C2004/5161, Transcript of Proceedings [2004] AIRCTrans 5015 (22 December 2004)

AUSCRIPT AUSTRALASIA PTY LTD
ABN 72 110 028 825

Level 4, 179 Queen St MELBOURNE Vic 3000
(GPO Box 1114 MELBOURNE Vic 3001)
Tel:[phone] Fax:[phone]

TRANSCRIPT OF PROCEEDINGS


O/N 9423
AUSTRALIAN INDUSTRIAL

RELATIONS COMMISSION

COMMISSIONER BLAIR

C2004/5161

CONSTRUCTION, FORESTRY,
MINING AND ENERGY UNION

and

VISY PULP AND PAPER PTY LTD

Application under section 170LW of the Act
for settlement of dispute re superannuation
entitlements

MELBOURNE

1.14 PM, MONDAY, 13 DECEMBER 2004

Continued from 2.8.04

PN99

MR J. CULLINAN: I appear on behalf of the CFMEU.

PN100

MS H. McKENZIE: I appear on behalf of Visy Pulp and Paper with MR F. FAJARDA. It is not clear whether I need to seek leave again, Commissioner, but if I do, then I seek leave to appear.

PN101

THE COMMISSIONER: Was leave granted last time?

PN102

MS McKENZIE: It is not entirely clear from the transcript. I know on the first occasion Mr McDonald of counsel sought leave and the proceedings then continued on, and it doesn't - it is not entirely clear whether leave was granted, although it appears to have been by implication almost granted, but on the subsequent occasion I think Mr Bishop appeared as agent for Visy, and again, it appears as though leave was granted for Mr Bishop to appear on that occasion, so I am not sure, but to the extent that I need to seek leave, I do so.

PN103

THE COMMISSIONER: Okay, thank you. Mr Cullinan.

PN104

MR CULLINAN: Commissioner, we don't believe leave was granted in the first instance. From my recollection, Mr McDonald, I think it was, from counsel, put an argument about the CFMEU right to represent members, and he was heard on that matter, and once that was dealt with and put to the side, or dealt with, I should say, we went straight into conciliation hearing with the company representing itself as it did at the last hearing. I think Mr Bishop would be surprised to hear that he has been representing the company in any way, shape or form, because he certainly wasn't in that second hearing.

PN105

Mr Fajarda who is with us here today, the human resources officer, was the head person in that and was making the decisions about what agreement was being reached. So, our definite point is that leave wasn't granted. We don't believe there are any special circumstances. This is a separate hearing on the same dispute, but it is about a very direct linked dispute, it is not the same issue that was already raised before, it is directly relevant to that, but it doesn't have any of the complexity of the maths that the superannuation in our previous dispute had. It is a simple dispute, and I think once we get to the proper matter of it, it will be clearer to you. If it please the Commission.

PN106

THE COMMISSIONER: Right. The purpose of seeking leave, Ms McKenzie?

PN107

MS McKENZIE: Yes, Commissioner. Well, I seek leave pursuant to section 42(3) of the Act which provides that a party may be represented by counsel, solicitor or agent, and just pausing there, on my instructions, Mr Bishop appeared as agent for the company and represented the company on the last occasion, and the listing note of today's hearing was sent to Mr Bishop at his company, Frontline Human Resources, which I think was reflective of the fact that Mr Bishop appeared on the last occasion. But in any event, the Commission has the discretion to grant leave on application made by a party if the Commission is satisfied that having regard to the subject matter of the proceeding there are special circumstances that make it desirable.

PN108

Now, Mr Cullinan as I understand him has said that this matter today is a separate matter, or a new matter and not a matter that has the complexity of the matter which was before the Commission on the first occasion. It may be that if the subject matter of the dispute has shifted a bit I will be able to take instructions in relation to my appearance in the light of the changed subject matter, but on the face of it, the matter is 5161, which was the matter notified originally by the CFMEU.

PN109

Although the listing note says it is an application under section 170LW, I think that same point was taken, or issue was raised on the first occasion, and I think Mr Woods, appearing then for the CFMEU, said that it was in fact not LW, it was a VG application, which is a similar provision, and it refers to the dispute-settling powers which may be conferred on the Commission arising out of the particular terms of - in the case of VG, an AWA, whereas LW refers to dispute-settlement procedures in a certified agreement.

PN110

So if, as I understand it, the matter is a notification pursuant to the dispute-settling procedures in the applicable AWA, being AWAs that apply to all of the wages employees at the Tumut Pulp and Paper Mill, then it is a VG dispute and the subject matter of it concerns superannuation entitlements. Now, on the first occasion there were some jurisdictional issues raised by Mr McDonald, and it went to the nature of the issue and also the capacity of the CFMEU to represent or to progress or pursue the matter in a representative capacity.

PN111

Where the proceedings were left, as I understand it from the transcript on the first occasions, is that there was to be some exchange of correspondence about the nature of the concerns, and then there was to be conciliation. Conciliation took place some weeks later on 18 August. Now, that was almost four months ago. The issue appeared from Visy's part, anyway, to be resolved or an issue which was not to be pursued - - -

PN112

THE COMMISSIONER: No, it wasn't resolved. The option was given, as I recall, for both parties to agree for the Commission to be able to deal with the matter, and I think it was under 111AA, and the company chose not to do that.

PN113

MS McKENZIE: Yes.

PN114

THE COMMISSIONER: The union indicated that they would then pursue the matter through the Australian Taxation Office, and I am not sure where that is at, but in order to clarify what today is about, in the correspondence from the union seeking that the matter be re-listed it goes to the issue of changes that have occurred to the members' insurance benefits. Now, they say that they have been advised that the changes to the salary continuance, death insurance and total permanent disability insurance are substantial, with insurance benefits now about 50 per cent less than the previous entitlements.

PN115

Now, they say that the company have made a unilateral decision to do that to reduce the entitlements of the employees. So, the first issue I think went to the calculation in terms of the requirements for the superannuation guarantee levy, how that was to be met.

PN116

MS McKENZIE: Yes.

PN117

THE COMMISSIONER: This issue now goes to the insurance benefits where the union alleges that since the last conference in August the - what has come to light is there has been a reduction in those benefits.

