[2017] FWCFB 584
The attached document replaces the document previously issued with the above code on 27 January 2017.
Typographical error in [21]
Helen Hamberger
Associate to Vice President Hatcher
Dated 31 January 2017
| [2017] FWCFB 584 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.156 - 4 yearly review of modern awards
4 yearly review of modern awards
(AM2014/67)
VICE PRESIDENT HATCHER |
|
Four yearly review of modern awards – Black Coal Mining Industry Award 2010 – industry-specific redundancy scheme
Introduction and background
[1] Clause 14 of the Black Coal Mining Industry Award 2010 (Modern Award) makes provision for severance and retrenchment payments to be made to redundant employees. Prior to April 2015 it relevantly provided:
“14. Redundancy
14.1 The redundancy arrangements in this award are an industry-specific redundancy scheme and, as such, Subdivision B of Division 11 the NES does not apply.
14.2 Definition of redundancy
(a) An employee is made redundant where an employee’s employment is terminated at the employer’s initiative:
(i) because the employer no longer requires the job done by the employee to be done by anyone except where this is due to the ordinary and customary turnover of labour; or
(ii) because of insolvency or bankruptcy of the employer.
(b) This clause does not apply to employees engaged for a fixed term or a specified task.
14.3 Severance payment
Except where clause 14.5 applies, when terminations occur due to redundancy the employees terminated are entitled to severance pay equal to one ordinary week’s pay for each completed year of employment.
14.4 Retrenchment payment
(a) Except where clause 14.5 applies, where redundancies occur due to:
(i) technological change;
(ii) market forces; or
(iii) diminution of reserves,
the employees terminated are entitled to retrenchment pay equal to two ordinary weeks’ pay for each completed year of employment. This payment is additional to the payment prescribed in clause 14.3. This makes a total of three ordinary weeks’ pay for each completed year of employment.
(b) Regardless of length of employment, the minimum payment due to employees under clause 14.4(a) is two ordinary weeks’ pay.
(c) The amount of payment due under clause 14.4 is not to be more than what an employee would have received had the employee remained in employment with the employer until the age of 60 years.
...”
[2] On 10 April 2015 a Full Bench of the Fair Work Commission (Commission) issued a decision 1 and determination2 varying the Modern Award by deleting clause 14.4 (c).
[3] In that decision, the Full Bench stated the following concerning the history of the black coal mining industry redundancy scheme (footnotes omitted):
“[29] The scheme of redundancy payments in clause 14 of the Award has two elements: the severance payments provided for in clause 14.3, and the retrenchment payments provided for in clause 14.4. The severance payment entitlement has its origins in decisions of the Coal Industry Tribunal in 1973. The payment of that entitlement has never been limited by reason of the age of the redundancy employee.
[30] For employees in New South Wales and Queensland, the retrenchment payment entitlement was added by a decision of the Coal Industry Tribunal of 19 January 1983 [Decision – Coal Mining Industry (Severance and Retrenchment Pay, New South Wales and Queensland), QR3132], and included the capping provision currently to be found in clause 14.4(c) of the Award. It appears, having regard to the evidence and submission in the matter that the rationale for the capping provision was to be found in the then-existing State legislative provisions which established a mandatory retirement age of 60 for coal miners and provided for the payment of pensions after that age [Coal and Oil Shale Mine Worker (Superannuation) Act 1941 (NSW), Pt.2 Div.1; Coal and Oil Shale Mine Workers (Pensions) Act 1941 (Qld); Coal Mine Workers Pensions Act 1942 (Vic)]. This statutory mandatory retirement age did not extend to colliery staff, who were permitted to work until the age of 65, but nonetheless an industry practice of retirement at 60 was recognised as applicable to them as well [Decision – Coal Mining Industry (Staff, New South Wales, Queensland and Tasmania), 3 February 1983, CR3147 at pp. 5,6.] In that context, the capping provision was determined to be necessary to ensure that no employee received more than he would have received had he remained at work until the statutory retirement age. In that decision the question of retrenchment benefits for employees over 60 did not arise because the statutory provisions referred to prohibited employment of persons over that age.
[31] The Coal Industry Tribunal’s decision to cap retrenchment payments by reference to the earnings an employee would have received had the employee not been retrenched and had worked to retirement was consistent with the standard redundancy provisions established by the Full Bench of the Australian Conciliation and Arbitration Commission in the 1984 Termination, Change and Redundancy Case [(1984) 8 IR 34]. In that case, the Full Bench said, in relation to the standard provisions it proposed to establish: “... we are of the opinion that where termination is within the context of an employee’s retirement, an employee should not be entitled to more than he/she would have earned if he/she had proceeded to normal retirement” [ibid at 75]. The standard provision which was ultimately determined in the supplementary Termination, Change and Redundancy Case [(1984) 9 IR 115 at 131] was:
‘Provided that the severance payments shall not exceed the amount which the employee would have received if employment with the employer had proceeded to the employee’s normal retirement date.’”
[4] In deciding to delete clause 14.4(c), the Full Bench found:
(1) “The original rationale for the provision, namely the existence of an industry retirement age of 60, no longer exists. …
(2) The standard provision established by the 1984 Termination, Change and Redundancy Case capping redundancy payments by reference to an employee’s normal retirement date has effectively been abolished. In any event the clause does not have any rational connection with the individual retirement dates of redundancy employees such as to serve the purpose of preventing a windfall gain upon redundancy to an employee about to retire.
(3) The employment of persons over the age of 60 is now an established feature of the coal mining industry. The effect of clause 14.4(c) is to deny such employees any retrenchment pay upon being made redundant in circumstances where younger employees made redundant in identical circumstances may receive a substantial retrenchment payment. Clause 14.4(c) therefore operates in a way which is clearly unfair.
(4) The effect of clause 14.4(c) is likely to discourage greater participation in the coal mining workforce by employees over the age of 60, directly contrary to the need identified in s.134(1)(c) to “promote social inclusion through increased workforce participation”.
