Fiji Islands Revenue and Customs Authority Officers and Staff Association v Fiji Islands Revenue and Customs Authority [2004] FJAT 18; Award 11 of 2004 (29 April 2004)

THE REPUBLIC OF THE FIJI ISLANDS

NO: 11 of 2004

AWARD OF
THE ARBITRATION TRIBUNAL

IN THE DISPUTE BETWEEN

FIJI ISLANDS REVENUE AND CUSTOMS AUTHORITY OFFICERS
AND STAFF ASSOCIATION

AND

FIJI ISLANDS REVENUE AND CUSTOMS AUTHORITY

FIRCAOSA: Mr K Vuataki
FIRCA: Mr S Sharma with Ms S Balawakula

DECISION

This is a dispute between the Fiji Islands Revenue and Customs Authority Officers and Staff Association (the "Association") and the Fiji Islands Revenue and Customs Authority (the "Employer") in relation to salary negotiations for 2002.

A trade dispute was reported to the Permanent Secretary on 24 September 2003 and was accepted for conciliation on 7 October 2003. After three conciliation meetings the Association threatened strike action on 11 December 2003. As a result the Minister authorized the Permanent Secretary to refer the dispute to an Arbitration Tribunal for settlement pursuant to section 6 (2) (b) of the Trade Disputes Act Cap.97.

The Dispute was referred to the Permanent Arbitrator on 12 December 2003 as a matter of urgency with the following terms of reference:

"..... for settlement over the deadlock in salary negotiations for 2002 arising out of fundamental differences in basis and justification for the claim for salary increase of 30% sought by the Association".

The Dispute was listed for preliminary hearing on 15 December 2003. On that day Mr Vuataki for the Association advised the Tribunal that he would be in a position to file preliminary submissions by 4.00pm on 16 December. The Employer was directed to file its written submissions by 4.00pm on 19 December 2003. The Dispute was listed for hearing on Monday 23 December 2003. The parties filed their preliminary submissions before the hearing commenced as scheduled on 23 December. The hearing continued intermittently for a further ten sitting days, finally concluding on 20 January 2004. The Association called a total of 15 witnesses whilst the Employer called one witness.

The Association filed its final submissions on 17 February 2004. The Employer filed final submissions on 22 March and the Association replied on 30 March 2004. The submissions were thorough and helpful.

The scope of the Tribunal’s jurisdiction in this Dispute is determined by the terms of reference. The reference requires the Permanent Arbitrator to settle a dispute arising out of the deadlock in salary negotiations for the year 2002. The deadlock is the result of fundamental differences in basis and justification for the Association’s claim for a salary increase of 30%.

The claim by the Association for a 30% salary increase does not include any claim in respect of cost of living adjustments (COLA) nor does it include any claim for a merit increase (SSPP). Although some evidence was adduced in relation to revenue targets being exceeded and although the Association’s submission dated 20 November 2002 to the Employer refers to 2002 revenue targets having been exceeded, the issue of a pay increase based on merit was not pursued in the Association’s submissions to the Tribunal.

It should also be noted that in February 2002 the Employer paid a lump sum of $200 to all employees whilst in December 2002 the Employer voluntarily paid a 4% salary increase and a 2% COLA increase to all employees, backdated to 1 January 2002.

The Association’s claim for 2002 is for a 30% salary increase across the board for employees on account of the Authority’s failure to implement a new salary structure for most of its employees (corporate employees and management staff excluded). This is how the claim is expressed on page 3 of the Association’s submission dated 20 November 2002 to the Employer. In its preliminary
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submission the Association re-asserted its claim for a 30% pay increase and sought to have the increase backdated to 1 January 1999. The claim was expressed in similar terms in the Association’s final submissions.

The basis of the 30% increase is explained on page 3 of the Association’s submissions to the Employer. It is based on comparisons of salary structures which are set out in two documents annexed to the submissions. They are Annexures A and B to those submissions. Annexure A sets out comparative figures for some of the FIRCA positions showing a comparison between PSC salary scales and the Association’s proposed salary scale. Annexure B sets out comparative figures for old and new salary scales currently in place for CEO and other employees of the Authority as a result of what is termed "selective restructuring". From the comparisons and calculations the Association arrives at the figure of 30% which it claims is a reasonable request. The Association’s preliminary submissions referred to the same Annexures and claimed that the average % pay increase as set out in Annexure B was about 30%. The Association’s final submissions again rely on the same two Annexures as the bases of the claim for a 30% across the board increase.

The justification for such a claim is dealt with in the Association’s various submissions. First, the Association relies on what it claims is the delay in implementing a new corporate salary structure. Such delay is said to have started in 1999 and continued at least up to the end of 2002. Secondly, the Association relies on what it terms as "discriminatory and selective salary increases" including bonus payments for employees in corporate and for management staff whilst all the other employees in the Authority have been required to await the Job Evaluation and Restructuring Project (JERP) Report. The project was undertaken by a company known as "Maxumise (Fiji) Ltd".

Thirdly, the Association relies on the Agreement dated 4 December 2001 between the Association and the Employer and the Collective Agreement dated 8 February 2002 between the same parties.

