[2015] FWCFB 540 [Note: refer to the Federal Court decision dated 3 September 2015 [2015] FCAFC 126 for result of appeal.]  
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
s.225 - Application for termination of an enterprise agreement after its nominal expiry date

Aurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd
(AG2014/6009)

Rail industry

VICE PRESIDENT WATSON
DEPUTY PRESIDENT GOSTENCNIK
COMMISSIONER SPENCER

SYDNEY, 22 APRIL 2015

Application for termination of 14 enterprise agreements - Whether agreements which had a nominal expiry date of 31 December 2013 should be terminated - Whether termination of the agreements is contrary to the public interest - Whether it is appropriate to terminate the agreements - Approach to considering whether it is appropriate to terminate agreements - Notion that it will generally be inappropriate to terminate when negotiations ongoing rejected - Fair Work Act 2009 - ss.3, 58, 171, 225, 226.

CONTENTS

 

Paragraph

   

1. Introduction

[1]

   

2. Background and Evidence

[7]

     
 

The Aurizon companies and their businesses

[10]

     
 

The privatisation process and the making of the enterprise agreements

[17]

     
 

Aurizon’s concerns about the enterprise agreements

[23]

     
 

Expert evidence on Aurizon’s market position

[28]

     
 

Legacy provisions and the changes sought by Aurizon

[35]

       
   

“No forced redundancy”

[44]

       
   

QR National Passes policy

[48]

       
   

Recruitment and selection

[51]

       
   

Dispute resolution

[52]

       
   

Roster cycles

[53]

       
   

Drug and alcohol testing

[54]

       
   

Complex and inconsistent entitlements across the enterprise agreements

[55]

       
   

Other restrictive provisions

[56]

     
 

Impact of changes on employees

[60]

     
 

Bargaining for new agreements

[72]

     
 

Re-opening of matter

[84]

     
 

Aurizon’s Undertakings

[95]

       
   

Duration of the Undertakings

[97]

       
   

What is Aurizon undertaking to do?

[100]

       
   

Operation of the Undertakings

[105]

       
   

Interaction of the Undertakings and bargaining

[112]

   

3. The Statutory Test

 
     
 

Approach to construction of the relevant statutory provisions

[115]

     
 

Relevant statutory provisions and context

[118]

     
 

Proper construction and application of section 226

[127]

   

4. Is termination of the enterprise agreements contrary to the public interest?

[153]

   

5. Is it appropriate to terminate the enterprise agreements?

[167]

   

6. Conclusion

[181]

1. Introduction

[1] Aurizon Operations Limited, Aurizon Network Pty Ltd and Australia Eastern Railroad Pty Ltd (Aurizon) have applied under s. 225 of the Fair Work Act 2009 (the Act) to terminate 14 enterprise agreements that have each passed their nominal expiry date pursuant to s. 226 of the Act.

[2] The Agreements concerned are the Australia Eastern Railroad North Queensland Rail Operations Enterprise Agreement 2011 1, QR National Traincrew Enterprise Agreement 20102, QR National Corporate Enterprise Agreement 20103, QR National Network Enterprise Agreement 20104, QR National Coal and Regional Freight Support Enterprise Agreement 20105, QR National Coal and Regional Freight Logistics Enterprise Agreement 20106, QR National Network Services Trackside Systems Enterprise Agreement 20107, QR National Rollingstock and Component Services Enterprise Agreement 20108, QR National Network Services Support Enterprise Agreement 20109, QR National Network Services Civil Maintenance Enterprise Agreement 201010, QR National Network Services Electric Control Operators Enterprise Agreement 201011, QR National Coal and Regional Freight Rollingstock Maintenance Enterprise Agreement 201012, QR National Infrastructure Projects Enterprise Agreement 201013, QR National Network Services Facilities Enterprise Agreement 201014, (the enterprise agreements).

[3] Since the application was made, there has been a material change in circumstances relevant to the scope of the application. On 13 October 2014, Aurizon filed in the Fair Work Commission an application to approve a new enterprise agreement titled the Aurizon Staff Enterprise Agreement 2014 (the Staff EA 2014). This agreement was made when a majority of employees to be covered by that agreement, who cast a valid vote, approved the agreement. The agreement was approved by Deputy President Sams on 21 January 2015, 15and has now come into operation. The Staff EA 2014 agreement applies to all employees who were covered by the QR National Coal and Regional Freight Support Enterprise Agreement 2010 and QR National Network Services Support Enterprise Agreement 2010. Pursuant to s. 58 of the Act these agreements cease to apply to the employees covered by the later agreements.In these circumstances the current application is not pressed in relation to the two agreements that have been replaced and no longer operate.

[4] In addition the Staff EA 2014 also applies to all employees covered by QR National Corporate Enterprise Agreement 2010 with the exception of approximately 28 employees employed by Aurizon Operations Limited outside the State of Queensland and 26 temporary employees participating in Aurizon’s graduate training program. Accordingly, the application in relation to the QR National Corporate Enterprise Agreement 2010 is pressed, although the number of employees affected by the application to terminate that agreement has been significantly reduced.

[5] At the hearing of the matter on 5-7 November 2014, 10-12 November 2014 and 10 February 2015, Mr HJ Dixon SC and Mr S Meehan of counsel appeared on behalf of Aurizon. Mr W Friend QC represented the Australian Federated Union of Locomotive Employees (AFULE), the Queensland Services, Industrial Union of Employees (QSU), the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU), the Automotive, Food Metals, Engineering, Printing and Kindred Industries Union (AMWU) and Together Queensland. Mr R Reitano of counsel appeared on behalf of the Australian Rail Tram and Bus Industry Union (RTBU) and Ms M Anthony appeared on behalf of the Association of Professional Engineers Scientists and Managers Australia (APESMA). We refer to the registered organisations collectively as the “Unions”.

[6] We have decided that pursuant to s. 226 of the Act the 12 enterprise agreements, which remain the subject of the application, must be terminated because the preconditions in s. 226 are met—we are satisfied that it is not contrary to the public interest to terminate each of the agreements and we consider that it is appropriate in each case to do so. These are our reasons for reaching that conclusion.

2. Background and Evidence

 

[7] The parties led extensive evidence, including expert evidence, about the context of this application. The evidence dealt with Aurizon’s business, the market in which it operates, changes that have occurred consequent upon its privatisation, the history of the enterprise agreements, the changes to the agreements sought by the parties during bargaining, and in particular the changes sought by Aurizon, the history of negotiations for new agreements, the importance of particular provisions of the agreements to employees, the operation of particular provisions in the workplace context and the impact on employees of the removal of particular provisions and of the termination of the relevant agreements that apply to the employees. Evidence was given by the following witnesses:

[8] Most of the evidence given by employees who are covered by the various agreements was not challenged by Aurizon, in the sense that the employees were not required for cross-examination and statements were simply tendered as evidence in the proceedings. Witness statements prepared by or on behalf of the following employees and officials were tendered:

[9] In addition, a large amount of economic and market information was tendered in evidence. We propose to summarise the important aspects of this evidence before turning to the task we need to undertake to determine this application. Many aspects of the history of the company and its enterprise agreements, including the timing of relevant events, are relevant as they relate to the context of the agreements now sought to be terminated.

The Aurizon companies and their businesses

[10] Aurizon Holdings Limited is a listed company on the Australian Stock Exchange. Prior to December 2012 it was known as QR National Limited and wholly owned a number of subsidiaries including QR Limited. QR Limited was previously a government owned corporation, the shares of which were held by the Queensland Treasurer and the Queensland Transport Minister on behalf of the State of Queensland. In 2010 QR National Limited was privatised. QR Limited has since been renamed Aurizon Operations Limited. It continues to be wholly owned by Aurizon Holdings Limited and is the principal business operator and employer in the Aurizon Group. As the privatisation process is a significant part of the context of the enterprise agreements, we deal with it in further detail below.

[11] Aurizon Network Pty Ltd is a subsidiary of Aurizon Operations Limited and operates the Central Queensland Coal Network. Australia Eastern Railroad Pty Ltd is the other employer in the Aurizon Group and is covered by one of the enterprise agreements.

[12] The Aurizon business, comprising the various corporate entities, is structured on functional lines. The operations division deals with coal, freight, rolling stock maintenance, program delivery, operations planning and safety. The network division operates the rail network comprising approximately 2,670 kilometres of heavy haul rail infrastructure in Central Queensland, one of the world’s largest coal supply chains. Other functional divisions within the Aurizon Group deal with Human Resources, Commercial and Marketing, Strategy and Business Development, Finance and Enterprise Services (including IT, Procurement and Real Estate).

