FEDERAL COURT OF AUSTRALIA

Australian Liquor, Hospitality & Miscellaneous Workers' Union v Coca-Cola Amatil (Aust) Pty Ltd [2000] FCA 782

INDUSTRIAL LAW – product losses – employer proposing to contract out the functions of employees unless employees came up with alternative plan – negotiations for a new enterprise bargaining agreement due and not begun – proposed new work practices requiring change to existing agreement or new agreement– whether contracting out proposal made in contravention of s 170NC or s 298K of the Workplace Relations Act 1996

INJUNCTIONS – exercise of discretion to grant interlocutory injunction – balance of convenience

Workplace Relations Act 1996, s 99, s 170LW, s 170NC, s 298K, s 298L, s 298V

Australian Workers’ Union v Yallourn Energy Pty Ltd [2000] FCA 65 followed

Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 referred

BHP Iron Ore Pty Ltd v Australian Workers’ Union [2000] FCA 430 referred

Davids Distribution Pty Ltd v National Union of Workers (1999) 91 IR 198 referred

AUSTRALIAN LIQUOR HOSPITALITY & MISCELLANEOUS WORKER’S UNION v COCA-COLA AMATIL (AUST) PTY LTD (ACN 076 594 119)

V 357 of 2000

KENNY J

MELBOURNE

5 JUNE 2000

UPON THE APPLICANT BY ITS COUNSEL UNDERTAKING TO THE COURT:

(a)      to submit to such order (if any) as the Court may consider to be just for the payment of any compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of this interlocutory order or any continuation (with or without variation) thereof; and

(b)     to pay the compensation referred to in (a) to the person there referred to:

THE COURT ORDERS THAT:

1.      Until the hearing and determination of the application, the respondent be restrained from taking any step to make any contract or from giving effect to any contract for the performance of any of the shipping work presently done by its employees at its Distribution Centre at Clayton other than a contract of service with an employee employed under the Coca-Cola Amatil Victoria Operation and Logistics Enterprise Development Agreement 1997.

2.      The application be adjourned for mention at 9.30am on 7 June 2000.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     This is an application for an interlocutory injunction to restrain the respondent, Coca-Cola Amatil (Aust) Pty Ltd (“the company”), “from taking any steps in the contracting out of the work of the employees” and from “threatening to alter or altering the terms and conditions of employment of the employees by contracting out the work or part of the work of the employees”.  By the conclusion of the hearing, the applicant union (“the union”) was seeking an interlocutory injunction that:

the respondent be restrained from taking any step to make any contract or from giving effect to any contract for the performance of any of the shipping work presently done by its employees at its Distribution Centre at Clayton other than a contract of service with an employee employed under the Coca-Cola Amatil Victoria Operation and Logistics Enterprise Development Agreement 1997.

The statement of claim alleges contraventions of s 170NC and s 298K(1) of the Workplace Relations Act 1996 (“the Act”).  The application was supported by affidavits sworn or affirmed by Brian Lenette on 26 and 29 May 2000, Trevor Veenendaal on 26 and 29 May 2000 and James Weissman on 29 May 2000.  Affidavits in opposition were sworn by Jeffrey Maguire on 30 May 2000, Alan Balmer on 31 May 2000, Troy Rackley on 31 May 2000 and Phillip Caris on 30 May 2000.  Mr Veenendaal and Mr Lenette were subject to cross-examination.

background facts

2                     The company manufactures non-alcoholic, ready to drink products which are distributed from a warehouse in Clayton to its customers.  The company employs between forty to fifty permanent employees at its Clayton warehouse (“the warehouse employees”) as well as a number of casual employees and salaried staff.  The employees work in three shifts – day, afternoon and night.  Almost all of the warehouse employees are members of the union. 

3                     The work of the warehouse employees involves storing received product, picking product from the warehouse in accordance with invoice instructions, loading distribution trucks by use of forklifts, as well as performing shipping functions.  The term “shipping” describes the process whereby the employees check the loads of the company’s product on transportation vehicles against the company’s load report to ensure that the correct amount of product has been loaded onto the vehicle.

4                     The terms and conditions of employment of the warehouse employees are regulated by the Coca-Cola Amatil Victoria Operation and Logistics Enterprise Development Agreement 1997 (“the EDA”) and the Food, Beverages & Tobacco Industry – Aerated Waters – General Award 1998 (“the Award”).  On 3 April 1998, the EDA was certified by the Australian Industrial Commission (“the Commission”), pursuant to Division 3 of Part VIB of the Act.  The EDA came into operation on that day.  Clause 1.3 of the EDA provides that the EDA’s nominal expiry date is 30 September 2000 and that negotiations for the next agreement are to commence six months prior to the EDA’s expiration.  Negotiations were, therefore, due to commence on 30 March 2000. 

