100104998

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

PARTIES THE AUSTRALIAN WORKERS' UNION, WEST AUSTRALIAN BRANCH, INDUSTRIAL UNION OF WORKERS & OTHER

APPLICANTS

 -v-

 BHP IRON ORE LTD

RESPONDENT

CORAM COMMISSIONER S J KENNER

DELIVERED MONDAY, 9 APRIL 2001

FILE NO/S CR 264 OF 2000

CITATION NO. 2001 WAIRC 02526

_________________________________________________________________________

Result Declaration issued.

Representation

Applicants Mr M Llewellyn for the Australian Workers’ Union, West Australian Branch, Industrial Union of Workers & Mr R Burton for the Transport Workers’ Union of Australia, Industrial Union of Workers, Western Australian Branch;

Interveners Mr C Young for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Workers Union of Australia, Engineering and Electrical Division, WA Branch; The Construction, Mining, Energy Timberyards, Sawmills and Woodworkers Union of Australia, Western Australian Branch & The Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union of Workers, Western Australian Branch

Respondent Mr T Power of counsel and with him Mr H Downes as agent

_________________________________________________________________________

Reasons for Decision

1. This is a matter referred pursuant to s 44 (9) of the Industrial Relations Act 1979 (“the Act”).  The subject matter of the dispute involves the proposed transfer of 12 employees from the respondent's mine engineering workshop (“MEW”) to its mining operations at its Mt Newman operation for a six-month trial period.  The particulars of the dispute are set out in the memorandum of matters referred for hearing and determination as follows:

“The applicant and respondent are in dispute as to the proposed transfer of twelve (12) employees from the respondent’s MEW section to mining operations at its Mt Newman site for a six month trial.

The respondent says that such a transfer is consistent with the terms of the Ongoing Change Agreement II contained at clause 3 of the BHP Iron Ore Enterprise Bargaining Agreement No AG 333 of 1997 (“the Agreement”) and wishes the transfer to proceed.

The applicant says that the proposed transfer:

1. Constitutes a forced redundancy;
2. Arises as a consequence of the engagement by the respondent of contractors in the MEW to perform work previously performed by employees; and
3. Is not supportable under the Agreement.

The applicant opposes the respondent’s proposed course of action.”

2. The applicants in the proceedings are the Australian Workers Union, West Australian Branch, Industrial Union of Workers (“the AWU”) and the Transport Workers Union of Australia, Industrial Union of Workers, Western Australian Branch (“the TWU”) (“the applicants”), with BHP Iron Ore Ltd as the respondent employer ("the respondent").  Additionally, on the commencement of the hearing of the matter, the Construction Mining, Energy and Timberyards and Sawmills Industrial Union of Workers (“the CMETSU”), the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Workers Union of Australia, Engineering and Electrical Division, WA Branch (“the CEPU”) and the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union - WA Branch (“the AFMEPKIU”) sought and were granted leave to intervene in the proceedings (“the interveners”).

3. Mr Llewellyn represented the applicants, after Mr Burton withdrew from the proceedings at an early stage.  Mr Power of counsel and with him Mr Downes as agent represented the respondent.  Representing the interveners was Mr Young.

Contentions of the Parties

4. The applicants, supported by the interveners, submitted that the effect of the respondent's proposal was to seek to move mine worker employees in the MEW to the mine production department, and to consequently re-classify those employees as production employees.  It was submitted that in meetings between the respondent and employee representatives, to announce the proposed changes, the respondent told the employees that once moved to the production department, contractors would be engaged to perform their work.

5. As to the history of the various industrial instruments relevant to these proceedings, the applicants submitted that the first Ongoing Change Agreement (“OC I”) was negotiated within the BHP Iron Ore Pty Ltd BHP Iron Ore (Goldsworthy) Pty Enterprise Bargaining Agreement II 1995 (“EBA II”).  Subsequently, as a result of negotiations for a new enterprise agreement, which became known as the BHP Iron Ore Enterprise Bargaining Agreement III 1997 (“EBA III”), OC I was amended and became known as Ongoing Change Agreement II (“OC II”), which was incorporated into EBA III at clause 3.0.  The applicants said that the meaning and effect of what was contemplated in OC I was contained in a letter from a Mr Grogan, the then manager of industrial relations at the respondent, which letter referred to some “60 odd efficiency improvements listed in EBA II are the types of changes that in the future the company wants to make”.  The submission was that this equally applied to OC II, as contained in EBA III. 

6. It was the submission of the applicants that given the terms of OC II, and its history, it could not be used by the respondent to forcibly make employees redundant nor to forcibly change the classification of an employee.  It was submitted that this course of action was also directly contrary to commitments given by the respondent during negotiations for EBA III, as to the use of what became OC II.  There was a further submission by the applicants that the ongoing change process had never been utilised by the respondent in the manner now sought to be applied, to move employees from one department to another against their will, and to re-classify them.

7. It was also said by the applicants that as the terms of OC II are ambiguous as to the type of changes contemplated by it, the Commission, in its interpretation of it, can have regard to extrinsic materials.  It was the ultimate submission of the applicants that if the respondent wanted to pursue such a change, then it would have to proceed by way of negotiations with the relevant employees and their unions.

8. Not surprisingly, the respondent had a different view of the matter.  Counsel submitted that in accordance with OC I contained in EBA II, the unions party to EBA II consented, subject to certain conditions, to permit the respondent to initiate one to three month trials of changes in the workplace.  If at the conclusion of the trial period the relevant unions opposed the introduction of the changes, then application could be made to the Commission to determine the issue.  With the introduction of OC II within EBA III, the respondent submitted that it could initiate trials of changes in the workplace from one to six month periods, subject only to the express limitations in OC II, despite any objection of the unions.