[13] The Aurizon business offers rail based freight transport and infrastructure services throughout Queensland, New South Wales, South Australia, Victoria and Western Australia. It is Australia’s largest rail freight operator and the world’s largest rail transporter of coal to port for export markets. It moves an average of 700,000 tonnes of coal, iron ore, other minerals, agricultural and general freight across Australia each day. At any particular time Aurizon operates approximately 60 coal trains in the Central Queensland Coal Network alone. The freight service delivery business is a national business covering bulk commodities including iron ore. The majority of bulk freight services are provided in Queensland and Western Australia. The Network Operations Division maintains the track, bridges, structures, overheads and associated facilities as well as planning, scheduling and controlling the running of trains on the Central Queensland Coal Network. The rolling stock maintenance division comprises three heavy maintenance workshops and 14 running maintenance facilities. It is responsible for maintaining all “above rail” assets.

[14] Apart from the mining companies that are its customers for the transport of coal from the Bowen Basin in Queensland, Aurizon’s customers include producers, suppliers and exporters of bulk agricultural, mineral, intermodal and other commodities.

[15] Aurizon employs over 6,000 employees located throughout Australia, who often reside in regional communities within close proximity to crew depots.

[16] Aurizon’s major competitor is Pacific National, which is wholly owned by publically listed company Asciano Limited. It also originated from government owned entities—National Rail and Freightcorp. Pacific National has obtained access to Aurizon’s Central Queensland Coal Network and has made a significant capital investment in its Queensland operations in order to compete for work. The markets in which Aurizon operates commonly involve contracts awarded on the basis of competitive tendering.

The privatisation process and the making of the enterprise agreements

[17] On 2 June 2009, the Queensland Premier issued a Ministerial Statement concerning the sale of a number of State owned entities including Queensland Rail. The Statement guaranteed employees’ terms and conditions of employment in enterprise agreements for the life of those agreements and provided employment guarantees for two years beyond the date of each asset sale.

[18] On 28 May 2010, QR National was informed that the Queensland government’s position was that the employment guarantees were to be effected by inserting an enforceable mechanism into new enterprise agreements. The following day the government informed QR National that the guarantees were to be for a period of three years and to proceed with enterprise agreements on that basis.

[19] Mr Tim Conroy, who was involved in discussions with the Queensland government at the time on behalf of QR National, gave evidence that the employment guarantees were of significant concern to QR National at the time. He said that the guarantees presented very significant constraints on the manner in which it would be able to manage its business in the future, as future restructuring of QR’s business was inevitable. Mr Conroy also said that other new clauses were added to the agreements at the behest of the Unions despite his view that they had no place in the agreements. He said that the clauses were inserted due to the pressure being exerted by the Queensland government to make new agreements with the Unions or the government would make decisions on QR’s behalf.

[20] The operative enterprise agreements at the time had not passed their respective nominal expiry date. Most had a nominal expiry date of 30 April 2011. One agreement had a nominal expiry date of 30 June 2013 and two others had a nominal expiry date of 30 March 2011.

[21] Because of the need to give effect to the Queensland government’s directive on the employment guarantee, negotiations commenced for new enterprise agreements using the existing enterprise agreements as a starting point. The end result was that limited changes were made. The core provisions of the old agreements were maintained and the new agreements contained the employment guarantee and some of the other provisions that had been sought by the Unions. In September 2010 the Fair Work Australia (FWA) approved all but one of the agreements. The other agreement was approved by FWA on 3 March 2011. The nominal expiry date of each enterprise agreement was 31 December 2013. The application before us seeks to terminate these agreements, apart from the two we have earlier identified.

[22] In October 2010 the initial public share offer for shares in QR National was made and on 22 November 2010, QR National Limited was listed on the Australian Stock Exchange.

Aurizon’s concerns about the enterprise agreements

[23] Aurizon considers that as a result of the operation of its enterprise agreements, Pacific National has a significant labour cost and productivity advantage over Aurizon in the Central Queensland Coal Network. Aurizon considers that its business is seriously impaired by many restrictions and inefficiencies that are enshrined in its enterprise agreements, and which are largely a legacy of its previous government ownership, the privatisation process, and the requirements to insert provisions in the enterprise agreements to give effect to commitments and guarantees given by the Queensland government at the time.

[24] Apart from Pacific National, Aurizon must also compete with other providers of rail services. In recent times these have included the mining producers themselves, who have invested in rolling stock for the transport of their product.

[25] Mr Adrian Browne, a former consultant with Booz and Company, and a former employee of Freightcorp, has been employed by Aurizon as a consultant for the past five years. He gave evidence about a labour analysis he undertook in relation to Aurizon’s coal haulage business. The detail of his analysis was admitted into evidence on a confidential basis. The analysis contains comparative cost data between Aurizon and Pacific National and a quantification of ten key differences between the operational restraints on the two companies that pertained to Aurizon’s ability to effectively deploy train crew to desired tasks. For example, his evidence was that:

[26] Other witnesses called by Aurizon gave evidence about operational restrictions and inefficiencies in the enterprise agreements. We do not propose to detail all of these matters in this decision. Apart from those mentioned in the evidence of Mr Browne and those referred to later in this decision, mention should be made of a “no forced redundancy” clause contained in each of the enterprise agreements. The application of the “no forced redundancy” clause requires Aurizon to continue to employ a significant number of employees in transition; that is, employees whose positions have become redundant but where no redeployment opportunities exist. At the time of the hearing of this application there were approximately 69 employees in this category. These employees are not engaged in any productive work. Mr Heenan said the following in relation to these employees:

[27] The evidence of other witnesses also dealt with restrictive provisions in the enterprise agreements said to be a barrier to productivity improvements and efficiency as well as the changes sought by Aurizon and the operational context of the changes. We deal with this evidence further below when considering the changes sought by Aurizon in the negotiations for new enterprise agreements.

Expert evidence on Aurizon’s market position

[28] The Unions opposed to the applications commissioned expert reports on the nature of Aurizon’s business, the markets in which it operates and employee perspectives on such matters. Dr Chris Hale is now a consultant in his own consulting business. He was previously a lecturer in Transport at the University of Melbourne. The executive summary and key findings from his report are as follows:

The overall picture emerging from this investigation is a situation of ongoing stability, moderate business growth, and freedom from any prospect of genuine, hard edged competitive pressures of the sort faced by most mainstream businesses operating in Australia.

A reasonable appraisal would suggest that Aurizon faces only marginal competition pressures toward its overwhelmingly dominant position in sectors such as Queensland coal haulage—and the company needs to stand and face those limited pressures through mainstream responses of business strategy and ordinary ongoing adaptation. Any “competition” faced by Aurizon lies at the more abstract and faint end of a spectrum, given its scale and dominance and its highly regulated and concentrated industry contexts.

This analytical exercise found no evidence of any discussion among reasonable independent Australian business operators, or independent experts in rail or competition policy, suggesting that Aurizon is subject to meaningful competitive pressures at this time.” 48

[29] Mr Richard Robinson is a Senior Economist and Associate Director - Economics with BIS Shrapnel and had a principal role in the compilation of a report by his firm entitled “The Economic Impact of Terminating Aurizon’s Enterprise Agreements with the RTBU.” Key aspects of the BIS Shrapnel report are as follows:

[30] Dr Olav Muurlink, a qualified psychologist, is a senior Lecturer in Strategic Management/Human Resource Management at Central Queensland University. He conducted a survey of Aurizon employees. The conclusions he drew from the results of the study were as follows:

[31] Aurizon commissioned two reports prepared by Mr Euan Morton, Principal, of Synergies Economic Consulting. Mr Morton has degrees in economics, law and commerce. He is a former member of the National Competition Policy Unit of Queensland Treasury and the inaugural Director of the Queensland Competition Authority. His first report was a response to the witness statement of Dr Hale. The summary and concluding remarks in his report are as follows:

[32] The second report was a response to the witness statement of Richard Robinson. Mr Morton’s summary and concluding remarks were as follows:

[33] In our view aspects of the evidence of Dr Hale do not represent a sound analysis of the market position of the rail freight industry. We found his evidence overly dismissive of obvious competitive pressures and unduly complacent in relation to the necessity for cost reductions and work practice improvements. In particular his view that there could not be a competitive market when only two competitors were involved adopts an overly technical approach. Pacific National has made major inroads into Aurizon’s market dominance in a very short time. Such competitive pressures cannot be ignored by Aurizon. In our view Dr Hale’s evidence failed to address the actual business circumstances of Aurizon in a realistic or practical manner.

[34] The evidence of Mr Robinson is characterised by a significant misunderstanding as to the effect of termination of the agreements. In assuming that Aurizon would be able to enforce bare award terms on its employees and significantly undercut Pacific National’s cost base, he has failed to appreciate the ongoing bargaining process and the likelihood of a new agreement on negotiated terms. He seemed unaware that bargaining for a new agreement could continue and the Unions and employees could avail themselves of protected industrial action to advance employee claims. While it is likely that Aurizon will be able to introduce some changes if it is free to do so, it is in our view also reasonable to expect that any new enterprise agreements while containing less operational inefficiency, will also contain similar wages and conditions of employment for employees. This is because the bargaining power of the employees and their bargaining representatives, the Unions, is not insignificant. The assumptions made by Mr Robinson in his evidence were not, in our view, sound and his evidence did not provide a great deal of assistance to us.

