Labour Council of New South Wales v Delta Electricity [2005] NSWIRComm 39 (16 March 2005)

Last Updated: 21 March 2005

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Labour Council of New South Wales v Delta Electricity [2005] NSWIRComm 39

FILE NUMBER(S): IRC 3757

HEARING DATE(S): 06/10/2004, 20/10/2004

DECISION DATE: 16/03/2005

PARTIES:

Labour Council of New South Wales; Construction, Forestry, Mining and Energy Union (NSW Branch); Electrical Trades Union of Australia (NSW Branch); Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, NSW Branch; Australian Institute of Marine and Power Engineers, NSW District: NSW Local Government, Clerical, Administrative, Energy, Airlines & Utilities Union,; Public Service Association and Professional Officers Association Amalgamated Union of NSW; Association of Professional Engineers, Scientists and Managers, Australia (NSW Branch): Australian Workers' Union, NSW; Delta Electricity.

JUDGMENT OF: Harrison DP

LEGAL REPRESENTATIVES

APPLICANT

Mr M Thistlethwaite

Labor Council of NSW

RESPONDENT

Counsel

Mr A Gotting

CASES CITED:

LEGISLATION CITED: Industrial Relations Act 1996

Energy Services Corporations Act 1995

Industrial Relations Act 1991

JUDGMENT:

- 28 -

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

CORAM: HARRISON DP

16 March 2005

Matter No IRC 3757 of 2003

Notification under s 130 by Labor Council of New South Wales of a dispute with Delta Electricity and others re proposed outsourcing of dust and ash plant at Wallerawang Power Station

DECISION

[2005] NSWIRComm 39

1 Wallerawang Power Station ("Wallerawang") units 7 and 8 were constructed during the 1970's. Ash and dust created by the burning of coal was disposed of by pumping it to the Sawyers Swamp Creek ash dam by wet slurry method. During the late 1990's and early 2000 a number of studies examined the useful life of the dam and strategies for extending its capacity were undertaken.

2 In 2001 it was concluded that the various strategies to extend the life of the ash dam had achieved limited success and that an operational life of two years remained, resulting in a need to implement a cost effective alternative dust disposal system or shut down Wallerawang.

3 A dry dust system was implemented during 2003. The operation and maintenance of the dry dust system is the subject of dispute in these proceedings. A dry ash system is scheduled for completion in late 2004/early 2005 and is not subject to dispute as management do not intend to involve contractors in the operation or maintenance of that system.

4 The dry dust disposal system installed is described as the latest generation technology, largely automatic, replacing a complex system of ejectors, sluiceways, pits, pump trains and pipelines all requiring extensive operator intervention and increasing maintenance as time advanced. The new dry dust system consists of collection tanks beneath each dust hopper, with a compressed air system to convey the dust by pipe to a collection hopper adjacent to the Castlereagh Highway. Dust is then loaded into trucks for transport to the dust disposal area where it is spread and compacted by mobile machinery; or, in the event that current endeavours to find a commercial application are successful, to various destinations determined by a purchaser.

5 The dispute in this matter was notified in July 2003 and subject to a number of compulsory conference proceedings throughout the latter part of 2003 together with earnest discussions between the parties which failed to resolve the matter. A Certificate of Attempted Conciliation was issued on 3 March 2004 and directions issued to bring the matter to hearing. Further directions were issued on 9 August 2004 and the matter was subject to inspection and hearing on 6 October and 20 October 2004, respectively. Final written submissions were filed by the parties in mid November 2004.

6 The Labor Council of New South Wales ("the Labor Council") seek Orders pursuant to s136 of the Industrial Relations Act 1996 (“the Act”) in the following terms (exhibit 18):

The Commission orders that:

1. Delta Electricity be required to offer work associated with the operation and maintenance of the Dry Dust Plant at Wallerawang Power Station to employees of Delta Electricity.

2. Such work offered shall include the operation and maintenance of the Dry Dust Plant up to the discharge point of the silo.

3. Such other orders as the Commission deems appropriate.

7 Delta Electricity ("Delta") engaged Alstom Power (the installation contractor) to work with them in an alliance agreement to design, install and commission the new dry dust plant. The cost of this was approximately $8.5 million. The plant was initially operated by the installation contractor's employees as part of the commissioning and warranty terms of the contract. This aspect of the process is largely unchallenged.

8 Some time after commissioning the contract to operate and maintain the dry dust plant was put to tender. The successful bidder was MPA Pty Ltd, a firm which has undertaken the operation and maintenance of a similar system under contract to Delta at the nearby Mt Piper Power Station ("Mt Piper").

9 Mt Piper was built in the 1990's and has had a dry dust disposal system operated and maintained by contractors from its inception.

10 The Labor Council argue that Delta failed to consult with employees and their representatives as required by the terms of an agreement made between the Labor Council and the Electricity Commission of New South Wales ("EC") ("the EC Agreement"), the entity which operated Wallerawang prior to a process of disaggregation, culminating in the formation of Delta.

11 The Labor Council also contend that Delta has failed to apply a policy adopted by Delta in respect to the use of contractors.