9. It was submitted by the respondent that pursuant to the terms of OC II, on 8 September 2000, the respondent gave notice of its intention to trial the relocation of some mine worker employees in the MEW from the mine maintenance department to the mine production department.  It was denied by the respondent that it was said that contractors would do the work previously performed by the relocated employees.

10. The respondent also denied that the proposed trial involves forced redundancies and in that regard, submitted that the meaning of “redundancy” is to be interpreted consistent with the terms of clause 31 of the Iron Ore Production and Processing (Mt Newman Mining Company Pty Ltd) Award No. A 29 of 1984 (“the Award”), such that there needed to be a termination of employment, which would not arise as a result of the proposed trial. 

11. In short, the respondent submitted that the proposed trial is in accordance with OC II and believes that it will demonstrate improved productivity and other efficiencies within its operations.

12. As to the terms of OC II, it was submitted by counsel for the respondent that the terms of OC II were clear and unambiguous and resort to extrinsic material was both unnecessary and impermissible.  In that connection, counsel for the respondent made a standing objection to evidence going to the intention of the parties to OC II, which objection was duly noted by the Commission.

Issues

13. At least in substantial part, issues arising in this matter include whether the terms of OC II contemplate the change as proposed by the respondent.  Secondly, if so, a further issue is whether the proposal falls into one of the exclusion's contained in OC II or constitutes “wholesale contracting out” in the MEW, which was common ground to not be contemplated by OC II.

Factual Background

14. There was a considerable amount of evidence lead by the applicants and the respondent in relation to this matter.  For present purposes, I propose to only summarise the relevant evidence before turning to my findings and conclusions. 

15. The background to the proposed changes was outlined in the evidence of Mr Geoffrey Knuckey, the respondent's manager mine maintenance at Newman.  He testified that the MEW is a section within his responsibility.  The MEW comprises areas including the haul truck maintenance workshop, operated and staffed by a contractor, Westrac, and the plant maintenance workshop (“the CAT shop”), which is operated and staffed by employees of the respondent in mine worker, tradesperson and apprentice classifications.  The function of the CAT shop is to maintain mobile plant such as water carts, dozers, front-end loaders and graders.  There were, at the time of these proceedings, approximately 38 employees and a number of apprentices employed in the CAT shop, excluding supervisory and managerial personnel. 

16. Of these 38 employees, there are some 13 mine workers the subject of the proposed trial, whom are referred to as the “lube crew”.  These 13 mine workers comprise nine employees engaged in lube truck and check point duties on a full time basis.  Of these nine employees, seven of them drive lube trucks full time.  The remaining four mine workers are relief lube truck drivers, one of whom has been on light duties since in or about June 2000.  The core duties of the lube truck drivers is to drive lube trucks in the mining operations, to attend to refuelling, lubricating and the topping up of coolant and hydraulic oils for the various pieces of mining equipment used in the mining operations department.  The four relief lube truck drivers, when not doing relief driving work, engage in a range of other duties including assisting tradesperson's; bucket hardware and ground engaging tools; assisting with the servicing of mobile equipment and general cleaning duties around the workshop and workshop offices.

17. Mr Knuckey testified that of the nine mine workers and one tradesperson engaged on lube truck and check point duties, all, with the exception of four full time drivers, report to the CAT shop at the commencement of their shift.  The four full time drivers liaise with the production department and receive instructions for equipment refuelling.  It was Mr Knuckey's evidence that there are three lube trucks in the department, with two lube trucks normally operating on each shift.  As well as driving, an employee may also during a shift have to attend to refuelling and oiling at the check point, depending upon production requirements.

18. Mr Knuckey gave evidence as to the reason for the proposed change.  He testified that soon after becoming responsible for the MEW, he formed the view that there was insufficient meaningful work for the mine workers to perform and there appeared to be a lot of unproductive time. He also said there were some concerns about the CAT shop being contracted out.  This led to Mr Knuckey reviewing the staff arrangements for the CAT shop.  As a result of this review, Mr Knuckey came to the conclusion that the optimum manning level in the CAT shop would be 20 employees for scheduled work and one employee to cover “peak” work, giving a total of 21 employees.  He therefore concluded that there should be a reduction in manning levels.

19. A number of meetings were held by senior management, including those from the production department.  The conclusion from this process was a proposal by the respondent that the majority of mine workers, including the lube truck drivers, would be transferred to the mining operations department “on the hill” on a trial basis in accordance with OC II.  It was intended that the responsibility for lube truck drivers be transferred to the production department, and the lube truck drivers be trained and operate haul truck vehicles in mining operations, to assist in achieving budgeted total material movement.

20. Based upon advice Mr Knuckey received, by memorandum dated 8 September 2000 (exhibit AWU 1) Mr Knuckey notified the relevant on site union officials of his intention to relocate the mine worker employees to the mining department in accordance with OC II, contained in EBA III.  It was proposed that this commence from in or about mid October 2000.  Mr Knuckey and Mr Spoonheim made a presentation to the relevant site union convenors a copy of which was tendered as exhibit AWU 2.  As to the “why” in the proposal being advanced, the presentation referred to the MEW having more people than required to operate at the equivalent efficiency to contractors; there was a labour shortage “on the hill” and referred to an ability to optimise lube truck service through synergies gained by working within the mining department.  As to the "how" in the presentation, this included reference to people transferring to the mining department entering as level three and requiring training and competency on haul trucks/spotting. 