(5) There is no alternative rationale for the retention of clause 14.4(c). We reject the submission of the CMIEG that the accessibility of superannuation benefits forms any sort of retrospective justification for the provision. That submission itself demonstrates that the requirements for access to superannuation and associated tax concessions vary over the age span of 55 to 65, so that the age of 60 is not of talismanic significance. Further, that submission is predicated on the inherently ageist assumption that a person aged over 60 who is retrenched will necessarily go into retirement rather than seek further employment.” 3
[5] The Full Bench also found that clause 14.4(c) was a term which discriminated directly against employees at or over the age of 60, as well as employees nearing 60, on the ground of their age. The effect of this conclusion was that clause 14.4(c) was a provision which was not permitted to be included in a modern award under s.153 (1) of the Fair Work Act 2009 (FW Act) and therefore due to s.137 of the FW Act had no effect. 4
[6] The Full Bench concluded its decision with the following:
“[44] We do not consider that we have sufficient material before us to reach any
conclusion that, by reason of the deletion of clause 14.4(c), clause 14 in its entirety should either be deleted in its entirety or modified to add a new limitation on the amount of retrenchment payments that is not discriminatory in nature. We would certainly need a very substantial merits case before us to be persuaded that we should, to borrow Buchanan J’s expression, “take the axe” to the whole redundancy pay scheme, and no case of that nature has been advanced before us. There may potentially be some merit in the proposition that a new limitation on retrenchment payments should be introduced to replace clause 14.4(c). Clause 14.4(c) did have the indirect effect of imposing a limitation on retrenchment payments of about 80 weeks (if one assumes a hypothetical minimum starting age of about 18), albeit that limitation operated in an unfair and discriminatory way for the reasons we have discussed. Arguably, in circumstances where the original consensual industry-specific redundancy scheme will now be altered to remove one of its starting-point features, a new cap upon what is a fairly generous scheme should be imposed in line with common industrial practice. However, to give proper consideration to this, we would need to have before us greater evidence as to a range of matters including the age profile and length of service of coal mine employees who have been made redundant, the typical circumstances they face on redundancy, and the cost impact on employers of the scheme.
[45] We will therefore grant liberty to apply to any party which wishes there to be any further variation to clause 14 of the Award as a consequence of the removal of clause 14.4(c)….”
[7] As part of the 4-yearly review of awards, the Coal Mining Industry Employer Group (CMIEG) 5 subsequently proposed a variation to clause 14 of the Modern Award as follows:
(1) A cap be included, providing for a maximum entitlement of no greater than nine years’ accumulation of redundancy benefits.
(2) The cap apply to both severance pay, under clause 14.3, and retrenchment pay, under clause 14.4. Accordingly a total cap of 27 weeks’ pay would apply, being nine weeks of severance pay and 18 weeks retrenchment pay.
(3) The cap would apply to all employees covered by the Modern Award.
[8] The CMIEG initially proposed that there be no ‘grandfathering’ arrangement. However it subsequently suggested that any employee who had more than nine years’ service with their employer at the date the proposed variation took effect (the operative date), and was subsequently retrenched by that employer, would be entitled to severance and retrenchment payments based on the employee’s number of years of continuous service with that employer at the operative date.
[9] Hearings were held on 7, 8 and 10 November 2016 to consider the CMIEG’s proposal. The CMIEG was represented by Mr Shariff, of counsel. Mr Bukarica appeared for the Construction, Forestry, Mining and Energy Union (CFMEU). Mr Taylor SC appeared with Mr Fagir of counsel for the Association of Professional Engineers, Scientists and Managers, Australia (APESMA). Mr Basiacik appeared for the Australian Manufacturing Workers’ Union (AMWU).
Relevant statutory provisions
[10] The CMIEG’s application arises as part of the 4 yearly review being conducted pursuant to s.156 of the FW Act. As part of the 4 yearly review process, the Commission has the power, pursuant to s156(2)(b)(i) to make “one or more determinations varying modern awards”. The power to vary a modern award involves the exercise of “modern award powers”.
[11] In exercising these powers the Commission is required to apply the “modern awards objective” contained in s.134. This provides that:
134 The modern awards objective
What is the modern awards objective?
(1) The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:
(a) relative living standards and the needs of the low paid; and
(b) the need to encourage collective bargaining; and
(c) the need to promote social inclusion through increased workforce participation; and
(d) the need to promote flexible modern work practices and the efficient and productive performance of work; and
(e) the principle of equal remuneration for work of equal or comparable value; and
(f) the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and
(g) the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and
(h) the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.”
[12] Section 139 identifies the terms that may be included in a modern award. Redundancy pay is not one of the matters included in s.139.
[13] However s.141(1) provides that a modern award can include an “industry-specific redundancy scheme” (such as that provided by Clause 14 of the Modern Award) in certain circumstances, including where such a scheme was included as part of the “award modernisation process”.
[14] The explanatory memorandum to the Fair Work Bill 2008 noted that:
“552. … the award modernisation request issued by the Minister for Education, Employment and Workplace Relations sets out the following factors relevant to whether such a scheme is included in a modern award:
553. FWA may also include an industry-specific scheme in a modern award where it makes or varies another modern award so that it covers employees who were previously covered by a modern award that included such a scheme. In such a situation, FWA must ensure that the coverage of the scheme is not extended to classes of employees that it did not previously cover.
554. The intention is that the industry specific nature of such a scheme should be retained if it is to remain in a modern award. This is because industry-specific schemes, developed with the needs of employees and employers in the particular industry in mind, operate to the exclusion of the general redundancy entitlements in the NES. If such a scheme no longer meets industry specific needs, the NES should apply.”
[15] Sections 141(3) to (5) provide for the circumstances in which the Commission may vary or omit industry-specific redundancy schemes from modern awards:
Varying industry-specific redundancy schemes
(3) The FWC may only vary an industry-specific redundancy scheme in a modern award under Division 4 or 5:
(a) by varying the amount of any redundancy payment in the scheme; or
(b) in accordance with a provision of Subdivision B of Division 5 (which deals with varying modern awards in some limited situations).