Legacy provisions and the changes sought by Aurizon

[35] As we earlier indicated, various of the witnesses called by Aurizon gave evidence about the key changes that it sought to negotiate as terms of any new agreements. These changes and the Unions’ responses are summarised below.

[36] Mr Michael Heenan the Manager of Employee Relations for Aurizon gave evidence about the scope, nature and impact of the current enterprise agreements in the context of Aurizon’s business operations. He said that 13 of the 14 agreements cover employees of Aurizon Operations Limited and Aurizon Network Pty Ltd and that all of these agreements contain a number of “legacy provisions” or terms and conditions that were applicable to QR Limited, as and when it operated as a government corporation. 53 The circumstances in which these provisions were included in the enterprise agreements is set out in the evidence to which reference has already been made, of Mr Tim Conroy, Aurizon’s Human Resources Manager.54 Mr Heenan said that Aurizon regards a number of the “legacy provisions” as having a detrimental effect on, and as unsuitable for its business.55

[37] Mr Heenan detailed the structure of Aurizon and said that Aurizon has changed since privatisation from a “business unit structure” to a “functional model” 56. He said that the "functional model" which Aurizon has adopted, has resulted in a division of the organisation, along functional lines, as follows:

[38] Mr Heenan said that in Aurizon's current organisation, there is delineation between the operations and support functions within the business, excepting Network, which operates under a specific statutory regime and is structurally separate. He said that Network has its own operations function and limited support functions such as finance, commercial development and network regulation. 58

[39] The changes sought through bargaining by Aurizon are said to be necessary for operational and commercial reasons. That is, the operation of a number of the “legacy provisions” results in significant inefficiencies and restraints on Aurizon’s operations and negatively impacts on productivity and the reasonable utilisation of its workforce. Specifically, Aurizon says it is seeking to remove restraints on three affected areas:

[40] There is nothing in the evidence suggesting a motive other than that which Aurizon has advanced.

[41] Further, Aurizon argued that the removal of restrictive provisions will enhance its ability to compete for contracts across the coal rail network, freight, the intermodal business and maintenance services. There can be little doubt that this is so.

[42] The “legacy provisions” include: 60

[43] The evidence about some of these is examined briefly below.

“No forced redundancy”

[44] The no forced redundancy clause prevents Aurizon from reducing its workforce in the event of positions becoming redundant or because of organisational or structural changes, other than by seeking volunteers. It is thereby also limited in its capacity to select the most appropriate person for any redundancy by using objective selection criteria having regard to the operational needs of the business.

[45] As we have already noted, Mr Heenan gave evidence that the “no forced redundancy” clause has led to a significant number of "employees in transition", being those employees whose former positions are no longer required. At the time of hearing, Mr Heenan confirmed there were 69 employees 61 registered with Aurizon's "Career Transition Unit", which is responsible for managing employees in transition. He said it was unlikely that redeployment opportunities will be identified for all employees in transition. Therefore, Aurizon is prevented from effecting compulsory redundancies where it cannot identify redeployment opportunities for affected employees, and these persons remain employed but ‘in transition’ by reason of the "no forced redundancy" clauses.62

[46] Mr Heenan said:

[47]  The continuation of the no forced redundancy provision was budgeted at cost of $8.6 million for this financial year. 64 The average cost is $120,000 per employee.65 Mr Heenan said that the costs associated with the no forced redundancy clauses included wages, and the cost of managing employees in transition, including provision of office space, internal administration and career counselling.66

QR National Passes policy

[48] The QR National Passes policy is a legacy entitlement derived from the then existing entitlement of Queensland Rail employees to free or concessional rail travel. As a result, Aurizon employees, their dependents and partners receive free or discounted rail travel depending on their purpose of travel and employee’s length of service.

[49] The QR National Passes policy can only be changed with the agreement of the Unions covered by each agreement. 67

[50] Aurizon does not operate the rail services to which the pass relates. Mr Heenan said that from 1 January 2014, Aurizon was “required to pay Queensland Rail and Translink (a division of the Department of Transport and Main Roads) a fee to secure the rail pass benefits for its employees. In addition, Aurizon is required to pay fringe benefits tax on this benefit.” 68 Mr Heenan said that the estimated cost of maintaining the "QR National Passes policy" is in excess of $3 million annually.69 Aurizon maintains that there is “no ongoing justification for a provision that in effect prevents Aurizon from discontinuing the provision of free or discounted rail travel to Aurizon employees”.70

Recruitment and selection

[51] The enterprise agreements impose a requirement, with some limited exceptions, that Aurizon advertise all identified vacancies internally. Mr Heenan said this led to excessive administration and that it would be more efficient to appoint an employee who is acting in the role, or who has been identified as having the necessary skills and experience to meet the requirements of the role. 71

Dispute resolution

[52] The essence of the evidence given by Mr Heenan was that the restriction on implementation of workplace changes until steps in the dispute settlement procedure had been completed resulted in its use by the Unions to bring about unnecessary and tactical delays so as to frustrate Aurizon’s capacity to implement change. 72

Roster cycles

[53] Mr Heenan gave evidence that the roster cycle provisions of the various agreements impose restrictions on the way in which Aurizon may roster working hours of its employees. In consequence Aurizon is unable to roster in a manner that best suits its operational requirements. 73

Drug and alcohol testing

[54] Mr Heenan’s evidence 74 was that Aurizon should be able to use any lawful and reliable means to test employees as part of its alcohol and drug testing program. The enterprise agreements prevent it from doing so and limit its capacity to use blood or urine testing.

Complex and inconsistent entitlements across the enterprise agreements

[55] Aurizon seeks consistent provisions. For example, it manages over 900 classification points and a multiplicity of allowances and disability payments payable under the various enterprise agreements. The effect is inconsistency in entitlements across Aurizon's workforce, complexity and administrative burden. 75This was demonstrated in the different shift payment regimes that applied across various groups of employees.76

Other restrictive provisions

[56] Mr Heenan gave evidence about the limited matters 77over which flexibility arrangements could be reached and said this was unnecessarily restrictive. The result is that Aurizon is limited in its capacity to deal with its employees to reach genuine agreement about terms and conditions of employment.78

[57] It must follow that flexibility arrangements between Aurizon and willing employees could not be made to respond to changing employee needs or to changing operational requirements.

[58] Mr Heenan gave evidence about the shift work swap arrangements. He said, for example, in Network Control, for one shift work roster change under the provision, the result was an average of just over 6 days additional payment per employee per year. 79 This imposed an unnecessary cost burden to Aurizon.

[59] Evidence was also given about the restrictions on Aurizon’s capacity to ensure that all hours for which train crew employees were paid could be utilised for the performance of productive work. The performance of productive work by train crew employees was described as “footplate” hours. In essence the evidence was that a number of paid hours of train crew employees were not available as “footplate” hours because of various restrictive provisions in enterprise agreements covering train crew employees and shunting employees. The Demarcation between drivers and shunters contributed to this. The evidence was that Aurizon could significantly improve the productivity of train crew employees by the removing or altering some of the restrictions and thereby increasing the number of “footplate” hours worked by train crew employees. 80

Impact of changes on employees

[60] Largely unchallenged evidence was given by witnesses for the Unions about the importance to employees of the provisions discussed above, the impact of their removal on employees and about the employees’ opposition to the termination of the enterprise agreements.

[61] The evidence dealt with the rationale for no forced redundancy and relocation, rail passes, dispute procedure, drug and alcohol testing, internal vacancies, RDOs on public holidays and RDO arrangements.

[62] The thrust of this evidence was that each of the provisions with which Aurizon takes issue, were explicable and reasonable conditions of employment having regard to the nature of Aurizon’s business, the locations at which work is carried out and the conditions under which work is performed.

[63] For example, Mr Stewart Rach, a train driver employed by Aurizon at Gladstone gave evidence about the changes sought to the shunting demarcation. He said that shunters have better training to perform the work and maintaining the demarcation reduces the workload for train drivers. Further, he said that the roster and advance notice of change were important to maintaining a work life balance, given the already unusual hours worked by Aurizon employees. He also provided evidence about the configuration of some trains and said that driver only operations can be more dangerous. 81

[64] Ultimately, it was submitted that the evidence demonstrated that the enterprise agreement provisions had been dealt with as a package in the initial negotiations. The rates of pay that employees have received for a number of years were lower because of the existence of these terms. The terms were valued by the employees and contributed to the maintenance of a work life balance. Some of the terms were also important mechanisms by which occupational health and safety issues are addressed.

[65] As to the “no forced redundancy “provisions, it was submitted that many employees have legitimate concerns about job security. When account is taken of age, length of service and location, it is clear that there is a reduced prospect of finding alternative work outside of Aurizon in the event of redundancy. Consequently the concern is reasonable. It is clear on the evidence that 69 employees’ employment will be brought to an end almost immediately, if this provision was removed. 82

[66] Aurizon argued that restrictions such as “lift up” and “lay back” of train crew, that is, the capacity to alter start and finishing times of train crew once the daily roster is set, are inflexible and an inefficient use of train crew. 83

[67] The evidence led by the Unions was to the effect that such provisions are necessary so that employees have certainty about their hours of work. This was important in an environment where employees already worked varying shifts and uncertain patterns. Accordingly, predictability of hours of work was an important consideration. It was submitted that there was no demonstrable benefit in removing restrictions on lift up and lay back and that there was no evidence about how productivity would be affected.