21. A number of concerns from onsite union officials arose from this presentation, and subsequent meetings, including contracting out of the CAT shop and redundancies.  In relation to the former, Mr Knuckey testified that it was not the respondent's present intention to contract out all of the work done by mine workers and trades people however he emphasised that the level of productivity in the CAT shop needed to be at the same level as that performed by contractors.  No guarantees however were given as to the future.  On the question of redundancies, Mr Knuckey said that this gave rise to heated debate and that the union convenors present said that the proposed trial was in effect, a redundancy for those in the MEW.  Mr Knuckey responded to the effect that if the trial proceeded, some mine worker positions in the CAT shop would become redundant, however alternative positions were available “on the hill”.  He also advised the convenors that when they were transferred, they would be reclassified as production workers.  Mr Knuckey said that he later changed his view on this to the effect that any reclassification would only occur on the final implementation of the change, not during the trial.

22. In cross-examination, Mr Knuckey conceded that he told the MEW employees in the meetings with them that the majority of the positions in the CAT shop were being made redundant and that jobs would be available for them “on the hill”.  He also confirmed in evidence that he told the affected employees that they had no choice under the respondent’s proposal and that they had to go to the “hill”.

23. The applicants called Mr Beggs to give evidence.  He is employed in the MEW as a mine worker and has been so employed in that area for about five years.  He testified that in this position he performs a range of duties as a level three mine worker including servicing plant; assisting trades persons in the workshop; general duties; running a fuel depot known as the “checkpoint” and driving the lube trucks.  Mr Beggs referred to the memorandum of Mr Knuckey dated 8 September 2000 (exhibit AWU 1) and referred to subsequent meetings between himself, two other site union officials, Messrs Kumeroa and Stead, and Mr Knuckey. 

24. Mr Beggs referred to Mr Knuckey's comment that in part the transfer was because of a shortage of labour “on the hill”.  He referred to the respondent's presentation and he testified that in response to a question to Mr Knuckey as to an MEW employee not wanting to transfer he was told that it was either "a job on the hill or the gate".  Mr Beggs said that he asked Mr Knuckey if positions in the MEW were to be made redundant and he was told that they were.  It was Mr Beggs' evidence in cross-examination that he was told by Mr Knuckey that he would be moved to "the hill" as a production worker and he had the distinct impression that this was not for a trial but he would be permanently located there.  Mr Beggs' evidence was that he could distinctly recall the discussion about redundancy because the conversation became heated on this point.  It was Mr Beggs' evidence that he applied for a position with the respondent and was appointed in the MEW and he did not want to move to "the hill". This was not a question of money, even though it appeared he might have the capacity for greater earnings “on the hill”.

25. Mr Kumeroa has been a production worker level four and is a convener for the Transport Workers Union.  He gave evidence about discussions with the respondent about the proposal along similar lines to Mr Beggs.  Mr Kumeroa testified that the union convenors raised with the respondent, its ability to engage new employees under EBA III and he said he was told that the respondent was not in a position to employ anyone under the EBA.  Mr Beggs also referred to this issue in his evidence, and said that a manager from the respondent, Mr Miller, told him that the respondent would not employ any more employees at that point, unless they could do so under workplace agreements.

26. Mr Kumeroa also gave evidence about the nature of work done by production employees in the production worker classification under EBA III.  He said that he was broadly familiar with the work to be done and to obtain level three production worker competency, requires an employee to progress from level one and attain the required skills and competencies.  Despite this, Mr Kumeroa said that Mr Knuckey intended to transfer the MEW employees straight across to production at level three.  As to duration of the transfer, it was Mr Kumeroa's evidence that he was given the distinct impression from the meetings that the transfer to the production department would be “forever and a day”.  Mr Kumeroa also said that he had previously been involved in the issuance of “90 day notices” in relation to contractors, and in his experience, the respondent has never used ongoing change to introduce contractors.  In his experience, the OC I and II had been used to introduce changes that did not lead to surplus employees or the forced reclassification of employees.  Mr Kumeroa gave an example of the contracting out of the blast crews in this regard.

27. Mr Kumeroa was cross-examined in relation to his role in the negotiations for EBA III.  He testified that he recollected that the respondent said that it needed to be able to make changes as were required, on a timely basis in order that the respondent be cost competitive.  He said the respondent's managers during the negotiations, gave examples as to the sorts of ongoing changes that might be the subject of the OC II.  Mr Kumeroa said that no one from the respondent told him that these would be the only items to be included.

28. Evidence was also given on behalf of the applicants by Mr Stead.  Mr Stead has been employed by the respondent for about 22 years, the last ten years of which as the convener for the AMWU.  Mr Stead gave evidence about his attendance at the respondent's presentations concerning the proposed transfer of employees.  He testified that at the work group meetings the respondent indicated that the MEW employees were surplus and that they had no option but to go “to the hill”.  Mr Stead also gave evidence about presentations to the various shifts involved.  He testified that at these meetings people became vocal.  One employee, a Mr Brewer, asked the respondent whether he was redundant and his job no longer required, to which Mr Knuckey replied in words to the effect that he no longer had a job in the MEW and he was redundant.  Mr Stead said that he recalled these issues being raised because they affected job security.

29. Mr Stead also gave evidence about previous involvement he has had with ongoing change matters.  He testified that at no stage had the ongoing change provisions been used to change an employee's classification, at least forcibly.  He also gave evidence about his involvement in the negotiations for both EBA II and EBA III.  Mr Stead previously held the position of representative for the combined union group in these negotiations.  Mr Stead said that during the course of this process, it was never intended that the ongoing change provisions be used to fundamentally affect the type of work an employee performed for example, a tradesperson being transferred to mining operations.

30. Mr Stead referred to the negotiations for EBA II, and the respective parties understanding of the use of ongoing change in that agreement.  He referred to the letter dated 10 August 1995 from Mr Grogan noted above.  Mr Stead testified that this letter was written to him in response to concerns expressed by employees of the respondent as to the respondent's anticipated use of the ongoing change provision in the then proposed EBA II, then under negotiation.