(4) In varying an industry-specific redundancy scheme as referred to in subsection (3), the FWC:
(a) must not extend the coverage of the scheme to classes of employees that it did not previously cover; and
(b) must retain the industry-specific character of the scheme.
Omitting industry-specific redundancy schemes
(5) The FWC may vary a modern award under Division 4 or 5 by omitting an industry-specific redundancy scheme from the award.”
[16] The Full Bench in the “Preliminary Jurisdictional Issues Decision” 6 set out a number of considerations applicable to the 4 yearly review. This included the following:
“[3] The Review is broader in scope than the Transitional Review of modern awards completed in 2013. The Commission is obliged to ensure that modern awards, together with the NES, provide a fair and relevant minimum safety net taking into account, among other things, the need to ensure a ‘stable’ modern award system (s.134(1)(g)). The need for a ‘stable’ modern award system suggests that a party seeking to vary a modern award in the context of the Review must advance a merit argument in support of the proposed variation. The extent of such an argument will depend on the circumstances. Some proposed changes may be self evident and can be determined with little formality. However, where a significant change is proposed it must be supported by a submission which addresses the relevant legislative provisions and be accompanied by probative evidence properly directed to demonstrating the facts supporting the proposed variation. In conducting the Review the Commission will also have regard to the historical context applicable to each modern award and will take into account previous decisions relevant to any contested issue. The particular context in which those decisions were made will also need to be considered. Previous Full Bench decisions should generally be followed, in the absence of cogent reasons for not doing so. The Commission will proceed on the basis that prima facie the modern award being reviewed achieved the modern awards objective at the time that it was made.
[4] The modern awards objective applies to the Review. The objective is very broadly expressed and is directed at ensuring that modern awards, together with the NES, provide a ‘fair and relevant minimum safety net of terms and conditions’.
[5] In the Review the proponent of a variation to a modern award must demonstrate that if the modern award is varied in the manner proposed then it would only include terms to the extent necessary to achieve the modern awards objective (see s.138). What is ‘necessary’ in a particular case is a value judgment based on an assessment of the considerations in s.134(1)(a) to (h), having regard to the submissions and evidence directed to those considerations.
[6] There may be no one set of provisions in a particular modern award which can be said to provide a fair and relevant minimum safety net of terms and conditions. There may be a number of permutations of a particular modern award, each of which may be said to achieve the modern awards objective.
[7] The characteristics of the employees and employers covered by modern awards varies between modern awards. To some extent the determination of a fair and relevant minimum safety net will be influenced by these contextual considerations. It follows that the application of the modern awards objective may result in different outcomes between different modern awards.
[8] Any variation to a modern award arising from the Review must comply with s.136 of the FW Act and the related provisions which deal with the content of modern awards. Depending on the terms of a variation arising from the Review, certain other provisions of the FW Act may be relevant. For example, Division 3 of Part 2-1 of the FW Act deals with, among other things, the interaction between the National Employment Standards (NES) and modern awards. These provisions will be relevant to any Review application which seeks to alter the relationship between a modern award and the NES. The Review will also consider whether any existing term of a modern award is detrimental to an employee in any respect, when compared to the NES (see s.55(4)).” 7
The arbitral history of the redundancy scheme
[17] As was noted by the Full Bench in the Preliminary Jurisdictional Issues Decision, in conducting the 4 yearly review the Commission will have regard to the historical context applicable to each modern award and will take into account previous decisions relevant to any contested issue.
[18] Severance pay was first introduced into the coal industry by a decision of the Coal Industry Tribunal (CIT) on 16 February 1973 (the 1973 decision). 8 In that decision the CIT found that there was insufficient evidence to warrant a finding of a general industry standard in respect of severance pay. It continued:
“Nevertheless, I consider the claim is sound in principle, particularly in an industry in which from time to time collieries close down either in whole or in part and unemployment thereby results. The coal mining industry is one in which employees tend to attach themselves to a particular colliery, in some instances for the whole of their working lives. Loss of a job which a man has come to regard as permanent is a serious matter and when an employee has reached middle age it is capable of causing an upheaval in his life which can affect his family as well as himself.
I have decided to make provision for severance pay. It will take the form of an order requiring an employer who has decided to close down a colliery in whole or in part either permanently or for an indefinite period to pay to each employee who has completed at least five years of continuous employment at the colliery, and whose services have been terminated by reason of the closure, severance pay of one week at ordinary rates for each completed year of service.
The intention of the decision is to provide a measure of relief for an employee who has given an appreciable portion of his working life to a colliery and who through its closure has been deprived of his livelihood. It is not my intention that the benefit should be available to an employee who immediately upon the closure or within seven days thereafter is placed at another colliery suitable for him in respect of duties, remuneration and location. I shall therefore provide for an exception from liability in favour of an employer who not later than one week after the date of termination of the employment obtains or causes to be made available for the employee work at another colliery (whether operated by the employer or otherwise) which the employee is competent to perform; which carries at least the award rate which he was receiving at the date of termination of his services; which may reasonably be regarded as permanent and which is within a reasonable distance of his place of abode. The exception shall also extend to the case of an employee who has been so placed on his own initiative.” 9
[19] The scheme was further enhanced by the addition of the retrenchment pay scale as a result of a decision of the CIT in 1984 (the 1984 decision). 10 The 1984 decision included the following:
“There is in existence an arbitrated code for retrenchment in the coal mining industry. It goes further than most other arbitrated codes. Indeed I was not referred to a truly comparable general provision. The present award provision is for one ordinary week’s pay for each completed year of service provided that the employee has had five years service with the employer. The evidence shows me conclusively that the five year service ‘barrier’ as it was called, created considerable hardship on those affected by the almost universal award provision of ‘last to come the first to go’ when, in circumstances shown to exist, the likelihood of re-employment in the industry in the district in which the employee lives is very slight overall. A case has been made for the removal of the barrier notwithstanding that the original concept of the severance pay provision as expressed in C.R. print No. 2183 was for protection of those who had given lengthy service….