5                     The present application relates to the company’s announcement that it intends to contract out shipping work performed by the warehouse employees at the company’s Clayton warehouse.  The company’s position is that this announcement was driven solely by concerns to ensure the security of the company’s product.  The company says that contracting out provides a system that meets all the requirements of an audit report concerning thefts of its product at the Clayton warehouse and that its only concern is to meet these requirements.  The union, on the other hand, does not deny that there is a problem of stock losses at the Clayton warehouse.  Nor does it deny that thefts have occurred.  Its case is that by its treatment of the theft problem and by resorting to the contracting out option, the company has sought to create a smoke-screen for compelling changes to be made to the EDA. 

evidence adduced on this interlocutory application

6                     The national supply chain manager, Mr Jeffrey Maguire, deposed that he became aware of significant security problems at the company’s Clayton warehouse in early 2000.  This was reiterated by the company’s logistics manager (Victoria and Tasmania), Mr Alan Balmer, who deposed that:

[The company] experienced stock losses of approximately $500,000 in 1999 and $300,000 year to date in 2000.  Stock losses are identified at the monthly stock count and represent the variance between the quantity of stock produced plus the inventory on hand at the start of the month, less quantity sold and invoiced in the same period.  [The company] has had significant stock losses in Victoria for a number of years.  There can be several reasons for stock losses.  For example, over reporting of production quantities, over receipt from external suppliers, unrecorded stock write-offs, dispatch of product without it being invoiced or theft.  It became apparent earlier this year that [the company] had serious problems with stock theft at its Clayton site. 

In January or February 2000, after I had been told that there were thefts of product occurring at the Clayton site I contacted our national security manager.  Subsequently, [the company], with the Victoria Police, conducted an investigation into significant quantities of stock allegedly being stolen by Linfox drivers from the [company’s] Clayton warehouse.  …  As a result of these investigations a Linfox driver was arrested on Wednesday 26 April 2000 for stealing [the company’s] stock.  …  The stock stolen has a wholesale value of approximately $16,000. 

Linfox Transport (Aust) Pty Limited (“Linfox”) is engaged by the company to distribute its products from the Clayton warehouse.  The police also questioned an employee or employees of the company.

7                     On 26 April 2000, Mr Rackley, the company’s operations manager (Victoria and Tasmania), addressed three meetings at the Clayton warehouse.  These meetings were with the day, afternoon and evening shifts of company employees on that day.  At those meetings, Mr Rackley referred to the investigation concerning the thefts and to the police involvement.  According to Mr Rackley, he told the meeting in substance that:

There is a weakness in our system surrounding the area of shipping and we need to make a change to make that part of our process a little bit tighter.  We need a plan that is going to ensure the safety of our company assets.  We will be meeting with the Clayton consultative committee this afternoon to discuss options.  In the event that we can’t come up with something as a group then we would take the option of independent security.  This system was much like our operation in Brisbane, which is considered best practice in [the company].  In the event that we go with that option, there will be no job losses or pay losses to any [company] employees. 

Mr Rackley stated that, when asked about the consequences of the introduction of independent security arrangements, he said:

If we go down that path, we would make the adjustments to the skill structure to try and give people the career growth they are looking for.  We have to stop the bleeding now because as a business we can not sustain these losses.  We will keep you updated on any further developments as they arise.

Mr Lenette, on-site union delegate, maintained, on affidavit and in cross-examination, that the impression given by Mr Rackley was that the company had already determined upon contracting out and that it proposed to discuss with the union only the implementation of that decision. 

8                     There was a subsequent meeting, at about 3.00pm on 26 April, between Mr Rackley, Mr Balmer, Mr Phillip Caris, employee relations manager (operations and logistics), Mr Lenette, Mr George Goricki, warehouse manager, Mr James Weissman, union industrial officer, and Mr Danny Hall, on-site union delegate.  The parties describe this as the Clayton consultative committee (“the consultative committee”).  At that meeting, the company’s representatives were apparently asked again about the extent of the company’s commitment to contracting out.  Their evidence was that they said that the company was anxious to protect its stock and that it was considering, as an option, the use of independent contractor shipping arrangements, but that the union was invited to put forward alternative proposals to deal with the security problem.

9                     A stop-work meeting held by the union on 27 April 2000 passed a resolution in the following terms:

That all [union] members unanimously endorse the following motion:  that there is to be no contracting out or outsourcing of any existing [union] function.

At a subsequent meeting that day, Mr Weissman is said to have advised members of the consultative committee that the stop-work meeting had resolved not to undertake industrial action.  The union representatives also put forward an alternative proposal to that proposed by the company.

10                  The company rejected the union proposal on 28 April 2000 at a further meeting of the consultative committee.  At that meeting, Mr Balmer deposed that he stated that any alternative proposal should satisfy the following criteria, namely:

·        Shipping has to be a completely independent function.  We will have to have employees devoted to shipping only;

·        We must be able to rotate people between shifts and out of the business to other businesses;

·        We need to introduce security specialists;

·        Shifts have to be unpredictable;

·        Collusion must be avoided;

·        All the changes must be introduced at no extra cost to the company.

There was a further stop-work meeting on 28 April 2000. 

11                  The company’s position was, it seems, reiterated on 28 April at a subsequent meeting attended by Mr Caris, Mr Balmer, Mr Hall and Mr Boris Anderiak, a warehouse employee.  Also on that day, the union notified the Commission of an industrial dispute pursuant to s 99 of the Act regarding the company’s “proposal to contract out its shipping department at the [company’s] Warehouse site”.  The union’s notification claimed that the company was:

in breach of the ‘status quo’ requirement [of] clause 3.16 of the dispute settlement procedure in the agreement in that it has said it wishes to proceed with the change regardless of the views of the union, its members and [the company’s] employees.