31. Formal parts omitted this letter provided as follows:

“On a number of occasions over the past weeks I have been asked to clarify the Company's anticipated use of the "Ongoing Change" Agreement in the proposed EBA II.  The company wants to have the ability to make timely changes in our operations that improve workplace efficiency.  The sixty (60) odd Efficiency Improvements listed in EBA II are the types of changes that in the future the Company wants to make on a timely basis ie. not wait every two (2) years.

The “Ongoing Change” Agreement is about workplace efficiency, not about general conditions of employment such as Housing.

I believe these issues have been debated through our negotiations, but I want to make it clear in writing to you the Company's position on the “Ongoing Change” Agreement as we progress through to ratification of the Agreement.”

32. It was Mr Stead's evidence that nothing within the “sixty (60) odd Efficiency Improvements” referred to in this letter involved the unilateral transfer of employees from one classification to another.

33. Mr Stead also said that he was involved in the negotiations for EBA III.  He testified that nothing was said in those negotiations to expand the types of changes contemplated to be the subject of ongoing change, from those set out in exhibit AWU 8.  It was Mr Stead's evidence that in his experience to date, no other changes had been put in place by the respondent using the ongoing change provisions, other than those types of changes referred to in exhibit AWU 8.  In the past, other methods had been used by the respondent such as the “Surplus Employees Agreement”, and the contractors’ clause in the Award.  In this regard, Mr Stead referred to the out sourcing of the machine shop that occurred in mid 1999, set out in a memorandum to him dated 26 February 1999 from the then manager mine maintenance (exhibit AWU 9).  This change took place after EBA II came into effect.  In this example, it was Mr Stead's evidence, that no employee was forced to transfer to other departments or to change classifications but rather, options including voluntary redundancies and alternative decisions were canvassed.  In cross-examination, Mr Stead accepted that a trial may not necessarily fix anything in stone and that the possibility of the respondent reverting to the previous arrangements could not be ruled out.

34. On behalf of the applicants, evidence was also adduced from Mr Llewellyn.  He testified that he became aware, as the assistant branch secretary of the AWU, of the respondent's proposal from Mr Beggs, the AWU convener.  Mr Llewellyn said that he was informed at that point that the respondent intended to use contractors to cover the work that could not be performed by employees of the respondent, in the MEW.  In his opinion, this meant that the respondent was “manning up for the troughs and would require labour to cover the peaks” in the MEW.  Various meetings took place involving himself and representatives of the respondent.  Mr Llewellyn testified that he told the respondent's management in these meetings that if the respondent intended to simply move the lube truck then there was little that the unions could to as that would fall within the ongoing change provisions.  He said however, for the respondent to forcibly move the MEW employees, including other than the lube truck drivers, and “back fill” those positions by using contractors, then that was not a course contemplated by the ongoing change provisions.

35. In relation to the presentation contained in exhibit AWU 1, Mr Llewellyn said that he discussed his concerns with Mr Knuckey.  His concern was that with the reduction in employees in the MEW, there would be a corresponding need to engage contractors to undertake breakdown work, as this had not been factored into the respondent's manning assessment.  Mr Knuckey told him that if the respondent’s employees could not perform the work, contractors would perform it, as was presently the case.  Mr Llewellyn's evidence also was that in one of the meetings where Mr Kumeroa was present, Mr Kumeroa asked the respondent what it would do if it “lost the change issue”.  It was said according to Mr Llewellyn, by Mr Keddie, the human resources manager that the respondent would give the employees one weeks’ notice and transfer them.  If they refused to go then they would be stood down for refusal of duty and their employment would be terminated. 

36. The history of negotiations leading to OC II and its predecessor in EBA II was adduced on behalf of the applicants through Mr Bruce Gibson, previously a convener with the AWU and Mr John Johnston, a convener with the TWU.  Mr Gibson testified that he was involved in negotiations for EBA III as a part of the single bargaining unit representing the AWU at Newman.  He said that he took detailed notes during the negotiations.  Mr Gibson testified that ongoing change was an issue of considerable debate during the negotiations.  The respondent indicated that it wished to change a number of issues in relation to OC I for the new enterprise agreement.  These issues included reference to contractors, redundancies and transfer from 12 to 8 hour shifts.  These matters were noted by Mr Gibson in his notes of the first day of negotiations on 21 October 1997 and annexed as “BG1” to his witness statement. 

37. Mr Gibson referred to a number of specific examples of ongoing change discussed at the meeting that were sought by the respondent.  In the case of Newman, examples included roster changes in field services; Pondy Point check point oil changes; topsoil removal; a new ANFO storage facility - contractor operated; roster system water services; fitters driving gear off the hill; and OHP clean up.  None of these issues cited as examples, would have or did on Mr Gibson's evidence, result in any displaced employees or the forced transfer of employees between departments or classifications.  These examples were also referred to in Mr Gibson's notes contained in “BG1”.  On the third day of negotiations, Mr Gibson said that agreement was reached between the parties in relation to a number of matters including a change to enable voluntary redundancies to occur under ongoing change.  Whilst the issue of the use of contractors was not agreed, Mr Gibson said that the respondent undertook that it would not use the ongoing change provisions to “wholesale contract out” a section of its operations.  If this were to occur, then the relevant provisions of the Award would be utilised.

38. Mr Gibson gave evidence of some discussions in relation to transfers within departments, but those were not particularly successful, apparently. It was Mr Gibson's testimony that in his experience, there has never been an ability for the respondent to direct an employee to move from one department to another or one classification to another, using the ongoing change provisions.  Moreover, he said that this issue was expressly raised during the negotiations and it was put by the respective unions that there could be no change to an employee’s classification during a trial period using the ongoing change provision.  He said that it was put that employees would be used within their classification during the trial, if they became surplus to requirements.  Mr Gibson testified that there was never an alternative position put that would change the unions view about this.  Mr Gibson said that Mr Keddie on behalf of the respondent indicated that this was agreed and his notes of the meeting on 25 November 1997 (“BG4”) reflected this.  He said that at this point in the discussions, the unions collectively made it plain to the respondent that they would not accept a position that ongoing change be used to change a person's classification.  This raised amongst other issues, deskilling of employees.  Mr Gibson said the respondent accepted this and had they not, he believed that the respondent understood that the unions would have collectively opposed it fervently, at the time.