…
I do find however that the existing provision is inadequate if the effect of retrenchment is loss of membership of the industry, i.e. if no place within it is available. The existing provision, particularly with the ‘barrier’ removed adequately recognises those factors capable of recognition by an industrial tribunal if further employment within the industry can be found within a reasonable period. Further, the existing provisions strike what I consider to be the best balance between the claims of employer and employee where the circumstances leading to retrenchment could not reasonably have been foreseen. Such circumstances are covered by the general description ‘natural disasters’. They include flood, fire and/or explosion and creep (at least of the kind experienced at Aberdare colliery on the West Moreton Field and referred to in Mr Lawrie’s evidence).
However when I consider the factors the submissions lead me to take into account I do not consider the existing provision adequate where the circumstances are such as to be reasonably foreseeable. Such circumstances are technological change, market forces and the working out reserves. No distinction is made between them.
Cases of assessment have been outlined in a number of decisions of the Conciliation and Arbitration Commission and other industrial tribunals. However the position in the coal mining industry is distinct. It has had a code since 1973 which is more comprehensive than any general arbitrated schemes to which I have been referred. While other decisions are useful guides the actual assessment must be done on an industry basis. The matter is therefore taken into account are – the industry is a career industry, some benefits accrue on an industry wide basis, many conditions are in advance of those in industry generally, loss of seniority, an inability to find comparable employment, difficulties and financial pressures occasioned by what will frequently be a need to move in the search for a job, changing community attitudes to retrenchment evidenced by legislation and the fact the retrenchment agreements exist whatever their terms, severance and retrenchment are industrial, not social, matters in a tribunal such as this and income maintenance is not a proper consideration, the costs of any measure and, so far as the evidence permits an assessment of the effect of any change on marginal operations. Conscious of problems confronting the industry on costs I nevertheless bearing mind the capital has poured into the industry and created demand for jobs which were beyond what are now seen as probable requirements at this time. In the light of these factors my assessment of the appropriate amount is three ordinarily weeks pay for every completed year of service.
The decision will be implemented in the following manner. The existing severance pay provisions are to be retained, subject to the removal of the barrier. There will be a further provision made for retrenchment on the specified grounds of technological change, market forces and diminution of reserves. This further provision which will provide for two weeks pay for every completed year of service with a minimum of two weeks pay for every employee will be in addition to the adjusted provision for severance pay. The provision – apart from its requirement for notice of one month – will only require such payment if another job within the industry in the district in which the mine is situated is not found or made available. The replacement job must be obtained or made available no later than seven days after termination and must carry at least the same award rate of pay…. There will also be a limit on amount occasioned by approaching retirement through age which was the subject of submissions by Mr MacLeod….” 11
[20] Following the abolition of the CIT in 1995, the main award covering employees in the coal mining industry was the Coal Mining Industry (Production and Engineering) Award 1997 (the P&E Award). This award consolidated a number of previously separate awards as set and varied by the CIT during the course of its existence from 1946 to 1995.
[21] During the award modernisation process, the industry parties agreed that the Modern Award should be based upon the core conditions of employment contained in the P&E Award and the pre-reform award covering coal industry “staff” employees. Amongst these core conditions were the existing redundancy and severance pay provisions contained in the P&E Award. These were largely replicated in the Modern Award on the basis that they constituted an industry-specific redundancy scheme, with some minor modifications including the insertion of a definition of redundancy.
[22] No further changes were made to the redundancy provisions until the decision of the Full Bench on 10 April 2015.
Evidence
[23] Evidence was given on behalf of the CMIEG by:
• David Gunzburg (Managing Director of DGHR Services Pty Ltd.; 12
• John Edwards (former General Manager – Human Resources, Centennial Coal Company Limited) 13;
• Lorraine Merritt (State Manager, Audrey Page and Associates Pty Ltd); 14 and
• Hannah Martin (Lawyer, Ashurst Australia). 15
[24] Mr Gunzburg produced a table based on data from five CMIEG members in relation to a total of 953 employees retrenched in the black coal mining industry over the period from 2012 to 2014 showing their age brackets and lengths of service. 16
[25] The table was as follows:
Age Range |
Number |
as a % |
Average LOS |
60+ |
97 |
10% |
16 |
60-55 |
146 |
15% |
15 |
55-45 |
252 |
26% |
9 |
45-35 |
242 |
25% |
6 |
35-25 |
190 |
20% |
4 |
Under 25 |
26 |
3% |
2 |
Total |
953 |
[26] Mr Gunzburg also presented a table showing the age distribution of black coal mining industry employees in NSW over the four years to 2010, based on data he had obtained from Coal Services. 17
[27] The table was as follows:
Under 20 |
20-24 |
25-29 |
30-34 |
35-39 |
40- 44 |
45-49 |
50-54 |
55-59 |
60 or over | |
2007 |
0.7 |
4.5 |
9.1 |
12.1 |
13.4 |
13.6 |
16.4 |
15.4 |
12.1 |
2.8 |
2008 |
1.2 |
5.6 |
11.1 |
12.6 |
14.3 |
12.9 |
14.9 |
13.3 |
10.7 |
3.4 |
2009 |
0.8 |
5.5 |
11.5 |
12.7 |
13.9 |
12.6 |
14.4 |
13.4 |
10.8 |
4.3 |
2010 |
0.8 |
6.6 |
12.8 |
13.5 |
14.0 |
12.8 |
13.1 |
12.3 |
9.7 |
4.4 |
[28] Ms Martin produced a somewhat similar table, based on data she obtained from the Queensland Department of Natural Resources and Mines. 18 The table was as follows:
Under 20 |
20-24 |
25-29 |
30-34 |
35-39 |
40-44 |
45-49 |
50-54 |
55-59 |
60 or over | |
2009 |
4.6 |
14.3 |
16.2 |
13.3 |
14.0 |
10.7 |
10.5 |
8.0 |
8.0 |
5.5 |
2010 |
3.5 |
14.2 |
16.4 |
13.4 |
13.6 |
11.9 |
11.0 |
8.1 |
4.8 |
3.1 |
2011 |
3.5 |
3.5 |
17.7 |
17.7 |
13.2 |
11.9 |
10.3 |
7.9 |
5.5 |
3.3 |
2012 |
3.3 |
13.3 |
15.8 |
14.6 |
14.3 |
13.3 |
10.4 |
8.0 |
3.8 |
3.2 |
2013 |
2.8 |
2.4 |
15.7 |
14.5 |
12.9 |
13.6 |
10.3 |
8.9 |
6.0 |
3.4 |
2014 |
2.4 |
10.6 |
14.5 |
14.3 |
11.2 |
13.6 |
12.1 |
9.6 |
8.4 |
4.3 |
[29] Mr Gunzburg also presented data sourced from the Australian Bureau of Statistics (ABS) which showed the length of time that employees from 19 different industries had been out of work at various points in time between November 1991 and November 2015. Figures were presented for the mining industry as a whole, as data is not available separately for the black coal mining industry. 19 This data indicates that the average duration for time out of work for employees in the mining industry was the second highest of all industries in November 2015, sixth highest in November 2010, 16th highest in November 2005, second highest in November 2000, 16th highest November 1995 and 12th highest in November 1991.
