Australia: The Schweppes strategy: using a lockout to end employee industrial action

Schweppes Australia's workers at its bottling plant are now back at work following Fair Work Australia's (FWA) decision to terminate industrial action at the Tullamarine site. However, it has a been dramatic road to get to this point for both Schweppes and its approximately 155 workers, who had been locked out since mid December 2011 in response to industrial action taken by the workers to resist the company's plans to introduce 12 hour shifts.

Industrial action

Schweppes and the workers' bargaining representatives United Voice, commenced negotiating a new enterprise agreement in June 2011. There were a number of claims outstanding, one of which was Schweppes' claim to introduce 12 hour shift patterns, consistent with its other sites and to allow flexibility. The workers were opposed to this configuration because it would lead to less overtime and therefore less pay. As the parties had reached a deadlock, the workers voted to take various forms of protected industrial action, including a ban on the performance of overtime and stoppages of work.

Between 14 October and 12 December 2011, United Voice issued 12 Notices of Intention to Engage in Industrial Action, the last of which proposed nine stoppages of work each of 60 minutes in duration per calendar day, commencing on 15 December 2011 and continuing for an indefinite period. All of the relevant employees engaged in the industrial action and some bans were continuing and of an indefinite nature.

On 15 December 2011, Schweppes gave notice of its intention to lock out employees for an indefinite period because it considered that the employee protected industrial action had escalated to such an extent that it was significantly compromising production.

Application to terminate industrial action Ironically, on 19 December 2011, Schweppes applied for an order that the industrial action being engaged in by Schweppes be terminated by FWA on the basis that its own lockout was causing 'serious economic harm' to the employees. The union opposed the application and gave evidence that its members could survive the lockout for a long time and were coping with their financial commitments.

Based on evidence given by Professor Ian Harper, Senior Deputy President Les Kaufman said he was prepared to infer that 'at least some employees' would have accumulated savings of $5000 or less'. Professor Harper estimated that workers who reduced their discretionary spending by 50% would be able to survive for 6 weeks in the case of a lower paid worker and 5 weeks in respect of a higher paid worker.

However, Professor Harper conceded that he was not aware of the specific circumstances of the employees.

SDP Kaufman had a discretion whether or not to make an order suspending or terminating the protected industrial action, provided that he was satisfied that the industrial action was causing or was threatening to imminently cause significant economic harm to any of the employees covered by the agreement. SDP Kaufman identified that the 'harm' caused by the lockout led to the inability of the employees to derive income but that the degree of harm would vary between individual employees. He noted that the evidence adduced by the union demonstrated that at least for the foreseeable future the employees would not suffer significant economic harm and had regard to the views of the 136 employees who had signed a petition indicating that they were opposed to Schweppes' application and had made arrangements to meet their financial commitments. He also noted that there appeared to be some employees present at the courtroom, which he inferred as a show of their support for the union.

SDP Kaufman was not satisfied that the Schweppes' employer response action was causing or threatening to cause 'significant' economic harm to any of the employees, as he was not prepared to draw an inference from Professor Harper's evidence that the action was threatening to cause significant harm. This is because the union's evidence suggested that a significant majority of the employees did not consider themselves to be under threat of significant economic harm and had capacity to bear the harm. SDP Kaufman

said that the employee's attitude of opposing the termination was a 'powerful factor against exercising [his] discretion in favour of Schweppes'. Whilst he noted that the bargaining representatives were genuinely unable to reach agreement, he said that 'leaving the parties to their own devices may lead to the impasse being broken'. Accordingly, he refused to grant the application.

Further application for a termination order

Following a further unsuccessful attempt to conciliate the dispute, on 10 February 2012 Schweppes made a further application for a termination order. Whilst the union conceded that there was now sufficient evidence of economic harm to employees, the union said it was important to acknowledge that Schweppes was the source of the harm. Notwithstanding this, the union and the company had reached an agreement that if the termination order was made effective immediately, employees would be back paid from 8 February rather than

15 February which was the earliest date that the company could resume production. Schweppes' application contended that each of the 155 employees might have lost approximately $15,000 or 20% of their annual wage. SDP Kaufman was satisfied that all of the necessary prerequisites for making a termination order had been met, being satisfied that at least one person was suffering economic harm and that it was 'more than likely, or almost certain, that other people [were] in the same position'. Accordingly, SDP Kaufman exercised his discretion to terminate the industrial action.

Implications for employers

The Fair Work Act is intended to provide both employers and employees with a mechanism to take lawful industrial action in order to resolve bargaining disputes. Following the Schweppes decision, the employer's right to lock out under the Act in response to employee industrial action may now be a more feasible option than previously, in circumstances where an employer can maintain production and/or minimise the disruption to its own operations.

Although the Schweppes case demonstrates that a lockout can be an effective step in ending employee action, it is clear that SDP Kaufman only granted the application for the termination of industrial action because he was clearly satisfied that at least one employee was actually suffering from economic harm and where the parties had reached an agreement about back pay. Mere speculation about the employee's financial circumstances was not enough, particularly where the employees who were being locked out had provided evidence that they had the capacity to bear the harm.

The Schweppes decision illustrates the high standard imposed by FWA for industrial parties endeavouring to terminate protected industrial action on grounds of significant economic harm. Generally speaking, the claimed harm must be exceptional in the sense that it is not a reasonably anticipated consequence of the action. That was difficult to establish in the Schweppes decision when the class of persons alleged to be suffering the claimed harm supported the continuation of the action.

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