12 The Labor Council argue that the use of contractors in the operation and maintenance of the dust plant in breach of the terms of the EC Agreement and Delta's contractor policy results in an industrial injustice to the employees concerned; and that there is no inconvenience or disadvantage to Delta for the work to be undertaken by Delta employees.

THE EC AGREEMENT

13 The EC Agreement (tendered Tab 10 of exhibit 8) is in the following terms:

1. The charter of the EC requires it "to provide a safe, reliable and adequate supply of electrical power to the people of New South Wales and to Industrial and commercial undertakings throughout the State at the lowest practicable cost". It is agreed that the permanent workforce will be used to its full capacity and contractors will not be used in preference to that workforce.

2. Contractors can be used for Capital, Rehabilitation, Specialist work and during peak periods which EC labour cannot handle.

The use of contractors in this way was anticipated by the Ministerial Review Committee (Bollins Report) in Attachment 48 which set down some guidelines.

3. A survey during May/June 1987 showed that 2,335 maintenance employees were in the power stations. The Electricity Commission will maintain this figure over the next twelve months unless unforeseen circumstances intervene, in which case, consultation with the Labor Council will take place before any alteration takes place.

The Electricity Commission is prepared to review this staffing level with the Labor Council in twelve months time. At this review, appropriate future levels will be considered in the light of projected maintenance requirements and staff utilization over the next twelve months.

At the review information concerning previous man hours worked by contractors will be made available.

4. Procedures whereby representatives of the Labor Council and affiliated unions associated with power generating are given advance notice of the EC's maintenance plans have already been adopted. The timetable for proposed work, its location and scope, together with the estimated necessary labour inputs are all encompassed in the existing process.

5. A "Negotiating Procedure for SMG Entry Into Power Stations" has also been agreed upon. This procedure provides, amongst other things, for the publication of a detailed outage plan for each financial year. During May each year Station Management provides delegates with a program for planned overhaul work for the coming year. It is from this program that an appropriate allocation of resources and work packages is arrived at.

6. Proposals for the use of contractors will be raised during the above mentioned processes. Site delegates will be kept informed well in advance of any possible requirements to use contractors.

7. Prior to any contract being arranged to carry out work at a power station site, delegates will be consulted with view to reaching agreement. Factors which must be considered when discussing possible contract jobs are.

(a) Capacity of E.C. staff to do the work at the specified time having regard to other work planned at the same time and the need for day to day maintenance to continue.

(b) The necessity that work be broken up into discrete packages which enable a clear identification of which group, station staff, SMG or contractors, have responsibility for each job.

(c) Work quality and job satisfaction by E.C. staff.

(d) Time available for work to be done.

(e) Nature of the work, e.g., capital, maintenance, specialists, period order, etc.

(f) Urgency of work.

(g) Timing of work-

(h) Public interest.

8. When a decision is to be made regarding division or work between E.C. and outside resources, due consideration must be taken of the nature of the jobs so that E.C. staff have the opportunity to undertake the more interesting and better quality work. To enable this to happen the site delegates, on request, should indicate those jobs which they regard as being the better quality work;

9. During the process of consultation on entry of contractors, the E.C. will make every effort not to take any action which may hinder the eventual resolution of the matter. However, due to the long lead time with some work, it may be necessary, on some occasions, to take preliminary action towards placing orders so that work can start on the specified date if it is ultimately decided that contractors will be used.

10. Prior to contractors employees commencing work on a site, the station delegates will be given notification and the contractors employees will be granted entry in the manner agreed at that station. Such notification procedure should include:

(a) A list of work to be performed under contract.

(b) Identification of the proposed contractor(s).

(c) The date and time when the work is to commence.

(d) Provision for no more than two nominated delegates or the site committee, without loss of pay, to conduct a financial union card check of contractor employees commencing work on the site.

14 The Agreement arose from negotiations between the parties in 1987 and can also be found as part of Annexure B to the judgment of Deputy President Varnum, as he then was, of 10 March, 1988 in matters No 232, 233, 234, 235 and 236 of 1988 (unreported) which varies a number of applicable awards to give effect to the four percent, two tier award increase available pursuant to the restructuring and efficiency principles of the State Wage Case Decision of 1987 [1987] 17 IR 105.

15 In an analysis of the contractor negotiating procedure at p9 of Annexure C of the Deputy President's judgment, consultative provisions were estimated to provide an annual cost saving to the EC of some $4.2 million. The previous position, new position and efficiency improvements are set out in the following terms:

7. Contractor Negotiating Procedure

In recognising the continuing role contractors play in the efficient operation of the Commission, the parties agree that there shall be no impediment to their use provided that such use is in accordance with the agreed procedure for the entry of contractors into power stations

7.1 Previous Position

Maintenance staff were reluctant to permit the use of contractors on operating power stations expressing a fear that this presented a threat to the job security of Electricity Commission staff.

This has resulted in much waste of time in discussion and disputation over contractor use. The inability to supplement the regular maintenance workforce with contractors during major overhauls and repair work has reduced plant availability and reliability.

