CORRECTIONS ASSOCIATION OF NEW ZEALAND INCORPORATED v CHIEF EXCUTIVE OF THE DEPARTMENT OF CORRECTIONS [2018] NZCA 268

CORRECTIONS ASSOCIATION OF NEW ZEALAND INCORPORATED v CHIEF EXCUTIVE OF THEDEPARTMENT OF CORRECTIONS [2018] NZCA 268 [24 July 2018]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA396/2017[2018] NZCA 268BETWEEN CORRECTIONS ASSOCIATION OFNEW ZEALAND INCORPORATEDAppellantAND CHIEF EXCUTIVE OF THEDEPARTMENT OF CORRECTIONSRespondentHearing: 10 May 2018 (further material received 24 May 2018)Court: French, Cooper and Williams JJCounsel: J G Miles QC and J M Roberts for AppellantS W Hughes QC and K F Radich for RespondentJudgment: 24 July 2018 at 11 amJUDGMENT OF THE COURTA We answer the question of law submitted for determination by this Court:Did the Employment Court err in holding that the respondent'sremoval of a work category from the collective agreement did notamount to a variation, itself requiring further agreement?No.B The appeal is dismissed.C The appellant must pay the respondent costs for a standard appeal on aband A basis and usual disbursements. We certify for second counsel.____________________________________________________________________REASONS OF THE COURT(Given by French J)Introduction[1] In 2015, the Chief Executive of the Department of Corrections (Corrections)1embarked on a restructuring of staff positions in prisons under his management.The restructuring involved the disestablishment of positions known as senior casemanager.[2] At the time of the restructuring, Corrections and the Corrections Assoc ofNew Zealand Inc (the union) were parties to a collective employment agreement called"Department of Corrections Frontline Staff (Prison Based) Collective AgreementCANZ 2015–2017."2[3] The union contended that implementing the restructuring required an agreedvariation to the collective agreement. Therefore, the change could not be unilaterallyimposed and for Corrections to purport do so amounted to a breach of the collectiveagreement.[4] This contention was upheld by the Employment Relations Authority.3However, on appeal to the Employment Court, Judge Smith held that Corrections wasentitled to make the change without first securing the union's agreement.41 In this judgment we refer to both the Chief Executive and the Department as "Corrections".2 The collective agreement commenced on 20 March 2015.3 Corrections Assoc of New Zealand Inc v Chief Executive of the Department of Corrections [2016]NZERA Wellington 56.4 Chief Executive of the Department of Corrections v Corrections Assoc of New Zealand Inc [2017]NZEmpC 78 [EmpC decision].[5] Dissatisfied with that outcome, the union then sought and obtained leave toappeal to this Court on a question of law under s 214 of the Employment RelationsAct 2000.5 The question this Court approved for determination was:6[W]hether the Employment Court erred in holding that the respondent'sremoval of a work category from the collective agreement did not amount toa variation itself requiring further agreement[?][6] As the leave decision makes clear, the question was based on theEmployment Court's alleged omission to consider relevant provisions of the collectiveagreement.Background[7] According to an agreed statement of facts filed in the Employment Court, thepurpose of case management roles is to provide specialist end to end case managementof prisoners with the aim of supporting them to take responsibility for completingactivities aimed at addressing their rehabilitation and reintegration needs.[8] Before the restructuring, there were two case management roles in theorganisational structure: case manager and senior case manager. Each of these rolescarried out the same primary function as described above, being to undertake front lineand hands on case management work with prisoners. Both reported to the sameposition.7[9] On 9 April 2015, Corrections issued a consultation document entitled "LiftingProductivity & Performance in New Zealand's Prisons". The document contained aset of structural change proposals which it said were aimed to achieve cleareraccountability for results in New Zealand's prisons and to reduce current inefficiencyin the delivery of prison services.5 Corrections Assoc of New Zealand Inc v Chief Executive of the Department of Corrections [2017]NZCA 477.6 At [5]. At the hearing before us, the Chief Executive of the Department of Corrections challengedthe use of the words "work category" in the question, submitting it was an obsolete and irrelevantconcept which does not appear in the collective agreement, the pleadings or in the decision underappeal. However, in our view nothing turns on that. The agreement does use the phrase"occupational classification".7 The team leader position to which both reported was called principal case manager. The roles ofsenior case manager, case manager and principal case manager were new positions created in anearlier restructuring in 2010.