[30] Mr Edwards gave evidence about three mines where he had been involved in retrenching coal mine employees: Mannering, Newstan and Angus Place. 20 At Mannering 113 employees were displaced when the mine ceased operations in November 2012. All the employees, other than six, were transferred to other mines within the Centennial Group. The average age of the affected employees was 43.8 employees. At Newstan 147 employees covered by the Modern Award were affected when operations ceased in August 2014, with 64 being forcibly retrenched and paid redundancy pay. The average age of the affected employees 45.2 years. At Angus Place 267 employees covered by the Modern Award were affected when the mine was placed into care and maintenance in November 2014. While some employees transferred to other mines, others took voluntary redundancy and 32 were retrenched and paid redundancy pay. The average age of these 32 employees was 50.1 years.
[31] Mr Edwards also tendered information about the age of retirement of employees across mines operated by Centennial between January 2004 and February 2016. The average age of retirement of these 230 workers was 59.9. 21 78 employees (34%) retired between the age of 61 and 70 years, 52 (23%) retired at age 60 years, and the remaining 100 (43%) retired between the age of 55 and 59 years. Their length of service at retirement went from less than a year to 43 years. Around 60% had 20 or more years of service at retirement, with the median being 25 years.
[32] Evidence was given on behalf of APESMA and the CFMEU by:
• Professor David Peetz (Department of Employment Relations at Griffith Business School at Griffith University, Brisbane); 22
• Gavin White (Account Director, UMR Research); 23
• Andrew Vickers (General Secretary, Mining and Energy Division, CFMEU); 24
• Peter Colley (National Research Director, CFMEU); 25
• Bob Timbs (Vice-President, South Western District Branch, Mining and Energy Division, CFMEU); 26
• Anthony Fardell (Mechanical Services Installer); 27
• Barry Elliott (Coal Miner); 28
• Craig Trusty (Coal Miner Electrician); 29
• Dan Watson (Coal Mine Fitter); 30
• Dennis Edwards (Coal Miner); 31
• Geordie Estatheo (Coal Miner); 32
• Mark Joseph Wallace (Coal Miner); 33
• Paul Byron (Civil Construction Worker); 34
• Robert Bennett (Coal Miner); 35
• Wayne Saunders (Coal Miner); 36
• Wilf O’Donnell (Fitter); 37
• Stephen Donald Took (Deputy); 43
• Catherine Bolger (Director, Collieries’ Staff Division, APESMA); 44
[33] Professor Peetz presented a report he had prepared into various aspects of employment in the black coal mining industry 45. Professor Peetz drew on a range of sources such as the ABS and other government agencies. He also drew on a survey of 2000 employees in the mining industry, who were members of either APESMA or the CFMEU conducted by Essential Research (“Essential survey”).
[34] According to Professor Peetz, for much of the last century, black coal mining employed an average of approximately 25,000 persons. It fell to below 20,000 in the early 2000s and then grew rapidly to over 50,000 around 2012, with a decline thereafter. 46
[35] However these trends mask developments at individual mines. Professor Peetz noted that:
“In particular, in almost any quarter, some mines have substantial reductions in workforce size, even when mine employment as a whole is growing.” 47
[36] Professor Peetz also stated:
“The age profile of the Mining industry is different to that of the total labour force. There has been a steady increase in the proportion of older persons in mining over the last few decades… Although the number of persons employed in mining has increased significantly this has not led to a greater proportion of younger persons. Overall the largest proportion of people working in mining are between 25 and 44 years. Between 1984 and 2015, the proportion of mining workers over the age of 45 has increased from one fifth to a third. In 1984, 16% of the workforce was aged between 44 and 55 and only 6% were over 55 years of age. In 2015 this is increased to 26% and 13% among these age categories, respectively.