PN118

MS McKENZIE: I see. Thank you, Commissioner. That does assist. That is not a letter which was sent to the company on my instructions - - -

PN119

THE COMMISSIONER: No. I note that there is no cc.

PN120

MS McKENZIE: - - - and it certainly would have assisted the company if it had been aware of the nature of the basis behind the re-listing. If the matter which the CFMEU wishes to agitate in these proceedings is to do with the insurance benefit, then it becomes clearer that there is a jurisdictional issue in relation to the Commission's capacity to deal with that matter, and insofar as there is an issue of jurisdiction, then in my submission that would be a matter which is relevant to the question of granting leave. The issue - the exercise of the Commission's dispute-settlement procedures arising out of clauses in AWAs is a novel, and I say novel, not that it is unusual, but that it is rare.

PN121

It is not one that has been exercised often in my experience, in any event, and there is in the light of what the Commission has informed me as to the nature of the issue which the CFMEU wishes to progress there is a very real jurisdictional issue about whether the Commission can either in conciliation or in any other way deal with that matter. So, I seek leave for the purposes of putting those submissions to the Commission in any event, and then to see where it goes.

PN122

THE COMMISSIONER: Well, let us just see what the company says about actually a reduction in entitlements as alleged by the union.

PN123

MS McKENZIE: Well, Commissioner, the matter is - if the matter is brought pursuant to section 170VG, which as I understand it the nature of the notification notwithstanding the notice of listing, VG4, subsection 4 says:

PN124

A dispute-resolution procedure that is included in an AWA may confer powers on the Commission to settle disputes between the parties about the application or interpretation of the AWA.

PN125

I think on the first occasion a copy of the pro forma AWA was provided to the Commission, and the Commission was taken to clause 15, which is the dispute-resolution procedure, and it sets out a four-step procedure. And I think on the first occasion there was some issue taken about whether the earlier steps had been pursued, but I put that argument to one side, and move to 15.4 - I am sorry - if I go to 15.1 first of all, the procedure applies to disputes and/or grievances arising out of the implementation and/or operation of this agreement. So the procedure is confined to matters that arise out of the application of the AWA, and at 15.4:

PN126

If a matter is unresolved as between the parties it will be referred to the Commission for conciliation.

PN127

Now, assume for the moment that the CFMEU can properly act as agents of employees whose employment is regulated by these AWAs, and assume for the moment that the parties have - or that the issue about whether the earlier steps have been followed is not a live issue. What we are left with is a requirement that first of all the dispute arose out of the implementation and/or operation of the agreement, and secondly that the matter - the Commission's role as agreed to by the parties in the AWA is to conciliate.

PN128

If the issue concerns the level of benefit or the changes which Visy may or may not have made in relation to the level of disability and death insurance benefits, then that is not a matter which is arising out of the implementation of operation of the AWA. The AWA does not deal with that benefit at all. The AWA has clause 14, which was the clause in respect of which the first part of the dispute was pursued, which relates to superannuation, but it is clear that clause 14 is only talking about superannuation in the sense referred to in the superannuation guarantee legislation, and the obligation under the AWA is to provide contributions which are not less than those required under the SGC legislation, and as I understand it, on the first occasion the allegation or concern of the CFMEU was that Visy was not properly meeting its obligations in that the contributions which Visy may have been making were not comparable to or not equal to or more than the SGC, and that issue has now been put to one side.

PN129

The CFMEU may or may not have pursued that course with the ATO, we don't know whether they have or not, but that is what the issue was about on the last occasion. If the issue is now something quite different and it is about the level of insurance which is provided, then that is not something that is covered by the AWA. That is a benefit which Visy provides quite separately to its employees outside of the AWA. And in that sense a dispute or an issue about the insurance benefits cannot be a dispute which can fall within clause 15 of the AWA, and is not otherwise a dispute which can be brought before the Commission.

PN130

THE COMMISSIONER: Thank you. Yes, Mr Cullinan.

PN131

MR CULLINAN: Commissioner, I take it that the understanding then is that they are saying that there is a lack of jurisdiction on the basis that it ..... of the AWA, and it is only about this one issue about whether member entitlements and member benefits out of the superannuation are somehow linked to the previous dispute. And we say they are absolutely linked, and when I get a chance to go through a bit of a chronology, in a few moments, hopeful, about what has happened, what has happened is, that the fund benefit, the fund salary, sorry, that is linked to the actual superannuation fund, has been changed.

PN132

It was changed in the middle of the dispute that we were having before. We have only just found out about this. We found out further information about this, and I would like an opportunity shortly to be able to explain that, but the effect of that is that people's entitlements and benefits have been massively slashed, so it is directly linked to the previous dispute. It is about that previous dispute. It is about the fund salary that dictates what the superannuation contributions will be. And so, when that fund salary was changed, that not only impacted upon people's actual superannuation contributions, but it has also impacted on their benefits that arise out of their superannuation fund.

PN133

And so we say that it is all one dispute, that one component of it is currently before the Australian Taxation Office, it is important, but also there is this other component now which has only just come to light that we are seeking really to have the matters put on the record, but also to have the matter dealt with in the Commission and with the company. What I am understanding though is that the company does not want that to happen. It does not want to have the matter dealt with here, and that is not good enough for us. So we say the jurisdiction is live, and clearly live.

PN134

THE COMMISSIONER: All right. Ms McKenzie?

PN135

MS McKENZIE: Well, maybe Mr Cullinan hasn't understood the argument that I have put, and again, had the company been given notice that what the issue was that they wish to ventilate today we may have come a bit better prepared to have responded to some of the issues in relation to what is actually happening with the benefit. But from just focussing on the jurisdictional issue for the moment, our argument is that the issue now seems to be about the level of salary continuance, death and disability insurance that is being provided to employees. That is a benefit or entitlement, depending on which way you look at it. Whether it is an entitlement or whether it is a benefit, it is an entitlement or benefit which operates outside the AWA.

PN136

THE COMMISSIONER: What is that premised on? The salary continuance and so forth. Is that on the basis that someone has used up all their sick leave or that they sustain an injury that may not be covered by WorkCover or what is it?

PN137

MS McKENZIE: I think that is right, Commissioner. I can get instructions, but I think it is that sort of - to provide for long term - a long term absence from work. Income maintenance.

