Transport Workers Union v Air Fiji Ltd [2008] FJAT 28; Award 30 of 2008 (2 June 2008)

THE REPUBLIC OF THE FIJI ISLANDS

NO 30 OF 2008

AWARD OF
THE ARBITRATION TRIBUNAL

IN THE DISPUTE BETWEEN

TRANSPORT WORKERS UNION

AND

AIR FIJI LIMITED

TWU: Mr K Kumar
AIR FIJI: Mr D Sharma

DECISION

This is a dispute between Transport Workers Union (the Union) and Air Fiji Limited (the Employer) concerning alleged breaches of the Collective Agreement.

A trade dispute was reported by the Union on 17 October 2007.
The report was accepted on 1 November 2007 by the Permanent Secretary who referred the Dispute to a Disputes Committee.

Subsequently the Minister authorized the Permanent Secretary to refer the Dispute to an Arbitration Tribunal for settlement pursuant to section 5A (5) (a) of the Trade Disputes Act Cap 97.

The Dispute was referred to the Permanent Arbitrator on 5 December 2007 with the following terms of reference.

"- - - for settlement over the employer’s decision to implement workers cost cutting measures with effect from 29 March 2007 which the union claims resulted in severe salary loss to its union members. The union claims that the actions of the employer are in breach of clauses 4, 9(g), 10, 11, 22 and 35 of the Collective Agreement. Therefore, the union seeks to have all the cost cutting measures to be re-instated with retrospective effect from 29 March 2007".

The Dispute was listed for a preliminary hearing on 14 December 2007. On that day the parties were directed to file preliminary submissions within 21 days and the Dispute was listed for mention on 30 January 2008.

The Employer filed its preliminary submissions on 4 January and the Union did so on 15 January 2008.

By consent the Dispute was subsequently relisted for mention on 29 February and again on 28 March 2008. On the latter day the parties were directed to file a signed Statement of Agreed Facts and the Dispute was listed for further mention on 25 April 2008. The parties were subsequently granted a short extension to file the signed Statement of Agreed Facts by 28 April 2008 which they did. The Dispute was listed for hearing on 7 May 2008 for the presentation of closing submissions.

When the Dispute was called for hearing on 7 May 2008 the parties indicated that they sought leave to call one witness each to give further evidence to supplement the material in the signed Statement of Agreed Facts. The Tribunal granted leave and following the evidence of the two witnesses, the parties presented oral closing submissions.

By memorandum dated 29 March 2007 addressed to all staff the Employer indicated that it intended to implement a number of cost cutting measures with immediate effect. The measures were stated as being necessary due to a downturn in business as a result of the political events of December 2006. However in his evidence before the Tribunal, the Employer’s Finance Manager (Mr. S. Ditoka) conceded that the arrival of a domestic competitor in the form of Pacific Sun in early 2007 had also been responsible for the drop in passenger numbers. It was also accepted by the Finance Manager that the arrival of a competitor had resulted in an increase in the number of passengers wishing to fly within Fiji by domestic carriers. It would appear that the problem really facing the Employer was its inability to compete with Pacific Sun when it came to the cost of an air ticket on routes where both carriers competed for passengers. There was an additional impediment to the Employer’s revenue earning capacity which related to the fixed ticket price for its routes to the outer Islands. No doubt the escalating price of oil also played a significant part in the Employer’s cost structure.

It was pointed out during the course of the evidence that the price of a ticket offered by its domestic competitor was to some extent subsidised through ticket pricing on international routes operated by the competitor’s parent company, Air Pacific.

The Tribunal accepts the evidence that by the end of calendar 2007 the unaudited operating loss incurred by the Employer was $1,996.299.00. Although a modest profit of $64,820 had been recorded in January 2007, a loss of $50,410 was incurred in February and a loss of $87,567 was incurred in March 2007. Monthly losses continued through to November when the Employer suffered a loss of $501,365. In December a modest profit of $52,994 was recorded. It would appear that the Employer was able to continue its operations as a result of an injection of funds from its overseas shareholders.

It should also be noted that the Employer expected that the audited accounts would show that the operating loss for the calendar year 2007 was more than the amount shown in the material before the Tribunal.

The cost cutting plan was to be introduced in 2 phases. Phase 1 was to be implemented with effect from 29 March 2007. This phase consisted of what was described as general measures and staff cost cutting measures. There were eight general measures listed and they related to matters which did not directly relate to terms and conditions of employment.

It was however, the staff cost cutting measures which were the basis of the reported trade dispute. Of the seven staff cost cutting measures that were listed, the first two represented the union’s grievance:

"1. All allowances to cease and this includes shift allowances, out of base allowances, Pilots RDO, Engineers’ allowances etc.

2. Overtime work shall cease unless a matter of essential urgency and this shall be compensated as normal time".

The other staff cost cutting measures were directed towards casual employees and management privileges.