7.2 New Position

A negotiated agreement on a procedure whereby contractors are used after appropriate consultation with the unions involved has altered this position. Contractors are now playing a significant role in the efficient maintenance of power stations.

7.3 Efficiency Improvement

Major overhauls and outage are being completed in a more thorough and timely fashion.

7.4 Cost Savings

On average each day there is a delay in bringing a unit back into service, there is a cost penalty of $42,000. By using contractors to assist in maintenance the saving in outage time for all major units is expected to total about 100 days a year.

$42,000 X 100

SAVING $4,200,000.

16 The Energy Services Corporations Act 1995 is the statutory authority for the disaggregation of the EC, culminating in the creation of Delta. Mr Thistlethwaite argued that Schedule 3 Transfer of staff, assets, rights and liabilities, effectively continues the obligation to comply with the EC Agreement. In particular, item 2 of Schedule 3 which applies to transfer of staff in the following terms:

"A member of staff who is transferred by a transfer to which this Schedule applies is (until other provision is duly made under any Act or law) to be employed in accordance with any relevant statutory provisions, awards, agreements and determinations that would have applied to the person had the person not been transferred but remained a member of staff of the transferor."

17 The Labor Council contend that in the absence of specific provision or replacement of the EC Agreement, it continues to apply by force of statute and must be complied with by management and employees of Delta.

18 Mr Gotting argued that the relevant legislation did not continue the EC Agreement to Delta as a successor organisation to the Electricity Commission under the transitional provisions of the EC Act. Mr Gotting further submitted that the EC Agreement could not apply in the present circumstances as it is directed at contractors undertaking maintenance work, whilst the work on the dry dust system involves operation and maintenance.

19 The Labor Council further rely upon a Delta policy ("the policy") concerning the utilisation of contractors (exhibit 10), which states:

DELTA ELECTRICITY - UTILISATION OF CONTRACTORS

Delta Electricity is committed to the efficient and optimal use of its staff to operate and maintain its assets

Maintenance Services Business Unit has been structured to maximise the use of Delta resources through flexibility and the ability to allocate maintenance staff to the varying maintenance requirements. As the preferred maintenance provider in Delta Electricity, Maintenance Service's objective is to provide competitive quality services at benchmarked prices. This objective is best achieved by providing maintenance services in the higher value added areas.

The utilisation of contractor resources is essential to the continuation of Delta's success. However before commencing procedures to engage contractors on maintenance work, the availability and suitability of Maintenance Services resources must be first reviewed. Specification for external contractors will only proceed when it has been established that Maintenance Services resources are unavailable or unsuitable for the maintenance work required.

Delta Electricity is committed to consulting with its staff concerning all matters which affect them. Each business group will establish procedures for consultation where it is arranging work for maintenance, outages or ongoing services where Delta staff do not have the capacity or economic advantage to perform the work-.

Matters considered in such procedures will include;

a) work load of Delta staff and possible alternative work arrangements to enable Delta staff to perform the work;

b) urgency and timing for the work to be performed;

c) opportunities to package the work between Delta and contract staff;

d) quality of work and job satisfaction for Delta staff;

e) economic viability for Delta staff to perform the work.

Urgent work will proceed without delay. Preliminary action towards placement of orders will also be taken where long lead times precede the commencement of work.

Employee/union representatives may peruse proposed workscope and contract specification documents on request.

The provisions of the Grievance and Disputes Procedures clause of the Delta Electricity Employees Award, 1996, are available where employee representatives feel work is being unreasonably allocated to contractors.

Willing membership of unions or employer associations is encouraged through proper and lawful means. This precludes victimisation, through any mechanism for membership or non-membership of organisations.

20 The Labor Council contend that the policy was not complied with, putting written and oral evidence is support of its contentions.

21 The parties have been engaged in attempts to resolve the issue of a contractors entry procedure for some years.

22 This policy evolved from discussions and negotiations between the parties arising from a claim by the Labor Council and unions that a provision to regulate the contracting out of work be inserted in the Delta Electricity Employees Award 1997 (1998) 306 IG 146 ("the 1997 Award"). These discussions resulted in an arrangement that contracting out be subject to leave reserved in the 1997 Award. The policy was communicated to the Labor Council and Unions in the form of a draft dated 21 November 1997.

23 There is no record of agreement to this or evidence of any process involving consultation which converted the draft to effective policy. The issue has remained a "leave reserved" matter in successive Delta awards since 2000.

24 On 17 June 2003 Mr Gadiel, as Deputy Assistant Secretary of the Labor Council, wrote to Delta (Att. F to Ex 8) confirming three key issues of concern, which he identified as:

· Job security

· Ensuring that employees have access to promotional pathways, and

· A protocol between Delta and the unions governing the use of contractors.

25 Delta replied to the Labor Council on 4 July 2003 (Att. 6 to Ex 8) setting out a detailed argument of the need and circumstances of pursuing development and installation of the dry dust plant to ensure station operation, which in their contention enhanced job security and offered no disadvantage to employees from the use of contractors in this case. Delta committed to further discussion on the broader issue of contractor usage on 15 July 2003. The meeting of 15 July 2003 did not resolve the issues.