PN138

THE COMMISSIONER: Fine. Is there any relationship whatsoever between the premium that is paid for that benefit, if you like, and superannuation, in terms of how you calculate it? Is there any nexus there at all?

PN139

MS McKENZIE: I will have to get some instructions about that, Commissioner, but it may be that the - it may be that the premium, which is calculated to provide - fund the insurance, is calculated by reference to a salary figure which is the same salary figure which is used for the calculation of the superannuation contribution. But they are two quite separate - they are separate benefits, so there is not a nexus, as I understand, in that sense, but I will confirm that with Mr Fajarda if you will give me a moment.

PN140

THE COMMISSIONER: Sure. Thank you.

PN141

MS McKENZIE: What Mr Fajarda confirms and what I have told the Commission is broadly correct; that the salary continuance is a separate insurance policy which the company takes out. It funds that, pays a premium which is calculated by reference to the employee's salary. The superannuation is a quite separate contribution which the company funds to meet - as required under the superannuation guarantee legislation. The contribution for superannuation has to be determined also by reference to a salary figure. The salary figure is the same for both, but that is the only connection. They are two quite separate benefits.

PN142

THE COMMISSIONER: It is like - is it similar to the income protection provisions that people are now including in agreements to ensure that, for some reason or other, if the employee loses the ability to earn 52, or 48 weeks income per year, that that income protection covers that and is there to reimburse them? That is not paid out of superannuation or anything.

PN143

MS McKENZIE: No, it is a separate - - -

PN144

THE COMMISSIONER: That is normally part of a salary sacrifice thing that people put in.

PN145

MS McKENZIE: Well, the company fund - it is an insurance policy which the company takes out.

PN146

THE COMMISSIONER: Right.

PN147

MS McKENZIE: Yes. It is that sort of - - -

PN148

THE COMMISSIONER: So it doesn't stem from superannuation at all?

PN149

MS McKENZIE: No. No, it is an insurance. It is a benefit which the company provides by taking out an insurance policy on behalf of its employees. There is - as I understand, there is also provision for employees to top up the benefit. They can themselves pay more to increase the benefit, but the company provides it through an insurance policy.

PN150

THE COMMISSIONER: Right. Thank you. Yes, Mr Cullinan?

PN151

MR CULLINAN: Commissioner, that is all new to us and that is quite amazing - quite an amazing response, because what we are hearing there is that the company actually takes out the policy on behalf of its workers for their salary continuance, and I assume their death and total permanent disablement, and clearly that would mean that reducing the benefit also reduces the cost of the policy for the company, and that creates great concern for us. Look, if I have an opportunity to maybe just go through five minutes of exactly what the dispute is over I think I can create that nexus quite clearly for you.

PN152

I think that it is absolutely based upon a salary that is defined by the company and has been defined by the company, has been changed in recent months and those changes have led to not only potentially a diminution in the company's responsibility to pay superannuation, but also an absolute diminution in people's entitlement to benefits in terms of salary continuance and total permanent disablement.

PN153

THE COMMISSIONER: Well, in terms of the disputes procedure and the superannuation issue, it does refer to the superannuation contributions, no less than required under the superannuation guarantee charge. Ms McKenzie says that this is not a policy that is determined by superannuation. Superannuation may be a component that makes up the salary in which a quite distinct policy is put in place where a premium is paid. Now, if they reduce the benefits, well, sure, the company may have a reduced premium. What the union has got to establish is that the premium is paid on the superannuation; or, the cover follows from an arrangement that the employer has with the superannuation fund.

PN154

MR CULLINAN: Ms McKenzie is actually wrong, and we can provide a bit of documentary evidence to that in a moment. But it is - the superannuation is paid on a fund salary. That fund salary is dictated by the company, apparently. The company changed that fund salary. That fund salary is also the basis upon which members make their own insurance payments for their salary continuance, and for their death and total disablement insurance. So members are paying for it themselves. Members are - and those calculations and what their benefit is in the long term is based purely on the fund salary that the company has told the fund administrator.

PN155

THE COMMISSIONER: But there is always arising from superannuation, there is always a death and total permanent disability coverage. You might have 1.5 times your salary on death or total permanent disability, twice - two times, which is normally funded from the contributions by the employee. That is quite distinct from what I think Ms McKenzie is putting, and that is that the company have decided to take out quite separate insurance for somebody who may not be covered by workers compensation, for instance.

PN156

They may have an injury, may be playing football, might be sky-diving or something, you know, bungee jumping, whatever, and therefore they are unable to bring a claim, but they suffer a loss of income; and it is that insurance policy that covers for that loss of income, up to whatever is the agreed ratio. Is that what I understand you to say, Ms McKenzie?

PN157

MS McKENZIE: That is what I understand to be the position, Commissioner. But I should say Mr Fajarda has just said this to me as well. That insofar as Mr Cullinan may assert that we are wrong about that, and he does so based on some information, we would not want what we put today to be taken as the definitive answer because, as I said, we weren't on notice that this issue was going to be discussed today so we have not come prepared with all the details. So if that is an important issue in determining the jurisdictional issue, then on my instructions I would need some further time to actually clarify, because it is important that I don't inadvertently give the Commission the wrong factual information about how the policy or the benefit is calculated.

PN158

THE COMMISSIONER: Okay. I appreciate that. There is the issue that the company queries or challenges the ability of the CFMEU to represent its employees. That right?

PN159

MS McKENZIE: Well, as I understand it, the company accepts that there are a number of employees, not - - -

PN160

THE COMMISSIONER: That have joined the CFMEU.

PN161

MS McKENZIE: There are a number of employees who are members and who have - - -

PN162

THE COMMISSIONER: Yes.

PN163

MS McKENZIE: In respect of whom the CFMEU represents. So, for the purposes of this issue, we don't take as a separate jurisdictional point that the CFMEU has no standing to be here on their behalf.

PN164

THE COMMISSIONER: Right.

PN165

MS McKENZIE: I mean, in any event, even as an agent they do. We don't take that - we don't take that point.

PN166

THE COMMISSIONER: Does it not make sense that if that is acknowledged that there are some employees that have chosen for the CFMEU to represent them, and that has been endorsed by the Commission because it has seen - - -

PN167

MS McKENZIE: Yes.

PN168

THE COMMISSIONER: - - - the authorisation forms.

