kellogg to implement its proposals having in mind the provisions of the award. By reason of s.154 of the Act, relief of that nature is exclusively within the declaratory jurisdiction of the Commission in Court Session..." 10By contrast, the interpretation of industrial instruments in s.130 proceedings (and other proceedings before a single member of the Commission) is contemplated in s.175, viz: " The Commission may, for the purpose of exercising its functions in connection with a matter before it, determine any question concerning the interpretation, application or operation of any relevant law or instrument (including the industrial relations legislation and any industrial instrument." 11But as I indicated in my unreported decision of Wednesday, 23 May, 2001 in the New England Area Health Service Case [Matter No.IRC 3547 of 2000], I do not regard s.175 as a primary source of my jurisdiction to interpret an industrial instrument: it does not stand alone. It is facilitative only, to authorise me during any proceedings properly addressing an existing industrial issue , including s.130 compulsory conferences, to interpret an industrial instrument which may be the root of the matter in dispute between the parties. 12In that respect, I had this to say in the New England Area Health Services Case (at p.6):: "...The key to my jurisdiction under s.136(1)(d) is the words of the provision itself - that such an order must be one that I am authorised to make ... Such authority must be found in some other part of the 1996 Act as, for instance, it is found for a stand-down order in s.126, the order of secret ballots in S.172 or orders for small claims in ss.379 and 380. If such authority for an order of interpretation is not found in s.175, as I have concluded is the case, it does not assist in that respect... The Commission may, for instance, make an order for reinstatement under ss.84(1) or 137(1) and, in the process, using s.175, interpret any instrument relevant to that order. But it may not make an order of interpretation to stand alone since there is no authority for it..." 13The AMWU claim in the MLC that prompted it to proceed before the State Commission in the first place has been resolved in conciliation. That industrial dispute no longer exists. But an issue of the interpretation of the relevant provisions of the BlueScope Steel Award remains and that primarily suggests declaratory relief under s.154. 14Nevertheless, as I see the position, s.146B does, in fact, widen the scope of the jurisdiction in these proceedings considerably and, in effect, a single member of the Commission may entertain such issues which the parties are prepared should come before the member by way of arbitration. It is s.146B, complimented by s.175, which now forms the source of my jurisdiction in this hearing. THE ISSUE IN DISPUTE 15That having been said, Mr Walkaden submitted that the customary approach to interpretation of the provisions of any industrial instrument it is the plain, ordinary meaning of the words used which provide the key. He argues that the bulk of Clause 44 is unambiguous. As Mr Walkaden sees it, problems arise with subclause 44.4 which, among other things, makes reference to "...adherence to agreed dispute settling procedure...", viz: "...The parties acknowledge that the continued viability of the Port Kembla Steelworks is dependent upon taking continual steps to reduce total costs and increase prime product tonnes invoiced. Typical measures which the parties agree to work towards to reduce total cost of sales, increased prime product tonnes invoiced and promote adherence to agreed dispute settling procedures." 16Mr Walkaden asserts in his written submissions that: "...clause 44.4 is aspirational. The use of the phrase 'typical measures' is particularly instructive. The clause provides the industrial parties with some certainty as to the matters that may be expected to form part of the agreed performance indicator. The clause does not provide that such matters must form part of the agreed performance indicator. The clause does not say that adherence to the dispute setting procedure is a pre-condition for payment of the PRP. The certainty provided is useful given the award does not explicitly state the criteria by which the PRP will be paid. Rather, the award establishes the framework and then leaves the industrial parties to agree, at some time after the award is made, upon the performance indicator. In resolving the current dispute, clause 44 can be readily interpreted by reference to its plain, ordinary English meaning. The closest the award gets to explictly stating the criteria by which the PRP will be paid in a particular quarter, and if so paid, the quantum, is business performance against the agreed performance indicator. Clause 44.3.1 then leaves it to the industrial parties with some guidance as to the matters that might be included in such a performance indicator. It is only matters that are included in the agreed performance indicator that determine whether the PRP will be paid...The current agreed performance indicator makes no reference to adherence to the dispute settlement procedure. The current agreed performance indicator does not provide that adherence to the dispute settlement procedure is a relevant consideration in determining whether the PRP will be paid. It follows that in determining whether the PRP will be paid, adherence to the dispute settlement procedure is an irrelevant consideration. 17Mr Brotherson does not agree, indicating in a written statement forming an outline of his contentions that: "...lump sum payments have been a feature of the industrial arrangements between the parties for many years. Such schemes have always been on the understanding that a required action for entitlement is adherence to dispute settling procedures..." 18And Mr Brotherson refers in that respect to a pamphlet prepared by BlueScope Steel and distributed to employees to explain the lump sum payment scheme and which emphasises compliance with the dispute settling procedure. One of the factors identified in that pamphlet as relevant for the consideration of the operation of the scheme is: "...by having any claim, dispute, issue, or grievance, dealt with according to the dispute settlement procedures..." CONCLUSION 19As Mr Walkaden submitted, in interpreting any industrial instrument it is the plain, ordinary meaning of the words used, in the context in which those words appear, which should be considered, unless there is some ambiguity which requires further evidence to be led to resolve that ambiguity [ Kingmill Australia Pty Limited v Federated Clerks' Union of Australia (2001) 106 IR 217 at p.229]. In Bryce v Apperley (1998) 82 IR 448 the Full Bench of the Commission (Hungerford, Marks and Schmidt JJ) explained the position (at p.452) in the following manner: "...In our view, in construing the true meaning of an industrial award, like any other instrument with legal force, the task requires an approach according to the actual words used and their plain, ordinary English meaning..." 