26 Delta assert that the use of contractors and associated issues are dealt with in their policy and in their submission are "not an award matter".

27 In correspondence dated 12 August 2003 (Annex. B to Ex 8) Delta refers Mr Gadiel to the policy.

28 The evidence of Mr McLachlan (Delta's Industrial Relations Manager) is that Delta reiterated its position to the unions in correspondence of 26 March 2003, the relevant paragraphs contained at p 63 of Mr McLachlan's evidence (Att B1 to Ex 8) in the following terms:

"Contractors. As indicated at the last meeting, apart from the one contractor issue raised for discussion recently, I note the lack of disputation relating to the use of contractors in recent times and the fact that leave reserved in the current award on this matter has not been actioned by the unions. In the circumstances, and after extensive internal discussions, Delta is not agreeable to including a clause concerning the use of contractors in the Award.

We are, however, prepared to confer with the unions to establish an agreed procedure for use of contractors, which will enable staff to be kept informed and have input in relation to the use of contractors whilst also enabling Delta sufficient flexibility to utilise contractors effectively. If agreement is not finalised within six months, the assistance of the Industrial Relations Commission can be sought."

LABOR COUNCIL EVIDENCE

29 Mr Terry Tonkin has been employed as a Station Plant Operator at Wallerawang since 1982. His duties include operation of the Ash and Dust disposal system from that time.

30 It is Mr Tonkin's evidence that operation and maintenance of the dry dust system by Wallerawang employees would be safer, cheaper and more efficient than the present use of contractors.

31 Mr Tonkin deposed that in discussions with Mr Peter Siers, the Assets Manager, Mr Siers had told him that if part of the plant were to be taken up by Delta, then it would be safer and cheaper for Delta to take up the whole plant, including the silo. Mr Tonkin deposed that an isolation point prior to the silo did not have adequate handover controls and that if contractors were required to continue to attend the silo there would be no cost savings to Delta. The present arrangement is that two employees of a contractor operate and maintain the dust system from an isolation point immediately below the precipitator dust hopper within the power station. Mr Tonkin deposed that all necessary controls are available in the main control room and that operation and maintenance of the dry dust system would not require any additional employees, nor give rise to any additional claim from the Union in terms of wages.

32 Mr Tonkin gave an undertaking in his capacity as Construction, Forestry, Mining and Energy Union (CFMEU) delegate for power plant operators at Wallerawang that there would be no claims arising from operation of the dry dust system by Delta employees.

33 Mr Tonkin deposed that he was aware that contractor employees had received a total of one week's training in operation of the new dry dust plant and accordingly put that Wallerawang plant operators held all necessary skills and competencies to undertake the work and would require less than one week's training and familiarisation with the system.

34 In his second affidavit (exhibit 2) Mr Tonkin deposed that he was not consulted, either as an employee or in his capacity as CFMEU delegate, in respect to operation of the dry dust system by contractors. It is Mr Tonkin's evidence that he attended a number of meetings with Mr Jones, Production Manager Wallerawang, concerning installation of the new system. Mr Tonkin's evidence is that at each meeting it was clearly put to Mr Jones that the employees objected to contractors operating the new dry dust system, and that Wallerawang operators were capable of undertaking the work. Mr Tonkin's evidence is that at each meeting he asked Mr Jones whether a decision had been made on who would be operating the plant and on each occasion Mr Jones responded in the negative, stating that the matter remained under consideration.

35 Mr Tonkin deposed that in December 2002 he was informed by Mr Jones that a contractor would operate the new plant after commissioning. Mr Tonkin strongly objected to this and on 24 December 2002 submitted a formal disputes avoidance procedure notice (DAP) to Mr Jones. Mr Tonkin deposed that DAP's were submitted relating to the same issue in February and October 2003.

36 A DAP is the formal notice adopted within Delta for initiation of the disputes procedure provision of the Award.

37 Mr Tonkin deposed that he was never invited to attend meetings with Mr Siers dealing with the conversion process and technical aspects of the new system. Mr Tonkin's evidence is that the Union proposal for operation of the complete system, including the hopper, would leave external parties concerned only with the filling of trucks in the same manner as the Migaldi ash collection system.

38 Mr Robert Waters has been employed as a mechanical fitter at Wallerawang since 1977. Mr Waters' duties involve maintenance of the wet ash and dust plant. Mr Waters deposed that he is familiar with the components of the new dry dust system and contends that he and other Delta maintenance employees possess all necessary skills and experience to undertake maintenance thereof.

39 Mr Waters, in his capacity as CFMEU Maintenance delegate, supported and made the same undertaking as Mr Tonkin, that there would be no claims for additional wages, allowances or staff numbers as a result of Delta employees taking up responsibility for the dry dust and ash plant. Mr Waters supported Mr Tonkin's assertion that maintenance by Delta employees within their existing ordinary time would be more efficient as it would remove the cost of the two contractor employees currently attending to these duties.

40 Mr Waters deposed that he was never consulted regarding maintenance of the new dry dust system. Mr Waters confirmed that he attended a meeting with Mr Siers, which he put addressed conversion of the new dust system and did not address the use of contractors to undertake the work.