PN169

MS McKENZIE: Yes.

PN170

THE COMMISSIONER: Does it not make sense for the company to actually talk to the union about what the union says is an important issue?

PN171

MS McKENZIE: That may be so, Commissioner. I am not aware of any occasion when the CFMEU has attempted to independently bring the matter to the Commission where the CFMEU has actually advised - asked the company for information in relation to this - - -

PN172

THE COMMISSIONER: All right.

PN173

MS McKENZIE: - - - and sought to have some discussion, but - - -

PN174

THE COMMISSIONER: I accept that the company says today that they were not aware of the reasons why the matter was brought back on.

PN175

MS McKENZIE: Yes.

PN176

THE COMMISSIONER: They assumed it was on the same issue that gave rise to the original hearing.

PN177

MS McKENZIE: That is right.

PN178

THE COMMISSIONER: Now that you are aware, does it not make sense to make an arrangement with the union to sit down and go through with them what the issues are, recognising that there a number of employees that have authorised them to represent them, and to see whether or not the whole matter can be talked through?

PN179

MS McKENZIE: Well, certainly if the CFMEU - maybe Mr Cullinan wants to do that, wants to do that now, today. If the CFMEU wants to advise the company as to what the basis of the concern is of its employees, once we get some information we may be able to resolve those concerns, simply by advising the CFMEU what is actually happening and then see where we - - -

PN180

THE COMMISSIONER: Go from there.

PN181

MS McKENZIE: Where we go from there.

PN182

THE COMMISSIONER: Mr Cullinan, does that not make sense?

PN183

MR CULLINAN: It does make some sense, Commissioner. We wrote to the company when this first came to light in mid-October and asked for them to immediately sit down with us. It is pretty important. People could be hurt or injured and that massively impacts upon what their family income will be.

PN184

THE COMMISSIONER: Yes.

PN185

MR CULLINAN: The company wrote back to us, and I have got a copy of the letter here on that, that Mr Kingmar was currently obtaining the necessary information so that he could fully explain the way in which employees' insurance benefits have been calculated. However, he assures that all legal obligations will be met. And so, we know how insurance benefits will be calculated. What we took this as was a letter saying that we are not going to sit down with you and discuss this issue and dispute that we have notified the company of. So we want to have this resolved and we think that there is an opportunity here for the company to resolve the matter, because that is what our instructions are from the fund administrator.

PN186

Perhaps if I can just outline, in five minutes, what the actual dispute is so the company is aware of it, and if there is an opportunity then for you to come and maybe be a part of any conciliation to resolve the matter. I think that that might be an appropriate path forward.

PN187

THE COMMISSIONER: All right. Let us hear what you have got to say, and we will see where we go.

PN188

MR CULLINAN: All right, Commissioner. The dispute that was regarding the superannuation payments for workers at Visy Pulp and Paper was notified previously, and since that time another issue that we have now discussed this morning a little bit more has been raised. On 1 June we wrote to the company, asking for their input, to sit down and discuss the issues to do with superannuation and the contributions. On the 10th they wrote back, that is 10 June, that they would raise the matter with employees since they had not been recently advised of any issue. On the 11th we wrote back, on 11 June. We wrote back saying no, this is a dispute. We need to discuss it with you.

PN189

We didn't get any response after that and we came to the Commission and we referred the dispute to the Commission on 23 July 2004, and subsequently met here on 2 August. Now, it has come to light that five days later, on 28 July, we were advised by the fund administrator, Visy corresponded with the superannuation fund administrator ..... to advise that the fund salary for each employee was to be changed, and we believe that is to entertain the company construction of what superannuation should be paid on. We met here on 2 August and we went through the - something of a charade of a conciliation and then off to the Australian Taxation Office when this change had already been made.

PN190

I just want to provide everyone a copy of the letter that we have from the fund administrator. One of our members wrote to the fund administrator to actually determine what was going on. And they said in this correspondence - and I will just read out a little bit of it:

PN191

The salary reported on your benefit statement is the salary advised to us by your employer at the funds review date. We are aware that there is a difference between this salary and the salary that was advised on 31 December, six months earlier. Part of ...(reads)... your benefits will be recalculated and an amended benefit statement will be issued.

[1.42pm]

PN192

I just need to give a brief outline of what the changes mean and the effect of the change to workers fund salary has been - greatly reduced workers insurance benefits. The salary continuance benefit, income protection, insurance death benefit and total and permanent and disablement benefits have all been massively reduced by approximately 50 per cent. This new level with change effected by the company was without any mention of it to workers. Families that previously had benefit of some 350,000 on the untimely death of a breadwinner have had that slashed by over $100,000.

PN193

Workers who earn about $70,000 would have previously have received a percentage of this of about $52,000. These changes now see that family getting approximately less than $36,000. These are substantial changes to the working terms and conditions of employees of Visy Pulp and Paper. And what Mellon says in this letter is that the company can change this at any moment. The company can contact us and advise us of new salaries and this will all be fixed.

PN194

The company has perpetuated a bit of a falsity on site that Visy isn't responsible for the change, that somehow it si the fund administrator's fault. Well, the correspondence from Mellon makes it absolutely clear where the fault lies. We believe that it is appropriate for the company to immediately contact Mellon and make the necessary changes to the fund salary so that we are back to the previous figures plus whatever wage increases have been won. But if the company isn't minded to take this fair and reasonable action we seek for the Commission to facilitate conciliation of the dispute to see if we can reverse this massive alteration to people's terms and conditions of employment that has occurred in recent months. So that is a brief outline of the dispute as it is, Commissioner.

PN195

THE COMMISSIONER: Thank you. Ms McKenzie, it seems obvious in the fourth paragraph that there is a nexus between the death and total permanent disability and the salary continuance, part of the superannuation scheme.

PN196

MS McKENZIE: I think the only nexus, Commissioner, is that both benefits are calculated by reference to a figure which is the salary. And as it says in the fourth paragraph:

PN197

As has a decrease in salary advised your benefits have also decreased.

PN198

So, there is a figure which is salary for the purposes of calculation of superannuation entitlements and that same figure is the salary for the purposes of the calculation of the insurance benefits.