39. As to events after the introduction of EBA III, Mr Gibson referred to a number of changes introduced by way of the ongoing change provisions.  He said none of these involved the unilateral forced transfer of employees.  An example he gave involved the proposal that the blast crew functions be put out to contract.  He said that this was done under the contractor provisions of the Award and those employees made surplus were given the option of voluntary redundancies or the choice of positions on a trial basis, with the ability to change positions or to access voluntary redundancy if they did not wish to remain in those positions.  It was Mr Gibson's evidence, that in all the time in which he was a site representative, which was from 1990 until 1998, there had never been a situation at Newman where surplus employees arising from an efficiency measure, were forcibly transferred to other classifications and in other departments.  He said that on each such occasion, those employees affected were offered either a voluntary redundancy or a choice of other positions.

40. Also called to testify on behalf of the applicants was Mr John Johnston.  He has been employed by the respondent since in or about June 1995.  He is presently a convener with the TWU which position, as a site representative, he has held in various capacities since in or about 1987.  Additionally, since that time, Mr Johnston has been involved in negotiations with the respondent in relation to the restructuring 1 and restructuring 2 negotiations, prior to the first enterprise bargaining agreement in 1993.  Since that time, Mr Johnston has been involved in negotiations for the 1993 agreement and EBA II and EBA III.

41. Mr Johnston said that during negotiations for EBA II, the issue of ongoing change was raised by the respondent, as the respondent did not want a “bank up” of efficiency items from one set of enterprise agreement negotiations to another.  Mr Johnston took detailed notes at the negotiation meetings and testified that the respondent made it clear that what it envisaged by way of ongoing change was implementation of the “60 odd issues that had been saved for EBA II”.  According to Mr Johnston, Mr Grogan on behalf of the respondent explained that the ongoing change provision would only have application to non-Award issues and would not involve contracting out of the Award.  He testified that the question of ongoing change was further raised later in the negotiations, with the respondent re-stating its earlier position in relation to types of changes envisaged in the “60 odd items” that had previously been raised. 

42. Mr Johnston said that the question of re-classification of employees was considered by the unions to be an Award issue and not one contemplated by the ongoing change provisions.  He testified that this was highlighted when at some point later in the negotiations, a manager of the respondent in Newman, indicated that the respondent could use the ongoing change process for any issues that were disagreed and not caught by the specific exclusions in the agreement. Mr Johnston's evidence was that this caused considerable disquiet, resulting in Mr Grogan's letter already referred to (exhibit AWU 8). 

43. It was Mr Johnston's evidence that this letter again affirmed the types of issues contemplated by the ongoing change provisions and they were not to affect general conditions of employment, but be restricted to workplace efficiency measures.  Mr Johnston testified that exhibit AWU 8 gave the unions a degree of comfort and said that at the meeting, it was put by the respondent that there was no “hidden agenda” in relation to the ongoing change issue.  Mr Johnston recorded this observation in notes of a meeting on 21 September 1995, as annexure “JJ 7” to his witness statement.

44. During discussions for EBA III in 1997, the issue of ongoing change was raised again.  At those negotiations, Mr Johnston said that there were some changes made generally consistent with the evidence of Mr Gibson, as reflected in Mr Johnston's notes of the meetings.  Mr Johnston also testified that one of the major issues arising out of these discussions was that the ongoing change provision would not be used for “wholesale contracting out” of a particular work area.  Mr Johnston said that the flavour of the negotiations from both sides was based on trust.  The unions suggested a preamble to the ongoing change provision as to what it meant, however the respondent's position was that the unions should “trust them” in respect of this issue. 

45. The evidence of Mr Johnston also was that a commitment was made by Mr Wheeler of the respondent, that if employees were displaced as a result of ongoing change during a trial, the respondent would find an alternative position with no loss of earnings and at the end of the trial, offer redundancy or re-deployment in accordance with the Surplus Employees Agreement.  He said that this would involve an offer of either a redundancy or a choice of available positions.

46. It was Mr Johnston's evidence that for the entire period of his employment, he had never known of a situation where an employee was forced to move from one area to another against his or her will.  Furthermore, in cross-examination, Mr Johnston said that the issue of re-classification of employees arose in both EBA II and EBA III negotiations and that the ongoing change provision would not be used for this purpose.  In re-examination, Mr Johnston testified that nothing was said by the respondent in EBA II or EBA III negotiations, to suggest that the ongoing change provisions had a broader reach than the types of changes contemplated by AWU 8.

47. For the respondent, evidence was adduced as to the development of the various industrial agreements and OC I and OC II, from Mr Michael Wheeler, employed by the respondent as its manager employee relations.  Mr Wheeler was also involved in negotiations in relation to the 1993 enterprise agreement and EBA II and EBA III, and was in the latter, the lead negotiator for the respondent.  He outlined in his evidence a detailed of history of the various industrial instruments applicable at the respondent.  Mr Wheeler outlined the background to negotiations for EBA II and OC I contained within it.  Mr Wheeler testified that the objective of the respondent with OC I, was to improve and streamline the method of introducing change in the respondent's business, in a timely fashion, with any disputes in relation to such changes being dealt with in this Commission at the end of the trial period introduced.  He said that one of the benefits of the trial period, was that any subsequent dispute referred to the Commission could be determined on at least in part, what had emerged from the trial process, rather than speculation as to what may or may not have occurred if the proposed change was to be implemented. 