20And Mason J in the judgment of the High Court (Stephen, Mason, Aickin, Wilson and Brennan JJ) in Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 had this to say (at p.352): "...The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking, facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although...if the facts are notorious, knowledge of them will be presumed..." 21But if there is some ambiguity in the language used in any particular provisions in an industrial instrument, then extrinsic evidence - in particular in the form of the pamphlet to which Mr Brotherson referred in his written submissions - will still be admitted to interpret those provisions. It is trite to say that since the parties before me are in dispute over the meaning of the relevant clause in the BlueScope Steel Award, then there must be some ambiguity in the clause - at least in their minds. 22And it has been my experience that often industrial documents present something of a problem when questions of interpretation arise. Whilst they lay down the law affecting employers and employees, they are often made in the light of custom and practice and working conditions and reflect agreements made after periods of negotiation which are frequently framed in words intelligible only to the parties and without much care in drafting [ George A Bond and Company Limited v McKenzie (1929) AR 498 at pp.503 and 504]. 23Such is the case in these proceedings, in my opinion. In that respect, Mr Brotherson referred to the decision of the Full Bench (Walton J - Acting President, Marks J and Ritchie C) in South Eastern Sydney and Illawarra Area Health Service v Health Services Union (2007) 165 IR 43 which commented (at para.30) that in interpreting industrial instruments: "...the approach to that analysis should not be too strict or too literal as the words will often be derived (as in this case) from an agreement between parties in an industrial context: Cepus v Heggies Transport Pty Limited (1994) 52 IR 123 at pp.127 and 128; Perisher Blue Pty Limited v Australian Workers Union at p.283..." 24And the Full Bench went on to say (at para.38): "...It is, therefore, in our view necessary to have regard to both the history of the award, and in doing so, various extrinsic material. The history of the award indicates the circumstances under which the allowance came to be inserted into the award... " 25I therefore do not consider that it is appropriate to read the relevant clause in the AIS Award too strictly or literally. The operation of the AIS Award is confined to the parties themselves. It is not a document which has common rule application where its strict interpretation may be required since other parties who are called upon to interpret it may, in fact, be bound by it. In my opinion, that gives me considerably more freedom in interpreting it and having regard to the actual intentions of the parties when they entered into the arrangements for the payment of bonus to the steelwork employees. 26Also I believe that the key to this matter is actually contained in clause 44.3.1 of the BlueScope Steel Award, ie that the agreed performance indicator at the Port Kembla Steelworks will "...be determined by the company following consultation with unions who are a party to this award...". It is primarily a matter for the discretion of the company - no doubt following discussion with the trade unions representing the steelwork employees and provided always that it exercise its discretion in that respect fairly and properly. But, as I see the situation, it is still a matter for the discretion of the management of BlueScope Steel. 27It is essentially Mr Brotherson's position that compliance with the grievance settling procedure was a pre-requisite to receipt of the bonus payment. Mr Walkden commented in his written statement in reply that: "....such an interpretation incorrectly assumes that the purpose of clause 44 is the adoption of a punitive approach to employee (and only employee) compliance with the dispute settlement procedure..." 28But it must be appreciated that not only the payment of the lump sum bonus may be dependent upon compliance with the dispute settling procedure, but any claim before the State Commission concerning it or any other matter. That is what the protocol which gives the State Commission its jurisdiction actually demands. As I indicated in my decision of Friday, 22 June, 2007 in the BlueScope Steel Limited Paintline Dispute Case [2007] NSWIRComm 1022 at para.6: "...The jurisdiction of the Commission to arbitrate many issues that now come before it in the BlueScope Steel operations in Port Kembla is dependent upon the actual terms of the referral agreement. It is a requirement flowing from the protocol that has been developed that for a referral agreement to be provided for any particular industrial dispute, the parties must comply with the established dispute settling procedure [DSP] for the steelworks. That means that any unauthorised work stoppage, in breach of the DSP, would negate the jurisdiction of the State Commission to arbitrate the issue in dispute...." 29At the present time, of course, BlueScope Steel and the trade unions representing its employees are in the process of extensive negotiations concerning the restructuring and downsizing of the steelwork operations and for a new enterprise agreement to replace the existing one. But I would nevertheless not anticipate any significant change to the protocol already established for the steelwork operations on which the role of the State Commission is governed. 30In the circumstances, I reject the interpretation placed on the provision on the AIS Award given by Mr Walkaden . I believe that it is open to BlueScope Steel to make the payment of the lump sum bonus dependent upon compliance with the established grievance settling procedure and to refuse it to those employees who do not follow it in the quarter under review. P J CONNOR Commissioner 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. Decision last updated: 14 October 2011