41 Mr Waters notes that the new Migaldi ash system is to be operated and maintained by Delta employees and has never been in dispute.

42 Mr Waters deposed that in February 2003 he was informed by Mr Jones that Delta would be calling for tenders for operation of the new dust plant, to which he and other maintenance employees objected, instructing the Labor Council to issue a dispute notification. Mr Waters deposed that a further dispute notification was lodged with Mr Saladin, Delta Western General Manager, confirming the objection to the use of contractors on this work.

43 Mr Waters deposed that recent advice that outage work would be reduced for Delta maintenance employees would mean increased capacity for the work in dispute to be undertaken by Delta employees.

44 Mr Waters deposed that the contractor's employees currently engaged did not hold trade qualifications, citing the example of his cousin, employed by the contractor as a plant attendant, whom he knows does not possess trade qualifications and accordingly Delta trades employees are better qualified to undertake the work.

THE CASE FOR DELTA

45 Mr Gotting asserted that Delta was not bound by the EC Agreement, that it had followed the requirements of its internal policy, and that the operation and maintenance of the dry dust system was the most safe, efficient and practical method.

46 Mr Gotting brought evidence from Mr Siers, employed by Delta as Asset Manager External Plant. Mr Siers deposed that in this capacity he is responsible for ensuring the continuing availability and serviceability of a number of plant systems at Mt Piper and Wallerawang, including the ash and dust systems. Mr Siers joined the Electricity Commission of NSW in 1990 and in 1991 took up the position of Electrical Engineer at Wallerawang where he has been employed in various positions prior to taking up his current role in 1999.

47 Mr Siers' evidence provides a detailed examination of the technical and operational features of the wet and dry ash and dust systems. Mr Siers described the system as consisting of three operational sub-systems, the first of which he described as the pneumatic system which collects the dust and transports it to the silo; the second is the trucking operation which collects dust from the silo and transports it to the dry repository site; and the third is the dry repository site.

48 The interface between the trucking operation and the pneumatic system is the loading of trucks in the dust silo which Mr Siers described is normally controlled by the truck drivers who use a small remote control device similar to a garage door opener with which they start and stop the silo unloading once their vehicle is properly located underneath the discharge chute. A substantial aspect of the trucking operation is the transport of material by road.

49 Mr Siers described the repository management operation as a process requiring geotechnical experience and landfill management experience. It requires the regular use of heavy equipment such as bulldozers and compactors and the occasional use of front end loaders and excavators.

50 Mr Siers deposed that Delta is not involved in the trucking operation which uses two dedicated vehicles of the same type as those which normally deliver coal to Wallerawang. In the event of breakdown, substitute vehicles can be used from a number of coal carriers in the area. Mr Siers deposed that Delta does not hold the expertise and experience to manage the repository operation.

51 Mr Siers expressed the opinion that having one entity responsible for all three operational sub-systems affords optimal operation of the plant and protects Delta from the possibility of claims from the operator of one part of the system alleging inconvenience or costs arising from inefficiency in another part of the system. Mr Siers deposed that a delay in the repository operation may slow down the trucking and cause difficulties in the storage aspect of the pneumatic operation, or alternatively, failure to operate the pneumatic system in concert with the other two systems could result in periods where no dust was available from the silo, rendering the other two operations idle; or conversely periods where the need to empty the silo was at a rate greater than the capacity of the available trucks. Mr Siers deposed that minor instances of inefficient overall operating coordination would increase Delta's costs, while more significant instances could jeopardise the ability of the power station to generate at full capacity.

52 Mr Siers deposed that he had undertaken a number of discussions with Delta employees and had prepared a presentation, given either by himself or the Asset Manager Unit Plant Western to all operators at scheduled training days during March 2002. Mr Siers deposed that he more recently gave a similar presentation to a combined meeting of Delta Maintenance Western personnel which conveyed the technical aspects of the new systems.

53 Mr Siers deposed that on 3 December 2003 he was involved in discussions with union representatives on site at Wallerawang in which it was confirmed by them that operation and maintenance of the pneumatic system only was in dispute and that no claims were made in respect to the trucking or repository management operations.

54 Mr Siers deposed that he explained to those present at an inspection held on 3 December 2003 that it was necessary for the one entity to be responsible for the entirety of the pneumatic system so as to avoid the occurrence of both Delta and contractor personnel operating plant isolation, thereby increasing the possibility of an oversight and resulting in an increase in the risk of injury to maintenance personnel or damage to the plant. Mr Siers evidence is that on this occasion he also explained the ongoing role of the wet system and that there was no intention, so far as he was aware, to transfer operation and maintenance responsibility for the wet system to a contractor or to make any of the operation and maintenance systems associated with the wet system redundant.

55 Mr Siers deposed that he was questioned strongly in this respect and formed the view that the propositions he advanced were not accepted.

56 Mr Siers deposed that the cost of suboptimal coordination of the three sub-systems could be as much as $500,000 per year, though it is likely that Delta would recognise that a significant lack of coordination was adding to the cost of the operation and would intervene to control this situation. Mr Siers deposed that the potential cost figure is based on the understanding that the greater part of the costs arise from the trucking and repository operations.