48. It was Mr Wheeler's evidence that as a result of the negotiations surrounding OC I, anything that fell short of the specific limitations appearing in the footnote to the agreement, would be allowable as a trial matter.  The respondent emphasised in the negotiations the ability for it to implement change in a timely fashion.  It was Mr Wheeler's understanding that the reference to “contracting out of the Award” in both OC 1 and OC II, were references to the respondent not implementing a trial which would have a detrimental effect on employee entitlements such as reducing salary payments, allowances, leave provisions, and such like.

49. As to EBA III, Mr Wheeler testified that a major focus of these negotiations was on changes to OC I.  Those changes principally involved an extension of the trial period from a maximum of three months to a maximum of six months; a change to the redundancy footnote to only exclude forced redundancies; deletion of the exclusion regarding the introduction of contractors to permanently replace employees (however a commitment was given that this would not be used to contract out an entire work area); the inclusion of employees displaced during a trial being found other duties and an acknowledgement that transfers from shift work to day work exists under the Award.

50. Mr Wheeler referred to a number of examples of changes under OC II.  These included changes to “smoko” breaks at Newman, the use of contractors at Finucane Island and the outsourcing of a tradesperson’s work at the locomotive workshop in Port Hedland.  As to the issue of re-classification, Mr Wheeler expressed the view that he considered there was no limitation in the Award or various enterprise agreements in relation to the re-classification of employees, however he added that he was not aware of it previously occurring other than by consent.  Mr Wheeler said that to his knowledge the question of re-classification did not arise in the negotiations for EBA III when dealing with OC II.  However, he said that Mr Keddie, who made certain comments during the negotiations referred to above, had authority to put and discuss matters within his area of responsibility.  He accepted that what was in Mr Gibson's notes as set out in annexure “BG 4”, could have been said during these negotiations. 

51. In relation to reference made by witnesses called on behalf of the applicants to the “Surplus Employees Agreement”, Mr Wheeler testified that this agreement is an unregistered agreement entered into specifically for the closure of the power plant in Newman in 1987.  He said that this agreement had not been applied or relied upon since he commenced employment with the respondent in 1992 however, he said that the respondent has applied income maintenance.

52. In cross-examination, Mr Wheeler said that there have been a number of long standing exclusions from ongoing change, including housing, safety and the issue of staff doing wages work.  I pause to note that none of these exclusions are expressly referred to in either OC I or OC II.  It was Mr Wheeler's evidence that the negotiation of OC II was a “new ball game” and that the commitments expressed in exhibit AWU 8, no longer had application to OC II.  However, he accepted in evidence that at no time during the negotiations did the respondent indicate that with the new ongoing change provisions, “all bets were off” as it was put, from the previous arrangements, nor that the commitments given previously as expressed in exhibit AWU 8, no longer had application.

Consideration

53. The first issue to consider are the respective rights and obligations of the parties as provided in EBA III.  It would appear that clauses 3.0 - Ongoing Change Agreement II, clause 4.0 - Continuous Improvement and clause 10.1 of clause 10.0 - Term, Scope and Operation of Agreement, bear upon this issue and relevantly provide as follows:

“3.0 - ONGOING CHANGE AGREEMENT II

The parties to this Agreement agree that ongoing change to improve business efficiencies has to be implemented for BHP Iron Ore to remain competitive in the Iron Ore industry.  The procedure set out over the page is an improved version of the original Ongoing Change Agreement contained within Enterprise Bargaining Agreement II.

The procedure is designed to ensure timely introduction of change to allow BHP Iron Ore the ability to compete on an equal basis.

“ONGOING CHANGE” AGREEMENT II

Company may originate change

Unions to be notified of any issue/change

 Without prejudice discussions if required (30 days maximum) (Written notification to both site and state union representatives)

PLEASE NOTE:

1. Does not allow contracting out of the award

2. Not used for:

 a) Manning changes that involve forced redundancies  c) Role of convenors, industrial time, union meetings

 b) Individual performance/discipline  d) Transfers from 12 hour shiftwork to 8 hour days #

* Employees displaced during a trial period will be found other duties.

# The parties acknowledge the ability for transfers from shiftwork to daywork exist under the award.

4.0 – Continuous Improvement

The parties to this agreement recognise and accept the need for every employee to contribute to BHP Iron Ore by continuously improving its processes and methods of working to remain competitive.

This means that the parties will continue with improvements and commitments made under previous agreements such as Stage I and II Restructuring and Enterprise Agreements I and II.

It also means that the parties are committed to recognising, adapting and implementing best practice wherever practical to ensure that BHP Iron Ore can compete in areas of

a)            Reliability

b)            Quality Performance

c)             Cost Competitiveness

One of the ways that BHP Iron Ore will achieve these objectives is to institute processes, systems or structures at a workgroup level to allow discussion and resolution of business issues.  This focus may take into account the following:

a)            Exploration of opportunities to improve efficiency within the workgroup.

b)            Identification of performance levels against Key Performance Indicators.

c)             Examination of means of achieving and monitoring these performance levels.

d)            Implementing changes in accordance with SELL (Safe Efficient Legal Logical) Principle.

BHP Iron Ore will benefit from improved performance due to employee involvement in continuous improvement (eg reducing costs, improving reliability and enhancing quality).

This will allow employees to benefit from greater involvement in determining workplace practices, increased job satisfaction and increased employment security.