[68] Evidence was also given that if Aurizon sought to contact employees on short notice so as to alter their start times, compensation for the alteration of start and finish times was sought or but the clear preference of employees was to retain the restrictions.

[69] As to the maintenance of rail passes, the evidence was that this was a long-standing entitlement allowing employees to travel on the rail network free of cost, and that for some employees, particularly on the suburban train network, this represented substantial value, for which they would seek compensation if it is to be altered.

[70] As to the demarcation between driving and shunting duties, the evidence led by the Unions suggested that shunting work was dangerous, it should only be undertaken by those appropriately trained, and given the variety of arrangements between depots and the potential consequences (serious injury) if mistakes in shunting were made, train crews as well as shunters supported retaining the current restrictions.

[71] Health and safety concern was also the reason articulated as underpinning the car driving restrictions. The Unions argued these restrictions should be maintained, given the dangers associated with train crew driving motor vehicles after the performance of train driving duties.

Bargaining for new agreements

[72]  Bargaining for the new agreements commenced in April 2013.

[73] At the time this application was made, Aurizon and various of its employees were covered by 14 enterprise agreements, each of which had passed its nominal expiry date on 31 December 2013. A table was provided as part of Mr Heenan’s evidence identifying each of the expired enterprise agreements, their scope and the approximate number of employees covered by each agreement.

[74] Formal bargaining commenced at an offsite location on 29 April 2013. The Unions rejected Aurizon’s proposal to commence bargaining by negotiation which Aurizon described as “common conditions”. The Unions instead first sought to reach agreement on the number and scope of agreements that would apply to Aurizon employees.

[75] In May 2013, Aurizon provided the Unions with three documents as its proposal for bargaining. Several meetings followed but no agreement was reached on the number of enterprise agreements or their scope. The Unions subsequently provided a log of claims, which it was understood, was underpinned by a proposal that nine enterprise agreements would be made. Some further scheduled meetings were adjourned to allow the Unions final endorsement of matters in the log of claims.

[76] After a further series of meetings, Aurizon filed a bargaining dispute application pursuant to s. 240 of the Act in June 2013. A series of conferences were facilitated by the Commission and associated Statements issued. The Commission recommended a framework for discussions. Further meetings were convened and the evidence of Aurizon and the Unions in summary terms, details the series of meetings and the minimal progress that was achieved in negotiations. Evidence was provided by Aurizon and the Unions about the details of these negotiations. These matters have been carefully considered. It is of some significance that, after a number of meetings chaired by Deputy President Asbury, the following Statement of 4 March 2014 to the parties was issued. 84

[77] It seems clear from the statement that as at 4 March 2014, bargaining had been protracted and that there has been little or no progress made on any substantive issue. The Deputy President also set out the options under the Act available to the bargaining parties to progress the bargaining. Most telling however is that whilst the Deputy President remained ready to assist the parties, she indicated, based on her experience of the negotiations, the futility of continued negotiations between the parties whilst the current deadlock of positions of the parties was maintained. The Statement concluded by indicating that the Deputy President was “not prepared to undertake further conciliation while those positions are maintained.”

[78] Aurizon next released three proposed enterprise agreements which would replace 14 expired enterprise agreements. Mr Heenan gave evidence that in an email sent to the Unions on 12 August 2014, Aurizon was seeking a reasonable response from the Unions to address Aurizon’s proposals. It seems to us on the evidence that the proposals contained in the email and accompanying proposed agreements carried with them a rationale, that was reasoned and that explained the commercial necessity underpinning the proposals. In the context of bargaining to that point, it also seems to us that the proposals deserved a considered and constructive response.

[79] The Unions submitted that the negotiations were difficult, but that there is nothing particularly irregular about that. They submitted that to intervene at this stage by terminating the agreements would be premature and against the scheme of the statute and that a reason for the protracted bargaining was that Aurizon was seeking massive change.

[80] During the hearing of this application, Mr Reitano alerted the Full Bench to the filing by the RTBU of applications for orders for protected action ballots. He submitted that the absence to date of such applications and at any protected action strongly indicated that bargaining was proceeding in accordance with a process envisaged by the Act. 

[81] Mr Dixon referred to the evidence of bargaining and submitted that it establishes that no real effort has been made by the Unions to address the issues between the parties in any meaningful or responsive way. 

[82] Aurizon made the following submission about the relevance and evaluation of the conduct of the bargaining parties to the question whether it was appropriate to terminate the enterprise agreements:

[83] We think the approached urged on us is a sensible and appropriate one, and we propose to adopt it.

Re-opening of matter

[84] On 6 January 2015, the RTBU made an application to reopen the proceedings as it sought to lead evidence about the events that had occurred since we reserved our decision. We agreed to re-open the matter so that all information relevant to the proceedings could be considered. A further hearing was held on 10 February 2015.

[85] Witness statements dealing with the continuation of the negotiations between the parties were filed. A statement of Mr Peter Allen of the RTBU was tendered. 86Mr Allen was not required for cross-examination.

[86] Mr Allen’s evidence dealt with the further negotiations and correspondence between some of the parties and the protected industrial action (supported by a majority) that had been taken since 12 November 2014. It was suggested by the Unions that Mr Allen’s evidence indicated progress directed at securing an agreement.

[87]  Mr Allen considered that the bargaining for a new agreement was continuing, that a proposal had been put to Aurizon and there was a prospect of agreement being reached.

[88] Mr Heenan was cross-examined on his statement 87 and on the recent negotiations since 12 November 2014. The Unions sought to demonstrate that negotiations were progressing and the RTBU and the AFULE had sought protected action ballot orders to take industrial action and were in the process of notifying Aurizon of the action that was to be taken. Therefore, it was premature for the Commission to intervene to terminate the agreements. In short, it was suggested that the events set in train should be allowed to play out.  

[89] We do not think that the evidence establishes that any real progress had been made. There was no demonstrable change in the status of the negotiations that formed the basis of Deputy President Asbury’s assessment, regarding the futility of the negotiations. If anything, the evidence on 10 February 2015 reinforced, rather than refuted, the picture painted by the evidence given before us in late 2014, that little progress was being made in bargaining for new agreements.

[90] That is not to say that no progress had been made. Mr Heenan conceded, in cross-examination, that there had been some movement in relation to the area of ‘car driving’, although an agreement in principle had not been reached. 88 Mr Heenan said that there had been quite a bit of debate and discussion around it.89Mr Heenan also said that there had been some progress on the train crew transfer guidelines.90

[91] However, in response to a question from Mr Reitano, about Aurizon’s position that there is no reasonable prospect of agreement, Mr Heenan indicated that his view was that there was still no reasonable prospect of agreement, “absent any proposal from the unions that deals with the key issues in a way that is satisfactory...we haven’t had a proposal that deals with those issues.” 91

[92] Mr Dixon submitted that while a number of meetings with delegates have been held over January and into February 2015, there had been “virtually no material progress made at all” 92 or “meaningful proposal on the key issues of concern”93 and that nothing has changed since the hearing of the matter in November 2014. We are inclined to accept that that is correct.

[93] As to the industrial action taken and proposed, there is no evidence of that fact materially altering the position of any party. Moreover, recourse to industrial action will remain an option whether the enterprise agreements are terminated or not.

[94] It therefore seems to us clear that no material change had occurred between November 2014 and 10 February 2015 that bears upon our decision.

Aurizon’s Undertakings

 

[95] Aurizon has offered written undertakings to its employees, which it says are enforceable at common law, in the event that the enterprise agreements are terminated. The written undertakings would operate from the date of the termination of the agreements and for a period of six months following (subject to an earlier intervening event). It provides, in addition to the minimum entitlements under the National Employment Standards (NES) and the Rail Industry Award 2010 (Award), Aurizon will provide certain terms and condition of employment 94 (Undertakings).

[96] The Undertakings are provided by Aurizon Operations Limited, Aurizon Network Pty Ltd and Australia Eastern Railroad Pty Ltd to their respective employees covered by one of the agreements the subject of the application and employed in the state of Queensland on the termination date. The Undertakings would not apply to employees now covered by the new Staff Agreement.

Duration of the Undertakings

[97] The Undertakings will cease to apply on the earliest of a number of identifiable events including:

[98] If none of these events occur, the Undertakings [other than paragraphs 7 (redundancy pay) and 9 (retirement allowance)] will cease to apply six months after they commence to apply to an employee, or a date after that date that is determined by Aurizon. Aurizon may continue some parts of Undertakings after six months, whilst others might cease to apply.