On 1 May 2000, pursuant to cl 3.16 of the EDA and s 170LW of the Act, the company notified the Commission of a dispute regarding:

[its] announcement of its plan, subject to consultation, to introduce independent security arrangements at its Clayton warehouse. 

Also on 1 May 2000, it seems that the company received a copy of the final, signed, internal audit report, prepared by the company’s audit manager for Australia and Oceania.  The internal audit report identified four key areas that needed to be addressed to resolve the theft of stock problem.  These were:

·        the carrying out of the shipping function at the gatehouse as vehicles depart and arrive;

·        the segregation of the shipping and warehousing functions with the result that personnel can only perform shipping or warehousing duties but not both;

·        changes to the structure of rosters of personnel performing shipping functions to make the rosters entirely random and variable; and

·        the employment of a security manager by the company.

The union apparently received a copy of that report on 2 May 2000.

12                  There were further meetings of the consultative committee between 2 and 5 May 2000 at which the union put forward a second proposal.  This too proved unacceptable to the company.  On Friday, 5 May 2000, Mr Balmer advised each warehouse shift of the company’s rejection of the union’s proposal and of its decision to proceed to outsource the shipping function at the Clayton site, with an implementation date of Monday, 22 May 2000.  Mr Balmer deposed that:

The reasons for [the company’s] rejection were that the [union] plans had not accepted or addressed all of the requirements in the Internal Audit Report. 

There were further meetings of the consultative committee on 8, 16, 18 and 19 May 2000.  On 15 May, there was a conciliation conference at the Commission.  The parties apparently agreed that they would hold at least two more meetings during that week to discuss implementing a system which would not involve contracting out but would comply with all the requirements of the audit report.  The company witnesses said that, in the course of meeting with union representatives about this time, they referred to the possibility of utilising staff employees, as opposed to award-covered employees or independent contractors. 

13                  There was a meeting on 18 May 2000, which was attended by company and union representatives.  Mr Lenette deposed that, at this meeting, Mr Balmer indicated that the union’s proposal would be more acceptable to the company if it addressed certain matters.  He wrote these up on a whiteboard.  Mr Lennette’s note of those matters reads:

·        7 day rotating roster

·        Flexible shifts – 4 to 12 hours

·        Split shifts

·        Daily staff levels to meet business demands

·        Staff rotates to sites of other CCAV

·        Avoids duplication of work

·        Process is cost effective

·        Security licence for shippers

·        Ship/Security are separate from warehouse

Mr Lenette’s evidence was that the implication that he necessarily drew from this was that the company would be prepared to reverse the contracting-out decision if the union would agree to varying the existing EDA to include these matters (or some of them) or enter into a new agreement.  Mr Balmer rejected Mr Lenette’s account.  Mr Balmer deposed that the notes on the whiteboard “were an indication of the way in which salaried staff could comply with the requirements of the Audit Report”.  Also at the meeting of 18 May, in answer to a question asked by Mr Weissman, Mr Caris apparently said that contractors would be paid “what is appropriate”. 

14                  At a meeting on 19 May 2000, the union put forward a third proposal for resolving the issue.  The company rejected the proposal, stating that it did not meet the requirements that the rosters for shipping staff be random and variable, and that the shipping functions be independent of other functions.  There were further conciliation conferences before the Commission on 22 and 24 May 2000.  There were also further meetings of the consultative committee.  The union put forward a fourth proposal, but that too proved unacceptable to the company. 

15                  Mr Maguire deposed that, on or about 23 May 2000, Mr Balmer informed him that the union had failed to put forward a proposal that, in his view, met all of the audit report requirements; and that, in those circumstances, Mr Maguire instructed Mr Balmer “to implement the plan to contract out the shipping functions”.  Mr Maguire further deposed that:

In approving the decision to contract out the shipping function, I was solely motivated by my obligation to see in place as quickly as possible a system that secured [the company’s] product to the greatest extent possible by way of compliance with the audit report.

Mr Maguire deposed that the decision to contract out the shipping function was his alone. 

16                  By letter dated 24 May 2000, Mr Balmer wrote to Mr Weissman notifying the union that the company rejected the fourth proposal, and stating that the company had decided to implement its plan to outsource the shipping functions at its Clayton warehouse on Monday, 5 June 2000.  The letter read in part:

The company has fully considered the proposal put at the meeting on Monday 22 May as to the segregation of the shipping function from the other Clayton warehouse functions, in circumstances where the shipping function would continue to be performed by full time employees covered by the EDA.

The company has come to the conclusion that your proposal cannot be agreed to.