The evidence given by each of the witnesses called by the Association dealt with one or more of these three issues. The written submissions filed by the Association contain assertions which were not always supported by the evidence adduced.

As to the basis of the claim for a 30% salary increase, the Employer claims that account needs to be taken of the 13% (9% in 2001 and 4% in 2002) salary increase and 5% (3% in 2001 and 2% in 2002) COLA increase granted to employees in 2001 and 2002. It further says that in relation to the 2002 claim, the Association had reduced its claim to 15% during negotiations. Consequently any award for 2002 must fall somewhere between 6% already granted by the Employer and 15% being the reduced claim.

In relation to the justification for the claim for a 30% salary increase, the Employer challenges each ground relied upon by the Association. First, the Employer concedes that there may have been delays in implementing a new corporate salary structure but claims that the responsibility and reasons for the delays cannot be attributed to the Employer. On this point the Employer seeks to rely on the evidence of Mr Colin Stringer with particular reference to the effect of the events of May 2000 and its aftermath. The issue of delay is dealt with in some detail by the Employer in its final submission on page 22 where the Tribunal is urged to consider the issue of delay in the context of all the prevailing circumstances.

Secondly, the Employer acknowledges that certain senior management and other selected employees were granted % increases in salary. The Employer claims
that the salary increases were a necessary consequence of the merger of the two revenue raising departments and the simultaneous establishment of an independent statutory authority pursuant to the Fiji Revenue and Customs Authority Act 1998.

Thirdly, the Employer maintains that the Association cannot claim for 2002 the same 30% as it did in 2001 given the agreement dated 4 December 2001 between the parties. The Employer claims that this agreement represented a final settlement on all matters (including the claim for a 30% salary increase) up to and including 4 December 2001.

The Employer called one witness, Mr Colin Stringer, whose evidence in chief was by way of a comprehensive statement read to the Tribunal. Mr Stringer was then cross-examined by Counsel for the Association. The Employer’s written submissions were to some extent supported by Mr Stringer’s evidence. However, Mr Stringer’s evidence was also critical of some of the implementation decisions taken by management.

It should be noted that Mr Stringer was the Australian Team Leader and Strategic Planning Advisor for the FIRCA project which was an Institutional Strengthening Project (ISP) funded by the Australian Government. He has considerable experience in project work of this description in other countries over a number of years.

The Fiji Island Revenue and Customs Authority came into existence on 1 January 1999 pursuant to section 3 of the Fiji Islands Revenue and Customs Authority Act

1998 (the "Act"). The establishment of this independent statutory authority represented the merger of two former government departments within the
Ministry of Finance, namely the Inland Revenue Department and the Customs and Excise Department.

As at 1 January 1999 this newly created entity in effect found itself alone in the world. The Authority no longer had access to and the benefit of the management and support infrastructure provided by both the Ministry of Finance and the Public Service Commission. Mr Stringer in paragraph 3.2 on page 4 of his statement referred to this predicament by stating:

".... The establishment of FIRCA as a statutory authority outside the public service meant that there was an urgent need to establish a corporate structure to provide the corporate services that were previously provided through the Public Service Commission (PSC). Principally this involved the areas of Information Technology, previously this was provided by the GOF Information Technology Centre (ITC), Human Resource, Finance and the expansion of legal services provided by the Authority."

On the issue of the delay in the implementation of a new corporate salary structure, the evidence of Mr. Stringer concerning the initial teething problems and the effect of the events of May 2000 was not seriously challenged. It is not surprising that there were more important priorities in 1999. The Authority was attempting to get itself established as an independent statutory authority. In a memorandum to staff dated 23 August 1999 the then Chief Executive Officer (CEO) Mr S T Mailekai indicated that a job evaluation project and a collective agreement were being pursued. The Tribunal is satisfied that any perceived delay in the implementation of a new corporate salary structure up to December 2001 was due to factors which were not attributable to the Authority. There was no sinister motive involved in the decision not to implement the Price Waterhouse Coopers Report. The Report became available in August 2000 and was subsequently rejected by the Board.

The evidence of witnesses called by the Association in most cases was consistent with Mr. Stringer’s understanding of the immediate problems facing the fledgling Authority. This evidence was in general terms to the effect that what the Association referred to as salary increases were the result of at least three different circumstances which were all related to the urgent need to establish a corporate structure. First, it was apparent from the evidence that several new positions needed to be created and filled as soon as possible. Secondly, some existing staff were required with immediate effect to undertake greater responsibilities. This resulted in amended job specifications. Thirdly, some existing staff applied for and were appointed on promotion to higher positions attracting larger salaries. There was no suggestion that these promotions were improper or did not follow a transparent selection process.

Having considered all the evidence on this issue, the Tribunal is of the opinion that the evidence does not support the Association’s contention that the Employer has undertaken the selective and discriminatory implementation of new pay structures.

The position of those civil servants employed in the two departments prior to 1 January 1999 was dealt with in section 17(1) of the Act which stated:

"As from the commencement of this Act, persons employed immediately before that date in the Inland Revenue Department or in the Customs and Excise Department whose services are required by the Authority for the performance of its functions under this Act shall be transferred to the services of the Authority on terms not less favourable than those enjoyed by them immediately prior to their transfer."