[99] Aurizon proposes that the Undertakings operate for six months because, in its view, if the agreements are terminated, it is reasonable to suppose that one or more new agreements containing more flexible provisions would be made within that period. Aurizon did not rule out extending the period of operation of the Undertakings.

What is Aurizon undertaking to do?

[100] The Undertakings provide for the following terms and conditions:

[101] Payments made to employees pursuant to the Undertakings are intended to satisfy all entitlements to wages and allowances otherwise payable under the Award, the NES or contract of employment and Aurizon will “set-off” or “absorb” any payment or benefit provided by the Undertakings against any payment or benefit to which an employee is otherwise entitled under the Award, the NES or contract of employment.

[102] The wages schedules are provided specifically for the Train Crew and AER streams, with additional notes on the breakdown of the rates, and schedules are also provided for the other streams.

[103] In comparing the resulting entitlements arising from the Undertakings, Mr Reitano provided a summary document listing a series of conditions in the enterprise agreements the subject of this application that are not included in the Award or the NES. He questioned how the Undertakings would deal with the absence of the application of these provisions if the agreements were terminated.

[104] The document provided by Mr Reitano included the “legacy provisions” about which Aurizon complains. The summary document also identified a number of other provisions that Mr Reitano argued also would be lost. For example, the document referred to the QR National Rollingstock and Component Services Enterprise Agreement 2010, which included provisions relating to consultation on major change, dispute resolution, particular public holidays provisions, long service leave and jury service, commitments to training, anti-discrimination and OHS. Similarly, a series of provisions in the QR National Train Crew Enterprise Agreement 2010 were detailed, for example, for time spent at training credited as work, annualisation of hours, and consultation on major change.

Operation of the Undertakings

[105] Aurizon submitted that the Undertakings would apply contractually to the relevant employees, in addition to the obligations under the NES and the Award. The Undertakings wouldbe enforceable at common law.

[106] It submitted that if the employees take the benefit of the Undertakings, by accepting payment and working the hours that are related to the payment, the Undertakings are contractual and Aurizon would not have the unilateral right to withdraw or alter them, except according to their terms. Mr Dixon submitted that although Aurizon could seek to withdraw the Undertakings“in the absence of consent, whether that consent be express or implied or by conduct, the undertakings will be contractually enforceable according to their terms for their duration and, of course, the undertakings themselves permit such an outcome” 95.

[107] Mr Dixon relied on Brambles Holdings Ltd v Bathurst City Council 96 and Commonwealth v Crothall Hospital97 to make good his point.

[108] The Unions submitted that the Undertakings were not enforceable or there was at least a sufficient degree of doubt about enforceability. Mr Friend submitted that neither Crothall nor Brambles were of assistance to Aurizon’s proposition. Mr Friend submitted that while the cases held that a party who had acted in accordance with a variation was bound by it, employees of Aurizon are not being asked to do anything other than that which they have already contracted to do. Consequently the question is not whether the employees are bound by the variation, but whether the Aurizon will be bound.

[109] Mr Friend emphasised that a variation to a contract must be supported by consideration and questioned what consideration would move from the employees to Aurizon in support of a variation of the contract which would allow employees to enforce the Undertakings. Referring to Ajax Cooke Pty Ltd v Nugent, 98 Mr Friend submitted that it was difficult in the present case to characterise consideration as employees giving consideration for Aurizon’s Undertakings by remaining in employment for the months of the undertaking.

[110] Mr Reitano submitted that the Undertakings were “no more and no less individual contracts that have no place in the Act”. 99 It was submitted that the undertakings were unenforceable and worthless, and that there was no power in the scheme of the Act accepting undertakings in exchange for terminating an agreement.

[111] Ultimately it is not necessary for us to determine whether the Undertakings will be legally binding and enforceable as terms of an employment contract or otherwise. For our part there is no reason to suppose that the Undertakings have not been given or proposed in good faith or that Aurizon is not genuine in giving or proposing the Undertakings. We are satisfied that Aurizon intends to and will, if the enterprise agreements are terminated, make good on its Undertakings. The Undertakings are given to the affected employees, not to the Commission. As such the question of the power of the Commission to accept the Undertakings is moot. However, that Aurizon has or proposes to give the Undertakings, and the terms of the Undertakings is a matter that is relevant in our assessment of whether it is appropriate to terminate the enterprise agreements. We propose therefore to take the Undertakings into account for that purpose.

Interaction of the Undertakings and bargaining

[112] Mr Reitano submitted that the Undertakings created a third basis for bargaining (in addition to a modern award or enterprise agreement), which is unilaterally determined by Aurizon 100. Mr Dixon submitted that the Undertakings, operating as a variation to the contract, would not alter the statutory regime upon which the Act proceeds for further bargaining101.

[113] Mr Dixon submitted that the effect of the Undertakings ceasing in six months' time, must be assessed in light of what were described by Mr Richard Robinson, Associate Director Economics, at BIS Shrapnel as “countervailing restraints which will be available and all the powers and remedies available to the parties for protected industrial action and proper bargaining under the bargaining stream s. 228.”  102

[114] We think this is correct.

3. The Statutory Test

Approach to construction of the relevant statutory provisions

[115] In considering the relevant statutory provisions at issue in this application the starting point is to construe the words of the statute according to their ordinary meaning having regard to the context and legislative purpose. 103  The words of the statute being construed should be read by reference to the language of the statute as a whole.104 As Lawler VP and Bissett C observed in JJ Richards and Sons Pty Ltd v Transport Workers’ Union of Australia,105 after reciting relevant authorities concerning statutory construction:

[116] In J.J. Richards & Sons Pty Ltd and Another v Fair Work Australia and Another  107 Flick J discussed three long established and fundamental principles to statutory construction. In so doing His Honour said:

[117] We respectfully agree and apply these principles to construing the provisions at issue in this application.

Relevant statutory provisions and context

[118] The legislative mechanisms by which an enterprise agreement may be varied or terminated are dealt with in Division 7 of Part 2– 4 of the Act. Subdivision C of Division 7 sets out the manner in which an enterprise agreement may be terminated by the agreement and for the approval of the termination of the enterprise agreement by the Commission.

[119] Subdivision D of Division 7 contains provisions which enable the termination of an enterprise agreement to be terminated after the agreement has passed its nominal expiry date. These provisions are as follows:

[120] As we have indicated above, these provisions, and relevantly s. 226, must be construed in a manner that is consistent with the language and purpose of the provisions by reference to the language of the Act as a whole, and so the context, general purpose and policy of the provision are an important means by which the meaning and effect of a provision is to be ascertained. 109

[121] These provisions form part of a scheme established by Part 2-4 of the Act designed, inter alia, to enable bargaining for, making of, approving, varying and for the termination of, enterprise agreements.

[122] The object of Part 2-4 is set out in s. 171, which provides as follows:

[123] Also relevant is the object of the Act contained in s. 3, which provides:

[124] The means by which this object is to be achieved is set out in the various paragraphs enumerated in s. 3 as follows:

[125] Other provisions of the Act providing context in which s. 226 is to be construed include:

[126] The legislative scheme therefore enables and facilitates good faith bargaining for an enterprise agreement. It also facilitates the making of enterprise agreements but does not mandate that result. Once an enterprise agreement is made and approved by the Commission, it seems clear that the legislative scheme does not intend that such agreements operate in perpetuity. Agreements have a finite nominal life. At the end of the nominal life of an agreement, bargaining parties may bargain for a new agreement utilising all of the tools available under the Act; or a person to whom an agreement applies may take steps to bring the agreement to an end in accordance with the provisions of the Act; or both may occur.

Proper construction and application of section 226

[127] In construing a provision of an enactment, an interpretation that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) is to be preferred to a construction that would not promote that purpose or object. 128

[128] The power under s. 226 to terminate an enterprise agreement that has passed its nominal expiry date, is exercisable only if an application for the termination of the agreement has been made under s. 225. Once such an application has been made the power must be exercised if the Commission:

[129] Section 226(a) requires a consideration of whether termination of the agreements is not contrary to the public interest. It seems to us that a consideration of the public interest will involve something that is distinct from the interests of the persons and bodies covered by the agreements. This distinction seems to be reflected in the structure of s. 226. The question of how the public interest is to be assessed was considered by a Full Bench of the Australian Industrial Relations Commission in Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000. 129 The decision in Kellogg Brown concerned an application to terminate a certified agreement pursuant to s. 170MH of the WR Act. The Full Bench observed:

[130] After considering the decision in Re Queensland Electricity Commission; Ex parte Electrical Trades Union of Australia, 131 the Full Bench in Kellogg Brown said:

[131] Section 226, unlike s. 170MH(3) of the WR Act, clearly requires the interests of the persons or bodies covered by an agreement to be taken into account. 133 Those interests are considered separately from the question of the public interest,134 although it is accepted that these interests may nevertheless be similarly affected. It seems to us therefore, that the approach to the question of whether termination of an agreement is not contrary to the public interest in Kellogg Brown remains apposite.