This position was, it seems, reiterated at the conclusion of the 24 May conciliation conference before the Commission.  On the evening of 24 May 2000, a picket line was created outside the company’s Clayton warehouse.  On 26 May 2000, Linfox commenced a proceeding in the Supreme Court of Victoria seeking to restrain the union from activities associated with the picket.  Later that day, interlocutory orders were made restraining the picketing. 

the claimed significance of contracting out

17                  Under the EDA, the warehouse employees are covered by what is referred to as the “Logistics Stream”.  Clause 6.2 of the EDA, headed “Logistics Career Path Structure,” outlines the career path structure within the logistics stream.  According to Mr Veenendaal, there is a competency-based classification structure.  This structure provides greater career opportunities for employees than the previous task-based structure.  He deposed that:

Central to [the EDA] structure is the notion that an employee’s ability to advance through the classification structure and thus improve her or his salary, is contingent upon skills-acquisition which is recognised by a designated number of ‘points’ for each skill.  The shipping skill has always been recognised as the most complex and it thus attracts the highest number of points.

Clause 6.2 allocates a set number of points for the acquisition of a given skill.  Shipping skills attract a relatively high number of points.  Broadly speaking, higher points translate into higher pay.  Besides those warehouse employees that already undertake shipping functions, there was evidence that there were about eight employees who, though they had not yet been trained for these functions, might be eligible for such training. 

18                  If employees were unable to perform the shipping functions, they would, so Mr Lenette deposed, be unable to maintain and acquire valuable skills.  According to Mr Caris and Mr Balmer, however, the company had undertaken that, if the shipping functions were contracted out, no employee would, as a consequence, suffer a loss of pay or be made redundant.  They deposed that the company would work to review the skills matrix set out in the EDA, with a view to investigating how other opportunities could be given to its employees without compromising stock integrity. 

19                  Mr Lenette also deposed that the shipping functions were “of strategic importance”.  Mr Lenette said:

[E]mployees doing shipping work, because it requires experience and training, cannot easily be replaced by casual employees in the way that employees performing other aspects of our work … can be.

Mr Lenette added that the shipping functions were “highly significant in terms of our ability to take industrial action in pursuit of enterprise bargaining demands”.  This was denied by Mr Balmer.  According to Mr Balmer, in two industrial strikes in late 1999, salaried staff had performed the shipping functions.

20                  Mr Veenendaal affirmed that the matters raised by Mr Balmer at the 18 May meeting (and written out on the whiteboard) represented fundamental alterations to the terms and conditions set out in the EDA.  He stated:

       In particular:

·        A 7-day roster should be compared with the existing 5-day roster;

·        Flexible shifts of 4-12 hours are to be compared with the present 8-hour shifts; and

·        Split shifts are a major inconvenience to employees … .

The company claimed, through Mr Balmer, that it had not yet formulated any position with respect to the renegotiation of a new agreement.  The issue of split shifts only arose, so Mr Balmer said, in the context of an attempt to accommodate the unions by avoiding the contracting out of shipping functions. 

21                  Mr Veenendaal further affirmed that, in his experience, union members at the company’s warehouse at Clayton were “among the most militant of all the union’s members”.  He also gave evidence in cross-examination that, whilst the union has coverage over employees in the security industry, the level of union density in the security industry is considerably lower than in the aerated waters industry.  Mr Balmer and Mr Caris denied having any awareness as to the density of union membership in the security industry.  Mr Veenendaal affirmed that, over the last twelve months, the company had sought to engage an increasing proportion of casual employees.  He said that it had also sought to “contract out” or “outsource” discrete areas of business.  In cross-examination, he referred to two occasions, in September and November 1999, when the issue of the employment of casual labour had arisen and Mr Caris had threatened that the company would “contract the whole warehouse out”.  He stated that he told Mr Caris that the union strongly opposed the increased engagement of casual labour since it eroded the security of employment of the union’s members, and that the union would be seeking to limit the company’s contracting-out capacity in negotiating a new agreement.  Mr Caris and Mr Balmer denied that the company has been seeking to erode the employment conditions of employees.  In particular, there was, they said, no policy of increased use of casual labour or contracting out.

22                  It was in this connection that Mr Veenendaal affirmed that he had spoken to Mr Caris in early to mid April this year about the need to commence negotiating a new agreement.  According to Mr Veenendaal, Mr Caris had said that the company would commence negotiations “after Easter”.  The first working day after Easter was 26 April, the day when Mr Rackley addressed company employees at Clayton about the product thefts and raised the prospect of contracting out.  Mr Veenendaal apparently entertained the view that this was not merely a matter of coincidence and was part of the company’s attempt to compel the warehouse employees and their union to agree to vary work practices protected by the EDA. Mr Veenendaal maintained his position in cross-examination.  His account was, however, partly contradicted by Mr Caris.  Mr Caris deposed that he had telephoned Mr Veenendaal in late March 2000 and that both had agreed it would be appropriate to start negotiations after Easter.  Mr Caris, who was not cross-examined, denied that the announcement on 26 April had anything to do with the negotiation of a new agreement.

serious question to be tried

23                  The union’s case alleges breaches of, first, s 170NC and, secondly, s 298K of the Act.  The first matter to be considered on the present application is whether there is a serious question to be tried on either limb of the case against the company.

Coercive intent?