At this stage it should be noted that the Phase 2 measures which also consisted of both general and staff cost cutting measures were not introduced at any time.

On the evidence before it, the Tribunal is satisfied that there was no consultation between the Employer and the Union prior to the announcement by memorandum dated 29 March 2007 concerning the decision to implement cost cutting measures.

By letter dated 3 April 2007 the Union requested that the Employer withdraw the cost cutting measures that were in direct breach of the Collective Agreement. The union sought re-instatement of those measures and consultation with the Employer.

A meeting took place between the parties on 5 April 2007. The evidence about this meeting was given by Mr. William Newtown who was the Union Vice-President and was employed as a check-in supervisor at Nausori. The meeting was held in the Board Room at Nausori.

In his evidence, Mr. Newtown informed the Tribunal as to what transpired at the meeting. He stated that the Union delegation had attended the meeting with an alternative proposition but had not conveyed it to the Employer for its consideration. The offer contemplated by the Union was an across the board pay cut of 3%. It would appear that the reason why the alternative proposal was not put forward at the meeting was because the Union felt that the Employer was not open to further negotiation.

Following the meeting, written correspondence passed between the parties for some months. There was at one stage reference to a review of the measures by the Employer in September. However, it would appear that the measures were retained until a memorandum dated 6 December 2007 from the Employer’s Managing Director advised staff that with effect from 10 December 2007 the meal allowance for shift workers was to be re-instated. The other measures remained.

The Tribunal is satisfied on the evidence before it that the Employer’s financial position became unsustainable in early 2007. The problem arose because revenue declined whilst costs, particularly aviation fuel, continued to increase. The reason for the decline in revenue was not so much a drop in patronage due to any political event but rather due to the arrival of a domestic competitor that offered cheaper flights on the principal domestic routes.

The Tribunal is also satisfied that the Employer implemented the cost cutting measures that were specified in its memorandum dated 29 March 2007 without any prior consultation with the Union. The staff cost cutting measures included measures which had the effect of reducing the take home income of Union members.

Clause 35 of the Master Agreement dated 1 January 1990 is headed "Consultation" and states:

"The Company and the Union will act in accordance with the Provisions of the Industrial Relations Code of Practice dated June 1973 or as revised from time to time".

There are provisions in the Industrial Relations Code of Practice setting out some guidelines for effective consultation between management and employees or employee representatives. In particular, clause 65 is relevant to the present Dispute. It states:

"Consultation means jointly examining and discussing problems of concern to both management and employees. It involves seeking mutually acceptable solutions through a genuine exchange of views and information."

The clause implies that management and employee representatives will act in good faith.

The Tribunal has concluded that the Employer breached clause 35 of the Master Agreement when it unilaterally introduced its cost cutting measures without any prior consultation.

The Tribunal has also concluded that both parties breached clause 35 by their conduct at the meeting held on 5 April 2007. The Employer failed to fully disclose its financial position and indicated an unwillingness to reconsider its earlier decision. The Union failed to even raise its alternative proposal which it claimed had been settled prior to the meeting. There was no attempt by either party to mutually, seek an acceptable solution to the Employer’s financial problems through a genuine exchange of views and information. Neither party demonstrated anything remotely resembling good faith. From the evidence before the Tribunal, it was apparent that at the meeting neither party was prepared to budge from the two extreme positions that they had stated in their correspondence.

In paragraph 13 of their Statement of Agreed Facts the parties have agreed that the Employer has not acted strictly in accordance with the Collective Agreement when it implemented the measures set out in its memorandum dated 29 March 2007.

As a result the Tribunal is satisfied that the Employer breached the various provisions of the Collective Agreement relating to allowances and overtime payable to union members.

The Tribunal directs that the Employer re-instate with effect from the date of this Award the measures in points 1 and 2 of the Staff Cost Cutting Measures which formed part of Phase 1 as set out in the Memorandum dated 29 March 2007.
The Tribunal does not consider if appropriate to direct retrospective re-instatement of these measures as the Union failed to offer any alternative proposal to assist the Employer.

More importantly the Tribunal directs the Employer to consult with the Union in accordance with clause 65 of the Code of Practice concerning its financial problems in order to arrive at a mutually acceptable solution with both parties genuinely exchanging their views and all relevant information.

The Tribunal does not consider it appropriate to express any views in any of the other cost cutting measures.

AWARD

The Employer has breached the Master Agreement with special reference to clause 35 and those provisions dealing with allowances and overtime.

The Employer is to re-instate measures 1 and 2 of the Staff Cost Cutting Measures in Phase 1 with effect from the date of this Award.

The Employer is to consult with the Union concerning its financial problems in accordance with the guidelines in the Industrial Relations Code of Practice and in particular Clause 65 thereof.

DATED at Suva this 2 day of June 2008.

Mr. W. D. Calanchini
ARBITRATION TRIBUNAL