[132] The scope and application of s. 226 of the Act was first considered by Vice President Watson in Energy Resources of Australia Pty Ltd v Liquor Hospitality and Miscellaneous Union (ERA). 135 In that case his Honour observed:

[133] Subsequently in Re Tahmoor Coal Pty Ltd 137 Vice President Lawler said:

[134] After referring, inter alia, to the passages from the decision in ERA to which we have earlier referred, his Honour said the following:

[135] The approach taken in Tahmoor Coal to the construction of s. 226 seems to have been followed in a number of subsequent decisions of members of the Commission. 140 For example in Royal Automotive Club of Victoria141 Commissioner Roe said:

[136] To similar effect, Deputy President Sams in SDV (Australia) Pty Ltd 143 said the following:

[137] Most recently in Metropolitan Fire & Emergency Services Board v United Firefighters’ Union of Australia 145 Commissioner Wilson endeavoured to qualify or explain an aspect of the decision in Tahmoor Coal, as follows:

[138] This is the first occasion on which a Full Bench of the Commission has had the opportunity to consider the operation of s. 226 of the Act. To the extent that the decision in Tahmoor Coal and the decisions which have followed it suggest that:

[139] In our view, there is no statutory imperative that the promotion and delivery of productivity benefits at an enterprise level is primarily or exclusively to be achieved through enterprise bargaining in good faith rather than by other means. True it is that bargaining, where it occurs, must occur consistently with the good faith bargaining requirements. But there is no imperative that an agreement must result in productivity improvements. Much less is there any requirement that a resulting agreement must deliver a productivity benefit at the enterprise level. Good faith bargaining for an enterprise agreement may, or may not, deliver productivity benefits at any enterprise level.

[140] The statute also mandates that on application by the person covered, an agreement that has passed its nominal expiry date must be terminated if the circumstances identified in s. 226 exist. Productivity benefits might also be delivered by terminating an agreement that has passed its nominal expiry date. Such benefits might be delivered through a combination of both means.

[141] As we have already observed, s. 226 forms part of a scheme in Part 2 – 4 of the Act to which the object in s. 171 is directed. Self evidently s. 226 is then a part of a scheme of provisions through which the parliament intended that the object might be achieved. There is no basis for concluding, at a level of generality, that continuing the operation of an agreement that has passed its nominal expiry date (whether bargaining is continuing or not) will be any more an effective means by which the object in s. 171 is to be achieved than terminating that agreement. Continuing the operation of an agreement that has passed its nominal expiry date may impede rather than enable an enterprise agreement to deliver productivity benefits at an enterprise level. It may also impede rather than promote good faith bargaining resulting in an agreement which delivers those benefits. The same may be true for the termination of the agreement. Ultimately, the circumstances will dictate the matter.

[142] In our view, to approach the construction of s. 226 in the manner suggested in Tahmoor Coal, particularly at [55] results in a predisposition against the termination of an enterprise agreement that has passed its nominal expiry date. There is no indication in the section or elsewhere in the Act that this should be the case. Section 226 operates according to its terms. Its application is guided by the language and purpose of the provision by reference to the language and purpose of the Act as a whole so that the meaning and effect of the provision is properly understood.

[143] Further, there is nothing in the structure or content of the Act to suggest that its object (of providing a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians) is to be exclusively or primarily to be achieved by enterprise level collective bargaining.

[144] Paragraphs (a) - (g) of s. 3 are not properly described as objects of the Act. The object of the Act is as stated in the previous paragraph.

[145] The means by which this object is to be achieved is then set out in the paragraphs which follow in (a) - (g). The means chosen do not have any particular hierarchy or precedence. It seems clear from the structure of the section that each of the means individually, and the means collectively are intended to achieve or further the object.

[146] We agree with Aurizon’s submission that his Honour’s reference in paragraph [51] of Tahmoor Coal, to the principle of construction that the specific overrides the general, with the result that emphasis on promoting productivity (s. 3(a)) is primarily to be achieved through collective bargaining in good faith (s. 3(f) and s. 171) rather than by other means, such as termination of an agreement that has passed its nominal expiry date, was misplaced.

[147] The principle or maxim generalia specialibus non derogant is not a rule that results in general provisions of an enactment giving way to more specific provisions. The maxim is to be invoked only where there is a conflict or inconsistency between provisions of an enactment and that conflict or inconsistency cannot be resolved as a matter of ordinary statutory interpretation. 147

[148] As we have already indicated, s. 3 of the Act should be read as a whole. Paragraph 3(f) is not given a particular precedence over, nor does it override or qualify, any other parts of s. 3. Each of the paragraphs can be read harmoniously. Each describes a means by which the Act’s object is to be achieved. Read together, the section describes the various means by which the object of the Act is to be achieved. There is in our view no conflict or inconsistency between the various paragraphs in s. 3 of the Act.

[149] Further there is not, in our view, any conflict or inconstancy between s. 3 (or any of its paragraphs) and s. 171 of the Act. Section 171 contains the particular objects of Part 2–4 of the Act. Its terms do not conflict with or qualify s. 3 of the Act and can be read harmoniously with s. 3 of the Act. Section 171 is relevant to the construction and application of s. 226 of the Act, but in our view, it does not operate on s. 266 in the manner suggested in Tahmoor Coal. On our reading of ss. 3 and 171, there is nothing in those provisions, when read harmoniously, that would suggest that the emphasis on promoting productivity (in s.3(a)) is primarily to be achieved through collective bargaining in good faith (in s. 3(f) and s. 171) rather than by other means, such as termination of an expired agreement. Moreover, such a construction assumes some incompatibility with terminating an enterprise agreement that has passed its nominal expiry date and collective bargaining. In our view the two are not incompatible.

[150] When read harmoniously with s. 3, s. 171 does not qualify or restrict the exercise of the power of termination under s. 226 of the Act in the manner suggested in Tahmoor Coal. Indeed the object in s. 171 (a) is directed to providing:

[151] Section 226 of the Act is part of the simple, flexible and fair framework, established by Part 2–4 to which the objects in s. 171 relate. There is nothing inherently inconsistent with the termination of an enterprise agreement that has passed its nominal expiry date and collective bargaining in good faith. There is nothing incompatible with the termination of such an agreement and the continuation of collective bargaining that has commenced in good faith at an enterprise level for an enterprise agreement that delivers productivity benefits. The framework that is established by Part 2–4 provides for applications and orders to be made for the termination of an enterprise agreement that has passed it nominal expiry date. It is not too difficult to suppose that such an agreement in particular circumstances might no longer deliver productivity benefits, or that such an agreement has never done so. It is not too difficult to suppose that the termination of such an agreement might better support good faith bargaining for an agreement that delivers productivity benefits at the enterprise level.

[152] In our view, there is no express or contextual indication that the objects in s. 3 or s. 171 operate on s. 226 in the way suggested in Tahmoor Coal. It follows that we do not propose to follow Tahmoor Coal in its construction of s.226 to the extent that the construction appears to place limits on the discretionary considerations in s. 226(b) because of that which we regard as an incorrect interpretation of the interrelationship of the objects in s. 3 and s. 171 of the Act. In our view the limitation is not justified.

4. Is termination of the enterprise agreements contrary to the public interest?

[153] As we have said above, we approach this question by applying the Full Bench decision in Kellogg Brown.

[154] Aurizon submits that where significant endeavours have been made to negotiate a replacement agreement and there is, nonetheless, little prospect of reaching agreement, it will not be contrary to the public interest to terminate a nominally expired enterprise agreement. It submits that when all of the circumstances are considered the Commission should be satisfied that it is not contrary to the public interest to terminate the Enterprise Agreements.

[155] The RTBU submits that the reduction or loss of entitlements as a result of termination of the enterprise agreements compels the conclusion that it is contrary to the public interest to terminate the enterprise agreements. It says that it is a significant matter to remove entitlements that were freely negotiated in the scheme of the Act that has as one of its objects the provision of a fair framework for collective bargaining and good faith bargaining. It submits the following matters are relevant to the public interest:

[156] The other Unions make similar submissions. They submit that termination would undermine bargaining and deliver a tremendous advantage to Aurizon in their negotiations because Aurizon would be able to negotiate from a very low base and be very likely to achieve significant advantages in its operations over those of its competitors covered by enterprise agreements. The Unions submit that granting the application would lead to a race to the bottom, not the maintenance of proper standards in terms and conditions of employment in the industry.

[157] We have considered all of the circumstances of this matter and have formed the view that it is not contrary to the public interest to terminate each of the 12 agreements earlier identified.

[158] As we have earlier indicated, there is nothing inherently inconsistent with the termination of an enterprise agreement that has passed its nominal expiry date and the continuation of collective bargaining in good faith for an agreement. Neither the Unions nor Aurizon have suggested that bargaining will stop if the agreements are terminated. Neither have suggested that they will not pursue new agreements or that they will cease bargaining if the agreements are terminated.