57 Mr Siers further deposed that negotiations were ongoing with the proponent of a manufacturing facility to be built adjacent to Wallerawang which will utilise the dry dust as feed stock. The proposal includes an extension of the pneumatic system to deliver material directly to the manufacturer's raw material silo. Mr Siers deposed that it is likely that the manufacturing facility will require all of the dust produced and, in the event of shutdown, dust would be reclaimed from the dry repository area.

58 Mr Siers asserted that it would be an unacceptable commercial risk for Delta to hold responsibility for delivering material to the proponent's manufacturing plant, adding that the current arrangements for the operation and maintenance of the dry dust system by MPA Energy Services conveniently allows the proposed manufacturer to enter into a delivery arrangement with the contractor from both the extended pneumatic system and depository reclamation.

59 Mr Siers deposed that the maintenance requirements for the pneumatic system are far less than those of the wet system, with normal maintenance requirements attended to by the two plant attendants and more involved maintenance procedures requiring additional personnel attended to by deployment of maintenance staff from MPA based at Mt Piper.

60 Mr Siers added that a significant component of the pneumatic system is the air compressor system which was augmented by the addition of four new air compressors during the construction of the pneumatic system. Mr Siers deposed that maintenance of the compressors has been carried out by a specialist contractor for many years.

61 Mr Siers deposed that there was also a commercial advantage to Delta, putting that the contract price offered by MPA at Mt Piper was reduced as a result of economies of scale achieved by combining the Mt Piper and Wallerawang work. Mr Siers added that the contract price offered by MPA at Wallerawang was less than that of the previous contractor.

62 Mr Siers gave extensive evidence in respect to the development and commissioning of the Migaldi system, which he emphasised would be operated and maintained by Delta employees.

63 Mr Siers deposed that in preparation of the contracts for the dry dust system he consulted with Mr Warwick Robinson, Manager of Delta Western Maintenance Division, and established that Delta maintenance lacked the necessary resources to undertake the maintenance work and did not desire to be involved. Mr Siers deposed that he was aware that discussions between Mr Jones and operators were incomplete, however, he was impelled to proceed with execution of the contract with MPA on the basis that Delta could withdraw if required to do so as a result of these proceedings.

64 Mr McLachlan, in his capacity as Industrial Relations Manager for Delta, deposed that he first became aware of concerns by delegates from Wallerawang and Mt Piper over the use of contractors in the dry dust system in early February 2003 as a consequence of a DAP conveyed to Wallerawang management by delegates on 5 February 2003. This notification (Att. D to Ex 13, Mr McLachlan's statement of evidence) is signed by seven representatives of six different unions and seeks discussion of the issue between Delta and the Labor Council. An email response was forwarded to the Labor Council on 6 February 2003 advising that there had been some local discussion and seeking confirmation of the Labor Council's requirement to be involved.

65 The matter was not subject to direct discussion between Delta and the Unions until 2 June 2003 in which Mr Saladin, General Manager Western, outlined the technical and operating features of the system and confirmed that contracting of the operation by Delta would not affect then current offers of voluntary redundancy, career paths or security of employment.

66 The issue was subject to further discussions between the parties and proceedings in this matter noted earlier.

67 The evidence of Mr Jones is that in his role as Production Manager, Wallerawang, his duties include managing the safe, efficient and reliable operation and maintenance of Wallerawang within environmental constraints, liaising with Delta Trading Group to meet production targets, and managing production, maintenance and training of personnel. Mr Jones has been involved in the power generation industry in NSW since 1982.

68 Mr Jones deposed that the use of contractors has been an integral part of the operation of Delta's Western Business Unit. Mr Jones' evidence is that a daily production meeting is held at Wallerawang, which he attends. This meeting is chaired by either the Production Coordinator or, on occasion, the Shift Manager and attended by ten to fifteen representatives of the asset teams, maintenance teams, shift teams and on occasion contractors. Mr Jones deposed that on any day approximately 40 separate jobs are reviewed and a priority placed on each one; the resources required and the entity best placed to carry out work are all set and consensus reached on the most appropriate way to balance the many conflicting priorities. Mr Jones put that on any day this results in work being completed by Delta staff, contractors and a combination of the two.

69 Mr Jones evidence at points 33 to 37 of his statement (Ex 17) is:

33) In my experience, decisions regarding the use of contractors within the Western business unit are made at the team level by the asset employee responsible for the particular item of plant within their appropriate financial limitations. In my experience, the availability of Delta staff, their skill level and the cost effective operation of the business are always considered and appropriate decisions made based on these factors. Each of the decisions set out in the next three paragraphs were made by the asset team member in control of the work after considering the above factors and in consultation with the Delta staff that perform the work.

34) On occasion, the result of this use of contractors process has involved Delta staff taking over work previously performed by contractors. Feed pump cartridges at Wallerawang are an example. In the past they were removed and installed by Delta staff with contractor technical assistance. Delta, however, found that Delta staff were able to perform this work in a more cost effective manner without contractor assistance. Delta staff now solely perform this work.