24                  Section 170NC(1) is in wide terms.  It provides:

A person must not:

(a)    take or threaten to take any industrial action or other action; or

(b)    refrain or threaten to refrain from taking any action;

with intent to coerce another person to agree, or not to agree, to:

(c)     making, varying or terminating, or extending the nominal expiry date of, an agreement under Division 2 or 3; or

(d)    approving any of the things mentioned in paragraph (c).

In Australian Workers’ Union v Yallourn Energy Pty Ltd [2000] FCA 65, Merkel J accepted the applicant unions’ submission that in threatening to bring and in bringing an action in tort against them, the respondent had taken action or threatened action with intent to coerce its employees to agree to make or vary an enterprise agreement, contrary to s 170NC.  His Honour said at [72-73]:

The issue of establishing corporate intent is often fraught with difficulty: see Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 582-583 per Brennan, Deane, Gaudron and McHugh JJ.  Their Honours cited with approval the following observation of Bright J in Brambles Holdings Ltd v Carey (1976) 15 SASR 270 at 279:

‘Always, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company. This process is often necessary in cases in which companies are charged with offences such as conspiracy to defraud.’

There is a degree of unreality about the submission of counsel for Yallourn Energy that the threatened proceeding is extraneous to and is unconnected with the employer’s bargaining position in relation to the new enterprise agreement.  Earlier in these reasons I outlined the steps taken by the various parties in the course of the present dispute.  In my view each step and counter step by the parties in the current dispute appears to be intended to advance their respective bargaining positions in relation to the new enterprise agreement.  Whilst there will be additional reasons for particular conduct to be engaged in during the escalation of the dispute, each step appears to be integrally related to each party’s position in the bargaining process.  Thus, whilst a reason for the proposed proceeding might be to recover loss, I would infer from the limited evidence before me that, on a prima facie basis, the proposed proceeding is another step to assist the position of Yallourn Energy in the bargaining process.

25                  The union’s case under s 170NC depends upon the following claimed facts:

·          For some time now, the company has been seeking unsuccessfully to alter work practices at its Clayton warehouse, e.g., by the introduction of split shifts.  The proposed new work practices are contrary to the terms and conditions of the EDA.

·          In discussing thefts of its product at the warehouse on 26 April 2000, the company announced that it would contract out the shipping functions presently performed by the warehouse employees.  That announcement was either absolute or subject to the proviso that contracting out would occur unless the union came forward with a suitable alternative plan.

·          On 18 May 2000, the company indicated that it would reconsider the contracting-out option if the union was prepared to agree to new work practices (such as split shifts).  The company reiterated its position in letters to the union on 22 and 24 May 2000.  Any agreement to accept the proposed new work practices would involve varying the EDA.

·          On 24 May 2000, the company announced that since the union had not come forward with a plan that it regarded as suitable, it would proceed to contract out shipping functions.  (The union’s claim is, in effect, that the company would not have regarded any plan as suitable if it did not involve the union’s consent to at least some of the new work practices.)

·          Contracting out would deprive the warehouse employees of part of their current work and would prejudice them in their employment in the material respects referred to by the union’s witnesses.

The union submits that, upon the basis of these claimed facts, the Court may infer that the company has taken action (in announcing its intention to contract out and in reiterating that intention in subsequent negotiations) or threatened to take action (to contract out) with intent to coerce the warehouse employees and their union to vary the EDA or to make a replacement agreement.

26                  The principal contention of the company was that there was no evidence to support the case for coercive intent put by the union.  It relied heavily on the evidence of Mr Maguire, to which I have already referred, as well as the evidence of other company witnesses.  The company submits that this evidence establishes, to the requisite degree, that (1) the reason for the April announcement about contracting out was to deal with the theft problem; and (2) the reason for the company’s conduct in the subsequent negotiations that culminated in the letter of 24 May 2000 was to satisfy the audit report requirements.  The company points out that the union has accepted that the theft problem exists.  It says that it sought to proceed by consultation with its employees; and that this consultation was of the kind contemplated and sanctioned by the EDA.  The company contends that, under the EDA, the parties agreed “that a dispute can reach the point where it’s not resolved by conciliation and one side or the other will then be able to take unilateral action” and “the provisions in this agreement allow the company to do what it has done up to this point”.  It follows, so it says, that there has been no contravention, or threatened contravention, of s 170NC(1). 

27                  Is it open to the Court to infer from the evidence that there is a serious issue to be tried as to whether the company’s intent –

(1)   in announcing and reiterating the contracting-out proposal; or

(2)   in threatening to contract out –

was to coerce the warehouse employees and their union into agreeing to vary the terms of the EDA or to make a new agreement?  I accept, for present purposes, that one reason for the company’s action was the need, as it saw it, to deal with the problem of theft and to meet the audit report requirements.  But I am unable to accept that the terms of the EDA answer, as completely as the company’s counsel would have it, the union’s allegation that s 170NC has been breached. 

28                  Clause 1.4(c) of the EDA reads as follows:

During the life of this Enterprises Agreement the Company agrees:

(i)                 Not to change/alter existing pay or employment conditions set out in this Agreement so as to result in a reduction of the overall pay or employment conditions of any employee.

(ii)               Not to change/alter the pay or employment conditions set out in this Agreement without prior consultation and agreement with the Parties and the employees whose pay or employment conditions are to be altered.  (Emphasis added.)