10.0 - TERM, SCOPE AND OPERATION OF AGREEMENT

10.1  Title and Relationship to Award and Enterprise Bargaining Agreement

10.1 This Agreement shall be known as the BHP Iron Ore Enterprise Bargaining Agreement 1997.

10.1.2       The terms of this Agreement shall, to the extent of any inconsistency, supersede, replace and prevail over the provisions of the Iron Ore Production and Processing (Mt Newman Mining Co Pty Ltd) Award No A29 of 1984 (the “Award”)

10.1.3       Subject to subclause 10.1.4 below, the terms of

• The BHP Iron Ore Enterprise Bargaining Agreement of 1995 (No C 339/1995);
• The BHP Iron Ore Enterprise Bargaining Agreement of 1993 (No C 314/1993); and
• The BHP Iron Ore (Goldsworthy) Enterprise Bargaining Agreement of 1994 (No C 228/1994)

Shall be binding upon all employees of BHP Iron Ore employed at the Mount Newman Joint Venture and the Mount Goldsworthy Mining Associates Joint Venture as the case may be.

10.1.4       The terms of this Agreement shall, to the extent of any inconsistency, supersede, replace and prevail over the provisions of

• The BHP Iron Ore Enterprise Bargaining Agreement of 1995 (No C 339/1995);

• The BHP Iron Ore Enterprise Bargaining Agreement of 1993 (No C 314/1993); and
  • The BHP Iron Ore (Goldsworthy) Enterprise Bargaining Agreement of 1994 (No C 228/1994)”

54. The relevant principles in relation to the interpretation of awards and other industrial instruments are well established.  This involves a reading of the instrument itself and the words being given their ordinary and natural meaning: Norwest Beef Industries Limited v Australian Meat Industries Employees' Union WA (1985) AILR 73; Nationwide News (trading as Sunday Times) v Printing and Kindred Industries Union (WA Branch) and Anor (1988) AILR 358.  Additionally, industrial instruments are to be generously construed and this is particularly the case when considering the terms of an industrial agreement, which arises from the consensus of the parties: AITCO v Federated Liquor and Allied Industries Employees' Union (1988) AILR 382.

55. In the case of industrial agreements, with which the Commission is here concerned, the principle of “generous construction” has even more relevance.  In AITCO, noted above, the South Australia Industrial Court, when dealing with the issue of interpretation of an industrial agreement said:

“We are here construing not an award of the Commission but an industrial agreement, which results from consensus between the parties.  In construing such a document we must, by viewing the matter broadly and giving heed to every part of the agreement, endeavour to give it a meaning which is consistent with the general intention of the parties to be gleamed from the document as a whole.”

56. With respect I agree with that view and consider that it should apply in the present circumstances.  In my opinion, clause 3.0 - Ongoing Change Agreement II must be interpreted within the terms of EBA III as a whole.  I do not agree with the submission of counsel for the respondent that in effect, the terms of OC II should be viewed as a stand-alone agreement, apart from the remainder of EBA III. 

57. In my opinion, the terms of OC II, when read in the context of EBA III as a whole, are not clear and unambiguous and resort to appropriate extrinsic material is permissible.  In this regard it is trite to observe that in construing industrial awards and agreements, regard can be had to the history and surrounding circumstances in which the particular instrument came into being: Pickard v John Heine and Son Ltd (1924) 35 CLR 1.  In this context, evidence of the intentions of the parties to the relevant industrial instrument can be referred to although, as counsel for the respondent quite correctly pointed out, caution must be exercised in this regard, to ensure that this relates to common intention and not merely the subjective intention of one or the other, in terms of what each may have hoped they would have achieved from their endeavours: Hume Pipes case 11 SAIR 1; Printing and Kindred Industries Union and Ors v Davies Brothers Ltd (1986) 18 IR 444.  This is not to say however in my opinion, that commitments given and/or understandings reached during the course of deliberations in the reaching of an industrial agreement, may not be relevant to its subsequent interpretation.

58. It is not in contest, and I find, that the respondent's proposal involves the effective abolition of positions within the MEW and the ultimate re-classification of those employees as production employees within the respondent's mining operations.  In particular in this regard, I refer to the cross-examination of Mr Knuckey noted above, where he said that the position he put at the meetings with the MEW employees was that the majority of the positions in the CAT shop were redundant, but employees would have jobs with the respondent “on the hill”.  As I have noted, he also conceded in cross-examination that the affected employees would have no choice with the change and they would have to go “to the hill”. 

59. In my opinion, from the plain language used in clause 3.0 - Ongoing Change Agreement II, the purpose of OC II is to facilitate the timely introduction of change at the respondent's operations in terms of worksite efficiencies.  This provision however does not, in my view, permit changes of an unlimited nature.  The terms of the ongoing change provision must be read within the terms of EBA III and its predecessors, with the terms of the Award, and with the terms of an employee’s contract of employment.  It is clear by the terms of clause 10.1, set out above, that EBA III, which includes OC II, is to be read subject to the provisions of the earlier enterprise bargaining agreements and the Award.  Furthermore, by the plain terms of the provisions of clause 4.0 - Continuous Improvement, when read with clause 10.1, it is clear in my opinion, that the parties have agreed and committed to maintaining improvements and commitments given under the previous industrial agreements, which must by definition, in the case of EBA II, include those given in relation to OC I.

60. In terms of EBA II, of which OC I is a part, the manner of application of OC I, in terms of the subject matter contemplated, was referred to in exhibit AWU 8.  By the structure of EBA III, in my opinion, this is not abandoned on the contrary, the plain language used in particular in clauses 3.0, 4.0, and 10.1, points in the opposite direction.  In my view, the reference to “improved version” in clause 3.0 of EBA III is a reference to those specific changes agreed upon during the course of the EBA III negotiations to which I have made reference above when dealing with the evidence led in these proceedings.  In other respects, I am not persuaded that OC II represents in some form, a “radical” departure from the prior arrangements.  Clearly, the content of exhibit AWU 8 reflects the types of changes intended for illustrative purposes.  They are not, in my view, the only changes that may be implemented.  However, it is changes of that kind, which are relevant and clearly were comprehended by the parties at the time.