35) On occasion the result of this use of contractors process has involved contractors taking over work previously performed by Delta staff. Boiler tube leaks are an example. This is urgent breakdown maintenance and Delta found that contractors perform this work quicker, to a better quality and more cost effectively than Delta staff.

36) Delta is currently spending approximately $10M overhauling the mills on Unit 7. This work is being carried out using a combination of Delta staff, contractor technical assistance, contractor supervision and occasional labour hire to meet peak work loads.

37) In my experience in the Western Region over the past 13 years, the use of contractors has rarely led to a dispute.

70 Mr Jones deposed that he was present at various discussions in late 2002 at which Mr Siers, Mr Saladin and Mr Roby, Assistant Manager Western, were present, during which the operation and maintenance of the dry dust plant was subject to consideration having regard to the capacity of Delta employees and the cost of engaging a contractor.

71 Mr Jones' evidence supports that of Mr Siers in respect to a reduction in cost resulting from a regional contract being awarded to MPA and negotiation for prospective commercial use of the dust as a raw material in a manufacturing facility.

72 Mr Jones' evidence details email communication between himself and Mr Tonkin, in particular a meeting held on 4 November 2002 in the plant control room, attended by officials of the CFMEU and PSA, to discuss a wages claim by operators. Mr Jones' evidence is that during this meeting there was a prolonged discussion in relation to operation of the new ash and dust plant and concern expressed by the Unions and employees at the prospect of contractor involvement. Mr Jones confirmed that he advised that a final decision had not been made and at some point the discussion returned to the issue of wages.

73 Mr Jones' evidence provided further detail to that of Mr McLachlan and Mr Siers in respect to exchanges and involvement between the parties and earlier proceedings in this matter.

74 Mr Jones detailed a series of meeting on 1, 29 and 30 October 2003 in which the use of contractors was discussed. There is nothing in this evidence to suggest that there was any concluded arrangement between the parties concerning the acceptance of contractors or the use of Delta employees to undertake the work, the issue continuing to be one of conjecture, some industrial disputation and the earlier proceedings in this matter.

75 The evidence of Mr Jones disputes the assertion that the operation and maintenance of the new dry dust system at Wallerawang could be carried out by existing Wallerawang employees at no additional cost. Mr Jones deposed that while current staff would undertake most activities, there would be call for additional staff from time to time who would have to be diverted from other priority tasks.

SUBMISSIONS

76 Mr Thistlethwaite submitted that breach of the EC Agreement and non compliance with its own policy on contracting out of operation and maintenance of the dry dust plant resulted in an industrial injustice to the employees of Delta, whom he put could conveniently undertake the work.

77 Mr Thistlethwaite conceded that Delta had informed the unions that it would not bound by the EC Agreement, which he put did not constitute a formal or specific rescission.

78 Mr Thistlethwaite submitted that the inconclusive negotiations between the unions and Delta were evidence that the EC Agreement had not been replaced.

79 Mr Thistlethwaite submitted that there had not been consultation in accordance with Delta policy and that the consideration of capacity of staff to do the work, the necessity of the work being broken up into packages, quality of work, job satisfaction, nature of the work, career path opportunities and the public interest had been ignored or misapplied, constituting an industrial injustice.

80 Mr Thistlethwaite submitted that any argument that contractors remain because they have experience with the plant is irrelevant and misdirected, particularly given the co-operation and patience exhibited by employees in the introduction of the dry ash system.

81 Mr Thistlethwaite acknowledged that in an orthodox legal sense the policy is not binding on Delta, however, having regard to the way in which the Policy came into existence as a response to union demands for an award provision, it is evidence of an agreement or undertaking to the unions which Delta should be obliged to follow.

82 Mr Thistlethwaite invited the Commission to consider the decision by Delta to contract out work on the dry dust system in light of the surrounding circumstances of offers of voluntary redundancy and a reduction in maintenance work.

83 Mr Gotting submitted that the EC Agreement was not raised until written submissions, noting that the dispute was not raised as one of failure to consult but objection to the contracting out of the work. Mr Gotting emphasised that the contractor's policy does not require consultation or negotiation with the unions. Mr Gotting submitted that the contractor's policy is not binding in the way an award or legislation would be binding, however, he acknowledges that Delta had informed the Labor Council and unions that it would follow the policy and had done so. Mr Gotting relied upon the evidence of Mr Siers that he had spoken with management of Delta Maintenance concerning their availability and capacity to do the work. Mr Gotting submitted that Delta had consulted with its employees in a series of meetings and presentations described by Messrs Siers and Jones in their evidence.

84 Mr Gotting submitted that the record of earlier proceedings in this matter, which included a site inspection by union officials and discussion with management, together with the undertakings by Delta that the contract entered into with MPA had an escape clause pending outcome of these proceedings, is further evidence of consultation in good faith.

85 Mr Gotting acknowledged that the substance of the union complaint is lack of consultation prior to the decision to contract out, putting that the course of these proceedings further demonstrates that consultation would not have resolved the dispute.