Employees in the mining sector are older than workers in other industries, overall…. Four fifths of all mining industry employees are between 25 and 54 years of age, compared to two thirds of employees from all industries. In contrast the industry in 2015 had only 1% of 15-19 year olds and 7% of 20-24 year olds, compared to 5% and 10% of these age groups employed in all industries. That said, there is a relatively low incidence of workers aged 55-64 years and above. This probably reflects two factors: compulsory retirement age 60 in various jurisdictions, until rescinded… and the preponderance of blue-collar workers with a high incidence of health problems.” 48
[37] In analysing the evidence provided by Mr Edwards, Professor Peetz stated that:
“The data shows a clear trend towards older retirement. Between 2004-06 and 2013-15, those retiring in their 61st or later years rose from 10% to 41% of the workforce. While part of this can be attributed to the removal in 2006 of compulsory retirement at age 60 in NSW, this does not appear to explain all possibly even most of it. The trend to later retirement continued well after the 2006 removal of the age retirement restriction. For example, the greater incidence of retirement in employees’ 61st or later years in the period 2013-15 (41% of retirees) than in 2010-12 (30% of retirees) is difficult to explain by reference to the removal of the statutory bar in 2006. Nor does the removal of the bar at all explain the declining incidence of retirement in the 55-57 age group (from 32% in 2007-10 to just 14% in 2013-15).” 49
[38] Professor Peetz went on to note that this trend towards later retirement is consistent with the trend in the rest of the labour force. 50
[39] Professor Peetz sought to estimate the incidence of redundancies in the black coal mining industry by examining media reports from late 2008. This suggested approximately 9500 redundancies between December 2008 and March 2016, equivalent to an average of about 1300 per year. 51
[40] Professor Peetz used the evidence of Mr Gunzburg to estimate that the odds of a black coal mine employee 55 years or older being retrenched are about 1.9 times higher than the odds of a similar employee aged 35-44 being retrenched, and over four times higher than a worker aged under 25 being retrenched. 52 He found a similar pattern when analysing the data from the Essential survey.53
[41] In analysing the results from the Essential survey Professor Peetz drew a number of conclusions, including the following:
• 32% of workers with service of more than ten years (‘long tenure’ workers) who had been made redundant in the previous three years wanted to leave anyway, and were pleased to be able to take a package;
• 45% did not want to leave and 19% said they would have preferred to stay, but were offered a package that was too good to reject (collectively ‘reluctantly’ redundant);
• Among ‘reluctantly’ redundant workers, 46% of ‘long tenure’ workers had not worked since being made redundant, with 35% of this group having decided to retire;
• A large majority of those ‘long tenure’ workers who had been made ‘reluctantly’ redundant and were now in employment were employed in casual or fixed term jobs, often for contractors rather than mine operators;
• 76% of employees who had been made ‘reluctantly’ redundant and were now working reported that their current wages and conditions were worse than before they were put off. 54
[42] Professor Peetz compared the results of the Essential survey with data sourced from the Household Income and Labour Dynamics in Australia study (HILDA). This comparison suggested that – when compared to workers in other industries who had been made redundant – workers in the black coal mining industry were more likely to move from a permanent to a casual job; 55 were more likely to be working part time56 and were more likely to have suffered a reduction in wages57.
[43] The Essential survey indicated that of those employees who had been retrenched (and who answered the relevant question:
• 67% had less than 10 years’ service with their employer;
• 19% had between 10 and 19 years’ service; and
• 14% had 20 or more years’ service. 58
[44] A number of statements were made by employees outlining their experience working in the coal mining industry, including their experience with redundancy 59. These employees were not required for cross examination. Much of their evidence concerned the difficulties they had faced after being made redundant. A number of the employees indicated that they had found it hard to obtain work outside the coal mining industry, due to the specialised nature of their qualifications and experience.
[45] Ms Bolger gave evidence that, despite efforts by APESMA, only about 12% of staff are currently covered by an enterprise agreement. 60 Approximately one half of APESMA’s membership is aged 50 and over with around 13% aged 60 and over.61
Submissions
[46] The CMIEG, noting the Full Bench’s decision of 10 April 2015, submitted that the redundancy entitlement of employees covered by the Modern Award is now entirely uncapped.
“The entitlement as it currently stands does not accord with the entitlement in any form as it has existed since 1983.” 62
[47] The CMIEG rejected that there was a need to show a substantial change in circumstances to establish a departure from an earlier provision in a modern award and that every term of a modern award as it currently exists can be taken to have satisfied the modern awards objective, particularly in the case of a provision which was inserted into a modern award on a consent basis without any argument on its merits.
[48] The CMIEG submitted that it had in the current proceedings made out a substantive merits case. It had attended to the task that the Full Bench identified in its decision of 10 April 2015, which was to present evidence of the age profile and length of service of coal mining employees; the circumstances they face on redundancy, and the cost impact on employers of the scheme. In addition, steps had been taken to demonstrate how these matters ought to be weighed so as to propose a cap that would be consistent with ‘common industrial practice’.
[49] The CMIEG submitted that the decisions of the CIT establishing the industry redundancy scheme could not be seen as binding on a Full Bench of the Commission. Moreover, the criteria relied upon in the Commission decisions either no longer have any relevance or are inconsistent with the authorities binding on the Commission or are ‘plainly wrong’. 63 In particular, the CIT decisions were made in a particular industrial context where there was no collective bargaining at an enterprise level. By contrast, the role of the Modern Award is to provide a fair and relevant minimum safety net.
[50] The CMIEG submitted, based on the evidence, that there was no reason to suggest that the experience of those retrenched in the black coal mining industry was any different from the experience of employees made redundant in other industries. The CMIEG also pointed out that black coal mining industry workers receive benefits additional to those available in other industries, including portable long service leave and the payment of untaken personal leave.
[51] The CMIEG submitted that, since the retrenchment entitlements were established in 1973 and 1983, there had been a change in the circumstances relating to the industry. These included that:
• the consolidation in the industry had led to greater redeployment opportunities;
• there was a prevalence of enterprise bargaining;
• there were now community standards for redundancy;
• seniority no longer played the role it used to;
• the location of mining operations were now near major population centres; and
• contrary to the notion of ‘career jobs’, the mining industry had a high level of labour turnover.