[10] One of the proposals related to the structure of the case management roles.Corrections considered there did not need to be two separately titled positions carryingout the function of case management in prisons and therefore proposed that instead ofhaving two separate positions, there would be only one such position, namely casemanager.[11] The document explained the proposal in the following terms: It is proposed that Senior Case Manager positions are replaced withCase Manager positions, so while the overall number of positions in casemanagement would not be reduced, the structure will be less hierarchical.This would mean all senior case manager positions would be retitled casemanagers however all current incumbents would retain their current terms andconditions including access to the Senior Case Manger progression criteria.[12] Following a consultation process, the proposal was confirmed withoutamendment and then implemented as from 1 July 2015.[13] All staff who were employed as senior case managers as at 30 June 2015retained their existing terms and conditions of employment including their duties andresponsibilities and their salary scale. The only change was that they no longer hadthe word "senior" in their job title. In colloquial terms, they were "ring fenced" on anindividual basis, with any new appointments being to the role of case manager. Thechange did not therefore result in any redundancies. Nor did it result in any change ofreporting line for either the former senior case managers or the case managers.[14] Union members employed as senior case managers and case managers werecovered under the collective agreement by the combined effect of the coverage clausein the agreement and a schedule to the agreement.8[15] Under the coverage clause, coverage is expressed to be primarily restricted toany position listed in annexed schs A1–A4. Schedules A1–A4 are described in theagreement as "schedules for occupational classifications". Schedule A1.1 is headed"Corrections Officer and Related Positions"; sch A2 "Prisoner Employment and8 There were 127 staff in the case manager role, 53 of those being union members. Union membersalso accounted for 29 of the 71 staff employed as senior case manager.Training Positions"; sch A3 "Support and General Positions"; and sch A4"Rehabilitation and Reintegration Positions".[16] Each of the schedules records the rates of pay and other terms and conditionsof employment that apply to union members who work in the specified occupationalareas and whose positions are part of the organisational structure of one of a listednumber of prisons. The prisons in question are listed in sch B1.[17] For the purposes of this appeal, the critical schedule is sch A4 Rehabilitationand Reintegration Positions. That Schedule relevantly provides:A4.1 Salary ScalesCase Manager1/3/15(2%)1/3/16(2%)Level 4 $64,785 $66,081Level 3 $60,467 $61,676Level 2 $56,148 $57,271Level 1 $51,828 $52,865Senior Case Manager1/3/15(2%)1/3/16(2%)Level 4 $73,424 $74,892Level 3 $69,646 $71,039Level 2 $66,407 $67,735Level 1 $62,627 $63,880Note: Level 4 Case Managers who are appointed to a Senior CaseManager position shall be appointed at Step 2 of the SeniorCase Manager salary scale1/3/15(2%)1/3/16(2%)SchedulerCoordinators/Schedulers $64,944 $66,243Programme Coordinator1/3/15(2%)1/3/16(2%)Advanced $51,589 $52,621Competent $48,143 $49,106Learner $42,984 $43,844Pou Arataki1/3/15(2%)1/3/16(2%)Advanced $68,824 $70,200Competent $62,489 $63,739Learner $56,310 $57,436The current rates for Librarians and Tutors as at the coming into forceof this agreement will increase by 2% from 1 March 2015 and 2%from 1 March 2016.A4.2 Progression for Case ManagersProgression will be in accordance with the progression criteria in theDepartment's performance management system.Employees attain the position of Senior Case Manager byappointment by the Department.A4.3 Higher Duties AllowanceA Higher Duties Allowance is payable where an employee is requiredto undertake the duties and responsibilities of a higher level positionfor five consecutive working days or more. The employee shall bepaid for such time at the applicable salary rate.A4.4 Additional Hours RateThe additional hours rate shall be time and a quarter.