That is, pursuant to cl 1.4(c), the company agreed to maintain the status quo with respect to employment conditions unless the parties (and relevant employees) agreed otherwise.  The company’s submission on the effect of the EDA disregards the consensual nature of any change contemplated by cl 1.4(c). 

29                  Both the company and the union relied on cl 3.10.  That clause, which constrains the company from increasing contracting out, relevantly reads:

Contractors

The existing contract arrangements for all contractors shall continue however the parties agree that the pay rate for contractors shall be no less than the EDA rate for equivalent classifications plus the normal/standard on-costs for labour hire/contract labour.

Should the Company require additional contract support and/or at the expiration of the existing arrangements, the relevant manger and shop steward(s) shall confer with the aim of reaching agreement for the engagement or continuation of contract support. 

In the event that agreement cannot be reached, the parties to this agreement commit to the use of the following Dispute Resolution:

‘If parties involved have failed to reach agreement on the use of contractors, it is then appropriate to involve an agreed independent arbitrator.  The arbitrator will be requested to determine positively in favour of an argument or the other.  Both parties agree to accept the decision of the arbitrator as the final agreement.  Both parties also agree that issues raised under this clause will be speedily dealt with in an atmosphere of mutual trust.  Where practicable, any dispute will be resolved within eight (8) hours of notification’.

The clause then lists some exceptions, none of which are relevant for present purposes.  Subject to hearing more on the matter, unilateral action by the company with respect to a matter covered by the clause would, it seems to me, be antithetical to the clause itself. 

30                  Both the company and the union referred to cl 3.16 of the EDA, which sets out the settlement of disputes procedure.  This clause first states:

The objectives of  this procedure shall be to promote the resolution of disputes by measures based on consultation, co-operation and discretion to reduce the level of industrial confrontation and to avoid interruption to the performance of work and the consequential loss of production and wages. 

After setting out the procedure to be observed, the clause affirms that:

This procedure has been accepted by the Parties in recognition of the fact that a major purpose of the Agreement is to obtain industrial peace and continuity of working.  During all discussions the status quo shall remain and work shall proceed normally.  ‘Status quo’ shall mean the situation existing immediately prior to the dispute or the matter giving rise to the dispute. 

The EDA does not, it seems to me at this interlocutory stage, countenance unilateral action of the kind the company is proposing to take. 

31                  Counsel for the company also relied on Attachment B to the EDA (entitled Redundancy Agreement) and he referred, in particular, to cl 2 and cl 6(a).  It seems to me, at least at this interlocutory stage, that cl 3, cl 11 and cl 12 militate against the proposition that Attachment B applies in the present circumstances.  Clause 11 provides:

Any disputes arising out of the operation or interpretation of this Agreement shall be dealt with by the Parties under current dispute settling arrangements.

Clause 12 relevantly states:

This Agreement shall only apply to redundancy circumstances as defined in Clause 3.

Clause 3 defines “redundancy” as meaning:

an employment situation arising where the work available for employees is reduced because of technological change or changes in work methods or systems or the rationalisation or restructuring of operations or changes in economic or in market conditions and where the number of employees exceeds the number required by the Company for the performance of the available work.

Even if cl 3 were construed to cover the current situation, in the case of disagreement between the parties after consultation, cl 11 channels the parties back into the dispute resolution procedures set out in cl 3.16 of the EDA.  At this stage of the proceeding, I do not accept the company’s submission that, by virtue of the EDA, there could have been no action with coercive intent contrary to s 170NC(1) of the Act.

32                  The evidence is sufficient, so it seems to me, to makes out at least a prima facie case that, in announcing and reiterating the contracting-out proposal, the company took action with intent to coerce the warehouse employees and their union to agree to vary the EDA or to make a replacement agreement.  The evidence that would justify such an inference includes the following:

·        That the company had, according to union witnesses, earlier indicated dissatisfaction with work practices relating to the use of casual labour and contracting out.

·        That, pursuant to the EDA, a new agreement had been due for re-negotiation since 30 March 2000, although formal negotiations had not begun.

·        That the company announced on 26 April 2000 that it would contract out (alternatively, that it would contract out unless the warehouse employees and their union came up with as good or better a solution to the theft problem).

·        That the company reiterated in negotiations that it would contract out unless the union came up with a proposal that met the requirements of the audit report and that involved agreeing to departures from the EDA.

·        That, in the circumstances, the company’s actions were likely to have had an intimidatory effect on the warehouse employees and their union. 

·        That, in discussions on 18 May 2000, a company representative stated, according to a union witness, that the company would look more favourably upon the union’s proposal if that proposal included certain changes to existing work practices (which in turn would have involved changes to the EDA).

·        That the effect of contracting out, as described by union witnesses, is likely to enhance the company’s bargaining position in negotiating a new agreement.

·        That the company’s awareness that it was incurring financial losses from missing stock was not new and the losses did not arise solely from theft.  Although company representatives stated that they became aware of the theft problem early in the year, there was no evidence about the extent to which the company’s losses from missing stock were attributable to theft.  This was so notwithstanding that contracting out is, so it seems, relevant only to the theft problem. 

