Fiji Bank and Finance Sector Employees Union v ANZ Banking Group Ltd [2005] FJAT 35; Award 60 of 2005 (31 October 2005)

THE REPUBLIC OF THE FIJI ISLANDS

NO. 60 OF 2005

AWARD OF
THE ARBITRATION TRIBUNAL

IN THE DISPUTE BETWEEN

FIJI BANK AND FINANCE SECTOR EMPLOYEES UNION

AND

ANZ BANKING GROUP LIMITED

FBFSEU: Mr P Rae
ANZ: Mr J Apted

DECISION

This is a dispute between the Fiji Bank and Finance Sector Employees Union (the "Union") and ANZ Banking Group Limited (the "Employer") concerning various issues raised by each party in their respective trade dispute reports.

It would appear that trade disputes were reported separately but concurrently on 16 December 2004 by both the Employer and the Union. The reports were accepted by the Chief Executive Officer who referred the Disputes to conciliation. The parties agreed by memorandum dated 22 December 2004 to voluntarily refer the disputes to Arbitration. As a result the Minister authorized the Chief Executive Officer to refer the Disputes to an Arbitration Tribunal for settlement pursuant to section 6 (1) of the Trade Disputes Act Cap. 97.

The Disputes were referred to the Permanent Arbitration on 4 January 2005 with the following terms of reference:

" ..... for settlement on terms of reference as follows:

(i) Settlement of the Union’s claim of 10% increase in all wages, salaries and allowances from 1 August 2004.

(ii) Determination of the Bank’s action in unilaterally changing the rates of wages, salaries and allowances without written agreement with the Union is in breach of the Collective Agreement.

(iii) The Union’s action in conducting a secret ballot whereas the Bank considered negotiations to be continuing was therefore premature.

(iv) Guidance to future negotiations on Wages, Salaries and Allowances".

The Disputes were listed for a preliminary hearing on 26 January 2005. On that day the parties were directed to file preliminary submissions by 16 February and the Disputes were relisted for mention on 25 February 2005. As neither party had filed preliminary submissions, the Tribunal directed that each party file its preliminary submissions by 4 March and the Disputes were again listed for mention on 30 March 2005.

The Union filed its preliminary submission on 23 March 2005.

On 30 March 2005 the Employer was directed to file its preliminary submission by 12 April 2005. The Disputes were relisted for mention on 29 April 2005.

The Employer filed its preliminary submission on 29 April 2005. On that day the Tribunal directed that the Disputes be set down for hearing on 16 August 2005. When the Disputes came on for hearing on 16 August 2005 the parties informed the Tribunal that as the facts were not in dispute there was no requirement to call evidence. The parties sought and were granted leave to file final written submissions. The Employer filed its final submissions on 12 September 2005. The Union filed answering submissions on 23 September and the Employer filed a reply submission on 30 September 2005.

The first issue raised by the Reference relates to the Union’s claim for a 10% increase in all wages, salaries and allowances from 1 August 2004. This Tribunal observed in Fiji Bank Employees Union –v- ANZ Banking Group Limited (Award No.4 of 1994 dated 13 September 1994) at page 33:

"In a wage claim, the party seeking the increase has to justify the increase sought".

The Union acknowledges that its claim for a 10% increase represents a claim in excess of the rate of inflation for 2004 which appears to be accepted as being 3.4%. The figure of 3.4% represents the amount by which a COLA increase may have been expected by the Union’s members as a result of the practice since 1993. The Union basis its claim for the additional 6.6% on two grounds. The first is the Employer’s strong recent performance and profitability. The second is the agreement reached with the Finance Sector Managerial Staff Association (FSMSA) which resulted in pay increases higher than the increase which the Bank was prepared to pay to the Service Workers, Salaried Staff and Accountants.

It should be noted that on 10 November 2004 the Employer implemented pay increases backdated to 1 August 2004 as set out in the Bank’s letter dated 9 November 2004 to the Union (U7 in the Union’s preliminary submission) and confirmed in paragraph 2.4 of the Employer’s Final Reply submission.

As the Employer pointed out in paragraph 3.14 of its Preliminary submission, these increases ranged from 3% to 6% depending on the category and level of the worker. The Employer acknowledged that negotiations would continue over the remaining difference and this would enable the Union to produce material to justify any further increase.

The claim for a further increase is not related to merit or work performance. It is a claim for an increase in pay for the categories of workers represented by the Union based on the Employer’s profitability and its ability to absorb such an increase and because of an increase granted to FSMSA members.

Before proceeding further, it is appropriate for the Tribunal to make an observation about a recent trend in the manner in which the parties file preliminary submissions. The Tribunal has stated on a number of occasions that the purpose of preliminary submissions is for each party to outline in simple and clear terms their respective positions in relation to the issues raised by the Terms of Reference. Preliminary submissions are not pleadings. Preliminary submissions are not a vehicle for one party to respond to the preliminary submissions of the other party.

Dealing with the first matter relied upon by the Union as justifying its claim for a pay increase above the agreed inflation rate of 3.4%.

The Union submits that the Employer has experienced a healthy profit growth since the year 2000. The material submitted by the Union shows that profit increased from $13.169m in 2000 to $23.993m in 2004. This represents an increase of about 82% in profit over a five year period.

The Employer submits that the gross profit growth does not reflect the true picture. The Employer relies on earnings per ordinary share and returns on ordinary shareholders’ equity statistics to show that returns to shareholder on average have been falling. However that fact may have more to do with Board decisions. No explanation was provided in the Employer’s submissions as to why shareholders were not enjoying the benefits of what appears to be a period of healthy profit growth.