PN199

THE COMMISSIONER: I don't think that is right because in any death and total permanent disability and salary continuance provision of a superannuation scheme it is a percentage of - or a factor of, your salary and your contribution rate.

PN200

MS McKENZIE: Yes.

PN201

THE COMMISSIONER: If that rate is not correct, and the letter says it has been reduced in terms of the salary - - -

PN202

MS McKENZIE: Yes.

PN203

THE COMMISSIONER: Notification has been reduced. That reduces your factor because if the factor is four of $150,000 but for some reason or other the company advises the superannuation that the salary is $130,000, it is a factor of four of $130,000. Is that not a reduction?

PN204

MS McKENZIE: That is right, Commissioner.

PN205

THE COMMISSIONER: Yes.

PN206

MS McKENZIE: There has been a reduction. There is no disagreement.

PN207

THE COMMISSIONER: Why is that? This is what I can't understand. We could - - -

PN208

MS McKENZIE: The reduction has arisen because there has been a change in the figure which is defined to the salary. Now, you may recall from - - -

PN209

THE COMMISSIONER: I know that and the issue last time was why has there been a reduction in the contributions based on a reduction in the salary and no-one could answer that and the company refused to allow the Commission to deal with this. And in fact, I think what the Commission did - and I am sure Mr Cullinan and Mr Fajarda would remind me if I am wrong. I think it suggested that there be actually a joint approach to the ATO to get some consensus from the ATO as to whether or not the approach taken by the company was right. And the company, I think, very kindly and politely, said go and get nicked.

PN210

MS McKENZIE: Well, the issue beneath each of the aspects of the dispute, the superannuation contribution and the insurance benefit, relates to what is salary for the purposes of the calculation of those entitlements. And you may recall Tumut employees are remunerated on an annualised salary.

PN211

THE COMMISSIONER: Yes.

PN212

MS McKENZIE: And the issue is, in effect, what should be treated as the salary for the purposes of determination of the company's obligations to pay the superannuation contribution and it is the same figure which is the figure used for the determination of the insurance benefit. Now, that issue, ie, what is the correct salary against which these calculations or benefits should be determined, is a live issue. It is a matter that is before the ATO. Visy has not yet had a response or ruling from the ATO in relation - Visy's view is that it has paid the superannuation contributions correctly and that it has discharged all of its superannuation obligations.

PN213

Now, it has done so by reference to a salary figure which is the same salary figure against which these benefits are to be paid. So to the extent that there has been a reduction in this member's and other members' salary for the purpose - which has lead to a notional reduction in the benefit, it is because the salary against which the insurance was calculated was incorrectly - a different salary from the salary against which Visy has been paying the superannuation contributions.

PN214

THE COMMISSIONER: But the impression given to the Commission is that the funds or the scheme that the company says the Commission has no jurisdiction to deal with is one that is set up quite separately and paid for by the company.

PN215

MS McKENZIE: That is correct.

PN216

THE COMMISSIONER: Right. But that doesn't answer the question, well, what about that part of the superannuation scheme itself that provides for death and total permanent disability payments and so forth. That is quite a separate stream apart from any private insurance that the company wishes to take. So why doesn't the union then have a case to say there is that nexus because the company in calculating the superannuation payments based on a lesser salary, has by its very nature, reduced the death and total permanent disability factor or outcome of the stream that falls within the Superannuation Guarantee Scheme?

PN217

MS McKENZIE: Yes, we would say though the only dispute or issue which the Commission could deal with under the terms of the dispute settlement procedure clause in the AWA is a dispute about the superannuation benefit. A dispute about whether or not Visy is properly meeting its obligations under the AWA.

PN218

THE COMMISSIONER: Which we tried to do.

PN219

MS McKENZIE: Which turns on the question of whether or not - I mean, the answer to whether Visy is meeting its AWA obligations turns on whether Visy is contributing at a level which is comparable to the Superannuation Guarantee.

PN220

THE COMMISSIONER: Yes.

PN221

MS McKENZIE: Once you get into the determination being are we meeting our SGC obligations, that is a question which ultimately only the ATO can determine because SGC is a level, it is not a benefit that goes into the pockets of the employees, it is - - -

PN222

THE COMMISSIONER: Yes.

PN223

MS McKENZIE: - - - a statutory levy. Visy has sought clarification from the ATO and it believes it has been properly meeting its SGC obligations, but since the CFMEU raised the issue; it has alleged that it is not, Visy has done the responsible thing. It has gone to the ATO and said, tell us. It is not an easy question because the answer depends on an analysis of the Visy super contributions through its funds which pre-date the SGC legislation and all turns on exemptions and things.

PN224

THE COMMISSIONER: And what factors are put into the annualised salary and - - -

PN225

MS McKENZIE: Indeed, that is the nub of the issue and Visy is waiting for an answer. It is the same - that answer will - I don't know whether I should say - determine, or at least shed light, if not, determine the issue about what is the correct salary for the purposes of determining the insurance benefits because the same salary figure is being used by Visy. Now, Visy is either right or it is wrong. If it is right, it is right in respect of both benefits.

PN226

THE COMMISSIONER: Yes.

PN227

MS McKENZIE: If it is wrong then - - -

PN228

THE COMMISSIONER: It is wrong in terms of both benefits.

PN229

MS McKENZIE: Well, it is wrong in terms of the superannuation and the implications for that on the insurance benefits will have to be assessed. But the insurance benefits are provided pursuant to the insurance policy which Visy takes out. They are not something that are - they are not employment entitlements which are referred to in the AWA. So there may be a separate issue about whether they are contractual, it is a contractual entitlement or whether it is a benefit which can be varied at Visy's discretion.

PN230

There is at least an issue about that aspect of it which doesn't arise in relation to superannuation. That is very clearly a legal obligation and entitlement of employees which Visy must meet. It is not quite so clear in relation to the insurance benefits. What I mean by that is, Visy may have some options to consider once it knows the answer because if it is wrong on the superannuation, then there is obviously some significant cost implications which may require Visy to re-assess the level of benefit it provides, full stop, in relation to the TPI and salary continuance and that. That is just a - and I don't put that as any - - -

PN231

THE COMMISSIONER: But that wouldn't flow from the superannuation itself, that would flow from any private policy.

PN232

MS McKENZIE: That is so.

PN233

THE COMMISSIONER: That is - - -

PN234

MS McKENZIE: So that is why there is a difference.