86 Mr Gotting submitted that s 136 of the Act does not afford the Commission the power to make the orders sought, and that the orders would not remedy any lack of consultation should that have occurred. Mr Gotting put that the contractor's policy is not a prohibition on contracting to be enforced by orders of the Commission.

87 Mr Gotting further criticised the orders sought on the basis that they lacked precision, were to operate indefinitely, and do not address undertakings in respect to wages, allowances and staffing.

88 Having regard to the substantive findings in this matter, I make no observation in respect to these submissions.

89 Mr Gotting submitted that an order requiring further consultation should not be made on the grounds that it would be futile to do so.

CONSIDERATION

90 This matter falls for determination pursuant to the Award disputes settlement procedure having regard to all of the circumstances.

91 The work claimed by the Labor Council has, if required to be undertaken by Delta Employees, no material or intrinsic benefit to those employees. In the absence of any advantage to Delta employees there must, of course, be no disadvantage to them arising from contractors carrying out the work.

92 There is no evidence or argument which supports any specific hardship, inequity or loss to Delta employees.

93 The evidence that Delta employees are available and likely to become more available as outage work diminishes to undertake the work, and have access to all necessary controls, raises a question of why Delta accepts the cost of a contractor to undertake work which can be done by their existing workforce.

94 The answer to this question would seem to be in an assessment of potential commercial risk identified by Mr Siers should a manufacturing facility be established to use the dust as a raw material. Viewed in this light the decision to accept the additional cost of a contractor is one for Delta, as curious and inconsistent with cost and efficiency arguments as that may be.

95 The reduction in cost of contracting the ash and dust system at Mt Piper by awarding a regional contract to MPA is not quantified, while the reduction in cost at Wallerawang from the change of contractor to MPA is compared to the previous contractor, not to the cost of the work being done by Delta employees.

96 I note the evidence of Mr Jones that there is potentially an additional cost arising from the need to use additional Delta employees from time to time. This is at best an opportunity cost. It is not possible to quantify the cost if Delta Employees were required to attend to maintenance of the dust plant and consequently other work was delayed or contracted out.

97 The sole consequence of success in this matter by the Labour Council and Unions would be the loss of employment for two contractor's employees. Such an outcome would visit hardship and inequity upon the individuals concerned and, in my opinion, would create an industrial injustice and be socially undesirable in limiting employment opportunities in the region.

The Delta Policy

98 This policy is a protocol devised and adopted by Delta for its own purposes.

99 The policy is not part of any contract with employees or their representative registered industrial organisation/s.

100 The policy is not an enforceable industrial instrument and the issue of whether Delta management observed the terms of the policy or not is a matter of internal discipline. I note that the terms of the policy and the conduct in accordance therewith described by Mr Siers requires only discussion and consultation between management.

101 Discussion between Mr Siers and the management of Delta Maintenance services could not, by any stretch of the imagination, be regarded as consultation between industrial parties or represent a genuine consideration of employer/employee interests.

102 The conduct of management in application of the policy is against the evidence of the development of the policy as a response to requests by the Labor Council and unions for award regulation of contractor issues. Management have applied the policy in a way which excludes and precludes union involvement or consultation with employees. This conduct reinforces the fact that the issue of "contractor arrangements", as the matter is currently described in cl 27.6 Leave Reserved of the Delta Electricity Employees Award 2003 (343 IG 331 at 376), remains and unresolved industrial matter.

The EC Agreement

103 The history of the EC Agreement reveals that it was introduced by arrangement between the Electricity Commission and the Labor Council and unions as a productivity initiative with the value thereof accruing to the employer party.

104 The EC Agreement was not made part of an award or registered industrial agreement, rendering it a code of conduct with no enforceable sanction. So characterised, it is not possible in my view to regard the EC Agreement as a transferred right or as part of the contract of employment.

105 The EC Agreement predates not only the formation of Delta, but also the introduction of disputes procedures in the applicable industrial instrument first found in Statutory prescription in the Industrial Relations Act 1991.

106 The EC Agreement can provide no more than a specific method of applying the disputes settlement procedure where issues of dispute arise in respect to the use of contractors.

107 The Agreement is, as Mr Gotting puts it, clearly overtaken by time and events, referring as it does to guarantee of specific employment numbers, the supplementary maintenance group and absence of reference to the disputes procedure now binding on all parties.

CONCLUSION

108 I note with approval and to the credit of all parties the process of consultation described by Mr Jones in the daily production meetings which appears on the evidence before me to be an appropriately inclusive process giving rise to substantial agreement. The difficulty occurs where there is no agreement.

109 I strongly recommend that Delta and the Labor Council establish a clear contractor's entry procedure to provide a mechanism for the resolution of disputes.

110 A particular value of a contractor's entry agreement is that consultation and the record thereof is focused upon the relevant issue/s, avoiding the type of dispute arising in this matter as to whether appropriate consultation took place at all.

111 A contemporary process as a means of meeting their obligation under the disputes settlement procedure would serve the parties well.

112 On the evidence before me in this matter I find no basis for intervention.

113 The orders sought by the Labor Council of New South Wales are refused.

114 Matter No IRC 3757 of 2003 is so concluded.

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LAST UPDATED: 16/03/2005