There was no evidence before the Tribunal that the Employer had not complied with this statutory undertaking. The material provided by the Employer in its bundle of documents was consistent with the conclusion that employees in the Authority are better off than their counterparts in the civil service.

Turning to the Memorandum of Agreement dated 4 December 2001. By the terms of this agreement, the parties settled the Association’s Log of Claims for 2001. The Log of Claims consisted of a claim for restructured salary scale, a claim for increases in existing allowances and benefits and a claim for the payment of redundancy packages. The Association also sought to have the payments backdated to 1 January 1999.

The settlement included an agreement by the Authority to pay 3% COLA increase across the board to all employees, a 4% increase by way of merit (SSPP) across the board to all eligible employees and a 5% immediate pay increase across the board to all employees. All payments were to be backdated to 1 January 2001. There was no dispute that the Employer has complied with this part of the agreement.

The Agreement also included a provision in relation to allowances in clause 2. Clause 3 of the Agreement then proceeded to deal with restructuring and job analysis. The Tribunal considers that the correct approach is to determine whether the Employer has acted in good faith in respect of its undertaking as set out in clause 3. Clause 3 states:

"That the Authority undertakes to conduct a restructuring and job analysis exercise on all FIRCA positions within six months of the signing of the Collective Agreement and upon completion thereof shall enter into further negotiation with the Association for:

(a) Further increases in allowances and benefits

(b) Implementation of new salary structure"

The Collective Agreement was signed on 8 February 2002. Article D of that Agreement, so far as is relevant to the present dispute, provides:

"Further negotiations are to commence after completion of the Authority’s restructure or six months from the date of signing of this Agreement, whichever is earlier".

Under the terms of these two agreements the Employer was required to do two things. First, the Authority was required to undertake a job analysis and restructuring exercise within six months of the signing of the Collective Agreement, i.e. by 8 August 2002. Secondly, the Employer was required to enter into further negotiations on terms and conditions at least by 8 August 2002.

It would appear that the Employer formed a steering committee which subsequently prepared terms of reference for the appointment of a consultant to undertake the restructuring and job evaluation project. The evidence suggests that the steering committee was formed and the terms of reference prepared in June 2002.

There was no satisfactory explanation from the Employer for the delay between February and June in commencing to comply with its obligations under the Memorandum of Agreement.

Although expressions of interest were called for in June 2002, it was not until October 2002 that the Employer endorsed Maxumise as the company to undertake the exercise. Once again no satisfactory explanation was offered for the delay. The Employer had received 8 expressions of interest by tender.

The Agreement with Maxumise was not signed until 3 February 2003 although it would appear that Maxumise had started the project in October 2002. The Report was presented in June 2003.

As Maxumise was not endorsed until October 2002, it is the opinion of the Tribunal that the Employer had not conducted a restructuring and job analysis exercise within six months of the signing of the Collective Agreement and was therefore in breach of the undertaking given in clause 3 of the Agreement dated 4 December 2001.

Furthermore, six months from the date of signing the Collective Agreement would have meant the commencement of negotiations by 8 August 2002. The evidence suggests that the negotiations did not commence until 8 October 2002, at the earliest. The Employer had not complied with its obligation to enter into negotiations despite an initial request from the Association by letter dated 2 August 2002.

Whilst it is unlikely that the JERP report would have been completed in 2002 had the Employer acted with reasonable promptness in honouring its undertaking to conduct a restructuring project, the inactivity till June 2002 has resulted in delay.
Further delay resulted from the fact that Maxumise was not endorsed until October 2002.

Similarly, even if negotiations had commenced shortly after 8 August 2002, it may well be that any agreement on terms and conditions as contemplated by the Collective Agreement may not have been reached in 2002. The failure to enter into negotiations within the agreed time has caused delay.

After carefully considering all the material the Tribunal is satisfied that the Employer could have and should have acted promptly and with greater urgency in relation to its obligations under the Memorandum of Agreement dated 4 December 2001 and under the Collective Agreement dated 8 February 2002.

It should be noted that there was no other issue raised by the Association concerning the Employer’s compliance with the Agreement of 4 December 2001.

The Tribunal does not accept the basis upon which the figure of 30% has been derived. The methodology used for calculating this figure is in the Tribunal’s opinion suspect. In particular the comparisons used in Annexure B to the Association’s submissions to the Employer are flawed to the extent that like is not being compared with like.

Under the circumstances the Tribunal considers that for the 2002 claim a 5% pay increase backdated to 1 January 2002 is an appropriate award to compensate employees for the Employer’s delay in complying with its obligations under the two agreements.

The evidence adduced during the course of the hearing raised a number of other issues which were not directly related to the Reference and as a result have not been dealt with in this decision.

AWARD

The Association is awarded a 5% increase in salary across the board to be backdated to 1 January 2002.

DATED at Suva this 29^th day of April 2004

Mr W D Calanchini
ARBITRATION TRIBUNAL