[18] As will be seen, each of the two roles relevant to this case had a four step salaryscale. It was proposed as part of the restructuring that an additional step would beadded for the case manager role to reflect there being a higher competency level forthe more experienced case managers. Corrections considered that this aspect of therestructuring did require a variation to the collective agreement. The union has neveragreed to it and therefore it has not been implemented.9[19] As noted by Judge Smith,10 apart from sch A4, the collective agreement doesnot contain any other references to senior case manager or case manager.9 The proposed fifth step was not as high as the maximum previously available for a senior casemanager.10 EmpC decision, above n 4, at [24].The reasoning of the Employment Court[20] In holding that the disestablishment of the senior case manager role did notrequire a variation to the agreement,11 Judge Smith relied primarily on two provisionsin the collective agreement, namely cls 2.2.4 (the right to manage) and 10(management of organisational change).[21] Clause 2.2.4 confirms Corrections' right to manage, stating that:The Department has the right to plan, manage, organise and finally decide onthe operations and policies of [Corrections], subject to the provisions of thisAgreement[22] Clause 10 is headed "Management of Change" and under a subheading"Organisational Change" states at cl 10.1.1 that the "process of change is continuousand forms part of [Corrections'] continuous improvement". Clause 10.1.2 provides:Where organisational change is being considered that may result in positionsno longer existing, consultation with [the union] shall take place in accordancewith the Consultation provisions of this Agreement, prior to a decision beingmade.[23] Clause 10.1.3 goes on to provide that if, as a result of organisational change, astaff member's position no longer exists, then certain options must be considered,namely reconfirmation, reassignment, retraining, job search, part time employment,temporary employment, special leave and, as the last resort, severance.[24] Judge Smith considered that cls 10.1.2 and 10.1.3 clearly contemplated thatCorrections was entitled to carry out organisational changes that might result inpositions no longer existing. He also held that reconfirmation was effectively whatthe 2015 restructuring proposed and carried out.12 The Judge went on to say it wasdifficult to see how read in this light, the natural and ordinary meaning attributed tothe ability to carry out change was anything other than what Corrections wasclaiming.1311 Judge Smith also had to consider an argument that the coverage clause required a variation to beconcluded. However, that argument was not advanced on appeal and is therefore not addressed.12 Reconfirmation is defined in the agreement as meaning placement in a position where the dutiesare the same (or very nearly the same) the salary is the same, the new position has terms ofemployment including career prospects which are no less favourable, and the location is the same.13 At [42]–[43].[25] In the Judge's view, there was nothing difficult, unusual or ambiguous aboutthe language used in the collective agreement. The natural and ordinary meaning ofcls 2.2.4, 10.1.2, 10.1.3 and sch A4.1 was that Corrections could reorganise to be moreefficient by making changes to positions.14[26] Judge Smith acknowledged the express restriction on the right to managecontained in the proviso to cl 2.2.4 "subject to the terms of this agreement" but heldthat having regard to cl 10 the only restriction limiting Corrections' ability toimplement this restructuring was an obligation to consult. Corrections had dischargedthat obligation. It had consulted and therefore there was no impediment in thecollective agreement to the changes taking place.15Arguments on appeal[27] On behalf of the union, Mr Miles QC submitted the Judge made a critical errorin the decision and that was his failure to consider cl 2.2.5 of the collective agreement.Clause 2.2.5 provides:[Corrections] recognises that employment conditions referred to within thisagreement may only be changed by negotiation and agreement.[28] In Mr Miles' submission, the wholesale abolition of an entire occupationalclassification must by definition constitute a change in employment conditions.Whereas before there had been two separate schedules of promotion and pay structure,now there was only one. In particular, the restructuring had significantly altered theterms and conditions of the case managers. The scope of their work had changedbecause they were now required to undertake complex work previously allocated tosenior case managers. It had also fundamentally changed the career prospects for casemanagers by removing the possibility of promotion to a senior case manager position.