[52] The CMIEG noted that, since the establishment of the industry redundancy scheme, the Australian Industrial Relations Commission had developed principles in relation to severance and retrenchment entitlements. The two key criteria were loss of non-transferrable credits and inconvenience and hardship (in particular, loss of seniority and loss of security of employment), and the Commission had specifically rejected the notion that severance and retrenchment pay was about income maintenance. Therefore, the CMIEG submitted, the factors that the CIT used to justify the introduction of a highly generous redundancy scheme no longer applied. However to the extent that there is any justification for a departure or variation from the NES or community standards the CMIEG position acknowledged that by retention of the three week period per year rate of accrual and its grandfathering proposal.
[53] The unions submitted that
• in order to succeed with its application, the CMIEG would need to demonstrate that its proposed variation was necessary to meet the modern awards objective of ensuring that modern awards provide a fair and relevant minimum safety net;
• The existing provisions of modern awards as made in 2010 were to be regarded as prima facie compliant with the modern award objective;
• The application was made pursuant to leave granted by the Full Bench in its decision removing the discriminatory cap previously contained in clause 14.4 (c) of the Modern Award; there was no invitation to conduct a ‘root and branch’ review of the industry scheme;
• The industry-specific scheme had never contained a cap. To justify introducing a cap, the CMIEG would need to demonstrate a substantial change in circumstances that merited such a significant change;
• The features of the industry which led to the establishment of the redundancy scheme continued to apply, and if anything the distinct character of the industry was more pronounced;
• The industry scheme was a long-standing feature of employment in the coal mining industry and had been accepted as the appropriate standard by employers and employees;
• The FW Act acknowledged that industry-specific schemes such as the one in question were not inconsistent with the modern award objective;
• There was no evidence of any change that justified departing from the current provision; and
• The variation would tend to reduce living standards and reduce the workforce participation of older workers.
[54] The unions further submitted that:
• The industry remained a career industry;
• the effects of retrenchment on employees in the industry were particularly harsh;
• those workers who did regain employment in the industry were likely to obtain employment on substantially worse conditions;
• the workforce was ageing; and
• unlike at the time the industry scheme was originally established, there was no longer preference for employment for those retrenched.
[55] The unions submitted that, unlike the unions, CMIEG failed to present any independent expert evidence, and the vast bulk of the evidence of the unions’ expert witness Professor Peetz was unchallenged. The unions summarised a number of conclusions that, it submitted, should be drawn from the Professor’s evidence. These included that:
• Employment in the black coal mining industry was characterised by peaks and troughs, with no evidence of labour hoarding;
• Profits per employee were very high during boom periods;
• Coal mining employers had a capacity to make provision for existing redundancy costs;
• Retrenched employees, if re-employed at all, were likely to be re-employed on inferior conditions;
• The experiences of retrenched employees in the coal mining industry were worse than employees in other industries; and
• Employees in the industry were older and longer tenured than average.
[56] The unions drew attention to the following conclusions it said could be drawn from the Essential Survey:
• Less than half of those retrenched are currently working in the coal mining industry;
• 28% of respondents had not worked at all since being retrenched;
• only 21% of those who had been retrenched are in full-time work;
• of those who are in paid work, 72% are worse off than they were before retrenchment;
• 57% of those who have found work have worked wholly on a casual or a fixed term basis;
• a majority of those retrenched had worked for their employer for longer than six years and 30% for longer than 10 years;
• 60% of those retrenched had been in the industry for longer than 10 years, and 41% longer than 20 years;
• 62% of respondents were working for contractors, compared to 27% working for contractors before retrenchment;
• a majority of those retrenched received no transition support at all. 20% received outplacement services and 3% relocation assistance. 6% received new training and 12% offered redeployment.
[57] The unions emphasised that:
“…the Commission is not now engaged in a process of determining an appropriate provision from scratch. It is considering only the question of whether a cap or to be introduced into a scheme that has never had one. As such the appropriate focus is on what is changed. None of the ‘principles ‘that are relied upon by the CMIEG constitute such a change.” 64
Consideration
[58] We agree with the unions that we are not called upon to determine an appropriate redundancy provision for the black coal mining industry from scratch. The Full Bench in the ‘Preliminary Jurisdictional Issues Decision’ referred to the requirement to maintain a ‘stable’ modern award system. It also stated that regard must be had to the historical context applicable to each modern award. There needs to be a good or ‘cogent’ reason to make a change to a Modern Award.
[59] We also reject the notion that having an industry-specific redundancy scheme with provisions that are more generous than the NES is inherently inconsistent with the modern awards objective. The legislative scheme, when combined with the award modernisation request made by the Minister, makes clear provision for such arrangements in modern awards where they are an established feature of an industry.
[60] We do note that Clause 14 was put in the Modern Award largely by consent. That does not mean however that we should not proceed on the basis that prima facie the Modern Award achieved the modern awards objective at the time that it was made. In considering whether to make any changes to the Modern Award, we need to be satisfied that the award, as varied, would meet the modern awards objective of ensuring that it provides a fair and relevant minimum safety net.
[61] We are satisfied that it remains appropriate for the Modern Award to continue to contain an industry-specific redundancy scheme broadly along the lines of that contained in Clause 14. This is largely because of the long history of the scheme, and its acceptance by employers and employees in the industry over many years.
[62] We are also satisfied that there are certain distinctive features of the black coal mining industry that support the retention of the industry-specific redundancy scheme. In particular, we accept the evidence that retrenched employees in the coal mining industry are significantly more likely to be re-employed on worse terms and conditions than is generally the case for employees in other industries.
[63] However we agree with the CMIEG that, given the abolition of the 60 years of age redundancy cap, the current entitlement is not the industry based scheme that previously existed.
[64] Accordingly, we consider some amendment is necessary to Clause 14 of the Modern Award, while retaining the essential characteristics of the scheme. No age-based cap ever applied to the one week per year of service severance payment, and we do not consider it would now be appropriate to impose a cap or make any other change to this aspect of the clause. However we do consider that a cap, based on complete years of employment, should be applied to the retrenchment payment of two weeks for each completed year of employment in order to restore the industrial balance in the scheme in a non-discriminatory way.