[159] While we accept that a termination of the agreements will disturb the current bargaining positions, we do not accept, as the Unions submit, that this is counter to the object of a fair framework for collective bargaining and facilitating good faith bargaining. Collective bargaining will remain available to the bargaining parties. The bargaining parties in their bargaining will continue to be required to meet the good faith bargaining requirements. The disturbance of the bargaining position does not result in the disappearance of collective bargaining or the rules by which the bargaining parties must abide.

[160] Moreover the Unions and employees will have available to them the full arsenal of tools under the Act to exert legitimate industrial pressure on Aurizon to bargain and to reach agreement. It is therefore not correct that the termination of the agreements results in little or no incentive on Aurizon to bargain.

[161] We also do not accept that by terminating the agreements, the Commission becomes the effective arbiter of terms and conditions of employment of the employees of Aurizon, because the effect is to alter the terms and conditions of employment of the employees. The Act sets out the safety net terms and conditions of employment. They comprise the relevant modern award and the NES. Whether an agreement passes the better off overall test is also measured by reference to these instruments, not the antecedent enterprise agreement.

[162] Whilst a nominally expired agreement applies to any employee, the termination of it will result in an alteration of terms and conditions of employment. The effect of the Unions’ submission is that it will always be contrary to the public interest to terminate an agreement in such circumstances. This simply cannot be correct. If it were, it would have been a simple matter for the parliament to have made clear that termination of an agreement that has passed its nominal expiry date must only occur if it no longer applies to any employee. Clearly s. 226 is not so confined.

[163] We are also not persuaded that the termination of the agreements will result in the oversupply of labour, profit taking by Aurizon and significant loss of employment as suggested by the unions. It is to be borne in mind that Aurizon has not suggested it intends to reduce its workforce in any significant way. Its real complaint is that the current constraints in the agreements preclude effective utilisation of labour, and unreasonably constrain its capacity to deploy and redeploy labour so as to coincide with its need and demand for its services. Indeed it says that by freeing itself from some of the restrictive provisions of the current agreement, job security will be enhanced rather than diminished because its competitive position will improve. We accept, other things being equal, that this is so.

[164] The circumstances in which the agreements were made is a significant factor. As part of the privatisation processes the Queensland government required Aurizon to provide a three year employment guarantee and formalise that in the enterprise agreements. The pressure exerted by the government led to other concessions to claims that Aurizon would not have otherwise agreed on. The three year period expired some 18 months ago, yet they continue to apply, and to restrain Aurizon’s capacity to conduct its business more effectively and productively.

[165] Many of the provisions sought to be removed or varied are not common in most enterprise agreements. They restrict Aurizon in making business changes that it wishes to make in response to a competitive market situation. The restrictive provisions restrain Aurizon’s capacity to effectively manage its labour resource needs. Aurizon has endeavoured to negotiate changes to those provisions but the lengthy and comprehensive negotiations have not led to an agreement. Many of the changes sought by Aurizon in the negotiations seem to us to be rationally based. We readily understand its desire that its now private sector business no longer be restrained by provisions that were effectively imposed through the privatisation process. We do not think the changes proposed, objectively viewed, involve exploitation or unfairness in the terms and conditions of employment of Aurizon employees.

[166] The question of whether it is contrary to the public interest needs to be considered against all of the circumstances and for the reasons given we are satisfied that it is not contrary to the public interest to terminate each of the agreements.

5. Is it appropriate to terminate the enterprise agreements?

[167] All of the circumstances also need to be taken into account in considering whether termination of the agreements is appropriate. In particular the views of employers and employees covered by the agreement, their circumstances, and the impact of termination need to be taken into account. The requirement in s. 226(b) to take into account all of the circumstances including those set out in s. 226(b)(i) and (ii) is a requirement to take the matters into account and to give them due weight in assessing whether it is appropriate to terminate an enterprise agreement. 148 In assessing appropriateness by taking into account all of the circumstances, we approached the task by reference to the construction of s. 226 and the contextual matters that bear upon that construction dealt with earlier as well as giving specific consideration to the matters identified in s . 226(b)(i) and (ii).

[168] Aurizon accepts that the Unions and a number of employees do not support termination but cautions against over generalisation of employee views as reflected in submissions by the unions. It submits that termination is likely to have the following effects on employees:

[169] Aurizon submits that termination is likely to have the following effects on itself:

[170] The Unions submit that termination will have a drastic effect on employees and this is recognised by Aurizon in making its Undertakings. However the Unions contend that enforcement issues and the ability of Aurizon to change its mind means that the meaning and intent of the undertakings are totally in the hands of Aurizon and cannot be judged until after the event. The Unions submit that the following factors are relevant to the issue as to whether it is appropriate to terminate the enterprise agreements:

[171] As is clear from the chronology of bargaining outlined above, termination of the twelve enterprise agreements is sought in the context of a stalemate in the current enterprise bargaining negotiations. Those negotiations, from Aurizon’s perspective, have sought to remove some restrictive provisions which impeded productivity and efficiency. Aurizon does not propose to reduce wages, indeed it has proposed real wage increases. In those negotiations the Unions are seeking enhanced benefits such as wage increases. Aurizon is seeking the removal of restrictions on workplace change and other flexibilities so as to enhance its competitive position and improve productivity. Save for that which we have earlier said about the restrictive provisions in the current agreements, it is not appropriate that we form a particular view as to the respective merit of the bargaining parties’ positions on such matters.

[172] However it is important to note that many aspects of the agreements sought to be changed have a peculiar history arising from the privatisation of Aurizon, from Aurizon’s public sector past and from directions issued to it from its previous owner, the Queensland government. It is also relevant to note that provisions sought to be changed such as the no forced redundancy provisions relate to an employment guarantee that was intended to expire some 18 months ago. Other changes relate to work practices that seem to us to be clearly inefficient and out of step with the needs of a flexibile and productive enterprise that can adopt to changing economic and competitive environments.

[173] Termination of the enterprise agreements does not mandate any particular outcome to the ensuing enterprise bargaining. Bargaining for new agreements will continue. Protected action would still be available. The assistance of the Commission would still be available. Unless the circumstances give rise to an industrial action workplace determination or a bargaining related workplace determination, bargaining can be expected to continue until there is agreement. The bargaining dynamics will necessarily change. Currently the Unions are reluctant to agree on changes in conditions to which employees have an ongoing entitlement - including the no forced redundancy provision that has been locked in by operation of the Act well beyond its intended life. Aurizon can be expected to make use of the powers it will obtain by the elimination of workplace restrictions, either through negotiations or unilaterally. But the change in bargaining dynamics that would result following a termination must be viewed in context. A number of the “legacy provisions” (and specifically the no forced redundancy provision) about which Aurizon complains did not find their way into the enterprise agreements through collective bargaining in the traditional sense. They were in effect imposed on Aurizon by the Queensland government as a cost of the privatisation transaction.

[174] If termination occurs it is likely that 69 employees who do not currently have a productive role in the organisation and are in transition, will have their employment terminated by reason of redundancy—unless other redeployment options are taken up. As unfortunate as this may be for the employees concerned, termination of employment because of redundancy is not an unusual circumstance. Indeed it is a usual element of any restructuring in enterprises that operate in a competitive market. Even those that do not operate in a competitive market cannot justify the continued employment of persons who are not productively utilised.

[175] We accept that the preponderance of the employees who are covered by the twelve agreements oppose the termination of those agreements. It is also clear that the employee organisations that are covered by those agreements opposed their termination. We also accept that there is a sound basis for these parties to oppose the termination of the agreements. Employees are understandably concerned that termination of the agreements which currently apply to their employment will result in a diminution of the terms and conditions of employment that they currently enjoy. This is not an insignificant matter. However, the Undertaking given by Aurizon for the maintenance of the core terms and conditions of employment applicable to employees, including wages and allowances, for a period after any termination of the enterprise agreements, should that occur, goes some way to assuage that concern.

[176] Although there has been doubt expressed about the enforceability of the Undertakings, it is to be expected, if the application is granted, that Aurizon as a publicly listed company, will make good on the undertakings given during the public hearings of this application. Moreover we are satisfied that the safety net terms and conditions of employment will not be disturbed. Ultimately, it cannot be expected that terms and conditions of employment contained in an enterprise agreement with continue unaltered in perpetuity after the agreement has passed its nominal expiry date. Terms and conditions may be altered by making a new agreement or by terminating the existing agreement. The statute guarantees the continuation of the safety net, not the terms and conditions contained in a nominally expired enterprise agreement.

[177] Given the matters earlier discussed we are not satisfied that the prospect of a reduction in the terms and conditions of employment of the employees covered by the 12 agreements at some time in the future (assuming new enterprise agreements are not made) is so significant a factor as to outweigh these other matters.

[178] The Unions have not persuaded us that other workplace changes that may be implemented by Aurizon are undesirable or unnecessary for Aurizon to implement, oppressive on employees, or in some way inappropriate. Aurizon, like any employer, needs to improve its efficiency and productivity and consider how inefficient work practices can be modified. In our view it is entirely appropriate that it do so and insofar as restrictive work practices relate to terms and conditions of employment that they be dealt with by the parties in enterprise bargaining negotiations.