[29] As for cl 10, Mr Miles contended that cl 10 could not override cl 2.2.5 of thecollective agreement. Similarly the other clause relied on by the Judge — cl 2.2.4, theright to manage — could not override cl 2.2.5. Clause 2.2.5 was supreme and because14 At [41].15 At [45] and [47].the restructuring changed employment conditions, the clause meant Corrections wasrequired to obtain the agreement of the union first. Consultation was not sufficient.Analysis[30] We acknowledge the Judge did not mention cl 2.2.5.[31] However in our view, Mr Miles' argument overlooks that not every change toan employment condition triggers cl 2.2.5. As the wording of the clause makes clear,it is only triggered if the change is to employment conditions referred to within theagreement. Those italicised words are pivotal. If the change is to an employmentcondition that is not referred to in the collective agreement, then cl 2.2.5 has noapplication.[32] The collective agreement says nothing about the work to be undertaken by thecase managers. That is detailed in separate job descriptions which are notcross-referenced in any way in the collective agreement and form no part of it.[33] The collective agreement does, through the means of sch A4, specify salaryrates and elsewhere specifies hours of work. Those matters therefore plainly qualifyas employment conditions referred to within the collective agreement but on the factsof this case these have not been changed. The one change Corrections did want tomake to the salary scale has not been implemented due to lack of agreement.[34] As for promotion, the agreed statement of facts before the Employment Courtwas that career progression between the two positions was not automatic. When asenior manager role became vacant, the role was advertised as a vacant position inaccordance with the requirements of the State Sector Act 1988 and a selection andappointment process would occur. Significantly, the selection pool was not limited toincumbent case managers and there was no requirement they be given any preference.[35] In those circumstances, at most for the case managers what has been lost is theopportunity to apply for a particular position. However, there was no contractualentitlement to be promoted to senior case manager which in our view is what wouldbe required before promotion opportunities could be considered an employmentcondition within the meaning of cl 2.2.5.[36] In coming to this conclusion we have not overlooked A4.2 of the schedulewhich states that progression for case managers will be in accordance with theprogression criteria in Corrections' performance management system. After thehearing, we asked the parties for further information about the performancemanagement system. The information supplied shows the system relates tocompetency models, against which the competencies and performance of employeesare reviewed. The competencies are not the same as the tasks and there is nosuggestion the restructuring has changed the progression criteria. We are satisfied thesystem does not have any bearing on the issue before us.[37] That then leaves the issue of whether the existence of a position is itself anemployment condition referred to within the collective agreement. In our view that isnot a tenable argument because the parties have already negotiated and agreed in cl 10what is to happen when Corrections imposes changes that result in existing positionsbeing abolished. There is therefore no conflict between cl 2.2.5 and cl 10.[38] A further argument raised by Mr Miles about cl 10 was that correctlyinterpreted cl 10 was concerned with organisational change in an individual prisonsuch as a downsizing at a facility requiring a reduction in the number of senior casemanagers employed at that facility, rather than the removal of an entire occupationalarea department wide. We do not accept that submission. There is no such site specificlimitation in cl 10. As Judge Smith pointed out,16 the restructuring at issue comes wellwithin the ordinary and natural meaning of the words of cl 10.[39] It follows we reject the submission that Judge Smith erred in failing to refer tocl 2.2.5. In our view, the Judge was correct in identifying this as a cl 2.2.4 (right tomanage) case.16 At [41]–[43].Outcome[40] We answer the question of law submitted for determination by this Court:Did the Employment Court err in holding that the respondent's removalof a work category from the collective agreement did not amount to avariation, itself requiring further agreement?No.[41] The appeal is accordingly dismissed.[42] As regards costs the parties agreed these should follow the event. We thereforeorder the appellant pay the respondent costs for a standard appeal on a band A basisand usual disbursements. We certify for second counsel.Solicitors:Hesketh Henry, Auckland for AppellantDepartment of Corrections, Wellington for Respondent