·        That, following investigations that included police involvement, the police had apprehended an alleged thief in April 2000 prior to the April announcement and had questioned another individual or other individuals.

·        That issues concerning more flexible work practices (e.g., split shifts), contracting out and casual labour are, according to union witnesses, likely to be significant issues in negotiating the new agreement.

I recognise, of course, that, at this interlocutory stage, no definitive findings can be made and that the company witnesses contradicted much of the union’s evidentiary material.

33                  As already noted, the company relied upon the evidence of a number of company representatives, especially that of Mr Maguire to which I have referred.  Mr Maguire was not cross-examined and his evidence must be given due weight. He did not, however, make the announcement on 26 April 2000 that precipitated the dispute.  Nor did he participate in the negotiations that preceded his decision on or about 23 May 2000 to implement the contracting-out proposal.  It was other company representatives who reiterated in the negotiations that it was the company’s intention to contract out unless the union proposed as good or better a plan to meet the audit report requirements.  His evidence does not, therefore, directly contradict the union’s case that the April announcement to contract out and the subsequent reiteration of intention were made with the relevant coercive intent.  (A question may well arise at trial as to what person or persons were so closely and relevantly connected with the company that the state of mind of that person or those persons is to be treated as the state of mind of the company.)  Both Messrs Balmer and Caris stated, in effect, that they were motivated by a desire, first, to deal with the theft problem and, subsequently, to secure compliance with the audit report’s requirements.  The effect of their evidence, as well as that of Mr Maguire, must, however, be considered in the light of all the circumstances.  In my view, notwithstanding the evidence of Mr Maguire, Mr Balmer and Mr Caris, the union has established that there is a serious question to be tried as to whether there has been a breach of s 170NC. 

Prohibited reasons?

34                  The second limb of the union’s case turns on s 298K.  Section 298K forbids an employer from engaging in certain conduct for a prohibited reason.  The union relied specifically on s 298K(1)(b) and (c).  Those paragraphs provide:

(1)    An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following:

…

(b)   injure an employee in his or her employment;

(c)    alter the position of an employee to the employee's prejudice;

….

The High Court referred to the breadth of these paragraphs, especially s 298K(1)(c), in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 18.  The prohibited reasons are set out in s 298L.  The union relied upon s 298L(a), (h) and (l).  They read:

Conduct referred to in subsection 298K(1) or (2) is for a prohibited reason if it is carried out because the employee, independent contractor or other person concerned:

(a)               is, has been, proposes to become or has at any time proposed to become an officer, delegate or member of an industrial association; or

…

(h)               is entitled to the benefit of an industrial instrument or an order of an industrial body; or

…

(l)                in the case of an employee, or an independent contractor, who is a member of an industrial association that is seeking better industrial conditions – is dissatisfied with his or her conditions; …

35                 In BHP Iron Ore Pty Ltd v Australian Workers’ Union [2000] FCA 430, the Full Court discussed the nature of the prescription in s 298K of the Act: see also Davids Distribution Pty Ltd v National Union of Workers (1999) 91 IR 198 at 233 per Wilcox and Cooper JJ.  The effect of s 298K is that an applicant for relief under s 298U must prove that the conduct was for a prohibited reason (as defined in s 298L).  In order to make that connection, the Act provides for a statutory presumption.  For the operation of the presumption in the context of applications for interlocutory relief, see Davids Case at 234 per Wilcox and Cooper JJ. 

36                  The union’s case under s 298K(1) of the Act is that if the company contracts out the shipping functions, the warehouse employees will no longer be able to maintain and acquire the valuable competencies that the performance of those functions involves.  The company does not deny that this will be the short-term result of contracting out, although it says that steps will be taken to ameliorate the warehouse employees’ position.  On this basis alone, there is, it seems to me, prima facie evidence to satisfy s 298K(1)(c).  I note too that the union witnesses also said that the loss of the shipping functions would afford the company greater opportunity to use casual labour, and that greater use of casual labour would diminish the job security of the warehouse employees.

37                  In order to make out the connection between the challenged conduct and a prohibited reason, the union relied on the presumption created by s 298V as well as evidence of certain matters such as the high level of union membership among the warehouse employees in comparison with the relatively low level amongst security industry employees; the militancy of the warehouse employees; the warehouse employees’ entitlement to the benefit of the EDA, the provisions of which were inconsistent with the new work practices being advocated by the company; and the company’s failure to confirm that the security industry employees would receive the same rates of pay as the warehouse employees. 

38                  The company sought to rebut the presumption created by s 298V, relying on the evidence of Mr Maguire, Mr Balmer and Mr Caris.  The effect of this evidence was that they did not have any operative prohibited reason (within the meaning of s 298L) in deciding, recommending or negotiating to contract out the shipping functions.  As already noted, none of them was cross-examined. 