PN235

THE COMMISSIONER: Yes.

PN236

MS McKENZIE: That is so.

PN237

THE COMMISSIONER: And I mean, if the company wishes to introduce a private policy which they fund, then I suppose, they are entitled to do what they want. The issue as I see it is the one that stems from the policy that is attached to the superannuation. For instance, my minimum factor I think is 1.5 or something like that but I can top it up at my discretion and at my cost and the employer pays half of it - 2.5 or three, whatever it might be.

PN238

MS McKENZIE: Yes.

PN239

THE COMMISSIONER: But that is part of the superannuation scheme. So to get back to one of the original questions. I mean, if the company says, look, we acknowledge that the union has got some members, why don't they talk to them?

PN240

MS McKENZIE: Well - - -

PN241

THE COMMISSIONER: They haven't got two heads.

PN242

MS McKENZIE: I think the letter that Mr Cullinan referred to where he quoted Mr Kingma as saying, in response to a letter from the CFMEU, that the company was in the process of ascertaining what the correct information was and Mr Cullinan said, well, clearly, they are refusing to speak to us. That is not what I heard the letter to actually say. The letter says what it says which is that the company is currently trying to - is finding the necessary information or whatever. I can't remember the exact wording but - - -

PN243

THE COMMISSIONER: Yes.

PN244

MS McKENZIE: And the reason why the company has not gone back to the CFMEU as yet is that it still has not had an answer on the superannuation and the two are - one is relevant to the other. The company will know more clearly what its position is once it knows what the ATOs view is in relation to the calculation of salary for the purposes of the SGC. That is why we have not got a definitive answer to the CFMEU but we would not accept that that letter from Mr Kingma constitutes a refusal to speak to the CFMEU and, you know, go away and don't bother us letter.

PN245

It says, as I recall it, it says, we are in the process of trying to find out the information. Now, when the company does get the information it would be, presumably, in its interest to put the matter to bed and to tell the CFMEU what the answer is either way. And I can't see any reason why the company wouldn't do that. I will get instructions from Mr Fajarda - - -

PN246

THE COMMISSIONER: Sure.

PN247

MS McKENZIE: - - - specifically about that. It seems a sensible course to - once the company comes to a view about - - -

PN248

THE COMMISSIONER: Yes.

PN249

MS McKENZIE: - - - what is the answer, to communicate that to the CFMEU. If it pleases the Commission.

PN250

THE COMMISSIONER: Thank you. Mr Cullinan?

PN251

MR CULLINAN: I just think there is two things to really comment on. The first one is about who is paying for the insurance. I have got a statement here from a member, which I obviously can't provide without permission from the member, that clearly shows that they are paying insurance components out of their superannuation contributions from the company. So the company might be paying 9 per cent of its construction but out of that there is a significant proportion which is going towards insurance costs and the insurance is for salary continuance and other components. So I think we need to be clear that there is insurance paid for by the member out of their superannuation and that happens across - - -

PN252

THE COMMISSIONER: But I - the Commission accepts that.

PN253

MR CULLINAN: Okay.

PN254

THE COMMISSIONER: That is the point I am trying to make. The company may have an entirely separate policy and premium paid for by the company but as part of every superannuation scheme that I am aware of there is a stream that says as part of the super scheme that there is a death and total permanent disability factor. The point that Ms McKenzie raises - and I have to say I think is a valid point. If you are in dispute, as you are about the salary that makes up the calculation of 9 per cent, whether it is $10,000 a year into super or it is 9,500, if that is in dispute and it is, then if that is cleared up by the ATO, as an example, where it has gone, then that then helps clarify whether the benefit paid in the superannuation scheme for death and total permanent disability is in fact the right benefit based on the correct salary.

PN255

MR CULLINAN: I understand that. I think there is - the other point which I was going to get to, is one clear point about that, because five days after we notified the Commission as I mentioned and five days before we came here the company changed that fund salary. So for the last two and a half, three years the funds salary with the super fund, which everything has been based on except the company's contributions, has been the actual paid salary, the 70 or 60 or $65,000. But right in the middle of this the company changed that. The company made a unilateral change to decrease all the benefits.

PN256

And what we - one of our key concerns ios that they are pre-empting any decision by the ATO because the decision of the ATO could be, well, the funds salary is defined in the trust deed. That what you base your insurance - sorry, your superannuation contributions is the funds salary that the superannuation fund has. And if that is the decision of the ATO, well, they have pre-empted that. They have solved the problem.

PN257

THE COMMISSIONER: No, how do you work that out? If they have calculated the 9 per cent on the wrong salary figure, then it surely must follow, that the benefits that flow from death and total permanent disability under the superannuation scheme has to be adjusted accordingly.

PN258

MR CULLINAN: No, Commissioner, that is - I mean, I would have to receive instructions, but that is not necessarily my understanding. One of our concerns is why they have made this change is because the amount that is listed with the superannuation fund may be the very basis upon which they have to pay superannuation. And so if they have changed that then - because if it isn't, then what is the harm in changing it back until a decision has been made. We are talking about three or four months. The last three months since we first met here until there is a decision, leaving it as it was.

PN259

THE COMMISSIONER: But the letter from Mellon says that there has been notification that there is a difference between the salary as at 30 June 2004 and the previous salary which was advised to 31 December 2003 and that salary is less based on what the company says are their right calculations which may prove to be wrong. But then the fifth paragraph says:

PN260

As there is a decrease to the salary advised your benefit for death and total permanent disability and salary continuance have also decreased.

PN261

Sp it follows that if - just say as an example, the company's decision in terms of calculating the 9 per cent is wrong and they have to make an adjustment, say, upwards, then so does the death and total permanent disability factor, it goes upwards as well. It has got to.

PN262

MR CULLINAN: I understand that. Unless - well, there is two issues. One is that the actual amount that they notified the superannuation fund of, the tax office may determine that is the basis for paying superannuation.

PN263

THE COMMISSIONER: Yes.