61. If it was the intention of the respondent to dramatically alter the common understanding as to how ongoing change would be utilised for the future, as opposed to how it was applied in OC I, during the EBA III negotiations, then that should have been clearly and unambiguously articulated and should have been the subject of negotiations, in an attempt to expand the scope of application of the ongoing change provision.

62. On the evidence, I find that this did not occur, and the respondent's subjective intention to create a “new ball game” is something that was never expressly dealt with by the parties.   In my view, such an intention would fall foul of the very objection raised by Mr Power, as going to the subjective intent of a party and not a common understanding between parties.  The common understanding on the issues the subject of this dispute supports the contentions of the applicants and the intervenors.  Moreover, the position of the respondent is in my view, contrary to the proper construction of the relevant provisions of EBA III, to which I have referred above, which expressly preserve and apply previous arrangements unless inconsistent.  In my opinion, from a plain reading of clause 3.0 - Ongoing Change Agreement II, there is nothing inconsistent with the construction that I consider is to be preferred, that would give effect to the respondent's position.   The language used in clause 3.0 points to the focus of OC II as being on worksite based efficiencies being introduced in a timely fashion.

63. Whilst it is not necessary to do so for the purposes of considering the meaning and effect of the ongoing change provisions, I merely refer in passing to the transcript of proceedings leading to the registration of EBA III, which confirm the views I have expressed above.

64. In terms of the re-classification issue, the change proposed by the respondent amounts to a substantial variation to the affected employee’s contracts of employment.  If such a change were effected unilaterally, it would, in my opinion, constitute a repudiatory breach of contract at common law: Westen v Union des Assurances de Paris (unreported, Industrial Relations Court of Australia per Madgwick J 28 August 1996); Quinn v Jack Chia (Australia) Ltd (1992) 1 VR 567.  I am not persuaded that either the Award or other provisions of EBA III permit this course.  Nor am I of the view, that this is a course of conduct contemplated by OC II.  One would have thought that if such a major change was to be permissible using the ongoing change provisions, then very clear words would be found in the agreement to enable such to occur.  There is nothing in the language used in clause 3.0 that suggests that this is the case, in my view. 

65. Furthermore, the terms of the Award point in the opposite direction to the submissions of the respondent on this issue.  By clause 5(11) of the Award, the employer “may direct an employee to carry out such duties as are within the limits of the employee’s skill, competence and training.  An employee may with his or her consent be transferred from one level to another by giving one weeks notice of transfer” (my emphasis). Regardless as to whether this means only within each grouping of classifications or otherwise, such a change can however, only be made by consent.  

66. To the extent that it is necessary to do so, I also refer to the evidence lead on this particular question.  I am satisfied and I find that the matter of re-classification was raised in the negotiations, particularly leading to EBA III.  I accept, that a commitment was made by the respondent that the ongoing change provision would not be used to re-classify an employee.  I reach this conclusion additionally having regard to the history and surrounding circumstances of OC I and OC II, and the commitments and undertakings given leading to common understandings, during the course of negotiations leading to those agreements.

67. In submissions, counsel for the respondent referred to the fact that notes contained in OC II refer to “employees displaced during a trial period will be found other duties.”  In my view, this does not provide support for the respondent's arguments.  It is clear that this provision is directed to displacement as a consequence of the trial and of a change, which otherwise falls properly within the scope of OC II.  It does not support the conclusion that the respondent may introduce “displacement”, as the purpose of the change itself.  There is a substantial difference in my opinion, between displacement of an employee as a consequence of a permitted change being introduced, and displacing an employee by way of a unilateral variation to an employee’s contract of employment, against an employee’s will.

68. In view of my conclusions as to the scope of OC II, and my reasons below, it is not necessary for me to express a concluded view on whether the changes envisaged constitute a “wholesale contracting out” of the MEW.  It would appear that whilst there is no doubt a substantial reduction in manning levels proposed, and an increase in the level of the engagement of contractors as a consequence, it is probably not the case, at least from the evidence, that the entire department is to be affected in terms of what was agreed to be not caught by the ongoing change provisions.

69. Finally, if it could be said that the changes proposed by the respondent are comprehended within the terms of OC II, then in my opinion on the evidence, the changes proposed involve a forced redundancy and are in any event, expressly excluded by the terms of OC II itself.  The respondent in its outline of submissions denied that the trial involved a forced redundancy because the meaning of “forced redundancies” is to be interpreted in accordance with clause 31 - Redundancy of the Award, defined to refer to where an employee’s employment is to be terminated.  The submission was that as no employee’s employment is to be terminated during the trial period, then there was no “forced redundancy”.  During the course of these proceedings Mr Power conceded however, and properly so in my view, that the definition of redundancy contained in clause 31 - Redundancy of the Award, is one confined to “for the purposes of this clause”.  In other words, the clause contains a deeming provision, which spells out by the definition, what is redundancy for the purposes of the application of the conditions set out in clause 31 of the Award as a whole.

70. It is trite to observe that the meaning of “redundancy” is not limited to the circumstance where an employee is dismissed.  It may well be the case that the job becomes redundant but not an employee, which still in terms of the common law definition, constitutes a redundancy: R v The Industrial Commission of South Australia; ex parte Adelaide Milk Supply Co-operative Ltd (1977) 44 SAIR 1202 at 1205.  On the evidence, it was clear that the affected employees would have no choice in accepting the respondent's proposal.  The changes contemplated clearly in my view, involve a forced change which have the effect of abolishing positions in the MEW, previously held by employees engaged in that section, with those employees then transferring to different positions “on the hill” in the respondent's production department.

71. For all of the foregoing reasons, in my view, the change proposed by the respondent is one that should be the subject of negotiations between the respondent and the relevant employees affected and their unions, and is not one that should be introduced using OC II.

72. I declare accordingly.