39                  It must be borne in mind that the question on the s 298K limb of the union’s case is whether the company is threatening to contract out shipping functions for a prohibited reason (as defined).  This is a different inquiry from that which arises in connection with s 170NC(1).  Mr Maguire’s uncontested evidence was that he alone made the decision that was notified to the union by letter of 24 May 2000; and that he made the decision because Mr Balmer advised him that the union had failed to make any proposal that would meet the audit report requirements.  Further, there is the evidence of Mr Caris and the evidence which the parties agreed was to be imputed to Mr Balmer that neither of them was motivated by a prohibited reason.  The effect of this evidence is to be considered in the light of all the circumstances.  The union claim is, in effect, that the statements on the part of the company witnesses that they were motivated by a desire to meet audit report requirements is tantamount to saying that they were motivated for the prohibited reason set out in s 298L(1)(h).   There may well be conceptual difficulties with this approach.  Having regard, however, to my view concerning the s 170NC(1) limb of the union’s case, it is unnecessary for me to express a view on the question whether there a serious question to be tried on the s 298K issue.  I do not do so. 

balance of convenience

40                  Where does the balance of convenience lie?  Counsel for the union referred, first, to the loss of the warehouse employees’ ability to perform the shipping functions and, in consequence, the loss, for some, of the opportunity to use valuable skill-based competencies and the loss, for others, of the opportunity to acquire those skills and, in consequence, obtain better rates of pay.  As I have said, the company undertook that no employee would lose pay or be made redundant if it proceeded to contract out the shipping functions.  It also undertook to review the skills matrix in the EDA with a view to finding other opportunities for its employees to acquire skill-based competencies.  It stated that it was prepared to undertake that any contract that it entered into with respect to the shipping functions would contain a provision permitting termination on forty-eight hours’ notice if the union were ultimately to succeed in its application.  Plainly enough, the company’s undertakings must weigh heavily in the balance.  In the event that the union were to succeed, however, none of the undertakings would ensure that the warehouse employees would not be disadvantaged in the period prior to the trial and determination of the application.  The company also referred to the ability of an individual employee to initiate a dispute, pursuant to cl 3.16 of the EDA, if he or she is dissatisfied with the consequences of the contracting out of the shipping functions.  I do not consider that this provides a sufficient answer to the union’s case of disadvantage.

41                  Union witnesses gave evidence on affidavit and in cross-examination that if the company were able to contract out the shipping functions, then it would be able to use more casual labour elsewhere in the Clayton warehouse.  Perhaps of more immediate importance, however, was the evidence of Mr Veenendaal (who was cross-examined) that issues relating to split-shifts, seven-day twenty-four hour rosters on weekends, twelve hour shifts, casual labour and contracting out were likely to be raised when negotiations commenced for a new agreement.  As a practical matter, it seems to me that, in altering the status quo in this case, there would be some diminution of the employees’ and their union’s bargaining power in those negotiations if the company were permitted to contract out prior to trial. 

42                  The harm that is likely to be done the warehouse employees and their union if the company were permitted to proceed to contract out the shipping functions on 5 June 2000 would not, it seems to me, be adequately compensated by an award of damages.

43                  There is also the nature of the union’s case to be borne in mind.  On the one hand, there is evidence that the warehouse employees and their union have actively sought to negotiate an alternative to the contracting-out option that the company seeks to pursue.  The union has not denied the theft problem, but it has sought to negotiate a solution that would diminish the problem and protect its members’ employment.  That course is mandated by the EDA:  see cl 3.10 and 3.16.  On the other hand, the course that the company proposes to take may well involve it in a failure to observe the terms, or at least the spirit, of the EDA.  The EDA recognises that the status quo is to be maintained pending the resolution of a dispute under cl 3.16.  Further, in cl 1.4(c), the company agreed not to alter employment conditions set out in the EDA without the agreement of the parties or the employees whose employment conditions are to be affected.  If the Court were to accede to a possible departure from the EDA, then that too might well diminish the bargaining position of the warehouse employees and their union in negotiating a new agreement. 

44                  The company claimed that it was experiencing “massive stock losses because of poor security” and that it was essential that it change existing security procedures.  It said that, if an injunction were granted, then “it [would stand] to suffer considerable financial loss”.  Apart from witnesses’ assertions to this effect, there was little evidence before the Court to support these claims.  The evidence establishes that there are numerous reasons for missing stock and consequential losses, only one of which is theft.  The evidence does not show what proportion of the company’s stock losses is, or may be, attributable to theft.  The evidence shows that the company has known for some time that, for numerous reasons (including theft), it was incurring significant financial losses as a result of missing stock.  The evidence shows that when the company became aware that thefts were occurring at its Clayton warehouse earlier this year, it began an investigation (which involved the police) and that that investigation led to the arrest of one person and the questioning of others.  It is reasonable to assume, in the absence of evidence to the contrary, that this has had some salutatory effect.  If the company is restrained from contracting out the shipping functions prior to the hearing and determination of the union’s application, it will be unable to meet the requirements of the audit report by this means.  It has not been said that contracting out is the only option to diminish the opportunity for theft, and the negotiations that have already taken place indicate that this is not necessarily the case. 

conclusion

45                  Accordingly, I consider that the interlocutory relief sought by the union should be granted.  Upon the union giving the usual undertaking as to damages, I propose to make orders in the terms sought until the hearing and determination of the application or further order.

Associate:

Dated:              5 June 2000