[65] Having regard to the evidence presented to us about the age and length of employment of employees who have been made redundant in the black coal mining industry we think that an effective cap of 15 completed years of employment (or 30 weeks payment) should be applied to the retrenchment payment.
[66] We consider that a ‘grandfathering clause’ should be adopted to protect those employees who have already completed more than 15 years of employment. It is modelled on the clause proposed by the CMIEG. It provides where an employee who is made redundant had, at the operative date of the variation, completed more than 15 years of employment with the employer, that employee will be entitled to a retrenchment payment based on the employee’s number of completed years of employment as at the operative date.
[67] In our view the award as varied will meet the modern awards objective of providing a fair and relevant minimum safety net of terms and conditions. In reaching that conclusion, we have taken into account each of the matters specified in paragraphs (a)-(h) of s.134.
Conclusion
[68] A draft revised Clause 14 of the Modern Award is attached which is designed to give effect to this decision. Interested parties are invited to file written submissions about the form of the proposed clause within 14 days of the date of this decision.
VICE PRESIDENT
Appearances:
Y Shariff of counsel with T Sebbens and E Lloyd, solicitors, for the Coal Mining Industry Employer Group.
I Taylor SC with O Fagir of counsel for The Association of Professional Engineers, Scientists and Managers, Australia.
A Bukarica and G South for the Construction, Forestry, Mining and Energy Union.
O Basiacik for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU).
Hearing details:
Sydney.
2016.
November 7, 8, 10.
Draft Revised Clause
14. Redundancy
14.1 The redundancy arrangements in this award are an industry-specific redundancy scheme and, as such, Subdivision B of Division 11 the NES does not apply.
14.2 Definition of redundancy
(a) An employee is made redundant where an employee’s employment is terminated at the employer’s initiative:
(i) because the employer no longer requires the job done by the employee to be done by anyone except where this is due to the ordinary and customary turnover of labour; or
(ii) because of insolvency or bankruptcy of the employer.
(b) This clause does not apply to employees engaged for a fixed term or a specified task.
14.3 Severance payment
Except where clause 14.5 applies, when terminations occur due to redundancy the employees terminated are entitled to severance pay equal to one ordinary week’s pay for each completed year of employment.
14.4 Retrenchment payment
(a) Except where clause 14.5 applies, where redundancies occur due to:
(i) technological change;
(ii) market forces; or
(iii) diminution of reserves,
the employees terminated are entitled to retrenchment pay equal to two ordinary weeks’ pay for each completed year of employment up to a maximum of 30 weeks’ pay. This payment is additional to the payment prescribed in clause 14.3.
(b) Regardless of the length of employment, the minimum payment due to employees under paragraph (a) is two ordinary weeks’ pay.
(c) Despite paragraph (a), an employee who as at [insert date of variation] (the operative date) had more than 15 completed years of employment and after the operative date is made redundant will be entitled to retrenchment pay equal to two ordinary weeks’ pay for each completed year of employment as at the operative date. This payment is additional to the payment prescribed in clause 14.3.
14.5 Exemption
An employer is not liable for the payment in clauses 14.3 and 14.4 if the employer obtains, or causes to be made available for the employee, work:
(a) that the employee is competent to perform;
(b) in a position that carries the same or a higher classification rate of pay than the employee’s previous position;
(c) that can reasonably be regarded as permanent; and
(d) allows the employee to reside in the same general locality as the employee’s previous residence.
14.6 Variation of retrenchment pay
Despite anything in this clause, an employer may make application to the Fair Work Commission to be granted relief from the obligation to make a payment pursuant to clause 14.4. A dispute over what is just and expedient may be resolved through the dispute resolution procedure.
3 Decision at [39]
4 Decision at [41]
5 For the purposes of the redundancy cap proposal the participants in the CMIEG are Anglo American, BHP Coal (BHP Mitsubishi Alliance), Centennial Coal, Ensham, Glencore, Jellinbah, Peabody, Vale, Wesfarmers, Whitehaven, and Yancoal.
7 Ibid at [60]
8 Coal Mining Industry (Composite Log of Claims), Coal Industry Tribunal, 16 February 1973, CR 2183
9 Ibid at p.7
10 Coal Mining Industry (Severance and retrenchment Pay: New South Wales and Queensland), Coal Industry Tribunal, 19 January 1983, CR3132
11 Ibid 36-37
12 Exhibits 1 and 2
13 Exhibit 3
14 Exhibit 5
15 Exhibit 9
16 Exhibit 1, attachment DG-2
17 Exhibit 1, attachment DG-4
18 Exhibit 9, attachment HM-1
19 Exhibit 1, attachment DG-5
20 Exhibit 3, paragraphs 12-26
21 Exhibit 3, paragraphs 34-35
22 Exhibits 11 and 12
23 Exhibit 16
24 Exhibit 17
25 Exhibit 18
26 Exhibit 19
27 Exhibit 20
28 Exhibit 21
29 Exhibit 22
30 Exhibit 23
31 Exhibit 24
32 Exhibit 25
33 Exhibit 26
34 Exhibit 27
35 Exhibit 28
36 Exhibit 29
37 Exhibit 30
38 Exhibit 31
39 Exhibit 32
40 Exhibit 33
41 Exhibit 34
42 Exhibit 35
43 Exhibit 36
44 Exhibit 37
45 Exhibit 11
46 Ibidpp 21-26
47 Ibid, p.27
48 Ibid pp 33-34
49 Ibid p.39
50 Ibid p.40
51 Ibid pp 46-51
52 Ibid p.70
53 Ibid pp 71-72
54 Ibid pp 76-81
55 Exhibit 12 [13]-[14]
56 Ibid [15]-[17]
57 Ibid [18] – [21]
58 Exhibit 14, p. 18
59 Exhibits19-36
60 Exhibit 37, [5]
61 Ibid,[37]
62 Final submissions of the CMIEG, [4]
63 Ibid [24]
64 Ibid [119]
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