PN264

MR CULLINAN: In which case what they have changed it to is the new basis upon which they have to pay superannuation and therefore the basis upon which they have to pay the other benefits. So it may have pre-empted any decision that was related to that - what the purpose and meaning of that fund salary is - - -

PN265

THE COMMISSIONER: The only benefit that the company would get in terms of pre-empting would be if they changed the multiple factor of whether it is two times your annual salary in terms of death or disability or whatever. If the salary factor in which the premium is paid is wrong, or the benefits are paid, is wrong and it has to be adjusted upwards, then so does the benefit.

PN266

MR CULLINAN: Yes, I understand that, I understand that.

PN267

THE COMMISSIONER: So how does that pre-empt anything that the ATO does if the ATO says the company is wrong and they have calculated it wrong?

PN268

MR CULLINAN: Because the one event that has happened where there has been a change has been - there has been a change to what the company has told the super fund, is the fund salary. So that is the only thing that has changed in this whole dispute. So if the company - if the ATO then says you were wrong with what you were paying before but now you may have matched the contributions you were making to the basis upon which you have to make contributions.

PN269

THE COMMISSIONER: Right, okay, let me see whether I can put that in panel beater's terms. If the company says the contribution you made in 2003 was the wrong contribution, you calculated it on the wrong salary package - - -

PN270

MR CULLINAN: Yes.

PN271

THE COMMISSIONER: - - - you should have calculated a lesser figure which you have now adjusted in terms of June 2004. So therefore the figure that you are now playing on is the right figure.

PN272

MR CULLINAN: Not - I understand that now it is, but it is my pre-emption. This is only one possibility that the tax office can come back with.

PN273

THE COMMISSIONER: No, you see, I have got to be honest, unless I am as thick as a brick - and some people would argue that I am. I don't understand that argument, either the company has paid it correctly or it hasn't.

PN274

MR CULLINAN: That is right.

PN275

THE COMMISSIONER: And it may have paid it below or it may have paid above what it was entitled to pay. If - and that was the purpose of the first conciliation.

PN276

MR CULLINAN: Yes.

PN277

THE COMMISSIONER: For both parties to go to the ATO collectively and say, here is the argument, here are the figures; you tell the company whether or not they have paid it correctly or not. So by the company reducing it, if at the end of the day, the ATO says, you are wrong, they have got to make the adjustment up otherwise they are in breach of the superannuation guarantee levy.

PN278

MR CULLINAN: I understand that. I might just give it one more go. If there is a potential that the ATO might say that the basis upon which you pay superannuation is the fund salary in the trust deed of the superannuation fund. And so for the last three years it has been - it is $70,000.

PN279

THE COMMISSIONER: Yes.

PN280

MR CULLINAN: So they have only been paying on 47,000 so there is a potential there they may have been wrong.

PN281

THE COMMISSIONER: Yes.

PN282

MR CULLINAN: Now, they have changed that 70,000 to the 47, so if the ATO said it has to be based upon the fund salary at the superannuation fund, then it was 70, you should have been paying on 70, you have been paying on 47, but now it is 47 anyway. So on a go forward basis that may be fixed.

PN283

MS McKENZIE: No, but if I could - the ATO is not going to determine the answer about whether we are paying it right or wrong by reference to what we declare to be the salary in the fund. I mean, if that was the case there would be no problem, we could just determine the salary - - -

PN284

THE COMMISSIONER: Do what you want.

PN285

MS McKENZIE: - - - and say this is what it is. The determination of what the salary is for the purpose of the SGC is a much more complicated - - -

PN286

THE COMMISSIONER: Of course it is - - -

PN287

MS McKENZIE: - - - consideration based on - - -

PN288

THE COMMISSIONER: - - - there is a component of given overtime. There is a component of - - -

PN289

MS McKENZIE: And it turns on definitions about - - -

PN290

THE COMMISSIONER: - - - shifts.

PN291

MS McKENZIE: - - - ordinary time within the SGC. It is that determination that we are waiting on. I think Mr Cullinan is concerned that by issuing Mellon with the - and we do this twice a year. By issuing them with the current salary figure, that that is somehow going to pre-empt the decision because the ATO will see that figure as carrying some weight in its determination. That is not the case, it is irrelevant to the ATOs determination so in that sense it can't pre-empt - - -

PN292

THE COMMISSIONER: No.

PN293

MS McKENZIE: It can't pre-empt the outcome.

PN294

THE COMMISSIONER: No, it is the components that make up the annualised salary. The shifts - the calculations for working so many shifts, for working - what did I say before - for so many hours, for so much overtime.

PN295

MS McKENZIE: That is right and it is relevant to what superannuation arrangements Visy had in place prior to 1996 or when the SGC came in. That is all relevant to the - and whether there was a complying fund in place. So it is all those sorts of issues that the ATO will be currently wrestling with and that will all have a bearing. I am instructed by Mr Fajarda that the company would want to have an opportunity to clarify exactly what is the basis of the disability and TPI policy so that we get the facts correct and we are happy to provide that information to the Commission and copy it to the CFMEU or vice versa so that we know what we are dealing with factually.

PN296

And when we are in a position to confirm what the relevant salary will be we will advise the CFMEU but we are a little bit in the ATOs hands as to timing on that aspect of it and - - -

PN297

THE COMMISSIONER: Well, that is the way I see it.

PN298

MS McKENZIE: The process is well and truly underway.

PN299

THE COMMISSIONER: Yes.

PN300

MS McKENZIE: And I think in the meantime we can clarify exactly what is the position in relation to the TPI benefits. Mr Cullinan mentioned an employee who he has a letter from. I am instructed that there are some employees who voluntarily add on - top-up - - -

PN301

THE COMMISSIONER: Yes.

PN302

MS McKENZIE: Increase their benefit out of their own - - -

PN303

THE COMMISSIONER: That is right.

PN304

MS McKENZIE: But that is a different - that is a voluntary, and some people do do that, but the benefit that is provided for everybody else is a standard benefit. If it please the Commission.

[2.10pm]

PN305

THE COMMISSIONER: Thank you. Mr Cullinan.

PN306

MR CULLINAN: Commissioner, I think that that probably resolves half of this dispute, and that is the concern about pre-emption so it is clear that any decision by the ATO is going to be used as a basis. But the other concern, and that is the real concern of this dispute, is the changes that have been made; and they have been made only recently. And especially in light of that we are waiting for an ATO decision, it makes perfect sense to the CFMEU that the change be made back; that a letter be written or whatever needs to be done by Visy to make the change back awaiting the decision of the ATO.