[179] We are satisfied that the rail freight industry is in a dynamic state of transition following the privatisation of major employers and the efforts of customers to reduce costs. In our view the economic imperative in such a situation is for employers to look for improvements and efficiencies that can be implemented and which do not impose unfairness on employees. Ultimately it will be in the interests of employees as well as the employer if the business can enhance its competitive position, retain its market share and compete more effectively for new market opportunities.

[180] In all of the circumstances we are satisfied that it is appropriate to terminate each of the 12 enterprise agreements that remain the subject of this application.

 

6. Conclusion

[181] We have concluded that it is not contrary to the public interest to terminate the 12 agreements that remain the subject of this application. We have also concluded, after taking into account the views of employees, the employers and the employee organisations, their circumstances, and the impact of termination of the agreements, that it is appropriate to terminate the agreements. The bargaining parties now need to set their attention on the appropriate terms and conditions of employment that focus, not on the past, but on the circumstances that prevail in 2015 and those which are foreseeable beyond. It is in the interests of Aurizon and its employees that bargaining continue in a constructive and cooperative manner having primary regard to the contemporary needs of the business and its employees. As the termination will likely give rise to some reconsideration by the parties of their circumstances, we propose a prospective date on which the 12 enterprise agreements will terminate. The orders we will issue will provide that termination will occur on 18 May 2015.

VICE PRESIDENT WATSON

Appearances:

Mr HJ Dixon SC and Mr S Meehan of counsel for Aurizon.

Mr W Friend QC for AFULE, QSU, CEPU, AMWU and Together Queensland.

Mr R Reitano of counsel for RTBU.

Ms M Anthony for APESMA.

Hearing details:

2014.

Brisbane.

November 5, 6, 7, 10, 11, 12.

2015.

Brisbane.

February 10.

 1   AE884420

 2   AE880759

 3   AE880768

 4   AE880766

 5   AE880769

 6   AE880772

 7   AE880774

 8   AE880775

 9   AE880763

 10   AE880765

 11   AE880761

 12   AE880770

 13   AE880771

 14   AE880773

 15  [2015] FWCA 550

 16   Exhibit D8, D9 and D10, PN277 - PN632

 17   Exhibit D11 and D12, PN633 - PN749

 18   Exhibit D13 and D14, PN750 - PN965

 19   Exhibit D16 and D17, PN975 - PN1088

 20   Exhibit D19 and D20, PN1092 - PN1387

 21   Exhibit D21 and D22, PN1389 - PN1426

 22   Exhibit D23, PN1429 - PN1539

 23   Exhibit D24 and D25, PN1550 - PN1978

 24   Exhibit D28 and D29, PN3387 - PN3609

 25   Exhibit R2, PN2474 - PN2548

 26   Exhibit R3, PN2553 - PN2606

 27   Exhibit R5, PN2945 - PN3291

 28  Exhibit R7, PN3814 - PN3938

 29   Exhibit F9, PN2112 - PN2279

 30   Exhibit F10, PN2280 - PN2416

 31   Exhibit F11, PN2618 - PN2943

 32   Exhibit F12, PN3301 - PN3383

 33   Exhibit F16, PN3622 - PN3665

 34   Exhibit F17, PN3666 - PN3742

 35   Exhibit F18, PN3743 - PN3794

 36   Exhibit F2

 37   Exhibit F3

 38   Exhibit F4

 39   Exhibit F5

 40   Exhibit F6

 41   Exhibit F7

 42   Exhibit R4

 43   Exhibit R6

 44   Exhibit A1

 45   Exhibit D24 at [40]-[42], [77]-[80], [102]-[107], [125]-[126], [142]-[144] and [153]-[155]

 46   Note the revised figure at PN299 is 69

 47   Exhibit D8 at [144]-[148]

 48   Exhibit F11, Attachment “CH3” page 4-5

 49   Exhibit R5- at [19]-[23], [31] [36]-[38] and [43]-[44]

 50   Exhibit F12, Attachment “OM3” pages 14-15

 51   Exhibit D28, Annexure “EM-2” pages 26-27

 52   Exhibit D29, Annexure “EM-2” page 29

 53   Exhibit D8 at [19] - [20]

 54   Exhibit D11

 55   Exhibit D8 at [22]

 56   Ibid at [22]

 57   Ibid at [23]

 58   Ibid at [24]-[25]

 59   PN3957 - PN3960

 60   Exhibit D8 at [22], [144]-[169]

 61   PN298

 62   Exhibit D8 at [144] - [145]

 63   Ibid at [147]

 64   PN299 - PN303

 65   PN301

 66   Exhibit D8 at [146]

 67   Ibid at [149]

 68   Ibid at [151]

 69   Ibid at [151]

 70   Ibid at [152]

 71   Ibid at [153]

 72   Ibid at [162]

 73   Ibid at [163]

 74   Ibid at [164]

 75   Ibid at [165]

 76   Ibid at Tab 11

 77   In seven of the enterprise agreements only the matter of annual leave loading may be the subject of such an arrangement

 78   Exhibit D8 at [158] - [159]

 79   Ibid at [168]

 80   Exhibit D24

 81   Exhibit F18

 82   PN590

 83   Aurizon’s outline of submissions at [102(f)]; see also Exhibit D13 at [109] - [111]; Exhibit D19 at [81] - [85] and Exhibit D24 at [153] - [164]

 84   Matters B2013/955 and B2013/956

 85   PN3975 - PN3995

 86   Exhibit R8

 87   Exhibit D33; PN33-PN130 (10 February 2015)

 88   PN61(10 February 2015)

 89   PN68 (10 February 2015)

 90   PN75 (10 February 2015)

 91   PN105 (10 February 2015)

 92   PN145 (10 February 2015)

 93   PN150 (10 February 2015)

 94   Exhibit D8 at Tab 12

 95   PN4047

 96   (2001) 53 NSWLR 153

 97   (1981) 36 ALR 567; 54 FLR 439

 98   (1993) 5 VIR 551

 99   RTBU’s final submissions at [35]

 100   PN2460

 101   PN4046

 102   PN4048

 103  Construction, Forestry, Mining and Energy Union v Hamberger and Another (2011) 195 FCR 74 at [70]; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) (2009) 239 CLR 27 at [14]; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408.

 104  Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69].

 105  [2010] FWAFB 9963

 106   Ibid at [29]

 107   (2012) 201 FCR 297

 108   Ibid at 310-311, [50]-[52]

 109  Project Blue Sky Inc & Others v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 – 382

 110   ss. 172, 181, 182; 207 - 212 and 220 - 227

 111  s. 228

 112   ss. 229-233

 113   ss. 234-235

 114   s. 269 (which appears in Part 2 – 5 of the Act)

 115   s. 236 – 237

 116   ss. 238 – 1039

 117   s. 240

 118   For Low Paid Bargaining see ss. 241 – 246 and for Single Interest Employer Authorisation see ss. 247 – 252

 119   ss. 408-410

 120   ss. 408 and 411

 121   s. 415

 122   WR Act ss. 435 – 448

 123   s. 228 (2)

 124   s. 186 (5)

 125   s. 54 (1)

 126   s. 54 (2) (a)

 127   s. 54 (2) (c) and s.58

 128   s. 15AA of the Acts Interpretation Act 1901 as in force on 25 June 2009; see s. 40A of the Act

 129   (2005) 139 IR 34

 130   Ibid at 40

 131   (1987) 61 ALJR 393

 132   (2005) 139 IR 34 at 41

 133   s. 226(b)

 134   s. 226(2)

 135  [2010] FWA 2434

 136   Ibid at [24] – [27]

 137   (2010) 204 IR 243; [2010] FWA 6468

 138   Ibid at 255, [49] – [51]

 139   Ibid at 256 – 257, [53] – [55]

 140   For example see Royal Automotive Club of Victoria [2010] FWA 3483 (per Roe C) Victorian Canine Association Trading as Dogs Victoria [2013] FWC 4260 (per Lee C); SDV (Australia) Pty Ltd [2013] FWC 5385 (per Sam DP); Country Club Ltd [2013] FWCA 2005 (per Sams DP); Badman v Altus Traffic Pty Ltd [2013] FWC 4409 (per O’Callaghan SDP).

 141  [2010] FWA 3483

 142   Ibid at [21] – [24]

 143  [2013] FWC 5385

 144   Ibid at [38] – [41]

 145  [2014] FWC 7776

 146   Ibid at [148]

 147  Purcell v Electricity Commission of New South Wales [1985] HCA 54 at [16]; (1985) 60 ALR 652 at 657

 148   See for example Nestle Australia Ltd v Federal Commissioner of Taxation (1987)16 FCR 167 at 184; Elias v Commissioner of Taxation [2002] FCA 845; (2002) 123 FCR 499 at [62]; Construction, Forestry, Mining and Energy Union v New Oakleigh Coal Pty Ltd and another [2012] FWAFB 5107 at [15]

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