The Employer also submits that it would be unfair to reward employees across the board, on top of individual performance increments, when shareholders returns are decreasing. In the absence of any explanation as to why shareholders returns are decreasing the Tribunal cannot place a great deal of weight on such an argument.

The Employer also submits that an across the board increase will enable those who have performed poorly to share in profitability to which they have not contributed. The proper method of sharing profit is the increment system for good performance which is the mechanism agreed to by the parties. However, the present application is expressly stated not to be related to performance.

In any event the Union maintains that only 271 of the 500 plus graded employees actually received a merit incremental increase in pay.

The Tribunal is satisfied on balance as to the Employer’s ability to absorb a further increase. It would also appear that the present system by which employees are rewarded for performance is restrictive. Although the Tribunal considers that an increase is justified, there does not appear to be any justification for the additional 6.6% in general terms sought by the Union.

Although the Employer’s costs to income ratio was above the ideal of 36.5%, it could not be said that this was due to any excess generosity by the Employer towards the Union’s members.

At this stage it is appropriate to consider the second ground relied upon by the Union which is the pay increases given pursuant to an Agreement dated 30 July 2004 between the Employer and the Finance Sector Managerial Staff Association (FSMSA).

The Union claims that the Employer has recently agreed with FSMSA to grant a 5.1% increase in the starting salary and 10% increase in the maximum salary of the Managers who are members of FSMSA.

It should be noted that the Tribunal accepts that COLA based increases no longer form part of wage determination under the Agreement with FSMSA.

The Tribunal has considered the issues of fairness and relativities. The Tribunal has also considered such issues as salary ranges, salary points, categories and the risks and benefits of the performance systems in the two agreements.

The Tribunal notes also that there has not been any structural change to the wages and salary scales since 1982. The only changes have been as a result of COLA adjustments. As a result of carefully considering all the material placed before the Tribunal in the submissions, some of which was in conflict and none of which was properly tested as evidence, the Tribunal is satisfied that a 3% increase is appropriate in addition to the increase which the Employer had implemented in November 2004 and which took effect from 1 August 2004. The additional 3% increase is also backdated to 1 August 2004. The Tribunal considers that this increase represents a fair balance between the interests of the major stakeholders.

The Tribunal is of the opinion that with some good faith and common sense the claim for an increase could have been amicably negotiated. Time frames should not be seen as an impediment to negotiating the settlement of a log of claims.

The second matter in the terms of reference relates to the decision by the Bank and the implementation of that decision to pay increases in salaries, wages and allowances by the same amounts as the previous year before the parties had reached agreement on the 2004 Log of Claims.

As noted above, the Employer’s letter dated 9 November 2004 deals with this matter in some detail.

The Tribunal accepts that the parties had not reached agreement on the question of pay increases when this decision was unilaterally taken and implemented by the Employer. If the Employer’s action is not expressly in contravention of clauses 2 and 17 of the Collective Agreement, it certainly breaches the spirit and the purpose of the clauses. The clauses are designed to give effect to the principles behind the constitutional right of both workers and employers to organize and bargain collectively. The Tribunal considers that the provision requires the parties to negotiate in good faith to reach agreement on the terms and conditions of employment which are subsequently set out in a formal agreement. The Employer’s actions were contrary to the spirit of collective bargaining, did not constitute good faith negotiations and were not conducive to the maintenance of harmonious employment relations.

The third matter in the terms of reference relates to the Union’s decision to conduct a secret ballot. It is not suggested that the Union breached the relevant legislation. It is not clear from the material in the submissions, if the decision to hold a strike ballot was in response to the Employer’s decision to unilaterally determine an increase in pay. If it was, then whilst perhaps extreme it was nevertheless understandable. The Employer may have stated a willingness to continue negotiations on a further increase in pay, however, it is the Tribunal’s opinion that the Employer did not intend to conduct further good faith negotiations. The Employer had made a decision and that was it.

The final matter raised by the Reference is a request by the parties for some guidance from the Tribunal in relation to future pay negotiations.

The Tribunal considers that the essence of collective bargaining is voluntary and free good faith negotiations by the parties. The question of pay increases is always a key matter in such negotiations. Pay is an essential term of any contract of employment. If the Collective Agreement is currently silent as to how annual pay negotiations are to be activated and conducted then it should be amended. The accepted past practices should be the bases of any such amendments to the Collective Agreement.

The Tribunal considers it inappropriate and contrary to international labour standards relating to collective bargaining for it to offer any more detailed guidance. The parties themselves are in the best position to settle appropriate procedures for and to identify relevant industry factors in negotiations on regular pay increases.

AWARD

The Union is awarded a further 3% increase in all wages, salaries and allowances with effect from 1 August 2004.

The Employer’s action in unilaterally changing the rates of wages, salaries and allowances without first having reached agreement with the Union was contrary to the concept of collective bargaining to which effect is given by clauses 2 and 17 of the Collective Agreement and in accordance with section 33 of the Constitution.

The Union’s decision to conduct a secret ballot was not necessarily premature in view of the Employer’s actions. The Union was not in breach of the legislation.

The Tribunal does not consider it appropriate to offer detailed guidance to the parties as it may be seen to be contrary to the principles of collective bargaining and international labour standards. Some general observations have been included.

DATED at Suva this 31 day of October 2005.

Mr. W. D. Calanchini
ARBITRATION TRIBUNAL