PN307

THE COMMISSIONER: But they can't do that, they can't do that. Because Visy had made a decision based on the calculations of the components of an annualised salary and what is ordinary time earnings. And they have said, we have paid 9 per cent on 70,000 when, in fact, when look at the components and make up the annualised salary we, in fact, may have paid - we should have paid, say, 9 per cent, as an example, of 65,000 so we have adjusted that. The ATO then comes in and says, well, let us look at the entire componentry of the annualised salary and what makes up those that are entitled to have the 9 per cent calculated on their figures.

PN308

The very fact that Visy says, well, we have looked at it and we think we have overpaid it automatically reduces the TPI and the death, disability benefit, automatically reduces it. It is not - even if Visy said to the insurance company, listen, that component increase it, we are only still going to pay 9 per cent of superannuation on 65,000. Then the insurance company - or, sorry, not the insurance company, the superannuation fund would say, well, hang on, if you want to increase the benefits you can only do that by buying additional units because the superannuation, death and total impairment disability is only based on the salary that we are advised. If you want higher than that, you have got to buy additional units. So if the company says, we are not going to do that because we think we are paying the super on the right figure, then it still falls back to the ATO.

PN309

MR CULLINAN: I understand that but the CFMEUs position and our members' position is that they need to do that to resolve this dispute.

PN310

THE COMMISSIONER: Well, in the interim I can understand that they feel aggrieved and they think, well, things aren't right. But ultimately if the ATO says the calculations are the calculations, and your death and total permanent disability is a factor of two of your annualised salary, the mere fact that the company has miscalculated your annualised salary and whether it is up or down, if it is down they will get the benefit because it will go up, if it is up and it has got to go down, well, okay, then it might be an option for them to buy additional credits.

PN311

MR CULLINAN: I understand that. One of the real concerns that the CFMEU and members have is that in the interim, in the interim the company acknowledges that the ATO might come up with a different interpretation but, in the interim, any member that is killed or hurt or off or off sick - - -

PN312

THE COMMISSIONER: But the - and I appreciate that, but surely if the ATO says that the company is wrong and they have miscalculated the figure downwards and, in fact, it should have been either as it were or upwards, then the person who may have a claim or may have been paid some benefit out of the insurance component of it would not be disadvantaged because they would have to be, if it was calculated down and it was wrong, they would have to be reimbursed up to the appropriate level.

PN313

MR CULLINAN: I think we would be seeking that commitment from the company - - -

PN314

THE COMMISSIONER: Well, it would follow. It would follow. I mean, the company can give the commitment but I would have thought it followed by law.

PN315

MR CULLINAN: That is what this dispute is over, we might say.

PN316

THE COMMISSIONER: Yes, sure. Yes. Ms McKenzie.

PN317

MS McKENZIE: Well, as the Commissioner said, it is in the fund, it is a salary. What is the salary within the terms of the fund? The superable salary is the same - - -

PN318

THE COMMISSIONER: Yes.

PN319

MS McKENZIE: It is the same salary that will drive the benefits here.

PN320

THE COMMISSIONER: That is right.

PN321

MS McKENZIE: And it is the same benefit for all members of the Visy Industry Superannuation Fund and that is a lot more employees than the small number of people at TUMIT. Applies across the board.

PN322

THE COMMISSIONER: So if you are unfortunate enough to be - sorry, not unfortunate enough to be a Visy employee, but unfortunate enough to have an accident and you are entitled to a payment, say, of $36,000 based on the salary component that makes up the 9 per cent on your superannuation, and the ATO says, well, hang on, that salary is wrong; you, in fact, should have been entitled on the correct salary to a payment of $40,000 not 36; you would have to be reimbursed that $4000.

PN323

MS McKENZIE: If that is the superable salary then the fund would have to - - -

PN324

THE COMMISSIONER: Yes, because it would be underpayment.

PN325

MS McKENZIE: The fund would pay out the benefit based on - and it is the fund that pays out the benefit.

PN326

THE COMMISSIONER: Yes.

PN327

MS McKENZIE: But that is exactly right, the salary for the determination of the multiple of the benefit is the same salary as the - - -

PN328

THE COMMISSIONER: That is right.

PN329

MS McKENZIE: - - - the superable salary. So once that is determined, then that will drive - - -

PN330

THE COMMISSIONER: Yes.

PN331

MS McKENZIE: So it is not necessary or appropriate for the company to be giving any commitment independently of what the terms of the fund will determine.

PN332

THE COMMISSIONER: Yes. Look, Mr Cullinan, I think what has come out of today - well, as clear as clear can be I suppose - is that there needs to be now something from the ATO. And if the ATO says that the company is right, then it follows that the death and total permanent disability is right. If it says that the company is wrong, then the company is wrong in terms of the - sorry, not the company but the reference to the total permanent disability factor is also wrong and needs to be adjusted.

PN333

Now, if the ATO says that the company is right and people feel aggrieved about that, then it is something that they may have to look at in terms of taking additional credits to improve their overall benefits in terms of the death and total permanent disability component. But as long as the company is complying with the minimum requirement - or the, sorry, I will get this right. The insurance part of the superannuation is complying with the minimum requirement, whether it is a factor of one or a factor of two, based on the salary, if that salary is deemed to be right, they are right.

PN334

If the salary is deemed to be wrong, they are wrong. And Visy obviously has to make the differential payment in terms of the contribution, 9 per cent contribution, if they are deemed to be wrong. It automatically follows that the fund itself then has to correct the insurance component for those people who may have been paid out or may have a fear that their coverage has been reduced. But it all depends now on the ATO. Okay.

PN335

MR CULLINAN: I understand that, Commissioner.

PN336

THE COMMISSIONER: Look, once the ATO decision is known, I mean if there is still an issue, the Commission is more than happy to see whether or not it can assist the parties. Okay, all right. If you could provide that information, please, Ms McKenzie - - -

PN337

MS McKENZIE: Yes, yes, I will, Commissioner.

PN338

THE COMMISSIONER: - - - that you have undertaken to do.

PN339

MS McKENZIE: Yes.

PN340

THE COMMISSIONER: Thank you. The Commission will stand adjourned. Thanks.

ADJOURNED INDEFINITELY [2.16pm]