BlueScope Steel Port Kembla’s (“BlueScope”) Operational Review 2014-2015

30 June 2016

In the face of reduced profitability following the decreased demand for steel in Australian and global markets, BlueScope commenced a detailed review of its operations in the pursuit of efficiency and productivity gains.

One such measure was the “Trade Operator Model”, which sought to reduce the distinction between skilled and non-skilled labour, by enabling trade-qualified labour to perform unskilled production line work for up to 50% of their work time. This model would enable BlueScope to roster fewer staff to work at any given time and realise significant financial gains.

The three relevant unions – the AWU, the AMWU and the CEPU – opposed the change for two fundamental reasons:

  1. The model enabled BlueScope to reduce the number of unskilled employees rostered at a given time.

  2. Asking trade-qualified employees to perform unskilled work would effectively “de-skill” those tradespersons.

BlueScope’s proposal was the subject of prolonged industrial disputation before the Fair Work Commission. Five decisions were handed down by the FWC, over a 9-month period from January to September 2015.

The “Trade Operator Model” also sought to introduce 12-hour shifts for some employees, which the unions opposed. This article will not address this aspect of the case, except to note that the proposal for 12-hour shifts was held, on appeal, to breach express provisions in the enterprise agreement (“EA”).

Initial Decision of Riordan C (Trade Operator Model)[1]

Clause 35 of the EA deals with the introduction of change for BlueScope, and sub-section 2 (c) requires that a proposed change be “safe, efficient, legal and fair”.

The unions challenged the introduction of the Trade Operator Model on the basis that it was not “safe, efficient, legal and fair”. They argued that it was not consistent with the EA’s job classification structures, and so it breached the “no extra claims” provisions of the EA, and therefore was illegal.

Riordan C considered the extent to which “multi and cross skilling” was permitted by the Structural and Efficiency Principles contained in the National Wage Case Decision of the late 1980s. He held that the introduction of the Trade Operator Model “could not be regarded as being ‘incidental or peripheral’, or in any way ‘related and ancillary to their principal discipline’ as required by the National Wage Case”. He continued to say “I do have some concerns about the possible ‘deskilling’ of highly competent trades people if this proposed were to be implemented…such an outcome is a natural consequence if tradespeople are taken away from their trade to perform production work for half of their working life”, though Riordan C said the BlueScope proposal was “not without merit”.

He eventually found in favour of the unions on the basis that the proposed change was not “legal”.

Employer’s Appeal to Full Bench (Trade Operator Model)[2]

The employer appealed Riordan C’s decision.  Hatcher VP, Drake SDP and Roberts C heard the appeal and unanimously granted permission to appeal, upheld the appeal, quashed Riordan C’s decision and remitted the matter back to Riordan C to determine the remaining issues in accordance with their revised findings.

The Full Bench said that Riordan C’s decision was affected by error, insofar as he concluded the “Trade Operator Model” was a “claim” in breach of the “no extra claims” clause of the EA, and therefore not “legal”. The Full Bench reasoned that Awards and EAs explicitly consider the possibility that major and unforeseen changes may occur in future and that, subject to the employer’s consultation obligations, employers are entitled to implement changes. They said:

The existence of a provision in a statutory industrial instrument which establishes a specific procedure to facilitate the implementation of significant workplace change (including change to the ‘…operation…of the workforce’ and ‘the skills required of employees’ as contemplated by clause 35.2.2(c)) cannot be read as constrained by the scope of the existing contracts of employment of existing employees, since to do so would substantially deprive it of utility.

They also observed that the classification structure of the EA is based on the Position Descriptions for each relevant position, and that the PDs:

commence with: ‘the main skill areas, responsibilities and requirements that shall be demonstrated and used, as required, are: …’ Then follows a series of identified specific duties in each case. It is apparent that the position descriptions are not intended to be exhaustive of the duties that may be required to be performed, and allow for the performance of other duties not specific provided that they do not become the ‘main skill areas, responsibilities and requirements.’

The Full Bench concluded that the change proposed by BlueScope was not inconsistent with the EA and therefore it would be “legal”. Insofar as Riordan C found otherwise he was in error.  The Full Bench then remitted the matter to Riordan C to determine whether the change met the other EA criteria of “safety, efficiency and fairness”.

Final Decision of Riordan C[3]

Riordan C looked at the remaining three requirements and concluded:

  • Safety: There was nothing in the Trade Operator Model that posed a risk to safety; in any event, Riordan C regarded BlueScope’s management team to be “very safety conscious”.

  • Efficiency: The proposal would result in fewer Operator positions being required, which will provide real and ongoing cost savings to BlueScope, thus the efficiency test was satisfied in the short-term. Being a qualified and licenced electrician himself, Riordan C explained this may not be the case in the long-term because a tradesperson’s skills will deteriorate “if they decrease their ‘hands on’ work at their trade”, but he did not consider this long-term risk an impediment to the self-evident short-term efficiency gains.

  • Fairness: Although the concept of ‘”fair” is ambiguous and subjective, “on balance [he was] satisfied that the Trade Operator Model is fair”. Riordan also commented that he had taken into account BlueScope’s announcement to the ASX, one month prior to the decision being handed down, that it must find $200m in cost savings, or else it would consider closing its steelmaking operations. He said it “would be unfair to BlueScope” to delay the introduction of their much needed cost saving measures.

All four requirements of the EA (that proposed change be legal, safe, efficient and fair) being met, Riordan C concluded that the Trade Operator Model could be “introduced immediately”.

Lessons for Employers

While this case clearly involved a unique and extreme example of industrial disputation, there are lessons for all employers:

  • This decision upholds the long held principle that employers are entitled to implement change and run their businesses efficiently. Unfortunately in this case, it took 12 months for that principle to be realised. Proper planning will increase an employer’s chances of introducing changes.

  • All Modern Awards and Enterprise Agreements impose an obligation on employers to consult with staff about the introduction of change. From a human behaviour viewpoint, there are also practical advantages to such an approach. “Our idea” is much more likely to be supported than “my idea”.

  • Disputation about Modern Award and Enterprise Agreements is on the rise. There were 16% more industrial disputes referred to the FWC in 2014/15 compared to 2011/12.

  • Ultimately, depending on the wording of your Enterprise Agreement, these disputes can lead to FWC conciliation and even an arbitration, which gives the FWC the final say on whether or not you can implement an intended change.

  • Many dispute resolution procedures require that the status quo is maintained until the dispute is resolved. This delays the employer from being able to proceed with their intended change, so is best avoided if possible.

[1] Handed down 22 May 2015 [2015 FWC 3214]

[2] Handed down 27 August 2015 [2015 FWCFB 5615]

[3] Handed down 24 September 2015 [2015 FWC 6512]